Business , Economy , Banking News - MAY

Phaneesh Murthy has been appointed CEO of Patni also

iGATE, which initiated its move to acquire Patni Computer Systems in January this year, announced on Thursday that it has completed the process. Making the announcement in Bangalore, Phaneesh Murthy, iGATE CEO, said iGATE now holds 82.5 per cent stake in Patni.

Mr. Murthy, who has also been appointed CEO of Patni, said Patni's board has been revamped with nine members. He said the acquisition has been made with a debt of $770 million and a convertible preferential stock issue amounting to $330 million. He said the $370 million cash balances with the company are “enough for capital investments in the short and medium term.” The deal cost iGATE $1.25 billion.

Patni and iGATE would continue to be listed in India and in the New York Stock Exchange, Mr. Murthy said.

Mr. Murthy said the two entities would “go to market as a single entity, using our revenue synergies.” “Within the next three years we would like to be a leader in the banking and insurance and in the health verticals,” he said. The combined entity hopes to “be a significant player” in the media and entertainment, manufacturing, retail, logistics, communications, energy and utilities verticals in this time-frame.

Mr. Murthy also said the combined entity hoped to increase utilisation rates from the current “low 70s (per cent) to about 80 per cent by the end of the year. “We hope to contain attribution to about 20 per cent by the end of the year,” he added.

The two companies have 26,000 employees and have a combined client base of 360. The top ten clients contribute to about half the revenues of the combined entity. “The higher revenue base will enable us to attract larger clients,” Mr. Murthy said.

Although food inflation slid to its 18-month low at 7.7 per cent during the week ended April 30 from 8.53 per cent in the previous week owing to declining prices of pulses and vegetables, serious concerns remain on a likely price spiral in non-food items and its impact on core inflation.

Lauding the downward trend in food inflation based on the Wholesale Price Index, especially as it was way higher at over 21 per cent during the like week in 2010, Finance Minister Pranab Mukherjee said: “The current trend in food inflation is welcome and we hope to see further moderation in food inflation in the coming weeks... However, there are concerns on price momentum in non-food articles.”

Even as prices of pulses eased by 9.05 per cent, vegetables by 3.64 per cent and potatoes by 3.58 per cent on a year-on-year basis, Mr. Mukherjee pointed to the prime cause for concern and said: “Sustained high non-food primary prices are creating cost-push inflationary conditions in the manufacturing sector. Thus, even though food inflation is declining, the concern on higher core inflation remains.” The Finance Minister, however, hoped that the hike in key policy rates by the RBI would help in containing the inflationary spiral, which has been shifting food to non-food items.

Making its first overseas buy, Kolkata-based container glass manufacturer Hindusthan National Glass Company (HNG) on Thursday announced its plans to buy a German company Agenda Glas AG in an asset deal, entailing an investment of about Rs.321 crore (50 million euro) over one year, including an acquisition price of 40 million euro and an investment in the plant, Mukul Somany, Vice-Chairman and Managing Director of HNG said. The funding would be through debt and equity.

HNG said in a release that the German company which began commercial production in February 2010, faced bankruptcy within a year and its assets were being acquired by HNG Global GmbH, a 100 per cent subsidiary. The target company's production capacity is 320 tonnes daily.

Mr. Somany said that through this acquisition, HNG planned to make a foray into the international container glass segment, which dovetails with its growth plan over the next three years. In India, the company has been looking at organic growth through green and brownfield expansions with an investment of Rs.2,500 crore.

HNG has export presence in over 23 countries including Europe, the U.S. and the UAE. In India, it is planning to ramp up production from 7.85 lakh tonnes in the last fiscal to 12 lakh tonnes in the current fiscal. On the anvil are capacity expansion plans and a new unit at Naidupeta in Andhra Pradesh and at the Nashik plant in Maharashtra.

HNG makes a wide range of glass bottles ranging from 5 ml to 3,200 ml with applications in the liquor, beer, beverages, pharmaceutical processes and cosmetic industries. It has acquired units in India in the past and of its units within the country, the ones at Rishikesh and Puducherry are those acquired from Owens Brockway. Its Nashik unit was bought from L&T while its Neemrana unit was acquired from Haryana Sheet Glass. It also has units in Rishra in West Bengal and Bahadurgarh in Haryana.

India Yamaha Motor on Thursday launched three new variants of its FZ series bikes to strengthen its position in the Indian motorcycle market.

The new FZ will be available at Rs.67,000, FZ-S at Rs.69,000, while the Fazer will be priced at Rs.74,000.

“India Yamaha Motor has introduced new variants of the FZ, FZ-S and Fazer bikes of its popular FZ series with a complete makeover,” India Yamaha Motor CEO and Managing Director Hiroyuki Suzuki said in a statement.

“The FZ series has gained immense popularity among youngsters since its launch in September 2008. The introduction of the FZ series in a whole new look is in line with our strategy to consistently provide our customers with fresh and new offerings. These bikes have been instrumental in taking our sales to a higher trajectory ,” he added.

TA Associates to buy stake in Tega Industries

TA Associates, a private equity firm, has invested $ 40 million to acquire a minority stake in Tega Industries, a global leader in the design and production of consumables for the mining industry based here.

Tega offers a range of products and services used in mining, mineral processing, screening, grinding and material handling industries. It has manufacturing facilities in India, South Africa and Chile, with offices in 14 countries, a release said.

“We are delighted that TA Associates is investing in Tega at such an exciting time for the business,” said Madan Mohanka, CEO and Founder, Tega Industries. “We are pursuing a variety of growth strategies, including increasing share in existing markets, entering new geographies and expanding our range of offerings. We are confident TA will prove a valuable partner in these endeavours”.

