Shailesh J.

Mehta School of Management

Indian Institute of Technology,
Inside this Issue
COAL-GATE: The legacy of
scams.. where does it end? 2-4
News of last 2 weeks 5-6
Markets 7-9
Knowledge section 10-11
Check your Fin Quotient 11
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Issue: Sep 03, 2012
The Fortnightly Newsletter
Source:
Mint
The Economic Times
The Economist
MoneyControl.com
Business Standard
Deccan Herald
Hindustan Times
Investopedia.com
COAL-GATE: THE LEGACY OF SCAMS...WHERE DOES IT END?
The political soap opera in Indian democracy once again hit the chart busters as
the report by Comptrollers and Auditor General (CAG) on coal scam made it to
the media. The report has been tabled on 17th august and it comes as the latest
scam revelation amongst several chains of scams that has been charged against the
ruling UPA coalition. This time noteworthy is the fact that our honourable Prime
Minister Dr Manmohan Singh has adorned the hot seat. Let us have a cursory look at
the facts related to this phenomenon.
FACT AND FIGURES
The report published on the 17th had following key highlights:
The nation faced a loss of 1.85 lakh crores
The coal fields were allotted to private companies instead of being auctioned
The policy adopted was First Come First Serve (FCFS)
142 allotments were made between July 2004 and 2006 to private and Govt. companies
at a rate of Rs 0.50 per metric tonnes

The companies which received the benefit did not start production themselves and
outsourced the operations to third parties at a premium and pocketed benefits in very
short time
CAG didn't mention the name of PMO and state Governments in the coal blocks
allocation
22 companies have been held accused including some big names and some of them are-
Tata Group, Naveen Jindal Group, Essar Group, Abhijeet Group, Laxmi Mittal's
Arcelor, Vedanta
The allegations say that the coal blocks were allotted to 51 companies in 2006, 19
companies in 2007, 41 companies in 2008 and 32 companies in 2009.CAG was quoted
saying, Delay in introduction of the process of competitive bidding has rendered the
existing process beneficial to the private companies. Audit has estimated financial
gains to the tune of Rs 1.86 lakh crore likely to accrue to private coal block allottees.
It has been also alleged that Reliance Power got undue benefit of Rs 29,033 Crores
when the Government allowed the use of surplus coal from blocks allotted to
Sasan power plant for its other projects.
COAL-GATE: THE LEGACY OF SCAMS...WHERE DOES IT END?
ROLE OF CBI
The Central Vigilance Commission (CVC) had asked the CBI to probe into the
whole saga that happened between 2006 and 2009. The CBI had also been asked
to complete inquiry within three months. According to CBI, they would not
probe the PM, though he was the concerned portfolio holder in the given period.
Their job would be to investigate- misconduct related to the allocation of blocks,
misuse of coal blocks by private companies, roll of bureaucrats, officials, ministers
who recommended the names of the companies. A CBI team met senior officials in
the coal ministry and sought documents pertaining to the 12 coal blocks -- nine in
Chattisgarh and three in Jharkhand-- besides action taken by the Ministry after it
emerged that the mining work had not started at all.
The time for filing a FIR after a Preliminary Enquiry (PE) was registered by the CBI
on June one this year following a direction from the CVC ends this Saturday. The
probe agency has not registered a case yet.
As the three-month deadline for a probe on a PE was nearing, the CBI despatched some
more teams to Jharkhand and was gathering relevant documents from other ministries
and state governments too.
The sources said Coal ministry officials had also informed the CBI that it had issued
show cause notices to some of the firms which were allocated the mines for explaining
the delay in conducting the mining work.
Some of the firms, which were
allocated coal blocks in 2005,
were yet to start mining. In a
related development, the CBI
was also examining the past
areas of operation of some of the
companies which were allotted
coal blocks in Jharkhand,
Chattisgarh and Karnataka, the
sources said.
The sources claimed that some
of these companies had been set
up only for getting coal blocks
allocated and the same was
later sublet to other companies
at a premium.
