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30th Aug 2012 – 05th Sep 2012

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IN BRIEF ECONOMIC INDICATORS

COVER STORY

COALGATE SCANDAL

MHSBC Manufacturing PMI 52.8 (August, 2012)

Brent Crude Oil: $116/barrel (as on 4th September, 2012)

PERSONALITIES OF THE WEEK

Mohamed Morsi

Aditya Ghosh

INDUSTRY ANALYSIS

INDIAN RETAIL INDUSTRY

NEWS DIGEST… BUSINESS NEWS

GLOBAL NEWS

MISCELLANEOUS NEWS

FinMin runs out of funds to subsidise diesel

Indo-China talk business

Arctic sea ice melts to record low

ECONOMIC INDICATORS 2 COVER STORY 3 INDUSTRY ANALYSIS 5 NEWS ANALYSIS 6

PERSONALITIES OF THE WEEK 4 JOB PROFILE11

PART ONE


K vN K NO OW WY YO OU UR RB BA AS SIIC CS S:: T TIIM ME ET TO OM MA AR RK KE ET T ((T TT TM M)) TIME TO MARKET (TTM) is the length of time it takes to develop a new product from an early initial idea to initial market sales. Precise definitions of the start and end point vary from one company to another, and may vary from one project to another within the company. TTM is important in industries where products go out to style quickly. A common assumption is that TTM matters most for first-of-a-kind products, but actually the leader often has the luxury of time, while the clock is clearly running for the followers. There are no standards for measuring TTM, and measured values can vary greatly. A tacit assumption of many is that TTM and product quality are opposing attributes of a development process. TTM may be improved (shortened) by skipping steps of the development process, thus compromising product quality

E EC CO ON NO OM MIIC C IIN ND DIIC CA AT TO OR RS S HSBC Manufacturing Purchasing Manager‟s Index – 52.8 for August (52.9 in July) Source - ET A purchasing manager’s index measures the sentiments of procurement managers which gives a good idea about the demand environment in a country. In India, HSBC measures the business sentiment of the manufacturing sector using the Manufacturing Purchasing Manager’s Index. Any value over 50 is considered to be growth and below 50 is interpreted as contraction. The August HSBC PMI values are the lowest seen in the past nine months indicating continued weakening in manufacturing growth. The reasons cited are weak demand from exporters and the series of power cuts that plagued the nation recently, especially in northern India. Brent Crude Oil - $116 per barrel (4th September, 2012) Source – Reuters & ET Brent crude has seen sustained highs and fluctuations in its price is expected due to a multitude of factors that are leading to uncertainty in the overall economic climate of the world. Some of the primary factors influencing the upward price movement are: 1) Weak Chinese economic data suggesting slowing growth and the coming change in governments which happens once in a decade 2) Tensions between Iran and Israel on the issue of Iran’s move towards building nuclear weapons 3) Even though the Gulf of Mexico refinery is back online in the aftermath of Hurricane Isaac, a weaker dollar has helped move prices upwards 4) Continuing uncertainty over the fate of Eurozone and the US Presidential elections slated for November C C H A R T S & G R A P H S – C H A N G E S N N D A N G O V E R N M E N T B U D G E T 1 9 9 0 2 0 1 2 CH HA AR RT TS S& &G GR RA AP PH HS S– –C CH HA AN NG GE ES S IIIN N IIIN ND DIIIA AN NG GO OV VE ER RN NM ME EN NT TB BU UD DG GE ET T (((1 19 99 90 0---2 20 01 12 2)))

TTTrrraaad d n g n m diiin ng geeecccooon nooom miiicccsss

A government budget is a legal document that is often passed by the legislature, and approved by the chief executiveor president. For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues. The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are derived primarily from taxes. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits.

opposite of a budget deficit is a budget surplus.

India reported a Government Budget deficit equal to 4.60 percent of the country's Gross Domestic Product in 2011. Historically, from 1990 until 2011, India Government Budget averaged -3.7 Percent of GDP reaching an all time high of -2.0 Percent of GDP in December of 1996 and a record low of -7.8 Percent of GDP in December of 2008. A budget deficit occurs when an government spends more money than it takes in. The


COVER STORY : COALGATE SCANDAL Yet another scam! And this time it’s about the irregular allocation of coal blocks by the government to public & private companies. According to a report by CAG, India’s exchequer suffered a loss of ₨ 1,86,000 crore making it the biggest scandal of all times. Our politicians as usual are questioning CAG’s calculations because according to them like 2G spectrum this time as well there is zero loss. The Opposition on the other hand has stalled parliament demanding the PM’s resignation. But one simple thing that our leaders don’t seem to understand is that the series of scams in the recent past has put the credibility of the government in question.

What does the CAG‟s report say? The Comptroller Auditor General of India accused the government of India

for not following the auction mechanism for allotting captive blocks post 2004 & adopting a non transparent screening committee based mechanism with no comparative evaluative parameters. This issue came in light when CAG’s report got leaked to the media early this year. The CAG’s report also said that during 2006-09, government distributed coal mines to the companies for free. At present, CBI is looking into the matter & has filed an FIR against five companies.

Government‟s retort: The government in its defense said that CAG’s calculations are

wrong & a loss of this magnitude is impossible. The government also argues that these laws were made when the NDA government was in power. In fact, P Chidambaram made a statement saying that loss can arise only once the coal is taken out of mother earth & if coal is not mined then how can there be a loss. That means that CAG’s calculations are flawed & need to be reviewed, but if that is the case then why did the government agree for the re-auction of 2G spectrum because according to the government 2G spectrum allocation also did not result in any loss. Well, before jumping to any conclusion, it would be interesting to know how CAG arrived at such a gargantuan figure.

How CAG arrived at this figure? CAG’s report says that the delay by the

government in introducing competitive bidding for blocks proved to be a windfall gain for private companies. It raises questions on the lack of transparency in the coal block allocation process. What is interesting is that CAG’s computation was done for private companies in 57 coal blocks, it excluded blocks allocated to public companies & their joint ventures. So that means the loss to the public exchequer is much greater than ₨ 1.86 lakh crore. Are the figures really exaggerated then? The question that needs to be answered is – if the coal blocks allocation process is so flawed then why didn’t the government try to change it? Well, the answer of this question lies in history.

