INDUSTRY NEWS DIGEST

VOLUME 2 1 - 15 JULY, 2011 NO. 13

PUBLISHED FORTNIGHTLY BY: MOC LIBRARY AMITY UNIVERSITY, LUCKNOW CAMPUS LUCKNOW

PREFACE

Industry News Digest attempts to provide a unified overview of the industries. Volume 2, Number 13 (1-15 July, 2011) is the thirteenth issue of the bulletin published during 2011. Abstracts in this document have been scanned from The Economic Newspaper. It is hoped that this issue will reach a wide and interested users. In case the full text or any other information is desired, the same may be obtained from the library.

Librarian (MOC Library)

SUBJECT INDEX
SUBJECT PAGE NUMBER

Automobile Industry Banking/ Credit Services Civil/ Construction Drugs/ Pharmaceuticals Education/ Training Electronics/ Telecommunication Export/Import Hotel Industry Human Resource Development Indian Economy Industry News Information Technology Infrastructure Investment/ Financing Management Retail Industry Tax/Taxation
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3 7 10 12 18 22 22 23 24 27 28 30 35 35 38 40 40

Automobile Industry
1. Auto Industry Eyes 15% Growth in FY12
How do you see the growth of auto industry unfolding in this decade? The auto industry has grown at a very healthy pace over the last decade. During this period, the industry volumes have increased by 3.2 times from a level of 4.7 million number to 14.9 million numbers. Going forward, the long-term potential for growth of the auto industry is very good, given the very low vehicle penetration in the country. As income levels rise and easy finance is available, the industry will continue to see a healthy growth rate. Siam estimates that the growth of the auto industry in FY12 will be in the region of 12-15%. Is the industry equipped to handle the consumer demand? The auto industry has already made huge investments in the country. As per 2008-09, the total investment of auto industry in India was Rs. 60,952 crore. Another Rs. 78,000 crore of new investments have been announced by the auto industry out of which some have already been made and the rest will come up over the next 2-3 years. Therefore, the auto industry is keeping pace with the growing demand for vehicles in all segments, eg passenger cars, two or three wheelers and commercial vehicles. Which could be the potential auto clusters in-the-making? Over the past a few years, we have seen a number of new automotive hubs emerge in the country. The northern states have seen significant auto investments propelled by tax benefits. Gujarat has attracted large investments in the auto and auto component sector. Now we are also seeing Rajasthan proactively attracting investments from the auto sector. As the traditional auto hubs gets saturated from the point of view of land availability and cost, we can expect to see industry moving to some of these new hubs. With demand of auto components from not just domestic, but even foreign OEMs rising, what is the way out for the fragmented auto component industry? The auto-component industry would need to ramp up capacities to meet the growing domestic and export demand. This would require constant investments in the component sector, specially at the Tier 2 and 3 levels where we are seeing capacity constraints. In addition, the component industry will also have to upgrade technology, quality levels and develop product development capabilities to design and manufacture the next generation of components. What have been the takeaways for the domestic auto sector in terms of best management practices with MNCs making India their manufacturing hub? The opening up of the auto sector to global competition has been a boon for the auto sector. Global competition has brought in higher standards of quality, encouraged higher productivity through best management practices as well as best practices on the shopfloor. Japanese concepts like 5S, SMED, PPM levels of quality, Kaizan, Poka Yoke etc. are now well known and common 3

terms in the automotive industry. Maruti was the first company that brought in these concepts to the Indian automotive industry. What about the existing infrastructure? Growth in the infrastructure sector has been comparatively much slower than the industry growth leading to a infrastructure deficit. However, with the roads and highways network improving with the establishment of the Golden Quadrilateral and the East West Corridors, there would be a definite boost to the auto sector. The auto industry would like to see a faster development in the infra sector. In addition to infra, there is huge scope for better traffic management, better road design, driving discipline and effective of ITES in transport etc which would permit the existing infrastructure to accommodate higher traffic densities. Electric bikes are trying to find a space for themselves in the cluttered Indian market. What is the scope of these bikes? There will always be some category of consumers who would prefer high performance vehicles. However, a large part of our consumer base wants to purchase bikes for simple mobility. Such consumers are highly price conscious and would purchase a vehicle only if it makes economic sense in terms of overall cost of ownership of the vehicle. The real challenge will lie in making EV/HEV technology economically viable and attractive for the consumer. Do you agree that Gujarat has suddenly emerged in the automotive map? Gujarat is a fast upcoming automotive destination. After having attracted the Tata Motors Nano plant, recently, Maruti has also announced their next big investment in Gujarat. Large OE investments will also pave the way for the component industry to invest in Gujarat as the suppliers would prefer to be close to their customers due to logistic reasons. This would give a fillip to the states economy as an automotive hub. At a time when the industry is bullish about the next level of growth, labour strikes may paralyse the system. What is the way out for the industry? No country is without its share of challenges. Labour strikes not only result in production losses, but also deprive the country of economic activity and dents the global image of the industry. There is clearly a need for actions to be taken to update the antiquated labour laws in the country. Industry also needs to be more sensitive to the rising aspirations of the labour and respond accordingly. The Economic Times 02.07.2011 p. 4

2. Hero Honda Intensifies R&D Efforts, Scouts for Tech Partner

Preparing for the solo journey following exit of Japan's Honda, Indias largest two-wheeler maker Hero Honda is intensifying research and development (R&D) programme, scouting for technology partner across the globe and even keeping the option of acquiring firms open. The 4

firm that has a licence agreement with Honda till 2014 said it will also be hiring hundreds as it looks to develop its own technology. This (technology) is something which we are very excited about. This (going solo without Honda) is an opportunity to develop our own R&D, Hero Honda Motors Senior Vice-President (Marketing and Sales) Anil Dua said. He said the company will be investing more as the company looks to build its technological prowess. We are recruiting for our R&D and will be recruiting more. We have had few hundred people and we will have hundreds more...We are making investments for equipments and people, Dua said without specifying details. The company has some small R&D set up at its Gurgaon and Dharuhera facilities, where cosmetic changes of the products are being done so far, he added. Besides developing technology on its own, the company is also scouting for global partners. There are good technologies around the world. We are also looking for suppliers, partners and entities, with whom we can tie up and buy technologies, Dua said. The Economic Times 04.07.2011 p. 5

3. Hero Motor Finalises Export Strategy for Overseas Mkts after Honda Split
Hero Motor has finalised an export strategy focusing on markets such as Latin America, Africa and South-East Asia, taking its first step towards emerging as a global player after the recent split with its 26-year old Japanese partner Honda. The BM Munjal-controlled company is making changes in its existing products to suit the needs of these fast-growing overseas markets, apart from identifying homegrown talent to drive export growth. There is a common thread between the three export markets. These are high volume and commuter-driven markets and its a quickwin for us, said Anil Dua, senior vice-president (marketing and sales) Hero Motor. Dua, who heads the 12-member panel which finalised the export strategy, is also spearheading an exercise to identify potential partners. We are visiting interested parties and a decision will be taken soon on whether to look for local assembly or export products from here, Dua said. Indias largest two-wheeler company has identified Latin America, Africa and South-East Asia as its bikes fit into the preferences of customers in these markets growing at the rate of 10-15%. The company may also look at launching threewheelers in these markets. Nigeria, the largest two-wheeler market in Africa, uses bikes for public transport. While Chinese bike makers sell 30,000 bikes per month in Nigeria, their Indian rival Bajaj Auto has monthly sales of 21,000 bikes. Bajaj, which made an entry into this market six years ago, is developing a low-cost bike to bolster market share. We are currently looking at the pricing power in each of these markets. Our focus on mileage and quality in the commuter segment will hold an edge over other Chinese products, said Dua. The group currently exports to South Asia, Sri Lanka, Bangladesh and Nepal and accounts for only 2% of its total sales. The joint venture with Honda barred it from exporting two-wheelers to countries where Honda sells bikes and scooters. Honda is present in markets like Africa and Latin America. The overseas two-wheeler market is about 50 million units against Indian twowheeler market of 10 million units. The Economic Times 06.07.2011 p. 5

4. Car Sales Post Slowest Growth in 27 Months at 1.62% in June

Domestic car sales fell for the third straight month in June, its lowest in 27 months, prompting the industry body to scale back the years projection for the second time this fiscal. Sales rose just 1.62% in the month as against 7% in May and 13% in April, data released by the Society of Indian Automobile Manufacturers (SIAM) on Monday showed. The growth is the slowest since March 2009, when sales grew 1.16%. Demand for vehicles in India, an important indicator of the countrys economic health, is led by a middle class that is guided by the cost of fuel and loans in it decision to buy. Fuel prices have risen almost 9% in the last two months and the central bank has pushed up policy rates 10 times since March 2010 to curb inflation. The times are tough. Any singledigit growth raises concerns for corrective steps to improve demand and restore consumer sentiments, said SIAM president Pawan Goenka, who is also president (automotive & farm equipment) at Mahindra &Mahindra. He, however,said some turnaround could be expected during the festival season beginning September end. India has the worlds second-fastest growing auto market after China. According to the industry body, 143,370 units were sold in June, against 158,817 in May and 1.98 million for the full 201011 fiscal. SIAM expects sales growth to slip to 10-12% in the current financial year, after being near 30% in the preceding two years. Last month, it had revised its sales growth forecast to 12-15% from 10-16% projected in April. Carmakers say over 80% of new cars sold in India are bought on loans, but rising interest rates have pushed it down to about 70%. There has been a total change in scenario, and taking a realistic view we have downgraded the sales that are expected to portray the fiscal on the ground level, said Vishnu Mathur, directorgeneral at SIAM. Analysts say the macro-economic changes over the past few months have gone against the auto industry. Surging inflation has impacted demand, as automakers have been forced to increase prices to offset the higher cost of raw materials. Be it the higher interest rates or fuel prices, all these have been factored in for a significant decline in its growth rate, said Sage Raj, managing partner with Mumbai-based research firm Equitorials. The Economic Times 12.07.2011 p. 5

5. Bajaj Auto Q1 Net Up 20% at 711 Crore

Bajaj Auto on Thursday reported a 20.48% jump in standalone net profit for the first quarter ended June 30 to Rs. 711.06 crore. The company had posted a net profit of Rs. 590.15 crore for the corresponding quarter last fiscal, Bajaj Auto Ltd (BAL) said in a statement. Standalone net sales during the period under review stood at Rs. 4,586.91 crore, as against Rs. 3,737.29 crore in the same period a year ago, an increase of 22.73%. Motorcycle sales during the first quarter this fiscal stood at 9,63,051 units, as against 8,28,391 units in the same period a year ago, up 16%. BAL said its commercial vehicle sales during the period under review stood at 1,29,764 units, up 30% compared to 99,918 units in the year-ago period. Total sales during the first quarter this fiscal grew 18% to 10,92,815 units, compared to 9,28,336 units in the same 6

period last fiscal, it added. BALs scrip was trading down 2.31% from its previous close on the BSE at . 1,415.60 per share at noon on Thursday. The Economic Times 15.07.2011 p. 6

Banking/ Credit Services

6. RBI Tightens Rules for Banks Lending to Realty
The Reserve Bank of India has laid out strict due diligence standards for banks in sanctioning loans to the real estate sector after inspections found that most frauds were due to document forgeries even after certified by lawyers and chartered accountants. The central bank has said banks should leave no stone unturned to verify the documents, including cross verification with the local administration, to ensure that frauds are eliminated. In case of loan against the security of land, banks may also seek reports from local revenue authorities regarding the title deeds before sanction of loan, RBI said in a notice to the chairmen and chief executives of banks. Wherever documents of title are submitted as security for loans, there should be a system where documents of title are subject to verification regarding their genuineness, especially for large-value loans. RBIs directive may be a fallout of the series of arrests the Central Bureau of Investigation made last year, including the top executives at the LIC Housing Finance and the Bank of India for alleged fraud. About eight executives were charged with bribery in what was called the loansforbribes scandal. But that did not cause any trouble in the system. But the latest ruling by the central bank could delay loan sanctions at all levels and may lead a further blow to the real estate sector that is witnessing slowing sales and rising losses. The additional due diligence could lead to delay in sanction of large-value loans, a banking analyst said. RBI has also asked banks to independently verify the authenticity of chartered accountant certificate, property valuation certificate, legal certificate, guarantee/line of credit or any other third-party certification submitted by the borrower. The reason for failure of the concurrent auditors was attributed to complex nature of financial products or transactions. Additionally RBI also observed that banks had assigned audit responsibility to their own staff without ensuring that they are suitably trained. For this, banks would have to directly communicate with the concerned authority issuing the certificate. Banks would also have to seek an indirect confirmation indicating to the issuer that in case there is no response by a certain deadline, it would be assumed that the certificate is genuine. In cases it is established that the certification given by a chartered accountant, lawyer, registered property valuer, or such third party is wrong, the Indian Banks Association should put in place a process to issue a Caution List regarding the certifier to all banks, the central bank added. To prevent frauds, bank would also have to ensure that internal discipline, staff rotation, checks and balances are in place. The Economic Times 01.07.2011 p. 14

