BUSINESS NEWS JUNE AND JULY -2009

Monday, June 01st 2009
Ispat promoters pledge stake to restructure debt
Plagued by growing debts, lack of access to key raw materials and ready, cheap source of power, the promoters of Ispat Industries, Pramod and Vinod Mittal, have pledged their entire shareholding of 41% in the company with lenders. This allows the company a debt restructuring package which moderates and delays repayment schedules. Ispat has debts of about Rs 8,000 crore, and a market capitalization of about Rs 3,022 crore. For the quarter ended December 2008, the company posted a huge loss of Rs 651 crore.

Monday, June 01st 2009
SBI receives RBI approval to guarantee Tata bond issue
The Reserve Bank of India has agreed to exercise "regulatory forbearance" in the case of the recent issue of non convertible debentures made by Tata Motors to refinance its Jaguar loan. This means that the Central Bank has made an exception to its rule preventing banks from guaranteeing corporate bonds and has allowed the State Bank of India to guarantee the recently concluded debenture issue by Tata Motors worth Rs.4200 crore. According to sources, RBI went ahead with the sanction as it did not want to jeopardize investor interests after the issue was concluded but it has also directed SBI not to guarantee any corporate bonds in future.

Monday, June 01st 2009
Government plans to raise Rs.10000 crore through sale of stake in PSUs
The new UPA government expects to raise Rs.10000 crore from divestment proceeds in the next one year as it offloads stake in various state-owned units. It has asked key ministries such as power, fertilizers, shipping and textiles to prepare a list of companies that are likely to generate interest among takers so that the state's holdings in them can be diluted at the earliest. The targets and timelines stated are indeed ambitious, especially in view of the fact that in its entire previous five-year regime, the UPA government had raised about Rs 8500 crore from disinvestment. However, this time it will be unfettered in its decisions with the Left no longer holding the stability of the government to ransom on every disinvestment issue.

Tuesday, June 02nd 2009
General Motors files for bankruptcy; no impact in India
The current recession claimed yet another huge corporate casualty with iconic American carmaker General Motors filing for bankruptcy protection under Chapter 11 on June 1 and entering an era of government ownership. It was largely on the prerogative of the Obama administration that the company, plagued by huge labour costs and phenomenal debts, was pushed into the fast track towards bankruptcy. The firm has already been in receipt of a $20-billion package and is likely to receive more taxpayer funds to navigate through the bankruptcy process and restructure itself into a much leaner organization. The government is expected to retain 60% stake in the reorganized entity. While the company is expected to close or liquidate 11 factories and three idle plants, GM India has confirmed that there will be no impact of the bankruptcy or closures on the Indian operations of the firm.

Tuesday, June 02nd 2009
Air India IPO in the pipeline
Civil Aviation Minister Praful Patel has indicated that national carrier Air India might be listed on the stock exchange once the capital markets improve. However he did not indicate any definite timeframe for the IPO to be floated and reiterated that the listing will not mean that the concern loses its public sector character or becomes privatized. Air India has lost about Rs.4000 crore in 2008-09 alone and is in need of large scale liquidity infusion. 

Wednesday, June 03rd 2009
Economy shows signs of recovery as core sectors record growth
The core infrastructure sectors comprising power, crude oil, refinery products, coal, cement and finished steel grew by 4.3% according to a release by the Ministry of Commerce and Industry on the back of positive cues such as election of a stable government and revival of business confidence. Growth was highest in coal followed by cement. Given that these six industries have a combined weight of 26.7% in the index of industrial production, the growth figures have raised hopes of increase in industrial output. Meanwhile shoots of economic recovery and revival of consumer spending were also inherent in the FMCG sector where key product segments have witnessed more than 20% growth in volume in April-May 2009 as companies shifted focus once more on brand building and consumer spending, facilitated by low input costs.

Wednesday, June 03rd 2009
GM's Hummer sold to Chinese company under reconstruction plan
Chinese road and construction equipment maker Sichuan Tengzhong Heavy Industrial Machinery Company has acquired the Hummer brand of large sport utility vehicles and pickup trucks from bankrupt auto giant General Motor in a deal reported to be worth $500 million. The divestment is expected to be completed by the third quarter. Sichuan Tengzhong has plans to aggressively fund future Hummer product programmes and expand the SUV's dealership network globally, while retaining main production in the US, protecting 3,000 jobs. 

Thursday, June 04th 2009
M&M, Tata Motors among potential acquirers of Saturn
Bankers representing iconic American car maker General Motors have listed Indian firms Mahindra & Mahindra and Tata Motors among the dozen or more global firms that are being tapped for the sale of GM's small car brand Saturn. However neither of the Indian majors has confirmed this news. Since the declaration of bankruptcy on GM's part, its brands Hummer, Saab and Saturn have all been put up for sale. It has been reported that Hummer has found a buyer in Chinese privately-owned company Sichuan Tengzhong Heavy Industrial Machinery. Those in the running for its Swedish brand Saab, include Swedish car company Koenigsegg and American financier Ira Rennert.

