Infosys Technologies Ltd. will be added to the NASDAQ-100 index, effective December 18. The NASDAQ-100 Index is composed of the 100 largest non-financial stocks on the NASDAQ Stock Market in terms of market capitalization. Infosys is the first Indian company to be added to the NASDAQ-100 index and is the only Indian company to be part of any of the major global indices.
S&P seeks further improvement in public finances
The Government's efforts in improving its finances is yielding some results, and it would do well to continue in the same vein if it wants to attract higher FDI. That's the message from Standard & Poor's (S&P), the global credit rating agency. In its Asia Pacific Market Outlook for 2007, S&P said that it can upgrade India's credit rating to "investment grade" if Asia's fourth-largest economy continues to improve its public finances. "The outlook on the sovereign credit rating on India is revised to positive from stable in 2006, highlighting that if current credit improvements continue, especially on the fiscal front, India could achieve investment grade ratings," S&P said. Fitch Ratings and Moody's Investors Service both rate India's foreign debt at investment grade, but S&P assigns a rating just below that at "BB+". The Government cut the fiscal deficit to 4.1% of GDP in the fiscal year ended March 31, 2006 from 5.9% in 2002-03. The deficit is expected to fall further to 3.8% of GDP in the current fiscal year, and the Government wants to cut it to 3% of GDP by 2008-09. But, there is a risk to this outlook from the proposed review of salaries for all government employees by the sixth pay commission, which is due to submit its report in 18 months, the S&P said. The international credit rating agency said that while the macroeconomic view was favourable for Indian stocks, the fiscal deficit could pose a risk. "Some potential risk lies in the government deficit which has thus far been offset by a positive capital account, through foreign investment inflows," S&P said.
Corus takeover saga continues
Even as India's Tata Steel Ltd. and Brazil's Companhia Siderurgica Nacional (CSN) fight for the control of Corus Group Plc, the Anglo-Dutch steel major sought to postpone the Dec. 20 EGM and court convened meeting till further notice. The move is aimed at giving Corus shareholders to consider both the bids. The latest on the Corus takeover saga comes in the backdrop of revised offers from Tata Steel and CSN. On Dec. 10, Tata Steel increased its initial offer by 10% to 500 pence per share. The next day, CSN lifted its bid to 515 pence a share. The battle for Corus started on Oct. 20, when the leading British steelmaker accepted an offer from Tata Steel at 455 pence per share. Then on Nov 17 CSN approached Corus with a cash offer of 475 pence a share. CSN is yet to make a formal offer to Corus shareholders, pending due diligence. In light of the approach from CSN regarding a possible offer, the Corus board adjourned the original EGM and Court Meeting planned for Dec. 4 to Dec 20. Tata Steel is now formulating a strategy to improve its offer for Corus after CSN announced a higher bid. Though Tata Steel has refused to comment on the issue, analysts believe it might increase its bid for Corus up to 550 pence a share. According to reports, Tata Steel has also started discussions with the major shareholders of Corus, including Standard Life, which has a 7.8% stake. Separately, Tata Steel has reportedly appointed UK-based merchant bankers NM Rothschild & Sons as financial advisor for the proposed acquisition. ABN Amro and Deutsche Bank are already acting as the Indian company’s advisors.
Auto production tops 10mn mark
The Indian automobile industry is on a roll. Total production of cars, motorcycles and commercial vehicles reached a record 10mn mark in the first 11 months of the calendar year, according to the data released by the Society of Indian Automobile Manufacturers (SIAM). Between January and November 2006, total vehicle production stood at 10,031,886 units with the industry growing at 16.8% compared to last year. During the same period last year, the industry produced 8,587,131, vehicles. In the whole of 2005, the industry produced 9.35mn units. Of the total vehicles produced, over 77% were two wheelers with 7,741,261 units compared to 6,686,963 during the same period last year, representing an increase of 15.77%, the SIAM data showed. Passenger car production also crossed the one million mark in the 11-month period with production growing at 18.5% to 1,100,799 units, while multi-purpose vehicles grew by 9.24%. Passenger vehicles accounted for about 13.6% of the total automobile production, SIAM said. During the period under review, a total of 189,716 units of LCVs and 251,114 M&HCVs were produced and accounted for about 4.4% of vehicle production. A total of 4,85,049 three wheelers were produced in the 11 months so far, SIAM said.
