Shift in bearing may cap Bay storm strength

Vinson Kurian

Thiruvananthapuram, Dec 5 Thursday’s depression in the Bay of Bengal has intensified into a deep depression on Friday, just a churn away from being classified as a cyclone, but slight shift in coordinates could weigh in to alter storm strength and direction.

According to the Joint Typhoon Warning Centre of the US Navy, the storm, numbered 07B, has of late shown a tendency to move along a more northerly track than seen earlier, guiding itself into a region massed by vertical shearing winds.

ALREADY AFFECTED

These shearing winds can lop off the top of a building storm, undermining its strength. A JTWC update cited satellite imageries to assess that 07B may already have been affected in this manner, with the low level circulation centre around which the storm builds getting partially exposed along the western flank.

Convective bands should ideally wrap into a closed core for the system to grow in strength. But incursion of dry winds or close proximity to land could work against consolidation in this manner despite obliging surface waters.

07B is forecast to continue to move to the northwest-to-west-northwestward direction (a net northerly bias to the track) that would bring it face to face with shearing winds.

TN FOR LANDFALL?

This may minimise 07B’s development as it moves in for a landfall which JTWC now figures could take place even along the southeast Indian coast (Tamil Nadu coast) by Saturday night or early Sunday morning.

In this context, the forecast by India Meteorological Department (IMD), the Regional Specialised Meteorological Centre for Indian Ocean (both the Bay of Bengal and Arabian Sea), is instructive.

The IMD update said on Friday that overnight’s depression over the southeast Bay moved west-northwestward and intensified into a deep depression at 5.30 a.m. It remained practically stationery about 650 km southwest of Port Blair, 1,100 km southeast of Chennai and 800 km east-southeast of Triconmalee.

The system is likely to intensify further and move in a west-northwesterly direction towards north Sri Lanka, Tamil Nadu and Puducherry coast during the next three days.

RAINS FORECAST

Rain or thundershowers are likely at many places over Andaman and Nicobar Islands and at a few places over coastal Tamil Nadu and Puducherry during the next 24 hours and at most places, thereafter.

Mainly dry weather is being forecast for the rest of Tamil Nadu, Kerala, Lakshadweep, Rayalaseema and coastal Andhra Pradesh during next 24 hours but scattered to fairly widespread rain or thundershowers thereafter. Isolated heavy to very heavy falls is likely over coastal Tamil Nadu and Puducherry commencing from Saturday night.

Squally winds speed reaching 55-65 km/hr in speed and gusting to 75 km/hr are likely along and off the Tamil Nadu and Puducherry coasts from Sunday morning.

`HIGH’ SEAS

Peak winds could gust to even 85 km/hr on Sunday and Monday. Sea condition will be very rough to ‘high’ along these coasts and fishermen have been advised not to venture out. Extended forecasts up to Wednesday spoke of fairly widespread rainfall activity over extreme south peninsula and the Andaman and Nicobar Islands.

Meanwhile, a moderately strong western disturbance is set to enter northwest India around the same time with a likely embedded cyclonic circulation. It is expected to cause scattered precipitation over the western Himalayan region and adjoining plains of northwest India.

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Carmakers offer discounts to clear stocks at retail end

Our Bureau

New Delhi, Dec. 5 Automobile companies are all set to entice customers by offering them the best deals on cars. Having witnessed the sharpest drop in sales last month and a pile up of inventory at the retail end, companies and dealers are offering high concessions on various models to exhaust their stocks.

Maruti Suzuki, for example, has almost doubled the concession on Wagon R and M-800.

The company increased discount on its Wagon-R to Rs 25,000 plus insurance for December as compared with Rs 12,000 and insurance the previous month. Even on M-800 it is giving a price cut of Rs 4,500 and insurance as compared with Rs 2,000 last month.

On its compact car, Alto, the concession is up to Rs 7,000. Hyundai too announced selling its flagship model Santro at Rs 2.99 lakh. The slowdown in the economy and reduced financing on vehicles by banks have led companies like Hyundai to provide attractive deals even to customers for its newer and best selling models like i10 by offering free accessories worth Rs 5,000 and insurance. US carmaker Ford’s Indian subsidiary has lowered prices of its mid size sedan Fiesta by Rs 91,000.

Dealers say that the discounts offered this month have been tempting as next month the model year will change. “Many of the customers do not want to buy a year end model. Hence to clear the stocks, companies usually offer good deals,” said a dealer.

The strategy of higher cuts is also amid fears that December could be worse. Almost all auto companies posted the sharpest decline in sales in November. Maruti Suzuki saw domestic sales fall by 27 per cent, Hyundai by 23 per cent and Mahindra by 12 per cent on its Logan.

“November has been very dull for all manufacturers. And December being the year end is even worse. So all companies want to liquidate their stocks,” said a Honda car dealer.

Markets this week

The Sensex opened on a positive note on Monday but changed direction and closed more than two per cent lower following a spate of bad news from the domestic economy and weak global equity markets. The Sensex ended 252 points down at 8,839 while Nifty closed at 2682, down by 72 points.

LIC takes its stake beyond five per cent in three public sector banks - State Bank of India, Bank of India and Allahabad Bank, according to BSE data.

During October-November, LIC acquired 1.67 crore shares representing 2.64 per cent stake of SBI from the secondary market. It also acquired 9.6 lakh shares of Bank of India on 11th November, hiking its stake to 5.14 per cent. It bought over 1.09 crore shares in Allahabad Bank, taking its stake to 8.84 per cent as on November 12.

The mutual fund industry's assets under management (AUM) fell seven per cent in November. Their AUM now stands at Rs 4,02,029 crore against Rs 4,31,860 crore in October.

