MORE PAIN FOR INDIAN BANKS AHEAD

CRISIL believes that loans restructured by Indian banks may increase sharply to Rs.3.25 lakh crore between 2011-12 and 2012-13, against the earlier estimate of Rs.2 lakh crore. Loans of Rs.1.6 lakh crore have already been restructured in 2011-12 and in the first quarter of 2012-13. The majority of restructuring will be in loans to the state power utilities (SPUs), and the construction and infrastructure sectors. The rise is a result of significantly higher funding challenges being faced by companies with large debt.

In recent months, availability of unsecured short-term loans from Indian banks has diminished. This is exacerbating refinancing and liquidity pressure, especially for the SPUs. This will lead to a significant increase in restructuring of SPU loans to nearly Rs.1.5 trillion. So far, SPU loans of Rs.0.6 lakh crore have been restructured. Furthermore, inability to raise adequate equity in a timely manner is straining the balance sheets and financial flexibility of developers in infrastructure and construction sectors, resulting in an increased likelihood of restructuring. Other vulnerable sectors include iron and steel, textiles, and engineering.

The proportion of restructured loans in this period will be high at around 5.7 per cent of banks’ advances as on March 31, 2013 according to CRISIL. Around Rs.0.50 lakh crore of these restructured loans may slip into NPAs, though this will depend on the terms of restructuring and fundamental viability of the projects and the companies. These slippages can aggravate the already stressed asset quality of banks by further increasing NPAs by 50 to 75 basis
points beyond March 2013. The loans to SPUs are unlikely to slip into NPAs, given the support expected from state and central governments.

Despite continued weak growth and profitability in the corporate sector, the large restructuring will help limit the increase in the banks’ NPAs in the near term. According to CRISIL’s estimates, the lower GDP growth of 5.5 per cent expected in 2012-13 may result in increase in banks’ gross NPAs to 3.5 per cent by end-March 2013 from around 3.0 per cent at the end of June 2012. The increase will be driven largely by delinquencies in the micro, small and medium enterprises, and agriculture and allied sectors.

An Economy is only as good as its statistica​l system

The government will announce the first quarter gross domestic product (GDP) numbers on Friday, and speculation is running high whether growth will be lower than the 5.3% notched up in the January-March 2012 quarter. What is very interesting is that in the meantime, the government has, rather quietly, revised downwards earlier GDP estimates for fiscal years 2009 and 2010.Recall that when GDP growth slipped to 5.3% in the January-March 2012 quarter, there was much adverse commentary about it being even lower than growth during the third and fourth quarters of fiscal 2009 (FY09), after the Lehman Brothers crisis. That didn’t reflect too well on the government, because while the lower growth in FY09 was the result of a global crisis, the current slowdown is largely a home-grown one.Well, growth in the fourth quarter of FY09 has now been revised downwards by the Central Statistics Office (CSO) from the earlier 5.9% to a much lower 3.5%. Gaurav Kapur, a senior economist at Royal Bank of Scotland NV in Mumbai, pointed out the revisions and drew attention to its magnitude. It’s a huge revision and once again calls into question the quality of data on which the GDP estimates are based.The CSO website says that the new series of the Index of Industrial Production (IIP) has been used for computing the data. But strangely enough, there’s been no revision in the GDP growth for the third quarter of FY09, which remains at 5.8%. The revised IIP data seems to have changed the GDP growth for the fourth quarter of FY09, but not for the third quarter.As the chart shows, growth for the first quarter of FY10 has also been revised down from 6.3% to 5.7%. That’s not such a big change, though, compared with some of the other revisions. Consider, for instance, the revisions for the first quarter of FY09 from 7.9% to 9.8%, or for the fourth quarter of FY10 from 9.4% to 11.2%.What was the reason for the big change during the fourth quarter of FY09? Well, they’ve revised down the growth rates in all three sectors—agriculture, industry and services. Growth in industry has been revised down from 0.8% to -3.6%.When the GDP growth numbers for the first quarter of FY13 are announced on Friday, if it falls below the 5.3% recorded during the previous quarter, as several economists believe it will, even then the growth rate won’t be lower than during the post-Lehman period. As an economist pointed out, we can now say that growth isn’t as bad as in the post-Lehman quarters, at least until the numbers are revised again.More importantly, when they announce the GDP growth numbers on Friday, where’s the guarantee it won’t be revised later by more than 2 percentage points, just as they did for the fourth quarter of FY09? And if the magnitude of error is so high, what’s the point of taking any decisions based on this kind of data? One can only express one’s sympathies to the Reserve Bank of India (RBI). Simply put, the credibility of the GDP data is at stake.

