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High inflation would not allow RBI to cut interest rts: CEOs

New Delhi, March 16: Expressing concern at inflation rate touching a nine-month high of 5.11 per cent, India Inc on Sunday said the price rise would not let RBI slash interest rates even though such a step is required to give a fillip to the slowing industrial growth.

"With the crude oil price touching 110 dollar a barrel and the global equity market giving way to commodities touching new high, the inflationary pressure is likely to continue, disallowing the RBI to opt for cut in interest rates despite signals of a slowdown," said majority of CEOs survey by industry chamber Assocham.

The majority of CEOs surveyed by the industry body had felt that the rising inflation has dashed hopes that RBI would cut interest rates to boost the sagging industrial growth.

"Government is confronted with the dilemma of keeping the inflation rate low and prevent further hardening of the interest rates, hence they are left with little elbow room," said Assocham president Venugopal Dhoot.

Also, about 85 per cent of the 130 CEOs surveyed said "while the government did announce fiscal measures in the Union Budget, the Indian economy cannot remain insulated from a sharp rise in global commodity prices".

Yesterday, Finance Minister P Chidambaram also indicated that RBI may not go for cut in policy interest rates due to high inflation rate.

In the backdrop of inflation breaching 5 per cent mark, to which RBI wants to limit it in the current fiscal, policymakers would refrain from moderating interest rates, especially in a year when several state assemblies have to go for polls, feel 74 per cent of the CEOs.

The economists see a limited role for monetary policy in reigning in inflation presently. "I expect the government to use administrative and fiscal tools to control inflation because the present rising inflationary trend is mainly due to supply-side problems," Enam Securities Chief Economist Sachichidanand Shukla said.

Shukla expects the government to effect excise and customs duty cuts on some items as a part of its fiscal initiatives to rein in inflation. "Administrative efforts would work better on the food side," he said.

On whether oil prices would be further hiked this year, the economists felt that this being a pre-election year, the government might not do so. "However, from an economic perspective, that (a hike) might be the best thing to do," Crisil`s Director and Principal Economist D K Joshi said.

The government might also consider another tranche of oil bonds, Shukla said.

"The oil price pass-through has not yet begun to reflect fully in our economy. Once it does, then inflation could rise further," IDBI Capital`s Managing Director & CEO Sushil Muhnot said.

The reserve bank cannot do much on factors such as rising oil prices. "The rupee too has not appreciated of late and hence, fuel prices will play a significant role in impacting inflation. Previously, the rupee appreciation helped somewhat offset rising global prices," Joshi said.

Economists do not see the country`s GDP growth slackening with almost all of them pegging growth at 8 per cent or over.

"Growth has definitely moderated but I still see it at 8 per cent in FY 09," Dr Nitsure said.

The key to stimulating growth would lie in reducing policy rates, Shukla felt. "Growth is softening and some stimulus will be needed to propel it. If industrial growth figures are ugly by the second-half of this year, then the rbi might be forced to cut rates," he said.

Till then, however, that possibility can be virtually ruled out given the present rising inflationary trend and the priority attached to combating inflation by the government, the economists said.

World Bank sees US recession risk

Brussels, March 16: The United States may well be heading into a recession and Europe faces further financial market turmoil too but developing countries are showing little signs of being hurt, World Bank President Robert Zoellick said.

"I am not an economic forecaster. People are debating: Is it going to be a slowdown or recession?," Zoellick said.

"Regardless of that debate, you are facing a serious economic slowdown from what you had before, and there may very well be a recession," he said, referring to the US economy.

Further fallout is likely from the squeeze in credit markets that forced US investment bank Bear Stearns to seek emergency financing last week, Zoellick said in an interview during the Brussels Forum conference on transatlantic relations.

"In financial markets in the United States, there is still a lot to go," he said, speaking on Saturday.

Europe too was likely to see subprime mortgage-related problems beyond those which affected German banks recently.

"My own view (is that) there is more to be worked through in the European market too," said Zoellick, a former US trade representative who also held top Treasury and State Department posts.

"This is spread more widely than one might have thought. I believe one of things we have seen in the market is that the use of these instruments has been far more distributed than people originally thought."

But the impact on developing economies so far was limited, compared with the way emerging markets tumbled domino-style in the 1990s, when Southeast Asia, Russia and Latin America fell into devaluation crises, and in the 1980s, Zoellick said.

"What is striking about this period of financial turmoil is the relative lack of effect compared to other periods."

