Tuesday, March 27, 2007
We are supposed to be a poor country, or, as some smart alecs put it, a rich country with poor people. All poor countries are supposed to be short of capital - which is why they are poor - and that is the reason they woo foreign investors. Or why is it that we are actually exporting capital, not a few million dollars, but billions of them, and acquiring foreign companies by the dozen, something we never did before?
Since even Tatas don't have that much spare cash, they are selling their shareholding in firms like TCS, and Birlas will be doing the same. The rest of the cash will come from foreign banks and financial institutions, some of whom are making so much money in such deals, they do not know where to keep it, and will no doubt use it to finance more such deals and make yet more money!
What is attracting all this foreign money to India is the reputation Indians have recently as managers and entrepreneurs. Somehow, Indians were never thought of as great managers or even as technical people. But the BPO industry has changed all that. For the first time, foreign companies have seen what Indians can do and they are amazed. They always thought of Indians as colonial people, people who are good clerks and babus, but not good enough as managers, let alone good engineers.
I recall once talking to a 'gora' bank manager in Calcutta - it was Calcutta then, not Kolkata - who presided over a huge army of clerks in a humid hall there was no air-conditioning then - none of whom was doing anything more exciting than adding up sums and post them in their flat ledgers.
For every little instruction, or something that involved a simple decision, they would come to him and ask for his advice. And he shook his head from time to time, as if to wonder how long he could go on with this lot, before he went home for his “tiffin”.
I have worked in England, as well as, of course, in India, and I can say that, man for man, or woman for woman and by the same token, an American, or, to put it mildly, a white man. We are far better educated, have gone through many ups and downs in the last two hundred or five hundred years and have a firm sense of who or what we are. What we lacked all these years was a sense of pride and faith in ourselves, having been bossed over by foreigners, goras and others, for hundreds of years.
It has taken us only 50 years to regain our pride and to think of ourselves as free men and women, second to none in any field of human endeavour. We Indians have at last found our voice, and nothing is more important for a people or a nation or a community, than its own authentic voice if only to tell the world that they have arrived.
Stocks of nine real-estate and construction firms, listed between April 2006 and now, are trading at stiff discounts to their listing prices. For two stocks, the discount to their listing price is as high as more than 40%. Six of the nine stocks are even trading below their offer
With their swimming pools, tennis courts and even zoos, the campuses of many Indian high-tech companies have more in common with a country club than the average office block.
But perks like these, along with talent contests and even letters to parents, are becoming vital weapons in the HR armory for Indian tech companies desperate to hold onto their best staff.
Much of the success of the Indian services companies to date has been down to the vast talent pool that they can draw on. But hiring--and keeping--the best people is a constant struggle and the top tech companies are getting increasingly sophisticated about how they reward and retain staff.
As use of offshore increases, so does the need for staff to service those deals. The big players--led by Infosys, TCS and Wipro--hire several thousand new staff every quarter in order to keep up with demand.
And even though India is renowned for churning out 300,000 engineering graduates every year, there is still fierce competition for the best. Because despite the huge headline figures, only a subset--say 25 percent--of those graduates are immediately employable.
And keeping hold of the best people once they are hired is just as big a problem.
As a recent McKinsey report stated: "There is almost a frenzy in India to find senior staff to keep more complex projects on track. In this scenario, resource management is a competitive differentiator."
Across the big players, attrition rates (the proportion of staff quitting each year) run at around 14 percent in IT positions but can run much higher in the business process outsourcing sector. Staff with one to four years' experience are the ones most likely to move jobs, many lured away by glamour postings in the United States and Europe. And this means companies have to get clever about how they attract and retain staff.
Pay, of course, is one way to keep staff happy. The lower salaries--particularly for junior staff--are one of the incentives to use Indian outsourcing in the first place but these are rising.
For example, recruits with engineering degrees might be paid somewhere between US$3,000 to US$7,000 per year. But these salaries rise by about 20 percent per year and someone with five years' experience might be earning US$20,000 to US$25,000. The further up the organization, the less of a difference there is between Indian salaries and those in the United States and Europe--for example a senior executive might make somewhere between US$100,000 and US$150,000.
On top of pay, companies are looking at ways of boosting loyalty through softer hearts-and-minds style programs.
Most of the large companies have luxurious campuses where staff can swim, play golf and even visit the zoo. Recently Wipro, for example, held the grand finale of its 'Spark' program, which was a day-long sports event and family entertainment day held in a stadium in Bangalore.
HCL has even gone for the approach of employee first, customer second. S Premkumar, HCL's head of financial services explained: "We believe that the value we generate is generated by our employees."
