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Monday, June 07, 2010
Reliance Communications gains
Reliance Communications rose 4.16% to Rs 175.15 at 15:29 IST after Abu Dhabi-based Etisalat said it was studying options in India, including a deal with Reliance Communications.
Meanwhile, the BSE Sensex was down down 345.03 points, or 2.02%, to 16,772.66.
On BSE, a huge 1.07 crore shares were traded in the counter as against an average daily volume of 13.55 lakh shares in the past one quarter.
Foreign banks keen to bolster foothold in India
According to media reports, the foreign banks have been in India for more than 150 years but more overseas lenders are now queuing up to set up operations, amid signs that tough restrictions on entry may be eased.
Five to eight foreign banks are seeking to come to India, with the country viewed as attractive because of gaps in the market and a buoyant economy that has created wealthier clients.
Karnataka fast-tracks plan 3,000MW gas-based plants
The Karnataka government has offered 3,000 mega watt (Mw) of gas-based power projects at a cost of Rs 12,000 crore to the private sector for investment. Of this, 2,100 Mw has been split into three projects of 700 Mw each. They have been put on the competitive bidding route while 900 Mw has been offe-red on a merchant basis that is to be developed by private parties with the projects ranging from 50 Mw to 300 Mw respectively.
Sensex ends below 17,000 on weak global cues
Indian equities had a disappointed day today. The Sensex tumbled over 300 points at close due to global woes. All sectoral indices traded in deep red. Metal, realty were badly hit followed by PSU, oil& gas, capital goods and auto stocks also led the downfall. It opened on a bleak note and soon fell sharply on the back of weak Asian peers. Aggressive selling was seen across board. The index plunged over 400 points in mid noon trades, touching a day`s low of 16,686.73. Finally, it ended below 17,000 mark, whereas Nifty managed to hold 5,000 mark.
On global front, European stocks dropped as concern lingered that the region`s spreading debt crisis will hold back the global economic recovery. US futures fell. Asian stocks tumbled, dragging down the MSCI Asia Pacific Index by the most in 14 months after a US jobs report missed economist estimates and concern grew that Europe`s sovereign-debt crisis is spreading.
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BSE Bulk Deals to Watch - June 7 2010
Deal Date Scrip Code Company Client Name Deal Type * Quantity Price **
7/6/2010 517356 ACI Infocom SAGAR TEX CREATION PRIVATE LIMITED B 50000 23.25
7/6/2010 517356 ACI Infocom ALLWELL INVESTMENTS PVT LTD S 79199 23.25
7/6/2010 500028 ATV Projects ASHISH SUBHASH CHANDWANI B 318371 15.90
7/6/2010 511664 BGIL Films CSM COMMODITY LIMITED B 160000 13.73
NSE Bulk Deals to Watch - June 7 2010
Date,Symbol,Security Name,Client Name,Buy/Sell,Quantity Traded,Trade Price / Wght. Avg. Price,Remarks
07-JUN-2010,KARURKCP,Karur K.C.P. Packkagings,SAR AUTO PRODUCTS LIMITED,BUY,84361,57.30,-
07-JUN-2010,MANGLMCEM,Mangalam Cement Ltd,BIRLA SUNLIFE INSURANCE CO.LTD,BUY,160000,151.00,-
07-JUN-2010,MANGLMCEM,Mangalam Cement Ltd,BIRLA MUTUAL FUND,SELL,160000,151.00,-
Hungary woes haunt markets
Today’s major news:
Oracle Financial tops the chart, the stock closes 6.63% up
Reliance Communications rallies on stake sale plan; the stock ends 4.61% higher
Mastek shoots up on acquisition buzz; the stock closes 13.60% higher
Post-market summary:
Nifty June 2010 futures below 5,050
Turnover surges
Nifty June 2010 futures were at 5,026.65, at a discount of 7.35 points compared to spot closing of 5,034. Turnover in NSE's futures & options (F&O) segment surged to Rs 80625.72 crore from Rs 64139.82 crore on Friday, 4 June 2010.
JSW Steel June 2010 futures at a discount at 1032.50 compared to the spot closing of 1042.
Tata Steel June 2010 futures were near spot price at 464.55 compared to the spot closing of 464.25.
Tata Motors June 2010 futures were at premium at 742 compared to the spot closing of 739.05.
In the cash market, the S&P CNX Nifty fell 101.50 points or 1.98% at 5,034.
Fatpipe Networks IPO subscribed 32% on day one
Gets bids for 19.31 lakh shares
The initial public offer (IPO) of the Chennai-based IT company Fatpipe Networks India was subscribed 0.32 times on day one. The IPO got bids for 19.31 lakh shares compared with 59.75 lakh shares on offer.
The company is offering shares in the price band of Rs 82-85 per share in the ongoing IPO which remains open between 7 and 9 June 2010.
Fatpipe Networks India manufactures and markets router clustering products, which improves reliability, security and bandwidth management application of wide area networks (WAN).
Asian stocks rumble as recovery hopes dashed
Regional benchmarks slump around 2-3% as investors eye weak US jobs data and European debt worries resurface
Stocks in Asia rumbled today, coming under a heavy selling spree as the markets were quick to react to a 300+ points slide in the DOW in Friday's trades. The investors were in a panic selling mode following a tremendous rise in the US dollar, which hit highs under 1.1900 against the Euro and exerted a tremendous selling pressure on the risky assets. Markets were also shivering on ideas China would tighten its monetary policy soon and help its already moderating economy to soften further in the second half of the year. Though a nominal pick up was seen in the markets from the day's lows, it was a panicky Monday for stocks with a intraday recovery in DOW futures, which cut losses to quote down 20 points when last seen, not being able to influence the direction much
Market snaps three-day winning streak
The key benchmark indices edged lower, snapping a three-day winning streak, as weak global stocks marred investor sentiment. Nonetheless, the market ended off the day's low, mimicking a recovery in many Asian stocks from an intraday steep slide. Reports that monsoon has revived after being stalled by a cyclone last week, also aided intraday recovery on the domestic bourses. Index heavyweight Reliance Industries (RIL) cut losses. Some auto stocks also pared losses. The BSE 30-share Sensex fell 336.62 points or 1.97%, up about 95 points from the day's low.
All the sectoral indices on the BSE were in the red. Both Mid and Small-Cap indices on BSE outperformed the Sensex.
Red metal registers big weekly loss
Demand concerns weigh on metal prices
Red metal prices fell at Comex on Friday, 04 June 2010. Prices dropped as economic concerns once again resurfaced following worse than expected job report and problems pertaining to Hungary. These problems once again questioned metal's demand in coming months.
Sterlite Industries - Annual Report - 2009-2010
STERLITE INDUSTRIES (INDIA) LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
Dear shareholders,
The Directors of your Company are pleased to present the 35th Annual Report
together with the statement of audited accounts for the financial year
ended 31 March 2010.
Financial highlights
The following table gives the financial highlights of your Company on a
standalone basis according to Indian Generally Accepted Accounting
Principles (GAAP).
(Rs. in Crore)
Year ended 31 March 2010 2009
Gross Turnover 13,676.47 12,277.74
Earnings before interest, tax depreciation
and amortization 1,628.41 1,653.94
Less: Interest 256.44 203.92
Gross profit 1,371.97 1,450.02
Less: depreciation and amortization 150.64 166.18
Exceptional items 273.53 (55.31)
Profit before tax 947.80 1,339.15
Taxation 116.30 102.72
Net Profit for the year 831.50 1,236.43
Add: balance brought forward from previous year 2,683.41 1,944.10
Amount available for appropriation 3,514.91 3,180.53
Appropriation:
General reserve 500.00 204.00
Debenture redemption reserve 2.90 3.00
Additional Dividend on ADS issued in
July 2009 (paid in September 2009) 53.54 -
Proposed dividend on equity shares
(including dividend distribution tax thereon) 367.49 290.12
Balance carried forward to next year 2,590.98 2,683.41
Grey Market Premiums - Jun 7 2010
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Standard Chartered PLC | 104 | Discount |
| Fatpipe Networks India Ltd. | 82 to 85 | 2 to 3 |
Crash...make the best of it!
Things turn out the best for the people who make the best of the way things turn out.- John Wooden
A gap down opening could be a blessing. The Indian market is set to correct at start merely on account of the global crash witnessed over the weekend. A weaker-than-expected U.S. jobs.
report, continued concerns about the European debt crisis (with Hungary part of the action) and the fall of the euro left no trace of bulls on the street. The worry on the street is if Hungary too is reeling, how bad would the actual situation be with other emerging markets in Central and Eastern Europe?
The Dow is down ~11.4% from its April 26 highs which brings academic interest on whether or not its heading into a bear market. Asian markets are understandably weak and the contagion in the market will spread to the Indian indices as well. While strong support could set in around the 4950 levels for Nifty, it may be worth a nibble at stocks which will fall for just no fault of their own.
Back home we have the Empowered Group of Ministers (EGoM) meeting today to decide on petroleum products pricing. Should the government bite the bullet, we should be geared for a Rs3 hike in fuel prices. Perhaps a phased hike could be a safer option the government may choose.
Rcom, which was among the prominent gainers last week could continue to witness action after the board approved in-principle the induction of strategic / private equity investors into the Company for an up to 26% equity stake at an appropriate premium to the prevailing market price. The company will also examine and pursue other appropriate strategic combination / consolidation opportunities.
While the near term worries, mostly global will continue to power the bears, the larger picture too needs to be kept in mind. The government is doing well on the fiscal front thanks mainly to the 3-G auctions. Achieving the disinvestment target could add to the confidence of fiscal consolidation being on the right path.
Though volumes on the stock market may not be anywhere near their highs, the proportion of deliveries has increased. Reports state that in the National Stock Exchange, the proportion of delivery-based trades for April 2010 were 28% of the overall shares traded on NSE while for BSE, the delivery trades stood at 38% in April.
Meanwhile, a FIICI survey suggests that ‘India is likely to see flight of capital from its equity and debt markets in the next six months as global investors hesitate to pour money outside the US because of the European debt crisis.’
"With de-leveraging (belt-tightening) expected to continue in the global markets, there is likely to be flight of capital from equity markets in emerging economies, including India," FICCI study stated.
Daily News Roundup - June 7 2010
Reliance Industries may foray into nuclear energy after being freed from a non-compete agreement with the ADAG that barred it from investing in some businesses. (ET)
Fortis Healthcare may avoid a hurried response to counter Malaysian investment fund Khazanah’s bid to acquire management control over Parkway Holdings. (BS)
Tech Mahindra to focus more on the Middle East and African market, in talks with three-four African telecom companies for large contracts. (BS)
Reliance Communications has granted an in-principle approval to the sale of 26% stake in the company to strategic or PE investors; however, it did not name any buyer or give a timeframe for the proposed sale. (BL)
AT&T is in talks with Reliance Communications to buy a shade under 15% stake. (DNA)
SBI to fix base rate around 8%. (FE)
GAIL set to start work on Dabhol-Bidadi project, To invest Rs 2,000 crore in 2010-11. (BS)
BEML plans to set up another greenfield manufacturing plant at an investment of Rs3.16bn in Bangalore. (BS)
JSW Energy plans to invest about Rs20bn in coal mine development. (BS)
Neyveli Lignite commissioned its lignite-based power plant at Barsingar, in Rajasthan. (BS)
Maytas Infra wins contract worth Rs1.85bn to build part of a metro rail network in the northern Indian city of Gurgaon. (BS)
SsangYong Motor lists six companies as its possible buyers, including M&M and the Ruia Group, of the original list of seven. (BS)
Jaiprakash Associates plans to invest around Rs100bn in the next three years to increase its annual production capacity to 50mn tons from a little over 20mn tons at present. (BS)
Bharat Forge forms joint venture with KPIT Cummins to produce a hybrid engine technology, which will hit the market in six months. (BS)
Adhunik Metaliks plans to invest Rs55.68bn in setting up a 2.2mn tons steel plant in Karnataka. (BS)
Life Insurance Corporation plans to sell its employee housing portfolio worth Rs13bn to its mortgage arm, LIC Housing Finance. (BS)
R-ADAG emerges as the preferred bidder for acquiring a controlling stake in Over-The-Counter Exchange of India from some of the exchange’s existing institutional investors. (ET)
Amtek Group forms 50:50 joint-venture with US-based American Railcar Industries to make railway wagons in Punjab. (ET)
SBI might look at raising money through a bond sale abroad during the next quarter. (ET)
Pipavav Shipyard bags Rs26bn contract to build offshore patrol vessels for the Indian Navy. (ET)
Ashok Leyland says that it has achieved 229% growth in its May sales to 6,502 units as compared to 1,977 in the same month last year. (FE)
Apollo Tyres is gearing up to supply tyres to German car maker Volkswagen in Europe. (ET)
Ashok Leyland and Nissan plan to roll out their first LCV product by mid-2011. (BS)
Welspun Corp. says it has received orders worth Rs7bn for pipes. (FE)
Shree Cement enters into a MoU with the Karnataka government to invest Rs20bn for setting up a cement unit and a power plant. (BS)
CESC acquires 100% ownership in Dhariwal Infrastructure by snapping the remaining 50% for a shade over Rs1bn. (ET)
Mastek is eyeing an acquisition in the insurance vertical in North America as well as the UK, and could spend up to US$50mn for the same. (BS)
Bhushan Steel plans to raise funds worth US$500mn from the market to finance the company’s greenfield projects. (ET)
Essar Oil plans to raise US$300mn by selling FCCBs to its promoter to part finance its expansion. (ET)
Havells India plans to undertake a rebranding exercise in Mexico to introduce products under its own brand. (ET)
Government has amended the Securities Contracts (Regulation) Rules to increase the non-promoter holdings in Indian companies to at least 25%. (BL)
India’s forex reserves dipped US$1.4bn in the week ended May 28, reserves are at almost US$272bn. (ET)
Value of pan India broadband spectrum has reached Rs95bn after 77 rounds of bidding. (BL)
Government to decide on free market pricing of petrol and diesel and increase the price of kerosene and LPG. (FE)
After freak back on winning streak...Nifty, Sensex adds 1.5% each
It was a choppy start for the week with indices falling below their 200-DMA. A freak trade in Reliance and a crash in the overall market on Tuesday had the bulls bruised. Fortunately the remaining days saw some pull back though with the usual intra-day gyrations. Monsoon arrived in Kerala, but uncertainty persists over its progress, which are adding to the market’s woes. India grew faster than expected in fiscal year 2010, March quarter GDP growth came in at 8.6%. Impressive monthly auto sales numbers boosted the auto stocks. FMCG stocks attracted buying interest following positive news flow across the sector. HUL and Colgate were among the notable gainers. Volatility in the markets drove investor’s attention towards defensive pharma space. Finally, the NSE Nifty was up by 1.4% and BSE Sensex was up 1.5%.
