Global Business |Update|
(A weekly update on Global Business )
Skyline Business School
Hauz Khas Enclave, New Delhi 110 016
Tel: 2686 4848, 2686 6968

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Issue 97

Global Business Update
(31st Dec’08---6th Jan’09)

Contents

Global Corporate

1 Investor warning on Bellway bonus

2 Woolworths closure delayed by day

3 Daiichi to book $3.9bn loss on Ranbaxy

4 M&S hard hit as UK stores feel the pinch

5 Alstom attacks Chinese train exports

6 Google in push to gain e-mail market share

7 Nokia to rely on top position to weather crisis

8 TVS bike sales dips 21.9 pct in Dec

9 Satyam-Upaid disparagements hearing on Jan 7
 

Global Outsourcing

10 Citigroup completes Indian outsourcing unit sale

11 Outsourcing Predictions for 2009

12 Web Design Outsourcing services by Cranberry

13 RR Donnelley buys Chile's PROSA for $23.5M

14 Dishman, Wanbury expect increase in pharma outsourcing

15 Jordanian ICT firms eye GCC
 

Global Economy
 

16 Obama 'planning $800bn stimulus'

17 India unveils economic boost plan

18 Belarus to get $2.5bn IMF loan

19 Oil rises on Middle East tensions

20 Government mulls help for banks

21 Cholamandalam to raise Rs 300 cr via FCP issue

22 Inflation seen at 6.38 pct on Dec 20

Global Markets

23 Oil jumps to $44.60 per barrel

24 Satyam hires Merrill to mollify shareholder outcry

25 Stocks lose over Rs 40 trillion in 2008

26 U.S. Stocks Start Soft, With Auto Sales On Tap

27 Hyundai rolls out no-cost car return program

Global Corporate

1 Investor warning on Bellway bonus
Housebuilder Bellway looks set to clash with investors at its annual meeting after a shareholder watchdog raised concerns over management bonuses. The Association of British Insurers (ABI), which represents major investors, said some shareholders were likely to oppose the payouts. Newcastle-based Bellway saw pre-tax profits plunge 30% to £165.7m in the year to 31 July with sales down 50%. The firm declined to comment on the ABI's report. The body criticised Bellway for ditching previous performance targets for its directors. And it issued a red top warning - a sign that it foresees serious levels of shareholder concern with remuneration at the annual general meeting on 16 January. Of about 700 companies which it monitors, the ABI says it only issues the warnings in about 2-3% of cases.
4th January 2009, www.bbc.co.uk

2 Woolworths closure delayed by day
The final closure of Woolworths stores is to be delayed by one day, the firm's administrator has said. Deloitte says 200 outlets that had been due to shut on Friday will now also remain open on Saturday, because there is still some stock to sell. The remaining 200 stores will now close on 6 January, also a day later than originally planned. Deloitte said another reason for the delay was the need for more time to make the "final arrangements". There are two main reasons for delaying the closures, said a Deloitte spokesman. One, stock levels - there's still some stock remaining. Two, workload - it's a big logistical exercise. More than half of Woolworths' 807 stores have already closed for the last time. Woolworths went into administration in November with debts of £385m. Deloitte tried but failed to sell the business as a going concern.
2^nd January 2009, www.bbc.co.uk
 

3 Daiichi to book $3.9bn loss on Ranbaxy
Daiichi-Sankyo said its full-year net profits were likely to be lower than initially expected due to an extraordinary loss of Y359.4bn ($3.9bn) arising from its acquisition of Ranbaxy. Japan’s second largest pharmaceuticals group said it would write down the value of its 64 per cent stake in Ranbaxy, after shares in the Indian generic drugmaker plunged nearly 66 per cent below its purchase price last year. Under Japanese accounting rules, companies are required to post valuation losses on their stockholdings if the share price falls 50 per cent or more. Daiichi-Sankyo’s Y490bn purchase of Ranbaxy, the largest foreign acquisition of an Indian company, was one of a slew of overseas acquisitions last year by Japanese companies, which took advantage of their improved finances, low interest rates in Japan and a more accommodating M&A environment to expand outside their shrinking domestic market. But Daiichi-Sankyo’s investment quickly ran into trouble when the US regulator launched an investigation into Ranbaxy and in September banned imports and sales of the Indian group’s products.
5th January 2009, www.ft.com

