Inflation falls sharply
This is surely going to bring some relief to the Government, the Reserve Bank of India (RBI) and the consumers. After several weeks of persistent upward trend, inflation, based on the Wholesale Price Index (WPI), has fallen. The benchmark measure for wholesale prices in the country slumped to 6.05% in the week ended Feb. 17, the Government said on Friday. In the previous week it was at 6.63%. Consensus estimate was for a drop to 6.3%. In the week ended Feb. 3, inflation touched a two-year peak of 6.73%, setting off alarm bells in the Government and prompting the RBI to increase the Cash Reserve Ratio (CRR) by another 50 basis points to 6%. The UPA regime, led by the Congress, has been under tremendous pressure to contain rising prices of essential products, especially foodgrains and pulses. The steep jump in prices of these food items has been a major issue in recently concluded state assembly polls, with the Congress losing in Punjab and Uttarakhand.
GDP growth slows in Q3
Even as Finance Minister P. Chidambaram presented a rosy picture of the Indian economy in the budget, the Government announced that the Gross domestic Product (GDP) had slowed in the October-December quarter. Asia's fourth-largest economy grew by 8.6% in the quarter ended December 2006 from a year earlier, spurred by robust show by manufacturing and service sectors, even as farm sector growth moderated further. The annual growth rate in the third quarter of FY07 was lower than the upwardly revised GDP growth rate of 9.2% in the July-September quarter. It was also lower than the 9.3% growth recorded in the third quarter of the previous fiscal year. The Indian economy has grown at an average of more than 8% in the last three years and the Government expects it to clock a 9.2% growth in the current fiscal year ending next month.
...so does manufacturing
India's red-hot manufacturing sector cooled off a little in February as the slew of monetary and fiscal measures taken by the Government started to have a moderating effect on new business. The seasonally adjusted Purchasing Managers' Index (PMI) declined to 53.6 in February, its lowest since the PMI survey started in April 2005. It was at 55.3 in January. The index has declined steadily since peaking at 59.3 in October. The new orders index fell to 56.5 in February, also the lowest in the survey's history, from 59.7 in January. The new export orders index also slipped to its lowest in the survey's history at 51.2.
...and exports
India's merchandise exports rose 5.5% in January to US$9.65bn from a year earlier, while imports were up 23.2% at US$15.43bn compared with the same period of the previous fiscal year. Trade deficit in January increased to US$5.78bn from US$3.38bn in the corresponding month a year earlier. Exports in April-January 2006-07 were up 20.15% at US$99.14bn while imports climbed 27.3% to US$149.73bn. As a result, trade deficit for the first 10 months of the current fiscal year stood at US$50.59bn versus US$35.13bn in the year-ago period. In the previous months, exports have been growing at a much faster rate. Also, with only two months to go, exporters have their task cut out if they are to meet the annual target of US$125bn in exports.
Govt bans futures trading in wheat, rice
With a view to contain spiraling prices of key food items and contain inflation, the Government banned futures trading in wheat and rice. Trading will stop once existing contracts expire on the nation's three exchanges. "Exchanges have been told not to launch new contracts in rice and wheat," said Anupam Mishra, Director at the Forward Markets Commission (FMC), the commodities market regulator. "Trading can continue in existing contract." The FMC order does not clarify how traders will liquidate existing contracts if no counter-party can build fresh positions. Separately, the Government decided to appoint an expert committee under the chairmanship of Prof. Abhijit Sen to examine the impact of forward trading in essential commodities on consumer prices. The panel will be requested to submit its report in two months.
Cabinet okays AI-Indian merger
The proposed merger of Air India and Indian (erstwhile Indian Airlines) got a green light from the Union Cabinet. With this clearance, the Government is all set to create not only India's largest carrier but also one of the biggest in Asia. "The merger of the two airlines would enable them to leverage combined assets and capital better and build a stronger and sustainable business," the Government said in a statement. Last month, a Group of Ministers agreed to merge the two state-run carriers into one single company with separate business units for engineering & maintenance, low-cost carriers and ground handling activities.