The BSE Sensex hit intra-week high of 17,150 and low of 16,318 while the NSE Nifty hit intra-week high of 5,148 and low of 4,961.
The top gainers: The top gainers in the Sensex were Maruti Suzuki (up 8.6%), Hindustan Unilever (up 6.5%), Bharti Airtel (up 6%), ONGC (up 5.1%) and Reliance Infra (up 5.1%).
The Top Losers: The top losers in the Sensex were Grasim (down 4.1%), Tata Power (down 2.5%), Tata Steel (down 2.3%), Hindalco (down 2.2%) and HDFC (down 1.5%).
The BSE IT Index (up 1.8%):The top gainers in the IT sector were Patni Computer (up 8%), Sasken Communication (up 5.9%), HCL Tech (up 2.6%), Mahindra Satyam (up 2.2%) and Infosys (up 2%).
The top losers were Mphasis (down 1.3%), Wipro (down 1.3%) and Oracle Financial (down 0.6%).
The BSE Consumer Index: The top gainers in the Consumer Durables sector were Mirc Electronics (up 6.8%), Su-Raj Diamonds (up 2%), Titan (up 1.3%) and Whirlpool (up 0.5%).
The top losers were Videocon Industries (down 1.9%) and Blue Star (down 0.9%).
The BSE Healthcare Index (up 2.1%):The top gainers in the Pharma space were Wockhardt (up 7.1%), Zandu Pharma (up 4.9%), Sun Pharma (up 4.5%), Cadila Healthcare (up 4.4%) and IPCA Labs (up 4%).
The top losers were Fresenius Kabi (down 5.1%), Glenmark Pharma (down 4.7%), Panacea Biotec (down 3.8%), Marksans Pharma (down 2.8%) and Natco Pharma (down 1.2%).
The BSE Banking Index (up 1.9%):The top gainers in the banking space were Union Bank of India (up 8.8%), Karnataka Bank (up 8.7%), Canara Bank (up 5.4%), Bank of Baroda (up 5%) and SBI (up 4.6%).
The top losers were Kotak Mahindra Bank (down 1%) and HDFC Bank (down 0.6%).
The BSE Auto Index (up 4.4%):The top gainers in the auto space were Maruti Suzuki (up 8.6%), M&M (up 7.2%), Ashok Leyland (up 6.3%), Hero Honda (up 3.6%) and Tata Motors (up 2.9%).
The BSE Oil & Gas Index (up 1.4%):The top gainers in the oil & gas space were GSPL (up 7.6%), Essar Oil (up 5.7%), MRPL (up 5.5%), Hindustan Oil (up 5.3%) and Chennai Petroleum (up 5.1%).
The top losers were Gujarat NRE Coke (down 6.5%), Jindal Drilling (down 1.2%) and Reliance (down 0.5%).
The BSE Capital Goods Index (up 1.1%):The top gainers in the Capital Goods space were Dredging Corp (up 12.9%), Elgi Equipments (up 6.9%), Greaves Cotton (up 4.1%), Crompton Greaves (up 3.4%) and Alstom Projects (up 3.3%).
The top losers were Thermax (down 2%), Siemens (down 1.8%), Usha Martin (down 1.6%), Ingersoll Rand (down 1%) and Esab India (down 0.8%).
The Cement Sector: The top gainers in the cement sector were Prism Cement (up 6.1%), Dalmia Cement (up 5.2%), Shree Cement (up 4.8%), India Cements (up 2.4%) and Birla Corp (up 2.1%).
The top losers were Grasim (down 4.1%), JK Cements (down 1.2%) and Binani Indus (down 0.2%).
The Telecom Sector: The top gainers in the telecom space were RCom (up 14.1%), Idea Cellular (up 11.5%), Bharti Airtel (up 6%), TTML (up 5.3%) and Shyam Telecom (up 2.3%).
The top losers in the telecom were Gemini Comm (down 2.3%) and Tata Communication (down 0.2%).
The Realty Sector (down 0.7%):The top losers in the Realty sector were Anant Raj Indus (down 8.9%), Sobha Developers (down 7.3%), Ansal Props (down 3.4%), Unitech (down 3.1%) and Mahindra Lifespace (down 2.2%).
The top gainers were Parsvnath (up 3.3%), HDIL (up 1.4%), DLF (up 0.6%) and Omaxe (up 0.2%).
The Metals sector (down 2.1%):The top losers in the metals sector were Bhushan Steel (down 4%), Jindal Steel (down 3.7%), Tata Steel (down 2.3%), Jindal Stainless (down 2.3%) and SAIL (down 2.2%).
The top gainers were Adhunik Metaliks (up 1.2%), Tata Metaliks (up 1.1%).
Hungary fears may drag Indian equities at start
Headlines for the day:
RCom board endorses 26% stake sale idea
Oil rig oversupply pulls down rates
GUVNL inks PPAs for 420MW solar projects in Gujarat
Events for the day:
Major corporate action
Government to review fuel pricing today
Fatpipe Networks India IPO opens today
Ex-date for dividend of Surana Corp, Tulsyan NEC
For more events, log on to Sharekhan.com
Pre-market report
Global signals
The European shares snapped their four-day winning streak to end lower on Friday (June 04, 2010) after US jobs data disappointed and banks fell, with Societe Generale down on concerns over its derivatives operations.
The US stocks stumbled to their lowest close since February on Friday after May's jobs figure slammed investors already reeling from worry over another developing debt crisis, this time in Hungary. US stocks fell 3% and the Dow Jones industrial average finishing below 10,000, hit by disappointing jobs data and fresh European fears.
In today's trade, the Asian markets were trading in the negative zone after Wall Street slumped on Friday. SGX Nifty was trading 126 points lower.
Indian Indices
The strong rally in the last week due to constructive triggers back home led the Indian equities end the week with a positive bias. But now the global scenario is quite different and the market sentiment across the globe is dragged down by fresh fears that Europe's debt crisis could spread as Hungary scrambled to calm worries that the nation is close to defaulting on its debts.
The Indian stocks may face pressure and reverse its rally leading to a gap-down opening at the start, following the movements of its global counterparts. It is expected to trade with a negative bias throughout the session. The major events back home today will be the meeting of empowered group of ministers (EGoM), to consider the Kirit Parikh committee recommendations on decontrol of fuel prices. The oil & gas stocks will be in focus throughout the day.
Commodity cues
In the commodity space, the crude oil prices slipped, with the Nymex light crude oil for the July series down by $3.10 per barrel, whereas in the metals space, the Comex Gold for the July series rose by $7.90 to a troy ounce and the Comex Silver for the July series was declined by $0.63 to a troy ounce.
Daily trend of FII/MF investment in equities
On June 04, 2010, the foreign institutional investors FIIs were the net buyers of the Indian stocks to the tune of Rs493.30 crore, whereas the domestic mutual, on June 01, 2010, were the net sellers of the stocks to the tune of Rs13.30 crore.
Crude sinks
Crude would have registered weekly gains if not for Friday's losses
Crude oil prices dropped sharply on Friday, 04 June 2010. Prices dropped as economic concerns once again resurfaced following worse than expected job report and problems pertaining to Hungary. These problems once again questioned crude's demand in coming months. Crude would have registered weekly gains if not for Friday's losses.
On Friday, crude-oil futures for light sweet crude for July delivery closed at $71.51/barrel (lower by $3.1 or 4.1%). For the week, prices shed 3.3%.
For the month of May, crude shed 14%. It was the biggest monthly drop for crude since December 2008. For the month of April, crude rose 2.8%. For the first quarter of this year, crude rose by 5.5%. Year to date, crude is higher by 1.8%.
In the currency market on Friday, the dollar stayed strong for almost the entire day and the dollar index ended the day with a 1% gain.
Among economic reports for the day, The Labor Department in US reported on Friday, 04 June 2010 that nonfarm payrolls grew by a seasonally adjusted 431,000 in May, but virtually all the new jobs were temporary jobs at the U.S. Census, leaving private-sector hiring very weak. Excluding 411,000 temporary Census workers, payrolls rose by 20,000 in May. The payrolls growth came in weaker than the 540,000 increase expected. The nation's unemployment rate fell to a seasonally adjusted 9.7% in May from 9.9% in April. Market had been expecting the jobless rate to sink to 9.8%.
The Dow ended the day with a loss of 324 points on Friday. Market participants sold stocks learning that officials from Hungary stated that economic conditions in their country are grave and that the country might be the next one in defaulting on its debt. In addition, the country does not plan to put austerity measures in place, leading many wonder whether the European Union will have to provide a bailout.
In the latest weekly inventory report, The Energy Department reported on Thursday that there was a decline of 1.9 million barrels in oil stockpiles in the week ended 28 May. Gasoline inventories decreased by 2.6 million barrels. Stocks of distillates, which include heating oil and diesel, increased by 500,000 barrels.
Among other energy products, reformulated gasoline for July delivery lost 9 cents, or 4.1%, to $1.99 a gallon. That settlement brought weekly losses to 2%.
Natural gas for July delivery added 11 cents, or 2.3%, to $4.79 per million British thermal units, hitting a fresh three-month high on Friday. On the week, natural-gas prices have risen 10%.
Crude ended FY 2009 higher by 78%, the highest yearly gain since 1999. It reached a high of $82 earlier in October 2009 and hit a low of $33.98 on 12 February 2009. Crude prices had ended FY 2008 lower by 54%, the largest yearly loss since trading began at Nymex.
Market may tumble on weak global stocks; RCom eyed
The market may slump after disappointing US jobs data and concerns over Hungary's debt problems rattled world stocks. Trading in S&P CNX Nifty index futures on the Singapore stock exchange indicated that the Nifty could tumble 121.50 points at the opening bell.
Among the stock specific action, shares of state-run oil market companies will be in focus ahead of the meeting of an empowered group of ministers (EGoM) today, 7 June 2010, to consider the Kirit Parikh committee recommendations on decontrol of fuel prices. The PSU OMC stocks had risen sharply over the past few days on expectations that the government may partially decontrol fuel prices. The Kirit Parikh committee had in February 2010 recommended freeing pump prices of petrol and diesel and raising kerosene prices by Rs 6 a litre and cooking gas prices by Rs 100 a cylinder.
India's second largest mobile services provider by sales Reliance Communications (RCom), burdened by debt and the cost of rolling out 3G services, said its board had agreed to sell up to 26% of the firm. RCom said its board had approved the issue of equity to strategic or private equity investors at a premium to the prevailing market price. The RCom stock had jumped 14% last week, with speculation rife that Abu Dhabi's Etisalat and South Africa's MTN could be potential partners. However, MTN had denied merger talks with the firm.
Asian stock markets tumbled on Monday, after Wall Street on Friday closed at its lowest level since February 2010, spooked by disappointing non-farms payroll data and concerns over Hungary's debt problems. The key benchmark indices in China, South Korea, Singapore, Japan, Indonesia, Hong Kong and Taiwan fell by between 1.43% to 4.01%.
US Stocks fell to their lowest close since February on Friday after May's jobs figure slammed investors already reeling from worry over another developing debt crisis, this time in Hungary. The Dow Jones Industrial Average dropped 323.31 points, or 3.15% to 9,931.97. The Standard & Poor's 500 Index lost 37.95 points, or 3.44% to 1,064.88. The Nasdaq Composite Index tumbled 83.86 points, or 3.64% to 2,219.17.
The latest data showed the US economy added fewer-than-expected jobs last month, with a large portion of those being temporary hirings for the US Census. The Labor Department said the US economy added 431,000 jobs in May 2010, far short of the 513,000 that Wall Street had expected. The unemployment rate dropped to 9.7% in May from 9.9% in April.
Europe's sovereign debt troubles could spread flared again after a Hungarian official said the country was at risk of a Greek-style crisis, driving the euro to a more than four-year low against the dollar. Hungary isn't a euro member.
Back home, the government after trading hours on Friday said all listed companies are required to maintain a minimum public float of 25%. Existing listed companies having less than 25% holding have to reach the stipulated level by an annual addition of not less than 5% to public holding, it said.
The monsoon rains were 11% below normal in the week to 2 June 2010, the weather office said on Thursday, 3 June 2010. The June-September monsoon rains hit Kerala on 31 May 2010, a day ahead of schedule. The south-west monsoon usually covers the entire country by mid-July. The weather office late April 2010 said rainfall is likely to be 98% of the long-term average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.
Last month, Australia's weather bureau said the El Nino weather pattern was over. El Nino is caused by an abnormal warming of the eastern Pacific Ocean and can play havoc with weather patterns across the Asia-Pacific region.
The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The quantum of rainfall in the crucial sowing month of July and distribution of rainfall during the monsoon season also holds key.
Data last week showed business activity remained strong for India's vast services sector in May 2010, with a key gauge growing for a 13th consecutive month even as some momentum was lost over the previous month. The HSBC-Markit Business Activity Index stood at 58.2 in May 2010 from a 21-month high of 62.1 in April 2010. A reading above 50 indicates expansion. Services make up about 55% of India's $1.2 trillion economy.
HSBC Markit Purchasing Managers' Index (PMI), based on a survey of 500 Indian firms, surged to a 27-month high of 59 in May 2010 from 57.2 in April 2010, bolstered by steady growth in output, new orders and employment. The rate of growth had slowed in March 2010 and April 2010.
On a flip side, another data showed that the food articles index rose 16.55% in the year to 22 May 2010, accelerating from previous week's rise of 16.23%. The primary articles index, which also includes food articles, rose 16.89%, higher than previous week's 15.90% rise. The fuel price index increased to 14.14 % versus 12.08% rise in the previous week.
India's economy grew at 8.6% in the March 2010 quarter driven by robust manufacturing sector on the back of government and consumer spending, data released by the government on Monday, 31 May 2010, showed. The growth was significantly higher than the revised 6.5% expansion in Q3 December 2009 and a 5.8% growth in Q4 March 2009. The manufacturing sector grew 16.3%, farm output rose 0.7%, mining sector expanded 14% and services increased by 8.4% in January-March 2010 quarter from a year earlier.