The agency has already questioned senior bureaucrats who were overseeing allocation
of coal blocks during 2005-09, the sources said.
The CBI was also examining the Comptroller and Auditor General report on coal
block allocation which was tabled in Parliament last week.
The agency has also questioned members of the screening committee including
Secretary and Joint Secretaries in the Ministry, CBI sources said.
They said the questioning of the Coal secretary, who also chairs the screening
committee, was done to understand the issues involved in the allocation of coal
blocks during the period and so far the agency has not found any irregularities
on their part.
THE POLITICAL MELODRAMA
The political situation has long been in a tumult in our country, courtesy the
policy paralysis of UPA-2, the corrupted portfolio of Congress and other
players like Baba Ramdev etc. With this latest addition to the ruling party's loss
of face, quite naturally the opponents are again in a war-like mode.
A complaint was given by BJP MPs like Prakash Javadekar and Hansraj Ahir to CVC.
Kejriwal was heard to opine that the beneficiary companies had "nothing to do with steel
cement and power. Their motive was to sell the mines". BJP senior leader Arun Jaitley
spoke on Coal-gate. The points he highlighted were that UPA can well be said the most
corrupt government in the history of our country, plethora of evidences ranging from
Bofors to the newly added Coal Gate supports that and again the resignation of the PM
echoed in his voice.
THE TAKE-AWAY NOTE
As the cases of corruption time and again come to the fore, doing rounds in the media,
the common man continues to bear the burden associated with them. Lack of a worthy
opponent, dirty coalition conundrums only adds insult to injury. One wonders where it
all ends. At a time when the GDP is taking unprecedented dips since liberalisation, the
burgeoning current account deficit poisoning the economy, all we hear is a loss to the
national exchequer worth 1.86 Crore. Time to reflect on our suffrage rights? Well the
mood seems ripe!!
COAL-GATE: THE LEGACY OF SCAMS...WHERE DOES IT END?
By- Abhishek Banerjee , SJMSOM, M.Mgt, 1st Year
News of last 2 weeks
Gross Domestic Product (GDP) grew by
5.5% in the April to June quarter of 2012
Gross Domestic Product (GDP) grew by
5.5% in the April to June quarter of 2012
versus expectations of a 5.3% growth. The
Q1 FY13 GDP growth matches the
reading for the January-March 2012
period, which was the slowest growth
rate since the first quarter of 2009. The
economic activities which registered
significant growth in Q1 FY13 were
'Construction' at 10.9%, 'Financing,
Insurance, Real Estate and Business
Services' at 10.8% and 'Community, Social
and Personal Services' at 7.9%

Sebi allows PE help to start-up IPOs for
lock-in requirement
With an aim to help companies set up by
p r o f e s s i o n a l s a n d q u a l i f i e d
entrepreneurs to tap capital market,
market regulator Sebi has allowed them
to get help from PEs and other funds to
meet share lock-in requirements. As per
regulations of Securities and Exchange
Board of India (Sebi), promoters are
required to lock-in at least 20 percent
stake in the company for at least three
years after allotment of shares in Initial
Public Offer (IPO). Besides, any holding
in excess of this minimum 20 percent
promoter stake is required to be locked in
for one year.
Apple Loses Patent Lawsuit
against Samsung in Japan
Apple Inc. lost a patent lawsuit
in Japan as a Tokyo judge ruled
that Samsung Electronics Co.
(005930) smartphones and a tablet
computer didn't infringe on an
Apple invention for synchronizing
music and video data with servers.
Apple was ordered by Tokyo District
Judge Tamotsu Shoji today to pay costs
of the lawsuit after his verdict, the latest
decision in a global dispute between the
technologies giants over patents used in
mobile devices. Samsung shares rose,
erasing earlier losses.
FM approves proposal for 49 percent
FDI in insurance, pension sectors
Finance Minister P Chidambaram has
approved a proposal floated by former
Finance Minister Pranab Mukherjee to
raise foreign direct investment (FDI)
ceiling in insurance and pension sectors
to 49 percent from the existing 26
percent to boost investor confidence.
