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30th Issue The Editorial Date: 19th May,2012 By Ashwin Kumar Lot of changes have come in the marketss with emerging trends ,withdrawl of FIIs and the global issues and its implications on domestic and international markets. With the chief aim of being acceptable and worthyful we have incorporated corporate news and economy news and also market wach to more be able to read and understand the markets presently . NEWS FOR USE By Namita Katariya
Market news
Cabinet clears Micro Finance Bill; RBI to regulate MFIs The Union Cabinet approved a bill to regulate the micro finance industry and bring the micro lenders under the purview of the Reserve Bank.The draft Bill, which was circulated for public comments in July last year, had proposed making RBI the regulator for the sector.It would be mandatory for micro finance institutions (MFI) to be registered with the Reserve Bank and have a minimum net-owned funds of Rs 5 lakh.In addition, a Micro-Finance Development Council will be set up to advise the government on formulation of policies, The draft Bill also proposes that any MFI, which is not a company registered under the Companies Act, 1956, and which becomes a systemically important micro-finance institution, shall convert its institution into a company registered under the Companies Act, 1956, with or without a licence, under Section 25 of the Act.The Reserve Bank will cancel the certificate of registration granted to a micro-finance institution if it fails to comply with the directives or conditions, the draft Bill states.The government had earlier introduced the Micro Financial Sector Bill in the LokSabha in March, 2007. However, the Bill lapsed when the term of the 14th LokSabha expired in 2009.
Securitisation norms to help boost mkt: Fitch The final guidelines on securitisation transactions can promote long-term growth of the securitisation market, provided there is clarity on the tax treatment side of the pass-through certificates (PTCs), Fitch Ratings has said.Securitisation involves pooling of homogeneous assets and the subsequent sale of the cash flows from such asset pools to investors.The RBI had issued the final norms for securitisation transactions. It asked banks to conduct regular stress-tests on their securitisation exposure to ensure that banks are not exceeding their prudential limits.Singh said the greater due diligence requirement in the new norms will also make it unattractive and has the potential to reduce new issuance volume in the country.
RBI asks exporters to sell 50% of forex earnings In order to arrest the declining value of the rupee, the Reserve Bank today asked exporters to sell 50 per cent of their retained foreign exchange earning."On a review of the scheme, it has been decided that 50 per cent of the balances in the Exchange Earners' Foreign Currency Account (EEFC) accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder," RBI said in a notification.As per the existing rules, an exporter is allowed to retain 100 per cent of their earning into foreign currency. Following a series of actions by the central bank, the rupee today recovered by a hefty 60 paise to 53.24 against the US dollar in early trade from yesterday's close of 53.82. Par panel for better coordination to check money laundering Concerned over possible flow of tainted money in capital markets, a Parliamentary committee suggested setting up of monitoring and coordination mechanism by all regulatory and intelligence agencies including RBI, SEBI and Enforcement Directorate to deal with the menace of money laundering. The Committee is headed by former Finance Minister and senior BJP leader YashwantSinha.It further said that "all the regulatory and intelligence agencies including the RBI, SEBI, FIU (Ind), the Enforcement Directorate, the Director of Revenue Intelligence and Investigation Wing of Income Tax Department should set up a monitoring/coordination mechanism for this purpose. No FIPB nod required for FIIs to invest in commodity exchanges