For the full year to March 2010, the economy expanded 7.4%, above a government forecast of 7.2%. Economic growth had slowed down to 6.7% in year ended March 2009.
The RBI expects India's economy to expand 8% in the year ending March 2011 (FY 2011) with an upward bias, assuming a normal monsoon this year and sustenance of good performance of the industrial and services sectors on the back of rising domestic and external demand. The RBI at its annual policy review on 20 April 2010 said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.
Meanwhile, a revenue bounty for the government from the sale of telecom spectrum would help bring down fiscal deficit in the current financial year.
Investors will eye the first installment of the corporate advance tax payment which will give some clue about Q1 June 2010 corporate results. The first installment of corporate advance tax falls due on 15 June. The combined net profit of a total of 3,572 companies rose 13.7% to Rs 87,241 crore on 24.70% rise in sales to Rs 9,27,168 crore in the quarter ended March 2010 over the quarter ended March 2009.
The key benchmark indices rose for the third straight day on Friday, 4 June 2010 as Asian stocks recovered. The BSE 30-share Sensex jumped 95.36 points or 0.56% to 17,117.69 on Friday.
Foreign institutional investors (FIIs) on Friday bought stocks worth a net Rs 100.91 crore, as per provisional data from the stock exchanges. Domestic funds sold shares worth a net Rs 126.61 crore.
Euro zone debt worries caused massive outflow of foreign funds from India recently as investors shunned risk. Foreign funds sold shares worth a net Rs 185.86 crore in the first four trading sessions this month, as per data from the stock exchanges. Foreign institutional investors (FIIs) had dumped shares worth a net Rs 12071.14 crore in May 2010.
Domestic funds have bought stocks worth a net Rs 328.17 crore in the first four days this month. Domestic funds bought stocks worth a net Rs 6361.17 crore in May 2010
Sunday, June 06, 2010
BREAKING: Reliance Communication in talks with AT&T
India's Reliance Communications Ltd. and U.S. telecom giant AT&T Inc. have sounded out each other's interest about a potential transaction in which AT&T would take a significant minority stake in the Indian cellphone company, according to people familiar with the matter.
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Annual Report - HDFC Bank - 2009-2010
HDFC BANK LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
To
The Members,
Your Directors have great pleasure in presenting the Sixteenth Annual
Report on the business and operations of your Bank together with the
audited accounts for the year ended March 31, 2010.
FINANCIAL PERFORMANCE
(Rs.in crores)
For the year ended
March 31, 2010 March 31, 2009
Deposits and Other Borrowings 180,320.1 151,975.2
Advances 125,830.6 98,883.0
Total Income 19,980.5 19,622.9
Profit before Depreciation
and Income Tax 4,683.5 3,659.2
Net Profit 2,948.7 2,245.0
Profit brought forward 3,455.6 2,574.6
Total Profit available for
Appropriation 6,404.3 4,819.6
Appropriations
Transfer to Statutory Reserve 737.2 561.2
Transfer to General Reserve 294.9 224.5
Transfer to Capital Reserve 199.5 93.9
Transfer from Investment
Fluctuation Reserve (1.5) (13.9)
Proposed Dividend 549.3 425.4
Tax Including Surcharge and
Education Cess on Dividend 91.2 72.3
Dividend (including tax/cess thereon)
pertaining to previous year paid
during the year 0.9 0.6
Balance carried over to Balance Sheet 4,532.8 3,455.6
- Change pursuant to reclassification
The Bank posted total income and net profit of Rs. 19,980.5 crores and
Rs.2,948.7 crores respectively for the financial year ended March 31, 2010
as against Rs. 19,622.9 crores and Rs. 2,245.0 crores respectively in the
previous year. Appropriations from net profit have been effected as per the
table given above.
DIVIDEND
Your Bank has had a consistent dividend policy that balances the dual
objectives of appropriately rewarding shareholders through dividends and
retaining capital, in order to maintain a healthy capital adequacy ratio to
support future growth. It has had a consistent track record of moderate but
steady increases in dividend declarations over its history with the
dividend payout ratio ranging between 20% and 25%. Consistent with this
policy, and in recognition of the Bank's overall performance during this
financial yearyour directors are pleased to recommend a dividend of Rs. 12
per share for the financial year ended March 31, 2010, as against Rs. 10
per share for the year ended March 31, 2009. This dividend shall be subject
to tax on dividend to be paid by the Bank.
Voltas
Investors with a two-year perspective can retain their exposure in the Voltas stock at the current price of Rs 185. The company has reported a 19 per cent sequential jump in its order book in the March quarter after six quarters of sluggish order inflows and declining order book, pointing to a revival in the domestic and international business.
The order book now (Rs 4,700 crore) however is just 1.5 times the revenues of (the MEP — mechanical, electrical and public health — business) last year.
Recovery in the Middle East market is at its nascent stage; order flows need to continue on a robust note in the coming quarters to bring the company back on a strong growth trajectory.
Post declaration of its FY10 results last week, the stock has made considerable gains (up 8 per cent). At the current market price the stock is trading at 18 times its FY10 earnings; the stock has been trading at a PE band of 16-23 times historically.
Middle East matters
Close to 60 per cent of Voltas' revenue is from the MEP business, which draws much of its orders from the Middle East market — United Arab Emirates, Qatar, and Bahrain. Though oil prices have recovered from lows of 2009, the economic situation in the Middle East is not yet out of the woods.
Credit growth remains sluggish on risk aversion among banks and financial institutions following Dubai World's bankruptcy, points out an IMF report.
This will be an impediment to growth and offtake of infrastructure and construction projects in the medium term.
Voltas' revenues from the Middle East have grown at a CAGR of 60 per cent between 2004-05 and 2008-09.
Revenues have been multiplying following the company's acquisitions and JVs and its growing market share. In May this year again, the company entered into a JV with an electronic and industrial products major in Oman, Mustafa Sultan Enterprises LLC. This will give further traction to the company's Middle East business in the coming quarters.
In the domestic market, the acquisition of 51 per cent stake in Rohini Industrial Electricals in September 2008 helped the company widen its business to include electrical and instrumentation projects in the cement, steel, power and oil and gas sectors .
In the first half of FY10, the MEP revenues (domestic plus international) grew at double digit rates (revenues were up over 30 per cent).
However, there was a slowdown in the second half following a lull in capital spending in user industries, and the MEP division closed the year with just 13 per cent growth in revenues.
The MEP business' carry forward order book has been on a decline from the quarter ending June 2008. The value of outstanding orders dropped from Rs 5,675 crore in end-March 2008, to Rs 4,666 crore in end-March 2009 and to Rs 3,964 crore in end-December 2009.
This makes a point that the order flow has been sluggish for almost two years now; the robust numbers of FY09 (MEP revenues up 59 per cent) are largely the result of orders won before the slowdown.
Cool show
Air-conditioners and commercial refrigeration products which make up the company's ‘Unitary Cooling' division witnessed a robust growth in 2009-10. This segment's revenues (25 per cent of the total) reported a growth of 29 per cent in 2009-10 and 72 per cent for the March 2010 quarter.
Voltas launched 50 new models (including the Gold, Platina and Plus versions of Vertis) in room air-conditioners for the 2010 summer with wide choices in features, price and tonnage.
Going ahead, contributions to the top-line from this segment are poised to increase with demand for air-conditioners on the rise in the domestic market.
Engineering reviving
Over the last two quarters there has been a pick up in the orders for textile machineries and mining and construction equipments. However, it hasn't yet translated into revenues for the company. The Engineering Products and Services division saw revenues fall by 14 per cent for FY10 (revenues down 3 per cent in the last six months of FY10).
Margins improve
Profit growth in FY10 outpaced top-line growth. With an 11 per cent growth in sales for 2009-10, Voltas managed a 51 per cent growth in net profits, thanks to the improved profit margins. Efficiency in cost management and fall in the cost of raw materials (raw material cost as a percentage of sales dipped to 47 per cent from 54 per cent in FY09) helped margin expansion at the operating level.
Operating profit margin expanded to 9 per cent in FY10 from 6.8 per cent in FY09. Voltas is quite comfortable on the debt front too. The company's debt-equity ratio stood at 0.2 in FY09. With interest expenses dropping by 23 per cent in 2009-10, outstanding debt can be assumed not to have increased.
via BL
Page Industries
Investors with a medium-term perspective can buy the stock of textile-and-retail player, Page Industries, trading at Rs 850, at 24 times its trailing 12-month per-share earnings. The stock lacks direct comparables, whether in the textile or retail space. Still, closest comparable Maxwell Industries trades at a discount to Page.
We had given a ‘buy' call on the stock at Rs 710 in early December 2009, when the stock was trading at 22.6 times the trailing 12-month per share earnings. The company has since clocked a 40 per cent growth in sales (for the second half of 2009-10), while profits grew 30 per cent.
Our recommendation is also supported by Page's sustained financial performance, good brand presence in a niche market, multiple product lines, vast geographical reach and good dividend payouts. Investors with moderate return expectations can buy this stock.
Product lines
Innerwear for men and women is the primary product line. To mitigate risks of product concentration, Page branched out into leisure wear and thermals for men and women. Both innerwear and leisure are collectively sold under the Jockey brand.
The product range is in a mid-to-premium band, providing it with the ability to make the most of the vast market of both the value-conscious and the lifestyle consumers. Product depth in innerwear is also quite strong, and it is the innerwear segment that accounts for majority of revenues.
The apparel market is dominated by menswear, though women's wear is a fast-growing segment. Menswear currently makes up more than half of revenues for Page. However, with established product lines in both categories, the company is well-placed to make the most of the dominant and growth segments.
Page has the licence to market the Jockey brand in Bangladesh, Sri Lanka and Nepal. However, revenues from exports are still negligible and are unlikely to be a revenue driver even in the coming quarters.
Page has production capacities for garment and elastic manufactures, which allow cost-controls leading to better operating margins. Manufacturing capacities have increased significantly, post the infusion of funds raised from its initial public offer in 2007.
Brand and retail reach
A key factor supporting Page is the strong brand recall that Jockey commands, especially in the mid-priced everyday innerwear segment, and compared with other international brands.
The company also benefits from the technological and design support of Jockey International. Additionally, Page benefits from the non-discretionary nature of its primary product offering and its presence in the value-for-money segment. However, the company aims to scale up leisure wear as a lifestyle brand, besides pushing sales in its premium category, both of which may be a tad difficult to achieve given its mid-priced foothold.
Another factor buoying sales is the extensive reach of Page's products. Page retails through its own exclusive branded stores, a whole host of multi-brand outlets such as Shoppers' Stop and Lifestyle, and finally through regular hosiery stores. Its retail network thus spans over 17,000 outlets in more than a thousand cities, up from the 14,000 two years ago.
Such a vast reach indicates its ability to address a wide customer space and mitigate risks of area concentration. Even with its exclusive outlets, stores are quite evenly distributed in the north, west and southern zones.
Current-owned store count stands at 55, up from the 43 at the end of FY-09. Plans are on reach a store count of 100 by the end of FY-11. With debt-equity on the lower side at 0.5 times, bankrolling such expansion may not be hard to come by.
Financial performance
Over a three-year period, sales clocked a 36 per cent compounded annual growth while net profits grew at 33 per cent. Sales in FY-10 grew 33 per cent over the figure in FY-09, while net profits posted a 26 per cent growth.
Operating margins stood at 21 per cent for FY-10. Margins are a shade lower than the 22 per cent of FY-09, on the backs of higher raw material costs. With cotton prices on an upswing, margins are likely to come under further pressure. Even so, margins are substantially higher than most retailers.
Depreciation costs have also been on the rise, as a result of significant capacity expansion, more than doubling from FY-07. However, depreciation as a percentage of sales has remained more or less constant at 2-2.5 per cent, implying that capacity addition has at least contributed to sales. Net margins have hovered around 12 per cent over the past three years. Given its low debt, interest costs do not drag earnings and margins; interest cover is healthy, having been maintained at over 10 times for the past three years.
via BL
ABG Shipyard
Investors with a two-three-year perspective can consider limited exposure to the stock of ABG Shipyard. Lull in order flows, slower execution pace and liquidity issues, as a result of severe cash crunch faced by shipowners globally led to Indian shipyards being de-rated from an average price-earnings multiple of 12-18 times to less than five times.
However, with an order backlog of 5.2 times FY-10 sales and nil order cancellations in the worst of times, ABG Shipyard has also shown more indications of pick-up in execution pace and order flows compared with other players.
A superior order mix, quicker revival in earnings and additional rig facilities to cater to the offshore market make this stock a superior option in the Indian context. However, given that shipbuilding as a sector is not fully out of the woods, ABG Shipyard may at best be a dark horse play. Investors with some risk appetite can consider exposure to the stock.
At the current market price of Rs 250, the stock trades at about 5.5 times its estimated per share earnings for FY-11. This does not factor in any revenue potential from its subsidiary, Western India Shipyard, a loss-making ship repair entity that ABG acquired under a scheme of arrangement. However, ship-repair business could fetch lucrative operating margins of 25-30 per cent.
Indian edge
While lower order cancellations and improved execution pace are likely to provide relief for shipbuilders worldwide, orders may take time to pick up as revival across the globe remains painfully slow.
However, Indian shipyard players stand differentiated for three reasons: They hold a more diversified order book across segments compared with their South Korean and Chinese counterparts. Indian players most often gain repeat orders, thereby reducing risks of cancellations.
With improved capacities, Indian players would be better placed to take orders for larger-sized vessels that may provide better profit margins.
Chinese and South Korean shipbuilders — leaders in shipyards — have been concentrating on dry and wet bulk carriers and containership segments. Globally, a majority of sea-borne trade happens in the dry bulk carrier segment. However, as demand for dry bulk commodities such as coal and iron-ore is largely perceived to be driven by China, the outlook for this segment remains muted.
Interestingly, according to a CARE Research Report on the Global Shipbuilding Industry, Indian shipbuilders have diversified by constructing offshore and specialised vessels.
When viewed in terms of volume (dead weight tonnes), dry bulk account for 82 per cent of Indian players' order composition as a result of the larger size of dry bulk vessels.
However, in terms of number of vessels, offshore and specialised vessels account for a good 52 per cent of Indian players' order book as against 35 per cent of dry bulk.
