Fw: Cygnus Daily Business Update 06 Apr,10
G.V.Sandeep
G.V.Sandeep
DY Manager
Cygnus Business Consulting and Research Pvt ltd
Hyderabad
9849427085
040-23430203-114
Global Economy
For American business, India is the new land of opportunity
From healthcare to technology to media, there is growing excitement in every sector in the United States about India, not just because India's road to economic reform India a safe bet it's cheaper to do business in India but for the opportunities that a nation of 1.2 billion people with its growing economy offers. It came out loud and clear at Duke University's second annual India Business Forum in Durham, North Carolina, as business leaders, professionals, alumni, faculty and students last week turned the spotlight on India. There is tremendous excitement about India," Debu Purohit, professor of business administration and academic director, India, and one of the forum organisers. Looking at challenges of doing business with and within India from the perspective of either Indians in India or from that of multinationals, the focus was solely on a cost-driven argument. Looking at challenges of doing business with and within India from the perspective of either Indians in India or from that of multinationals, the focus was solely on a cost-driven argument.
Indian Economy
India-US cooperation key to global economic stability
The US sought greater engagement with India on the economic front, saying their ability to cooperate was critical to creating a10 most admired US companies more stable global financial system, balanced economic growth and an open trading system. The US has separately been demanding greater access to the Indian financial services market, including insurance -- which could be used to fund infrastructure. At present, foreign direct investment in the insurance sector is capped at 26 per cent.
IT dept to de-freeze 100 demat accounts
The income tax department will recommend de-freezing of about 100 demat accounts after it found the claims of a few individuals in the frozen accounts to be genuine. The department has been probing more than 6,300 frozen demat accounts, which had Rs 6,700 crore of unclaimed stocks. Some claims on these accounts have been found to be genuine by the Income Tax (I-T) department. They will be recommended for de-freezing to the two depositories, National Securities Depository Ltd (NSDL) and Central Securities Depository Services Ltd (CDSL), who froze them in January 2007, after legal formalities. During its probe, the I-T department had found monetary links of these frozen demat accounts to various other bank accounts and investment avenues like share markets. The department is checking the veracity of the account holders as it suspects certain 'benami' accounts also. The department is investigating into 6,385 frozen demat accounts, which had balances in excess of Rs 10 lakh as on December 2008. Demat accounts are required for trading in the stock exchanges. Without a demat account no trading can be done. The I-T department earlier had asked its Chief Commissioners of Income Tax (CCITs) to serve notices to all the account holders and report unclaimed accounts so that such accounts can be seized.
Industry News
Agri Commodities
Sugar prices fall on ample supply, reduced offtake
Sugar prices tumbled by Rs 100 per quintal in the national capital following ample supply amid reduced offtake. The increased arrivals from mills along with fall in offtake from bulk and retail consumers, such as soft drink and ice cream makers, led to fall in sugar prices.
Auto Comp
Auto part cos tap new sectors to drive growth
The uptick in the auto segment may be back, but global slowdown has taught auto component firms one key lesson — the need to spread risks and not put all eggs in one basket. If in the past, tier I and II suppliers were gung-ho about the export market, scores of auto component companies have now started seriously evaluating diversification opportunities. Those having made a headway include Bharat Forge, Sundram Fasteners, Wheels India, Shriram Pistons, Lucas TVS, Autotech Industries, India Pistons, Super Auto Forge, Susira, the Mahindras, the Tata Group, Lakshmi Precision Tools, Caparo Fasteners, Sterling Tools, Caparo Engineering and Maini. While India enjoys a cost-advantage in casting and forging as manufacturing costs in India are 25-30% lower than western countries, component makers are diversifying into non-core businesses in a bid to insulate them from cyclical nature of auto business. It helps them to utilise idle capacity and distribution channels.
Automobile
US govt to seek $16 mn recall penalty against Toyota
The US Transportation Department was seeking the maximum penalty of more than $16 million against Toyota Motor for failing to notify the government promptly about defective gas pedals among its vehicles. The fine of $16.375 million would be the largest civil penalty ever demanded from an automaker by the US government. Toyota has recalled more than 6 million vehicles in the United States, and more than 8 million worldwide, because of acceleration problems in multiple models and braking issues in the Prius hybrid. Toyota has two weeks to accept or contest the penalty. The largest auto industry fine came in 2004, when General Motors paid $1 million for responding too slowly on a recall of nearly 600,000 vehicles over windshield wiper failure.