Intense anxiety

Although India and China were expected to see slower growth this year, both economies were expected to stay relatively robust giving broader balanced growth around the world economy.

"That is very significant in the systemic sense in that while I don`t believe there is decoupling (the theory that US economic problems will not affect other economies)..., we do have domestic demand in those countries that provides an independent source of growth," he said.

"I think this is a very important and a good development for the international system."

Nonetheless, there were early signs that US market jitters were starting to hit bonds from developing countries with some issuers offering less debt than they hoped for and some companies apparently not going to market at all, he said.

"Certainly what I have sensed in the United States is the intensity of the anxiety has increased greatly in the last week or two and I think some of this may be flowing through to developing markets but it is still a little early to tell."

Zoellick also said he was hopeful that rich countries suffering from dry credit markets and emerging countries holding trillions of dollars in export revenues would agree on a new code of conduct for sovereign wealth fund investments.

The World Bank, with other institutions, is involved in drawing up guidelines aimed at smoothing the way the funds from the oil-rich Gulf or new trade powers such as China invest in developed economies without raising political suspicions.

"I am cautiously positive that people will find reasonable ground on this," Zoellick said.

A first draft of the guidelines, expected to touch on issues such as transparency, is due to be published in October.

On high food prices which have triggered riots in countries such as Cameroon and led the United Nations to warn of a $500 million shortfall in its food aid budget, Zoellick said the World Bank was roughly doubling its investments in agricultural projects in sub-Saharan Africa to $700 million this year.

"When one talks about markets today it`s not only New York and London but it`s also agricultural markets and their effect on Africa."

Maintaining stability of financial system a priority: Paulson

Washington, March 16: The US government is prepared to do "what it takes" to maintain the stability of the financial system, Treasury Secretary Henry Paulson said on Sunday, while defending the federal reserve's decision to bail out ailing investment giant Bear Stearns.

Appearing on a talk show, he refused to speculate if federal government will intervene in the crisis surrounding Bear Stearns and argued that the administration would have to strike the fine line between "moral hazard" of intervention and stability of the financial markets.

Paulson also maintained that a strong US dollar is in the interests of the country and that the administration is doing everything it can to increase the confidence in the economy.

"Our long-term fundamentals in this country, economic fundamentals, are strong. Our economy has its ups and downs like any other economy, but I believe that that long-term strength is going to be reflected in the dollar," he said.

"Everything I'm doing when I'm here is to make this us economy more competitive, stronger...Anything we can do to enhance confidence in our marketplace... Are the policies that increase confidence in our economy over time," he added.

Paulson would not commit himself to a particular direction the government would be willing to take to come to terms with crisis in the financial markets, the latest in the series being that of Bear Stearns.

"The government is prepared to do what it takes to maintain the stability of our financial system. That's our priority," he said.

Paulson said the fed's intervention in the Bear Stearns crisis was the "right decision".

JPMorgan to Buy Bear for $2 a Share
Sunday March 16, 10:31 pm ET
By Joe Bel Bruno and Madlen Read, AP Business Writers
JPMorgan Says It Will Buy Ailing Bear Stearns for Fire-Sale $2 a Share, or $236.2 Million
NEW YORK (AP) -- Just four days after Bear Stearns Chief Executive Alan Schwartz assured Wall Street that his company was not in trouble, he was forced on Sunday to sell the investment bank to competitor JPMorgan Chase for a bargain-basement price of $2 a share, or $236.2 million.
The stunning last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system sparked by the collapse in the subprime mortgage market. Bear Stearns was the most exposed to risky bets on the loans; it is now the first major bank to be undone by that market's collapse.

The Federal Reserve and the U.S. government swiftly approved the all-stock buyout, showing the urgency of completing the deal before world markets opened. The Fed also essentially made the takeover risk-free by saying it would guarantee up to $30 billion of the troubled mortgage and other assets that got the nation's fifth-largest investment bank into trouble.

"This is going to go down in very historic terms," said Peter Dunay, chief investment strategist for New York-based Meridian Equity Partners. "This is about credit being overextended, and how bad it is for major financial institutions and for individuals. This is why we're probably heading into a recession."

JPMorgan Chase & Co. said it will guarantee all business -- such as trading and investment banking -- until Bear Stearns' shareholders approve the deal, which is expected to be completed during the second quarter. The acquisition includes Bear Stearns' midtown Manhattan headquarters.