ICICI Bank hikes lending, deposit rates
The largest private sector bank in the country, ICICI Bank, raised the lending rates by 0.5%, while the deposit rates are being hiked by between 0.25% and 0.75%. The move is the fallout of the recent hike in CRR with State Bank of India (SBI) and Union Bank of India also having hiked deposit rates. The bank will also increase its Benchmark Advance Rate (I-BAR) for corporates and its Floating Reference Rate (FRR) for consumer loans (including home loans) by 0.5% with effect from December 18. The revised I-BAR will be 13.75% p.a. payable monthly as against 13.25% at present. The revised FRR will be 10.75% p.a. as against 10.25% at present. For existing floating rate customers, the increase in FRR by 0.5% will be effective from January 1, 2007. The existing fixed rate customers whose loans are fully disbursed, will, however, not be impacted by the increase and their contracted rates will remain unchanged. The bank will also increase interest rates on deposits worth less than Rs10mn in the range 0.25%-0.75% across various tenors with effect from December 18.
Reliance Comm, 2 others eye Hutch Essar: reports
With relations between India's Essar Group and Hong Kong-based Hutchison Telecom International Ltd. (HTIL) souring to a point of no return, hawks have started to circle one of the most coveted telecom companies in India. The latest media reports suggest that Reliance Communications Ltd., part of the Anil Dhirubhai Ambani Group (ADAG), is among the three players in the race for India's third-largest GSM-based cellular service provider. According to reports, Reliance Communications is roping in a US-based private equity player while the other two suitors are Egypt's Orascom and Malaysia's Maxis. Earlier, newspapers had reported that Essar too could look at buying out the JV partner. Even Sunil Mittal of Bharti airtel has been quoted as saying that he may consider buying Hutch Essar if approached by the Ruias of Essar. Reliance Communication is believed to have tied up funds for its proposed bid for Hutch Essar. The company is understood to have mandated UBS as its advisor for raising debt and resources, adding that if needed, Reliance Communications may raise an additional US$4bn to US$5bn from the market. CLSA said in a research note earlier this week that it had estimated Hutch Essar at US $14.4bn. The diversified Essar group has the first right of refusal in the event that HTIL sells its stake to another company, according to terms of their agreement. Essar could hold out for a bigger valuation, or make a bid for the entire company itself, according to analysts.
Demerged Zee to start trading on Dec 18
Zee Telefilms Ltd. (ZTL) announced that from December 18, the company would start trading as the demerged entity, to be renamed Zee Entertainment Enterprises Ltd. (ZEEL). The two new companies - Wire & Wireless India Ltd. (WWIL) and Zee News Ltd. (ZNL) - would get listed independently, after relevant approvals from the stock exchanges. Listing is likely in January 2007. " Though the business of both WWIL and ZNL was earlier part of ZTL, they would be able to unlock greater shareholder value as independent companies," Subhash Chandra, Chairman, of ZTL said. The company has already received the approval from the Bombay High Court for the demerger of cable undertaking (WWIL) and news and regional undertaking (ZNL). The process of getting approval for the demerger of direct consumer undertaking (ASC Enterprises Ltd. to be renamed Dish TV India Ltd.) is underway. Shareholders of ZTL as on the relevant record date would receive 45 shares of ZNL and 50 shares of WWIL for every 100 shares held in the company. They would also get shares in the DTH business (Dish TV) as and when it is spun off from ZTL. In the meantime, the demerged ZTL (including Dish TV) would continue to trade on the stock exchanges. A separate record date would be announced for the demerger of Dish TV.