RIL, Hindalco announce preferential issue
Mukesh Ambani is all set to increase his holding in Reliance Industries (RIL). This will be done through a preferential issue. Mukesh Ambani and associates will subscribe to the equity-linked warrants of RIL on a preferential basis at Rs1402 per share. An amount equivalent to 10% of the price would be paid on allotment of warrants and the remaining 90% would be paid at the time of subscription to equity shares on exercise of rights attached to the warrants within 18 months. On exercise of such rights, the paid-up capital of RIL will increase from Rs13.93bn to Rs15.13bn. On Feb. 24, the RIL Board approved a plan to set up a new petrochemicals unit. The company would invest US $3bn in the petrochemicals project, designed to have an annual capacity of 2mn tons, and is expected to be completed by 2010-11. The cracker will make ethylene, propylene and other special derivative products, it said. RIL also reiterated its plans to raise up to US $2bn from overseas markets to fund a capital spending plan for its oil and gas business.
Separately, Hindalco said that its Board will meet on March 2 to consider preferential offer of equity shares or equity-linked instruments to the promoters. Last year too, the Birlas had increased their stake in Hindalco via a preferential allotment. Aditya Birla Group chairman Kumar Mangalam Birla had recently said the promoters' stake would be gradually increased through the creeping acquisition route. Though Hindalco didn’t specify the reasons for the preferential issue n or the size of the issue, the move appears to be aimed at part financing the proposed acquisition of US-based Novelis for US $6bn. Meanwhile, Novelis reported a US $275mn loss for 2006 because the company was unable to pass along higher costs to customers.
Cement, Steel, Auto Cos hike prices
A day after Finance Minister P. Chidambaram slapped a 50% increase on costlier cement bags, manufacturers in western and northern India hiked prices by Rs12 per 50-kilogram bag with immediate effect. Chidambaram raised the excise duty on cement priced above Rs 190 per 50 kg to Rs 600 per ton from Rs 400 in the budget for the fiscal year 2007-08. At the same time he cut the duty on cheaper cement bags to Rs 350. Post the hike, average wholesale price of cement in Mumbai would be Rs 233 per 50 kg bag while the retail price would be Rs 245, said Sanjay Ladiwala, President of the Cement Stockists & Dealers Association Bombay.
Tata Steel hiked prices for the first time this year following an increase in global steel prices. The price of hot-rolled coil (HRC), an industry benchmark, was raised by Rs1,000 per metric ton, or 4%. Prices of rebars, used in construction, was increased by up to Rs500 a ton. HRC sold at an average Rs26,000 a ton last month in the spot market. Jindal Stainless will increase prices by as much as 5% for some products because of higher raw material costs. India's No.1 stainless steel producer will raise prices of the 300-Series by as much as Rs10,000 per ton to Rs210,000 a ton. Prices of the 200-Series will be raised by Rs2,000 a ton. Others like Ispat Industries, Essar Steel, JSW Steel and SAIL were also likely to follow suit.
The Indian car industry decided to pass on the burden of additional 1% education cess proposed in the Budget 2007-08 to consumers. Market leader Maruti was the first to announce its decision to hike prices from March 15. Hyundai, the country's second largest carmaker, said it will increase prices of all its models. Tata Motors and Mahindra & Mahindra too increased prices of some of their models. Honda Car India will increase the price of its sports utility vehicle CR-V between Rs10,000-12,000. This is because the company's sales tax holiday is coming to an end in Uttar Pradesh from April 1. Others, including Ford and GM, were taking stock of the situation. DaimlerChrysler India and Toyota said they will keep prices unchanged. Meanwhile, Skoda Auto slashed prices across all models by up to Rs 24,000 citing reduction in customs duty on imported car parts. BMW also reduced prices.