JPMorgan Chief Financial Officer Michael Cavanagh did not say what would happen to Bear Stearns' 14,000 employees worldwide or whether the 85-year-old Bear Stearns name would live on after surviving the Great Depression, two World Wars and a slew of recessions. He told analysts and investors on a conference call that JPMorgan was most interested in buying Bear Stearns' prime brokerage business, which completes trades for big investors such as hedge funds.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.

"Having taking Bear Stearns out of the problem category, and the strong action by the Federal Reserve, we would anticipate the market will behave quite differently on Monday than it was Thursday or Friday," Cavanagh said.

Some analysts expected it to be a brutal day for global stocks, nevertheless. Shortly after the news broke, Japan's benchmark Nikkei stock index plunged more than 3 percent in morning trading.

A bankruptcy protection filing of Bear Stearns could have heightened anxiety in world financial markets amid a deepening credit crunch. So far, global banks have written down some $200 billion worth of securities slammed amid the credit crisis -- more write-downs could come. Last week, a bond fund controlled by private equity firm Carlyle Group faltered near collapse because of investments linked to mortgage-backed securities.

JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.

"The past week has been an incredibly difficult time for Bear Stearns," Schwartz said in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."

Wall Street analysts say the bid to rescue Bear Stearns was more than just saving one of the world's largest investments banks -- it was a prop for the U.S. economy and the global financial system. An outright failure would cause huge losses for banks, hedge funds and other investors to which Bear Stearns is connected.

After days of denials that it had liquidity problems, Bear was forced into a JPMorgan-led, government-backed bailout on Friday. The arrangement, the first of its kind since the 1930s, resulted in Bear getting a 28-day loan from JPMorgan with the government's guarantee that JPMorgan would not suffer any losses on the deal.

This is not the first time Bear Stearns has earned a place in Wall Street history. A decade ago, Bear Stearns refused to help bail out a hedge fund that was deemed "too big to fail." On Friday, the tables had turned, with the now-struggling investment bank in need of the same kind of aid.

Bear Stearns was founded in 1923 and in recent years was best known for its aggressive investing in mortgage-backed securities -- and what was once a cash cow turned into the investment bank's undoing.

In June, two Bear-managed hedge funds worth billions of dollars collapsed. The funds were heavily invested in securities backed by subprime mortgages. Until that point, subprime mortgage-backed securities were immensely popular with investors because of their profitability.

The funds' demise and subsequent problems in the credit markets called into question Bear Stearns' ability to manage its own risk and the leadership ability of then-Chief Executive James Cayne. Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

Cayne took over from the legendary Alan "Ace" Greenberg in 1993. Greenberg joined Bear Stearns as a clerk, working his way up through the ranks to eventually take over as CEO in 1978. Greenberg was known for his irreverent style, and his regular memos to employees were turned into a book called "Memos from the Chairman."

Before Greenberg's ascendancy to CEO, Bear Stearns began to expand from its New York roots throughout the 1950s and 1960s, opening international offices and expanding its U.S. operations.

AP Business Writers Jeannine Aversa in Washington and Stephen Bernard contributed to this story.

Investors pull out $2 bn from emerging market funds: Report

New Delhi, March 16: The volatility in stock markets has forced investors across the world to pull out over 700 million dollars from funds focused on Asian market last week, while there was an outflow of as much as two billion dollars from the emerging market equity funds, says a report.

According to the emerging market fund tracking firm, Emerging Portfolio Fund Research (EPFR), global investors have pulled out from most of the emerging markets during the second week of March, as investors fretted about the loss of export competitiveness in the face of a slumping dollar and showed little confidence in the view that growth in key emerging markets is decoupled from the US economic cycle.

Investors pulled out USD 2.01 billion of the diversified Global Emerging Markets (GEM) Funds, USD 714 million out of Asia (ex-Japan) Funds and modest amounts -- around 0.1 per cent of assets under management -- from EMEA and Latin America Equity Funds for the week ended March 12 , the EPFR report said.

Among BRIC (Brazil, Russia, India and China) country funds, Russia was the only one to post an inflow during the reviewed period, while the funds focused on the BRIC region recorded outflows for the third time in four weeks.

However, strong commodities story provided some protection and flows out of Brazil and Latin America regional funds were a minimal 0.01 per cent and 0.02 per cent of assets under management, reflecting the regions close correlation with commodity prices, the report added.