7. RBI Imposes 25-l Fine on Citibank

The Reserve Bank of India on Monday imposed a penalty of Rs.25 lakh on Citibank for violation of anti money laundering (AML) and know your customer norms that led to a Rs. 400crore fraud at one of its branches in Gurgaon. The failure in following the KYC/AML 7

guidelines while opening accounts led to the perpetration of a fraud at its Gurgaon branch, said RBI in a statement. In December 2010, a Citibank employee, Shivraj Puri, was accused of luring 40 high net-worth individuals and corporate entities to invest in bogus investment schemes, promising returns beyond normal securities available in the market while diverting funds to wagering in the stock market. Puri, who perpetrated the Rs. 400-crore fraud, not only duped a string of wealthy individuals, but also duped the Munjals-controlled Hero group to invest close to Rs. 200 crore in the sham investment scheme that promised a high rate of return. A case was filed against the Citi employee in Gurgaon and the police had arrested Puri and Sanjay Gupta, the chief financial officer of Hero Corporate Services, which is a part of the Hero Group. Currently, the case is subjudice and under investigation. The central bank had issued a show cause notice to the bank on April 21, 2011, with a possible penalty of Rs. 50 lakh, in response to which the bank submitted a written reply dated May 6, 2011. The Economic Times 05.07.2011 p. 14

8. Quality of Data Fails Policymaking: RBI

Policymaking at the Reserve Bank is often failed by bewildering quality of data that does not reflect real economic activity, raising doubts on its growth and inflation forecasts, Governor D Subbarao said amid debate whether the last few years of growth created jobs, or destroyed them. A field study of demand by Goldman Sachs validates the governors doubts about various numbers such as the Wholesale Price Index and Index of Industrial Production, as 10 rate hikes in the past 15 months are still not dampening demand while official data points to a slowdown. At the Reserve Bank, we are handicapped by the reliability of some of the basic data that we need to use in policy calculations, Subbarao said at the 5th Annual Statistics Day Conference. The recently put-out data on employment throw up a paradox as they simultaneously indicate fewer jobs created in the five-year period to 2010 along with a decline in the long-term unemployment rate. Economic forecasts of every institution, from the Central Statistical Organisation to the Planning Commission and the central bank, have been questioned in the last two years as many of them turned out to be inaccurate, forcing revisions. The Economic Times 06.07.2011 p. 1

9. Many Foreign Banks Charge 50% Interest

Barclays, HSBC, Standard Chartered and Citibank are among many lenders that charge interest rates as high as 30-50%, mainly on consumer loans, akin to microfinance lenders that face a possible cap on lending rates. Although all banks have a base rate, or benchmark prime lending rate, most loans are priced well above it as small entrepreneurs and individual borrowers do not have the power to negotiate lower rates. Most of these high-priced loans are either credit card loans or unsecured loans. Citibank and StanChart charged a 41% interest rate for over 60% business contracted under the cash credit category while HSBC charged 53% on term loans, RBI data for the quarter ended December 2010 shows. In that quarter, the base rate of most banks was between 7.75% and 9.5%. Although credit card companies justify charging high rates due to high delinquencies on credit 8

card receivables, there is an urgent need to cap such rates of interest as it is done in case of MFIs, said AC Mahajan, former chairman & managing director of state-run Canara Bank. It is generally believed that some banks, including foreign and private banks, charged 36% upward on credit cards dues and extra penalty on overdues. Banks lending practices, including those of state-run ones, were questioned when they were found lending below their previously benchmarked prime lending rates to top clients. The Economic Times 08.07.2011 p. 1

10. SBI will Charge You 0.25% More for Loans

The State Bank of India has made loans dearer by 25 basis points, paying heed to the Reserve Bank of Indias monetary squeezing strategy. It has raised deposit rates by up to 100 bps. While a higher loan rate is expected to reduce money supply and check rising inflation, it may also compress economic expansion. This is the third time the countrys largest bank has raised the lending rate this fiscal, effecting a cumulative 125 bps rise since April. SBIs new base rate will be 9.50% a year, raised from 9.25% earlier. All new rates will be effective from July 11. A 25 bps increase means a rise of quarter percentage point. Accordingly, its fresh housing and car loans will be dearer by 25 bps straightaway, as these are mostly linked to banks base rate. Interest rates on new loans and advances are now linked to base rate since July 1, 2010. The bank has increased its benchmark prime lending rate by the same extent. BPLR is linked to loans and advances sanctioned up to June 30, 2010. Borrowers who opted for fixed rate loans will not be impacted by the latest trend as their contracted rates will remain unchanged. While the bank increased deposit rates for most maturities, it reduced rates for 180-240 days tenure. It will pay 25 bps more at 7% for deposits up to 90 days while deposits for 91-189 days will fetch 7.25% a year. Depositors will get a uniform 9.25% rate for more than one-year period. To provide depositors more flexibility, SBI has waived penalty for premature withdrawal for deposits up to 90 days and reduced the penalty by 50 bps to 0.5% for tenures beyond 90 days. Private sector Dhanlaxmi Bank hiked its lending rates by 25 bps too. The base rate and the BPLR will be revised to 10.25% and 19.25%, respectively, from the current 10% and 19%, the bank said in a statement. Dhanlaxmi Bank chief financial officer Bipin Kabra said: The hike in our base rate and BLPR reflects tight monetary conditions and is in line with market trends. A host of other lenders, including ICICI Bank, has already raised lending rates by 25 bps earlier this month. ICICI Bank raised its base rate to 9.50% while Canara Bank raised the benchmark rate by the same extent to 10.25%. Viyaja Bank, Corporation Bank and Indian Overseas Bank followed suit and have raised their base rates to 10.25% while Dena Bank has revised its base rate to 10.20%. The Economic Times 08.07.2011 p. 14

11. RBI Penalises 48 Banks for Violation of Norms

At a time when the government is grappling with the black money menace, the RBI has penalised as many as 48 small banks in just six months, for lapses in implementing customer identification norms and various other violations. In the first six months of 2011, the apex bank has slapped penalties on 48 erring banks mostly co-operative compared to just 15 such actions during 2010. The apex bank has so far slapped 9

penalties between Rs. 1 lakh and Rs. 5 lakh on 48 banks during the January-June period, according to official data. On its part, the government has adopted a multi-pronged strategy, including setting up of special panels and review of tax treaties with different countries, to curb black money menace. Most of the erring small banks were found violating guidelines issued by the RBI on KYC norms and anti-money laundering standards. The RBI is sending right signals as laxity on KYC norms is a serious matter as it compromises transparency, Crisil principal economist DK Joshi said. He said the RBI has been regulating the sector pretty well and strong vigil is good for the sector. Earlie, the RBI had slapped a penalty of Rs. 25 lakh on Citibank contravention of various guidelines and instructions relating to KYC and AML. The Economic Times 11.07.2011 p. 10

12. RBI Doubles Bond Purchases in June to Stabilise Yields

Purchase of government bonds by RBI the governments debt manager doubled in the last week of June, signalling it wont hesitate to intervene in stabilising yields when the government borrowing for the fiscal year is forecast to surpass the budget target. The central bank bought government bonds worth Rs. 1,143 crore in the secondary market, almost double of what it bought in the first two months of this fiscal, RBI data shows. The concern now is on risk of overshoot in budgeted fiscal deficit of 4.6% of the GDP, says Moses Harding, head of global markets, IndusInd bank. The poor economic performance will put pressure on revenue collections and disinvestment plans may not go as per schedule. It seems that the government is worried on locking into higher coupon rate in the longer-tenor segment and the belief is that 10year bonds above 8.25% are beyond their tolerance level, he said. The Economic Times 13.07.2011 p. 14

Civil/ Construction
13. Real Estate Cos Tap PEs, NBFCs for Capital Need
Builders are tapping domestic private equity funds and non-banking finance companies (NBFCs) to raise cash by pledging their receivables as banks turn wary of financing construction projects. Over the last few months, several developers, including Parsvnath, Emaar-MGF, Adarsh and Ansal Properties, have struck such deals. The latest to take this route is Paras Buildtech, which has raised Rs. 40 crore from Xander's NBFC arm to fasttrack its 'Paras Tierea' project in Noida, which is already 70% sold. We needed to bridge the gap between customer advances and our construction requirement, said Harindra Nagar, director of national capital region-based Paras Buildtech. Under a receivable financing deal, which is generally for 12-18 months, money generated through installments paid by homebuyers is put in an escrow account by the builder and used only for repayment to the lender and for construction work. Payment from customers is constructionlinked. Funding through this route, which was earlier provided by banks, is seeing new players in the form of NBFCs, such as Xander, Piramal Enterprises and Religare Finvest, and domestic funds, such as ICICI Venture, Kotak Realty Fund and HDFC PMS. Most receivable financing happens 10

when a developer has a cash crunch and can't continue the development of a project, said Prashant Kaura, director at GenReal Property Advisers. Supertech is another developer looking to get its receivables financed. Banks are not funding adequately, so to bridge the gap, we are looking at raising money by pledging our receivables, said managing director RK Arora. The developer is in talks with domestic funds and nonbanking finance companies to raise .Rs.200-300 crore for the first phase of its Noida project, called Capetown. Typically, this financing instrument is construction-linked and meant for cash-strapped developers whose projects are 60% sold, said Ambar Maheshwari, managing director, corporate finance at property consultancy Jones Lang LaSalle. Religare Finvest chief executive Kavi Arora said, This instrument helps monitor the end use of money through an escrow account and cash received from clients goes towards repayment to the lender. However, risk for developers lurks in the form of poor market sentiment, like the one that followed Lehman's crash, when many customers withheld their installments. Developers can get trapped in capital inadequacy if sales fall. Sometimes, a large project can get stuck in such financing schemes, says Amit Goenka, national director, capital transactions at property consultancy Knight Frank India. The Economic Times 02.07.2011 p. 6

14. Real Estate Market Ready for Correction

Property prices are finally correcting after a year of upswing that crimped home sales across the country, a housing index showed on Friday. Property rates dropped in the quarter ended March over the previous three months in eight of the 15 cities tracked by the National Housing Banks residential housing price index, or Residex, with the fall being the steepest in Indias silicon valley, Bangalore. Prices rose the most in Delhi, though at a modest 2.4%. In metros where prices fell, Bangalore was followed by Hyderabad (4.6%) and Kolkata (0.8%). Other cities that saw a decline were Kochi (14.9%), Faridabad (6.4%), Jaipur (2.6%), Surat (3.8%) and Bhopal (3.6%). Prices in Mumbai, Pune, Lucknow, Ahmedabad, Patna and Chennai went up marginally. Some of the markets like Bangalore had seen a big increase in property prices over the last one year. Now the market seems to have responded to the slackness in demand and higher interest rates, said National Housing Bank chairman and managing director RV Verma. Home loan rates have gone up from about 8% a year back to about 11.5% today. As a result, property prices, which have been on a boil across the country in the last one year, have begun to come down, forcing buyers to defer purchases in many markets, especially Bangalore, Mumbai and Delhi. Naresh Dandapat, regional director (south) at property consultancy Knight Frank India, said there was a correction in the Bangalore market in the last 45 days. It is headed for a further correction as developers are looking at tapping the latent demand in the market, he said. Kolkata and Hyderabad have seen a general flight of capital because of political uncertainty. In the January-March 2011 quarter particularly, there was not much of decision-making in Kolkata, both on the government and consumer side, because of the elections, Verma said. In both these cities, developers were keen to quickly exit projects by lowering prices. The rise in interest rates in recent months was the main reason for prices falling in smaller cities like Jaipur, Surat, Kochi and Bhopal. It impacts small buyers the most, who then defer their decisions to purchase homes, Verma said. The demand slump in these cities is not so much because of high property prices. The surprising development was the price increase, though marginal, in Mumbai and Delhi, where demand had slumped in the last few quarters. In these two cities big players have the capacity to hold on to prices, Verma pointed out. In the last year, very few projects in 11

Mumbai got approvals because of greater scrutiny by authorities, which has meant very little new supply. As demand picks up, there will be short supply in Mumbai and prices will increase further, says Lalit Kumar Jain, president of Confederation of Real Estate Developers Associations of India. The Economic Times 02.07.2011 p. 6

15. Real Estate Sector to be Hit as Construction Costs Go Up

Mumbai Realty research firm PropEquity has said that the increasing construction costs are expected to hit the real estate sector. Taking into account price increase of the four key construction components steel, cement, labour and bricks there is an 18% gross rise in construction cost over the last 2 years (2011 over 2009). This escalation will corrode the profit margins significantly, Prop Equity study said. The impact of increased delivery commitment along with escalating costs will affect the delivery of residential units on time. It is estimated that delivery of 480,000 residential units across affordable, mid and luxury housing segments, scheduled for completion during 2011-13, will be delayed in the 11 cities. The Economic Times 04.07.2011 p. 12

Drugs/ Pharmaceuticals
16. Merck & Cos 2 Senior Officials Vacate Posts
Two senior executives, who spearheaded the Asian growth plans of Merck & Co Inc the worlds second largest drugmaker, have vacated their positions. Ramesh Subramanian, senior vice-president and president (Asia Pacific human health) at Merck & Co, quit at the end of May while Naveen Rao, former MD at MSD, the Indian subsidiary of Merck, has moved to global headquarters in New Jersey. He has joined a senior position with global public policy and corporate responsibility division. A Merck & Co spokeswoman said the firm is finalising suitable replacements for both positions. A senior industry executive said Subramanian is expected to join another global pharmaceutical major. This could not be independently confirmed and Subramanian, who is based in Singapore, could not be reached for comments. Subramanian, an industry veteran of over 25 years, was with the firm for five-and-ahalf years. He was closely overseeing the companys new innings in India, a market where it aims to be among the top five firms by 2015. Rao was mainly responsible for setting up the Indian team and its operations after Merck & Co re-entered the Indian market in 2005. Merck & Co has been going through a restructuring process globally after it bought rival Schering-Plough Corp for $41 billion in March 2009. The two firms are treating the acquisition as integration and Merck & Co has retained several top executives of Schering-Plough globally. In India, KG Ananthakrishnan, MD at Schering-Ploughs units Organon (India) & Fulford (India) took over as MSD head in late 2009. Rao was promoted as head of medical affairs for the companys Asia-Pacific region covering 13 countries. Prior to his Indian posting, Rao was in the US with Merck and joined as medical director-India in 2005, before taking over as its head in 2007. MSD has been aggressively scaling up its operations in the country and plans to capture about 4% market share in the fiercely competitive and fragmented Rs. 58,000-crore Indian drug market. The firm is also among the few global innovative drugmakers that have launched their original drugs at significant discount as low as one-fifth of its US price. It has also launched several drugs and 12

formed a joint venture with Sun Pharma to develop innovative drugs for emerging markets, including India. The Economic Times 01.07.2011 p. 7

