Global News - Sep 3 2010

US manufacturing sector grows unexpectedly

Manufacturing sector growth in the United States accelerated in August. The US PMI grew faster than expected, offering a positive note amid worries about the state of the economic recovery. Economists had expected US manufacturing to slow further in August, but the closely watched figures from the Institute of Supply Management (ISM) pointed to an acceleration of output growth even as separate regional surveys painted a more downbeat picture. The US purchasing managers’ index rose to 56.3 from 55.5 in July. A reading above 50 indicates growth and a figure below it points to contraction. The US sector expanded for its 13th straight month in August, according to the ISM. Stock indexes surged across the globe after an unexpectedly strong US manufacturing survey further eased tensions about the global economic recovery. Across the world, the global manufacturing PMI indicated manufacturing activity continued to rise for the 15th month in a row although the data indicated that the most rapid phase of the recovery was over. The big question is whether the economic momentum can be sustained going ahead.

Weekly Global News - Dec 27 2008

US GDP contracts 0.5%

The gross domestic product (GDP) fell by the annual rate of 0.5% in the summer, according to the final revision from the Bureau of Economic Analysis. The report compares the three month period that ended Sept. 30 to the preceding quarter. The measure was unchanged from the government's prior revision for the third quarter, and it matched economists' expectations. The 0.5% decline marks the biggest drop since the first quarter of 2001. A 3.8% slump in personal consumption during the third quarter helped drag down the overall GDP, according to government figures. GDP rose by an annual rate of 2.8% in the second quarter, according to Commerce Department. Growth at that time was spurred by economic stimulus payouts and strong exports. For the current quarter, economists are predicting a sharp decline of around 6%. This would be the biggest drop since the early 1980s.

UK third-quarter GDP revised down

The UK economy shrank the most since 1990 in the third quarter and mortgage lending dropped to the lowest in 14 years as tightening credit exacerbated the slide into recession. Gross domestic product (GDP) contracted 0.6% from the second quarter, the Office for National Statistics said. The drop was bigger than the previous estimate of 0.5%, which economists had expected would be confirmed. From a year ago, the economy grew 0.3%, the same pace as estimated a month ago. Last year’s growth of 3% for the whole of 2007 was the strongest since 2000. The Centre for Economics and Business Research (CEBR) predicted that the economy will shrink by 2.9% in 2009 - more than at any time since the 1940s. It expects consumer spending to decline and investment in business to slump.

Japan's industrial output shrinks sharply

Industrial production in Japan shrank in November at a record pace, as companies slashed output and cut jobs to ward off the threat from the worst financial crisis in several decades. Separately, core consumer prices fell faster than forecast, putting the Japanese economy on course for another spell of deflation. The grim data could push the Bank of Japan (BOJ) to implement unconventional monetary easing measures as it has little room left to cut interest rates after reducing them to 0.1% to 0.3% last week. Factory output plunged 8.1% in November from October, the Trade Ministry said. This was the largest fall on record and exceeded a median forecast for a 6.8% drop. Industrial output is expected to fall a further 8% in December and 2.1% in January, data from the Ministry of Economy, Trade and Industry showed.

Annual core consumer inflation slowed sharply to 1% in November from 1.9% in October, largely due to the drop in oil prices, and a little bit below a median market forecast of 1.1%. Excluding food and energy, prices were flat, after having finally started to rise in June this year. Other data showed that the jobs-to-applicants ratio for November fell to 0.76, matching a low hit in February 2004, from 0.80 in October. The reading, which fell short of a median market forecast of 0.77, means 76 jobs were available per 100 applicants. The number of new job offers fell 23.7% in November from a year earlier after an 18.1% drop in October. Japanese wage earners' total cash earnings fell 1.9% in November from a year earlier, the first drop in nearly a year.



Ireland injects €5.5bn in three top banks

The Irish government will invest €5.5bn (£5.12bn) in the country's three main lenders, taking majority control of Anglo Irish Bank after a loan scandal there rocked an already beleaguered industry. Dublin will invest €2bn each in market leaders Bank of Ireland and Allied Irish Banks via preference shares giving 25% voting rights over what the government described as key issues. Pressure on the Irish government intensified after Anglo Irish revealed its chairman had kept shareholders in the dark about €87mn (£80mn) worth of loans he had received from the lender. Its shares slumped to a record low of 19 euro cents and the financial regulator launched a probe into directors' loans at all major Irish banks.

Canada offers loans to carmakers

The federal and Ontario governments pledged US$4bn in emergency loans to support the Canadian subsidiaries of US automakers Chrysler and General Motors (GM). The aid package, announced by Prime Minister Stephen Harper and Premier Dalton McGuinty in Toronto, came a day after the White House unveiled a US$17.4bn plan to shore up the US auto sector. Harper said Canadian auto parts suppliers will also get improved insurance while vehicle buyers will get more access to credit. The financial help for Canada's troubled auto sector amounts to 20% of the US aid package.

Big Three's debt ratings cut

General Motors (GM) and Ford had their debt cut further below investment status by Standard & Poor’s (S&P) and Moody’s. GM’s unsecured debt was trimmed one level to C, or 11 grades below investment quality, by S&P. Moody’s lowered its rating on US$26bn in Ford debt by two grades to Caa3, or nine below investment quality. The moves reflect unease over effects on debt holders of the $13.4bn emergency US aid plan for GM and Chrysler, which comes with conditions including labor-cost cuts. S&P said unsecured lenders can expect negligible recovery should GM default, and Moody’s said Ford will need to restructure debt to win union concessions similar to those at GM and Chrysler. The risk of bankruptcy remains high for US automakers, S&P said. The global credit rating agency also cut its corporate credit rating on Chrysler. S&P cut the rating by three notches to "CC," a speculative grade that is just two notches above "D", or default.


The People's Bank of China cut its benchmark lending rates and deposit rates by 27 basis points (bps). The Chinese central bank also cut banks' reserve ratios by 50 bps effective Dec. 25 and reduced refinancing interest rates as well. It said that the moves were part of a moderately loose monetary policy to bolster economic growth amid fears of a prolonged global recession. The cost of one-year bank loans will fall to 5.31% from 5.58%, while the benchmark one-year deposit rate falls to 2.25% from 2.52%, the People's Bank of China (PBOC) said. This was the fifth rate cut move by the Chinese central bank since mid-September. The five biggest banks in China will have to hold 15.5% of their deposits in reserve at the PBOC, down from 16%. The requirement for other lenders drops to 13.5% from 14%. The PBOC last cut required reserves on Nov. 26.

World News - July 28 2008

UK economy...the slowdown continues

The British economy continued to slow in the second quarter of the year, recording a rate of growth that has not been seen in seven years. Weaker construction and production brought down the UK's Gross Domestic Product (GDP) growth down to 0.2% from 0.3% in the first quarter of 2008. The annual rate of GDP growth in the April-June quarter fell to 1.6% from 2.3% in the same period last year. The last time the UK economy grew at a lower rate on a 12-month basis was in 1993. Output from the construction industry fell 0.7% over the last three months compared to a rise of 0.4% in the first quarter of 2008, with large falls recorded in housing construction. However, high levels of growth were recorded in the transport and communication sectors - up 2.2% on the previous quarter. The slowdown was expected by economists, who think that growth rates will fall further in the rest of the year.

Japan cuts growth forecast; inflation jumps

Japan revised down its economic growth forecast for the current fiscal year to 1.3% from the previous outlook of 2%, saying that high oil prices, a stronger yen and sagging US demand would continue to hurt the world's second-biggest economy. The Cabinet Office - which also serves as a government advisory body - also said slowing growth would make it harder for Japan to achieve its self-imposed target of a balanced its core budget by 2011-12. "Very tough economic conditions have been continuing since the start of the year," Economy Minister Hiroko Ota was quoted as saying by The Wall Street Journal. Separately, Japan's consumer prices rose at the fastest pace in a decade as food and gasoline costs climbed, squeezing household budgets and slowing economic growth. Core prices, which exclude fruit, fish and vegetables, increased 1.9% from a year earlier after gaining 1.5% in May, the statistics bureau said in Tokyo.

German Ifo, euro-zone PMI drop sharply

German business confidence fell the most since the Sept. 11 terrorist attacks in 2001, signaling growth is faltering in Europe's biggest economy. The Ifo Institute's German business climate index reportedly fell to 97.5 in July, down from 101.3 in June and well below market expectations for a decline to 100.2. That's the weakest reading since September 2005. Separately, a key measure of euro-zone economic activity fell further in July, suggesting that the currency bloc is set for weak Q3 growth. The preliminary composite purchasing managers index (PMI) for the euro zone fell to 47.8 from 49.3 in June, below expectations for a decline to 48.7. A reading of less than 50 signals a decline in activity, while a reading of more than 50 signals expansion.

