THE RELIANCE RPL MERGER IN RATIO OF 16:1

The big piece of news from India’s corporate world this past weekend has been the merger of two companies under the Mukesh Ambani led Reliance Group. The news broke & developed over and was a done deal by the time the weekend was over. In every sense the affair has been handled in true Reliance style – quickly, efficiently and without making too much of a fuss. The integration of Reliance Petroleum Limited into Reliance Industries is being handled with a lot of care. Considering the ease with which Reliance has started to pull this off has been commendable.

The company has been careful enough to make sure that they do not get into the bad books of their shareholders.Tackling integration requires managing the priorities of both the companies being integrated. In this case the interests of the shareholders of both Reliance Industries and Reliance Petroleum have been safeguarded.

Mukesh Ambani in a statement was quick to point out that the deal would create “shareholder value”.

Shareholders themselves are pretty satisfied with the merger of Reliance Industries and Reliance Petroleum. They get to be part of a bigger entity with a much more simplified company structure.

Reliance Petroleum being the refining arm of Reliance Industries no longer needs to be kept separate from the company’s core business of oil and gas exploration and marketing.

By integrating the refinery business into the main fold they will be able to function as before with the petroleum wing being an internal subsidiary.

All that Reliance had to do was to simply re-purchase a 5% stake in Reliance Petroleum which until now belonged to Chevron. This being successful allows the company to increase its stake to seventy five percent in RPL thus making the merger a matter of detail.

RIL has agreed upon a price of Rs.60/share to buy Chevron’s stake in RPL. By no means has the company overpaid. In fact they’ve paid the IPO launch price for the stake. Shareholders can therefore be satisfied that the company has not overspent.

Reliance has also been fair with the share distribution ratio for RPL shareholders.The company has decided to fix the ratio of RPL to RIL shares at 16:1.

The ratio is a fair reflection of the current market value of both the companies.Therefore the shareholders have not been crossed in this matter as well.Small investors and fund managers alike agree on the ratio being a good deal thus the merger should not face any serious problems in the future.

RPL has just recently started commercial production. From a financial point of view it does depend on its parent company RIL for funds and easy credit access. The channel for credit being much simpler now that both companies come under the same name is a good move.

The RIL-RPL combine also catapults RIL higher into the list of the world’s biggest refining companies.Ironically RIL now replaces and gets ahead of Chevron which decided to exit its stake in RPL

India`s gold futures climb to new record

A weaker rupee makes the imported yellow metal expensive. The Indian rupee fell to its lowest in more than two weeks on Tuesday

Gold futures in India were trading above the psychological mark of Rs15,000 on strong global cues and support from a weak rupee. Internationally, gold prices continued their recent bull run as investors scramble for safe haven assets amid a worsening global economic outlook.

A weaker rupee makes the imported yellow metal expensive. The Indian rupee fell to its lowest in more than two weeks on Tuesday on expectations that FIIs would dump more local shares, while a stronger dollar overseas also dampened sentiment.

April-delivery gold gained as much as 2.9% to Rs15,131 per 10 grams on the Multi Commodity Exchange of India Ltd. (MCX), the highest since the bourse began trading the metal in November 2003. The contract had gained more than 3% last week.

Record high gold prices are serving as a major deterrent for gold buyers in India, notwithstanding the ongoing wedding season. Customers are postponing gold purchases due to record high prices and weak economic climate.

India is the world’s biggest consumer of gold.

India's import of gold this year may more than halve to 250 tons from 720 tons in 2008. India's gold purchases have declined for three consecutive months with imports in January slumping to about 2 tons from 24 tons in the year-earlier month, according to the Bombay Bullion Association.

Gold prices are up 30% in the past three months.

Funds are pouring huge amounts of money into gold and buying the metal at every support level. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, climbed to a record 985.86 metric tons as of Feb. 13, gaining 14% last week alone.

Meanwhile, gold for immediate delivery advanced 1.8% to US$959.05 an ounce, the highest level since July 22. It was trading at US$958.74 at 2:05 p.m. Singapore time.

Gold for April delivery in New York advanced to US$961.10 an ounce, the highest level for the most active contract since July.

Be(ar) Aware : From The Street

One of the biggest fears for an investor in a bear market is the fact that he is in a sense trapped.The value of his investments is very very low. At this point he has to make a choice – either stay the course till his investment posts a return giving him a PROFIT or pull out immediately thus accepting a certain degree of LOSS .

If he decides to stay the course then he has to contend with the bear market.A market that is ‘played’ by people who try to make money even in such a climate. Sellers not buyers call the shots and at such a time many traders get together to form infamous groups called ‘BEAR CARTELS’. The Indian stock market is not immune from attacks by such cartels. Many companies in the current marketplace have fallen victim to such cartels. Any of these companies could have been ones that you invested in and many companies you are investing in right now could fall prey to these cartels in future.

