1st March 2012 Edition

ABB20120301

The Abhyaas Business Bulletin for the MBA aspirant in you.

Kingfisher losses mount, flights cancelled, woes increase
Vijay Mallya, the flamboyant Chairman of Kingfisher Airlines (KFA) would not really count himself as the King of good times today. Ever since the airlines declared bankruptcy in November 2011, it has been embroiled in controversy and in the last fortnight, it made news for all the wrong reasons, not really standing up to its tag line of Fly the good times. It started with KFA posting a loss of Rs. 444 crore for the quarter ending 31st December, 2011 blaming the depreciation of the rupee and high crude oil prices for the dismal performance. While the government refused a bailout for the airlines, the State Bank of India (SBI), which leads the consortium of banks lending money to it with an exposure of Rs. 1,457.78 crore, directed it to reverse nearly Rs. 100 crore guaranteed commission it paid to its promoter Vijay Mallya as it was a regulatory violation. Also clarifying doubts that the SBI would give fresh loans to KFA which resulted in an 8% dip in their shares, the SBI said that KFA was a non-performing asset, and that further lending to them would not be considered until it raises new equity itself. Compounding its woes, S.K. Goel, Chairman of the Central Board of Excise and Customs (CBEC) declared that the cashstrapped airline had to pay dues of Rs. 40 crore in indirect taxes by the 31st of March, 2012. But that was not where KFAs problems ended. The beleaguered airlines continually cancelled national and international flights from the 18th of February to the end of the week leaving passenger stranded, resulting in a summon from the Directorate General of Civil Aviation (DGCA) to submit a revised and realistic flight schedule. In related news, Air India turned in a good performance in January with the overall revenue going by 30.4 percent over the same period last year. While the recent permission to directly import of jet-fuel and rumoured recapitalization offers from two local investors would minutely help KFA, a debt of Rs. 7057 crore is no laughing matter. What is making KFA mount such steep losses? What does regulatory violation mean? What are the different regulatory violations that can happen in transactions of a firm with its stakeholders? What is recapitalization? Which investors are in news for equity stake discussions with KFA?
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From the Editors desk:

Hello Reader, Welcome to the latest Abhyaas Business Bulletin keeping you posted with the business news and events occurring in the second fortnight of February, 2012.

In India, the Kingfisher Airlines and its troubles only seemed to intensify with flights being cancelled haphazardly and dozens of pilots resigning. The verdict of cancellation of licenses in the 2G scam still showed its aftereffects with Telenor seeking to split from partner Unitech and asking for alimony. The GDP growth slowed to 6.1% in the quarter ending December which was the weakest in almost three years.
Globally, while United Stated aggressively pursued its sanctions against Iran, the search for the person to head the top post at the World Bank began as current President Robert Zoellick resigned. In Europe, the German parliament backed Chancellor Merkel's 108bn Greek bailout despite fierce public opposition. Do make sure you read in detail about all the events being discussed in the bulletin and try answering the questions asked at the end of each news bit.

Happy Reading!
Index: Page 2: Stock Market and Indicators Page 3: National Business News Page 4: International Business News

(Ms. Sonal Jaiswal)

The Abhyaas Business Bulletin

1st March 2012 Edition

ABB20120301

Stock Markets across the World (16th February 29th February, 2012)

Macro Indicators
Bank Rate Repo Rate Reverse Repo Rate SLR CRR Exchange Rate(with USD) Inflation(WPI) % Change 9.50% 8.50% 7.50% 24.00% 5.50% 48.94 6.55%

Other Indicators
Crude Oil(NYMEX) Crude Oil(BRENT) Gold Price(Indian Bullion) 107.1 $/barrel 122.7$ $/barrel 2713.89 INR/gm
(As on 29h Feb, 2012)

Overview
A lower than expected economic growth in the third quarter led to bearish sentiments on the Dalal street. The BSE Sensex and Nifty are beaten down by 2.21% and 2.48% in the last fortnight. While Japan's Nikkei Stock Average has advanced hugely by 5.25% and closed at 9723.24, Shanghai Composite Index performed second best by advancing 3.03% and the London's FTSE 100 lost around 0.20%, while NASDAQ has advanced by 1.19%. The crude oil stockpiles slightly rose again for the second consecutive week, this time by only 0.5 million barrels. Crude oil prices sharply increased. Benchmark crude hovered above $107.1 per barrel.
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1st March 2012 Edition

