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Thursday, March 19, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


Hikes, bonuses put on quarantine as IT firms prepare for slump

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Bengaluru: India's IT services companies may freeze pay hikes and cut bonuses to deal with the business slowdown sparked by shutdowns due to the Covid-19 outbreak globally, replicating moves made during the US financial crisis over a decade ago, senior executives and analysts told ET."Bonus, variable pay or any increment is right now on hold," C P Gurnani, CEO of Tech Mahindra, told ET. "At this stage, most of the world is addressing their first priority: keeping people safe".India's technology services firms have asked those employees who can deliver remotely to work from home. They have sent trainees back home from campuses in a bid to keep to social distancing norms and reduce the spread of the virus.Most India-based IT services firms have eight out of ten employees working in centres locally.The fallout of the outbreak in key markets in the US and Europe has also made analysts revise growth for the IT sector for FY21. Kotak Institutional Equities has cut revenue growth estimates of some large and mid-cap tech services companies by 2-4% and of the industry by 3-8%. Accenture on Thursday cut its guidance for FY20 (September-August) citing the uncertainty due to the spread of the virus. It expects to grow in the range of 3-6% as against its earlier forecast of 6-8%. In the first six months, it has grown revenue by 8%, effectively indicating that business will be flat or negative in the next two quarters. Accenture's business is a key barometer on the impact on other Indian IT companies.Tata Consultancy Services has already completed its annual appraisals for the year, but has not yet decided on the payouts, said a senior TCS executive, who did not want to be named. "We are still dealing with the immediate fallout. No discussion on pay freezes has been done," the TCS executive said. TCS did not respond to queries by ET.Companies such as Wipro, HCL Tech and Infosys hand out hikes later in the year. "The crisis will likely negatively affect profits and to the extent that bonuses are tied to firm performance and profitability, they will automatically be reduced. In this case employees are likely to view the reductions as justified," said Peter Bendor-Samuel, CEO, Everest Group.However, if the compensation adjustments are made to keep profits high then the firms are likely to have morale and turnover problems going forward, he added.IT companies have seen demand and bill rates crash, as clients have moved to doing only the most crucial work to keep their business running, a Nasscom executive said. New deals are not being signed and old ones are being placed on standby, the person said.

What Tata's boss bought in a carnage

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ET Intelligence Group: Amid the carnage on Dalal Street, one investor seems to be bullish on select Tata Group stocks.N Chandrasekaran, executive chairman of Tata Sons, has bought shares of Tata group companies including Tata Communications, Tata Chemicals and Tata Investment Corporation for a cumulative sum of nearly Rs 6 crore.According to announcements by the respective companies, the Tata Sons chief has purchased 1 lakh shares of Tata Communications and Tata Chemicals each and 10,000 shares of Tata Investment Corp.The stock of Tata Communications, an enterprise data services provider, has more than halved over the past month.According to analysts and industry experts, a boost to work from home concept amid the Covid-19 pandemic may boost data consumption by 15 per cent sequentially for the next two quarters. The data business accounts for 80 per cent of the company's revenues and 91 per cent of the operating profit before depreciation and amortisation (EBIDTA).Tata Communications is the largest company in the country's enterprise data segment. It owns the largest undersea cable network which is required for data transmission, making it one of the leading global digital infrastructure players. Its data revenue rose by 9 per cent year-on-year in the first nine months and EBIDTA rose by 37 per cent.Reliance Jio has also started building its enterprise data business in a tie-up with Microsoft. Bharti Airtel has also recently tied up with Google to offer the service.Analysts don't see this as a threat, as balance sheets of the competitors are leveraged, which lowers the probability of a price war. 74722179 CLSA in a recent report said that Tata Communications' earnings may double in the next two years led by the growth in data services business. The company has a debt of nearly Rs 9,000 crore and debt-EBIDTA ratio of 2.7, which the company intends to bring down to 2.5 times. Tata Communications has shown operational turnaround. Its adjusted loss reduced from Rs 2,875 crore in FY18 to Rs 131 crore in FY19. Analysts are expecting the company to report a net profit of Rs 270 crore for FY20.In case of Tata Chemicals, lower crude prices is a positive since crude related costs account for nearly 40 per cent of the company's total costs of manufacturing chemicals such as soda ash and soda bicarb.The supply of these chemicals is likely to remain low given the production shutdowns in China and other global markets, which may offset any demand slowdown. Lower demand may soften realisations, but margins are less likely to be impacted, say analysts."We do not expect the same to impact the margins negatively given that crude oil and natural gas prices are also down considerably. This can provide some respite to the operational performance, going ahead," said Chirag Shah analyst with ICICI Securities. The stock is down by 34 per cent in the past one month.

