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Showing posts with label Economic Times. Show all posts
Showing posts with label Economic Times. Show all posts

Monday, May 20, 2019

The mystery of India's vanishing working capital - economic news of india - world economic news - economics news for students - indian economy news

The mystery of India's vanishing working capital
by Andy MukherjeeAsk any small Indian firm how long it takes to get paid by larger companies, what kind of a runaround they’re given, what devilish excuses they encounter on the way, and you’ll wonder how they remain in business. The answer is simple: They raise cash by borrowing against the value of property. Such advances are tailor-made for the entrepreneur. A term loan for business expansion sometimes comes bundled with a working capital limit, all of it backed by the entrepreneur’s residential or commercial property, preferably self-occupied and in a big city. Conceptually, there’s nothing wrong here. Peruvian economist Hernando de Soto’s key insight was that poor countries become rich when their toiling masses have clean, marketable titles to property they can mortgage to start businesses. The problem with the Indian loan against property is more to do with the lenders than the borrowers. Like with most credit creation in India in the past few years, banks have ceded space even here to nonbank, or shadow, lenders. 69395076 Shadow lenders got cheap funds from wholesale markets, including mutual funds. They gave credit to small businessmen who then refinanced their loans even more cheaply by going to another shadow lender. (I noted in January 2017 that yields on loans against property had fallen by 300 basis points in just 12 to 18 months.)Trouble started when the sudden bankruptcy last year of infrastructure financier-operator IL&FS Group triggered a crisis of confidence and raised funding costs for India’s shadow lenders. Since then, the ultimate borrower has been hit by a triple whammy of higher interest rates, fewer refinancing options, and a souring of sentiment among lenders about the collateral. Real-estate valuations are under stress because developers, which themselves need large dollops of refinancing, aren’t getting any. 69395081 It used to be that entrepreneurs would take out loans for 10 years to 15 years against property and refinance them in three to five. Now they can’t, so defaults are rising. India Ratings and Research Pvt, a unit of Fitch Ratings Inc., saw delinquencies beyond 90 days increase to 1.77% in January 2019 from 1.05% in January 2018. If these numbers appear low that’s only because the loans that get turned into securities (and are seen by rating firms) are of higher quality. Riskier borrowers, who pawn their homes to more adventurous lenders, are faring far worse.TransUnion CIBIL, a credit registry, put the size of India’s loans-against-property market at the end of last year at Rs 3,84,000 crore ($55 billion). However, growth in origination of new loans, in money terms, crashed from 54% in the final quarter of 2017 to to 11% in the three months through September, when IL&FS blew up. It may have fallen further since then. Slower origination means even more defaults in future because stressed borrowers won’t get refinancing so easily. And borrowers are stressed. Car and SUV sales in India had their worst slump in almost eight years in April. Even soap and biscuit makers are struggling to eke out volumes. These are big, publicly traded companies, whose first response in tough times is to shorten their own working capital cycle by lengthening it for their suppliers – the smaller firms. The response of a government that’s desperate to boost its tax kitty will also be to delay refunds to firms in the supply chain.A $55 billion source of working capital slipping out of the reach of small firms will trigger a chain reaction. Investors aren’t prepared for it. As India watchers wait for May 23 to see who gets elected as the next prime minister, probably the bigger question is what comes next for finance. Someone will have to fix this broken engine, and quickly.
Source: ET

'Buy 11,500 calls to bet on May 23, Nifty could gain 300 points' - economic news of india - world economic news - economics news for students - indian economy news

'Buy 11,500 calls to bet on May 23, Nifty could gain 300 points'
Traders wanting to bet until the poll outcome on May 23 could buy a call option on Nifty for playing a potential 300 points rise from Friday’s close of 11,407, said analysts. This after almost all exit polls gave the NDA a majority on Sunday.This means, traders could buy a May 30 expiry 11,500 call on Monday, when the Nifty might open with a gap-up of 100-150 points. The reason for this is that the 11,400 strike straddle — cost to buy a call and put — on Friday cost Rs 581 a share. The potential upside basis for this price is 11,981 and the downside 10,819 post the poll outcome on May 23.The strategy is risky as buyers could lose the whole chunk of the premium paid.But, analysts feel that with exit polls giving NDA a clear majority, odds of markets testing the upper band of the range are substantially higher.If the market tests the 11,700 level before the actual outcome, the 11500 call will be Rs 200 in the money, yielding Rs 15,000 on every contract (75 shares). The loss will be limited to the option buy price on Monday.“I would expect the Nifty to test 11,700 until the actual poll outcome,” said Rajesh Palviya, derivatives head at Axis Securities.“Purchase of a call option till the poll outcome is a decent strategy, but one will have to square off the position before market closing on that day (May 23) if it’s a plain vanilla option,” said Chandan Taparia , derivatives analyst at Motilal Oswal Financial Services.Taparia feels a bull call spread involving purchase of 11500 call and sale of 1200 call to play post actual outcome is expedient.Analysts feel for buyers a Nifty option is safer than buying Nifty futures if the poll outcome disappoints. Loss in an option is limited to the premium the buyer pays, while returns potential are very high. Analysts also advise playing with stop losses.
Source: ET

Do not just go by exit polls, be cautious: Swaminathan Aiyar - economic news of india - world economic news - economics news for students - indian economy news

