Cygnus Daily Business Update 12 Apr,10

[G.V.Sandeep]

 

 

 

 

	CygnusDailyBusiness Updates                                                                                       12 April 2010       Indian Economy Govt asks industries to invest in rural areas Reaching out to India Inc, Government invited the industries to invest in the rural development sector to bring sustainable growth in rural areas. The appeal was made by Rural Development Ministry to industries and corporates to collaborate with the ministry in its wage employment programme Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) and self-employment programme Swarnajayanti Gram Swarojgar Yojna (SGSY). Addressing a national summit on rural development organised here by the CII, he also called upon them to forge a partnership with the government in its training and skill development programmes.  They can also consider participating in rural infrastructure development programmes like road construction work under Pradhan Mantri Gram Sadak Yojna (PMGSY). NREGA has reduced distress migration in the country and brought a vast area of land under agriculture operation since activities on the land of small and marginal farmers have also been now permitted by an amendment in the Act.     Industry News     Banking Banks unlikely to fix base rates at very low level Banks are unlikely to fix their base rate at a very low level even though the Reserve Bank of India has given them the freedom to decide the methodology to arrive at their respective base rates. To enhance transparency in lending, the Reserve Bank on issued guidelines to replace the existing benchmark prime lending regime with base rate from July 1, below which no bank can lend. RBI also gave time till December for banks to change and fine tune the method of calculating the new rate. Base rate of banks assumes significance as so far, banks used to lend much lower below their BPLR to their top rated corporate clients and to common customers at a much higher price, which invited the Reserve Bank's attention to the issue. Given that banks are free to choose the methodology, which means they can benchmark the base rate even to a 14-days or 45-days deposit (means around 4 per cent interest), there is a possibility that some banks may fix their base rate at very level, according to banking sources.     Consumer durables German soft drink company Aqua Montana readies India foray. German soft beverage maker Aqua Montana has struck three separate contract manufacturing deals with local bottlers to make and sell diet beverages and energy drinks in India. Aqua Montana is entering the diet carbonated drinks market, that is dominated by cola giants Coca-Cola and PepsiCo, under its brand Slim. It is also launching an energy drinks brand Explode that would operate in a market that is currently led by Red Bull. There is lack of choice in the diet beverage segment and consumers are looking for more options. Our first objective is to get the consumer taste our product as it is an innovative combination of natural fruit based carbonated drinks and yet significantly low on calories. The company plans to launch other products starting with ice tea later this year to be followed by mountain water. Munich based Aqua Montana is aiming to clock revenues of around Rs 45 crore in the first year in India and hopes to double it annually for the next two years. It has set an initial budget of around Rs 12-15 crore for marketing activities and expanding distribution. India is the first significant market outside Europe where the privately-owned Aqua Montana is launching its soft beverages. It could also look to enter other markets in Asia-Pacific region by shipping products sourced from low cost Indian manufacturing partners. Aqua Montana has inked sourcing contracts with regional bottlers in Ludhiana, Daman and Mysore who are already supplying to other beverage makers. But none of the bottlers currently sell to competing brands in the same product category.     Tatas to set up shoe, bicycle factories in Bangladesh Indian conglomerate Tata Group has signed an agreement with a company here to jointly manufacture shoes and bicycles in Bangladesh.  The pact was signed by Nitol-Niloy Group that had plans to manufacture Tata's $2,200 'Nano' car, but has since offered to manufacture ancillaries for Tata vehicles in Bangladesh. Tata withdrew in 2008 its $3 billion offer, the highest Bangladesh has received, to invest in a wide range of agro and gas-based industries, engineering and infrastructure. The Tata proposal, made personally by its chief Ratan Tata in 2003, was considered "politically sensitive" by past governments and held up.   Education JEE goof-up leaves IIT aspirants in a tizzy It was a goof-up alright: while some students sweated through their IIT-JEE examination because the order of subjects on the question paper didn’t match the sequence on the answer sheet, others cracked the seeming teaser by figuring out that there was an obvious printer’s devil. While the question paper had the first 28 questions from physics, followed by an equal number of questions from chemistry and maths, the ORS sheet (objective response sheet) had a different sequence of subjects. What complicated matters was that every subject had precisely 28 questions. As students across the country complained about the sequence of subjects not matching, the IIT authorities woke up to the gaffe and asked every exam centre to advise students to ignore the subject heads on the ORS sheets and go by the question numbers. The JEE released an official statement saying there was a minor error in the order of printing of the subject headings. Authorities sent out a clarification in quick time, but with the exam being conducted across 1,026 centres, it came in at different stages during the exam.       