India IT sector is facing the heat of the rising rupee

By Vipin Agnihotri

Winter in setting in India but the IT sector is facing the heat of the rising rupee. It’s quite clear when you see their second quarter results, which have just come in.

In terms of statistic, Infosys and TCS have reported a net profit of Rs 10.74 billion (increase of 19.8 per cent) and Rs 12.53 billion (increase of 22.8 per cent) respectively. While some mid sized firms like Mastek and iGate showed decent gains as well. In fact Mastek managed over 18 per cent growth in their net profits of Rs 251.2 million.

Point to be noted here is that there were remarkable increases of more than 126 per cent in the net profits of iGate previously. However, all in all, pure volume growth and pricing of the company while still encouraging, are far behind previous quarter numbers. In part because of the rising rupee, these IT companies weren’t able to put a magnificent show with their top lines.

In my opinion, Infosys profitability has increased but its still below the expected level. All this is happening because of rupee appreciation. It is worth mentioning in this regard that for every 1 per cent increase in rupee against the dollar, the operating margin of Indian IT sector is getting affected by around 40 to 50 basis points.

With the rupee gaining around 2.5 per cent since the US rate cut last month and more than 15 per cent over the last one year, one can understand the pinch. If experts are to be believed, attrition and a slowdown in the US economy have made it even more challenging for these software giants to manage their margins.

It has come into the notice of The India Street that most companies had tremendously increased their currency hedging positions in the last two quarters but still the increase is not enough to stop the rupee from denting their bottomlines. In my opinion, IT companies like Infosys really need to take appropriate steps such as increasing utilization rates and billing rates in order to counter the move and drive profitability.

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Who is buying up all of the Satyam and Infosys shares?

By Vipin Agnihotri

Thanks to tremendous corporate performances and strong macro-economic growth in the last few years, the Indian equity market is attracting a lot more investors. Because of this, the shareholder base of India Inc has grown dramatically over the last year period.

If experts are to be believed, IT companies Satyam Computer Services and Infosys Technologies have registered the biggest increase on this count, more than doubling their shareholder bases over this period.

It has come into the notice of The India Street that between April 1,2006 and March 31, 2007, the shareholder base of Satyam increased 165 per cent from 95,356 shareholders to 252,000. It is worth mentioning in this regard that shareholder base of Satyam in 2004 was higher, at 132,000, than in 2006.

Unlike Satyam, which has seen its shareholder base up, down and up again, Infosys Technologies on the other hand has seen a steady increase in these numbers- it expanded 149 per cent to 489,000. Keeping aside, Satyam and Infosys Technologies, Wipro and TCS have seen only a modest increase in the number of shareholders – of 27 per cent and 22 per cent, respectively.

In my opinion, increasing institutional participation and the entry of new domestic investors are pushing this trend. Point to be noted here is that over the past four years, the number of FIIs registered with the Securities and Exchange Board of India (SEBI) has risen almost 100 per cent from 600 to nearly 1,100, while the number of registered FII sub accounts has touched 3,300 compared to nil in 2004.

Another significant factor that must be taken into account is the number of mutual funds investor folios has also increased to 30 million compared to around 24 million in March 2006. According to experts, this goes against the traditional wisdom that the increasing Sensex has not attracted many new retail investors.

Among other BSE Sensex companies, the shareholder bases of Cipla, L&T, Tata Steel and Hindalco have increased in the range of 24-83 per cent. On the other hand, State Bank of India and HDFC Bank have seen one per cent increase.

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Casting couch in corporate world of India

By Vipin Agnihotri

If you thought that the ‘casting couch’ syndrome was only limited to Bollywood in India, you are in for a real shock. It has come into the notice of The India Street that high profile corporate men and government officials of India are also looking out for opportunities to satiate their carnal desires within the office premises.

In my opinion, official power is the tool that they often use with impunity to subvert the modesty of their female colleagues. Take the case of Parul (name changed) a bright intellectual girl- entered the big bad corporate world at an age of 21 with a promise to prove her talent as a true blue professional. But she was not aware that the professional space dominated by men would demand her dignity and not the intellect to achieve her dreams.

In the case of Parul, his sexually frustrated boss expected her to perform for him more in the bedroom than in the boardroom. You may not believe at first but it’s true that majority of cases of sexual harassment in India go unreported.

Recently, an ex KPMG director filed a complaint against Vikram Uttam Singh, head of Financial Advisory Services & Senior Partner of KPMG India, for sexual abuse at workplace. Uttam Singh allegedly often made obscene gestures towards the woman director.