Rural Indians outpace urbanites in spending growth

For the first time since economic reforms began two decades ago, consumption in rural India is

growing faster than in urban India. Given the large size of India’s rural population, the value of goods

and services consumed has always been greater in rural India, but urban India had narrowed the

differential during most of the last decade by growing at a faster pace. Between 2009-10 and 2011-

12, additional spending by rural India was Rs.3,750 billion, significantly higher than Rs.2,994 billion

by urbanites. For sustaining the rural boom, it is critical to substitute short-term income boosters such as government-sponsored employment guarantee schemes with durable job opportunities in rural areas.

Growth in rural consumption was fuelled by a rise in household incomes due to greater non-farm job

opportunities and government initiated employment generation schemes. NSSO data shows that

during 2004-05 to 2009-10 rural construction jobs rose by 88 per cent, while the number of people

employed in agriculture fell from 249 million to 229 million. In addition, migrants from villages to urban

areas who benefitted from job opportunities in infrastructure and construction projects increased

remittances to their families in rural India, which boosted consumption.

A notable phenomenon in rural consumption is a shift from necessities to discretionary goods. About

one in every two rural households now has a mobile phone. Even in India’s poorest states such as

Bihar and Orissa, one in three rural households has a mobile phone. Nearly 42 per cent of rural

households owned a television in 2009-10, up from 26 per cent five years earlier. Similarly, 14 per

cent of rural households had a two-wheeler in 2009-10, twice that in 2004-05. For India, a young

population, rising income and low penetration of many consumer durables means that rural

consumption has the potential to remain an important source of demand.

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) fuelled job

creation on an unprecedented scale and provided an opportunity to rural households to supplement

their traditional farm income. Nearly 27 per cent of rural households availed employment under

MGNREGS in 2009-10. Wages under MGNREGS increase with retail inflation: consequently, rural

wages have risen faster than inflation since 2007-08.

Source: CRISIL

Five Reasons Ayn Rand Is Bad for Business

For decades, CEOs have touted Ayn Rand as a "must-read" for staff and employees alike. Here are five good reasons that's a bad idea — if you want your business to be successful.

1. Rand focuses employees on money. Rand practically worshipped the almighty dollar  seeing the acquisition of wealth as a goal worthy in and of itself. Unfortunately, when that attitude spreads throughout an organization, a higher salary becomes the only motivation that really works. That means top workers will, of course, leave the moment they get a better offer elsewhere.

2. Rand encourages selfishness. For Rand, there is no higher good than pursuing one's own happiness. The problem with that philosophy is that it encourages workers to view their personal success as being far more important than the group's success — and that kind of self-centered thinking is fatal to getting team members to work together.

3. Rand creates fanatics. While some Rand fans have a nuanced view of her, there are plenty of people who glom onto her writing with evangelical intensity. Their quest to convince everyone else in the workplace that Rand was the greatest thinker and philosopher of the 20th century (or maybe of all time) is distracting, annoying and counter-productive.

4. Rand alienates the religious. Rand's value system is the antithesis of Judeo-Christian teaching. For example, while Jesus says "blessed are the poor," Rand calls them "moochers." Top-quality workers who value their religious faith might feel out of place in a work environment that seeks to canonize Rand's brand of atheism.

5. Rand discourages charitable giving.Rand devotees criticize CEOs who give to charity because "you have no moral obligation to 'give back,' because you didn't take anything in the first place." For many workers, though, an altruistic desire to "give back" is a strong motivator. Such workers respect leaders who know that others contributed to their success.

