Thu, 26th November 2015

Anirudh Sethi Report


Archives of “Analysis” Category

India reports 11 per cent jump in frauds

The number of fraud cases in India, has gone up 11 per cent according to the Kroll Global Fraud Report where 80 per cent of the India-based executives who responded to the survey were affected by fraud.

Of all the countries surveyed, India had the highest incidence of fraud in four categories — corruption and bribery (25 per cent of companies), regulatory compliance breach (20 per cent), IP theft (15 per cent) and money laundering (7.5 per cent).

Reshmi Khurana, managing director and head of South Asia for Kroll, said, “India has one of the highest incidence of fraud (4 out of the 11 fraud types) assessed by the survey. Further, 92 per cent of Indian respondents have confirmed that their firms have seen an increased exposure to fraud in the last year.”

“This is consistent with our experience on-the-ground in India.” She said despite these rising concerns, companies in India are not investing in the appropriate anti-fraud strategies.


Hero MotoCorp’s promoter Pawan Munjal emerged as the highest paid director among the top listed private companies, taking home a pay packet of nearly Rs 44 crore last fiscal, followed by two other executives of the auto group, says a report.

The group’s two other promoters – late Brijmohan Lall Munjal and Sunil Kant Munjal – were the second and third most paid directors during 2014-15 period, according to proxy advisory firm InGovern.

Brijmohan Lall, who passed away earlier this month, had a pay packet of Rs 43.64 crore, while that of Sunil Kant Munjal stood at Rs 41.87 crore.

Desh Bandhu Gupta, chairman of Lupin, earned a salary of Rs 37.58 crore, while Larsen & Toubro chairman AM Naik drew an annual remuneration of Rs 27.32 crore.

An analysis of the salary of 95 directors in Nifty companies shows that on an average remuneration of a director is Rs 9 crore.

All the top 10 directors were paid remuneration in excess of Rs 19 crore.

According to the report, Pawan Munjal took home a pay packet of Rs 43.91 crore last fiscal, which is 1.84 per cent of his company’s net profit.

A total of 34 Nifty-50 companies disclosed pay-ratios, while three firms – Bajaj Auto, Bosch and Maruti Suzuki – shied away from making any such disclosures. The Index has 10 PSUs which are exempted from making such disclosures.

India : Just growth, fiscal improvement can’t resolve NPA issues: Standard & Poor’s

Global ratings agency Standard & Poor’s (S&P) today called for a multi-pronged strategy to help banks tide over asset quality issues, saying stronger economic growth and improvement in fiscal situation alone cannot resolve the crisis.

“Work is needed on multiple other facets, including pick-up in industrial demand, de-leveraging of balance sheets, resolution of problems in stressed sectors like infrastructure and metals and mining, and pass-through of lower interest rates to borrowers to improve the asset quality,” an S&P report said.

The agency noted that while improvements in policy making have raised prospects for a stronger economic and fiscal performance, there is need for action on other fronts to improve the weakness in asset quality, which it termed as a “risk”.

“Economic risks could increase in the absence of such steps and lead to a continuous increase in stressed assets for the banking sector,” S&P said.

It added that for the next 12 months, it expects risks from economic imbalances to be low as credit growth remains moderate and inflation-adjusted property prices are likely to decline.

However, the report said the economic risks trend, which affects the banking sector, is “negative”.

5 things to learned from ECB leak

With 8 days to go, everything is on the table

Reuters spoke to anonymous ECB officials and gained some insight into next week’s pivotal ECB decision.

We know the ECB will offer something to ease European disinflation despite objections from Lautenschlager and the German hawks.

Here are the key takeaways:

1) The ECB doesn’t have a coherent plan yet

The have thrown a lot of things out there just 8 days ahead of the ECB decision. This should be the time when they’re sorting out details not trying to figure out what rates they’ll lower and what assets they’ll buy.

“We have deflation, so you have to do something,” said a source. “How this all looks in a few years, nobody knows.”

That’s a scary statement.

The clock might simply run out. These are untested methods and the euro at 1.06 might be the excuse for officials to offer a token move and hint at what’s coming in January. The euro squeeze higher would probably take it to 1.10 but with the Fed next and a promise of action in January, it wouldn’t go higher.