Do not just go by exit polls, be cautious: Swaminathan Aiyar
“In the land of the blind, the one eyed man is king” and in a world of slowing growth, India despite not returning to record highs, may still be the one-eyed king in the next five years, says Swaminathan Aiyar, Consulting Editor, ET Now. Alastair Newton, Alavan Business Advisory, Sunil Subramaniam, MD & CEO, Sundaram Mutual, Swaminathan Aiyar, Consulting Editor, ET Now and Vikas Khemani, Founder, Carnelian Capital Advisors, in conversation with Nikunj Dalmia of ETNow on exit polls and impact on the market. Edited excerpts: We can debate whether the exit poll is right or wrong, we can debate whether we should believe it or not, but markets are going to believe it. Sunil Subramaniam: FIIs who had left the market will make a resounding come back because the continuity of Mr Modi was a big hangover in their minds and domestic fund managers had over the last month gradually shifted from not buying to buying. So they got a sense. But FIIs who were on the sidelines and will now make a strong entry into the market. Why would the market get excited because if I look at the track record of the current government, earnings are depressed, demonetisation some would argue has been a failure, there is acute slowdown in autos and consumer stocks? Swaminathan Aiyar: I would want to get excitement because, 75% of the polls are saying Modi is back, 25% that he would not come back. 25% is not a negligible chance. It is a very significant chance. So, you need to be cautious. Do not just go on the basis of exit polls. If you are going to show enthusiasm, show it after the actual result confirms the direction of these. Do not get carried away just by the exit polls. Secondly, yes without doubt the economy is slowing, without doubt earnings are not going to be anything more lacklustre. But as I said this is a general problem the world over. The world economy is slowing. You are going to have earning problems the world over. Therefore investors are going to say where am I going to put my money and a sufficient number of them will say that the long-term prospect of Modi mark II would be sufficiently attractive for a significant amount of money to be attracted into India regardless of the fact that the current year financial year may turn out to be not very good. It may be turn out to be one where GDP growth comes down to 6.5% that is somewhat pessimistic thing but let us face it, the thing is slowing down. Even at that, India might turn out to be the fastest growing economy in the world with chances of picking up later. I would say India looks to have a good long-term prospect of Modi continuing for 10 years would be a further positive sign for that. Nobody expects anything dramatic but you do not need anything dramatic. If it is already the fastest growing major economy in the world, that is sufficient for the markets to have sufficient faith to say this is a place that deserves more money. Empirical data and anecdotal evidence indicate that FIIs irrespective of who the prime minister is, do not sell India. FIIs have sold Indian stocks only in 2008, 2018 and 2014 and that had nothing to do with India and politics. Do you think there is a leakage in this theory that FIIs are sitting on the sidelines, waiting to return? Alastair Newton: There is always leakage in any theory about how markets behave. But overall I tend to agree with what Swami has just been saying, let us keep in mind that today we are living in a world of excessively loose monetary policy which means there is still a lot of cash running around the place looking for yield. Since the start of the year, the favourite has been the US stock market and yet the US stock market is not looking particularly great at the moment because of China-US trade related tensions. It would not surprise me at all to see not necessarily long-term money coming into India but certainly a certain amount of hot money coming in and moving around the stock market. I expect to see the stock market performing strongly as it opens tomorrow. Whether that survives rest of the week may depend on how accurate the exit polls prove to be. But also on exogenous factors, a trade deal between the US and China would be a positive for the global economy clearly, might not be such a positive for India. A big hit on the oil price going up would definitely be bad news for India as I was saying on the programme earlier on. What should a sensible investor do? Act on Monday because if you will wait for 23rd and if the exit poll numbers are right, then markets would not be available? Vikas Khemani: In the last seven-eight days, there was a narrative building that NDA might not get past the majority mark and hence the market was worried and we saw significant correction in markets. The exit poll results leave those worries behind and obviously we will have to wait and watch for the final result to come. I would not advise anybody to react because from a long-term investing perspective, you need to see a lot more things from direction perspective and not only react on the news flows. Definitely by and large, the probability is that NDA will form the government based on this data but one should wait for final results because we have seen always disconnect between the exit polls and outcome. But having said that, I have always believed that the India story remains intact. We will see the NDA-led government in power whether with exactly this number or slightly lesser than this number. I would like to believe that this time around, you will see the government a lot more proactive on economic repair because that is the urgent need of the hour. We need serious repair on the economy. We have had three-four years of shocks to the market and economy time and again through different measures and this is a time where they will have to come out with a plan to repair the economy and that is where market should take comfort. I think 23rd May would be just one more event but more important, I would watch out what kind of plan of action for this government would put out for the next 100 days and based on that, one should take some kind of call but I do believe that risk reward of investing remains in favour. One should look to invest into market at this point in time. If you work with an assumption that NDA-2 is coming back, the pitch of NDA-1 was acche din, economic prosperity. The pitch of NDA-2 is exactly not acche din. Do you think from an economy standpoint, the repair work or the promise of accelerating economic growth which was priority of NDA-1 may not be priority of NDA-2? Swaminathan Aiyar: I would be a pessimist about a growth acceleration. UPA-1 and UPA-2 were at the time of global boom -- the greatest boom the world has ever seen. India rode that boom extremely well and obviously you got a huge increase in stock market outcomes because of that. During NDA-1, there has been growth but that has not been remotely as encouraging as earlier on and if the stock markets have done reasonably well, nevertheless it is because of this enormous excess liquidity being pumped out by central banks in America, Europe and other places. But if you look at what the actual economic outcomes have been in the last five years, there have been some bright spots. America has done reasonably well. A whole lot of other areas are not doing very well. What is the process prospects for the next five years? I would say probably things are going to become worse. The US-China thing it threatening to drag down not just in those two countries, but has global implications. Mr Trump is having these various ways to crack down on Russia, Iraq and China as well. None of these moves is good for global growth. None of them therefore is going to be good for Indian growth. I would not be surprised therefore if global growth and Indian GDP growth is worse in NDA-2 than in NDA-1. Nevertheless, relative performance of the Indian economy may still be better than others. Even with the slowdown, India may continue to be the fastest growing major economy. Because of that, as they say “in the land of the blind, the one eyed man is king”, maybe that is the kind of one-eyed king that India might be in the next five years. If NDA-2 comes back, market will be euphoric for the next couple of days. What should one do? Sunil Subramaniam: Investors should stick to the SIP route to continuous… That is boring. You would have said if the government would have changed also. Sunil Subramaniam: The reason I am saying this is that look at the downside. Let us say the exit poll is the poll. The worst in exit poll in terms of missing the mark has been 10% and it is about 10%. So assume that 300 number goes to 270. They are still around the majority. Assume it goes to 250, I am saying there may be is some opposition party which will join up and so there will be a Modi-led government regardless of even a 20% negative swing from exit poll to actual results. There is no doubt that Mr Modi will come back to power, albeit with slightly weaker coalition. So investors should welcome continuity to stay invested, one point. Second point, in a market, do you buy a strong stock in a slowing sector or do you buy an average stock in a growing sector? While Swami’s point on the world economy is slowing and Indian economy also not repeating is a point well taken, I would say that the surge of liquidity will mean that liquidity will find its highest level and India as the one-eyed king will attract a huge amount of capital and it will not just be FII money. There is FDI money coming and helping the growth. The opposition had tried to attack the government on the economy front. Balakot luckily happened and Mr Modi sailed through. But he now knows where the opposition attacked him. Also, except for demonetisation which is a very drastic step, the inputs of the Modi government -- be it Make in India, skill India, GST implementation -- were in the right direction. The outcomes did not happen because they were learning governance. The government will now understand how to move. Earlier, he was trying to put the Gujarat model into India and now he has figured out that will not work. An improved Mr Modi will deliver a better performance on the economy albeit the slowdown will affect but liquidity is the factor. See when you talked about those returns, between the three, the UPA-2 despite the GDP slowing down still delivered 74% return and mind you each one of those return you talked about was on higher and higher base. So, if you are going to get a 60% return over the next three to four years, why do you want to crib? So investors should continue to stay invested. Investing into India has not been easy. If I look at what foreigners have actually got with the exception of HDFC Bank or in Bajaj Finance or few consumer names, the MSCI India has not been a very profitable trade. So what changes? Why should market get euphoric? Alastair Newton: One question I am asked frequently is where do I find Indian stocks which actually represent good value. A dip in the Indian market would actually encourage more foreign investors to come in because they would see opportunities to buy at attractive prices. I am not convinced yet that those attractive prices are there today. A lot of prices are a bit more attractive today than they were a year ago. Does that mean we are going to see a lot of foreign investors rushing in? It is not at all clear but there is an opportunity for long-term investment coming in because even though the outgoing BJP government underperformed, that reform agenda has been put in place which are improving the fundamentals in this country and though you can look at the bottle still as being half empty, I would argue that relative to 2014, it would be much more sensible to look at it from a half-full perspective. Also keeping in mind that in contrast to 2014, a BJP government in the Lok Sabha would be more strongly placed in the upper house now than it was in 2014. One of the big barriers to reform has been the difficulty of getting it through both houses of the parliament.If markets like the election verdict on 23rd of May, where do you think money would move? Will it chase consumers, autos, where feel good factor could come back or this time around it will chase corporate banks, cyclicals and industrials where the corporate capex had dried up and where private investment since last one year has dried up completely because everybody wanted clarity? Vikas Khemani: Clearly, a) overall sentiment will improve but from a risk-reward perspective, one sector which I think would do well would be consumer discretionary including autos which recently took a beating after the bad numbers which happened due to credit crisis and slowdown of availability of credit. One of the things which I feel this government would do is going to improve the liquidity in the system. They will have to do to improve the liquidity in the system and also the feel-good factor to bring the consumer spending back. I do believe that that sector which has corrected also in the recent past should do well from that perspective. Otherwise, the rally or the markets would have to be led by definitely financials which offers a great risk reward because we have had huge amount of drag on corporate banks and may of the stories in financials. The market will be definitely led by financials, it is almost 30-35% of the weightage but there will be opportunity in financials, in consumption and also in the investment basket because capex is going to pick up and it is already picking up according to me.The order book of some of the companies is picking up. It is showing early signs of pickup and that might get acceleration. But mind you, this is not going to happen like in one or two quarters, it is directionally going to be better. In my opinion, the reflection will start happening only three or four quarters down the line. In the next one or two quarters, one should not expect anything miraculous to happen. Once the euphoria around elections settles, the market will be back to normal to dealing with the numbers and how the hypothesis will be made will be based on the how the real economic plan is laid by the government to repair the economy and hence accordingly plan. Structurally, I am pretty bullish on the markets from a medium to long-term perspective. Again we are working with an assumption that it is NDA-2. What do you think the economic machinery of NDA-2 needs to address quickly -- take care of the farm/rural distress, make sure capital formation starts early, work on foreign relations or perhaps get the animal spirits back by coming out with new schemes? If I look at NDA-1m the schemes were many, nothing really got implemented -- Digital India, Swachh Bharat, Make in India. Swaminathan Aiyar: So it is very clear if you have 10 slogans, maybe three will work. But having more and more slogans does not lead to better outcomes. What is the fundamental problem on exports? That is the most important question. There is no country in history that has managed to sustain 7% growth over any substantial period without buoyant export growth of at least 15%. On domestic growth alone, you cannot sustain 7% beyond a point. To me, the reason why our exports are not is because we have relatively high land prices because of acquisition problems; relatively high interest rates; expensive capital because of the attitude of the RBI towards inflation and relatively high wage costs because of our labour laws which Mr Modi threatened to reform and did not. So NDA-1 failed to reform the labour, failed to reform capital, failed to reform land. Will it do any better in NDA-2? I have a feeling that it will not even attempt to do as much because this is going to be a weakened Modi government. He is going to be less capable of cracking the whip than in NDA-1. In these circumstances, I would expect only small incremental steps. Those small incremental steps can take you up to a point and as Alistair said the good things about GST and the Insolvency and Banking Code the dividend from those two major reforms they were not immediately available. They will come in NDA-2. I do not think you are going to see any great reforms. I do not think we are going to see any radical changes, you will see small incremental steps along with the hope that there will be dividends from some of the reforms in NDA-1. It would be relatively un-exciting and hoping that in effect we are going to muddle through and do reasonably well rather than charging up with some fantastic new vision.
Source: ET

