Highlights of  Current Economic Scene

Agriculture

Wheat harvesting has started in the regions of Punjab and Haryana. It is expected that wheat procurement this year would fall below the target as unseasonal rains have flattened crops dampening hopes of bumper procurement this season. According to assessment made by the revenue department, out of total wheat crop-sown area of 23,400 hectares nearly 18,968-acre crop has been affected due to untimely rains and hailstorm that took place during 20 March and 02 April 2009.

The central government has allowed trading firms like State Trading Corporation of India (STC), MMTC and PEC to export 2 million tonnes of wheat after 15 May 2009, as stocks of wheat is reported to be more than 15 million tonnes. Out of the total amount, each of these trading firms would get to export about 65,000 tonnes of wheat.

Wheat procurement from Punjab is expected to be lower this season due to untimely rain causing widespread damage to the crop. This has reduced estimates of wheat output in the state by 500,000 tonnes to 15 million tonnes. The state had earlier estimated that wheat production would touch 15.5 million tonnes as against last year’s output of 15.7 million tonnes. It is expected that due to reduction in the crop estimates, the total crop procurement in the season is expected to be lower at 10 million tonnes as against last year’s 10.61 million tonnes. As on 14 April 2009, state’s mandis have received 2.89 million tonnes of wheat, nearly six times more than that in the corresponding period last year. Of the total procurement, 2.573 million tonnes has already been purchased by the state procurement agencies and private traders.

Wheat procurement from Haryana is expected to increase by 10-20 per cent this season on account of timely sowing, quick maturing and early harvesting. It is projected that nearly 5.5-6 million tonnes of wheat would be purchased this year as against 5 million tonnes procured last year. The total area covered under wheat this season is around 2.482 million hectares as compared to 2.462 million hectares a year ago.

According to the latest official data, public sector trading firms STC, MMTC and PEC and co-operative institution Nafed have contracted to import 10.25 lakh tonnes of pulses in 2008-09 as against import of 15 lakh tonnes of pulses in 2007-08. As India needs to import about 30 lakh tonnes of pulses a year to meet the domestic demand, the government has set a target (for itself) of importing half of these in 2008-09. This would result into spiral in domestic prices of pulses.

As per the report by US department of Agriculture (USDA), India ’s rapeseed production this year is projected to increase by 28% to 7 million tonnes, up by 1.55 million tonnes from last year. This improvement is expected to be due to higher minimum support price and high yield. The area under rapeseed is estimated to rise to 6.6 million hectares in 2008-09, from 5.98 million hectares in the last year. It is also expected that this year yield per hectare would be up by 11% to around 1.06 tonnes over the period of last year.

The import of edible oils jumped by 15 lakh tones to 34.3 lakh tonnes during the review period compared to 19.3 lakh tonnes during the same period last year. The very purpose of withdrawal of duty on soybean oil in March is defeated with the rise in domestic prices of edible oils in the last one month.

According to Solvent Extractors’ Association of India, vegetable oil imports increased to 6.41 lakh tonnes, including 6.09 lakh tonnes for edible purpose as against 5.03

lakh tonnes during the same period a year ago. For the oil year that began from November, imports have increased by 59% to 35.92 lakh tonnes as against 22.64 lakh tonnes during the previous year. Domestic availability of oil has reduced due to lower kharif crop as well as due to farmers holding back their fresh output of rapeseed and mustard anticipating market prices to move upwards, which has led to rise in imports. Even prices of oil in the domestic market are ruling lower due to zero custom duty, which has resulted into rise in consumption.

Sugar prices at domestic level crossed Rs 30 per kg. mark, which has threatened the central government owing to which they are considering to ban exports of sugar through all channels. Further, the dire shortage of sugarcane this year has delayed the crushing season, which began by November end instead of October.

Tea exports from the country has declined by 25.4% during the month of February 2009 due to fall in output and global recession that has reduced demand for the beverage. The overseas sales were reported to be around 12.02mn kilograms, down from 16.12mn kilograms during the same period a year ago. Exports of tea dropped by 3.3% in value terms to Rs 1.48 billion (US $30 million) even as prices rose by 30% on an average to Rs 123.32 per kilogram.

Industry

The General Index (IIP) stands at 280.4, which is 0.5% lower as compared to the level in the month of January 2008. The cumulative growth for the period April-January 2008-09 stands at 3.0% over the corresponding period of the previous year.