TA's previous investments in India include Dr Lal PathLabs, GlobeOp Financial Services, Idea Cellular and Micromax Informatics.

Even as the poor show by manufacturing and mining sectors pulled down the industrial growth rate to 7.8 per cent in 2010-11 from 10.5 per cent in 2009-10, the silver lining is the vastly improved performance during March this year, which is being viewed as a ‘turnaround' for the current fiscal.

The quick estimates of the Index of Industrial Production (IIP) released here on Thursday by the Central Statistical Organisation revealed that the industry's standalone performance during March has been the best since October 2010 with a growth of 7.3 per cent, way above the dismal 3.6 per cent notched up in February.

After posting a robust expansion of 11.29 per cent in October last year, industrial growth had slumped for four straight months to below 4 per cent from November onwards, mainly owing to a sharp fall in manufacturing output, which accounts for nearly 80 per cent of the IIP basket.

The growth in factory output plunged to 2.7 per cent in November, slipped further to 2.5 per cent in December and then gradually improved to 3.95 per cent in January and to 3.6 per cent in February this year.

Commenting on the IIP data, Finance Minister Pranab Mukherjee noted that the improvement in March was not ‘totally unexpected' after four months of low growth. “Some improvement has taken place on the figures. I expected a little more but whatever is a fact, we shall have to accept it,” he said although he felt that the annual growth should also have been more.

However, Finance Ministry's Chief Economic Adviser Kaushik Basu viewed the IIP's March figures with greater satisfaction.

“After looking at these numbers, I feel a bit better. Industrial production was doing badly for four months. This is a turnaround after that,” he said.

Apart from the turnaround from a four-month span of low growth, an important aspect is that though the growth posted in March this year is just about a half of the 15.5 per cent expansion recorded in March 2010, the upward trend has been despite effect of a high base.

Harping on this fact, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The 7.8 per cent is not a big surprise. It is roughly what we thought it would be.

“The important thing is that the monthly numbers have shown a significant improvement and that is welcome.''

Even as 13 out of 17 industry groups posted positive growth in March this year, the official data shows that the annual growth in manufacturing declined to 8.1 per cent in 2010-11 from 11 per cent in the previous fiscal. For the month of March alone also, the sector's production increase was lower at 7.9 per cent as compared to the16.4 per cent expansion achieved in March 2010.

Capital goods

Among the various segments of manufacturing, capital goods were one of the worst affected to register a growth of 9.3 per cent in 2010-11 as against a healthy 20.9 per cent increase in the previous fiscal. As for March alone, the growth in capital goods output slipped to12.9 per cent this year from 36 per cent in the same month of 2010.

Likewise, the mining sector also witnessed a fall in growth to 5.9 per cent in 2010-11 from 9.9 per cent in 2009-10. In March this year, it saw a mere 0.2 per cent growth as compared to 12.3 per cent in the same month of 2009-10.

The growth in electricity generation also slowed down to 5.6 per cent in 2010-11 from six per cent in 2009-10 while in March this year the sector posted a growth of 7.2 per cent as compared to 8.3 per cent in the same month of 2009-10.

PTI reports:

While lauding the better-than-expected 7.3 per cent industrial growth in March, industry bodies, however, expressed concern over the slump in the manufacturing segment and the rate hikes on account of Reserve Bank of India's monetary measures.

India on Friday signed a Double Taxation Avoidance Agreement (DTAA) with Colombia for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income emanating from either country. Apart from enabling close monitoring of tax evaders, the provision of the agreement will help in preventing money laundering and deal with other tax-related offences.

According to an official statement here, the DTAA, signed by Central Board of Direct Taxes (CBDT) Chairman Sudhir Chandra and Colombia's Ambassador Juan Alfredo Pinto Saavedra, provides that business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment by way of a branch or factory in that state.

As per the provisions of the agreement, profits of a construction, assembly or installation project is to be taxed in the source state if the project continues in that state for more than six months. Profits derived by an enterprise from the operation of ships or aircraft in international traffic shall be taxable in the country of residence of the enterprise.

Dividends, interest and royalty income will be taxed both in the country of residence and in the country of source. However, the maximum rate of tax to be charged in the country of source will not exceed 5 per cent in the case of dividends and 10 per cent in the case of interest and royalties. Capital gains from the sale of shares will be taxable in the country of source. More importantly, the DTAA incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities of the two countries in line with internationally accepted standards. This includes exchange of banking information and also incorporates anti-abuse provisions to ensure that the benefits of the agreement are availed of by genuine residents of the two countries. “The agreement will provide tax stability to the residents of India and Colombia and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services” between the two countries, the statement said.

Ricoh India on Friday announced the acquisition of Noida-based Momentum Infocare Pvt Ltd, marking the foray of printing and imaging solutions firm into information technology (IT) sector.

The company is looking for more such acquisitions to strengthen its presence in the Indian market.

“With the changing business environment, customers are looking for products and services that offer quality, increase efficiencies and have short turnaround time with prompt after-sales service.

The fast-changing IT space has brought about major changes in the working of any organisation. We have completely aligned with this transformation, hence this acquisition,” said Tetsuya Takano, Managing Director and CEO of Ricoh India, a subsidiary of Japan's Ricoh Company.

“We have been making rapid strides in offering advanced solutions by acquiring the skill set and technological knowledge that help our clients to deliver better results. We envisage over 25 per cent of our new businesses coming from such synergies…the markets of Ricoh U.S. and Europe have also grown phenomenally primarily because of such initiatives,” Mr. Takano said.

