Wednesday, April 29, 2009
ECONOMY SET TO TURN THE CORNER RIGHT INDICATORS
ECONOMY SET TO TURN THE CORNER RIGHT INDICATORS
The Economic Times, April 29, 2009, Page 1
From rosy investments to vibrant hiring to smooth sailing for ports to fired-up output data,all signs are that the bounce is indeed back for the economy
Anto Antony, NEW DELHI
GROWTH ahoy! A raft of lead indicators, investments that refuse to flag, rejuvenated hiring, sprightly freight movement at major ports and robust data from key manufacturing segments indicate that the downturn has bottomed out and that the economy is poised to regain its vigour.
Nomura’s Composite
Leading Index (CLI), UBS’ Lead Economic Indicator (LEI) and ABN Amro’s Purchasing Managers’ Index (PMI) all point to a pick-up in growth soon. And CMIE’s capex database, which tracks investments by companies, shows no big slowdown in this space.
A lead indicator is a composite of a variety of indices that track activity in vital economic sectors.
And that’s not all. The strong showing of sectors such as auto, cement, steel, capital goods, port traffic along with record telecom subscriber additions supports the strong turnaround thesis of these lead indicators.
After three months of rise on the trot, UBS’ LEI index for India now stands at 2.1; it touched a low of -2.08 last December. The LEI is a composite indicator of variables like government bond yields, M1 money supply, currency risk premium, foreign exchange reserves and stock market gains.
UBS’ economist Philip Wyatt expects a sustained recovery thanks to India’s low levels of excess capacity, private sector indebtedness and non-performing loans. ”With this significant rebound in LEI, we are more confident of a turning point in the industrial cycle by June 2009,” says Mr Wyatt in a research report.
Nomura’s composite leading index (CLI)—used to identify the turning points in the growth rate cycle—rose in the first quarter of 2009 after four consecutive quarterly falls. As the CLI indicates a turnaround in non-agricultural GDP growth rate with a two quarter lead time, the pick-up in the first quarter of 2009 hints at a recovery from June.
ABN Amro’s PMI—an indicator of the country’s manufacturing scene based on a survey of 500 companies—has improved to 49.5 this March from 44 last December. A reading below 50 indicates contraction. The PMI jump to nearly 50 suggests that manufacturing has put the contraction days behind and is poised to enter an expansion phase.
The Economic Times, April 29, 2009, Page 1
From rosy investments to vibrant hiring to smooth sailing for ports to fired-up output data,all signs are that the bounce is indeed back for the economy
Anto Antony, NEW DELHI
GROWTH ahoy! A raft of lead indicators, investments that refuse to flag, rejuvenated hiring, sprightly freight movement at major ports and robust data from key manufacturing segments indicate that the downturn has bottomed out and that the economy is poised to regain its vigour.
Nomura’s Composite
Leading Index (CLI), UBS’ Lead Economic Indicator (LEI) and ABN Amro’s Purchasing Managers’ Index (PMI) all point to a pick-up in growth soon. And CMIE’s capex database, which tracks investments by companies, shows no big slowdown in this space.A lead indicator is a composite of a variety of indices that track activity in vital economic sectors.
And that’s not all. The strong showing of sectors such as auto, cement, steel, capital goods, port traffic along with record telecom subscriber additions supports the strong turnaround thesis of these lead indicators.
After three months of rise on the trot, UBS’ LEI index for India now stands at 2.1; it touched a low of -2.08 last December. The LEI is a composite indicator of variables like government bond yields, M1 money supply, currency risk premium, foreign exchange reserves and stock market gains.
UBS’ economist Philip Wyatt expects a sustained recovery thanks to India’s low levels of excess capacity, private sector indebtedness and non-performing loans. ”With this significant rebound in LEI, we are more confident of a turning point in the industrial cycle by June 2009,” says Mr Wyatt in a research report.
Nomura’s composite leading index (CLI)—used to identify the turning points in the growth rate cycle—rose in the first quarter of 2009 after four consecutive quarterly falls. As the CLI indicates a turnaround in non-agricultural GDP growth rate with a two quarter lead time, the pick-up in the first quarter of 2009 hints at a recovery from June.
