tag:blogger.com,1999:blog-79043357829880251822024-02-20T07:18:12.656-08:00Indian Stock Market InfoUnknownnoreply@blogger.comBlogger131125tag:blogger.com,1999:blog-7904335782988025182.post-4954059600226674192009-10-08T13:54:00.000-07:002009-10-08T13:56:09.243-07:00Reward time for Reliance shareholdersReliance Industries chairman Mukesh Ambani has said issue of bonus shares after a 12-year hiatus was just fulfilment of the company's commitment to reward shareholders after completion of important projects.<br /><br />The RIL board on Wednesday approved giving one free share for every share held, upon completion of a mega refinery at Jamnagar in Gujarat and KG basin oil and gas field development.<br /><br />"It was a Reliance commitment, whenever we finish a value creation cycle, we make sure that everybody is awarded," he told CNBC TV-18 business channel.<br /><br />The company built a 580,000 barrels per day refinery at a cost of $6 billion to make Jamnagar the world's largest refining hub. It invested an equal amount in beginning production of natural gas from KG-D6 fields in record time. Together with a $4 billion pipeline for transporting gas to consumption centres, the group had invested over Rs 100,000 crore (Rs 1 trillion) in 3-4 years.<br />"This value creation cycle was the biggest in our history where we had nearly Rs 100,000 crores of assets coming in line," said Ambani who heads the nation's most valuable company.<br /><br />The gas from KG-D6 has cut fertiliser subsidy and increase power generation, thereby helping the economy in times of downturn, he said.<br /><br />"I think it was the shareholders turn (to be rewarded now). It was a commitment (we have fulfilled now)," he said.<br /><br />Ambani said Reliance was "pretty focused" on growth trajectory. "We are very much on track." He, however, refused to discuss new projects saying: "You have to wait for the next AGM to get specifics of that but the direction is not changing at all."<br /><br />Asked about the growth vehicles for Reliance in next five years, he said: "We will spell out the specifics on November 17."Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-46518918000554226402009-03-16T06:13:00.000-07:002009-03-16T06:19:49.754-07:00Deflation - Are we going to face problemsNowadays we keep on reading that global economies such as US and Europe will face severe problems of deflation due to recession. Fed fund rate in the US is between 0.00-0.25% or 25 bp (100 basis point = 1%). Inflation in these countries is close to 0. With the falling interest rates in India will we too face similar situation?<br /><br />Deflation is a “sustained” fall in the general price level of goods and service below zero percent inflation. It results in an increase in the real value of money — a negative inflation rate. It is just opposite of inflation, which is the general increase in the price level of goods and services. When the inflation rate slows down (decreases, but remains positive), this is known as disinflation. Disinflation is a substantial drop in the rate of increase of the price level. Deflation should not be confused with temporarily falling prices; instead, it is a sustained fall in general prices.<br /><br />Inflation destroys real value in money whereas Deflation creates real value in money.<br /> Real Price ~ Nominal Price –Inflation<br />With the passage of time, the “real price” of any good or service is characterized by above equation. Hence, if it is positive inflation or normal inflation, real price decreases over a period of time. However, if inflation is negative i.e. deflation, real price increases with time. Alternatively, the term deflation was used by the classical economists to refer to a decrease in the money supply and credit.<br /><br /><strong>Causes of deflation</strong><br />1. Deflation is caused by the fall in aggregate level of demand i.e. there is a fall in how much the whole economy is willing to buy, and the going price for goods. Because the price of goods is falling, consumers have an incentive to delay purchases and consumption until prices fall further, which in turn reduces overall economic activity - contributing to the deflationary spiral. (As we can currently see that buyers believe real estate prices will fall further, thus delaying their purchase decisions. This in turn has reduced the demand for the real estate properties which in turn has reduced the construction activities. Thus, general economic activities such as cement production etc are down.)<br /><br />As demand and economic activity falls, investments fall as well because corporate do not want to invest in increasing capacity as there is no demand. This leads to further reduction in aggregate demand. This is the deflationary spiral i.e. a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. An answer to falling aggregate demand is stimulus, either from the central bank, by expanding the money supply, or by the fiscal authority to increase demand such as reducing interest rates or giving money to corporate or people at significantly lower rates.<br /><br />2. In monetarist theory, deflation is related to a sustained reduction in the velocity of money (It is the average frequency with which a unit of money is spent in a specific period of time. Velocity affects the amount of economic activity associated with a given money supply) or number of transactions. This is attributed to a dramatic contraction of the money supply, perhaps in response to a falling exchange rate, or to adhere to a gold standard or other external monetary base requirement. In the present scenario it appears to be one of the prime reasons for growing fears of deflation.<br /><br />3. Deflation also occurs when improvements in production efficiency lower the overall price of goods. Improvements in production efficiency generally happen because economic producers of goods and services are motivated by a promise of increased profit margins, resulting from the production improvements that they make. Competition in the marketplace often prompts those producers to apply at least some portion of these cost savings into reducing the asking price for their goods. When this happens, consumers pay less for those goods; and consequently deflation has occurred, since purchasing power has increased.<br /><br />4. Deflation may be caused by a combination of the supply and demand for goods and the supply and demand for money, specifically the supply of money going down and the supply of goods going up. Historic episodes of deflation have often been associated with the supply of goods going up (due to increased productivity) without an increase in the supply of money, or (as with the Great Depression and possibly Japan in the early 1990s) the demand for goods going down combined with a decrease in the money supply.<br /><br /><strong>Indian scenario</strong> – Last few years we saw massive boom in all the sectors. There were huge demands for real estate properties, IT services, Cements, Food products etc. Our economy was growing in excess of 9% and mood was upbeat. Everybody thought this growth will continue forever. Hence, corporate invested heavily in building capacity, developers invested billions of dollars in launching new projects etc. Suddenly the boom busted due to financial crisis. People lost jobs, interest rates went up through the roof and demand plunged. There was a huge mismatch between supply (more) and demand(less). This led to price correction - real estate saw over 40% drop in prices, commodities went down by over 70% and so on. Moreover, due to global financial crisis, there is acute shortage of liquidity in the market and hence less flow of money in the economy. People are holding back to their investments as well as consumption; thus, reducing velocity of money. Does it sound like symptoms of deflation?<br /><br /><strong>Effects of deflation<br /></strong>1. Deflation leads to decrease in prices of good and services, increasing value of money. While an increase in the purchasing power of one’s money sounds beneficial, it can actually cause hardship when the majority of one’s net worth is held in illiquid assets such as homes, land, and other forms of private property.<br /><br />2. Deflation raises real wages, which are both difficult and costly for management to lower. Moreover, falling prices and demand discourages corporations from investing. This frequently leads to layoffs and makes employers reluctant to hire new workers, increasing unemployment.<br /><br />3. Deflation often follows a period of nearly zero interest rates. When the central bank has lowered nominal interest rates all the way to zero, it can no longer further stimulate demand by lowering interest rates. This is the famous liquidity trap. When deflation takes hold, it requires “special arrangements” to “lend” money at a zero nominal rate of interest (which could still be a very high real rate of interest, due to the negative inflation rate) in order to (artificially) increase the money supply.<br /><br /><strong>Why deflation is bad?</strong><br />While shoppers see falling prices as a good sign, economists see it as a threat to the economy or nation. Deflation hurts the economy much more than inflation. In fact a small positive inflation is good for the economy because it suggests growing demand as well as healthy economy. However, in deflationary conditions consumers postpone expenditure, because they think prices will decrease further. This decreases demand in the economy which badly affects firms, who then scale back production and investment plans, leading to job losses, further affecting purchasing power and demand, which leads to a downward spiral in the economy.<br /><br />We will now take a look at the most infamous deflation in the history of modern world.