World Summary: BEAR STEARNS CRUNCH ROCKS WALL ST..........................
Sydney, Mar 17, 2008 (RWE via COMTEX) -- US equities have been rocked by the developments at Bear Stearns, which suggested the credit crunch has reached a new and more perilous phase.

Wall Street fell, the dollar sank, and Treasury prices surged higher as investors sought the safety of government paper.

Gold again moved over $1,000 and oil held around $110.21 barrel on the New York Mercantile Exchange.

On the bell, the Dow tumbled 195, and the broader industrial S&P 500 index was down 27.

In technologies, the Nasdaq Composite lost 51 and the 100 index came off 36 on the close.

US interest rate futures jumped on an official prediction from Citibank that the Federal Reserve will lower its benchmark short-term US target rate by 100 basis points next week.

The March fed funds futures contract implied that traders are placing a 54pc likelihood of a 100-basis-point move.

Standard & Poor's has now cut its ratings on Bear Stearns and indicated it may cut it again, after the bank said a cash crunch forced it to turn to the Federal Reserve and JPMorgan Chase for emergency funds.

Its shares plunged after the investment bank said that it will receive funding assistance from J.P. Morgan Chase and the New York Fed.

The firm said its liquidity had "significantly deteriorated" in the past 24 hours amid "market chatter" about a squeeze.

Markets became erratic and uncertain with stocks and the dollar tumbling and bonds jumping.

Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, sources in several dealing rooms said.

At least six major institutions in London, including Commerzbank, Royal Bank of Scotland and JPMorgan, had stopped giving prices to the US bank, a credit trader at one European institution disclosed.

The dollar came under renewed pressure, with the euro climbing to $1.5647 in afternoon action on Friday.

The United States is in a recession that could be substantially more severe than recent ones, National Bureau of Economic Research president Martin Feldstein said.

"The situation is very bad, the situation is getting worse, and the risks are that it could get very bad," He said in a speech at the Futures Industry Association meeting in Florida.

"There's no doubt that this year and next year are going to be very difficult years."

NBER is a private sector group that is considered the arbiter of U.S. business cycles.

Bankers say lenders will likely demand more compensation for temporary, or bridge loans, used for acquisitions and will be less willing to commit to long-term bridge facilities.

One worry is that companies will have more trouble replacing bridge loans with long-term corporate bonds as yields in the bond market rise.

On key data news, the Labor Department said the Consumer Price Index, was flat last month after rising 0.4pc in January.

It was the first unchanged reading since August.

Cheaper gasoline, food, autos and clothing kept US consumer prices in check in February, the government said on Friday, but a recent spike in gas costs to a record high means the inflation relief may be short lived.

The closely watched core index, which excludes volatile food and energy items, also held steady.

"This is a huge surprise," said Ken Landon, a foreign exchange strategist with JPMorgan Chase in New York.

"It gives further support for the Fed to cut rates more aggressively."

In the 12-month period through February, consumer prices rose 4pc, a moderation from the 4.3pc gain registered in January and the smallest year-over-year increase since October.

In the market, a fund affiliated with Carlyle Group all but collapsed as banks rushed to sell assets backing the fund. Carlyle Group isn't expected to suffer much financially, but it's a severe blow to the reputation of the asset-management company.

WALL STREET... The Dow Jones Industrial Average ended 194.65 lower at 11,951.09. Standard and Poor's 500 index lost 27.34 points to 1288.14. The Nasdaq Composite index finished 51.12 lower at 2212.49 and the 100 index closed 36.57 points lower at 1713.83. In Treasuries the 10-year rose 29/32 to 100 22/32, cutting the yield 11 points to 3.41pc. The 30-year bond yield shed 10 points to 4.34pc and the 2-year note yield dropped 19 points to 1.43pc.

US DOLLAR... is changing hands at 99.15 yen, compared with 90.01 previously. The euro is at 1.5677 from 1.5677 previously while sterling is at 2.0170 from 2.0186. On the Swiss franc, the US dollar is trading at 0.9969 against 0.9977.

AUSTRALIAN DOLLAR... is changing hands at US93.67c compared with US94.34c on the local close. Offshore the Aussie posted a high of US94.48c and low of US93.50c. The Aussie crosses are 92.82 yen (pre 95.23), 0.5974 euros (pre 0.6055) and 46.44 pence on sterling (pre 46.55).