Friday, June 05th 2009
Intel to acquire Wind River Systems
California-based Wind River Systems, leading vendor in the embedded systems and mobile device capabilities market, will reportedly be bought out by chip-major Intel in an all cash deal amounting to $884 million. Industry leaders such as Apple, Hewlett-Packard, Boeing, Motorola, NASA, and Mitsubishi are among Wind River's customers and this acquisition will not only give Intel access to complementary, market-leading software assets but also facilitate its strategy of expanding its processor and software presence outside the traditional PC and server market segments.

Friday, June 05th 2009
Sensex surges on the back of reforms speculation
As the last week saw a continuous buzz and some activity on the reforms front initiated by the newly elected government, the business barometer rose consistently, finally breaching the 15000-mark on June 4 for the first time since September 2008. The Sensex has surged by nearly 80% in the last three months making many analysts uncomfortable about the pace, especially since there has been no real economic recovery globally, nor have government reforms transcended the proposal stage to implementation. In this scenario, many feel that the rise of the index is only due to money pouring in from hedge funds and overseas investors with short-term perspective and driven by ambiguous parameters, so that when markets correct themselves in tune with reality, the adjustment could be painful.

Friday, June 05th 2009
Banks revise lending rates
With the liquidity situation easing relatively and customers apparently more eager to purchase or close deals, ICICI Bank and HDFC Bank have both lowered their lending rates. In the second rate cut in six weeks, ICICI Bank lowered interest rates on loans by 50 basis points for both new and existing borrowers. HDFC on the other hand lowered the prime lending rate (to which all floating rates are linked) by 25 basis points. HDFC also reduced interest rates by an additional 50 basis points for new customers availing loans amounting between Rs.30 lakh and Rs.1 crore.

Monday, June 08th 2009
Chrysler creditors move court again
Indiana pension funds, which hold $42.5 million of US carmaker Chrysler's $6.9 billion secured loans, have filed papers with the US Supreme Court seeking review of a ruling that allows the carmaker to sell its assets to Italian auto-major Fiat. According to the funds, the sale of assets scheduled to close on June 8 in the absence of any stay from the Court, would cause them "irreparable harm." Interestingly, the final outcome of this would also affect the restructuring of General Motors which is also considering a similar quick sale of assets.

Monday, June 08th 2009
Walmart shortlists Indian IT majors for outsourcing contract
According to unauthorized but official sources, global retailer Walmart Stores is considering outsourcing multiple contracts for managing its business applications and other back-office applications and has shortlisted Indian firms Infosys, Wipro and TCS for these contracts potentially worth $500 million. Walmart has outsourced smaller projects to these companies in the past, but apparently is looking at a more comprehensive outsourcing strategy with a view to globalizing its IT sourcing initiatives.

Monday, June 08th 2009
Infosys plans to open software development centre in Brazil
Infosys Technologies will set up a software development and back office centre in Brazil that will enable it to serve its North American customers better by establishing near shore presence and also ensure more business from the regional market. TCS and Wipro already have centres in Brazil which recorded 75% growth in IT exports in 2008. The Infosys Centre is expected to commence operations in the next three to four months employing around 100 professionals.

Monday, June 08th 2009
IATA predicts $9-billion loss for global airline industry
According to the International Air Transport Association, the global airline industry will incur a whopping loss of $9 billion in 2009 on the back of consistently deteriorating revenues. According to the director general and CEO of IATA, airlines worldwide have suffered a revenue drop of 15 percent in the current economic downturn (translating into a loss of $80 billion) – more than double the loss (7 per cent) suffered in the consequence of the 9/11 attacks in 2001. The IATA has further stated that future recovery and growth will call for "drastic reshaping by partners, governments and industry."

Tuesday, June 09th 2009
Infosys to hire more locals in foreign centres; abandons Kolkata plans
Recessionary pressure coupled with unfriendly worker immigration rules in markets such as the USA are forcing top Indian IT exporter Infosys to revisit several policies. For one thing, the Company, which already employs over 10000 non-Indian workers, has now decided that it will hire more local people in these markets. At the same time the firm plans to reduce the amount of work at its customer locations, and move the work to other remote locations to ensure continuity for customers. Closer home, the IT major appears to have decided to drop their West Bengal project. Talks of a development centre in Kolkata employing 5000 people had been brewing for quite some time but the tardy response of the state government to Infosys' request of land allocation and the generally inconducive economic atmosphere for expansion have led the Company to put the plans on the backburner for the time being.