US approves housing aid, Fannie-Freddie plan

The US House of Representatives approved far-reaching government assistance for the nation’s housing market, including broad authority for the Treasury Department to protect Fannie Mae and Freddie Mac, the nation’s two largest mortgage finance companies from collapse. The measure also included an aggressive plan to help hundreds of thousands of troubled borrowers avoid foreclosure by refinancing their mortgages with more affordable government-insured loans. President Bush would sign the measure despite his opposition to the inclusion of nearly US$4bn in grants for local governments to buy and refurbish foreclosed properties. Bush’s support assures that the bill will become law after final passage by the Senate. The House approved the bill 272 to 152. The legislation leaves numerous questions unanswered. The biggest one is whether the move will be adequate to slow the meltdown in housing sector and help the economy recover from a prolong slump.

Ford posts US$8.7bn quarterly net loss

Ford Motor reported a second-quarter loss of US$8.7bn, or US$3.88 a share - the company’s worst quarterly results ever. The performance is a consequence of slumping sales, especially of trucks, in a sour US economy with US$4-a-gallon gasoline, as well as rising material costs. Last year during the same period, Ford reported a net profit of US$750mn, or 31 cents a share. Revenues during the April-June period declined to US$38.6bn, down from US$44.2bn a year ago. The second-quarter loss included US$8bn, or US$3.26 a share, in special charges, mostly in North America, which has been hit hard by an economic slowdown, a consequence of crises in the housing, credit and energy sectors. Ford said it will double production of hybrid vehicles, sell more European autos such as the Fiesta in the U.S. and convert three North American truck factories to make a redesigned Focus and other small cars.

Toyota takes global sales lead

Toyota sold more than 4.8mn vehicles worldwide in the first half, up 2% from the same period a year earlier, the Japanese automaker said. That exceeded General Motors' (GM) sales of 4.5mn vehicles in the same period, raising speculation that Toyota could potentially upstage GM's 77-year reign as the world's top automaker by sales. Toyota spokesman Hideaki Homma said the company sold 4,817,941 vehicles globally during the first six months of the year. GM said it sold 4,540,409 vehicles, a decline of 3% from the first half of 2007. The Detroit automaker blamed the decline on economic pressures and labor disruptions in the US. But GM said it posted record-breaking sales in other regions, including Latin America, Asia and Europe. Toyota has also been hit by softening demand in the US, western Europe and Japan. The company said last week it was reviewing its global sales target for 2008. It is expected to lower its projection from 9.85m units to about 9.5mn.

UBS hit with multibillion-dollar suit

New York State Attorney General Andrew Cuomo brought a multi-billion dollar civil lawsuit against the Swiss banking giant UBS for allegedly pushing everyday investors into buying troubled auction-rate securities. The lawsuit charges UBS with falsely marketing and selling auction-rate securities as safe, cash-equivalent investments at a time when the market for these securities was under severe strain. The state's investigation also revealed that top UBS executives sold off about US$21mn of their personal holdings of auction-rate securities, after they learned of troubles in this segment of the market. UBS said it would vigorously defend itself against civil fraud charges. "It is frustrating that the New York Attorney General has filed this complaint while we have been fully engaged in good faith negotiations with his office to bring liquidity to our clients holding auction rate securities," the Swiss bank said.

Yahoo and Icahn strike a deal

After several weeks of acrimony and intense war of words, Internet giant Yahoo! agreed to give billionaire investor Carl Icahn a seat on its Board to settle the long-running dispute. The company said its board is being expanded to 11 members, one of whom will be Icahn. Eight members of the Yahoo board will be eligible for re-election at the annual meeting, on August 1. The line-up includes CEO and co-founder Jerry Yang and chairman Roy Bostock. Current director and Activision Robert Kotick will step down. After the annual meeting, the Yahoo board will be expanded by one seat to 11 members. One seat will be given to Icahn and the two remaining seats would chosen from a list of nine candidates recommended by Icahn. Simultaneously, Icahn, who already owns about 5% of Yahoo shares, dropped his plan to put in place a rival slate of directors before the company's AGM.

World News

ECB hikes key interest rate by 25 bps

As expected, the European Central Bank (ECB) hiked its key interest rate by 25 basis points to reign in inflation, even though economic growth has slowed in line with the global trend. The ECB boosted its key lending rate to 4.25%. This was the first increase by ECB in 13 months. President Jean-Claude Trichet hinted that he was done boosting borrowing costs for now. He played down the prospects of a series of interest-rate increases, saying that the quarter-point hike will help bring inflation back below 2%. The euro headed for a weekly decline against the dollar on speculation a worsening European economic outlook will rule out future rate increases. The 15-nation currency traded near a one-week low against the dollar after Trichet said he has no bias and that economic growth is not flattering.

IEA cuts oil demand forecast on record prices

The International Energy Agency (IEA) cut its five-year forecast for global oil demand, saying that record high prices and slower economic growth will reduce demand. The Paris-based agency cut more than 3mn barrels per day from its 2012 global demand forecast. A drop in OPEC spare capacity to 1mn barrels per day by 2013 will keep the market tight, the IEA said in its Medium-Term Oil Market report. The agency, which advises 27 of the world's most industrialised nations, cut oil demand estimates for each year between 2009 and 2012 by about 3%. The IEA forecast that global oil demand will rise to 86.87mn barrels a day in 2008, down 1.4mn from the 88.27mn barrels it projected in last year's report. Global oil demand will expand by 1.5mn barrels a day, or 1.6% a year on average in the five years between 2009 and 2013, the agency said, compared with a forecast of 2.2% a year to 2012 in its previous report, issued last July.

Moody's upgrades Japan's debt rating

Japan's debt rating was increased one level to 'Aa3' by Moody's, citing government's continuous effort to restrain spending to reduce debt. This is now the fourth-highest investment grade. "The increase from A1 was prompted by expectations of continued fiscal restraint and consolidation, coupled with an easing-out of the debilitating effects of deflation," Thomas Byrne, senior vice president of Moody's said. The upgrade came eight months after Moody's raised the rating to 'A1' and puts Japan on a par with Taiwan and Cyprus. Japan still ranks the lowest among the G7 nations. Within the G7 only Italy, with 'Aa2', and Japan have ratings below the top 'Aaa' grade. Economists say Japan has not done enough to pare the debt, which the OECD estimates stands at 182% of GDP.

Global News - June 13 2008

Lehman Bros unveils recast of top deck

Troubled US investment bank cum securities firm, Lehman Brothers ousted CFO Erin Callan and COO Joseph Gregory, becoming the latest casualties of the credit crunch that has engulfed the Wall Street since late last year. Lehman said Bart McDade, head of the global equities business, would replace Gregory. Co-chief accounting officer Ian Lowitt will replace Callan. The latter, who had served as the firm's CFO since December, will be rejoining the investment-banking division in a senior capacity. The announcement came three days after Lehman Brothers raised US$6bn to help shore up its fragile capital position and reported the first quarterly loss since the company went public in 1994. On June 9, Lehman Brothers said it sold US$130bn in assets in recent months, reducing leverage, but analysts and others still question about the brokerage firm's illiquid holdings and how it has valued some of those exposures. The company also reported a preliminary net loss of US$2.8bn for the second quarter ended May 31, surprising analysts and investors, and announced plans to raise US$6bn by selling new shares and preferred securities.

Yahoo says deal talks with Microsoft fail

Yahoo shares slid on June 12 after the Internet giant said its negotiations with software major Microsoft on a merger fell through. The acknowledgement from Yahoo puts an end to a five-month ordeal over a proposed merger that would have been the largest deal ever for the technology sector. Microsoft later confirmed that the companies were not able to reach an agreement, though it reiterated that it remains open to a deal. According to analysts, the collapse of the talks meant that Microsoft is not willing to buy Yahoo for the US$33 a share it offered before talks broke up more than a month ago. The news deals a setback to billionaire investor Carl Icahn’s effort to force the two sides into a merger. Separately, Yahoo and Google struck an online advertising partnership. The Internet firm announced that it would begin using Google’s search advertising technology to help grow its profits.

InBev offers US$46bn for Anheuser-Busch

Belgium's InBev NV announced an unsolicited offer for US-based Anheuser-Busch Cos., to create the world's biggest brewer with half of the US market. InBev, whose prominent labels include Stella Artois, Becks & Bass, offered to pay US$65 per share in cash for the maker of Budweiser, an offer that values the company at US$46.3bn. The bid was 11% higher than Anheuser-Busch's share price at the end of New York Stock Exchange composite trading, on June 11. InBev plans to finance the transaction with at least US $40bn in debt arranged by banks including Banco Santander SA. InBev said that it sees significant opportunities to globalise Anheuser-Busch's key brands and would position Budweiser as the combined company's flagship brand, leveraging InBev's expansive international footprint. It also vowed to keep key members of the management team and all of its US breweries while offering to rename the company to evoke the heritage of Anheuser-Busch brands. In light of the limited overlap between the InBev and Anheuser-Busch businesses, the Belgian company said it believes the proposed combination should not face significant regulatory issues and that it expects the proposed transaction to be completed promptly.