Source: Reports

IDBI PAVES THE WAY FOR MORE SGD BOND ISSUANCES

IDBI Bank made the first publicly listed benchmark Singapore Dollar bond issue from India on August 21, 2012.  The transaction received overwhelming response and the order book was oversubscribed by 12 times.  The SGD 250 million bond issue is for a 3 year maturity and carries a fixed coupon of 3.65% p.a. This landmark issue by IDBI Bank will pave the way for other SGD bond issuances by Indian issuers.
This transaction is significant to India and IDBI Bank on several counts:
i) It is the first benchmark public bond transaction by any Indian entity in the Singapore Dollar bond market.
ii) It has opened up a new source of funding and investor diversification for Indian issuers.
iii) IDBI Bank is the only issuer from India to have tapped the Dim Sum (CNH) and Singapore Dollar (SGD) bond markets and is the only bank from India to have accessed the Swiss Franc (CHF) Bond Market in FY 2013.
iv) The transaction received a record oversubscription of 12 times which is the highest for any Indian bank.
v) The issue achieved the tightest pricing for any benchmark 3 year senior bond issue by any bank in the SGD market during 2012 year till date.
IDBI Bank undertook road shows in Singapore on August 14 and 15, 2012 which were very well attended by a diverse set of SGD focused private banks, asset managers and banks who were eager to hear the India and IDBI Bank story.  The highly impressive and well received road shows led to some large accounts indicating initial interest in an issuance and IDBI Bank decided to capitalize on the same despite significant volatility in global credit markets. 
The transaction was announced in the morning of August 21, 2012 as a SGD benchmark 3 year bond in the 4% area.  The books grew rapidly and soared to over SGD 1 billion within 2 hours of opening.  This enabled the announcement of a significantly tighter final guidance of 3.70% area post lunch in Singapore.  The book continued to grow to over SGD 3 billion, allowing the final pricing outcome of 3.65% at the tight end of the
final price guidance.  This price tightening of 35 bps from the initial price guidance is unprecedented.
The transaction attracted interest from a diversified array of investors including private banks (65%), asset managers (17%) and banks (18%).  Around 78% of the book size came from Singapore, with the balance 22% being from Hongkong and other geographies. 
DBS Bank, HSBC Bank and Standard Chartered Bank acted as Joint Book Runners and Lead Managers to the transaction. 

RIVALRY BETWEEN CHIDAMBARAM AND SWAMY SPANS DECADES

It was 1977 and the Janata Party had astonished media pundits by coming to power on the distaste created by the Emergency for the Congress party. A slim lawyer from Tamil Nadu shyly came up to the Stormy Petrel of the period, Subramanian Swamy, who had just been elected to the Lok Sabha from Bombay, the city his Parsi wife Roxna regarded as home. During the Emergency, Swamy had stealthily entered Parliament House, quickly signed the attendance register, and vanished before policemen could apprehend him. Swamy was, because of his opposition to the Emergency, one of that period's Most Wanted.
Although regarded with less than affection by A.B. Vajpayee, he was a favourite of Morarji Desai, and had come back to India after giving up a teaching career at Harvard. Palaniappan Chidambaram, the lawyer from Tamil Nadu, was one of the editors (together with N. Ram of the Hindu) of the Radical Review, a left publication strongly in favour of nationalisation of private assets (the Hindu and the Chidambaram family's assets presumably excluded). Chidambaram reminded Swamy that he was one of his appreciative Harvard pupils, only to get a cold stare from the newbie celebrity, and a "who are you?" look
Although it failed with Swamy, Chidambaram's youth and clipped accent, so different from the denizens of Mylapore or Egmore, impressed Rajiv Gandhi. He was inducted into the Central Council of Ministers in 1984, as Minister of State in the Home Ministry, no less. Some of his joy at the elevation in his status was probably tempered by the sight of the forgetful Harvard professor, who seemed to have won the affection of the PM to an even greater degree than Chidambaram. What was Swamy doing, meeting the PM? Discreet warnings about the opposition element who had "opposed Indira Gandhi" had little effect on Rajiv Gandhi, who liked to surround himself with those who had taken a political line different from that of the Congress party. Swamy continued to meet with the PM regularly, and even do secret missions for him, tasks that were not confided to the Minister of State by either Swamy or the PM.
The situation was made intolerable for Chidambaram by (the then Rajya Sabha MP) Swamy raising the Hashimpura massacre in Parliament in 1987. The killing of more than 40 Muslim youth by the UP Provincial Armed Constabulary had sickened the nation, and both officials as well as politicians sought to distance themselves from the foul deed. Swamy did not allow Chidambaram such a luxury. He accused the minister of doing an "aerial reconnaissance" of the killing field, the implication being that the lawyer-turned-politician was behind the massacre. This was crossing a huge red line, and it was dangerous to be so foolhardy with Chidambaram, whose memory for slights rivals that of a Pathan tribal elder.