17. Drug Cos may Get Aid to Upgrade Plants

The government plans to provide financial assistance to small drugmakers to upgrade their manufacturing plants to World Health Organisation standards so that they can sell their medicines in unregulated markets overseas. The pharmaceutical department proposal, which will be implemented in the 12th Five-Year Plan (2012-17), could help over 10,500 small drugmakers, a government official said. The assistance, possibly up to 30% of the cost of the plant's upgrade, could be in the form of a subsidised loan or a one-time grant. The department, under the chemicals and fertiliser ministry, will hold discussions with industry and other stakeholders and send its recommendations to the Planning Commission, the official said. The so-called nonregulated markets -- the Middle East, CIS, Latin America, Asia and Africa excluding North America, Europe and Japan -- account for about two-thirds of the country's Rs. 50,000 crore annual business, according to the Pharmaceutical Exports Council of India. India's drugs exports are growing at over15% a year and the government plans to make the country a global supplier of low-cost drugs. Some industry representatives have raised concerns about the offer, though. Jagdeep Singh, general secretary of SME Pharma Industries Confederation, said that many of these companies may not be able to avail of the scheme because the government's arbitrary rules threaten their business or restrict their growth. When the government extended a similar assistance to upgrade small drugmakers to the mandatory Schedule M, the country's drug manufacturing standards, only those firms who made profits in the last three years were eligible, he said. They cannot take the risk of taking loans from banks in such an environment. Besides, most firms also don't have the resources such as land if they have to expand capacity to meet WHO norms. He said a company may need to a maximum of Rs 20 crore or a minimum of Rs. 1 crore to upgrade its facility to WHO norms, depending on the size of plant, nature of the product to be manufactured and capacity. The Economic Times 02.07.2011 p. 5

18. Drug Cos Eye US Entry after FDA Checks

The US drug regulator has inspected the manufacturing plants of at least half-a-dozen Indian drugmakers, raising hopes that these companies will be able to export medicines to the worlds largest drug market, reports Khomba Singh from New Delhi. Several industry executives said teams of inspectors from the US Food and Drug Administration (FDA) did not find any major deficiency during their inspection of facilities of Ranbaxy Laboratories, Orchid Chemicals, Emcure Pharma, Nectar LifeSciences and Ind Swift Laboratories. But this could not be officially confirmed from the FDA. The Economic Times 05.07.2011 p. 5

19. FDA Checks Indian Drug Plants

The US drug regulator has inspected manufacturing plants of at least half a dozen Indian drugmakers in the last few weeks, raising hopes among some of these companies that they will 13

shortly be able to export medicines to the world's largest drug market. Several industry executives said teams of inspectors of the US Food and Drugs Administration (FDA) did not find any major deficiency during inspection of facilities of Ranbaxy Laboratories, Orchid Chemicals & Pharmaceuticals, Emcure Pharma, Nectar Lifesciences and Ind Swift Laboratories over the course of the last four weeks. But this could not be officially confirmed from FDA, which did not respond to an e-mail query sent last Thursday. While in the case of Ranbaxy and Nectar, a goahead from the FDA will mean that they can begin exporting to the US from their units, in the case of other companies, an FDA approval will allow them to continue exporting. FDA conducts audit to ensure that Indian drugmakers meet US drug manufacturing norms so that the medicines made at these facilities are safe for American citizens, before they are allowed to be sold in the US market. Senior industry executives said this was the first time that FDA had inspected so many manufacturing units in India during such a short span of time. The US government may be trying to expedite approval of generic drugs to reduce healthcare cost, which is a welcome move, D G Shah, secretary-general of Indian Pharmaceutical Alliance, an association of big Indian drugmakers said. An estimated $30-40 billion worth of drugs, including top-selling drugs like Lipitor (Pfizer), Nexium (Astra Zeneca) and Plavix ( Bristol Myers Squibb), will lose patent protect protection in the next 1-2 years. This means generic firms can launch their versions at one-tenth of the price of the original brand, if they have FDA approval. For the US consumer, sale of more generic drugs will result in greater competition and therefore, lower prices. Ranbaxy Laboratories, the country's largest drugmaker, stands to benefit the most from a favourable report from the FDA. The US constitutes a fourth of Ranbaxy's total sales and a nod from the FDA will permit the Gurgaon-based firm to sell new drugs in the US from its Indian plants, nearly three years after FDA banned and halted marketing approval of new drugs from its two main plants for data fabrication. Two FDA officials spent about two weeks examining the drugmakers new manufacturing facility at Mohali, Punjab and it is learnt that they have not pointed out any major flaw during the examination. A Ranbaxy spokesperson declined comment. FDA officials carried out separate four-day inspections at the active pharmaceutical ingredient (API) plants of two Chandigarh-based firms, Nectar Lifesciences and Ind Swift, at their Dera Bassi plants. Nectar can begin exporting APIs to the US once it gets a formal approval from the American regulator. For Ind Swift, which already exports to the US, this was a re-inspection which concluded about a week back, said the company's managing director NR Munjal. The Nectar Lifesciences spokesman declined comment. Chennai-based Orchid Chemicals said late last month that its cephalosporin API manufacturing facility in Alathur, Chennai has cleared a recent FDA inspection allowing it to continue supply of niche APIs to developed markets. For Pune-based Emcure, this was the third reinspection of its API plant in Kurkumbh, near Pune. FDA officials also audited the facility of a Mumbai-based drugmakers plant in Naroda, near Ahmedabad. The Economic Times 05.07.2011 p. 7

20. Eli Lillys Gulati Joins Ranbaxy as President

Ranbaxy Laboratories has hired industry veteran Rajiv Gulati from American drug major Eli Lilly as its president-global pharmaceuticals business, a post that was last held by the company's current managing director Arun Sawhney. Gulati will be part of the sixmember global executive team of the company. According to his profile on professional social networking site Linkedin, Gulati was based in Indianapolis, as Senior Director Global Anticounterfeiting Operations at Eli Lilly, a firm where he spent nearly two decades of his 28-year-old career. His is the first senior-level recruitment by Ranbaxy since it was acquired by Daiichi Sankyo in 2008. The companys share price closed at Rs. 530.55, up 0.66% at the Bombay Stock Exchange on Monday. A senior industry official said 14

Gulati will be mainly responsible for the companys global marketing strategy and report to Sawhney, who heads the executive team. Gulati joined the Gurgaon-based firm company more than a month back and has relocated to the country. Gulati is a seasoned professional adept at managing large business teams across key functions of marketing, business development and corporate strategy, Ranbaxy said in its website. A graduate from the Indian Institute of Management, Ahmedabad, Gulati is familiar with the Indian pharmaceutical market and Ranbaxy. He was the MD of Eli Lilly India for seven years and also Director, India & China (Corporate Strategic Planning) for twoand-a-half years. In the early phase of his career, he also worked in Ranbaxy for over six years in different roles, the last being marketing manager in 1992. Several top executives have left Ranbaxy in the last three years, since Daiichi Sankyo took over the firm in June 2008. Amid its pending regulatory problems in the US, top officials, including two CEOs, Malvinder Singh and Atul Sobti; heads of finance, regulatory affairs, human resources, global pharmaceutical and Europe, quit the organisation. The Economic Times 05.07.2011 p. 7

21. Glenmark Settles Patent Row with Daiichi, Genzyme

Glenmark Pharmaceuticals on Monday said it has settled patent infringement litigation with Daiichi Sankyo and Genzyme, paving way for it to market generic Colesevelam Hydrochloride used for treating diabetes and high cholesterol in the US market. As per the terms of the settlement, the company has received a licence from Daiichi Sankyo and Genzyme that will permit it to launch its generic Colesevelam Hydrochloride products on April 2, 2015 or earlier under certain circumstances in the US, Glenmark said in a statement. It, however, did not specify what 'the certain circumstances' were. Daiichi Sankyo and Genzyme had filed a patent infringement suit in November 2010 in the US District Court for the District of Delaware seeking to prevent Glenmark from commercialising its ANDA prior to expiration of the Orange Book patents, the company said. The company and its subsidiaries have settled the litigation with Daiichi Sankyo Inc and Genzyme Corporation regarding its abbreviated new drug application (ANDA) filed with US food and Drug Administration for Colesevelam Hydrochloride, Glenmark said. The Economic Times 05.07.2011 p. 7

22. USFDA Bans Sale of Medicines from DRLs Mexico Facility, Warns Cadila
The United States Food and Drugs Administration on Wednesday banned the US sale of medicines made at Dr Reddy's Mexican facility and sent a warning letter to Cadila Healthcare for violating manufacturing norms at their plants. With this, all top Indian pharmaceutical firms have either been warned or slapped with product bans in the US in the last two to three years, four of them in the last three months alone. The US market, the largest in the world, accounts for about a quarter of India's . 50,000-crore drug exports. The import ban on Dr Reddy's follows a warning by the USFDA last year. The FDA letter had listed four violations by Industrias Quimicas Falcon de Mexico SA plant, in Jiutepec, which manufactures intermediates and active pharmaceutical ingredients (APIs) for use in Dr Reddy's generic medicines. Dr Reddy's acquired the Jiutepec site 15

from Roche in 2005. It is one of Dr Reddy's eight API-manufacturing facilities. The other six others are in India and one in the UK. A Dr Reddy's spokesperson declined to comment. A Cadila spokesperson said: We have received a warning letter from the agency based on the preapproval inspection of our new injectable area. We are addressing the issue expeditiously. We do not expect any impact on our current business. The company has 15 days to notify the steps it has taken to correct the violations. The USFDA also said failure to correct these violations may result in ban on articles manufactured at the Sanand facility into the US. The company's formulation plant at Moraiya, in Sanand, makes tablets, capsules and soft gel capsules as well as injectable drugs in both sterile liquid and lyophilised form. On BSE, DRL shares slipped 2.40% to close at Rs. 1, 527 while Cadila Healthcare lost 1.63% to end at Rs. 933.25. The BSE healthcare index closed at Rs. 6,387.62, down 0.44%. Brokerage firms said the financial impact for both Cadila and Dr Reddy's would be small because the respective plants were either small or contributed little to total sales. But, it is a matter of concern and multiples of the companies in future will be under pressure, if issues are not sorted out, Hemant Bakhru, pharma analyst at CLSA said. Dr Reddy's financials would not be affected significantly, said another analyst who did not want to be quoted as he was not authorised to speak with the media. Market estimates suggest that the Hyderabad-based company's Mexican facility contributes close to $60 million to DRL's revenues, of which half the sales are to the US alone. Companies now have to remain vigilant and take regulatory requirements at top priority, said Daara Patel, president of Indian Drug Manufacturer's Association. Abhay Shanbhag, pharma analyst at Deutsche India Equities Research, wrote in a note that the developments will have a drain on sentiments. The aggressive FDA focus on Indian companies is because the country has the highest number of FDA-approved facilities outside the US, and not due to lack of quality. India has about 120-130 USFDA approved plants, or for every plant that has been penalised, there are nine others which are fully compliant. Indian firms account for 40% of drug masterfile filings, 27% of abbreviated new drug applications approvals and 13% of volume market share in US market, the note said. The Economic Times 07.07.2011 p. 5

23. Pharma Stocks will Ride High on Rising Disposable Incomes

Bajaj Allianz Life Insurance is bullish on Indian pharmaceutical shares, as rising disposable incomes are increasing peoples access to better healthcare, said chief investment officer (CIO) Sashi Krishnan. He is also bullish on the banking sector due to attractive valuations despite a slowdown in credit growth. Pharmaceutical shares are likely to outperform the market, he said, adding that, growth in the sector will be driven by the domestic market. The increase in disposable income will result in access to improved healthcare. Pharmaceutical companies have the potential to grow by 14% by 2013, said Krishnan, who oversees assets worth Rs. 39,330 crore. In the pharma space, the company holds stake in Cipla, Aventis, Pfizer and Ranbaxy. On the banking sector, Krishnan said, Margins have come down and the next few quarters are going to be challenging. But the good thing is that valuations have come down. We would not have been comfortable buying SBI at two times the price-to-book ratio. The companys holdings in the financial space include ICICI Bank, HDFC Bank, and Federal Bank. Capital goods and infrastructure are some of the sectors the company has been avoiding due to valuation concerns and challenges in project execution, said Krishnan. 16

