Fw: Cygnus Daily Business Update 14 Apr,10

[G.V.Sandeep]

 

With regards
G.V.Sandeep
DY Manager
Cygnus Business Consulting and Research Pvt ltd
Hyderabad
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040-23430203-114

 

 

 

	CygnusDailyBusiness Updates                                                                                       14 April 2010         Global Economy India to contest steel subsidy complaint in EC India will counter an allegation in the European Commission that its steel exports to Europe are subsidized. The Directorate General of Foreign Trade in the Commerce Ministry has begun the spadework for collecting documents to prove that the complaint before the EC was ill-founded. The European Commission (EC) has started an investigation into allegations that some steel imports from India are subsidised, resulting into damage to its domestic producers. The allegations, if proved correct, could result in the European Union (EU) slapping anti-subsidy duties on these imports. EC started the probe on a complaint lodged by the European Federation of Iron and Steel Industries (Eurofer) on February 15. It is alleged that "imports of certain stainless steel bars, originating in India, are being subsidised and are thereby causing material injury to the (European) Union industry." Eurofer, represents firms which account for 25 per cent of the total production of certain types of stainless steel bars in the European markets. As per the complaint, producers of the products have benefited from a number of subsidies granted by the Indian Government and from state subsidies. The subsidies, the complaint alleged, include benefits to industries located in special economic zones, loan guarantees from the Central Government and regional subsidies by Maharashtra and Gujarat. India's steel exports in 2009-10 fell by 28.7 per cent to 3.16 million tonne as western markets are still to recover from the demand crunch. India's main markets include the US and Europe.     Indian Economy Countdown begins for rocket launch with Indian cryo engine The countdown to launch a heavy rocket with an Indian cryogenic engine to inject an advanced communication satellite in the geo-synchronous orbit began at the Sriharikota spaceport in Andhra Pradesh. The countdown began at 11.27 a.m. at our Satish Dhawan Space Centre in Sriharikota. All preparations for launching the geo-synchornous satellite launch vehicle (GSLV-D3) carrying the geo-stationary experimental satellite (GSAT-4). The spaceport is located on a small island off the Bay of Bengal, about 80 km north-east of Chennai. The preparations during the 29-hour countdown includes filling up the second stage and four strap-ons of the 416-tonne rocket with about 200 tonnes of liquid propellants. In the run up to lift-off, the cryogenic upper stage will also be filled with propellants. Certain mandatory checks and charging of batteries on the 50-meter tall rocket and the 2.2-tonne satellite onboard will be carried during the countdown. Readiness of the ground stations at Sriharikota, Biak in Indonesia and the master control facility at Hasan in Karnataka, about 180 km from here, will also be tested by the space scientists and engineers simultaneously.     India should not copy American development model Telecom guru Sam Pitroda  said India should develop an indigenous model for development that focuses on low-cost solutions, instead of copying the consumption-based American economic model which is unsuitable for this country. Addressing participants of Microsoft-organised TechED 2010, a technology conclave here, via videoconferencing from Chicago, the technocrat said India has its own challenges and requires Indian model focused on low-cost solutions. Advisor to Prime Minister on public information infrastructure and innovations, Pitroda said India's rural areas could become outsourcing hubs for urban centres.   India's growth prospects pick up India's economy is seen growing at a faster pace in 2010/11 than earlier expected, supported by a global recovery, domestic demand and a double-digit expansion in factory output. Such expansion will generate greater inflation than previously expected, requiring a steady series of rate rises from the central bank by the end of December. Asia's third-biggest economy will grow at annual rates above 8 percent in coming quarters and is seen expanding 8.4 percent for the 2010/11 fiscal year, the survey of 20 analysts showed. India's economy grew 6.7 percent in 2008/09, slowing from rates of 9 percent or more in the previous three years. The government has said it expects growth in 2009/10, or the fiscal year that ended on March 31, to have been 7.2 percent. Analysts expect the Reserve Bank of India (RBI) to tighten policy further, raising the repo rate , at which the central bank lends to banks, by 100 basis points to 6.0 percent by the end of December from the current 5 percent. Last month, the RBI raised the repo rate and the reverse repo rate , at which it absorbs excess cash from the banking system, by 25 basis points each. That took the reverse repo rate to 3.5 percent. The rises were the first since the RBI began cutting rates in 2008. The central bank cited inflationary pressures and a steady economic recovery for the move. Fifteen out of 16 economists surveyed said the central bank would raise the repo rate between 25 and 50 basis points by the end of June.   Industry News     Automobile Maruti to relaunch Alto with new engine; to price it up to Rs 2 lakhs India's largest car maker Maruti Suzuki is all set to bring on the road a revamped and cheaper Alto. Maruti feels that now is the time to launch a stripped down version of its largest selling car. It sells close to 20,000 Altos every month making it India's best selling car model. Maruti hopes the leaner Alto will not only help it counter competition from new cars in the markets but also replace the iconic Maruti 800 which is being phased out. Now that the new Alto will have a 1 litre K-Series Engine and will be priced up to Rs 2 lakh. The car will be in showrooms in the next couple of months but don’t expect major changes in design. The company doesn’t want to change the design of its highly successful car model and its not just Alto, Maruti is planning to refresh its entire car line up a new Wagon R which is also expected before end of April.     