For efficient use of margin capital by market participants, SEBI on Tuesday announced extension of cross margining across the cash and derivative segments for all categories of market participants.

Earlier, this facility was available only for institutional trades. However, only the index based stocks and stock futures will be eligible under the new cross-margining scheme.

Shares ended weaker on Tuesday, led by blue-chips and auto companies, over concerns about the global economy, but short-covering towards the end pared early losses.

The Sensex ended down 100.63 points at 8,739 and the Nifty fell 25 points to 2,658.

Indian Shares closed flat on Wednesday after a volatile session. The Sensex ended up 8 points at 8,747. after rising to 8,855 in opening trade, buoyed by positive global cues and expectation of interest rate cut by the RBI. On the NSE, the Nifty index closed flat at 2656.

NSE has revised upwards the market lot for 243 stocks in the derivative segment.

As per data put out by NSE, these changes would take effect on the farther month contracts - March 2009 series. The upward revision ranges between two and 14 times.

The benchmark indices surged on Thursday, sparked by a lower inflation rate, and expectations of a stimulus package from the Government to boost the economy.

The Sensex surged by 482 points to close at 9230 and the Nifty gained by 131 points to end the day at 2788.

The inflation rate for the week ended November 22 was at 8.4 per cent, which created hopes of a substantial cut in interest rates by RBI on Saturday.

Indian stocks tracked the European markets which were up in early trade as the European Central Bank, Britain and Sweden made big rate cuts to shore up their economies.

Indian companies will now have one year's time to launch their IPOs or rights issues after the clearance of draft prospectus by SEBI.

SEBI at its board meeting on Thursday decided to extend the validity of its approval for IPOs and rights issues from three months as of now to one year, subject to updating of documents by the issuer.

Fund managers welcomed the decision on Thursday making listing mandatory for close ended schemes of mutual funds, and disallowing early exit from these schemes.

The European Central Bank on Thursday slashed its benchmark lending rate by 75 basis points to 2.5 per cent.

The Bank of England has cut the bank rate by 1 percentage point to 2 per cent.

The BSE benchmark Sensex on Friday tanked 265 points to close below 9,000-mark on heavy selling by funds in blue-chips led by the information technology, realty and metal segments owing to profit booking at higher levels. The Sensex closed at 8,965.20, down 264.55 points. On the NSE, the Nifty ended lower by 73 points at 2,714.40 points.

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Will Indian auto parts cos break into Japanese clubs?

T. Murrali

Chennai, Dec. 5 The Japanese auto industry has begun exploring possibilities of sourcing components from India.

A two-day event, organised jointly by the Automotive Component Manufacturers Association (ACMA) and Japan External Trade Organisation (JETRO), saw the presence of 22 large potential buyers from Japan.

Pointing out that this is the first time that JETRO is conducting such an event in India, experts in the auto components industry said that the event shows a first-time interest in India by the Japanese.

India imports from Japan auto components 10 times more than what it exports. Imports from Japan (Rs 2,413 crore) grew 72 per cent in 2007-08 over the previous year. Exports to Japan, which grew 11 per cent last year, were still nothing much to write home about, at Rs 205 crore.

Japanese small car major Suzuki entered India as a joint venture in 1981. Today, it buys 97 per cent of the components domestically, but buys practically nothing for its plant in Japan. The reason could be ‘keiretsu’, a tradition under which an OE buys its requirements from a close group of associates. Keiretsu assures the associates of business and lets the OE have a control over quality and price.

So Japan has made Asean countries, especially China, Thailand and Malaysia, its manufacturing suburbs, but India is yet to break into the club.

This is despite there being 200 Japanese entities in India — joint ventures as well as wholly-owned subsidiaries. Seven of them are vehicle manufacturers.

Yet, Japan accounted for 1.4 per cent of India’s exports of auto components (Rs 14,130 crore) last year. North America accounted for 28 per cent and the EU, 38 per cent.

In contrast, Japan is buying more from other countries. Japan’s imports from China, Thailand and South Korea are growing.

Are things changing?

But now, following its decision to reduce dependence on any one country, Japanese auto industry is looking at India as a probable sourcing destination.

Japanese representatives at the expo said India is by far more stable and robust economy to work with than their Asean counterparts.

Twenty-two Japanese companies, including Denso, Hitachi, Honda Siel Cars, Mikuni India, Mitsubishi Heavy Industries, Renault Nissan Technology & Business Centre, showcased their products that they were keen to source from India. Similarly, about 30 Indian auto component manufacturers, including Amtek, Caparo, GNA, IP Rings, LGB, Rane and Hi-Tech Gears also displayed their wares.

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PSBs play it safe with nostro accounts in US

C. Shivkumar

Bangalore, Dec. 5 Public sector banks have now begun restricting their correspondent account balances to a handful of US banks.

Senior banking sources said that nostro account balances or correspondent accounts were maintained with 17 banks, including Wachovia, till about 3 months ago.

A nostro balance is that one bank maintains with a foreign bank in foreign currency.

Bankers said that the Reserve Bank of India has now sought details of the number of nostro account balances with the various US banks. Besides the RBI intervention, a series of US bank failures have made domestic bankers cautious.

Nostro accounts

At least 22 banks have failed in the US. In many of these institutions, domestic banks, both private and public sector, had maintained correspondent accounts.

Domestic bankers said that the RBI also advised them to hold their nostro balances only with large banks that have clearing operations. Accordingly, bankers said that most of them have now restricted their nostro accounts to such clearing banks in the US.