Babcock & Brown shares slump on debt worries

Shares of Australian securities firm Babcock & Brown tumbled in Sydney after the company's market value fell below levels that could prompt banks to call for a review of its debt obligations. Babcock shares plunged as low as A$4.70 (down 32%) on the Australian stock exchange, dipping below its October 2004 IPO price of A$5 for the first time. It fell 28% on Thursday. The stock had reached a record high of A$34.78 on June 19, 2007. The huge sell-off this week shaved off nearly A$1bn from Babcock's market capitalisation, cutting it to A$2.3bn, well below the A$2.5bn trigger point that lets its banks call for a review of its A$2.8bn. However, Babcock said it's market value would have to remain below A$2.5bn for at least four months before banks can demand early repayment of debt. UBS, Citigroup, Merrill Lynch and Credit Suisse all cut their ratings on Babcock. Separately, Babcock, which said that the rout was caused by short-selling and that business was running as usual, signed a US$7bn deal to buy Angel Trains in the UK from the Royal Bank of Scotland (RBS).

Steve Jobs unveils 3G iPhone; cuts price

Apple unveiled a new 3G version of its iPhone, as it tries to take market share from smart phones made by Nokia and BlackBerry maker Research in Motion. The new handset is expected to come on the market next month at drastically reduced prices. The new iPhone will be sold at half the price of the current model. The new 8-gigabyte iPhone will cost US$199 and a 16-gigabyte version will cost US$299. Some analysts said the price reduction on the new iPhone lineup will make it a mass market product as opposed to the earlier niche positioning. The news was greeted with a mixed reaction by Wall Street investors, who drove Apple's shares down as much as 5% after the announcement. However, the stock managed to regain some lost ground by the closing bell. The new iPhone will be available worldwide starting July 11.

UK's FSA to restrict short selling

In a major clamp down on short selling, British regulator Financial Services Authority (FSA) said it would introduce a new disclosure norms next week for significant short positions in companies undertaking rights issues. The new restrictions, which will come into force from June 20, come hot on the heels of sharp falls in share prices of companies like Royal Bank of Scotland (RBS) and HBOS to raise capital by selling new shares to existing investors. "In current market conditions, there is increased potential for market abuse through short selling during rights issues," the FSA said. "As a result, there has been severe volatility in the shares of companies conducting rights issues." "This is potentially damaging not only to the issuers in question but also to confidence in the overall fairness and quality of the UK market. It can be particularly prejudicial to the interests of small investors," it added. The FSA said the practice of taking a short position in a company while it is undertaking a rights issue to shareholders was potentially an abuse of the market. From next week, short-sellers will have to disclose their positions to the wider market.

UBS completes rights issue

UBS said it has successfully completed its SFr15.97bn (US$15.4bn) rights offering, marking the Swiss bank's third attempt in the past few months to shore up its precarious finances. UBS issued 760,295,181 new shares at SFr21 per share. Subscription rights for 755,466,901 new shares were exercised, representing 99.4% of the rights offer. The remaining 4,828,280 new shares will be sold by UBS Investment Bank in open market. Investors were offered 7 new shares for every 20 held. UBS shares were up 1.7% at SFr24.74. Since the start of the rights offer, UBS shares have tumbled by about 13%. It has lost 63% of its market value in the past 12 months. The bank is scheduled to publish its second-quarter results on August 12. The rights offer is fully underwritten by a group of banks, led by JPMorgan Chase, Morgan Stanley, BNP Paribas and Goldman Sachs.

Dollar spurts on rate hike talk

The US dollar and bond yields jumped after Federal Reserve Chairman Ben Bernanke fueled expectations of interest rates increases by warning that inflation risks were rising in the world's biggest economy. In a speech delivered in Massachusetts on June 9, Bernanke said the Fed will strongly resist a rise in inflation expectations, which have come under pressure from soaring energy prices. "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so," Bernanke said in a speech at a Boston Fed conference. "The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations." European and Asian stocks dropped and Asian bonds slumped on concern that the Fed will raise borrowing costs. Futures markets now expect American and euro-area interest rates to rise before the end of the year.

The dollar headed for its biggest weekly gain in more than three years against the euro on speculation officials from the Group of Eight nations meeting on the weekend will signal they favor a stronger US currency. The euro also fell on concern voters in Ireland will reject the EU's new governing treaty designed to boost the strength of the 27-nation bloc. The dollar was poised for the largest weekly advance versus the yen since 2004 before a government report that may show US inflation accelerated, giving the Fed more reason to raise rates. The dollar rose to US$1.5319 per euro at 7:04 a.m. in New York on Friday from US$1.5439 on Thursday. The dollar rose 3% this week, the most since the week ended Jan. 7, 2005. The currency traded at 108.33 yen, from 107.96 on Thursday. It is up 3.1% this week, the biggest advance since Feb. 2004.

IEA cuts global oil demand forecast

As expected, the International Energy Agency (IEA) cut its oil demand growth forecast for the year. But, in a surprise move, the energy watchdog announced a deep reduction in its non-OPEC supply growth forecast, leaving the world economy more dependent on OPEC. In its monthly oil market report, the IEA cut its demand growth forecast further by 80,000 barrels per day (bpd) to an annual increase of 800,000 bpd because of record high prices, US slowdown and the partial removal of fuel subsidies in some Asian countries. "This is a case of supply and demand pulling in opposite directions to push prices higher," the IEA said. "Global market fundamentals showed continued tightness, with constrained supplies and robust non-OECD demand growth." The agency said every day there were fresh signs of demand destruction, particularly in sectors such as airlines. But, it warned that so far there were very few signs of slowing demand in non-OECD countries.

Meanwhile, crude oil fell as the dollar headed for its biggest weekly gain in almost three years, reducing the appeal of commodities, and partly on a report that Saudi Arabia plans a sizeable increase in crude production. Oil is down 2.3% this week as the dollar has risen against the euro, making dollar-denominated commodities more expensive for buyers in other currencies. Saudi Arabia is likely to announce higher oil production at a June 22 meeting with consumers, the Middle East Economic Survey reported. Crude oil for July delivery fell as much as US$1.94, or 1.4%, to US$134.80 a barrel on the New York Mercantile Exchange. It traded at US$135 at 12:02 p.m. London time. Futures reached a record US$139.12 a barrel on June 6.

TOP STORIES FOR THE WEEK

Inflation falls below 6%

Finally, there is some good news on inflation which should cheer up the Government and the Reserve Bank of India (RBI) ahead of the annual monetary and credit policy announcement on April 24. India's inflation, based on the Wholesale Price Index (WPI), tumbled to 5.74% in the week ended March 31 as against 6.39% in the previous week, the Commerce & Industry Ministry said on Friday. The final headline inflation reading for FY07, which is subject to a revision, is slightly above the RBI's annual target range of 5-5.5%. What's also heartening is that inflation was much below the average expectations of around 5.8%. The annual inflation rate was 3.98% during the corresponding week of the previous year. In the past few months, the Government has unleashed a slew of monetary tightening steps and slashed import duties on a number of essential products to reign in spiraling prices. The latest data should take some pressure of the policy makers though there are doubts whether the inflation will remain under 6% for long given the renewed upsurge in global commodity prices.

Infosys disappoints slightly

Infosys Technologies Ltd. has posted a consolidated net profit of Rs11.44bn for the fiscal fourth quarter ended March 31, 2007 as against Rs9.83bn in the quarter ended December 31, 2006. This translates into a sequential growth of 16.37%. Consolidated revenues for the fourth quarter are Rs37.72bn compared to Rs36.55bn in the previous quarter, reflecting a quarter on quarter growth of 3.2%. This was lower than the company's guidance of Rs37.9bn. Earnings Per Share (EPS) for the January-March quarter is at Rs20.30 versus Rs17.64 in the third quarter of the financial year 2006-07. Operating Profit Margin (OPM) slid by 100 points due to the impact of the rupee's appreciation versus the dollar and higher SG&A expenses.

For the year ended March 31, 2007, the IT major has reported a consolidated net profit of Rs38.56bn as against Rs24.58bn in the year ended March 31, 2006. Full-year consolidated revenues are at Rs138.93bn versus Rs95.21bn in the previous fiscal year. For the year 2006-07, EPS before exceptional item increased to Rs 69.11 from Rs 45.03 in the previous year; YoY growth was 53.5%. The net profit for the year ended March 31, 2007 included a reversal of tax provisions amounting to Rs1.24bn and Rs1.25bn, respectively. Excluding this reversal, the EPS for the quarter and year ended March 31, 2007 would have been Rs 18.10 and Rs 66.86.

The Board of Infosys has recommended a final dividend of Rs6.5 per share (130%) for FY07, totaling Rs3.71bn. Including the interim dividend of Rs 5 per share (100%) amounting to Rs2.78bn, the total dividend recommended for the year is Rs 11.50 per share (230%), amounting to Rs6.49bn. "Our revenues grew by around US$ 1bn this year," said Nandan M. Nilekani, CEO and Managing Director. "The global IT services industry continues to show strong growth with exciting opportunities, and Infosys is well positioned to take advantage of this."

MARKET MOOD

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Bulls rise from ashes

Lights go out and I can't be saved
Tides that I tried to swim against
You've put me down upon my knees
Oh I beg, I beg and plead
Come out of things unsaid, shoot an apple of my head
Trouble that can't be named, tigers (bears) waiting to be tamed

In our last weekly newsletter we asked our readers to watch out for Friday the 13th. But, luckily the day has turned out to be fairly good one for the bulls despite Infosys reporting slightly disappointing Q4 results. The key indices continued their upward journey. Slowly, but slowly markets have risen from the dumps hit in February. Impressive industrial production data and lower inflation figures also aided the recovery.