Tuesday, June 09th 2009
Opposition to FDI in Retail
A Parliamentary Standing Committee on Commerce headed by BJP leader Murali Manohar Joshi has recommended that the government should stop issuing any more licences to foreign majors for cash-and-carry or wholesale shops or for their joint venture with Indian partners. The government presently allows 100% FDI through the automatic route in cash-and-carry, and 51% in single-brand retail. No FDI is allowed in general retail, or opening of neighbourhood stores. However the parliamentary panel has held that even FDI in cash-and-carry is simply a camouflaged form of direct investment in retail and would in effect lead to large scale unemployment in the unorganized retail sector. The panel has, in fact, even called for a blanket ban on domestic corporate heavyweights seeking to enter the business of retail trade in grocery, fruits and vegetables.

Tuesday, June 09th 2009
Gold prices fall
In the face of a strengthening dollar (which makes gold less desirable as alternative investment) and the absence of any festival or marriage season, the price of gold fell by Rs 120 to Rs. 14760 for 10 grams. Global cues were also weak, where the metal lost $6.63 to $948.63 an ounce.

Friday, June 12th 2009
Nokia's Chennai Unit emerges the largest manufacturer globally
Nokia's Chennai plant has beaten the two factories in China to emerge as the largest global manufacturing facility for cell phones in terms of unit-wise production. According to unofficial reports, the unit produces over 100 million phones every year.

Friday, June 12th 2009
Nadathur Group buys Bangkok Hotel Group
NS Raghavan founded investment firm Nadathur Holdings has bought majority stake in Bangkok based BMC Management, owners of a chain of boutique hotels and resorts in Thailand and Cambodia. The $500-million Nadathur firm has acquired this stake through a group firm Ativa Hospitality and through the acquisition, hopes to gain access to similar properties in Laos, Vietnam, Myanmar and the Chinese south-western provinces. The deal size has not been disclosed.

Friday, June 12th 2009
Dempo's mining business acquired by Vedanta-subsidiary
Sesa Goa, a subsidiary of Anil Agarwal owned Vedanta Resources has bought Goa-based Dempo Group's mining assets for Rs. 1750 crore in an all-cash deal. Given the consolidation trends in the global iron-ore industry, miners seem set to command more pricing power and this acquisition is expected to empower Sesa Goa in a similar way in the domestic markets. It is also likely to the latter's operational and cost efficiency given that its assets in Goa are physically adjacent to Dempo's mines.

Monday, June 29th 2009
Longer hours being mulled for capital markets
Capital Markets regulator SEBI is contemplating the extension of working hours for equity markets in order to enable players to react more effectively to global market cues. If the proposal is approved, trading in equity markets will be open from 9:00 am to 5:00 pm. According to sources familiar with the issue, the final decision on this will be taken by the Secondary Market Advisory Committee within a month after taking into account the views of all categories of participants likely to be affected by this move. 

Monday, June 29th 2009
Suzlon reports whopping Rs.183-crore loss
Tulsi-Tanti owned wind turbine major Suzlon Energies has suffered a whopping loss of Rs.183 crore for the quarter ended March 2009, primarily due to currency losses and huge expenditure (Rs. 411 crore) incurred on replacement for faulty blades supplied to US customers. The company also fears flat revenues in the coming months because of paucity of demand in the key markets that the Company serves. According to sources within the company, there have been significant corrections in the wind industry as a whole so that from a growth rate of 30% plus in recent years, the industry is now looking at a period of flat growth. 

Monday, June 29th 2009
JLR set to hit Indian roads
Luxury car brands Jaguar and Land Rover were formally launched in India in the presence of Tata Motors chairman Ratan Tata and JLR CEO David Smith at a conference in Mumbai. Expectedly, the fancy models are to be priced in the highest end of the Indian context – in the range of Rs.63 lakh to Rs 92 lakh. Post the Tata Group's $2.5-billion acquisition of the brands, sales of the vehicles dropped drastically and JLR posted a loss of Rs.1777 crore leading to almost 2000 job losses but the Group expects their strategic stance to be vindicated once the recession has waned. Besides the Indian launch is expected to help matters since the growing luxury market in the country has to a large extent been insulated from the worst effects of the global meltdown. 

Thursday, July 30th 2009
Yahoo & Microsoft in a 10 yr deal
Software giant Microsoft and Yahoo! Have entered a ten year deal after much speculation. The ten year deal forges an alliance between the two companies in the Internet search and advertising space. This new development will pose a challenge to market leader Google. As per a statement released by the two companies in the media, Microsoft will now power Yahoo! Search and Yahoo would in turn become the exclusive worldwide relationship sales force for both companies' premium search.