<br /><br /><strong>Deflation in Japan</strong><br />Deflation in Japan started in the early 1990s. The Bank of Japan and the government tried to eliminate it by reducing interest rates, but this was unsuccessful for over a decade. In July 2006, the zero-rate policy was ended. There were several reasons for deflation in Japan which are explained below:<br /><br />1. Bust of Asset price bubble: There was a rather large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989). When assets decrease in value, the money supply shrinks, which is deflationary.<br /><br />2. Insolvent companies: During the boom time (1980s) Japanese banks lent aggressively to companies and individuals that invested in real estate. However, when real estate values dropped, people were not able to pay back these loans to banks. The banks tried to collect the collateral (land or properties), but this wouldn’t pay off the loan because their prices had fallen significantly. Banks delayed their decision to foreclose these loans hoping asset prices would improve. These delays were also allowed by national banking regulators. This continuing process is known as maintaining an “unrealized loss”, and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law were suggested by leading economists as methods to speed this process and thus end the deflation.<br /><br />3. Insolvent banks: Japanese banks had a larger percentage of their loans as “non-performing” i.e. they were not receiving any interest payments on them, but have not yet written them off. With high non-performing loans or assets, they were unable to lend more money; thus, their earnings declined significantly and risk of insolvency increased many a fold.<br /><br />4. Imported deflation: Japan imports Chinese and other countries’ inexpensive consumable goods, raw materials (due to lower wages and fast growth in those countries). Thus, prices of imported products were decreasing with the rise of economy of scale in China. Domestic producers had to lower their prices in order to remain competitive. This decreasing in prices of domestic products over a period of time led to deflation.<br /><br />5. Fear of insolvent banks: Japanese people were afraid that banks might collapse so they preferred to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in local bank accounts. Thus less money was available for lending and therefore economic growth. This meant that the savings rate depresses consumption, but did not appear in the economy in an efficient form to spur new investment.<br /><br /><strong>Deflation alarms in the US?</strong><br />With the fed fund rate at a historic low (0.00-0.25%), there is a growing fear of deflation in the US. Many economists believe that USA could face short term period of deflation. With the bust of housing bubble, acute shortage of credit and falling consumption, USA has more or less similar conditions that were prevalent in Japan in early 1990s. However, I believe there are some basic yet crucial differences.<br /><br />Firstly, Japanese companies were far more dependent on commercial banks for financing than are today’s U.S. multinationals, which have stockpiles of internal capital as well as broader access to capital markets. Moreover, US Treasuries are still considered as the safest investments in the world. This keeps the flow of money into the US economy.<br /><br />Secondly, Bank of Japan’s exceptionally poor monetary policymaking was a big reason for the country’s protracted problem. The central bank’s failure to lower interest rates in the early 1990s ultimately drove the economy into a deflationary death spiral. They were just too slow and conservative to react to the situation. However, US Fed has been quite aggressive and proactive in taking sound monetary decisions and ensuring that they do not repeat those mistakes. In 1992, for example, amid negligible inflation and a comatose economy, the Bank of Japan’s key interest rate was still nearly 4%. In contrast, after the tech bubble burst in the USA, the Fed quickly slashed its benchmark rate to 1 %. Also, the current fed rate is between 0.00-0.25%.<br /><br />Thirdly, though both USA and Japan faced housing trouble and mortgage crisis, Japan’s central bank was too slow to act. The country’s banks hid their bad loans beneath opaque corporate structures rather than absorb the losses. But rather than write off the loans, Japanese banks extended additional credit to borrowers, allowing them to at least make minimal interest payments. Those made banks look healthier than they were, at the cost of impairing the flow of credit to new businesses. However, American banks have been forthcoming in absorbing the losses on their books and writing off loans. This has given fed a clear picture of true losses and subprime crisis in the economy.<br /><br />Having said that I believe the US economy may bleed for some time and enter a period of deflation. However, that period would be short lived and not as prolonged as that of Japanese economy in 1990s. As per an estimate, avoiding a long period of deflation and recession might cost the US a staggering $3 Trillion.<br /><br /><strong>Will India face deflation?</strong><br />Let’s examine Indian economy vis-à-vis Japanese economy of 1990s. In the last five years BSE exchange went up from 5,000 to 21,000, an increase of 400% while real estate prices in Indian witnessed an increase of over 300%. This is phenomenal increase in prices and asset prices looked highly inflated. After the global financial crisis, Indian stock exchange plunged by over 60% and real estate values dropped by almost 30-40% in less than six months. Some welcomed this fall while majority believed Indian global dream is finally over. The mayhem still continues with stock prices and real estate prices further going down.<br /><br />Compare this with that of Japan - In the five years before its 1989 peak, the Nikkei (Japanese stock exchange) stock average rose 275%. Property prices became so inflated that the tiny spit of land surrounding the Imperial Palace in central Tokyo was briefly worth more than the entire state of California. At the time, Japan’s seemingly unstoppable rise inflamed fears among Americans that the United States had slipped into permanent economic inferiority. When the bubble finally busted in late 1989, stock and property prices nose-dived in tandem. In less than three years, the Nikkei stock average fell 63% from its peak of 38,916. It didn’t hit bottom until April 2003 and a total decline of 80%. Do these two stories sound similar? Yeah they do!<br /><br />Inflation figures for the last week was 3.92% which is far less than the peak rate of 12% less than six months back. Are we going into a period of negative inflation or deflation? We are currently in a state of disinflation which is a decreasing value of inflation as the inflation rate is still positive. However, this may lead to a situation where downward price movement continues and we enter a period of deflation. I believe this is highly unlikely because we are a growing economy with very young population. Moreover, we are not an export oriented economy and hence do not depend too much on external demand. Our economy is mostly driven by domestic demand and consumption, which is somewhat insulated from other countries and global events. We still have lot of room to maneuver our policies to regenerate demand and spending. Yet, with the growing globalization we too run a risk of deflation if our monetary and fiscal policies are not handled well.<br /><br /><strong>How deflation can be avoided?</strong><br />To counter deflation we have to revitalize our growth story, reignite demand and create confidence among people. Compare to the inflation rate, 3.92%, lending rates in India are still close to 10%, which is quite high. Unless lending rates do not come down people won’t buy properties, automobiles or other consumer goods. Moreover, corporate won’t be able to borrow money to launch new innovative projects, spend on infrastructure or build capacity. Thus, to create demand and investments, government as well as RBI has to bring down this lending rate by implementing ways to reduce cost of borrowing funds.<br /><br />Hence, only monetary policy won’t be sufficient to tackle this menace; fiscal policy too has to play a significant role here. Government has to be more aggressive in implementing reforms and speeding up infrastructure spending. Let us hope better sense will prevail among our political class.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-74676560426583460452009-01-18T10:27:00.000-08:002009-01-18T10:31:39.709-08:00Yahoo CEO Carol Bartz to get $19 mn this yearThe newly-appointed Yahoo! chief executive Carol Bartz will receive a compensation of $19 million this year.<br /><br />The 60-year-old technology veteran has replaced the Internet major's founder and chief executive Jerry Yang. Bartz would get a base salary of $1 million and a grant of $10 million in cash and stock to compensate the benefits forfeited from the previous employer. Further, she would be paid an annual grant worth about $8 million.<br /><br />Bartz was appointed as the chief executive by Yahoo! board on January 13.<br /><br />In a regulatory filing to the Securities and Exchange Commission on Thursday, Yahoo! said that Bartz would receive stock options for 5 million shares and the price would be decided on January 30.<br /><br />To compensate Bartz for the forfeiture of the value of equity grants and post-employment medical coverage from her previous employer Autodesk, she would be provided an 'equity grant with a grant-date value of $10 million, payable 25 per cent in cash and 75 per cent in restricted stock,' the filing noted.<br /><br />Yahoo! would also provide post employment medical coverage under its plans to Bartz, her spouse and eligible dependants as necessary, with Bartz paying the full premiums, it added.