The biggest of companies are susceptible to bear maulings. When a market turns from being bullish to being bearish then bear cartels start operating. A few traders get together and decide to co-ordinate their efforts so that they’re able to drastically bring down the price of a particular stock.They start selling or shorting mass quantities of a company’s stock thus driving the price down by significant numbers.

An operating bear cartel is very much like a mafia. They target a stock that they believe can be damaged and put out a ‘hit’ on it like a mafia. Ultimately they shoot the price of the stock down with similar cartels and end up achieving their goal of profit.

Some of India’s biggest companies have fallen prey to the actions of these vicious cartels.

A few months ago immediately after the crash of Lehman Brothers, ICICI Bank fell prey to a bear cartel. Rumors were spread that ICICI was involved and positioned with Lehman Brothers and that it too would share a similar fate to Lehman Brothers. People who believed this panicked and sold ICICI bank shares in huge numbers that caused a fall in the company’s share prices mostly in September. The situation calmed down only after the central government issued a statement that ICICI was a safe bank and that the rumors were false.

Similarly Unitech, one of the country’s biggest real estate developers was brutally mauled by the Bear cartel. It is true that Unitech is leveraged but not to the extent that the bear cartel made it out to be. The result was that on October 24th ,Unitech’s stock fell by over 50% in a single day and has not recovered since. Just this month another company Rolta was mauled in the same way but thanks to timely intervention by the company and positive growth reports, the damage was minimized.

Guidelines for execution of block deals on the stock exchanges

1. SEBI had issued a circular (reference no. SEBI/MRD/SE/Cir-7/2004) on January 14, 2004 on disclosures of details of “bulk” deals with a view to impart greater transparency to the market on such transactions executed on the stock exchanges. In terms of paragraph 1.1 of that circular, a “bulk” deal constituted of “all transactions in a scrip (on an exchange) where total quantity of shares bought/sold is more than 0.5% of the number of equity shares of the company listed on the exchange”. Thus the quantitative limit of 0.5% could be reached through one or more transactions executed during the day in the normal market segment

2. There is however a felt need of the market to execute large trades through a single transaction easily without putting either the buyer or the seller in a disadvantageous position. In order to facilitate execution of such large trades, the stock exchanges are being permitted to provide a separate trading window. A trade, with a minimum quantity of 5,00,000 shares or minimum value of Rs.5 crore executed through a single transaction on this separate window of the stock exchange will constitute a “block deal” as distinguished from “bulk” deal defined earlier.

3. A “block” deal will be subject to the following conditions :

a. The said trading window may be kept open for a limited period of 35 minutes from the beginning of trading hours i.e. the trading window shall remain open from 9.55 am to 10.30 am.

b. The orders may be placed in this window at a price not exceeding +1% from the ruling market price/previous day closing price, as applicable.

c. An order may be placed for a minimum quantity of 5,00,000 shares or minimum value of Rs.5 crore.

d. Every trade executed in this window must result in delivery and shall not be squared off or reversed.

e. The stock exchanges shall disseminate the information on block deals such as the name of the scrip, name of the client, quantity of shares bought/sold, traded price, etc to the general public on the same day, after the market hours.

f. There is no change in regard to the disclosure of trade details of ”bulk deals” as specified in the earlier SEBI circular reference no. SEBI/MRD/SE/Cir -7/2004 dated January 14, 2004, and such disclosures shall be continued to be made by the stock exchanges to the general public on the same day after the market hours.

4. The stock exchanges shall ensure that all appropriate trading and settlement practices as well as surveillance and risk containment measures, etc., as presently applicable to the normal trading segment are made applicable and implemented in respect of the proposed special window also.

5. The stock exchanges are advised to

a. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately.

b. bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website.

c. communicate to SEBI, the status of the implementation of the provisions of this circular in the Monthly Development Report for the month of September 2005.

6. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

ZIMBABWE CURRENCY AND 231 MILLION PERCENT INFLATION.....!!

           Bunch of Banana's for 50 CR (1 Million = 10 Lakhs)

100 Lakh Cr (1 Trillion = 1 Lakh Cr)

10,000 Cr (1 Billion = 100 Cr)

SEVEN LAKHS FIFTY THOUSAND

From 1000 Cr to 10,000 CR (1 Million = 10 Lakhs)

50 CR (1 Million = 10 Lakhs)

10 CR (1 Million = 10 Lakhs)

5000 CR (1 Billion = 100 Cr)

ON 18th April 1980 Zimbabwe was born from British colony of Rhodesia & Rhodesian Dollar was replaced by Zimbabwe Dollar at PAR.

