BUSINESS NEWS MARCH 2009

Monday, March 02nd 2009
Pharma Retail Market clocks impressive growth
The Indian pharmaceuticals retail market has recorded growth of nearly 15% in January 2009, and over 13% in December 2008. The market clocked a growth rate of nearly 10% in the entire calendar year of 2008. In terms of market share, Cipla bagged the largest followed by Ranbaxy, Glaxo Smithkline, Piramal Healthcare and Zydus Cadilla in that order.

Monday, March 02nd 2009
Indian companies lose market value in American bourses
The market capitalization of 16 Indian companies, listed as American Depository Receipts (ADRs), lost almost $8 billion in value in the month of February alone largely due to the high volatility in US markets in view of the deepening economic crisis. IT majors Infosys and Wipro are reportedly among the biggest losers, which also include HDFC Bank, Patni Computer Services, Tata Motors, Sterlite Industries and others. Latest economic data from official sources show that American GDP contracted by an overwhelming 6.8% in the final quarter of 2008 – a revelation that led US markets to hit record lows last week, leading to the massive erosion of market valuation of the Indian companies trading in US stock exchanges.

Tuesday, March 03rd 2009
RIL-RPL merger finalized
In what is slated to be the biggest merger in Indian corporate history, Mukesh-Ambani owned Reliance Industries Ltd. (RIL) has decided to merge group company Reliance Petroleum Ltd (RPL) with itself, giving RPL shareholders 1 RIL share for every 16 RPL shares that they own. RIL shares valued at Rs 1265 on the BSE (Friday, Feb 27) while RPL shares stood at Rs 76.2, which means that RPL shareholders receive a premium of around 3.5%. The RIL-RPL merger will create a global petrochemical giant that can boast of the largest single-location petro-refinery in the world in Gujarat.

Tuesday, March 03rd 2009
Exports fall 16% in January
Indian exports which have been adversely affected by the global downturn witnessed a 16% decline in January 2009 to $12.4 billion from $14.7 billion recorded during the same period in the previous year. But since imports have also fallen by 18.2% ($ 18.5 billion in Jan 2009 as compared to $22.6 billion in Jan 2008) due to slowdown in industrial production and slippage in domestic demand, the trade deficit has shrunk from around $7.9 billion to $6.1 billion (around 23%). However, if one looks at cumulative trade deficit during the period April 2008 – January 2009, it stood at $445 billion, which is a 65% increase over the deficit of Rs. 269.35 billion during the same period in 2007-08. The current cumulative trade deficit figures are pretty concerning as they amount to almost 270 per cent of the country's forex reserves of around $165 billion. 

Thursday, March 05th 2009
RBI revises key rates
As fears of deepening recession mount, the RBI has decided to wield monetary policy instruments at its hand to do its bit to complement the fiscal stimulus announced by the government. On Wednesday, March 4, it announced a cut in both the repo rate (at which RBI lends to banks) and the reverse repo rate (at which RBI borrows from banks) by 50 basis points each. This move is intended to give a stimulus to lending by banks, making it less attractive for them to keep money with the Central Bank. Banks across the spectrum have seen this as a positive measure that would be conducive to consumption and investment though it could take some time before the impact on overall demand in the economy is felt.

Sunday, March 08th 2009
Sterlite to acquire US mining company
Anil Agarwal-promoted Sterlite Industries Ltd. has announced an agreement with Asarco LLC, a Tucson, Arizona-based miner, for the purchase of almost all the operating assets of the company, for $1.1 bn in cash payment. Sterlite will also pay interest-bearing promissory notes of $600 mn over a period of nine years. Asarco is America's third largest copper producer and reported total revenues of nearly $1.9 billion and profit before tax of $393 million for the year ended December 31, 2008. The agreement is subject to the approval of the US Bankruptcy Court for the Southern District of Texas, Corpus Christi Division. 

