1st Dec 2011 Edition

ABB20111102

The Abhyaas Business Bulletin for the management aspirant in you

Cyrus Mistry chosen heir to the Tata Empire
Ending the speculation over who would be handed the reins of the Indian multinational conglomerate, the Tata Group, the current Chairman, Mr. Ratan Tata announced on 23rd November that Cyrus Pallonji Mistry will be taking over from him. Mr. Tata who has been leading the group since 1991 will groom Mistry until December 2012, after which he would retire. Until then, Mistry has been appointed the deputy Chairman of the Tata Group. Cyrus Mistry is the younger son of construction tycoon Pallonji Mistry and is the Managing Director of Shapoorji Pallonji Group. His family owns the largest single equity block of 18.4% in Tata Sons, the holding company of the Tata Group. Though he does not have a Tata surname, Mr. Mistry is no outsider to the conglomerate. He has been on the board of the Tata Group for over five years; also his sister is married to Noel Tata, who was also in contention for the top slot. The Tata Group, a salt-to-software-to-SUV conglomerate is one of the largest in India by market capitalization and revenue. It has operations spread across 6 continents and 80 countries. Successfully, it has ventured into motors, telecommunication, hotels, steel, IT, energy, chemicals and many other arenas. It is one of the most successful, trusted and longrunning business families in India, with Jamsetji Tata pioneering the legacy way back in 1868. In the recent past, under Ratan Tata, the diversified group has made multibillion dollar purchases and has gone global cracking deals with European steelmaker Corus and British luxury car makers Jaguar and Land Rover. While industry stalwarts hailed this decision, the markets seemed to react tepidly to the news of Mr. Tata handling over the baton to Mr. Mistry. A day after the news was announced, share prices of TCS, Tata Motors, Tata Steel, Tata Coffee marginally decreased. Though Mr. Mistry has a sizeable task ahead of him with the global market scenario being bleak, what remains to be seen is how he would rise up to the challenges. Why do you think the stock markets have reacted negatively to this news? How big is Tata empire by annual turnover and market capitalization? Check out all those who headed Tata Sons before Ratan Tata?
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From the Editors desk

Hello Reader, Welcome to the edition covering the business happenings across India and the world in the second half of the month of November. Many significant business events occurred in India, all of which are discussed in detail in the bulletin. While Cyrus Mistry being chosen as the CEO in-waiting of the Tata Empire raised a few eyebrows, the UPA government sanctioning 51% stake to foreign direct investments across multi-brand retail outlets in India raised more eyebrows than they would have anticipated. Also, Vikram Akula, the founder of SKS Microfinance making a rather unpleasant exit of his own company made headlines. Towards the later half of the month, Indias GDPI that decreased significantly was a cause of concern. The international arena was rocked by the ever diminishing economy of Europe with Hungary and France facing the music from credit rating agencies. Do read the entire bulletin thoroughly to get a heads-up into the business events occurring in India and abroad. Another piece of advice do try and figure out answers for the questions provided at the end of each of the news bits. The intent of the bulletin, apart from just providing you with the snippets of news is also for you to read more, and in detail about them. Good Luck and Happy Reading!

(Ms. Sonal Jaiswal)

Index: Page 2: Stock Market and Indicators Page 3: National Business News Page 4: International Business News
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Stock Markets across the World (15th November 30th November, 2011)

Macro Indicators
Bank Rate Repo Rate Reverse Repo Rate SLR CRR Exchange Rate(with USD) Inflation(WPI) % Change 6.00% 8.50% 7.50% 24.00% 6.00% 51.9308 9.01%

Other Indicators
Crude Oil(NYMEX) Crude Oil(BENT) Gold Price(Indian Bullion) 99.26 $/barrel 109.5 $/barrel 2905.04 INR/gm
(As on 30th Nov)

Overview
India's Sensex and Nifty are beaten down by 4.2% in the last fortnight amid persistent selling by foreign institutional investors on fears of slowing domestic growth, weakening rupee and rising debt concerns in Europe. While Japan's Nikkei Stock Average declined by 2.9% and closed at 8477.82, Shanghai Composite Index performed worse losing 5% and the London's FTSE 100 lost around 3.7% while NASDAQ has been the biggest loser with 6% drop. Oil fell from the highest price in two weeks, paring the gains, as signs of rising U.S. stockpiles countered optimism about the economy of the worlds biggest crude consumer.
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The Abhyaas Business Bulletin

1st Dec 2011 Edition

ABB20111102

UPA grants 51% stake to FDIs in multi-brand retail

The Union government, on 24th November, decided to throw open Indias $450 billion retail sector to foreign groups to invest up to 51% in multibrand retailers. It also increased the level of foreign direct investment (FDI) from a cap of 51% to 100% for single-brand retailers. This opened the doors for retail giants like Walmart and Tesco that have since long sought to tap Asias third biggest economy. While proponents say that this will change the way Indian consumers shop and the method in which supply chains in India run, opponents say that this would result in millions of small retailers in India losing their sources of income. Touted as a move by the UPA government to reduce the soaring inflation rates, the decision evoked a ferocious political opposition from allies and some UPA constituents. Chief Ministers, Ms. Jayalalitha and Ms. Mamata Banerjee opposed the move and opposition party BJP said the parliament would not function unless the decision was reversed. Though Finance Minister Mr. Pranab Mukherjee met Opposition leaders over the issue, the meeting failed to resolve the logjam in both the Houses of Parliament. A day after announcing the policy on FDI, Pranab Mukherjee on 25th November sought parliamentary approval to spend a net additional 568.5 billion rupees, on top of the budget target of around $244 billion, in the current fiscal year that ends in March 2012. Do you support the proposed FDI into retail? What are the FDI limits in various sectors in India? Compare India's FDI inflows with China. What do you think are the reasons for this contrast. How are FII different from FDI?