The annual growth of thee Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of January 2009 at (-) 0.4%, (-) 0.8% and 1.8% as compared to January 2008. The cumulative growth during April-January, 2008-09 over the corresponding period of 2007-08 in the three sectors have been 2.7%, 3.0% and 2.6% respectively, which moved the overall growth in the General Index to 3.0%.

In terms of industries, as many as five (5) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of January 2009 as compared to the corresponding month of the previous year. The industry group ‘Machinery and Equipment other than Transport Equipment’ have shown the highest growth of 17.5%, followed by 10.3% in ‘Other Manufacturing Industries’ and 5.3% in ‘Beverages, Tobacco and Related Products’.  On the other hand, the industry group ‘Food Products’ have shown a negative growth of 16.1% followed by 15.2% in ‘Wood and Wood Products; Furniture and Fixtures‘ and 13.4% in ‘Transport Equipment and Parts’.

As per Use-based classification, the Sectoral growth rates in January 2009 over January 2008 are (-) 1.0% in Basic goods, 15.4% in Capital goods and (-) 9.2% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 2.5% and 0.7% respectively, with the overall growth in Consumer goods being 1.1%.

Infrastructure

The Index of Six core industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) with base 1993-94 stood at 242.0(provisional) in February 2009 and registered a growth of 2.2% (provisional) compared to a growth of 7.0% in February 2008.  During April-February 2008-09, six core-infrastructure industries registered a growth of 3.0% (provisional) as against 5.8% during the corresponding period of the previous year.

Crude Oil production (weight of 4.17% in the IIP) registered a negative growth of 6.2% in February 2009 compared to a growth rate of 2.3% in February 2008. The Crude Oil production registered a growth of (-)1.7 (provisional) during April-February 2008-09 compared to 0.5% during the same period of 2007-08.

Petroleum refinery production  (weight of 2.00% in the IIP) registered a growth of 0.5% (provisional) in February 2009 compared to growth of 5.8% in February 2008. The Petroleum refinery production registered a growth of 3.0% (provisional) during April-February 2008-09 compared to 7.2% during the same period of 2007-08.

Coal production (weight of 3.2% in the IIP) registered a growth of 6.0% (provisional) in February 2009 compared to growth rate of 11.6% in February 2008. Coal production grew by 8.7% (provisional) during April-February 2008-09 compared to an increase of 5.6% during the same period of 2007-08. 

Electricity generation (weight of 10.17% in the IIP) registered a growth of 0.3% (provisional) in February 2009 compared to a growth rate of 9.8% in February 2008. Electricity generation grew by 2.1% (provisional) during April-February 2008-09 compared to 6.6% during the same period of 2007-08.

Cement production (weight of 1.99% in the IIP) registered a growth of 8.3% (provisional) in February 2009 compared to 12.8% in February 2008. Cement Production grew by 7.2% (provisional) during April-February 2008-09 compared to an increase of 7.9% during the same period of 2007-08.

Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 3.6%(provisional) in February 2009 compared to 2.3% (estimated) in February 2008. Finished (carbon) Steel production grew by 2.4% (provisional) during April-February 2008-09 compared to an increase of 5.6% during the same period of 2007-08.

Inflation

The official Wholesale Price Index for ‘All Commodities’ (Base: 1993-94 = 100) for the week ended 4 April  2009 rose by 0.4 percent to 228.2 from 227.3 for the previous week.

The annual rate of inflation, calculated on point-to-point basis, stood at 0.18 percent (Provisional) for the week under reference as compared to 7.71 percent during the corresponding week of the previous year.  

The index of major group primary articles rose by 1.1% from 245.0 to 247.6 due to increase in prices of fruits and vegetables, arhar, urad, Raw rubber, raw cotton and raw silk.

An increase in the prices of aviation turbine fuel, naphtha, light diesel oil and bitumen pushed up the price  index for major group fuel, power, light and lubricants by 0.5%.

The index for major group manufactured products rose by 0.1 percent over the week due to higher prices of imported edible oils, benzene, etc..

Wholesale price index for ‘All Commodities’ (Base: 1993-94=100) revised up to 227.5 from 228.0 for the week ended 7 February 2009 and annual rate of inflation based on final index, calculated on point to point basis, stood at 3.69 percent as compared to 3.92 percent (Provisional).