FM rolls back duty on jewellery Government rolled back the one per cent excise duty levy on branded or unbranded precious metal jewellery sacrificing Rs 6 billion and deferred implementation of anti-tax avoidance rules by a year as a sop to foreign institutional investors.Finance Minister Pranab Mukherjee, even while standing firm on the on the Vodafone tax issue, addressed foreign investors' concerns saying the retrospective tax amendment will not be used to reopen cases where the assessment orders have been finalised.Jewellery traders all over the country had gone on a long strike in protest against the one per cent central excise on branded and unbranded jewellery.Thewithdrawl of the 1 per cent excise duty and some other changes in excise and customs duties would entail a revenue loss of Rs 6 billion. Implementation of GAAR provisions deferred Giving relief to investors, Finance Minister PranabMukherjee deferred the implementation of General Anti-Avoidance Rules (GAAR) to check tax evasion by one year.The GAAR provisions will now apply to income of Financial Year 2013-14 and subsequent years.The Committee has already held several rounds of discussion with various stakeholders including the Foreign Institutional Investors. "After examining the recommendations of the Standing Committee on GAAR provisions in the DTC Bill 2010, I propose to amend the GAAR," he said. India soon to export 1 mntonne of sugar India, world's second biggest sugar producer, had in March allowed mills to export 1 million tons of sugar to ease a surplus.The global economic crisis, the sovereign debt crisis in Europe and the economic slowdown in developed economies including US had adversely impacted demand for India's exports.Even though exports in March this year declined by 5.7 per cent - the steepest fall in three years - the export target of US$ 300 billion was met in 2011-12 fiscal, he said.Oil import bill in 2011-12 touched US$ 162 billion while gold imports cost US$ 60 billion.Trade deficit increased by 55.8 percent. DoT moves cabinet note on NTP 2012 The DoT is learnt to have moved the draft Cabinet note on National Telecom Policy, 2012, which aims at de-linking spectrum from licences among other proposals."Draft cabinet note on NTP has been sent to cabinet for approval," a senior telecom ministry official told PTI. The policy, if approved, will replace 13 year-old New Telecom Policy 1999 through which telecom sector is governed. DoT has also sought approval for decision on certain issued relating to the introduction of Unified Licences.Under NTP 2012, it has been proposed to de-link spectrum from licences, reduce number of different licences, give industry liberal mergers and acquisition norms and remove roaming charges burden from consumers
Corporate news
'Pvtairlines exploiting passengers by raising fares' Noting that private airlines had raised fares exorbitantly in the wake of Air India strike, members in the RajyaSabha voiced concern over the matter.Raising the matter during Zero Hour, Mukhtar Abbas Naqvi (BJP) said passengers were facing harassment due to cancellation of Air India flights on one hand and hike in fares by private airlines on the other.e matter has been brought to the notice of the Civil Aviation Minister and I hope some concrete steps will be taken and private airlines told to resist from such activities.
2G: No offence made out against us, says Essar The promoters of EssarGroup told a Delhi court that no offence of cheating is made out against them as the government had not found any irregularity and illegality in granting 2G licences to Loop Telecom.Government found there is no irregularity and illegality in giving licence to this company. Before licences were issued, a full examination takes place and it is clear from the stand of the government that whole thing was probed and then licences were given. The CBI, in its charge sheet filed on December 12 last year, had named Essar Group promoters Ravi Ruia and AnshumanRuia and Loop Telecom promoters I P Khaitan and KiranKhaitan, besides Essar Group Director (Strategy and Planning) VikashSaraf as accused in the case. Air India pilots' stir continues, 20 flights cancelled
Ramcos System
Ramco Systems, one of India's largest pure-play IT products companies, has been burning cash for years, because of global competition and plain old bad luck. But the company, piloted by CEO P.R. Venketrama Raja, kept investing in R&D. Can it finally make it big? The year 1997 was memorable for Ramco Systems. The launch of its first full-fledged enterprise resource planning (ERP) product, called Marshal 3.0, was only part of the reason. The other part was getting Microsoft founder Bill Gates to launch it during a visit to India. It was a coup of sorts, as Gates rarely launched other companies' products, and his involvement was interpreted by the market as a vote for the quality of Marshal 3.0. Initial sales were brisk.
The company, it appeared, was finally heading somewhere. Ramco Systems was set up in 1992 as the research and development (R&D) division of Ramco Industries. Hived off as a separate company in 1999, Ramco Systems was a dream come true for P.R. Venketrama Raja, whose family owns the Chennai-based Ramco Group, a maker of cement and textile products.