Coal blocks nationalization – In 1973, the government of India nationalized coal mines in the country & then in 1976 allowed captive mining sub leasing by private companies engaged in the production of iron & steel with the purpose of making the power sector more efficient. The rationale behind opening the sector is justifiable but why was the concept of competitive bidding not implemented & why no supervisory body was constituted to look after the coal block allocation? Had the process been properly monitored & supervised, coal mines wouldn’t have landed in the hands of the mafia. Detractors might say that the direct control over coal allocation would have made the process more cumbersome, clearly, confusing process optimization with red-tapism. Well, the result is in front of us – a loss of ₨1.86 lakh crore! In order to compensate for the loss, BJP wants government to re auction coal blocks without realizing that re-auctioning would worsen the situation. Is re-auctioning the solution? The opposition are saying that the coal mines should be auctioned again, but

that would have its own repercussions. If the coal blocks are auctioned again then it will have a direct bearing on the consumer. As already, Indian citizens are reeling under high inflation so increase in electricity rates will only worsen the situation & also defeat the purpose of the government of providing “Power for all at affordable price”. Another problem that cancelling of the coal blocks license may create is the power supply shortage, similar to the one that happened last month. Well, the above arguments prove that the cancellation of coal blocks license is not the solution.

What is the solution? A change in the process can solve this problem. Once the coal block is discovered, the government should do a detailed study & then make the block available for use. There should be proper guidelines regarding the time frame to start & the target production figures for actual delivery. These measures will not only bring transparency in the process but also get rid of the problem of procedural delays in the distribution.

Conclusion: This time the matter is more serious as Prime Minister Manmohan Singh has been accused of being the

part of the problem. Recently, the Washington Post gibed at Manmohan Singh by calling him a “Tragic Figure”. If we want to portray a good image of India, we need good governance. Indian is still trying to recover from the economic turmoil caused by the global slowdown, avoidable scandals like coalgate would only add to the woes that are already worrying India Inc.


P PE ER RS SO ON NA ALLIIT TIIE ES SO OFF T TH HE EW WE EE EK K

Mohamed Morsi- President of Egypt

Mohamed Morsi, the current President of Egypt, is the first civilian to hold the office ousting exPresident Hosni Mubarak, thus bringing an end to more than three decades of his autocratic rule. Initially nominated as a back-up candidate by his party, the Muslim Brotherhood, he won the post in the aftermath of the 2011 Egyptian Revolution. Credited with being the first Islamist to rule an Arab country, Morsi is constantly in the news for his stance on the country’s domestic and foreign policy. He controversially convened the Egyptian Parliament when it had been dissolved by the powerful military, objected to a constitutional provision which intended to limit the powers of the President, forced several key-people to resign and reshuffled the cabinet on the back-drop of financial assistance from Qatar.

"The blood of the Syrian people is on our necks, and it will not stop unless there is an intervention by all of us"

Morsi was born in a village in Northern Egypt and had humble beginnings. He received his Bachelor’s and Master’s degrees in engineering from Cairo University in 1975 and 1978 respectively. In 1982, he received his PhD in Electrical Engineering from the University of Southern California. A teacher by profession, he has over 30 years of experience teaching at California State University and at Zagazig University, Egypt. Disagreeing with the nature of policies under Mubarak’s regime, he entered politics in 2000 and served as an MP for five years. He was frequently jailed for his blatantly outspoken views against police brutality, lack of free elections, state of emergency laws, uncontrollable corruption, etc. In 2011, Morsi was elected as the Chairman of the Freedom and Justice Party and stood as its candidate for the May-June 2012 Presidential Elections. During campaigning he appealed to political liberals and minorities and portrayed his rival Ahmed Shafik as a Mubarak-era hand-me-down. At the same time he proclaimed that if he won, Egypt will be totally Islamic and minorities will be forced to pay Jizya (religious tax) or emigrate-a stance which he later retracted. Post his win, a question-mark arises on his success as Egyptian bureaucracy remains stocked with Mubarak’s loyalists who may oppose any changes Morsi tries to bring about. On the foreign relations front, Morsi has promised that he would honour all of Egypt’s previous International Treaties. His recent attendance at the NAM Summit created controversy as he openly backed Syrian rebels in the ongoing Civil War, thus causing embarrassment to hosts Iran-a country which is one of the few supporters of President Bashar al-Assad.

Aditya Ghosh-President, IndiGo

Toppling the leader is not an easy task by any means. People who master this task are highlycompetent, well-educated and have a zealous urge to reach the top. One such person is Aditya Ghosh, the President of IndiGo, who within a span of four years, made a success story of IndiGo and dethroned Jet Airways from its top-spot. A highly reserved and down-to-earth person, Ghosh is averse to publicity. A man of simple means, he arrived at a meeting with India’s Prime Minister in a CNG-powered Wagon-R that sported the colours of his airline, drawing sharp contrasts to other airline bosses who arrived in posh chauffeur-driven cars. He applies the same strategy in running his airline-sticking to its basic, no-frills USP.

“We don’t try to do anything fancy, we don’t try to bend the wind, we just stick to our business model,”

A lawyer from Delhi University, Ghosh had the honour of working with legal-eagle Jyoti Sagar as his Executive Assistant. His mentor later on took him as the only junior lawyer in the ground-breaking basmati and turmeric patent cases. At the young age of 28, he was the General Counsel of InterGlobe Enterprises, the major stakeholder of IndiGo, and worked on the airline’s 100-aircraft deal. Impressed by his natural leadership qualities and ability to connect with employees, the promoters to IndiGo offered him the top job which he gladly accepted. As his mantra for success, Ghosh adopted the hallmark of every successful global low-cost airline- austerity-avoiding frequent flier programmes, airport lounges and TV screens on board, taking inspiration from Southwest Airlines in the US and Europe’s Ryanair-airlines which are still flying high due to their persistent focus on costs. Ghosh has steered IndiGo to be the only no-frills airline in India which continues to make money, pushing past its rivals who continue to bleed because of exorbitant taxes, high fuel prices and fierce price competition. Due to his immense success, Ghosh has been at the receiving end of various jabs and public slanging from many of his contemporaries, who refuse to believe that IndiGo is one airline which has continued to defy all odds and remain profitable. In response to these accusations, Ghosh has continuously maintained a characteristic monk-like silence, shrewdly answering questions regarding the airline’s safety records and proposed review of its’ fleet expansion plans only to the relevant authorities. Ghosh’s able leadership and sharp focus on things relevant and necessary has given the young carrier an edge over its rivals by bolstering its perception as a premium brand despite being a low-cost operator. He is also instrumental in making IndiGo as the travel industry’s Best Employer.