Hari Thalapalli, human resources director at Satyam, explained his approach: "We recognize that we can't hope to stop attrition completely. So we say we don't want to lose people at a leadership level."
Satyam targets the top 30 percent of staff at every level and gives them perks--like first refusal on new projects and regular exposure to new technologies and industries--and claims to have reduced attrition to five per cent in this group.
Thalapalli said the company also runs a talent competition, even writing letters to parents and partners of staff telling them "they have made a significant difference to the company".
It also tries to keep in touch with people who leave the company. The company's vice president of leadership development, Ed Cohen, said: "There's a high percentage of people at Satyam that leave and come back--how you exit people is becoming as important as how you recruit or retain."
Of course, there are different pressures in different parts of the market. In the call centre space, staff attrition can run at 80 to 140 percent per year, which means a company might have to replace its entire workforce every year.
Souvik Chakraborty, managing director of recruitment company CAPntel, said the growth of IT means some top techies try to demand massive salary hikes when moving between employers. "The expectations are pretty ridiculous," he added.
BPO has meant a big change for graduates. He said: "For a plain undergraduate for whom getting a job would be a big challenge, BPO has changed the whole scenario. Now they are not just getting jobs, they are getting multiple offers."
There are also other reasons for the fast turn over in some BPO areas, as Venkatesh Roddam, CEO of BPO company Nipuna--part of Satyam--points out: "The call centre employee's job is scientifically rated as the most stressful in the world." After all, who wouldn't find it stressful if they were to deal with complaints all day?
On top of this there is big demand for good workers. He added: "The market is buzzing with opportunities for people today. These are youngsters that are becoming extremely employable in the call centre space."
As a result, Nipuna has a chief fun officer who is tasked with keeping the atmosphere vibrant. And BPO operations regularly latch onto celebrations such as Valentine's Day and have themed days in the office.
The next trick, of course, is to make sure the clients are as happy as the staff. And that can be a little trickier than just laying on a pool as an after-work treat.
Ansal Properties & Infrastructure Ltd (APIL) is setting aside about Rs200 crore to buy small development companies that have run into financial trouble. The company said it has been approached by several such sellers, an indication that some pockets of India’s overheated real-estate market have started to cool.
India’s fourth-largest listed real-estate developer said it hasn’t sealed any deals yet. “The market is slowing down and funds from banks are not easily available,” said Anil Kumar, chief executive officer, APIL. “Some of them would like to exit.”
The acquisitions are likely to be in the same places where the company operates: Rajasthan, Punjab, Uttar Pradesh and National Capital Region. Kumar said the company might also consider other financial arrangements with distressed companies. Ansals, for example, could build a project on a company’s land, and then return a portion of it to the company, he said.
Real-estate prices in most cities have increased by 30% in the past year, fuelled by a booming economy, easier availability of home loans and a rush to buy property in anticipation of high returns. But analysts say the market, in some pockets, has begun to show signs of a slowdown as interest rates rise and higher prices of lands slow buying. The concern over sky-high land deals has prompted the country’s central bank to warn banks against excessive lending to the real-estate sector.
Kumar said small companies have more difficulties riding out problems such as delays in approvals which add to their cost of developing a property. Ansals could get a discount of up to 25% on market value for the properties it buys, depending on site approvals, the status of the project and location of the land. But the larger advantage is that Ansals would be able to buy assembled land rather than having to endure price increases as it pieces together the site.
Typically, developers who want to acquire large tracts of land have to often buy it bit- by-bit because of fragmented holdings. While they may get the first few parcels at relatively affordable prices, land-owners, who hold out for long, charge several times more, taking advantage of splintered ownership which makes it mandatory for developers to negotiate with each owner to ensure continuity of the land parcel.
Sujit Jain, a real estate analyst at PINC Research in Mumbai, said many smaller companies paid high prices in land auctions and were unable to make projects viable. Now it makes sense for large developers to sweep in and acquire the distressed companies’ land banks, he said.
“Instead of going out and buying plots at high prices, why not go and buy companies who have already built up land banks,” Jain asked. “These people (promoters of smaller firms) will look to liquidate and take out as much money as possible.”
The stock markets turned distinctly weak on 26 March on all-round selling amid squaring up of long positions that took its toll on shares’ values and the benchmark Sensex tumbled by 162 points.
Bank, auto and IT shares led the fall and were at the receiving end on heavy offloading.
Squaring up long outstanding positions by operators and retail investors ahead of the expiry of March contract on 29 March also impacted negatively on the market sentiment.