THE PROBLEM Despite good products, Ramco Systems has not been able to make it big THE SHORTCOMING Lack of product differentiation in a market dominated by well established global players THE CHALLENGE Continue investing in R&D to develop technologies to take on the competition
Between 1994 and 1997, with hardly any billings, Ramco Systems spent more than Rs100 crore, employed over 1,000 people, and designed Marshal 3.0 The product did not fare well in India, either. Ramco Systems then refined the product and brought out new versions, but the market remained indifferent. "At that point, most entrepreneurs would have backed out, but not Raja," says Ramamoorthy. Between 1994 and 1997, with hardly any billings, Ramco Systems spent more than Rs 100 crore, employed over 1,000 people, and designed Marshal 3.0. "The product Bill Gates launched was world-class and could take on the best of the competition," says Raja. But his company had no time to rest on its laurels. The increasing use of Internet meant the future belonged to browser-based products, and new languages such as Java were emerging. "Marshal 3.0 was designed on client server architecture, and developed entirely on a Microsoft platform," says Shyamala Jayaraman, Senior Vice President, R&D, Ramco Systems. "Changes in technology gave the new product at best a twoyear market window." That was not enough time to recover the money spent on the product. As if that was not bad enough, Y2K fears turned the market cold. "Most companies across the world postponed large-scale IT investments and focused on making their systems Y2Kcompliant," says Ramamoorthy. By 1998, Ramco Systems's stakeholders were worried about years of losses and no major revenues. Private equity investors, financial institutions, banks and employees began to question whether the company should continue as a pure-play product company or jump on the booming Y2K and software services bandwagon. Raja says: "I was faced with this stark reality. I had to give up my vision or think of a way to overcome the serious disparity in strength and resources in order to compete."
Success in aviation solutions and the ERP product's inability to grab a big market share taught Ramco to differentiate its products His association with management guru C.K. Prahalad came to the rescue. Prahalad prescribed disruptive thinking. Raja began by identifying the typical challenges that small companies faced in the ERP business, where products were complex and required thousands of man years of work. Marshal 3.0, for instance, had 23 modules and 25 million lines of code. To adapt to rapid technological change, all that code would have to be completely rewritten. "While large ERP companies can employ thousands of people and spend billions of dollars to keep pace with these changes, smaller companies like us have to think differently," says Raja. So, Ramco Systems built VirtualWorks, a platform that automated software development. "It lets us develop products that are technologyagnostic, easily adaptable and rapidly scalable with less manpower," says Jayaraman. In other words, VirtualWorks not only levelled the playing field for Ramco Systems but also gave it the technological edge. In 2002, Ramco Systems launched its web-based ERP product, built using VirtualWorks. Around the same time, it also released a niche product called Ramco Aviation Solutions. Today, Ramco is the market leader in the helicopter segment, and among the top three in commercial airlines and in the maintenance, repair and overhaul business. "Ramco Aviation Solutions accounts for 25 per cent of the company's revenues and enjoys a premium in certain markets over SAP and Oracle products," says Thamizha Nambi M.M., the company's Senior Vice President, Business Consulting Group and Aviation Solutions. But the Web-architected ERP product did not do as well as expected. Most big companies had invested millions of dollars in a SAP or Oracle solution and saw little reason to shift to Ramco's product. Besides, there was a preference for multinational players. Even new customers went with SAP or Oracle, because these companies had a huge ecosystem of consultants, product implementers, and training institutes. Ramco Systems had no such ecosystem to propel demand. The success of Ramco Aviation Solutions and the failure of the ERP product to grab a large share of the market taught Ramco Systems a valuable lesson. "We learnt that the company can succeed against big players by avoiding a monolithic approach, and instead adopting product differentiation," says Ramamoorthy. In 2004, the company launched Ramco DecisionWorks, a business intelligence platform which aids management-level decision making. A few more years of losses ensued, but the company survived thanks to the support of group companies such as Ramco Industries and Madras Cements. The rise of cloud computing has helped Ramco Systems in its quest for differentiation. In 2008, the company used VirtualWorks to launch a pathbreaking product, Ramco On-Demand ERP (RODE). "We married technology and necessity to offer a unique ERP product that taps an all-new
