Fw: Cygnus Daily Business Update 23 Mar,10
G.V.Sandeep
Global Economy
Obama to revel in hard-fought healthcare victory
President Barack Obama will revel the passage of landmark healthcare legislation, a hard-fought win that will help shape his legacy and the Democrats' chances of holding power in the U.S. Congress. Obama will sign the bill to revamp the $2.5 trillion healthcare sector and then speak at a ceremony with lawmakers, in the culmination of a year-long push that hurt his approval ratings. Aides have described a euphoric atmosphere at the White House after the House of Representatives narrowly approved the healthcare legislation, which analysts had pronounced all but dead only a few weeks ago. Obama put his reputation on the line and poured his energy into passing the bill, even canceling a planned trip to Indonesia and Australia. His intense focus on the issue drew criticism from some Democrats who worried healthcare was becoming a distraction from the need to fix the economy and boost jobs. The overhaul will extend health coverage to 32 million Americans, expand the government health plan for the poor, impose new taxes on the wealthy and bar insurance practices like refusing cover to people with pre-existing medical conditions. It marks the biggest change in the system since the Medicare health program for the elderly was created in 1965 and fulfills a goal that eluded many of Obama's predecessors for a century, most recently including Bill Clinton in 1994.
Oil sinks below $82, hit by firm dlr, Greek woes
The American Petroleum Institute weekly oil inventory report, due later in the day, will offer clues on the outlook for demand in the world's top energy user, while existing February home sales data could shed light on the health of the world's largest economy. This month, oil has managed to top $83 four times, but has failed to hold the gains, partly stemming from rising risk aversion due to nagging worries over Greece's debt woes and expectations of oversupply this year.
Indian Economy
Montek wants agri reforms, pushes for market prices
The country’s apex planning body has called for wide-ranging reforms in agriculture, while criticising the strategy employed by the government to increase farm output and tame soaring food prices. As per the Planning Commission, agriculture pricing system should be made more market-oriented by delinking support prices from procurement prices. It suggested measures such as abolition of levies and stocking limits, encouraging free movement of goods across the country and doing away with bans on exports and futures trading. The farm sector did well between 2005-06 and 2007-08 to grow at 4%, the performance in the past two years showed that the government’s strategy was not effective and more needed to be done on the supply side to maintain growth. The government’s management of agriculture has drawn criticism from several quarters after its policies failed to rein in food price inflation, which is hovering around 18%, a level unseen in several years. Growth in agriculture production dropped to 1.6% in 2008-09 and is estimated to post a decline of 0.2% in 2009-10 due to poor rains affecting kharif crops. The government has targetted 4% agriculture growth for the plan period. Agriculture and allied activities account for less than a fifth of India’s gross domestic product (GDP), but it provides livelihood to more than 60% of the country’s 1.2 billion people. The Eleventh Plan strategy for enhancing farm production stressed on improving farmers’ access to technology, enhancing the quantum and efficiency of public investments, increasing systems support while rationalising subsidies and encouraging diversification towards higher value crops and livestock.
Euro-IV switch to make fuel costlier from April 1
Petrol and diesel is set to become costlier in 13 major cities including Delhi, Mumbai, Kolkata and Chennai from April 1 when these cities will move for cleaner auto fuel (Euro-IV). The oil ministry is considering a proposal to raise pump prices of Euro-IV petrol and diesel to recover about Rs 15,000 crore spent by state-owned oil companies in upgrading their refineries. The price increase will be marginal and will remain below Re 1 a litre. But no one could give a definite numbers. State-owned refiners such as Indian OilCorp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have already spent about Rs 40,000 in upgrading their refineries to produce Euro III and Euro IV fuel. Capital expenditure on upgrading refinery to Euro-IV alone was about Rs 15,000 crore.
