Tuesday, May 5, 2009
MKT CATCHES GLOBAL FEVER, JUMPS 731 PTS | 12K: NO BULL, IT’S FOR REAL
MKT CATCHES GLOBAL FEVER, JUMPS 731 PTS 12K: NO BULL, IT’S FOR REAL
The Economic Times, May 5, 2009, Page 1
The buzz was back on Dalal Street as FIIs pumped in Rs 1,417 crore to help Sensex notch its biggest single-day gain in six months. All eyes are now on the grand finale of India’s biggest reality show—the general elections—on May 16
Our Bureau MUMBAI
INDIAN shares surfed the wave of bullishness in global equity markets to post their biggest single-day gain in six months on Monday, despite some concerns that hopes for a speedy economic recovery may be just frothy optimism.
The 30-share BSE Sensex rose 6.4%, or 731.5 points, to close at a seven-month high of 12,134.75, with foreign institutional investors (FIIs) largely responsible for the spectacular surge in stock prices. Shares from the metal, banking and IT sectors were the best performers, with the sectoral indices g
aining 8-9%. “This is purely a global rally, but I am not too worried about valuations (in India),” said Rashesh Shah, chairman, Edelweiss Capital.
The Nifty closed at 3,654, rising 5.2%, as FIIs bought shares worth Rs 1,417 crore, according to provisional data.
The positive mood in the global markets was enhanced on Monday by data showing that China’s manufacturing rose for the first time in nine months. Key markets in Asia rose 3-6% while those in Europe gained 1-4%. The Dow Jones Industrial Average in New York had gained over 2% in early trading.
The popular belief is that a recovery in China will help pull the global economy out of recession by creating demand. The CLSA China Purchasing Managers’ Index for April gained on a mix of a slower rate of decline in export orders and government stimulus spending of 4 trillion yuan.
“The extreme chaos of 2008 seems to be behind us. Till last month, players were comfortable with the price, but were wondering if it was the right time to buy. Now the consensus seems to be that it is indeed the right time,” Mr Shah said.
Foreign investors have kept up their pace of purchases of Indian shares, but a May 1 report by Citigroup Global Markets says Hong Kong and China are the more favoured destinations in Asia.
Jayesh Gandhi, executive director of Morgan Stanley Asset Management, was of the view that a “substantial part of the rally had to do with an impending economic recovery; the rest may be due to liquidity”.
“Economic parameters would increasingly get better hereon.”
But many economists and market analysts have warned that the surge in stock prices globally and in India could be a short-lived reaction to the fiscal packages announced by governments. There are also murmurs that some of the unaccounted money parked in Swiss banks by Indian entities could be returning home, fearing tighter banking regulations in future.
“A decent chunk of overseas money that has flowed into equities over the past few weeks has been coming through the participatory note (P-note) route, and there is reason to believe that a good portion of this could be unaccounted money finding its way back into the country,” said a dealer at an institutional brokerage who did not want to be named.
Investors who do not want to take exposure to India directly invest through registered FIIs, which invest on their behalf and issue them P-notes as shares cannot be held by unregistered portfolio investors. The Securities and Exchange Board of India had put curbs on P-notes in 2007, but revoked it last year, hoping to attract more capital flows.
The immediate trigger for Indian shares will be the announcement of election results on May 16. Just a few weeks ago, most players were of the view that concerns of a hung Parliament may slow down the rally. That has not happened, leading many to believe that election results may not matter after all. “The market had priced in too much pessimism over the poll results,” said Rakesh Jhunjhunwala, one of India’s biggest individual investors. “My feeling is that the results could throw up a (positive) surprise. Things won’t be as bad as most people fear; we will not see a khichdi government,” he added.
The Economic Times, May 5, 2009, Page 1
The buzz was back on Dalal Street as FIIs pumped in Rs 1,417 crore to help Sensex notch its biggest single-day gain in six months. All eyes are now on the grand finale of India’s biggest reality show—the general elections—on May 16
Our Bureau MUMBAI
INDIAN shares surfed the wave of bullishness in global equity markets to post their biggest single-day gain in six months on Monday, despite some concerns that hopes for a speedy economic recovery may be just frothy optimism.
The 30-share BSE Sensex rose 6.4%, or 731.5 points, to close at a seven-month high of 12,134.75, with foreign institutional investors (FIIs) largely responsible for the spectacular surge in stock prices. Shares from the metal, banking and IT sectors were the best performers, with the sectoral indices g
aining 8-9%. “This is purely a global rally, but I am not too worried about valuations (in India),” said Rashesh Shah, chairman, Edelweiss Capital.The Nifty closed at 3,654, rising 5.2%, as FIIs bought shares worth Rs 1,417 crore, according to provisional data.
The positive mood in the global markets was enhanced on Monday by data showing that China’s manufacturing rose for the first time in nine months. Key markets in Asia rose 3-6% while those in Europe gained 1-4%. The Dow Jones Industrial Average in New York had gained over 2% in early trading.
The popular belief is that a recovery in China will help pull the global economy out of recession by creating demand. The CLSA China Purchasing Managers’ Index for April gained on a mix of a slower rate of decline in export orders and government stimulus spending of 4 trillion yuan.