4 M&S hard hit as UK stores feel the pinch
Marks and Spencer, one of Britain’s retailing bellwethers, is expected to deliver its worst Christmas trading performances in a decade this week as the effects of the spending downturn are laid bare by some of the high street’s biggest names. Analysts are sharpening their pencils for a round of hefty downgrades when reporting kicks off on Tuesday with Next, Debenhams and privately-owned New Look revealing how they fared over Christmas. While Next and Debenhams are expected to report falling sales, M&S is likely to be the weakest performer. The City expects overall sales at M&S to be down between 5.5 and 9.6 per cent, with underlying sales in clothing and home expected to be off by 6 to 10 per cent.
1st January 2009, www.ft.com

5 Alstom attacks Chinese train exports
Western countries should close their markets to sales of Chinese trains because China’s domestic market is closing to outside suppliers, says the head of one of the world’s largest rolling stock builders. In a Financial Times interview, Philippe Mellier, chief executive of Paris-based Alstom Transport, also claimed that Chinese companies were offering trains for export using technology derived from western suppliers. Such technology is usually supplied on condition it not be used outside China. The comments by Mr Mellier, whose company is the world’s number two trainmaker, underline the growing tension in the world’s train-building industry over China’s role. China promises to become one of the world’s most significant markets for high-speed trains, metro cars, freight locomotives and many other forms of rolling stock. However, after a period when China signed contracts with several suppliers from other parts of the world to transfer technology to itself, it is gradually insisting new trains be entirely domestically designed and built.
31st December 2008, www.ft.com

6 Google in push to gain e-mail market share
Google, the clear leader in internet search, has been zeroing in on user’s inboxes in a push to win market share in e-mail, an area where its rivals Microsoft and Yahoo still dominate. Gmail, its web-based e-mail product, has become a development focus for the Silicon Valley company, with a stream of innovations leading to its promotion by influential early adopters. With links to Google Docs, Calendar and other web-based services, Google appears to be making Gmail the centre of an online productivity suite that could eventually challenge the dominance of Microsoft’s Office collection of programs. Google has two motives for pushing harder into e-mail. First, Google makes money from advertising placed inside e-mails. But the service is also valuable for its “stickiness” in increasing users’ dependency and time spent on other Google products.
2nd January 2009, www.ft.com

7 Nokia to rely on top position to weather crisis
Nokia is looking bruised. In November, the world’s largest mobile phone maker issued a profit warning for the fourth quarter after seeing a sharp cutback in spending by consumers on handsets. The Finnish company had already shocked investors in September by revealing its market share of mobile sales would fall in the third quarter, partly because of aggressive price-cutting by competitors. It was the first year-on-year decline in three-and-a-half years.
3rd January 2009, www.ft.com

8 TVS bike sales dips 21.9 pct in Dec
Chennai-based TVS Motor Company on Friday reported 21.9 per cent decline in motorcycle sales in December last year at 40,057 units in comparison with 51,293 units in the same month previous year. Total two-wheeler sales stood at 89,285 units in December 2008 against 97,576 units in the corresponding period of the previous year, down 8.5 per cent, the company said in a statement. During the month, TVS exported 16,930 units of two-wheelers against 14,402 units in the corresponding period of the previous year, up by 17.6 per cent.
4th January 2009, www.financialexpress.com

9 Satyam-Upaid disparagement hearing on Jan 7
More trouble may be brewing for the beleaguered Satyam Computers with a Texas district court scheduled to hear on January 7, a case filed against the IT major by a small British mobile solution firm, Upaid, over the Maytas deal. On January 10, Satyam is holding a board meeting to discuss the options of restoring shareholders confidence after the failed Maytas deal and any further legal development before that could spell more problems for the management. Upaid, which is already fighting a forgery case against Satyam in a US court, had filed a motion against Satyam Computer Services with the state court, saying that they are looking for a testimony from Ramalinga Raju, CFO Srinvas Vadlamani, and the company's Head of Corporate Governance Jayraman after the abortive Maytas deal.
1st January 2009, www.financialexpress.com
 