Health Care Pfizer Investments ups stake to 70.75 pct in Pfizer Ltd Drug-maker Pfizer Ltd Pfizer Investments Netherlands B.V. along with Pfizer Inc has raised stake in the company to 70.75 percent from earlier 41.23 percent through an open offer. Financial details were not provided.   Glenmark settles patent dispute with GSK over malaria drug Glenmark Pharmaceuticals is a US-based group company has settled a patent dispute with GlaxoSmithKline over the launch of a generic version of anti-malaria drug Malarone. Glenmark Generics Inc has settled the litigation pending between the company and GSK over patent actions concerning atovaquone and proguanil hydrochloride 250mg/100mg tablets, the generic version of GSK's Malarone tablets. GSK currently markets its product as Malarone in the US, for the prevention and treatment of malaria. Total US sales as reported by IMS Health for the 12 month period ending December 2009 were approximately USD 56 million. Glenmark Generics Inc is the US subsidiary of Glenmark Generics Ltd, which is a subsidiary of Glenmark Pharma. Glenmark Generics Ltd is planning an initial public offer and has filed a Draft Red Herring Prospectus with SEBI.   Hospitality International brands bet high on Indian budget hotel segment Even as the domestic hospitality sector is back on recovery, global players such as Golden Tulip and Premier Inn are betting big on the budget hotel segment, that boomed during the economic downturn. -based Louvre Hotels, that operates Golden Tulip brand, and UK's Premier Inn plans to expand their foot prints in the country in the next 2-3 years. There is a huge scope for us in the budget segment as the moderate-priced hotels is increasingly addressing need of people who want to travel but have cheaper accommodation. Louvre Hotels, which operates 7 brands across the world plans to open 50 hotels in the next five years under its four mid-scale brand such as Golden Tulip, Tulip Inn, Campanile and Premiere Classe.     ITSS Led by US, strong tech recovery seen in 2010 There will be a strong recovery in demand for IT product and services in 2010 with the US IT market -- the world's largest -- set to grow by 8.4 per cent. The tech recovery has begun in the US and around the world with Q4 (2009). IT market indicators are showing an end to declines, and setting the stage for stronger growth in 2010. Forrester expects the US IT market to grow by 8.4 per cent and the global IT market (in US dollars) by 7.7 per cent. The US and Asia Pacific will be standout regions in local currency terms while the Western and Central Europe expanding at the slowest rate among the regions. On an industry basis, US manufacturers, financial services firms, utilities, and healthcare will see the strongest growth in 2010. Forrester said that with nominal GDP and tech investment turning positive year-over-year in the US, its 2010 tech recovery will be much stronger than the economic recovery. Forrester advised technology vendors to emphasise on lower costs and then shift to growth.     Life insurance ULIP investors are safe Amid a turf war with SEBI on ULIP schemes, insurance regulator IRDA today assured investors that the equity-linked products are safe, while seeking greater clarity from authorities on jurisdiction of the two watchdogs. SEBI banned 14 life insurance companies, including Reliance Life, SBI Life, ICICI Prudential, Tata AIG and HDFC Standard Life , from raising fresh money in ULIP schemes that invests a major chunk of funds in stock markets. A day after, IRDA asked these companies to continue their business as usual, questioning the SEBI's authority to issue such an order.     Mutual funds Diversify your portfolio by investing overseas Indians are under-owned in terms of foreign assets. Though our markets continue to be among the best-performing ones globally, some diversification is needed One may argue, that investing overseas when most FIIs are bullish on India is going against the grain. But, there is logic behind this. Indian markets are richly valued at the moment. We recommend a 10% exposure overseas as a part of diversification of an individual’s portfolio. You can invest either through MF route or buy directly in markets overseas. MFs available in this category operate on multiple models. The first one being actively-managed portfolios from India, where the local fund managers buy and sell stocks in foreign markets. Templeton India Equity Income is one of the oldest schemes in this segment. The second is the fund of funds model. The Indian fund manager invests the money in various funds listed overseas and actively monitors these investments. The third model, the most common one, is the feeder fund model and is a kind of fund of fund. Here, the Indian fund invests in a fund listed overseas. ING Latin America Fund is a classing example of a fund of fund investing in a feeder fund that invests in Latin American markets. Principal Global Opportunities Fund is one of the oldest offering here.     