In 2004, Zimbabwe’s inflation was 624 %

In February 2007, the central bank of Zimbabwe declared inflation "illegal", outlawing any raise in prices on certain commodities between March 1 and June 30, 2007. Officials arrested executives of some Zimbabwean companies for increasing prices on their products. Such measures, frequently tried during other episodes of hyperinflation, have always failed.  In March 2007, inflation surged to a new high of 1,730%, and in June the government released a figure of 7,638%. The predictions for the annual inflation ranged from 3,000% (according to the IMF) to 8,000%. In fact, inflation that month rose to 11,000% from an earlier estimate of 9,000%. U.S. ambassador Christopher Dell predicted it would reach 1.5 million percent by December 2007, although in the event the IMF estimated a rate of "only" 115,000% for that month, and 150,000% for January 2008. The government then circulated a Z$200,000 note, and reports of extreme shortages of basic foodstuffs, fuel, and medical supplies abounded. The government instituted a six-month freeze on wages on September 1, 2007. Hyperinflation in Zimbabwe began shortly after destruction of productive capacity in Zimbabwe's civil war and confiscation of white-owned farmland.  Food output capacity fell 45 %, manufacturing output 29 % in 2005, 26 % in 2006 and 28 % in 2007, and unemployment rose to 80 %. During the height of inflation from 2008–09, it was difficult to accurately account and monitor for Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. This cessation in filing made it difficult to accurately observe how severe inflation was in the country. However, Zimbabwe's peak month of inflation is estimated at 6.5 sextillion percent in mid-November 2008. In 2009 Zimbabwe abandoned its currency; at present in 2012 a new currency has yet to be introduced, so currencies from other countries are used.

Hanke Hyperinflation Index for Zimbabwe (HHIZ)

Date	Index	Monthly Inflation Rate	Annual Inflation Rate
5-Jan-07	1.00	13.70%
2-Feb-07	1.78	77.60%
2-Mar-07	3.14	76.70%
5-Apr-07	6.90	56.20%
4-May-07	6.75	-2.15%
1-Jun-07	20.70	207.00%
6-Jul-07	53.00	60.40%
3-Aug-07	49.10	-7.29%
7-Sep-07	82.50	70.60%
5-Oct-07	219.00	165.00%
2-Nov-07	642.00	193.00%
28-Dec-07	2,010.00	61.50%	215,000%
25-Jan-08	2,250.00	11.80%
29-Feb-08	8,260.00	259.00%
28-Mar-08	17,700.00	115.00%
25-Apr-08	57,100.00	222.00%
30-May-08	442,000.00	498.00%
26-Jun-08	23,600,000.00	5,250.00%	41,400,000%
4-Jul-08	49,200,000.00	3,740.00%	93,000,000%
11-Jul-08	81,800,000.00	2,080.00%	167,000,000%
18-Jul-08	122,000,000.00	1,030.00%	250,000,000%
25-Jul-08	157,000,000.00	566.00%	317,000,000%
29-Aug-08	6,330,000,000.00	3,190.00%	9,690,000,000%
26-Sep-08	794,000,000,000.00	12,400.00%	471,000,000,000%
3-Oct-08	3,570,000,000,000.00	15,400.00%	1,630,000,000,000%
10-Oct-08	32,300,000,000,000.00	45,900.00%	11,600,000,000,000%
17-Oct-08	1,070,000,000,000,000.00	493,000.00%	300,000,000,000,000%
24-Oct-08	124,000,000,000,000,000.00	15,600,000.00%	26,100,000,000,000,000%
31-Oct-08	24,600,000,000,000,000,000.00	690,000,000.00%	3,840,000,000,000,000,000%
7-Nov-08	4,890,000,000,000,000,000,000.00	15,200,000,000.00%	593,000,000,000,000,000,000%
14-Nov-08	853,000,000,000,000,000,000,000.00	79,600,000,000.00%	89,700,000,000,000,000,000,000%

Sources: Imara Asset Management Zimbabwe and author’s calculations

BARACK OBAMA SAYS ECONOMY TO WORSEN BEFORE RECOVERY..!

The year 2009 started in the midst of a crisis unlike any that all of us have seen in our lifetime. US President-elect Barack Obama, who sworn-in , has warned that the economy will get worse before it improves. Meanwhile, Wall Street ended the week on a positive note; financials, however, continue to wilt.

Obama said, “The need for us to act is now; it has never been more urgent. We started this year in the midst of a crisis unlike any that we have seen in our lifetime. If nothing is done and we continue on our current path this recession could linger for years, and America could lose the competitive edge that has served as the foundation for our strength and standing in the world.”

YOU KNOW WHAT WARREN BUFFET SAYS ABOUT OBAMA......? READ THIS

This is what he says and I am quoteing this from one of media reports---

As the President-elect Barack Obama gets all set to walk into the Oval Office as the 44th President of the United States of America now more than 24 hours, Warren Buffet, Chairman of Berkshire Hathaway and Kirby Daley, Senior Strategist of the Newedge Group, comment on Barack Obama and the challenges he will have to deal with as the president.

Warren Buffet said, “He's the absolute right Commander-in- Chief. That's another thing American people seem to do is we elect people that are right for the times, whether it was Lincoln or Roosevelt, you could not have anybody better in charge.”