Global Outsourcing

10 Citigroup completes Indian outsourcing unit sale
Citigroup Inc. said Wednesday it completed the sale of its India-based business process outsourcing unit Citigroup Global Services Ltd. to Tata Consultancy Services Ltd., India's largest software services provider. Citigroup (nyse: C - news - people ) said it will receive $512 million in cash. It agreed to sell the business to Tata in October. At that time, the companies also signed a contract that said Tata will provide outsourcing services to Citigroup and its affiliates for the next nine and a half years.
31st December 2008, www.forbes.com

11 Outsourcing Predictions for 2009
Low-hanging fruit outsourcing with immediate cost-savings will be strong.  As we discussed and surveyed here, it’s areas where enterprises can streamline initial costs over a contract and get an immediate impact on the bottom-line.  That’s bread-and-butter application outsourcing, high-arbitrage BPO areas such as Finance & Accounting  and vertical-specific analytics (that KPO stuff).  I am also expecting increased adoption of procurement BPO models as increased procurement and supply management work is moved offshore, and buyers can benefit from labor arbitrage to underpin the transformation costs that have held back adoption in the past. Many initiatives which require incremental upfront investment that cannot be tied directly to revenue-metrics will suffer.  The back-end of Q1, Q2 and Q3 2009 will be busy times for outsourcing deal activity. The onshore/offshore decision-process is reversed to “why should this stay onshore?”  The traditional evaluation methodology for companies’ outsourcing and offshoring opportunities is fast-changing.  Rather than companies determining which processes can be carried out from a remote location, most will be determining why processes need to be carried out onshore.
1st January 2009, http://blogs.zdnet.com/BTL/?p=11341

12 Web Design Outsourcing services by Cranberry
Cranberry Communications Pvt. Ltd. has come up with specialized web design services for web design companies based in USA, Canada and European Union countries. Cranberry is presently providing web design and web development services to big web design agencies in USA and UK. Presently cranberry is providing Graphic design, Web Design, PSD to XHTML, PSD to CSS, search engine optimization and content management system development based on PHP and asp. net. Cranberry has launched fixed project based pricing, per man-hour based pricing and staffing augmentation services for long term projects. Cranberry is now expanding its market for non English speaking market specially Norway, Denmark, Germany and Switzerland for various web services. Cranberry services will not only help in minimizing the effect of economic downturn by providing cost effective services at a affordable prices which will help web design and development companies in USA and European countries to cut their cost but at the same time experienced team of cranberry will help them achieve the quality output, which their clients look for.
2nd January 2009, www.tutorial-reports.com

13 RR Donnelley buys Chile's PROSA for $23.5M
R.R. Donnelley & Sons Co. said Friday it bought Chilean web printing company PROSA for $23.5 million, expanding the company's Latin American presence. Including PROSA, R.R. Donnelley will have 15 facilities in Latin America and the Caribbean. PROSA produces magazines, catalogs, retail inserts and softcover textbooks. R.R. Donnelley provides print and business-process outsourcing services. Shares of the company rose 86 cents, or 6.3 percent, to close at $14.44. The stock has ranged from $9.53 to $38.19 over the past year.
2nd January 2009, www.forbes.com

14 Dishman, Wanbury expect increase in pharma outsourcing
Wanbury and Dishman Pharmaceuticals & Chemicals think that outsourcing will not only increase in 2009 but will also play a significant role in their future growth, reports DNA. Both the companies anticipate contract research and manufacturing services (Crams), which means outsourcing of research and manufacturing work to low-cost countries like India, to improve their sales drastically this year. The company said that it works with innovator companies seeking lower costs. With the economic meltdown there would be more outsourcing of research and manufacturing to India. Presently, Crams contributes about 75% to Dishman Pharma`s revenues of Rs 8.03 billion. The company, which expects to end fiscal 2008-09 with sales of Rs 10 billion, sees contribution from Crams increasing by over 10% in the coming years. The Rs 6.18 billion Wanbury expects Crams to grow by 30-40% this year. Shares of the company closed up Rs 3.15, or 6.98%, at Rs 48.30. The total volume of shares traded at the BSE was 11,983 (Friday).
3rd January 2009, www.tutorial-reports.com

