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India on target to achieve an average 9% growth: Ahluwalia

Mumbai, March 21: Planning Commission deputy chairman Montek Singh Ahluwalia Friday said the country was on target to achieve an average nine per cent growth for five years, despite a slowdown this year.

"We are on target to achieve an average nine per cent growth ...The year which is ending the growth is almost 8.7 per cent, much higher than originally thought," Ahluwalia told reporters on the sidelines of an IMC function.

"Even if we are slowing down, the country can achieve an average nine per cent growth for five years," Ahluwalia said.

Observing that there has been a lot of turmoil in global markets, Ahluwalia said this will have some impact on the country.

Asked about the slowdown in industrial production, he said one should not make assessments based on a month's data and should take long-term view on the matter.

Ahluwalia said the government remains concerned about the rising inflation levels and would take a series of steps to control it.

"Around the world, we have seen huge increases in fuel, food and commodity prices. Our performance has been better than others," Ahluwalia said.

D-St slide show leaves listed co investors poorer
22 Mar, 2008, 0440 hrs IST,Vivek Sinha.........................

NEW DELHI: It’s all about timing. That’s what the world’s biggest PE funds and some of the country’s largest companies have learnt the hard way. Their investments in listed companies between September and mid-March have led to losses of thousands of crores. Clearly, their advisors and investment bankers got it all wrong.

The list of marquee investors who couldn’t anticipate the fall include the likes of Blackstone, Warburg Pincus, Walt Disney, Holcim, Tata Sons and Orient Global-all of whom lost over Rs 100 crore each.

Many fund managers and chief financial officers of strategic acquirers are now counting notional losses with short-term returns on investments turning turtle and the value of many target companies dropping by 50% or more since they invested. ET studied the deals announced recently involving listed companies to see the extent of erosion in the value of investment made by firms and PE funds.

Among the strategic acquirers, Walt Disney increased its stake in UTV Software last month through a mix of equity and convertibles. The deal was struck at Rs 860.79 per share. Given UTV’s last closing price of Rs 755.85 per share, it translates into a 12% drop in value for the US company. Walt Disney should consider itself lucky. Its notional loss on this investment would been much more had it invested before the market meltdown of January. Given the deal size, Disney has made a loss of Rs 100 crore on this transaction.

Cement giant Holcim’s timing was worse. It picked additional shares in Ambuja Cements in October’07 at Rs 149 per share, or 18% higher than the current price of the scrip. Its loss on this transaction is pegged at close to Rs 135 crore.


Tata Sons, which picked 7.34% in Praj Industries as a financial investor, lost about Rs 190 crore on its Rs 337-crore investment due to a 56% drop in the scrip of the solutions provider to ethanol plants.

Among private equity investors, Blackstone was the most active in 2007, and also the biggest loser. It signed the single largest loss-making deal last year for Gokaldas Exports. The deal, struck at Rs 275 per share, translates into a loss of about Rs 240 crore for Blackstone. This includes the payment to Gokaldas promoters as well as the amount shelled out for the open offer to minority shareholders.

Blackstone’s investment in Nagarjuna Construction is, however, still in the black.

Some other significant loss-making PE deals include Warburg Pincus-Havells (about Rs 136 crore, including the convertibles issue) and Orient Global Tamarind, which picked 4.9% stake in Yes Bank for Rs 330 crore at Rs 225 per share. Yes Bank’s scrip is now worth just Rs 137, a drop of about 40%. Both the deals were struck around December’07, a month before the market went into a tailspin.

Other notable loss-making deals include Blackstone-Allcargo Global Logistics, Baring Private Equity-JRG Securities, Apax Partners-Apollo Hospitals and between a group of investors, including Tatas and UAE’s Al Bateen Investments, and Development Credit Bank.

Futures ban not affected prices; reconsider CTT: Pawar to FM
21 Mar, 2008, 1443 hrs IST......................

NEW DELHI: Coming out in support of futures trading, Agriculture Minister Sharad Pawar has asked Finance Minister P Chidambaram to give a 'second thought' to the budget proposal for commodity transaction tax, a move that has agitated exchanges and regulator alike.

"I wrote to him (Chidambaram saying) till the time we take a decision, hold it and give a second thought," he told PTI when asked whether the proposed levy would make futures trading in India most expensive and if he wanted it to be removed.

The proposed CTT of 0.017 per cent had prompted sharp reaction from all the three major exchanges as also commodity regulator who had jointly petitioned Pawar saying it would sound the death knell for the futures trading.

