BUSINESS NEWS FEBRUARY 2009

Tuesday, February 03rd 2009
SEBI may alter takeover norms in order to facilitate Satyam transition
The Securities and Exchange Board of India is considering easing its takeover regulations in unusual crisis situations such as that facing Satyam Computer Services. This is being mulled over in view of the requests made by the current Board which is having a difficult time finding buyers under the existing regulatory norms. Under the current rule, any acquirer who gets 15% stake in a company has to make an open offer to all shareholders at no less than the average closing price in the previous 26 weeks (or in the two weeks before the 15% limit was reached, whichever is higher). Now in Satyam's case, this works out to be nearly six times the present closing price of Rs 57.60 (given the fraudulent disclosures by the company's promoters during that period). This is acting as a deterrent for many prospective buyers and the Satyam Board had requested SEBI to reconsider the regulations and make an exception, which the latter has indicated that it might do. However, the Chairman of SEBI C B Bhave has not indicated any definite time frame within which the amendments may be effected. 

Tuesday, February 03rd 2009
India enters nuclear safeguards agreement with IAEA
On February 2, India signed an agreement for the 'Application of Safeguards to Civilian Nuclear Facilities' in Geneva with the International Atomic Energy Agency, the UN nuclear supervisor, which will allow the latter to inspect 14 of India's 22 civil nuclear reactor facilities. These 14 reactors will then be placed under India-specific safeguards specified by the IAEA by 2014. This agreement, though subject to ratification by the Indian government, is expected to pave the way for enhanced nuclear commerce with the United States and other members of the 45-member Nuclear Suppliers Group.

Tuesday, February 03rd 2009
20 million migrants may have lost jobs in China
According to a report published in national daily Hindusthan Times, a senior planning official in China has indicated that the ongoing economic crisis has taken one of the worst tolls the country has ever seen, with an estimated 20 million among the country's migrant workers having lost their jobs and forced to return home. China has an approximately 130 million strong migrant labour force in the cities and according to the official, about 15.3% of this force has been rendered jobless. However, if fiscal stimulus and recovery of the construction sector takes off later this year, some of them may be absorbed back.

Tuesday, February 03rd 2009
International trade figures indicate high economic activity in India
Even as the world grapples with one of the worst ever economic slowdowns in history, India may still emerge to be among the least affected, going by what international trade data seems to signify. It is true that Indian exports have been distressed by the crisis, and Indian exports have fallen by 1.1% in December 2008 as compared to a year earlier but the sharp increase in imports by 8.8% indicates that activity on the economic front has still been vigorous. This seems to be especially true since import growth in the non-oil sector has been a massive 31.9% and India's non-oil imports primarily constitute capital equipment and project goods. Exports too would seem to be recovering if compared with the decline of 12.1% and 9.9% in October and November 2008 respectively. However, cumulative trade deficit in December stood at $93.8 billion – 74% higher than what was recorded in the same period a year ago.

Wednesday, February 04th 2009
Australian government unveils stimulus plan
As the economy Down Under struggles to face the slowdown brought about by the prevailing global severe downturn, Australian Prime Minister Kevin Rudd has unveiled a stimulus package that would provide for additional spending worth A$42 billion ($US 26.5 billion). According to the country's treasurer Wayne Swan, of the A$ 42-billion outlay, A$28.8 billion would be invested in schools, housing and roads, while A$12.7 billion will be used to provide cash support for lower-income families. This package comes on top of the extra spending of A$ 10.4 billion in the last fiscal and is expected to create a deficit in the Australian federal budget for the first time in almost a decade. Plummeting global commodity prices in the wake of the crisis have affected the resource-based Australian economy sharply and the government has halved its economic growth forecast for 2008-09 to 1 per cent from 2 per cent projected earlier.

Wednesday, February 04th 2009
Indian IT services market could grow at 18%
According to a report released by the leading IT research and advisory firm Gartner, the Indian IT services market is poised to grow at a compounded annual growth rate of 18.3% to 2012, despite the worldwide slowdown in economic activity. Retail and government verticals are expected to top the list of contributors to the sector's growth. According to a senior research analyst in the group, the Indian government's proposed spending of $5.78 billion over the next five years under the National e-Governance Plan is expected to generate employment for over 70000 people and also provide a huge opportunity for IT service providers.

Thursday, February 05th 2009
NASSCOM revises revenue and exports targets for IT-BPO sectors
The National Association of Software and Services Companies (NASSCOM) has released its performance and projections data for software and IT services for the fiscal 2008-09. In the report, the industry body has revised its earlier projections for growth of the sector and revenues to 16-17% (as against 21-24% earlier) and $47 billion (as against $50 billion earlier) respectively. BPO export is estimated to reach $12.8 billion (against the earlier prediction of around $15 billion), growing at a rate of 17.5%.