Financial Market Developments

Capital Markets

Primary Market

According to global deal tracking firm Dealogic, there has been a lull in the primary market scenario across the world, with the global initial public offer (IPO) value registering a decline of 95% to $1.6 billion with 53 deals in 2009 compared to the $37.3 billion raised via 255 deals in 2008 YTD. There was very little activity in the United States and the EMEA (Europe, the Middle East and Africa ) region, while there was no activity at all in the European region. Some of the firms braving the weak primary market include US software firm Rosetta Stone, which will raise $115 million in an IPO, while Vodafone Qatar is expected to price its IPO this month for raising $952 million. Apart from them, there were no IPOs by European issuers since Resolution Ltd raised $970 million via Bank of America-Merrill Lynch, Citi and HSBC on 5 December 2008, Dealogi. Recently, Bridgepoint Education (BPI) raised $141.8 million at $10.50 per share. The offering was priced below the initial range of USD 14-16 per share.

Rights issues emerged as the single-biggest fundraising route during the year to March-end in stark contrast to IPOs and overseas issues that dominated fundraising in the previous year. According to Prime Database, companies raised Rs 12,622 crore through 23 rights issues in 2008-09 compared with Rs 2,023 crore through IPOs during the period. The amount raised through rights issues in 2008-09, however, more than halved compared to Rs 32,518 crore by 30 companies last year, although the extent of decline was much less than IPOs, which tumbled 95% during the same period.

According to a release from the State Bank of Travancore (SBT), customers of the bank can now use the Application Supported by Blocked Accounts (ASBA) facility while applying for an IPO using their existing account with SBT. Securities and Exchange Board of India (SEBI) has allowed retail investors to apply for an IPO through the ASBA process instead of paying through cheque and the application money will be retained in the investor’s account till the allotment process is finalise. SBT has registered with SEBI as a ‘self certified syndicate bank’ to provide the ASBA facility to retail investors.

Secondary Market

Key benchmark indices extended gains for the sixth straight week boosted by positive global cues, signs of economic recovery, easing credit situation and inflow from foreign funds. The market gained in 3 out of 4 trading sessions during the week. Signs of an improvement in the Indian economy and easing of the credit crisis has triggered a solid rally on the domestic bourses during the week. The rally was also a part of a sharp surge in global equities triggered by hopes that the worst of the global economic recession may be over. With inflation slowing to around 20- year low of 0.18% in the week 4 April 2009 from a year earlier after rising 0.26% the previous week, analysts opine that the central bank may cut interest rates further in its meet scheduled on 21 April 2009 to boost slowing economy. Foreign institutional investors (FIIs) inflow in April 2009 totaled Rs 3,092.20 crore (till 15 April 2009) reversing a marginal Rs 1.10 crore outflow in March 2009. However FIIs are still net sellers to the tune of Rs 3,579.50 crore in calendar year 2009. The BSE Sensex gained 219.2 points or 2.0% to 11,023, in week ended 17 April 2009. The BSE Mid-Cap and the BSE Small-Cap indices outperformed the Sensex. The BSE Mid-Cap index gained 114.25 points or 3.40% to 3,472.60 and the BSE Small-Cap index advanced 184.01 points or 4.88% to 3,952 in the week. The NSE Nifty jumped 42.35 points, or 1.26%, to end the week at 3384.

During the week under review, most of the sectoral indices of BSE recorded positive gains. Among them, the BSE Bankex (9.5%), Realty (6.1%) and Auto (4.1%) sector gained on expectations that the central bank may cut key rates in its annual policy. Lower Infosys guidance led to a fall in IT stocks to1.5% over the week.

On 16 April 2009 the SEBI board decided to seek the opinion of a legal expert on the issue of whether it had the authority to examine if the committee appointed to look into the National Securities and Depository Limited (NSDL) issue had acted within the framework of the terms of reference established by the board resolution.

In a bid to reduce concentration risk for mutual funds, the SEBI said that funds’ exposure to money market instruments of an issuer will be capped at 30% of its net assets. Schemes can, however, continue to invest up to 15% or 20% of net assets, as the case may be, in other investment grade debt instruments of an issuer.