Although on the record, backers of the current Union Home Minister deny any role in Swamy's travails, others claim that Chidambaram waited for an opportunity to strike back. He was clearly patient, holding his fire when Swamy briefly became Commerce Minister in the Chandrashekhar government. The Tamil Nadu politician, whether because of the presence within it of Swamy or not, was one of the most persistent advocates of the Congress party withdrawing support to Chandrashekhar, advice that Rajiv Gandhi finally took in 1991, forcing the election that caused him his life.
Palaniappan Chidambaram is aware that he is a gift of nature to humanity, and is generous with advice to acolytes. It must rankle that Swamy has never, not even once, turned to him for guidance. To Chidambaram's chagrin, although he was Minister of State for Commerce with independent charge in the Narasimha Rao ministry, Swamy was made chairman of the GATT Commission set up to assist in the negotiations with that international trade body. Worse, he was given Cabinet rank, a slight that Chidambaram held against Rao thereafter, finally breaking with the PM in 1996 in the company of his old benefactor, Govindaswamy Karuppiah Moopanar. When H.D. Deve Gowda formed a government in 1996, Chidambaram became the Union Finance Minister.
Soon afterwards, a chance presented itself to send Subramanian Swamy to jail. The stormy petrel of Emergency days had taken over in 1997 as chairman of a trust set up by "spiritual guru" Chandraswamy, after Dr P.C. Reddy (the founder of the Apollo Group) resigned after Chandraswamy was targeted by the Finance Ministry for FERA violations, the godman's real offence being his closeness to one of Chidambaram's betes noire, former Prime Minister Rao. Although Swamy had just been inducted into the trust, and therefore had no role in any of the transactions being investigated, an arrest warrant was issued for him. Was it to be checkmate? Would Chidambaram succeed where Indira Gandhi had failed during the Emergency? Unfortunately for him, before Swamy could be arrested, Prime Minister Deve Gowda learnt of the warrant, and got it cancelled. Till recently, Swamy had been Gowda's nominal boss as president of the Janata Party, of which Gowda had been the Karnataka state boss, till he quit to join hands with the Janata Dal.
While Chidambaram may be a Pathan in his outlook, Subramanian Swamy is Sicilian. Soon after escaping from the prospect of jail in 1997, he filed a complaint against Chidambaram, alleging that the Finance Minister had misused his position to get promoters shares in Fairgrowth, an investment subsidiary of a nationalised bank. The Delhi High Court issued notice to the minister, who admittedly had been allotted the shares. However, masterful arguments by counsel Arun Jaitley led to the court asking Swamy for a fresh complaint, because of a technicality. Fortunately for Chidambaram, the Lok Sabha elections took place soon afterwards, in 1998, and Swamy lost interest in pursuing the case. Litigation is a full-time job in India, not a task one can attempt in one's spare time.
Although there were rumours that Chidambaram would join the BJP in 2003, a year later he re-emerged as Finance Minister in the Congress-led government headed by Manmohan Singh. From that lofty perch, he could perhaps afford to ignore Private Citizen Swamy, who by the 1999 polls was out of both government as well as Parliament. However, the converse was not true, especially after 2008, when a group of Telecom Ministry officials secretly called on Swamy at his New Delhi residence and gave him details of what they claimed was massive fraud in the allocation of 2G spectrum. By the beginning of 2011, Swamy became convinced that the scam had been perpetrated by both Raja and Chidambaram, with the Congress stalwart being the "senior partner". According to Swamy, it was Chidambaram who told Raja about the escape route that the companies that had been allocated spectrum could take to get over the three year lock-in period. Rather than sell the spectrum, they could sell the entire company, and thereby the spectrum.
as Chidambaram told in writing by then Home Minister Shivraj Patil about security concerns regarding Etisalat and Telenor, the two foreign companies that bought two of the Indian entities that had been given 2G spectrum by A. Raja sans an auction? Are there minutes of meetings between Raja and Chidambaram that show that the decisions taken were arrived at jointly, rather than (as numerous media plants claim) Chidambaram opposing Raja? Swamy says yes. On 26 August 2011, Swamy went to the Supreme Court asking for Chidambaram to be included as a culprit in the 2G scam. The very next day, the Crime Branch of the Delhi police (which directly reports to the Home Ministry, headed by Chidambaram since 2008) registered an FIR against Swamy for an article that he had written in DNA. The game of Catch between the two Tamil politicians thus goes on, so far with neither man succeeding in sending the other to jail.