Buffet added, “He's smart, got the right values, but he also understands our economics very well. He's cool, he's analytical, but then when he gets it all thought through he can convey to American people what needs to be done. Not to expect miracles, that is going to take time. But we are going to get to the other end.”

Even Kirby Daley said, “It will be a great speech. This guy is nothing if he isn’t a walking-talking speech machine.” Daley added, “He has built up so much hope in this nation. This speech is going to be of massive importance. What he should do and what he's going to do are two very different things. He should walk out there and he will go down in history if he prepares the country for what is inevitable and what is coming and that is severe belt tightening.”

9% FOR 2009 ? I HOPE WE CAN.........

The New Year for the Indian economy is an uncertain one. The highs that the markets reached a year ago have inadvertently led to the lows that it finds itself in. The euphoria from the Bull Run that lasted for four years has been wiped away in a matter of twelve months and has given birth to a Bear Market not seen in over half a century. For the Finance Department, getting the economy on track remains priority number one. In one sense it’s a good thing that India has not crept into a recession but the fact does remain that the magical growth rate of 9% will somehow not be that easy to achieve.

If 2009 was just another year then we could perhaps expect the government to finely balance the need of public sector units and private industry needs. A balancing act that has worked well for sometime in the past. The spanner in the works is the General Election of 2009.

An event where the world’s largest democracy will go to polls. For most parts the issue that is the incumbent point of contention is the one of Internal Security even more after the Mumbai terrorist attacks .In such a case other issues like the economy are being pushed aside. Perhaps the overwhelming sentiment for the Indian government is to somehow stay in power. The Rhetoric of anti terrorism is one way of winning seats.

From an economic point of view it’s hurting the country not to have a full time Finance Minister. With the Prime Minister also handling the Finance Portfolio, much of the finance work is being performed by senior bureaucrats of the government. With a very important Union Budget coming up in less than two months time the question that should be asked is will the finance department deliver a mini-budget to tide things over till the general election or will it deliver a full scale budget that addresses important issues?

There is also the question of growth for 2009.As said before a 9% growth is not achievable but the task of stimulating growth is paramount. In this aspect the government needs to make sure that interest rates come down for private players so that their projects aren’t stonewalled. At the same time if the rate cuts do not reflect appropriately in cheaper rates for average consumers then the problem will not have been fully solved.

Inflation is one area that seems to be under control but much of this too has come from consumers going into a saving shell. The drop in the price of crude oil has also helped the Indian economy to curb inflation as it is an importer of oil.

Were the trends to be reversed, will the Indian economy still be able to control inflation?

There are clearly many sectors that have been hit by the economic crisis of 2008.Real Estate, Infrastructure, Banking, Outsourcing and the like. Much of 2009 will be spent in cleaning up the mess of 2008.

In that sense it might not be such a Happy New Year after all.

THE SELF DESTRUCTION OF SATYAM & SPELL BACKWARDS MAYTAS

As many know the biggest scam in the history of India’s corporations has come to light. Satyam Computers, the country’s fourth largest IT Company stands on the brink of termination. More recently in the news for the failed takeover attempt of its sister company Maytas; Satyam is now staring into an abyss of anger and shame. Shareholders have dumped the stock left, right and centre. In every sense Satyam has managed to become India’s ENRON. It has cooked its accounts to show non existent revenues. We take a look at how this scam came about.

In a letter addressed to the Board of Directors of Satyam the former Chairman Ramalinga Raju whilst delivering his resignation has accepted total responsibility for the fudging of the company’s accounts. That was however of little concern as the damage has already been done.

In less than 24 hours the company could be sold to zero levels rendering it out of business. The National Stock Exchange has already removed Satyam from its Nifty index with the BSE likely to also remove it from the Sensex.

The fudging of accounts is indeed a criminal offence which if proved could very well lead to serious jail time for everyone involved in this fiasco. And upto 10 years

For now the only culpable offender seems to be Mr.Raju himself who has accepted all the blame himself in his letter. However, it is indeed difficult to believe that only he is guilty of this offence.

At some point earlier Satyam starts to make lesser and lesser profits. In order to maintain the same pace and acquire newer clients it starts to overstate its revenues and operating margins.

Profits reduce even more leading to Mr.Raju overstating his company’s revenues. While the revenues are in tens of crores, he manipulates the accounts to show them in the thousands.

Since the promoters and Mr.Raju’s family members hold minority equity stakes of Satyam Computers, Mr.Raju feels that if he reported the real figures his company could easily be a victim of a takeover. Therefore he continues to fudge figures and shows overstated numbers in quarterly reports and accounts.

Things start to become even more desperate and the fudging continues.

Mr.Raju realizes that he can’t continue to fudge figures anymore and decides to throw the dice one last time.

This time he decides to acquire Maytas Infra, A family owned company. The acquisition of Maytas could explain the discrepancies between the non-existent assets of Satyam and the existent ones. Due to massive shareholders oppositions the Maytas deal is called off. More allegations of corruption arise within the Satyam fold and the World Bank, an important client of Satyam decides to ban Satyam from doing business with the World Bank for eight years.