Industry News
Agri Commodities
Turmeric drops on profit-booking; jeera, pepper up
India's turmeric futures wiped out early gains by midday on profit-booking after gaining more than 15 percent in the last 5 sessions and on rising arrivals in the physical market. Arrivals are gaining pace in spot market but demand is good and is likely to support prices. Turmeric exports in January 2010 stood at 3,250 tonnes, down 22.61 percent from a year ago. India's jeera futures were higher on improved seasonal demand and a decline in arrivals. India pepper futures were higher on robust domestic demand amid limited supply in the market as farmers held on to their produce for better prices.
Automobile
Porsche Panamera: A family car
The 500-horsepower Porsche Panamera Turbo is fast enough to qualify as a bullet train. And with the car’s six-figure price tag, you might need a federal subsidy to procure one. The four-door Panamera takes Porsche, long known for its lithe two-door sports cars, even more deeply into the mainstream of the auto market. The company’s previous move into family transportation, the Cayenne sport utility introduced in 2002, was met with derision and dismay by hardcore Porsche enthusiasts. But the Cayenne became the company’s best seller and brought a new group of customers into Porsche dealerships. You start the car by inserting a clever “Panamera shaped” key into a slot and pressing a button. The front-mounted engine – an adaptation of the motor in the Cayenne Turbo – emits a serious growl. As you expect from a Porsche, especially one with such a lofty price tag, the Panamera is a technological tour de force. When the chassis and engine-management systems are set to the full-performance mode, “PASM Sport Plus,” the Panamera is more like a rocket sled than a family car.
Tractor industry divided over govt directive to pay cess
A section of the tractor industry could move court against a recent government directive asking them to pay cess on their makes, sparking off a fresh round of legal spats over an issue that has split companies along different lines. Companies such as Sonalika Group and Indo Farm Tractors & Motors are exploring legal options to contest the government order. These companies had stopped paying the levy after the Supreme Court upheld a Himachal Pradesh High Court order in favour of Indo Farm that exempted the tractor industry from automobile cess rules while others such as Mahindra & Mahindra (M&M), Tafe-Eicher and Escorts continued to do so.
Banking
ICICI gets full banking ops approval in Singapore
India's No. 2 lender ICICI Bank is opening its Singapore branch and had received approval from the regulator to launch full banking services in the city state. The Monetary Authority of Singapore had granted ICICI a license to transact banking business there with effect from August 2003, and the bank has been offering services such as international loan syndication and corporate banking. After getting the qualified full banking (QFB) status on Monday, the bank will be able to offer services including taking deposits and giving loans in Singapore.
Construction
Cement majors to tap rural markets as overcapacity threatens to dent profits
Cement makers see overcapacity looming large from the next fiscal and are trying to compensate by targeting the rural heartland, small towns and villages to increase their sales and protect their bottomlines. Cement majors — UltraTech, Heidelberg Cement, ACC, Ambuja — and mid-level players, such as Shree Cement, Binani, have aggressive plans as they focus on the relatively untapped rural market to be the next growth driver. Shree Cement, the largest cement maker of North India, has chalked out an expansive plan for marketing in the villages of Rajasthan, Haryana, Punjab, Chattisgarh, Madhya Pradesh and Gujarat. Binani Cement, which mainly supplies to Rajasthan, Gujarat and Delhi, is also creating awareness for its cement brand in rural India. It’s increasing its penetration in the rural market and villages through retail outlets. The total installed capacity of the Indian cement industry, the world’s second-fastest growing market after China, is 240 MT. The cement industry is growing at 9-11% for the past few years. It is widely-believed that the growth will be around 9% over the next few years. China is growing at over 14% annually.
Consumer durables
Canon to launch 40 new products in India by June
Japanese office automation and imaging giant Canon would launch 40 new products, including a wide range of digital cameras and printers, in the Indian market over the next three months. These include digital cameras, video cameras, printers and copiers. At present, they have 148 products. These new launches will replace older ones. They will also launch this week a new range of document machines -- a multi-functional device combining a scanner, printer and photocopier in a single equipment. These document machines are targeted basically for office users. These are like multi-functional devices. A single machine can perform various tasks. The $45 billion company has tied up with 13 retail chains to sell its products and set up 14 service centres, up from 10 at present. Canon also hopes to beat Nikon in the 50,000-unit market for single-lens reflex (SLR) cameras in India with a 55-percent marker share. The Indian arm of the company, a wholly-owned subsidiary of Canon Singapore, has set a target of Rs 1,100 crore ($345 million) in revenues this year, against Rs 840 crore ($185 million) in 2009.