As much as Rs 22,000 crore worth of fixed maturity plan (FMP) schemes are going to mature in the month of April and May. Out of this, FMPs worth Rs 12,000 crore have already matured to date. But mutual fund (MF) industry players say that the money is moving into some of the other short-term debt schemes with rollovers being extremely thin. The rising stock market has seen renewed buying interest from mutual funds, but only in select stocks. In March, mutual funds were net sellers in equities to the tune of Rs 270.60 crore and net buyers in debt of Rs 702.20 crore, as per the SEBI data. However, select stocks such as HDFC Bank, State Bank of India , ITC, Larsen & Toubro and United Spirits saw sustained buying. The fund houses were mainly bullish on heavyweight stocks such as HDFC Bank and bought 4.34 million shares worth Rs 402.29 crore, followed by the State Bank of India (Rs 175.59 crore), ITC (Rs 169.71 crore), Larsen & Toubro (Rs 166.52 crore), United Spirits(Rs 163.36 crore).

Derivatives

After opening a promising opening during the week, the Nifty future struggled at higher levels. It closed at 3381.3 points, at a marginal gain of 0.7% over its previous week’s close. Nifty April futures, which ended the week at a premium of 13 points closed at a discount this time around. Open interest (OI) also declined to 4.09 crore shares, suggesting that there may have been profit booking at higher levels. Derivative volumes have doubled and the carryover trend is healthy. Daily derivative volumes are above Rs 70,000 crore and much of the volume is obviously being contributed by Indian traders.

Volatility in a rising market is being reflected by rising premiums. Traders should be braced for a sell-off at settlement. The carryover trend is healthy. About 39% of Nifty option volume has switched into May and beyond. About 10% of Nifty futures volume has moved into the May-June series, while a lot of April Nifty futures OI has been extinguished. The Nifty options market has healthy signals as well. The put-call ratio (PCR) is at 1.6 overall (in terms of OI) and it is at around 1.9 in April, which is higher than comfort levels though theoretically bullish.

Daily volatility has risen along with rising volumes and that historic volatility is being reflected in higher option premiums. Volatility index continues to give out cautious signals. The index, which measures the immediate expected volatility of Nifty future, has been adding value quite consistently. After two months. It closed above 50-point mark at 50.8 against the previous week close of 43.54, clearly indicating that stock markets are entering the correction zone. . It is worth noting that on previous occasions whenever India VIX, the fear gauge as popularly christened climbed to about the 50-point mark, the Nifty future had tumbled sharply.

The FII outstandings amount to around 35% of all OI. The cumulative FII positions as percentage of the total gross market position on the derivative segment as on 16 April stood at 35.10%. While they were net buyers in index futures, FIIs offloaded stock futures. They now hold index futures worth Rs 12,743.48 crore (Rs 12,540.03 crore) and stock futures Rs 16,370.08 crore (Rs 15,872.01 crore).Their exposure to index options was quite high at Rs 27,150.9 crore (Rs 26,308.55 crore).

South Africa was toppled as the biggest single stock futures market by India after derivative contract defaults forced banks to buy equity stakes and plunging share prices deterred trading. According to the World Federation of Exchanges, the NSE of India traded 50.2 million single stock futures in the first quarter compared with 27 million on the Johannesburg Stock Exchange (JSE), operator of Africa ’s largest stock market.

Government Securities Market

Primary Market

The RBI re-issued 7.56% 2014 and 8.24% 2027 for the notified amount of Rs 8,000 crore and Rs 4,000 crore, respectively. The cut-off yield for the 5-year paper maturing in 2014 was set at 6.10% and for the 18-year paper maturing in 2027 was set at 7.44%.

Four state governments auctioned 10-year paper maturing in 2019 for the notified amount of Rs 3,577.45 crore. The cut-off yield was set in the range of 7.50-7.58% being highest for Nagaland and lowest for Andhra Pradesh.

On April 15 2009, the RBI auctioned 91-day TBs and 182-day TBs for the notified amount of Rs 8,000 crore and Rs 2,000 crore, respectively. The cut-off yield for the 91-day TB was set at 3.81% and for the 182-day TB was set at 4.07%.           

Secondary Market

Overnight call money rates on the weekend traded near the central bank benchmark borrowing rate as a cash surplus in the system has lowered demand for funds from banks to meet reserve requirements. The three-day money was at 3.50/55%, scarcely moved from its previous close of 3.50/60. Call money has traded around the key 3.5% mark for the last eight sessions. Banks have been deploying more than a trillion rupees a day at the central bank's reverse repo auction for the last six sessions, indicating the extent of surplus funds with banks. Traders and analysts opine that monetary easing by the central bank as well as its buyback of government securities, and redemption of two bonds in recent weeks has boosted cash. Even though the auction was as per market expectations, the prices did not rise after the results were announced by the RBI. The RBI auctioned Government securities worth Rs 12,000 crore. There was some profit taking by investors as they tried to take advantage of the sustained rally in the markets, added the d ealer. Total traded volumes on the order matching system were lower at Rs 17,325 crore (Rs 18,315 crore).