India is changing rules for Covid testing

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New Delhi: India is considering a proposal to broaden testing criteria for Covid-19 amid debate that they may be too narrow to detect community transmission of the disease. The high-level expert committee set up by the Indian Council of Medical Research (ICMR) has suggested that all with atypical pneumonia and close contacts of Covid-19-positive persons be tested. Currently, only those who have come from affected areas overseas or have been in contact with such persons are being tested."The testing protocol has been reviewed and will be updated soon," said an expert. "The suggestions to include atypical pneumonia patients and close contacts of Covid-19 positive patients have been given to the ministry today." He clarified that India doesn't intend to undertake mass testing as in South Korea. "We will also have to see our testing capacity. As of now we don't plan to allow all symptomatic patients to go for testing," he said. However to check whether there's community transmission, the ICMR has also decided to pick up additional samples from Covid-19-affected areas for testing, as it proposes to expand random checks to keep tabs on whether this is happening, said Rajnikant Srivastava, scientist at India's top health research body."The surveillance has been expanded to include more areas, specially those areas where Covid-19 cases have been reported," he said. "All results of random samples are negative, which reassures that there is no community transmission yet."As per the current testing protocol, all asymptomatic patients who have undertaken international travel should be home quarantined for 14 days and tested only if they develop symptoms such as fever, cough or breathing difficulty. If the test is positive, they will be isolated and treated as per the protocol.Additionally, all contacts of laboratory confirmed positive cases should be home quarantined for 14 days and tested only if they become symptomatic.

Olympic flame arrives in Japan ahead of Tokyo 2020

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HIGASHIMATSUSHIMA: The Olympic flame arrived in Japan Friday to a muted reception, with what should have been a joyous celebration dramatically downscaled due to the coronavirus pandemic that has cast doubt over whether the Tokyo Games can even go ahead.The flame landed on a special charter flight into Matsushima Air Base in the Japanese province of Miyagi, chosen as part of the "Recovery Olympics" to showcase the region's revival after the 2011 earthquake, tsunami and nuclear meltdown.Former Japanese Olympians Saori Yoshida and Tadahiro Nomura collected the flame from the aircraft and took it through a guard of honour to a cauldron in the shape of a cherry blossom on a stage in front of selected guests.But some 200 local children who were due to welcome the flame were kept away as part of what organisers called the "heartbreaking" decision to pare back events as the world battles the virus that has killed nearly 10,000 people.