Oil & Gas GAIL in talks with Interoil for stake in New Guinea gas plant State-run gas utility GAIL India is talking to Interoil Corp for a possible stake in the Canadian oil firm's proposed liquefied natural gas project in Papua New Guinea. Papua New Guinea, an island in the Southwestern Pacific ocean, last year granted initial approvals for its second LNG project, which would follow a plant proposed by an Exxon Mobil Corp-led venture. The venture would cost about USD 5 billion for a plant producing 3.5 million tonnes a year of LNG, with shipments due to start in 2014. The Canadian company is believed to have asked GAIL for a 'resource payment' of USD 5.03 million apart from equity contributions as strategic investors. GAIL finds the asking price too high. LNG is natural gas chilled to liquid form for transportation by tankers to destinations not connected by pipeline. China National Offshore Oil Corp - China's biggest offshore petroleum explorer, is already working with Interoil and the Papua New Guinea-owned Petromin PNG Holdings on commercial terms for financing the government's stake in the project. It is, however, not clear if China National Offshore Oil Corp, the Beijing-based parent of the Hong Kong-listed Cnooc, would take a stake in the project.     Placement MBAs losing out to CAs as decision-makers Chartered accountants, the nuts-and-bolts professionals in the world of finance, are scoring brownie points over suave MBA graduates as India Inc gets increasingly risk-averse in a post-slowdown environment. Companies are focusing more on risk-compliance than pursuing ambitious targets as they recover from an 18-month economic downturn, paving the way for recruitment of more CAs, perceived to have core competence in financial matters. Thus, CAs are currently being accepted as business leaders who could take up roles beyond auditing and financial management. While MBAs are being hired for purely sales, marketing or international trade functions, CAs are increasingly being looked upon as decision-makers. Compared to a two-year MBA curriculum, CAs go through a rigorous three-year curriculum. Since they understand balance-sheets the best, CAs are being hired for work other than the traditional audit.     Real estate Singapore a REIT listing magnet for India firms The success of Singapore's first real estate trust offering this month has prompted talk that other similar, previously shelved, offerings are now being dusted off. India's top real estate firms, DLF Ltd and Unitech Ltd may revive their Singapore IPO plans. Cache Logistics Trust raised $300 million after its IPO was priced at the high-end of an indicative range at a time when Asia's IPO markets have seen mixed success since last year's bull run. DLF had planned a $1.5 billion IPO, while Unitech had sought to raise about $500 million for its IPO, but these were put on hold in 2008 due to the global financial crisis. DLF and Unitech are India's two largest listed developers.   Retail Govt kicks off talks on FDI in retail The government has launched discussions between ministries about opening multi-brand retail to foreign direct investment (FDI), stepping gingerly into an issue that has been gathering dust for fear of triggering a political whiplash. The department of industrial policy and promotion (DIPP), the government body responsible for framing foreign investment policy, has written to the finance ministry on the issue and is also in talks with the agriculture ministry about the pros and cons of the move. The move to open up retail is part of the government’s strategy to plug gaps in the food supply chain and more importantly, help bring down the difference between farm-gate prices and retail prices. The department, a key offshoot of the commerce and industry ministry, has also floated a proposal to allow 100% FDI in defence production. The government allows up to 51% foreign investment in single-brand retail, but has so far been skittish about opening up multi-brand retail. The rules allow foreign multi-brand retailers only through franchise agreements with local players.     Telecom Nokia Siemens to pump Rs 105 cr more into Chennai plant Telecom equipment supplier Nokia-Siemens Network plans to invest an additional Rs 105 crore at its facility near Chennai taking the total investment to over Rs 300 crore as per the MoU with TN Government reached in 2008. So far, Nokia-Siemens Networks has invested Rs 220 crore, providing direct employment to over 300 people. The additional Rs 105 crore investment would generate employment for 500 people directly and 700 indirectly over the next two years. The Indian telecom industry is considered one of the fastest-growing sectors globally and India is pegged to become the second-largest global player in this business. According to Trai, subscriber base in the country has surpassed the 600-million mark and the overall tele-density of telephones per 100 people has touched 51%. The subscriber base in the wireless segment rose from 544.98 million in January this year to 563.73 million the next month. Though India may be the last to join the 3G bandwagon, Nokia-Siemens is well-placed to grow rapidly.Nearly 80% of the workers in the manufacturing unit came from the neighbourhood.     Textiles Forbes Brands to enter leisure wear market Forbes Brands, a branded apparel venture of Shapoorji Pallonji's Gokak Textiles Limited, is looking at entering the leisure wear market in six months. With our foray into men's innerwear with the launch of FACIT brand, we are also looking at entering men's leisure wear market which will comprise bermudas, shorts, pajamas and shirts, in another six months. Forbes Brands ventured into innerwear because they understand knitwear very well.

 

 

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