Global Business

Global Business |Update|
(A weekly update on Global Business )
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Issue 78

Global Business Update

(26th March---1st April)

Contents

Global Corporate

1 UBS doubles sub-prime writedowns

2 American Express to buy GE unit

3 Tata closes JLR deal for $2.65 bn

4 Lehman share sale to raise funds

5 Bata India net at Rs 47 cr, up 18%

6 ArcelorMittal-SA to raise steel prices

7 Maruti posts record annual sales, up 13.3% in FY08

Global Outsourcing

9 India leads Asia in IT outsourcing

10 Public sector outsourcing users paying up to 75% over market rates

11 GPO defends outsourcing for e-passports

12 WNS plans to up the ante in KPO business

13 GE withdraws nominees from Genpact board, may hasten exit

14 HDFC Bank moves to rural India; to hire 2,000 people for BPO

Global Economy

15 India introduces rice export ban

16 Report warns of UK recession risk

17 Gloom over Japan economy deepens

18 $100bn Fed move over credit fears

19 Morgan Stanley cuts India's GDP forecast to 7.1%

20 Removal of import duties on cards

Global Markets

21 Oil falls to $106 on economic woes

22 Rupee improves further against dollar

23 Equities seen down on inflation woes

24 Sensex posts biggest qtrly fall since June 92

Global Corporate

1 UBS doubles sub-prime writedowns

Swiss financial giant UBS has reported that its writedowns as a result of the sub-prime crisis have more than doubled to about $37bn (£18.5bn). It is the largest writedown by any bank since the credit crunch began. UBS also announced that its chairman and former chief executive Marcel Ospel would not be seeking re-appointment. The bank has announced $19bn of fresh asset writedowns on top of the $18.4bn it wrote off in 2007, as the value of its assets has plummeted. UBS added that it was seeking to raise 15bn Swiss francs ($15bn; £7.5bn) in capital by issuing new shares. Its losses dwarf those declared by US banks such as Citigroup ($21.1bn) and Merrill Lynch ($22bn).

1st April 2008, www.bbc.co.uk

2 American Express to buy GE unit
American Express Co said on Thursday it would acquire Corporate Payment Services, a commercial credit card and corporate purchasing business from General Electric Co for $1.1 billion. The acquisition will cut into American Express earnings per share and return on equity for several years after the transaction, assuming cash used for the purchase would have otherwise been used for buying back shares. But the acquisition makes strategic sense for American Express, which is looking to bulk up its corporate payments business and reduce its reliance on consumer credit card lending. Reducing reliance on consumers is increasingly important as the U.S. Economy slows. A government report on Thursday said the Economy grew at a meager 0.6 percent annual rate in the fourth quarter.

28th March 2008, www.financialexpress.com

3 Tata closes JLR deal for $2.65 bn

Tata Motors Ltd had closed a deal to buy Ford Motor Co's Jaguar and Land Rover brands for $2.65 billion, a news channel said on Tuesday, citing unnamed sources. The television channel said the deal would be signed in London later on Tuesday. However, a Tata Group spokesman said discussions were still going on and the company had no guidance to give on the deal. We have nothing to tell you now, he said. Tata Motors, India's top vehicle maker, received union backing for the deal and was named the front-runner in January by Ford, which is seeking to shore up its balance sheet and reduce debt.

26th March 2008, www.financialexpress.com

4 Lehman share sale to raise funds
Lehman Brothers, one of America's largest investment banks, is selling $3bn (£1.5bn) of new shares to bolster its balance sheet. Lehman has been beset by speculation it might face similar problems to rival Bear Stearns, which almost collapsed earlier this month. Merrill Lynch, Citigroup and Morgan Stanley have also raised money from investors after sub-prime losses. Lehman said the cash raised would increase financial flexibility. We also felt this was the right time as there was a window of opportunity in the market, as we have received significant interest from several key institutional investors, said Erin Callan, Lehman Brothers managing director and chief financial officer. Lehman stock fell as much as 48% on March 17 on talk it would face the same cash shortage that broke Bear Stearns. However, the next day its share price rebounded as it stressed the strength of its liquidity.

31st March 2008, www.bbc.co.uk

5 Bata India net at Rs 47 cr, up 18%
The net profit of Bata India for the year ended December 31, 2007, stood at Rs 47.4 crore as compared to Rs 40.1 crore in the previous year, registering a rise of 18.15 per cent. Total income of the company during the period stood at Rs 890.8 crore as against Rs 797.3 crore in the same period previous year. Bata India managing director Marcelo Villagran said that improved financial performance was a result of sustained efforts made by the company. He said that the company was on an aggressive growth path and had implemented forward looking initiatives like investments in large format stores. Towards this, Bata had adopted an ambitious strategy of opening 70 stores every year for the next few years.