SpiceJet to raise US$118.5mn; Tatas to buy 7.5%
New Delhi-based low cost carrier SpiceJet announced that it plans to raise US$118.5mn through a preferential allotment of equity shares to a clutch of foreign and domestic investors. The potential investors include Tata Group companies, Texas Pacific Group Ventures, Istithmar PJSC and Goldman Sachs amongst others, SpiceJet said in a statement. These investors are set to pick up a 25% stake in the low cost carrier for around US$75mn (approx. Rs3.3bn) at an average price of Rs51.40 per share. Earlier, newspaper had reported that the Tata Group was planning to acquire up to 10% stake in SpiceJet as a 'financial investment'. The equity stake of the promoters, consisting of the London based Kansagra family, Ajay Singh and other investors, will fall from 48% to around 36% as a result of the equity expansion. The Tata group proposes to pick up 7.5% stake in the company for US$17.2mn. The US-based private equity firm Texas Pacific group proposes to invest US$30mn. The existing shareholders, Istithmar, the Dubai government’s private equity arm, and Goldman Sachs propose to invest US$25mn and US$5mn, respectively in the airline. In addition, Swiss Finance Corp, BNP Paribas, and IL&FS have also shown interest in investing in the airline.
Tata Motors, Fiat formally announce JV
Tata Motors and Fiat formally announced their joint venture to manufacture passenger vehicles, engines and transmissions for the Indian and overseas markets. The companies had signed a MoU in July for the creation and establishment of a joint venture in India, located at the Fiat plant at Ranjangaon, in Maharashtra. The plant will have capacities to produce more than 100,000 cars and 200,000 engines and transmissions annually. Both Fiat and Tata vehicles will be manufactured at the same facility, which will be managed equally by the two shareholder partners. A first assembly line for Fiat cars at Ranjangaon plant has already been commissioned for Fiat Palio and Fiat Adventure models and trial runs have already commenced. The first batch of cars will roll out in early 2007. Tata will distribute Fiat branded cars through the Tata-Fiat dealer network as per the arrangement already in place since March. The aggregate investments in this industrial joint venture will be made in a phased manner and may exceed Rs40bn (over €665mn). The joint venture will start production of engines and new cars progressively from the beginning of 2008. Fiat and Tata motors are also continuing discussions for industrial and commercial co-operations in Latin America, as per a joint analysis, which began in July.
BOI, L&T Infotech unveil acquisitions
Bank of India (BOI) is acquiring more than 50% stake in Indonesia's PT Bank Swadesi, Bank Indonesia's Deputy Governor Siti Chalimah Fadjriah said. Jakarta-based Bank Swadesi has a market value of US$20mn and posted a profit of 11.7bn rupiah (US$1.3mn) last year. Indonesia's 133 banks, which are being forced by the central bank to find investors or merge, are attracting buyers as the Southeast Asia's largest economy expands.
Larsen & Toubro Infotech Ltd. will acquire GDA Technologies, a privately held electronic design firm based in USA and all of its design centers in the USA and India. The company has over 350 employees in the USA and India and over 100 customers in the USA, Japan and India. AM Naik, Chairman & Managing Director of L&T Infotech, said, "GDA's electronic design capabilities are a key building block in our roadmap towards creating end-to-end solution delivery capability for our global customer base."
Maruti to hike prices from January
Come January, consumers would have to shell out more for their favorite Maruti Suzuki cars. The country's largest passenger carmaker Maruti Udyog Ltd. will increase prices by as much as Rs 12,000 to overcome higher costs of freight and components, newspapers reported. Maruti, which had last raised prices in August due to rising freight and input costs, has decided to go in for another revision. It has already informed its dealers about the same. Separately, the company would shut down its plant near New Delhi for maintenance from Dec. 24-31, papers said. The shutdown is a planned biannual exercise. Maruti, 54.2% owned by Japan's Suzuki Motor Corp., had raised prices of some of its cars in August by Rs 500 to Rs 5,000. Earlier this month, Toyota Kirloskar Motor (TKM) and Skoda Auto announced that they would be increasing prices in January owing to rising input costs. The exact quantum of the increase is yet to be finalized, it could be between 1% to 2% of the vehicle cost, TKM said on Dec. 6.
Mid-Day & Bennett, Coleman forge partnership
Mid-Day Multimedia Ltd., the publishers of Mid-Day and Bennett, Coleman & Co. Ltd., the publishers of The Times of India and The Economic Times, announced a business co-operation partnership to share their printing and distribution network. The two companies would jointly approach various markets in the country for mutual benefit. This alliance would benefit both the companies through cooperation in printing, circulation and advertising sales. Mid-Day said that it would sell 6.65% stake to an affiliate of Bennett, Coleman & Co. for Rs211.1mn. The promoters of Mid-Day would pump in an additional Rs225.6mn. After this investment, the promoters will own 51% of Mid-Day and Bennett, Coleman & Co. hold 6.67%. Mid-Day plans to expand to seven cities in two years besides expanding its FM radio operations. Mid-Day has firmed up plans to launch another edition of its flagship tabloid in about four months.