In contrast, offshore and specialised vessels accounted for just 9 per cent (in terms of number of vessels) of China's order book and 5 per cent of Korea's orders.
It is, perhaps, this diversified profile that has provided some cushion to Indian players. ABG, for instance, witnessed a 37 per cent growth in revenues annually over the last two years, while net profits expanded by 14 per cent over the same period.
Offshore opportunity
Offshore vessels could also be an area that holds prospects over the long term. According to reports, close to 50 per cent of offshore vessels are over 25 years of age and need replacement.
Recent incidence of oil spill puts forth the need to have double hulls to reduce the impact of such accidents on the marine ecology.
Indian shipyards specialise in the construction of offshore vessels. For instance, ABG shipyard has a rig facility in its existing yard to cater to the increasing demand in this space. Besides, Indian shipyards have also been promised orders (for both public and private companies) by Defence, partly to combat recessionary times. Companies such as Larsen & Toubro have already been recipients of such orders.
Why ABG?
ABG Shipyard, Bharati Shipyard and Pipavav Shipyard are the three major players in the shipbuilding industry in India, aside of L&T's Greenfield project.
ABG tops the list in terms of volume of order book (86 as against 42 for Bharati).
While Pipavav holds larger capacity, the company has already faced order cancellations and is re-negotiating terms for a number of other orders, thus adding uncertainty on the revenue front.
The Bharati Shipyard stock has traditionally suffered a discount to ABG as a result of its high gearing.
While the company's recent stake in Great Offshore has brought with it business opportunities (and debt) in the offshore segment, its inability to bag orders in the mainstream business in recent times is a cause for worry.
The company is also reported to have taken a German customer to court after the latter cancelled an order.
ABG, on the other hand, has managed to get orders for cement carriers recently, thus bringing some relief on the order flow front.
Besides, the company has ramped up execution pace significantly, suggesting that clients have not been requesting for postponement of delivery.
The company delivered 17 vessels in FY-10 as against just six in FY-09. This increased execution also means that cash flows from clients would flow in at a faster pace.
For the full year ended FY-10, ABG's sales grew 28 per cent to Rs 1,807 crore while net profits expanded 22 per cent to Rs 208 crore.
However, for the March quarter, operating profit margins, excluding subsidies, fell sharply by 5 percentage points to 13.5 per cent over the previous quarter, suggesting that raw material costs are beginning to hurt once again.
As shipbuilders tend to have adequate stock of raw materials such as steel, there may not be too much volatility in input costs for a few quarters.
With debt of Rs 2,500 crore, ABG's debt-equity ratio has become more risky at 2.5 times. However, this appears to be largely a result of slower execution pace, which means longer periods of guarantees and higher working capital cycle.
With execution pace picking up, this may be expected to decline. Fund flows from clients such as Essar (financial closure being over) may help tide over immediate concerns.
via bL
IVRCL
IVRCL Infrastructures & Projects (IVRCL) has mitigated the risk of slower pace of project execution in Andhra Pradesh through robust order intake in other segments such as roads. Stability in operating profit margins and significant progress in subsidiary-held BOT projects are also likely to help earnings traction. Investors with a two-year perspective can consider investing in the stock. At the current market price of Rs 177, the stock discounts its likely per share earnings for FY-12 by 13 times. Investors can consider accumulating the stock in small lots on declines linked to broad markets.
IVRCL ended the year on a modest note as sales for FY-10 grew 10 per cent and net profits declined 6.6 per cent as a result of higher interest and tax charges. However, the company demonstrated improvement in revenue and earnings growth in the quarter ended March 2010. More positively, after almost eight quarters, the company's operating profit margins at 10.5 per cent, moved to double-digit once again. As commodity prices have been creeping up again, clearly, better project mix, rather than lower input costs have resulted in the profit margin improvement.
IVRCL suffered from project hold-ups last year. The pace of execution in Andhra Pradesh, a key contributor to revenues, suffered setbacks as a result of political problems within the State. To combat this, IVRCL diversified into other regions and business segments. It ramped up significantly its presence in road projects through its subsidiary IVRCL Assets & Holdings. Parent IVRCL executes road contracts for the subsidiary. This reduced its order backlog in Andhra Pradesh to 16 per cent of the total Rs 24,500 crore of orders to be executed. This figure stood at 24 per cent in the December quarter. Besides, as a good number of road projects have been recently commissioned, revenue from this stream is likely to ramp up significantly for the group in the upcoming quarters. Some of the irrigation projects in Madhya Pradesh were also stalled pending clearances. These have now been resolved.
As a result of slower pace of execution and resultant increase in working capital, interest cost for FY-10 shot up by 25 per cent. With improvement in execution, this concern too would be addressed. IVRCL's funding requirements for its subsidiary may not be too high given that all but two of the projects are pending financial closure.
The biggest positive for IVRCL in recent times is its strong order intake. The company's order intake increased three-fold to Rs 5,760 crore in the March 2010 quarter over a year ago period as a result of bagging a number of road projects. With these, the current order book at 4.4 times FY-10 sales is far higher than the average three times seen in recent years.
via BL
Saturday, June 05, 2010
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Looking beyond borders
The Indian markets have delivered stupendous returns in the past five years, with the BSE Sensex giving compounded returns of 22% per annum compared to the world average of 1%. Having said this, India is not the only market to have performed well. Emerging markets, such as Brazil, Indonesia, China and Latin America, have done even better. Surprisingly, among the developed economies, Japan, a long-time laggard, was the best performing market in March this year. The country posted gains of 9.5% compared with an average growth of 5-6% registered by global markets. Clearly, individual market performances aren't consistent and, hence, diversifying across geographies could reduce the chances of skewed returns.
Here's another compelling argument: India's total market capitalisation stands at around 3% of the world market cap. By sticking solely to Indian stocks, you could miss out on 97.3% of the opportunities that exist elsewhere. To capitalise on these, most Indian fund houses are offering funds that invest globally. You can choose to either invest directly or take the fund of funds route, which is managed by the local country experts. If you are a firsttime global investor, you could opt for funds that make small allocation in foreign markets. Take ICICI Prudential's Indo Asia Equity Fund, a star performer that has more than 65% of its assets in Indian equities. It has invested its global portfolio (~33%) in the IOF Asian Equity Fund, which is managed by Prudential Singapore and has an exposure to various markets, including China, Hong Kong and Korea. As Sankaran Naren, CIO, ICICI Prudential Mutual Fund, who manages the Indian portion of the fund, puts it, "It is a question of expertise in the markets."
A similar story plays out in several other 'global' funds like the Templeton India Equity Income Fund or the Fidelity International Opportunities Fund. Though this offers a tax advantage to investors, think zero long-term capital gains since funds with over 65% exposure to domestic funds are treated as equity funds and you get only a small exposure to the global markets. Defending this strategy, Naren says it works well for the novice investor who wants to get a flavour of the global market before making larger allocations.
On the other hand, global funds like the Tata Growing Economies Infrastructure Fund allow the investor to choose between a fund with a higher proportion of global equities and one with a stronger India focus. The fund's Plan A invests up to 70% of its assets in infrastructure companies outside India, while Plan B invests more than 65% in Indian firms. There is a difference between the fund performances as well. Plan B has generated around 70% returns, while Plan A delivered around 56% in one year. In fact, in the past one year, funds that have predominantly invested in Indian equities have fared better than those with a higher global representation. This is mainly because India has outperformed most economies in the same time frame.
India is the second most expensive market globally, trading at a PE of 17x forward earnings compared to the MSCI World Index PE of 14x. According to Naren, this is probably the best time to be bullish on international funds, especially because they have underperformed significantly. Adds Gaurav Mashruwala, a certified financial planner (CFP): "Though Indian investors are diversified across all asset classes, be it real estate, gold or equities, they are exposed to a single currency, which is a high-risk category. If something were to happen to the rupee, the entire portfolio will get disturbed."
Then there are the thematic funds, be it commodity, agribusiness, precious metal or oil funds. Be warned that these require some amount of research on the relevant theme before investing, say, on the fortunes of the oil companies in Russia. To start with, experts say that one should ideally choose a relatively well-diversified fund, which invests across sectors anywhere in the world. According to Suresh Soni, managing director, Deutsche Asset Management, a retail investor could allocate up to 15% to global funds. He recommends a sub-allocation to focused funds like the DWS Global Agribusiness Offshore Fund. This enables you to gain from the alpha generation by the fund while insulating you against a rise in food prices, claims Soni. Considering that India has limited listed opportunities in the agri sector, such a feeder fund works well. On the flip side, this space attracts activities by hedge funds, which can hurt performance. Also, as is true for any thematic fund, it's better suited to investors willing to make a concentrated bet.
Though most global funds have a limited performance history (except the Principal Global Opportunities fund, which hasn't been encouraging), experts opine that much of the performance is going to be driven by Asian and emerging markets. These include Brazil, Russia, China, India, Korea, Taiwan, Mexico, Hungary, Indonesia and Malaysia, to name a few. Asia, according to fund managers, remains a very promising investment destination due to its strong economic fundamentals, one of the highest savings rate and an increasing global interest, which boosts capital formation. Also, the Asian market is not dependent on any single theme unlike, say, Latin America, which is basically driven by commodities. Asia offers maximum diversity by combining various themes like services, manufacturing and finance. According to a fund manager at Tata Mutual Fund, emerging markets are a good bet since they have better balance sheets, current account surpluses, good foreign exchange reserves and a low debt to GDP. When most of the developed world plunged into recession, many emerging economies saw their GDP ticking upwards. In fact, Tata's Growing Economies Infra Fund has been able to leverage the good performance over the past year-and-a-half due to its exposure to Latin and emerging European markets. Economies like the US and Europe could also offer some value plays since stock prices are far below their historic highs. Citibank, for one, is available at $5 a share compared with its peak of $55.
Investing in the American market will soon become easier as the National Stock Exchange begins trading in futures contracts of the S&P 500 and Dow Jones Industrial Average, two of the world's most influential market indices. Recently, Benchmark has also launched the Hang Seng Exchange Traded Fund (ETF), which invests in a basket of companies listed on the Hong Kong Stock Exchange. Though the ETF could be a cheaper route of investing with no fund manager risk, you could also lose out on the alpha generated by an actively managed fund.
Now for the fine print. Before investing abroad, understand the market risk as well as the country and currency risks involved. So, an exposure to countries like Portugal or Greece, which are mired in financial woes, could significantly affect your returns.
Source: Money Today
China's manufacturing PMI slows in May
China's manufacturing sector growth slowed in May, reinforcing a growing view that growth may be easing in the world’s third-biggest economy. China’s Shanghai Composite Index declined after a purchasing managers’ index (PMI) showed that the country’s manufacturing industry expanded at a slower pace in May.
The official China Federation of Logistics and Purchasing purchasing managers index (PMI) fell to 53.9 from 55.7 in April.
That was less than the median estimate of 54.5.An output index fell to 58.2 from 59.1 in April, today’s report showed. The new-order index slid to 54.8 from 59.3 and an export-order index dropped to 53.8 from 54.5. The input-price index decreased to 58.9 from 72.6. Separately, HSBC Holdings' PMI fell to 52.7 in May from a revised 55.2 in April. This is the lowest since June 2009.
"The overheating risk is likely to ease as tightening measures filter through," Qu Hongbin, chief China economist at HSBC, said today. "We see robust economic growth without double-dip risks not least because of massive existing infrastructure investment and resilient private consumption."
Weekly Newsletter - June 5 2010
The coming week will see added pressure especially at start. The US markets could well be on their way down again as the government's monthly jobs report has fallen short of expectations. Indices are struggling to break out convincingly from their resistance zones. There appears no clarity for now on the direction of the market though the fear factor seems to dominate. Weigh your options and take a call on individual stocks rather than betting on the market as a whole.
This week saw the indices falling below their 200-DMA initially. A freak trade in Reliance and a crash in the overall market on Tuesday had the bulls bruised. Fortunately the remaining days saw some pull back though with the usual intra-day gyrations. Monsoon arrived in Kerala, but uncertainty persists over itsprogress, which are adding to the market’s woes. India grew faster than expected in fiscal year 2010, March quarter GDP growth came in at 8.6%. Impressive monthly auto sales numbers boosted the auto stocks. FMCG stocks attracted buying interest following positive news flow across the sector. Volatility in the markets drove investor’s attention towards defensive pharma space. Finally, the NSE Nifty was up by 1.4% and BSE Sensex was up 1.5%
EGoM meet on June…Will petrol and diesel prices be decontrolled?
An Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee is scheduled to meet on June 7, to decide on de-controlling the prices of petrol and diesel.
Besides freeing petrol and diesel prices from the government control, dealing with the revenue lost on selling domestic LPG and PDS kerosene below cost is also on agenda of the ministerial panel.
For petrol and diesel prices to be freed from government control, rates would have to be raised by over Rs6 a litre. Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum lose crores of rupees by selling fuel below cost.
According to the terms of reference (ToR), the EGoM is reportedly said to consider a pricing policy for petrol and diesel, including decontrol. The Kirit Parikh panel had also recommended an increase of Rs6 per litre of kerosene and Rs100 per cooking gas cylinder, apart from a Rs80,000 levy on diesel cars. A Rs20-25 per cylinder increase in LPG price may be approved, reports indicate.
Friday, June 04, 2010
Thomas Cook - Annual Report - 2009
THOMAS COOK (INDIA) LIMITED
ANNUAL REPORT 2009
DIRECTOR'S REPORT
TO
THE MEMBERS:
Your Directors have pleasure in presenting the Thirty-third Annual Report,
together with the Balance Sheet and Profit and Loss Account for the year
ended 31st December 2009.
Rupees in Million
Year ended Year ended
31st December 2009 31st December 2008
Revenues 2247 2588
Profit before Taxation and exceptional items 341 536
Provision for Taxation 114 187
Provision for Deferred Taxation 4 (1)
Provision for Fringe Benefit Tax 1 16
Profit after Taxation and before Exceptional item 222 334
Exceptional item, net of taxation - 32
Profit after Taxation 222 302
Transferred from Reserve U/sec. 80 HHD of
the Income Tax Act, 1961 15 18
Transferred to General Reserve 22 34
Proposed Dividend * 80 93
EPS (Basic) after exceptional items 1.06 1.76
EPS (Diluted) after exceptional items 1.03 1.71
* Includes preference share dividend
Operations & Results:
The global and local markets continued to witness an economic slowdown for
most of 2009. Corporates and individuals alike, remained cautious to spend
on travel due to the downturn. When the confidence level in the economy
went up during the second half of the year, higher Foreign Institution
inflows made the Rupee stronger. Also lot of volatility was witnessed in
Indian Rupee against the major currencies.