Stating that with the acquisition of the Momentum Infocare, its headcount would increase by 100 to reach 860, Mr. Takano said: “With the taking over of the IT company, our vision is to offer package of IT services to clients that would bring efficiencies in work, reduce cost and bring complete turnaround in the corking of company. Positioned as a one-stop-solution company, Ricoh will now be offering value-added services to further optimise processes. We can offer our unique solutions to our partners in India as well as abroad.”

Pointing out that Ricoh India has earmarked Rs.60 crore for acquisition in the current fiscal, Mr. Takano further said: “Our printing business is doing very well…we are now focusing towards new businesses like IT services, managed document services and production printing to expand our portfolio in India. All this will help to provide complete solutions to our clients and also strengthen our leadership position in the Indian market.”

Tata Motors on Friday said its U.K.-based subsidiary Jaguar Land Rover had completed raising of 1 billion pound (over Rs.7,300 crore) to refinance its existing debt and other purposes.

“This is a major milestone in significantly strengthening the capital structure of Jaguar Land Rover and we are pleased with the outcome,” Tata Motors Chief Financial Officer C. Ramakrishnan said in a filing to the BSE.

Earlier this week, the company had announced its plans to raise the amount through the issue of sterling and U.S. dollar denominated senior notes, which were debt instruments that took priority over other unsecured or otherwise more ‘junior' debt owed by the issuer.

“Jaguar Land Rover, the parent company of Jaguar Cars and Land Rover, itself wholly-owned by Tata Motors, is pleased to announce the pricing of 1,000 million pound equivalent senior notes following a significant over-subscription by investors,” the company said.

JLR has issued 500 million pound worth senior notes due 2018, at an interest of 8.125 per cent annually. It has also issued two sets of $410 million senior notes each.

“The proceeds from the issuance and the sale of the notes will be used to refinance existing debt and for general corporate purposes,” the filing said.

The British firm's total debt as on December 31, 2010, stands at 2.65 billion pound (over Rs.19,300 crore), while parent Tata Motors' gross debt stood at about Rs.34,000 crore.

The move by JLR to raise funds comes after a month of announcing that it would invest around 7.5 billion pound (about Rs.54,000 crore) at least in the next five years.

Dr. Reddy's Laboratories has announced an adjusted net profit of Rs.1,076 crore ($242 million) for 2010-11 with a 17 per cent growth over the profit achieved in the previous year, Rs.921 crore ($207 million).

Announcing the unaudited consolidated financial results for the year ended March 31, 2011, under the International Financial Reporting Standards (IFRS) here on Friday, company Managing Director and Chief Operating Officer K. Satish Reddy termed the profit posted as significant in spite of “modest growth in revenues” and attributed it to good margins in the U.S.

The company's revenues had marginally up by 6 per cent at Rs.7,469 crore ($1.70 billion) in 2010-11 compared to Rs.7,027 crore ($1.60 billion) in the previous financial year. The results were largely impressed by the company's performance in the fourth quarter as it posted revenue of Rs.2,017 crore with 23 per cent growth over the last quarter (Rs.1,642 crore) and adjusted profit of Rs.307 crore with 57 per cent growth, he explained.

Rise in expenses including investment for acquisitions and workforce, delay in launching new products and loss in tenders in Germany contributed to the modest growth in the company's revenues during 2010-11, Mr. Reddy stated. However, numbers were encouraging in North America, Russia, CIS counties and India, he noted.

Expenditure on research and development was 7 per cent of total sales in 2010-11 against 5 per cent in the year before. He projected it to be about 8 per cent this year mostly on bio-similars, proprietary products and generics.

Chief Executive Officer G. V. Prasad stated that they had launched 135 generic products and filed for 107 new product registrations and 57 (drug master files (DMFs) during 2010-11. On the outlook for the company in the current year, he stated that they were expected buoyant performance based on emerging markets business, improved customer orders and flow of revenue from recent acquisitions.

Tata Housing Development Co. on Friday said it would develop ‘Subh Grah' projects in at least four cities — Chennai, Bangalore, Ahmedabad and Mumbai — in the current fiscal to meet the low-cost housing needs of people. The Tata Group company is also looking at entering international markets through the public-private partnership (PPP) model.

“So far, we have developed three affordable housing projects that have been successful. In 2011-12, we will be doing four such new projects. There is huge demand for low cost housing, particularly in metros and State capitals, which we can meet in partnership with the government. If the government provides us land, we can deliver smart-value homes and low-cost projects to meet housing needs of people,” Tata Housing Managing Director and CEO Brotin Banerjee told journalists here.

Tata Housing, which also announced the launch of luxury housing project Primanti in Gurgaon, comprising 1,100 units, said in the current fiscal, it would invest Rs.1,000 crore towards developing land bank and another Rs.2,000 crore towards construction.

“Last year, we did around 9,000 homes while this fiscal we plan to double this. We will launch 8-10 new projects this year…we are also looking at two new lines of business related to land development,” he said. Notably, Tata Housing is growing at an over 100 per cent CAGR (compound annual growth rate) for the past three years.

Referring to the realty firm's proposed global foray, Mr. Banerjee said: “We are looking for partners to enter into two countries in the SAARC region through the PPP model. Our focus will be affordable housing projects to meet shortage of housing.”

Talking about the Primanti project, Mr. Banerjee said: “The project will be spread in 36 acres and comprise world-class villas and executive floors and apartments, with prices starting at Rs.1.50 crore.”

Singing a different tune than its foreign partners, Bajaj Auto on Friday said it would launch a four-wheeler commercial vehicle in mid-2012 from the ultra-low cost car (ULC) platform, which was originally planned to roll out a car with Franco-Japanese alliance Renault-Nissan.

“By the middle of next year, we will bring a four-wheeler from the ULC platform. For us, this will be a commercial vehicle and it will be a goods carrier,” Bajaj Auto Chairman Rahul Bajaj told PTI.