Thursday, February 05th 2009
Japan ties up with the World Bank to aid third-world banks
Japan and the International Finance Corporation (IFC), an arm of the World Bank, have signed an accord to launch a $3-billion fund that will contribute towards recapitalizing failing banks in poorer countries in Central and South America, the Caribbean region, Africa and Asia. The Japan Bank for International Cooperation will contribute $2 billion and IFC will provide $1 billion to the fund. As banks across the world, irrespective of the strength of management, grapple under the cascading impact of the credit crisis in a globalised world, this fund will provide support to those countries that cannot bail out their financial institutions in the way US and European governments can. The money can be used to boost lending activities of banks and thus buoy the depressed economies in these countries.

Thursday, February 05th 2009
NPCIL inks pact with Areva
The Nuclear Power Corporation of India and French company Areva SA have signed a commercial pact under which work on the setting up of two reactors at NPCIL's Jaitapur site in Maharashtra, ensure life time fuel supply for these units through its Uranium plants located in various countries and even perhaps extend technical co-operation to NPCIL. The MOU thus facilitates India's first large capacity plant that will be built using international equipment. At present, the cost of each reactor has been estimated to be between $5.2-7.8 billion. 

Friday, February 06th 2009
Satyam gets new CEO
A veteran of 15 years in the company, 50-year old A S Murty was named by the Board of Directors as the new CEO of Satyam Computer Services. Murty faces the unenviable task of lifting the morale within the company and mollifying clients to restore the reputation of the firm that was severely dented following revelations of fraud and accounting irregularities. Given his minute and in-depth knowledge of the firm, its operations and clients, Murty was thought to be the best person who can steer the firm during this difficult phase. He will be assisted by Homi Khusrokhan, former MD of Tata Chemicals and Partho S Dutta, former CFO of the Murugappa Group.

Friday, February 06th 2009
BoE cuts bank rates
In an effort to stimulate lending and revive an economy caught in deep recession, the Bank of England (BoE) cut the official rate on commercial bank reserves for a second time since January by 0.5 percentage points to a historic low of 1%. The British central bank has been steadily reducing its key lending rate almost every month since last October, when it stood at 5.0 per cent.

Saturday, February 07th 2009
Kiran Karnik named Satyam Chairman
Former President of the Nasscom, Kiran Karnik has been named Chairman of the Board of Directors of troubled IT-giant Satyam. Apart from President of Nasscom, Karnik has held several key positions in the IT industry and was also Managing Director of the Discovery Network in India.

Saturday, February 07th 2009
RBI eases funding norms for exporters
In a bid to revive sagging exports and help exporters who have been one of the worst hit sections in this global recession, the Reserve Bank of India has allowed exporters to raise foreign currency funds at 350 basis points above the London Interbank Offer Rate (LIBOR) as against 150 bps earlier. This is expected to help exporters have easier access to funds at a time when the cost of borrowing in the international market has risen significantly. The central bank has also asked domestic banks not to levy any fee like service charge and management charge. 

Tuesday, February 10th 2009
Optimistic growth estimates for the Indian economy from CSO
According to advance estimates of growth in Indian national income over FY 2009 released by the Central Statistical Organization, the economy is expected to register a growth of 7.1% in GDP this fiscal, which would make it second in growth only to China. If the estimates are met, it would also mean that the Indian economy turns in a remarkable 8.5% compounded annual growth rate over the period 2004-05 to 2008-09. However several non-government analysts have been skeptical about this projected rate of 7.1%. In fact, a survey by the Confederation of Indian industries on 96 manufacturing sectors of the economy has revealed that a third of them have been seriously affected by the global downturn and have actually reported negative growth in production during April-December 2008. Some of the most-severely hit sectors listed by the CII- ASON survey are fertilisers, polymers, steel, pig iron, textile machinery, distribution transformers, commercial vehicles, utility vehicles, rubber footwear and auto cycle tubes among others. In view of the adverse hit taken by so many sectors, the CSO estimate indeed seems to be very optimistic. 

Thursday, February 12th 2009
Indirect Investment no longer under FDI ceiling
In a significant change in foreign investment policy announced by the Government, it was decided that indirect investment by foreign firms through domestic companies would be excluded from overall sectoral FDI ceilings. This gives foreign firms a chance to increase their equity stakes in joint ventures. 

Thursday, February 12th 2009
Industrial growth shrinks 
Despite a stimulus package announced by the government to revive demand conditions within the economy, the Index of Industrial Production in December fell by 2% as compared to its 8% growth in the corresponding period a year earlier. The manufacturing sector, which has a weight of about 80 per cent in the IIP, registered negative growth of 2.5 per cent. However, minister for external affairs Pranab Mukherjee continued to maintain that the Indian economy will grow by 7 per cent this fiscal, despite the slump.