2) The ECB wants to surprise markets

More than the technical aspects, this is probably the most important factor.

“There are some who say you should surprise markets. But you cannot surprise indefinitely. Sooner or later, you are bound to disappoint,” the anonymous ECB source said.

The ECB is congnizant of expectations and wants to exceed them, at least this time. Or maybe the nearly 10 cent fall in the euro since the previous ECB meeting will make them feel they don’t need to deliver.

The good news is that the decision probably won’t spill out of the leak-ridden ECB ahead of time.

“QE For Metals” – China’s Desperate Commodity Sector Demands A State Bailout

The one-word reason for this condition: China, which as documented extensively in the past, has clammed down on its unprecedented credit creation now that its debt/GDP is well over 300% and as a result conventional industries are dying a fast and violent death. In fact, months ago we, jokingly, suggested that what China should do, now that it has scared sellers and shorters to death, is to launch QE where it matters – the commodity space.

That joke has become a reality according to Reuters, which reports that China’s aluminum and nickel producers have asked Beijing to buy up surplus metal, sources said, the first coordinated effort since 2009 to revive prices suffering their worst rout since the global financial crisis.

The state-controlled metals industry body, China Nonferrous Metals Industry Association, proposed on Monday that the government scoop up aluminum, nickel and minor metals including cobalt and indium, an official at the association and two industry sources with direct knowledge of the matter said. The request was made to the state planner, the National Development and Reform Commission (NDRC).

One Reuters source familiar with the producers’ request said the China Nonferrous Metals Industry Association had suggested that the state buys 900,000 tonnes of aluminum, 30,000 tonnes of refined nickel, 40 tonnes of indium, and 400,000 tonnes of zinc.

Overnight US Market

Seasonal stock market trends are again overcoming geopolitical fears on Wall Street as traders push stock prices mostly higher as they often do in the days leading up to and following Thanksgiving.

On the strength of the Nasdaq composite, U.S. stocks ended mostly in the black, after shares in Europe rebounded sharply after diving a day earlier on geopolitical fears. The Nasdaq gained 0.3%, while the Dow Jones industrial average, up fractionally, and the S&P 500, down fractionally, basically treaded water.

Despite ongoing angst over the elevated terrorism threat around the globe and fresh uncertainty over the potential fallout following Tuesday’s downing of a Russian fighter jet by Turkey, Wall Street investors for the most part  are shrugging off those risks and instead focusing on some decent economic data in the U.S., and the hopes for more stimulus from the European Central Bank next week.

Wall Street appears to be following historical trends on two fronts. History has shown that terrorism and other geopolitical risks only impact markets for a short period of time, with markets quickly pivoting back to more traditional drivers, such as the health of the economy, corporate earnings and other measurable economic trend.

In addition, the Thanksgiving week has been bullish for stocks, history has shown. The S&P 500, for example, has gained an average of 0.63%, on average, in the holiday-shortened week over the past 50 years, which is better than the 0.14% gain in all weeks over the past five decades. Stocks have also been up 82% of the time on the Wednesday before Thanksgiving in the past 50 years, and were higher 70% of the time on the Friday after Thanksgiving

CEO Of Brazil’s “Goldman Sachs” Is Arrested

Several years ago, when Brazil’s economy was roaring on the coattails of the Chinese commodity boom, the country’s Grupo BTG Pactual was transformed into the largest independent investment bank in Latin America by the golden boy of Brazil’s finance – billionaire Andre Esteves.

Alas, over the past year as Brazil’s economy imploded, BTG had been grappling with fallout from his firm’s loans and investments in companies linked to the nation’s biggest-ever corruption scandal.

According to an old Bloomberg profile of Esteves, having disrupted an entrenched industry dominated by old-line banking dynasties, traditional banks and foreign lenders, Esteves became a billionaire before turning 40, then joked that his firm would become “better than Goldman”, a play on the company’s name.

It was not meant to be, not because of rising concerns about the bank’s financial health but because unlike executives linked to Goldman in every way imaginable, earlier today the CEO of “better than Goldman” was arrested in the corruption probe touching everyone from the country’s petrol-producing giant Petrobras, to president Rouseff herself, one which has shaken the country’s political and economic leadership and left the economy reeling in the deepest depression it has suffered in 80 years.