S&P lifts India to investment grade
After 15 years, Standard & Poor's raised India's sovereign debt rating to investment grade citing its record pace of growth. S&P increased the rating by one notch to BBB- from BB+. Moody's Investors Service raised its rating to investment grade in January 2004, followed by Fitch Ratings in August 2006. Investment grade ratings is likely to attract increased overseas investments into the country. The upgrade will also reduce borrowing costs for companies in India. However, the global credit ratings agency said that the ratings on India remain constrained by the weak fiscal profile, especially its high government debt burden and deficit. "Further rating improvements will depend on sustained prudent fiscal policy that leads to a decline in government debt and interest burden," it added.
Inflation above 6% again
India's inflation, based on the Wholesale Price Index (WPI), rose to 6.11% in the week ended January 20, as prices of fruits, vegetables, condiments and spices increased, the Government said on Friday. The WPI inflation stood at 5.95% in the previous week, the Ministry of Commerce and Industry said in New Delhi. The annual inflation rate had been estimated at 6.03% to 6.08%. Inflation was 4.24% during the corresponding week of the previous year.
December exports up 7.8% yoy
Merchandise exports during December 2006 stood at US$9.9bn compared to a revised US$9.19bn in December 2005. Imports during the month were US $15.58bn as against US$11.88bn in December 2005. The trade deficit increased to US$5.68bn from US$2.69bn in the corresponding month a year earlier. Crude oil imports stood at US $4.82bn in December 2006 compared with US$3.72bn in the same period last year, thus registering a growth of 29.58%. Non-oil imports were estimated at US $10.76bn during December 2006, which was 31.81% higher than the value of non-oil imports at US $8.17bn in December 2005.
Govt ups FY06 GDP forecast to 9%
The Government revised upwards its FY06 Gross Domestic Product (GDP) growth estimate to 9% from an earlier projection of 8.4%, owing to higher expansion in agriculture and manufacturing. Manufacturing output growth was revised to 9.1% for the year ended March 31, 2006 from 9% earlier, the Government said in a statement in New Delhi. Agriculture output was at 6% for FY06 compared to an earlier estimate of 3.9%. The Government will announce its growth forecast for the current financial year ending March 31 on February 7. The Indian economy grew by 7.5% in the year ended March 31, 2005.
Manufacturing growth slows
The strong growth in the manufacturing sector decelerated sharply last month as the Government's desperation to contain inflation hurt domestic as well as overseas demand, a private survey of purchasing managers reveals. The seasonally adjusted Purchasing Managers' Index (PMI) eased to 55.3 in January from 56.6 in December - its lowest since March 2006. A reading above 50.0 signals an improvement in business conditions while anything below 50.0 indicates a deterioration. The survey published on Feb. 1 was conducted before the Reserve Bank of India (RBI) hiked its benchmark short-term lending rate by 25 basis points to 7.50%, its highest in nearly four years, to reign in inflation. The PMI is compiled by UK-based NTC Research and sponsored by ABN AMRO Bank. The index, introduced in April 2005, hit its highest in October. It has declined steadily since.
Transfer of RBI stake in SBI to Govt approved
The Union Cabinet approved the proposal to transfer the Reserve Bank of India's (RBI) stake in State Bank of India (SBI) to the Government by the end of June. The exact value will be worked out while effecting the actual transfer. The Government may acquire the stake in a cashless transfer valuing each share at Rs 1,300, Finance Minister P. Chidambaram said after a Cabinet meeting. At that price, the 59.73% stake will be valued at Rs 404bn (US$9.15bn). The RBI currently holds 59.73% in the country's largest commercial bank but has proposed transferring the stake to avoid conflict of interest as both a bank owner and a regulator. "The RBI will be able to focus on its regulatory and supervisory functions, and it will also remove the conflict of interest in due discharge of its duties as the banking regulator and also having ownership in banks / financial institutions," the Government said. Separately, the Cabinet also approved the plan to transfer the RBI's shareholding in NABARD and NHB to the Government in June 2008 at book value.