Suppose there is a power plant which has a PPP signed but there is no permission to mine...There are challenges involving financial closure. It is becoming difficult to raise equity, forget debt. Private equity and venture capital funds are not enthusiastic. The RBI is worried over banks excess exposure to infrastructure as it has already touched 40%, he said. The 11th Five Year Plan infrastructure number was . 20 lakh crore, while the 12th Year Plan is . 42 lakh crore. Unless you target everyone, insurance, pension, where would that money come from? said Krishnan. Among other sectors, the company plans to hold on to its exposure in auto stocks though they have been hit by the rise in input cost. There are the first signs of a slowdown in auto. Sales have come down while commodity prices are going up. From the inflation and financial perspective, demand has come down in both two wheelers and four wheelers. In auto, the company has a stake in Maruti Suzuki. On the overall market condition, Krishnan said, equities are likely to trade with a downward bias over the next few months and fall 7-8% this financial year amid rising uncertainty over implementation of government policies. Everybody thinks the government should do something, which is the worrying part. Look at GST and DTC, the government has not been able to implement them. People are not seeing the intent to pass government policies and that is the cause of increasing concern, he said. The Economic Times 11.07.2011 p. 9

24. Gilead Licenses 4 Indian Cos to Sell HIV Generics

California-based Gilead Sciences Inc has allowed four Indian companies to make and sell lowcost versions of three of its new HIV drugs under a firstof-its-kind agreement between an innovator pharmaceutical firm and a United Nations-backed patent-sharing body. Under the licensing deal, Ranbaxy Laboratories, Matrix Laboratories, Hetero Drugs and Strides Arcolab can make and sell the three drugs in 100 countries, including India and other developing nations, by paying royalty. These drugs Elvitegravir, Cobicistat and Quad are in late-stage clinical development, Gilead said in a statement. The worlds largest seller of AIDS medicines said it was the first drug company to ink a licensing agreement with the Medicines Patent Pool Foundation, a Geneva-based organisation, which negotiates for marketing licences from patentholders to eventually sell them to generic drugmakers at an affordable price. The foundation is also talking to six other patent-holders for similar licences. An analyst with global research firm Datamonitor said, The HIV market is dominated by just a few companies. Gilead is the current market leader. The entry of generic firms will help bring down the price by a couple of dollars, enabling them to play a volume game in developing countries. The Economic Times 13.07.2011 p. 7

25. Cheaper Clones of Pricey Drugs May be an SMS Away

Consumers may soon be able to choose the cheapest brand of a drug prescribed by doctors. The government is set to roll out an SMS-based service where a consumer can send the brand name of a prescribed drug in a text message. He will get an SMS reply with a list of brands of the same medicine along with their prices, providing him an option to choose the cheapest brand. The programme is being executed by the National Pharmaceutical Pricing Authority (NPPA), an autonomous government body responsible for monitoring prices of drugs to make medicines affordable for masses, along with the department of pharmaceuticals, a person familiar with the 17

development said. Though this promises to significantly reduce healthcare costs for the masses, there could be some medical issues and legal bottlenecks, points out CM Gulhati, editor of medical journal Monthly Index of Medical Specialties. For one, Gulhati says it is illegal for chemists to sell substitute brands for prescription medicines. Besides, in some cases, brand substitution can be harmful to patients. There is a significant difference in the price of the costliest brand of a medicine and its cheapest alternative. A recent survey by NPPA found that prices of the expensive brands can be ten times higher than the cheapest alternative of the same medicine. Drugs are not allowed to be advertised, so companies push their brands through doctors. There is a wide practice of companies giving gifts, sponsoring foreign trips and other incentives to doctors to prescribe their brands. Indian consumers are price-sensitive, but most are unaware they need not buy the costly brands prescribed by physicians. The purchase decision is made by their doctor. This will curb some of the overriding power of doctors, the person added. Low-cost drugs are not only less profitable for pharmacists but even doctors might resist brand substitution under pressure from drug firms. The possibility of substitution of their drugs with cheaper alternatives will upset the marketing strategy of large pharma companies, says Gulhati. Mankind Pharma Managing Director Ramesh Juneja says the implications of the governments initiative will be known only after it is implemented. Experts say there are several other issues the government must address before launching this programme. The government has no centralised database of over 90,000 brands of drugs sold in the country, raising questions about the accuracy of the information on alternative brands provided to consumers by SMS. We have to take the first step, a government functionary said, adding such issues will get addressed over time. The Economic Times 14.07.2011 p. 7

Education/ Training
26. IIM-B Makes Summer Internships Optional for Experienced Students
INDIAN Institute of Management-Bangalore (IIM-B) has decided to make summer internships optional for students with prior job experience after feedback from students indicated that the two-month training was suited only for fresh passouts. The IIM-B move may lead to a similar change at other B-Schools, though no institute ET spoke to said it would follow suit immediately. The number of experienced students is rising at all top B-Schools almost 25% as most grads prefer to go for management education only after working for a couple of years. IIM-B has communicated the decision to its students. We have taken the important decision and made internships optional for students who have worked for at least 34 months. Experienced students from earlier batches said they did not learn much more during the internships. We are now exploring options on engaging the students during these two months when no teaching takes place on the campus, Sapna Agarawal, head of IIM-B career development services (CDS) told ET. This is for the first time that an IIM student will have a choice of skipping internship if he has significant experience. Internships offer entry level roles and experienced students feel that they are under utilised, she added. B-Schools send their grads to work with the industry for two months after they complete the first year. Corporates pay stipend to the interns to work on shortterm projects. The stint helps the corporates in identifying prospective candidates for pre18

placement offers (PPOs). Candidates who secure PPOs need not appear for final placements as their job is secured. Work experience counts during placements, but it is not taken into account during internships and hence experienced students find the exercise irrelevant. IIM-B had 25% of its students with work experience of more than 36 months in the 2009-11 batch that had total 348 students. The 375-student strong batch of 2010-12 has 28% students with more than 36 months of experience. It expects that the new batch of 2011-13 too will have a similar composition. However, a professor at one of the top IIMs said the decision may impact the number of Pre Placement Offers (PPOs). Logically, the decision is good. Internships are meant to make students understand how an organisation runs. Students having around three years of experience know everything about corporate world. However, in some cases, internships really help experienced students. If a student has worked with an engineering firm and he wants to join financial services sector after doing MBA, he can learn significantly during the internship. Also, there might be some impact on PPOs, if a large number of experienced students opt to stay away from internships, he said. According to Credila Financial Services, an HDFC group company, the IIM-B decision will not have major impact on the final placements. If a student has significant work experience, he knows about the corporate world and he need not go through internships. Mostly freshers prefer internships. There can be some impact on PPOs, but companies give good offers to experienced students during final placements, Dinesh Gehlot, assistant VP of Credila Financial Services told ET. The Economic Times 02.07.2011 p. 5

27. Engineering, MBA seats go abegging

A quarter of the 15 lakh seats in the countrys engineering colleges and 40% of the 3.5 lakh seats in MBA institutes are estimated to go abegging this year, as the lure of the two courses wanes. The academic year usually begins in July-August across the country. Despite the huge education industry capacity created, industry is not finding the talent it needs while the existing capacity cannot produce the required talent. This year, we expect that 25% of all engineering seats across the country will lie vacant, says Amit Bansal, CEO, Purple Leaf, a Pearson Educomp joint venture which provides external coaching for engineering and MBA courses. Students and parents, he points out, no longer see any return on investment after investing Rs 5-7 lakh for an MBA degree or nearly Rs 4 lakh for a four-year engineering degree. The estimate of vacant seats was based on figures published by the AICTE and universities where the company has a presence and then extrapolated to the rest of the country. The unemployability issue of fresh engineering graduates was first highlighted in a Nasscom report of 2009. It was something everyone knew but had not articulated: only a quarter of the countrys graduating engineers were employable. Engineering and management degrees are regarded as the fastest way to recover investments made by parents in their childs education. However, like all best laid plans, this return on investment has gone awry. The slowdown in the global economy has hit sectors that have tended to employ the most engineers IT and ITeS. The return on investment will now take six to seven years instead of the two to three years that was anticipated. The same applies to an MBA degree holder, says Bansal. A fresh engineering graduate lands a job that should ideally be filled by a diploma holder, so the wages are low. We found that more than training, they needed professional education. The industry wants finance and accounts professionals to understand strategy, so they should be able to assimilate, analyse and communicate, says Vandana Saxena Poria, managing director, Get Through Guides or GTG, an angel investor-funded provider of training to accounting and finance. 19

Given the anticipated shortfall in admissions to engineering colleges, Bansal says there could be a shakeout, with colleges shutting down. In Orissa, four colleges have already shut down since they did not get students. In Bangalore, an MBA college has closed down, and been replaced by a mall. In Andhra Pradesh, colleges are up for sale about 70 km from Hyderabad. Colleges are either shutting down, selling the land and buildings, or are being taken over by better managed institutes. This is happening mainly where the focus of the management is non-academic, says Bansal. For long-term sustainability, say Saxena Poria and Bansal, there is an urgent need for good faculty. Only then will the two courses see some of their sheen restored. The Economic Times 05.07.2011 p. 10

28. One-on-one Interaction is Best for the Team

The most misused word in todays corporate environment is communication. Despite being one of the hallmarks of a leader, it is also the most misunderstood aspect of leadership. How important is communication? Isnt compelling communication essential in energising and mobilising others? In this context, Pericles, who was a prominent and influential statesman, orator, and general of Athens during the citys Golden Age, draws one to a very interesting comment. He had said, The man who can think but does not know how to express what he thinks, is at the same level as he who cannot think. How often do you find that great leaders are those who communicate effectively with their rank and file? Loud and frequent communication is often confused with adequate and appropriate communication, says Shrikant Goglekar, a leadership consultant. It is seen that in organisations its often ones sense of superiority that drives communication. Arrogant bosses may call their loud, one way horn-blowing as communication. Disdainful bosses may have a tinge of condescending tone in the way they communicate. As a result, the only emotion they arouse in the listener is one of resentment, hostility or defensiveness. Suspicious bosses may parcel out information only on a need to know basis. A lot of communication depends on what kind of a person you are, adds Shrikant. Given the noise around communication and employee motivation, most organisations and supervisors these days make an attempt at communicating with their people down below, feels Sona Singhani, VP, Leadership Development at an MNC. However where they fail miserably is in establishing a connect. They communicate from their own point of view, but often do not connect with what is relevant to the audience. For example, to my worker in Saharanpur, the fact that my company is buying another company in Tiruchirapalli may not be relevant. But the fact that this acquisition will reduce the stress on the Saharanpur plant and that in turn will translate in to better work life balance for him may strike the right chord and enable him to appreciate the acquisition better. Shrikant too is on the same wavelength. Doesnt matter how right your vision is, how deeply held your principles are they wont mobilise and energise others if they cannot be communicated effectively. Resonating Shrikants thoughts about the values of an individual driving effective communication, Sona adds, Effective and honest communication is also the cornerstone of building trust in the various teams that operate in sync in any organisation. As supervisors we need to be seen as individuals with high personal integrity. Personal integrity strengthens even a weak communication. Leaders have to move beyond dry logic, reading out printed statements like an old school master giving a lecture. They need to get into the crowd, relate to their people, get down to their level and communicate with them in a manner that they feel involved and important. Highly effective leaders transfer their energy and passion to people theyre trying to mobilise with words that 20

transform the canvas with exciting colours, are credible, spur creativity, charge up the teams imagination and touch the spirit. Like the leader, their words too are charged with energy and more importantly relevance to the audience. Most leaders have excellent verbal and written communication skills. They connect with people. And since leadership is about dealing with emotions, energy, spirit and motivation communications, particularly of the verbal kind plays a big role in positioning you as a leader in any organisation. The Economic Times 05.07.2011 p. 10

29. End 3-Year Lock-In on FDI in Education Infrastructure: Dipp

Foreign direct investment in education infrastructure could become easier if a department of industrial policy and promotion proposal finds favour with the government. The department has recommended dropping the three-year lock-in for FDI in construction if it is for creation of education infrastructure. The proposal is under consideration, an official told ET. There is a view that building of education infrastructure needs to be treated differently from construction, he said. FDI up to 100% is permitted in the construction sector, but is subject to stringent conditions that include a threeyear lock-in, minimum capitalisation of $5 million for joint ventures and $10 million for wholly-owned subsidiary and development of at least 10 hectares of land. The FDI policy does not make a distinction on the basis of the end use of the constructed asset even as it has allowed 100% FDI in education per se since February 2000. DIPP has circulated the proposal to the ministries concerned, seeking their views on dropping these conditions for investment in building infrastructure for education, a priority sector for the government. This proposal is quite relevant and timely, said Punit Shah, executive director, tax & regulatory services (financial services), KPMG. This move is also in line with past waivers of such conditions by DIPP in sectors of strategic importance such as health care and hospitality. The government has already decided to provide viability gap funding for education projects under the public private partnership (PPP) route. The DIPP proposal would make investment in education infrastructure even more attractive for foreign investors, who have not been really interested in the construction sector as a whole. Since April 2000, over $9 billion investment has come into the construction sector, but a big portion of it has been in roads and highways. DIPP argues that relaxation of construction sector norms could give a leg up to overall FDI inflows, which have declined 25% in 2010-11 from a year ago. The country attracted $19.4 billion in FDI in the precious fiscal. The department has repeatedly pitched for removal or relaxation of the stringent conditions on FDI in construction but has found stiff resistance from the Reserve Bank and the finance ministry, both of which cite the buildup of an asset bubble that had led to a huge jump in FDI flows and a price rise even in tier three cities soon after the sector was opened up in 2005. In fact, in 2007, the central bank had proposed that the government allow FDI in the sector only after nod from the Foreign Investment Promotion Board, or FIPB. The Economic Times 11.07.2011 p. 13