Finally, the writing is on the wall.Ramalinga Raju resigns realizing there are no other options left.

GOLD RESERVES AS ON DEC 2007

Gold reserves (or gold holdings) are held by central banks as a store of value. In 2001, it was estimated that all the gold ever mined totaled 145,000 tonnes.

1. One tonne of gold equated to a value of US$25.75 million as of October 2008 ($730/troy ounces)

2. The total value of all gold ever mined would be $3.39 trillion at October 2008 prices.

At the end of 2004, central banks and official organizations held 19% of all above-ground gold as a reserve asset.

3. About one percent of all above-ground gold (370 metric tonnes) was mined in the first five years of the California Gold Rush (worth approximately $11 billion at July 2008 prices).

4. IMF gold reserves refers to 3,217 tonnes of gold held by the International Monetary Fund. It is currently priced at $42 a troy ounce ($1,370/kg) for accounting purposes, a price that was fixed in 1971 just before the Nixon administration officially delinked the U.S.dollar from gold and instead allowed market forces to set the dollar's worth. An attempt to revalue the gold reserve to today's value has met resistance for different reasons. For example,Canada is against the idea of revaluing the reserve, as it would flood the market with gold and therefore depress its price.

5. It is also not clear whether the gold reserve is the property of the IMF or of member countries. As of September 2008, gold exchange-traded funds held 1,039 tonnes of gold in total for private and institutional investors.

6. The United States' holding of gold is worth approximately $241 billion (July 2008). Although the United States has the largest reserves of individual countries, in total the Eurozone gold holdings are greater (11,065 tonnes as of December 2007).

SEBI's clause call: No misuse of client funds by brokers

The Securities and Exchange Board of India (SEBI) will consider revamping key clauses in the client-broker agreement to prevent stock brokers from misusing client funds.

The dramatic crash in the stock market at the beginning of this year and the ensuing liquidity crisis led to misuse of client funds by many broking firms. Acting on this, SEBI had formed an informal committee — comprising senior officials from both exchanges, brokers, and investors’ representatives — in June 2008 to address the issue. “The committee has sent its recommendations to SEBI to make the agreement more investor-friendly and less cumbersome. It is very likely that some changes will come through,” said a person familiar with the development. In the current structure, an account opening form, known as ‘Individual Client Registration Form’, has boxes which the investor has to tick depending on whether he wants to trade in cash, derivatives or debt markets. There have been instances, where brokers have ticked the derivatives option after the client has filled in the form, and then used his account to punt in the market. To curb this practice, SEBI is considering introducing different colour pages in the form so that the investor knows what he is applying for, and the broker will not be able to make changes later on. The committee has proposed reducing the number of signatures to be done by clients in the agreement. If implemented, the agreement will henceforth require just half-a-dozen signatures as opposed to nearly 20 signatures at present. After the agreement is signed, brokers will be required to give the copy of the agreement, signed by both parties, to clients. Currently, the form has a section titled “adjustment of balance in family accounts”, which gives a room to the broker to adjust the outstanding balance of two family members against each other without the consent of the other client. That will no longer be possible, once the new agreement comes into effect. The committee has recommended a provision to have a prior consent from the member on the form to do so. Further, the committee has said that the broker should be compulsorily required to make the account ‘zero balance’ every quarter by exchange of cheques so that disputes don’t go beyond three months. This should be accompanied by a balance confirmation from the client with signature at the end of every financial year. It is also recommended that there should be separate forms — one having mandatory requirements by SEBI and other with optional conditions stipulated by the broker. Currently, stipulations are mixed in one form, which also includes certain conditions not mandated by regulator, but incorporated by the broker as a safeguard against potential legal action by the client. Sources said that initially, brokers on the SEBI panel were resisting these moves, as these would involve more time and costs, besides making them more accountable to their clients. But due to increasing cases of client-funds misuse coming to light, brokers had to bow down to pressure from other committee members.

WHAT ARE BFSI COMPANIES?

Banking, Financial Services and Insurance (also known as BFSI) is an industry name. This term is commonly used by IT/ITES/BPO companies to refer to the services they offer to companies in these domains. Banking may include core banking, retail, private, corporate, investment, cards and the like.

Financial Services may include stock-broking, payment gateways, mutual funds etc. Insurance covers both life and non-life. A lot of data processing, application testing and software development activities are outsourced to companies that specialise in this domain.

Satyam's Experiment In Stupidity

Nobody takes shareholders for a ride – that’s the message that’s gone out loud and clear to the owners and promoters of Satyam Computers, one of India’s biggest IT companies. A corporate fiasco that began as little as a day ago has ended abruptly with the Board of Satyam throwing in the towel against a vastly growing majority of their own shareholders.Satyam’s decision to acquire Maytas Infra Limited was a very difficult decision to swallow for the shareholders. Questions were asked about the need of the acquisition. More importantly, how exactly was the company justified in spending a lot of money on a family owned company?