The Bombay Stock Exchange (BSE) 30-share sensitive index opened strong at 13,345.73 points, which was also to be the day’s high, but reacted downward on sustained selling and touched a low of 13,090.80 before ending at 13,124.32, a steep fall of 161.61 points or 1.22%.
Similarly, the broader S&P CNX Nifty of the National Stock Exchange (NSE) dipped by 41.10 points, or 1.06%, to 3,819.95 from previous close of 3,861.05 points.
Auto counters were under heavy selling pressure following possibility of slowdown in sales due to high interest rates amid spiralling global crude oil prices near $63 a barrel, dealers said.
IT stocks also bore the brunt of selling as the rupee rose against the dollar to a 20-month-high, they added.
The fall in the Sensex could be gauged by 26 out of 30 index-based shares suffered sharp to moderate losses.
Jittery investors sentiments saw profit booking in the indicies after a very strong week where Sensex made the highest gains ever. There markets were lacklustre ahead of the Investors were also in a holiday mood as well as cautious ahead of F&O expiry. Market lost its ground in mid-day trade under selling pressure across index heavyweights which continued to slip southwards. Adding to this fall was the weakness in Dollar as the Rupee surged to a 20-month high. High crude oil prices also weighed on the bourses. Selling pressure was witnessed in selective stocks of Auto, Software and Airlines, while Cement and Telecom sector were in investors favour. Asian Markets managed to trade in green before closing, while Europe trading in mixed.
Sensex closed down by 162 points at 13124.32. Weighing on the Sensex were losses in Tata Motors (753.85,-5 percent), HDFC Bk (982,-3 percent), Wipro (584.8,-3 percent), Maruti (818.9,-2 percent) and TCS (1261.25,-2 percent). Losses were restricted by gains in Satyam (472.25,+2 percent), ONGC (853.2,+1 percent), TISCO (441.9,+1 percent), RCVL (426.3,+0 percent). Volumes were low as they were expected to be. However FNO expiry for March and the year end date accounting may bring in high volumes for the rest of he week.
Glenmark Pharmaceuticals inched a deal to buy more than 90% of the Czech firm Medicamenta. Glenmark joins bigger Indian rivals such as Dr. Reddy's and Ranbaxy in trying to expand into Europe's growing generics market. This acquisition provides Glenmark with a strategic entry point into two of the fastest-growing and attractive markets in Europe. Glenmark also expects Medicamenta to provide a base for its branded products in Europe and will also look to develop and expand Medicamenta's current portfolio. Medicamenta, with marketing operations in Czech Republic and Slovakia is expecting its revenues to touch US$ 8 m in 2007. Pharma sector traded firm with Glenmark Pharma (up 6%) and Pfizer (up 4%) being the key gainers.
Sugar sector was back in demand today on government's decision to give incentives to companies that export the sweetener giving some cushion. The government would give a subsidy of as much as Rs 1,450 a tonne to sugar exporters while an incentive of Rs 440 a tonne will be provided on the export of raw sugar and will also consider creating buffer stocks of 20 lakh tonnes for two years in view of the high production of 250 lakh tonnes estimated this year. Market observed the incentives offer and expected to give a boost to sugar sector and the subsidy will provide a cushion to sugar makers. Bajaj Hindustan, Balrampur Chini closed up by 4%, while Sakthi sugars and Renuka sugars were the other major gainers.
Imported liquor might see scrapping of additional customs duty on wines and spirits. Currently there is a basic customs duty of 100-150 per cent and an additional customs duty (ACD) of 25-150 per cent on wines and spirits. The total incidence of tax is between 250-550 per cent depending on the import price of products. If the bill is passed then the imported liquor will be really cheap that will slow down smuggling. Though this is negative prima facie for United Sprits, and Radico Khaitain but the Indian system of distribution within states is so controlled that benefits of this will only accrue to existing players given that they understand the system. The foreign brands in any case dont have such a mass following we believe. However even Champagne could do the imports and benefit from the same though really it could slow the growth of its own brands which is key. There was little action here though.
Technically Speaking: It was a volatile morning but Sensex then after making an intraday high of 13330 kept its nose pointed downwards. Sensex is in a correction mode, after a big spurt last week. Supports were seen at 12950 and 12905 and Resistance at 13286- 13428 levels. Key positive would be with Sensex breaking out of 13520 levels. With the Derivatives expiry nearing in, markets likely to see some volatility before it can break above those levels. Market turnover stood at Rs 3126 cr. Market breadth was in favor of Decliners as; Advances were 849 against Decliners of 1746.
A big sell-off of stocks towards the end of trading hours on Monday pulled down the benchmark indices. The first trading session of this week seemed to mark a snap in the spell of the indices' upward trend that was witnessed during most of the trading days of last week.