Govt bans milk products till Sept-end
The Government banned exports of milk products until the end of September to boost domestic supplies and rein in prices, Finance Minister P. Chidambaram said. In recent times, the Government has announced a slew of measures to contain inflation, which touched a two-year high of 6.12% in the first week of January. The latest move appears to be in the same direction as prices of milk products have been rising due to supply constraints. "Surging exports of skimmed milk powder reduced availability of milk for domestic consumption, prompting the Government to ban overseas shipments," Chidambaram said. Milk procurement by Indian co-operative producers declined by 100,000 kilograms a day to 23 million kilograms from a year earlier, the Finance Minister said. Higher global milk powder prices, fueled by a lower production in drought-hit Australia and Europe, was expected to push up India's exports of the dairy products by 61% to 65,000 tons in the year ending in March, Chidambaram said.
DD, AIR to get ad-free live sports feed
The Union Cabinet passed an ordinance, making it mandatory for private broadcasters to share live ad-free feed of sporting events of "national importance" with public broadcaster, Prasar Bharti's Doordarshan and All India Radio (AIR). "This ordinance would provide access to the largest number of listeners and viewers, on a free to air basis, of sporting events of national importance whether held in India or abroad," the Government said in a statement. A bill will be introduced in the coming budget session of Parliament to replace the Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Ordinance, 2007 by an Act. The executive order comes amid a raging debate on Government's access to the live feed of the just-concluded one-day internationals between the West Indies
and India. Private broadcaster Nimbus Communications Ltd. last year paid US$613mn for winning the telecast rights for all cricket matches arranged by BCCI, the Indian cricket board, for four years.
Govt unveils recast package for HMT
The Cabinet Committee on Economic Affairs approved the revival of HMT Machine Tools Ltd. with a cash infusion of Rs7.23bn. This will enable the ailing public sector company to restructure its balance sheet and fund the Voluntary Retirement Scheme (VRS). Of the total amount being pumped in by the Government, Rs4.43bn will be in the form of preferential share capital, Rs1.8bn by fresh equity capital and Rs1bn through special non-plan loan for the VRS scheme. "With the restructuring of the company, its balance sheet including the debt equity ratio will improve," Finance Minister P Chidambaram said after the CCEA meeting, which cleared the restructuring package. However, Chidambaram said that the details of the proposed Joint Venture are yet to be worked out. He also added that the issue of negative net worth of the company would be addressed through repayment of long term loans, discharge of old liabilities and restructuring of balance sheet.
Carrefour close to signing India deal
French retail major Carrefour is close to signing a deal with an Indian company in the next two weeks, Commerce and Industry Minister Kamal Nath said. "Carrefour is looking at India very closely. They said they are very close to closing up a retail deal in the next two weeks, that's what they told me," Nath told reporters on the sidelines of a conference in London. Carrefour, the world's second-largest retailer, was in talks with the Wadia Group and its Britannia unit, Nath said, adding that the Government of India would explore liberalising FDI norms for the retail sector in the next two to three months. A financial daily reported earlier this week that Carrefour's worldwide Chairman and CEO, Jose Luis Duran is visiting India and is likely to meet potential partners after talks with the Dubai-based Landmark group fell through. Duran may hold talks with the Aditya Birla group for the French company's India foray.
Cairn India reports new oil find in Rajasthan
Cairn India Ltd. announced that it had found more oil in Rajasthan, this time in the Shakti North East, located six kilometres north-east of the Shakti-1 discovery. The well, known as Shakti-NE-1, encountered about six metres of net pay of oil. It flowed about 83 barrels of oil per day, Cairn India said. The company also said it plans to return cash to Cairn Energy Plc shareholders in the second quarter. The cash will come from the proceeds of the IPO of Cairn India, which raised around US$1.9bn. Cairn India did not say how much of the proceeds will be distributed to Cairn Energy shareholders. In addition, Cairn India said the resolution of the dispute with ONGC on the proposed pipeline project is expected in the first half of the year. Cairn India said it would announce its preliminary results for the year ended December 31, 2006 on March 27.