Index heavyweights led from the front after being at the receiving end for the last 7-8 weeks. Also, mid-cap stocks participated in this week’s rally. Among the new listing ICRA hogged the limelight, as the stock gained Rs500 over the issue price of Rs330.

Capital Goods, Auto, IT, Metals and Banking stocks were the major gainers over the week. Cement stocks were again under a cloud after the first shipment arrived from Pakistan at a much lower prices.

Finally, the BSE Sensex advanced 4.1% or 528 points to close at 13384 and the NSE Nifty gained by over 4.4% or 165 points to close at 3917.

Metal stocks put in a stellar performance amid talk of a fresh price hike and expectations of better results. Tata Steel was in the limelight after the company announced a meet on April 17 to consider fund raising plans for the proposed US$12bn acquisition of UK-based Corus Group Plc. The BSE Metal index rose nearly by 8% during the week. Tata Steel rallied by over 10% to Rs511, JSW Steel jumped by over 11% to Rs553, SAIL surged over 9.5% to Rs125 and Essar Steel added 5% to Rs128.

Capital Goods stocks did well on the back of strong industrial output numbers. Siemens, ABB and BHEL were the star performers on the week. Siemens rose by over 7.5% to Rs1142, BHEL gained over 5% to Rs2479 and ABB advanced by over 4% to Rs3748.

IT shares outperformed the key indices, rising by over 5% after Infosys’ Q4 earnings and FY08 guidance met market expectations though it missed the topline guidance for Q4. Infosys advanced by over 4.5% to Rs2087, Satyam rose over 5.5% to Rs481, TCS climbed over 5% to Rs1262 and Wipro added 3% to Rs567.

Telecom stocks too joined the party on the back of strong monthly subscription numbers. Bharti Airtel added 1.7mn mobile users in March.

The scrip gained 4.7% to Rs781. MTNL was the top gainer. The scrip rose by over 7% to Rs158. Reliance Communication surged by over 6% to Rs421, VSNL advanced 4.8% to Rs421 and TTML added 3.8% to Rs21.

Value buying was seen in auto stocks after the recent hammering. The BSE Auto index gained 4.6% during the week. Tata Motors was up by over 5.5% to Rs26, M&M advanced 4.4% to Rs745, Maruti was up by 2% to Rs771 and Ashok Leyland added 5.7% to Rs37.

INVESTMENT STRATEGY

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Results, inflation to drive sentiment

With the Infosys results out of the way and inflation softening, the market is poised for more gains. But bear in mind that the steep fall in inflation was largely due to a high base effect rather than the Government’s efforts. So, the pressure will continue on this front. The Government and the central bank will continue to be on guard and take steps accordingly. After Infosys its now going to be the turn of other IT giants like TCS and Wipro to deliver the goods next week. There will also be results from other non-IT firms. One should also give due consideration to the global issues like the US economic slowdown, oil prices, other commodity prices, etc. We will see spikes both ways as the market will remain choppy with a positive bias. FT, Indiabulls, TCS, HCL Tech, HDFC Bank, UTI Bank, Praj Industries, Aban Offshore, ACC, Biocon, MRF, Gujarat Ambuja, India Cements, Satyam, Wipro, Renuka Sugar and IDBI are among the major companies announcing their quarterly numbers next week.

DOMESTIC NEWS

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Industrial production strong

The slew of monetary and fiscal tightening measures seem to have had little impact on the industrial activity in the country. This is something that the Government and the RBI would surely take note of. India's industrial production grew by 11% in February as against 8.8% in the same month last year, the Commerce & Industry Ministry said. This was slightly lower than January's upwardly revised growth rate of 11.4% (10.9%). Manufacturing output was up at 12.3% in February compared to 9.2% in the year-ago period, and a revised 12.1% annual growth rate in January. Mining output expanded by 6.3% in February versus 3.8% in the same month of last year. However, electricity was a drag, growing at just 3.3% as against 9.1% in February 2006. On a cumulative basis (April-February 2006-07), the Index of Industrial Production (IIP) expanded by 11.1% versus 8.1% in the year-ago period. As many as 15 out of the 17 industry groups showed a positive growth during the month compared to the corresponding month of the previous year. During the month, growth in Basic Goods, Capital Goods and Intermediate Goods was 10.4%, 18.2% and 13.7%, respectively. Consumer Durables and Consumer Non-durables recorded a growth of 1.6% and 9.7% respectively, with the overall growth in Consumer Goods being 7.6%.

Cabinet allows import of 1.5mn tons pulses

The Government continues its fire fighting efforts against rising prices. In a bid to boost local supplies and arrest spiraling prices, the Cabinet Committee on Economic Affairs (CCEA) decided to import of 1.5mn tons of pulses. NAFED, STC, MMTC and PEC will import 0.75mn tons of urad, tur, moong, masur and gram, and 0.75mn tons of yellow peas and other pulses. The announcement was made by Information & Broadcasting Minister Priya Ranjan Dasmunsi after the CCEA meeting in New Delhi. "This will hopefully stabilise prices of pulses," Dasmunsi said. The entire quantity is likely to be imported over 6-8 months, the I&B Minister said. The Government will subsidise losses incurred on import of pulses by the four public sector agencies up to a limit of 15%, Dasmunsi said. The Centre would consider further imports, if needed, he said. Meanwhile, Dasmunsi clarified that the CCEA did not take any decision on cutting edible oil import duty. Earlier, Rural Development Minister Raghuvansh Prasad had said that the Government had decided to cut the import duty on edible oils.

Car sales hit low gear

India's domestic passenger car sales grew by just 2.9% in March but for the year 2006-07 the automobile industry has set a new annual record, the Society of Indian Automobile Manufacturers (SIAM) said. Domestic passenger car sales stood at 114,195 units last month as against 110,978 units in the same month a year ago, data released today by the body of automakers showed. For the year ended March 31, 2007, car sales were up 22% at 1.076mn units, a new record. Maruti saw its March car sales rise by 7% at 55,623 units as against 51,951 units in the same month last year. Tata Motors posted a growth of 11.3% at 19,651 units compared to 17,655 units in the year-ago period. Industry analysts said the hardening of interest rates in the past few months could have hurt sales in March. Moreover, in March last year sales had surged on the back of a reduction in excise duty on compact cars. Meanwhile, motorcycle sales in March declined by 3.5%, as Bajaj Auto and TVS Motor sales declined, even as market leader Hero Honda managed to clock a growth of 6% from the same month last year, the SIAM data revealed.

GSM subscriber numbers impress again

The country's GSM-based mobile telephone operators added a record 6.1mn new subscribers in March, taking their total user base to 121.4mn, data released by the Cellular Operators' Association of India (COAI) shows. At the end of February, total GSM customers stood at 115.3mn. The March increase was the highest-ever monthly rise and was higher than the 4.9mn new user additions in February, the body representing the GSM service providers said in a statement released late on Wednesday. Bharti Airtel added 1.7mn customers in March, taking its total to 37.14mn. BSNL added 1.98mn new users, taking its user base to 27.43mn. Hutchison Essar added 1.1mn new customers, taking its total to 26.44mn. Idea Cellular added only 370,551 subscribers in March as against 568,051 mobile phone users added in February, boosting its user base to 14.01mn. MTNL added 167,992 mobile phone users to take its subscriber base at the end of March to 2.75mn.

TRAI urges infra sharing to reduce rollout cost

With the telecom sector set to grow exponentially, the Telecom Regulatory Authority of India (TRAI) asked wireless telecom operators to share passive, active and back haul infrastructure to cut the cost of expansion. License conditions should be amended to allow mobile phone service providers to use each other's equipment, including relay towers and antennas, the telecom regulator said in its proposals to the DoT. No sharing of spectrum at access network side is permitted, it said. The exponential growth in wireless telecom services calls for massive investment in infrastructure, TRAI said. The country would require about 3.3 lakh towers by 2010 against the present 1 lakh towers, TRAI said. Apart from huge investments needed, the time taken to roll out wireless services could be a major bottleneck in the achievement of 500mn subscribers by 2010, TRAI said. Even if the target is achieved it will only be about 50% of the tele-density with major gaps in the rural areas, it said.

Pak cement shipment hits Indian shore

Ten days after the Government scrapped the Countervailing Duty (CVD) and Special Additional Duty (SAD) on portland cement, the country received its first batch of imported cement from neighbouring Pakistan. Agency reports said a 200-ton consignment of cement has landed in Mumbai from Pakistan last weekend. The landed cost of the imported cement is US$70 per ton or Rs155 per 50 kg considering an exchange rate of Rs44 for one dollar. The bad news is that prices in Pakistan have climbed to US$75 per ton (Rs165 per 50 kg bag) after the dispatch of the first shipment and could go up further in anticipation of rising demand from India. But, what is debatable is what is the actual quantity of excess capacity in Pakistan, and how much can be exported to India. Also, what will happen if prices of cement keep rising in Pakistan.

