Business Today

Chiaroscuro

     Print Edition: September 4, 2011

MARKETS
World markets went into a tailspin, after Standard & Poor's downgrade of the US sovereign credit rating from AAA to AA+ on August 5. Stocks in the US and Asia, including India, were on a rollercoaster ride. Markets in Europe, where many governments were already battling debt problems, turned even more nervous. In India, the demand for government bonds has gone up, and the rupee has come under pressure. Gold is perceived as a haven for investors. On August 9, the precious metal crossed Rs 26,000 per 10 gm in India, the world's biggest gold consumer. Still, the only silver lining appears to be a softening of crude oil prices. With the world economy expected to slow down, lower oil demand could keep prices below $100 a barrel - and mean lower petrol prices in India. To keep India's growth story intact, industry body Ficci wants RBI to cut interest rates and provide the necessary stimulus to the economy.

The pharma sector's top firms, Ranbaxy and Cipla, have reported lower quarterly profits due to higher costs and fewer exclusive sales. Ranbaxy reported a dip in profit of about 25 per cent to Rs 243.2 crore for the April-June period. Sales were marginally up at Rs 2,062 crore from Rs 2,039 crore. Cipla's profit dipped 1.6 per cent to Rs 253.34 crore while sales were up 9.2 per cent to Rs 1,573.81 crore.

Britannia Industries is in revamp mode. Chairman Nusli Wadia recently said the company will reduce the number of subsidiaries. For the June quarter, Britannia's net profit jumped 27 per cent to Rs 42 crore, while sales increased 21 per cent to Rs 1,106 crore. While its UAE and North African operations have been affected by political turmoil, Britannia is eyeing a bigger share in South East Asia, Africa, Australia and the US.

CORPORATE
This results season has been a mixed bag for India Inc. (See Rate Regime Gear Change Answer to Muted Earnings, Page 44) Among the many who beat market expectations is India's top utility vehicle maker Mahindra & Mahindra, which reported an eight per cent rise in net profit at Rs 605 crore. Net sales rose 30 per cent to Rs 6,673 crore. M&M sold 44,407 utility vehicles, a growth of 14.3 per cent compared to the industry's 5.1 per cent.

  • London's ability to host the 2012 Olympics is being questioned after waves of rioting in British cities. Commercial premises were affected badly, and London's worst riots since the 1980s are expected to cost tax payers »100 million.
  • Rajat Gupta, the former Goldman Sachs director accused of providing insider tips to Galleon hedge fund boss Raj Rajaratnam, has secured a breather. The Securities and Exchange Commission has dropped its civil administrative proceedings against Gupta after a judge upheld his petition that the SEC was being discriminatory since it had taken others in the same case to a federal court. Administrative proceedings limit a defendant's ability to fight back.
  • General Motors has raced past Toyota Motor and Volkswagen to become the world's largest automaker. GM sales rose 8.9 per cent to 4.53 million units in the half-year ended June 30. This compares with 4.13 million units for Volkswagen and 3.71 million units for Toyota. India's car exports, meanwhile, jumped 40.83 per cent in July, thanks to better demand from non-European nations.
  • China's famed copycats have produced their own version of Apple's iPhone 5. It sells for 200 yuan or Rs 1,300. Chinese are lovingly calling it 'hiPhone 5', which is based on leaked images of yet-to-belaunched iPhone5. It is thinner and lighter than the iPhone4
Ajay Piramal-led Piramal Healthcare has struck a deal to buy from Essar Teleholdings a 5.5 per cent stake in Vodafone Essar, for $640 million. The deal values Vodafone Essar at $11.6 billion, compared to the $16-billion valuation by Vodafone Plc when it agreed to buy Essar Group's stake this year. Piramal's stake will help Vodafone meet regulatory norms: foreign firms can hold only up to 74 per cent in Indian telecom firms.

Larsen & Toubro, which walked away with the coveted BT Best CFO award has bagged big-ticket orders from the UAE and Thailand. Its order book in the hydrocarbon sector has now grown to Rs 18,000 crore. The order from Abu Dhabi Gas Industries for its Habshan-Ruwais-Shuweihat gas pipeline project was worth $189 million. The other order was for $450 million from ADMAOPCO, a subsidiary of ADNOC and a major producer of oil and gas in the UAE. L&T has also been awarded a $250-million contract from PTTEPI, a Thailand government owned oil and gas major.

The partnership between Eastern India Hotels and Reliance Industries is blooming. EIH Chairman P.R.S. Oberoi announced plans to develop hotel properties in Bangalore and Goa in partnership with Reliance.The new takeover norms also make it easier for RIL to hike its stake in EIH. In August 2010, Reliance bought 14.98 per cent in EIH, to stop rival ITC, which holds 14.8 per cent, from wresting control of EIH.

180 tonnes Gold bought by central banks of emerging markets so far in 2011. This compares with 73 tonnes purchased by them in 2010.

Rs 7.76 cr Expenditure for estimating unaccounted income/wealth within and outside India. The study, likely to be completed in 18 months, is being conducted by the National Institute of Public Finance and Policy, National Institute of Financial Management and the National Council for Applied Economic Research.

$8 bn External commercial borrowings by Indian companies in April-June 2011, against $5.30 billion in the corresponding period last year. A low interest rate overseas is increasing India Inc's appetite.
 
ECONOMY
The government has not set any specifi c economic growth target for 2011/12 and 2012/13, the Lok Sabha was told. According to the Prime Minister's Economic Advisory Council, India will grow by 8.2 per cent this year.

If the collections of indirect taxes so far are any indication, there is no slowdown in the economy. The July indirect tax collection was up 16.4 per cent from a year ago. In April-July, the tax kitty surged 27 per cent from a year ago. The indirect tax revenues were estimated at Rs 4 trillion, an increase of 17.3 per cent over the revised estimates of 2010/11.

Mamata Banerjee, West Bengal's Chief Minister and the ruling UPA coalition's chief ally, has wrangled a Rs 21,614-crore fi nancial package for the state. Of this, Rs 9,240 crore is the actual grant, while the state government has to raise Rs 12,374 crore from the market.

COMING UP
A new British Bribery Act, which came into force on July 1, opens companies operating in England to criminal liability for paying and receiving a bribe, bribing a foreign public official, and failing to put internal systems in place to prevent bribery. Apart from a hefty fine, punishment includes imprisonment up to 10 years. So, how will this law impact Indian companies? A company with headquarters in India is now answerable to the British Serious Frauds Office even if its subsidiaries in another country had indulged in bribery, and this meant loss of business to British firms. The Tatas, Essar, and a host of smaller Indian companies have operations in the UK.

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