Pawar disagreed with the view that the futures trading was leading to rise in prices of commodities saying the government has not seen any impact on prices of commodities that were banned for the futures trading.

Asked if there was a proposal to ban futures trading of essential commodities, Pawar said the issue was raised in the Parliament and a committee under the Chairmanship of Abhijit Sen was appointed.

"We have banned (last year) some of the items. We have banned pulses, rice and wheat. But we have not seen any impact on prices after the ban.

"Our observation is after liberalisation has been accepted in our country and other countries, prices are not just decided here," Pawar said.

Husain's 'Mahabharata' fetches record $1.6 mn
21 Mar, 2008, 1945 hrs IST..............................
NEW YORK: M F Husain's "Battle of Ganga and Jamuna: Mahabharata 12 (Lot 57)", a painting from the Hindu epic, fetched $1.6 million, setting a world record at Christie's South Asian Modern and Contemporary Art sale, amid protests against the self-exiled painter's works outside the auction venue.

The artist is currently in self-exile in Dubai after a series of protests against him in India for his depiction of Hindu goddesses. He has been under threat from fringe Hindu groups. A clutch of cases has been filed against him around India, now clubbed together by its Supreme Court.

Even as the auction was going on at Christie's in Manhattan Thursday, supporters of the Indian American Intellectual Forum and Hindu Janjagruti Samiti held a noisy demonstration outside.

They had earlier demanded withdrawal of Husain's works from the auction, accusing him of depicting Hindu gods and goddesses in a "derogatory and vulgar" form.

The auction house went ahead, arguing that "art and culture embrace multiple interpretations and re-interpretations of religious and ethnic symbols that are often highly individual expressions".
Estimated at $600,000-800,000, the work executed in 1971-1972 was sold to an anonymous bidder. Husain's monumental work, a large diptych, was made in the apex of his career.

"Mahabharata" beat the earlier record held by Tyeb Mehta's "Mahisasura", which sold for $1.58 million, also at Christie's in New York in 2005.

"Battle of Ganga and Jamuna" depicts a scene of the ancient Hindu epic "Mahabharata", detailing the cosmic civil war between forces of right and wrong.

At second slot at the auction was Lot 23, Ram Kumar's figurative work from 1952, "The Vagabond". Estimated at $400,000-600,000, it sold for a hefty $1.1 million, setting another world record for the artist.

This rare figurative work, made in 1956, portrays three isolated and forlorn figures, the mood emphasised by the dark and sombre pallet.

Third place belonged to Lot 43 - Tyeb Mehta. His untitled work from 1981 sold for $657,000. The work by the lauded master of Indian modernism was one of the sale highlights and was estimated at $600,000-800,000.

The painting depicts two female figures intermingled, demonstrating Mehta's formal and psychological considerations. The two forms suggest the tangled figures of his later "Mahisasura" series.

Fourth and never to be forgotten was Lot 70 - Francis Newton Souza's untitled work of 1961, estimated at $350,000-500,000, which sold for $385,000. Souza's untitled nude is of spectacular size and a highlight among the dozen paintings by the artist offered in the sale.

Made in the artistic peak of Souza's career, this work demonstrates why he was known as the "master of lines". Souza's paintings reflect his inventive interpretation of the human form, and like Gauguin, possess both a strong sexual aura and a sense of the primitive, the other and the unfamiliar.

Eighty-six-year-old Syed Haider Raza's "Bindu Pancha Tatva" at Lot 10 took the fifth highest slot as it sold for $361,000 from an estimate of $300,000-500,000.

Of great excitement was the new name at slot 6 - of young Santhosh. His work, "Traces of an Ancient Error", 2007, at Lot 27 flew from a humble estimate of $150,000-200,000 and sold for an admirable $337,000.

Santhosh is internationally known as one of the rising stars of the contemporary Indian art scene with several exhibitions to his credit. His works capitalise on the attributes of post-modernism, and often address the subjects of war, catastrophe and modern society.

At seventh position was Rameshwar Broota's "Traces of Man - I", 1995, estimated at $180,000-200,000 which sold for $265,000.

The much touted work by Atul Dodiya that Christie's put on its cover for the catalogue second print run failed to attract the world record attention they sought.

Dodiya's untitled 2004 work, estimated at $120,000-150,000, sold for $217,000. Sources feel that Dodiya's market has reached a saturation point and hence failed to create the high frenzy of bidding. The sources also state that the market is correcting itself in a big way and the bull-run is slowing down.