“The extreme chaos of 2008 seems to be behind us. Till last month, players were comfortable with the price, but were wondering if it was the right time to buy. Now the consensus seems to be that it is indeed the right time,” Mr Shah said.
Foreign investors have kept up their pace of purchases of Indian shares, but a May 1 report by Citigroup Global Markets says Hong Kong and China are the more favoured destinations in Asia.
Jayesh Gandhi, executive director of Morgan Stanley Asset Management, was of the view that a “substantial part of the rally had to do with an impending economic recovery; the rest may be due to liquidity”.
“Economic parameters would increasingly get better hereon.”
But many economists and market analysts have warned that the surge in stock prices globally and in India could be a short-lived reaction to the fiscal packages announced by governments. There are also murmurs that some of the unaccounted money parked in Swiss banks by Indian entities could be returning home, fearing tighter banking regulations in future.
“A decent chunk of overseas money that has flowed into equities over the past few weeks has been coming through the participatory note (P-note) route, and there is reason to believe that a good portion of this could be unaccounted money finding its way back into the country,” said a dealer at an institutional brokerage who did not want to be named.
Investors who do not want to take exposure to India directly invest through registered FIIs, which invest on their behalf and issue them P-notes as shares cannot be held by unregistered portfolio investors. The Securities and Exchange Board of India had put curbs on P-notes in 2007, but revoked it last year, hoping to attract more capital flows.
The immediate trigger for Indian shares will be the announcement of election results on May 16. Just a few weeks ago, most players were of the view that concerns of a hung Parliament may slow down the rally. That has not happened, leading many to believe that election results may not matter after all. “The market had priced in too much pessimism over the poll results,” said Rakesh Jhunjhunwala, one of India’s biggest individual investors. “My feeling is that the results could throw up a (positive) surprise. Things won’t be as bad as most people fear; we will not see a khichdi government,” he added.
FIIs go on buying spree as domestic institutions sell
FIIs go on buying spree as domestic institutions sell
The Financial Express – Corporates & Markets, May 5, 2009, Page 1
fe Bureau, Mumbai
The contrasting trend in the Indian equity markets is getting starker. While overseas investors have been seen making consistent purchases in the Indian market, domestic institutional investors have been selling off.
In the month of April, according to the Securities & Exchange Board of India (Sebi) website, overseas investors have been net purchasers to the tune of Rs 6,508 crore (around $1.3 billion), the most since October 2007. And, according to the data provided by the BSE, domestic institutions have been net sellers to the extent of Rs 782 crore. A similar trend was noticed on Monday as well.
“There has been high cash level with Asia dedicated and GEM fund, which gets deployed, hence the buying,” said Amitabh Chakraborty, president (equity), Religare Capital Markets. “Overseas investors are seeing India as a long-term bet and are willing to take risks. The risk apetite has also improved over the year and the flows have begun to happen. The system, despite the meltdown, has liquidity with funds of more than $1 trillion being stashed in liquid funds. These are searching for investment destinations and emerging markets are one of the best places to go,” said a senior representative of one of the large FIIs in India.
On the other hand, domestic institutional investors see this as an opportunity to book profits and re-enter the markets at lower levels. “We think that post elections there could be a correction,” said Jiten Shah, an analyst with a Mumbai-based stock broker. Hence, the contrasting styles. The domestic institutions funds are anyway flush with funds hence their net selling clearly indicates this trend, he added. And according to first cut results, the mutual fund houses have also seen an increase in their asset under management levels.
This contrast can also be seen in the investing styles. According to a study by Kotak Institutional Equities, in the first quarter of 2009, FIIs decreased their positions in the banking and telecom stocks while the domestic insurance companies actually increased their positions these very sectors.
And, mutual funds bought into consumer related sectors while the insurance companies preferred to be net sellers in this sector.
The Financial Express – Corporates & Markets, May 5, 2009, Page 1
fe Bureau, Mumbai
The contrasting trend in the Indian equity markets is getting starker. While overseas investors have been seen making consistent purchases in the Indian market, domestic institutional investors have been selling off.
In the month of April, according to the Securities & Exchange Board of India (Sebi) website, overseas investors have been net purchasers to the tune of Rs 6,508 crore (around $1.3 billion), the most since October 2007. And, according to the data provided by the BSE, domestic institutions have been net sellers to the extent of Rs 782 crore. A similar trend was noticed on Monday as well.
“There has been high cash level with Asia dedicated and GEM fund, which gets deployed, hence the buying,” said Amitabh Chakraborty, president (equity), Religare Capital Markets. “Overseas investors are seeing India as a long-term bet and are willing to take risks. The risk apetite has also improved over the year and the flows have begun to happen. The system, despite the meltdown, has liquidity with funds of more than $1 trillion being stashed in liquid funds. These are searching for investment destinations and emerging markets are one of the best places to go,” said a senior representative of one of the large FIIs in India.