Friday, February 20th 2009
Survey indicates IT budgets will continue to grow in 2009
According to a CIO (Chief Information Officer) Agenda survey released by leading IT research and advisory firm Gartner, IT spending in India will continue to grow despite the global meltdown by 5.52% during 2009, which of course is a sharp fall from the 13% increase reported in IT budgets in 2008. The survey indicated that 60% of the increased budget will be utilized in daily operations, 23% to expand the business and 17% for transformation of business. According to a separte study by another consulting outfit Zinnov, attrition in the Indian IT sector will probably reach an all-time low in the coming year primarily due to the economic slowdown. 

Friday, February 20th 2009
CLB grants Satyam auction 
The Company Law Board has granted crucial approvals to scandal-hit IT firm Satyam Computer Services to increase its authorized capital base from Rs.160 crore to Rs. 280 crore and acquire a strategic investor through a competitive auction process. The company has also been allowed to allot new shares on a preferential basis at par or at a premium. This is likely to set off a keenly contested bid war for the stake.

Saturday, February 21st 2009
Indian telecom sector registers record growth in January
According to a release from the TRAI, the telecom sector in India registered its sharpest monthly growth ever in terms of number of new subscribers added with 15.26 million additional subscribers recorded in January - a quantum jump over the 10.66 million added in December 2008. Most of the growth has occurred in the wireless segment with 15.4 million new subscribers added in January. The wireline segment has actually seen a decline in new subscriptions from December by 148000 connections.

Saturday, February 21st 2009
China emerges as top foreign creditor to US
China has increased its holdings in the US treasury by about 46% in the last year, surpassing Japan to become the top foreign creditor to the United States. China invested $14.3 billion in US treasury bonds in December 2008, taking its total holdings to $696.2 billion. This has, however, been received with some concern by a certain section of Chinese analysts who fear substantial loss of forex reserves if US treasury prices collapse in the near future.

Monday, February 23rd 2009
Satyam Board lays down bidding norms
According to the bidding norms finalized by the Board of Directors at Satyam Computer Services on February 21, the net worth of the bidder and his ability to infuse cash into the beleaguered company will be key criteria for strategic investors wishing to acquire stake in it. According to the norms, the Board will prescribe a floor in terms of net worth, and any firm with a lower net worth would be disqualified from the bidding process. Moreover, any bidder should be able to bring in a minimum of Rs. 1000 to Rs. 1500 crore into the company either in the form of preferential allotment or through convertible debentures. The recommendations of the Board will now be forwarded to the SEBI and the Company Law Board.

Monday, February 23rd 2009
Lowe to return to old christening 
Global advertising agency Lowe Worldwide, which had decided to drop association with it Indian predecessor Lintas after it acquired full ownership, has now decided to go back to its branding as "Lowe Lintas" in India. This comes in recognition of the brand equity still commanded by Lintas in India and the high regard that it enjoys among the clientele who associate it with iconic advertising imagery and some of the finest talent in Indian advertising. 

Monday, February 23rd 2009
RBS plans massive restructuring; 20000 job cuts likely
The Royal Bank of Scotland has planned a dramatic rescue restructuring in which the bank will be split into a "good bank" and a "bad bank" each reporting figures separately, and assets worth billions of pound will be put up for sale. The asset sale (including sale of its Asian operations and its retail operations across Central and Eastern Europe) is expected to lead to substantial shrinkage of the banks' one-trillion pound balance sheet. Reeling under one of Britain's biggest ever corporate losses, RBS also has to launch a mammoth cost-cutting drive through which it can reduce costs by one billion pounds a year. This is likely to lead to 20000 job losses, more than half of which will be in Britain. RBS would also place at least 200 billion pound of toxic assets into the government's asset-protection scheme.

Tuesday, February 24th 2009
New Chief Executive for Honda Motor
Takanobu Ito, the head of core automaking operations at Honda Motor has been named as the company's new Chief Executive replacing Takeo Fukui who will remain on Honda's board as adviser. The leadership change is being seen as a move to battle the crisis faced by the auto industry worldwide and press ahead with technological innovations to effect a turnaround in business. Ito has stated intentions to continue in Fukui's footsteps, focusing on development of ecological, affordable products that can "pave the way for new times."