Low base props up auto sales in Feb
Tata Motors announced its total vehicle sales (including exports) grew by 19% in February to 53,707 units from 45,113 units sold in February last year. Cumulative sales (April-Feb 2006-07) jumped 30% to 516,599 units. Maruti Udyog Ltd. said its domestic sales grew by 61.4% in February over the corresponding month last year. During the month, the company sold 59,095 vehicles versus 36,608 in the same month last year. Exports were down 13% at 3,904 units. Mahindra & Mahindra Ltd. (M&M) said its automotive sector sales grew by 19.2% in February to 13,746 units from 11,536 vehicles in the year-ago period. This figure includes exports of 480 vehicles as against 257 in February 2006. M&M's tractor sales posted a growth of 7% in February over the corresponding period last fiscal. The total sales volumes for the month stood at 7003 including exports, an 5% rise over last fiscal.
Hero Honda Motors Ltd. said on Thursday that its total sales climbed by 11.8% in February to 280,515 units from 250,695 units in the same month a year earlier. Bajaj Auto Ltd. said its total sales fell 1.7% last month due to production constraints. The Pune-based two-wheeler major sold 202,212 vehicles last month, compared with 205,776 a year earlier. Exports in the month jumped 46% to 38,228 vehicles from 26,237 a year earlier, Bajaj Auto said. TVS Motor Co. Ltd. said its motorcycle sales rose by 6% last month to 70,155 units from 66,391 units in the same month a year earlier. Overall sales climbed by 10% to 120,110 vehicles in February, compared with 108,923 units a year earlier. Exports rose 33% to 8,017 units.
M&M, Nissan, Renault to build Chennai plant
Mahindra & Mahindra Ltd. (M&M) signed a MoU with Renault and Nissan for setting up a car plant in Chennai. The facility will have an installed capacity of 400,000 units per year, seven years after its initial production. Renault, Nissan and M&M are committed to investing a minimum of Rs40bn (€ 686mn/US$902mn) in the Chennai plant during the next seven years. M&M will hold a 50% stake in the JV, while the balance will be owned by Renault and Nissan. The project will provide vehicle production for each carmaker, plus a powertrain facility for Renault and Nissan. The MoU will facilitate M&M and its partners to manufacture passenger cars and SUVs in the 925 acre (about 400 hectares) facility. Production is expected to begin in the second half of 2009.
Jindal Steel seals iron ore deal with Bolivia
indal Steel & Power Ltd. managed to salvage the mega iron ore exploration deal with Bolivia. Differences over natural gas prices and taxes had threatened to jettison the deal. Both parties signed preliminary agreements on the tax rate and gas prices for the iron and steel project, and will sign a definitive contract within 45 days. In June last year, Jindal Steel won an international bid to exploit 50% of the El Mutun iron ore reserve in a joint venture with the Bolivia government. The company committed to invest US$2.1bn in mining and steel manufacturing activities. Jindal Steel said it will create 4,600 direct jobs. Bolivia expects to receive some US$200mn a year in profit sharing and taxes from the 40-year concession. El Mutun, believed to contain one of the world's biggest iron-ore reserves, contains an estimated 40bn tons of iron ore of medium-grade quality. The deposit is located southeast of La Paz, near the Brazilian border.
Deals galore
Gujarat Ambuja Cements Ltd. (GACL) sold part of its stake in Ambuja Cement India Ltd. to Holcim Ltd. "GACL owns 33% stake in ACIL, and has exercised its put option for 11% of its holding," the company said. GACL sold 95,375,000 shares of ACIL for Rs5.27bn (US$119mn). By selling these shares, GACL realised a profit of Rs2.41bn. After this sale, GACL owns 22% in ACIL and Holcim holds the balance 78%. Holcim's stake in ACIL increases to 78%, while the remaining 22% is held by Gujarat Ambuja. ACIL holds 35% in ACC and 9.93% in Gujarat Ambuja.
Zensar Technologies Ltd. said its Indian promoter the RPG Group will purchase the entire stake held by the Japanese Joint Venture partner Fujitsu for an undisclosed sum. Fujitsu holds a 29% stake in Zensar through two group companies. As of March 1, Zensar's market cap was Rs5.64bn. So, Fujitsu's stake in the company works out to around Rs1.64bn. A financial daily reported on Feb. 23 that Fujitsu had sold its 29% stake in Zensar to the RPG Group citing strained relations between the two JV partners. It also stated that the Japanese company was keen to go solo in India was even eyeing acquisitions.