Bengaluru topped cyber hitlist in 2018, says study - economic news of india - world economic news - economics news for students - indian economy news

Bengaluru topped cyber hitlist in 2018, says study
BENGALURU: Bengaluru faced the highest number of cyberattacks in 2018, according to a report by Quick Heal that was shared exclusively with ET, and other cities including Mumbai, Delhi/National Capital Region and Kolkata also becoming victims to these attacks.“Bengaluru, being the technology hub and the top destination for IT jobs, has become the favourite target for cybercriminals,” said Sanjay Katkar, founder of Quick Heal, elaborating on the findings.“Even if these companies are using technology, cybercriminals find ways since it’s their top target.”69407101 Cryptojacking, which is the illegal use of another person’s computer to mine cryptocurrency, has replaced ransomware as the number one threat for consumers and enterprises.Ransomware, which is a form of malware that locks a user out of files or devices and then demands online payment anonymously to restore access, was reported up to 14 times per minute, according to Quick Heal’s findings, signalling increasing risk. Threats to mobile devices and cryptojacking were also increasing, it said.Consumers are still the most targeted, with an alarming 973 million malware attacks on Windows devices last year, translating to almost 1,900 detections per minute, the report found. On the other hand, Android devices faced relatively lesser threats.69407105 Cyber criminals were targeting compromised websites. Although recognising compromised websites was difficult, a browser warning could act as a precaution, Katkar said.Cybercriminals are now selling malware as a service (MaaS) along with ransomware as a service (RaaS).While cyber criminals have been using various means of conducting cyberattacks, the internet of things (IoT) is fast becoming the latest and rapidly trending means of cyberattack, it said.69407113 “This can be attributed to the relative scalability and simplicity of the millions of devices that can easily be turned into potential victims, to cause cyberattacks of a larger scale and stronger impact,” the report pointed out.Awareness around cybercrimes was still quite low, which is worrying, said experts. Laws, too, need to be made more stringent as convictions in cyber crimes have been low, they said.
Source: ET

Sunday, May 19, 2019

How Sivaramakrishnan Ganapathi knit the biggest revival story of India’s apparel export industry - economic news of india - world economic news - economics news for students - indian economy news

How Sivaramakrishnan Ganapathi knit the biggest revival story of India’s apparel export industry
In December 2017, Sivaramakrishnan Ganapathi was in Dubai for a short Christmas holiday with his family. It had been planned months ago. Else he would have avoided taking a break just two months after taking a job as managing director at Gokaldas Exports. But this was in some ways worse — now he was on vacation, and yet his mind was preoccupied. After two decades at the Aditya Birla Group, it took a lot of deliberation to quit as chief operating officer at Idea Cellular and move to lead Gokaldas, heeding the call of his friend and IIM-Bangalore classmate Mathew Cyriac, a one-time PE executive who now owned a significant chunk of the publicly traded garment exporter. Gokaldas was weighed down not just by the structural challenges in India’s apparel export industry — low margins, a fluctuating rupee and competition from countries such as Vietnam, the Philippines, Pakistan and Bangladesh — but also its own chequered past. 69390526 The company was among the earliest India targets for Blackstone, one of the world’s largest investment firms, led by the influential American executive Stephen A Schwarzman. By virtue of its scale, Blackstone’s investments and their performance are closely watched for signals about sectors and countries. In 2007, the bulge bracket investor put in Rs 482.50 crore for a 50.1% stake, which at Rs 275 a share represented a 20% premium to the prevailing share price. It then acquired another 20% through an open offer. Over the next decade, however, the company stagnated, its dollar revenues halved, and its share price was hammered down to double digits. Blackstone tried to sell the company, and slowly offloaded its stake. In early 2017, after having spent a decade at Blackstone, Mathew Cyriac quit as co-head of the firm’s private equity business in India to start his own fund. It was when he went to the company’s New York offices to say his goodbyes that the firm offered Gokaldas to Cyriac. When his Florintree Capital bought Blackstone’s stake at Rs 42 a share — through special purpose vehicle Clear Wealth Consultancy Services LLP — the deal represented an 84% write-down on the latter’s original investment. 69390534 69390539 69390551 First order of business was hiring a CEO, and the second, backing them up with necessary capital. “When I looked around, most apparel exports companies were led by their owners. I decided I needed to find a CEO who would think like an owner,” Cyriac says. Ganapathi’s mandate was to turn around the company, once India’s largest apparel exporter. He visited the company’s Bengaluru factory four times before he signed on. He also held discussions with the company’s chairman, Richard Saldanha, who told him that the company was not in the business of apparel, but in the business of trust. 69390558 69390562 Companies such as Gokaldas make their money by supplying garments to the world’s leading fashion retailers. Think Gap, Tommy Hilfiger, Zara and so on. These brands are not just paranoid about quality, they need to be able to trust a supplier to not deviate from specifications across tens of thousands of units. Nurturing relationships, calming frayed nerves, offering the flexibility to quickly turn around unscheduled but urgent orders — these are all as much part of the business as producing high-quality garments. Cyriac says he also felt a “moral obligation” to set the story right, as someone who had been part of Blackstone’s India journey right through. (He was not involved in managing Gokaldas while he worked at the investing firm). There were 25,000 employees who were counting on the company’s turnaround. 69390567 Big players such as Arvind Lifestyle were entering the field. Gokaldas had slipped to the seventh position on the export turnover league table. The top player, Shahi Exports, posted seven times as much revenue as Gokaldas, whose top line had stagnated at about Rs 1,000 crore for a decade. Things were not looking good. 69390573 Once he was in the driver’s seat, Ganapathi lost no time in donning the battle gear. On the morning of December 29, 2017, he took a break from his Dubai vacation and got into a video-conference, while the rest of the Gokaldas board joined from Bengaluru. His primary focus was to get approval to raise around Rs 125 crore. That was the easy part. It would take five more months for the company to raise Rs 70 crore through qualified institutional placements. The money came from L&T Mutual Fund and HSF Mauritius, an overseas fund. With the money in the bag, Ganapathi turned his focus on customers and efficiency. Around a year later, his plan seems to be working. After recording losses of Rs 46 crore in 2016-17 and Rs 28 crore in 2017-18, Gokaldas has recorded a net profit of Rs 25.58 crore for 2018-19. All the four quarters were in the black despite the apparel exports industry facing steady headwinds. The shares of the company closed at Rs 76 at the end of trading on Friday, May 17. The challenge now is to maintain the gains and take the company higher up in the exports league table. So what did Ganapathi change? 69390582 Richard Saldanha, chairman of Gokaldas Exports and a former vice-chairman at Blackstone, says the basic change has been “how the company goes to market” — how it interacts and sells its services to its clients. Saldanha had joined the Gokaldas Exports board in 2011 after the exit of the erstwhile promoters, the Bengaluru based Hinduja brothers — Madanlal, Rajendra and Dinesh (unrelated to the UK based Hinduja group). It was unusual for a private equity investor to let the erstwhile promoters run the business for three years after a buyout. After the trio left, the company saw two more CEOs — Gautam Chakraborty and P Ramababu — come and go. But sustainable performance eluded it. Meanwhile, the rupee to dollar rate that was around Rs 39 in 2007-08 was flirting with Rs 70 in 2017. Earlier, says Saldanha, Gokaldas would go to customers only to take orders. One of the first things Ganapathi did after taking over as CEO was to visit all his major customers across the world — the list includes the likes of Nike, Adidas, GAP and Marks & Spencer. Ganapathi says: “I met all the customers one by one, explained to them that we are seriously committed to the relationship and we will expand our capacities.” Next, Ganapathi focused on increasing capacity. “The company has been shrinking and giving up on capacity. I thought let me push it.” 69390591 He found assembly lines lying idle in warehouses and decided to revive them. This alone led to a 10% increase in capacity. Another move was operational efficiency. He pushed the same assembly line that made 1,000 garments in a given time to make 1,100, he says. “We tried to engineer the assembly lines better.” Ganapathi says a garment-making assembly line is not a smoothly moving chain. A particular stitch may take 33 seconds while the next one may take 38 seconds, and bottlenecks develop at these points. “We redeployed the most efficient workers to the parts of the assembly line that took more time.” Automation was brought in to expedite work. “We reduced the time taken to make a shirt from 21 minutes to 19 minutes,” Ganapathi adds. Margins soon improved and working capital needs dropped from 120 days to 100 days. The last and key part of the turnaround process was to inject funds and invest in new, modernised processes. The fund infusion happened in May 2018. The company invested Rs 36 crore in improving its plants, processes and information systems, and also acquired seven new customers. Ganapathi points out that for over a decade no equity had flowed into the company, as the buyout deals were between promoters. Cyriac says he sees a “big opportunity” in the industry. “We see a chance to treble the company’s turnover in double quick-time and opportunities to acquire many distressed assets,” says Cyriac. He also sees an opportunity to build an apparel-making platform around Gokaldas Exports. Independent analysts are not quite as optimistic. “India’s apparel exports are estimated to de-grow by 4-5% in FY2019, following a similar de-growth of 4% in FY2018,” credit rating agency ICRA said in a February report. The report added a bottom was near and it expected a positive movement soon. However, it also pointed out that Indian players have not been able to make anything out of overall growth in the global trade in apparel. China has been continuously losing market share, which has been pocketed by Bangladesh and Vietnam. The report pointed out the new emerging free-trade agreements such as the 11-nation trans-Pacific partnership and the proposed European Union-Vietnam foreign trade agreement would be detrimental for Indian exporters. These would give exporters from nations with zero or very low tariffs access to the Indian market. There are domestic challenges, too, says Ganapathi. Despite all the homework he did before joining, he was not ready for the sudden developments — for example, the rupee strengthening in the last few months of 2017, the impact of the goods and services tax regime on exports or the credit squeeze on banks. Other structural changes can help Gokaldas. Analysts at Prabhudas Lilladher said in a December 2018 report that as global customers set up shop in India, now 20% of Gokaldas’ revenues would come from the domestic market. The report, by Shailee Parekh and Charmi Mehta, said: “We expect Gokaldas Exports to grow revenue at a compounded annual growth rate of 18.3% in 2017-18 to 2020-21, taking the overall turnover to over Rs 1,700 crore in 2020-21.” It also predicted a sharp growth in its gross margin from 48% now to 53% by 2021. This would be music to the ears of investors such as L&T and HSF Mauritius who invested in Gokaldas last year, and can push the company up to among the top three among Indian apparel exporters. The market capitalisation of Gokaldas Exports has been stagnant at Rs 300-400 crore for over a decade. By continuing to win the trust of customers, the company might eventually win the trust of the stock markets, too.
Source: ET