Primary market update
The mega issue of Cairn Energy was fully subscribed after several difficulties as uncertainties over the offtake, the midstream project controversy with MRPL and government cess kept investors at bay. Majority of demand for the issue came from the QIBs. The IPO of Pyramid Saimira Theatre Ltd. was subscribed by more than 2 times. The Public Offer of Tanla Solutions Ltd. was subscribed 39 times. The QIB portion was subscribed 57 times, the HNI portion was subscribed 41.56 times and the retail portion 11.10 times. The offer received over 2.45 lakh bids. The company entered the capital market on December 11 with a public issue of 15,885,000 equity shares of Rs2 each in the price band of Rs230 to Rs265 per share.
Bangalore-based IT services company MindTree Consulting Ltd. filed a Draft Red Herring Prospectus (DRHP) with the Securities & Exchange Board of India (SEBI) to enter the capital market with an IPO of equity shares. The company proposes to offer 5,593,300 shares of Rs10 each. The issue comprises of net issue of 4,940,740 shares to the public. Up to 372,900 shares will be reserved for subscription by eligible employees and up to 279,660 shares each will be reserved for subscription by Business Associates. The IPO, which is being made through the 100% book building, will constitute 15% of the post-issue capital of the company. The net issue will constitute 13.25% of the post-issue capital of the company.
Global News
As expected, the US Federal Reserve left its benchmark interest rate unchanged for the fourth time in as many meetings amid a slowdown in the world's largest economy. However, the US central bank reiterated its view that inflation remained a challenge even as the Fed policy makers acknowledged a steep fall in the housing market, and some signs of softness in the economy. The Federal Open Market Committee (FOMC) decided to keep their target for the federal funds rate, an overnight bank lending rate, at 5.25%. The FOMC called the cooling of the housing industry "substantial", one of the few changes in language from its previous statement in October. The central bank policy makers also predicted a moderate economic expansion on balance over the coming quarters, rather than simply moderate, and called recent economic indicators mixed. Fed Chairman Ben S. Bernanke still expects the US economy to withstand the downturn in housing and manufacturing. Some traders interpreted the new language as a prelude to a much-awaited reduction in rates next year. A different school of thought feels that the Fed will need more evidence that the real estate slowdown is hurting consumer spending and manufacturing before it would consider cutting rates. It is unlikely that the Fed would cut rates at its next meeting in late January.
OPEC to cut output in February
The Organisation of Petroleum Countries (OPEC) decided to put on hold another half a million barrels per day (bpd) or 2% production cut, till February, sending oil prices higher. The proposal was also ratified by the oil ministers of the 11-nation group later in the day. The cartel, which pumps over a third of the world's oil, has already curbed output this year by 1.2mn bpd to 26.3mn in October to halt a 10-week, 25% drop in prices. OPEC opted to wait until after the peak of winter demand to implement the new curbs, so that the major energy consumers like the US and China are not adversely affected. Analysts said OPEC's deal was a compromise between price hawks who feared that rising inventories could drag down prices in the second quarter and others who are worried that an immediate cut could lead to a shortage at the height of winter. Some analysts doubted OPEC's ability to support prices that remain under pressure from swelling US stockpiles and mild winter weather in the northern hemisphere. Oil prices have hovered around the US$60 a barrel mark for the past three months as OPEC's first cut helped arrest a steep 25% slide from a record-high US$78.40 a barrel in July. US light, sweet crude was unchanged at US$62.51 a barrel.