In an effort to hasten the process of settlement in primary market issuances, the SEBI is mulling ways to shift to the T+2 (transaction+2 days) system, which is followed by the secondary market for settlement of transactions. As per sources SEBI was making efforts to introduce the T+2 system in primary market issuances like IPOs, rights issues and bonus issues. At present, allotment of shares or refunds in the primary market has to be done within 15 days from the date of the closure of a public or a rights issue. Implementation of a T+2 system would mean that the process of settlement or refund would be completed within two days from the date of investment by a subscriber in any public issue. This would significantly reduce the overall timelines of public issuances and would add to the confidence of the investor. This would also prevent locking-in of investors’ money for as long as 15-20 days, which otherwise could help in improving the liquidity scenario in the secondary market.

Bond Market

During the week under review, one bank and one non-banking financial corporation tapped the bond market to mobilise an amount of Rs 800 crore through issuance of bonds.

Foreign Exchange Market

The rupee closed at Rs.49.71 per dollar on 17 April 2009 as compared with Rs.49.91 per dollar as on 09 April 2009. The Rupee moved between Rs.49.49 and Rs.49.88, with a standard deviation of 18 paise during the week.

The dollar was strong against other global currencies except the yen, due to risk aversion on part of investors. The forward premia market saw some paying, as the rupee weakened, with the six-month closing at 2.75% (2.67%) and the one-year at 2.15% (2.13%).

The country’s forex reserves declined by $2.183 billion to touch $252.977 billion during the week ended 10 April 2009.

Commodities Futures derivatives

The country's leading commodity bourse, Multi-Commodity Exchange (MCX), which is struggling to increase volumes in agri-futures, launched futures contracts in 10 farm commodities, including crude palm oil, mentha oil and potato on 19 April. According to the MCX circular, futures contracts in cashew kernel, coriander, crude palm oil, jeera, maize, mentha oil, potato, red chilli, rubber and sesame seed will start with immediate effect. The agri-futures contracts will mature in June, July and August and cashew kernel, jeera, maize, red chilli and sesame seed contracts will expire in June. Crude palm oil and potato both Agra and Tarkeshwar variety will mature in July, while coriander, mentha oil and rubber contracts in August.

Gold prices slipped by 0.34% in futures trade as speculators and investors indulged in reducing their holdings in bullion to shift funds in the surging stock markets. On the MCX, gold for the August contract fell by 0.34% to Rs 14,239 per 10 gm. The contract traded 247 lots. The precious metal for the June contract was down by 0.32% to Rs 13,232 in trading of 4,416 lots.

A sudden increase in the traded volumes of sugar futures earlier this month, coinciding with a surge in spot prices, had almost forced the government to slap a ban on futures trading in the commodity. But the Centre finally decided against enforcing a ban was since it would have sent out a ‘very negative’ signal to the market at an already difficult time. The government is, however, keeping a ‘close watch’ on all transactions in sugar on the various exchanges and is ready to crack the whip at the slightest sign of manipulation. It could also ask the Forward Markets Commission (FMC) to raise trading margins.

Sugar spot and futures dropped sharply on 17 April after the central government released an additional 6,00,000 tonne of sugar under the free-sale quota for the April-June quarter. Because of additional release of sugar, spot prices in many markets across the country dropped by around Rs 15 to Rs 60 per quintal. In futures markets, prices dropped by almost 2% after opening higher as speculators reduced their positions. Sugar for delivery in the April contract traded at Rs 61, or 2.90%, lower at Rs 2,160 per quintal after rising to Rs 2,229 per quintal in early trade. The contract recorded business turnover of 15,060 lots. May contract also traded at Rs 54, or 2.6%, down at Rs 2,254 per quintal with a turnover of 89,660 lots, while June contract fell Rs 20, or 0.85%, to Rs 2,350 per quintal after dipping to Rs 2,304 per quintal.