Airtel Digital, Dish TV to launch HD service this year
DTH operators Airtel Digital and Dish TV will launch their high definition (HD) services this year, in time for the Commonwealth Games. While Bharti Airtel's DTH venture will launch the HD service, which offers better picture and sound quality compared to the regular service, before the games, Dish TV plans to launch its service in the first quarter of next fiscal. The service would be charged at a premium over the normal DTH services.
Education
Financial education must in age of complex products
Financial understanding has assumed greater importance in the wake of the global crisis, which was triggered by complex products that people invested in without realising the risks. Today financial competence has become more essential as financial markets offer more complex choices. The workshop was jointly organised by the Reserve Bank of India (RBI) and the Organisation for Economic Cooperation and Development (OECD). In fact, the recent global financial crisis has raised the question whether lack of financial knowledge led individuals to take out adjustable rate mortgages or incur credit card debts they could not afford.
Hospitality
Four Seasons Hotels to have 4 new properties in India by '15
Microsoft founder Bill Gates- promoted luxury hotel group Four Seasons, will have four new properties in India within the next five years as part of its strategy to tap the resurgent hospitality sector in the country. The Canada-headquartered chain will add over a 1,000 rooms to its inventory and focus both on the leisure and business segments. Their plan is to have two new hotels in Bangalore and Gurgaon and two resorts in Kerala and Jaipur by 2015. This will add over a 1,000 rooms to our inventory. While the two hotels at Bangalore and Gurgaon will focus on the business segment, the resorts will cater for the leisure sector. The group started its operations in India in 2008 and currently runs a mid-sized luxury boutique in Mumbai with 202 rooms. Four Seasons, promoted jointly by Microsoft founder Bill Gates and Saudi Arabia's Prince Al-Waleed bin Talal, currently operates 86 hotels across the globe.
ITES
Opportunity comes knocking on outsourcing firms' doors
The outsourcing industry received its biggest bonanza yet with the US healthcare bill being passed by the House of Representatives. Opportunity that it throws up for outsourcers is huge and far bigger than the Y2K, which included only changing code. When the bill becomes law, it will bring around 32 million more Americans under insurance cover, pushing healthcare providers and insurance firms to become more efficient and opening up demand for less-expensive services, better technology and business intelligence. Nearly all top IT firms and BPOs have been anticipating the move and preparing for it by pursuing contracts and acquisitions giving them a footprint the US healthcare provider and insurance segment, estimated at around $ 30 billion. A significant amount of business will come from enrollments, claims processing and providing customer services with technology and tools helping insurance providers get more customer insights and price their products appropriately. Universal access to insurance increases the risk to insurance providers, forcing them to become more efficient by lowering costs. From no revenues from healthcare providers and payers, Intelenet now gets 10% of its revenues from this segment. Mumbai-headquartered IT services provider, Patni Computer Systems, announced a strategic deal with a US-based healthcare insurance provider that involved taking over part of its operations in El Paso, US, only last week.
ITSS
US healthcare reforms to spawn $20-bn market for IT players
President Barack Obama will not be the only one celebrating the passage of the US healthcare reforms Bill by the US House of Representatives. Indian IT companies are equally jubilant. That’s because the Bill, which proposes to create Electronic Health Records (EHRs) for all Americans by 2014, is expected to open up a $20 billion market opportunity for Indian IT services firms like Infosys, Wipro, TCS, Firstsource and MindTree. Obama’s plan proposes to allocate $150 billion to healthcare. Of this, nearly $20 billion is proposed for healthcare IT alone, most of which is expected to be spent on EHRs. Indian IT firms are expected to participate in EHR implementations, upgradation, integration of databases and inter-operability. They could also build solutions to assist the US healthcare industry to prevent leakages and reduce costs and waste.