The markets had started last week from an oversold position. The cues that investors had taken from the strong rise of key indices in the major Asian markets and the attraction of buying into the frontline cement and information technology stocks at low rates had proved to be key drivers of the indices' rise during the first trading session of last week.
Overall market trend
However, despite the fact that the global markets were stagnant and seemed to remain calm even though a few weak economic indicators from the US were expected, this Monday's session turned distinctly volatile during the second half at the two major bourses of the country.
Overall, the markets had closed marginally lower on the final trading session of last week, after a gain of over 6 per cent during the previous sessions. Opening this week on a negative note, profit-booking and squaring-off of positions on Monday led to a large fall in the indices.
The key indices - Bombay Stock Exchange's Sensex and the National Stock Exchange's Nifty index had both opened in the black during the morning session on Monday.
After being range-bound, the indices seemed to slide down slowly into the red till mid-session, when a sudden bout of buying support pulled the indices back into the black.
However, the sharp rise in selling pressure led to the indices plummeting into the red within a short span of two hours. By the time the markets closed for the day, the NSE Nifty had fallen by over 41 points and the BSE Sensex had lost over 161 points. The fall had shaved off over 1 per cent from both the indices. There were only nine stocks from the Nifty's 50 and only four stocks from the Sensex 30 that were gainers at the close of Monday's trading session.
Some of the biggest losers came from the information technology, auto, banking, capital goods and engineering sectors. The major gainers amongst Nifty stocks during Monday's session were MTNL, HPCL, Satyam Computers, Oriental Bank and ONGC. The top five losers from the Nifty were Tata Motors, HDFC Bank, Dabur, Wipro and Jet Airways.
At the BSE, the big losers from the Sensex were HDFC Bank, Tata Motors, TCS, Reliance Energy, Maruti Udyog, ICICI Bank, SBI, Reliance Industries, NTPC, L&T, Infosys Technologies, ITC, Cipla, Gujarat Ambuja Cements, Hindalco, Hero Honda, Dr Reddy's Laboratories, BHEL, Bajaj Auto, ACC and Bharti Airtel.
Sugar sector stocks were again in the limelight on Monday with at least a dozen of them recording gains. The prominent amongst them were Ponni Sugars (Erode), Dharani Sugars and Chemicals, Shree Renuka Sugars, Sakthi Sugars, Bajaj Hindusthan, Balrampur Chini Mills and Triveni Engineering & Industries.
Select pharma and banking stocks also managed to close the day with gains.
Reliance Communications has shortlisted four merchant banks for the initial public offer of its overseas subsidiary FLAG Telecom, which operates a global fibre optic cable network.
RCom will select from among Goldman Sachs, Morgan Stanley, Deutsche Bank and UBS to lead manage the IPO, said sources.
RCom will offload around 10-15 per cent stake in FLAG, which will list again on London Stock Exchange.
Before it was fully acquired by RCom (then Reliance Infocomm) in 2004, FLAG was listed on both NASDAQ and LSE.
The IPO proceeds will part-fund a $1.5 billion expansion plan for FLAG that involves the addition of 50,000 kms of `Next Generation Network' over the next three years.
After RCom acquired FLAG, it augmented it with a new network called FALCON connecting 11 countries in West Asia.
RCom is also planning an additional landing station for FALCON in Thiruvananthapuram in Kerala that will connect the Maldives, said sources. This will be in addition to FALCON's landing station in Mumbai and FLAG's landing station, also in Mumbai.
Reliance had acquired FLAG — which had filed for bankruptcy — for $207 million in early 2004.
Bharat Heavy Electricals
Cluster: Apple Green
Price target: Rs2,650
Current market price: Rs2,255
Foray into defence equipment space
Bharat Heavy Electricals Ltd (BHEL) is planning to produce defence equipment, including weapons. It has already applied for a licence to produce defence products. It is likely to manufacture all types of guns, including field guns, air defence guns, and mortars for the Indian defence sector and para-military forces. It has also firmed up plans to produce underwater weapon systems, weapon control solutions and their components.
ABC BearingsExpansion to drive growth
The bearing industry is expected to grow at a rapid pace of about 15-20% going forward. ABC is expected to keep pace with the industry. To cater to the strong demand, the company is expanding its capacity from the current 6.5 million units to about 8.0 million units by October 2007. The company would be able to do this at a minimal capital expenditure. With technological inputs from NSK it would be able to make all its lines "universal", capable of producing both taper as well as cylindrical bearings. At present, the company is operating at 100% utilisation