Insurance

Second largest public sector general insurer Oriental Insurance is expecting a decline in its profit by about Rs 300 crore during the year ended March 2009. The company had registered a profit before tax (PBT) of Rs 453 crore in 2007-08, and it is estimated that in the financial year 2009-10 the company’s PBT would be in the range of Rs 100-150 crore. The company collected a premium of Rs 4,075 crore during the financial year 2008-09, registering a growth of 4.5 % over the last year. 

Life Insurance Corporation (LIC) has set up a new department for implementing risk management practices and to ensure better control over investments within regulatory provisions and internal guidelines by adopting advanced technology support for efficient analysis and reporting. The corporation is stuck up with its 4% equity stake holding in Satyam as the IT major’s market value has plummeted substantially after erstwhile chairman Ramalinga Raju confessed to a Rs 7,000-crore fraud. To avoid such losses LIC has taken steps and the risk management department will keep strict vigilance on the rapidly changing investment scenario in the country. LIC is one of the largest institutional investor in the country, with investments of Rs 7 lakh crore in form of equities, debts and other instruments. More than 27% of LIC's income comes from investment operations. Out of a total income of Rs 1.5 lakh crore in 2007-08, around Rs 40,655 crore was accrued from investment income. Thus, the establishment of the new department for risk management practices will help to prevent such mishaps in future.

Public Finance

According to the latest press note revenue receipts as on February 2009 works out to be 79 per cent of the actual to revised estimates at Rs. 437,397 crore with the receipts under net tax revenue reaching to Rs. 356,390 crore and non-tax revenue Rs.81, 007 crore.

With total expenditure reaching 83.1 per cent of the revised estimates, fiscal deficit till date works out to be Rs.307, 133 crore. Market borrowings at Rs.300255 crores financed about 98 per cent of the fiscal deficit.

Banking

The credit information market is set to see tough competition as RBI has now allowed four companies to operate in the segment. Recently, RBI issued ‘in-principle-approval’ to Credit Information Bureau ( India ) Ltd., Equifax Credit Information Services Pvt. Ltd., Experian Credit Information Company of India Pvt. Ltd and Highmark Credit Information Services Pvt. Ltd, to set up credit information companies (CICs) in India .

After extending the duration of its special housing and SME loans schemes with the discounted rate of 8% till September 30, SBI has now taken a similar step towards its agricultural loans. The bank has decided to extend the period of its concessional financing against cold storage and warehouse receipts for five months, under which it will charge 8% interest for a year, if the borrower applies for it before September 30.

International Finance Corporation (IFC), the investment arm of World Bank is extending a credit line of $60 million to EXIM Bank to ramp up its operations. The two-part, short-term loan includes a $30-million credit line by IFC and another $30 million will be raised from private sector bank. The proceeds of the loan will be disbursed mainly to small and medium enterprises (SMEs) to aid their exports.

In order to focus on core business, Shriram City Union Finance (SCUF) Ltd has decided to sell its non-core assets like windmills and non-conventional energy arm (produces biomass based power). The company has also decided to sell its entire holding (50 lakh shares) 4% in the Shriram Sanlam Life Insurance.

Corporate

Barely year after Hero Group and Daimler formalized a joint venture (JV) in the country for commercial vehicles, Hero Group has pulled out of the JV with Daimler to produce trucks in India . The 60:40 JV between Daimler of Germany and Hero Group has proposed to set up a plant in Tamil Nadu with an initial capacity of 70,000 trucks which were to be rolled out in 2010. With an entailed investment of Rs 4,400 crore, the capacity was to be scaled up further by 2012 when the JV parents would have manufactured heavy trucks as well.

Competition watchdog CCI announced that it will expedite the process of mergers and acquisitions (M&As) if those do not obstruct competition, a stance that should ease worries of India ’s corporate sector on this count. The Commission has been working towards sensitizing stakeholders to fair competition, but has not been able to take up any cases because the regulations under the Act are yet to be notified.

Eagle Burgmann India Ltd., a wholly-owned subsidiary of Singapore-based Asia I, will soon be moving to its own manufacturing facility at Pune to make mechanical seals for refineries and petrochemical plants.

In its endeavor to service more debts, the country’s second largest real estate firm, the cash strapped Unitech, has sold a Gurgaon hotel, Marriot Courtyard for Rs 231 crore to a high net worth individual based out of Delhi . Recently, Unitech has raised $325 million to retire part of its Rs 8,400 crore debt. The company is also planning to sell four more hotels in Noida, Kolkata and Gurgaon within six months. As part of its strategy to deal with the slowdown in the realty sector, the company is monetising its non-core assets by ‘deleveraging through sale of assets like hotels, offices and infusion of private equity at individual project level.