Source: Reports

DICHOTOMY BETWEEN HOUSING PRICES AND LOAN GROWTH

HOUSING PRICES RISE BUT LOAN GROWTH SUBDUED

UP UP AND AWAY
As per a study conducted by the National Housing Bank housing prices have risen by up to 10.5 per cent in 16 major cities in India during the April-June period. NHB 'RESIDEX' tracks the movement in prices of residential properties on a quarterly basis since 2007. The maximum increase in housing prices was observed in Pune (10.5 per cent) followed by Bengaluru (8.7 per cent), Patna (8.6 per cent), Ahmedabad (6.4 per cent) and Ludhiana (5.3 per cent). Housing prices rose by 4.1 per cent in Lucknow, while homes became costlier in Mumbai by 3.7 per cent, Delhi and Kolkatta by 2.6 per cent each, Bhubaneshwar, Bhopal and Chennai by 1.7 per cent each, Surat and Guwahati 1.2 per cent each, and Vijaywada and Kochi by 1.1 per cent each. According to a recent Knight Frank report, Indian real estate prices rose 12% in the past year, the third highest in the world.

LOAN GROWTH SUBDUED
Reserve Bank data shows housing loan growth slowed to 12.1% for the year ended March 2012 from 16% in the previous year. Also, before real estate prices peaked in 2008, big lenders were managing to grow their home loan portfolio at an annual average of 25%. Loan growth at LIC Housing Finance slipped to 17% in 2011-12 from 28% a year ago, forcing the company to set a lower target of 20% for the current fiscal. State Bank of India's housing loan disbursement grew 15% in 2011-12 against its target of 20%. State Bank of India (SBI) has revealed that it has cut its annual home loan growth target by up to 10 per cent age points. The biggest lender of the country has to revise their target due to sluggish growth in property market. Bank management stated that earlier target was 25 per cent growth in its home loan book. However, due to constant drop in home registrations, they now expect that the home loan segment will grow by only 15-20 per cent.

INFLATION DIPS: BUT THE RBI MAY NOT ACT AS YET

A SLIGHT RELIEF
Inflation for the month of July fell more than expected to 6.87% y-o-y in July from 7.25% in June (Consensus: 7.2%). The relief was primarily led by a much lower-than-expected increase in primary inflation (mainly food and minerals prices) even as core inflation jumped sharply.

CORE INFLATION STILL HIGH
Core inflation (WPI manufactured ex-food) rose to 5.4% y-o-y in July from 4.8% in June. Key hit came from higher global commodity prices and the lagged effect of INR depreciation. Meanwhile, food inflation fell more than expectations and eased to 8.7% y-o-y from 9.0% as prices of vegetables contracted. Excluding volatile vegetable prices, food prices in India continued to rise.

IS THIS AN ABERRATION ?
The current primary (food and non-food) inflation numbers do not yet seem to reflect ground reality, and according to most economists the July reading may get revised up as we start to factor in a deficit monsoon. Supply shocks led by a deficit monsoon and higher global food prices may push primary (food and non-food) inflation higher in the coming months. This, along with an impending fuel price hike and a delayed adjustment to electricity prices, suggests that the July month reading is unlikely the start of a trend.
Most economists still have kept the full year WPI estimates unchanged between 7.5-8%

INDIA'S INFRA STORY: BETTER LATE THAN NEVER

CHALLENGES FACING INFRA DEVELOPMENT: JAYPEE GROUP'S SAGA

India's longest 6-lane access-controlled expressway was finally inaugurated last week after which promises to cut travel time between the Taj Mahal and Delhi by more than half. Originally conceived as the Taj Expressway project during 2001, it could not take off for another two years due to a change in the regime. It was revived again in 2007. Still the project took a little around 10 years to complete with its fair share of controversies.  The six-lane highway is built under the public-private partnership model and is the biggest such project in the country. Jaypee Infratech, the company that has built the project, has a 36-year concession (rights) over the it.