ABN Amro’s PMI—an indicator of the country’s manufacturing scene based on a survey of 500 companies—has improved to 49.5 this March from 44 last December. A reading below 50 indicates contraction. The PMI jump to nearly 50 suggests that manufacturing has put the contraction days behind and is poised to enter an expansion phase.
Realty finds room for growth in education
Realty finds room for growth in education
The Economic Times, April 29, 2009, Page 1
Four Realty Firms Plan To Set Up Business Schools Across Country
Abhijit Deb MUMBAI
AT A time when the biggies of real estate are divesting non core businesses, a clutch of mid-level developers are chalking up plans to invest in the ‘recession proof’ education sector. In the last one month, four real estate developers have announced plans of setting up business schools across the country with the combined investment exceeding Rs 500 crore. “It’s a natural progression for a real estate developer to foray into the sector which offers such a tremendous growth potential. There is a shortage of supply in the education sector which we feel we can successfully cater to,” says Pranav Ansal, Chairman, Ansal API. With diminished demand for housing and a cash constraint, it’s a natural progression for many developers with available land banks. The Chennai based R. R Industries, Ahmedabad based Omega Realty, Delhi based Ansal Plaza and Kolhapur based Sanjay Ghodawat group are betting heavily on the `business of education’ to diversify their businesses; a model that has worked successfully in some countries like US and Canada.
The Delhi based Ansal API plans to invest Rs 200 crore in next three to five years for setting up private schools, engineering institute across various centre in the country. The group has already tied up with elearning service provider Educomp and has leased out its three operational schools in Gurgaon to Educomp. The realty major also plans to build school in townships being developed by them.
Similarly, the Ahmedabad based Omega Realty plans to get into business schools - to be named as United World School of Business - with a proposed investment of Rs 105 crores. The three proposed schools in Mumbai, Delhi and Ahmedabad will commence operations in academic session 2009-10.
Another builder to jump into the education bandwagon, the Kolhapur based Sanjay Godhwat Group plans to offer courses in engineering, management and also in the pipeline is an international school. The development of the 150 acre Sanjay Godhwat Institute will happen in three phases with an investment of over Rs 250 crore.
The trend is being seen amongst the builders in south too. Chennai based real estate firm R. R Industries has tied up with National Management School (NMS) which is being set-up by US academics to start 25 business schools across the country with an estimated cost of Rs 9 crore.
Experts say the reason for the rush into education is the burgeoning demand supply gap and also a logical extension into an adjacent category for builders who have the necessary wherewithal. Karan Khemka, principal, of a global strategic advisory boutique explains, “High rate of returns on investment coupled with huge imbalance in demand supply is attracting real estate players towards the sector who will be at ease in setting up the required infrastructure who already have land banks with them”. But the diversification won’t be an easy one, as similar initiatives have flopped in China.
The Economic Times, April 29, 2009, Page 1
Four Realty Firms Plan To Set Up Business Schools Across Country
Abhijit Deb MUMBAI
AT A time when the biggies of real estate are divesting non core businesses, a clutch of mid-level developers are chalking up plans to invest in the ‘recession proof’ education sector. In the last one month, four real estate developers have announced plans of setting up business schools across the country with the combined investment exceeding Rs 500 crore. “It’s a natural progression for a real estate developer to foray into the sector which offers such a tremendous growth potential. There is a shortage of supply in the education sector which we feel we can successfully cater to,” says Pranav Ansal, Chairman, Ansal API. With diminished demand for housing and a cash constraint, it’s a natural progression for many developers with available land banks. The Chennai based R. R Industries, Ahmedabad based Omega Realty, Delhi based Ansal Plaza and Kolhapur based Sanjay Ghodawat group are betting heavily on the `business of education’ to diversify their businesses; a model that has worked successfully in some countries like US and Canada.
The Delhi based Ansal API plans to invest Rs 200 crore in next three to five years for setting up private schools, engineering institute across various centre in the country. The group has already tied up with elearning service provider Educomp and has leased out its three operational schools in Gurgaon to Educomp. The realty major also plans to build school in townships being developed by them.