IIN ND DU US ST TR RY YA AN NA ALLY YS SIIS S:: IIN ND DIIA AN NR RE ET TA AIILL IIN ND DU US ST TR RY Y Overview: With a population of over 1.2 billion (120 Crore), India is a favorite destination for international retail giants who want a piece of the huge retail market which contributes to 14% of the country’s GDP. Currently the retail industry stands at USD 450 billion (nearly ₨ 25 Lakh Crore) with 92-95% of it covered by the unorganized segment. It caters to a diverse set of demographic tiers and is one of the biggest retail markets in the world. With a compounded annual growth of 15%-20%, Indian retail is the fastest growing retail market in the world. India has over 1,80,000 households whose annual income is ₨ 45 Lakh and above and retail density at 6% is the highest in the world. Structure & Major Players: Even after implementing various reforms to encourage organized retailing, India still has one of the largest fleet of over 12 million Kiranas (mom-and-pop stores) operating across the country. Although urban areas are witnessing a rising number of supermarkets & hypermarkets, rural areas & semi-urban regions are still dominated by low cost retail shops, fruits & vegetable markets, convenience stores etc - which are a part of the unorganized retail market. The organized market is gaining popularity amongst the urban population attracted to the spreading “Mall Culture”, but holds a meager 5-8% of the total retail industry. Big brands like Pantaloons, Big Bazaar, Reliance Fresh, Shoppers Stop, Hyper City, Brand Factory & Central amongst others are slowly spreading their presence from tier I cities to tier 2 & 3 cities. Domestic Retailers including Tata Group, Future Group, Reliance Retail, Lifestyle etc operate in various segments like – apparel (clothing), food & grocery, consumer durables, furniture and health & beauty. The next generation retailing phenomenon, online retailing, is also taking the country by storm with portals like Myntra, Flipkart, Fashion&You, Zovi offering a huge range of products & the convenience of shopping from home. The online retail market is currently estimated at USD 3.2 billion (approx. ₨ 17,000 Crore) & is growing at the CAGR of above 23%. Foreign Direct Investment: The retail sector in India was liberalized in 1997, when 100% FDI in cash & carry operations was allowed – but only via government’s approval route. After a lukewarm response by foreign investors, the government made reforms in 2006 and allowed 51% FDI in single brand retail after which the sector saw a downpour of foreign investments at around USD 1 billion. Global companies like Wal-Mart and Carrefour started their cash & carry operations in the country. In November 2011, amidst the economic slowdown, Prime Minister Manmohan Singh announced another set of reforms: 100% FDI in single brand and 51% FDI in multi-brand retail. However the FDI in single brand retail came with compulsory sourcing clause & few other regulations and since then foreign companies like IKEA – who want to start their operations in India, have been pressurizing the Indian government to relax these rules. In case of multi-brand retail, the 51% FDI reform has not yet seen daylight as it received opposition from various political parties & industry heads. Current Issues: The major problem in the retail industry is the lack of proper supply chain which leads to wastage of tonnes of perishable goods every year. Many times due to insufficiencies in the supply chain; goods do not reach the consumers thus creating a gap in demand & supply and increasing the prices – primary cause of rising inflation. With the large number of middle men in unorganized retail, prices of commodities increase about three fold till it reaches the final consumer. These issues can be resolved by allowing international retail giants to enter multi-brand retail. Wal-Mart & Carrefour have already built their back end supply chain in the country, and if the multi-brand retail reform is passed these companies shall provide commodities at cheaper rates; reduce their wastage and would help in reducing the current account deficit of the country. The Final Words: India’s huge diversity has fuelled the rapid growth of the retail industry. The domestic consumption is driven by spending on special occasions like marriages & festivals - which occur almost throughout the year due to the diversity in culture & region across the geographies. The Indian market is an endless opportunity for foreign investors but the regulatory flip flops by the government are discouraging them to invest in the country. According to reports, the organized sector will take a decade to grow to acquire 25% of market share of the retail industry and is estimated at USD 250 billion (₨ 13 Lakh Crore). The Economist has forecasted that the Indian retail will double by 2020.