21

Electronics/ Telecommunication
30. Good Communication Skills are Key To Being in Charge
In his eight steps model to bring about transformations in organisations, John Kotter from Harvard Business School says a leader can never underestimate the importance of communication. According to him, communication is the common platform upon which a leader builds his change process. He relies on communication to establish a sense of urgency, form a powerful guiding coalition, create a vision and empower others to act on the vision. A good example is Jack Welch, the earlier chairman of GE, who transformed the stodgy $13 billion company into a $525 billion giant. By emphasising on communication skills, Jack began his revolution of building a new GE, very different in attitude and functioning from the GE of the past. He facilitated more than 250 sessions in GEs Management Development Institute in Crotonville, New York, often lasting more than four hours each. Welchs communication skills yielded tremendous motivation in the management and staff at GE. Faulty communication can cause many problems. It can lead to confusion and cause a good plan to fail. Probably the best example of faulty communication ruining a company is that of Gerald Ratner, once head of Britains biggest high street jeweller. He was one of the countrys most successful businessmen, building Ratners Group into a jewellery business with sales of 2.5 billion dollars. Ratner, which in 1991 produced profits of $220 million, while addressing the Institute of Directors, described a silver decanter as total crap. Ratner was reported by the Financial Times as saying: We also do cutglass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for 4.95. People say, How can you sell this for such a low price? I say, because its total crap. Ratner paid a terrible price for his comments: customers boycotted the chain, about a billion dollars were wiped off the value, the companys profits soon turned into a loss and investors forced him to leave the board. If only he had chosen his words more carefully, the entrepreneurial community would probably have bracketed him with the likes of Philip Green of British Home Stores and Richard Branson of Virgin. So, how can leaders avoid the perils of faulty communication? The Economic Times 01.07.2011 p. 10

Export/Import
31. Exports Rise 46% to $29 b
Indias merchandise trade grew at a faster-than-expected pace in June, belying fears of depressed demand in buyer countries and possible slowdown at home. June exports rose 46.4% to $29.2 billion while imports increased 42.4% to $36.9 billion over the year-ago period, data released by the government on Friday showed. Cumulatively, first quarter exports rose 45.7% to $79 billion and imports 36% to $110.6 billion. In May, exports went up by a huge 56.93% at $25.94 billion from $16.53 billion in May 2010. The surprisingly robust trade performance has baffled experts and policymakers, who say theyre not sure if it would be sustained throughout the year. The Economic Times 09.07.2011 p. 1 22

32. India Appeals to US Senators for Revival of DutyFree Imports

India is lobbying the US to restore duty -free imports from developing countries, including India, that were suspended earlier this year, stressing that it helped the labour-intensive small and medium enterprises. The scheme allowing duty-free imports was stopped in December 2010 when Congressional authorization for it was not renewed, following objections by some senators. "Indian ambassador to the US Meera Shankar has written to a number of senators and the speaker for continuation of the scheme that was suspended on a flimsy ground," a government official told ET. India, the third largest beneficiary of the scheme, exported $3.48 billion of goods without import duty to the US in 2010, about one-eighth of its exports of $29.6 billion to the country, according to US data. Developing countries with per capita income lower than $12,196 are eligible for Generalized System of Preferences, or GSP, which allows duty-free imports of over 3,000 products. However, beneficiaries can avail GSP only for those imports that do not exceed certain thresholds that are deemed to constitute competitiveness. India's exports of jewellery graduated out of the GSP scheme in 2007 when exports touched $2 billion, but it continues to get the benefit for products like handicrafts, carpets, wind-power generators, certain chemicals and motor vehicle parts. "Our embassy is trying to garner support within the Congress so that the legislation for renewing the GSP is passed at the earliest," the official said. The GSP was not renewed following objections by Alabama Senator Jeff Sessions on extension of the benefit to sleeping bags from Bangladesh, which comprises less than 2% of total sleeping bag imports. Indian exporters want the government to pressurise the US to sort out the matter soon as exporters getting the benefit were losing their competitive edge, especially against China, which does not qualify for benefits because of its communist rule. The Economic Times 13.07.2011 p. 15

Hotel Industry
33. Manpower Crunch Plagues Hospitality Industry
As Indias hotel industry readies for unprecedented growth, it is about to face a manpower crisis the likes of which it has never seen before. Too few people are being trained for the industry; many of those who have received the training choose greener pastures and fierce fights break out regularly to keep or poach the few who remain. All this while a new hotel or restaurant is being added every week. It is a battle every day to retain people you have groomed over the years. While earlier the mantra was to engage with the staff, today you have to keep them enchanted, said Sujata Guin, regional director of human resources at luxury boutique hotel chain The Park. It is not just other hotels we are losing people to. Everyone wants a piece of the hospitality pie retail, telecom and banking. With Indias economy expanding by about 8% a year, the number of people travelling on business or for pleasure is booming. Every year, there are 540 million domestic travellers and the number of overseas tourists will increase from five million now to 18 million by 2016, according to HVS Hospitality Services, a consulting firm focused on the hotel industry. Where India now has 62,000 top-quality rooms for such travellers, by 2014 it is expected that there will be 150,000 rooms. But where are the chefs, butlers and bellboys to serve all the guests? Surveys show an immediate shortfall of 30-40% in the supply of quality manpower as students passing from hotel management institutes shun the profession because of poor pay and long work hours. They prefer 23

to work overseas or with cruise liners, airlines and retail companies. One such student is Sandeep Singh, who graduated this year from the International Institute of Hotel Management in Delhi. He had offers from Le Meridien, Pullman and The Oberoi but he preferred to join an event management company. I am getting three times the money offered by the hotels and I do not have to work for 14 hours a day, he said. Another hotel management graduate Manish Paul took up a job at Kingfisher Airlines, a decision he made after working 42 hours on the trot at a hotel during his training. Nakul Anand, who heads the hospitality, travel, and tourism businesses for ITC, said six out of every 10 students from the Welcome group Graduate School of Hotel Administration run by the business conglomerate do not join the hotel industry. We need to find more creative ways to attract people, he said. There was a hotel boom in the late 1980s and 1990s but demand for manpower was met by hotel management and catering institutes. This time, the industry is ill-prepared. Anand, who is also the president of the Hotel Association of India, estimates that the hotel industry will need to add 100,000 staff within four years. But only about a fifth of this number are even being trained and a big slice of them will not join the hotel industry. The Economic Times 01.07.2011 p. 5

Human Resource Development

34. India Inc Keeps Its Alumni Network Buzzing
Organisations are going the extra mile to stay connected not just with the usual business contacts, but with employees who have left them. Like most educational institutes do, companies such as Pepsi-Co, Marico, Sapient, NIIT, HUL, and Deloitte are organising alumni meets, so that existing employees keep in touch with former employees as a way to network and spread the word about the organisation. We believe former employees are your ambassadors. Even if they have quit the firm, they should be updated about whats happening in the firm. It is important to stay connected today, says Dhananjay Bansod, chief people officer of consulting firm Deloitte India. Deloitte runs a programme called Boomerang, wherein existing and former employees get together. The programme runs across the year over different geographies and divisions, depending on the groups convenience. This helps the company feel the pulse of the market, says Bansod, adding, You never know, some of your former employees may become your customers tomorrow. PepsiCo India, too, runs an alumni network, which meets at least once a year. Not only are former employees your brand ambassadors in the corporate world, many atime, former employers too get to learn about best practices. There is a lot of knowledge sharing in such meets, says PepsiCo India chief people officer Samik Basu. Sapient, on the other hand, holds its alumni meet every six months. The company invites most of its former employees to participate in such meets, regardless of their level or seniority. Such events are a great source for business referral. Several of our former employees who moved to join potential client companies have invited us back to do business with them, says Prashant Bhatnagar, director hiring at Sapient India. Such meets also result in wooing former employees back into the fold. Take Ramswaroop Gopalans case. The country manager, SapientNitro, was the first project manager for Sapient in India in 2000. He left the organisation in 2007 only to return in 2009. Gopalan says he quit because he wanted to get sales experience. I was not comfortable settling abroad for a sales profile so I decided to move. However, Gopalan was regularly in touch with the senior management at the company and was aware of its activities and new initiatives. When the right opportunity came, the senior management asked me if I would like to head SapientNitro and I agreed. 24

The Economic Times 01.07.2011 p. 10

35. Big Savers may Pay More for NPS

Big savers will have to pay more to invest in the New Pension Scheme (NPS) if the government accepts the recommendations of an expert panel chaired by former Sebi chairman GN Bajpai. To improve the incentive for sellers and protect small savers, the panel has recommended a charge of 0.5% on every transaction instead of a flat fee of Rs. 20 paid by individual volunteer members now. The NPS manages the pension funds of civil servants who joined service from January 2004 and also individual volunteer members. Though well regulated, the scheme, which competes with other financial products such as pension plans sold by insurance companies or mutual funds, has been floundering due to a faulty marketing model. In its report submitted to the pension fund regulator, Yogesh Agarwal, last week, the Bajpai panel has recommended sweeping changes in the marketing model to widen the reach of NPS. These include, among other things, higher commission and fund management charges, lower central record keeping charges and allowing mobile companies and other private players to distribute the product, said a source privy to the report. Today, subscribers pay a flat charge of Rs. 40 for opening an account and per transaction fee of Rs. 20, irrespective of the amount they regularly save. So, the distributors or the so-called points of presence banks and financial institutions that open NPS accounts for subscribers have little incentive to market the scheme. The ad valorem charge is expected to incentivise distributors. Big savers who contribute more and earn higher returns will be charged more. The average return on the NPS was 11% last fiscal year. Flat charges penalise the low-income population. Its much more fair to have a fee linked to the quantum of contribution. The real challenge is to discipline savings of the informal sector, says Gautam Bhardwaj, director, Invest India Economic Foundation. The panel has recommended rationalising fund management charges, which is a meagre 0.0009% for assets under management. With waferthin charges, fund managers can hardly afford to market the scheme using their money. However,the panel has said that the charge should automatically drop as volumes surge when more subscribers join the NPS. Subscribers also pay Rs. 280 every year as record-keeping fee. The committee is in favour of lowering the central record keeping agency (CRA) charges. Allowing pension fund managers (PFMs) to float PoP (point of presence) subsidiaries to market NPS also features in the recommendations. PFMs would, however, not be allowed to sell NPS directly. The panel has made out a case for allowing more PFMs as well. At present, there are seven fund managers including LIC Pension Fund, SBI Pension Fund and UTI Retirement Solutions and Reliance Capital Pension Fund. The Economic Times 04.07.2011 p. 10

36. Indias Biggest Recruiters

The placement season ended a while ago and the new joinees have even come on board at his bank. But K Ramkumar, group chief human resources officer at ICICI Bank, is still upset with one of the top Bschools of the country IIM Ahmedabad. So miffed has he been with the business school that he decided not to go to IIM Ahmedabad to recruit young managers from the class of 2011. We have had a relationship with the IIMs for the last 30 years. During the current year, out of all the IIMs, we found IIM-A to be too full of themselves. We will not go to any campus that dictates terms to recruiters, Ramkumar declares, refusing to elaborate further. His resolve notwithstanding, ICICI Bank this year has emerged the top recruiter across B-schools, in terms of the number of students hired. The one marquee event that defines B-schools across the 25

country the final placement season brings forth many recruiting trends, student preferences, new entrants and a constant buzz around salaries. ET decided to look at one more aspect of the recruitment spectacle: the companies that hired in large numbers at the top Bschools, including seven of the IIMs. The objective was to look at who had managed to snare the best and finest talent from Indias top Bschools. A couple of caveats though. We are talking about the big recruiters that hired in numbers and not about any pecking order. Also, we approached a large number of institutes and some of them declined to divulge the exact numbers. Some top-notch recruiters may have failed to make it to the list due to this, but those who did, showed us that the numbers do tell a story. ON A ROLL Placements 2011 was an extension of the happy sentiment of 2010. If 2010 was the return of topnotch jobs to campuses, 2011 was the time students were on a roll. Caution was thrown to the wind and the heady days of being courted by the Whos Who of India Inc were back. Says IIM Kozhikode director Debashis Chatterjee, The number of offers at campuses was back to 2008 levels. Companies agree. Priti Rajora, VP and head, global talent acquisition at Wipro Technologies, says: We have been witnessing very strong economic growth indicators for the past several months. Due to positive changes in the demandside ecosystem and organic and inorganic growth and projections, our outlook for hiring in the current fiscal has been very optimistic. Ramkumar agrees. It was a more confident year at the campus compared to the last two years, he says. This backdrop, however, ensured that placement this year was almost as much dictated by students as it was by recruiters. We give you a snapshot of who found favour with students, and what makes this set of companies tick. The Economic Times 08.07.2011 p. 10