For the first time in seven years, the foreign tourist arrivals into India
fell by 3% in 2009 distorting the six-year growth rally.
The first-half 2009 saw a steady decline in bookings in the travel &
tourism industry, particularly due to the November 26, 2008 terror attack
in Mumbai.
Consequently, the revenues reduced by Rs. 341 million to Rs. 2247 million.
Costs were saved by Rs.146 million. Profit before Taxation and exceptional
items reduced by Rs. 195 million to Rs.341 million.
Your Company recorded turnover of Rs. 2247 million and profits before tax
and exceptional item of Rs. 341 million with profit after tax being Rs. 222
million for the year ended 31st December 2009. The basic earning per share
of the Company is Rs. 1.06.
Utilisation of Rights Issue Proceeds:
During the year ended 31st December 2009, the Company allotted 50,650,699
fully paid up equity shares of Re. 1/- each towards Rights issue for cash
at a price of Rs. 35.50 (including a share premium of Rs. 34.50) per equity
share in the ratio of 35 fully paid up equity shares for every 100 fully
paid up equity shares held by the existing shareholders on the record date
27th December 2008. Consequently, the issued and paid up equity share
capital increased to 211,446,569 shares. The Right Issue Proceeds
Utilisation is as below:
Particulars Rs. (in mn) Rs. (in mn)
Inflow: Rights Issue proceeds 1,798.1
Outflow: Preference Share Capital redemption
(including redemption premium dividend and (1,167.6)
dividend distribution tax)
FCNR Loan repayment (423.8)
Repayment of commercial paper/short term borrowings (183.7)
Expenses pertaining to Rights Issue (23.0) (1,798.1)
Lower borrowings, coupled with reduced interest rates negotiations helped
your Company in achieving a reduction in the Interest cost from Rs. 299
million in 2008 to Rs. 149 million in 2009 and consequently, the Company
was able to make savings of Rs.150 million.
Thomas Cook Presence:
As of December 2009 end, Thomas Cook (India) Limited, alongwith its
subsidiaries, continues to be the largest integrated travel group in India
with over 180 locations by way of its own branches, and additional presence
by way of General Sales Agents (GSA's), Preferred Sales Agents (PSA's) and
Franchisee Offices. We have 180 branches located in 72 cities, over 190
GSA's/ PSA's and around 32 Franchisee f offices across India to have a
wider spread and network across the country.
We also have presence in 5 countries outside of India through our
representative offices in USA (New York), Spain (Barcelona & Madrid), UK
(London), Japan (Tokyo) and Germany (Frankfurt), apart from our
subsidiaries in Mauritius and Branch offices in Sri Lanka.
Share Capital Structure:
The share capital structure as of 17th March, 2010 is as follows:
Authorised Capital: Rs. Rs.
Equity:
34,58,27,060 Equity Shares of Re.1/- each 345,827,060
Preference:
(i) 11,47,60,000 Class 'A, 4.65% Cumulative
Non-Convertible Redeemable Preference
Shares of Rs. 10/- each 1,147,600,000
(ii) 3,55,294 Class 'B' 0.001% Cumulative
Convertible / Redeemable Preference Shares
of Rs. 10/- each 3,552,940
(iii) 3,02,000 Class 'C' 0.001% Cumulative
Convertible / Redeemable Preference Shares
of Rs. 10/- each 3,020,000
(iv) 12,50,00,000 1% Cumulative Non-Convertible
Redeemable Preference Shares of
Rs. 10/- each 1,250,000,000
2,750,000,000
Issued, Subscribed and Paid-up Capital:
Equity:
211,546,569 Equity Shares of Re.1/- each 211,546,569
Preference:
(i) 3,19,765 Class 'B' 0.001% Cumulative
Convertible / Redeemable Preference Shares
of Rs. 10/- each 3,197,650
(ii) 2,71,800 Class 'C' 0.001% Cumulative
Convertible / Redeemable Preference Shares
of Rs. 10/- each 2,718,000
217,462,219
Employees Stock Option Scheme (ESOP):
With the objective of motivating and retaining key talent in the
organisation and fostering ownership, your Company has framed the Thomas
Cook Employees Stock Option Plan 2007 and pursuant to the same, has granted
stock options to its employees over the years.
The Recruitment & Remuneration Committee administers and monitors the
scheme. The applicable disclosures under the Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 ('the Guidelines') are mentioned in the Annexure to the
Directors' Report.
Except for senior managerial personnel and one other person, none of the
employees have received options exceeding 5% of the value of the options
issued during the year ending December 2009. Likewise, during the year, no
employee has been issued share options equal to or exceeding 1% of the
issued capital of the Company at the time of grant.
The Recruitment & Remuneration Committee has, subject to the approval of
the shareholders at the present general meeting, varied the ESOP Scheme
2007 to the effect that all future grantees shall be granted options at a
discount of 10% of the Market Price instead of a 5% discount as provided
for earlier. This is in fine with changes in the market conditions and
towards retaining Key Talent by having a more attractive ESOP Plan. This
price shall apply only to fresh grants being made under the scheme.
Dividend
Your Directors recommend dividend on the Class 'B' & Class 'C' Preference
shares as per their terms as also seek the ratification of the dividend
paid to holders of 10,50,00,000 1% Cumulative Non-Convertible Redeemable
Preference Shares on redemption. The Directors are also pleased to
recommend a dividend of 37.5% on the equity share capital.
The proposed dividend on the equity capital and preference capital absorbs
Rs. 80 million for dividend & Rs. 14 million for Dividend Tax.
General Reserve
Your Directors have resolved to transfer Rs. 22 million to General Reserve
out of the profits of the Company. With the transfer, the total reserves
stand at Rs. 2508 million as at 31st December 2009.
Directors' Responsibility Statement:
The Directors would like to assure the Members that the financial
statements for the year under review conform in their entirety to the
requirements of the Companies Act, 1956 pursuant to Section 217 (2AA) and
that:
1. the Annual Accounts have been prepared in conformity with the applicable
Accounting Standards;
2. the Directors have selected such accounting policies and applied them
consistently except where otherwise stated in the notes to the accounts and
made judgements and estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Company at the end of
the financial year and of the Profit of the Company for that period;
3. the Directors have taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities. The internal
auditors have conducted periodic audits to provide reasonable assurances
that established policies and procedures of the Company have been followed.
However, it must be recognised that there are inherent limitations in
weighing the assurances provided by any system on internal controls;
4. the Directors have prepared the annual accounts on a going concern
basis.
Promoters:
Thomas Cook Group plc:
Thomas Cook Group plc is a leading international leisure travel group,
created by the merger of MyTravel Group PIC and Thomas Cook AG in June
2007. Thomas Cook Group plc is a fully listed company on the London Stock
Exchange.
Thomas Cook (India) Limited is a part of Thomas Cook Group. It remains as a
subsidiary of TOM Limited, an unlisted private company, incorporated under
the laws of England and Wales having its Registered Office at Peterborough,
England, U.K. and holding 55.84% of the post ESOP Issue paid-up equity
share capital of the Company. Thomas Cook UK Limited (TCUK) apart from
holding 21.44% of the post ESOP Issue paid-up equity share capital of the
Company, also holds 100% holding in TOM Limited. Thus, TCUK indirectly
holds 77.27% of the present paid-up equity share capital of the Company.
Group
Pursuant to intimation from the promoters, the name of the Promoters and
entities comprising the 'group' are disclosed hereinbelow for the purpose
of Regulation 3(1)(e)(i) of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997, and
they include the following:
Group:
Airtours the Holidaymakers Limited
Thomas Cook Group UK Limited (erstwhile Blue Sea Investments Limited)
Blue Sea Overseas Investments Limited
MyTravel Group Plc
MyTravel UK Limited
Sandbrook Overseas Investments Limited
Sandbrook UK Investments Limited
TCIM Ltd.
Thomas Cook Continental Holdings Limited
Thomas Cook Group Plc
Thomas Cook Investments (1) Limited
Thomas Cook Investments (2) Limited
Thomas Cook Overseas Limited
Thomas Cook Scheduled Tour Operations Limited
Thomas Cook Tour Operations Limited
Thomas Cook UK Limited
Thomas Cook (India) Limited
Operations in India [including Travel Corporation (India) Limited]
Consolidation of businesses across the Company and its subsidiaries
continued through 2009.
During the year, new initiatives were taken like the launch of a complete
Print Holidays campaign under the new name 'Holidaywallas'; the venturing
into a new segment - the luxury segment with our new luxury brand
'Indulgence'; launch and/ or continuation of products like 'Honeymoon
Holidays', 'Holyland tours', 'Rock on series'; launch of new luxury train
itinerary, 'The Indian Maharaja - Deccan Odyssey' through our subsidiary
Travel Corporation (India) Limited. The Company also started a new
marketing campaign for Leisure Travel with focus on new products and change
in media mix. A corporate booking tool - the Corporate Travel Module (CTM)
was launched and the Company also undertook a back end integration /
consolidation exercise through the Service Excellence Centre.
The E-Businesses also launched a gamut of new products & services in 2009
catering to various segments of the customers based on their requirements
and travel trends for air and rail ticketing, hotel bookings and branded
international holidays; customisable self-booking tool for Corporates,
modules for the Visa & Passport Services Team.
Operations in Mauritius
The Mauritian subsidiaries have changed their accounting year to a period
of nine months ending 30th September, 2009. During 2009, Thomas Cook
Mauritius Operations Company Limited, the foreign exchange arm of the
Mauritius Holding entity has seen the implementation of a new front-end
business application for its Foreign Exchange business which is under
stabilisation. With the increased network of 20 branches, the operations
company has exceeded its budgets and last year's numbers.
New business has been signed with parties in the market for increasing the
variety of products offered from the branches and the company is further
enjoying increased visibility.
Operations in Sri Lanka Branch
The Sri Lanka branch of your Company offers foreign exchange services from
the arrival and departure lounge of the Bandaranaike International Airport,
Colombo, Sri Lanka and has a staff strength of twenty personnel.
The focus of your Company is to expand its operations beyond the airport by
opening branches in various cities as and when the approvals are received
from the regulatory authorities. Your Company is also seeking to enhance
its scope of license to enable it to play a more constructive role in the
financial system of the country.
Post the end of insurgency in Sri Lanka, the inflow of tourists has started
to increase. Now with a stable Government in place after the recent
elections, the outlook seems positive for the country's economy and your
Company would look to capitalize on it.
Accolades and Awards:
Thomas Cook (India) Limited has been the recipient of the following highly
prestigious awards in 2009:
- CNBC AWAAZ- Best FOREX Company in India
- CNBC AWAAZ - Best Tour Operator for the second time in a row
Directors
In accordance with Article 131 of the Articles of Association of the
Company, Mr. H.S. Billimoria, Mr. A.V. Rajwade and Mr. Rakshit Desai retire
by rotation and being eligible, offer themselves for re-appointment to the
Board.
Mr. Ramesh Savoor, Mr. Mahendra Kumar Sharma and Mr. Krishnan Ramachandran
were appointed as Additional Directors with effect from 29th May 2009. As
Additional Directors, Mr. Savoor, Mr. Sharma and Mr. Ramachandran hold
office upto the date of the ensuing Annual General Meeting of the Company.
Mr. Vinayak K. Purohit was re-appointed as the Executive Director - Finance
of the Company for a period of three years w.e.f. 14th May, 2010.
The Service Agreements of Mr. Madhavan Menon, Managing Director and Mr.
Rakshit Desai, Executive Director - Travel Services were varied during the
period.
The above appointments, re-appointments and variations form part of the
Notice of the Thirty-third Annual General Meeting and the relevant
Resolutions are recommended for your approval.
Profiles of these Directors, as required by the Listing Agreement
provisions, are given in the Notice/ Corporate Governance Report forming
part of this Annual Report.
During the period, Mr. Udayan Bose, Mr. Manny Fontenla-Novoa, Dr. Juergen
Bueser, Mr. Roland Zeh, Dr. Angus Porter and Mr. Dilip De resigned from the
Company. The Board placed on record its sincere appreciation for the
contribution made by the Directors during their tenure as Directors of the
Company.
Auditors
M/s. Lovelock & Lewes, Chartered Accountants, Auditors of the Company who
retire at the forthcoming Annual General Meeting are eligible for re-
appointment and have expressed their willingness to accept office, if re-
appointed. They have given a certificate to the effect that the re-
appointment, if made, would be within the limits prescribed under Section
224(18) of the Companies Act, 1956. Your Directors recommend their
reappointment.
M/s. Price waterhouse Coopers, Chartered Accountants, Colombo, Sri Lanka,
are recommended for re-appointment as Branch Auditors of the Sri Lanka
Branch of the Company.
Auditors' Report:
Regarding Sub-Clause (i) of Clause (h) of the Auditors' Report, an
application to the Central Government in respect of the appointment and
remuneration of Mr. Rakshit Desai, Executive Director-Travel Services, is
already made and for which approval is pending.
Regarding Sub-Clause (ii) of Clause (h) of the Auditors' Report, relevant
applications to the Central Government in respect of payment of managerial
remuneration to Mr. Madhavan Menon and Mr. Vinayak K. Purohit have already
been made and for which approvals are pending.
The Management has noted the comments on Corporate Travel Module (CTM)
implementation and it is committed to resolving the issues at the earliest.
Subsidiary Companies:
The Audited Statement of Accounts along with the Directors' Report of
Travel Corporation (India) Limited, Thomas Cook Insurance Services (India)
Limited, Thomas Cook Tours Limited, Indian Horizon Travel & Tours Limited
and the Consolidated accounts of Thomas Cook (Mauritius) Holding Company
Limited for the year ended 31st December, 2009 are separately attached as
required under the provisions of Section 212 of the Companies Act, 1956.
The Mauritian subsidiaries have changed their accounting year to a period
of nine months ending 30th September, 2009. Accordingly, the Consolidated
Accounts of Thomas Cook (Mauritius) Holding Company Limited for the nine
months ended 30th September, 2009 are separately attached.
Particulars regarding conservation of energy, technology absorption and
foreign exchange earnings and expenditure.