N NE EW WS SA AN NA ALLY YS SIIS S 1) Indo-China talk business – MoneyControl/BS IMPACT: The Indian Minister of Commerce, Anand Sharma, recently met his Chinese counterpart to deal with the issue of rising trade deficit between the two countries. After talks on various trade related matters, both the countries have come up to a mutual agreement. China will increase its imports from India thus reducing the trade deficit which was at $1 billion in FY02 & rose to $39.7 billion in FY12. Both countries have decided to chalk out a five year trade plan. According to the FY-12 figures, out of the total trade between the two countries at $75.45 billion – Indian imports were 76% whereas exports constituted were only 23%. China; who have been importing primary & intermediate products along with raw materials; has agreed to open up its markets to Indian sectors like agriculture, IT and pharmaceuticals. It will also allow the screening of Bollywood movies in the country. The Chinese minister has said that both the governments are looking forward to increase the bilateral trade from current at $ 57.55 billion to over $100 billion by 2015. KEY PLAYERS: India, China WHY IT IS IMPORTANT? Asia’s largest economy, China is known for its low cost products. India’s power sector also imports majority of its equipment from China. To curb this practice and to protect domestic companies, the Indian government had announced the imposition of 21% import taxes on such equipment. But, during trade talks, China asked the Indian government to remove the tax as it would negatively affect the bilateral trade relations. According to a study, Chinese imports to India will contribute to about 80% of India’s manufacturing GDP in next 20 years. 2) Indian Aviation performs badly amid economic slowdown – ET/BS/Livemint IMPACT: According to the latest reports by the International Air Transport Association, the Indian aviation sector has performed worst amongst its global peers. The global aviation sector has been hit by the economic slowdown & airline companies are doing their best to reduce losses. The domestic aviation sector also could not firewall itself from the slowdown, and decreased by 1.1% in July this year in comparison with results of July 2011. It had seen an upward growth at over 20% between 2010 and 2011. However, the growth halted following worsening economic conditions. The aviation companies from the African continent and the Middle East posted increase in revenues, breaking the trend of negative growth. Air carriers globally have suffered as the fuel prices have reached record highs and taxes & airport charges have gone up substantially. Airlines are now trimming their seating capacities, reducing the frequency of flights & truncating air travel routes in order to bring down losses. KEY PLAYERS: Indian Aviation sector, WHY IT IS IMPORTANT? The low cost airlines are growing at a faster pace, as full service carriers are struggling to attract customers. Although the domestic airline is in its turbulent times, yet growth is projected in the coming months. The basis of this projection is the burgeoning middle class of Indians who are yearning to fly. Increasing number of airline companies are now trying to attract Indians who make up for more than one third of the passenger list of Gulf carriers. These are Indians who are visiting Gulf as well as passengers who are transit travelers. 3) Essar Oil teams up with Cafe Coffee Day to attract customers – ET/Essar.com/Wall Street Journal IMPACT: Indian private oil company Essar Oil is finding new ways to increase its revenues from other business (non-fuel) as it is finding it difficult to maintain its profits in the fuel business. In past several months, the company has formed alliances with companies from varied sectors like agro-products, BFSI and food & beverage. All this is to attract more customers to its fuel outlets (petrol pumps). Recently, it has teamed up with India’s largest coffee chain, Cafe Coffe Day, to open a series of latter’s coffee shops in its fuel outlets. Currently, Essar Oil operates about 1,400 fuel stations across the country and is trying to draw customers by offering other products like food items. This move can be seen as an early step for Essar Group’s plans to enter retail business. KEY PLAYERS: Essar Oil, Cafe Coffee Day WHY IT IS IMPORTANT? The fuel business is surely going down for the private oil companies. They are facing tough competition from the state run oil companies who get subsidies from the government and offer fuel at much lower prices. The difference between diesel prices of private & state run oil companies (in gas stations) is up to 35%. The government is also considering diesel subsidies for private fuel retailers. This has led Essar Oil to form new strategies to increase its revenue from the non-fuel business.


4) Sahara group accused by SC for holding “benami” money – TOI/MoneyControl/Firstpost IMPACT: The ghosts of the past have come back to haunt Sahara India Parivar with the Supreme Court accusing the group of holding illegal money and asking it to return ₨17,400 crore back to its investors with 15% interest. SC has directed two companies of the group Sahara India Real Estate Corporation and Sahara Housing Investment Corporation, to return the amount within three months. Further, the court has also asked SEBI to conduct an investigation against the two companies to find the source of this benami (illegal) money and authorized the board to freeze the companies’ assets if they fail to refund the amount. In a press release, Sahara Group has lashed out at the regulators stating that the group has carried out clean operations since past 33 years and they do not hold any illegal money. Also, such a verdict has created a negative impression about the two companies which raised the amount (₨17,400 crore - to be refunded now) through optionally fully convertible debentures. KEY PLAYERS: Sahara Group, Supreme Court, SEBI WHY IT IS IMPORTANT? Sahara Group is in the news for the wrong reasons and has maintained its stand of being innocent. However, the past history of the group and its recent actions show otherwise. According to The Economic Times, few days after the SC verdict, Sahara Group has started working on forming a new entity called Sahara Credit Cooperative Society. This business cannot be regulated by either RBI or SEBI. In its 2008 venture, Sahara India Financial Corporation, the group evaded regulation and used public issue to 30 million people as private placement. 5) Reebok India in loggerheads with franchisees – FE/HT/BS IMPACT: Few months after Reebok India accused its MD of fraud amounting to ₨ 870 crores, the company is in clashes with its franchisees across the country. The company has sent notice to its franchisees to either accept its new business model or exit the business by November this year. The company has asked the franchisees to extend the SALE with up to FLAT 50% OFF to clear the inventory. In case of the unsold stock, Reebok will buy it at ten percent of the wholesale or a mutually agreed price after the November deadline. This news has caused uproar among the franchisee owners as they term this arrangement to be completely biased and not in favour of the franchisees who helped the international sportswear giant build its brand in the country. As per the agreement between Reebok & the Indian franchisees, if a franchise wants to exit business, they shall be given three months to liquidate stocks & the unsold inventory would be bought by the company at the purchase price. So the franchisees are accusing Reebok of not sticking to the agreed terms. KEY PLAYERS: Reebok India, Adidas group WHY IT IS IMPORTANT? Reebok India is currently under investigation after the income tax department found out that the ₨ 870 crores revenue fraud may indeed be an income tax fraud. The company later announced that it will restructure its business in India – shut down over 300 of its outlets and change the current Minimum Guarantee (MG) business model. It plans to adopt a newer and more efficient performance based business model. Reebok is looking for a fresh start by early 2013 & has undertaken Franchisee Transformation Project. 6) India to give ` 20,000 crore incentive to global electronic makers to set up shop- ET IMPACT: The Government plans to send delegations to countries like South Korea, Taiwan, Japan, Germany, etc armed with incentives like sops and tax breaks. If this policy is successful, it will be a big boost for Indian Industry. The global Electronics Industry at $ 1.75 trillion is the largest and fastest growing manufacturing industry in the world. At the current rate of growth, the domestic production can cater to a demand of $ 100 billion in 2020 as against a demand of $ 400 billion and the rest would have to be met by imports. Unless the situation is corrected, the electronics import may far exceed even oil imports. Implementation of policies such as the National Policy on Electronics, 2011 is essential for tapping into the fast growing electronic market. KEY PLAYERS: Ministry of Communications & IT WHY IS IT IMPORTANT? India has already missed a series of opportunities on the international scene to establish itself as a major outsourcing hub in the electronic sector. Currently, India's production constitutes only about 1.3% of the global electronics hardware production of $1.7 trillion. In contrast, China is home to some of the largest electronics manufacturers such as Foxconn, Huawei and ZTEcompanies who supply to popular electronic brands including Apple and Nokia. The National Policy on Electronics aims to address the issue with the explicit goal of transforming India into a premier Electronic Systems Design and Manufacturing (ESDM) hub.