TV Today Network said that Reliance Capital Ltd., part of the Anil Dhirubhai Ambani Group, has picked up 11.93% stake in the company on Feb. 28 through the open market route. In a filing to BSE, the news broadcaster said that Reliance Capital purchased 6,918,327 shares. However, TV Today didn't say the price at which the shares were bought nor the sellers.
Autoline Industries said it will acquire a 51% stake in Stokota NV of Belgium for about Rs668mn in cash and equity. The two companies signed a MoU to execute a merger of the two companies. Stokota is a MNC with operations in Belgium, France, Poland, China, and India. It has partnerships in over 16 European Union (EU) and Eastern European countries. Stokota is the largest manufacturer of aluminum tankers in Europe and is a leader in the market for steel and stainless steel tankers. It's customers include Volvo, Scania, MAN, Iveco, Renault, DAF in Europe and FAW and Deng Fong in China.
Spice to issue 138mn shares in IPO
Spice Communications Ltd. plans to issue 137.99mn equity shares in an Initial Public Offering (IPO). The issue would constitute 20% of the fully-diluted post-equity capital of the company, shows its Draft Red Herring Prospectus (DRHP), filed with capital market regulator SEBI. Malaysia's TM International holds 49% in Spice through its wholly-owned unit, TMI India. The proceeds of the IPO would be used partly to repay long term debt, pay for licences and other capital expenditure requirements, Spice said. The company is also considering a private placement of shares before the issue. Spice provides cellular services on the GSM platform in Punjab and Karnataka. As of Dec. 31, 2006, the company had a subscriber base of 2.45mn. The company has applied for mobile services licenses to operate in 20 more circles and plans to provide ILD and NLD services.
Indian Bank listing
Shares of Indian Bank performed well on the company's stock market debut on Thursday. The stock opened at Rs105 on the Bombay Stock Exchange (BSE) as against the issue price of Rs91, translating into a premium of 15.4%. The scrip closed its maiden trading day at Rs98.30 after touching a low of Rs77. The company came out with an IPO of 85,950,000 equity shares of Rs 10 each. The public issue received a tremendous response from investors, especially foreign institutional investors. Overall the IPO was subscribed 32.16 times. The IPO constituted 20% of the post- issue fully diluted paid up equity capital of Indian Bank. Post-IPO, the Government of India will hold 80% of the public sector bank's equity share capital.
Global stocks slump as China melts
Stock markers tumbled across the world following a steep drop in Chinese stocks on Feb. 27. Chinese stocks registered the biggest fall in a decade after regulators said they would ban illegal activities in the stock market. The tighter regulation on stock market investments through borrowed funds was later withdrawn. The selloff was also partly attributed to profit taking after key indices reached record high last week. China's stock market was the biggest gain last year. The Dow Jones Industrial Average lost 3.2% in the last three sessions, while stocks across Europe and Asia also declined, extending their worst slump in four years. However, China's stocks rose on Friday as some investors judged this week's tumble, the biggest in four weeks, as excessive.
US recession possible, not probable: Greenspan
Former Federal Reserve Chairman Alan Greenspan said that a recession in the United States is possible, though not probable this year as inventory problems in the economy are being addressed quickly. "It is possible we can get a US recession toward the end of this year, but I don't think it's probable," international wire news agencies quoted Greenspan as saying in his speech at a forum in Tokyo organized by international brokerage CLSA. Earlier on Feb. 26, Greenspan said that a recession in the US was possible, though it was difficult to predict the timing, a comment blamed in part for the global market decline this week. "Things look reasonably good in the short run for the US and the world," he said. " But we can't just assume that this extraordinary period of recovery can extend indefinitely." Greenspan also said yesterday that the US has gone through the major part of adjustment in housing prices and the worst is over, though the housing market is expected to remain weak.