D-St wishes for a stable govt but experts say coalition a better bet - economic news of india - world economic news - economics news for students - indian economy news

D-St wishes for a stable govt but experts say coalition a better bet
Mumbai/New Delhi: While Dalal Street has built in a possible return of the Modi government in stock prices, a few market veterans have expressed the view that coalition governments are actually a better idea for progress on the policy front.They say a coalition regime actually helps keep checks and balances in place, which works better for the economy. Data showed the domestic equity market has delivered robust returns under coalition governments previously.India has collation governments ever since 1989. Even the outgoing Modi regime was a coalition called the NDA, but an overwhelming majority for the BJP made it dominant in that dispensation.BSE benchmark Sensex more than doubled during 1989-1991. Likewise, it rallied nearly 5 times under the Manmohan Singh-led UPA governments during 2004-14.“I believe coalition governments are better for India. That is my view,” Shankar Sharma, vice-chairman and joint managing director of First Global, said in an interview last month, adding that there was data to back his contention.“India has seen the best 25 years of growth between 1991 and 2014. Coalition has checks and balances, prevents over-centralised decision making, keeps it very democratic. If it becomes one or very few people making decisions in a complicated area like the economy, sometimes it might be right, sometimes it might be wrong,” Sharma said.The first successful coalition government to complete a full five-year term was the BJP-led NDA regime under Prime Minister Atal Bihari Vajpayee which ruled between 1999 and 2004. However, the 30-share Sensex remained almost flat at 4,961 on May 21, 2004 against 5,033 as of October 1999.However, the index advanced 30 per cent since Vajpayee first became PM for 13 months in March 1998.After that, the Congress-led United Progressive Alliance (UPA), comprising as many as 13 parties, ruled for two terms from 2004 to 2014 with Manmohan Singh as Prime Minister. “A weak coalition government is not a death knell. It totally depends upon who the prime minister is. What kind of a government it is, who is the finance minister, what role does RBI play in the interim period between the time the government is formed and the finance minister is in place to take some crucial decisions, what will the new budget look like -- will all depend on a lot of these factors,” Ashwini Agarwal, Co-founder, Ashmore Investment Management India, told ETNow in an interaction.Market witnessed one of the biggest rallies during the two UPA governments between May 22, 2004 and May 26, 2014. Sensex soared nearly 400 per cent to 24,717 from 4,962 during this period."You cannot go back to the coalition era and say this decision really went wrong. Some policies will be very good, some policies will be moderately good or some policies will be bad, but nothing will be disastrous. I think coalition governments are fine,” Agarwal said.Kenneth Andrade, founder of Oldbridge Capital Management echoed Sharma’s views. “If you look at elections in the past and the outcomes of elections in the past some of the best governance that we have had is when parties come together or form a coalition. So the mid-90s we had a coalition that was there and we had professionals who ran that government at that point in time,” Andrade said in an interview with ETMarkets.com earlier this week.A section of the market was of the view that it did not matter who formed the government at the Centre.According to Saurabh Mukherjea, founder of Marcellus Capital, if one looks back at India’s history over the last 40-50 years, there is very little evidence that politics have any meaningful impact on the economy or on the stock market.Mukherjea said for past five decades, India’s GDP growth has been better than it was in the decade before. “Obviously, it will be hard to convince ourselves or others that over the past five decades, India has had some enlightened version of economic leadership, which has resulted in five decades of trending up,” Mukherjea said in an interview last month. “…if you look at our country, there is very little proof or evidence that government X changes the policy of government X minus one. Since 1991, there has been a great deal of continuity in economic policy of various governments. Whatever policy the previous government promulgated, the next government have taken it through. There are obviously ideological differences between our political parties but those ideological differences are not with regards to economic policy,” Mukherjea said.
Source: ET

Option band suggests Nifty50’s trading range at 11,000 to 11,550 - economic news of india - world economic news - economics news for students - indian economy news

Option band suggests Nifty50’s trading range at 11,000 to 11,550
By Chandan TapariaNSE Nifty opened flattish, but gradually extended gains and surged 150 points to close above the 11,400 level ahead of exit poll results. The index formed a big bullish candle with a reversal of the Harami formation on the daily scale as sustained buying interest was seen on Friday.The index now needs to hold above the 11,350 level to extend gains towards 11,500 and then 11,550. On the downside, supports are seen at 11,250 and then 11,180.On the options front maximum Put open interest was seen at 11,000 followed by 11,500 strike while maximum Call OI stood at 12,000 followed by 12,500 strike.Call writing was seen at 11,800 followed by 11,400 strike, while Put writing at 11,000 strike. Option band signified a wider trading range between 11,000 and 11,550 levels.India VIX fell down 1.01 per cent to the 28.07 level. However, higher VIX suggests that volatile swings could continue in the market ahead of election outcome.Bank Nifty witnessed strong buying momentum throughout the session and gained nearly 600 points to close above 29,450. The index formed a bullish candle on the daily scale as it surpassed crucial hurdle of 29,250. Till it holds 29,250, it could extend its move towards 29,850 and then 30,000, while on the downside, supports are seen at 29,000 and then 28,888.Nifty futures rose 1.38 per cent to the 11,440 level. Built-up of long positions were seen in Just Dial, Bajaj Finserv, Arvind, Tata Chemical and Bajaj Finance while shorts were seen in Aurobindo pharma, Bank of India, Siemens and Lupin.(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)
Source: ET

Mind completely occupied with Mindtree acquisition; will make it a big firm: A M Naik - economic news of india - world economic news - economics news for students - indian economy news