ABB20120301

PM steps in to resolve coal crisis, orders CIL to import coal

The Prime Ministers Office (PMO), on February, led by Principal Secretary Pulok Chatterjee chalked out a plan for Coal India Limited (CIL) to facilitate fuel supply agreements (FSAs) with power plants that have entered into long-term power purchase agreements with power distribution companies and have been or would be commissioned before 31st March 2015. The FSAs would be signed for the entire quantity of coal mentioned in the Letters of Assurance (LoAs) and for a period of 20 years. If the supply falls below 80% of the assured amount, CIL would be penalized and would be given incentives if it rise above 90%. The initiative, a result of a meeting held earlier in February with the PM and heads of power-generating companies like Tata and Reliance, would aid power plants with an estimated capacity of 50,000 MW. This news saw a surge in the share prices of power companies to as high as 13%. What are the causes for the coal crisis in India? How do the demand and supply figures compare for coal in India? Which countries are the favorite coal import destinations for Indian power sector companies? Which states of India have high coal reserves? 15th

Why does Railways have a separate budget presentation in the Parliament every year? What is its size presented this year? What are the different zones in Indian railways? What does a trunk route mean in railways?

BSNL launches tablet to rival Aakash

BSNL launched the tablet Penta T-Pad IS 701R on 24th February in association with Pantel, a Noida based firm for Rs. 3250 in a bid to provide competition to Datawinds Aakash. The T-Pad, priced a few hundred rupees more than Aakash, comes with 1 GHz processor, 256 MB RAM, has a 7 inch resistive screen and runs on Android 2.3 operating software. It also has an HDMI port through which it can be connected to a TV. Two other medium ranged tablets, T-Pad WS704C and T-Pad WS802C are being released by the same team priced at Rs. 10,999 and Rs. 13,500. What are the features of a tablet that distinguish it from other computing devices? Which is the world's first tablet? What is the progress on Aakash stage 2? Which organisations are involved in Aakash project?

Railways upgrade needs 1 lakh crore: Safety Review Committee

A high-level safety review committee headed by Dr. Anil Kakodkar, former Chairman of the Atomic Energy Commission and comprising of former Delhi Metro Rail Corporation Managing Director, Dr. E. Sreedharan as adviser said that the Indian Railways needed 1 lakh crore rupees over the next 5 years to meet its safety requirements. The break-up included Rs. 50,000 crore for elimination of all level crossings, Rs. 20,000 crore for advanced signalling systems on trunk routes, another Rs. 20,000 crore for maintenance of safety-related infrastructure and Rs. 10,000 crore for manufacturing coaches with better designs. Lambasting the deplorable financial state of the Indian Railways, which has not raised tariffs in the last 10 years resulting in overburdening of the substructure, it said that no new passenger trains must be introduced unless there are infrastructural changes in the system, advising and suggesting ways to raise Rs. 20,000 crore each year. It also suggested that the Railway Safety Authority (RSA) should be made autonomous, and that the Commissioners of Railway Safety must be brought under the RSA umbrella.
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Muhammad Yunus, IIM A collaborate for social business

Muhammad Yunus, the Bangladeshi Nobel laureate also called the Father of microfinance and Indian Institute of Management, Ahmedabad (IIM-A), widely credited as Indias premier business school joined forces to float a Rs 50 crore fund to seed social ventures. The idea behind it is a social business that pays no dividends to shareholders, but pulls the earnings back to the company, whose objective would be to serve social needs. The Centre for Innovation Incubation and Entrepreneurship (CIIE) at IIM-A and the Grameen Creative Lab (GCL), which is a joint venture between the Yunus Centre and circ-responsibility, a consulting company in Germany will work together in encouraging emerging entrepreneurs who are looking to serve the society with out-of-the-box ideas and solutions by a strong mentoring network and programmes designed to help them identify and build viable social business options. What is micro finance? What are the different micro finance models in the world? Which model is followed in India? What is the recent controversy in micro finance in India? Which committee studied this problem?
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The Abhyaas Business Bulletin