Your Company being in the Tourism hospitality industry, its activities do
not involve in any expenditure on Technology and Research and Development
and therefore, the other particulars in the Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1988 are not
required to be submitted.
However, due to the voluntary measures adopted to conserve energy through
an energy audit and consequently implementing its recommendation, your
Company was able to make a savings in its energy l electricity consumption
of 106950 units at the Head Office and 31487 units at its Chembur office.
During the year, the foreign exchange earnings amounted to Rs. 580 million,
whereas, the Company has incurred Rs. 65 million as expenditure in foreign
currencies towards interest, bank charges, licence fees, professional fees,
as well as travelling for promotional activities, subscriptions, etc., as
disclosed in Schedule Q Note 2(h) and 2 (f) in the Notes to the accounts.
Fixed Deposits:
Your Company has not accepted deposits from the Public within the meaning
of Section 58A of the Companies Act, 1956 and as such no amount principal
or interest was outstanding on the date of the Balance Sheet.
Listing of Shares
Your Company is listed on two Stock Exchanges in India viz. Bombay Stock
Exchange Limited, Mumbai and National Stock Exchange of India Limited,
Mumbai. The Company has paid the Listing Fees to both the Stock Exchanges
for the Financial Year 2009-2010.
Employees
Relations with the employees continued to be cordial throughout the year.
Your Directors place on record their appreciation of the efforts,
dedication, commendable teamwork and exemplary contribution of the
employees in the various initiatives of the Company and contributing to the
performance of the Company during the year under review.
Information pursuant to Section 217(2A) of the Companies Act, 1956:
The particulars required under Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975, forms part
of this Report and have been annexed herewith.
Corporate Governance
Your Company continues to be committed to good corporate governance aligned
with the best corporate practices. It has also complied with various
standards set out by SEBI and the Stock Exchanges where it is listed. The
Management Discussion and Analysis Report forms part of this Annual Report.
For the year ended 31st December, 2009, your Company has complied with the
requirements of Clause 49 of the Listing Agreement and other applicable
rules and regulations with respect to Corporate Governance. A certificate
from the Auditors of the Company regarding such compliance of conditions of
Corporate Governance is attached to this report. The Company is yet to
consider the adoption of 'Corporate Governance Voluntary Guidelines, 2009'
recommended by the Ministry of Corporate Affairs and released at the India
Corporate Week during 14th to 21st December, 2009.
Pursuant to the requirements of Schedule XIII Part II Section II Clause (C)
Proviso (iv) point IV sub-point (2), the following details are being
disclosed:
i) All elements of remuneration package such as salary, benefits, bonuses,
stock options, pension, etc., of all the Directors for the year ended 31st
December 2009:
Executive Directors:
Name of Director A B C D E F G
Mr. Madhavan Menon 5,726,688 9,036,031 - - 859008 15621727 -
Mr. Vinayak K.Purohit 3,533,808 9,420,214 - - 530076 13484098 -
Mr. Rakshit Desai 8,129,004 15,439,155 - - - 23568159 -
Sub-Total (a) 17,389,500 33,895,400 - - 1389084 52673984 -
A = Salary (Rs.)
B = Benefits (Rs.)
C = Bonus/Commission (Rs.)
D = Sitting Fees (Rs.)
E = Pension * (Rs.)
F = Total (Rs.)
G = Stock Options
* Pension includes Superannuation
Non-Executive Directors:
Name of Directors A B C D E F G
Mr. Udayan Bose - - 209,473 120,000 - 329,473 -
Mr. H.S. Billimoria - - 516,603 430,000 - 946,603 -
Mr. A. V. Rajwade - - 516,603 410,000 - 926,603 -
Mr. Dilip De - - 516,603 180,000 - 696,603 -
Mr. Ramesh Savoor - - 307,131 120,000 - 427,131 -
Mr. M. K. Sharma - - 307,131 280,000 - 587,131 -
Mr. Krishnan - - 307,131 60,000 - 367,131 -
Rarnachandran
Sub-Total (b) - - 2,680,675 1,600,000 - 4,280,675 -
Total (Rs.) (a+b) - - 55,354,659 1,600,000 - 56,954,659 -
A = Salary (Rs.)
B = Benefits (Rs.)
C = Bonus/Commission (Rs.)
D = Sitting Fees (Rs.)
E = Pension * (Rs.)
F = Total (Rs.)
G = Stock Options
* With effect from May, 2005, Commission to the Executive Directors was
paid on the Return on Equity (ROE) formula.
* None of the Directors held any shares in the Company as on 31st December
2009 other than Mr. Madhavan Menon, who held 2000 equity shares as on that
date.
ii) Details of fixed component and performance linked incentives along with
the performance criteria:
Name of Director Salary
Fixed (Rs.) Performance Linked
Incentives (Rs.)
Mr. Madhavan Menon 15,621,727 -
Mr. Vinayak K. Purohit 13,484,098 -
Mr. Rakshit Desai 23,568,159 -
Total 52,673,984 -
Performance criteria:
The Recruitment & Remuneration Committee determines and recommends to the
Board, the compensation of the Directors and employees. The key components
of the Company's Remuneration Policy, as approved by the Recruitment
Remuneration Committee are:
* Compensation is an important element to retain talent.
* Compensation will be competitive and would factor in, the market
compensation levels.
* There will be a variable component in the total Compensation, and that
will be linked to the individual, business and organization performance.
* Compensation will be transparent. fair and simple toadminister.
* Compensation will be fully Legal and Tax compliant, as per the relevant
laws in place.
* ESOPs may be granted having regard to the role / designation, length of
service, past performance record, future potential and/or such other
criteria
The shareholders approve the compensation of the Executive Directors for
the entire period of the~r term. The compensation payable to each of the
independent Director is limited to a fixed percentage of profits per year
as recommended by the Recruitment & Remuneration Committee. The aggregate
of these is within the limit of 1% of the net profits of the Company for
the year in respect of Non Executive Directors, calculated as per the
provisions of the Companies Act, 1956, as approved by the shareholders, and
is separately disclosed in the financial statements. The actual amount of
commission payable to each NonExecutive Director is decided by the Board
based on the overall contribution and role of such Directors.
The role and the involvement of the Non-Executive Directors as members of
the Board and its Committees, has undergone qualitative changes pursuant to
more stringent accounting standards and corporate governance norms.
Further, in view of the scale and expertise required for the Company's
business, the Company has paid sitting fees at the rate of Rs. 10,000/- per
meeting to the Non-Executive Independent Directors for attending the
meetings of the Board, Audit Committee, Share Transfer & Shareholders'/
Investors' Grievance Committee and Recruitment & Remuneration Committee
constituted by the Board. With effect from 29th April 2009, sitting fees
for attending Board and Audit Committee Meetings has been increased to
Rs.20,000/- per meeting.
iii) Details of Service Contracts, Notice Period, etc. of all the Directors
for the financial year ended 31st December 2009
Name of Director Service Period Notice Severance fees,
Contract Period if any
Mr. Madhavan Menon Yes 1st May 2009 to 6 months As decided by
30th April 2012 the management
Mr. Vinayak K.Purohit Yes 14th May 2007 to 3 months As decided by
13th May 2010 the management
Mr. Rakshit Desai Yes 25th Nov.,2008 to 3 months As decided by
24th November 2010 the management
Non-Executive Directors No None. The Non- None None
Executive
Directors liable
to retire by
rotation, get
re-appointed as
per the Articles
of Association
of the Company
and the Companies
Act, 1956
iv) Stock option details, if any, and whether the same has been issued at a
discount as well as the period over which accrued and over which
exercisable:
Note: None of the non-executive directors were issued/ granted employee
stock options under the Thomas Cook Employee Stock Option Scheme 2007 as on
31st December 2009
Name of the Director A B C D E F
Mr. Madhavan Menon 205000 5% 250500 5% - NA
Mr. Vinayak K.Purohit 162500 5% 185000 5% - NA
Mr. Rakshit Desai - NA - NA - NA
A = 2007 - Options issued
B = 2007 - Discount %
C = 2008 - Options issued
D = 2008 - Discount %
E = 2009 - Options issued
F = 2009 - Discount %
Period of accrual: 1/3rd of the options granted, vest every year, over 3
years.
Exercise Period: All the options are exercisable over a period of 10 years
from the respective grant dates.
Acknowledgments:
Your Directors thank all the Shareholders, Customers, Vendors for their
continued support throughout the year. We also thank Ministry of Tourism,
Reserve Bank of India and other Banks, Financial Institutions, Government
of India, State Governments, and other Government agencies for the support
extended by them and also look forward to their continued support in
future.
Your Directors also wish to place on record their appreciation of the
contribution made by the Company's employees at all levels but for whose
hard work, solidarity and support your Company's consistent growth would
not have been even possible.
FOR AND ON BEHALF OF THE BOARD
MADHAVAN MENON - Managing Director
VINAYAK K. PUROHIT - Executive Director- Finance
Mumbai Dated: 17th March, 2010.
Disclosures under the Securities and Exchange Board of India (Employee
Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999
for the year ended 31st December, 2009
Scheme Name: ESOP 2007 Granted on 25th July 2007 Granted on 10th
July 2008
1. Options Granted 1104125 1414250
2. Pricing Formula 95% of the closing market 95% of the closing
price on that exchange market price on
where higher shares are that exchange
traded where higher
shares are traded
3. Options Vested and
exercisable 542946 364496
4. Options Exercised 13540 0
5. Total number of Ordinary 13540 0
Shares arising as a
result of exercise of
Options
6. Options Lapsed/ 276085 320750
Forfeited/Cancelled
7. Variations of terms The ESOP 2007 Scheme None
of options was amended vide Postal
Ballot Notice dated 21
August 2007 and approved
on 12th October 2007, for
the purposes of recovering
the Fringe Benefit
Tax (FBT) from the
employees and varying
certain terms of the
Scheme according to SEBI
guidelines
8. Money realised by Rs. 7,026,990.60 N.A.
exercise of the Options
9. Total number of Options 814500 1093500
in force (vested +
Unvested)
Scheme Name: ESOP 2007
1. Options Granted Granted on 20th March 2009
2. Pricing Formula 2194725
95% of the closing market
price on that exchange
where higher shares are traded
3. Options Vested and None vested so far
exercisable
4. Options Exercised 0
5. Total number of Ordinary 0
Shares arising as a
result of exercise of
Options
6. Options Lapsed/ 126000
Forfeited/Cancelled
7. Variations of terms None
of options
8. Money realised by N.A.
exercise of the Options
9. Total number of Options 2068725
in force (vested +
Unvested)
10. i) Details of Options granted to senior Appendix-A
managerial personnel in 2009
ii) Any other employee who receives in any Appendix-B
One Year of grant of Option amounting to 5%
or more of options granted during the Year
iii) Identified employees, who were granted None
options, during any One Year, equal to or
exceeding 1% of the issued capital
(excluding outstanding warrants and
conversions) of the Company at the time
of the grant
11. Diluted Earning Per Share (EPS) 1.03
calculated in accordance with Accounting
Standard 20 issued by ICAI for the year
ended December 31, 2009.
12. i) Method of calculation of employee Intrinsic Value Method
compensation cost
Reported Profits: 221,647,447
Add: Intrinsic
Value: 3,711,487
ii) Difference between the employee Less: Fair Value: 41,901,176
compensation cost so computed at (i) above Adjusted Profits: 183,457,758
and the employee compensation Reported Basic EPS: 1.06
cost that shall have been recognized Adjusted Basic EPS: 0.87
if fair value of Options had been used Reported Diluted EPS: 1.03
Adjusted Diluted EPS: 0.85
iii) The impact of difference on profits
and EPS of the Company for the year ended
December 31, 2007 had fair value options
had been used for accounting Employee
Options
13. Weighted Average exercise price of Rs. 30.31
options granted during the year is less
than market price of stock on the grant date
14. A description of method and significant assumptions used during the
year to estimate the fair value of Options granted during the year
The fair value of options has been calculated by using Black Schole's
Method. The assumptions used in the above are:
1) Risk free interest Rate 6.73%- 6.90%
2) Expected Life 5.50-6.50 years
3) Expected Volatility based on daily
closing Market Price 49.72%-46.64%
4) Expected Dividend Yield 0.86%
5) The price of underlying share in the market at 31.90
the time of rant
Appendix-A (Details of options granted to and accepted by Senior Managerial
Personnel)
Sr. Name of Senior Designation A B C
No. Managerial Personnel
1. Mr. Madhavan Menon Managing Director 205000 250500 -
2. Mr. Vinayak K.Purohit Executive Director
- Finance 162500 185000 -
3. Mrs. Nalini Gupta President & Head
- Travel Businesses 150000 185000 -
4. Mr. Gautam Sharma President & Head
Financial Services - Marketing & 108750 - -
5. Mr. Parag Mehta President & Head
- Foreign Exchange 108750 100000 -
6. Mr. Amitabh Pandey President & Head
- E-Businesses 63750 86000 116100
7. Dr. D. Prasanth Nair President & Head
Special Projects - Human Resources & 56750 86000 116100
8. Mr. R. R. Kenkare President & Head
Secretary - Legal & Company - - 261375
TOTAL 855500 892500 493575
A = No. of Options Offered and accepted in 2007
B = No. of Options offered and accepted in 2008
C = No. of Options offered and accepted in 2009
Appendix - B (employees, apart from Senior Managerial Personnel, who
received in 2009, grants of Options amounting to 5% or more of options
granted during 2009)
Sr. Name of Employee Designation options %age of
No. offered options
in 2009 offered in
2009
1. Mr. Sunit Suri Chief Operating Officer
- Leisure Travel (Inbound) 122850 5.60%
TOTAL 122850
Employees, apart from Senior Managerial Personnel, who received in 2008,
grants of Options amounting to 5% or more of Options granted during 2008:
Sr. Name of Employee Designation options offered %age of
No. in 2008 options
offered in
2008
1. Mr. Vishal Suri Chief Operating Officer
- Leisure Travel (Outbound) 73000 5.16%
& Domestic
2. Mr. Sunit Suri Chief Operating Officer
- Leisure Travel (Inbound) 78000 5.52%
TOTAL 151000
(Note: There were no employees who received in 2007, grants of Options
amounting to 5% or more of options granted during 2007)
FOR AND ON BEHALF OF THE BOARD
MADHAVAN MENON - Managing Director
VINAYAK K. PUROHIT - Executive Director- Finance
Mumbai
Dated: 17th March, 2010.
