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Industrial growth plunges to 3.8%

New Delhi, July 11: Industrial growth plunged to 3.8 per cent in May, as compared to 10.6 per cent a year-ago, due to poor showing of manufacturing and electricity sector.

Industrial output, as measured by Index of Industrial Production (IIP), grew by just 5 per cent in the first two months of this fiscal, against 10.9 per cent during the same period last year.

Rising interest cost led to drastic deceleration in manufacturing growth to 3.9 per cent in May, compared to 11.3 per cent in a year-ago period. Manufacturing has a weight of over 79 per cent in IIP.

However, the positive point is consumer durables growth rose to 4.4 per cent, against negative 0.7 per cent. Electricity generation also grew by two per cent from 9.4 per cent in May last year.

Only mining output grew by 5.2 per cent, against 3.8 per cent.

The deceleration in industrial output does not augur well for overall economic growth in the first two months.

Prepare for a possible strike on Iran`

London, July 13: US President George W Bush has given Israel a go-ahead to begin preparations for a military attack on Iran, in case talks over the country's controversial nuclear programme fail to yield results, a media report has said.

The Bush administration is said to have informed Jerusalemm that he would back an Israeli plan to strike Iran's main nuclear sites with long-range aerial weapons if diplomatic talks over Tehran's nuclear programme broke down, a leading newspaper said quoting a pentagon official.

The American President has given Israel an "amber light" to start preparing for a possible offensive, the official told the newspaper.

"Amber means get on with your preparations, stand by for immediate attack and tell us when you're ready," the official was quoted as saying to the newspaper.

The US President's voice of support comes despite his military officials' opposition to an attack on Iran, given the risks of an aerial strike.

However, the US would not deploy American forces for such a strike nor would Israel be able to depend on its military bases in Iraq for logistical support, the official said.

Washington would also not give a "green light" to the attack without unquestionable proof that the Islamic republic is involved in military preparations of its own, the report said.

Iran last week test launched a series of medium-range ballistic missiles it claimed were capable of striking Israel.

The tests prompted a threatening message from Israel Defence Minister Ehud Barak, who said that the Jewish state will not hesitate from taking military action against Tehran.

Inflation to touch 17% by Sept"

New Delhi, July 13: Global investment banker Barclays Capital has projected that inflation may surge to 17 percent by September on back of another round of hike in fuel prices in the same month.

"We believe WPI inflation will remain in double-digit territory until May 2009. We expect WPI inflation of 17 percent by September 2008," the report said.

For the week-ended June 28, wholesale prices-based inflation touched a new 13-year high of 11.89 percent much higher than the Reserve Bank's tolerance limit of 5.5 percent for the current fiscal.

According to the report, the government is likely to hike fuel prices between 10 and 20 percent again as early as September to limit fiscal risks.

Rise in the price of the Indian crude oil basket to USD 145-150 per barrel from the current USD 132 per barrel could be the trigger for another round of increase in fuel prices, it said.

The government last revised retail petroleum prices with effect from June 5, when petrol prices was increased by Rs 5 a litre, diesel by Rs 3 per litre and cooking gas by Rs 50 per cylinder.

This resulted in inflation touching a double-digit figure of 11.05 percent for the week ended June 7.

Last week, even Finance Minister P Chidambaram's adviser Shubhashis Gangopadhyay predicted that double digit inflation will continue throughout the year 2008 and could impact the economic growth negatively.

Mayawati join hands to ‘defeat nuke deal’

New Delhi, July 13: After threatening to make it politically impossible for the ruling UPA government to go ahead with the Indo-US nuclear deal, CPI(M) general secretary Prakash Karat on Sunday took a step forward in that direction when he succeeded in garnering BSP supremo Mayawati’s support for ‘the cause’.

Just days after severing ties with the UPA, the Left parties’ voice, Karat met Mayawati on Sunday afternoon and gave shape to a ‘tie-up’ with the BSP to corner the Congress-led UPA in and outside Parliament. It is a well-known fact that the Congress and BSP have not been living in harmony of late.

Emerging from the meeting with the Uttar Pradesh Chief Minister, Karat told reporters that the Left and BSP have decided to join hands against UPA policies.

While appreciating Mayawati’s anti-nuke deal stance, the CPI(M) leader said the BSP had agreed to support the Left in its bid to block the nuclear deal.

“We have to get the Indo-US nuclear deal defeated,” he said.

Mayawati had earlier described the nuke deal as anti-minority.

Left’s nationwide campaign

Meanwhile, Left parties are launching a "vigorous" nationwide campaign in New Delhi from tomorrow against the government detailing its "unkept promises" and "obsession" with the nuclear deal.

The four Left parties -- CPI(M), CPI, RSP and Forward Bloc -- will explain to the people what prompted them to withdraw support to the UPA and why they oppose the nuclear deal, the bone of contention between them and the Congress.