Jet-Air Sahara deal takes off again

After 10 months of public spat over a failed deal last year, Jet Airways India Ltd. agreed to acquire Sahara Airlines for Rs19.5bn. Jet has already paid Rs5bn as part of the previous deal. It will pay Rs4bn before April 20 while the balance Rs5.5bn is payable in four interest free annual equal installments commencing on or before March 30, 2008. At the current interest rate, the Net Present Value (NPV) of the lumpsum price is in the vicinity of Rs12bn. But, despite the 40% discount that Naresh Goyal managed to get on a new deal, industry analysts still view this as an expensive transaction. Plus, Sahara Airlines doesn't really bring in any substantial benefits for Jet in terms of assets, as all its aircraft are leased. The only real gains for Jet are the landing slots and parking bays allotted to Sahara Airlines at key airports across the country. The industry is likely to benefit as Sahara Airlines had of late turned desperate and was giving huge discounts on tickets. It had also converted its planes into a single economy class configuration. The industry will also gain from consolidation as lesser players will mean less competition, better efficiency and reduced losses, though ticket fares may not fall much.

ICRA skyrockets on debut

Shares of ICRA Ltd., a local credit rating agency partly owned by Moody's Investors Service, surged on the first day of trading on Friday. The stock more than doubled in a broad market rally. ICRA opened at Rs525 on the Bombay Stock Exchange (BSE) as against the issue price of Rs330, translating into a premium of 59%. It touched a high of Rs880.10 and finished at Rs797.60 with traded volume of 12.43mn shares. The company entered capital market with an Initial Public Offering (IPO) of 2,581,100 shares of Rs 10 each, through a 100% book building process. The issue was subscribed 75 times.
Moody's has a 29% stake in ICRA. The balance stake is held by leading financial institutions and banks like SBI, LIC, IFCI etc. About 26% of ICRA was sold by current shareholders, and significant portion of it was from IFCI. The objects of the offer were to achieve the benefits of listing on the stock exchanges and provide liquidity to existing shareholders and employees. Book running lead managers to the issue are SBI Capital Markets & Kotak Mahindra Capital and registrar is Intime Spectrum Registry.

UTV unveils recast plans

UTV Software Communications Ltd. announced that it was breaking itself up into three separate units - Movie, Broadcasting and New Media. UTV Broadcasting Ltd., a wholly-owned subsidiary, will look after the broadcasting initiatives. It will include GenX Ltd. - the youth subsidiary which houses the Brand Bindass, and its related channels and businesses relating to the youth activity including Web, Gaming, Events, etc. V&S Broadcasting Ltd. will launch and run Variety, Entertainment and Speciality Channels. UTV UK Ltd., a 100% subsidiary, will house all of UTV's New Media initiatives including its animation (UTV Toons), Post Production and SFX (UTV Post) as well as the recent controlling investment in Ignition UK (Console Gaming) and India Games (Mobile and Online Gaming). UTV said it will transfer all film production business to a wholly owned subsidiary and seek a listing on any overseas stock exchange, possibly the AIM of the London Stock Exchange. The Ronnie Screwvala-promoted company will come out with an IPO or issue fresh shares in the overseas subsidiary to one or more private investors, not exceeding 25% of the shareholding.

GLOBAL NEWS

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Global economy still going strong

The global economy looks all set for continued robust growth in 2007 and 2008 despite a downturn in the US, according to a new IMF forecast. Global economic growth is expected to moderate to 4.9% in 2007 and 2008, after hitting 5.4% in 2006, the IMF says in its latest World Economic Outlook. While the US economy has slowed more than was expected earlier, spillovers have been limited, growth around the world looks well sustained, and inflation risks have moderated, the IMF says. The risks to the growth outlook are less threatening than the September 2006 World Economic Outlook, but are still tilted to the downside, the IMF feels. Particular uncertainties include the potential for a sharper slowdown in the US; the risk of a retrenchment from risky assets; the risk that inflation pressures could revive as output gaps continue to close, particularly if oil prices spike and the low probability but high cost risk of a disorderly unwinding of large global imbalances.

BOJ, ECB leave key rates unchanged

As expected, the Bank of Japan (BOJ) left its benchmark interest rate unchanged for the second month running as the world's second-biggest economy is still grappling with years of declining prices or deflation. Weakness in the US, Japan's largest trading partner, could also have influenced the BOJ's move. Central Bank Governor Toshihiko Fukui and his policy colleagues voted unanimously to hold the key overnight lending rate at 0.5%, the lowest among major economies. The decision was widely expected by economists. The BOJ raised its key policy rate to 0.5% from 0.25% in February, saying that the Japanese economy was on track for a steady growth and that prices will rise at a modest pace. Analysts say the BOJ could put off a rate hike till it gathers enough clues about the health of the Japanese economy as well as that of the US economy, the world's largest. That may mean no increase in interest rate at least in the next few months.

No rate cuts yet as inflation still looming: Fed

Ben S. Bernanke and Co. are not quite as prepared to tart cutting rates as they still see inflation as a danger despite clear signs of a slowdown in the world's largest economy. In its last policy meeting, Federal Reserve policy makers maintained that further rate hikes may be necessary in the event of inflation picking up, even as they altered the statement to give themselves more flexibility. "Further policy firming might prove necessary to foster lower inflation," the Fed said in minutes of the Federal Open Market Committee's (FOMC) March 20-21 meeting released this week. "But in light of the increased uncertainty about the outlook for both growth and inflation, the committee also agreed that the statement should no longer cite only the possibility of further firming," the FOMC said. At the end of its meeting, the FOMC kept the benchmark fed funds rate unchanged at 5.25%, the sixth straight meeting with no change in rates.

No headway in WTO talks

The world's six major economies agreed to speed up the beleaguered WTO trade talks and sign a new multilateral trade agreement by the end of the year. Ministers from Brazil, EU, India, US, Australia and Japan, the so-called G6, met in New Delhi to try and arrive at some consensus in the crucial areas of agriculture and industrial goods and services. The Doha round of negotiations to reduce the barriers to trade has missed several deadlines owing to differences among the WTO members, mostly on farm subsidies, but also on market access for industrial goods and services. The WTO negotiations all but faltered last year over the continuing differences, particularly in agriculture. But, the Doha round of trade talks were relaunched at the end of January. The New Delhi meeting is the first time they have sat at the same table to negotiate since last July. The key is how far the US and the EU are prepared to go in cutting farm subsidies and how far developing nations like India and Brazil will allow access to their markets in agriculture and industrial products.

DOMESTIC NEWS & GLOBAL NEWS

Inflation falls to 6.39%

After stubbornly remaining static for three consecutive weeks, India's inflation, based on the Wholesale Price Index (WPI), declined marginally in the week ended March 24. The point-to-point inflation was 6.39% compared with 6.46% in the preceding week. The latest inflation reading is above the average estimate of around 6.25% by economists. The annual inflation rate was 4.06% during the corresponding week of the previous year. The slight dip in inflation may not bring much relief to the Government and the Reserve Bank of India (RBI) till it falls below 6%. Finance Minister P. Chidambaram wants inflation at 4%. The RBI has set a target of 5-5.5% for the year 2006-07. It may be recalled that on March 30, the RBI announced a 25 basis point hike in the repo rate, a key short-term lending rate, besides raising the Cash Reserve Ratio (CRR) by 50 basis points to 6.5% in two stages. The surprising monetary tightening measures by the RBI took most economists by surprise as they had expected the central bank to wait at least till the annual policy meeting, scheduled for April 24, before taking any further steps

February exports up 8% yoy

India's merchandise exports grew by 7.87% in February to US$9.7bn from US$8.99bn in the same month last year, the Government said on Monday. Imports rose 25.11% to US$14.36bn from US$11.48bn in the year-ago period. As a result, the trade deficit in February was US$4.66bn as against US$2.49bn in the corresponding month a year earlier. The trade deficit stood at US$5.78bn in January, US$5.68bn in December 2006 and US$6.2bn in November 2006. During April-February 2006-07 (first 11 months of the fiscal year 2006-07), exports were up 19.26% at US$109.13bn while imports climbed by 27.78% to US$164.98bn. Year-to-date trade gap is up at US$55.86bn from US$37.62bn in the year-ago period.

February core sector growth slows

The production of six infrastructure industries grew by 7.2% in February from a year earlier, the Government said on Thursday. The index for the six key industries increased to 219.9 in February from 205.2 a year earlier. In January, the growth was 8.2% year on year. The six industries - Steel, Cement, Coal, Crude Oil, Refinery and Electricity - account for a quarter of the country's industrial production, which represents a 25% of Asia's fourth-largest economy. On a cumulative basis, the core sector growth in the first 11 months of the current fiscal year stood at 8.3% as against 6.1% in the same period a year earlier, data released today by the Commerce Ministry showed.

Govt ups wheat production forecast

The Government on Wednesday revised its forecast for wheat production this year citing improved cultivation by farmers. Wheat output may reach 73.7mn tons in the year ending June, exceeding 72.5mn tons forecast in February, Agriculture Secretary P.K. Mishra said in New Delhi. India, world's second-biggest wheat producer, produced 69.35mn tons of the grain last year. Wheat was planted in 28.45mn hectares (70.30mn acres), up 7% from a year ago, according to the Agriculture Ministry. India's foodgrain production may rise to 211.78mn tons from 208.6mn tons a year earlier, while output of oilseeds may fall to 23.26mn tons from 27.98mn tons, Mishra said.