On the other hand, domestic institutional investors see this as an opportunity to book profits and re-enter the markets at lower levels. “We think that post elections there could be a correction,” said Jiten Shah, an analyst with a Mumbai-based stock broker. Hence, the contrasting styles. The domestic institutions funds are anyway flush with funds hence their net selling clearly indicates this trend, he added. And according to first cut results, the mutual fund houses have also seen an increase in their asset under management levels.
This contrast can also be seen in the investing styles. According to a study by Kotak Institutional Equities, in the first quarter of 2009, FIIs decreased their positions in the banking and telecom stocks while the domestic insurance companies actually increased their positions these very sectors.
And, mutual funds bought into consumer related sectors while the insurance companies preferred to be net sellers in this sector.
Sensex tops 12-k mark as global markets rally
Sensex tops 12-k mark as global markets rally
The Financial Express, May 5, 2009, Page 1
Markets Bureau, Mumbai
The rally in emerging markets, especially Russia and China, last week was reflected in Indian markets on Monday, which reopened after a four-day recess. Equity markets jumped to their highest level since October 2008.
The 30-share Sensex of the Bombay Stock Exchange (BSE) topped the psychological 12,000-level to end the trading session at 12,134.75 points, gaining 731.50 points or 6.41%. The Sensex was the highest gainer among all Asian markets. Similarly, the broader S&P CNX Nifty of the National Stock Exchange (NSE) surged by 180.05 points, or 5.18%, to close the day at 3,654 points.
The rally was part of the extended gains witnessed in Asian markets, which moved up in response to data released by China revealing its industrial output had expanded for the first time in nine months. Late night trends showed the recovery persisting, with US equity markets also rising in early trades.
Leading indicators of India’s industrial output indicate that a recovery could be around the corner. An ABN Amro bank purchasing managers’ index-based survey of 500 companies rose to 53.3 in April from 49.5 in March, pointing to increased activity in the domestic manufacturing sector.
Te latest macroeconomic data showed an improvement in manufacturing activity in the US and Europe, too. The Eurozone manufacturing purchasing managers’ index came in at 36.8 in April, above 33.9 in March. The widely tracked ISM purchasing managers’ index in the US rose to 40.1% in April from 36.3% in March, its highest gain since September 2008.
Bolstered by strong global and domestic macroeconomic data, key equity indices across the Asia-Pacific region rallied higher on Monday to their seven-month closing high. Key benchmark indices in China, Hong Kong, Singapore, Taiwan, and South Korea gained by between 2.09% and 5.82%.
“Overall, the macroeconomic numbers coming in are very encouraging and more positive than they were earlier. So, there has been a clear recovery in investors’ risk appetite resulting in increased fund allocation for emerging market equities. Funds that have been sitting on the sidelines have now started coming in,” said Mirae Asset Global chief executive Arindam Ghosh.
Echoeing a similar view, Birla Sun Life mutual fund co-head of equity investments Ajay Argal said, “The rate of fall of key economic variables has certainly eased in recent times. The latest macroeconomic and corporate earnings results have been better than market expectations, giving hope of a recovery among global investors.”
According to provisional data released by BSE, foreign institutional investors were net buyers of equity worthy Rs 1,417 crore on Monday while domestic institutional investors turned net sellers to the tune of Rs 92.60 crore. Since March 9, 2009, FII’s have bought domestic equity worth Rs 9,840.60 crore.
Market breadth, indicating the overall health of the market, remained positive throughout the trading session with 1,771 stocks in the BSE gaining ground, compared with 770 stocks that declined.
The Financial Express, May 5, 2009, Page 1
Markets Bureau, Mumbai
The rally in emerging markets, especially Russia and China, last week was reflected in Indian markets on Monday, which reopened after a four-day recess. Equity markets jumped to their highest level since October 2008.
The 30-share Sensex of the Bombay Stock Exchange (BSE) topped the psychological 12,000-level to end the trading session at 12,134.75 points, gaining 731.50 points or 6.41%. The Sensex was the highest gainer among all Asian markets. Similarly, the broader S&P CNX Nifty of the National Stock Exchange (NSE) surged by 180.05 points, or 5.18%, to close the day at 3,654 points.
The rally was part of the extended gains witnessed in Asian markets, which moved up in response to data released by China revealing its industrial output had expanded for the first time in nine months. Late night trends showed the recovery persisting, with US equity markets also rising in early trades.
Leading indicators of India’s industrial output indicate that a recovery could be around the corner. An ABN Amro bank purchasing managers’ index-based survey of 500 companies rose to 53.3 in April from 49.5 in March, pointing to increased activity in the domestic manufacturing sector.
Te latest macroeconomic data showed an improvement in manufacturing activity in the US and Europe, too. The Eurozone manufacturing purchasing managers’ index came in at 36.8 in April, above 33.9 in March. The widely tracked ISM purchasing managers’ index in the US rose to 40.1% in April from 36.3% in March, its highest gain since September 2008.
Bolstered by strong global and domestic macroeconomic data, key equity indices across the Asia-Pacific region rallied higher on Monday to their seven-month closing high. Key benchmark indices in China, Hong Kong, Singapore, Taiwan, and South Korea gained by between 2.09% and 5.82%.