In the smaller goods carrier space, other homegrown auto majors like Tata Motors and Mahindra & Mahindra are doing well and the company is looking at that space, he added. “We are a two-wheeler and three-wheeler makers and we are moving up towards the four-wheeler segment. With the help of our expertise and frugal engineering and Renault-Nissan's technological expertise, we will launch the vehicle,” he said.

Mr. Bajaj also said that the foreign partner would “market it (the product from ULC platform) as a car, but not a low-cost car”, and it will be sold at a “mutually agreed price”. “The platform is same and it will be for four-wheelers. For them (Renault-Nissan), it is a car, while for us it is a commercial vehicle,” he said, declining to comment on whether the two products will be launched simultaneously or not.

Mr. Bajaj did not clarify further whether there will be a single product or two different vehicles hitting the roads. However, differing strongly, Renault said the company had not seen the final product and would not settle down with a vehicle having any shortcomings of a car. “We are very clear that Renault would only be comfortable with a product that fulfils all the requirements of a car. Nothing short of that will pass our stringent requirements,” a Renault spokesperson said. Renault will be in a position to take a final call only after an exhaustive review of the final product that Bajaj will show, the official said. “Till then, it would only be speculation and that is something we would not like to do,” he added.

The partners had joined hands in 2008 to make a small car with a price tag of $2,500. The ULC was first scheduled to hit the roads in India in 2011, but was delayed due to differences between the partners on pricing and design.

While Renault-Nissan wanted to price the car at around $2,500, Bajaj insisted on lowering the overall cost of ownership.

In 2010, Renault-Nissan announced the signing of a memorandum of understanding with Bajaj Auto to take forward their ULC car project.

As per the MoU, design, engineering, manufacturing and supply base expertise for the ULC would be executed by Bajaj with the support of the alliance, while branding, marketing and selling will be by Renault-Nissan.

Commenting on the nature of the association, Mr. Bajaj said: “There will not be any joint venture to develop the product”.

Last year, Bajaj Auto Managing Director Rajiv Bajaj had said that the partners might explore the possibility of entering into a contract manufacturing deal, instead of a joint venture as proposed at the initial stage of the project.

“We can perhaps fulfil our mutual objective through a simple OEM arrangement and without the need to necessarily create a new corporate entity in the form of a joint venture,” Mr. Bajaj had said. This is in contrast to an MoU signed in May 2008, under which Bajaj was supposed to hold 50 per cent in a joint venture for developing the car, while Renault and Nissan would have 25 per cent stake each.

China will suspend diesel exports to ensure domestic supply as demand for the fuel rises due to the ongoing power shortages across the country.

China will suspend diesel exports in the near future, other than to Hong Kong and Macao, China's top economic planning body said in a notice on Friday. The National Development and Reform Commission (NDRC) also called for increased production of oil by-products and ordered dealers not to artificially raise the price of petrochemicals through hoarding. The notice came as the country enters its peak period for diesel use due to seasonal demand from the agriculture and fishing sectors. Meanwhile, power shortages have pushed up diesel demand as factories use diesel powered generators to maintain production. Many factories in Zhejiang Province, one of the country's major manufacturing bases, installed diesel powered generators after the power shortages in 2003, 2004 and 2005.

Power shortages are not only due to recent coal price hikes but also a lingering drought in China's south which has reduced the country's hydro power resources.

Experts believe reforming the power pricing mechanism is the best way to tackle the power crisis.

Different from the power crises last decade, China has sufficient installed capacity, but a high percentage of generators are not operating, said Yu Yanshan, deputy head of the general administrative office of the State Electricity Regulatory Commission (SERC). Raising power prices will help alleviate the shortages, but if this can not be done because of inflation concerns, then more measures could be made to control coal prices, Mr. Yu said.

The NDRC has urged domestic oil refiners to increase imports of chemical light oil, which is used to produce oil products. China's oil products imports declined year-on-year 5.57 per cent to 3.22 million tonnes in April, while total imports in the first four months hit 14.25 million tonnes, up 18.3 per cent year-on-year, according to the General Administration of Customs. — Xinhua

Reliance Communications (RCom) had drawn the second tranche of Rs.1,780 crore ($400 million) towards refinancing of 3G spectrum fees out of the Rs.8,700 crore ($1.93 billion) facility signed with the China Development Bank (CDB) on March 9.

The facility includes Rs.6,000 crore ($1.33 billion) for refinancing 3G spectrum fee payment by RCom and Rs.2,700 crore ($600 million) for equipment imports from Chinese vendors.

The drawn down amount will be used to refinance RCom's short-term rupee borrowings resulting in substantial savings in its interest cost apart from extending its debt maturity profile.

First tranche

The first tranche of Rs.3,000 crore ($ 665 million) was drawn down on March 17, 2011.

With this drawl, RCom has already drawn Rs.4,780 crore ($1.06 billion) towards refinancing of 3G spectrum fees and the last tranche is expected to be drawn very shortly.

The loan facility is fully underwritten by CDB.

Industries for higher rubber production

Two associations of rubber-consuming industries have asked for increasing the production of natural rubber in the country to meet the growing demand for value-added products domestically. Otherwise, the import of such products will go up, they say.

Making a presentation to the Rubber Board here on Monday on their suggestions to be included in the 12th Five Year Plan proposals on the rubber sector, the All-India Rubber Industries' Association (AIRIA) and the Automotive Tyre Manufacturers' Association (ATMA) said that taking a cue from China, the government should make urgent policy interventions to ensure timely availability of competitively priced rubber to the industries.