7) Software firms slow-down their on-campus hiring process- BL/ET IMPACT: Indian software firms have suffered a lot in the face of shrinking demand from Europe and USA for new projects, leading to less than inspiring results in the last financial year. Thus, when it comes to fresh hiring from colleges, they have adopted a wait-and-watch mode. The hiring targets will depend upon the growth of their operations. Industry experts believe that campus placement numbers could be low this year in the backdrop of a fall in the industry’s growth by 40%-50%, low employee utilization and low attrition. Major IT firms such as Infosys and iGate have already delayed the joining dates of approximately 26,000 fresh engineers in the wake of a slack in demand. KEY PLAYERS: Major Indian software firms, engineering graduates WHY IS IT IMPORTANT? While reducing hiring in India, major IT firms are increasing hiring in the US in the face of mounting backlash against outsourcing as well as tightening of visa rules for Indian employees of these companies. There is also an increasing trend of off-campus hiring as it can be done whenever there is a demand for more people. It is extremely popular among IT firms that are cautious and not able to take long term hiring decisions during the placement season. Campus hiring has also reduced due to discouraging forecasts. Nasscom has cut the IT-BPO industry's growth forecast to 11-14% this year, down from 16% last year. Some companies like Infosys have given a revised projection of 5%. IT companies are looking to adjust hiring to the slowdown. 8) Maruti Suzuki to increase automation in certain critical production functions- ET/livemint IMPACT: Maruti Suzuki’s plan to increase automation in certain critical production functions is aimed at bringing its operations on par with its hi-tech production plants in Japan. It is also aimed at bringing consistency in the quality of the cars. The carmaker has been steadily increasing automation of its plants in India. In over a decade, the company has doubled the number of robots used in its plants to around 1,500. It will add another 50-100 new robots in the older plant at Manesar to increase automation to 99% from the current 90%. On average, car manufacturing plants in India have automation levels going up to 40% of the entire manufacturing process. Maruti is the only company in India with more than 60% automation levels at its plants in Gurgaon and Manesar. Thus, further increasing automation reflects its desire to have an edge over its competitors and retain its No.1 spot in the Indian market. KEY PLAYERS: Maruti Suzuki WHY IS IT IMPORTANT? Automation is a sensitive issue for Maruti Suzuki in the aftermath of violence at its Manesar plant which left one senior manager dead and more than 100 workers injured in addition to a lockout which caused more than ` 1,500 crore in losses. Since then it has been contemplating various means to minimise human intervention as it aims to modernise its Indian facilities, which now churn out more than 50% of parent Suzuki's global output. The company also believes that automation is cost-effective as the investment made is recovered over a period of time unlike the ever-increasing labour and management costs. However, experts are of the view that this kind of West-centric automation, when applied to India, will lead to massive job losses which can cause significant problems. 9) FIIs investment reaches ₨ 11,000 cr in August – ET/TOI IMPACT: Foreign Institutional Investors (FIIs) have continued investing in Indian equities with expectations of economic reforms by the government. The bourses received a net inflow of foreign funds worth ₨ 10,803 crore in August, which was up from ₨ 10,273 crore received during July. This year, the FIIs, which have remained gross buyers of stocks, have pumped in Rs 63,070 crore in the share market. FIIinvestment was highest in February at ₨ 25,212 crore. The data provided by SEBI reflects FIIs positive outlook which has remain undeterred by the slow economic growth & high interest rates in India. This trend is likely to continue in coming months as US Federal Reserve Chief Ben Bernanke has given enough indications of monetary policy easing, while similar measures are expected from the European Central Bank. KEY PLAYERS: FII, SEBI WHY IT IS IMPORTANT: US is expected to initiate third stage of Quantitative Easing, a step which it sees will prop up the economy & create more employment in the country. These measures are challenged by the Republicans as well as a large group of economists; however the stock markets have taken these positively. Hence, the global sentiment gets translated to buoyant performance in the Indian markets. However, a lot in future will also depend on the outcome of Coalgate scandal.