<br /><br />She would be receive an 'annual grant for 2009 with a value of approximately $8 million which is expected to be granted in February 2009.'<br /><br />Also, Bartz's salary would be subject to annual review for increases and would be eligible to receive an annual bonus, it said.<br /><br />'The actual amount of the annual bonus will be determined by the compensation committee of the board based upon both the company's and Bartz's performance for the relevant year,' the filing added.<br /><br />On January 13, 2009, Yahoo! entered into an employment agreement with Bartz to serve as chief executive for an initial term of four years and may be extended by mutual agreement thereafter.<br /><br />Bartz served most recently as executive chairman of the board of directors of Autodesk and she was chairman, president and chief executive officer of the company for 14 years.<br /><br />She currently serves on the board of directors of Cisco Systems, Intel Corporation and NetApp, Inc.<br /><br />On Thursday, shares of Yahoo! shed 6.45 per cent to close at $11.61 on the Nasdaq.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-84225399203007732652009-01-07T11:03:00.000-08:002009-01-07T11:05:05.287-08:00NYSE halts trading in Satyam ComputerNew York/New Delhi, Jan 7 (PTI) New York Stock Exchange today halted trading in Satyam Computer at its bourses in the US as well as Amsterdam in Europe, after founder and Chairman Ramalinga Raju disclosed financial bungling at the Indian IT major. "Yes, the stock is halted in New York and Amsterdam," a spokesperson for NYSE Euronext told PTI in an emailed reply on queries whether trading were being halted in Satyam shares.<br /><br />In pre-market trade in the US, Satyam stock plunged by over 90 per cent to 0.85 dollars after Raju disclosed what has emerged as the biggest ever corporate fraud in India. Shares of Satyam on Indian bourses plunged by close to 98 per cent today, wiping off about Rs 10,000 crore (more than two billion dollars) from its market valuation.<br /><br />Incidentally, two of Satyam's Indian rivals Infosys and Wipro that are also listed in the US, were trading with significant gains at the American bourses. NYSE-listed Wipro was trading with a gain of about 1.7 per cent, while Nasdaq-listed Infosys was up about 1.8 per cent.<br /><br />However, most of the other US-listed Indian companies, such as ICICI Bank, HDFC Bank, Sterlite, Patni Computer, Rediff, Genpact, WNS, EXL Service, MTNL, Tata Motors and Dr Reddy's, were trading in the red at the US bourses. ICICI Bank was down over 13 per cent, while HDFC Bank plunged by over 10 per cent.<br /><br />Besides, Sterlite was down over 9 per cent, Genpact and Dr Reddy's were down over 7 per cent, MTNL by over 6 per cent, Tata Motors by close to 5 per cent and WNS by over two per cent. PTI.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-35002316449493450202009-01-07T11:01:00.000-08:002009-01-07T11:02:35.699-08:00Rs 8,000 cr fraud hits Satyam; Raju may get 7-yr jailIn the country's biggest corporate fraud involving about Rs 8,000 crore, iconic IT company Satyam was hurtling towards disaster following the shocking disclosure of accounts fudging by its founder Ramalinga Raju, who then quit as chairman - leaving an uncertain future for the company and its 53,000 employees.<br /><br />By the end of the day, the fourth largest IT company lost a staggering Rs 10,000 crore in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 at BSE. The NYSE-listed firm could also face regulator action in the US.<br /><br />The government, regulator SEBI and the industry reacted with shock and anguish over the turn of events that could tarnish India's corporate and raise vital issue like ethics, corporate governance and accounting and business practices.<br /><br />Acting in tandem, Corporate Affairs Ministry and SEBI announced that the episode would be probed and action taken against the perpetrators of the fraud that entails inflating profits and creating fictitious assets.<br /><br />"I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."<br /><br />The Maytas firms, although promoted by his family, proved to be his nemesis, with Raju saying: "The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones... But that was not to be. What followed in the last seven days is common knowledge."<br /><br />While the government said the entire issue would be referred to the Serious Fraud Investigation Office, SEBI described it as an event of "horrifying magnitude." "It was like riding a tiger not knowing how to get off without being eaten," said Raju.<br /><br />Removal from Sensex, Nifty<br /><br />Satyam Computers may be removed from the Sensex and Nifty following the revelation of manipulation in the company's accounts, analysts said. Rajiv Mehta, senior analyst with India Infoline, a large brokerage house said his firm has immediately stopped covering Satyam and many other brokerage houses are also expected to do the same. There will not be any investor interest in the company anyway. The company may be removed from sensex and nifty, he said.<br /><br />With the fall in its stock prices, Satyam has lost its weightage in the sensex considerably over the recent past and currently has weightage of only 1.56 as of Tuesday. While in nifty, the weightage is only 0.63 per cent.<br /><br />B Ramalinga Raju can get a 7-year jail term<br /><br />Satyam Computer Chairman B Ramalinga Raju can face seven years' imprisonment in addition to monetary penalties for forging accounts, breach of trust and misappropriating funds.<br /><br />"He (Raju) can be charged under various sections of the Indian Penal Code for falsification of accounts, cheating and breach of trust. These offences attract a maximum penalty of seven years," said a senior partner of law firm Titus and Company, Diljeet Titus.<br /><br />Expressing a similar opinion, senior Supreme Court advocate C A Sundaram said, "If the admissions (made by Raju in his resignation letter) are true, it is a very serious matter. It would be violation of (the) SEBI (code), Company Law and the IPC".<br /><br />Another senior advocate and corporate law practitioner U K Chaudhary said the Satyam chief could be imprisoned for seven years under various provisions of company law. "Under section 628 of the Companies Act, which deals with misrepresentation of accounts, he could be punished for a maximum of 2 years along with penalty. However, the punishment term could be extended to seven years for producing false affidavits and other documents," he said.<br /><br />In addition to Raju, Titus said "action should also be taken against Chief Financial Officers, Finance Managers, and Legal and Tax Advisors for their complicity in this episode".<br /><br />Suggesting that the CBI should get into the case, he said if appropriate action is not taken, the Satyam fiasco would "make a mockery of the Indian enforcement mechanism".Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-6740519798696324042009-01-07T10:58:00.000-08:002009-01-07T11:00:04.756-08:00NSE to remove Satyam shares from Nifty from January 12MUMBAI: National Stock Exchange said on Wednesday it will remove Satyam Computer Services Ltd from its S&P CNX Nifty 50-share index from Jan 12. <br /><br />The head of the outsourcing firm resigned on Wednesday, disclosing profits had been falsely inflated for years, sending its shares crashing nearly 80 percent. <br /><br />The exchange did not give any reason for the change. Anil Ambani-group firm Reliance Capital Ltd will replace Satyam in the main index, the exchange said in a statement. Satyam will also be excluded from the CNX 100 index, CNX 500 index and the CNX IT index. <br /><br />Satyam is a component of the Bombay Stock Exchange's main 30-share index <.BSESN>, the country's benchmark index. The BSE has not made any statement on Satyam as yet.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-72849709870248413022009-01-07T10:53:00.000-08:002009-01-07T10:58:14.545-08:00Satyam: Full text of Ramalinga Raju letter to the BoardSatyam Computers Services Ltd. <br /><br />From B. Ramalinga Raju <br />Chairman, Satyam Computer Servcies Ltd <br /><br />Dear Board Members, <br /><br />It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice: <br /><br />1. The balance sheet carries as of September 30, 2008 <br /><br />a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore refglected in the books) <br /><br />b) An accured interest of Rs 376 crore which is non-existent <br /><br />c) An understated liability of Rs 1,230 crore on account of funds arranged by me <br /><br />d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books) <br /><br />2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone. <br /><br /><br />The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs. <br /><br />Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. <br /><br />The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. <br /><br /><br />I would like the board to know: <br /><br />1. That neither myself, not the Managing Director(including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes. <br /><br />2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers. <br /><br />3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results. <br /><br />4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as Ram Mynampati, Subu D T R Anand, Kesab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia. Ravindra Penu Metsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors immediate or extended family members has any ideas about these issues. <br /><br />Having put the facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps: <br /><br />1) A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T R Anand, Keshab Panda and Virender Aggarwal, representing business functions, and A.S.Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board. <br /><br />2) Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities. <br /><br />3) You may have a ‘restatement of accounts’ prepared by auditors in light of the facts that I have placed before you. <br /><br />I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. <br />in light of the above, I fervently appeal to the board to hold together to take some important steps. Mt T R Prasad is well placed to mobalize support from the government at this crucial time. With the hope that members of the Task Force and the financila advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well. <br /><br />Under the circumustances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My contribution is just to ensure enhancement of the board over the next several days or as early as possible. <br /><br />I am now prepared to subject myself to the laws of the land and fact the consequences thereof. <br /><br />(B. Ramalinga Raju) <br /><br />Copied marked to: <br />1) SEBI Chairman <br />2) Stock ExchangesUnknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-37419514710201716902009-01-02T00:28:00.000-08:002009-01-02T00:45:51.490-08:00Anil Ambani: The biggest loser of 2008Touted on the cover of Forbes 2008 billionaires issue for having added $24 billion to his fortune in one year, Ambani has dropped $30 billion since then. But don't worry too much. His Reliance Entertainment is investing $500 million in a new studio venture with Steven Spielberg's DreamWorks. Plus, he remains quite wealthy, worth $12 billion. That's something many others can't claim.<br /><br />The biggest billionaire gainer last March is now the year's biggest loser. Ambani lost $30 billion in the past nine months, more than anyone in the world. Stock of his telecom company dropped after his estranged brother helped scuttle a deal with African telecom MTN. It's quite an achievement in a year in which three of his fellow countrymen--estranged brother Mukesh, steel tycoon Lakshmi Mittal and Indian KP Singh, all of whom ranked earlier among the world's 10 richest--lost more than $20 billion apiece.<br /><br /><strong>Anil Ambani</strong><br />March net worth: $42 billion<br />Current net worth: $12 billionUnknownnoreply@blogger.com1tag:blogger.com,1999:blog-7904335782988025182.post-76515905182567026212008-12-22T10:20:00.000-08:002008-12-22T10:22:08.582-08:00Over 21 lakh jobs lost in US since Dec 2007More than 21 lakh individuals have become jobless in the US ever since the world's largest economy entered into recession last December, with more number of employers resorting to mass layoff actions.<br /><br />The number of such layoffs -- where 50 or more people are handed pink slips by a single employer -- touched 20,712 in the last eleven months.<br /><br />On a seasonally adjusted basis, the Bureau of Labour Statistics in a statement said, "From the start of the recession in December 2007 through November 2008, the total number of mass layoff events was 20,712, and the number of initial (jobless) claims was 21,08,743." The number of job losses due to mass layoff actions stood at 1,41,750 in December last year.<br /><br />Meanwhile, the National Bureau for Economic Research, which dates the nation's economic cycles, has said that America officially entered into recession in December 2007.<br /><br />In the wake of the worsening financial turmoil, companies worldwide are cutting jobs to cut down costs. So far in December, companies across the world have announced more than 1.20 lakh job cuts.<br /><br />More than one-third of the layoffs happened in America, where unemployment touched a record high of 6.7 per cent.<br /><br />Reflecting the worsening labor market scenario, the data showed that the number of mass layoff actions rose to 2,328 last month whereas the same stood at 2,140 in October.<br /><br />In terms of job losses, the November figures reached 2,24,079, slightly lower than 2,32,468 in the same period a month ago.<br /><br />"The number of mass layoff events in November increased by 188 from the prior month, while the number of associated initial claims decreased by 8,389," data available with the Bureau of Labor Statistics showed.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-32253763334974809982008-12-20T05:06:00.000-08:002008-12-20T05:11:23.570-08:00Auto parts: 200,000 may lose job; 4,000 units face closureIndia's auto component makers are facing one of the biggest crises ever. With the domestic market in the doldrums and the exports to the American market badly hit, many companies are on the verge of shutting down.<br /><br />The entire supply chain of auto companies is bearing the brunt of the economic meltdown. From Tier-1 companies to small-scale units, all are facing a huge fall in demand, delayed payments and a stiff liquidity crunch.<br /><br />"About 4,000 ancillary units are on the verge of closure and about 200,000 people will be affected by this crisis. Most companies have cut down the number of shifts, working days and are cutting down production. The US crisis has aggravated the problem," says Anil Bhardwaj, secretary general, Federation of Indian Micro, Small and Medium Enterprises (FISME).<br /><br />The commercial vehicle segment is the worst hit by the crisis. Such crises are cyclical, and tend to recur every 5-6 years, but a calamity of this magnitude has put all companies in trouble. "Auto component makers are hit very badly. The original equipment manufacturers (OEMs) have not been able to sell stocks. Cash flow is getting hugely affected. Payments are getting delayed, affecting a lot of projects. The overall sentiment is negative," says Jayant Davar, vice president, Automotive Component Manufacturers Association (ACMA).<br /><br /><strong>Domestic woes</strong><br /><strong></strong><br />It all started with the crisis in the auto industry. Car sales, which were booming, have now plunged. In the wake of the marked economic slowdown, there is a severe credit crunch. This has, in turn, slowed down demand for vehicles.<br /><br />"Payments to vendors are getting delayed, loans for capacity expansion are not being sanctioned, and banks are refusing loans to auto companies that are supplying to companies like General Motors, Ford, etc. The removal of insurance cover for exporters too has severely hit the industry," Davar explains.<br /><br />The Chennai-based Sundram Fasteners, which supplies radiators caps and fasteners to General Motors, says it is more worried about India than the United States. "Most of the auto companies have done very badly in 2008. The business in the second half of the year has been 50 per cent less than in the first half," says V G Jaganathan, president (finance), Sundram Fasteners.<br /><br /><strong>The US impact</strong><br /><strong></strong><br />The auto crisis in the US has only worsened the situation. Auto component makers' exports to the Ford, GM and Chrysler were growing at 50-70 per cent. Out of this 35-40 per cent of the exports were to GM in North America. GM accounts for about $500 million of India's auto component exports.<br /><br />Exports from Indian companies accounted for over $3 billion last year. "We were expecting a 20 per cent year-on-year growth. But this year, this has drastically fallen to about 6 per cent. November and December were the worst months for auto component makers," says Davar.<br /><br />The auto sector is amongst the worst-hit industry sectors. Adding to their woes is the cancellation of credit insurance which protects manufacturers against payment defaults from buyers.<br /><br />The Export Credit Guarantee Corporation has frozen issue of fresh credit risk insurance (CRI) cover to Indian component vendors of US auto giants. "Auto component makers are coping with the double whammy of the domestic market and the export market," says Bhardwaj.<br /><br />Meanwhile, GM India is playing down the impact of the parent company going under. "GM North America is in crisis while GM Europe has flat growth. GM Latin America and Middle East, and GM Asia Pacific are doing well. GM has already sourced components woth $500 million from India and it will meet the target of $1 billion by 2010, as other markets still need components," says P Balendran, vice president (corporate affairs), GM India.<br /><br />For companies like Sundram Fasteners, the crisis will have short-term impact. "GM accounts for about 2-3 per cent of the total business. We will continue to outsource products. In case, GM files for bankruptcy, payments will be delayed. Bankruptcy does not mean closure, it is restructuring," says V G Jaganathan.<br /><br /><strong>Big trouble</strong><br /><br />Sandhar Technologies, a diversified auto parts maker that has plants in the Europe, has seen a fall in business by about 50 per cent.<br /><br />"The topline growth for Sandhar Tech has grown to Rs 800 crore (Rs 8 billion) compared to Rs 640 crore (Rs 6.4 billion) last year. But the bottomline growth has been severely hit. Steps taken by the government -- like Cenvat cut -- are just nominal. There is no liquidity in the market. With high auto loan rates and a scary job market, the last thing on anyone's mind would be to buy a car," Davar, who is also the CEO and founder of Sandhar Technologies, laments.<br /><br />Auto component companies employ about 400,000 people. The small and medium enterprises in India employ about 3.3 crore (33 million) people. Many of these SMEs are in the auto sector. A good majority of them have already lost their jobs and the sector is likely to see more job cuts.<br />"Though the jobs cuts are not apparent, a large number of people have already been asked to leave. "Many ancillary units which supply to these companies are also likely to be wiped out if the crisis continues," Davar says.