AUSTRALIAN MARKET... is expected to weaken after the Wall St tumult. The March futures contract is showing a fall of 36 points to 5124. The ASX 200 index finished 71 points higher at 5206.9 on Friday and the All Ordinaries index gained 72.8. Ex dividend stocks today are Billabong, Brisbane Broncos, Count Financial, Housewares and Pro Medicus. Proto Resources is ex an entitlements issue.

EUROPEAN MARKETS... London's FTSE-100 fell 60.7 points to 5631.70 the Paris CAC-40 lost 38.04 to 4592.15, Frankfurt DAX Xetra dropped 49 to 6451.90 while Zurich dropped 119.7 to 7132.03. Other regionals were weaker. Amsterdam shed 2, Brussels 29, Madrid 6, Milan 222 and Oslo 1.

METALS... COMEX gold (Apr) rose $5.70 to $999.50 oz and touched a high of $1009, while the June contract gained $5.60 to $1004.30 oz and reached $1013.50 oz. May silver gained 23.5c to $20.574 oz. April platinum fell $26 to 2076 oz, while April copper rose 70 points to 384.70c lb in New York.

On the London Metal Exchange, the official cash ask prices showed copper rose $61 to $8611 tonne. Tin gained $945 to $20,800, lead dipped $31 to $3111, zinc fell $51 to $2585, aluminium advanced $30 to $3108 and nickel sold $365 higher at $32,650 tonne.

The 3-month ask prices were: copper $8390 (pre $8350), tin $20,700 ($20,100) lead $3080 ($3080), zinc $2590 ($2625), aluminium $3080 ($3115) and nickel $32,600 ($32,100).

OIL... April crude fell 30c to $110.21 barrel and touched a high of $110.92 and a low of $108.84 barrel. The May contract lost 66c to $108.74 barrel with a high of $109.69 and low of $107.56 barrel. Brent ICE for April shed 1c to $107.56 with a high of $108.02 and low $106.24 barrel.

Reuters CRB index fell 4.24 points to 416.40.

India may be forced to seal China border
17 Mar 2008, 0001 hrs IST..........................

BEIJING: It has become a do-or-die situation for many of the monks and ordinary Tibetans who have participated in both the peaceful demonstrations and violence that rocked Lhasa over the past few days.

Some of them may try to escape to neighbouring provinces with large Tibetan population and possibly sneak into India, a source said.

The Indian government may come under greater pressure from Beijing to ensure that none of the protesters cross the mountain border from Tibet. At present, the Chinese pressure on New Delhi is restricted to ensuring that the Dharmasala-based Tibetans don't cross over to Tibet. Many of the protesters in Lhasa would ignore the Monday midnight deadline for surrendering to the authorities, who have sweetened the offer by promising leniency to those who surrender.

"The Communist Party has infiltrated most of the major monasteries. It knows almost everything about the lives of the monks. Surrendering would not save them from future reprisal by the authorities," a human rights activist told TOI.

Those who don't surrender and manage to escape arrest might plan more demonstrations and agitations in the future. The Chinese government, which has started house-to-house searches, is expected to make sure that none of the demonstrators escape the police net.

The last few days of demonstrations have seen monks and believers of different sects and monasteries of Tibetan Buddhism coming together to fight what they regard as imposition on their way of life, a source said.

"Those who joined the uprising are marked men, who may find it difficult to live peacefully among their Han Chinese neighbours in future," the activist said. Many of them would prefer to continue the fight instead of surrendering to the authorities.

Most of the important posts in the Communist Party in Tibet are held by Han Chinese politicians, who have been deputed by the party leadership to work in the region. Though ethnic Tibetans are increasingly getting political positions, the community remains largely alienated from the party.

Pepsi to replace packs of Aquafina with new labels
17 Mar, 2008, 0411 hrs IST,Ratna Bhushan...............


NEW DELHI: After labeling all its products with a quality seal last year to put the pesticide row behind it, PepsiCo India is again set to roll out a global first. Starting March end, the soft drink company will replace all existing packs of Aquafina, its packaged water brand, with new labels.

The labels will announce that by next year, PepsiCo India will be a positive water balance company. In other words, the company says it will save and replenish more water in its plants and communities than the total water it uses in the country.

PepsiCo India CEO Sanjeev Chadha told ET: “India is the first country in the PepsiCo universe where a corporate sustainability initiative is being communicated to consumers through a product pack. The Aquafina pack labelling is a public declaration of PepsiCo’s commitment to positive water balance.”