The bankers said nostro balances were parked are Citibank, Wells Fargo, JP Morgan Chase and Bank of America.

But even with these banks, nostro balances were restricted only to trade finance requirements. Consequently, the nostro balances of all the banks in the country were only about one per cent of the export receipts or about $1.6 billion.

Bankers said that most of the balances were either repatriated to India or held in US Government Treasuries at low yields.

Resisting temptation

This was despite the high interest offered on US dollar deposits. Six-month certificates of deposits in the US banks are currently as high as 4 per cent.

Yet given the uncertain financial conditions in the US, Indian banks are staying away from the high-yield offerings. Some banks preferred repatriating the resources and investing them in domestic treasury bills, where the yields were slightly better.

Besides, the bankers said that the failure of some of the US banks and the lack of the coverage under the Federal Deposit Insurance Scheme were likely to lead to provisioning of some of the balances.

Vostro accounts

Nostro balances are treated as assets though they are not risk weighted. This is because Indian banks also maintain a mirror account as a liability in the form of correspondent account of the foreign bank or as a vostro account. This obviated the need for risk weighting such accounts. Yet, there are fears that despite the mirror accounts, the prospects of nostro balances becoming sticky are high.

Consequently, some Indian banks were also resorting to holding correspondent account balances in overseas branches and subsidiaries of other domestic banks as risk mitigation measures. Large domestic banks, like the State Bank of India, already have a large presence in the US.

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Outdoor media, hoardings going vacant on poor market sentiment

Varada Bhat

Mumbai, Dec. 5 A few weeks ago, when your car zoomed across the neon-lit streets in Mumbai, there was a glitzy illuminated sign that promised you the comfort of a luxury apartment at an affordable price or a telecom company that kept buzzing with unlimited free calls.

But now due to slowdown in businesses coupled with downturn in the economy, outdoor media companies can’t find more innovations to illuminate their blank sites.

Big ad spenders such as HDFC, Reliance and ICICI are shying away from fat-budget campaigns outdoors, said Mr Sudhesh Paul, Business Development Manager with Bright Outdoor Media (Pvt) Ltd, which has a 50 per cent market share in the ‘Out of Home’ business in Mumbai.

Mr Paul says last week, one of the top private sector conglomerates terminated a six-year contract with Bright outdoor on several locations in the country by giving one month’s notice.

“Sixty per cent of our sites are vacant now,” Mr Alt aaf Shaikh Director of Mumbai-based Roshan Publicity told Business Line. The company once boasted of a clientele of Airtel, Bajaj, ICICI Prudential and HSBC.

Slashing bookings

According to Mr Shaikh, new campaigns are becoming shorter and softer in length as advertising budget is pruned.

“One of the telecom companies, which launched its operations in Mumbai in August, had an initial booking worth Rs 2 crore, which got slashed to Rs 75 lakh,” Mr Paul added.

Traditionally, during the festive season from October to December, the outdoor companies used to hold bid for prime locations, but now due to the financial turmoil, the billboards are falling vacant.

According to Mr Anant Raj, Account Manager with Primesite (the outdoor arm of Mudra Communications), says that his financial clients have stripped the launches of their new products and schemes due to dampened consumer sentiment in the markets.

According to a media guide of a leading outdoor agency, on an average, hoardings cost Rs 18-20 lakh a month, kiosks cost Rs 3500-15,000 a month and gantries cost Rs 3-6.5 lakh a month.

Media efficiency

Although Mumbai and Delhi comprise 50 per cent of the outdoor market in numbers, 70 per cent of values in terms of money are coming from tier II and tier III cities that have also been affected drastically.

Mr Amish Tripathi, IDBI Fortis Life Insurance National Head (Marketing and Product Management), said, “We have started focusing on the efficiency of each media. We are selectively choosing media, through which we are getting lot of yields.”

Mr Sanjay Pareek, President of Percept Out-of-Home, a division of Percept Holdings, feels corporates have also realised that the television is a cost-effective medium, considering the increasing penetration.

“The sheer boost in airtime inventory due to recent launches of new channels has resulted in dropping down of rates. Even we are advising our clients to shift from outdoor to television,” he said.

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‘I’ve never seen such a positive environment for renewable energy’

N. Ramakrishnan

Recently in Denmark

It has been a long day for Mr Ditlev Engel, President & CEO of leading wind turbine maker Vestas. He has been accompanying financial analysts to Vestas facilities in Aarhus and Hammel, Denmark, with other senior company officials.

In the evening, Mr Engel, 44, sits down with some Indian journalists, on a visit to Denmark sponsored by Vestas, for a chat on the global economic situation and its impact on the wind energy sector. Mr Engel, who has been President & CEO of Vestas Wind Systems A/S since May 2005, holds a Diploma in Business Economics from the Copenhagen Business School and has participated in a general management programme at INSEAD, France. Excerpts:

What has been the impact of the global economic situation on the wind energy sector?

I would prefer to talk about the impact on Vestas rather than that on the sector, because these might be two different things. In 2007, we did about 5,000 MW at Vestas. We decided to go to 10,000 MW by 2010. Our investment and development have been focussed on getting up to this level of execution capability.

The world changed fast. When we announced our second quarter results in August, the only question analysts asked was whether we could get to 10,000 MW by 2010. I said yes, we can. We have over the last 12 months employed 5,000 people. Even though next year we expect to grow by 25 per cent, we have actually made it clear that we have a cost base now that is 15 per cent too high for a 25 per cent growth.

We have demonstrated that we were on the right track with the kind of ramp-up and investment that we are doing. Our investment next year stands at €1.2 billion. Our confidence in the growth scenario is robust. The energy challenges have become even more daunting and pressing now. We live in a world where people are managing issues from day to day, but energy is about long-term view.