However, a decision on the insurance
and pension bills was deferred due to
the absence of consensus in the
cabinet on the issue. The bills are
expected to be taken up for
legislation in the winter session of
the parliament if they get the
cabinet nod.
News of last 2 weeks continued..
Inflation needs to fall for RBI to cut
rates
Reserve Bank of India (RBI) Governor
Duvvuri Subbarao said on Tuesday that
inflation remains too high and needs to
fall further or risk more damage to the
economy, dismissing criticism of the
bank's hawkish policy stance. Since
cutting its main interest rate in April by a
bigger-than-expected 50 basis points to
eight percent, the RBI has stayed on hold,
drawing complaints that high rates are
burdening consumers and slowing
growth.
Govt liberalises ECB norms
India has eased overseas borrowing rules
to allow easier access to cheap dollar
funds to housing finance companies such
as HDFC, small industry financier
S I DBI and permitted non-resident
entities to provide rating enhancement
facility to Indian borrower. The move will
also help boost capital flows by allowing
even lower rated companies to raise
dollar funds. The high level committee on
external commercial borrowings (ECB)
chaired by Secretary, Department of
Economic Affairs Arvind Mayaram on
Wednesday took a number of decisions to
further liberalise the foreign borrowing
norms.
RBI bats for more FDI in
r e t a i l , i ns ur a nc e a nd
aviation
The Reserve Bank of India
(RBI ) said there is a need to
further improve foreign direct
investment (F DI ) inflows in
sectors such as insurance, retail,
aviation and urban infrastructure.
The central
b a n k s a i d
this would
a u g m e n t
n o n - d e b t
c r e a t i n g
f l ows and
k e e p t h e
composition
of I ndi a' s
external liabilities at a comfortable
level. On the apprehensions over FDI
in multi-brand retail, the RBI said
international experience on the whole
suggests that allowing FDI in retailing
space leads to increased competition.
Fiscal deficit for April-July at Rs 2.64
lakh crore
Fi scal defi ci t duri ng Apri l -Jul y
reached 51 per cent of the budgetary
estimate of Rs 5.13 lakh crore, raising
fears of the government breaching its
fiscal deficit target of 5.1 per cent of
GDP for the current year. The
renewed concerns will discourage
the Reserve Bank of India from
easing monetary policy and give
the rating agencies reason to carry
out their threat of downgrading
India's sovereign rating to junk
grade.
Markets
The market tumbled on profit booking after gaining in the past four
consecutive weeks. Euro zone debt worries weighed on sentiment.
Investors were also concerned by the Reserve Bank of India (RBI) governor D
Subbarao's speech signalling tough policies delivered in the US on Tuesday,
28 August 2012. Key benchmark indices fell in four out of five trading sessions.
The BSE Sensex fell 353.65 points or 1.99% to 17,429.56.
The 50-unit S&P CNX Nifty fell 128.20 points or 2.38% to settle at 5,258.50. Foreign
institutional investors (FIIs) bought shares worth net Rs 10803.90 crore in August
2012 so far (till 30 August 2012). They had purchased shares worth net Rs 10272.70
crore in July 2012. The latest data showed that the nation's GDP growth languished
around its lowest in three years in Q1 June 2012.
India's gross domestic product (GDP) rose 5.5% in Q1 June 2012, data released by
the government on Friday, 31 August 2012, showed. The services sector grew 6.9%,
industry grew 3.6% and agriculture sector grew 2.9%. Manufacturing output rose
0.2% while mining sector grew 0.1% in Q1 June 2012.
Key Highlights:
Raghuram Raj an appoi nt ed as
finance ministry economic adviser
Former International Monetary Fund
(I MF) chief economist Raghuram
Rajan took charge as chief economic
adviser in the finance ministry on
Wednesday.
Rajan, who succeeds Kaushik Basu,
has taken charge at a time when
investments and growth in the Indian
economy have slowed significantly
and economic reforms have been
st al l ed due t o l ack of pol i t i cal
consensus.