37. High Wages, No Tax Breaks to Dent Mid-Cap IT Margins

Mid-sized technology services firms will see revenues growing anywhere between 2% and 5% for the first quarter ending June on the back of growing demand for IT services. However, expiry of tax breaks under the software technology park scheme and rising wages will be party-poopers pulling down net profits and margins for these second-tier IT companies. Companies like Hexaware Technologies and KPIT Cummins are expected to post strong revenue growth of between 3% and 7.5% for the quarter. For Hexaware, which is expected to meet the upper end of the dollar revenue guidance, brokerage firm CLSA says margins will be moderate due to wage hikes over the past few quarters. Bangalore-based MindTree is expected to maintain confidence in business prospects throughout FY12 and likely to rebound after disappointing results in the past quarter. While revenue momentum is being driven by higher demand across banking, financial services and insurance (BFSI), retail and manufacturing, the expiry of tax benefits claimed by IT firms under the software technology park scheme will definitely hit bottomlines. The benefit was discontinued from March this year. Margins are expected to drop by 200-360 basis point for the mid-cap tech firms, says brokerage MSFL. Wage hike is another factor eating into net earnings. Margin pressures are likely to be subdued by wage hikes, said the CLSA report. Most companies spend on wage hikes during the first quarter of the fiscal. Chennaiheadquartered Polaris Software, a report by brokerage firm Sharekhan points out, is expected to report a 5.5% quarter-on-quarter revenue growth in dollar terms to $102 million. However, its margins may decline by 90 basis points over the previous quarter to 11.1 % due to wage hikes 26

during the quarter. Over previous quarters levels, net profit is expected to decline by a significant 23% to Rs 44.3 crore given the higher tax rate. Polaris will have to pay an effective tax rate of 27% this quarter against a nuch lower 13.4% in the previous quarter. NIIT Technologies is also likely to report a robust 4.4% sequential revenue growth. Here too, margins are expected to decline by 270 basis points over the previous quarter to 17.8 % on account of wage hikes. Net profit will also drop due to higher tax rates In the mid-cap space, KPIT Cummins will deliver the strongest growth at 4 % quarter on quarter. Geometrics growth will be flat on back of delay in some projects, the MSFL report said. Summing it up, Rohit Kumar Anand of Pinc Research points out: Mid-tier firms will deliver bi-polar results with firms being clear outperformers and laggards in terms of revenue growth. Players like Hexaware and Persistent are likely to show strong revenue growth this quarter. Others like MindTree, MphasiS, Sasken and Geometric are struggling with specific issues which will result in muted revenue growth. The Economic Times 12.07.2011 p. 4

Indian Economy
38. Data Shows Economy on Firm Ground
Indias macro economy is in a much better shape than what the mood on the ground reflects, a clutch of data released by the government on Thursday showed. The readings point to a moderation in food inflation, a brighter industrial outlook and a comfortable balance of payments position. Economists say the data indicates the Indian economy may avoid a hard landing, but there will still be pain in the offing. It seems we might have a soft landing, said Sonal Varma, India economist for Nomura Financial Advisory and Securities Private Limited. The countrys eight key infrastructure industries logged a growth of 5.4% in May, up from 4.6% in April, data showed. This indicates that overall industrial output growth could rise above 6.3% registered in April. The revamped infrastructure index has eight sectors, as against six in the earlier index, and has a 38% weight in the Index of Industrial Production, as compared with 27% in the old index. The higher weight in the IIP makes it a good indicator of industrial growth. Right now the key relation to be assessed is between growth and inflation, said Samiran Chakraborty, chief economist with Standard Chartered Bank. The numbers are suggesting that growth is moderating, but not collapsing. The rise in core sector output was despite a 9.3% contraction in output of natural gas in May from a year earlier. Steel output, a key indicator of demand in the construction sector, rose 6.1% in May from 4.8% in April. Food inflation dropped to a sixweek low of 7.78% for the week to June 18 while consumer price index for industrial workers rose at a slower pace of 8.7% in May from 9.41% in April. The decline in food inflation was because of a drop in prices of vegetables, pulses, poultry and tea. Even at the retail level, food inflation dropped to 7.61% in May from 8.24% in April. However, most experts see food inflation rising in the coming months because of the knock-on effects of the recent hike in prices of diesel, cooking gas and kerosene. Fuel inflation rose to 13% for the week ended June 18 from 12.8% in the week before. I am not sure if we have seen the worst, said Madan Sabnavis, chief economist at Mumbaibased CARE Ratings. Until September, inflation would be high. It is too early to see food inflation declining, we will have to wait and watch, he said. Fuel price increase is alone expected to add one percentage point to the headline wholesale inflation, which stood at 9.1% for May. On the inflation front, there is 27

still about 2-4 months of pain left, said Chakraborty. The consensus estimate is that the economy will expand at about 8% in the current fiscal because of the rise in interest rates, which is beginning to impact demand. The biggest positive was the current account deficit, which came in much lower than what had been expected in the middle of 2010-11. The impressive 47.1% rise in exports in the last quarter and a slower 27.4% growth in imports kept the trade deficit in check. The Economic Times 01.07.2011 p. 15

39. Fitch Scales Down 2011 GDP Growth Estimate to 7.7%

As the stern anti-inflationary stance of Reserve Bank crimps growth and demand, global ratings agency Fitch has further lowered its growth forecast for the domestic economy in 2011 to 7.7% from 8.3% previously. The growth has clearly hit a soft patch, as GDP grew only 7.8% in the first quarter of 2011 (Q4 of FY11), down from 8.4% in Q4, FY10, and 8.9% in Q3, FY10, said Fitch Ratings in its global economic outlook report. A breakdown of GDP by expenditure shows that the slowdown can be largely attributed to a downturn in fixed investments, which grew by only 0.4% in Q1 of 2011. Private sector investment activity not only appears to be affected by higher borrowing costs, but has also been affected by other factors like rising input costs, thin profits and rising bureaucratic red tape, the report notes. Fitch joins other major agencies like the IMF and World Bank that have projected sub-8% growth for the domestic economy this fiscal, in a major drop from 8.5% last year. The Fitch report says the economic outlook is likely to remain somewhat clouded by persistently high inflation. Wholesale price index-based inflation has remained high since early 2010, noted the Fitch report, and said, Core inflation grew by average of 9.3% in the first five months of 2011, slightly below 9.6% averaged in 2010. Although food inflation has eased from the high 20.9% in the first half of 2010, underlying inflation pressures remain intense. The economic outlook is likely to remain somewhat clouded by persistent inflationary pressures as the headline measure of WPI inflation has remained high since early 2010, says the report. After a month-long rally, food inflation plunged to a oneand-a-half month low of 7.78% for the week ended June 18, down from 9.13% in the previous week. The Economic Times 04.07.2011 p. 16

Industry News
40. Indian Consumption to Grow 14% in 3 Yrs: Study
Consumer durables, automobiles, food and personal care products have the maximum growth potential in the country as multinationals shift focus to Asia Pacific and Latin America to drive up their sales, says a study. And Indian consumers will maintain their spending spree despite challenges such as rising prices and higher interest rates, according to an Ambit Capital Research report, The Indian Consumer: a robust operator in an uncertain world. Despite being impacted by several challenges, we expect India's consumption growth story to maintain its course of about 14% growth over the next three years driven by three factorsinclusiveness, mix changes and specific consumption categories, senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant wrote in the report. 28

Reasonable valuations will keep acquisition interest by global midcap firms alive, they added. The $473-billion processed dairy category could grow at a rate of 15% in the next four years, while the $340-billion personal care products category would grow a tad lower at 14%. Multinationals are aware of the potential in India. I am hopeful that McDonalds India will contribute half a percent to the global sales in the next fiveseven years, McDonalds India (North & East) MD Vikram Bakshi said. India currently accounts for just 0.37% of the US fast food giants $24-billion global business. Last week, at the Cannes advertising festival, Unilever CEO Paul Polman was categorical when he said We have to shift our thinking to New Delhi, not New York. Calling Unilever an 'emerging markets company', Polman said the shift of economic power to the East and the South was forcing the worlds second largest consumer products firm to make extraordinary changes. He said while about 56% of Unilevers revenues come from outside North America and Europe, by 2020, Unilever expected this to be 70-75%. At the same venue, Paul Bulcke, CEO of the world's largest foods maker Nestle SA, said that the most important global economic difference over the last few decades was that emerging markets are emerging. As sales flatten in mature markets like the US and Europe, consumer products makers are relying on Asia Pacific and Latin America for growth. Multinationals are committing resources to India not only for manufacturing but also for innovation. Both traditional names such as Nestle and contemporary ones like Yum Brands and Google have committed to setting up local innovation centres, the report said. And Indian managers are being given positions of power to steer growth in emerging markets. Late last month, Unilever elevated Harish Manwani, currently chairman of its India arm Hindustan Unilever, to become the global giants chief operating officer, second only to CEO Paul Polman. Three months back, British consumer goods giant Reckitt Benckiser named India-born Rakesh Kapoor as its CEO to succeed Bart Becht who spent a decade at the firm. Earlier this year, GlaxoSmithKline Consumer Healthcare, maker of Horlicks milk drink and Crocin anti-pyretic drug, elevated its subsidiaries in India and China to report directly to the companys global headquarters instead of its international division that excludes the US and Europe. India and China are now part of the companys global consumer healthcare leadership team, with India among the fastest-growing regions of GSK Consumer. A combination of good GDP growth, India being a nutrition deficient geography and an emerging consumer class are contributing to the growth, GlaxoSmithKline Consumer Healthcare MD Zubair Ahmed said. The Economic Times 05.07.2011 p. 5

41. Higher Provisioning Hits Non-life Cos FY11 Profits

Public sector general insurance companies had their profits dented last fiscal by higher provisioning for third party motor pool, high claim ratio and poor investment income. United India posted a net profit of Rs. 130 crore against Rs.707 crore a year ago. National India reported a net profit of Rs. 75 crore against Rs. 225 crore in the previous year. Oriental Insurance posted net profit of Rs. 54 crore against Rs. 44 crore loss in the previous fiscal. The countrys largest non-life insurer, New India Assurance, is yet to announce its numbers. The insurer is likely to post a loss of Rs/ 300 crore for 2010-11, sources said. New India made an investment income of about Rs. 2,100 crore while the underwriting loss was about Rs. 2,500 crore, said chairman and managing director M Ramadoss. The company 29

provided Rs. 450 crore towards third-party motor pool and Rs. 300 crore for wage revision. There may be a loss. But it will be premature to comment on it since we are yet to announce the result, he said. Cut-throat competition and high discounts have been taking a toll on the underwriting profits of insurers. The market is driven by competition. Insurers need to compromise between topline and bottom line. They should not grow top line at the cost of bottom line, said General Insurance Council secretary general SL Mohan. Insurers have been posting losses after underwriting their core activities since the sector was detariffed. An insurance company reports underwriting loss when the claims paid out exceeds premium income. The combined ratio of most insurance companies was below 105% without third party motor pool. There was pressure due to wage revision and extra capital towards third party. Investment income may not be good because of the volatility in the market. Insurance companies will have to resort to risk-based pricing if they want to improve underwriting, said a senior executive at a large public sector insurance company. The four public sector insurance companies recorded 21% growth in gross written premium in 2010-11. The Economic Times 06.07.2011 p. 14

Information Technology
42. After Infosys & Wipro, TCS Under Lens for Body Shopping
Its now the turn of Indias largest software company to spell out its stand on a tricky point that tax authorities have been raking up. After Infosys and Wipro, the Income-Tax Department has initiated scrutiny on Tata Consultancy Services (TCS) for claiming tax benefits for onshore services, often derogatorily called body shopping. Onshore software services account for close to 45% of TCS $8-billion revenues.In a scrutiny notice initiated a few days ago, the I-T Department has revisited its argument that onshore software services provided by Indian exporters boil down to export of manpower, rather than software, a senior tax official said. Onshore development refers to the practice of IT companies sending their staff to work in overseas markets, including the US and Europe. Often, such services are rendered in the premises of the overseas client. The Income-Tax Department has argued that since professionals are under the control and supervision of the company abroad, the contract between the local software company and the foreign client amounts to export of manpower. Simultaneously, tax authorities say many software companies often book the earnings from such onshore work in their units located in the Software Technology Parks of India (STPI) to avail tax benefits. Responding to an email, a TCS spokesperson said: As a policy we do not comment on taxrelated issues. According to a senior tax practitioner, the timing of the notice is important. While there is no longer tax holiday for STPIs and EOUs (except for units in SEZs) from April 1, 2011, the government continues to be under pressure to generate revenues, said Indraneel Roy Chaudhury, Tax Leader, South India Practice, PwC. Interestingly, under Indian tax rules, human resource services can get the benefit of tax holiday. But on this, he said, one need to examine contracts to determine what would fall within this purview. The Economic Times 01.07.2011 p. 1

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43. IT Biggies to Post Top-Dollar Sales

The top four listed IT companies are expected to report sequential growth of 4-6% in dollardenominated revenues during the quarter ended June 30, 2011, better than the lukewarm growth of 2-4% in the previous quarter, as demand stays strong in the key markets of Europe and North America. The profitability of some companies, including TCS and Infosys, the two largest IT players, could face marginal pressure due to wage hikes, but overall profitability of the sample group of companies is expected to remain intact with some marginal improvement expected from Wipro, as per estimates by ET Intelligence Group. TCS, Indias largest software company, and Shiv Nadar-controlled HCL Technologies, the fifth largest, are likely to be the biggest beneficiaries of the IT outsourcing demand. According to ETIG estimates, investors can expect a 5-7% sequential topline growth from these companies during the June quarter. Infosys and Wipro, the secondand third-largest IT companies, are likely to experience higher revenue growth than the previous quarter, but may continue to lag behind their peers. Infosys, which will kick off the first-quarter results season when it declares its numbers on July 12, is expected to beat the upper end of its guidance. The company has guided for sequential revenue growth between 2.6% and 3.6% in dollar terms. But the average of the estimates of seven brokerages is higher. They predict a 4-5% revenue growth in the June quarter. The Economic Times 05.07.2011 p. 1