Independent director P H Ravi Kumar has been appointed interim nonexecutive chairman with immediate effect. Akula will stay on as a consultant till the end of March 2012 to assist with the transition. SKS Microfinance was Indias first listed microfinance company in India, when on July 28th, 2010 it made its debut on the Bombay Stock Exchange, offering its shares to the general public. However, shares have plunged down over 90% since then to now. What are the teething problems with microfinance sector in India and the world? A government committee has submitted a report on microfinance in India. Identify the committee and study their recommendations.

Indias GDP dips to 6.9%, lowest in more than 2 years

Indian economy grew at a rate of 6.9% in the second quarter (Q2) of the current fiscal year, its slowest pace in more than 2 years according to reports released on 30th November. This is in opposition to the 8.4% in the same period in the last fiscal year. Such a major decrease, coupled with Q1s rate of 7.7% has raised doubts over the governments target of 8.5% for the year 2012. The global economy crisis, rising inflation rates, high interest rates and a retreat of foreign capital are being attributed as reasons for the dropping GDP. While the RBI has hiked interest rates 13 times since March 2010 in an effort to curb inflation rates, they have also accepted that it would have hurt the countrys growth prospects. Has Indian economy entered a slow down phase? Do you know the size of Indian economy in Rs crores? What is India's rank in terms of GDP by absolute value and purchasing power parity?

Vikram Akula quits SKS Microfinance

Founder and Chairman of SKS Microfinance, Vikram Akula quit all the posts that he held in the organization on 23rd of November. The resignation comes in the wake of SKS seeing a massive decline in its financial fortunes, and facing flak for being too aggressive in collecting repayments and increasing the interest rates. The organization was started with a mission to eradicate poverty by facilitating borrowing needs in the impoverished areas of the country. Meanwhile industry stalwarts - including Grameen Bank founder Muhammad Yunus - pointed to SKS as a symbol of an industry that was becoming irresponsibly pro-profit.
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Rupee hits an all time low of 52.35

Falling for the eight day in a row, the Indian rupee on Wednesday, 23rd November ended at 52.35/36 - its all-time closing low - against the U.S. dollar. Foreign funds have been pulling out of shaky stocks over the past week and oil refiners who import about three-quarters of India's crude consumption have been heavy buyers of dollars in recent sessions. With
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the RBI reluctant to intervene in the market to check the rupee's slide, some analysts are forecasting that the partially convertible currency will slip to as low as 55 against the dollar. The rupee had on Tuesday, 22nd November plunged to its life-time low of 52.73 intra-day. The rupee has lost more than 14% of its value this year, making it the worst performing currency in Asia. The second-worst is the Thai baht, which has dropped only 3.5%. RBI meanwhile loosened rules for companies to borrow abroad and raised the interest rate on bank deposits by its citizens living overseas to help stem the decline in Asias worstperforming currency. Is the exchange rate of Rs 52.35 per USD nominal or real? How is a nominal exchange rate different from real effective exchange rate? Check out if the current trend is a temporary phase or a structural correction.

Britain extends austerity measures, Britons revolt

George Osbourne, the Chancellor of the Exchequer announced on 29th of November that the government was falling behind its deficit reduction plan and that the austerity measures would drag for another two years. Citing reasons such as the economic growth of UK not reaching the targeted value and also the Euro-zone crisis, he took 1 billion out of the planned child tax credit increases, 280 million off the working tax credits and a 15 billion a year spending cuts to meet the borrowing targets. According to Treasury figures, the total austerity package now stands at 147bn a year by 2016-17, up from 126bn in the March 2011 Budget. Public sector workers in Britain, on 30th November, started their biggest strike in their generation to protest the austerity measures with schools, courts, hospitals and airports shutting down. Is Britain right in extending austerity measures? What is your opinion? Would you suggest similar measures for India and China?

France warned on credit rating outlook, Hungary downgraded

Moodys, the credit rating agency, warned France that its weaker growth prospects coupled with rise in the interest rates on the governments debt could take a toll on its AAA rating. Only six countries in the Eurozone currently can boast of AAA rating off which analysts say, France, the second largest economy has the weakest economic fundamentals. Moody's, on the 21st of November, said that France pays nearly twice as much as Germany for long-term funding, adding that a 100 basis point increase in yields roughly equates to an additional 3 billion in yearly funding costs. Adding more weight to it, Fitch, another credit agency said that France would have trouble keeping up its AAA rating if European leaders dont stop the present Eurozone crisis from worsening. Close on the heels of Greece and Italy, on 25th November, Moody's cut Hungary's government bond rating by one notch to Ba1, below investment-grade, with a negative outlook. It cited rising uncertainty about Hungary's ability to meet fiscal goals, high debt levels as the main reasons behind the downgrade from Baa3 as the forint, the local currency fell to a record low. Are Eurozone countries streamlined on fiscal and monetary policy? What is the difference between the two? How are these twin factors affecting Euro Crisis? What should Eurozone do with respect to these policies?
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B School Spotlight: Faculty of Management Studies, Delhi

FMS was established in 1954 under the aegis of the University of Delhi and offers management training to the professional managers in part-time and full-time MBA programmes. It is widely known to be one of the oldest business schools in India and correspondingly has a very strong alumni network. Consistently, it has been ranked among the top 10 B-Schools in India. Apart from being one of the best, it is also one of those colleges in India that give a high return-on-investment as the fees for it is only Rs. 10,500 per annum. The entrance exam for FMS, Delhi is CAT for the admissions from academic year 2012-13 onwards. The cut-off percentiles could be very high because of its excellent reputation. The number of seats in the institute for a 2 year MBA programme are 200. For more details visit: www.fms.edu

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