The pack labels will carry details of the company’s ‘replenish and restore our water’ message. With the objective of involving the consumer, the pack urges the consumer to partner with the company to ‘use water wisely so it could be enjoyed by future generations’.

An external auditor has been mandated to audit its positive water balance process. Water sustainability is a subject close to PepsiCo global chairman and CEO Indra Nooyi. Few months back, PepsiCo India had put together a print campaign highlighting the company’s corporate social responsibility (CSR) and water conservation initiatives featuring Ms Nooyi. However, the campaign did not get global approval.

Highlighting the latest initiative, Mr Chadha said: “It is a way of telling our consumers that not only do we care about our environment and communities, but we are also committed to water sustainability to make our tomorrow better than today.”

Soft drink companies have, in the past, been accused of ground water depletion in few Indian states. Coca-Cola India, in fact, had to close down its plant in Kerala following protests by local authorities. PepsiCo is hopeful that the communication through packs will help boost its public image. “There is a connection between community initiatives, brands and business,” Mr Chadha said.

The company says it has been working on water community water replenishment over the past five years by conserving and recycling water usage within its manufacturing processes, constructing rain and roof water harvesting structures, rolling out community water projects, and hosting watershed management programmes in partnership with Teri. PepsiCo says it has reduced water usage in its manufacturing plants by over 60%, and that it has saved 2 billion litres of water in the process.

While the positive water balance will be highlighted only through Aquafina packs initially, PepsiCo may extend it to other brands packs at a later stage. The Rs 1,200-crore packaged water market comprises of three major players—market leader Bisleri, PepsiCo’s Aquafina and Kinley from the Coca-Cola stable, in addition to a slew of smaller, regional strongholds. The industry is expected to see a flurry of action in the coming months.

HCL Tech to take SPAC route for foreign buyouts
17 Mar, 2008, 0202 hrs IST,Deepshikha Monga,.....................

NEW DELHI: This could be a global first: a strategic acquirer taking an unconventional route to strike an acquisition deal. India’s fifth-largest IT services player HCL Technologies’ founder, Shiv Nadar, told ET that he is planning to raise a blank cheque firm or a special purpose acquisition corporation (SPAC) on Paris-based NYSE Euronext exchange. This could potentially allow the IT firm or its promoters to acquire a company abroad without straining the balance sheet of the Indian company.

SPACs are usually raised by asset managers, merchant bankers or private equity investors who use it as a fund raising route to strike buyout deals. By character, it is a very individual-driven listed firm where the investors bet on the management’s ability to snap a good company. In simple words, SPACs are a more liquid form of private equity which usually focuses on a single buyout rather than a portfolio of transactions by a conventional private equity fund.

“In India, you can’t float a SPAC. Even in Europe, it’s very new. On Euronext, we would probably be floating one, maybe one of the earliest,” Mr Nadar, who is HCL Technologies chairman and chief strategy officer, said. He didn’t give any hint about the size of the proposed SPAC or whether he intends to use this vehicle to acquire strategic interests which could have synergies with HCL Enterprises. HCL Enterprises includes both the IT software and hardware businesses of the group

Mr Nadar said Indian companies should look at opportunities to acquire parts of global biggies facing the impact of a global slowdown. “I see worried CEOs when I meet them. They say demand is shrinking for their products or services. There lies an opportunity to carve out something out of them. We did something similar with British Telecom and Deutsche Bank earlier,” he added.

HCL Technologies has earlier expressed interest in acquiring small companies in the US and Europe with capabilities in the area of SAP implementation, infrastructure management and BPO. It recently acquired US-based software product company Capital Stream for $40 million in an all-cash deal. The acquisition would strengthen HCL’s capability to provide end-to-end solutions to commercial and retail financial institutions.

Blank cheque firms or SPACs basically raise funds through a public offering and put it in an escrow account till they find a target company. Their management, in effect, gets a blank cheque from shareholders to invest and hence, the name. When they zero in on a potential acquisition, they ask their shareholders for approval and go ahead with the deal. Usually SPACs restrict themselves to targeting small and mid-sized companies. This also separates them from large private equity funds.

Some of the key India-focussed SPACs have been Millennium India Acquisition Company (MIAC) and Indian Hospitality Corporation (IHC). The US-listed MIAC acquired 14.9% stake in Delhi-based brokerage firm SMC Global for about $40 million last year while London’s AIM-listed IHC acquired Mars Restaurants and SkyGourmet Catering for $110 million.