Ramco needs to have a strong business orientation and its product suite should refl ect global trends in enterprise solutions: Sunil Padmanabh GO-TO-MARKET STRATEGY Ramco has mostly focused on mid-market enterprises and relied on the strength of the product. Simplicity of use and pricing have been their key go-to-market strategies. They have played the India localisation card well, though the breadth and depth of domain expertise has not been impressive compared to larger rivals such as SAP and Oracle. Also, Ramco has lacked a strong partner ecosystem, which is key to its growth strategies in terms of selling, branding and delivery of its ERP solutions. The end result is that the product suite has not captured the mindshare of large enterprises in India or attracted global enterprises. It lacked an aggressive go-to-market strategy, and clients viewed it as a poor cousin of SAP/Oracle. As regards RODEs success, it is directly proportional to its strong ecosystem that includes consulting, training, data migration services and hybrid deployment models. They need to bundle their services in order to provide a complete software as a service experience. Post recession, Ramco has the edge in the on-demand ERP market as an early mover, but newer competition is emerging with large vendors such as Oracle and SAP providing comprehensive solutions with seamless integration between ERP, CRM and HCM, better pricing models and deployment options. Ramco needs to focus on a strong partner ecosystem, devise an aggressive marketing strategy and continue to invest in its product suite to keep pace with technology trends. In order to enhance their branding globally, they need to refocus their partner strategy and work with leading system integrators, which could give them renewed impetus. But execution is critical. They need to have a strong business orientation and their product suite should reflect global trends in enterprise solutions. Sunil Padmanabh is Research Director, Gartner The Indian pyramid amazingly flat, and every time you drop notch for eligibility, the addressable market mushrooms: Bharat Goenka SELLING IN INDIA IS TOUGH There is little doubt that Ramco has attempted to tread a path which few Indian companies have. India has been, and will be for some time, an underserved market. It has been more lucrative for companies to tap into and service global markets. Selling in India has been difficult for anyone, Indian or foreign. So, while the potential of India continues to attract attention, it has never really become manifest. The top of the pyramid in India has typically been served to the same level as its global counterparts, largely because of its access to resources. In the past couple of decades, therefore, this has been the target market, and Ramco has naturally picked it up. What is intriguing is scoping out the size of the market. The Indian pyramid is amazingly flat, and every time you drop a notch for eligibility (for example, by turnover, or number of people, or any other parameter), the addressable market mushrooms. Considering their stated market to be below the top of the pyramid, I would have looked for a much larger chunk, and developed my strategies around it. While foreign markets will continue to be attractive, they do not need to come at the expense of the massive Indian one. Since I am not privy to the underlying financial plans, it is entirely possible that the cost/revenue
Gujarat's power sector was in a shambles in 2001, when Narendra Modi became chief minister. A decade later it is in the forefront of states that have carried out sweeping power reforms, as a result of which it now has surplus power. This case study details the key steps the government took to bring about the change, which was carried out in a manner fair to all stakeholders. When Narendra Damodardas Modi took over as chief minister of Gujarat in October 2001, he found the state's power situation grim. The Gujarat State Electricity Board, or GSEB, had posted a loss of Rs 2,246 crore for 2000/01, on revenues of Rs 6,280 crore. Interest costs alone were Rs 1,227 crore. Transmission and distribution, or T&D, losses were a substantial 35.27 per cent, and load shedding was frequent. GSEB had no funds to add generation capacity on its own, nor was it able to persuade the private sector to invest. Reforming the GSEB, thus, became one of Modi's top priorities. "He feared that a bankrupt power utility could derail his vision for the state," says Saurabh Patel, Gujarat's Industries and Power Minister, then as now. "He knew electricity is crucial for growth."
