Largely unaffected by the recent carnage in stock markets, salt-to-software conglomerate Tata Group is closing in on to become the country’s first business house to attain a market valuation of Rs 6 lakh crore.
The cumulative market capitalisation of all 32 listed companies of the Tata group has risen to nearly Rs 5.90 lakh crore as on Friday– the highest for any business house in the country and almost double the market value of the second ranked Mukesh Ambani-led Reliance Industries Group. The total market value of Tata group exceeds the combined market capitalisation of at least three leading business houses in the country — Mukesh Ambani-led RIL group (about Rs 2.75 lakh crore), Kumar Mangalam Birla-led Aditya Birla Group (about Rs 1.5 lakh crore) and Anil Ambani-led Reliance Group (about Rs 62,000 crore).
Interestingly, the Tata group’s market value has grown substantially over the past one year, including in the past a few months when the overall stock markets have been facing strong headwinds and have lost value. In the past three months, the Tata group’s valuation has grown by over Rs 80,000 crore or over 15 per cent, while the total valuation of Indian markets has actually fallen by about 10 per cent during the same period, shows an analysis of data available from stock exchanges. Read More
Differences have cropped up between the Reserve Bank and the finance ministry over the guidelines for new banking licences, which are likely to be announced within the next fortnight.
Even as the RBI has the final say in framing the guidelines, it has been holding consultations with the finance ministry over the last few weeks to iron out the differences, but without much luck.
The Reserve Bank wants the rules to be framed in a way that large corporate houses and real estate giants are not able to corner these licences as their business interests may clash with the prudential norms needed to run banks.
The finance ministry is firm in its stand that the norms should not keep corporate houses out, but rather set up a barrier between owners and banking operations. Read More
The Reserve Bank should give preference to the non-corporate sector for new bank licences, Prime Minister’s Economic Advisory Council ChairmanC Rangarajan said.
“It is possible for the Reserve Bank to start with initially non-corporate business and find out whether there are suitable applicants and thereafter proceed to look at the other applicants,” he said in an interview.
The RBI is in the process of finalising the guidelines for giving new bank licences after Parliament approved Banking Laws (Amendment) Bill last month.
The central bank, Rangarajan said, “should look at various types of financial institutions that are available currently and decide”.
“…. many of the strong private sector banks today have been at one time or other in the financial system. They can look at it first and look at the other later on,” he said. Read More
A glance at the balance sheets of corporate India shows an alarming increase in the levels of borrowings. Perhaps policies were not quite expected to come apart the way they have but the resultant sharp fall in industrial growth has left several business houses up to their necks in debt. One number puts this in perspective: a study by Credit Suisse (CS) shows that the ten groups that have been the top beneficiaries of bank loans, in the past five years, have an average group debt to Ebitda (earnings before interest, tax and depreciation) of a high 7.6 times. More worrying, as the CS study shows, four of the ten have an interest cover (Ebit/P&L interest cost) of less than one. Some of this is due to the largesse of banks who, between 2006 and 2008, let India Inc borrow aggressively.
Companies, for their part, also accessed cheap overseas liquidity, at times to fund acquisitions overseas before the subsequent slowdown, post the Lehman crisis in late 2008, forced them to manage their money better, by shedding flab and trimming inventories.
The rally in the stock markets that began in mid-2009, after the second UPA government was elected, and which saw the Sensex hit lifetime highs, helped many companies rebalance their gearing; they sold shares at better valuations and were also able to whittle down their borrowings by selling off peripheral businesses.
Since then, however, with the economy on a down-trend and the markets in a lull, equity has been hard to come by. Among the few meaningful equity issuances was Tata Steel’s follow-on issue of just under R4,000 crore in January 2011. Read More
A steep rise in debt levels of large business houses like Lanco, Adani, GVK, Vedanta and GMR groups in the past five years has led to a much higher ‘borrower concentration risk’ at Indian banks, as compared to their other Asian and emerging market peers.
Infrastructure major Lanco group has witnessed the steepest rise in its debt level in the past five years, followed by Adani, GVK group, Vedanta and GMR, as per an analysis of debt levels of top 10 corporate groups in the country by global financial services giant Credit Suisse.