15 Jordanian ICT firms eye GCC
Jordanian information and communication technology (ICT) firms expect to see 15 to 20 per cent growth in demand for technology products and services from the GCC markets, an industry association said yesterday. A group of nine member companies from the Information Technology Association of Jordan revealed positive expectations for the year to come, in light of a growing demand for outsourced services during the financial crisis. These companies have set expansion plans in the UAE, Saudi Arabia, Qatar and Kuwait for the coming year. The demand for IT in the Gulf markets is continuing to grow, especially as organisations recognise the benefits of services such as contact centre outsourcing as a more cost-effective method of communicating with customers during the global financial crisis, said Rami Sweis, Chief Executive Officer, CrysTelCall, Jordan's first independent multilingual contact centre. It provides a full range of inbound and outbound contact services, consultancy and business process outsourcing (BPO).
5th January 2009, www.tutorial-reports.com

Global Economy

16 Obama 'planning $800bn stimulus
US President-elect Barack Obama is meeting Congressional leaders to discuss his plans for a multi-billion dollar stimulus package. US media reports say the package could be worth more than $800bn (£551bn), including $300bn of tax cuts - which would be higher than had been expected. Mr Obama has said he wants a plan that will create three million jobs by 2011. The president-elect hopes to be able to enact the package shortly after his inauguration on 20 January. He said the specially convened meeting with Congressional leaders had been called because the people's business can't wait. We've got an extraordinary economic challenge ahead of us, we're expecting a sobering job report at the end of the week.
5th January 2009, www.bbc.co.uk

17 India unveils economic boost plan
Indian authorities have unveiled a fresh economic stimulus package, including another reduction in the country's main interest rate. The Reserve Bank of India has cut its key lending rate by one percentage point to an eight-year low of 5.5%, its fourth reduction in as many months. In addition, the government is to allow increased foreign investment in both Indian bonds and companies. It is the country's second economic stimulus plan in less than a month. Under the latest package announced on Friday, the central bank has also cut the amount of funds that commercial lenders have to keep in reserve to 5% from 5.5%.
2nd January 2009, www.bbc.co.uk

18 Belarus to get $2.5bn IMF loan
The International Monetary Fund (IMF) has given initial approval to a $2.5bn (£1.7bn) loan to Belarus to help it cope with the financial downturn. The IMF said Belarus faced a difficult economic situation, and its actions to cope with crisis deserve the support of the international community. President Alexander Lukashenko threatened Belarus would leave the IMF if its loan request was rejected. The agreement still has to be formally approved by the IMF's executive board. The IMF said the loan agreement could go before its executive board in mid-January, and Belarus would be able to draw on about $800m immediately after the loan was given the go-ahead.
31st December 2008, www.bbc.co.uk

19 Oil rises on Middle East tensions
Crude oil prices have climbed on concerns that Israel's attacks on Hamas could disrupt oil production and threaten supplies from the Middle East. Light, sweet crude rose $1.22 to $37.89 a barrel in New York, below a session high of $42.20. Meanwhile London Brent added $1.39 to $38.70 a barrel, after reaching a high of $43.18. Oil has fallen more than $100 from its peak of $147.27 a barrel on 11 July as slowing economies have dented demand. Geopolitics had disappeared from the oil scene for the last couple of months but will regain some price premium with the latest Israeli attack in Gaza, Olivier Jakob, of consultants Petromatrix, said in a research note.
31st December 2008, www.bbc.co.uk