“Overall, the macroeconomic numbers coming in are very encouraging and more positive than they were earlier. So, there has been a clear recovery in investors’ risk appetite resulting in increased fund allocation for emerging market equities. Funds that have been sitting on the sidelines have now started coming in,” said Mirae Asset Global chief executive Arindam Ghosh.
Echoeing a similar view, Birla Sun Life mutual fund co-head of equity investments Ajay Argal said, “The rate of fall of key economic variables has certainly eased in recent times. The latest macroeconomic and corporate earnings results have been better than market expectations, giving hope of a recovery among global investors.”
According to provisional data released by BSE, foreign institutional investors were net buyers of equity worthy Rs 1,417 crore on Monday while domestic institutional investors turned net sellers to the tune of Rs 92.60 crore. Since March 9, 2009, FII’s have bought domestic equity worth Rs 9,840.60 crore.
Market breadth, indicating the overall health of the market, remained positive throughout the trading session with 1,771 stocks in the BSE gaining ground, compared with 770 stocks that declined.
Slowdown creates blank space, 50 IT SEZs to be dropped by year-end
Slowdown creates blank space, 50 IT SEZs to be dropped by year-end
The Financial Express, May 5, 2009, Page 5
Arun S, New Delhi
The slowdown in the information technology (IT) space has started affecting the performance of IT-based Special Economic Zones (SEZ) projects too. According to commerce ministry estimates, at least 50 IT/ITeS SEZs, whose developers have little experience or knowledge of the sector’s dynamics, would drop out by 2009-end.
“You could easily expect as much as 50 of the IT/ITeS SEZs to drop off by 2009-end,” commerce secretary G K Pillai told FE.
Developers without core competence in IT, and especially those belonging to the realty sector, are finding it tough to attract clients to their SEZs. Sources said at least 30-40% of the space meant for supply in sq ft-terms in IT/ITeS SEZs has become “excess capacity” and therefore is lying vacant due to lack of demand from IT/ITeS exporters.
According to consultants, while IT/ITeS SEZ developers without core competence in IT (like the realty players) continued to be in the ‘denial mode’ on the reduction in value of their space, even long after the slowdown in the IT space began, developers with specialisation in IT quickly understood the needs of the IT clients. Typically, even an SEZ developed by IT-specialists like Infosys or Wipro could house other IT/ITeS companies as clients/units.
“Selling IT space is a totally different ball game altogether. It is not like selling other commercial space. Developers with IT experience understand this better than other developers,” said Tapan Sangal, senior manager, PricewaterhouseCoopers.
“They (developers with specialisation in IT) understand that IT clients are more cost-conscious now, especially with the slowdown and dollar appreciation. Besides, IT clients are also more comfortable with a developer who knows their needs and are able to help them in marketing their products. The other developers think developing an SEZ is everything, but that approach does not work anymore,” Sangal said.
This means, pure play IT/ITeS companies who are developing such SEZs will be in a better position to tide over the slowdown without surrendering their SEZs.
But those who will have a relatively tougher time would include several firms, who are otherwise engaged in sectors like realty, infrastructure, logistics, publishing, healthcare, steel, pharmaceuticals, hotels, equipment-making and even stud farms, but have chosen to enter the fray to develop IT/ITeS SEZs. All these players had entered the business of developing SEZs to take advantage of the IT boom in the previous years.
Another reason is that IT/ITeS units housed in the Software Technology Parks and EOUs do not feel the need to shift immediately to SEZs to avail of tax breaks as the EOU and STPI schemes have been extended till March 2010. Besides, the government is also positively inclined to extending these schemes further, sources said.
Already, realty major DLF has decided to return four of their IT SEZs.
Other biggies in the real estate industry owning SEZs are expected to follow suit as some of them have had talks with the government in this regard, sources said.
On its part, the government is considering a proposal to relax the norm for the required built-up area for IT/ITeS SEZs in tier II and tier III cities. The minimum built up area for IT/ITeS SEZs is one million sq ft. There is also a proposal to extend the validity of approvals, thereby giving more time for the developers to complete construction in their SEZs. But obviously only the new government would take these up.
Despite the poor showing by developers without prior experience in the IT/ITeS space, the government will not frame any guidelines stating that in order to develop an IT/ITeS SEZ, the developer should have considerable experience. “It is best left to market forces,” Pillai said.
Consultants working on these projects said several of these developers, hard-pressed for funds, prefer to surrender the SEZ status of these plots, return the tax benefits availed, and then either dispose off the land to pay their debts (in extreme cases, as there are hardly any buyers of land now) or build residential units there for which there is demand.
“While people are re-looking at IT/ITeS SEZ projects, the clear agenda in the short to medium term is to explore whether there is better utilisation of land by changing the project nature to residential, hotels or hospitals. If, however, in the long term, there is still an opportunity for commercial real estate based on geography and location, they may decide to hold the land (earlier meant for IT.ITeS SEZs),” said Ajit Krishnan, partner, Ernst and Young.
“They (developers) want to exit the SEZ space now and keep the land vacant for better purposes. If they keep the land vacant, they can always re-apply for SEZ status as and when the demand for SEZs picks up,” another consultant said.