“There is a growing deficit between domestic production and consumption of rubber. Rubber import is, therefore, inevitable; or else, import of finished products will take place, denying the opportunity of value-addition within the country,” Vinod Simon, AIRIA president, said after the presentation.

“In the past five years, the international scene has undergone a sea change. India stands at the cusp of opportunity to emerge as a low-cost producer of rubber products, both tyre and non-tyre. There is enough domestic demand to be catered to. However, the domestic natural-rubber deficit and the expensive imports have been inhibiting the full blossoming of the rubber industry in the country,” he said.

Two-pronged strategy

“A two-pronged strategy needs to be adopted to bridge the growing deficit between domestic production and consumption. The domestic production needs to be enhanced by taking up replanting as a top priority and undertaking major planting initiatives in non-traditional areas. However, enhancing natural-rubber production being a long-drawn-out affair, duty-free imports to the extent of domestic deficit need to be allowed every year,” Rajiv Budhraja, director-general, ATMA, said.

In the past four financial years, the production of natural rubber has increased by only 1 per cent, while the consumption has increased by more than 15 per cent. In the current financial year, new capacities and major expansions undertaken by tyre companies to cater to the booming automobile industry will lead to an increase in consumption by 1.5 lakh tonnes. The industry has, therefore, reiterated its demand for a duty-free import of 2 lakh tonnes during the current financial year, he said. “In view of the widening gap between natural-rubber supply and demand, coupled with growth in tyre demand, a rise in volume of imports of finished products is likely, notwithstanding the adequate domestic capacity. As a result, value-addition from natural rubber to finished products, particularly tyres, will take place outside the country, especially in China, which has ensured adequate and timely availability of natural rubber to its industry through timely interventions, including acquisition of land outside the country,” Mr. Budhraja said.

The Rubber Board has projected an increase in consumption by only 40,000 tonnes during the current financial year. Accordingly, the gap between production and consumption has been put at 75,000 tonnes, which is at wide variance with industry estimates based on actual capacity expansion. The conservative consumption estimates by the board could impact the desired policy-making for the rubber sector, he said.

Mr. Simon emphasised the need for appointing a development commissioner, similar to those in the jute and the textile sectors. He said the consumption of natural rubber by the non-tyre sector had gradually declined to 33 per cent. Even the absolute consumption by the sector had recorded a decline, which was worrying since India was on a major growth curve. The office of the development commissioner should oversee the development of the rubber industries, particularly small and medium enterprises, which had borne the brunt of an unprecedented increase in the rubber price and were turning unviable.

Canara Bank on Saturday said it has decided to revise interest rates on deposits with effect from May 16.

For 555-days tenor, the bank is offering 9.25 per cent to the general public and 9.75 per cent for senior citizens.

For a one-year period, it is offering 9.10 per cent for the general public and 9.60 per cent for senior citizens.

The bank has also changed its rates for various periods upto 10 years, it said in a release here.

Indian Bank

Indian Bank has raised the interest rates on domestic term deposits for different maturities. According to a release, the rate for 7-14 days and 15-29 day deposits have been raised to 6.25 per cent from 3.50 per cent, for 30-45 days to 6.25 per cent from 4 per cent, for 46-90 days to 6.25 per cent from 5 per cent and for 91-120 days to 7 per cent from 6.25 per cent.

In keeping with the rate hikes by the Reserve Bank of India earlier this month, HDFC on Saturday announced hike in lending rates by 50 basis points, a development that will make home loans expensive.

The revised retail prime lending rate (RPLR) will be applicable from May 16, the bank said in a statement.

The Reserve Bank of India has hiked key policy rates by 50 basis points in its annual credit policy on May 3, to curb demand and check inflation, which is hovering around 9 per cent.

HDFC said home loans up to Rs.30 lakh will attract 10.25 per cent interest (floating rate) and 10.5 per cent on loans on Rs.30.01 lakh to Rs.75 lakh.

Loans above Rs.75 lakh will attract interest rate of 11 per cent, the statement said.

Freeing savings bank rate is a complex issue in India. The Reserve Bank of India (RBI) recently launched a debate on this issue by presenting a discussion paper prior to its Annual Monetary Policy for 2011-12.

While announcing the policy, the RBI has also raised the savings bank rate from 3.5 per cent fixed in 2003 to 4 per cent. The spread between savings deposit and term deposit rates has widened significantly in recent times. This was why the RBI raised the savings bank rate, while a decision on freeing these rates was pending before the central bank for a final decision.

“We want to be sure that it contributes to financial inclusion. So that it does not militate against financial inclusion,” said the RBI Governor, D. Subbarao, in his post-policy press conference, referring to the deregulation of savings bank rate.

On raising the savings rate his deputy Subir Gokarn said that this rate had been at 3.5 per cent since 2003 all other rates have been deregulated, rates have moved up and down in the last eight years but this one had not and so as part of the overall adjustment, deregulation was still a debated proposition whether “we should let it go or not”. But given the differential that had emerged between this rate and all the other rates, particularly in this upward cycle, the RBI thought that an adjustment was necessary.

With regard to all other interest rates, Dr. Subbarao has pointed out that “We moved away from regulation”. Almost all interest rates, except the one on savings bank and NRI deposits which are administered as of now, are deregulated. So, “we believe that that is the way to move forward but again I want to say that we are open-minded and we would certainly respect and are being open to all the feedback that we get”.

Now banks have complete freedom in fixing their domestic deposit rates, except interest rate on savings deposits, which continues to be regulated. In pursuance of the announcement made in the Annual Policy Statement for 2009-10, the Reserve Bank advised scheduled commercial banks to pay interest on savings bank accounts on a daily product basis with effect from April 1, 2010.