Let me put the financial issue out of the equation and look at the political agenda. I travelled in China two weeks ago with the Danish Prime Minister where he met with both the President and Premier. Denmark is hosting the climate change conference next year. He got the best support ever on a (climate) deal. The EU has also said that financial challenges are not an excuse for not addressing the climate issue.

In the US, the President-elect, Mr Barack Obama, wants to create 5 million new jobs and he has said that energy independence and climate issues are going to be on the top of his agenda. All energy is politically driven and politically regulated. I have been the CEO of Vestas for the last three-and-a- half years and I have never seen such a positive political environment.

On the day we announced our Q2 results, the price of oil was around $140 a barrel and analysts asked me why we can’t double the price of our turbines. Now, when the price of oil is $50 a barrel, the analysts are asking me why we can’t lower the price of our turbines. I said the energy companies have a 20-year view and not the flavour of the day. It is clear that fossil fuels prices will go up. There are customers who are facing difficulties, but, overall, the energy agenda is one of the reasons why we believe that the outlook is robust.

We employed 5,000 people over the last 12 months. There have been no lay-offs, but we have stopped employing people for the moment. We haven’t stopped investing. We believe that these things will start moving again, may be not at the same speed. We are certain that the US agenda for going Green is going to be big and we are certain we will kick ourselves if we had stopped ourselves in the US. We are going to use 2009 to build in the US more than manufacture in the US.

What about access to capital?

We believe that we can make the projects more bankable for our customers. If you take the customers or the banks’ customers through a presentation, when the banks start to release cash again, we believe that it is some of the lowest risk you can actually release. Germany is a market driven by small-medium-sized developers. You have got the German state buying electricity, the same guys who bail out the banks. You got a very high business case certainty.

There would be other projects with a higher risk profile, which would be more likely to be hurt than these kinds of projects. We spend a lot of time reviewing our customer portfolio and the bankability. There are many projects when times were good, when people have had some very exciting projects and we have just said no, we are not going to do it. The marginal projects will have more difficulties, whereas those who have a safe business will go on.

Have you had any order cancellations? Do you see a slowdown in order bookings?

No, none at all. We have seen that those customers who have lost a bank, for instance, when Lehman went in the US, calling up and saying they can’t go on, because their bank has disappeared. Lehman was a big trader for tax credits on the PTC in the US, so the appetite for tax credits has gone down. In some of these areas, we have seen an impact.

We have learned from the financial crisis that big is not equivalent to good. Those, who do not have good projects or whose financing situation is more complicated, will have a bigger challenge.

Those having good cash flows, good management and strong operations would go on even if they are not the largest companies.

The wind energy industry has always said that with oil at above $59 a barrel, wind energy is more competitive. Now, with crude prices falling below that mark, how do the economics work out?

In July, crude was at $140 and people said it will go to $200 by Christmas. The same people are now saying it is going to be at this level for the next 9-12 months. Apart from the price of oil, it is true that higher the fossil fuel prices, the easier it is to understand the attractiveness of our energy.

From the utilities point of view, this is also about balancing their risk. Wind is the only type of energy where you can hedge your risk 100 per cent for the next 20 years. From a risk management point of view, you want to make sure that you have a diversified portfolio.

I think we have not had a price on carbon in the US. I think the new administration is going to put a price on carbon.

Another issue that people haven’t spent so much time on, but I know that some of our customers are factoring in into their business price model is that they don’t believe the price of water for exploration and so many other things will remain at this cost. China has invested $10 billion in pumping water from the South to the North because of drought. Drought is a huge issue in Australia and in certain states in the US. That water will come at a cost. Water is an important part of energy exploration. When you start to factor these things in, which many of the major utilities are doing, you start getting many different mechanisms in your pricing model for wind versus other types of energy. You need to balance the view on certain other aspects.

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Lots of business, but little profit for call centres here

Adith Charlie

Mumbai, Dec. 5

‘A lot of business with little income’

This seems to be the common complaint among the captains of BPO firms that provide third party collections and debt recovery services for clients in the banking and financial services space.

In spite of bagging new contracts (for collections-related work), there is little by way of corresponding revenues for the collections unit of these back-office firms, as they are paid on a per-realisation basis, according to Mr Milan Sheth, Partner, Advisory Services, Ernst & Young. In other words, if a BPO company is able to manage collection of $250 from a bank’s customer, it keeps a percentage of that amount as its fee. (Indian BPO companies telephonically follow up with delinquent debtors overseas and also track their whereabouts. Some vendors also engage last mile collection agents overseas.)

However, in the US, a growing number of people are falling behind on their mortgage payments because of the credit crunch. Credit reporting agency TransUnion LLC found that 3.96 per cent of people holding a mortgage were at least 60 days behind in payments for the quarter ended September 30, compared with 2.56 per cent in third-quarter 2007. This has made collections difficult for Indian vendors.

Mr Ananda Mukerji, Managing Director & CEO, Firstsource Solutions, said in a recent conference call with analysts: “…collections business, we are seeing liquidation concerns on both sides and we have seen negative pressure on that aspect. We expect continued stress on liquidation rates and pressure on profitability and we are monitoring the situation closely and taking corrective action at the operating level and in terms of juggling the portfolio we work…”

Firstsource, which generates 10 per cent revenues from BFSI collections, expects the pressure on its collection business to continue for the next few quarters. A questionnaire sent to Aegis BPO, another back office firm which provides services in this space, remained unanswered at the time of going to press.