Sunday, March 08th 2009
Lloyd's Banking to cede control to state 
British mortgage lender Lloyd's Banking Group will now enjoy the protection of state guarantees covering 260 billion pounds ($360 billion) of risky assets in return for which the Gordon Brown government will secure a stake of as much as 75% in the Bank. This makes Lloyds the fourth UK bank to slip into state control since the run on Northern Rock in September 2007. It is reported that Prime Minister Brown is using his stakes to ensure that banks increase their lending to homeowners and businesses, stimulating an economy that is in the throes of the worst recession since World War II. 

Monday, March 09th 2009
JP Morgan Chase to increase outsourcing
JP Morgan Chase, the second largest bank in the USA and one which already provides outsourcing contracts in IT and back office projects worth $250-300 million annually to companies like Cognizant, TCS and Accenture, has indicated that it will increase its outsourcing to India by 25% this year up to nearly $400 million. The bank, which acquired Washington Mutual and Bear Stearns recently, has also said that it will manage the integration of the acquired firms from India to bring down the cost of integrating different information technology (IT) systems. This comes close on the heels of a statement from global financial and economic form Moody's to the effect that although India's outsourcing industry will certainly be hurt by this global downturn, it will recover well as soon as the global economy shows signs of revival and "will remain a top outsourcing destination because of its tech-savvy and English-proficient urban workforce whose wages are much lower than their western counterparts."

Tuesday, March 10th 2009
Merck set to acquire Schering-Plough
US-based multinational drug firm Merck is all set to acquire another American pharmaceutical company Schering-Plough Corp in a $41.1-billion deal involving both cash and stock settlement. Shareholders in Schering-Plough will get $23.61 a share - 0.57 shares in Merck and $10.50 in cash for each share that they hold - which amounts to a premium of 34% on Friday's closing price. Merck will reportedly finance the cash component of the deal through a combination of $9.8 billion of existing cash reserves and $8.5 billion from committed financing to be provided by JP Morgan. The deal will help Merck diversify its product line at a time when many of its blockbuster patents near expiry deadlines, making it the second largest drug-maker in the USA.

Tuesday, March 10th 2009
Satyam kickstarts bidding process
Shortly after market regulator SEBI gave trouble-hit Satyam Computer Services the go-ahead to invite offers from strategic investors for 51% stake in the company, the IT major initiated the bidding process by inviting expression of interest (EoI) from prospective bidders. Interested bidders must register by March 12 and submit their detailed EoI by March 20, along with proof of availability of funds worth Rs 1500 crore at least. However, given relaxations granted by SEBI, there will be no requirement of a minimum floor price, which is normally a mandatory requirement for an initial subscription. According to the terms of the offer from the Board, 31% of the company's newly-issued share capital will initially have to be subscribed to by the investor, following which he must mandatorily make an open offer to purchase at least 20% of the company's equity.

Wednesday, March 11th 2009
IMF Chief portends negative global growth
IMF managing director Dominique Strauss-Kahn has warned that the world economy is set for a "great recession" and may well find growth dipping below zero as a result of "continuous deleveraging by world financial institutions, combined with a collapse in consumer and business confidence." The Chief also drew attention to the impact of the crisis on Africa, which may be delayed but nevertheless severe, throwing millions back into poverty and creating a strain on the fragile political systems of the continent. According to estimates, which in themselves may be optimistic, regional growth in Africa is set to dip to 3% - half the rate which has been recorded over the last five years.

Wednesday, March 11th 2009
Citi claims return to profitability
In a memo sent to colleagues by CEO Vikram Pandit, Citigroup has reportedly said that it was having its best quarter-to-date performance since June 2007 and has actually been profitable in the first two months of 2009. The memo even expressed confidence in the capital strength of the organization, having conducted tough internal stress tests. Even though Citi shares closed at a little over a dollar on the NYSE on March 9, the Group has said that they have not detected any signs of clients or trading partners withdrawing business and hence government contingency planning regarding fresh support may not be called for. However no official declaration on any of this has come from the management or senior authorities. 

Tuesday, March 24th 2009
IT Services pricing to decline
According to research firm Gartner, prices of IT services in outsourcing are anticipated to shrink by 5% to 20% during 2009 and 2010, primarily due to uncertain economic climate. Many clients are reportedly in talks with service providers about renegotiation of contracts for terms and conditions, service level agreements, fees. Other causes leading to pressure on Indian IT companies in particular are the Mumbai terror attacks, the Satyam scandal, persistent wage inflation and volatile currency movements.