<br /><br />Commercial and passenger vehicle sales have fallen drastically. Unless sales go up, the market will continue to be sluggish, says carmakers. Most of the companies were half way through expanding their operations and building new capacities. It is now a huge burden on these companies as they have to bear the huge interest costs and the defaults in payments.<br /><br /><strong>Help us!</strong><br /><strong></strong><br />Many banks have refused to offer credit to companies who are supplying to GM. They fear that in the event of a bankruptcy, their payments will also get stuck. Many companies established auto plants in India to enjoy the benefits of the excise cut exemption. They have already invested huge amounts into these plants.<br /><br />ACMA has asked the government to intervene and help the industry. There should be more liquidity in the system. Many banks have pulled back credit to auto companies. The interest rates have to come down to push sales. Auto companies badly need the ECGC cover. The government should look into these issues.<br /><br /><strong>Auto crisis & GM India</strong><br /><strong></strong><br />The crisis will not have any impact on GM's India operations. The company's plans are going on as per schedule. "We will go ahead with our plans with internal approval so the crisis in the US will not affect us in India. GM is the only auto company which has seen consistent growth despite a fall in sales in November," says Balendran.<br /><br />Optimistic even during the crisis, he says that GM India performed better in 2008 than it did in 2007. "In 2006, we sold about 35,000 units; in 2007, we sold about 60,032 units, while in 2008, we have already sold 72,000 units. It has been a steady growth," he says.<br /><br />GM has inaugurated the engine plant at Talegaon, with a capacity of 160,000 units. This plant is expected to be commissioned in the year 2010. GM India is likely to hire 500 employees at the plant. GM has also started the engine power train facility with a capacity of 140,000 units.<br /><br />"We have already hired 1,000 people and we will be hiring 500 more. We have no plan to cut production or cut costs. The reason for GM's success in India is the product line up. Starting from Rs 2.99 lakh (Rs 299,000), we have cars for every segment. We will be launching the new Captiva in January, a sedan called Cruze mid next year, and a mini car in 2009. The upgrades programme will also continue as planned," Balendran adds.<br /><br /><strong>Bleak future</strong><br /><strong></strong><br />How long will the crisis last? There are no definite answers to this.<br /><br />"We are hoping the situation will improve slightly in the Jan-Mar quarter. But if the recession worsens, it will only be tougher for companies to get going," says Davar.<br /><br />GM India believes the situation will take many months to improve. "The slowdown has gathered pace in the last 3 months. The market is very sluggish. Liquidity is certainly a problem and it will take months to recover," P Balendran says.<br /><br />"About 25 per cent of all companies in the small and medium enterprises, have already become 'non-performing assests (NPAs).' As the crisis worsens, 50 per cent of SMEs in the auto sector will end up as NPAs," says Anil Bhardwaj.<br /><br />The FISME has said that these trying times should be converted into an opportunity to create a lean and powerful economy with sustainable growth.<br /><br />In its memorandum to the Prime Minister Manmohan Singh, the association has sought several relief measures, including a moratorium on repayment and the allowing of corporate debt restructuring for all unit.<br /><br />The association has also demanded that wrking capital limits of enterprises must be enhanced liberally and specific steps be taken to ensure timely payment to Micro, Small and Medium Enterprises (MSMEs) against supplies made to corporates.<br /><br />A big push is needed for exposing SMEs to exports. Currently, 0.5 per cent of SMEs are engaged in exports and yet contribute to about 50 per cent of the exports.<br /><br />There is a critical need to look beyond Export Promotion Councils and leverage resources of private organisations and associations focusing SMEs, the FISME has said.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-41642795694020097652008-12-20T04:56:00.000-08:002008-12-20T05:00:56.705-08:00Congress agrees to bail-out of Ford, GM and ChryslerLawmakers on Capitol Hill this weekend agreed to a short-term bail-out of America’s three biggest carmakers to prevent an imminent collapse of the ailing industry.<br /><br />The White House and Democrats in Congress are this weekend working on details of the package to provide about $15bn (£10bn) in loans to General Motors, Ford and Chrysler. The legislation is being crafted for the beleaguered industry, which has called for a government bailout as the global recession has led to plunging sales of cars.<br /><br />House Speaker Nancy Pelosi said the House of Representatives would consider legislation next week to provide “short-term and limited assistance” to the industry, which will undergo “major restructuring.”<br /><br />She said: “Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness.”<br /><br />The short-term lifeline comes as the heads of the Detroit car manufacturers have this week faced two days of intense questioning by assorted politicians on Capitol Hill as they call on Congress for $34bn of loans to help them survive a severe economic downturn.<br /><br />Although a rescue package is likely to be considerably smaller than this figure, politicians have recognised that the collapse of any one of the Big Three would have profound implications for an already damaged American economy.<br /><br />The agreement to put together a bailout package came just hours after the government reported that employers slashed 533,000 jobs in November – representing the worst single month’s job loss in 34 years. The three carmakers together employ nearly 250,000 workers, and more than 730,000 others produce materials and parts for cars.<br /><br />The focus of the short-term bridging loan is likely to be GM and Chrysler, which are most in need of immediate assistance. GM had said it needed $4bn before the end of this month, while Chrysler, which is understood to have hired Jones Day for restructuring and bankruptcy work, had wanted $7bn immediately. The Senate is scheduled to be in session next week.<br /><br />A key breakthrough on the long-stalled bailout proposals is understood to have come when Ms Pelosi bowed to President George Bush’s demand that the aid come from a fund set aside for the production of environmentally friendlier cars. She, along with environmentalists, had instead wanted the administration to take money from the $700bn fund the government set aside for the financial industry.<br /><br />Ms Pelosi said the billions of dollars that had been set aside to modernise plants to develop the green cars would be repaid “within a matter of weeks.”<br /><br />Although the details of the legislation are still being thrashed out, it is understood that this could include the creation of a trustee or group of industry overseers to make sure the bailout funds were used by car manufacturers for their intended purpose. The funds are designed to last until March.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-13834564437293169622008-12-20T04:46:00.000-08:002008-12-20T04:54:51.110-08:00US Government bails out General Motors and Chrysler with $17bn loanThe US government has saved General Motors and Chrysler from imminent bankruptcy with a $17.4bn (£11.6bn) lifeline loan package in an unprecedented move that will pile pressure on the British government to follow suit.<br /><br />President George W. Bush agreed to hand over the funds to the two companies after months of fraught negotiations over the future of the two companies and a week after politicians in the US Congress rejected a $14bn bail-out package.<br /><br />The news will safeguard an estimated 3m jobs reliant on the car industry in the US, as well as 5,500 staff at General Motors' Vauxhall factories in Ellesmere Port and Luton.<br /><br />GM and Chrysler, both based in the once-booming city of Detroit, Michiagn, had warned they would have run out of cash by the end of the year without assistance, putting hundreds of thousands of jobs directly at risk, and risking 3m job losses in the wider economy.<br /><br />"In the midst of a financial crisis...allowing the U.S. auto industry to collapse is not a responsible course of action," said the US President, who is tapping the $700bn bank bail-out pot for the necessary funds.<br /><br />He had been considering a form of bankruptcy for the pair, but decided against it as it was thought customers would be unwilling to buy cars from a bankrupt manufacturer.<br /><br />President-elect Barack Obama said the funding should be used to reshape the American car industry, which has been in terminal decline for decades due to rising labour costs, uncompetitive product offerings and falling sales.<br /><br />"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it," he said.<br /><br />Although the American deal helps to the future of Vauxhall, GM Europe said it was still seeking assistance from the UK Treasury "within days", with a spokesmen saying it continued "aggressive work" to "align the business with the significant downturn in the market".<br /><br />The European arm of the company would likely have remained outside the collapse of GM in if it had gone into bankruptcy, but the European arm is still seeking a range of new measures, along with the rest of the British car industry, including tax deferrals and investment in new, more fuel-efficient technologies.<br /><br />Unite joint general secretary Derek Simpson said that intervention must come within the next week. "What is being asked for from the Government is not a handout, not a gift, it is access to strategic funding for a sector that is key to our economy's global stature and one that will play a lead role in its emergence from this recession."Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-35570899598638371442008-12-15T09:04:00.000-08:002008-12-15T09:19:31.578-08:00Property prices may fall by 30% next yearExperts say that developers are likely to focus on sub Rs 20 lakh (Rs 2 million) flats due to huge demand for such flats and the government's stimulus package for Rs 20 lakh home loans.<br /><br />"Earlier, developers thought that there is latent demand for premium homes, but in the current slowdown, that perception has changed. There is always demand for Rs 500,000-Rs 15 lakh (1.5 million) homes and developers will look towards that," Maheshwari said.<br /><br />Property prices in the key cities have more than doubled in the past few years helped by a boom in the stock market and a spurt in salaries of home buyers. The subsequent measures of the Reserve Bank of India to cool the overheated economy and a subprime crisis coupled with a credit crunch, has tempered growth prospects in the country hurting sales of property developers.<br /><br />The benchmarket Sensitive index has dropped more than 60 per cent from the beginning of the year, eroding much of the investors' wealth and RBI has increased repo rates by 150 basis points till September this year to curb inflation.<br /><br />''Many developers will come down on their asking rates after being saddled with unsold stock beyond their ability to hold on," added Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj.<br /><br />To boost sales property developers have been forced to cut prices of real estate but buyers are still adopting a ''wait and watch'' stance as many feel that even the lower rates continue to be unaffordable.<br /><br />Property prices in Gurgaon, Noida in the National Capital Region have fallen by 25-30 per cent while Mumbai's distant suburbs have seen 15-20 per cent drop in prices. Now property consultants foresee further price correction of 25-30 per cent in 2009.<br /><br />"By the middle of 2009, developers will loose holding power and cut prices sharply. Cuts will follow big time after elections," said Ambar Maheshwari, director of DTZ, an investment advisory.<br /><br />Experts say that developers are likely to focus on sub Rs 20 lakh (Rs 2 million) flats due to huge demand for such flats and the government's stimulus package for Rs 20 lakh home loans.<br /><br />"Earlier, developers thought that there is latent demand for premium homes, but in the current slowdown, that perception has changed. There is always demand for Rs 500,000-Rs 15 lakh (1.5 million) homes and developers will look towards that," Maheshwari said.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-977431442966107562008-12-15T08:44:00.000-08:002008-12-15T09:00:01.063-08:00Govt announces package to boost economyThe government on Sunday effected an across-the-board four per cent cut in CENVAT that will bring down prices of cars, cement, textiles and other goods as part of an economic stimulus package that also earmarks an additional Rs 20,000 crore (Rs 200 billion) for infrastructure, industry and export sectors.<br /><br />In a virtual mini-budget that entails a revenue loss of Rs 8,700 crore (Rs 78 billion) in the next four months, the package seeks to revive the crucial housing, export, automobile, textiles and small and medium enterprises sector to counter the economic slow down caused by the global financial crisis and the recession in the West.<br /><br />The Central Value Added Tax (CENVAT) on non-petroleum products would down to ten, eight and four per cent for different categories.<br /><br />The package also contained full exemption from basic customs duty on industrial intermediate naphtha to give relief to power sector and withdrawal of export duty on iron ore fines while cutting down the levy on export of iron lumps from 15 per cent to 5 per cent.<br /><br />The much-awaited package, set rolling by Prime Minister Manmohan Singh who is also the finance minister, targets power, exports, housing, auto, small and medium industries and infrastructure sectors through additional funding and guarantees that total an amount of over Rs 30,000 crore (Rs 300 billion). The 10-point package contains substantial incentives for the sectors hit by the slowdown, besides allowing India Infrastructure Finance Company Ltd to raise Rs 10,000 crore (Rs 100 billion) through tax free bonds by March as part of efforts to support Rs 100,000 crore (Rs 1,000 billion) programme in the high-way sector.<br /><br />Unveiling the package, Planning Commission Deputy Chairman Montek Singh Ahluwalia said "the market forces would compel manufacturers in a competitive environment to bring down prices and pass on tax benefits to customers."<br /><br />Cheering the package, India Inc said it would augur well and car companies led by market leader Maruti announced that they would cut prices. "It is a significant effort to stimulate expenditure in rural infrastructure areas," the industry said.<br /><br />"The government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem," an official statement said.<br /><br />The steps taken by the Reserve Bank of India to pump in sufficient liquidity in the financial system are being "supplemented by fiscal measures designed to stimulate the economy. In recognition of the need for a fiscal stimulus the government had consciously allowed the fiscal deficit to expand beyond the originally targeted level."<br /><br />"It's just a very good stimulus package, if you want one word for it," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters while briefing on the package.<br /><br />"Don't look for one number. Assigning one number is not the right way to look at it," said Ahluwalia, who said it was a significant effort to give a stimulus on expenditure side, especially on rural infrastructure and housing sectors which have the high employment potential.<br /><br />As part of steps to create demand in the economy that is expected to grow by over 7 per cent, "the total spending programme in the balance four months of the current fiscal year, taking plan and non-plan expenditure together is expected to be Rs 300,000 crore (Rs 3,000 billion)."<br /><br />The stimulus package announced on Sunday comes on the heels of RBI'S monetary measures to ease the cost of funding for the banks, signalling that lenders should lower their interest rates.<br />"The government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem," an official statement said.<br /><br />Having assured stability of the financial system, the government said it has focussed its attention on countering the impact of the global recession on India's economic growth.<br /><br />"The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year," it added.<br /><br />The measures also included the government departments being allowed to seek replacement of government vehicles within the allowed budget, in relaxation of extant economy instructions.<br /><br />"The government is keeping a close watch on the evolving economic situation and will not hesitate to take any additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity," it added.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-67366963494485210722008-12-15T08:32:00.000-08:002008-12-15T08:44:05.825-08:00Banks cut home loan ratesPublic sector banks on Monday announced that home loans up to Rs 5 lakh (Rs 500,000) would be given at a maximum interest rate of 8.5 per cent, while those between Rs 5 lakh and Rs 20 lakh (Rs 500,000 and Rs 2 million) would be offered at 9.25 per cent.<br />Besides, the banks would not charge any processing fees and pre-payment charges for loans up to Rs 20 lakh, and would also provide free insurance cover, the Indian Banks Association said.<br />The package looks at reviving the demand in the housing industry.<br /><br /><ul><li>Interest rates not to exceed 8.5% for loans up to Rs 5 lakh </li><li>Interest rates for loans between Rs 5 lakh and 20 lakh to be 9.25%. </li><li>No processing fee or pre-payment charges, free insurance cover for loans up to Rs 20 lakh.</li><li>PSU banks announce one percentage point cut in loans for micro, small and medium enterprises (MSMEs). </li></ul>However, it is not yet clear if the existing home loan borrowers will benefit from the special home loan schemes unveiled by state-owned banks on Monday.<br /><br />Outlining the new housing loan package in accordance with the stimulus package announced by the government on December 7, State Bank of India chairman O P Bhatt said the interest rate under the two schemes could come down, but would not go up beyond the threshold limit of 8.5 and 9.25 per cent for a five-year period.<br /><br />The offering under the packages would be made till June 30, next year, Bhatt said, adding that after the lock-in period of five years the borrowers could look in for free or floating rates that could change in accordance with market conditions.<br /><br />To make the package attractive, the public sector banks would give the loans at a margin of 10 per cent up to Rs 5 lakh and 15 per cent for loans between Rs 5 lakh and Rs 20 lakh, and in either case, banks would offer free insurance cover, Bhatt said.<br /><br />Leading private lenders, including ICICI Bank and HDFC, appeared favourably inclined to cut their rates, with sources saying the two lenders would study the PSU banks' package before taking a call.<br /><br />Sources said any decision would be taken after ascertaining whether PSU banks are getting any government subsidy for implementing the package.<br /><br />The banks have also decided to cut the lending rates for the micro and medium enterprises by 100 basis points.