So how should companies work around this trend?

BPO firms should try to ensure that billing is not exclusively modelled on a per-realisation basis, according to Mr Vineet Mittal, CEO, Stream BPO. A mix of pay per realisation and fixed billing rate (on an hourly basis) would be ideal.

Firstsource is being cautious on the kind of collections work that it is undertaking.

“…there is a lot of paper on offer out there, we are making sure that we pick up paper on which we can make the kind of margins we want to make in this business at this point in time, but there is a trade-off to some extent between adding collectors and trying to add revenue and the impact on profits…., “Mr Mukerji said

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Vendors hope to ride out the global auto crash

Vishwanath Kulkarni
Shamik Paul

Bangalore, Dec. 5 Notwithstanding the impending collapse of North American auto firms such as General Motors, Ford Motors and Chrysler, the Indian IT firms are cautiously optimistic that global automakers would sustain long-term investments in futuristic technologies such as fuel efficiency and emission control systems.

However, the IT firms are cautious about the impact in the short-term as they expect some cut in budgets on discretionary ‘nice-to-have’ projects as auto companies affected by the declining demand and credit crunch await a bail-out package.

Already battered by the meltdown in the US financial services sector, the Indian IT vendors had set eyes on sectors such as manufacturing and retail to offset the impact.

The auto sector is a major component of the manufacturing vertical for many an Indian vendor.

No cancellations

TCS, which serves clients such as Chrysler and Ferrari, is cautious about the dynamic developments in the North American auto industry and has adopted a “watch-and-see” stance.

“We have not seen any reduction in projects or cancellation of contracts,” said Mr Reghuayaswamy, Vice-President and Global Head of Engineering and Industrial Services practice at TCS. However, there is an increasing interest to offshore as clients want to control costs.

Mr Reghuayaswamy expects the auto companies to maintain their sustenance type of budgets that are already committed. While there could be pressure on the discretionary budgets, customers would go ahead with investments in programs relating to fuel efficiency, emission controls, electronic systems, better engine management and hybrid vehicles, he said.

TCS earns about five per cent of its revenues from the automotive clients.

Customers cautious

“Customers are cautious about the outlook and the decision making has got delayed,” said Mr Ravi Pandit, Chairman and Group CEO of KPIT Cummins Infosystems Ltd. “Investments would grow in areas of technology innovation and on newer products that are essential for companies to remain competitive when the economy starts looking northwards again,” he said.

KPIT, which earns about a third of its revenues from the auto engineering and auto IT, said it has not seen any project cancellations so far. “While US companies are awaiting decision on the auto bail-out plan expected in the next two weeks, we expect renewed activity from European customers in the New Year,” said Mr Pandit, adding that investments in futuristic technologies relating to higher mileage and advanced safety systems would be sustained.

Other major vendors such as Wipro and Satyam, who serve companies such as General Motors, did not comment.

Sensing a slowdown, Geometric Ltd started diversifying a few quarters ago to reduce its dependence on auto and moved into new verticals such as oil and gas, fashion and high tech, said Mr Ajit Joshi, Senior Vice-President and Head- Product Lifecycle Management (PLM) solutions.

Geometric provides PLM solutions to auto companies, which helps them to manage the entire lifecycle of the product right from conception through design and manufacture to service and disposal. Admitting the increasing pressure on rates, Mr Joshi said the company was also witnessing some delays in new project starts. However, there have not been any major cut back on the existing PLM projects as these help companies in product innovations and reduce time to market. Mr Joshi felt that European automakers, which are closely following their US counterparts in the IT off-shoring wave, will be an opportunity for the India Inc to grab.

Analysts not upbeat

However, analysts are not optimistic unlike the IT vendors. “Business will suffer to an extent for vendors who have exposure to the auto industry as IT spends for clients will take a back seat,” said Mr Harit Shah, equity analyst at Angel Broking Ltd.

“There is likelihood that new projects will be delayed or cancelled, and there would be pricing pressure as well,” Mr Shah predicted.

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Personal income-tax collections down 31% in November

Our Bureau

New Delhi, Dec. 5 The Centre’s personal income-tax collections were pegged at Rs 5,782 crore in November 2008, reflecting a 31.28 per cent decline over the collections of Rs 8,414 crore recorded in the same month last year.

Corporate tax collections too declined in November 2008 on a year-on-year basis. In November 2008, the Centre’s corporate tax collections stood at Rs 4,561 crore, recording a decline of 41 per cent over the collection level of Rs 7,741 crore in the same month last year.

Personal income-tax collections indirectly mirror the state of the economy as these represents taxes from the salaried and informal businesses.

Seasonality

There is seasonality in direct tax collections and November is not generally a month where one sees strong corporate tax collections, industry observers pointed out.

Official data released by the Central Board of Direct Taxes (CBDT) here today showed that personal income-tax collections (includes BCTT, STT and FBT) during April-November 2008 stood at Rs 67,215 crore, reflecting a 15.28 per cent increase over the Rs 58,304 crore collected in the same period last year.

The break-up

While fringe benefit tax (FBT) grew 34.47 per cent during April-November 2008 at Rs 4,120 crore (Rs 3,064 crore), banking cash transaction tax (BCTT) grew 17.33 per cent at Rs 421 crore (Rs 359 crore). Securities transaction tax (STT), however, declined by 15.42 per cent to Rs 4,165 crore (Rs 4,924 crore).

For the April-November 2008 period, corporate tax collections grew 26.82 per cent at Rs 1,09,735 crore (Rs 86,526 crore).