LINK TO FULL INTERVIEW: INDIA'S INFRA STORY: BETTER LATE THEN NEVER

A YEAR OF U.S. DOWNGRADE: AND LIFE GOES ON

A YEAR OF WORRY: OR WAS IT ?

Exactly a year ago in August 2011...rating agency Standard and Poor's shocked the world by announcing a rating cut of the US of 'A', stripping away the coveted AAA bond rating. The downgrade, unprecedented in nature threatened to turn the world upside down, drive up U.S. interest rates, pushing the dollar down, driving bond yields to exorbitant levels and scaring investors away from stocks and into that traditional refuge for the fearful: gold. Atleast most economists expected this sort of a reaction, had we been living in a perfect world. Exactly a year has passed, long-term interest rates are sharply lower, the Dow industrials reversed course and is now firmly above 13000. The dollar has rallied, and gold prices are down from where they were when S&P lowered the rating. It is difficult to imagine a more decisive repudiation of S&P's warning that the U.S. government might not be able to pay its bills.

ASSET CLASS                  % CHANGE
Dow:                                  +14.4%
Gold:                                  -3.21%
Crude:                                -1%
Dollar:                               +6%

EMERGING MARKETS: NOT IN GREAT SHAPE

Equity experts propogated that with the developed world in turmoil, global funds and investment giants would have no option but to seek refuge in Emerging Market equities which offered relative value with slightly more risk. But the reality seems to be far apart. Emerging markets such as India and brazil have barely moved in these last 12 months with ahigh interest regime prohibiting any recovery coupled with steep interest burden for the corporate sector. China still faces the prospect of a hard landing despite the monetary authority pinpointing to more easing.

MARKET                         % CHANGE
India:                                +2.5% 
Brazil:                              -0.88%
China:                               -17.95%

THE NAME IS 'BOND'

Despite S&P's warnings and the political stalemate, investors still want U.S. Treasurys. Given economic turmoil in Europe and uncertainty elsewhere, U.S. government debt and U.S. dollars look like the safest bet around. That is why the interest rate, or yield, on 10-year Treasury notes has fallen from 2.58 on Aug. 5, 2011 to lows of 1.5 percent. At a recent auction of German bunds the two-year note yields fell below zero for the first time as the euro-region’s deepening crisis saw investors willing to sacrifice any return in exchange for holding the region’s safest assets.

BOND YIELDS                              % CHANGE
US 10 Year:                                     -39.5%      
German Bund 10 Year:                   -53.36%  
Spain 10 Year:                                 +8.03% 
Italy 10 Year:                                  -1.32% 
Greece 10 Year:                              +68.89%

WANT TO IMPROVE CORPORATE PERFORMANCE: INCLUDE MORE WOMEN ON BOARD

CORPORATE BOARDROOMS: NO MORE A MALE BASTION

For years women' rights groups have been arguing in favour of giving women more say and power in corporate boardrooms, and now a study has revealed that companies with women on their boards performed better in challenging markets than those with all-male boards suggesting that mixing genders may temper risky investment moves and increase return on equity.

FASCINATING RESULTS

Shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years, according to Credit Suisse Research Institute. The research, which includes data from 2,360 companies, shows a greater correlation between stock performance and the presence of women on the board after the financial crisis started four years ago. Net income growth for companies with women on their boards averaged 14 percent over the past six years, compared with 10 percent for those with no female director, according to the Credit Suisse study, which examined all the companies in the MSCI ACWI Index.

RISK AVERSION THE KEY

Stocks of companies with women on boards tend to be a little more risk averse and have on average a little less debt, which seems to be one of the key reasons why they’ve outperformed so strongly in this particular period.
The net-debt-to-equity ratio at companies with at least one female director was 48 percent, compared with 50 percent at all-male boards, and the study showed a faster reduction in debt at businesses with women on the board as the financial crisis and global economic slowdown unfolded.