1st March 2012 Edition

ABB20120301

S&P reaffirm Japans AA- rating; gives warning

Rating agency Standard & Poors affirmed Japans AA- rating with a negative outlook on 20th February, but not before giving it a warning that it would lower the sovereign rating if the economic growth augments lesser than the 1.2% that was forecasted, if the public debt persistently enhances, which currently is the highest among industrialized economies and if the government does look at immediate ways of reducing debt. Japan is at a crossroads with structural problems such as shrinking nominal GDP and increasing social security costs weighing on its ability to reduce its budget deficit. Meanwhile the ruling Democratic Party government, led by Prime Minister Yoshihiko Noda is not finding support to implement its policies of higher taxation. S&P and Fitch, both rate Japan AA- with a negative outlook while Moody's ranks it at the same level, at Aa3, but at a stable outlook. What are the equivalent ratings from S&P, Fitch and Moody's? What is sovereign rating and how is it different from corporate rating? Which countries have the highest sovereign rating across the world? Why does Japan have shrinking nominal GDP?

China cuts RRR, targets 14% growth in money supply

People's Bank of China, Chinas central bank cut the reserve requirement ratio (RRR), the amount of cash that banks must set aside as reserves by 50 basis points to 20.5 per cent for large commercial banks and 17 per cent for mid-and- small-sized banks, effective from 24th February. The decrease was authorized for the second time in three months clearly indicating the transition to stabilize growth from containing prices, which also corroborated Premier Wen Jiabao statement that the government is finetuning the macro policies in the face of falling exports due to global economic crisis and declining growth rate. The bank also set a target of 14% growth rate for its money supply, which is the entire quantity of bills, coins, loans, credit and other liquid instruments in a country's economy, in 2012. Adopting a prudential macroeconomic policy framework, improving credit structure and utilizing various monetary policies effectively are the tactics China will use to keep a nominal money supply. What is the equivalent of RRR in India? How does nominal money supply differ from actual money supply? Does India also maintain a two tier reserve ratio structure - one for large commercial banks and the second for mid/small size banks like China?

U.S mounts pressure on India to stop oil supplies from Iran

The Secretary of State of United States, Hillary Clinton stepped up the pressure on India to reduce importing oil from Iran, aggressively pursuing the economic sanctions that the U.S has slapped on it. She also elucidated that a team was put through to suggest ideas on how countries globally, specifically Russia, India, China, Pakistan can decrease their oil dependence on Iran. Sanctions included the President issuing an executive order on 6th February that blocked assets under U.S. jurisdiction of all Iranian banks, also making it clear that both the departments of treasury and state were expected to enforce the sanctions absolutely. China and India are the biggest importers of Iran oil accounting 22% and 12% respectively of its total export, and both the nations have affirmed that they will continue the oil import despite the prohibitions by the US which are supported by the European Union. What is the absolute size of India's crude imports from Iran? What are the reasons behind US economic sanctions on Iranian banks? What is the stance of major nations in the Iranian issue? How do India and China differ with regards to the same?
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B School Spotlight: NMIMS, Mumbai

Located in the heart of India's financial capital, Mumbai, and established in 1981, Narsee Monjee Institute of Management Studies (NMIMS) is amongst the nation's prime educational and research institutions. It has consistently readied students to manage, build and lead enterprises in a global economy, fuelled by technology, information and constant change. The flagship programme of NMIMS is a two year full time programme, spread over six trimesters and leading to the degree in Master of Business Administration. However, specialised management programmes in Banking, HR, Actuarial Science, Pharmaceutical Management and Capital Markets are also offered. NMIMS currently has overseas links with the University of EUROMED Marseille in France, ESC ROUEN in France and with ESSCA at both its campuses, i.e. France and in Hungary. Do visit nmims.edu for more details.

For further info contact us at: info@abhyaas.in

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