Coal India eyes IPO in FY08

Coal India Ltd. (CIL) wants the Government to sell a 5% stake in the company through an Initial Public Offering (IPO) to strengthen its finances and management, its chairman said on April 4. "An IPO is needed as this would bring in a greater degree of financial discipline and...better corporate governance," said Chairman Partha Bhattacharyya. CIL is currently wholly-owned by the Government. "I will take it up with the Government in 2007-08," Bhattacharyya said. Coal India, which produces 85% of India's coal, plans to invest Rs24bn to raise output to 384.5mn toes this fiscal year. Last year, it produced 360.94mn tons. Bhattacharyya said the company expected to sign a 20-year fuel supply agreement with NTPC in a month. It currently supplies 110mn tons of coal every year to NTPC for power generation. CIL will also spend Rs10bn on a planned Rs35-bn joint venture to acquire coal mines abroad.

Five senior executives resign from Jet Airways

In a major blow to Jet Airways India Ltd. five executives of the full service carrier have put in their papers, citing poor management practices, centralised decision making process and lack of empowerment. V Raju, Jet's Vice President (South East Asia); Michal Tan, Head of Training; Nandini Verma, Vice President (Communications); Vijay Sethi, Senior General Manager and Ravindran, Head of Training were among those who have stepped down. The latest round of exits from Jet comes close on the heels of the start of arbitration proceedings on the aborted purchase of Air Sahara. The airline has also seen a steady decline in its market share, which is down from 34.9% at the end of the first quarter of 2006 to 30.4% during the third quarter of 2006.

BHEL, NTPC, BEML, BEL unveil provisional results

NTPC Ltd. announced its provisional financial results for the fiscal fourth quarter and year ended March 2007. The public sector power generation major has reported a net profit of Rs67.26bn for the year 2006-07 as against Rs58.2bn in the previous financial year. This translates into a growth rate of 15.5%. Revenues for the year ended March 2007 are up by 27% at Rs332bn versus Rs261.43bn in the year 2005-06.

Bharat Heavy Electricals Ltd. (BHEL) announced the tentative financial results (flash results) for the year 2006-07. The state-owned power equipment maker has posted provisional net profit of Rs23.85bn in the financial year ended March 31, 2007 as against Rs16.79bn in the previous fiscal year. This represents an increase of 42% year on year. Provisional turnover for the year 2006-07 is up 28.75% at Rs187.02bn.

Bharat Earth Movers Ltd. (BEML) announced provisional results for the fourth quarter and financial year ended March 2007. The public sector heavy equipment maker recorded a fourth quarter net profit of Rs1.55bn while sales for the January-March quarter are more than Rs10bn. For the year 2006-07, BEML has clocked a provisional net profit of Rs3.15bn on an all time high turnover of Rs26bn, which is up 18% over the previous fiscal year.

Bharat Electronics Ltd. (BEL) announced that it has recorded its highest ever turnover of Rs39.6bn (provisional) for the year 2006-07, which is an increase of 12% over last year's turnover of Rs35.36bn. The estimated Profit Before Tax (PBT) is Rs10.42bn as against last year's figure of Rs8.55bn, an increase of 22%.

Fortis sets IPO price band of Rs92-110

Fortis Healthcare Ltd., one of the largest private healthcare companies in India and a Ranbaxy group company, is entering the capital market with an Initial Public Offer (IPO) of 45,996,439 equity shares of Rs10 each for cash at a premium to be decided through a 100% book building process. The company proposes to allot 242,476 equity shares to eligible employees in the firm allotment portion. The price band for the issue has been fixed between Rs92 and Rs110 per share. The issue opens for subscription on April 16 and closes on April 20. The price band set is lower than the highest price at which it made its pre-IPO placements. The New Delhi-based firm had raised 1.54 billion rupees through pre-IPO placements in the range of 135-159.50 rupees per share. Bulk of the proceeds from the issue are to be used to part-fund a hospital to be built in New Delhi and to pay a loan made for an acquisition, Shivinder Singh told reporters. "We believe in pursuing greenfield projects and acquisitions for growth," Singh, who is also the CEO said.

NHPC files DRHP for IPO

National Hydroelectric Power Corporation (NHPC) has filed a Draft Red Herring Prospectus (DRHP) with the capital market regulator SEBI for its Initial Public Offering (IPO). NHPC plans to raise up to Rs25bn (US$580mn) through the IPO, valuing the company at around US$4.25bn. The public sector hydropower major would issue 10% fresh equity, while the Government would divest 5% of its stake in the power PSU. Post IPO, the Government's stake in NHPC would come down to about 86.3%. NHPC has a paid-up capital of Rs106bn and an authorised share capital of Rs150bn. The company is planning to hit the capital market by June this year. The funds from the IPO would finance six planned projects which would have a combined capacity to produce 3,080 MW, on top of the existing capacity of 2,755 MW, according to the offer document. NHPC plans to sell 1.12bn new shares in the IPO, while the Government will sell about 558mn shares.

Mahindra-Renault launch Logan

Mahindra & Mahindra Ltd. (M&M) and Renault SA, France's second-largest automaker, on Tuesday announced that they had launched the Logan entry level sedan in the Indian market through their Joint Venture. M&M has a 51% stake in the JV called Mahindra Renault, while the French auto major has the remaining 49% holding. The Logan will be rolled out nationwide by November. Delivery will start four weeks after the booking. The Logan will be available in both petrol and diesel variants. Customers will have the option of six colours. The price of the 1.4 litre and 1.6 litre Petrol versions of the Logan will range from Rs428,000 (ex-Mumbai) while the 1.5 litre Diesel versions will be available in the range of Rs547,000 and Rs644,000 (ex-Mumbai). The ex-Delhi price of the Logan will be Rs435,000 to Rs576,000 for the two petrol variants and Rs554,000 and Rs651,000 for the two Diesel variants.

Auto sales

For the years ended 2006-07, Bajaj Auto's total vehicle sales rose 19% to 2,721,178 units. Motorcycle sales for FY07 climbed 24% to 2,376,518 from 1,912,224 units last year. The motorcycle market share improved from 30.8% in FY06 to 33.5% in FY07. Total two-wheeler sales were up 18% at 2,399,400 units while 3-wheeler sales jumped 28% to 321,778 units.

For FY07, Hero Honda clocked an impressive cumulative tally of 3,336,756 units compared to cumulative sales of 3,000,751 units in the previous fiscal year. TVS Motors clocked motorcycle sales of 924,813 units compared to 806,708 units in 2005-06, translating into a growth of 14.6%. Total two wheeler sales grew by 13.85% to 1,528,214 units from 1,342,204 in the previous financial year.

Maruti sold 635,629 vehicles in the domestic market in 2006-07, the highest ever annual sales in the company's history. This marked a growth of 21% over domestic sales in 2005-06. In all, the company sold 674,924 vehicles during the year, including exports of 39,295 vehicles. Exports grew by 13% over 2006-07.

For the fiscal year 2006-07, Tata Motors Ltd. reported record sales of 579,378 vehicles (including exports), up 28% over 454,345 in 2005-06. For the financial year 2006-07, Ashok Leyland's overall sales climbed by 34.8% to 83,101 vehicles from 61,655 units in the previous fiscal year. While domestic sales were up 35.75% at 77,076 exports grew by 23.5% to 6,025 units.

Tata Steel completes Corus acquisition

Tata Steel Ltd. on Monday announced that it had completed its £6.2bn (US$12bn) acquisition of Corus Group Plc at 608 pence per share in cash. The completion of the transaction is pursuant to the Scheme of Arrangement being declared effective by the High Court of Justice in England and Wales on April 2. The enlarged company will have a pro forma crude steel production of 27mn tons in 2007 and will be the world's fifth largest steel producer with 84,000 employees across four continents. The combination of Tata Steel and Corus with a high value added product range and strong positions in auto, construction and packaging, will create the world's second most global steel producer with a combined presence in 45 countries.
S&P keeps Tata Steel rating under scanner

Deals continue to pour in

Indian Hotels Company Ltd., along with financial investors, is set to acquire the San Francisco-based 110-room Hotel Campton Place for US$60mn, subject to approvals. The boutique Campton Place exudes European ambience and comprises two early 20th century buildings in the shopping and financial districts of San Francisco, California.

Hindustan Lever Ltd. (HLL) said on Wednesday that Unilever India Exports Ltd. (UIEL) will sell its home delivery retail business Sangam to Wadhawan Foods Retail (WFR) on a slump sale basis with effect from March 31. UIEL is a 100% subsidiary of HLL. Although Sangam has met many of its business milestones successfully, the company believes that it is not in its strategic interest to continue to be present in this format of organised retail, HLL said.

Hershey Co. will buy a 51% stake in Godrej Beverages & Foods Ltd. for US$54mn. Hershey has received the green signal from the Foreign Investment Promotion Board (FIPB) for the purchase. Hershey plans to buy 40% from IL&FS, 5% from Godrej Industries ( which holds a 48% stake in Godrej Beverages), and 6% from A Mahendran, Managing Director of Godrej Beverages.