MANAGEMENT DISCUSSION AND ANALYSIS
India Travel and Tourism Industry:
India's first major civilisation flourished along the Indus River valley
nearly five thousand years ago. in a country as diverse and complex as
India, it is not surprising to find that people here reflect the rich
glories of the past, the culture, traditions and values relative to
geographic locations and the numerous distinctive manners, habits and food
thatwill always remain truly Indian. It is this rich cultural heritage,
natural beauty, diversity of religion and traditional medicare that
attracts visitors from around the world.
The last two years have shown a de-growth over previous years primarily due
to the economic slowdown witnessed in the global and local markets and the
frequent terror attacks.
The travel market is changing dramatically. With the internet, e-mails,
mobile phones and other communication technology becoming a part of daily
lives, a whole world of information and choices are available to today's
travellers, which make it critical for the travel agents to constantly
innovate in order to understand the customer's needs and expectations.
Domestic tourism is growing rapidly. Earlier, one had to plan holidays in
advance. But now, with improved air-connectivity and more options, one can
plan a holiday at short notice and cover long distances. Many destinations
are getting a boost due to their tie-ups with airlines. Many domestic
travellers are making use of the option. The destinations and packages
offered vary according to the season. The travel packages, which were aimed
at luring foreigners to India, are also helping boost domestic tourism like
ayurveda and spa.
Uncertainties such as terror attacks, epidemics, conflicts, natural
calamities and the effects of the global business downturns are risks the
travel and tourism industry will be susceptible to; these perils cannot be
disregarded in the future.
A statement giving Foreign Tourist Arrivals in India and Foreign Exchange
Earnings from tourism for the last eleven years i.e. 1999 to 2009 are given
below:
Foreign Tourist Arrivals and estimated Foreign Exchange Earnings during the
years 1999-2009
Year A B C D E F
1999 2.48 5.2 12951 6.6 3009 2.1
2000 2.65 6.7 15626 20.7 3460 15.0
2001 2.54 -4.2 15083 -3.5 3198 -7.6
2002 2.38 -6.0 15064 -0.1 3103 -3.0
2003 2.73 14.3 20729 37.6 4463 43.8
2004 3.46 26.8 27944 34.8 6170 38.2
2005 3.92 13.3 33123 18.5 7493 21.4
2006 4.45 13.5 39025* 17.8 8634 15.2
2007 5.08 14.3 44360* 13.7 10729* 24.3
2008 5.28 4.0 50730@ 14.4 11747@ 9.5
2009 5.11@ -3.3@ 549600 8.3@ 11394@ -3.0@
A = Foreign Tourist Arrivals (in million nos.)
B = Percentage Change Over Previous Year
C = Estimated Foreign Exchange Earnings (Rs. in Crore)
D = Percentage Change Over Previous Year
E = Estimated Foreign Exchange (in Million US$)
F = Percentage Change Over Previous Year
* Revised Estimates @ Advance Estimates
(Source: Market Research Division of the Ministry of Tourism)
Though the growth rate for 2009 is (-)3 .3%, it is better than UNWTO's
projected growth rate of (-)60/ to (-)4% for the world.
SPECIAL GOVERNMENT INITIATIVES
The Ministry of Tourism, Government of India has undertaken several
confidence building measures with a view to giving a boost to the tourism
industry in the aftermath of the global economic slow down and the
terrorist attacks in Mumbai.
The following incentives have been offered by the Ministry to the tourism
industry:
a) Enhanced benefits under the Market Development Assistance (MDA) Scheme.
b) Familiarisation (FAM) Tours for Overseas Media and Travel Trade
Representatives: As part of the confidence building measures, FAM tours for
trade and media representatives to Mumbai and other regions of the country
have been specially organized by the overseas India tourism offices, to
project the ground realities relating to safety/security conditions in the
country.
c) Road Shows: A series of Road Shows are being organized in important
tourist generating countries, in collaboration with the Indian Association
of Tour Operators and with participation of different segments of the
tourism industry. The focus of these Road Shows is on one-to-one business
meetings between the seller delegates from India and buyer delegates
overseas, with a view to promoting inbound tourism to India.
d) Visit India Year 2009: The Year 2009 was declared as the Visit India
Year. Diverse and complex cultures, traditions and values; the varied
Indian lifestyles and climatic conditions (eternal snows of the Himalayas,
the peninsula of the far South, the deserts of the West, the humid deltas
of the East, the dry heat and cold of the Central Plateau, the cool forest
foothills); the colourful mosaic of Indian festivals and fairs are just
some of the reasons for people to visit India.
e) Commonwealth Games 2010: To make maximum use of the opportunities=that
will be presented to India when we host the 2010 Commonwealth Games in New
Delhi. The Games are expected to significantly boost tourism in India.
Present Scenario:
India's GDP in 2008-09 declined to 6.7% after a consecutive 9% growth rate
in the preceding three years.
2009 has witnessed a sharp volatility in the Indian Rupee versus the major
currencies. Inflation (WPI), which was at 4.4% at the beginning of 2009,
going negative to -1.6% in June-July 2009 peaked to 7.3% in December 2009.
The Foreign exchange (forex) reserves in foreign currency assets have gone
down from USD 3,489.40 bn in 2008 to USD 3,230.33 bn in 2009.
During 2009, corporates continued to hold back their spends on travel and
entertainment due to recession. Indian leisure travellers remained cautious
in spending on holidays. Recession in the European and US markets affected
the inflow of foreign tourists. Terror attacks in November 2008 kept the
tourists away from India during the first quarter of 2009, which is the
peak tourist season. Volatility in Indian Rupee affected the foreign
exchange margins. All the above impacted the financial performance of your
Company in 2009.
FINANCIAL SERVICES
Forex market in India is a regulated market and volumes are closely tied up
to Dollar-Rupee exchange rate.
Your Company is the market leader in forex and offers various services like
currency exchange, money transfer, remittance, Travelers cheques, pay
orders, wire transfers and pre-paid cards.
It caters to the forex needs across various segments of customers such as
leisure outbound travelers, travelers for migration, employment and medical
treatment, students travelling abroad for studies, inbound tourists,
business travelers, banks, non bank retailers and money changers.
Your Company handled 1.3 million transactions in 2009 and is the one of
largest exporter in world for bank notes. It handles 60% of India's foreign
currency bank notes. It has a largest distribution of 172 locations in 70
cities amongst the forex players in the country.
After depreciation in Rupee Vs Dollar in 2008, the year 2009 witnessed a
volatility in Rupee Vs Dollar. It depreciated by 6% during Quarter 1 and
then appreciated by 10% by the year end. As the confidence level in the
economy went up, during the second half of the year, higher Foreign
institution inflows made the Rupee stronger. This impacted our currency
purchase volumes. Although the Indian economy started turning back on track
during the second half, individual and corporate customers remained
cautious in spending the money on travel. Economic slowdown in source
markets affected the inbound tourist inflow. Footfalls at the airports
remained lower than 2008.
Despite the challenges above, your Company was able to sustain the volumes
in 2009 through various initiatives such as U-special, a product for
students going abroad for studies, focusing on various segments for retail
customers, remittance business, expansion into secondary airports, malls,
etc. Margins remained under pressure due to the volume challenges. Costs
were rigorously controlled and were lower than 2008.
The Company has taken a series of initiatives to deliver a sustainable
growth. During 2009, your Company added 51 new sub-agents for inward
remittance business. We have tied up with two large hospitals to open up
kiosks for the foreign exchange. Cochin airport contract was renewed for
five years.
Your Company would like to expand the distribution network further and in
this regard, twenty new shops were opened in last quarter of 2009 in
various tier-2 cities across India. In January'10 we have done a tie-up
with India Post for opening of counters at post offices offering forex and
travel services. We have been awarded the contract to set-up and run
counters at Delhi airport for the next seven years.
Global remittances into India is expected to dip to USD 47 billion as
against USD 52 billion in 2008 on account of a lagged response to a weak
global economy and the opportunity remains for us in this category. Your
Company is a principal agent in India for MoneyGram. We are in the process
of appointing more subagents for MoneyGram.
Volatility in exchange rate, increasingly stringent compliance requirements
and dearth of skilled manpower are some key external factors that could
impact the business adversely. However, the Company is exploring every
possible avenue to mitigate these risks.
Business in Mauritius is growing and during 2009, the company expanded the
branch network, improved the visibility and focused on customer service.
Post the end of insurgency in Sri Lanka, the inflow of tourists there has
started to increase. Now with a stable Government in place after the recent
elections, the outlook seems positive for the country's economy and your
Company would look to capitalize on it. The focus of your Company in Sri
Lanka is to expand its operations beyond the airport by opening branches in
various cities as and when the approvals are received from the regulatory
authorities. Your Company is also seeking to enhance its scope of license
to enable it to play a more constructive role in the financial system of
the country.
INSURANCE BUSINESS
The insurance industry has evolved over the past decade through increase in
market penetration and increase in number of insurers and intermediaries.
With innovation in products and processes, insurance players are attracting
a larger audience.
The insurance penetration is still low and provides tremendous potential
especially in the travel space. Your Company will continue to explore the
internal svnergies especially in the leisure travel, corporate travel and
student travel market to drive growth. Moreover, the combination of brick
and mortar shops and worldwide web network provide opportunities for many
more insurance products outside the travel space to be offered to the
customers.
The Company continued to explore relevant offerings to our customers
through our partnership with TATA-AIG General Insurance Company. Through
the PLUS product, we now offer wallet and credit card loss coverage to our
customers.
In order to leverage on the brand and the network, the life insurance
initiative was started in conjunction with Bajaj Allianz Life Insurance
Company.
With the other businesses of Thomas Cook poised for growth and the
Insurance industry itself growing at a CAGR of over 25% (over 98-'99),
this sector offers ample opportunities to leverage upon and create value
for the stakeholders.
Inspite of challenges in terms of Insurance Regulatory
Development Authority guidelines (on commissions) and stiff competition,
the growth rate of the industry continues to remain good.
TRAVEL & RELATED SERVICES
2009 was an extremely challenging year for most industries; travel and
tourism being no exception. The scale of decline in air traffic volumes was
unlike anything experienced before by the industry, and was on account of a
15%-30% downturn in economic activity in major economies worldwide. The
combined effect dwarfed all the recessions in the past 40 years, and made
this possibly the worst downturn since 1930s.
The number of outbound travellers from India and inbound tourists into
India has shown a de-growth over previous year primarily due to the
economic slowdown witnessed in the global and local markets. Corporates
across the board put a tight leash on travel expenses to manage costs
during the downturn.
While the effects of the downturn were quite pronounced through the first
three quarters, the last quarter showed some signs of recovery. From the
start of the last quarter of 2009, economies started to move out of
recession, particularly the emerging markets; which boosted first air
freight and then air travel. However, the yields have been slow to rise
from the sharp falls of the first half of the year, and fuel prices
continued their upward trend. While load factors were back to pre-recession
levels at the end of the year (partly helped by the festive season),
however, aircraft utilization was down sharply due to fleet expansion.
Your Company took several initiatives to boost demand during the sluggish
period. The Company launched several new products and also launched a
complete media campaign under the new name Holidaywallas' to boost demand
on the leisure side of the business. Continued negotiation with suppliers
helped protect margins. Costs were kept under a tight control with several
initiatives being taken to boost productivity. The Company launched a
Service Excellence Centre', a centralised fulfilment unit for the
corporate travel business to increase efficiency and improve quality.
Most industries and corporates are bullish on 2010 and are expecting
positive growth. With stalled expansion projects and freeze on hiring by
companies, the lift out of recession is seeing business travel being put on
the growth path once again. Domestic yields have already witnessed
significant improvements and international travel is slowly increasing.
Business class travel which had witnessed the sharpest drop is now picking
up once again. With the receding recessionary pressures, the suppressed
demand in leisure is also expected to come back.
Your Company has taken several initiatives to capitalise on this recovery
and deliver sustained growth. The Company is looking to expand its reach
through new outlets and franchisees. Even on the inbound segment, your
Company is looking to develop new source markets to boost inbound passenger
count.
With increasing degree of comfort of customers with internet, online
business is expected to gain increased momentum and increase in volumes.
All Thomas Cook products are available through our website. In addition, a
corporate self booking tool has been launched for smaller corporates who
can directly book their own travel requests, at a lower/marginal service
fee.
Your Company will nurture and grow the new product lines and continue to
innovate to meet the needs and expectations of the customers.
Your Company will continue to focus on MICE (Meetings, Incentives,
Conferences and Events) which continues to be a fast growing segment within
leisure travel. Your Company is able to leverage its corporate business to
grow this segment.
Domestic tourism has been growing rapidly in the last few years. The
Company has launched several tour packages to capitalize on the growing
demand from the domestic tourism.
The stronger demand has also led to airlines firming up ticket prices,
which will lead to better yields. The increase in total ticketed volume for
the combined travel businesses, will enable us have better bargaining power
with our principals, to sustain higher revenue margins.
Our customer base is projected to expand with the inclusion of some new
large volume corporates. This, coupled with organic growth and newer
business avenues from our existing large accounts, would help us register
growth during 2010.
Any desperate attempt by competition to eat in our customer base, even on
loss making financials, could affect our growth during the year.
The possibility of oil prices going on an upward trend are a cause of
concern, as any continual rise in fare hikes would lead corporates to prune
their travel budgets during the year by either curtailing number of trips
or travelling on lower class/ low cost airlines.
Any unforeseen global economic downturn, or acts of terror, natural
calamities which may derail the economy, would lead to curtailment of
travel during the year; these perils cannot be disregarded in the future.
The Company will continue to strive in dovetailing its actions and
strategies to take advantage of the ever changing and growing travel
sector, and continue to interact and influence the government, in
continuing to provide the Indian tourists with global bench-marked services
and an appropriate infrastructural platform to the tourism sector.
VISA AND PASSPORT BUSINESS
Your Company set up a separate vertical for visas and passports a little
over a year ago and primarily services the needs of the travellers of the
Travel Businesses. Having established itself internally, the business now
seeks to provide third party services to the travel industry with the
intention of becoming the largest organized player in the market by
leveraging technology in a market which has no organized players with a
pan-India presence.
To facilitate operations, the business has developed a content site
providing detailed information on the country of travel, the contact
details of the foreign missions, downloadable visa forms, check lists of
documents required etc. which can be used by internal and external
customers as well. It also has an end-to-end online tracker for tracking
various stages of the documentation process which is facilitated by bar
coding of the documents, which is a first in the industry.