Banking
ICICI Bank, HDFC Bank play down 'foreign' tag
The country's two largest private sector lenders - ICICI Bank and HDFC Bank - played down concerns about being treated as banks on account of majority foreign shareholding in them, saying they continue to remain Indian. The two - along with five other private sector banks - are likely to get impacted by the new FDI policy as foreign shareholding in these entities in different forms like ADRs and GDRs exceeds 50 per cent. This could make them ineligible for being treated as domestic entities. The other five banks which are likely to get impacted by this are Yes Bank, IndusInd Bank, Federal Bank, ING Vysya and Development Credit Bank.
SBI opens strategic training unit to hone trainee skillsets
SBI has established a strategic training unit (STU), which will bring the bank’s entire training system under a unified command, headed by a chief general manager. This has been done with the objective of developing skills, particularly among the 25,000 additional recuritments that the bank is planning for the current fiscal. The bank, with over two lakh employees, has one of the largest training facilities in the country. These include 45 learning centres and four apex institutes. The STU, located at Hyderabad, will be headed by chief general manager. The apex institute includes the three Hyderabad-based organisations — State Bank Staff College with its 16.5-acre campus and the State Bank Institute of Rural Development. The fourth is the State Bank Academy, which has a 11.5-acre campus in Gurgaon. Until now, the administration of SBI’s educational network was looked after by the respective operational units.
Bio Pharma
Biocon acquires 49% Cuban partner CIMAB’s stake in JV
Biotechnology major Biocon has fully acquired the joint venture Biocon Biopharmaceuticals from its Cuban partner CIMAB. Under the business restructuring plan, Biocon will pick up CIMAB’s 49% stake and will make Biocon Biopharmaceuticals (BBPL) a wholly owned subsidiary of Biocon. Although the company did not announce the financial details of the deal, the buyout was financed through internal accruals. The JV was established to provide manufacturing support for a range of jointly-developed biopharmaceuticals. This partnership had led to the launch of India’s first novel monoclonal antibody BIOMAbTM for the treatment of head and neck cancer. With Biocon’s expanding needs for biosimilars, the company sees the possibility of utilising the facility better through acquisitions and expects to turn it around within 3-5 years. Manufacturing support to all partnered products will continue along with the joint development of novel biologics led by T1h programme.
Construction
ACC pegs industry growth at 10% on govt’s infra thrust
Rising input costs, non-availability of wagons and imminent excess supply pose challenges for the cement industry for the current financial year, but the government’s continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10% in 2010. The prices of major inputs such as coal, slag, gypsum, fly ash and petroleum products have started rising and are likely to harden in 2010, pushing up manufacturing and distribution costs. In addition, the availability of raw materials continues to pose challenges. Also, the supply of railway wagons is likely to worsen during the course of the current year. The sales figures of cement companies for March corroborate ACC’s prediction of demand surge. The March sales of four cement companies, including companies of the Aditya Birla Group, Jaiprakash Associates, JK Lakshmi and Ambuja, have seen robust growth in the range of 40-75%, mainly due to higher consumption by the building industry. But the rising demand may suffer a set back in December when excess supply is expected to hit the market.
FMCG
FMCG firms facing package ordeal
Sharp surge in packaging costs is tormenting consumer product marketers, squeezing their margins and forcing them to consider increasing prices of processed food and some other products in a cut-throat market. Prices of packaging materials such as aluminium foil, kraft paper, adhesives for corrugated boxes and packaging plastics have increased up to 25% in the last three months, forcing companies such as Marico and Dabur to talk price hike in a marketplace where increasing prices and cutting advertising spends could prove fatal. FMCG companies, working with extremely low margins after absorbing most of last year’s rise in raw material prices and higher logistics costs due to fuel price hike, are also exploring innovation in packaging and hedging materials to retain profitability. Some analysts expect companies to cut internal and advertising costs for some time before hiking prices in the second quarter of the next fiscal. Companies are also exploring innovation in packaging. Shyam Sunder, senior design manager at IDE (Innovation Design Engineering) division of Tata ELXSI, as many FMCG companies now demand for smarter and cost-efficient packaging solutions.