Similarly, the Ahmedabad based Omega Realty plans to get into business schools - to be named as United World School of Business - with a proposed investment of Rs 105 crores. The three proposed schools in Mumbai, Delhi and Ahmedabad will commence operations in academic session 2009-10.
Another builder to jump into the education bandwagon, the Kolhapur based Sanjay Godhwat Group plans to offer courses in engineering, management and also in the pipeline is an international school. The development of the 150 acre Sanjay Godhwat Institute will happen in three phases with an investment of over Rs 250 crore.
The trend is being seen amongst the builders in south too. Chennai based real estate firm R. R Industries has tied up with National Management School (NMS) which is being set-up by US academics to start 25 business schools across the country with an estimated cost of Rs 9 crore.
Experts say the reason for the rush into education is the burgeoning demand supply gap and also a logical extension into an adjacent category for builders who have the necessary wherewithal. Karan Khemka, principal, of a global strategic advisory boutique explains, “High rate of returns on investment coupled with huge imbalance in demand supply is attracting real estate players towards the sector who will be at ease in setting up the required infrastructure who already have land banks with them”. But the diversification won’t be an easy one, as similar initiatives have flopped in China.
Morgan Stanley buys 5.1% stake in Unitech
Morgan Stanley buys 5.1% stake in Unitech
The Economic Times, April 29, 2009, Page 1
Our Bureau MUMBAI
US-BASED foreign institutional investor, Morgan Stanley, has bought a 5.1% equity stake in realty major Unitech for Rs 400 crore through the QIP route. Unitech has placed 10.4 crore shares with the fund, subsequent to which the latter holds 5.2% stake in the former, according to disclosures filed with the Bombay Stock Exchange (BSE). Before the placement, Morgan Stanley was holding 19.4 lakh shares, or 0.1%, in the Delhi-based company.
Unitech has allotted a total of 42.1 crore shares a price of Rs 38.50 per share, including premium of Rs 36.50, to Rs 44 qualified institutional buyers, raising Rs 1,621 crore to repay part of its debt. The shares have been allotted under the recently closed QIP issue which, according to merchant banking sources, was subscribed more than two times. SSKI was appointed as the main book-running lead manager for the issue. On Tuesday, Unitech shares closed 2% down at Rs 43 on BSE, 12% higher than the QIP price. The stock has risen 20% in the past one month, though it is still quoting at a sharp discount to the peak of Rs 338 recorded on May 5 ‘08.
The placement would substantially dilute promoters’ stake in Unitech. According to the company’s shareholding data available as on March 31 ‘09, promoters held 64.5% stake, while foreign institutional investors owned 8.2% equity.
The Economic Times, April 29, 2009, Page 1
Our Bureau MUMBAI
US-BASED foreign institutional investor, Morgan Stanley, has bought a 5.1% equity stake in realty major Unitech for Rs 400 crore through the QIP route. Unitech has placed 10.4 crore shares with the fund, subsequent to which the latter holds 5.2% stake in the former, according to disclosures filed with the Bombay Stock Exchange (BSE). Before the placement, Morgan Stanley was holding 19.4 lakh shares, or 0.1%, in the Delhi-based company.
Unitech has allotted a total of 42.1 crore shares a price of Rs 38.50 per share, including premium of Rs 36.50, to Rs 44 qualified institutional buyers, raising Rs 1,621 crore to repay part of its debt. The shares have been allotted under the recently closed QIP issue which, according to merchant banking sources, was subscribed more than two times. SSKI was appointed as the main book-running lead manager for the issue. On Tuesday, Unitech shares closed 2% down at Rs 43 on BSE, 12% higher than the QIP price. The stock has risen 20% in the past one month, though it is still quoting at a sharp discount to the peak of Rs 338 recorded on May 5 ‘08.
The placement would substantially dilute promoters’ stake in Unitech. According to the company’s shareholding data available as on March 31 ‘09, promoters held 64.5% stake, while foreign institutional investors owned 8.2% equity.