While Lanco’s group debt has grown at an annual rate of 76 per cent in the past five financial years, the rise has been 74 per cent for Adani, 65 per cent for GVK, 58 per cent for Vedanta and 55 per cent for GMR group.
The combined debt of the top 10 groups grew over five times in last five years, from Rs 99,300 crore to Rs 5,39,500 crore, at a compounded annual growth rate of 40 per cent.
In comparison, the total banking system loans grew by just 20 per cent annually during this period. Read More
Exports expanded in November 3.87 percent year-over-year
India’s exports in November grew 3.87 percent to $22.32 billion year-over-year, the lowest growth rate in two years.
Total exports from April through November, the first eight months of fiscal 2011-12, increased 33.2 percent to $192.7 billion from a year earlier.
“The poor showing in November was mainly on account of the weak demand for Indian goods in the traditional markets such as the European Union and the U.S.,” a Commerce Ministry official said.
Imports for November expanded 25.6 percent to $35.9 billion year-over-year, creating a trade gap of $13.6 billion.
Overall imports during April to November surged 30.2 percent to $309.5 billion, expanding the trade gap for the eight-month period to roughly $116.8 billion.
Based on current indications, the trade deficit for fiscal 2011-12, which ends March 31, is expected to reach $155 to $160 billion. The ministry expects exports to in the fiscal year to grow 6.7 percent.
“To boost exports and arrest the trade deficit, the government should provide export finance at concessional rate of not more than 7 percent for small and medium export segment, and 9 percent for large business houses,” a representative of the Federation of Indian Export Organisations said.
India, one of the world’s fast-growing economies, exported $246 billion in goods in fiscal 2010-11, which ended March 31, and has set an export target of $500 billion by 2014.
“Always keep your friends close, but keep your enemies even closer”..Don Vito Corleone, The Godfather
While Sicilian mafioso’s have lived and practiced this adage for decades, so popularised to phantasmic proportions by Mario Puzo. Indians have have been nurtured on the ideologically correct but emotional deceit of Vibhishana. In the much younger days of this writer it was a known fact that RIL had mastered the Art Of Corporate Intelligence. So strong was gathering of information, that while everything a competitor did was chronicled with documentary proof, the fact that the demonic sword hung somewhere terrorised business houses that ever attempted to hold out against RIL.
But a sword always cuts both ways. So, while the evidence that was needed and used to destroy the ADAG group existed, similar evidence to destroy RIL perceivably also exists. The KG D6 basin extends into some 2000 sq kms of deep sea. Over a span of 2 decades extent of over-capitalisation aided and abetted by the MOPNG, DGH and even CAG existed in the realms of possibility. The siphoning over 2 decades was collectively whispered at over $10 bn, an amount that was laundered through more than 200 companies of the group to help one clansman to raise his Equity stake in RIL to over 50 per cent.
True or untrue no one knows. Except that in it’s new found “Avatar” the CAG has noticeably woken to corruption and doctoring of accounts. Something that was mandated for them from inception but conveniently ignored for decades. Now that another General Election looms large and movements like those of “Anna” herald an Indian Summer, the increasingly distressed Centre is trying to squeeze out businesses including RIL.
To be fair commentators like Gurumurthy and Gurudas Kamat had pointed at RIL cooking books for decades but to no avail. Nowhere did the lay investor understood that the ballooning KG expense was only meant to deny profit petroleum or revenue sharing to the country for existing pricing policies had assured RIL that nothing need be shared till the corporate recovered as much as 6 times the capitalisation of KG.
So while the GOI could control the gas price for KG they could do nothing about Revenue share. If the black hole in RIL comes out to be as large as what the CAG now claims, investors can kiss a four digit price for the RIL stock for decades to come. Instead they could see lower 3 digit price in a very short time.
What one wonders is whether Vibhishana is once again siding with the GOI, to destroy Ravana? Time will tell.
Watch PANIC in AUTO Sector ,As expected Bank Stocks in pressure -ASR TEAM/BARODA
The government will roll back fiscal stimulus on more than 300 products as it feels the economy, which is expected to grow by nearly 9 per cent in this fiscal year, is now in a far better shape.