M&M buys German forging firm
Mahindra & Mahindra Ltd. (M&M), through its Mauritius-based subsidiary Mahindra Forgings Global Ltd. acquired a 90.47% stake in Schoneweiss & Co. GmbH., a leading company in the forgings sector in Germany. Schoneweiss is a family-owned German company with over 140 years of experience in the forging sector. It is one of the top five axle beam manufacturers in the world and specializes in suspension, power train and engine parts. The company has forging capacity of 50,000 tons per annum and turnover of Euro 90mn (for CY2005). Its top customers include DaimlerChrysler, MAN, Scania and Volkswagen. Schoneweiss has three manufacturing plants in Hagen and Gevelsberg, Germany with a total manpower of 550 people.
Alembic Ltd. announced the acquisition of the entire domestic non-oncology formulation business of Dabur Pharma Ltd. The consideration for the acquisition is Rs1.59bn plus the actual net working capital on the closing date. The acquisition would be on a going concern basis. Non-oncology formulation business of Dabur Pharma is mainly into high growth life style segments like Cardiovascular, Diabetic and Gastrointestinal, Gynaecology, etc. The transaction is likely to be completed in about two months. This business had net sales of Rs 620mn for nine months ended December 31, 2006 and is expected to post sales of Rs 800mn for the full year.
NTPC, Railways to form 74:26 JV
The Cabinet Committee on Economic Affairs gave its approval for the setting up of a Joint Venture called Bhartiya Rail Bijlee Co. Ltd. with seed capital of Rs100mn and authorized capital of Rs16.06bn. NTPC Ltd. will hold a 74% stake in Bhartiya Rail Bijlee, the remaining 26% stake will be owned by the Railways. NTPC will invest Rs11.88bn in the JV while the Railways will pump in Rs4.18bn towards equity. Tata Chemicals Ltd. said that it will form an equal joint venture with Ireland's Total Produce Plc. to distribute fresh fruits and vegetables in India. The joint venture will set up a distribution network and begin supplying Indian retailers and wholesalers. It will first set up centres in the north and east at a cost of Rs260mn, the two companies said.
MindTree, Idea IPOs announced
MindTree Consulting Limited said that it had set a price band of Rs365-425 per share for its forthcoming Initial Public Offering (IPO). The company is offering 5,593,300 equity shares, comprising a net issue of 4,940,740 equity shares. Up to 372,900 shares will be reserved for employees and up to 279,660 shares for business associates. The issue will constitute 15% and the net issue 13.25% of the post-issue capital of the company. The proceeds of the issue will be used to fund a new development centre in China and repay loans. The issue will open on February 9 and close on February 14. Idea Cellular Ltd., an Aditya Birla Group company, fixed the price band of Rs65 to Rs75 per share for its forthcoming Initial Public Offer (IPO) of equity shares. The issue opens for subscription on February 12 and closes on February 15. The issue, with the greenshoe option, aggregates to Rs24.44bn. The company has concluded a pre-IPO placement of Rs3.75bn, to certain of its promoters, directors and certain high net worth individuals.
FLAG Telecom to be listed globally
The Board of Directors of Reliance Communications approved the global listing of FLAG Telecom, the company's global undersea cable infrastructure company. Reliance Communications said that it has turned around FLAG Telecom over the past year and aligned it with the Indian franchise. FLAG Telecom recently announced its nearly Rs70bn (US$1.5bn) Next Generation Network project which on completion will make the company the largest fully IP-enabled global undersea cable system operator touching 80% of the world population. The potential global listing of FLAG Telecom would highlight the hidden value created in its business and provide further focus on the unique growth opportunities, Reliance Communications said in a statement. Meanwhile, Reliance Communications said that FLAG Telecom won major new contracts worth more than US$100mn (about Rs4.4bn) during Q3 FY2007.