Prior to the introduction of a daily product method, interest on savings deposit account was calculated based on the minimum balance maintained in the account between the 10th day and the last day of each calendar month and credited to the depositor's account only when the interest due was at least Re.1 or more. After this change, the effective interest rate on savings bank deposits increased, benefiting the depositors.

Savings accounts are maintained for both transaction and savings purposes mostly by individuals and households. A savings account, being a hybrid product, provides the convenience of easy withdrawals, writing/collection of cheques and other payment facilities as well as an avenue for parking short-term funds which earn interest. The maintenance of savings bank deposit accounts, however, entails transaction costs. In fact, a term deposit doesn't involve transaction cost for banks.

Savings deposits are an important component of bank deposits. The average annual growth of savings deposits, which decelerated in the 1990s compared with that of the 1980s, accelerated sharply in the decade of the 2000s. In this decade, the average growth rate of savings deposits exceeded that of demand and term deposits, notwithstanding the growth in term deposits outpacing that of savings deposits during 2005-10. The RBI had raised several questions on this issue. Should savings deposit interest rate be deregulated at this point of time? Should savings deposit interest rate be deregulated completely or in a phased manner, subject to a minimum floor for some time? How can the concerns with regard to savers (senior citizens, pensioners, small savers, particularly in rural and semi-urban areas) be addressed in case savings deposit interest rate is deregulated? How serious are concerns relating to a possible intense competition among banks and asset-liability mismatches if savings deposit interest rate is deregulated? Should higher interest rate be paid on savings deposits without a cheque book facility?

Global experience

In sum, deregulation of savings deposit interest rates has both pros and cons. The RBI's view, as reflected in the discussion paper, was that savings deposit interest rate could not be regulated for all times to come when all other interest rates have already been deregulated as it created distortions in the system. International experience suggests, according to the RBI, that in most countries, interest rates on savings bank accounts are set by the commercial banks based on market interest rates.

Most countries in Asia experimented with interest rate deregulation to support overall development and growth policies. These resulted in positive real interest rates, which in turn contributed to an increase in financial savings.

Further the RBI argues that deregulation of savings bank deposit interest rate also led to product innovations.

The flowery points of the RBI are likely to give a push for a de-regulation. However, unlike many other countries in Asia as well as other parts of the world, the Indian situation is different. A large number of people in India are from the rural background with less saving.

The urban poor, migrated from the remote rural areas of the country too are having small savings.

The urban labourers send their weekly earnings through public sector banks (PSBs) to their dependants living in villages.

Further, with larger presence in rural and semi-urban areas, the PSBs would be having maximum number of small savings bank account holders. Generally, the PSBs were attracting small customers along with other high value depositors, who trust PSBs compared to other private sector banks.

Maintaining an account with huge balance in savings bank would be cheaper for banks than maintaining an account with small balances as transaction cost of banks would be higher in the case of small account holders. In the case of salaried employees, their salaries would be credited to a particular bank. As the regulator frees the savings bank rate, the private sector and foreign banks will offer boutique products and fascinating interest rates to attract these huge accounts from corporates as well as government organisations.

Deregulation of savings bank rate would work against financial inclusion as public sector banks saddle with all un-remunerative accounts and all high value accounts would migrate to the new generation private sector banks and the foreign banks. Always the small customer is at the receiving end.



How the process started

The process of deregulation of interest rates was resumed in April 1992 when the existing maturity-wise prescriptions were replaced by a single ceiling rate of 13 per cent for all deposits above 46 days.

The ceiling rate was brought down to 10 per cent in November 1994, but was raised to 12 per cent in April 1995. Banks were allowed to fix the interest rates on deposits with maturity of over two years in October 1995, which was further relaxed to maturity of over one year in July 1996.

The ceiling rate for deposits of 30 days and up to one year was linked to the Bank Rate less 200 basis points in April 1997.

In October 1997, deposit rates were fully deregulated by removing the linkage to the Bank Rate. Consequently, the Reserve Bank gave the freedom to commercial banks to fix their own interest rates on domestic term deposits of various maturities with the prior approval of their respective board of directors/asset liability management committee (ALCO).

Banks were permitted to determine their own penal interest rates for premature withdrawal of domestic term deposits and the restriction on banks that they must offer the same rate on deposits of the same maturity irrespective of the size of deposits was removed in respect of deposits of Rs.15 lakh and above in April 1998.

Math majors, rejoice. Businesses are going to need tens of thousands of you in the coming years as companies grapple with a growing mountain of data.

Data is a vital raw material of the information economy, much as coal and iron ore were in the Industrial Revolution. But the business world is just beginning to learn how to process it all.

The current data surge is coming from sophisticated computer tracking of shipments, sales, suppliers and customers, as well as email, Web traffic and social network comments. The quantity of business data doubles every 1.2 years, by one estimate.

Mining and analysing these big new data sets can open the door to a new wave of innovation, accelerating productivity and economic growth. Some economists, academics and business executives see an opportunity to move beyond the payoff of the first stage of the Internet, which combined computing and low-cost communications to automate all kinds of commercial transactions.

The next stage, they say, will exploit Internet-scale data sets to discover new businesses and predict consumer behaviour and market shifts.

Others are sceptical of the ‘big data' thesis. They see limited potential beyond a few marquee examples, like Google in Internet search and online advertising.

The McKinsey Global Institute, the research arm of the consulting firm, is coming down on the side of the optimists in a lengthy study. The report, based on nine months of work, is ‘Big data: the next frontier for innovation, competition and productivity'. It makes estimates of the potential benefits from deploying data-harvesting technologies and skills.