29th March 2008, www.economictimes.com

6 ArcelorMittal-SA to raise steel prices
Steel manufacturer ArcelorMittal South Africa has announced another hike in the alloy's price that will come into effect from May 1. This will be the fourth steel price hike in four months. The company's spokesperson, Tami Didiza, told Engineering News on Monday that the hike was a result of continued upward movement of international prices and softening of South African currency. Didiza, however, said it was still not charging import parity prices and was also at the bottom-end of the benchmark of steel prices, measured against domestic prices charged in about seven other countries, which is currently used to set local prices. The base price of all the company's flat and long products would increase on an average by USD 150 a ton. But galvanised 762 mm x 0,3 mm would increase by USD 295 a ton, and galvanised 914 mm x 0,3 mm would go up by USD 266 a ton.

30th March 2008, www.financialexpress.com

7 Maruti posts record annual sales, up 13.3% in FY08
Country's largest carmaker Maruti Suzuki India on Tuesday reported its highest ever annual sales, registering a growth of 13.3 per cent in 2007-08 over the previous fiscal. The company said it sold 7,64,842 vehicles in 2007-08 as against 6,74,924 units in the previous year. Sales in the month of March was, however, down by 2.1 per cent at 70,296 units as against 71,772 units in the same month last year. During the full fiscal year, domestic sales stood at 7,11,818 units as against 6,35,629 units, a growth of 12 per cent. Exports also recorded a quantum jump of 34.9 per cent at 53,024 units as compared to 39,295 units in the previous year. Sale of its entry level car M800 declined by 12.2 per cent at 69,553 units as against 79,245 units in the previous fiscal.

1st April 2008, www.economictimes.com

Global Outsourcing

8 India leads Asia in IT outsourcing
India is leading Asia in the IT outsourcing market, according to new research published this week. Analysts at Springboard Research revealed this week that the Asia-Pacific IT services market is set to grow by a five-year annual rate of 10.5 per cent, to reach $55.9 billion (£28 billion) by 2011. Excluding Japan, India will lead this market, which is the fastest growing IT services industry in the world, valued at $37.5 billion (£18.75 billion) in 2007. Phil Hassey, vice-president of services research at Springboard Research, said: The markets of interest in the region are not just the top four - China, India, Australia and Korea - but also emerging ones like Indonesia and Vietnam, which will register significant growth going forward. According to the report, application hosting - with an annual growth rate of 19.5 per cent between 2007 and 2011 - would register as the fastest growing sector of this market. Enterprise IT outsourcing, which was the largest IT services market in Asia-Pacific during 2007, is expected to lag behind due to the reluctance of Chinese firms to outsource business.

27th March 2008, www.tutorial-reports.com

9 Public sector outsourcing users paying up to 75% over market rates

Compass, which helps users of outsourcing check whether they are paying market prices, is warning the government that public sector outsourcing is costing up to 75% over the market rate. The company has public sector clients among its customers and so has an insider’s view of outsourcing pricing. It has submitted a paper to the Government’s Public Services Industry Review, which was commissioned by John Hutton, Secretary of State for Business Enterprise and Regulatory Reform. The review, which is headed by DeAnne Julius - a founder member of the Monetary Policy Committee of the Bank of England – is taking evidence how to make the £40bn-a-year market in outsourced government services work better. The deadline for submissions is 4 April 2008.Compass says the cost of changes during the life of contracts “often eliminates any original savings and leads to poor value for money and poor governance over the longer term.

26th March 2008, www.tutorial-reports.com

10 GPO defends outsourcing for e-passports

The government had no choice but to outsource a key security feature of the new electronic passports to a foreign corporation, the Government Printing Office said in response to a series of critical news reports by The Washington Times last week. GPO is contracting with a Dutch company, which does part of its work in Thailand, to produce and implant a data chip in the back cover of each new passport. The company, Smartrac Technology Ltd., was the only company in the world that produced a chip to store passport information that met the State Department’s standards, GPO said in two news statements on March 26 and 27. The company and its procedures have been fully vetted by the State Department, GPO said. GPO has printed passports since 1926. Smartrac plans to build a U.S. plant for passport assembly, GPO said. The newspaper first reported on March 26 that GPO had outsourced passport work, raising questions that terrorists or foreign spies could snag the sensitive technology and produce counterfeit passports. The story also alleged GPO overcharged State for the passport books and improperly banked profits.