Telcos won’t get 20 years to pay AGR dues if licences expire

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MUMBAI: The Department of Telecommunications (DoT) will not allow operators to use the full 20-year period to pay their adjusted gross revenue (AGR) dues in circles where the licenses expire, if the Supreme Court accepts the staggered payment proposal of the government, a person familiar with the matter said.The person added that the government will insist that unless the license is renewed, the telco will have to pay its statutory dues for the circle in which its license for spectrum is expiring, by the expiry date."A telco cannot use the 20-year period to pay for spectrum dues, even if its license has expired. Payments need to happen while the licenses are valid," said the person aware of the development. The comments clear the air for telcos like Vodafone Idea and Bharti Airtel, who are the worst affected by the Supreme Court order of October on widening the definition of AGR, and have licenses across circles ready to expire well before the 20-year outer limit, which will expire in 2040.For instance, in 2021, Airtel has eight licenses expiring while Tata Teleservices has four. Tata Teleservices had already sold its consumer mobility business to Airtel. Then in 2024, the two operators will have to renew another six and 12 licenses, respectively. Vodafone Idea's renewal will kick-in in 2033 when it will brace for 22 of its licenses to expire.The three telcos did not comment on ET's queries. People close to development said that DoT expects operators to renew their licenses so that customers are not impacted and therefore, a stage where licenses are withdrawn will most likely be averted.As a relief measure, the government has requested the Supreme Court to allow affected telcos to pay AGR dues over 20 years or less. The formula of AGR payment includes freezing interest and penalty components as of October 24, and protecting the net present value using the discount rate of 8%.In its application to the Supreme Court filed on Monday, the government cited an "adverse impact" on the economy, jobs and millions of consumers from the collapse of a telco while urging the court to accept its formula to receive the AGR dues. The Supreme Court on Wednesday said it will consider the government's proposal after two weeks. The court has been taking a hard line against the telcos so far, and on Wednesday banned any reassessment or self-assessment of the AGR dues.Vodafone Idea has so far paid Rs 6,854 crore of its DoT estimated dues of Rs 58,254 crore, comprising license fees, spectrum usage charge, interest and penalties.Bharti Airtel on its part has paid government Rs 18,004 crore compared with the DoT's estimate of Rs 43,980 crore. Tata Teleservices' dues have been estimated at Rs 16,798 crore by the DoT whereas the company has paid Rs 4,197 crore.The self-assessed AGR dues of these companies are less than half of the DoT's estimates, but those aren't being considered after the top court order on Wednesday.

Govt should bring legislation to resolve AGR crisis: Harish Salve

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The government may not have any other option but to bring in a legislation to resolve the adjusted gross revenue (AGR) crisis and prevent operators from shutting down, given the Supreme Court's recent observations, senior advocate Harish Salve said. Speaking to ET Now's Nayantara Rai, Salve described as "illegal" and "overreach" any move by the top court to send company executives to jail for non-payment. Edited excerpts:It was a big day at the Supreme Court (in the AGR case)…There is a dispute between A and B, i.e., the government and the private telecom operators, that dispute gets resolved. The government gets a judgement in its favour. Now, as decree holder, if the government wants to hold back enforcing its decree, I do not know why it should not be open to the government, especially when they are coming in and explaining to the court that there is good reason to do so. This problem has now possibly reached a stage where anything short of a legislation is not going to resolve this.So you are saying the way out could perhaps only be a piece of legislation?I would not like to comment on what can or cannot be done…I believe if you shut down (one of) the three big telecom companies, there will be a lot of people who will not be able to access the telecom system…that is more important than throwing people in jail. And the second, you may say I will wind up a company…but to throw people in jail for non- payment, this I think is overreach by the Supreme Court, and this practice has to stop. The Supreme Court is created to protect people's liberty…The Supreme Court unfortunately seems to be becoming the first for damaging liberties. Under which law will they send people to jail?In my personal view…it is not just wrong, it is illegal…It is wrong on principle and it sends a very wrong message out of the court.Why has the AGR matter blown up to this level?Personally, I have always felt that…the government's claim on merits was right…I have a more fundamental objection to a situation where the court starts dictating to the government what they need to do, where the government is acting in larger interest in the case of an economic slowdown…whether the 2012 telecom judgement, the worst was the coal judgement…the Supreme Court was partly responsible for the economic slowdown in India… acting in a manner completely oblivious to economic reality and oblivious to the fact that it is primarily the government's job to run the country.