Direct tax

Net direct tax collections for the first eight months of the current fiscal stood at Rs 1,77,251 crore, up 22.2 per cent from Rs 1,45,053 crore recorded in same period last year.

This 22.2 per cent increase in direct tax collections till November this fiscal is a shade lower than the 25 per cent increase in collections targeted for fiscal 2008-09.

The Centre had recently revised the direct tax collection target for 2008-09 to Rs 3,95,000 crore. In 2007-08, the direct tax collections of the centre stood at Rs 3,14,468 crore (provisional).

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Ashok Chavan is new Maharashtra Chief Minister

Rahul Wadke

Mumbai, Dec. 5 Mr Ashok Chavan, Industries Minister of Maharashtra, is the new Chief Minister of the State.

The decision comes about 36 hours after the position fell vacant with the resignation of Mr Vilasrao Deshmukh. He had resigned owning moral responsibility for the Mumbai terror attack, where gunmen held the financial capital under siege for over 60 hours.

The Senior Congress party leader Mr Pranab Mukherjee made the announcement after over 24 hours of hectic parleys and discussions with the Congress high command on Friday. In a parallel development, the NCP leader, Mr Chhagan Bhujbal, was named the Deputy Chief Minister and Home Minister.

In the first government of Mr Deshmukh, he had held the same portfolio. He resigned from his position in December 2003 over the fake stamp paper scam.

Also in the race for the top post were the former Chief Minister, Mr Narayan Rane, and the Co-operation Minister, Mr Patangrao Kadam. But before the announcement was made, Mr Rane alleged that he had been sidelined by the party.

Political Career

The 50-year-old Mr Chavan hails from a Congress loyalist family in Nanded. His father, late Shankarrao Chavan was also Chief Minister of Maharashtra and Union Home Minister.

The junior Mr Chavan started his political career in 1987-88 when he was elected as Member of Parliament from Nanded parliamentary constituency. In July 1992, he was elected as member of the Maharashtra Legislative Council. He was Minister of State for Public Works between 1993 and 1994. Between 1995 and 1999 he was the General Secretary, Maharashtra Pradesh Congress Committee.

In October 1999, he was elected as an MLA from the Mudkhed Assembly constituency in Nanded. In the same month, he was inducted as Cabinet Minister for Revenue and Protocol. Again, he contested the Assembly elections from Mudkhed in October 2004 and won by a margin of 71,000 votes. In November 2004 he was inducted into the Cabinet and since then has been holding charge of Industries, Mining, Cultural Affairs and Protocol.

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SEBI: Ensure cos maintain security deposit with SEs

Our Bureau

Mumbai, Dec. 5 The capital market regulator, Securities and Exchange Board of India, has asked stock exchanges to ensure that all listed companies maintain the mandatory security deposit with them.

Under the listing agreement, companies have to deposit one per cent of the money collected from public shareholders with the exchanges as security deposit.

Of this, 50 per cent shall be made in cash and the balance can be provided as bank guarantee.

According to SEBI, in many cases bank guarantees kept with the stock exchanges by companies have expired and the exchanges had not asked them to renew such guarantees.

“By allowing the bank guarantees to expire, the stock exchanges have compromised with an important mechanism available for redressal of investor grievances,” SEBI said in a circular issued on Friday.

SEBI has asked stock exchanges to recoup immediately any shortfall in the deposit that has been caused due to the expiry of bank guarantees by taking either cash or fresh or re-validated bank guarantees from the companies concerned.

The bourses should invoke bank guarantees before it expires if any issuer company failed to meet the shortfall within the given timeframe, the circular added.

The regulator has directed the stock exchanges to keep one per cent security deposit at all times.

SEBI also told the exchanges that no adjustment of the security deposit against any dues of the company payable to the exchanges would be permitted.

The security deposit can be released by the exchanges only after obtaining a no-objection certificate from SEBI, the circular said.

The stock exchanges have also been directed to put in place a system to keep track of the bank guarantees so that bourses have sufficient time to alert the issuer companies to provide fresh or renewed bank guarantees.

The SEBI measure will fall hard on companies which had raised big amounts through IPOs and rights issues recently and are not complying with the SEBI regulations, said an analyst.

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NBFCs may get easier access to funds

K.R. Srivats

New Delhi, Dec. 5

Non-banking financial companies (NBFCs) may get some policy support from the Government and the Reserve Bank of India as part of the economic stimulus package slated to be unveiled on Saturday.

Allowing such companies to access external commercial borrowings (ECBs) window was among the several measures that figured in the discussions of the Prime Minister’s apex panel that finalised the stimulus package, highly placed sources in the Government told Business Line.

It has been recognised by policy makers that NBFCs, unlike banks, do not have access to low-cost deposits and are all “choked” on account of the growth seen in recent years. Also banks’ ability to lend to these entities is restricted as there are limits to banks’ exposure to NBFCs.

With the Indian economy witnessing a slowdown, banks are curtailing the flow of funds to the NBFCs, leading to difficulties in accessing funds. “With the RBI also clamping on the flow of funds to NBFCs, many of them look stressed and over exposed. Either banks may now be nudged to lend more to NBFCs by opening more lines of credit or they may be allowed to borrow through ECBs”, sources said.

While it was not clear as to what the scope of measures would be, indications are that the exposure limits of banks to such entities may also get tweaked to enable flow of more funds to NBFCs. The absence of an active corporate debt market and the steps needed on this front were also under consideration of the policy makers so as to address the funding requirements of NBFCs.

In India, there are two broad categories of NBFCs, NBFCs-D (deposit taking) and NBFCs-ND (non-deposit taking). There has been a significant decline in the deposit base of NBFCs-D.