Out of 125 lots, 111 sold, putting the sale value at 87 percent of lots sold and fetching $10,974,600.

Subprime make IT cos lend helping hands to clients
22 Mar, 2008, 0815 hrs IST................................

BANGALORE: Barely a quarter back, the biggest frown line on IT services companies was caused by a volatile rupee. Most companies were pushing their case with clients for price revision and experimenting with new forex cover options to minimise the currency shock. But, the scenario has undergone a sea change in just a matter of weeks. With the US subprime crisis and recessionary trends unfolding a story which has led to even more uncertain times, India’s IT services companies, predictably, are prepared for a cautious outlook on rupee.

The IT industry faced the brunt when the rupee rose dramatically and almost gained around 15% in 11 months. However, the rupee has remained stable against the dollar in the last six months, hovering around 40 mark.

By and large, for every one per cent rise in rupee against the dollar, the operating margins of IT companies is hit by 40-50 basis points. At the same time, companies have been able to use various levers to hedge against the appreciating rupee. According to a study done by Tholons, a offshore advisory firm, “Many companies focused on acquiring businesses in other currency geographies and also focusing on domestic business, which were immune to currency fluctuations.”

It further said that in some cases, efforts were made to sign rupee denominated contracts. Organisations also resorted to hedging balance sheets and cash flows. The other lever that organisations are utilising to counter the effect, is one of improving operational efficiency.

A senior executive of a large IT services firm says, “The rupee story is over. It is a wait and watch time. Also, now is the time when we cooperate with our clients who may be in a vulnerable position.” So, IT firms are looking at becoming their partners and also in helping them tide over the tough times.

At a time when there are question marks on IT spends and large offshoring contracts, Indian vendors have little choice but to come up with confidence-winning tricks. Companies may be pushing solutions that not just offer cost arbitrage but also bottom line enhancing outcome. “It will not happen overnight. But, we can, for instance, take over the IT department of a large corporation, and drive down costs and enhance value,” said an executive from India’s top six IT firms.

Such a move will not just put these firms as strategic partners but also land them with far larger budgets compared to a piecemeal contract. Obviously, the premise is that any crisis would actually increase offshoring when the dust settles. The picture will be clearer in the next two quarters, trackers s

Infosys: 47% of core business assets stagnating?
26 Feb, 2008, 0024 hrs IST.................................

Infosys has published its December ending Q3 results. The consolidated results disclosed a net profit of Rs 3,410 crore on an equity of Rs 14,309 crore, yielding 32%. As a marginal investor, I’am satisfied and then worried, because there is significant loss of shareholder value, and it is under reported.

CEO Gopalakrishnan has deployed Rs 14,309 crore in assets, of which Rs 6,679 crore (47%) were deployed in cash and bank balances, outside the core business. Kris and team were able to use only 53% of the risk capital retained from their shareholders.

And that is not acceptable business leadership, for me. For every rupee in core business, eighty paise is deposited in the bank, because they do not know what else to do ? Or is the business model of Infosys intrinsically risky, so as to keep a cash reserve ratio as high?

What worries me more is that this has been a habit. Historically, 30-50% of the total assets were in cash and bank deposits—50% in 1982, 30% in 1998, 49% in 2002, and 50% in 2007—as disclosed in the last annual report. Therefore, this is a genetic disorder, and it needs a paradigm shift at the capital of Infosys

One option is to get a respectable investment banker into the board. Another option could be to return the surplus to shareholders, than holding back for meager bank interests. Or CFO Bala can retain wealth managers and assign investment objectives to earn more return on more investments.

Alternatively, N R Narayana Murthy could grant to Infosys Foundation, say, 50% of the Rs 6,000-crore surplus—to compensate for that part of the Indian economy, which has not benefited, as fast, from the economic growth. I also know Infosys accounted Rs 19 crore, Rs 13.25 crore and Rs15 crore as grant to their Foundation in 2007, 2006 and 2005 year-ending respectively—a mere 0.28% of their 2007 under-utilised equity surplus.

For each Re 1 invested in core business, let Infosys invest 40 paise in their Foundation, and keep the balance 48 paise with investment bankers, not simply bankers. The trustees should demand more—the current scale of grant has been peanuts, not worthy of the huge capital underutilised at Infosys.