Parsvnath aims to reduce its debt by a quarter
Parsvnath aims to reduce its debt by a quarter
Business Standard, April 29, 2009, Page 8
Business Standard, April 29, 2009, Page 8
Govt review says stimulus packages spurred growth
Govt review says stimulus packages spurred growth
The Financial Express, April 29, 2009, Page 1
Economy Bureau, New Delhi
Stock taking by the government of its three stimulus packages shows they have nudged up GDP growth, but officials said they would reserve final assessment on the impact until industrial output figures for March come through by early May.
Cabinet secretary KM Chandrasekhar, the country’s senior-most civil servant, met the secretaries of finance, commerce, industry and micro, small & medium enterprises (MSME) to evaluate the implementation of various fiscal measures announced since December. The meeting also reviewed the impact of various rate cuts announced by RBI.
The central bank has estimated the combined value add of the fiscal stimulus packages—including a 4% cut in central excise and 2% in service tax—along with the rate cuts at 3% of GDP. The centre and RBI have between them released Rs 4.62 lakh crore into the economy. Emerging from the secretary-level meeting a senior official said, “Progress and issues related to implementation of various measures were discussed. The meeting also took note of bankers reducing lending rates.”
The index of industrial production fell by 1.2% in February—a 15-year low. IIP grew at just 2.8% between April 2008 and February 2009, compared with a robust 8.8% in the same period of 2007-08. But Macquarie Research said in a note on Tuesday that India’s industrial production is likely to rebound and may post double-digit growth on the back of the fiscal and monetary measures. “March data will probably post a 10% month-on-month gain,” it said.
Ministry of statistics & programme implementation secretary Pronab Sen told FE, “We don’t know what is happening to investments. While cement consumption is going strong, trade data suggests there is not much growth in machinery and equipment. There is a lot of conflicting data. We are still waiting for the IIP (March) and agriculture (third advance estimates) data to come in, so it is difficult to come out with an estimate for GDP at present.”
Tuesday’s meeting is the latest in a series held by the Chandrasekhar with central officials, state chief secretaries, industry chambers and banks to ascertain the progress of various measures.
RBI has cut repo (the rate at which it lends to commercial banks) by 425 basis points since mid-September, while it reduced reverse repo (the rate which banks park their funds with RBI) by 275 basis points in the same period. However, commercial banks have reduced their prime lending rates by only half as much and industry chambers have been demanding single-digit interest rates.
Banks have lent about Rs 8,500-9,000 crore to the MSME sector as a part of the stimulus packages, said MSME secretary Dinesh Rai at an Assocham function on Tuesday. “Of the Rs 7,000 crore refinance facility extended to Small Industries Development Bank of India, Rs 4,300 crore has already been released to commercial banks,” Rai said.
The Macquarie note said some industries like motor vehicles, cement and steel are already showing signs of increased activity, “though India’s structurally broad industrial base suggests that (industrial production) will need a bit more time for the year-on-year growth rates to be firmly in the black, and rising”.
RBI governor D Subbarao said in Washington on Monday that effective implementation of the stimulus packages was a key challenge. “There are several challenges on the way forward: implementing the fiscal stimulus packages, particularly stepping up public investment; revival of private investment demand; unwinding of fiscal stimulus in an orderly manner; maintaining the flow of credit while ensuring credit quality; preserving financial stability along with provision of adequate liquidity; and ensuring an interest rate environment that supports the return of the economy to a high growth path,” he had said.
The Financial Express, April 29, 2009, Page 1
Economy Bureau, New Delhi
Stock taking by the government of its three stimulus packages shows they have nudged up GDP growth, but officials said they would reserve final assessment on the impact until industrial output figures for March come through by early May.
Cabinet secretary KM Chandrasekhar, the country’s senior-most civil servant, met the secretaries of finance, commerce, industry and micro, small & medium enterprises (MSME) to evaluate the implementation of various fiscal measures announced since December. The meeting also reviewed the impact of various rate cuts announced by RBI.
The central bank has estimated the combined value add of the fiscal stimulus packages—including a 4% cut in central excise and 2% in service tax—along with the rate cuts at 3% of GDP. The centre and RBI have between them released Rs 4.62 lakh crore into the economy. Emerging from the secretary-level meeting a senior official said, “Progress and issues related to implementation of various measures were discussed. The meeting also took note of bankers reducing lending rates.”