28th March 2008, www.tutorial-reports.com

11 WNS plans to up the ante in KPO business

The niche segment of the Indian IT industry, knowledge process outsourcing (KPO), is getting more broad-based with companies looking at providing an integrated level of services. WNS, a BPO services provider in India, is upping the ante in KPO segment by getting into the shared-services model. Under this, WNS will be providing a complete array of its KPO services, be it business research, analytics or market research. WNS Knowledge Services CEO Anish Nanavaty says company has been able to aggregate different pieces of its KPO activity to bring it under a single umbrella of services. The KPO segment of WNS constitutes around 15% of its topline and has around 1,500 people. The shared-services model could actually see WNS driving a proposition which goes beyond mere saving of costs and act as a one-stop-shop.

27th March 2008, www.economictimes.com

12 GE withdraws nominees from Genpact board, may hasten exit
Corporate conglomerate GE has moved out of the board of Genpact, India’s largest BPO firm that started out as a GE back-office 10 years ago. It has also brought forward by nine months the period till which it is required to hold a minimum of Genpact shares. While these moves seem to point towards plans of an early exit from the NYSE-listed BPO firm, GE has extended its client relationship with Genpact. The BPO firm’s biggest client has extended its master services agreement (MSA), guaranteeing a minimum annual volume with it, till December 2014. The two GE nominees on Genpact board, Gary Reiner and Ferdinando Beccalli-Falco, have resigned, following an amendment in the BPO firm’s shareholders pact by which GE gave up board representation. GE, which is required to hold a minimum of 26.74 million Genpact shares till December 2009, will now have to hold the shares till March 20, 2009.

13 HDFC Bank moves to rural India; to hire 2,000 people for BPO
Country's largest private sector lender in terms of branch network, HDFC Bank is moving its BPO activity to the semi-urban area by hiring about 2,000 people in next two months. The move is expected to bring down the operation by about 50-60 per cent primarily due to cheaper human resources and real estate cost. The bank will soon open 400-seater BPO in Trupati, the second one after Nellor in Andhra Pradesh, sources close to the development said. The Mumbai-based bank is expected to have 2,000 people working (at these two BPOs) by June, sources said.

14 India introduces rice export ban
The Indian government has banned the export of non-basmati rice to try and control soaring domestic food costs. The decision, one of a series of measures to curb inflation, was taken during an emergency cabinet meeting. The price for exports of aromatic basmati rice has also been raised to $1,200 per tonne to discourage exports. The move could have an impact on rice prices globally as the country is the third largest exporter of the grain - a staple food in many countries. The move is the latest in a series of increases in the export price of non-basmati rice. The price of such rice was increased from $650 to $1,000 per tonne in the month of March alone. The government imposed a total ban on non-basmati rice exports last October but lifted it following protests from exporters. India is the second-largest rice producer in the world. It usually exports more than four million tonnes of rice a year. The government also announced that it would be scrapping import duty on all crude edible oils as part of its inflation-curbing measures. India ended its reliance on food imports in the 1970s, largely to the government's so-called Green Revolution.
1st April 2008, www.bbc.co.uk

15 Report warns of UK recession risk
There is a one in three chance of the UK going into a recession over the next two years, according to investment bank Lehman Brothers. It says the global financial turmoil is increasing mortgage rates and predicts this will reduce consumer spending. Lehman Brothers says the Bank of England will be forced to cut rates to 4% or lower to boost the economy. The report comes as the latest revised official figures cut the annual rate of UK growth at the end of 2007 to 2.8%. The annual growth rate in the October to December quarter was trimmed from an earlier estimate of 2.9%, and was the lowest rate since the second quarter of 2006. The Office for National Statistics figures showed growth during the fourth quarter remained unrevised at 0.6%.

16 Gloom over Japan economy deepens
Japanese business confidence has hit a four-year low as fears grow that corporate profits will be hit by slowing US demand, a report suggests. The Bank of Japan (BoJ) quarterly Tankan survey of 10,000 firms showed that the sentiment index of large manufacturers fell to 11 from 19. It was the second quarter in a row that the index had declined and the bleakest showing since December 2003. The survey adds to evidence that Japan's economic growth is stagnating. The BoJ kept interest rates unchanged at 0.5% at its last meeting as it battled the twin challenges of rising inflation risks and a cooling economy.