Click here to Enlarge Modi's first step was to identify a bureaucrat capable of taking on the enormous challenge. He chose Man- jula Subramaniam, a Gujarat cadre officer, who had been joint secretary in the prime minister's office from 1993 to 1998, playing a key role in the country's liberalisation, and appointed her Chairperson of GSEB and Principal Secretary, Energy and Power. Subramaniam quickly realised that GSEB was too large an entity to be managed effectively. But she did not rush into unbundling it. Instead, she initially concentrated on two areas: bolstering the power utility's finances and building employee morale. Discovering that GSEB had secured loans at interest rates of 18 per cent or more, she sought debt restructuring, convincing banks and financial institutions to lower their rates, which resulted in savings of Rs 500 crore in 2002/03. Her next step was more radical. Rarely before had electricity boards renegotiated power purchase agreements, or PPAs, already signed with private players. But having examined the PPAs her board had entered into, Subramaniam felt the heat rate - a measure of generator efficiency - had been inflated by the power suppliers, who were consequently charging more than they should have. Though the private players initially resisted, the government-constituted committee set up for the process stood firm, and ultimately, after more than 18 months of hard bargaining, got the rates lowered, leading to a further saving of Rs 675 crore in 2002/03 and Rs 1,000 crore in 2003/04. Simultaneously, Modi's government began plugging the leakages in distribution. Power thefts in Gujarat then ranged between 20 per cent in urban areas and 70 per cent in rural regions. It passed a law against power thefts and set up five police stations across the state, solely to nab such thieves. Stringent action began against those who ran up large power bill arrears, including disconnecting their supply. Unmetered power supply, which some rural areas were getting was stopped altogether, with GSEB entering into a structural loan re-adjustment with Asian Development Bank to fund the installing of meters. Subramaniam also found that many employees, disturbed by widespread talk of power reforms, feared for their jobs, and were feeling somewhat alienated from GSEB. She appointed a consultant to suggest ways to win back their loyalties. From mid-2002, armed with the consultant's suggestions, the board began its special effort to reach out to employees. It started training programmes at all levels to reassure them that while people may be redeployed, no one would be laid off. Senior officials increased their interactions with the staff, including holding 'town hall' meetings where they shared details of the board's financial position and encouraged employees to ask questions. An internal newsletter was also started. Once assured of retaining their jobs, the employees themselves began discussing possible reforms. A 'reforms progress management group', comprising GSEB employees, was also set up. It was now time for the unbundling. In May 2003, the Gujarat government passed the Gujarat Electricity Industry (Reform and Reorganisation)
The separation of feeders for supply towards agricultural was a master for Gujarat: Kirit S. Parikh Where there is a will The Gujarat experience clearly shows what strong political will to reform the electricity sector can achieve. Of the many innovations the state tried, the separation of feeders for supply towards agricultural use was a master stroke. It not only helped farmers get quality power at fixed time but also ensured that leakages were curtailed. It enabled measurement of the power used for agricultural purposes as well, so as to arrive at the exact quantum of subsidy that needs to be reimbursed to the distribution feeder separation is being adopted by many others states.
companies.
Today
Also the manner in which pilferage was tackled is interesting. I know how the CEO of a state-run distribution company that supplied to one half of a particular city in Gujarat was fully empowered to take all measures to match the low T&D losses of a private sector company that supplied to the other half of the city. The state has also been proactive in promoting renewable energy. By offering to buy solar power at `12.50 per unit, the state will soon see over 350 MW of power from solar energy. It is true that the cost of electricity is higher in Gujarat but that is because the states electricity regulator has proactively raised prices as costs of generation rose. This makes sense in the long term. As can be seen, companies foraying into Gujarat are not too concerned about paying a couple of rupees more for consistent and good quality power. The challenge that the state faces is on the T&D loss front where there is still scope for reduction by four percentage points or so. More needs to done there. Kirit S. Parikh is Ex-member of Planning Commission, and Chairman, Integrated Research and Action for Development
