THE WEEK SUMMARY - 30.03.09

Corporate

No change in Satyam bid
THE government-appointed board of Satyam Computer Services ruled out any change in the bidding process, even as the BK Modi-promoted Spice Group threatened to pull out of the race to buy Satyam citing lack of transparency. The Spice Group wanted the board to disclose the identity of qualified suitors, preferred an e-auction, and was against a second round of shortlisting of bidders, said Preethi Malhotra, director of Spice Innovation Technologies Ltd (SIT), a special purpose vehicle floated by the Spice Group to buy Satyam. Group chairman BK Modi said he was still awaiting a reply from Justice SP Bharucha, the former chief justice of India who is overseeing the bidding process. Another suitor for the beleaguered IT firm, Tech Mahindra, kicked off its due diligence on Friday to arrive at a valuation.

TATAS RAISE RS 740 CR FROM STAKE SALE
Tata group company Tata Communications (TCL) recovered over half of its initial investment in the unlisted Tata Teleservices (TTSL) by selling a minuscule portion of its stake in the firm. On Wednesday, TCL sold a 1% stake in TTSL for Rs 424 crore. It was in 2002 when TCL, then called Videsh Sanchar Nigam Limited, acquired a 19.9% stake in TTSL for Rs 636 crore. Over time, with changes in the share-holding structure, TTSL’s stake went down to under 15%. Tata Power, another Tata group company, also sold a part of its holdings in TTSL for Rs 317 crore. The price at which Tata Power acquired this holding has not been made public. Importantly, all this has taken place after Japanese telecom major NTT DoCoMo late last year acquired a 26% stake in TTSL for $2.7 billion. This was a combination of fresh equity to the extent of 20% with the balance 6% coming in by acquiring stakes of existing shareholders.

RANBAXY TRUST BUYS RELIGARE SHARES
The employee’s trust of Ranbaxy Laboratories invested Rs 22 crore in Religare Enterprises, a financial services company promoted by Ranbaxy’s chairman and managing director Malvinder Singh and his brother Shivinder Singh, both former owners of the drugmaker. The move evoked criticism from industry analysts as the companies are in completely different sectors with little in common.

Economy

AS-11 suspended till 2011
THE National Advisory Committee on Accounting Standards (Nacas), which is the final word on accounting policies followed by Indian industry, has favoured suspending for two years a key rule that requires firms to mark-to-market foreign exchange assets and liabilities. The decision comes as a major relief for corporate India as it sits down to draw yearly financial results.The demand to suspend this rule, known in accounting circles as AS-11, was made by the Confederation of Indian Industry (CII) on grounds that it could severely distort the earnings of many companies. The industry lobby contended that this accounting standard, designed to address normal conditions, should be suspended for now as the present market conditions were not normal. Indeed, India Inc may post better results if Nacas’ recommendations are accepted, as it would spare several companies from taking a hit to reflect the 27% depreciation of the rupee against the US dollar in the last one year.

ECONOMY TO GROW 6.5-7%, SAYS PM
India’s economy would expand by 6.5 to 7% in the current fiscal with revival seen in consumer spending and there was no danger of the country slipping into a deflationary mode, Prime Minister Manmohan Singh said. “I don’t see India is
in danger of deflation. I don’t see that we are facing a deflationary trend,” he said while talking to reporters here. Noting that government had announced stimulus packages to boost economy reeling under the impact of global financial meltdown, the Prime Minister said, “Consumer durable goods are showing lot of improvement, though there are some regressive trends.” As regards growth in the current fiscal, he said, “We will still grow at 6.5 to 7%.” The Central Statistical Organisation (CSO) in its advance estimate of national income in February had projected a growth rate of 7.1% for the current fiscal.

INFLATION DROPS TO 0.27%
Inflation continued its downward journey for the week ended March 14 but the price rise in food items and manufactured products such as cement and metals have tamed the pace of decline. Annual inflation rate came down from 0.44% to 0.27% for the week, the lowest in the last 32 years.

Technology

EXL may acquire overseas firm
BPO firm Exl Service Holdings (EXL) said it’s hopeful of closing an acquisition in Eastern Europe or the US soon. It’s currently evaluating 5-10 firms with capabilities in areas such as insurance, utilities, compliance and risk management. The company has cash reserves of about $112 million, of which it will spend about $70-75 million on potential acquisitions, EXL president and CEO Rohit Kapoor said. Insurance and utilities are the largest verticals for the BPO company and target companies would be those with proprietary platforms or other capabilities in these areas. “Regulatory compliance would be a key growth area as companies, especially financial institutions, will have to comply with a host of new regulation in the aftermath of the global financial crisis,” Mr Kapoor said. EXL has not made any acquisitions in the last two years.