Top finance ministry officials said most business houses and chambers of commerce were lobbying the government for keeping the tax sops doled out to guard the economy from the global economic crisis in 2008. However, finance minister Pranab Mukherjee feels the time has come to start winding down the stimulus measures.
In the wake of the global financial crisis, Indian industry had contracted for a few months, throwing millions of workers out of their jobs in textile and garment factories.
To stop the trend, the government had, two years back, provided tax benefits of Rs 40,000 crore in three tranches.
Some of the sops, including duty drawback and interest subsidy on select manufactures, were withdrawn last year. Besides, excise duty, which had been slashed from 14 per cent to 8 per cent in December 2008, was raised by 2 per cent to 10 per cent.
“We cannot continue with crutches for industrialists for all time. Some concessions will continue for the export sector but most will be withdrawn,” said top officials. Automobile industry executives say their discussions with finance ministry officials indicate that taxes on compacts and sedans can go up by 2 per cent.
The textile industry has been similarly lobbying to retain all the fiscal benefits given to them but fear some of these will be withdrawn. However, the finance ministry will have to brace for a tough time as the ministries of commerce, industry and textiles are expected to vigorously oppose much of the rollbacks.
The government hopes to raise around Rs 7,45,000 crore indirect and indirect taxes in this fiscal and wants to raise this target for the coming financial year (2011-2012) to nearly Rs 8,50,000 crore.
“While the bulk of the increase will come from direct taxes, indirect taxes will continue to be an important source of revenue,” officials said.
Over the last few months, most car makers and consumer durables firms have raised prices by 4-8 per cent putting additional pressure on overall inflation, which stood at 7.48 per cent in November.
However, despite hiking prices, car sales increased by nearly a third between April and November 2010. Most car makers, including Maruti, posted double-digit percentage growth in December.
“If car makers and others see a rise in demand even after raising prices, we don’t see why the government should be denied its taxes,” said officials.
The Reserve Bank has already rolled back its stimulus by ending the cheap money policy last year.
The RBI increased its benchmark interest rates by 1.5 per cent last year, the most by any monetary authority in Asia, to curb inflation, raising lending rates all around.
The finance ministry, too, thinks it is time to exit most of the stimulus as India “is less vulnerable to risky parameters, which beset Western economies”.
The need to withdraw stimulus measures also stems from the high fiscal deficit.
Fiscal deficit for the current year is expected to stand a little below the targeted level of 5.5 per cent, thanks to gains from the auction of 3G telecom spectrum and the sale of stocks in public sector companies.
“However, to slash it down to 4.8 per cent in the coming fiscal, every paisa of tax revenues will have to be accounted for,” said officials.
The release of more than a 100 telephone conversations, allegedly of a prominent corporate lobbyist, by the Outlook magazine has given a glimpse into the close links between big business houses and political parties.
The conversations, which allegedly took place in mid-2009, seem to feature the who’s who of the Indian corporate world, going by the names and voice tones.
The tapes — if authentic — indicate that at least some in the media and legal circles felt that a prominent industrialist was trying to secure a favourable verdict in the Supreme Court, in one of the most closely-watched corporate legal battles. The tapes — posted on the magazine’s website — also allegedly show how the lobbyist tried to — and succeeded — in bringing together warring corporate houses to fight against the low-on-luck Anil Ambani.
“I know what he is doing on the Supreme Court front,” a prominent and well-connected journalist warned the lobbyist on her client, just before a big corporate battle was to be heard in the Supreme Court. He urged the lobbyist — perhaps the most powerful in the country due to her illustrious clients — to tell her client to be cautious. “What he’s doing is known to the rest of the world, which is not good… Just convey that the way he is going to the Supreme Court is not the right way,” the voice, allegedly of the prominent journalist, added.
While the voices do sound like those of the persons after whom the digital files seemed to be named, there is very little to vouch for the authenticity of the tapes themselves — or the identity of the eavesdropper. While papers found with the recordings seemed to suggest that the phone-tapping was done by central tax authorities, the home ministry has already issued a denial that it had “authorised” any such exercise. Read More