MphasiS net up 7.2% at Rs. 208.74 cr in
May-July
IT and BPO services firm MphasiS on
Wednesday posted a rise 7.2% in net
profit at Rs. 208.74 crore for the
quarter ended July, 2012, on the
back of improved operational
performance. The company had
posted a net profit of Rs. 194.80
to Rs. 1,355.12 crore for the quarter
compared to Rs. 1,293.63 crore in the
same quarter last year, the company
said.
J SW Steel cancels $275 mn fund
raising
JSW Steel Ltd has dropped plans to raise
upto $275 million through overseas
borrowings as it did not get necessary
regulatory clearances. But the name of
relevant authority who has denied
permission couldn't be known.
.
.Reliance Communications hits an all
time low on bourses
Share price of Reliance Communication
Ltd., the mobile telephony arm of the
Anil Ambani led Reliance Group, hit its
lifetime low on the bourses on 27th
August 2012 when the company's stock
closed at Rs. 52.15 per share on BSE,
down 3.69% from its previous close. R-
Com has lost 93.82% of its market value
since its stock hit a lifetime high price of
Rs. 844 per share on 10 January 2008. In
the same time, the Sensex has fallen
14.11%.
HP posts mega loss after EDS
writedown
Hewl et t - Packard Co. ( HP )
swung to an $8.9 billion quarterly
loss as personal computer sales
shrank again and it swallowed a
huge writedown linked to its $13.9
billion purchase of Electronic Data
Systems Corp. The company also on
Wednesday reduced its full-year
earnings outlook slightly to the lower
end of its previous range, responding
to a faltering PC market as well as touch
economic conditions in Europe and also
China, where growth is slowing, too. Its
shares slid more than 4% in late trading.
The company is undergoing a multi-
year restructuring aimed at focusing the
sprawling corporation on enterprise
services in the mould of IBM. The plan
calls for reducing its employee base by
8%.
DLF ends innings as IPL sponsor; to
promote other sports
The country's largest realty firm DLF
has decided to end its five-year long
a s s o c i a t i o n wi t h c r i c k e t
t ournament I ndi an Premi er
League as the title sponsor and
did not renew its contract that
was due by last month.
Markets continued..
Markets continued..
Currencies:
The Indian rupee declined on Friday,
August 31, 2012 due to risk aversion by
investors across the globe ahead of Fed
speech at Jackson Hole later on that day.
INR opened lower by 8 paise at Rs 55.71 to
a dollar and registered a high of 55.67 and
Expectations for week ahead
The market is likely to be volatile next week. Automobile and cement stocks will be
focus as companies from these two sector start unveil monthly sales volume data for
August 2012 from Saturday, 1 September 2012.
In Europe, European Central Bank (ECB) holds its monthly policy meeting on euro
area interest rates on Thursday, 6 September 2012. The ECB slashed its interest
rates to an all-time low in July. The ECB is
expected to continue its easing cycle,
probably as soon as in September, to help
the economic recovery of recession- and
crisis-ridden members of the euro zone.
COMEX Gold quotes at $1660.90, up $6.10 per
ounce on Friday. The counter has recovered from
lows of $1652 per ounce during the course of the
day. However, the MCX Gold futures are quoting
at Rs 30797, down Rs 40 per 10 grams on the day.
The yellow metal is still grappling with demand
low of 55.72 during the entire day. The euro slumped overnight to its lowest level
in a week to 1.2486 against the US dollar as the market nervously looked to
whether the U.S. Federal Reserve chief will indicate the possibility of monetary
stimulus later in the day.
Commodities:
worries from India as the local spot prices still remain very close to Rs 31000 per 10
grams in the major trading centers of the country. According to the World Gold
Council, India imported 969 tonnes gold in 2011. The council expects the country's
imports in Jan-Jun to have been just 340 tonnes, down 50% from the previous year on
bloated prices, high inflation and poor economic conditions. These factors are
unlikely to change in the near term.
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