Satyam knew that they would not in any way have it easy in acquiring Maytas - an infrastructure company owned and operated by members of the same family that also runs Satyam Computers. Satyam did in fact play safe and announced the Maytas acquisition plan a day earlier late in the evening after the markets had closed because had they done so a few hours earlier the stock would have been hammered.

Nonetheless, the stock was hammered anyway and the impact of the announcement had the uppermost management of Satyam in crisis control mode. Satyam’s stock listed on the New York Stock Exchange was beaten down by half its market value.

Fearing the same reaction a few hours later on the Indian stock markets, Satyam’s home bourses; the company immediately realized the extent of the damage they had caused and announced that they had decided to drop the plan to acquire Maytas.

What had happened in New York was only the beginning because on the Sensex and the Nifty; Satyam’s stock was mercilessly drubbed into the sub-200 levels for the first time after a year. By the time the session closed,the stock had closed thirty percent lower leaving the management especially the Board of Directors with an important lesson to heed their own shareholders.

Shareholder opposition to the Maytas acquisition has been eminent for quite a while but their reaction to the company’s enforcement was definitely underestimated by Satyam.

Right from the morning of December 17, 2008 Satyam’s shareholders; big investment, mutual fund houses and average small investors systematically dumped their shares and continued to do so even after they learnt that the Maytas acquisition plans had been cancelled. It was clearly a lesson to Satyam from their shareholders.

There was definitely no need for Satyam an IT company to acquire Maytas-an infra development company. The fact that it was a family owned company that would cost 1.6 billion dollars to Satyam made things worse. If Satyam indeed felt the need to diversify into other fields, then many other choices were available.

It’s been an episode that has definitely embarrassed Satyam and has once again raised the question of Corporate Governance. Satyam in fact went ahead and said that they did not even need shareholder approval to acquire Maytas. It’s been this attitude that’s led to the fall in their share price.

Tata Tele to now write off Rs1,648 crore

Tata Teleservices Ltd (TTSL), which has written off Rs5,141.28 crore, will write off Rs1,648 crore more as it goes ahead with the third leg of its capital restructuring programme which comes in the wake of a November announcement by NTT DoCoMo Inc. that it was paying $2.7 billion (Rs13,070 crore) for a 26% stake in the company.

A recent petition to the Delhi high court related to its restructuring plan that it will use gains of Rs1,648.74 crore from revaluing its equity investment in listed subsidiary Tata Teleservices (Maharashtra) Ltd, or TTML, to write off more book losses and unabsorbed depreciation. TTSL isn’t listed on the exchanges.The company has till 15 March 2009 to complete this restructuring. All such schemes have to be approved by high courts, according to India’s Companies Act.

TTSL has explained that its investment in 714.3 million TTML shares, which was valued at Rs387.05 crore or about Rs18 per share, was in September revalued at Rs28.5 per share, based on six-month average market prices on the National Stock Exchange (NSE).

Following the revaluation, this investment has grown to Rs2,035.80 crore, an appreciation of 426%. Its not ascertain when TTSL made this investment in TTML, which was earlier known as Hughes Ispat Ltd.

According to TTSL’s petition, it has received an approval for the restructuring scheme from 19 of the 33 equity shareholders accounting for 99.75% of the company’s shareholding. TTSL’s earlier plan had envisaged halving its equity capital to Rs3,173.57 crore and using Rs1,967.71 crore from its share premium account to write off past losses and unabsorbed depreciation.

TTSL’s losses increased from Rs8,547.49 crore as on 30 September 2007 to Rs9,177.17 crore as on 31 March. As on 30 September, TTSL held a 37.65% stake in TTML with associates such as Tata Sons Ltd, the group’s main holding company, holding the remainder of the combined 66% stake held by promoters, according to data on BSE’s website.

TTSL, which services 30.2 million subscribers through a network based on wireless technology standard CDMA, said in a recent presentation that its subscriber base was growing at a compounded annual growth rate of 80%. The company’s subscriber base represents 9.2% of the 325.7 million mobile users in India.

The company explained in its petition that the move to cancel part of its share capital, which was already lost on account of accumulated losses, was to have a balance sheet that “depicts a more realistic capital employed which is fairly represented by the value of productive assets on the balance sheet.”

THE 3 STEPS PROCESS FOR THE SCHEME OF RESTRUCTURING.

Losses as on: 30 Sep 2007 - Rs8,547.49 cr.

Losses as on: 31 Mar 2008 - Rs9,177.17 cr.

STEP 1: Amount available from extinguishment of share capital:- Rs3,173.56 crore.

To write off book losses of Rs1,586.78 crore. ...and unabsorbed depreciation of Rs1,586.78 crore.

Balance Nil.

STEP 2: Available in the share premium account:- Rs1,967.71 crore.

To write off book losses of - Rs983.85 crore. ...and unabsorbed depreciation of - Rs983.85 crore.