This particular case clearly signifies that male mindset of control & power over men’s body is still there. As a matter of fact, men still consider women as an object of entertainment. If experts are to be believed, the Indian government needs to implement laws with vigour.

Five years ago, another high profile case that ironically increased public awareness was the one involving the former Executive Assistant Rekha Maximovitch and the Infosys’ Director & Head of sales and marketing Phaneesh Murthy.

Business houses should have a grievance cell dealing with the issue of sexual harassment. What’s more, working women have to be made aware of their rights. Last but not the least, it is of paramount importance that companies in India incorporate well-defined policies against sexual indiscretion within the office space.

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Vadodara: Hot real estate destination

By Dr Suvrokamal Dutta

Not so long ago the banyan city, Vadodara, hardly figured on the list of hot real estate destinations. As a matter of fact, land, commercial and residential property was easily available at highly affordable rates. But in last two or three years, the huge inflow of industrial investment from across sectors and growing interest of real estate developers, retailers and IT giants has put Vadodara on the growth trajectory.

If experts are to be believed, it’s tough to find a good piece of land in the best areas at the right price in the city with a population of just over 15 lakh. It has come into the notice of The India Street that the Gujarat government is already working on a plan to develop Vadodara as a knowledge city to attract several leading companies such as DLF, Raheja, Infosys and Satyam to invest in the city.

In my opinion, Vadodara has huge growth potential but it faces competition from Ahmedabad and other tier-II cities, which are preferred investment destinations for leading IT players. The non-resident Gujarati investment pouring into the city will no doubt drive the real estate growth.

In terms of statistic, land prices in Vadodara have appreciated by almost 50 percent in the last two-three years. In addition, the residential and commercial property prices in Vadodara too have shot up in the last two years. Theoretically speaking, the cost of office spaces have increased to Rs 2500-3000 per square feet now from Rs 1500-1700 two years ago. The residential property prices have jumped to Rs 1500-2000 per square feet in key areas as against Rs 1000-2000 per square feet two years ago.

It is worthwhile pointing that in Vadodara, investment in residential projects mainly comes from the actual buyers, as the concept of second home is yet to pick up here. According to Raghu Romeo of Raghu real estate, the retail as well as office space demand in the city is expected to gain momentum. Several tier-III cities in the population bracket of 60,000 to one million are on the radar of the leading retailers.

The newly developing areas such as Sindhrot, Waghodia Road, Padra Road and Sevasi are emerging as promising options for investors. The proximity of the city to Ahmedabad and Surat, the key investment hot spots and the improving civic infrastructure too are fuelling the growth.

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India Economic News Weekly Report, August 3-9, 2007

Courtesy of Sanjay Garg

The biggest economic news of the week by far, at least globally, is the virtual collapse of the sub-prime mortgage market in the U.S. caused by large numbers of people defaulting on their home mortgages. What made it much more worrisome is the uncertainty about who actually holds large chunks of these mortgages and are therefore exposed to a large drop in value. In Germany, Allianz SE revealed today that it has $2.3 billion of exposure to the U.S. subprime market, Deutsche Bank AG lost 30% of the value in its asset-backed securities WDS ABS Fund; WestLB Mellon Asset Management suspended redemptions from its asset-backed securities ABS Fund.

A pool of German banks stepped in this week to shield IKB Industriebank AG from further losses after the lender's Rhinleland Funding Capital Corp. bought 14 billion euros ($19.11 billion) in fixed-income securities — some of them backed by subprime mortgages. The bank's chief executive and chief financial officer have both resigned. French bank BNP Paribas SA announced the suspension of three asset-backed securities funds, saying it could not value them accurately. A number of Australian Hedge Funds are close to a virtual collapse. America's largest home loan lender, Countrywide Financial said yesterday that it is running dangerously short of money and this news caused its shares to fall by 13.8% in Friday pre-market trading.

As far as the Indian economy is concerned, things are moving along quite nicely. Here is the news for the past week:

Bosch India plans to invest Rs 250 crore in unit
Bosch is working on advanced technologies designing new Electronic Control Unit for diesel and Gasoline engines, and other automotive applications such as portable navigation systems, semi autonomous parking systems and adaptive cruise control

Infosys to open 200 seat BPO unit in Mexico
This is a first for Infosys in that part of the wolrd. The centre will be set up in the city of Monterrey

Pizza Hut plans 60-70 more outlets in India
There are currently 135 Pizza Hut outlets across 34 cities such as Delhi, Mumbai, Bangalore, Chennai etc

India: Fun Cinemas to pump in Rs 5 billion for expansion into tier 2, 3 cities
The chain plans to operate another 300 screens by the end of FY 2011 across 23 cities.