The index of industrial production fell by 1.2% in February—a 15-year low. IIP grew at just 2.8% between April 2008 and February 2009, compared with a robust 8.8% in the same period of 2007-08. But Macquarie Research said in a note on Tuesday that India’s industrial production is likely to rebound and may post double-digit growth on the back of the fiscal and monetary measures. “March data will probably post a 10% month-on-month gain,” it said.
Ministry of statistics & programme implementation secretary Pronab Sen told FE, “We don’t know what is happening to investments. While cement consumption is going strong, trade data suggests there is not much growth in machinery and equipment. There is a lot of conflicting data. We are still waiting for the IIP (March) and agriculture (third advance estimates) data to come in, so it is difficult to come out with an estimate for GDP at present.”
Tuesday’s meeting is the latest in a series held by the Chandrasekhar with central officials, state chief secretaries, industry chambers and banks to ascertain the progress of various measures.
RBI has cut repo (the rate at which it lends to commercial banks) by 425 basis points since mid-September, while it reduced reverse repo (the rate which banks park their funds with RBI) by 275 basis points in the same period. However, commercial banks have reduced their prime lending rates by only half as much and industry chambers have been demanding single-digit interest rates.
Banks have lent about Rs 8,500-9,000 crore to the MSME sector as a part of the stimulus packages, said MSME secretary Dinesh Rai at an Assocham function on Tuesday. “Of the Rs 7,000 crore refinance facility extended to Small Industries Development Bank of India, Rs 4,300 crore has already been released to commercial banks,” Rai said.
The Macquarie note said some industries like motor vehicles, cement and steel are already showing signs of increased activity, “though India’s structurally broad industrial base suggests that (industrial production) will need a bit more time for the year-on-year growth rates to be firmly in the black, and rising”.
RBI governor D Subbarao said in Washington on Monday that effective implementation of the stimulus packages was a key challenge. “There are several challenges on the way forward: implementing the fiscal stimulus packages, particularly stepping up public investment; revival of private investment demand; unwinding of fiscal stimulus in an orderly manner; maintaining the flow of credit while ensuring credit quality; preserving financial stability along with provision of adequate liquidity; and ensuring an interest rate environment that supports the return of the economy to a high growth path,” he had said.
‘India’s steel demand to beat global trend, consumption to rise by 2%’
‘India’s steel demand to beat global trend, consumption to rise by 2%’
The Financial Express, April 29, 2009, Page 13
London: Bucking the global trend, India’s steel consumption is likely to rise by nearly 2% to 53.5 million tonne in 2009, the World Steel Association has said.
In its short-range outlook for global steel sector, the Association representing 180 steel producers across the world, said that India’s steel consumption is estimated to grow by 1.7 per cent to 53.5 million tonnes (mt) this year against 526 mt in 2008. “India is projected to have a positive growth of (about) 2 % for apparent steel use in 2009,” a statement from the World Steel Association (WSA) said.
It however, did not ascertain the reasons for the growth though experts said it would be mainly on account of improved demand from automobile and construction sectors.
Globally, WSA has forecast steel consumption declining by 14.9 % to 1,018.6 mt as against 1,197 mt a year-ago.
The association, however, expects the demand to stabilise in latter part of 2009, leading to a mild recovery in 2010.
“... (The) improvement in steel consumption for the second half of 2009 will depend on the effects of government packages, the continued stabilisation of financial systems and a return of some consumer confidence,” WSA Economics committee chairman Daniel Novegil said.
The WSA board reviewed the forecast for 2009 at its meeting in London last week. Other than India, the countries that are expected to report a positive growth rate in usage of steel during the year are Egypt and Iran.
The US is likely to report the biggest decline of 36.6% in steel demand at 61.8 million tonnes against 97.5 million a year-ago. Japan and Europe face similar fall.
—PTI
The Financial Express, April 29, 2009, Page 13
London: Bucking the global trend, India’s steel consumption is likely to rise by nearly 2% to 53.5 million tonne in 2009, the World Steel Association has said.