Tuesday, February 24th 2009
Good news for Indian IT industry
The United Kingdom is considering off-shoring work related to revival of several government technology systems to Indian IT majors. According to a report in Indian daily, the Economic Times, a research director at Towergroup Europe has indicated in an interview to the publication that internal development resources within the UK state departments are not of the strongest quality and work outsourced to UK-based providers have not always been efficient, timely or cost effective. Hence the Department of Work and Pensions, HM Revenue and Customs and the Ministry of Justice in the UK may well flesh out $2-3 billion worth of outsourcing contracts. 

Tuesday, February 24th 2009
Patni looks to expand Europe operations
Software Services firm Patni Computer Systems has announced four new executive appointments in what is being seen as part of a larger move to expand its presence in Western Europe. The new appointees will mostly look at operations in Germany, Austria and Switzerland. 

Wednesday, February 25th 2009
Government takes further measures to boost demand
Just a few days after the UPA Government presented its rather lacklustre Interim Budget at the parliament, it has now unveiled a Rs. 30000-crore stimulus package that comprises, among other things, a cut in median excise duty rates and service tax rates by 2%. The average consumer may breathe some sighs of relief as television, washing machines, refrigerators, soaps, detergents, cola, hybrid cars and 90% of manufactured items that attracted excise of 10% will now be subject to only 8% and will thus be cheaper. With a lower service tax, the cost of every service accessed on a daily basis – starting from telephone to maintenance and repair – will be impacted albeit by varying extents. The cuts are not only being seen as a move to stimulate demand in the economy but also a move towards the stated goal of a unified goods and services tax in the country. 

Wednesday, February 25th 2009
S&P downgrades India's ratings
International ratings agency Standard & Poor's has lowered its long-term sovereign credit rating outlook for India to negative (from stable) in view of the fiscal deficit in the country which has been described as "unsustainable in the medium term." According to S&P, the overall government deficit, including off-budget items, will be as high as 11.4% in the FY ending March 2009. The agency apprehends the recent Interim Budget, which highlights policies such as debt relief for farmers and a pay hike for government employees, to trigger serious levels of government deficits and debt burden. As such it views a fiscal slippage that signifies a reverse in the trend of consolidation that the Government at various levels had earlier committed itself to (2007). That is the primary cause for the downgrading.

Thursday, February 26th 2009
Obama's tax laws create concern for India Inc.
In his first address to the joint session of the US Congress, President Obama has indicated that American firms will no longer enjoy tax breaks if they outsource any part of their jobs to any other part of world. Firms which outsourced jobs were till now protected by a particular provision of the tax code which allowed them to pay lower taxes on profits repatriated from foreign shores. However, Democrats have for long been demanding abolition of the provision which, according to some analysts, could account for up to 3 million jobs abroad, and consequent elimination of local positions. Now, it seems final that it will be indeed shelved in the wake of President Obama's attempt to "restore a sense of fairness." This could be a cause of concern for the Indian tech sector, one of the major beneficiaries of US outsourcing. However, a majority of senior officials in the industry are unwilling to draw any definite conclusions or read too much into Obama's moves at this point in time.

Friday, February 27th 2009
Ranbaxy may lose revenue over FDA charges
US health regulator FDA has accused pharma major Ranbaxy of falsifying data in its marketing applications and has invoked its application integrity policy (AIP) to place all past, pending and new drug approvals, manufactured at Ranbaxy's Paonta Sahib (Himachal Pradesh) facility, under review. This may adversely impact nearly 15% of Ranbaxy's drug exports to the USA. The FDA has also asked Ranbaxy to implement a corrective action operating plan (CAOP) to provide assurance that the data from Paonta Sahib facility is reliable. The FDA may also seek third-party independent audit of drug applications from Paonta Sahib. Earlier, Ranbaxy stocks fell by 18% to Rs 169.95 on the Bombay Stock exchange upon leveling of these charges, while Daiichi Sankyo's stock crashed 9.5% to 1,680 yen at the close on the Tokyo Stock Exchange.

Friday, February 27th 2009
$3.5-trillion dollar US Budget unveiled
President Obama has presented a $3.552-trn dollar budget for the US economy with an aggressive spending plan focused towards revival of the recession-stricken economy and makeover of the US health-care system. The projected spending includes around 200 billion dollars to fight wars in Iraq and Afghanistan over the next 18 months. It also involves a mammoth 634-billion-dollar, 10-year fund to pay for health care reforms, which has been a primary pillar of Obama's presidential campaign. The President has also asked for an additional 250 billion dollars to be constituted into a fund just as a conservative measure in case the banking industry should require further bail-out money over and above the 700 billion dollars that have already been committed. The budget also seeks to fulfill a campaign pledge to raise taxes on Americans earning more than 250,000 dollars a year from 35 percent to just under 40 percent and may be fiercely contested on this ground at the Congress since many Republicans strongly oppose the proposed structure.