An advisory group appointed by the committee on financial sector assessment had concluded that both categories showed an increased dependence on borrowings as a funding source. It was being felt that their growth should not be stifled through excessive regulations even while ensuring that these entities do not pose any risk to the system.

Besides the issue of access of low-cost funds, the NBFCs-D also bear high regulatory costs, and in the medium term, it may be difficult for these entities to compete with banks, according to the advisory group.

Meanwhile, in the interest of better market discipline and in the context of increasing complexities of holding structures and multi-layering, the advisory group is set to recommend that the RBI could consider increased disclosure by NBFCs such as ownership structure, significant holdings and nature and type of activities and products.

The central bank should also explore the option of examining the suitability of the major shareholders and senior management of NBFCs, according to the advisory group

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Pact signed for supply of Russian copters worth Rs 2,400 cr

Our Bureau

New Delhi, Dec. 5 India is to receive 80 MI-17V-5 helicopters from the Russian Federation. An agreement for the supply of the helicopters, which industry expects to be a contract of around Rs 2,400 crore, was signed during the on-going visit of the Russian President, Mr Dmitry A. Medvedev.

The MI-17 helicopter is a multi-utility machine that can perform a variety of functions from transporting VVIPs to being converted into a mobile hospital and can fly in various weather conditions, the company website states.

The two countries also agreed to cooperate in the construction of Russian designed nuclear power plants at new sites within the country apart from assisting in the construction of additional nuclear power units at Koodankulam in Tamil Nadu. The Russians are already constructing two 1000 MWe units at the Koodankulam site and talks have been on for at least four additional units at the same site.

The visit could also lead to an Indian citizen taking a spaceflight as the Indian Space Reach Organisation (ISRO) and the Russian Federal Space Agency signed a memorandum of understanding on joint activities in this field.

A memorandum of understanding between the co-chairs of the chief executives councils was signed by the Council Co-Chair, Mr Vladimir Yevtushenkov, and the Chairman and Managing Director, Reliance Industries, Mr Mukesh Ambani. Besides, an agreement was also signed for a joint action programme for cooperation between India and Russia in the tourism for the period 2009-10.

These decisions formed part of 10 agreements that India and Russia signed during the visit. Addressing the meeting, the Prime Minister, Dr Manmohan Singh, said that India has directed its officials to “expedite all measures” required to achieve the bilateral trade target of $ 10 billion by 2010.

The two sides also discussed the possibilities of greater cooperation in both up and downstream projects in the hydrocarbon sector. “Our dialogue in this area has intensified considerably,” Dr Singh added. Besides, issues connected with science and technology, culture and terrorism were also discussed at the talks between the Russian President and the Prime Minister.

The Prime Minister said that all steps including the activation of existing and new mechanisms such as Inter Governmental Commission, the Joint Task Force, the India-Russia Trade and Investment Forum and CEOs Council will be taken to achieve the $ 10-billion target.

Later speaking to the media, the Russian President said that a “substantial time” was spent in discussing military and technical issues. “We spoke on military and technical issues in great detail. We have identified ways to resolve outstanding issues” Mr Medvedev said.

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Govt cuts petrol price by Rs 5, diesel by Rs 2

Our Bureau

New Delhi, Dec. 5

Call it a Christmas gift or ushering in a feel-good factor, the Government on Friday announced a cut in auto fuel prices.

Passing on the benefit of steep fall in international crude prices to the consumers, retail selling price of petrol has been cut by Rs 5 a litre and diesel by Rs 2 a litre.

The prices of cooking fuels were, however, left untouched.

Speaking to newspersons after a meeting of the Cabinet Committee on Political Affairs (CCPA), the Petroleum Minister, Mr Murli Deora, said, “to protect the interests of the common man and to pass on the benefit of the fall in international oil prices, the Government has decided, as an interim measure, to reduce the price of petrol by Rs 5 a litre and diesel by Rs 2 a litre with effect from December 6.”

He further said that the Government is closely watching the international oil prices and their impact on the country’s economy, and will take appropriate decisions whenever necessary.

Pressure had been mounting on the Government to cut fuel prices. Since August, crude oil prices had started declining. On December 4, the Indian basket stood at $ 41.53 a barrel, after hitting a high of $ 142.04 a barrel in July.

According to the industry, there were two options before the Government. It could either free petrol and diesel from the administered price mechanism, thus allowing the PSU oil marketing companies (OMCs) to revise the prices in tandem with market conditions or consider a price cut.

When crude was scaling over $ 120 a barrel, the Government had in June increased prices of petrol by Rs 5 a litre, diesel by Rs 3 a litre and LPG by Rs 50 a cylinder. Even then the Government had taken the average crude price of around $ 67 a barrel. The increase had resulted in petrol costing Rs 50.56 a litre in Delhi from Rs 45.56 a litre. In effect, the current cut has neutralised the June petrol hike.

Friday’s price cut would result in a collective saving of about Rs 6,000 crore for auto fuel consumers, while the OMCs will incur an additional burden of Rs 5,300 crore. The OMCs – Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd – at current international prices and with the revised retail prices are projected to incur under recoveries of about Rs 1,10,000 crore for the current fiscal. “A formula would be worked out to deal with the issue of under recovery,” the Minister said.

The OMCs incur revenue loss on petroleum products, as they sell them at controlled price. They started earning positive margins from November on petrol and diesel. The companies were making Rs 14.89 a litre profit on petrol and Rs 3.03 a litre on diesel. However, they continue to lose Rs 16.60 a litre on kerosene and Rs 142.67 on an LPG cylinder.