Mind completely occupied with Mindtree acquisition; will make it a big firm: A M Naik
NEW DELHI: Acquisition of Mindtree is the topmost agenda for infrastructure giant Larsen & Toubro at the moment and eventually the mid-sized IT firm is going to be transformed into a big company, L&T Group Chairman A M Naik said.The USD 20 billion conglomerate, which has taken its overall holding in Mindtree to about 26 per cent, will launch the open offer to buy additional stake in around 10 days, he added."We continuously look for opportunities as they come by, but right now our mind is completely occupied on Mindtree and I hope we will be able to eventually make this into a big company as well," Naik told PTI in an exclusive interview here.Naik said Mindtree's acquisition was top on L&T's agenda right now."We have got around 26 per cent stake in Mindtree and now we will wait till we get 51 per cent. The open offer will be launched in about 10-12 days time," he added.Naik joined L&T in 1965 as a junior engineer and rose to the position of CEO and MD in 1999 and chairman in 2003. In 2017, he stepped aside from executive responsibilities and took over as Group Chairman.On delays in approval for the open offer, Naik said: "In about 10 days it will start."Elaborating on Mindtree promoters' opposition to the hostile takeover bid, Naik said they are obviously attached to their company, but have started to realise that L&T is also an employee-centric organisation."Mindtree promoters are obviously attached to their company, so they don't easily want to give up. But now they realise that L&T is a very nice company which is excellent to its employees too."I think slowly they also feel...they wanted to sell it anyway. Altogether it is about 12 per cent (stake) and we are not saying you sell and go. Whenever they sell and if they want to sell it to us, we will buy the stake," he said.Naik stressed that Mindtree is over over a billion dollar acquisition and there is huge potential for growth in the segment."I hope we will do better and do great things. ... in IT and engineering service, once we complete our acquisition of Mindtree, we will be USD 3 billion and our idea is in three to four years, take it to USD 5 billion," he asserted.He added: "It was zero when I took over....application of new generation of technologies is now a major focus for us with L&T Nxt and I hope we will do a great job in this area."Earlier, L&T had purchased around 20 per cent stake of V G Siddhartha and Cafe Coffee Day in Mindtree through a block deal for about Rs 3,210 crore, and has since topped that up with share purchases from the open market.In all, the infrastructure major is eyeing up to 66 per cent stake in Mindtree for around Rs 10,800 crore -- marking the country's first-ever hostile takeover bid in the information technology industry.L&T had proposed to buy additional stake in Mindtree through an open offer that was slated to begin on May 14 and close on May 27.
Source: ET

Friday, May 17, 2019

The road India must take after May 23 - economic news of india - world economic news - economics news for students - indian economy news

The road India must take after May 23
By Ajay ChhibberAs India is preoccupied with its election, the world is getting more and more uncertain and volatile. Two global developments may have huge impact on India: the trade spat between China and the US now shows signs of becoming a full-scale trade war; the removal of Iran oil purchase waivers and the prospect of rising tensions in the Gulf and elsewhere make India’s oil options more difficult.A new Indian government will need to navigate through these uncertainties as it tries to revive private investment and a slump in exports as the consumption-led growth of the last two years begins to lose steam — as any consumption-led spurt always does. Despite the likelihood that the Bimal Jalan Committee will recommend transferring extra reserves from RBI to the finance ministry, a government spending-led recovery will be difficult as the unbudgeted invoices of huge election-related giveaways will need to be paid. State finances are also in a precarious state.Get the Basics RightOur research shows that the key determinants of private investment are the real exchange rate, credit available to the private sector, public investment and capacity utilisation. Public investment could be boosted by aggressively selling public sector utilities (PSUs) and earmarking those funds to the National Investment and Infrastructure Fund (NIIF) — and not frittered away in the revenue budget. Capacity utilisation is finally picking up, as is credit to the private sector.The injection of capital into public sector banks (PSBs) through recap bonds has provided some headroom for commercial lending. The banking sector remains impaired by the non-performing assets (NPA) problem. There was hope that the Insolvency and Bankruptcy Code (IBC) would help resolve this. IBC is a good reform but is not designed to address a systemic NPA problem quickly. Serious reform of the banking system remains for the future.One of the most important variables that affects private investment and exports is the real effective exchange rate (Reer). Reer has appreciated by about 15% over the last five years. This is largely due to the very high interest rates that the new monetary policy framework has introduced. RBI’s repo rate over the last five years has averaged 6.7% and the actual consumer price index (CPI) has averaged 4.4%, realising a real repo rate of 2.3%. The main reason for such high repo rates has been RBI’s inflation expectations that have averaged 5.7% over the same period.The monetary policy framework gives primacy to inflation over growth and employment, and should be reviewed. It also produces this persistent bias of overestimating inflation expectations. The new RBI governor has lowered rates but, for now, they still remain too high. If inflation remains low, further cuts in interest rates to encourage private consumption and to reduce the overvaluation of the exchange rate are needed.Correcting the rupee overvaluation of 10-15% will be necessary, but not sufficient to boost exports. Export promotion must take on a war footing as rising oil prices will hurt India’s balance of payments. India’s share in global markets remains tiny, giving us huge opportunities to increase export despite the slowdown in global trade growth. Free-trade agreements with Asean also need to reviewed and expanded into the services sector where India has comparative advantage.Attracting FDI, which is leaving China for other locations, and entering global value chains must be given special priority as the China-US trade war heats up further. Relaxing labour laws will be crucial to boost India’s competitiveness.Finding stable oil supplies at reasonable prices holds the key to India’s prosperity as the country remains hugely vulnerable to oil price swings. Non-dollar-based oil purchase arrangements must be pursued aggressively to avoid vulnerability to sanctions.Green Shoots on the FarmsThe biggest boost to growth and employment immediately can come from the services sector, especially in tourism and mobility services. A cheaper rupee will help tourism. But India must review its tourism policy on a much more comprehensive basis. The tax rate on hotels, the poor state of infrastructure in tourist sites, which can be addressed by creating special tourist policing arrangements, must be considered, especially for women. Encouraging the mobility and e-commerce sector holds great promise also for attracting FDI.Both PM-Kisan and MGNREGA hold key to alleviating rural distress, and expanding productivity. But the funding needed if these schemes are to be expanded must come from removing wasteful subsidies in electricity and fertilisers that are now hurting agricultural productivity. Free electricity is helping create a water crisis and leading to uncompetitive cropping patterns. The current PM-Kisan scheme must be expanded to provide more direct income support to smaller farmers, and MGNREGA must be funded to provide at least 100 days of employment to help reduce distress.Any new government will also have to focus on the social sectors: the quality of education and skilling, expanding basic health, ensuring Ayushman Bharat gets properly implemented, and addressing air pollution and climate change. These must be given high priority. The immediate need is to revive the economy and create employment in a competitive manner, while handling global uncertainties and geopolitical fault lines.Businessman-politician Gary Johnson said it best, ‘Regardless of who wins, an election should be a time for optimism and fresh approaches.’ Let’s hope that despite the bitter rhetoric of a campaign, India takes that path post-election.The writer is visiting scholar, Institute for International Economic Policy, George Washington University, US
Source: ET

Why are IndiGo founders at each other's throats? - economic news of india - world economic news - economics news for students - indian economy news

Why are IndiGo founders at each other's throats?
MUMBAI: Cofounders Rahul Bhatia and Rakesh Gangwal hold near-equal stakes in IndiGo, but the scales are tilted in favour of Bhatia when it comes to control of the board and management.Bhatia’s holding company Inter-Globe Enterprises (IGE) has the right to appoint key managerial personnel, including the chairman, MD, CEO and president. It also has the right to nominate three non-independent directors, one of whom will be non-retiring.The Rakesh Gangwal (RG) Group, on the other hand, has the right to nominate just one non-independent director, who will be a non-retiring director, according to filings with the Registrar of Companies.The articles of association (AoA) also give IGE operational control over the company and its management. The RG Group is required to fully comply with the shareholders’ agreement and the AoA, and its voting during general meetings is to be dictated by IGE. 69366460 “IGE Group shall at all times control the company in all aspects and manner including management and operational control thereof,” says the AoA. “The RG Group shall fully comply with the terms of the shareholders’ agreement and these articles (including ensuring control of the company as aforesaid by IGE) by voting at the general meetings in the manner as directed by IGE Group.”‘Other, Bigger Issues Too’The shareholders’ agreement, which appears to be among the irritants that triggered the current tiff between Bhatia and Gangwal, expires later this year.“In hindsight, would Gangwal change some clauses in the articles of association and shareholders’ agreement? Absolutely! But there are other, bigger issues too,” said a person close to the development.An email sent to IndiGo didn’t elicit a response till press time Thursday. In a clarification to stock exchanges earlier in the day, the company said it couldn’t comment as the matter related to the promoters. Neither Bhatia nor Gangwal commented on the issue.Bhatia and his family own 38.26% in the company while the Gangwal family holds 36.69%. Both have roped in their respective legal advisers — J Sagar Associates for Bhatia, and Khaitan & Co for Gangwal — to iron out the differences.The shareholders’ agreement is inscribed in the company’s AoA, and any change will require a special resolution.Sanjay Ashar, a partner at law firm Crawford Bayley & Co, said any change in the AoA can only happen through a special resolution and needs the approval of 75% of the shareholders. “If a shareholder fails to get 75%, they can approach the National Company Law Tribunal under Sections 241and 242 of the Companies Act, 2013,” he added.The AoA also says the shareholders’ agreement “will automatically expire on the fourth anniversary of the initial public offering”. IndiGo’s initial public offering hit the markets in October 2015, and its fourth anniversary falls in October this year.The IGE Group represents InterGlobe Enterprises, Rahul Bhatia, Rohini Bhatia and Kapil Bhatia. The RG Group represents Rakesh Gangwal, his Caelum Investments, Shobha Gangwal and The Chinkerpoo Family Trust — whose trustees are Shobha Gangwal and JPMorgan Trust Company of Delaware.It is not yet clear how the promoters would resolve their differences, but a parting of ways won’t be easy. A clause in the shareholders’ agreement says that “if any member of either the RG Group or the IGE Group proposes to transfer its shares to a third party purchaser (not being an affiliate) otherwise than on a stock exchange or by way of a pre-negotiated sale on a stock exchange, then the other group will have the right of first refusal and tag along right”.“Neither group can transfer, either directly or indirectly, without the prior written consent of the other group, any of its shares to a competitor or to any person, if such a proposed transfer requires such a person to make an ‘open offer’ under the takeover regulations,” the agreement says.These clauses will, however, expire with the current shareholders’ agreement in October.The case of Greg Taylor illustrates the differences between the founders. A three-decade veteran at United Airlines, Taylor was brought in at Gangwal’s behest and was slated to head IndiGo. Taylor, a foreign national, though never got the requisite regulatory approvals to get appointed. Instead, Ronojoy Dutta, Gangwal’s former colleague but Bhatia’s choice, was brought in. Dutta too is a global aviation veteran. He headed United Airlines and was a board member at US Airways — both former employers of Gangwal. Dutta has also headed the erstwhile Air Sahara.Another point of divergence was Gangwal’s aggressive ambition for expansion, which often faced resistance from IndiGo executives and Bhatia.Gangwal and Bhatia’s confidence and trust in each other helped them build a profitable airline. In an interview before Indi-Go’s parent InterGlobe Aviation went public, Gangwal had reflected on his relationship with Bhatia: “It evolved into a phenomenal friendship. Blind trust is the way to look at it. It has worked well for both of us. I’ve enjoyed this relationship.”
Source: ET