India: Pragya religious channel to launch by mid-September
The company has been beaming test signals from 30 July. Programming will be centered around spirituality and religion.

India: Tunga group to launch Rs 40 crore, 55- room 4-star hotel in Mumbai
The same group also owns Hotel Tunga Regency, Tunga International and Tunga Paradise, all in Mumbai.

Galaxy Hotel to invest Rs 750 cr for lifestyle hotels in India
Land cost is extra. The first hotel in Gurgaon has 80 rooms which range in size from 370-750 sq ft, offers a spa and high end shopping

Indus Inns sets up 150-room no frill property in Bangalore.
Cost is 7 crores and it will charge Rs 1,500 per night.

35 Indian airports to get modern facilities
This includes international terminal buildings, parking bays, expansion of cargo facilities and ultra-modern runways

3 reservoirs, water treatment plants to come up at Rajarhat, near Kolkata
Residents in the area will soon have acces to fresh water

Blackstone set to invest 100 mln usd in India's Gokaldas Exports
Gokaldas is one of India's largest apparel exporters, supplier to Nike, Adidas,GAP and Abercrombie and Fitch

India to provide Rs 1,600 mn fellowship for 600 tribal students
Financial assistance of Rs 8,000 per month for the initial two years and Rs. 9,000 per month for the remaining period of the fellowship. Beside this fellowship amount, a contingency fund for humanities and social sciences is also provided at the rate of Rs 10,000 per annum for the initial two years of the fellowship and Rs 20,500 annually for the remaining period of research work.

Ramky group setting up Rs 170 crore pharma incubation centres
Ramky is developing a pharma city near Visakhapatnam and expects to see investment of Rs 5,000 crore

Apollo Group India, DKV AG launch health insurance company
DKV AG is Europe's largest health insurer. For this venture, the partners have invested Rs 108 crore to set up six regional offices in major metros and expand to 25 category A cities by the end of the second year. By 2010, it expects to have a presence in over 100 cities across the country.

Bombardier of Canada setting up €25 million metro coach factory in Vadodara
The very first foreign direct investment in the metro coach manufacturing sector and this new facility will make propulsion equipment for metro coaches.

India's Sierra Atlantic acquires US-based ArrAy, Inc.
The combined entity will have over 1,500 employees worldwide and has global delivery centres in Guangzhou and Shanghai in China.

All Nippon Airways to launch first Tokyo-Mumbai non-stop flight
This flight is an all-business, 36-seat configuration, non-stop and 6 days a week

India's Sensex rises 375 points, crosses 15,000 again
Trading sentiment was buoyant on Wednesday as IT and refinery stocks powered the sensex

DuPont sets $11 million up health solutions plant in India
Location is Baddi in Himachal Pradesh and it will manufacture animal and human healthcare solutions. .

HK firm to build $125 mn wind farm in Gujarat
CLP Holdings is Hong Kong's biggest power utility and the capacity of this plant is 100.8 mw

French IT services giant Steria buys outsourcing firm Xansa in £456m deal
Xansa has been winning a lot of business recently on the strength of its 5,038 employees in India

Wipro of India to open two BPO centres in China
The two centres, in Shanghai and Chengdu, will employ 300 and will provide financial services and accounting works

India: Nirula's to open 150 more outlets by 2009
Nirula’s currently runs 52 outlets in North India and will ramp up to 200 in the next 2-3 yrs.

Accentia of India buys 2 US companies
Both companies, GRS Physicians Billing Services and GRS Systems, provide billing and collection services in the US healthcare insurance field.

India: Birla Science Centre to expand IT research
The centre has tied up with universities in the European Union for conducting research programmes. From 7, they will soon go to 15 scholars.

India's major ports record 15% growth in cargo handling
Handled 164 million tonnes during April to July when compared with 143 million tonnes for the corresponding period last year.

India's Kale Consultants buys Zero Octa of U.K.
Kale is interested in Zero Octa's end-to-end solutions to airlines and its presence in Europe, North America and Asia Pacific

Qatar Airways expands Indian route to tier 2, 3 cities
Will add Nagpur now and Ahmedabad 3 months later. Who would have thought that Nagpur would be an international destination?

Infosys to invest Rs 30 crores to expand Chandigarh facility
Will ramp up headcount from 2,000 to 3,000.