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-38948967701237159562008-12-15T08:29:00.000-08:002008-12-15T08:31:24.071-08:00Gold surges on firming overseas trendGold prices surged by Rs 100 to Rs 13,000 per 10 gram on the bullion market here on stockists buying sparked by a firming trend in the international market.<br /><br />Silver also rose by Rs 50 at Rs 17,000 per kg.<br /><br />Buying activity picked up following reports that the precious metal in overseas market rose as weakening dollar against the euro raised demand for the gold as an alternate investment.<br /><br />The dollar fell to seven-week low level against the euro. The rising price of crude oil was another supporting factor for the yellow metal.<br /><br />Gold generally moves in opposite direction to the US currency, traders said, adding that surging crude oil raised concerns of inflation and boost demand for precious metal as a safe hedge.<br /><br />Along with the general firm trend, silver ready rose by Rs 50 at Rs 17,000 per kg and weekly-based delivery by Rs 40 at Rs 17,120 per kg. Silver coins spurted by Rs 200 at Rs 26,600 for buying and Rs 26,700 for selling of 100 pieces.<br /><br />Standard gold and ornaments gained Rs 100 each at Rs 13,000 and Rs 12,850 per 10 gram respectively. Sovereign was unchanged at Rs 10,500 per piece of eight gram.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-33969802473092515522008-12-15T08:22:00.000-08:002008-12-15T08:27:57.545-08:00Cheaper home loans may not cheer realty sectorThe real estate sector is unlikely to see any movement even after measures like bringing Rs 20 lakh and below loans under the priority sector. However, it will trigger demand in the tier II and tier III cities.<br /><br />Since the beginning of the year, realty prices have fallen by 10% to 15% across the country. Analysts expect a further price correction of 20% to 25% followed by a time correction. But real estate cost in metro cities like Delhi and Mumbai continue to be high. In September 2008, the rates prevailing in south Mumbai was higher than what it was in November. The September rates for the residential segment in Churchgate, Cuffe Parade and Colaba in (Rs/sqft) was 15,000-32,000; 15,000-35,000; 14,000-40,000 respectively. The November rates for the same areas have however fallen. In (Rs/sqft) the current rate in Churchgate is 15,000-30,000; Cuffe Parade and Colaba are12,000-30,000.<br /><br />In Delhi a lot of areas have experienced a dip. During September, 2008 the rates in (Rs/sqft) in areas like Golf Links, Greater Kailash and South Extension were 6,000-10,000; 6,500-12,000; 7,000-12,000. Prices have dropped since then in all these areas. In (Rs/sqft) the current rate in Golf Links is 5,200-9,000; in Greater Kailash it is 4,500-9,000; in South Extension it is 4,500-10,000.<br /><br />Though much activity is not expected in Mumbai and Delhi, suburbs like Thane, Virar, Vashai and Panvel will see movement in the housing sector. Similarly, while places in the heart of Delhi will not beaffected, places like Rohtak and Sonepat will feel an impact.<br /><br />Even after the current decline in prices housing accommodation in metros are still on the higher end and beyond the purview of Rs 20 lakh loan. So even if home loans become cheaper in this category metro accommodation is unlikely to come within its gamut and hence spur demand here.<br /><br />“In the tier II and tier III cities there may be an impact with Rs 20 lakh loans becoming cheaper, but it will hardly affect demand in the metros where prices continue to be steep,” said Hitesh Agarwal, head of research, Angel Broking. The reason for demand to pick up in these cities is that here most of the buyers are end-users and hence genuine buyers, whereas in major metros investors majorly drive the demand. For the demand to start picking up in metros a price cut for the properties is essential.<br /><br />Currently the interest rate of the priority sector hovers around 9% to 10%. PSU banks are likely bring it down by 2% to 3%. Banks are even looking at waiving off processing fees and reducing money margins.<br /><br />Developers also think a further reduction in home loans to 6% to 7% for the priority sector is going to trigger demand.<br /><br />With banks being more apprehensive about lending to this sector and chances of PE deals happening in the near future being equally grim, industry experts feel that developers will have to be realistic about the situation and bring prices down to drive demand.<br /><br />“The bubble has gone bust in this sector. There is a slowdown in the global economy. Realtors cannot expect to maintain profit margins of the boom era. They will have to cut prices and set realistic targets for the future,” Agarwal pointed out.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-87272561704769787692008-12-01T11:29:00.000-08:002008-12-01T11:30:21.386-08:00US in recession<p>A panel of the National Bureau of Economic Research says the U.S. economy fell into a recession last year.</p><p>The NBER says its group of academic economists who determine business cycles met and decided that the U.S. recession began in December 2007.</p><p>Many economists believe the current downturn will last until the middle of 2009 and will be the most severe slump since the 1981-82 recession.</p>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-31125413410809568602008-11-24T06:07:00.000-08:002008-11-24T07:06:34.051-08:00Finding Your Magic Investing FormulaPeople often ask me, "How do you find great investments? " My standard reply is, "You have to train your brain to see them. Great investments are all around you.<br /><br />"I know that's not a very satisfying answer. Most people want something more specific and concrete. But my reply is as accurate as possible. If we could've seen all the great investments just in the past decade, we'd all be multi-billionaires.<br /><br /><strong>Missing Out on Millions</strong><br /><strong></strong><br />There have never been more opportunities to become rich than in the last 10 years. And there'll be even more opportunities in the next 10. Let me explain. Like many investors, I didn't see the power of eBay almost a decade ago. If I had, I'd be a billionaire today. Nor did I see the power of YouTube, or Google, or MySpace. Being an old guy, my brain isn't trained to see investing opportunities in cyberspace. So I missed them.<br /><br />Thirty years ago, when my business career was just starting at Xerox, I was introduced to a new type of computer. I wasn't tuned into computers at the time, so little did I know that I was looking at the early version of what was to become the Macintosh. So I also missed that billion-dollar opportunity, too. How many billion-dollar opportunities have I missed? Maybe millions.<br /><br />If I've missed so many million- and billion-dollar opportunities, why am I writing articles and speaking worldwide about financial independence? That's a valid question, and the answer has to do with helping you find great investments.<br /><br /><strong>Perseverance Pays Off</strong><br /><strong></strong><br />I took my first real estate investment course in 1974 in Honolulu. The cost was $385, and I believe it was two or three days long. Toward the end of the class, the instructor said something I've never forgotten: "Now you know the difference between good real estate investments and bad real estate investments. Now you all know what to look for.<br /><br />"He paused and then added, "The problem is, most people will tell you such investments don't exist. Your friends will tell you so, and so will real estate agents." Truer words were never spoken. For the next few months, I went from real estate office to real estate office, looking for investments. As promised, the real estate agents told me what I was looking for didn't exist. My friends and co-workers at Xerox told me the same thing, and said I was either dreaming or smoking funny cigarettes.<br /><br />Finally, in a small, obscure real estate office in downtown Waikiki, I met a scruffy little broker who said, "I have what you want." The next weekend I was on a plane to Maui, where he'd found an entire condominium development that was in foreclosure.<br /><br />I purchased my first piece of investment real estate for $18,000, putting the $2,000 down payment on my credit card. The one-bedroom/ one-bath condo paid me a positive cash flow, even after all the expenses and mortgage payments. My investment career had begun. More important, I was training my brain to see what most people don't see. That $385 real estate course has made me millions of dollars over the years.<br /><br /><strong>Keep an Open mind</strong><br /><strong></strong><br />Earlier this year, around tax time, I wrote an article, "Think Rich to Lower Your Taxes." It was about an investment strategy known as the "velocity of money," and how I use it to invest, make a lot of money, and then legally use the tax laws to minimize my own taxes. I suspected it would spark some controversy, and it did.<br /><br />For a couple of weeks, I kept track of responses. Some of the less-complimentary comments reminded me of what those real estate agents and my friends at Xerox said to me back in 1974.<br /><br />You see, our brains are either our greatest assets or our greatest liabilities. As I said, when it comes to investment opportunities in technology, my brain is a liability; I just don't get it. When it comes to investment opportunities in real estate, gold, oil, and silver I'm above average, but not great. And that's because I've trained my brain to see opportunities in those areas.<br /><br />So, instead of criticizing the readers who were close-minded (or even mean-spirited) about my advice, I encourage them to keep an open mind and find their own way of seeing investments most people miss. That's how you get rich. People who refuse to open their minds to new strategies seldom become rich — which I guess is why there are more critics in the world than rich people.