17 $100bn Fed move over credit fears
The US Federal Reserve will make a further $100bn (£50bn) available to major banks in April, trying to ease concerns about a global credit crunch. The sum, offered across two auctions, is in addition to $260bn provided in short-term loans to the end of March. Other unorthodox steps include the Fed allowing investment banks to borrow from it directly - previously only possible for commercial banks. The financial crisis has caused chaos on US and global markets. This month Bear Stearns became the highest profile US victim of the credit crunch - facing near collapse before a deal was struck for it to be bought at a bargain price by JP Morgan Chase. The rescue was supported by the Fed, which agreed to buy up to $29bn of Bear Stearns debts. The Fed's chairman, Ben Bernanke, will be quizzed about the auctions, and other Fed actions to ease the credit crunch, when he faces Congress next week. Critics say that the central bank is bailing out banks who have not assessed their risks properly.

18 Morgan Stanley cuts India's GDP forecast to 7.1%
Morgan Stanley said on Monday it had cut its forecast for India's economic growth to 7.1 percent for the fiscal year starting in April, after the government said last week it was prepared to give up growth to fight inflation. This would be the slowest economic expansion in Asia's third-largest Economy in six years, after a sizzling 9.6 percent rise in 2006/07 and a central bank estimate of 8.5 percent in 2007/08. Annual inflation in India struck 6.68 percent in mid-March, the highest since a two-year peak of 6.69 percent in January last year, mainly due to a jump in world prices of food, oil and metals.

19 Removal of import duties on cards
Government on Monday said it is considering elimination of import duties on a host of items, mainly food products, to improve their supply and rein in rising inflation. With international prices going to be steep, we are looking at cutting duties on many products, on food front, on edible oil and a whole range of products; in fact, bringing them to zero, if necessary, Commerce and Industry Minister Kamal Nath said in New Delhi, ahead of the crucial meeting of the Cabinet Committee on Prices. On steel, which has witnessed a sharp rise in the past few months, Nath said the government would have to calibrate duties to allow imports. He said the demand from the construction industry for both steel and cement has to be met.

20 Oil falls to $106 on economic woes
US oil futures fell more than a dollar on Friday toward $106 a barrel, as traders wary over the US economic outlook took profits from a three-day rally. Prices jumped on Thursday due to a major oil pipeline explosion in Iraq. US crude fell $1.23 a barrel to $106.35 a barrel by 0359 GMT, paring a gain of $1.68 a barrel on Thursday.

21 Rupee improves further against dollar
The rupee on Friday improved further by 2.50 paise to 40.07/08 against the US currency in late morning trade due to sustained capital inflows amid weak dollar overseas. In dull trade at the Interbank Foreign Exchange (Forex) market, the Indian unit opened lower at 40.12/13 a dollar but recovered smartly to quote at 40.07/08 at 10.30 am from Thursday's close of 40.0950/1050. The dollar, which gained against its major currencies on Thursday in New York, weakened against key rivals in Asian trade today on sustained worries over the widening damage to financial firms from the credit crisis. Foreign Institutional Investors (FIIs) continued their buying spree and they pumped in over 700 million dollars into equity Markets in last five sessions since March 19, impacting positive on the rupee sentiment.

22 Equities seen down on inflation woes
Indian shares may open lower on Monday, unsettled by the rapid rise in inflation to 14-month highs, worries about the deteriorating outlook of the US Economy and losses in Asian share Markets. Asian shares were headed towards their worst quarterly performance in over five years on persistent concerns about the global credit crunch. By 0333 GMT Tokyo was down 1.5 percent, Seoul had slipped 0.2 percent and Hong Kong had lost 1.6 percent. The global cues are negative and plus there is inflation, because of which we may see a rise in the cash reserve ratio, said Ambareesh Baliga, vice-president at Karvy Stock Broking Ltd.

23 Sensex posts biggest qtrly fall since June 92
Indian shares fell 4.44 percent on Monday to end the March quarter down 22.9 percent, their biggest quarterly fall since the June 1992 quarter, as surging inflation and signs of an economic slowdown scared off investors. Monday also marked the end of the 2007/08 fiscal year, and despite the sharp fall in the March quarter the index ended the fiscal year up 19.7 percent due to a strong rally in 2007. Financial stocks were hit hard, hurt by persistent concerns of a global credit crunch and Friday's data showing a rise in local inflation to a 14-month high of 6.7 percent in mid-March. Top private lender ICICI Bank fell 7.8 percent to 770.10 rupees, taking its losses for the quarter to 37.5 percent and contributing most to the fall in the main index.