ADAG says no firing; to hire 90,000

In the midst of massive layoffs being announced by various corporate houses hit by a global economic slowdown, Anil Ambani group on Friday said it is not planning any job reduction and is rather planning to create up to 90,000 employment opportunities in the next few months.

Debunking the reports that the group is laying off 6,000 people in its financial services and entertainment businesses, a spokesperson said, "There are no layoffs."

"In fact, the coming three months are high investment period for tax saving products and we are going to appoint almost 75,000 to 90,000 agents and sales representatives in the coming months," he added.

Earlier this month, Reliance [Get Quote] Life Insurance's chief P Nandagopal had told PTI that the company would recruit 90,000 insurance agents and 2,500 sales managers by March 2009.

Financial crisis demands intelligent response:Amartya Sen

New Delhi: Noted economist and Nobel laureate Amartya Sen said on Thursday the present global financial crisis demands an “intelligent” response but the measures taken so far to tackle the turmoil are not good enough.

“It (coming out of the crisis) will depend on how intelligent the response is. At the moment, the response has not been adequately well thought out. But we hope that it will be better,” Sen said at a discussion, “Ideas India 2008”, hosted by the Aspen Institute India here.

“We have to see to what extent these problems, which are created by human beings, can be solved by an intelligent response to the problem that we have ourselves created, he added. The measures to tackle the problems should not lead to another trouble. “It’s in our hands to change things in a way that we don’t get into the kind of mess in which we have got into now.”

Noting that he himself is engaged in an advisory capacity, Sen said many people are involved in finding a way out of the present crisis.

“There are number of initiatives being taken. I am involved in two of them. One with (French) President Nicolas Sarkozy and another with former (British) prime minister Tony Blair. I am meeting him in Paris next month,” Sen said.

Satyam backs down over construction takeovers

The purchase of two struggling construction companies for $1.6 billion (£1 billion) by a successful technology group was always likely to be regarded as curious.

Ultimately, what most onlookers found most odd was that the board of Satyam, India's fourth-largest IT outsourcer, did not foresee that the acquisitions would trigger one of the country's most vivid displays of investor outrage.

Under any circumstances, diversifying so radically at a time when Satyam's rivals are hoarding cash to weather a global slowdown, would have been baffling, analysts said.

That the two target companies — Maytas Properties and Maytas Infra — were controlled by Satyam's founder and chairman, B. Ramalinga Raju and run by his sons, triggered a shareholder revolt of an intensity seldom before seen in India.

The purchase of two struggling construction companies for $1.6 billion (£1 billion) by a successful technology group was always likely to be regarded as curious.

Ultimately, what most onlookers found most odd was that the board of Satyam, India's fourth-largest IT outsourcer, did not foresee that the acquisitions would trigger one of the country's most vivid displays of investor outrage.

Under any circumstances, diversifying so radically at a time when Satyam's rivals are hoarding cash to weather a global slowdown, would have been baffling, analysts said.

That the two target companies — Maytas Properties and Maytas Infra — were controlled by Satyam's founder and chairman, B. Ramalinga Raju and run by his sons, triggered a shareholder revolt of an intensity seldom before seen in India in the country.

The acquisitions would have netted the Raju family as much as $570 million while exhausting Satyam's cash reserves and driving it into $400 million of debt.

After IIFL, an Indian broker, calculated that Satyam had valued Maytas Properties at $1.3 billion — nearly six times its net worth of only $225 million — one foreign fund manager said the deal reminded him of the "bad old days when cronyism ruled India," a country still battling endemic corruption. "I thought we'd been through this. Wearisome is not the word," he added.

In an acrimonious call with Satyam's management, Chetan Sehgal, of Templeton Asset Management, said he was "willing to go to any length to prevent [the acquisition] from happening."

Claiming to be shocked by the level of investor anger and chastened by a 30 per cent plunge in the group's share price, Satyam abandoned the deals on Wednesday. "If we had anticipated [this reaction], we wouldn't have done this in the first place," Mr Raju said.

However, analysts say the damage has been done and that Satyam's — and perhaps even India's —- reputation for sound governance has been badly tarnished.

Sachin Jain of Jefferies & Co, the US-based brokerage, said: "This clearly raises questions about what kind of corporate governance you have in other Indian companies."