Banking Daimler keeps 2010 earnings, dividend outlook German carmaker Daimler reaffirmed it would earn more than 2.3 billion euros ($3.14 billion) of operating profit this year, with all divisions returning to the black, allowing it to pay a dividend again. Following a near 27 percent rise in sales of Mercedes-Benz brand luxury cars, its retail volumes would increase faster than those for the overall industry. Zetsche will likely earn a hefty rebuke from shareholders for his decision to omit a payout for the first time in 14 years, although he has pledged to distribute a dividend for 2010 equivalent to about 40 percent of the group's net profit. Last week, Daimler agreed to a cross-shareholding with Renault and Nissan, cementing a strategic partnership that will stretch from small cars through light commercial vehicles to sharing even technology for electric power trains. India's bilateral trade with China has already exceeded $40 billion, making Beijing New Delhi's largest trading partner. During his visit to the US in November last year, the mild-mannered Manmohan Singh surprised many when told a US think tank that he had seen an assertive China lately and it was a cause of concern for India.     SBI Capital Markets to boost equity, M&A business SBI Capital Markets, the investment banking unit of the country's top lender, State Bank of India, has a pipeline of 20 equity issues that it will be managing over the next 3-4 months. The investment bank is also aiming to play a larger role in mergers and acquisitions in 2010 as it intends to leverage its parent's banking relationship with Indian corporates. SBI Caps was a little quiet last year as the equity market was not very active. Now that we are seeing a potential in the market, we are fully geared up for that and we have a big pipeline ahead of us. In 2009, SBI Caps was involved in five major equity issues that raised 136.5 billion rupees ($3.1 billion). This included mega issues such as that of state-owned NHPC Ltd, which raised $1.25 billion, and privately owned Adani Power, which raised $630 million. It is banking on the nearly $9 billion worth of disinvestments planned by the government in the current fiscal year which started on April 1. SBI Caps, which, with $29.5 billion, topped the league tables in Asia Pacific (ex-Japan) in syndicated loan arrangements in 2009, has been a minor player in M&As so far.   Banks likely to raise realty loan rates on real estate projects The Reserve Bank of India (RBI) may make borrowing more expensive for builders by asking banks to set aside more capital for loans to commercial real estate projects. A higher capital requirement will force banks to raise interest rate on such loans. Senior bankers feel that RBI may either raise standard provisioning or risk weight on bank loans to real estate companies in the forthcoming policy on April 20. This will be aimed at protecting banks’ exposure to properties amid spiralling prices. Risk weight is the capital that is set aside to calculate capital adequacy ratio, which is 9% for all banks. Banks have to set aside less capital for borrowers with higher credit rating. For a triple A clients, the risk weight is 20%, which means banks have set aside Rs 1.80 of its own capital for every Rs 100 loan to such borrowers. But risk weight for real estate companies is 100%, irrespective of the rating; this means banks have to keep aside Rs 9 for every Rs 100 loan to builders. Chances are the regulator may raise this risk weight to 125% or even 150% in the forthcoming policy. To help builders and banks cope with the crises, RBI had lowered it to 100% from 150% during the downturn. But while doing this, RBI had indicated that these were counter-cyclical measures. Revival in the sector has resulted in real estate prices rising and now RBI may need to make an effort to cool down prices. On a YoY basis, loans to real estate sector surged 15.3% when overall credit rose 10.4% as on November 20, 2009. Unlike personal loans, which grew only 0.7% as banks slowed down when customers began to default, they continued lending to builders. It was financing a high-risk sector and was not justified this resulted in real estate prices not dropping to the extent that they could have more so, given the over supply in the market.     Consumer durables Two major Indian apparel brands go organic When it comes to going green, two major Indian apparel brands have taken the lead. Van Heusen and Arrow have come up with 100 percent organic lines made of cotton, linen and natural dyes, doing their bit for the environment and also spreading awareness among consumers. Limited resources and increasing productivity have put the natural environment around us under tremendous pressure. Reason enough for us (Van Heusen) to get serious about starting down the eco-friendly path.  It's a conscious attempt to make all of us understand the importance of being earth-friendly. Even something as small as weed removal for cotton crops has been done physically without reliance on chemical killers. The way the world is heading, we feel it is critical for us to create awareness among ourselves so that we can contribute towards saving nature and our eco-system. While Van Heusen's eco-friendly apparel range starts at Rs.1,599, just like their other clothes, Arrow's line is slightly higher compared to their normal line.       Education Centum Learning to open 20 college campuses in 3 years Centum Learning, a Bharti associate company, plans to open 20 college campuses in the next three years, to offer undergraduate & post graduate courses in management, finance, economics and media & entertainment. It will invest about Rs 100 crore to set up these campuses. The first five campuses, under the name-Centum U, will come up in cities including Delhi, Mumbai, Hyderbad, Mohali and Pune. Centum has also tied up with the University of London, UK to offers courses in economics, management and finance at these campuses. While undergraduate degrees in economics and finance will be offered by the London School of Economics, the management courses will be offered in collaboration with Royal Holloway. Also, both UG & PG programs in media & entertainment programs are being offered in collaboration with Whistling Woods International, Mumbai. The course fees will range between Rs 1.5 lakh-3.5 lakh. Centum Learning also offers vocational training in Tier II and III cities, besides organising training sessions and workshops for corporate in India. It has around 130 learning centres across 90 cities for such programs.     