44. The Artificial Intelligence Champ

Today, this supercomputer is winning Jeopardy! Tomorrow, Watson might be making medical diagnosis, filtering databases and more. The revolution he represents could change every industry it touches, reports Rituparna Chatterjee in San Francisco
Having won 74 times in a row, Ken Jennings was an undisputed grand champion of Jeopardy!, a brain racking quiz show. But as he finally approached his defeat this February to a young Jeopardy! novice named Watson, he sportily wrote: I, for one, welcome our new computer overlords. The world had wowed over that historic win, which turned Watson into something of a celebrity. Several months later, IBM, the supercomputers maker, which is also famous for making the Deep Blue computer that beat humans at chess, is exploring real world applications for it. In pop culture, Watson has become a living answer to the dreaded question science fiction has been asking since forever: in the battle between man and machine, who will win in the end? The reality, at least at this point, couldnt be further from the truth. Because this computer with superpowers was built specifically to help humans. This is not about a computer taking over the world, or even making decisions itself, but helping you, says Katharine Frase, vice-president of industry solutions and emerging businesses at IBM Research. What makes Watson revolutionary is that you dont have to feed or type anything into the system, as you would with a regular computer. Just like Captain Kirk asked his futuristic computer for advice in Star Trek, we too can (finally!) simply ask this artificial intelligence (AI) computer system. It will respond to natural language inquiries by digging up answers in seconds. Since Watson could comprehend the quiz masters quick clues in Jeopardy!s extremely high-pressure environment, it can certainly respond almost perfectly to us. Mostly we train humans to behave the way the computer is used to. Whats interesting with Watson, is that we did nothing of the sort, says Frase. Watson is 31

indeed unique! agrees Larry Fisher, Research Director at ABI Research. This is why Watson might herald a new wave in the future of AI and advanced computing. It shows what could be possible in computing, says Whit Andrews of technology consulting firm Gartner. But then Watson wasnt created to play Jeopardy! The Economic Times 07.07.2011 p. 4

45. Indian IT Cos Lobby to Jump US Firewall

Lobbying has been a taboo for Indias wildly successful software companies: that distasteful activity was supposed to be the preserve of those looking to prosper from the licencepermit raj. And anyway, their markets were mostly overseas. But now, in the home of freemarket capitalism, as their encounters with disguised protectionism grow more frequent, the L word does not appear so dirty any more. That is why, while America keeps inventing reasons to make it harder for them to do business, many Indian software companies are spending large sums hiring professional help to win friends and influence people in their biggest market. At stake is over $30 billion (. 1.3 lakh crore) in business every year, about half of Indias total outsourcing revenue. Among the companies mounting an aggressive PR effort is Wipro, Indias third-largest software exporter. Last year, it hired Melanie Carter-Maguire, a government relations professional, to launch its lobbying effort in Washington DC. Between January and March this year, Wipro spent nearly $60,000 (. 27 lakh) to lobby lawmakers and other officials about restrictive visa rules and policies that favour local companies. Cognizant, which is headquartered in the US but employs over 80% of its staff in India, spent $350,000 during the first quarter this year. Two years ago, it hired Robert Hoffman, a Capitol Hill regular, to lead its lobbying efforts. Engaging with policymakers and local communities through lobbyists and PR professionals was long considered a taboo. Now, some senior managers, especially those based there, are questioning that stance and asking us to step up, said the CEO of a tech firm. The Economic Times 08.07.2011 p. 1

46. US Scrimps, Picks at Indian IT Profits

After years of scorching profitable growth, Indian tech firms are being asked by top outsourcing customers to reduce rates for back office and software work by up to 15%, threatening to erode their high profit margins. While new business from customers seeking to give away noncore IT work will continue to grow at 20-30%, company officials, customers and outsourcing consultants say this growth is coming at lower rates. As Americas top outsourcing customers aim to restore profits amid rising oil prices and weak consumer demand, they are asking Indian tech firms to do more with less billing rates for back office, software development and maintenance projects are already down by up to 15%. Over the past few months US retailers Walmart and Home Depot, apart from Cisco, Ericsson and insurance firm AIG, have cut rates that could see profit margins for TCS, Infosys, Wipro and others fall by 1-3% this quarter. There are no holy cows in the business now even Accenture and Infosys are thinking twice before letting a large, lucrative project go to rivals offering lower rates, said the CEO of a big India-based outsourcing firm. 32

Unlike in the past, when a fraction of rising salary and other operational costs were passed on to customers, clients are now refusing to share any burden citing low demand in their own businesses. Indian IT firms pyramid model wherein lowcost, fresh engineering graduates are pumped into the system every year to deliver projects at nearly 30% profit margin is under pressure as salaries rise. Were seeing everything from 0-20% depending on scope, age of deal, industry, etc. The older the original rates, the more likely you are to see a large percentage drop some rates that have not been negotiated since before 2008, for example, could see doubledigit reductions, said Esteban Herrera, COO of US-based HfS Research, which advises customers on outsourcing. These rate cuts are happening for commoditised maintenance kind of projects, and there are still certain projects that are immune to such price cuts. The Economic Times 11.07.2011 p. 1

47. Therapist Will See You via Web

SEE a therapist without leaving your home? In an article in the American Journal of Psychiatry, Dr Thomas F Dwyer, a Massachusetts psychiatrist, says he has practiced telepsychiatry, via video teleconferencing, for five years. Its adoption by psychiatrists and patients, he predicts, will proceed quickly if the organizers cope with the irrational responses of some users. But wait: That article appeared almost 40 years ago. It told how microwave television signals were used to connect a satellite clinic to Massachusetts General Hospital in Boston. Today, even with the rise of the Internet, virtual therapy hasnt been widely adopted. But several start-up companies are trying to make Dr Dwyers decades-old vision a workaday reality. Therapy delivered over the Internet, says Lynn Bufka, a psychologist and staff member of the American Psychological Association, may open access to those who might be reluctant to go to an office or to those who might be physically or psychologically unable to. Proponents of Internet-based therapy point to some research suggesting that it is effective for certain kinds of conditions, like depression and anxiety. Reporting in The Lancet in 2009, a team of researchers found that cognitive-behavioral therapy delivered remotely to depressed patients in Britain continued to show benefits eight months later. But companies promoting online therapy must contend with uneven or absent support from insurance companies, Medicare and Medicaid. Most states dont require insurers to pay for telehealth services (those not delivered in person). And any reimbursements can be less substantial than for in-person treatment. Medicare offers reimbursement only if providers are very scarce, as in rural areas. One company that is trying to match patients to therapists online is Cope Today, based in Raleigh, NC Tania S Malik, its chief executive, said the company, which began in 2010, worked with the North Carolina National Guard for a pilot test of its service. It has since opened its service to individuals, whom it attracts primarily with search ads that are keyed to phrases like online counseling or treating anxiety. Cope Today lets prospective clients view a list of therapists and their availability for consultation via video, phone or online chat. It provides the first 10 minutes of a session free, then charges $35 for 15-minute increments. Ms Malik says the average length of a consultation is 43 minutes. She declined to say what percentage of clients return for further sessions. It is hard to sell the service to individuals who must pay for therapy themselves, Ms Malik says. But she hopes to sign up employers who will pay for the service. I dont think we could be a success on a strict direct-to-consumer business, operating without reimbursement from insurance companies, she says. Another company 33

offering online therapy, HealthLinkNow, in Sacramento, has decided to avoid the direct-toconsumer route, at least for now. The company, which started its service in May, is trying to sign up institutional clients, like hospital emergency rooms or large employers, rather than individuals online at home. Barb Johnston, the chief executive of HealthLinkNow, says: I think youre going to see larger companies provide rooms in which employees can seek telemedicine services, including mental health services. That way, the employee wont lose a half or a whole day of work for a consult. Because a range of health services would be provided in the privacy of that room, no stigma should attach to a patient who goes in for a private e-therapy session. No one will know, Ms Johnston says. One disadvantage of online therapy through teleconferencing is that it can be hard to read each others cues that are not visible, like body language, Ms Bufka says. Humor can misfire, and some people may really benefit from having the personal relationship of therapy, she says. The Economic Times 12.07.2011 p. 4

48. Infosys Lags, No Longer Leads the Indian IT Pack

Infosys dismal first-quarter performance against the backdrop of a strong global demand for IT outsourcing is a reaffirmation that Indias second-largest software exporter viewed as an industry bellwether no longer represents the broader trends in the sector. After the turnaround in demand six quarters ago, TCS Infosys closest peer and the countrys largest IT player has reported a faster growth rate. In the two years ended March 2011, which encompass the period of recovery, sales and operating profit of TCS grew by 10% and 16%, respectively, on a compounded basis. The corresponding numbers for Infosys were 8% and 8.1%, respectively. Even smaller peers, including Cognizant and HCL Tech, have been able to take advantage of the rebound in demand to clock better growth. The Economic Times 13.07.2011 p. 1

49. TCS Q1 Net Rises 26.7% to 2,415 Crore

Indias biggest software exporter Tata Consultancy Services joined global rival Accenture in signalling higher demand for outsourcing from customers in the US seeking to cut costs, and posted 26.7% rise in its first quarter profit from last year. However, rising salary costs dragged TCS net profit for the June quarter by 7.9% to . 2,415 crore from the fourth quarter ended March this year. For Indias $60-billion outsourcing sector looking for positive cues amid growing economic uncertainties in the top markets of US and Europe, TCS 31.4% growth in first quarter revenues to . 10,797 crore provided some relief. As top customers General Electric and Citigroup seek to cut costs and become more profitable, they are increasing the outsourcing of non-core back office and software development projects to vendors like TCS. Indias number two software firm Infosys, which announced its April-to-June quarter earnings earlier this week, also saw its first quarter profit fall by 5.3% compared to the fourth quarter of last year on increased salary costs. While Infosys raised concerns on demand ahead for outsourcing because of economic uncertainties in the top markets of US and Europe, TCS denied any such trend. While we are watchful, as of now we continue to see sustained demand for our services, TCS CEO and MD N Chandrasekaran said on Thursday. Shares in TCS closed down by 2.2% at Rs. 1,123.70 on the BSE on Thursday ahead of the companys earnings. 34

Investors and experts tracking the sector were anxious about the prospects ahead after Infosys provided a muted forecast and raised concerns about macro economic worries affecting demand for outsourcing business. While TCS, too, saw it profits get affected because of wage hikes, the management commentary hinted at strong demand, which is quite opposite of what Infosys projected, said an analyst at Mumbai-based office of a multinational brokerage firm. Last month, consulting firm Accenture reported better-than-expected third-quarter profit growth of 28% and raised its outlook for the year, citing strong demand for services. TCS results were above our estimates. The 7.4% volume growth was the highlight. More importantly, the growth was broadbased, which lends a degree of stability to this growth, we believe. The management is confident about client spending while being cautious on the macro scene, said Dipen Shah of Kotak Securities. The Economic Times 15.07.2011 p. 6

Infrastructure
50. World Bank Approves $648-M Loan to THDC
State-run THDC India Ltd has received loan of $648 million (about Rs. 2,886 crore) from the World Bank for its project in Uttrakhand. With the loan, the 444-MW Vishnugad Pipalkoti hydroelectric project has achieved full financial closure, the company said in a statement. The company has recently received environment ministrys nod for diversion of 80 hectares of forest land for the project that is expected to be completed by 2016. THDC has a portfolio of hydro projects in Uttarakhand, Maharashtra and Bhutan with aggregate capacity of 8,868 MW. Its 1,000-MW Tehri hydro power project is operational since 2006-07. The companys 400-MW Koteshwar hydro power project is likely to be fully commissioned by 2012. THDC is implementing 4060 MW Sankosh project in Bhutan for which a detailed report is under preparation. It is also implementing a 1,320-MW Khurja super thermal plant in Uttar Pradesh. The Economic Times 02.07.2011 p. 6

Investment/ Financing
51. At $4.66 B, FDI in May Second Highest in 11 Years
Foreign direct investment (FDI) into the country more than doubled in May from year ago, touching $4.66 billion against $2.21 billion in May last year. This is the second highest monthly FDI inflow since 2000. The rebound follows a dismal 201011 fiscal in which FDI dropped 25% to $ 19.4 billion. Foreign investors have shied away from India in the last year even as growth remained robust at above eight percent, amid mounting governance concerns and a decline in overall investment sentiment. "The recent trend of a dip in foreign direct investment inflows appears to have been reversed in the current financial year, where a significant upward trend is evident," the industry ministry said in a statement on Monday. The FDI is likely to spurt as a number of acquisition have been cleared against which inflows will come soon. The proposed tie up between BP and Reliance and Vodafone buying share of Essar could alone result in an inflow of approximately $ 12 billion. 35

Major deals like Cairn Vedanta are also expected to give an impetus to FDI into the country. There is a likelihood of another surprising spurt in the coming months with many projects are due for clearance under FIPB. FDIs tend to have a bunching effect under private equity, said Abheek Barua, chief economist at HDFC Bank. Combined inflow over April and May through FDI has jumped 77% to $7.79 billion, the data showed. Economists say that continued inflows could be a big positive as the stock market has not been able to attract FII inflows. The FDI could help in paying for the current account deficit (CAD) at the end of the year. The CAD is expected to be in the range of 2.5-3% of GDP for FY12. According to data released by Grant Thornton India, 27 more deals were signed in May this year over last year worth $5.4 billion as compared with $1.8 billion May 2010. The deals include mergers and acquisitions, qualified institutional placements and private equity deals. These include the acquisition by Mundra Port of Abbot Point worth $1.96 billion, Religare-Fortis deal amongst others. The decline in FDI in the last year had become a cause for concern, as most of the emerging nations had been able to attract huge amounts of FDI inflows. In response the government has simplified a number of procedures and also tried to consolidate the FDI policy. The Economic Times 05.07.2011 p. 15