IT hardware
Use your iPhone to help scan food barcodes
Allergy sufferers could soon be able to use their iPhone to scan a food's barcode at the supermart to determine whether it's safe to eat. The application, being developed by Deakin University (DU), not-for-profit organisation GS1 Australia and food major Nestle, will allow consumers to instantly access detailed product information including allergens such as wheat, egg, peanuts and shellfish directly from their iPhone. The barcoding system administered by GS1 Australia, had "unlimited potential" because it could be associated with other valuable product data such as serving size, nutrient information, and environmental related information.
ITSS
Students can become interns in UID project
After roping in techies as volunteers, and on sabbatical from the private sector , the government’s unique identity project led by Infosys co-founder Nandan Nilekani has now decided to cast its net wider to even include students in its functioning. They want to bring in those studying in universities and researchers to work for them as interns for a specified period so that they can also contribute to the success of the venture. They can work on designated projects as summer interns, for example. They will come out with the internship modalities shortly, which will contain details of the kind of people they are looking for. Sharma said there had been a “wonderful” response from IT companies to Nilekani’s request to send some of their best minds to work for the UIDAI on a temporary basis. They are still processing many of the applications but some have already joined (on a sabbatical). They will write to Nasscom thanking them for their help in this regard. In January, Nilekani had requested the software industry body to urge their members to send engineers, having expertise in the development of large-scale software systems , on a sabbatical to the Authority so that their abilities could help fast-track the rollout of the UID project.
Metals
Nalco increases metal price by Rs 6000 to match LME price
The Navartna PSU and India's largest producer and exporter of alumina and aluminium, National Aluminium Company Limited has hiked domestic prices of metal by Rs 6,000. Now it will sell the metal at Rs 1.09 lakh per ton. The increase in the LME prices of metal has forced us to increase by Rs 6000 to keep parity with international price. The LME cash price on a cost, insurance and freight basis has crossed USD 2300 [Rs 1,03,500]”. Nalco also recently sold 9,000 tons of aluminium ingots at USD 88 per ton premium over the average LME cash price on a cost, insurance and freight basis, USD 10 more than the last tender. The Company is quite bullish about the metal price as it commits itself for 100% capacity utilization of its aluminium smelter at Angul to produce 4.6 lakh tons of metal and 16.58 lakh tons of alumina from its refinery at Damanjodi. Besides, the Company has set higher financial targets and early completion of its on-going second phase expansion projects in the current fiscal.
Oil & Gas
Iran says any oil sanctions would hurt West, Reliance not to renew import contract
The United States is pushing for a fourth round of U.N. sanctions on Tehran over its refusal to halt sensitive atomic work the West suspects is aimed at making nuclear bombs, a charge Iran denies. The latest draft proposals agreed by the United States, Britain, France and Germany include restrictions on new Iranian banks established abroad and on insurance of cargo shipments to and from Iran, the world's fifth-largest crude exporter. They do not include sanctions targeting Iran's oil and gas sectors as the French had originally pushed for. Energy-hungry Asian countries are the main buyers of Iranian oil, but recent months have seen a drift in Asia away from crude sourced from the Islamic Republic. Reliance Industries will not renew a contract to import crude oil from Iran for financial year 2010. Some trading sources said the move could be due to a price disagreement when the refiner has easy access to competing grades, while others said pressure from the United States and its allies may be another reason. Japan's Iranian crude imports are also seen declining this year, while China's purchases from Iran fell nearly 40 percent in the first two months of the year. Ghanimifard said any sanctions on Iran's oil sector would not be practical, suggesting the country could always find alternative buyers.