In its short-range outlook for global steel sector, the Association representing 180 steel producers across the world, said that India’s steel consumption is estimated to grow by 1.7 per cent to 53.5 million tonnes (mt) this year against 526 mt in 2008. “India is projected to have a positive growth of (about) 2 % for apparent steel use in 2009,” a statement from the World Steel Association (WSA) said.
It however, did not ascertain the reasons for the growth though experts said it would be mainly on account of improved demand from automobile and construction sectors.
Globally, WSA has forecast steel consumption declining by 14.9 % to 1,018.6 mt as against 1,197 mt a year-ago.
The association, however, expects the demand to stabilise in latter part of 2009, leading to a mild recovery in 2010.
“... (The) improvement in steel consumption for the second half of 2009 will depend on the effects of government packages, the continued stabilisation of financial systems and a return of some consumer confidence,” WSA Economics committee chairman Daniel Novegil said.
The WSA board reviewed the forecast for 2009 at its meeting in London last week. Other than India, the countries that are expected to report a positive growth rate in usage of steel during the year are Egypt and Iran.
The US is likely to report the biggest decline of 36.6% in steel demand at 61.8 million tonnes against 97.5 million a year-ago. Japan and Europe face similar fall.
—PTI
Cartel in steel sector needs to be probed: competition panel
Cartel in steel sector needs to be probed: competition panel
The Financial Express, April 29, 2009, Page 13
New Delhi: Alleging the government of distorting competition in the steel sector, a CCI-sponsored study has suggested that the competition watchdog should investigate the HR coil industry, which is dominated by a few top producers.
The study prepared by Indicus Analytics said, “The CCI should investigate and take a view on how to deal with potential anti-competitive behaviour in one segment of the industry ... the HR coil segment is quite apt since it has high concentration level”.
The study said there is no doubt about the concentration level in certain products market “such as hot rolling coils is significant with the dominance of a few at the top”.
Hot Rolling (HR) coils are a vital steel input for consumer industries like automobiles. The study further added that the Competition Commission of India should also probe in captive mining and priority allocation of mines to some players, which is an indirect means of subsidisation.
“The difficulty with captive mining as a concept lies in the fact that it first creates a dominant position for the mineral and allows non-competitive pricing,” the report said. Though the industry is concentrated in some segments, the study said, setting up an independent steel regulator will be “against the standard philosophy of regulation”.
At present, to informally control the steel price, the government works on the assumption that there are a few steel producers and they can be talked to uniformly cut the prices to fulfill its objective.
however, the study said that this way the government is bringing in more distortions than competition in the steel industry. “Such government intervention related distortions are likely to adversely affect investment plans of incumbents,” the study said.
—PTI
The Financial Express, April 29, 2009, Page 13
New Delhi: Alleging the government of distorting competition in the steel sector, a CCI-sponsored study has suggested that the competition watchdog should investigate the HR coil industry, which is dominated by a few top producers.
The study prepared by Indicus Analytics said, “The CCI should investigate and take a view on how to deal with potential anti-competitive behaviour in one segment of the industry ... the HR coil segment is quite apt since it has high concentration level”.
The study said there is no doubt about the concentration level in certain products market “such as hot rolling coils is significant with the dominance of a few at the top”.
Hot Rolling (HR) coils are a vital steel input for consumer industries like automobiles. The study further added that the Competition Commission of India should also probe in captive mining and priority allocation of mines to some players, which is an indirect means of subsidisation.
“The difficulty with captive mining as a concept lies in the fact that it first creates a dominant position for the mineral and allows non-competitive pricing,” the report said. Though the industry is concentrated in some segments, the study said, setting up an independent steel regulator will be “against the standard philosophy of regulation”.
At present, to informally control the steel price, the government works on the assumption that there are a few steel producers and they can be talked to uniformly cut the prices to fulfill its objective.
however, the study said that this way the government is bringing in more distortions than competition in the steel industry. “Such government intervention related distortions are likely to adversely affect investment plans of incumbents,” the study said.
—PTI
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