The slowdown in the IT space is quite evident as according to National Association of Software and Services Companies or Nasscom, the $50 billion software and services export revenue target for the Indian IT sector by 2010 is likely to be delayed by 3-4 quarters.
Commerce ministry, the nodal agency for giving clearance to SEZ projects, did not want to deny anyone the opportunity of taking their share of the IT/ITeS pie. Therefore, any developer meeting the minimum net worth criteria, and with the ability to provide plug and play facilities, round-the-clock air-conditioning and with a built up area of 1 million square feet with a viable project, was given the approval. What went in favour of such SEZs was that they are relatively pollution-free and easier to set up.
As a result, IT/IT-enabled services sectors have bagged the maximum share in the total number of approvals. Of the 552 SEZ projects that have received formal approvals (having procured the stipulated minimum area of land for such projects without any legal hassles), 341 have gone to the IT/ITeS sector. This is 61.77% of the total such approvals. Of the 274 SEZs that have been notified and have begun operations, 181 (or 66%) are from the IT/ITeS. There are also 11 IT/ITeS SEZs with in-principal approval (for a viable project, but without the required land).
The Financial Express, May 5, 2009, Page 5
Arun S, New Delhi
The slowdown in the information technology (IT) space has started affecting the performance of IT-based Special Economic Zones (SEZ) projects too. According to commerce ministry estimates, at least 50 IT/ITeS SEZs, whose developers have little experience or knowledge of the sector’s dynamics, would drop out by 2009-end.
“You could easily expect as much as 50 of the IT/ITeS SEZs to drop off by 2009-end,” commerce secretary G K Pillai told FE.
Developers without core competence in IT, and especially those belonging to the realty sector, are finding it tough to attract clients to their SEZs. Sources said at least 30-40% of the space meant for supply in sq ft-terms in IT/ITeS SEZs has become “excess capacity” and therefore is lying vacant due to lack of demand from IT/ITeS exporters.
According to consultants, while IT/ITeS SEZ developers without core competence in IT (like the realty players) continued to be in the ‘denial mode’ on the reduction in value of their space, even long after the slowdown in the IT space began, developers with specialisation in IT quickly understood the needs of the IT clients. Typically, even an SEZ developed by IT-specialists like Infosys or Wipro could house other IT/ITeS companies as clients/units.
“Selling IT space is a totally different ball game altogether. It is not like selling other commercial space. Developers with IT experience understand this better than other developers,” said Tapan Sangal, senior manager, PricewaterhouseCoopers.
“They (developers with specialisation in IT) understand that IT clients are more cost-conscious now, especially with the slowdown and dollar appreciation. Besides, IT clients are also more comfortable with a developer who knows their needs and are able to help them in marketing their products. The other developers think developing an SEZ is everything, but that approach does not work anymore,” Sangal said.
This means, pure play IT/ITeS companies who are developing such SEZs will be in a better position to tide over the slowdown without surrendering their SEZs.
But those who will have a relatively tougher time would include several firms, who are otherwise engaged in sectors like realty, infrastructure, logistics, publishing, healthcare, steel, pharmaceuticals, hotels, equipment-making and even stud farms, but have chosen to enter the fray to develop IT/ITeS SEZs. All these players had entered the business of developing SEZs to take advantage of the IT boom in the previous years.
Another reason is that IT/ITeS units housed in the Software Technology Parks and EOUs do not feel the need to shift immediately to SEZs to avail of tax breaks as the EOU and STPI schemes have been extended till March 2010. Besides, the government is also positively inclined to extending these schemes further, sources said.
Already, realty major DLF has decided to return four of their IT SEZs.
Other biggies in the real estate industry owning SEZs are expected to follow suit as some of them have had talks with the government in this regard, sources said.
On its part, the government is considering a proposal to relax the norm for the required built-up area for IT/ITeS SEZs in tier II and tier III cities. The minimum built up area for IT/ITeS SEZs is one million sq ft. There is also a proposal to extend the validity of approvals, thereby giving more time for the developers to complete construction in their SEZs. But obviously only the new government would take these up.
Despite the poor showing by developers without prior experience in the IT/ITeS space, the government will not frame any guidelines stating that in order to develop an IT/ITeS SEZ, the developer should have considerable experience. “It is best left to market forces,” Pillai said.
Consultants working on these projects said several of these developers, hard-pressed for funds, prefer to surrender the SEZ status of these plots, return the tax benefits availed, and then either dispose off the land to pay their debts (in extreme cases, as there are hardly any buyers of land now) or build residential units there for which there is demand.
“While people are re-looking at IT/ITeS SEZ projects, the clear agenda in the short to medium term is to explore whether there is better utilisation of land by changing the project nature to residential, hotels or hospitals. If, however, in the long term, there is still an opportunity for commercial real estate based on geography and location, they may decide to hold the land (earlier meant for IT.ITeS SEZs),” said Ajit Krishnan, partner, Ernst and Young.