Health Care MNC, domestic pharma cos lock horns over patents in India MNC durgmakers hit back at their domestic counterparts over frivolous patent issue and even the local firms are engaged in filing for intellectual rights for incremental innovations that merely improve the safety or efficacy of an already known drug. The Organisation of Pharmaceutical Producers of India (OPPI), an industry body of multinational (MNC) drugmakers, said there was a fundamental lack of understanding among domestic pharma companies that plan to oppose granting of patents in India for known drugs. There are examples wherein Indian pharmaceutical companies are applying for patents based on incremental innovations in third markets like the US and Europe. They were commenting on the recent move by the Indian Pharmaceutical Alliance (IPA), an industry body of domestic drug makers, to oppose all drug patent applications filed after October 2009. IPA had said many of the patent claims made by multinationals do not necessarily enhance the efficacy of previously known drugs. Rather, the MNCs were doing so only to extend the period of patent, commonly known as ever-greening, by tweaking the molecules a bit, terming them as frivolous. OPPI, whose members include Novartis, Eli Lily, Merck, GSK and Pfizer among others, also said constant innovation is the only way to keep ahead of the ever-evolving diseases particularly complex diseases such as diabetes and cancer, as well as age-old scourges, like Malaria and TB, which change over time and make current medicines useless.     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. France-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.   Power S&P revises outlook on RIL to stable from negative Global rating agency, Standard & Poor,  has revised its outlook on Reliance Industries Ltd (RIL) to stable from negative. At the same time, the agency affirmed the 'BBB' long-term corporate credit rating on RIL and the 'BBB' issue rating on the company's senior unsecured notes. We revised the outlook to reflect our expectation of an improvement in RIL's financial metrics because we believe the consistent improvement in the company's operating performance over the past year is sustainable. As per its report that RIL's EBITDA to have increased by 20 per cent for FY 10. The improvement is driven by reasons such as gas production at the KG D6 block surpassing 60 mmscmd (million standard cubic meter per day) of gas within 12-months of starting production, the strong market conditions for the petrochemical business, and the successful ramp-up of the new Jamnagar refinery. RIL will further improve its operating performance by maintaining the existing level of gas production and a potential improvement in refining margins. But this depends on the favorable resolution of RIL's legal dispute with Reliance Natural Resources Ltd and NTPC.   Real estate Realty to drive Supreme's growth The 30% profit growth reported by leading plastic product manufacturer Supreme Industries has failed to impress investors as its share has remained more or less stagnant since the company declared its March 2010 quarter numbers last Friday. Lacklustre operating performance and the company’s inability to complete the sale of its office property in Andheri in western Mumbai appear to be the main reasons behind the lukewarm investor response. The company has 18 office blocks available for sale out of which it has been able to sell only one so far. In the December 2009 quarter, Supreme Industries had clocked Rs 20.5 crore revenues from the sale of 13,106 sq ft of premises at an average realization of Rs 15,600 per sq ft from its commercial complex in Andheri. At this rate, its 2.5-lakh sq ft commercial complex is valued at Rs 390 crore and investors expected a steady flow of revenues from the sale. The profit growth during the quarter was primarily driven by extraordinary gain from the sale of company’s land in Sewri in central Mumbai for Rs 3.72 crore. Excluding this, the company’s operating performance was not very impressive. Despite a 15.4% sales growth at Rs 512 crore, operating profits grew a mere 3.3% as margins shrunk. Halving of interest cost to Rs 8 crore was the other key driver of profit growth. In line with its restructuring efforts over the past couple of years, the company recently shifted its manufacturing unit for protective packaging from Nandesari in Gujarat to Pune in Maharashtra, which has left it with another piece of land worth Rs 1.5 crore that can be sold in future.   Retail Raheja vs Raheja duel to spice up retail mart Construction baron GL Raheja is about to stretch his retail compass by taking over Homecare Retail Mart, a chain of hypermarket stores mauled by the slowdown, pitting himself against brother CL Raheja’s Shoppers Stop and Hypercity. The GL Raheja group is buying out other high net worth investors in the Mumbai-based company for an undisclosed amount. The group has been a minority partner in the privately-held owner of Magnet stores since inception in 2007. The struggling company, which shut five stores in Maharashtra and Gujarat because shoppers pinched pennies during the slowdown, is seen as the perfect retail launch pad for a group whose mainstay is property development and hotels. On expansion, the Rahejas are likely to follow big retailers such as Reliance Retail, Aditya Birla Group’s More, Big Bazaar and Shoppers Stop, which are cautious despite the prospect of shoppers returning on the back of a growing economy, as the slowdown is still fresh in their minds. Retailers and developers are working together to pull down costs and sustain the 20-25% growth.

 

 

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