The McKinsey research unit, for example, says that the value to the U.S. health care system could be $300 billion a year, and that U.S. retailers could increase their operating profit margins by 60 per cent. But the study also identifies challenges. One hurdle is a talent and skills gap. The U.S. alone, McKinsey projects, will need 140,000 to 190,000 more people with ‘deep analytical' skills, typically experts in statistical methods and data-analysis technologies.

McKinsey says the nation will also need 1.5 million more data-literate managers, whether retrained or hired. The report points to the need for a sweeping change in business to adapt a new way of managing and making decisions that relies more on data analysis.

Managers, according to the McKinsey researchers, must grasp the principles of data analytics and be able to ask the right questions.

“Every manager will really have to understand something about statistics and experimental design going forward,'' said Michael Chui, a senior fellow at the McKinsey Global Institute.

The study estimates that the use of personal location data could save consumers worldwide more than $600 billion annually by 2020. Computers determine users' whereabouts by tracking their mobile devices, like cellphones.

The study cites smartphone location services, including Foursquare and Loopt, for locating friends, and ones for finding nearby stores and restaurants.

Biggest benefit

But the biggest single consumer benefit, the study says, is going to come from time and fuel savings from location-based services tapping into real-time traffic and weather data that help drivers avoid congestion and suggest alternative routes. The location tracking, McKinsey says, will work either from drivers' mobile phones or GPS systems in cars.

Personal location data raises privacy concerns. Both Google and Apple, for example, have faced protests recently for collecting location data without most users' knowledge.

The McKinsey report says such services should require that users have a choice and opt-in to use them, but the report does not deal with privacy issues in detail.

The sizable projected payoff for consumers, some experts say, is not surprising.

“Much of the benefit of innovation always flows to consumers,'' said Martin Baily, an economist at the Brookings Institution, who was an adviser on the study, ‘So the large consumer surplus makes sense'.

Health care

In health care, the biggest slice of the $300-billion gain is expected to come from more effectively using data to inform treatment decisions. The tools include clinical decision support to assist doctors, and comparative effectiveness research to make more informed decisions on drug therapy.

For example, the Department of Veterans Affairs and Kaiser Permanente save millions of dollars a year in treating many patients with high cholesterol with generic statins instead of branded statins, like Lipitor.

But such tailored treatments require electronic health records for tracking results, and most of the nation's hospitals and physicians still use paper records.

Sceptics say the economic payoff from harnessing big data sets is mostly wishful thinking so far.

The nation's technology-assisted increase in productivity began in 1995 and continued through 2004, having trailed off since, despite investments in data analytics.

“The big dividend mostly hasn't arrived yet,'' said Tyler Cowen, an economist at George Mason University.

The McKinsey authors say that the big-data trend is just getting under way. It will take years, they say, before the gains show up in the economic statistics, just as it did for computers to prove they were engines of productivity.

“But it's clear that data is an important factor of production now,'' said James Manyika, a director of the McKinsey Global Institute. — New York Times News Service

Glenmark Pharmaceuticals S.A (GPSA), a wholly-owned subsidiary of Glenmark Pharmaceuticals Limited India (GPL), has entered into an agreement with Sanofi to grant Sanofi a licence for the development and commercialisation of GBR 500, a novel monoclonal antibody for the treatment of Crohn's Disease (a form of inflammatory bowel disease) and other inflammatory conditions.

The transaction is expected to close in the coming month subject to customary closing conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Under the agreement, Glenmark will receive an upfront payment of $50 million, of which $25 million will be paid upon closing of the transaction and $25 million, which is contingent upon Sanofi's positive assessment of certain data to be provided by Glenmark.

In addition, Glenmark could receive potential success-based development, regulatory and commercial milestone payments. The total of these payments could reach $613 million. In addition, Glenmark is eligible to receive tiered double-digit royalties on sales of products commercialised under the licence. Sanofi will have exclusive marketing rights for North America, Europe, Japan, Argentina, Chile and Uruguay. Sanofi and Glenmark will co-market in Russia, Brazil, Australia and New Zealand, and Glenmark will retain exclusive marketing rights in India and other countries in the rest of the world.

GBR 500 is an antagonist of the VLA-2 (alpha2beta1) integrin.

It is a first-in-class therapeutic monoclonal antibody and has established proof of concept in animal models across a range of anti-inflammatory conditions.

Glenmark has completed Phase-I dosing of GBR 500 in the U.S. and the drug has been well tolerated with a good pharmacokinetic profile. Plans are in place to initiate clinical proof of concept studies in Crohn's Disease. Sanofi has licensed the rights to all therapeutic indications.

“There continues to be a strong medical need for safer and more efficacious products for the treatment of inflammatory diseases,” said Elias Zerhouni, M.D., President, Global Research & Development, Sanofi.

“GBR500 brings an innovative approach to Sanofi's immuno-inflammation portfolio, which we believe may address a significant gap in treating inflammatory diseases which would be of huge benefit to patients”.

According to Glenn Saldanha MD and CEO of GPL, “This collaboration, on a novel first-in-class monoclonal antibody, validates Glenmark's world-class innovative R&D capabilities in the drug discovery arena. We are pleased to have this second licensing collaboration with Sanofi, one of the largest pharmaceutical companies in the world and the first one from Glenmark in the field of novel biologics”.

Glenmark is a leading player in the discovery of new molecules, both NCEs (new chemical entity) and NBEs (new biological entity). It has eight molecules in various stages of clinical development and is primarily focussed in the areas of inflammation and pain. It has 12 manufacturing facilities in four countries and five R&D centres.

Offering a temporary respite of sorts, headline inflation eased marginally to 8.66 per cent in April from 9.04 per cent in March — revised upward from the provisional estimate of 8.98 per cent — owing to a moderation in prices of food and manufactured goods.