Top Left leaders will address a meeting at Mavlankar Hall ground here where they will cite the UPA's "drawbacks and failures, including rising prices and inflation, surrendering of national interest, and unkept promises with regard to the Common Minimum Programme (CMP)".

The leaders are expected to launch a "vigorous attack" on the government for its "refusal" to take appropriate steps to tackle the "runaway" inflation and "back-breaking" price rise.

"We will explain to people the reasons for withdrawing our support. We will also explain the UPA's pro-American and anti-people policies which are resulting in price rise and other problems," Karat said.

He said the Left will rally with other democratic and secular forces "who do not want either Congress or BJP to be the only alternative".

In the course of the campaign, he said the Left will also place before the people the alternative to meet energy requirements for development and for putting an end to economic policies which are "harmful to farmers, rural poor, workers and other sections".

Markets may remain lacklustre this week: Analysts

Mumbai, July 13: Dalal Street is expected to witness another sluggish period this week, with a host of negative cues like domestic political uncertainty and bearish global scenario, plaguing the investor sentiments, say analysts.

"Markets will continue to be bearish this week and we are still not out of the woods. This is mainly the impact of the domestic political uncertainty and the bearish scenario in the entire global markets," domestic brokerage SMC Global vice president Rajesh Jain said.

Analysts believe the strong bear grip would continue for next 3-6 weeks as disappointing industrial production figures, rising inflation and crude prices are playing spoilsport with sentiments, which even the better-than- expected earnings of IT major Infosys failed to boost.

"On the global front, the building of tension on the Iran issue will have a direct bearing on the crude prices, while inflation will continue to rise with nothing dramatic likely to happen in the next 4-6 weeks and the disappointing IIP figures could have a far reaching impact on the market," Arun Kejriwal Director Kejriwal Research and Investment Services (KRIS) said.

Although the market would continue to remain weak, the only saving grace could be if the benchmark indices do not fall to new lows this week," Kejriwal added.

BSE benchmark index Sensex lost as much as 457 points to close at 13,469.85 on Friday, while National Stock Exchange's 50-share index Nifty settled 113 points down at 4,049.

Industrial production rose 3.8 percent in May 2008, much lower than the revised 6.2 percent growth in April 2008, the government data released on Friday showed.

Ambani meets PM, decries demands for WPT

New Delhi, July 14: With UPA government's new found ally Samajwadi Party gunning for Reliance Industries, the company head Mukesh Ambani on Monday met Prime Minister Manmohan Singh and a host of other senior government functionaries to explain how demands for levy of windfall tax was bad economics. Ambani first met Singh and there were unsubstantiated reports that he followed this with a meeting with Congress President and UPA Chairperson Sonia Gandhi.

Ambani is believed to have told policy makers that fiscal revenue gain from a WPT would be short-term in nature, but the economic costs of introducing an unstable fiscal regime could be long lasting.

Ambani is believed to have told policy makers that fiscal revenue gain from a WPT would be short-term in nature, but the economic costs of introducing an unstable fiscal regime could be long lasting.

Ambani is believed to have told policy makers that during boom periods of business cycles diverse sectors enjoy high returns like the IT boom in the late 1990s, but a WPT was not even contemplated for them.

Presently, many domestic natural resource-extracting entities in non-oil sectors have also benefited financially from the unprecedented global commodity boom. Will it be justified to impose WPT on them, he asked.

The US imposed a WPT in 1980 but repealed it in 1988 as it led to increased dependence on imported oil and gross revenue gains were significantly less than anticipated.

Ambani is believed to have stated that the current high crude oil price has led to an unprecedented increase in supply and service costs raising both exploration and development of oil and gas by a factor of 3 times over the last 3-4 years.

In economic terms, taxes such as WPT increase marginal production costs, and profit maximising firms respond to it by reducing output and raising prices.

Imposing WPT could have several adverse economic affects. If imposed as an excise tax, the WPT would increase marginal production costs, reduce domestic oil production and increase the level of oil imports.

Windfall profit tax is a tax on actual profit or profit margins. If levied on actual profit then it would need to take into account the capital invested, asset base and similar parameters while if levied on profit margins it was necessary to look at margins of other businesses especially during boom periods.

Refining business, Ambani is believed to have argued, is cyclical in nature. Product deficits catalyses expansion plans. But as new capacities come on stream, refining margins decline precipitously. Also, refining needs large and continuous investments just to meet stringent clean fuel specifications and stay in business.

IFCI scouts for strategic partner

New Delhi, July 14: Country's oldest financial institution IFCI on Monday said that it is open to the process of inducting a strategic partner, despite failed attempts made last year.

"We are committed to looking at all possibilities to ensure IFCI reaches sustainable pattern of growth ... Strategic investor would play role of angel investor to help company in deepening its competency," IFCI chief executive officer Atul K Rai told reporters here.