WOMEN CALL THE SHOTS

While female representation increased to 59 percent last year from 41 percent at the end of 2005, countries such as Japan and South Korea are lagging behind the U.S. and Europe, which has added female representation the fastest over the six-year period. Larger companies have a higher proportion of women on their boards, as well as those in the health-care industry -- 73 percent have at least one female director -- and industries close to consumers, the study shows.

TIME TO BE MORE INCLUSIVE

The materials and information-technology sectors have the highest percentage of male-only boards, both at more than 52 percent, according the report. Traditionally some industries have just never really been seen as the domain of a woman, like some of the mining industries or heavy-capital goods industries, according to the report.
In the U.S., 36 percent of companies still have no women on their boards of directors, according to a report by researcher GMI Ratings on gender diversity released today. The average corporate board has about nine members.

INDIA AMONG WORST COUNTRIES FOR ENTREPRENEURS

Rampant corruption, lack of adequate capital and credit, and poor technology and training have impeded the creation of small businesses in India. Moreover the recent economic slump and capital constraints has impeded the creation of small businesses.

According to a Gallup poll India has been ranked last in Asia in promoting entrepreneurship. According to the survey, of 5,000 adults in India from January to March of this year, 16 percent of Indian adults own a business and half of those owners are solo operators. The survey found that business thinking, optimism and persistence – all important for entrepreneurs — are common traits among Indians. Small and medium-sized businesses contribute 8 percent of India’s gross domestic product and employ 60 million people in 26 million enterprises, according to a January 2010 government report. Nearly half of those surveyed by Gallup said that the government is a significant stumbling block to starting a business. Seven out of 10 Indians said that corruption is widespread in government and 60 percent said that corruption is common in business. Training and mentorship are also crucial for startups, but only 37 percent of current business owners and 28 percent of those seeking to start a business said that they know someone who can offer advice about business management, the Gallup poll found. A recent study by the World Bank ranked India at 166th rank among 183 countries in terms of the ease of starting a business.

The survey results were released just as India experienced the two worst blackouts in human history and as foreign investment in India has slowed in part because of concerns about changes in India’s tax policies.

A NEW PARADIGM IN SHAREHOLDER ACTIVISM

TCI TAKES COAL INDIA TO COURT: THREATENS TO SUE THE BOARD

TCI ON THE OFFENSIVE

The Children's Investment Fund (TCI) which owns about 1% stake in Coal India today threatened to sue the entire board of the public sector behemoth after filing a writ petition in the Delhi High Court alleging breach of fiduciary duties by Coal India. In its petition TCI has argued that coal prices are completely de-regulated and the Indian Coal Ministry does not have legal authority to interfere with the discretion with CIL as it has been doing on a regular basis. The petition also argues that the January revision in the price is also illegal being a direct consequence of the illegal and invalid instructions of the Ministry. In its petition TCI has also sought a direction by the High Court to the Ministry not to interfere with the pricing mechanism in any manner. TCI also believes that the FSA system of distributing coal has an inbuilt risk of engendering corruption and has drawn strong parallels between the corruption related to the allocation of the 2G spectrum and selling FSA (Fuel Supply Agreement) coal below market prices.

TCI THREATENS TO SUE THE BOARD

In addition to its writ action in the High Court TCI has also threatened to sue the Board of Coal India for breach of fiduciary duties and abuse of minority shareholders. It alleges that the directors' continued failure to expedite ramp up of coal washing  capacity and raising coal prices is further evidence of their unwilligness and inability to run Coal India to the best of shareholders' interests.

Q1 EARNINGS REVIEW: NET INCOME SURPRISES

SUMMARY

Deutsche Bank's analysis of fiscal first quarter earnings season shows profits for corporates well above estimates helped by a mix of FX gains, MTM gains on investments and higher other income.