Campa Cola's revival adds local fizz to market - economic news of india - world economic news - economics news for students - indian economy news

Campa Cola's revival adds local fizz to market
MUMBAI: To the lovers of colas, who missed local brands that took the place of Coca-Cola when it was forced to leave Indian shores in 1977, Campa Cola is back. Campa Cola was created in the 1970s by the same Pure Drinks Group that had pioneered the Indian soft drinks industry by introducing Coca-Cola in India in 1949. They were the sole manufacturers and distributors of Coca-Cola till the 1970s. After Coca-Cola left India, Pure Drinks Group and Campa Beverages started Campa Cola and dominated the Indian soft drinks industry in the absence of foreign competition.With a slogan ‘The Great Indian Taste’, Campa Cola appealed to nationalistic fervour back then. Today, Jaywantjit Singh — a member of the fourth generation of the Singh family, which founded Pure Drinks Group — is driving the revival of the desi brand in a big way to have a national presence, in the face of stiff competition from both Coca-Cola India and PepsiCo.Jaywantjit, the greatgrandson of founder Sardar Mohan Singh, is managing operations for the brand to bring it back in the mainstream. Currently, Campa is available in almost 80% of the states with 13 franchises across different territories in Jammu & Kashmir, UP, Haryana, Punjab, five North East states, Rajasthan, Delhi, Uttaranchal, Himachal Pradesh and Bihar.“We have a few franchising plants across India, catering to tier-2 and -3 cities, mainly in the north and northeast markets. We are now setting up a bottling unit in Silvassa with a capacity of 600 bottles per minute, which will cater to the western markets. We also have a presence in Nepal and are looking at southern markets like Chennai. In a way, we are gradually moving to tier-1 cities as well. We are doing about 4 million cases (each has 24 bottles of 250ml),” said Singh.69369463 After the exit of Coca-Cola, through the late 1970s and ’80s, another group that dominated the soft drinks scene was Parle, with leading brands like Thums Up, Gold Spot and Limca. These were later sold to The Coca-Cola Company on its return to India, in 1993. Once Coca-Cola was back, followed by the entry of rival PepsiCo, local brands either diminished or got taken over.Samsika Marketing Consultants CMD Jagdeep Kapoor said Campa Cola has three opportunities — it has a strong brand equity in the north, a clear nostalgic value among those who have grown up with the brand and, if the taste is consistent, it will be a good trigger for old memories. However, the big challenge would be its positioning, said Kapoor.“The other three cola brands — Thums Up, Coca-Cola, Pepsi — have a fairly large presence in the market. Campa Cola would need to position the brand in such a way that it appeals to today’s generation as well. If a brand is contemporary, it will succeed. The brand will have to maintain a good balance between the past and the present, a balance between nostalgia and young aspirations,” said Kapoor.Campa Cola is being retailed both in modern trade stores like Reliance Fresh and DMart, as also general stores. The emergence of PET bottles and cans is said to be a key reason for Campa Cola’s return. In addition to cola, Campa Cola is also available in flavours like orange, lemon, lime & lemon, jeera soda and fizzy apple.
Source: ET

Sold over 2 million TV units in India in 14 months: Xiaomi - economic news of india - world economic news - economics news for students - indian economy news

Sold over 2 million TV units in India in 14 months: Xiaomi
Chinese smartphone and electronics maker Xiaomi on Friday said it has sold more than two million television units in India in 14 months of its launch.Announcing the development, Xiaomi India MD Manu Kumar Jain tweeted: "We've sold 2 million MiTV in just 14 months. I doubt if any brand has sold so many smart TVs so fast. We are truly bringing smart TV experience to millions of Indians."Xiaomi, which is also the country's largest smartphone maker, said it is the number one smart TV brand in India for three consecutive quarters in a row quoting market tracker IDC figures for Q2, Q3 and Q4 2018.Mirroring its smartphone strategy, the company launched TV models at lower than market prices forcing the top television makers like Samsung, Sony and LG to lower prices. Samsung recently also rolled out a dedicated series at lower prices for online. Xiaomi currently sells its television models from Flipkart, its exclusive brand stores and multi-brand mobile phone retailers becoming the first TV brand to do so.
Source: ET

Top performing India blue chips fail to impress on global charts - economic news of india - world economic news - economics news for students - indian economy news

Top performing India blue chips fail to impress on global charts
Blue-chip stocks have been the top performers in India so far in 2019 but their gains pale in comparison to their global counterparts. No Indian company made it to the top 200 list of Bloomberg 500, a club of the top 500 listed companies globally by market value, in 2019, according to an ET study on the basis of their returns. In comparison, nine companies made it to the top 200 list in 2018.Out of the 11companies that figure in Bloomberg 500, private lender Kotak Mahindra Bank is the best performing Indian stock in the list with a rank of 208. Hindustan Unilever (HUL) is the worst performer with a rank of 475 out of 500, data showed.69367273 Analysts said Indian blue chips have underperformed their global peers in 2019 on the back of growth concerns. “Indian equities have underperformed benchmark World and EM indices year-to-date, and this explains why our companies are not at the top of the performance rankings,” said Bharat Iyer, head of India equity research at JP Morgan. “The underperformance this year is partially pay back for last year’s outperformance and could also be attributed to the near-term slowdown in the economy and some uncertainty over the election results .”Indian entities put up a better show in the last two years in the Bloomberg 500 club. In 2018, Tata Consultancy Services (TCS) was ranked 20 in the list with returns of over 37 per cent while HUL and Infosys featured in the top 50 list. Even stocks such as Reliance Industries, ICICI Bank and HDFC were among the top 100 in Bloomberg 500.The action has shifted from emerging markets to developed markets in 2019 with the US benchmark index S&P 500 gaining 13 per cent . Other developed market indices such as FTSE 100, Euro Stoxx and DAX too have risen in the range of 8-15 per cent during 2019, data showed. In contrast, India’s Nifty has underperformed with 2.3 per cent returns this year.The 11 Indian stocks that feature in the Bloomberg 500 list are amongst the better performing ones on the domestic bourses. Over 80 per cent of the gains made by the benchmark Nifty this year has been driven by four stocks -- Reliance Industries, the HDFC cousins and Kotak Mahindra Bank. These four stocks are a part of Bloomberg 500. Most of the other Indian blue chips have fared even poorly in the global context.This weakness in the Indian markets is also on account of several global headwinds including the sharp rise in the crude oil prices and escalating trade war tensions between world’s largest economies – the US and China. Global oil prices have risen by over 40 per cent since January and are currently at $71 per barrel, data showed.“If the oil price trajectory remains an upward one, this factor alone could overshadow the rest of the macro context and trigger a phase of vulnerability in the short term,” said HSBC in a recent note to investors. The brokerage, however, pointed out that the riskon in the Indian equities is expected to continue since there is enough room for growth thanks to the recent correction.E-commerce firm Shopify is the best performing stock amongst the Bloomberg 500 this year with year-to-date returns of 84 per cent . The US-based telecom firm Qualcomm, Facebook, Ford Motors and Japan’s Softbank are among other best performing stocks in the pack with each going up by over 40 per cent during 2018.
Source: ET