Power
Railways' orders seen a boost for future earnings
The expansion, marked by an additional capacity increase of 50%, would enable it to generate additional revenues of Rs 8,000-10,000 crore in FY11, which are equivalent to a sales growth of 25-30%, compared to the modest sales growth of 16% projected by the company. The sales growth would translate into a profit growth of 35-40% for the next four quarters, providing impressive earnings visibility for the company. The projected growth in sales and profit for this fiscal is also equivalent to its five-year average growth rate. The total expenditure on fixed assets during the year stood at Rs 1,700 crore, up by nearly two-thirds compared to last year. The results are provisional and don’t provide any break-up of costs. However, since the profit growth at 40% is higher than the nine-month profit growth of 34%, it implies that major cost items, including raw material, have been under control. It also recorded a significant increase in fresh orders during the past few quarters leading to an order backlog.
Power cos may get ECB refinance window
Reliance Power, Essar, Adani and other power producers could soon be able to refinance their domestic debt through overseas borrowings. A high-level committee on external commercial borrowings, a key decision making body on overseas debt, will consider allowing refinancing of domestic debt taken for equipment purchases for power projects. The external commercial borrowing window may also be further opened for the new category of non-banking finance companies, such as Srei Finance, that lend mostly to the infrastructure sector. Refinancing of domestic debt through ECBs is not allowed in general. They need to explore the mechanism to allow external funds to replace domestic funds. The government had recently opened the refinancing window for the telecom sector in a limited way. It amended the overseas borrowing rules allowing winners in an upcoming 3G wireless spectrum auction to pay the fee in rupees that could later be refinanced by overseas borrowing within 12 months. Indian power producers have been lobbying for a refinance facility for some time now. With interest rates in the country expected to go up following monetary tightening, overseas borrowing seem a lucrative option for these companies. Currently, companies can borrow overseas at an average rate including currency hedging costs at around 9-10%, which is still lower than domestic credit.
Retail
New FDI norms: Bharti-Wal-Mart, Tata-Tesco JVs in a spot
New rules on foreign direct investment in wholesale trade have caused consternation among Indian business houses with big plans for retail such as Sunil Mittal’s Bharti and the Tatas and their partners, global giants like Wal-Mart and Tesco. The guidelines have also disrupted plans by India’s largest retailer Kishore Biyani to team up with French company Carrefour for a foray into wholesale trading, also known as cash & carry. Companies are seeking the help of lawyers and consultants to make sense of the sudden change in the regulatory landscape which might result in existing agreements being reworked. But the main irritant is the 25% cap on sales to group companies because some agreements had been structured so that cash & carry companies owned by foreign investors sell the bulk of their goods to Indian-owned retailers selling to consumers. India allows foreigners to own 100% in companies carrying out wholesale trade but prohibits FDI in retailers selling to consumers. Foreign-owned wholesale traders can sell to shops and restaurants or other retailers but not to individual buyers.
Telecom
Microsoft to unveil new cellphones next week
Microsoft plans to unveil a new line of cellphones next week with social-networking capabilities aimed at young consumers. Microsoft plans to unveil new mobile phones manufactured by Japan's Sharp Corp. Microsoft had designed the software, online services and hardware for the new mobile phones as part of a development project code-named "Pink." It said the phones will be offered through a partnership with Verizon Wireless, the telephone carrier owned by Verizon Communications and Vodafone. The phones will initially only be available in the United States, but will eventually be available internationally. The Journal said the phones will run software that resembles a new Microsoft mobile phone operating system due out later this year called Windows Phone 7.
DoT conducts mock auction for 3G spectrum
The Department of Telecom (DoT) conducted the mock auction to familiarise the nine 3G and 11 broadband wireless access (BWA) bidders with the system and clarify their technical queries about the auction. Bidders logged onto the DoT's mock auction network since morning to understand the nitty gritties. Nine telecom companies are in the final list of bidders for three-four slots of 5MHz of 3G spectrum, while there are 11 bidders for two slots of BWA. Winners will be able to offer customers high-speed voice and data transfer and multimedia services. The process of e-auction allows applicants to bid from their computers. Mine applicants including Bharti Airtel, Vodafone Essar, Reliance Telecom and Idea Cellular, and 11 applicants for BWA have qualified to take part in the auction. Government hopes to collect about Rs 30-Rs 35,000 from the auction of the radiowaves. The reserve price for a pan-India 3G licence is Rs 3500 crore while that of BWA is Rs 1,750 crore.
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