“They (developers) want to exit the SEZ space now and keep the land vacant for better purposes. If they keep the land vacant, they can always re-apply for SEZ status as and when the demand for SEZs picks up,” another consultant said.
The slowdown in the IT space is quite evident as according to National Association of Software and Services Companies or Nasscom, the $50 billion software and services export revenue target for the Indian IT sector by 2010 is likely to be delayed by 3-4 quarters.
Commerce ministry, the nodal agency for giving clearance to SEZ projects, did not want to deny anyone the opportunity of taking their share of the IT/ITeS pie. Therefore, any developer meeting the minimum net worth criteria, and with the ability to provide plug and play facilities, round-the-clock air-conditioning and with a built up area of 1 million square feet with a viable project, was given the approval. What went in favour of such SEZs was that they are relatively pollution-free and easier to set up.
As a result, IT/IT-enabled services sectors have bagged the maximum share in the total number of approvals. Of the 552 SEZ projects that have received formal approvals (having procured the stipulated minimum area of land for such projects without any legal hassles), 341 have gone to the IT/ITeS sector. This is 61.77% of the total such approvals. Of the 274 SEZs that have been notified and have begun operations, 181 (or 66%) are from the IT/ITeS. There are also 11 IT/ITeS SEZs with in-principal approval (for a viable project, but without the required land).
‘FDI inflows into India to take a hit this financial year’
‘FDI inflows into India to take a hit this financial year’
The Financial Express, May 5, 2009, Page 4
At a time of the global slowdown, 52% of the total respondents of a recent survey on foreign direct investment (FDI) in India carried out by global consultants Booz & Company and AMCHAM said that the country is an attractive FDI destination. However, 60% of them were concerned about poor infrastructure, while 55% opined that lack of clarity in the FDI guidelines trouble them while making investments. Other worries included red-tapism and shortage of skilled professionals. FE's Arun S spoke to Jai Sinha, managing director, India, Booz & Co, on these issues. (Excerpts)
FDI into India declined in five of the last six months till March 2009 (barring January 2009). How will it fare in the coming months?
The over-emphasis on monthly FDI figures is misplaced. The average FDI (including reinvested earnings) is now about $2.5-3 billion a month, leading to $33-36 billion a year. There is a fundamental optimism about FDI in India. India will not go back to FDI of $5-billion-per-annum kind of a situation. Instead of investing in one go, they may invest smaller amounts initially. The underlying resilience of the investment will continue owing to Indian market's attractiveness. India's GDP may not be growing at 9%, but even at 6% it is higher compared with many other countries. In absolute terms, I don't think India will have the same FDI inflows in 2009-10 as it had in 2008-09. But in terms of how it is overall compared with the global figure, it will be okay.
Why has FDI into other sectors, especially services, grown dramatically faster than manufacturing? Will this trend continue?
Since the services sector in India is attractive, the growth in FDI is very dramatic. But manufacturing has a lot more constraints. Transforming capital into assets or output is more difficult in manufacturing than in services. Manufacturing is more impacted by constraints in infrastructure, policy delays due to red-tapism, etc than services.
What are the policy restrictions affecting FDI inflow?
Addressing infrastructure constraints at local levels are more important than macro-level policy issues. Issues like land acquisition, power and logistics can subtract 50% from profitability. These are the main challenges that will have to be addressed at local and the state government levels. If you want to get more FDI, especially into manufacturing, then focus on infrastructure development, talent pool and local policy. If you can't solve all the issues in manufacturing, segment them either by geography or by industries, like it was attempted in the SEZ policy. Select some leading sectors to begin with. The government needs to ensure that there is consistency irrespective of the change in the political situation. It is important to give confidence to investors that there are consensus and consistency regarding policy direction.
Do you feel the need for further simplification of FDI guidelines?
Lots of automatic approvals are taking place. So, at that level things have been simplified. But the ability to bring capital into the country is not everything. What is more important is the ability to transform it into output. We may be able to bring in FDI through certain automatic sectors. But if I bring in, say, FDI worth $500 million and need to get 500 permits to convert the same into a functioning manufacturing unit, then what's the point. The National policy allows you to bring in FDI. The rest depends on local policies--how easy or difficult they are.
Due to the slowdown, do you see any new sources of FDI emerging?
Investments from the UK, the US and NRIs account for over 50% in terms of sources of FDI in India. But as the FDI pie expands, new sources of capital, including from the Middle East, are emerging. This did not occur six or seven years back. More important than the actual flow is the conversion. The investment community has acknowledged that India is an attractive FDI destination.
What is your take on liberalization of FDI in the retail sector?
In the long term, my leaning is towards liberalization of FDI in retail. India's service sector in retail is very competent. I also understand the compulsions and constraints. There are many small and marginal traders in the business and you don't want to drive them out overnight. I definitely will not advocate opening up of everything tomorrow. The political backlash would be such that it will become unsustainable. We should have a consensus so that it stays for a long term. The biggest enemy of
FDI is inconsistency. If I know the direction and the pace at which it is moving, I can plan. But if you go zigzag, then I find it difficult to invest in such a country.
What are your views on the importance of transparency regarding FDI from tax havens like Mauritius and Cyprus?