Market ready to form short-term bottom ahead of exit poll results - economic news of india - world economic news - economics news for students - indian economy news

Market ready to form short-term bottom ahead of exit poll results
By Chandan Taparia The Nifty50 remained highly volatile throughout Thursday’s session and traded in a wide range between 11,140 and 11,280 levels. The index formed a bullish candle on the daily scale as it managed to regain the losses of the previous session and closed above crucial hurdle at 11,250.The index formed a Harami pattern and a narrow range Three Bar formation on the daily scale, which indicated that a small follow-up could lead to a short-term bottom ahead of exit poll and election outcome related volatility. Now, it has to hold above 11,250 to extend its bounce towards 11,333 and then 11,420 levels while on the downside support is seen at 11,188 and then 11,118 levels.On the options front, maximum Put open interest was at 11,000 followed by 11,500 while maximum Call OI was at 12,000 followed by 12,500. There was Call writing at 11,300 followed by 11,500 while Put writing was seen at 11,000. The option band signified a trading range between 11,000 and 11,500 levels.India VIX fell 1.01 per cent to 28.37 level. However, a higher VIX suggests volatile swings could continue in the market ahead of election outcome.Bank Nifty managed to hold above 28,500 and witnessed sharp recovery from lower levels in the latter part of the session towards 28,950 level. It formed a bullish candle on the daily scale. Now it needs to hold above 29,000 to extend its move towards 29,250 and then 29,500 levels, while support exists at 28,500 and then 28,388 levels.Nifty futures closed positive at 11,301 with a gain of 1.10 per cent. Long buildup was seen in Tata Global, Tata Chemicals, Just Dial and Titan while shorts were seen in Petronet LNG, RBL Bank, IndiGo and Apollo Hospital.(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)
Source: ET

Wipro turns to government business, hires hands to boost numbers - economic news of india - world economic news - economics news for students - indian economy news

Wipro turns to government business, hires hands to boost numbers
BENGALURU: Wipro is focusing on growing revenue from its India State Run Enterprises, a business that currently has negative operating margins, by hiring account managers and sales talent, as it looks to tap the central and state governments for growth.The India SRE business provides IT service offerings to entities and departments owned or controlled by the Government of India and the various state governments.For FY19, Wipro reported $123.5 million in revenue from its SRE business and said the segment had an operating margin of -21% for the year. The revenue from this segment is not included in the company’s IT services revenue. “There was a major reorganisation in this business and now the company has decided to invest again. But there will be more selective picking of projects. They are focusing on banks and utilities in the public sector and governments in specific regions such as South India and Western India,” a source with direct knowledge of the company’s plans said.Wipro has Sanjeev Singh to head its India state-run business, while Anand Padmanabhan heads the private enterprises business for the country. Part of the growth plan involves bringing in talent with new account managers to scout for, win and manage government projects. “They are looking to bring in at least 10-15 people with sales and account managing experience,” the source said.A search of professional networking site LinkedIn, shows a slew of job offerings asking for six to 10 years of experience in selling to the governments and public sector businesses and the ability to ‘hunt’ for new customers and ‘farm’ existing accounts.Wipro includes the revenue it gets from the private sector in India in its IT services revenue. The company, however, does not break that revenue out separately.
Source: ET

Thursday, May 16, 2019

RBI's latest move shows problems at Yes are far from over - economic news of india - world economic news - economics news for students - indian economy news

RBI's latest move shows problems at Yes are far from over
By Andy MukherjeeIt’s no secret that India’s banking regulator hates having its officials sit on the boards of state-run lenders.The practice exposes the Reserve Bank of India to all kinds of potential conflicts it would rather avoid. So when the RBI used its special powers to appoint a former deputy governor as a director of Yes Bank Ltd., a non-state lender, it sent a powerful signal: The bank’s troubles run deeper than investors believe, and a cleanup will probably be harder. The eventual solution may be to let the country’s 10th-largest bank by market value get swallowed by a bigger balance sheet.Yes Bank’s problems started two years ago, when the regulator forced it to disclose that nonperforming loans were $630 million more than the $113 million reported in the company’s audited accounts for the year ended in March 2016. The divergence widened to almost $1 billion a year later.Last September, the RBI pulled the plug, and refused to approve a further three-year term as chief executive for co-founder Rana Kapoor. Deutsche Bank AG’s former India CEO Ravneet Gill, who recently replaced Kapoor, has decided to make kitchen-sinking of problem loans his first priority. Yes reported its first-ever loss during the March quarter after the new CEO took a $300 million hit to cover for loans that could go bad in the future.Still, with the old management out and a cleanup guy in place, why would the RBI get involved with Yes now? Its gross nonperforming asset ratio is 3.2 percent, compared with 7.5 percent for State Bank of India, the country’s largest lender by assets. 69352159 A reasonable guess is Yes Bank’s linkages with financial and real-estate firms, two of the businesses facing the biggest funding squeezes in India. Such exposure works out to a sixth of the loan book, based on figures released by the bank.A fire sale of debt securities held by Yes Bank’s treasury would further push up funding costs for its borrowers — the struggling shadow-lending industry. Before you know it, the financing drought that started with the collapse of IL&FS last September could turn into a full-fledged famine just as a new government is getting sworn in in New Delhi.That’s not something the central bank can allow on its watch.The RBI has previously used its special powers to appoint directors in Dhanlaxmi Bank as well as Lakshmi Vilas Bank. Interestingly, Indiabulls Housing Finance Ltd. wants to merge with Lakshmi Vilas, provided the RBI allows the shadow bank to morph into a deposit-taking institution. It’s reasonable to expect that even Yes Bank will become the target of some sort of special situation investor. 69352166 However, there are uncertainties around how much headway new CEO Gill will make and how soon. His problems literally run from A to Z — from tycoon Anil Ambani to television broadcaster Zee Entertainment Enterprises Ltd. The bank’s exposure to the former’s crumbling empire alone is $1.85 billion, or half of the bank’s common equity, BloombergQuint reported this month. Ambani’s telecom company is in bankruptcy, while his finance business struggles with a liquidity crunch and credit downgrades. Meanwhile, Yes Bank has a $470 million exposure to Zee’s controlling shareholder, Business Standard reported in January.Given all this, a long line of willing suitors for Yes is unlikely. Any hookup will probably have to be an arranged marriage, solemnized by the RBI.
Source: ET

10% up or 20% down ? What may happen on May 23 - economic news of india - world economic news - economics news for students - indian economy news

10% up or 20% down ? What may happen on May 23
NEW DELHI: Even if the election outcome on May 23 delivers shock verdict, Dalal Street is unlikely to swing more than 10 per cent.Analysts say the market has already witnessed severe battering from non-political factors like adverse global cues and mixed March quarter earnings and valuations have come off quite a bit.“I do not think there is any optimism left. People are cautious; they are suffering because of economic pain. The approach should be to get the house in order rather to going overboard with optimism,” Ravi Dharamshi, CIO, ValueQuest Investment Advisors, told ETNow.In May alone, the market has taken a major hit following the April losses. Indian market been one of the top losers among major emerging markets so far in May amid renewed concerns over the US-China trade war. Aggregate market capitalisation of stocks listed on BSE has come off some 6.7 per cent, or $138 billion so far this month.Various pre-poll surveys conducted during January-March suggested a majority verdict in favour of the BJP-led NDA. Those projections have since been revised downwards as actual ground reports started trickling in with every round of voting.Edelweiss Professional Investor Research says if NDA comes to power, Nifty50 may see 10 per cent upside and touch 12,500 kind of level.“Since equity mutual funds are currently sitting on approximately 5 per cent cash compared with an average of 3.5 per cent at the start of the year, there is cash waiting on the sidelines to be deployed,” the brokerage said.In case a third front government comes to power, it may add to market volatility, with the indices likely to correct 10-12 per cent, Edelweiss said. In that case, Nifty may test the 10,000 mark.“It will not be a 20 per cent kind of a move like the one we saw in 2004, where the loss for the incumbent government came as an absolute shock. But a negative event will not have a prolonged impact,” Dharamshi said.A stable UPA-led front, meanwhile, can trigger muted to positive market reaction.Tushar Mahajan of Centrum Broking feels that the market is already pricing in 5-5.5 per cent rise after election results.“From the current level, you are talking about probably 11,800-11,850 on upside and 10,700 on the downside. That is the range we see. Given the lack of liquidity, if there is a selloff, the downward move could be exaggerated,” Mahajan said. 69246434 Some analysts have warned that China has high weightage in emerging market funds and any escalation in US-China trade war may lead to selloff by such funds, as has been evident in monthly outflows this month. Brokerage Prahudas Lilladher (PL) expects Nifty EPS to rise 8.4 per cent in FY19 compared with a 3.8 per cent contraction in FY18. It projects Nifty EPS growth at 16.9 per cent in FY20 to Rs 553.6 and 16.8 per cent in FY21 are seen to Rs 646.7.“If a stable NDA government comes to power, a rally can make the market test 24-25 times earnings, which gives a target of 13,272-13,825 on Nifty. Any adverse political outcome and global volatility can take P/E multiples to pre-rally levels of 19 times,” Prabhudas Lilladher said.Nifty currently trades at 21 times one-year forward earnings, which is at a 16.6 per cent premium to the long-term average of 18.Dharamshi said a less-than-expected poll outcome would provide more reasons for stocks to turn cheaper. “But one cannot prepare for such an outcome in advance. If you liquidate your portfolio going into the election results, and if the outcome is opposite, you may not get these valuations,” he said. 69245733 "The only thing you can control is your behaviour. Even if election result is favourable and markets go berserk, you still need to be careful, as it is not necessary that economic data would turn positive immediately," he warned.
Source: ET