10) Finance Ministry says that it has run out of funds to subsidise diesel – The Hindu/ET IMPACT: Government is expected to raise the price of diesel, domestic LPG cylinders & kerosene under public distribution system anytime soon, as Finance Ministry has finally given its ultimatum that it will not be able to fund OMCs (Oil Marketing Companies) anymore. State owned OMCs (Indian Oil, Bharat Petroleum and Hindustan Petroleum) have been under pressure due to rise in international crude oil prices which have reached $112 per barrel. The refining & production of diesel, LPG & kerosene has become costlier by 28% since June 2011; still, government has not allowed OMCs to raise prices. This has resulted in losses which are calculated to be around ₨ 560 crore a day. As diesel adds up to nearly 60 per cent of total losses of these companies, they have long been demanding hike in its price. Incidentally, government, (which has decontrolled the pricing of petrol) is also reported to have prevented any major price hike in petrol in recent times. Hence, even petrol is being sold at a loss of around ₨ 5 per litre. KEY PLAYERS: Oil Marketing Companies, Finance Ministry WHY IT IS IMPORTANT: It may be noted that cost of importing crude oil is lesser than importing refined products. Thus, the fluctuations in international crude oil prices may not directly impact the prices of kerosene & diesel in the manner a layman would like to think. Hence the petroleum products are priced according to the Trade Parity Price, which is a weighted average of the import parity and export parity prices in the ratio of 80:20 - reflecting the current trade pattern. Due to these complexities, CAG has announced to audit the huge under-recoveries reported by the big three state run OMCs. This will also check their claims about selling diesel at a loss of more than ₨ 19 per litre. 11) GM & Honda planning to focus on „small‟ to get big in India – Reuters/BS IMPACT: Though in recent days, the MPV (Multi Purpose Vehicle) segment has grown at the fastest pace, the compact car segment hasn’t been bad either. Indian car market, which is set to become world’s third largest by 2020, still has huge demand for compact cars. Recognising these trends foreign carmakers are now making considerable changes in their car line-ups in India. GM will be launching Sail – its first Chinese designed car – in India next month. Globally No.1, GM has so far failed to generate enough buzz in the highly competitive & price sensitive Indian market. Its sales have skid 11 percent in the first six months of 2012. Sail is expected to revive its fortune, as Etios did for Toyota in India. The cars with both hatchback & sedan versions designed by its partner SAIC (Shanghai Automotive Industry Corporation) were top-sellers in China in June 2012. On a similar note, Honda which was struggling with 20 per cent drop in sales in 2011 has seen a 70 per cent jump in sales in Jan-Jul 2012 with launch of Brio – another compact. The company has also reportedly delayed plans to launch new Honda Civic & Accord in India. It is also looking at the prospect of hatchbacks & compact sedans in India. KEY PLAYERS: GM, Honda WHY IT IS IMPORTANT: Compact cars have the largest share in Indian passenger vehicle markets. Toyota’s Etios & Liva, launched on the same platform now make up nearly 50% of its sales in India. Maruti Suzuki also has Swift (hatchback) & DZire (Sedan) sharing the same platform. Both these cars are top sellers in India and hence GM & Honda will look to enter the market by launches in same price bracket. 12) EU crisis forced Indian Exports to take a nosedive in July - BS/Hindu Business Line IMPACT: European economic crisis is beginning to show its effect in much pronounced manner than ever before. India’s exports took a nosedive in July, falling to $ 22.4 billion in July 2012. These are down by 14.8 per cent from last year’s July exports figure of $26.3 billion. Sluggishness in US has also played its role in bringing the slump. The near $ 4 billion drop in exports in July was steepest since Aug-2009 when the exports had registered a drop of 23.59 per cent. Even the imports in July (including oil) were down to $37.9 billion against $41.1 billion in same period last year. However, the 7.78 per cent fall in imports in July was far outweighed by fall in exports, leading to a massive trade deficit of $ 15.5 billion against last year’s trade gap of $ 11.08 billion. KEY PLAYERS: Indian Government, EU, US WHY IT IS IMPORTANT: India is a leading exporter of gems and jewellery, textiles, chemicals, leather products, engineering goods and IT/BPO services, whereas it depends heavily on imports of oil & coal for its energy needs. This has turned its balance of trade negative. D K Joshi who is chief economist at CRISIL has said that Commerce Department’s target of $360 billion of exports this financial year is very unlikely to be met and that it’s going to get even tougher in coming days.


M MIIS SC CE ELLLLA AN NE EO OU US SN NE EW WS S 13) Arctic sea ice melts to record low – NBC News/BBC News IMPACT: Scientists are stunned by the extent to which Arctic ice cap has reduced in size this year. The area covered by polar ice has dropped to 1.58 million square miles which is below the 1.61 million square miles figure recorded by NASA satellites in 2007. In fact, the ice cap is at its smallest size in the last three decades. The melting is expected to continue for a little while before winter sets in and creates a new ice cap. Interestingly, scientists have also said that melted ice and water at the north-pole is effectively doubling mankind's contribution to global warming by absorbing more sunrays. It’s because white ice & snow reflects more sunlight (albedo effect) than when it melts down. Further, they explain that it is similar to 20 years of additional CO2 being added by man. KEY PLAYERS: IEA, NASA WHY IT IS IMPORTANT: It’s not just post summers data that ice cap has shown decline in; the ice cap on poles is much lesser than what it used to be few decades ago, throughout the year. Experts have warned about the effects of global warming and see industrial & vehicular emissions as the only consistent explanation for CO2 rise in the atmosphere. Hence, they have raised the demand to global heads to encourage usage of renewable energy sources. On a similar note, Executive Director of International Energy Agency Maria van der Hoevan appealed Indian government & other developing nations to shift subsidies from fossil fuels to renewable fuels. Fuel subsidies by these developing economies in 2011 exceeded $500 billion. 14) India's Kumbh Mela TV rights sale plan put on hold – TOI/Hindu Business Line/BBC IMPACT: Kumbh, which is one of world’s biggest spectacle attracting millions of pilgrimages on the banks of Ganges & River Godavari, is in the news for some curious reasons this time. The country would be having Kumbh’s in 2013 & 2015 at Allahabad & Nashik respectively. Planning (which includes costs of providing amenities, from security to sanitation) for such a large event is a major headache for state governments. Thus, UP government came up with a proposal in May to offset of its event management costs by selling media rights for the coverage of the event. This has created controversy as Sadhus claim that the right to take decisions over the matter is theirs’ and not governments’. Further, they have claimed that commercialisation of the event would be highly offensive. On the other hand, Nashik has decided to spend Rs 2,505 crore for all round development of the region ahead of Kumbh Mela to be held here in 2015-2016. KEY PLAYERS: UP Government, Mela organisers WHY IT IS IMPORTANT: Kumbh Mela is organised every six years in Allahabad, Haridwar, Ujjain, and Nashik. In 2007, around 7 crore people participated in the 45-day Ardh Kumbh Mela in Allahabad. Planning for such events may require huge expertise and that’s why Nashik even considered consulting Ernst & Young for the purpose. 15) Only 6% of the Indian companies have a transparent self-governance system - FE IMPACT: India Inc is plagued with various scandals amounting to several Crores coming to light amidst the economic slowdown. Along with greed and lack of corporate ethics, the corporate culture of “Informed Acquiescence” which is prominent among majority of the Indian companies has also contributed to the rise in such scandals. US headquartered LRN Co has found out that over 90% of Indian companies do not have a transparent self governance structure. According to the survey, 68% companies follow informed acquiescence archetypes, 26% adopt blind obedience and mere 6% companies are self governing. According to an article in Financial Express, “In self governance model, companies repose a lot of trust on their employees & have lesser number of rules and procedures to follow. Decisions at such firms are taken on the basis of a set of core values and transparent collaboration. On the other hand, the employees of 'blind obedience' model companies follow a central leader and performance by workers is driven by fear. However, majority of the companies are governed by 'informed acquiescence' wherein elaborate rules, hierarchical structure are found.” KEY PLAYERS: Indian Companies WHY IT IS IMPORTANT? The survey shows the trend amongst companies in India. It is also found that self-governing companies have highest levels of employee loyalty and lowest levels of employee misconduct and thus they have a greater advantage in the marketplace than their peers.