20 Government mulls help for banks
The government has said it is mulling further plans to encourage UK banks to raise lending to firms and households. Chancellor Alistair Darling said that pumping more state cash into banks was not the first port of call. But he added that discussions would be held about what further steps could help thaw the loans freeze. BBC business editor Robert Peston said the Treasury was eyeing an insurance scheme where banks would pay a fee to reduce potential losses on bad loans. He added the scheme may encourage the banks to lend more freely because they would have a better idea of what losses they could face, while the state was sharing the risk.
4th January 2009, www.bbc.co.uk

21 Cholamandalam to raise Rs 300 cr via FCP issue
Cholamandalam DBS Finance on Friday said it will raise Rs 300 crore through the issue of one crore preference shares to the promoters of the company. In a filing to the Bombay Stock Exchange Cholamandalam DBS said it has decided to seek the approval of the shareholders for issuing 1,00,00,000 zero coupon fully convertible preference shares (FCPs) for Rs 300 per piece including premium. The company is issuing 26.67 lakh shares to Tube Investments of India, 3.33 lakh shares to Carborundum Universal and 50 lakh shares to DBS Bank. Moreover, the company would issue 10 lakh shares to EID Parry (India) and Coromandel Fertilisers respectively, the filing added.
31st December 2008, www.financialexpress.com

22 Inflation seen at 6.38 pct on Dec 20
India's annual inflation rate is seen falling to near 10-month lows in the third week of December, as lower fuel prices feed into the economy and the cost of manufactured products slides, a Reuters poll showed. The median forecast of 10 economists was for a 6.38 percent rise in the wholesale price index in the 12 months to Dec. 20, compared with 6.61 percent in the previous week. If the forecast is realised, it would be the smallest annual increase since March 1, when the index rose 6.21 percent. We expect inflation to edge lower as a result of the improved availability of food articles, the second round effect of fuel price cuts and ongoing deflation in manufactured product prices, said Rupa Rege Nitsure, chief economist at Bank of Baroda.
1st January 2009, www.financialexpress.com

Global Markets

23 Oil jumps to $44.60 per barrel
US crude oil rose 14 per cent on the final trading day of 2008 in thin pre-holiday trade on Wednesday, tracking a jump in gasoline as a slowdown in domestic refinery activity sparked fears of tightening fuel supply this winter. US crude oil futures for February settled up $5.57 to $44.60 per barrel, but down 54 per cent from the $95.98 on the last day in 2007. London Brent settled up $5.44 at $45.59. This year saw the record high prices in July above $147 a barrel crash to the year low of $32.40 on Dec. 19 as the global recession dissolved world demand. Weekly US inventory data on Wednesday showed a decline in refinery activity and a 500,000 barrel rise in crude stocks, compared with forecasts for a 1.5 million barrel decrease.
1st January 2009, www.financialexpress.com

24 Satyam hires Merrill to mollify shareholder outcry
Under pressure from the investors, Satyam Computer Services, India’s fourth largest software exporter, has engaged the services of DSP Merrill Lynch to look at the available options to enhance shareholders’ value. The company, which is under fire ever since its aborted bid to acquire two promoter-related firms for $1.6 billion, could also see a change in the composition of its board when it meets on January 10 as against the earlier date of December 29. The company on late Saturday evening postponed its December 29 meeting and also broadened the agenda, which earlier was only to discuss the buyback option. There’s been intense speculation that the company’s chairman B Ramalinga Raju may step down from the board. However, another independent director BS Raju came out in support of the present regime. “I am not looking for a change in management,” he told a news agency.
31st December 2008, www.financialexpress.com

25 Stocks lose over Rs 40 trillion in 2008
It was a story of riches to rags. Lady luck deserted investors and punters during 2008 with stock markets losing over Rs 40 trillion, a figure that not many would know carries how many zeroes. Household names such as Tatas, Birlas and Ambanis, on whom small investors banked with their eyes shut, proved no guarantee for the safety of investment in the market where cumulative wealth of all listed companies got eroded by over 50 per cent during the year. And analysts are predicting more troubled times ahead - at least till the first half of 2009. The industry's who's who are a part of the club where each member lost tens of thousands of rupees during the story of boom to bust, but the misery of lakhs of individual and small investors is manifold more.
2nd January 2009, www.financialexpress.com