Financial Technologies India Ltd. (FT) on Tuesday announced that Dubai Multi Commodities Centre (DMCC) had purchased an additional 1% stake in the Dubai Gold and Commodities Exchange (DGCX) for US$12.5mn. Following the latest purchase, DMCC now holds 51% in DGCX and FT holds the balance 49%.

Sherwin-Williams Co., the largest US paint retailer, agreed to buy Nitco Paints for an undisclosed consideration to enter the Indian market. The terms of the purchase were not disclosed. Nitco Paints is a privately owned manufacturer and distributor based in Mumbai with sales of about US$18mn, Cleveland-based company said.

Oil prices dip as Iran releases UK sailors

Oil prices fell on marginally on Thursday after Iran decided to release the 15 British navy personnel after holding them captive for nearly two weeks. Light, sweet crude for May delivery rose 14 cents to US $64.52 a barrel in mid afternoon Asian electronic trading on the New York Mercantile Exchange. This followed a drop of 26 cents the day before after the Iranian president announced he would release the UK sailors. On London's ICE Futures, Brent crude for May rose 22 cents to US $68.62 a barrel. The standoff had raised fears of a disruption in oil supplies and caused a nearly US $5 jump in prices. But crude is still trading higher than before the March 23 detention, fueled by concerns about tight US domestic supplies. A weekly report released Wednesday by the US Energy Information Administration showed that gasoline inventories declined for the eighth straight week and that demand is still strong.

China to hike reserve requirement again

The People's Bank of China announced that it will boost the reserve requirement ratio of banks to slow inflation and investment in the fastest-growing major economy. The move is the third increase in reserve requirement this year and follows a 27 basis point hike in short-term interest rates on March 18. The reserve ratio will increase by 0.5% to 10.5% starting April 16, the People's Bank of China said in a statement. "The central bank will continue to carry out prudent monetary policies, use multiple tools to strengthen liquidity controls to maintain liquidity at a moderate level and to prevent money supply and lending from growing too rapidly," the People's Bank of China said.

Japanese companies plan higher capex

Japanese companies plan to step up investment, underscoring their optimism about the outlook for growth at home and abroad. The Tankan, Japan's most closely watched business survey, showed that large companies plan to increase spending by 2.9% in the year that began on April 1, beating economists' estimates. However, sentiment among Japan's largest manufacturers slipped from a two-year high, the Bank of Japan said. The Tankan showed that manufacturer confidence declined to 23 points in March from a two-year high of 25 in December. The average estimate had pegged the reading at 24. Sentiment among large non-manufacturers stayed at a 16-year high of 22 points in March, below the 23 point forecast. Japanese companies tend to be conservative in their capital expenditure estimates in the March survey and upgrade them later. In March last year companies planned to boost spending 2.7%. That increased to an estimated 11.9%, the fastest in more than 15 years, the survey showed.

Yen hits 5-week low vs dollar

The yen touched its lowest level in five weeks against the dollar as traders across the world resumed the so-called "carry trade" amid optimism that interest rates in Japan will remain the lowest among the G8 nations. The dollar hit a five-week high versus the yen, at 119.08 yen, before retreating against the Japanese currency. The euro also hit a 5-week high at 159.05 yen. The recent gains in global stock markets are giving investors more confidence to step up trades with money borrowed with the Japanese currency. But gains in the dollar were capped ahead of key US employment data. Markets were nervous ahead of a keenly-watched US non-farm payrolls report on April 6 and the G7 finance ministers meeting next week, which may yield some comments on currencies. The dollar came under pressure after data showed that growth in the US service sector slowed to a four-year low in March, reinforcing the view that US interest rates could be cut later this year. The jobs data will provide more clues on whether the Federal Reserve will lower rates from the current 5.25% to support the economy.

US, South Korea reach deal on FTA

The United States and South Korea reached a free trade agreement (FTA) that would be America's biggest such accord in more than a decade and could boost bilateral trade by as much as US$20bn. The negotiations, reached just minutes before the final deadline was to expire, were difficult to conclude due to differences over such sensitive sectors as rice, beef, automobiles and pharmaceuticals. Details were not announced. The FTA will eliminate duties on products like South Korean autos and apparel, and cut investment barriers for US insurers and financial companies. South Korea will abolish its 40% tariff on US beef over 15 years and the pork tariff over 10 years. Rice wasn't included in the FTA. Seoul and Washington had been in talks over the last 10 months to try and meet the ambitious timetable for sealing the deal, which could see annual bilateral trade rise from US $70bn to US $90bn a year. For the US, the deal is the largest trade since the North America FTA accord was signed with Canada and Mexico more than a decade ago. On the other hand, South Korea would get much greater access to the markets of its second-largest trading partner.

DaimlerChrysler admits talks to sell Chrysler

DaimlerChrysler finally confirmed that it was looking at parting ways with Chrysler, which lost US $1.5bn last year. We are talking with some of the potential partners who have shown a clear interest," DaimlerChrysler CEO Dieter Zetsche told shareholders on April 4. "So far, I am satisfied with the process. Everything is going according to plan." Zetsche, however did not identify the suitors. Nor did he guarantee that the talks would end in a sale. "We need to keep all options open," he said. "We need to keep maximum scope for maneuver." But reports said that three bidders had submitted preliminary offers for Chrysler two private equity firms - the Blackstone Group and Cerberus Capital Management - and a Canadian auto parts supplier, Magna International. Chrysler has around US $20bn in health care obligations for retired workers. Some estimate it may fetch no more than US $5bn to US $7bn, or even a naught. Daimler shares have soared nearly 25% ever since talk of the company contemplating selling Chrysler broke in February. But, they dipped 1.4% on April 4 as investors were frustrated that Zetsche did not offer more details.

DOMESTIC NEWS & GLOBAL NEWS

Sweet sops for sugar industry
In a potentially controversial move, the Government announced plans to create a sugar buffer besides providing export incentives to help mills combat an anticipated glut and bunching up of payment arrears to cane farmers. Agriculture and Food Minister Sharad Pawar launched the Rs8.5bn relief package for the sugar industry despite concerns that the Election Commission could take the Government to task for the move ahead of next month's assembly polls in Uttar Pradesh. The Government will build a buffer of two million tons of sugar for two years and provide incentives to exporters amid expectations of a record production. India is set to produce more than 25mn tons of sugar in the year ending in September, up 30% from the previous year and higher than earlier estimates.

Pawar said that there was no plan to block sugar exports through freezing of the Release Order (RO) as reported by certain section of the media. Pawar also said that his announcement of a package for the beleaguered sugar industry ahead of next month's assembly polls in Uttar Pradesh would not lead to any problems with the Election Commission. Reports also said that a section of the sugar industry was not happy with the Government's move to introduce differential transportation incentives for coastal and non-coastal regions.

Inflation unchanged at 6.46%

For the third successive week, India's inflation, based on Wholesale Price Index (WPI), stood at 6.46% in the week ended March 17. Though the latest reading was the same as in the previous week, it was slightly lower than average estimates of 6.5%. The annual inflation rate was 3.69% during the corresponding week of the previous year. With this, the Reserve Bank of India (RBI) is all set to miss its annual inflation target of 5-5.5% as only two more weeks data is to be announced. With less than a month to go for the annual credit policy for FY08, the central bank could well go for another monetary tightening measure in a last ditch attempt to check inflation. Finance Minister P Chidambaram hinted as much when he said this week that there may be further tightening on the cards.

Current account deficit narrows

India's current account deficit, a key barometer of a country's trade, declined to US$3.04bn in the quarter ended December 31, 2006 from US$4.78bn a year earlier, the Reserve Bank of India (RBI) said. The fall in the current account deficit was largely due to the doubling of receipts from professional, software, and business services abroad and remittances by non-resident Indians, the central bank said. The deficit was little changed at US$11.8bn in the nine months ended December 31, 2006 from US$11.9bn in the same period a year earlier. Separately, the Finance Ministry said that India's overseas debt increased to US$142.7bn as of December 31, 2006 as companies stepped up their overseas borrowings amid rising local interest rates. India had an external debt of US$136.5bn by the end of September, the Government said in a statement.

Fiscal deficit 80% of target

India's fiscal deficit in the 11 months ended Feb. 28 reached 80% of the Government's target for the fiscal year ending March 31, the Controller General of Accounts said. The deficit was Rs1.21 trillion, compared with the full-year target of Rs1.52 trillion, the Controller General's office said on its Web site on Friday. The deficit was 90.5% of the target a year earlier.

Sasan UMPP sinks deeper into trouble

The controversial Sasan Ultra Mega Power Project (UMPP) is facing fresh troubles. Newspaper reports suggest that the Lanco Infratech-Globeleq consortium will not be allowed to go ahead with the project implementation. Ernst & Young (E&Y), financial consultant to the Sasan UMPP, has asked the Government to annul the contract awarded to the Lanco-Globeleq consortium (now Lanco-Jindal Steel) and invite fresh bids. The Government has reportedly extended the terms of the Deepak Parekh panel to determine the future course of action on the Sasan UMPP. Though it is almost clear that the Lanco-Jindal Steel consortium will be kicked out of the project, the uncertainty is whether new bids be invited or whether the second lowest bidder be awarded the project. Meanwhile, Lanco says that as per the terms of the bidding documents, the LOI cannot be cancelled once it is awarded, since the consortium is willing to satisfy the above conditions.