Life insurance
LIC's new biz grew 23 pc during April-Feb 2009-10
The new busineses of the country's largest insurer Life Insurance Corporation (LIC) grew by over 23 per cent, with Rs 54,320 crore collected in the first eleven months of the current fiscal. During the April-February period of last fiscal, LIC mopped up first year premium of Rs 43,883 crore, sectoral regulator Insurance Regulatory and Development Authority (IRDA) said in its monthly data. Overall, life insurance industry collected premium of Rs 83,891 crore in the first eleven months of this fiscal compared to Rs 72,017 crore in the corresponding period last fiscal, thereby growing by over 16 per cent.
Logistics
Logistics cos ramp up supply chain to meet rising demand
India’s logistics services providers are steadily expanding their limited supply chain network countrywide to cater to a growing clientele, but limited capabilities and poor infrastructure are slowing them down. The $2 billion third-party logistics (3PL) segment is among the top five most targetted sectors for investment, as demand for transportation and ancillary services grows rapidly, and many firms are looking to cash in on this opportunity. While the country is expected to clock a growth of over 7.2% in the year to March 2010, it is striving to once again get back to the 9% GDP rate of the recent past. This would hugely benefit the 3PL segment which, going by trade estimates, is growing at 20-25% annually. 3PL players such as Aqua Logistics, Arshiya International and Gateway Distriparks, among others, have ambitious plans to expand their range of offerings. Aqua Logistics raised about Rs 1.5 billion via an initial public offering in February while Arshiya International plans to invest Rs 25 billion to set up five warehousing special economic zones across India by 2012.
Metals
Foreign steel giants learning alliance mantra
Steel Authority of India Ltd’s Bokaro steel unit has 32,000 acres. That is eight times the requirement of Korean giant Posco’s requirement in Orissa and twice Bokaro Steel’s current requirement, half of it unutilised. No surprises, therefore, that Posco has turned to SAIL after a five-year wait for its land in Orissa. Steel majors—domestic and global—have realised that land is the biggest impediment to the projects, leading some global producers to forge alliances with Indian counterparts. While Posco and ArcelorMittal have first-hand experiences, other foreign steel makers have learnt from what they went through. Clearly, it’s the vast stretches of land required for the mega steel plants which is standing in the way. Even mine allocation appears more achievable. At stake is the steel ministry’s target of achieving a production capacity of 115 mt of production capacity in the country by 2012, recently brought down from the earlier 124 mt. The current capacity is about half of this.
Oil & Gas
Indraprastha Gas to raise CNG prices by Rs 1.1/kg
Indraparastha Gas Ltd, which supplies gas in Delhi and surrounding region, aims to raise retail prices of Compressed Natural Gas (CNG) by about 1.10 rupees per KG from April 1.
Power
States get invite as hydropower projects put on the fast track
THE government has put large hydro-power projects on the fast track with an empowered group of ministers asking states to come forward with proposals. Large hydel projects have been envisaged on the lines of the coal-based ultra mega power projects (UMPPs). Once the projects are identified, the process of securing land and other clearances would begin, followed by a tariff-based bidding. The procedure is expected to reduce risk associated with hydro projects to a large extent thereby attracting more investments and participation from companies. India has an estimated hydro-power potential of 1,50,000 mw, of which only about 37,000 mw has been tapped. The threshold size of large hydel projects is likely to be kept at as much lower 500 mw to make them feasible and avoid large scale dislocation and environmental hazards. A coal-based UMPP has a capacity of 4000 mw. The proposed UMPP scheme for hydro projects would follow a model similar to the one for thermal projects with PFC being the nodal agency responsible for forming the shell companies and inviting and finalising bids. The shell companies would also have representation from National Hydro Electric Power Corporation (NHPC), CEA and the power ministry.