Balance Nil.

STEP 3: Original value of investment: Rs387.05 cr.

Value of the investment after proposed revaluation:- Rs2,035.80 cr.

Difference between the original value and the revaluation:- Rs1,648.74 cr.

To write off book losses of - Rs1,307.21 cr. ...and unabsorbed depreciation of - Rs341.53 cr.

Balance Nil.

Manipulators also feels the heat of meltdown

According to the latest intelligence report from the government which tracks the economy and markets, very few such operators have been able to make profits in the steep downturn by using short-selling and buy-back routes. What’s more, given the liquidity squeeze, a new kind of blame game has started between promoters and manipulative brokers who had an eye on jacking up stock prices of some companies. Interestingly, the report has also cited instances where promoters of companies have accused such cartels of selling shares in their companies without their knowledge. For instance, the promoter of a Mumbai-based education services company has accused one such cartel of selling a huge quantity of the company’s shares in mid October without his knowledge, the report said.

Also, the report has mentioned the names of two companies, one each in steel and real estate, as those in deep financial strait. According to the report, the Mumbai-based diversified conglomerate has already incurred losses to the tune of $1.5 billion in its steel business alone. It has further said that the group is starved of funds to develop new businesses. Similarly, the report has pinned the blame of the hammering down of stock prices of a top real estate company as the handiwork of a large business house in India for allegedly taking over the company itself. It has also warned how a few Ahmedabad-based stock manipulators, in collusion with promoters, are planning to shore up the prices of five companies.

Disney raises stake to 50 pc in UTV Software

Walt Disney Company (South East Asia) has raised its stake in UTV software to more than 50 % and has become the majority shareholder of UTV Software Communications. Walt Disney recently acquired about 20 % of UTV shares from the open market and increased its holding in the company to more than 50 %. Earlier, its shareholding was 37 %. This made Walt Disney the first Hollywood studio to have majority shares in an Indian entertainment company. The shareholding of UTV and Walt Disney in UTV Software Communications has increased to 83.25 %. In February, Walt Disney had invested $190 million in UTV Software and increased its stake from 14.85 % to 37.29 %. According to UTV sources, though Walt Disney is now a majority partner of UTV Software Communications, its equation in the company will remain unchanged. As per an agreement reached with UTV founder, Ronnie Screwvala, Walt Disney will not claim more than 3 seats it already has on the UTV Software 12-member board. Also, it will not use its voting rights till 2012, but may amend if needed. An industry source revealed that Disney might have taken advantage of the market slowdown to buy UTV software's 23 % additional shares in the open market at a cheaper rate and if this continues Walt Disney may look to delist UTV Software in some time nearby, giving an open offer to UTV's minority shareholders. Surely I foresee the great future of UTV Software ahead. 
Currently UTV trading at Rs. 227, maybe by or after 2012 Disney may offer delisting.

INVESTORS GAIN LITTLE IN BUYBACKS

If stock prices movements are an indicator, then investors are not happy with buybacks or share repurchase programmes initiated by companies. While the consensus view is that buybacks are positive as they are usually an indication that the company's management thinks the shares are undervalued, shares of none of the 11 companies whose share buybacks are open have gone up after the initiative was started, data shows- Stocks of Reliance Infrastructure, SRF, Rain Commodities and DLF have fallen by as much 35-60% from the day the buyback was open and most companies have seen their stock value erode by an average 40% in the same period. All the buybacks are to be done through open market purchase. Though on the day of announcement, stocks might have usually reacted positively, stock prices of the same companies have mostly fallen by as much as 10-50% in the period between the buyback intention was first announced and when it actually started. "What's in it for the ordinary investors, if the company is buying back at the prevailing price? Only the promoters appear to benefit from this peculiar situation as they are indirectly increasing their stake (since bought back shares will be extinguished) and that too without using their own funds. Companies such as Amrutanjan, Godrej Consumer, EID Parry and Ipca Labs announced buyback plans in the last two days alone. While its true that shares of most companies are available at steep discounts (40%-80%) vis-a-vis their January peaks, since most of the purchases are done through open market, nonpromoter entities hardly stand to benefit from the scheme of things. "Certainly, its a good time from a valuation perspective. But whether investors are appreciating (buybacks) or not, is a judgement on individual companies which is again dependent on many factors . The maximum buyback price in cases such as Reliance Infrastructure (Rs 1600), DLF (Rs 1100), SRF (Rs 160) or HEG (Rs 350), practically becomes a non-benifical

INDIA IN RECESSION ?........NAAAAA

US went into recession followed by Britain and European nations even the Asian countries were not speared by this global recession. Hong Kong also slipped into recession in the 3rd quarter as on 15th NOV 2008, as global economic slowdown took its toll on the financial hub, Hong Kong’s gross domestic product fell 0.5% from the previous quarter on a seasonal adjustment basis, following a fall of 1.4% in second quarter.