Tuesday, March 24th 2009
US Public-Private Investment Programme in debt-ridden banks
The US Treasury Department has laid out plans for a Public-Private Investment programme based on generous government financing through which private investors will be persuaded to help rid banks of up to $1 trillion in toxic assets. The programme will initially draw $75-$100 billion from the Treasury's existing $700-billion bailout fund approved by Congress last fall. 80% of the initial capital will be provided by the Treasury with the rest coming from private investors. The Federal Deposit Insurance Corp (FDIC) will then offer debt financing for up to six times the pooled amount. The Federal Reserve will also increase financing through its Term Asset-Backed Securities Loan Facility.

Wednesday, March 25th 2009
HDFC Bank beats ICICI Bank in market capitalization
In terms of market capitalization, HDFC Bank toppled ICICI Bank to emerge as the most valued private bank in the country, even as the State Bank of India retains its number 1 position as the most valued bank in the country. Share prices of both the private banks had tumbled steadily ever since the global meltdown became more and more pronounced in the latter half of 2008, resulting in SBI making it to the top. But stocks of HDFC Bank surged over 6% on the Bombay Stock Exchange over the last couple of weeks while share prices of ICICI Bank have failed to recover to the same extent, leading to an increase in market capitalization of the former against the latter.

Thursday, March 26th 2009
IMF eases lending rules
Stirred by the needs of member countries at an hour of global crisis, the International Monetary Fund has significantly changed its lending rules, easing conditionalities and introducing a more flexible line of credit. This is expected to facilitate easier availability of credit for IMF member nations and hence a return to sustainable growth. Changes include revision of IMF conditionalities for all borrowers, introduction of a new Flexible Credit Line, making the Fund's traditional stand-by arrangement more flexible, doubling normal access limits for non-concessional resources, simplifying cost and maturity structures, and eliminating certain seldom-used facilities. The Fund is also expected to announce reforms of concessional lending instruments for low-income members soon.

Thursday, March 26th 2009
GAIL India to split into two
In response to new petroleum regulatory requirements, GAIL, the country's largest gas transportation company will split into two separate entities, dealing separately with its transportation and marketing businesses, starting April 1. This was recommended by the petroleum regulator so that intergrated companies such as GAIL cannot cross-subsidise its two different activities and create unfair competition. GAIL India will now deal with transportation and construct cross country pipelines, the new entity GAIL Gas (GGL) will handle marketing. GGL will soon be listed on the domestic stock exchanges.

Tuesday, March 31st 2009
Global markets tumble; Sensex falls under the effect
Reversing a five-day-long upswing, the BSE Sensex shed almost 480 points (4.8%) on Monday, March 30, to close at a little over 9500 points. The fall of the index was largely a reflection of the broader mood among investors in world equity markets which slumped on the back of growing fears of prolonged economic crisis. Markets are increasingly becoming aware that President Obama's economic recovery plan might take longer than expected to take effect; neither are they hopeful of any effective plans for revival emerging from the imminent G-20 meeting in London. Most Asian markets are down by 4-5% on similar cues. In the Indian context, markets are expected to remain choppy with uncertainty looming high about the political scenario in the country as it gears for elections. Expectations regarding corporate earnings are also very low leading to further edginess in markets.

Tuesday, March 31st 2009
USA asks GM CEO to step down
It was a day of dramatic developments for the auto industry with the Obama administration finally asking General Motors CEO Rick Wagoner to step down, shortly after the auto giant was denied further bailout money. Fritz Henderson, GM's president and chief operating officer, has become the new CEO. Both GM and Chrysler had asked for additional funds in February worth $16.6 billion and $5 billion respectively.However the recovery plans of the tottering auto majors failed to meet the US administration's requirements and were not approved. While Wagoner stepped down, Chrysler has been told that it will receive $6 billion in aid only if it forms an alliance with Italian carmaker Fiat SpA in the next 30 days.