Major insider trading scam bust: US Govt
The US government charged 13 people, including employees at major Wall Street banks, with securities fraud, wire fraud, bribery and other charges in what could be one of the biggest case of insider trading in years. Prosecutors said that that all 13 people had been arrested, and four had pleaded guilty. Also, the Securities and Exchange Commission (SEC) charged 11 people and three companies in a civil suit related to the insider trading schemes. It was one of the most pervasive Wall Street insider trading rings since the days of Ivan Boesky and Dennis Levine, said Linda Thomsen, Director of enforcement with the SEC, at a joint news conference with the US attorney and the FBI on March 1. She was referring to major insider trading scandals of the 1980s. Prosecutors in New York and Washington accused an executive at UBS and a former compliance lawyer at Morgan Stanley of tipping off traders and brokers to new analyst ratings and secret takeover talks. At least four Bear Stearns professionals traded on information leaked from UBS and Morgan Stanley, SEC said. The scheme stretched over five years, included hundreds of tips and produced more than US$15mn in illegal profits, it added.
Japanese inflation falls to zero
Japan had zero inflation in January, underscoring the economy's struggle to overcome seven years of slumping prices. Japanese inflation as measured by the core consumer price index fell to zero in January, and wages fell the most in more than two years, underscoring the country's struggle to overcome seven years of slumping prices. Core consumer prices, which exclude fresh food, were unchanged from a year earlier, the statistics bureau said, matching the average estimate of e conomists. It was the first time prices failed to rise since May, and followed a 0.1% gain in December. A separate report showed that wages slumped 1.4% in January, the biggest drop since June 2004, damping prospects for faster inflation and higher interest rates in the world's second-largest economy. The Bank of Japan raised rates for the second time in six years last week and Governor Toshihiko Fukui said further increases will be gradual.
Buffett owns stake in Tesco, Posco
Shares in Tesco rose on news that billionaire investor Warren Buffett has a 2.9% stake in Britain's biggest retailer. According to Buffett's annual letter to shareholders, his insurance and investment company Berkshire Hathaway Inc. owned 229,070,000 shares of Tesco at the end of 2006, worth US $1.82bn. Buffett also disclosed that Berkshire Hathaway had a 4% stake in Korea's Posco, sending shares of the world's third-largest steelmaker soaring in Seoul. The letter didn't disclose when or how Berkshire Hathaway acquired 3.49mn shares of Posco for US $572mn. The Omaha, Nebraska-based firm's investment in Posco was worth US $1.16bn as of the end of last year, Buffett, 76, said in his annual letter to shareholders, released on March 1. Berkshire's other holdings included 12.6% of American Express and 8.6% in Coca-Cola. The only other Asian company listed was PetroChina, China's biggest state- run oil company, in which Berkshire had a 1.3% stake. Separately, the legendary investor said after more than 40 years overseeing Berkshire, he was looking for a new chief investment officer who will replace him when the time comes.
Oracle gobbles up Hyperion
Oracle Corp. agreed to buy Hyperion Solutions Corp., a leading global provider of performance management software solutions, for about US$3.3bn in cash. Hyperion investors will get US$52 a share, Redwood City, California-based Oracle said in a statement. The price is 21% more than Santa Clara, California-based Hyperion's closing price of US$42.84 yesterday. Hyperion has about 12,000 customers. The company reported second-quarter earnings in January that topped analysts' estimates as it won orders from BT, New York University and RadioShack. Revenue is expected to jump to as much as US $895mn this year. Excluding some costs, the acquisition will boost the company's EPS by at least 1 cent in fiscal year 2008, which ends in May, and by at least 4 cents in fiscal 2009, Oracle said. Including those costs, the purchase will be modestly dilutive in 2008, before starting to contribute to earnings, CFO Safra Catz said on a conference call. Oracle will reap cost savings because the companies target the same customers, Catz said. Even so, Hyperion has fewer products in common with Oracle than Siebel and PeopleSoft had, she said. "We have virtually no overlap with these folks," Catz said. "We should be up and running very quickly."