In every system people can figure out the loopholes and exploit them. This is a quasi-legal framework issue and I have no comments. My concerns are regarding solving other fundamental problems.
Govt, realtors must provide low-cost, rural housing: Assocham
Govt, realtors must provide low-cost, rural housing: Assocham
The Hindu Business Line, May 5, 2009
Press Trust of India / New Delhi
At a time when India's real estate sector is reeling under depressed market conditions, industry body Assocham has suggested that the government and realty players should join hands to meet the demand for 47.43 million low-cost houses by 2012 in rural areas.
There is huge demand for low-cost houses in rural areas, which needs to be fulfilled. The Indira Awaas Yojana Scheme, (IAY) under the umbrella of ‘Bharta Nirman’ programme, should be restructured, Assocham President Sajjan Jindal said.
"There is a strong case for private sector participation to bring in right technology for such types of houses and ensure fast completion of the projects," he added.
Citing the data of the Ministry of Rural Development, the chamber said since the inception of the scheme, 171 lakh houses have been constructed with an expenditure of Rs 1,89,898.56 crore. However, the desired results under the scheme have not been fully achieved as there are problems like availability of land, clearances by the forest department, delay in release of funds and lack of basic amenities in the constructed houses; as a result, most of the houses remain abandoned, it said.
Among the states which face the maximum shortage of houses in rural areas are Bihar (4.21 million), Assam (2.24 million), Andhra Pradesh (1.35 million) and Uttar Pradesh (1.32 million), the study said.
The Hindu Business Line, May 5, 2009
Press Trust of India / New Delhi
At a time when India's real estate sector is reeling under depressed market conditions, industry body Assocham has suggested that the government and realty players should join hands to meet the demand for 47.43 million low-cost houses by 2012 in rural areas.
There is huge demand for low-cost houses in rural areas, which needs to be fulfilled. The Indira Awaas Yojana Scheme, (IAY) under the umbrella of ‘Bharta Nirman’ programme, should be restructured, Assocham President Sajjan Jindal said.
"There is a strong case for private sector participation to bring in right technology for such types of houses and ensure fast completion of the projects," he added.
Citing the data of the Ministry of Rural Development, the chamber said since the inception of the scheme, 171 lakh houses have been constructed with an expenditure of Rs 1,89,898.56 crore. However, the desired results under the scheme have not been fully achieved as there are problems like availability of land, clearances by the forest department, delay in release of funds and lack of basic amenities in the constructed houses; as a result, most of the houses remain abandoned, it said.
Among the states which face the maximum shortage of houses in rural areas are Bihar (4.21 million), Assam (2.24 million), Andhra Pradesh (1.35 million) and Uttar Pradesh (1.32 million), the study said.
Top steel firms raise prices
Top steel firms raise prices
Business Standard, May 5, 2009, Page 6
BS Reporter / Kolkata
Steel majors Tata Steel and Rashtriya Ispat Nigam Ltd (RINL) have raised prices by Rs 300 to Rs 1,000 a tonne for long products, used in the construction industry, marking the first rise since prices crashed in the middle of last year.
Tata Steel has increased spot prices Rs 300 to Rs 500 a tonne on some long products, while public sector steel producer RINL has increased rebar prices by Rs 500 to Rs 1,000 a tonne. Rebars, which are also long products, are currently ruling at Rs 32,000-33,000 a tonne.
CG Patil, director (commercial), RINL, said this was the first increase since July-August, when prices started dropping. The increase was on the back of lower production owing to power cuts. Patil said this was seasonal and the market could see some correction again during the coming monsoon, when demand would be lower. A Tata Steel spokesperson said this was a market correction.
The price increase was effective May 1. A Steel Authority of India Ltd (SAIL) spokesperson said the company was yet to raise prices. Patil said the coming quarter looked better, as prices in Europe had stabilised.
Secondary steel producers have also increased prices. Bipin Vohra, chairman and managing director, SPS Steel, said the company had raised the price of TMT bars (also a long product) by Rs 800 a tonne. SPS manufactures around 40,000 tonnes of TMT bars and is the second-largest player in the eastern region at the retail level.
Secondary steel makers account for around 50 per cent of the total long product output of around 32 million tonnes.
Vohra said the price increase was temporary, as demand had surged on account of production cuts. “Once normal production is resumed, prices will come down,” he said. SPS TMT bars are currently priced at Rs 36,500 a tonne.
Business Standard, May 5, 2009, Page 6
BS Reporter / Kolkata
Steel majors Tata Steel and Rashtriya Ispat Nigam Ltd (RINL) have raised prices by Rs 300 to Rs 1,000 a tonne for long products, used in the construction industry, marking the first rise since prices crashed in the middle of last year.
Tata Steel has increased spot prices Rs 300 to Rs 500 a tonne on some long products, while public sector steel producer RINL has increased rebar prices by Rs 500 to Rs 1,000 a tonne. Rebars, which are also long products, are currently ruling at Rs 32,000-33,000 a tonne.