Apart from incurring losses due to selling products below the market price, there have been additional factors adversely affecting the financial health of OMCs. The factors include high interest burden due to heavy borrowings at high interest rates, foreign exchange losses due to rupee depreciation, inventory losses, and drop in gross refining margins.

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‘I’ve never seen such a positive environment for renewable energy’

N. Ramakrishnan

Recently in Denmark

It has been a long day for Mr Ditlev Engel, President & CEO of leading wind turbine maker Vestas. He has been accompanying financial analysts to Vestas facilities in Aarhus and Hammel, Denmark, with other senior company officials.

In the evening, Mr Engel, 44, sits down with some Indian journalists, on a visit to Denmark sponsored by Vestas, for a chat on the global economic situation and its impact on the wind energy sector. Mr Engel, who has been President & CEO of Vestas Wind Systems A/S since May 2005, holds a Diploma in Business Economics from the Copenhagen Business School and has participated in a general management programme at INSEAD, France. Excerpts:

What has been the impact of the global economic situation on the wind energy sector?

I would prefer to talk about the impact on Vestas rather than that on the sector, because these might be two different things. In 2007, we did about 5,000 MW at Vestas. We decided to go to 10,000 MW by 2010. Our investment and development have been focussed on getting up to this level of execution capability.

The world changed fast. When we announced our second quarter results in August, the only question analysts asked was whether we could get to 10,000 MW by 2010. I said yes, we can. We have over the last 12 months employed 5,000 people. Even though next year we expect to grow by 25 per cent, we have actually made it clear that we have a cost base now that is 15 per cent too high for a 25 per cent growth.

We have demonstrated that we were on the right track with the kind of ramp-up and investment that we are doing. Our investment next year stands at €1.2 billion. Our confidence in the growth scenario is robust. The energy challenges have become even more daunting and pressing now. We live in a world where people are managing issues from day to day, but energy is about long-term view.

Let me put the financial issue out of the equation and look at the political agenda. I travelled in China two weeks ago with the Danish Prime Minister where he met with both the President and Premier. Denmark is hosting the climate change conference next year. He got the best support ever on a (climate) deal. The EU has also said that financial challenges are not an excuse for not addressing the climate issue.

In the US, the President-elect, Mr Barack Obama, wants to create 5 million new jobs and he has said that energy independence and climate issues are going to be on the top of his agenda. All energy is politically driven and politically regulated. I have been the CEO of Vestas for the last three-and-a- half years and I have never seen such a positive political environment.

On the day we announced our Q2 results, the price of oil was around $140 a barrel and analysts asked me why we can’t double the price of our turbines. Now, when the price of oil is $50 a barrel, the analysts are asking me why we can’t lower the price of our turbines. I said the energy companies have a 20-year view and not the flavour of the day. It is clear that fossil fuels prices will go up. There are customers who are facing difficulties, but, overall, the energy agenda is one of the reasons why we believe that the outlook is robust.

We employed 5,000 people over the last 12 months. There have been no lay-offs, but we have stopped employing people for the moment. We haven’t stopped investing. We believe that these things will start moving again, may be not at the same speed. We are certain that the US agenda for going Green is going to be big and we are certain we will kick ourselves if we had stopped ourselves in the US. We are going to use 2009 to build in the US more than manufacture in the US.

What about access to capital?

We believe that we can make the projects more bankable for our customers. If you take the customers or the banks’ customers through a presentation, when the banks start to release cash again, we believe that it is some of the lowest risk you can actually release. Germany is a market driven by small-medium-sized developers. You have got the German state buying electricity, the same guys who bail out the banks. You got a very high business case certainty.

There would be other projects with a higher risk profile, which would be more likely to be hurt than these kinds of projects. We spend a lot of time reviewing our customer portfolio and the bankability. There are many projects when times were good, when people have had some very exciting projects and we have just said no, we are not going to do it. The marginal projects will have more difficulties, whereas those who have a safe business will go on.

Have you had any order cancellations? Do you see a slowdown in order bookings?

No, none at all. We have seen that those customers who have lost a bank, for instance, when Lehman went in the US, calling up and saying they can’t go on, because their bank has disappeared. Lehman was a big trader for tax credits on the PTC in the US, so the appetite for tax credits has gone down. In some of these areas, we have seen an impact.

We have learned from the financial crisis that big is not equivalent to good. Those, who do not have good projects or whose financing situation is more complicated, will have a bigger challenge.

Those having good cash flows, good management and strong operations would go on even if they are not the largest companies.

The wind energy industry has always said that with oil at above $59 a barrel, wind energy is more competitive. Now, with crude prices falling below that mark, how do the economics work out?

In July, crude was at $140 and people said it will go to $200 by Christmas. The same people are now saying it is going to be at this level for the next 9-12 months. Apart from the price of oil, it is true that higher the fossil fuel prices, the easier it is to understand the attractiveness of our energy.

From the utilities point of view, this is also about balancing their risk. Wind is the only type of energy where you can hedge your risk 100 per cent for the next 20 years. From a risk management point of view, you want to make sure that you have a diversified portfolio.

I think we have not had a price on carbon in the US. I think the new administration is going to put a price on carbon.

Another issue that people haven’t spent so much time on, but I know that some of our customers are factoring in into their business price model is that they don’t believe the price of water for exploration and so many other things will remain at this cost. China has invested $10 billion in pumping water from the South to the North because of drought. Drought is a huge issue in Australia and in certain states in the US. That water will come at a cost. Water is an important part of energy exploration. When you start to factor these things in, which many of the major utilities are doing, you start getting many different mechanisms in your pricing model for wind versus other types of energy. You need to balance the vi

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