"We are very much open to it as and when we have requisite condition in place we will go for it (strategic sale)," he said.

The company is also looking at raising resources from the market.

Resources would be raised through private placement or preference shares either by the end of this fiscal or early next fiscal, Rai said.

Meanwhile, IFCI had announced a net profit of Rs 151.07 crore for the first quarter ended June 30, a 38.80 percent decline over the corresponding period a year-ago.

The firm had a net profit of Rs 246.86 crore in the first quarter of FY'07-08, it IFCI said in a filing to the Bombay Stock Exchange on Saturday.

UBI in pact with Belgium firm for mutual funds business

Mumbai, July 14: State-run Union Bank of India, (UBI) has entered into an agreement with Belgium-based KBC Asset Management NV, to form a joint venture asset management company in India.

Union Bank will have a 51 percent stake in the joint venture company while KBC will hold a 49 percent stake, UBI's chairman and managing director, M V Nair, told reporters in Mumbai on Monday.

"Banks are looking at various opportunities for creating synergies among their different lines of businesses...Over the next five years, the Indian retail mutual funds industry is expected to grow at 35-42 percent CAGR," Nair said.

With this, the industry is expected to witness an addition of 90-lakh new retail MF customers during the period, he said.

UBI has plans to use 1,000 of its branches for the mutual funds venture in the initial phase and scale up to include all branches in the future, an UBI official said.

UBI already has a JV with Bank of India and Japanese life insurance firm, Dai-Ichi, in which it holds a 23 percent stake.

Union Bank plans to recruit around 500 marketing executives to strengthen its team for the mutual funds business and is expected to announce the top management of the new company in the next few months, the official said.

The new entity is expected to get operational in the next 3-6 months period after receiving necessary regulatory approvals.

KBC asset management NV is a wholly-owned subsidiary of KBC group of Belgium and has strong presence in central eastern Europe and Belgium.

The company has assets under mangement worth Euro 174 billion as on end-2007.

Ranbaxy gets shareholders nod for securities issue to Daiichi

Mumbai, July 15: Pharmaceutical firm Ranbaxy laboratories on Tuesday said it has received shareholders approval for allotment of over 7 crore securities to Japanese drug maker Daiichi Sankyo.

The shareholders of the company at the extra ordinary general meeting held today approved the allotment of 46,258,063 equity shares and 23,834,333 warrants to Daiichi Sankyo company on preferential basis, Ranbaxy said in a filing to the Bombay Stock Exchange.

Ranbaxy would issue over 4.62 crore equity shares at Rs 737 each and over 2.38 crore warrants convertible into one equity share of Rs 737 a piece, the company added.

Recently, Ranbaxy had announced that the promoters has signed a share purchase agreement with Daiichi Sankyo to sell off their entire stake of 34.8 percent in the company to the Japanese firm for Rs 9,576.14 crore.

Meanwhile, the Japanese drug firm, has made an open offer to pick up a further 20 percent stake in the domestic pharma major for up to Rs 6,818.65 crore.

On completion of the acquisition, the board of directors of the company would be re-constituted to comprise 10 members, of which a combination four independent and non-independent directors would be nominated by Ranbaxy, while the rest six would be named by Daiichi Sankyo.

Shares of Ranbaxy were down over 7 percent and was quoted at Rs 442.40 in morning trade on the Bombay Stock Exchange.

Mallya moves on after SpiceJet offloads equity

Farnborough (Britain), July 15: Amid reports that he was interested in picking up equity in no-frill carrier Spicejet, Kingfisher Airlines' Chairman and CEO Vijya Mallya on Tuesday (July 15) said that he had made an offer for the same.

Incidentally statement comes a day after WL Ross, a global private equity investor, announced aninvsetment of 80 million dollar (Rs 345 crore) in the low-cost carrier.

Mallya said SpiceJet had countered his offer by demanding a price that he was not prepared to meet. "I did discuss with the management of SpiceJet, I won't deny that, but I like to do good deals and I won't do expensive deals," he said after unveiling an Airbus A300-200 aircraft here which will fly on international routes.

He said that SpiceJet needed cash and was looking into seeking alternative investment such as bonds.

Consolidation is still the preferred option in the current uncertain aviation climate, said Mallya. "I still make the point that for any small player it is far more vulnerable to be a small independent player in today's context.

Consolidation is a classical play in any difficult market environment. It has been practised all over the world in many industries and many sectors."

Giving the example of the Deccan-Kingfisher merger, Mallya said the move had helped realise huge amounts of synergy. "The reason why we've been able to find innovative ways of tackling our fuel bill where we are going to redesign the system of buying aviation turbine fuel is that we have the scale and size to do so after I bought Deccan."

Kingfisher alone, or Deccan alone or some other airline alone would not have the scale and size to drive such economies." he added.