Moody's readying for mass global downgrade of virus-hit firms

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LONDON: Credit rating agency Moody's is carrying out a global review of its corporate ratings in light of the coronavirus and oil price slump, with a first mass wave of downgrades or downgrade warnings likely in the coming days. The firm has already begun the process in a number of the hardest hit sectors such as airlines, cruise and oil firms , but the moves are about to ratchet up, two of the firm's top analysts told Reuters. "We are undertaking a global review of ratings that are impacted by the virus," Managing Director of Global Strategy & Research Anne Van Praagh and Christina Padgett, Associate Managing Director of Corporate Finance Research, said in an interview. "By the end of the week we will have a fair amount of rating actions," Van Praagh added, saying it was likely to impact whole groups of companies or sectors all being impacted in the same way. Earlier this week Moody's said that about 9% of the 920 companies it rated in Europe, the Middle East and Africa had a "high exposure" to the effects of the coronavirus outbreak, with another 54% having moderate exposure. It also estimated that about 16% of the more than 2,000 companies it rates in North America would be at high risk of rating move under the now widely expected scenario of a global recession. "We have the virus, the big fall in commodity prices and now (the pressure in) the capital markets. This combination of events is unprecedented, so we have to come at it from several different angles," Padgett said. The first flurry of downgrades could take a few weeks. As well as sectors like airlines, oil and gas and travel, shipping, hotels and entertainment and leisure will all be heavily impacted too. Firms with weaker finances already in the junk grade, of high yield category as it is also potentially see multi-notch downgrades, while on the flip side government support, if strong enough, could potentially spare others. "Some of the bigger companies that are coming under pressure may benefit from extraordinary government support - in those cases, that may temper the rating actions," Van Praagh said (Reporting by Marc Jones; Editing by Angus MacSwan)

Nifty forms Death Cross; experts say it may slip all the way to 7K

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Adding to the woes of the bulls, Nifty has just formed a Death Cross on the daily charts – a signal considered ominous for the market's near-term outlook. However, analysts said it may not have much significance given the sharp fall that the market has already witnessed.A 'Death Cross' gets formed on daily charts when the short-term moving average (50-DMA) crosses below its long-term moving average (200-DMA)."It will not have much significance, as we have fallen over 30 per cent within a short span of time. These signals work in normal market conditions. This is not a very normal situation, as demand and supply are being influenced any external factors," said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in.Even if some bullish signals arise in some time, that too will not have any significance, he said.Nifty has been in a secular downtrend, as investors are fleeing equities in droves amid a rise in the number of coronavirus cases, threatening a collapse of many businesses. Till Thursday's close at 8,263, Nifty has fallen 33.47 per cent from its high of 12,430 recorded in January.Milan Vaishnav, Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, concurred with Mohammad, saying that this is a lagging formation and the 'Death Cross' formed after such steep downside would not have its usual significance."We will continue to be dominated by global trade setup. What we saw today was a broad short-covering-led technical pullback. The market will either consolidate in a broad range or see some negative bias," Vaishnav said.Mohammad said now Nifty's next stop would be in the 7,850-7,950 zone, but if that is broken, then we may need to prepare for bigger cuts, which may take it to 7,450 or 7,000 levels.Thanks to the selloff, just five stocks in Nifty100 pack are trading above their long-term moving average (200-DMA) – Pidilite, Divi's Labs, Cadila Healthcare, Bharti Airtel and Avenue Supermarts.For half of them, the short-term moving averages are trading below their long-term averages, signalling 'Death Cross' on each individual counter.

Covid-19 pandemic: Govt talks to Facebook, Google, WhatsApp for virus information blitz

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New Delhi: The government has roped in technology company Google and instant messaging platform WhatsApp, and is in talks with Facebook to run massive information outreach campaigns to fight the Covid-19 pandemic, three government officials told ET. The US-based search giant will send close to 300 million notifications a day to users containing information on the pandemic, a senior official said. The government has also launched a Chatbot on Corona on Whatsapp called MyGov Corona Helpdesk. Saying Hi on WhatsApp to 9013151515 will get automated response on queries related to Corona, a government official told ET.Google has also customised its India search page with the campaign "DO THE FIVE. Help stop coronavirus" that also contains a link to the Ministry of Health page giving important information on the pandemic, along with real-time data on the number of positive cases, their location and reported deaths."The government is exploring all possible technology solutions to deal with the contemporary challenge of Covid-19," said another government official, adding that the Big Tech companies had approached the government with some suggestions on how to create awareness. While the Google initiative was launched on Thursday, talks are on for collaborating with some other big platforms such as WhatsApp and Facebook, the person added. India is one of the largest markets for Google. With 400 million users, it is the largest market for WhatsApp. Facebook has over 260 million users in the country."The company had approached the government for partnership on this and it is also changing search algorithms to provide information from authentic sources such as the Ministry of Health and Family Welfare at the top of its search ranking," said a government official."To help surface authoritative information during these exceptional times, we are working closely with all government ministries including the PMO," a spokesperson for Google told ET. Apart from the 'Do The Five' social campaign, Google has also issued Push Notifications on the Google App for Android and iOS users in India to highlight this important information. Other initiatives include SOS Alerts, country-specific Search Trends pages and a promo card on the YouTube Homepage that links out to the MoHFW website for up-to-date information, the spokesperson added.