GENPACT SETS SIGHTS ON HOME TURF
Genpact is eyeing around 30 outsourcing deals in India across sectors like manufacturing, telecom, utilities and financial services, according to the company’s president and CEO Pramod Bhasin. The country’s largest BPO firm by sales has also zeroed in on China, Japan and West Asia as growth markets. The country’s BPO market, valued at $1.3 billion, is expected to grow by 40% in 2009. “The domestic market is very receptive towards outsourcing. Deal sizes, however, remain small, ranging between $1 million and $5 million,” Mr Bhasin said.

DEADLY PC VIRUS TO STRIKE ON APRIL 1
A security expert has cautioned that an Internet worm, called Conficker C, can strike at infected computers around the world on April 1. Conficker C is a sophisticated piece of malicious computer software, or malware, that installs itself on a PC hard drive via specially written web pages and then conceals itself on a computer. Graham Cluley, of the security specialist Sophos, has claimed that Conficker C is programmed “to hunt for new instructions on April 1”. However, the biggest catch is that no one yet has any idea what exactly Conficker C is programmed to do.

Markets
Sensex crosses 10k-mark
A SPATE of positive developments lifted the benchmark Sensex past the 10,000-mark to close at 14-week high of 10,048.49. The key index also registered its largest weekly point-wise gain of 1,081.81 points in the year 2009 on all-round buying as bulls were back in action. The 30-share index also recorded its fourth highest ever weekly point-wise gains in the history of the BSE. The Sensex completed its threeweek gaining string with a sharp rise a total of 1,722.67 points, or 20.69 per cent, indicating that the worst might be over. For the week ended March 28, the Bombay Stock Exchange 30-share barometer moved in a range of 10,127.09 and 9,040.30 before ending the week at 10,048.49, a steep rise of 12.06 per cent over the preceding weekend. Similarly, the broad-based 50-issue Nifty of the National Stock Exchange spurted by 301.60 points, highest in the current calender year, or 10.74 per cent, to 3,108.65 from its last weekend’s close. On the first day of the week, the bell-wether BSE index logged its biggest single-day gain of 457.34 since December 10,2008 on distinctly firm global cues due to surprising decision by the US Federal Reserve to pump in over USD 1.0 trillion into the financial system to help revive the American economy. Brokers said the markets across the globe welcomed the US’ public-private sector programme announced on Monday to help the ailing banking system recover from massive losses suffered in the US real estate meltdown. Most of the global indices displayed a firm trend at the weekend on hopes that the downturn in US economy, the world’s biggest, is easing. Some positive developments on the domestic front also gave a boost to the market sentiment. On Tuesday, Prime Minister Manmohan Singh said India’s economy will see a huge revival in six to seven months as stimulus packages work their way through the system and demand expands. However, the Planning Commission said the economy would grow by 6.5 per cent during the current fiscal, below the 7.1 per cent projected by the government last month. The market shot up Thursday on hectic short-coverings on the last day of March series. Moving towards zero, inflation fell further to 0.27 per cent during the second week of March from 0.44 per cent during week ended March seven, giving room to the central bank to take further monetary steps to spur the economy.

Politics
Manmohan still Cong candidate for top job
CONGRESS president Sonia Gandhi on Tuesday declared in unambiguous terms that Manmohan Singh would remain the party’s prime ministerial candidate for the forthcoming elections. “The Congress party candidate for prime minister is Mr Manmohan Singh. What more can I say? There may be several claimants for the post, but no one comes close to the PM,” she said. The announcement, made just after unveiling the party manifesto, comes in the backdrop of a section of the UPA allies seeking to reopen the issue pertaining to the UPA’s prime ministerial candidate. By declaring that there was no vacancy for the slot, Ms Gandhi was also trying to silence voices within the Congress that had been clamouring for anointing AICC general secretary Rahul Gandhi as the nominee for the top job. Announcing Mr Singh’s candidature in his presence on Tuesday, Mrs Gandhi said the Congress had always fought for a secular, democratic and socially-just country.
UPA ALLIES DESERT PARTY
The UPA government’s attempts to retain power at the Centre appeared to be in total disarray. PMK, a key ally in Tamil Nadu quit the alliance to formally solemnise a tie up with AIADMK while the SP, RJD and LJP floated a “secular alliance” within the UPA. In the Hindi heartland, there appears to be a concerted effort to pull Congress down from its perch. SP general secretary Amar Singh on Thursday said that Mulayam Singh Yadav and Lalu Prasad as well as Ram Vilas Paswan will co-ordinate their political efforts in Uttar Pradesh and Bihar.