European nations which became Euro Zone from the year 1999 and introduced Euro € as its currency, also faced the recessions. The 15 European countries faced this situation first time in ten years since being in euro zone. They recorded -0.2% growth rate in the second quarter of the year. If the growth rate in Europe goes to negative, constantly for two quarter it is officially pronounced recession in Europe.

Generally recession is identified as- continues fall in GDP for two consecutive quarters of the country is termed as recession in that country.

But whereas in India, there is no question of recession but will definantely slowing down for a bit. With inflation down to 8.40 per cent, the Reserve Bank is expected to cut policy rates, repo and reverse repo, along with a fiscal stimulus package by the Government, to spur economic growth. The Indian economy grew by 7.6 % in the first half of the fiscal from 9.3% a year ago, and analysts predict further slowdown in the remaining period of this fiscal. Data released by the Central Statistical Organisation on 28 th of Nov 2008 showed that all the eight economic sectors that contribute to the gross domes-tic product (GDP) recorded a lower growth year-on-year. The slow-down in the services sector — which accounts for nearly 60% of the output — was milder than expected, The economy expanded by 7.9% during the first quarter, taking the first-half GDP growth to 7.8 %. Economists had been expecting second quarter GDP to grow 6.9%,

Growth in manufacturing during the second quarter almost halved year-on-year to 5%, and was down 60 basis points compared with the preceding quarter. Growth in agriculture slipped to a two-year low of 2.7%, raising concerns about its potential impact on food inflation, which continues to rise despite falling headline inflation.

Tata Tele sets off losses of Rs5,141 crore,....Biggest write-off by an Indian firm; two-step capital restructuring to help company achieve profitabili

Tata Teleservices Ltd, or TTSL, the country’s sixth largest phone services firm, has started restructuring its capital by writing off Rs5,141 crore in losses and unabsorbed depreciation, according to excerpts from proceedings of shareholders meeting, in what is the largest such set-off by any Indian firm.

The restructuring, which was approved at an extraordinary general meeting of shareholders on 8 September and is pending approval from the Delhi high court, will potentially help the company achieve profitability faster.

This is the second occasion in the telecom sector’s recent history that such a large write-off is being executed; the first being in 2005 when Reliance Industries Ltd’s then subsidiary Reliance Infocomm Ltd, now called Reliance Communications Ltd, or RCom, wrote off Rs4,500 crore as part of a split between the Ambani brothers. RCom is now run by younger brother Anil Ambani’s Reliance-ADA Group.

According to the TTMLs profit-and-loss statement for fiscal 2008, the Tata phone firm had losses of Rs9,177.17 crore, including carried forward loss of Rs7,363.41 crore. Most of the losses were on account of increased capital expenditure for capacity building as the company expanded its subscriber base to nearly 30 million, as of end-August data from industry lobby Association of Unified Telecom Service Providers of India.

As its network expands and it gains customers in India, the world’s fastest growing phone services market by customers, TTSL has reduced annual losses to Rs1,813.76 crore for the period ended 31 March 2008, against Rs2,062.52 crore in the previous year. Revenue also increased to Rs5,377.90 crore for fiscal 2008, a rise of 15.70% over Rs4,647.80 crore in the year to 31 March 2007.

The restruc-turing plan includes reducing Rs1,967.71 crore from its share premium reserves on the balance sheet by writing off Rs983.85 crore of book losses (through wiping out share premium) and Rs983.85 crore of unabsorbed depreciation.

In a simultaneous move, TTSL plans to halve its equity share capital from Rs6,347.15 crore to Rs3,173.57 crore, by reducing Rs1,586.78 crore from its book losses and Rs1,586.78 crore against unabsorbed depreciation.

The capital restructuring will enable the Tata Sons Ltd subsidiary to hasten dividend plans and perhaps make it more attractive for a foreign strategic telecom partner to pick up stake. TTSL is an unlisted entity.

Writing off losses enhances TTSL’s dividend paying capacity, one expert said, but its benefit will have to weighed against the minimum or alternative tax benefits the company enjoys as a result of the losses. “One has also to see whether the dividend capacity is really useful at a time when further investments are called for,” said Vivek Gupta, partner at BMR Associates, an audit firm.

This move “right-sizes the balance sheet”, said Girish Vanvari, executive director at KPMG, a management consultancy and accounting firm. Share capital, reserves and surplus add up to a large net worth and bloat the balance sheet. Also, he added, “companies cannot declare dividends till they wipe out accumulated losses”.

WHAT IS ISLAMIC BANKING?

a) Islamic banking does not involve transaction of payment or taking of interest, thus cannot maintain the SLR in government bonds which are Interest bearing.

b) Loans are given on Profit/loss sharing basis.

c) Mortgages are based on cost plus profit mark up as opposed to interest based loans.

d) Banks buys an asset and sells it at higher price to client on deferred payment basis.

e) If the bank goes bust, according to Shariah, the depositor is advised to share the loss, though in countries like U.K the bank is legally bound to pay back deposits.