Hiring of top executives likely to be delayed by a quarter due to coronavirus spread

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Mumbai | Kolkata: CXO searches are likely to be delayed or pushed back by at least a quarter, as the Covid-19 pandemic forces companies to suspend projects and find immediate ways to cope with the situation, said executive search experts.Usually, hiring of top executives such as chief executives, and operations and finance chiefs remains much less affected than others, because companies can't hold off hiring for critical roles. But now, the next few weeks will be the deciding factor and even crucial roles will get impacted if the situation escalates, experts fear.Several companies have already cancelled or postponed interviews and are turning to videocalls as they are unable to travel for face-to-face interactions, which is important in such senior hires, said experts."Several India entry projects are getting or likely to get postponed. Senior-level hiring, which is considered as critical hiring and usually remains insulated from various other factors, is likely to be pushed back by at least one quarter," said Kamal Karanth, a cofounder of staffing solutions provider Xpheno. "Companies and senior executives are unable to travel. Interviews are getting pushed and indefinitely postponed. Senior-level hiring needs significant face-to-face interaction. There is a significant slowdown possibility," he said.K Sudarshan, the managing director at EMA Partners India, said it was not just about recruitment, but business sentiment had also taken a big hit. This in turn will dent senior level hiring plans, he said, adding: "It is not just about India but how rest of the world moves and how the next few weeks pan out, in bringing things under control."BTI Consultants managing director James Agrawal said at least four clients scheduled to fly down from the US, Germany and Singapore to meet CXO candidates had postponed travel plans, pushing the hiring process back in the bargain. This includes two GICs (Global In-house Centres), an engineering firm as well as one from the FMCG space. "They had completed the initial rounds through Skype calls, etc., and wanted to close the search after face-to-face meetings. But now, if there is no visibility on the situation over the next 7-10 days, they will have to fall back on the video calls option."So far, no CXO hiring plans have been put on hold, but things may change in the next few weeks if the number of cases escalate, he said.R Suresh, the founder of boutique executive search firm Insist, said as of now none of his clients had withdrawn any project, but they were not sure how business would pan out. "This year January onwards senior-level hiring was looking better but now it seems there may be a lull for the next six months until some positive news comes," he said.Transearch India partner Ashish Sanganeria cited the example of an ecommerce major hiring for a senior vice-president role who had meetings scheduled this week, but now postponed. Similar is the case for some startups in Mumbai.The real impact of the Covid-19 outbreak on hiring in India will take 3-4 weeks to gauge, said experts. For instance, in the startup ecosystem, hiring has been decided based on the growth plans they have. After the WeWork and other debacles in the startup industry, investors have started asking tough questions, so any hiring planned is of the critical variety. "However, we are seeing foodtech, travel companies, etc. getting affected now. If this goes on, over the next 2-3 months, we will see an impact on numbers," Sanganeria said.Fidius Advisory Companies managing partner Anuj Roy, however, is more hopeful than the rest."Crucial roles will not get postponed," he said. "Non-essential futuristic growth-led hiring may be delayed as companies follow the Covid-19 impact over the next 3-4 weeks. However, if this problem explodes and a lot of people get affected, then it will become a big issue."

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