For the customer as a stakeholder, Shibulal as their COO could crack the capital now. My broker Jose Avaran asks me—since recession has taken firm roots in the US, why not offer a recession discount to the North American customer segment, which contributes 33% net operating income, while accounting for 60% share of the aggregate operating net income across the segments.

Thus, Shibulal can invest the bank deposits to penetrate more deeply into existing and new customer relationships, thus gaining market depth and share, than park them with banks.


Infosys accounts for an average overhead amount of Rs 981 crore per month. HR Director Mohandas Pai can crack the HR goals, recruiting 12 people for the job of 10, send all the 12 home on time, with no over- time, no work-pressure.


He now pays Rs 981 crore every month, let him pay Rs 1,177 crore for 20% extra people capacity, so that the employees can build their homes more and there is less divorce.

Thus, Shibulal and Pai can shift the extra under- utilised operating profits—earned by cost reduction—from bank deposits to the homes and neighbourhoods of the employees.

I can sketch a capital structure scope as high as Rs 42,900 crore against the current Rs 14,309 crore, if debt is added. The company has to stop boasting ‘ being ‘debt free’, when debt is cheap, cheapest in USD, which is the currency of over 62% of Infosys income inflows, hence no currency mis-match risk.

The weighted average cost of capital, since debt has been zero, has been equity cost of capital, and in the range of 16.99 to 12.96% over 2003-07. The economic value added was 18.2% in 2003, grew to 26.1% in 2005 and declined to 23.2% in 2007, as per last annual report. By adding cheaper debt, this can be substantially increased. So instead of depositing money with banks, Bala, drive the Board to do the opposite, borrow more.


The challenge is before the Chairman Nandan, to blow-up current goals and strategy, which have been systemically ignoring fair return on retained earnings. The minimum demand for feasible business ideas is proportionate to retained capital.

The leadership needs to have viable business ideas to consume all the equity capital. Then they should have twice more feasible ideas which is worthy of the cheaper debt capital, if not they should give way to new leaders with more feasible ideas. Check mate, Nandan.

Citigroup to cut 400 jobs in UK; India to follow
24 Jan, 2008, 1925 hrs IST........................LONDON: Reeling under huge subprime-related losses, Citigroup is planning to axe close to 400 employees in its UK investment banking business, which it might soon follow with job cuts at other places including India, a report said.

"Citigroup is to cut about 400 of its investment banking staff in the UK as part of the US bank's plan to reduce the headcount by 4,200 globally," Financial Times reported.

"The remaining 3,800 of Citi's proposed cuts are likely to fall in its US consumer finance business, as well as in Asia and India," the report added.

The world's largest bank, which late last year appointed India-born banker Vikram Pandit as its CEO, has already disclosed billions of dollars worth of losses related to the subprime crisis in the US, whose after-effects are being witnessed across the global financial markets including India.

The bank has a headcount of close to 11,000 people in the UK. The daily said that Citigroup reviews its staff every year in January with an aim to "weeding out the weakest 5 per cent and filling their positions with stronger external recruits."

"But the process this year would see only a minority of departures being replaced," the report quoted people The bank started the consultation process on the proposed job cuts earlier this week, while disclosing the bonuses for its employees for the year 2007.

"It used the bonus round to retain promising junior staff and even paid higher bonuses to members of its fixed-income division if they performed well," it quoted insiders as saying.

Haier plans to enter new segments
22 Mar, 2008, 0500 hrs IST, TNN

BANGALORE: Chinese consumer durables giant Haier is planning to enter new segments like commercial refrigeration, water heaters and commercial ACs in India. The company is also in talks to acquire manufacturing facilities for its existing businesses in India. According to the Haier Appliances India’s director (sales and marketing), RT Rajan, the company will be entering these three new segments before the end of 2008.

The demand for commercial refrigeration and water heaters is growing in India, and globally we are strong in these segments. So we will be launching these, even as we continue to strengthen our core areas in refrigerators and ACs,” Mr Rajan said. Haier will be importing some of these products, while some will be made by exclusive third-party manufacturers. Haier is also planning to almost triple its capacity at the Pune plant, which it got after acquiring Daewoo Anchor last year. At present, they have a capacity to make 3.5 lakh refrigerators per annum, which they will be increasing to 10 lakh refrigerators per annum. The company said it was too early to tell what market share they would be eyeing. However, Haier would be customising some of the products to the suit the needs of the Indian market.

Asian workers set for biggest pay rise: report
17 Jan, 2008, 1704 hrs IST......................