Retail
Future group sharpens focus on food retailing
Kishore Biyani’s Future Group is sharpening its focus on food retailing to tap the growing opportunity in the segment. The group is looking at opening different kinds of food retail stores, depending on where it operates, and to acquire more to expand its presence. It acquired the Indian franchisee store of South Africa’s Shoprite in the Mulund area of Mumbai and renamed it Foodrite. Close to 85 per cent of the stock is food items. It already has formats such as Food Bazaar, Big Bazaar and KB’s Fair Price, which predominantly stock food items. Food retail is a third of the group’s Rs 9,000-crore revenues. The Group operates a little over 1,000 stores, with a total retail space of 16 million sq ft. According to its estimates, Mumbai itself has a total food market of Rs 28,000 crore, with an addition of Rs 8,000 crore per annum. This is the market among those who earn more than Rs 2 lakh per annum. Future is not alone in increasing the focus on food retailing. Other retail majors such as Tata’s Trent Hypermarkets and Aditya Birla’s More hypermarkets are focusing more on this segment, with kitchens inside stores and a vast assortment of fresh produce. Fresh produce and food stock are believed to be major drivers of footfalls in retail stores. To improve efficiency in fresh produce retailing, the group is setting up a separate arm which will handle sourcing, grading, assortment and packing of fresh produce.
Telecom
RCom-Polycom launch wireless video conferencing
Reliance Communications announced that it was partnering with Polycom, a global leader in tele-presence and video conferencing services. This partnership would introduce high-resolution wireless video-conferencing services, to be marketed by Reliance Webstore, the retail arm of the Anil Dhirubhai Ambani Group. The service would be commercially rolled out in over 40 cities immediately and reach 60 cities in four months. Reliance Webstore plans to expand it to 100 cities by the end of the year. Reliance Webstore already sells wired video conferencing services to over 1,500 companies. It does so through a network of 200 video conferencing suites. Polycom’s technology, coupled with its broadband services, reduces the cost of their wireless service. Reliance plans to extend this service to small and medium-sized enterprises, as well as individual consumers. The new offering comes with Polycom’s QDX6000 video conferencing system, with dedicated virtual private network connectivity through the Reliance Netconnect Broadband, with a wireless broadband data card. The entire equipment comes for Rs 2 lakh and has a connectivity plan of Rs 1,500 per month for a usage of 10 GB. On a pay-per-use basis, a managed video conferencing service costs Rs 1,500 for every half-hour.
3G bids: Uncertainty may've led to new foreign telcos' absence
The lack of any new foreign telecom company’s application to join the April 9 auction for third-generation (3G) spectrum may be due to uncertainty on spectrum availability, coupled with higher cost of rolling out services. Only those foreign companies with an existing presence in Indian telecom finally put in bids for the 3G auction. The last date for applications was March 19. US-based AT&T and Verizon and Australia’s Telstra, among others such as Orange and Sprint, were keen to enter the Indian mobile market and participate in the auction. DoT is to auction three slots of 3G spectrum in most of the circles. The reserve price for pan-India spectrum has been fixed at Rs 3,500 crore. Out of the 22 circles, five — Punjab, Bihar, West Bengal, Himachal Pradesh and Jammu & Kashmir — will have four private players each.
Textiles
Binny promoters to separate, manage 3 different entities
The three promoters of Century old Binny- M Ethurajan, M Nandagopal and V R Venkatachalam, have decided to part ways amicably. They will manage three different entities arising out of the demerger of Binny, which is listed on stock exchanges. They acquired Binny in 1987 when the sick company with its cotton and silk mills in Chennai and Bangalore was at the peak of its crisis. They would have infused nearly Rs 300 crore over the years as a part of the revival effort. At the recently held EGM, convened by Madras High Court, shareholders approved the scheme of arrangement and de-merger of Binny for creating two new entities, Binny Mills and S V Global Mill, which will seek listing in the exchanges later. However, the demerger and separation will lend greater focus to the operation of each of the diverse businesses of Binny, attract fresh capital and new investors. It will lead to better and specialised management of the individual businesses by the respective entities. It is also to unlock the value of shares.
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