The Wholesale Price Index (WPI) data on overall inflation released here on Monday for April shows that even as the price spiral is lower than the 9 per cent average projected by the Reserve Bank of India for the first half of the fiscal following a significant moderation in the rate of price rise in food and manufactured items, the breather may be short-lived owing to the cascading impact of higher fuel prices which are yet to be factored in.

Considering that the oil marketing companies (OMCs) hiked petrol prices by about Rs.5 a litre late last week and an increase in the administered prices of diesel and cooking gas (LPG) is expected to be announced any day during the month, a fresh bout of inflation is certainly on the cards. In the event, the inflation figures for May, to be released next month, will reflect the impact of higher retail prices of fuel products.

For the present, however, the substantial moderation in headline inflation has brought some cheer and Finance Minister Pranab Mukherjee hoped that the declining trend would continue in the coming months. “The April prices have come down both on the manufacturing sector and food sector...Therefore, this is [a] good trend and if it continues, then perhaps it will be more moderated,” he said while pointing out that these are not the ‘kind of inflation figures' that he is ‘comfortable' with.

Mr. Mukherjee, according to an official statement, admitted that there would be some impact on overall inflation due to the adjustment in petrol prices effected by the OMCs in the coming months. Also, “the international scenario on commodity prices also does not appear good at present,” he said.

Chief Economic Advisor Kaushik Basu said that headline inflation in April has been ‘on line' with government expectations and in keeping with his projection of 8.50-8.60 per cent for the month.

As per the WPI data, while inflation in food items eased to 8.71 per cent in April from 9.47 per cent in March, the rate of price rise in manufactured products, which account for the highest weight of 64.9 per cent in the WPI basket, also moderated to 6.18 per cent from 6.50 per cent on a month-on-month basis.

Apart from the upward revision of WPI inflation in March to 9.04 per cent owing to incorporation of data for metal products which had been left out earlier owing to “a programming error”, the figure for February has been revised up to 9.54 per cent from the provisional estimate of 8.31 per cent.

According to Crisil's chief economist D. K. Joshi, headline inflation in April has remained at a high level despite the high base of 10.88 per cent in April 2010.

“High global commodity prices remain a matter of concern, with crude still hovering around $100 a barrel despite the recent fall. Besides, the hike in petrol prices and the expected revision of diesel and LPG prices is likely to put further pressure and take headline inflation to around nine per cent,” he said. In April, the basket for primary articles, including food, non-food and minerals, turned expensive by 12.05 per cent on an annual basis. Prices of food articles were up by 8.71 per cent while non-food primary articles were dearer by 27.33 per cent and minerals by 7.41 per cent.

Hindustan Unilever Limited (HUL) announced the launch of India Water Body, an initiative aimed to address the challenge of water scarcity in India.

Nitin Paranjpe, CEO & Managing Director, Hindustan Unilever, said, “It is estimated that by 2030, supply of water in India would be half of the demand for it. This is a crisis that has the potential to derail the economic and social development of the country and impact the health and livelihoods of millions of people across the country. We at Hindustan Unilever believe that what concerns the nation must concern us too. Therefore, we have launched India Water Body to drive water security for the country by 2030”.

The India Water Body will be conducting a nation-wide study to assess the demand-supply gap for water in India. The study will build on the available body of knowledge and engage multiple stakeholders to evolve an India water road map enumerating clear priorities and solutions for implementation.

Water management has been a key focus area for HUL in India across its entire value chain. HUL has consistently reduced water consumption in its operations, helped small-holder farmers to use water judiciously in agriculture and developed product innovations such as Surf Excel quickwash that helps consumers use less water while washing clothes.

HUL has been working for more than a decade in the area of water conservation in partnership with NGOs and local communities across the country, in locations which face acute water shortage. The success of these projects has been driven by establishing public-private partnerships involving the local communities. This has helped to not only sustain these projects but also to scale them. HUL has initiated projects in several States that will enable create capacity towards conserving more than 50 billion litres of water in the next four years (by 2015).

Repco MSME Limited, a non-banking finance company promoted by Repco Bank, is looking at Rs.300 crore advances to micro, small and medium-scale enterprises (MSMEs) during 2011-12.

Managing Director of Repco Bank R. Varadarajan told this correspondent here on Monday that the company had eight branches now and this would be increased to 20 this year.

The bank's lending to MSMEs during 2010-11 was about Rs.100 crore.

The company started functioning from the middle of last year and all advances to MSMEs would come under the company now.

Repco Bank's deposits crossed Rs.3,000 crore in 2010-11 while advances stood at Rs.2,250 crore.

The bank's business was growing at about 35 per cent annually. It had 74 branches in the four southern States and planned to open another 11 this year.

Of the total advances, nearly 30 per cent was towards jewel loans. Another focus segment was the self-help groups. The bank had funded 20,000 groups through Repco Foundation for Micro Finance and planned to extend loans to another 10,000 groups this year, he said.

Production trend in 100 new items, including ice cream, fruit juices and mobile phones, will weigh on measuring the pace of industrial production, as per the new index series approved by the government. The new Index of Industrial Production, which will come into effect from June 10 with base year 2004-05, had been approved by the Committee of Secretaries (CoS), an official said.

The new items in the IIP would also include computer stationery, newspapers, chemicals such as ammonia and ammonia sulphate, electrical products, gems and jewellery and molasses.

On the other hand, obsolete articles like typewriters, loud speakers and VCRs would be taken off to make the series representative of the present-day industrial production and demand scenario. The base year for the new series will be changed to 2004-05 from 1993-94. The IIP for April would be based on the new model of measuring the country's factory output. The April data would be released on June 10.