Founders lock horns over IndiGo's future - economic news of india - world economic news - economics news for students - indian economy news

Founders lock horns over IndiGo's future
MUMBAI: Serious differences have cropped up between the two founders of IndiGo that could end up affecting the airline’s functioning if left unresolved, people close to the development have told ET.Among the issues are clauses in the shareholders’ agreement and differences between the two founders — Rahul Bhatia and Rakesh Gangwal — over strategies and ambitions for the airline. ET couldn’t immediately ascertain the specific clauses in the shareholders’ agreement that are a bone of contention.The promoters refused to comment on the development.ET Now, ET’s business channel, was the first to break the story on Wednesday evening.Both founders are, however, trying to iron out the differences so that the functioning of the airline isn’t impacted. “The dispute may have escalated in the last few weeks, but things are at a very nascent stage with regard to any formal legal dispute and both parties are weighing other options as well,” said one of the persons. 69350780 Legal firms Khaitan & Co and J Sagar Associates are helping the founders resolve the problems. “The promoters, Gangwal and Bhatia, are old clients of Khaitan & Co and J Sagar Associates, respectively, and hence the leadership teams from both the firms are actively overseeing the entire situation,” the same person said.Neither of the promoters has yet broached the possibility of buying the other out or exiting the airline.Gangwal, a United Airlines and US Airways veteran, has been the driving force behind IndiGo’s emergence as one of the fastest growing carriers in the world.Speed Vs CautionIt was Gangwal who was behind IndiGo’s record breaking plane orders, its aggressive expansion in India and the ambition to make it a global carrier which resulted in vast changes in senior management.Gangwal, a US citizen, worked from the shadows while Bhatia ran the show in India, supporting the airline’s growth and manoeuvring regulatory hurdles. Sources said Gangwal was also reluctant to take up a board seat in IndiGo, saying instead that he wanted to push its growth and expansion.But differences cropped up on several occasions in the last two years, with Gangwal supporting growth at breakneck speed to harness the potential of India’s aviation market and some of the airline’s management and on occasion, Bhatia, opting for a more cautious approach.In February last year, Gangwal declared that FY19 would see Indi-Go increasing its capacity by 52%, more than it had ever done, and taking its fleet size to 250 from 155. This was opposed by a majority of its management, including then president Aditya Ghosh, saying this would create problems of overcapacity and impact yields. Gangwal is said to have retorted that with India’s potential, nothing less than 500 aircraft was too many. Ghosh subsequently resigned. IndiGo currently has a fleet of 225 planes.Both founders believe the group is at an inflection point as it chases its next phase of growth. With Jet Airways and Air India floundering, they believe IndiGo can occupy the vacant slots left behind by the two legacy carriers. How to grab this opportunity is where they differ.Bhatia is open to considering wide-bodied aircraft to pursue its international dream. Gangwal is a believer in the budget carrier Southwest Airlines’ model of operating a single model aircraft: the narrow-bodied Boeing 737. This would mean the airline would not be able to service longhaul destinations. Instead, Gangwal preferred code-share agreements with foreign carriers. As of now IndiGo has stalled its plans to buy wide-bodies and has signed its first codeshare agreement with Turkish Airlines.
Source: ET

Trump all set to announce merit-based immigration - economic news of india - world economic news - economics news for students - indian economy news

Trump all set to announce merit-based immigration
WASHINGTON: In a major policy speech Thursday, US President Donald Trump is all set to announce a new proposal to overhaul the country's immigration policy that would give preference to foreigners based on merit rather than the existing system that gives preference to family ties, a move that could end the agonising Green Card wait for hundreds and thousands of Indian professionals.Brainchild of Trump's son-in-law, Jarred Kushner, the new plan primarily focusses on strengthening border security and revamping the system of Green Card or legal permanent residency so that people with merit, higher degrees and professional qualifications could get an easy access to the immigration system.As of now, about 66 per cent of the green cards are given to those with family ties and only 12 per cent are based on skills. The Trump Administration intends to change this. Trump is scheduled to roll out his plan at the Rose Garden of the White House Thursday afternoon.However, the plan faces an uphill task mainly because of the bitterly divided Congress on partisan lines, especially on the issue of immigration reform.Even if Trump succeeds in convincing his Republican lawmakers on this, the opposition Democrats, led by Congresswoman Nancy Pelosi, House Speaker, and Senate Minority Leader Chuck Schumer, are dead against any such legislative success to the president.The Trump Administration is well aware of the issue. It is planning to make it an election issue in 2020 if the opposition Democrats are unwilling to be engaged on this, a senior administration official told reporters during an interaction on the eve of the rollout of the merit-based immigration policy."It is going to be a very detailed piece of legislation and it can be what they want it to be. If they do not want to engage, then it will be part of the election. If they want to engage, then it could be part of a negotiation. That is going to be up to them," said the official who requested anonymity.Both Trump and Kushner are believed to have briefed Republican lawmakers on the issue.In his speech, Trump is unlikely to propose changes in the existing number -- 1.1 million -- of green cards issued each year. Instead, the new policy calls for issuing more than half of the green cards to those based on employment or skills.Such a move is likely to benefit hundreds and thousands of Indian professionals on H-1B visa whose current Green Card wait, on an average, is more than a decade.According to the details given by the senior administration official, the proposed system mirrors the point-based system of countries like Canada, Australia, New Zealand and Japan.Officials said the plan would favour those immigrants who are exceptional students, those with "extraordinary talent" and people who work in professional and specialised vocations.The applicants would receive points for age, English proficiency and offers of employment at a certain wage threshold in order to protect low-wage American workers, the official said.
Source: ET

Jet's lenders to get bids verified, open to joint bid - economic news of india - world economic news - economics news for students - indian economy news

Jet's lenders to get bids verified, open to joint bid
Mumbai-Grounded Jet Airways' lenders plan to get all bids legally verified before beginning negotiations with interested parties.According to informed sources, lenders have a limited number of options to recover their outstanding dues worth Rs 8,400 crore. They might also try to stitch a deal involving two bidding parties."We will first get all (solicited and unsolicited) bids legally verified and after that we will invite the selected parties on to the negotiating table," a senior banker told IANS in Mumbai."We can also explore a way to bring two bidding parties together, whereby both will work with lenders."Another source involved in the matter said: "If the process to find a suitable bidder fails, then the other options will be DRT (Debt Recovery Tribunal) and NCLT."When asked about the sudden exodus of the company's top management and lenders view on the same, the senior banker said: "It is for the owners of the airline to decide about appointments. We are not the part of any controlling entity."On Tuesday, an exodus of senior management personnel took place, as the airline's CEO, CFO and Company Secretary resigned.The resignations came after the airline's top executive Gaurang Shetty, considered close to founder Naresh Goyal, resigned from the board of directors.Having run out of cash, Jet Airways suspended its operations on April 17. Besides employees exiting, its aircraft are also being gradually de-registered. These events have added to the growing uncertainty about airline's revival.Lenders of Jet Airways led by state-run State Bank of India (SBI) are currently in the process of selling the airline to recover their dues of over Rs 8,400 crore.Private equity firm TPG Capital, Indigo Partners, National Investment and Infrastructure Fund (NIIF) and Etihad Airways had been shortlisted to place their bids after they submitted Expressions of Interest (EoIs).On May 10 -- the last date for submitting the binding bids -- only Etihad gave its offer. The other three bids for the airline were unsolicited.Faced with salary delays and uncertainty over revival of the airline, thousand of Jet Airways employees, especially pilots and engineers, have left the company to join rival carriers.
Source: ET