JJO OB BP PR RO OFFIILLE E Part 2

PART ONE

Ritesh Sethia Investment Risk Analyst Q: Can you give us a brief overview of your qualifications and work experienced prior to joining your current organization? Answer: I did my MBA in Finance, and am currently pursuing my Chartered accountancy. Prior to joining my current organization, I was working with Futures First, a proprietary trading firm and prior to that a good 27 month with a CA firm just after my graduation (B.com Accy Hons). Q: Can you tell us about your current company and your designation there? Answer: I am working with Northern Trust Global investment, a sister concern of Northern Trust. NTGI is a global financial services firm. In the Bangalore centre we look after middle office support. I am an investment risk analyst there. Q. Sounds like an interesting profile, so what exactly does an investment risk analyst do? Answer: Well, basically an investment risk analyst looks the risk in the portfolio of a client and also monitors what we call the tracking error. Tracking error simply implies any deviation in the returns of the portfolio versus returns from the benchmark. I also look after the compliance side of the investment. The investment should be as per the mandate of the client. For example A client may ask that you can invest in every company except ones which might be involved in the manufacture of socially sensitive products , say tobacco or liquor. The client’s mandate should be taken care of, otherwise in some cases the bank has to pay a penalty to the client. Q. You seem to have considerable work experience prior to your current role. How has that helped in your current profile? Answer: My first job as part of a CA firm has helped me a lot in my current profile as a lot of analysis work was involved there, just like in my current profile. My experience with Futures First though does not have direct bearing to my current role. Nevertheless, the fact that I was in an actual trading environment there was a dream come true where nothing compares to being right on the trading floor making the big bets. Q. What kind of training did your receive when you first joined Northern Trust? Answer: Well, the training was largely about processes and compliance. There are certain tools that are required for the performance of my responsibilities and the training sought to acclimatize me to them. Compliance is something taken very seriously by most MNC banks and northern trust is no different. We better know what we can do and what we most definitely cannot. Q. What is an average day like for you at the office? Answer: My day normally starts at 11 AM. I am part of a four man team and we collectively take a stock of all action items for the day. Then the next step is decide who will be responsible for which task and deciding the feasibility of each tasks performance, in other words, delegation. This also happens to be the primary challenge in my day to day work. If delegation is not done in the right manner, nobody will have any idea as to when to expect the deliverables! In case we have any doubts relating to any particular task we get in touch with the risk office which advises us as to further action. The day normally ends with a team meeting discussing the events of the day and checking if all the deliverables have been submitted as per requirement and deadlines.


SOURCES Charts & Graphs: http://www.tradingeconomics.com/india/exports SOURCES FOR COVER STORY http://www.legalindia.in/the-coal-mines-nationalisation-act-1973 http://www.thehindubusinessline.com/features/investment-world/article3848300.ece http://www.thehindubusinessline.com/opinion/editorial/article3795838.ece?homepage=true http://www.eng.chauthiduniya.com/chauthi-duniyas-report-vindicated-coalgate-scam-cag-underplayed-it/ http://englishfrombasics.wordpress.com/2012/08/29/indias-coalgate-scam-how-the-congress-mishandles-it/ http://www.dnaindia.com/analysis/column_ek-tha-tiger-the-other-side-of-the-coal-scam_1732473 http://indianpolitytoday.wordpress.com/tag/coalgate-scam/ http://www.youcon.in/forums/showthread.php?p=4316 http://www.newsyaps.com/coalgate-scam-is-merely-an-instance-of-corruption-cursed-india/2268/ http://www.thehindu.com/opinion/editorial/article3808402.ece http://www.dnaindia.com/india/report_coalgate-may-further-delay-mining-approvals-report_1730986 http://www.siliconindia.com/finance/news/Coalgate-to-Affect-Energy-Sector-nid-127147.html SOURCES FOR PERSONALITIES OF THE WEEK: http://en.wikipedia.org/wiki/Mohamed_Morsi http://www.biography.com/people/mohamed-morsi-20862695 http://ikhwanweb.com/article.php?id=29964 http://www.ft.com/intl/cms/s/0/921c698a-f377-11e1-9c6c-00144feabdc0.html#axzz25NirhS6Q http://businesstoday.intoday.in/story/young-indian-business-leaders-aditya-ghosh/1/15125.htm http://articles.economictimes.indiatimes.com/2012-06-03/news/31985593_1_aditya-ghosh-indigo-president-kingfisher-airlines http://investing.businessweek.com/research/stocks/private/person.asp?personId=29532959&privcapId=21879534&previousCapId=8285079&previousTitle=IndiGo% 20Airlines%20Pvt.%20Ltd. http://book.goindigo.in/skylights/cgi-bin/skylights.cgi?module=C3&page=MBIOS INDUSTRY ANALYSIS: http://en.wikipedia.org/wiki/Retailing_in_India http://www.business-standard.com/india/news/kit-online-apparel-retail/484471/ http://articles.timesofindia.indiatimes.com/2012-06-25/news/32408603_1_retail-sector-retail-industry-global-retail-development-index http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf http://www.ficci.com/sector/33/Project_docs/Sector-prof.pdf http://www.careratings.com/Portals/0/ResearchReports/TableofContent-RetailMay2012.pdf http://www.pwc.com/in/en/assets/pdfs/rc-publications/WinningSector.pdf http://www.indiaretailing.com/pdf/Indian-Retail-Sector-March-2011.pdf SOURCES FOR NEWS ANALYSIS (1-15) 1) Indo-China trade talks – MoneyControl/BS http://www.moneycontrol.com/news/business/china-to-import-moreindia-to-reduce-trade-gap-report_751540.html http://www.business-standard.com/india/news/india-china-meet-to-resolve-trade-matters-strengthen-ties/484663/ 2) Indian Aviation performs badly amid economic slowdown – ET/BS/Livemint http://articles.economictimes.indiatimes.com/2012-08-31/news/33500856_1_tony-tyler-airline-body-iata http://www.business-standard.com/india/news/airline-industry-woes-chip-away-passenger-choices/484444/ http://www.livemint.com/2012/06/05212731/India8217s-aviation-competi.html 3) Essar Oil teams up with Cafe Coffee Day to attract customers – ET/Essar.com/Wall Street Journal http://articles.economictimes.indiatimes.com/2012-08-30/news/33499474_1_cafe-coffee-day-essar-oil-outlets http://www.essar.com/article.aspx?cont_id=vWdYivclVok= http://blogs.wsj.com/indiarealtime/2012/08/31/fuel-retailer-hopes-to-lure-customers-with-coffee/ 4) Sahara group accused by SC for holding benami money – TOI/MoneyControl/Firstpost http://timesofindia.indiatimes.com/business/india-business/Sahara-Group-lashes-out-at-regulators/articleshow/16104776.cms? http://www.moneycontrol.com/news/business/sc-orders-sahara-to-refund-363-bn-raisedinvestors_751753.html http://www.firstpost.com/business/meanwhile-sahara-has-moved-on-to-its-next-fund-raiser-444008.html?utm_source=voices&utm_medium=cat_india 5) Reebok India in loggerheads with franchisees – FE/HT/BS http://www.financialexpress.com/news/reebok-tells-partners-to-exit-with-50/995475/0 http://www.hindustantimes.com/business-news/CorporateNews/Reebok-tells-partners-to-sell-items-at-50-off-and-exit/Article1-921966.aspx http://business-standard.com/india/news/reeboks-franchisees-in-delhi-cry-foul-over-notice-to-shut-shop/484568/ 6) India to give ` 20,000 crore incentive to global electronic makers to set up shop- ET http://articles.economictimes.indiatimes.com/2012-08-31/news/33521339_1_huawei-and-zte-china-new-electronics http://www.siliconindia.com/guestcontributor/guestarticle/25/The_Indian_electronics_industry_past_present_and_future_Steve_Sanghi.html http://www.eetindia.co.in/ART_8800659135_1800000_NT_d53582f6.HTM http://india.gov.in/allimpfrms/alldocs/16392.pdf 7) Software firms slow-down their on-campus hiring process- BL/ET http://www.thehindubusinessline.com/industry-and economy/infotech/article3851306.ece?homepage=true%3Cbr/ http://www.livemint.com/2012/09/05102935/India-services-PMI-shows-faste.html