HT Media launches business paper
HT Media Ltd. launched its business newspaper with content from the Wall Street Journal. The new daily, titled Mint, hit the stands in New Delhi and Mumbai a day after the Reserve Bank of India (RBI) announced its third quarter review of the annual monetary policy. The two metro cities account for the majority of India's annual advertising revenue. The newspaper will be published Monday through Saturday. Along with Indonesia, India is the fastest-expanding newspaper industry in Asia-Pacific and print media has about half the share of advertising spend in the US$854bn economy, according to the Indian Newspaper Society. Advertising may expand by as much as 15% in the next five years. Advertising expenses at 0.34% of India's GDP are about a third of the global average of 0.98%, according to the India Brand Equity Foundation.
Marico unveils major recast
Marico Ltd. on Friday announced a re-organisation aimed at extending its successful run of sustained profitable growth. The Marico Group will now comprise three Strategic Business Units (SBUs) - Consumer Products Business, Kaya Business and International Business. It will also have three functional units- Technology, Finance & IT and HR & Strategy. "We like to think ahead in terms of structures to manage growth. While we have always been growing with a double digit CAGR in both turnover and profits over the post six years - the past two years have seen an acceleration in growth. This re-organisation is aimed at giving each business a higher thrust and focus to enable growth and providing the right platform for Functional support for growth," said Harsh Mariwala, Chairman and Managing Director of Marico Group.
India's 1st Gold ETF opens on Feb 15
India’s first Gold Exchange Traded Fund (Gold ETF) will be open for subscription on February 15. Benchmark Mutual Fund is the first Asset Management Company (AMC) to launch India’s first open-ended gold fund called Gold BeES. The new fund offer (NFO) will close for subscription on February 23. After the closure, within 30 days the fund proposes to list on the National Stock Exchange (NSE). The scheme intends to provide returns that closely correspond to returns provided by domestic prices of gold by investing 90% in physical gold. The minimum subscription amount for the scheme is Rs10, 000 and in multiples of Rs 1,000 thereafter. Units will be allotted within 30 days from the date of NFO closure up to three decimal points. Each unit of Gold BeES will be approximately equal to the price of one gram of gold.
US economy grows faster than expected
The US economy grew at a surprisingly faster 3.5% annual rate in the fourth quarter of 2006 despite the sharp downturn in the housing market. Robust spending and slowing inflation more than offset the biggest decline in residential investment in 15 years. The Government's first report on the health of the world's largest economy in the October-December quarter was better than expected. Economists had forecast GDP expansion of 3%. The Q4 report is subject to two revisions in coming months. The US economy grew by 3.4% for the whole of 2006. That was an improvement from a 3.2% showing in 2005 and the strongest showing in two years. The GDP report also delivered good news on inflation. It said that the personal consumption expenditures (PCE) price index, closely watched by the Fed, declined at a 0.8% annual rate during the quarter, biggest decline since the third quarter of 1954, when it dropped 1.2%. The quarterly decline reflected a huge drop in energy prices, a Commerce Department official said, and was substantially lower than the 1.9% advance economists were expecting.
Fed leaves rates steady
As expected, the US Federal Reserve kept the benchmark interest rates unchanged while adding that the world's largest economy was doing well without pushing inflation higher. The central bank left its target for the federal funds rate, an overnight bank lending rate at 5.25%. It was the fifth straight time the Fed held rates steady after lifting the same for 17 straight times. Investors cheered the news, pushing key stock indices higher. Bond prices also rallied as investors bet that rates wouldn't head higher anytime soon. The Fed's decision came just a few hours after the government reported that GDP growth in the fourth quarter was higher than expected and that inflation pressures had eased. "Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market," the FOMC said in its closely watched statement, adding that the economy "seems likely to expand at a moderate pace over coming quarters." The Fed also said that "readings on core inflation have improved modestly in recent months," and that "inflation pressures seem likely to moderate over time." There is a growing sense on Wall Street that the Fed may leave the fed funds rate at 5.25% for the next few months, and possibly through the rest of 2007, sparking a broad based rally in the stock market.