GAIL unveils major pipeline expansion plan

GAIL India Ltd. said it had received an approval from the Petroleum Ministry to lay five new gas pipelines. The public sector gas transmission major plans to invest Rs180bn over the next five years in new pipeline projects across India. GAIL will build new pipelines totaling 5,000 km to enhance the company's gas transportation capacity to 280mn standard cubic metres per day (mmscmd) from the current 145 mmscmd, Chairman U.D. Choubey said in New Delhi. The investment would boost revenues to Rs58bn by 2011-12 from 20bn in the current year, he said. Choubey said that GAIL would go to the market to fund the expansion. "Details are being worked out," he said without providing details on whether it would be equity, debt or a combination of both.

JVs galore for India Inc

Godrej Consumer Products Ltd. said on Monday that it had signed an agreement with Sweden's SCA Hygiene Products AB (SCA), a 100% subsidiary of the SCA Group, to forms Joint Venture (JV) to manufacture and market paper based absorbent hygiene products, specifically sanitary napkins and baby diapers, in India, Nepal and Bhutan. Godrej Consumer and SCA will be equal partners in the JV incorporated as Godrej SCA Hygiene Ltd. Adi B. Godrej, Chairman of the Godrej group of companies will be the chairman of the new entity, which is being set up with an equity capital of Rs 200mn

Tata Metaliks Ltd. said on Thursday that it had signed a Joint Venture (JV) agreement with Kubota Corporation of Japan for manufacturing Ductile Iron (DI) pipes in the country. Kubota is the world leader in the manufacturing of DI pipes. Kubota and Tata Steel plan to start production early 2009 and target annual sales of 10bn yen (US$85mn) in the first five years of operation.

Amtek Auto Ltd. signed an agreement with Belgium's VCST Industrial Products for setting up a 50:50 Joint Venture with headquarters in Sint Truiden, Belgium.
The JV will set up a manufacturing facility for powertrain components in India. It will primarily focus on the manufacture of gears and shafts for automotive on- and off-road applications. The manufacturing facility under the Joint Venture will be set up near Amtek Auto's cluster of manufacturing plants at Sanaswadi near Pune. It will have an initial installed capacity of about 1.5mn components for exports only. The facility is scheduled to start shipping out finished parts by February 2008.

Buzz from Deal Street

Glenmark Pharmaceuticals Ltd. said on Monday that its 100% Switzerland subsidiary Glenmark Holdings SA will acquire a majority stake (over 90%) in Medicamenta AS, giving it a commercial foothold in the European market. Under Czech law, a holding of more than 90% shares in a company will trigger a mandatory takeover bid for the remaining shares. This acquisition provides the company with a strategic entry point into two of the fastest growing and attractive markets in Europe, Glenmark said in a statement.
Rain Commodities (USA) Inc. (Rain USA) did not exercise its right to match the sweetened offer by Oxbow Carbon & Minerals Holdings, Inc. (Oxbow) to acquire all the assets of Great Lakes Carbon Income Fund. Rain USA, a wholly-owned subsidiary of Rain Commodities Ltd., had offered C$13.50 per unit for Great Lakes Carbon Income Fund. It had until March 27 to match Oxbow's bid. Great Lakes Carbon Income Fund also said that it will enter into an agreement with Oxbow, which has offered to buy the fund's assets at C$14.00 per unit of the fund in cash. On March 20, the Board of Trustees of Great Lakes Carbon Income Fund said that Oxbow's C$14.00 per unit proposal was a superior proposal. Based on Great Lakes' last quarterly results filing, the company had 51.2mn units outstanding, valuing Oxbow's offer at C$717mn.

Big orders for Man Ind, Patel Eng

Man Industries India Ltd. said that it has recently bagged an order totaling about US$225mn (approximately Rs10bn) from the United States. The company would manufacture and supply 257 Miles of 42 Inch Diameter LSAW and HSAW line pipes with external and internal anti-corrosion coating systems, Man said in a statement. With this new order, the company's order book position will increase to Rs22bn.

Patel Engineering Ltd. announced that it has bagged an order worth Rs8.06bn in joint venture with Gammon Ltd. from the Satluj Jal Vidyut Nigam Ltd. for the 434 MW Rampur Hydro Electric Project. Satluj Jal Vidyut Nigam is a joint venture between the Government of India and Government of Himachal Pradesh. The project is located on the river Satluj in Shimla and Kullu districts of Himachal Pradesh. The project work involves construction of a 15-km-long head race tunnel (HRT), a 140-m deep surge shaft and power house on the right bank of Satluj near village Bael. The project will be completed in the next 54 months.

Advanta IPO subscribed

The Initial Public Offering (IPO) of generic agrochemicals maker Advanta India Ltd., a subsidiary of United Phosphorus Ltd., was subscribed 3.5 times. The company received bids for 11.68mn shares as against the issue size of 3.38mn shares. The price band for the issue was set at Rs600 to Rs650 per share. The IPO opened for subscription on March 26 and closed on March 30. The issue will constitute 20.08% of the post-issue paid-up capital of the company. The company has already allotted 1.7mn shares at Rs625 each to a clutch of investors in a pre-IPO placement. The investors include Morgan Stanley Dean Witter Mauritius Co. Ltd, Morgan Stanley Investments (Mauritius) Ltd., Citigroup Global Markets Mauritius Pvt. Ltd., Deutsche Securities Mauritius Ltd. and Emerging Markets South Asian Stars Fund. Advanta India intends to invest about Rs2.5bn to pay off the dues of its subsidiary Advanta Holdings BV. Post-issue, United Phosphorus' stake in Advanta would fall to just under 50% from 62.43%.

Oil hits 6-month peak on Iran woes

Crude oil prices touched six-month high as tension between Iran and the UK escalated over the capture of British by Tehran last week. A day after closing at a six-month high, light, sweet crude futures rose another 45 cents to US$66.48 a barrel in Asian electronic trading on the New York Mercantile Exchange. Trading settled Thursday at US$66.03 a barrel on the New York Mercantile Exchange - the highest settlement price since Sept. 8, 2006, when crude finished at US$66.25. Brent crude for May gained 64 cents on Friday to US$68.52 a barrel on London's ICE Futures exchange. Oil in New York jumped briefly past US$68 per barrel in after-hours trading on Tuesday on rumors that Iran had fired on a US ship in the Persian Gulf.

The UK Government froze diplomatic links with Iran and sought help from its allies, to rescue its sailors and marines held since March 23. Prime Minister Tony Blair stepped up diplomatic pressure on Iran to release 15 navy personnel. Iranian Foreign Minister Manouchehr Mottaki said that Britain must admit that its marines breached Iranian waters before they will be freed. The UN Security Council expressed grave concern over Iran's seizure of 15 British sailors and marines and called for an early resolution of the escalating dispute.

Fed still worried about inflation

Inflation continues to be the primary concern for US central bankers, but they need more elbow room to structure their monetary policy amid growing risks to the world's largest economy, Ben S. Bernanke, the Chairman of the Federal Reserve said. "Our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk," he told the Joint Economic Committee of Congress in Washington. "Still, uncertainties have risen, and therefore a little more flexibility might be desirable." Bernanke's remarks came a week after the Fed policy makers surprised the markets by dropping their bias towards higher borrowing costs, which was taken by most as a signal that the central bank was ready to cut rates. However, much to the dismay of the markets, Bernanke's latest comments contained no reference to a possible interest rate cut, which some economists predict as soon as next quarter. In fact, the Fed chief said that policy makers want to move away from guidance on future rate decisions.

US economic growth improves

The US economy grew at a higher than expected pace in the fourth quarter, spurred by swelling inventories and higher exports even though investments in software were revised slightly lower. The Gross Domestic Product (GDP) grew at a 2.5% annual pace in the final three months of 2006, slightly faster than the previous estimate of 2.2%, the Commerce Department reported. Economists had forecast an unchanged reading of 2.2%. The final revision was up from a 2% GDP growth rate in the third quarter and meant that the world's largest economy expanded by a solid 3.3% during 2006. It was the third straight year that GDP grew by over 3%, following a growth of 3.2% in 2005 and 3.9% in 2004.

Chinese steel output will fall

production China's steel production will slow in the current year due to lower domestic demand as Beijing aims to reduce investment in fixed assets to prevent the world's fourth-largest economy from overheating. Crude steel output in China will grow by 13% in 2007 as against 18% last year, Luo Bingsheng, Executive Vice-Chairman and Secretary General of the China Iron and Steel Association said. Speaking at the Steel Market and Trade Conference in Guangzhou, Luo said that China's crude steel output this year would increase to 472mn tons from around 419mn in 2006. The slower production coupled with the Government's measures to curb surging foreign investment will keep exports at the same level as 2006 or lower, Luo said. China exported 43mn tons of steel products in 2006, up 109.6% while imports fell 28.3% to 18.5mn tons.