52. P&G Upbeat on India, Invests 345 Crore in Subsidiary

Procter & Gamble, the worlds largest consumer goods firm, has invested Rs. 345 crore in its unlisted arm P&G Home Products in one of its largest investments in a decade in the country. Confirming the fund infusion into the 100% owned subsidiary that makes Ariel, Tide and Pantene, a P&G spokeswoman said the money will go into reaching out to more consumers, in more parts of India, more completely. Analysts now expect the US giant to be more aggressive in the Indian market, enter new categories, including toothpastes, surface cleaners and hair oils, and make more products locally to offer more mass-consumption products. In an extra-ordinary general meeting held in May, Procter & Gamble Home Products decided to allot 4.6 million shares to Procter & Gamble Overseas India BV, a holding company of the US parent, at Rs. 750 each, aggregating to Rs. 345 crore. This will increase the companys total number of shares to 19.4 million and value it at Rs. 1,455 crore. The money will primarily power P&Gs Project 2-3-4 strategy to double the number of Indians who use its products, treble per capita spending by Indians on its products and quadruple net sales of its India operations by 2015. The development confirms the Cincinnati-headquartered companys move to shift its focus away from the western markets and catch up with archrival Unilever in emerging markets such as India. While developing markets account for just 30% of global sales for P&G, Unilever gets more than half of its revenues from India, Brazil, Indonesia, South Africa, China and Vietnam. P&G Global Chairman & CEO Robert McDonalds stated goal is to garner 800 million new customers by 2015, most of them from Asia and Africa. The target consumer in these markets is those earning less than Rs. 100, or $2, a day. P&G has three subsidiaries in India. Procter & Gamble Health & Hygiene, which markets feminine hygiene brand Whisper and Vicks anti-cold balm and lozenges, and Gillette India, maker of razors and other shaving products, are listed on the bourses. Procter & Gamble Home Products is the largest subsidiary with presence in big categories such as laundry, hair care and skin care, which together make up a Rs. 18,000-crore market, or more than half of the home & personal care segment. The unlisted firm is also the vehicle for new 36

products and innovations. With annual revenues of more than $1 billion, it is over two times as large as P&Gs listed subsidiaries. Between 2005 and 2010, P&G Home Products has generated Rs. 360 crore in profits after tax. And it clocked sales of around Rs. 2,188 crore in the year ended March 2010, but its biggest rival, Hindustan Unilever, was over nine times bigger. The Economic Times 12.07.2011 p. 5

53. Tax Havens Draw 1/3rd of Indian Funds

Almost one-third of the money that is invested abroad as outbound investment have been in tax havens. Over 80 companies invested in countries like Mauritius, British Virgin Islands and Cyprus popularly known for their liberal taxation regimes, where usually not many questions are asked about investments to and from these markets. Investments by Indian companies in overseas markets were over $5 billion in June, according to a Reserve Bank of India release on overseas direct investment, which the central bank has put in public domain for the first time. However, much of these outflows ($3.9 billion) are in the form of guaranteed issues. Outflows worth $600 million are in equities and $900 million is in the form of debt. Most of the investments are in wholly-owned subsidiaries and joint ventures. Mundra Port was the highest investee in the overseas market, with a $2.2-billion investment as credit guarantee in Australia, followed by Biocon which made a $350-million investment in its Malaysian subsidiary and Sun Pharmas $300-million investment in British Virgin Islands. Put simply, a tax haven is a foreign country that has unique offerings for investors, the primary one being relatively low tax rates in comparison to other countries. Jigar Saiya, partner at MZS & Associates, said: Countries like Mauritius have an exemption of capital gains tax. In India, a company has to pay 30% on the operating income while in Mauritius it is 3%. Notably, Mauritius accounts for 60% of equity investments by Indian companies. Tax experts say countries such as British Virgin Islands are used by companies to save on tax in the US, where a company might have a base. The Economic Times 13.07.2011 p. 14

54. Now, Pay Only 15% Tax on Short-term Gains

There is a dim ray of hope for scores of investors who were asked to pay a higher tax for selling shares within 30 days of purchase. The Income Tax Appellate Tribunal has ruled that profits from sale of shares held for even less than 30 days are eligible to be treated as short term capital gains on which 15% tax has to be paid. Often tax officials claimed a higher tax of over 30% on the ground that since shares were sold before 30 days from the date of purchase such gains should be considered as business income and not short term capital gain. Since tax rules do not spell out the duration of holding and frequency of securities trades for tax treatment, tax officials often use their discretion to arrive at a claim. This has been a source of endless disputes between investors and tax department. The June 15 ruling by Income-tax Appellate Tribunal (ITAT), Mumbai, is the latest in a series of judicial and quasijudicial decisions on the issue of what constitutes short-term capital gains and business income. The Mumbai ITAT decision in the case of Hitesh Satishchandra Doshi followed two earlier ITAT decisions in the case of Sugandhchand Shah by Ahmedabad Bench and in the case of Sanjiv Chawla by the Mumbai Bench. In both these cases the ITAT drew a 30-day mark to 37

distinguish between business income and short-term capital gains. The Mumbai ITAT, however, held that the statute is clear only as far as the distinction between long-term and shortterm capital gains is concerned. For long-term capital gains, shares have to be held for at least 12 months and profit from shares held for less than 12 months will be taxed as short-term capital gains. There is no tax on longterm capital gains. But the Mumbai ITAT observed that the law does not lay down a 30-day mark to distinguish between business income and short-term capital gains. The ITAT pointed out at the whole set of parameters laid down by the Supreme Court for making the distinction between investment and trading in shares. Factors such as intention of the assessee at the time of buying shares, whether the assessee borrowed money to purchase the shares and paid interest thereon, the frequency of such purchase and disposal in that particular item, whether the purchase and sale is for realising profit or purchases are made for retention and appreciation in its value, and how the value of items has been taken in the balance sheet, are critical in whether a gain is business income or short-term capital gains. Therefore, no single factor can be said to be decisive to determine whether the nature of the transaction is trading activity or investment, the ITAT held. Each case needs to be decided on the facts of the case. The Economic Times 14.07.2011 p. 9

55. Daimler Set to Launch Non-banking Financial Biz

German luxury car and commercial vehicle maker Daimler will launch its non-banking financial business next week. Siddhartha Nair, former executive with Daimlers corporate headquarters in Germany, will head Mercedes Benz Financial Services. The financial services company has hired 60 people. The company, with an initial investment of $50 million, will support the sales of Mercedes-Benz cars and subsequently Daimler trucks in the country. Bharat Benz is the truck arm in India. As we see a big growth ahead in luxury cars, this easy availability of finance will also help in enhancing car sales, said a person close to the development. Initially, the financial services arm will provide for the Mercedes Benz passenger car business which will be followed up with Daimler trucks sometime next year. The Economic Times 15.07.2011 p. 7

Management
56. My First 100 Days as CEO
Five CEOs, in a candid conversation with ET on Sunday, explain why their first days as the top boss were so critical in shaping their tenure
All new beginnings offer a chance to reboot, start afresh. When the beginnings are about a CEOship, the stakes are higher. The first 100 days of a new CEO are the most critical part of the stint in a company. With the change of guard, this is the best time to set the tone and signal a change. Here, an eclectic set of CEOs from western MNCs to a Korean chaebol, from a cooperative to a PSU share their experience about their first 100 days. They are a good mix of internal and external hires. LG Indias new CEO moved base from Korea to India. Philips Indias new boss 38

moved up from within. The new boss at Mother Dairy is an IIM alumnus who has worked with a range of MNCs from Pepsi to Cadburys to Philips. Each CEO transition is unique. But they are not without a few ground rules. Outsider CEOs face vastly different kinds of challenges vis--vis insider CEOs. For insiders, the change is on familiar ground the boss knows the people and vice versa. This knowledge helps him but also constrains him with past biases. As the new big boss, it is critical for him to rise above the past and set the tone to signal the change. In contrast, outsider CEOs are unknown entities with no historical baggage; it is easier for them to start on a fresh note. But in unfamiliar territory, they must spend time to understand and build connections in the initial days. Under constant scrutiny, their every move is watched. They must function with an open mind and give themselves time to form views about people and issues. Many use the time between the announcement and formal joining to do background research on the firm and its work culture. The first 100 days are rarely about microgranular goals most use the period to get the big picture right the big goals, challenges, key people and leadership team. They also use this time to project an image formal vs informal, hands-on vs hands-off the perceptions they want to nurture through their tenure. While doing all that, some also get their hands dirty to grab quick business victories. It helps build an instant rapport and establishes them as leaders. The Economic Times 02.07.2011 p. 10

57. The success mantras

THE LEADERS IN MANAGEMENT EDUCATION SHOULD UNDERSTAND THAT THEY SHOULD PROVIDE THE YOUTH A PLATFORM THAT CHALLENGES THEM TO BRING ALIVE THEIR DREAMS AND IDEAS TO TAKE COMPANIES TO GREATER HEIGHTS
Exciting industrialisation and exponential economic growth on one side exceptionally exploited people's sustained armed struggle in the form of Naxalism on the other side Adding fuel to the fire, few gentlemen's threat to go on fast until death on the issue of Lokpal Bill which is pushing the government in all the directionsThe heightened awakening amongst the people and the massive turnout in the recently held elections in West Bengal, Tamil Nadu and Kerala. Judiciary's overreach to entangled in the burning social issues including corruption and black money. A Union government where every minister acts and behaves like a prime minister. The sudden resignation MPs and MLAs on the issue of Telengana.The everchanging issue of the aggrieved DMK withdrawing support to the UPA government. Thus, the business environment is not giving the 'feel good' feeling around the country. Slowly and silently, social tension is building up. The country, which until recently was threatening the world to emerge the economic superpower, is entangled with internal wrangling. Why the disturbing trends suddenly? The business world, though unequipped to solve the political problems, does get affected. And this business world no more belongs to TATAs or Birlas or the Ambanis. For, it is 'you' and 'I', the shareholders in the companies who are the real owners of the corporate world. Are they, the issues which inject restlessness in the society, the by products of uneven growth of economy? Are they unique to India? How are we, the students of business management, going to take the whole scenario and act/react to protect our interests? For, the industrialists have become the scapegoats every time the political economy experienced imbalanced attacks from various quarters. That is how when the veteran industrialist and great freedom fighter Kirloskar 39

was arrested on silly charges. History is full of instances where this kind of drama was enacted with impunity. The Economic Times 11.07.2011 p. 16

Retail Industry
58. Fast Fashion Gains Currency among Asians
As pop music blares from a Zara store in Bangkok, Suthip Nanthavong jostles with others for bargains that might disappear in days -- from stylish thin-strap t-shirts selling for 490 baht ($16) to racks of bluedenim jeans. When you're in the store, there's little time to think. What's here today might be gone tomorrow, said the 30-year-old flight attendant, clutching two pairs of shorts and a dress. Some call it fast fashion retailing -- the apparel sector's equivalent to fast-food. Across Asia, global brands are setting up shops as U.S. and European shoppers cut discretionary spending, burdened by rising prices and a weak economic outlook. U.S. teen retailer Abercrombie & Fitch Co and clothing maker Gap Inc, which operates the Gap and Banana Republic brands, are among them. They plan to open their first stores in Hong Kong's central business district in a few months. Expansion plans by Abercrombie and other big names could hurt established Asian brands such as Giordano, Esprit and Bossini , rather than high-end clothiers. Although Asian shoppers still aspire for luxury brands, many are embracing specialty stores with higher inventory turnover and better value, especially as a new middle class emerges with more disposable income and fickle fashion tastes. Cheap chic brands are known for a limited run of new designs in as little as two weeks, a model that limits the surplus of unwanted clothes on shelves. Consumer confidence is very high in Asia, especially China, said Shaun Rein, managing director of Shanghai-based China Market Research Group, forecasting fast-fashion retail would grow as much as 15 percent a year in Asia.In the fashion retail industry, if you don't win China, you're going to lose the world. The Economic Times 01.07.2011 p. 4

Tax/Taxation
59. Mumbai I-T Dept to Collect 17% More Corporate Tax this Year
The Mumbai income-tax department, which accounts for 35-40% of the countrys total tax collections, is planning to collect 17.2% more corporate tax than last year, as revenue authorities expect buoyancy in the economy seen last year, to continue. The projected corporate tax collection from Mumbai for the current fiscal is Rs. 127,200 crore. The government has fixed a 20% higher target for the current fiscal years all India direct tax collection at Rs. 532,630 crore. However, senior Income-tax officers say the advance tax collection in the next installment, due in September, will be a better indication of whether they can meet the target. Advance taxes are collected in four installments, June, September, December and March. Over 40% of the estimated advance taxes are paid by September and therefore the September figures are considered a fair indication of the total advance tax collected in the year. 40

The tax department is aware of the general mood which has seen deferment in various projects, bringing back memories the 2008-09 period when the first installment showed a 75% increase in tax collection, but fell sharply by the end of the year, as a fallout of the economic downturn triggered by the collapse of Lehman Brothers. The Economic Times 05.07.2011 p. 6

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