Japanese business confidence up in December
In a development that could increase the chances of an interest rate hike, a main business sentiment index of the Bank of Japan (BOJ) touched a two-year high, the central bank said. The quarterly Tankan survey, Japan's most closely watched barometer of business sentiment, showed that confidence among large manufacturers climbed to 25 points from 24 in September, the BOJ said in Tokyo. The index for big manufacturers was the highest since September 2004, when it was plus 26, and matched the market's average forecast. Among service industries, sentiment rose more than forecast. Sentiment for large non-manufacturers rose to 22, beating the consensus estimate for a reading of 20. The index was the highest since November 1991, when it was plus 33. The index for small manufacturers improved for the first time in a year to plus 10, the highest level since August 1991. Also, large manufacturers' planned capital spending was revised down by 0.3%, the first downward revision in four years for a December survey. Planned capital spending by all large firms was raised by 0.8% to a rise of 12.4% in the current financial year to March, the fastest pace since 1991. Bonds fell amid expectations that the Tankan survey may prompt the central bank to increase interest rates, the lowest among the G7 group of advanced nations, as soon as January.
WB sees global economy slowing in next 2 yrs
The global economy would slow in the next couple of years, primarily due to the downturn in the United States, the World Bank says in its annual Global Economic Prospects report. Global growth is expected to reach 5.1% this year, then fall to 4.5% in 2007, only to rise slightly to 4.6% in 2008, the Washington-based lender says in the report. The developing countries are forecast to grow by 7% in 2006, the report says. The pace of expansion would fall to 6.4% in 2007 and 6.1% in 2008, more than double the 2.6% rate of high-income countries. In comparison, developed economies would expand by 3.1% this year, slow to 2.4% in 2007 and strengthen to 2.8% in 2008. "The gap between developing countries and high income countries is widening," says World Bank economist Hans Timmer. "Developing countries are able to accelerate while high income countries are not doing that." The report says that a soft economic landing for the global economy is likely, but warned that a cooling US housing market could spark a sharper-than-expected downturn and even a recession, which could have a major impact on developing nations. The World Bank report also says that the global economy could expand to US$72 trillion by 2030 from US$35 trillion in 2005, driven largely by the developing economies.
Nasdaq launches formal offer for LSE
The Nasdaq Stock Market Inc. formally launched its 2.7bn pound (US$5.3bn) hostile bid for the London Stock Exchange Group Plc. (LSE) after Europe's largest exchange spurned a friendly offer three weeks ago. Nasdaq owns 28.75% of LSE, but needs more than 50% to succeed. The New York-based exchange is offering 1,243 pence per share (Euro18.40; US$24.26), but shares of LSE were quoting at 1,315 pence (Euro19.46; US$25.67). Nasdaq is giving investors until January 11 to accept its offer. By posting the offer document, Nasdaq is setting a deadline for LSE management to consider negotiations for a better price. Under British takeover laws, Nasdaq can raise its bid within 46 days should it get a recommended offer from LSE. Nasdaq, the second-largest US stock exchange, is increasing pressure on LSE after its offer was rejected twice in nine months. LSE, led by CEO Clara Furse, rejected Nasdaq's request to discuss its bid on Nov. 20, saying that the offer substantially undervalues the exchange. "The bid represents full and fair value for LSE shareholders, taking into account both the successes of the business, but also the new competitive threat which LSE faces in 2007 and beyond," Nasdaq CEO Robert Greifeld said.
Qantas accepts higher takeover bid
A day after spurning a A$10.9bn (US$8.6bn) bid from Macquarie Bank Ltd. and Texas Pacific Group, Qantas Airways Ltd. agreed to a sweetened offer from the same consortium. Australia's largest airline accepted a higher A$11.1bn (US$8.7bn) buyout in what would be the world's biggest aviation takeover. The offer of A$5.60 a share, 10% above Qantas's last trade, was unanimously endorsed by the Qantas Board after the bidders dropped their demand for a break fee and simplified other conditions, Qantas Chairman Margaret Jackson said. The board had rejected an offer of A$5.50 on Wednesday. "I think we've done a very good job for the shareholders," Jackson said. Qantas shares jumped to a record high A$5.37, but remained below the offer price, suggesting that investors were not expecting a higher bid. Also, the government may block the takeover as being against the national interest. The latest offer price is 29% higher than Qantas's share price before Nov. 22, when the airline first admitted that it had been approached with a buyout offer. Qantas CEO Geoff Dixon, who has run the airline since 2001, will remain in the job. Dixon said the new owners have no plans to break up the airline, send maintenance jobs overseas or cut regional services.