NET INCOME (PROFIT AFTER TAX) SURPRISES
The Jun-qtr earnings season is more than midway through, and till date aggregate numbers under coverage have been broadly in line with estimates on Revenue and EBITDA (core earnings). However aggregate net income has come in 7% ahead of estiamtes on account of a favorable mix of FX gains/MAT credit entitlement (Cairn India), MTM gains on investments (Hindustan Zinc, Bank of India), dividend income from subsidiaries (L&T), lower interest costs (Sterlite) and higher other income (HUVR, Sterlite) across different companies. Positive surprises on net income have outnumbered negative surprises by a ratio of 62:38, while positive and negative surprises on EBITDA have been evenly distributed.

KEY TRENDS
(1) While Government owned public sector banks have been severely impacted by asset quality concerns, private sector banks have performed reasonably well.

(2) Pricing and mix have continued to improve for most car companies, even as margin has come under pressure due to rupee depreciation and SG&A costs.

(3) Oil companies have suffered from lower refining/petchem margins while the gas segment has been impacted from low volumes.

(4) Steel/Aluminium margins have been better than expected while copper producers has disappointed on TC/RC realizations.
(5) Cement realizations have been robust, rising by 12-14%.

(6) Capital goods continued to witness margin pressure and working capital stress.

(7) Utility companies have benefitted from better execution and better coal availability.

(8) Price competition has resumed in Telcos even as minutes of usage growth remain stable.

(9) INR depreciation of 17% yoy meaningfully supported numbers of IT and Pharma companies.
Source: Deutsche Bank Markets Research

WORKING CAPITAL CRUNCH FOR CAPITAL GOODS COMPANIES

DIFFICULT TIMES

A study conducted by credit rating agency CRISIL (subsidiary of Standard and Poor's) shows that the working capital requirement for the capital goods sector in India have surged at a 5 year high. The pressure on this sector is primarily due to the deferment of large capital investment plans since 2011-12 (refers to financial year, April 1 to March 31) by end user industries such as power utilities. The resultant build-up in inventory and delay in release of payments by customers has led to tight liquidity conditions within the sector. The reasons for deferment in projects include demand slowdown, increase in project costs and interest rates, and lower cash flows.

WORKING CAPITAL NEEDS SURGE

Working capital requirements have increased substantially; the gross current asset (GCA) days of a sample of 50 listed mid-sized players have increased to 370 as on March 31, 2012, from 280 as on March 31, 2009, the highest in the past five years. GCA days refer to gross working capital expressed as number of days of sales and the sample of 50 companies accounts for a-third of the revenues of all capital good entities covered by CRISIL.

HIGH COST DEBT PILING ON

A large portion of the incremental working capital needs has been funded either through delayed payments to suppliers or through high-cost short-term debt. Prevailing high interest rates for short term borrowings have led to a steep drop in  the interest coverage ratio (profit before depreciation, interest, and tax/interest, and finance charges) of companies covered by CRISIL. The ratio of cash flows from operations to total debt also declined sharply, to a negative 0.30 times from 0.07 times during the same period thereby indicating that the cash from operations is inadequate for servicing debt payments.


Source: CRISIL

INDIAN AUTO SECTOR PROFITS UNDER THREAT: FITCH

NOT IN AUTO MODE ANYMORE

Fitch ratings expects profitability for Indian auto suppliers in H2' fiscal 2012 to moderate significantly. According to the rating agency a fall in volumes in some sub-segments of the domestic auto industry could manifest into lower revenue growth for certain suppliers. Limited ability of original equipment manufacturers (OEMs) to fully absorb high raw material prices, caused partially by a weaker rupee, alongside an increase in other input costs is also cited as a significant headwind for the sector.

RATINGS UNDER THREAT ?

Fitch expects an easing of operating profitability along with a lengthening of credit cycle to necessitate the need for higher working capital. This is in addition to the long-term borrowings from previous capex plans or proposed projects, which would be likely to weaken the credit metrics of auto suppliers over H212. However, the limited exposure of Indian auto suppliers to foreign currency borrowings would help prevent any large alteration in their credit metrics in 2012 from rupee depreciation. A sharper and widespread fall in automotive volumes beyond 2012 could adversely impact OEM's operating cash flows and in turn lengthen their payable periods to auto suppliers. Auto suppliers' stressed liquidity through higher working capital borrowings could constrain their financial flexibility for completion of capex plans and may cause a revision in the outlook to negative.

Source: Fitch Ratings