Honda Motorcycle and Scooters India (HMSI) is planning to invest Rs 300 crore over next three years. Planned investment will be used for launching new range of vehicles besides the up-gradation of the plant capacity at Manesar. The company has invested Rs 900 crore since its inception and the proposed investment of Rs 300 crore will be addition to it.

Despite the economic slowdown, Larsen & Toubro (L&T) is speedily building up its order book. As on December 31, 2008, the company has bagged Rs 68,000 crore worth of orders and is expecting an order book size of over Rs 70,000 crore for the financial year ended March 31, 2009. On account of diversified capabilities in various sectors, slowdown in one sector has not made an impact to L&T so much. The company is having presence in sectors such as power, railways, infrastructure, hydrocarbons, minerals, metals and material handling. These diversified portfolios have enabled rapid growth to the company.

External Sector

Exports during February 2009 were valued at US$ 11931 million which was 21.7% lower than that in Februry 208 as a result during the fiscal year so far the total exports at US$156597 million registered a growth of 7.3% over that of US $ 145878 million reported in the comparable period last year.

Imports during February were valued at US $ 16823 million, a decrease of 23.3 per cent over that of US$ 21934 million in February 2008 and the cumulative import at US$ 271687 million was 19.1% more than that of US $ 228081 during April- February 2007-08.

Trade balance during February thus worked out to be $ 4910 as compared to $6714 in 2008. The cumulative trade balance for April-February 2008-09 estimated at US $ 115090 million was 1.4 times to that of US $ 82203 million during April-February 2007-08.

While oil imports during the current fiscal year so far gone up from US $ 70704 million in April-February 2007-08 to US $ 89684 million, that of non-oil imports accelerated by 15.6% to US $ 182003 million.

Information Technology

BK Modi-owned Spice Group, engineering major L&T and Tech Mahindra were the two companies that have been short-listed by the board of fraud-hit Satyam Computer Services (SCS) for the next level of the bidding process. And finally Tech Mahindra, India ’s sixth largest software exporter wins the bid for a 31% stake in SCS for Rs 1,756 crore, at a bid price of Rs 58 a share. The second highest bid at Rs 45.90 came from L&T Infotech, which already holds a 12% stake in the company. The third bid was for Rs 20 a share by private equity firm WL Ross & Co. Venturbay Consultants Pvt. Ltd., a 100% subsidiary of Tech Mahindra, will be acquiring over 30 crore shares in SCS for the 31% equity stake and an additional 20% through the mandatory open offer to the public. With this acquisition Tech Mahindra has joined the league of the top IT firms in India like Tata Consultancy Services (TCS), Infosys Technologies and Wipro Technologies. Tech Mahindra will be funding the acquisition through equity and debt. Matters such as retention of staff would be the choice of the ultimate buyer. SCS currently employs 48,000 people on its rolls. SCS has 450 acres of land, 50% of which is freehold. In addition, the buyer is also free to bring in a strategic partner. Tech Mahindra operates only in the telecom vertical while SCS is providing services to banking, financial services & insurance (BFSI), auto, healthcare, SAP etc. the synergies that are apparent are an access to a diverse set of verticals, greater access to US-based clients and a strong workforce. 

The Company Law Board (CLB) has approved Tech Mahindra’s proposed acquisition of a 31% equity stake in beleaguered Satyam Computer Services and has asked the buyer to deposit Rs 1,756 crore for the deal by April 21, 2009 in a designated account. The CLB, in its order, also asked Tech Mahindra to nominate maximum of four directors on Satyam’s board after depositing the required capital. However, the present six directors of Satyam appointed by the government will continue till further orders.

Telecom 

Tata Communications (formerly VSNL), Rs 800 crore data and communications service provider company, has announced its participation in the $600 million new West African Cable System. The consortium includes Angola Telecom, Broadband Infraco, Cable & Wireless, MTN, Telecom Nambia, Portugal Telecom, Sotelco, Telkom SA, Togo Telecom and Vodacom. The operators have recently signed a construction and maintenance agreement (C&MA) and supply contract for the implementation of the West Africa Cable Systems (WACS).

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.