CG Patil, director (commercial), RINL, said this was the first increase since July-August, when prices started dropping. The increase was on the back of lower production owing to power cuts. Patil said this was seasonal and the market could see some correction again during the coming monsoon, when demand would be lower. A Tata Steel spokesperson said this was a market correction.
The price increase was effective May 1. A Steel Authority of India Ltd (SAIL) spokesperson said the company was yet to raise prices. Patil said the coming quarter looked better, as prices in Europe had stabilised.
Secondary steel producers have also increased prices. Bipin Vohra, chairman and managing director, SPS Steel, said the company had raised the price of TMT bars (also a long product) by Rs 800 a tonne. SPS manufactures around 40,000 tonnes of TMT bars and is the second-largest player in the eastern region at the retail level.
Secondary steel makers account for around 50 per cent of the total long product output of around 32 million tonnes.
Vohra said the price increase was temporary, as demand had surged on account of production cuts. “Once normal production is resumed, prices will come down,” he said. SPS TMT bars are currently priced at Rs 36,500 a tonne.
DLF likely to sell 50% in Saket hotel for Rs 75 cr
DLF likely to sell 50% in Saket hotel for Rs 75 cr
The Economic Times, May 5, 2009, Page 7
Sanjeev Choudhary & Meenakshi Verma Ambwani, NEW DELHI
IN LINE with its stated strategy of selling hotel projects to raise cash, DLF is close to divesting 50% stake in its soon-to-be-opened 120-room hotel at Saket, New Delhi for around Rs 75 crore to a wealthy individual, people familiar with the matter said. Less than a month ago, the real estate company sold another 60-room property, located adjacent to its mall at Saket, for around Rs 55 crore.
DLF’s 120-room hotel has a management contract with international hotel chain Hilton and will sport the brand Garden Inn. The construction is almost complete and the hotel is due to open in the current quarter. People with knowledge of the proposed deal said an understanding has been reached, but a final agreement is yet to be signed with the buyer and no money has changed hands yet. The likely buyer is understood to be a wealthy individual, who is not involved with any hotel chain.
As per people familiar with the proposed deal, the hotel has been valued at Rs 150 crore, or Rs 1.25 crore a room. The 60-room hotel sold recently fetched around Rs 1 crore a room.
DLF’s smaller rival Unitech too sold its 198-room property in Gurgaon recently for Rs 230 crore, translating into a valuation of Rs 1.16 crore a room.
A DLF spokesman denied the development, saying: “This (proposed sale of 50% equity) is not true, we have no such plans.” But DLF vice-chairman Rajiv Singh had on Saturday told an analyst conference call that the company plans to sell some of its hospitality projects. Mr Singh though didn’t name any property specifically.
DLF hopes to raise Rs 5,500 crore through sale of “non-strategic assets,” including hotels, land parcels and wind power. This is part of its “portfolio adjustments towards liquidity preservation and de-leveraging” exercise.
DLF is in talks with multiple potential buyers to sell 8-9 hotel plots across India to raise around Rs 900 crore, one person briefed on the matter said. The entire effort at generating cash through asset sale is aimed at ensuring that other more important or ‘strategic’ business of the company such as construction of residential projects go unhindered.
The Economic Times, May 5, 2009, Page 7
Sanjeev Choudhary & Meenakshi Verma Ambwani, NEW DELHI
IN LINE with its stated strategy of selling hotel projects to raise cash, DLF is close to divesting 50% stake in its soon-to-be-opened 120-room hotel at Saket, New Delhi for around Rs 75 crore to a wealthy individual, people familiar with the matter said. Less than a month ago, the real estate company sold another 60-room property, located adjacent to its mall at Saket, for around Rs 55 crore.
DLF’s 120-room hotel has a management contract with international hotel chain Hilton and will sport the brand Garden Inn. The construction is almost complete and the hotel is due to open in the current quarter. People with knowledge of the proposed deal said an understanding has been reached, but a final agreement is yet to be signed with the buyer and no money has changed hands yet. The likely buyer is understood to be a wealthy individual, who is not involved with any hotel chain.
As per people familiar with the proposed deal, the hotel has been valued at Rs 150 crore, or Rs 1.25 crore a room. The 60-room hotel sold recently fetched around Rs 1 crore a room.
DLF’s smaller rival Unitech too sold its 198-room property in Gurgaon recently for Rs 230 crore, translating into a valuation of Rs 1.16 crore a room.
A DLF spokesman denied the development, saying: “This (proposed sale of 50% equity) is not true, we have no such plans.” But DLF vice-chairman Rajiv Singh had on Saturday told an analyst conference call that the company plans to sell some of its hospitality projects. Mr Singh though didn’t name any property specifically.
DLF hopes to raise Rs 5,500 crore through sale of “non-strategic assets,” including hotels, land parcels and wind power. This is part of its “portfolio adjustments towards liquidity preservation and de-leveraging” exercise.
DLF is in talks with multiple potential buyers to sell 8-9 hotel plots across India to raise around Rs 900 crore, one person briefed on the matter said. The entire effort at generating cash through asset sale is aimed at ensuring that other more important or ‘strategic’ business of the company such as construction of residential projects go unhindered.
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