<br /><br /><strong>Finding Your Magic Formula</strong><br /><br />One of the most important things my rich dad taught me was to never say, "I can't do it" or "I can't afford it." Those thoughts are self-limiting, and it's hard to find great investments when you're basing your behavior on limitations. In today's world, there are more investing opportunities than ever before. Why would anyone want limited financial results in an unlimited world?<br /><br />One of the reasons I write about financial independence is so I can put forth ideas that challenge the way people think about investing. If you want the same old financial-planning dogma of "work hard, save money, live below your means, get out of debt, and invest in a well-diversified portfolio of mutual funds," then my philosophies are obviously not for you.<br /><br />My job is to stimulate your thinking, inform you about why rich people get richer, and encourage you to find the magic financial formula that works for you. I found mine, and I want you to find yours.<br /><br />- Robert Kiyosaki.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-85731773421105617762008-11-14T09:13:00.000-08:002008-11-14T09:15:50.095-08:00Global crisis to hit India more in 2009: World Economic Forum (WEF)The global downturn will pressurise the Indian economy more next year and the government has to speed up reforms and boost investment to sustain high growth rates, a report said on Friday.<br /><br />The report jointly prepared by World Economic Forum and Confederation of Indian Industry also said India could see a sharp outflow of capital, and a fall in share and asset prices due to the global financial crisis.<br /><br />The report was released ahead of the annual India Economic Summit starting Nov. 16 in New Delhi, where top government officials are expected to interact with heads of global firms.<br /><br />"India's dependence on capital flows to finance its current account deficit is a macroeconomic risk and the global crisis could generate a sharp increase in capital outflows and a reduction in the availability of finance," it said.<br /><br />"Clearly, the global economic picture will be harsher next year and there will be greater pressures on Indian economy."<br /><br />The global credit crisis has rattled Indian markets as foreign investors sold shares worth more than $12.5 billion so far this year while the rupee fell by more than 20 per cent.<br /><br />"It (global crisis) could also weaken the balance sheets of the financial institutions, cause a further fall in share and asset prices, and challenge the macroeconomic situation due to shrinking global growth," WEF said.<br /><br />Indian policymakers expect a moderation in economic growth to less than 8 per cent in the year to March 2009, compared with 9 per cent recorded in 2007/08 fiscal year.<br /><br />Earlier this month, Prime Minister Manmohan Singh cautioned that the global financial crisis could be more severe and prolonged, and the government would take all necessary steps -- monetary and fiscal -- to protect growth.<br /><br />"A tighter environment may also help speed reforms and encourage greater efficiency," WEF said, adding a great deal of political will and dialogue with different stakeholders would be required to take reforms forward.<br /><br />"...India's growth is still strong relative to other economies and its growth story will continue to be one that will unfold over decades rather than years," it added.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-45770931749359849742008-11-14T09:10:00.000-08:002008-11-14T09:12:33.992-08:00About 20 thousand workers may face axe in TirupurWith an anticipated 30% decline in export turnover during the current fiscal, there is an apprehension that about 15,000 to 20,000 workers in the knitwear industry in Tirupur will lose their jobs.<br /><br />Attributing the economic recession sweeping the Western Countries to the dip in turnover, sources in the Tirupur Exporters’ Association, said exports have nosedived during the first half of this fiscal to Rs.5050 crore from Rs.5350 crore registered during the corresponding period last year.<br /><br />Exporters see a bleak future in the remaining period of the fiscal, since there had been a 25 to 30 per cent decline in orders from different markets, particularly the USA and Europe, the sources said.<br /><br />This would result in reduction of working days and hours, leading to rendering of jobless to 15000 to 20,000 of about three lakh workers employed in different segments of about 600 manufacturing units in the knitwear cluster, they said.<br /><br />Some units have already started to function five-day a week and reduced the working hours from 10 to eight hours, from October last, the sources said.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-1499353211337958842008-11-14T09:04:00.000-08:002008-11-14T09:06:49.809-08:00Sensex down by 303 pts; loses 1,000 pts in 2 daysThe BSE’s benchmark Sensex extended its losses amid a see-saw trade on Wednesday, succumbing to heavy selling across all counters.<br /><br />The 30-share barometer gyrated in a wide range before concluding the day at 9,536.33 – a fall of 303.36 points or 3.08 per cent.<br /><br />Market breadth remained negative with 1,701 losers against 818 gainers. Trading volume remained low at Rs 3,690.41 crore. In the last two days alone, the Sensex has shed nearly 1,000 points.<br /><br />The NSE’s broader 50-issue Nifty also dropped further by 90.20 points, or 3.07 per cent, to 2,848.45. Marketmen said a slew of factors contributed to the extremely choppy trade: Weak global bourses, fall in the collections of excise and customs duties in October, export growths falling in September and expectations of more capital outflows – weighed on investors’ sentiments.<br /><br />Additionally, most of the Asian indices ended in the red while European, after surrendering initial gains, were quoting lower this morning following feeble cues overnight from Wall Street.<br /><br />Credit problems originating from the US are fast spreading to other global markets as many of the developed and some developing economies are heading toward recession.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-43820883345879084312008-11-14T09:00:00.000-08:002008-11-14T09:03:03.592-08:00India’s richest end up poorer by 60%Latest Forbes list of 40 richest Indians finds that their total wealth has shrunk from last year’s $351 bn to just $139 bn due to weak stock markets and rupee<br /><br />Sliding stock markets have taken their toll on the much-vaunted personal wealth of India’s richest citizens.<br /><br />In fact, according to global business magazine Forbes’ annual rich-list for the country, the combined net worth of India’s 40 richest has declined by 60 per cent due to weak equity markets and a volatile rupee that lost much ground this year against the dollar.<br /><br />In addition to shrinking net-worths of the top captains of India Inc (their combined wealth is now $139 billion, down from $351 billion just a year ago), these factors also caused a major shake-up in the rankings itself.<br /><br />For one, Reliance Industries’ Mukesh Ambani has overtaken NRI steel tycoon Lakshmi Mittal as the richest Indian in the world, with a net worth of $20.8 billion to Mittal’s $20.5 billion.<br /><br />They are followed by Mukesh’s younger brother Anil Ambani, whose wealth stands at $12.5 billion.<br /><br />Telecom czar Sunil Mittal and realtor KP Singh are ranked fourth and fifth with $7.9 billion and $7.8 billion, respectively.<br /><br />Source: <a href="http://www.mumbaimirror.com/index.aspx?page=article&sectid=5&contentid=20081114200811140242386732702e898&sectxslt=section">Mumbai mirror</a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-48963097279894796102008-11-14T08:52:00.000-08:002008-11-14T08:57:26.990-08:00India loses $63 billion in six monthsIndia’s richest are not the only ones who have lost billions in net worth in the midst of the global meltdown. The country’s central bank has seen its foreign exchange reserves shrink more than $63 billion — enough to fund 600 Moon missions — in less than six months as exports slumped, trade deficit widened on a surge in the oil import bill and foreign investors pulled out of the stock market.<br /><br />Lately, the reserves are falling at an alarming pace, squeezing much of the room for manoeuvre that India had in the face of the ongoing financial turmoil. The fall was a staggering $31 billion in October, or almost half of the decline since May 23, when reserves touched a record $316 billion.<br /><br />The fast depletion has serious implications, as it could bring more pressure on the rupee, which has already depreciated about 20 per cent this year and made everything from imported machinery to foreign travel and education more expensive. A weaker rupee could also reverse the recent slide in inflation.<br /><br />“If this trend continues for more than three months, there could be a problem,” said a top monetary policy official, who didn’t want to be named because the issue is market sensitive.<br /><br />The government, however, is hopeful that the situation would change once its policy responses begin to play out and stability returns to global financial markets. “We are trying to minimise the drawdown on reserves,” said Suresh Tendulkar, who heads the prime minister’s economic advisory council. He said the Centre is trying to induce NRI deposits and tap sovereign wealth funds, especially from the Gulf. Efforts are underway to revive exports growth, he said.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-7904335782988025182.post-71952796331669519172008-10-30T00:46:00.000-07:002008-10-30T00:58:14.143-07:00Mahurat tradingMahurat trading is the auspicious stock market trading for an hour on Diwali (Deepawali), the biggest festival for Hindus.Unknownnoreply@blogger.com0