Add Ons Most Desirable Brands 1. Microsoft 2. BMW 3. Google 4. Apple 5. Adidas 6. Mercedes 7. Audi 8. Disney 9. Sony 10. IBM
By Ashwin Kumar
Recently the BRICS nations meet and discussed up on their economical and other issues ; the specifics of these nations are as follows Nations Brazil Russia India China South Africa GDP $2,087.89 $1,479.82 $1,729.01 $5,878.63 $363.63 PCI $4,699.40 $2923.14 $822.76 $2,425.47 $3,745 IR 5.8% 3.7% 7.65% 3.20% 6.10% GDP GR 1.4% 4.8% 6.10% 8.90% 2.90% Ranking in corruption 73 143 95 75 64
Market Watch
ByGirish Kumar
News
Koutons to raise over Rs 1,000 cr through pref share issue. Lodha in talks to buy DLF's Mumbai land. Jaypee Infratech Q4 net down 11% at Rs 349 cr. Essar Shipping posts Rs 55 cr profit in Jan-Mar qtr. Mahindra Satyam Q4 net at Rs 534 cr. Wipro close to bagging Rs 960-cr contract from IAF. Bajaj Auto Q4 net dips 45% to Rs 772 cr. DLF, Huda to invest up to Rs 600cr on 16-lane road in Gurgaon. RPower asks CAG to drop audit note on undue gains. Govt makes norms stringent for incorporation of firms. Bharti Airtel cuts 3G mobile data prices in India. NSPCL net up 2% at Rs 194 cr in FY12. Cairn deal boosts minor Vedanta's core profit. Nomura downgrades Ashok Leyland to 'neutral'. April indirect tax collection up 10% to Rs 33,045 cr. HDIL to sell Bangalore land to Godrej Properties.
By Puneet
Name the Rashtriya Lok Dal (RLD) leader who was inducted into the Union Cabinet as civil aviation minister on 18 December 2011. Ajit Singh Jayant Chaudhary Devendra Nagpal Sanjay Singh Chauhan
2. The Union cabinet of India on 22 December 2011 approved __ percent share for minorities within the 27% OBC quota in jobs and university seats. a) 4.5 b) 5.6 c) 3.4 d) 5 3. Which company on 27 Deember 2011 mentioned that it would acquire the remaining 51 per cent stake from BP Alternative Energy Holdings in the joint venture that it formed with BP? a. Reliance Power b. Tata Power c. Adani Power Limited d. ABB Ltd
5. According to the RBI data, India's foreign exchange reserves fell by what amount to $302.1 billion during the week ended 16 December 2011 on account of a fall in foreign currency assets? a. $4.67 billion b. $3.33 billion c. $5 billion d. $5.75 billion
6. Sally Pearson, the world 100m hurdles champion, was named the Female World Athlete of the year for 2011 by the IAAF. To which country does she belong?
7. Who is the author of the book 'The Exile', which is based on the life of Duleep Singh, the last Maharaja of Lahore? Chetan Bhagat Navtej Sarna Mulk Raj Anand Khushwant Singh
8. The term Bull's eye is associated with which of the following sports? a. Badminton b.boxing c. shooting d. cricket
9. Which of the following is not the name of a foreign bank? a. BNP Paribas b. Deutsche Bank c. Barclays d. Cathay Pacific 10. Which of the following awards/ prizes is given for science? a. Templeton Prize b. Jnanpith Award
Vocabulary
1.Piquant : appetizing flavour, stimulating Syn: spicy, intriguing Ant: bland, insipid, dull A particularly piquant story kept me awake till early hours of the morning. 2. Transitory : not permanent Syn: brief, temporary Ant: lasting, durable Europe was marked by transitory period of medieval greatness. 3. Sodden: soaked through, extremely wet Syn: drenched, saturated Ant: dry, dehydrated One look at the sodden ground and the umpires called off play. 4. Knave: dishonest or unscrupulous Syn: cheat, swindler Ant: benefactor, idealist Dont let yourself be hoodwinked by that knave. 5. Luscious: ripe, appealing Syn: appetizing, delectable Ant: unappetizing, unsavoury Luscious fruits and vegetable were displayed in the store.
Editor in chief Ashwin Kumar Dwivedi Sourceseconomist. Editorial Team- AshwinKumar Dwivedi , Namita Katariya , Puneet Arora , Payal Ahuja, Nandish ,Mani Dubey , Girish Kumar Mishra www.yahoo.finance.com , www.rediff.business.com, www.wikipedia.com, www.businesstoday.com
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