Anjani cements lines up Rs 170 cr for capacity expansion
This is a great turnaround case. Took over a sick, non-operating unit and turned it into a healthy dividend paying company within 7 years.

Isagro Asia to set up Rs 50-cr facility in Gujarat
This includes establishing a process development laboratory and strengthening agronomical research facility.

Think3 of italy sets up shop in India
The company is starting with a12-member sales and marketing team which will ramped up to 60 by the year-end. It will also establish a 100-seat centre in Gurgaon in the next two months.

India: Pulse output likely to go up by 12% to 51.25 lakh tonnes
Good news. More daal for everyone.

India succesfully tests indigenous cryogenic stage
A cryogenic stage is used as the topmost stage in a GSLV launch of heavy satelltes weighing up to 2,500 kg.

Wipro buys US-based Infocrossing for $598 mn
Wipro is currently sitting on cash reserves of about Rs 3,200 crore or approx $800 million as of June 30, 2007

Wipro to set up major hub in Bhubhaneshwar, India
This one can accomodate 15,000 including the facilities to train 3,000 persons

10 million saplings planted in one day in U.P. India
Led by Mayawati, hundreds of thousands took part in a massive greening exercise across Uttar Pradesh Tuesday

68 marine police stations coming up in India
The Coast Guard and police forces of 10 maritime States and five Union Territories will set these up to enforce laws in inshore waters up to five nautical miles.

India's Akkayya to invest Rs 5000 crores for 108 E-Inns
The E-Inns are a smoke-free, alcohol-free and meat-free hotels

India to set up first Arctic research base
India has had a presence in Antarctica since 1981 but this is the first in the Arctic.

Reliance to hire Indian armed forces ex-servicemen
Reliance Industries has a capacity to hire almost 60,000 & Reliance Retail requires almost five lakh employees

Indian Rlys approves 244 proposals for additional earnings of Rs 305.29 crore
Secret to Lalu's success? Delegate more decision making powers to zonal offices and generate additional revenues.

University of Hyderabad plans to double enrollment
In the current academic year, two new schools of study – School of Medical Sciences and School of Engineering Sciences and Technology – have been added.

Microsoft India centre working on Windows 7
The India center has already come up with XP Service Pack 3 (SP3), which will benefit 400-500 million users globally and filing 180 patents.

India: IT jobs will double to 3.2 m in four years, says Nilekani
It took 30 years to get to 1.6 million. For comparison, the U.S. has 5.6 million in the hitech sector which includes infotech, biotech etc.

Tata Indian Hotels shifting to rupee tariff as rupee strengthens
Plans to up room count to around 18,000 in 36 months. Considering foray into Vietnam, Indonesia, Fiji

Reliance expects 3 trillion cubic feet gas from North-East coast block
The company has already drilled eight wells and made six discoveries in this block. Government projections indicated that India will be self-sufficient in natural gas by 2009.

Tata Steel to buy 35% in Australian co for A$100 million
The Mozambique Coal Project is a listed company and the output will be supplied to Tata's Corus facilities in the UK and Europe and also to the company’s enhanced requirement in India in the future

Apollo to build 17 bed hospital inside Hyderabad airport
Medical facilities like ultrasound, ECG and dental care will be offered. Once can almost see foreign visitors getting their teeth cleaned at low cost in between connections!

Domino’s India building Rs 9 crore pizza dough making facility
At present, there are 148 outlets in the country and another 50 would be added by March 2008. Additional pizza dough making facilities will come up in Bangalore and on the outskirts of Mumbai.

India: Apollo building 3 hospitals in Mumbai at Rs 600 cr
This is joint venture with a subsidiary of the JP Morgan group. Other projects include a 200-bed orthopaedic hospital in North Chennai and hospitals in Ahmedabad, Bhubaneshwar, Nashik, and Visakhapatnam. In addition, the company is setting up training facilities for nurses at Chennai and Madurai.

India projects a million biotech jobs by 2010
GoI aims to create world-class human capital, build quality infrastructure and generate $5 billion revenues.

ICICI Bank India to invest $370 millon for western hub
This will be in Gandhinagar. A 31-storey building, full range of financial services and direct employment of 30,000.

HDFC Bank India taps rural BPO firm
Will set up a 50 person center in Puttaparthy, followed by five more in rural areas of Tamil Nadu, Karnataka and Andhra Pradesh

State Bank of India plans to triple ATM network
Will go from 7,200 to 25,000. SBI also expects to issue 1 million debit cards per month.

India: Tata Motors set to set up world's largest bus plant
Possible sites for the plant include Goa and Karnataka

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