Windows Vista launched for consumers
Microsoft launched its new operating system, Windows Vista for consumers having spent a whopping US$6bn and after a delay of some two years. Microsoft claims that it's latest operating system, the first since XP in 2001, has better security and new navigational designs. Bill Gates, the chairman of the software giant, promised PC users that "the wow starts now," but analysts said they would wait for Vista's sales figures before arriving at any conclusions about the product. But despite the high decibel marketing campaign, there were no queues at a Manhattan Best Buy store where Microsoft CEO Steve Ballmer kicked-off the high profile launch. And, since only about 15% of existing computers have memory and graphics cards powerful enough to run premium versions of Vista, most will have to buy a new computer if they want to upgrade. US research firm IDC says it does not expect a significant boost in PC shipments due to Vista. Apple called Vista a copycat version of its Mac OS X Tiger operating system, which introduced many of the new features. The iPod maker plans to introduce a new operating system of its own later this year. Nonetheless, research reports say Vista will be installed on more than 100 million PCs worldwide.
NYSE, Tokyo Stock Exchange form alliance
The New York Stock Exchange and the Tokyo Stock Exchange said they will form an alliance that could eventually lead to a merger of two of the world's largest financial markets. The broad agreement will allow both sides to cooperate on joint developments, such as financial products, mutual listings and technology. Further, it sets into motion the possibility of a true combination once Japan's biggest stock exchange becomes a public company in 2009. The development comes amid the ongoing consolidation between domestic and global exchanges. The process was kicked off by NYSE, which turned into the first trans-Atlantic market with its acquisition of Paris-based exchange operator Euronext NV. For Japan's biggest stock market, the pact should help boost market confidence, which has been dented by a series of technical mishaps in its trading operations. One obstacle both exchanges face is symmetry between the regulatory bodies that govern them. addition, companies based in Japan and in the U.S. have different regulatory standards to guarantee they are safe and liquid.
Michael Dell returns as CEO
Dell Inc. Chairman and founder Michael Dell reclaimed the CEO's position, ousting Kevin Rollins. The computer-maker is trying to reboot its business in response to sliding market share, a string of disappointing earnings and an ongoing federal accounting probe. Investors were heartened by the news. Dell's return at the helm of one of the world's largest computer manufacturers is effective immediately and comes after a nearly four-year hiatus. Dell said he was "excited to be CEO again and feel the same level of energy and drive I did when we launched the company back in 1984. I am as passionate as ever about delivering a superior value to our customers." Dell said he would focus his efforts on improving customer service. Dell's direct-sales model, which allows business and consumers to buy equipment directly from the company, turned it into a leading computer manufacturer and a darling of the Wall Street. But in recent years, the company has been stung by a glut of low-cost, low-profit PCs and weaker-than-anticipated sales of its pricier, more lucrative desktops and notebooks. Just last year, Dell lost its No. 1 position in the industry to rival HP.
Other Global News Roundup
Shares of Posco, the world's third- largest steelmaker, rallied to a record on speculation that it may be a takeover target, and as the company's CEO met with a senior official from Arcelor Mittal. AstraZeneca Plc said it will cut 3,000 jobs, or about 4.6% of the workforce, as the U.K. drugmaker reduces expenses to counter generic competition to its medicines. Power Financial Corp., the owner of Canada's biggest mutual-fund company, agreed to buy Boston-based Putnam Investments from Marsh & McLennan Cos. for US $3.9bn in cash to break into the US $10 trillion US fund market. US Airways withdrew its hostile US $9.8bn offer for Delta Air Lines after Delta's creditors threw their support behind the bankrupt carrier's reorganisation plan. Delta and its pilots' union insist the company has a future as an independent airline, but the bid has raised speculation about more attempts at consolidation in the industry. Tanabe Seiyaku Co. agreed to buy Mitsubishi Chemical Holdings Corp.'s drug unit for 560 billion yen (US$4.6bn) in stock to create Japan's fifth-largest pharmaceutical company.