SINGAPORE: Salaried workers in Asia are tipped to enjoy the world's largest pay increase of 7.3 percent on average this year, an international human resources firm said Thursday.

The increase in Asia will be higher than the global figure of 5.9 percent, said ECA International.

Asia's economic growth along with the need to retain skilled talent are the main factors fuelling the wage rise, it said.

"Relatively high rates of salary increase in Asia in comparison to elsewhere in the world reflects that robust economic growth recorded in 2007," said Lee Quane, ECA's Hong Kong-based general manager.

"Principal causes of these salary increases are inflation, economic growth and the need for organisations to retain key talent," he said.

Within the region, Indian workers' pay packets will likely see the biggest rise of 14 percent, which is also the highest increase among the 47 countries included in the survey of 250 multinational firms.

Vietnamese workers' wages are expected to jump 10 percent, the second highest growth in Asia, while at the other end of the scale Japanese employees will have the lowest rise of three percent, the survey said.

"These high increments are mainly the result of fast economic growth and widespread skills shortages which are prompting companies to pay more for talent while keeping pace with the inevitable inflation that comes with economic development," ECA International said.

In China, wage growth is expected to remain at eight percent while in Hong Kong, the forecast is four percent and in Singapore five percent, said ECA International.

In Indonesia, wages will rise 11.3 percent, the Philippines eight percent and Thailand 6.5 percent, according to the survey carried out in the second half of last year.

Salary hike: Infrastructure overtakes IT
20 Feb, 2008, 0900 hrs IST,Vivek Sinha & Chaitali Chakravarty, TNN

NEW DELHI: It’s a study in contrast. Infrastructure companies are giving mid-term hikes and poaching people with 40-50% jumps in annual compensations at a time when vaunted software firms are sacking people and cutting variable pay.

Huge demand for engineering, procurement and construction professionals has led to across-the-board 18-20% mid-term hikes in large infrastructure companies like Larsen & Toubro, Punj Lloyd, Sobha Developers and Reliance Retail’s EPC division, among others.

Human resource managers attribute this to a demand-supply mismatch and a heightened activity in the construction, infrastructure and retail sectors. India requires $494 billion worth of investments in the infrastructure sector over the next five years, as per the Eleventh Five Year Plan. Of this, nearly 40% has to come from the private sector.

This is coupled with the fact that a part of the pool of civil engineers and experienced construction managers are constantly changing companies within the country as well as moving overseas, particularly to the Middle East which has traditionally attracted construction engineers from India.

One immediate impact is mid-term salary revisions, breaking the norm of an annual appraisal. For instance, Punj Lloyd, the second largest construction firm after L&T, has just implemented a mid-term hike in January for its experienced people ranging around 18% with a bigger hike at the junior level.

According to the human resources head of Punj Lloyd PK Gandhi: “This was a mid-term correction, the actual revision will happen in April when we expect the cumulative hike to be around 25-30% with the top performers getting on average 40%-45% hike. There are two aspects to this, one relates to realigning salaries to reflect market realities and the other issue is scarcity of experienced people.”

Others are not far behind. Sobha Developers had implemented a similar mid-term pay hike for its ‘on-site’ employees in November ‘07. The quantum varied, with average hikes of 15-20% while at the entry level, for instance, project engineers with one year experience are receiving a 25-30% hike. The firm plans to follow up with the annual salary revision, scheduled for April. The final quantum of hike is not frozen as of now but given the hikes already implemented it would amount to 30% plus on average for entry level people who work on the site.

“Employee and labour costs have gone up significantly over time and today it constitutes about 30% of any project cost. With 25-30% salary hikes, which we are forced to implement given market realities, it would further push up the cost of construction as already we are facing cost push pressure from material side,” said Sobha Developers' executive director-HR & IT N Venkatramani.

L&T is also mulling a similar mid-term salary revision. According to L&T’s HR head MS Krishnamurthy: “Since last year we have started a practice of six monthly salary revision as against annual revision which happens in June-July period. We did a mid-term hike in January ’07 and are considering a similar hike this year, though a final decision has not been taken.”

HR consultants say there is a levelling of the salaries of software and civil engineers at the fresher level. Firms hiring from regional engineering colleges are said to be offering an average annual package of Rs 2.5 lakh for civil engineers against the IT firms which are paying in the vicinity of Rs 2.1 lakh. This is explained by an expected deceleration in IT sector growth, which now permits IT companies to at least get rid of the deadwood, even as it hires large numbers.