http://www.thehindubusinessline.com/industry-and-economy/info-tech/article3812487.ece?ref=wl_industry-and-economy http://online.wsj.com/article/SB10000872396390444506004577614772118969532.html?mod=googlenews_wsj http://articles.economictimes.indiatimes.com/2012-08-29/news/33476074_1_placement-season-visit-campuses-naveen-narayanan http://economictimes.indiatimes.com/news/news-by-industry/jobs/tcs-infosys-wipro-cognizant-ibm-hit-campuses-hiring-likely-to-bemuted/articleshow/16251450.cms 8) Maruti Suzuki to increase automation in certain critical production functions- ET/livemint http://articles.economictimes.indiatimes.com/2012-09-03/news/33563177_1_manesar-plant-manesar-operations-automation http://www.livemint.com/2012/09/05003430/Maruti-Suzuki-to-increase-depe.html?h=A1 http://www.carzy.co.in/blog/car-news/maruti-suzuki-plans-increase-automation-manesar-99-1020.html/ 9) FIIs investment reaches ₨ 11,000 cr in August – ET/TOI http://articles.economictimes.indiatimes.com/2012-09-02/news/33548765_1_fii-investment-destimoney-securities-md-highest-net-investment http://timesofindia.indiatimes.com/business/international-business/Bernanke-says-Federal-Reserve-ready-to-act-but-short-on-specifics/articleshow/16150803.cms 10) Finance Ministry says that it has run out of funds to subsidise diesel – The Hindu/ET http://timesofindia.indiatimes.com/business/india-business/Remove-fuel-subsidy-in-phases-GSI/articleshow/15578971.cms http://www.thehindu.com/business/Economy/article3859110.ece http://articles.economictimes.indiatimes.com/2012-09-02/news/33548761_1_oil-firms-cag-fuel-sales 11) GM & Honda planning to focus on ‘small’ to get big in India – Reuters/BS http://in.reuters.com/article/2012/09/03/honda-india-sedan-nikkei-idINDEE8820EQ20120903 http://www.business-standard.com/india/news/gm-sets-sail-to-beat-india-blues/479802/ 12) Exports dip 15% to $22.4 bn in July; steepest fall in three years - BS/Hindu Business Line http://www.business-standard.com/india/news/euro-crisis-pulls-down-indias-export-growth-to-35-mth-low/485306/ http://www.thehindubusinessline.com/industry-and-economy/article3854211.ece 13) Arctic sea ice melts to record low – NBC News/BBC News http://usnews.nbcnews.com/_news/2012/08/27/13509837-a-less-polar-pole-arctic-sea-ice-at-record-low?lite http://www.bbc.co.uk/news/science-environment-19496674 http://www.thehindubusinessline.com/industry-and-economy/article3858898.ece 14) India's Kumbh Mela TV rights sale plan put on hold – TOI/Hindu Business Line/BBC http://articles.timesofindia.indiatimes.com/2012-09-05/nashik/33614799_1_kumbh-mela-travel-finance-corporation-district-collector http://www.bbc.co.uk/news/world-asia-19460283 http://www.thehindubusinessline.com/news/travel/article3836617.ece 15) Only 6% of the Indian companies have a transparent self-governance system - FE http://www.financialexpress.com/news/most-companies-follow-controlled-mgmt/996642/0


Aug 30 - Sep 05