The outlook of the business is positive considering the revived growth
numbers of outbound travellers in the leisure and business segments.
Missions are also moving towards e-visa in a few cases and these can be
processed only by approved visa agents thereby increasing opportunities for
your Company.
The business faces challenges and risks in the form of biometrics processes
being introduced by some of the Missions which will eliminate the use of
intermediaries. 'Visas on Arrival' being granted to Indians will lead to
fewer visas being processed.
FINANCIAL PERFORMANCE
The Company has posted profit before tax (and before exceptional items) of
Rs. 341 million and the profit after tax (after exceptional items) of
Rs.222 million. On a consolidated basis, the profit before tax (and before
exceptional items) stood at Rs.405 million and the profit after tax (after
exceptional items) was Rs. 250 million.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Internal control systems are basically of four types namely Strategic,
Operational, Financial and Legal. All the four types of systems have been
integrated to ensure that the Company's Business Objectives are duly
accomplished. These systems are being regularly reviewed and wherever
necessary are modified or redesigned to ensure better efficiency and
effectiveness. In 2005, our Company implemented an integrated Front Office
System (FOS) - the Project Vector, to give effect to various system level
controls. During the last quarter of 2009. your Company has launched web
based software for our Corporate Travel Management and Leisure Travel
Outbound -GIT business, and the Company is in the process of stabilising
the implementation of the same. During 2009, Thomas Cook Mauritius
Operations Company Limited, the foreign exchange arm of the Mauritius
Holding entity, has seen the implementation of a new front-end business
application for its Foreign Exchange Business, which is under
stabilisation. The front office system and web based applications are
backed by an integrated SAP Accounting System. These twin integrated
systems form the backbone of the overall control environment. Further, user
requirements are taken care of on an on-going basis so as to derive maximum
benefits of these information systems.
The systems are subjected to supervision by the Board of Directors and the
Audit Committee, duly supported by the Corporate Governance, voluntarily
observed since the last two decades and statutorily applicable from the
financial year ending October 2001. Control environment has been well laid
down through written policies pertaining to integrity and business ethics,
prevention of insider trading, anti money laundering and human resources.
These policies are implemented through operational and financial manuals.
Credit Policy is implemented to effectively monitor the Credit Business to
Corporates and thereby effective funds management is ensured. Considering
the key role played by Information Technology in the various business
processes of the Company, proper framework has been provided for the data
security through the information Systems Security Policy laid down by the
Management. Periodical reviews are carried out to ensure effective
implementation of the policy in all the functional areas.
All the systems are subject to Internal Audit by in-house internal Audit
department as well as outside consultants and agencies in the form of Audit
assignments such as Operations audits, Finance and Accounts audits, Support
functions audits, Systems and IT audits, Statutory compliance audits. These
are further supported by the Statutory Auditors who validate that the
financial reporting is true and fair. The President & Head - Legal &
Company Secretary heads the Compliance function, the Vice-President -
Foreign Exchange is the Money Laundering Reporting Officer (MLRO)
overseeing the AML compliance and the Vice-President - BPI & Audit, in
addition to his role as an Internal Auditor, conducts constant spot checks
to ensure that the compliances of all rules and regulations including
business processes are met. Clause 49 Audits are conducted by External
Auditors and their recommendations are implemented for effective Corporate
Governance. The Company has also adopted the system of Concurrent Audit for
its branches in the foreign exchange business with effect from October 2003
as per the requirements of Reserve Bank of India.
Anti Money Laundering Manual for India is in force since 2003 with
revisions therein according to the modified guidelines of RBI. Anti Money
Laundering Manual for Mauritius and Sri Lanka is in force and effectively
monitored.
RISKS AND CONCERNS
General:
Corporate level Risk Matrix is approved by the Board and Company resorts to
Risk Management methodologies to ensure that various business risks,
identified well in time, are assessed for their possible impact and are
effectively mitigated through various control measures. Open risks, if any,
are adequately covered by insurance. Business Continuity Plans (BCPs) have
been designed for the key operations of the Company to address any disaster
event. BCPs are further being reviewed during every. year, for effective
updation.
The Company has a Risk Committee chaired by the Managing Director, which
meets monthly, in addition to emergency meetings, whenever required to
address the risk issues relating to various business and support areas and
monitor the critical factors in order to effectively address them. The Risk
Committee approved the risk mapping for India, which lists down major risks
faced by the Company in India and the mitigation controls put in place to
bring down their impact. To address the Information
Systems related risk issues, the Company has constituted information
Systems Security Committee (ISSC) which has its quarterly meetings. Minutes
of the ISSC are put up in the Risk Committee which approves the
recommendations made by the ISSC for implementation. The Risk Committee in
turn reports to the Audit Committee, constituted by the Board.
INFORMATION TECHNOLOGY
We have a mix of different hardware (servers - Intel, RISC etc.). These
servers run the day-to-day transaction systems like FOS, SAP, TRIBS& RTF
etc. and also systems which handle e-mail, proxy, Anti Virus etc. We have
software which is internally developed and also have systems developed by
external providers (e.g. TCS). The Company uses various networking service
providers like Airtel-Bharti, Tata, BSNL etc. for its communication needs.
The network is by-and-large a VPN (Virtual Private Network). However,
internet is also used as a method of connecting remote users to our
business applications.
One of the prime concerns on the hardware and software front is that it
should be upgraded in a timely manner so as to be up-to-date with the
prevalent technologies and be ready for supporting the increase and
changing needs of the business. Further, the network has got points of
connect through the internet. Internet being a public domain area, it has a
potential of disrupting our network if proper security measures are not put
in place.
We have used the best technologies and firewalls to ensure that our network
is protected from the vagaries of the internet.
Information Systems Security Committee:
The internal information security is governed by the ISSP (Information
System Security Policy). As noted, the policy is implemented and monitored
by the ISSC. The Committee consists of members from the Business Process
Improvement & Audit department and the Human Resources Department. Member
from the Information Technology (IT) department acts as Rapporteur.
The Committee meets quarterly before each of the Risk Committee Meetings.
It also meets when significant changes take place in the information
Systems and/or Technology that would affect the security and control
perspective favourably/ adversely and on any significant breaches of the
security/ security policy. This Committee has overall responsibility for
all areas concerning IT security.
SERVICE QUALITY & CUSTOMER SERVICES
The Service Quality & Customer Services department has been an independent
department since June 2007 and now reports to the Executive Director-Travel
Services. During this period it has been able to infuse tremendous
awareness in the organization on the need to build a 'Customer Centric'
culture in the organization that provides us with a cutting edge over the
intensifying competition and as a most conspicuous differentiating factor
for the increasing discriminating customers.
Going forward the objective is/will be to leverage the current capabilities
across all the Customer touch points and steer strategically the processes
and technology changes to align the organization with the volatile market
conditions. This has been categorized for action as follows:
* Greater focus on Customer service.
* Ensuring a structured service resolution and Customer retention.
* Track multi channel Customer interactions.
* Recording, Managing and Integrating Customer lifecycle history.
During the year 2009, the department undertook the following initiatives:
INTERNAL & EXTERNAL BENCHMARKING - In order to develop Service Standards,
the department had collated best practices in processes and soft skills
across our Organization and that of our competitors. Continuous improvement
is our main aim in all aspects of our customer interfacing businesses and
we actively seek feedback through customer questionnaires and independent
research in order to analyze and develop our service delivery.
The data from mystery audits and customer feedback were used to develop
Internal and External Benchmarks. The use of market research data and
mystery audits on competition identified the areas of external benchmarks.
This provides us with the knowledge on where we stand vis-a-vis competition
and the capabilities of each Branch.
SEAMLESS CUSTOMER SERVICE AWARDS - The objective of these awards is to
create the importance of customer service by rewarding those employees who
go 'beyond the call of duty'. These awards are collated on a quarterly
basis and culminate in annual awards which also recognize those support
departments that have ably assisted the frontline through the year. There
are various categories of annual awards which recognize branches,
departments and individuals in a transparent and systematic manner. The
annual awards were presented at a large get together of many employees of
the organization.
COMPLAINT MANAGEMENT ANALYSIS - The Complaint Management software that had
been specifically made for the Service Quality & Customer Care department
to capture complaints and their service recovery, thereby ensuring detailed
analysis on the service detractors of the Company. Standard Operating
Procedures have been created and are followed diligently by the Service
Quality department when addressing customer grievances, so as to ensure an
effective recovery of the customers' concerns. There have been a large
number of positive
comebacks to the replies sent to the complaints received from irate
customers, thereby indicating that the detailed responses have a pacifying
effect.
UNIFORMS - The department has unveiled new uniforms for all customer
interfacing employees across India, as a well groomed appearance instills
confidence in a customer and projects a positive and efficient outlook to
all. The uniforms have been inspired by those worn in Thomas Cook UK but
have been adapted to suit our needs. These employees are our 'brand
ambassadors' and will wear the uniform with pride and confidence whether at
our retail outlets or at the Corporate customers' locations.
HEALTH & SAFETY - Protecting the health and safety of our customers remains
our primary concern. As part of our endeavour to ensure high levels of
safety for our customers and employees, Thomas Cook has initiated such
focus through dedicated resources in the Organization. The aim is to
develop policies and standards that would adhere to international
requirements for preferred practices and ensure high quality systems to
enable consistent Health and Safety reporting of incidents and accidents
that could arise. In the future, the aim would be to train and develop
appropriate staff to maintain the professional levels of product and
service offerings that we have come to be known for.
CUSTOMER DATA MANAGEMENT - It is essential to capture customer information
in order to leverage for Customer Relationship and Loyalty and thereby
sustain and increase our business; as well as to cross-sell our huge range
of products and services.
In order to create a database of our customers which would be used for any
future Customer Relationship Management solution, a software has been put
in place to capture accurate details of customers, at one source, by the
Sales colleagues at all customer interface touch points across the Thomas
Cook network. The data being inputted is also tracked and managed on a
monthly basis and provided to the relevant departments for updating clients
on new offers.
While we continue on this path of constant improvement, we strive to make
this Company one that 'truly delights' the customer this time and every
time.
HUMAN RESOURCES
Human Resources Management:
Human Resources in Thomas Cook strives to enable the organization to
achieve its objectives by constantly aligning the 'people factor' with the
'business needs'. This creates a need for constantly evolving and
stimulating the systems and processes in the context of organizational
culture. As part of the HR Action plan, we have initiated steps to work on
each of key variables that affect human resources, both at a strategic
level and at an operational level.
The world stands at important crossroads. These are challenging times, and
to retain a competitive edge, a company must direct individual
accomplishment toward organisational objectives. The only sustainable
differentiator of organisational success lies in the Vision and Values of a
company. We must be the force that influences industry standards. In our
kind of business, people come to us with dreams, with plans, with trust,
hoping we will make those dreams come true.
The Thomas Cook Group has defined the Vision of the Group, an inspiration
for each one of us: 'We Go Further to Make Dreams Come True.'
To enable the vision and to provide the context of the kind of organisation
we want to create and the people we want to be, the group also defined the
VALUES'. Thomas Cook India has always prided itself on core values that
act as a foundation to our organisation and we are now re-aligning our
values to reflect that of the Group. Our Values are called the PRIDE
Values.
P Pioneering our Future
R Respect for Individuals and United as a team
I Integrity
D Delighting the Customer
E Excellence
The Human Resources Department has rolled out various training initiatives
in its quest that each member of Thomas Cook India will be a torch bearer
for the Vision and Values of our organisation and uphold them with pride
PRIDE' in Thomas Cook.
To drive the future business growth TCIL this year has embarked upon a Key
Talent Plan through which employees are identified as Key Talent based on
performance, potential and criticality. Various interventions are planned
for nurturing those identified and enable them scale up for higher
responsibilities.
The organization continued to focus on Training & Development initiatives
at all the levels - The Managerial and Leadership Effectiveness (MILE)
programs launched in collaboration with two of the most prestigious
management institutes in India - the Indian Institute of Management,
Ahmedabad and the Indian Institute of Management, Indore. We run the
program at three levels for Senior, Middle and Entry level Managerial
staff, viz. MILE I, MILE II and MILE III.
The Company continues to nurture talent through TCMLP (Thomas Cook Middle
Leadership Program) and TCETP (Thomas Cook Executive Trainee Program) so as
to create talent pipeline at various levels in junior and middle
management.
We continue with The Thomas Cook Management Education Program (TCMEP) for
those who aspire for higher studies in the Management stream. Towards this,
we have tied up with several Business Management schools, the prestigious
Indian Institute of Management, Kolkata and the Indian Institute of
Management, Kozhikode for Executive MBA programs for our employees. We have
also tied up with ICFAI for Distance MBA. Women employees of Thomas Cook
can apply for a special U21 Scholarship for an Online MBA course with
Singapore University.
We realize that the only sustainable competitive advantage in today's
dynamic, challenging and rapidly changing context is human resources.
Towards that, we are in the process of constantly energizing and
revitalizing our people by equipping them with cutting edge skills,
developing a holistic perspective and imparting in them, a drive for
excellence, so as to enable them to be the best in class and in turn,
facilitate the movement of Thomas Cook India From Good to Great'.
Employee Strength:
The financial year end employee strength was 2305 including those employed
at Sri Lanka, Mauritius, TO and in the Insurance subsidiary.
Employee Relations:
Peaceful and cordial relations continue with the employees. The Management
wishes to place on record its acknowledgement and appreciation for the
support extended by all the employees of the Company.
Your Company is undergoing a transformation in its business models while at
the same time experiencing rapid growth in all aspects. This provides both
opportunities for Thomas Cook to gain the major market share and grow
rapidly, as well as a challenge to maintain profitability and make itself
more cost efficient.
CAUTIONARY STATEMENT
Statements forming part of the Management Discussion and Analysis covered
in this report may be forward-looking within the meaning of applicable
securities laws and regulations. Actual results may differ materially from
those expressed in the statement. Important factors that could influence
the Company's operations include demand and supply conditions, changes in
government regulations, exchange rates, tax laws, monsoon, natural hazards,
economic developments within the country and other factors.
FOR AND ON BEHALF OF THE BOARD
MADHAVAN MENON VINAYAK K. PURCHIT
Managing Director Executive Director- Finance
Mumbai,
Dated : 17th March, 2010
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