That the deal was initially approved, apparently by a unanimous vote by the Satyam board, has placed in doubt the judgement of some of India's most feted business figures.

The board includes Vinod Dham, a scientist known as the "father of Pentium" for his role in developing the breakthrough computer chip made by Intel; TR Prasad, dean of the Indian School of Business, and Krishna Palepu, who teaches at Harvard Business School.

Also cast in a dim light by the affair are those who dole out corporate governance awards. Just three months ago, The World Council for Corporate Governance, with Ola Ullsten, the former prime minister of Sweden as its lead judge, ranked Satyam as among the best run companies in the world.

Today, still struggling to placate investors, Satyam said it was looking at a share buyback instead. Harit Shah, of Angel Broking in Mumbai, said: "This is the least they can do to boost investor sentiment … it will take a long time for them to forget this incident."

Reliance Money partners with Malaysian firm

Reliance Money, a financial services firm, has tied up with Infinity Financial Solutions, a financial products and services distribution company in Malaysia.

The partnership will allow Reliance Money to offer its services to a large number of non-resident Indians (NRIs) and Persons of Indian origin (PIOs) in Malaysia.

Through this alliance, Reliance Money would also be launching its Portfolio Management Services (PMS) apart from other investment services. 

Reliance Money's PMS in Malaysia would be offered at a threshold level of as low as $50,000. Reliance Money is already present across three continents, Asia, Europe and Africa and plans to expand its operations in over 15 countries by next year.

''We aim to generate 50 per cent of our revenues from overseas markets by 2012 and capture a bigger share of the record $195 billion invested in India last year by overseas funds," said Sudip Bandopadhyay, director and chief executive officer, Reliance Money.

An economic slowdown has only just begun

It’s becoming a familiar story: economic or corporate performance may turn out better than expected, but everybody brushes that aside because the reports relate to earlier months and the downward momentum has gathered pace since then.

India’s GDP data for the September quarter, too, has beaten expectations, but the numbers are likely to get worse.

Let’s take the figures one by one. Gross fixed capital formation grew at a year-on-year (y-o-y) rate of 13.8%, well above the 8.9% y-o-y growth rate notched up in the June quarter. But the credit crunch since September has seriously affected the expansion plans of firms.

As Goldman Sachs Group Inc. economist Tushar Poddar had pointed out in a research note: “As the market valuation of capital drops relative to the cost of acquiring new capital, (also known as Tobin’s Q) firms will prefer not to acquire new capital and postpone investment decisions.”

In future, the growth rate for capital formation is expected to plunge. At the same time, private consumption growth was at 5%, compared with a growth rate of 7.9% in the June quarter. An inkling of that trend was seen in the negative growth for car sales while retailers, too, have reported fewer customers. In future, job losses will also contribute towards keeping private consumption in check.

Construction growth, at 9.7%, also beat expectations since most economists were expecting it to be affected on account of the slowdown in real estate.All the more reason to be sceptical of this growth rate in future quarters. And since construction has strong linkages with the rest of the economy, a slowdown in this sector will have a wider impact.

The trade, hotels, transport and communication sector held up quite well during the September quarter, growing at an annual rate of 10.8% against 11.2% in Q1. But after the Mumbai attacks, the hotels sector is likely to be hit badly.

Also, as A. Prasanna, economist at ICICI Securities Ltd, says, growth in railway freight showed a decline in October, against the year-ago period.

The financing, insurance, real estate and business services sector grew by 9.2% in the September quarter, almost the same as the 9.3% growth in the previous quarter. With IT services firms reducing their guidance and with cracks in the outlook for real estate, this sector, too, could come under pressure in the next quarter.

And finally manufacturing growth, too, could slow further, because the slowdown in exports has just begun.

The only silver lining could be the outlook for community, social and personal services, where the impact of the Pay Commission could be felt in the next quarter.

In fact, notwithstanding the relatively robust Q2 numbers, Macquarie Securities economist Rajeev Malik has revised his GDP forecast for the full year from 7.2% to 6.8%, which means he’s expecting growth of just 5.8% in the second half. But perhaps we can console ourselves that, as the table shows, we’re not doing badly compared to the rest of the world.

Source - Mint

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