01.02.2007

• Tata Steel acquires Corus Steel, the Anglo-Dutch steel company
• The company bought it for $12.1 billion; the biggest cross border acquisition to date by an Indian company.
• Tata Steel’s final offer for the winning bid was 608 pence a share, as compared to the rival CNS’s offer of 603 pence per share.
• With the acquisition, the combined turnover of the merged entity will touch $23 bn, the fifth largest in the world. This places it at the 268^th rank in the Fortune 500 list of companies, a clear jump of almost 850 places.
• Tata Steel joins the only 6 other Indian companies on the Fortune 500 list. These are: Indian Oil, RIL, BPCL, HPCL, ONGC and SBI.
• Corus Chairman: Jim Leng
• Corus CEO: Philippe Varin
• According to the present policy LBOs (Leveraged buyouts) cannot happen in India, because regulations don’t permit them. So offshore entities based in countries like Mauritius are used to leverage (incur debt for the acquisition) the buyout of a foreign entity. This same company also buys out the Indian company. The Indian company services the debt by paying dividends or a shareholder loan.
• Household savings in India
• Savings in financial assets by this sector stood at 10.3% of the GDP in 2004-05 while savings in non-financial assets stood at 11.3%.
• Archbishop Desmond Tutu given the Gandhi Peace Prize
• He was awarded the Rs. 1 crore prize at a ceremony in the Rashtrapati Bhavan, New Delhi.
• RBI hikes repo rate by 25 basis points
• In its credit policy review, the RBI has raised the repo rate by 25 basis points to 7.5%. Repo rate is the rate at which it lends money to the banking system. The reverse repo rate (rate at which it sucks out money from the system) remained untouched at 6%.
• Open sky policy in satellite communications
• Enabling both DTH (Direct To Home) and VSAT (Very Small Aperture Terminal) operators to directly negotiate and hire bandwidth from foreign satellite operators.
• This is not currently permitted in India.
• Existing policy is that operators will have to buy transponders only on Indian satellites, or go through the department of space (DoS) which hires transponder space from abroad and sells it to them.
• Currently there are over 15 satellites with spare capacity overlooking India which translates to 3 Bbps of idle transponder space.
• Each transponder can provide between 15-25 channels.
• World’s first airline to allow onboard mobile telephony
• Dubai’s Emirates Airlines
• PC sales in India
• In the first half of the current fiscal 2006-07, they touched 2.9 mn units. For the full year, it is estimated that they will cross the 6.5 mn figure.
• IT sector exports booming
• They are placed at $23.6 bn.
• Kimberley Process
• Is a global regulatory system, which was acceded to by 71 countries in the world. According to this, the signatories certify that roughs (diamond roughs) from the time they are mined to the time they reach the cutting and polishing centre are not ‘conflict diamonds.’
• A conflict diamond (also called a blood diamond) is a diamond mined in a war zone and sold, usually clandestinely, in order to finance an insurgent or invading army's war efforts.
• On reducing rural distress
• A survey conducted by NSSO – Situation Assessment Survey of Farmers, found that 40% of the country’s farmers have no desire to persist with farming, but do so for want of an alternative.
• India is stated to be having about 650 mn farmers; an exaggeration. Only around 58% of our total workforce is dependent on farming, either as cultivators or as agricultural workers. Another 3% live on fishing. In fact, 27% of rural workers are engaged in activities other than cultivation.
• As per the latest estimates less than 18% of the GDP comes from agriculture and allied activities, which engage 61% of the workforce.
• So, the best way of reducing rural distress is to shift farmers away from farming and raise the incomes of those who remain in agriculture. How to achieve this?
• Urbanization, agro-processing, organized retail and organization of farmers into Amul like cooperatives to give them institutional capability.
• Farmers could proactively pool their land, build a township on it, sell and lease it out to new dwellers, provide services and produce to them. This was reportedly done in Magarpatta township near Pune.
• Quarterly review of monetary and credit policy by RBI. Highlights
• Repo rate hike by 25 basis points.
• Will lead to increase in interest rates across the board in the coming weeks.
• High provisioning on credit card receivables
• Freebies like cashback, special interest rates on card offers will come down
• Higher provisioning on personal loans
• Interest rate on personal loans will go up
• Extra provisioning on banks’ stock market exposure
• Interest on credit against shares, IPO finance, broker lonas to rise at least 25 basis points; unofficial, private finance for stock investment may grow
• Interest on NRI loans lowered
• Bad news for NRIs who borrow abroad to park money in higher interest deposits with Indian banks; inflows will slow down
• Loans above Rs. 20 lakh against NRI deposits stopped
• A chunk of this money was going into stocks. This will drop.
• Extra provisioning on loans to builders
• Builders will try to pass on higher cost to home buyers
• Higher provisioning and risk weightage on bank lonas to large NBFCs
• Interest rate will rise on truck finance, SME finance, loans to promoters for creeping acquisition and stock investment.
• Chairman of NTPC
• T. Shankaralingam
• Revised GDP figures
• GDP grew at 9% in 2005-06. It was 7.5% for 2004-05.
• With this revision GDP at constant prices stood at Rs. 26,04,532 crores in 2005-06. It was Rs. 23,89,660 crores in 2004-05.
• Gross capital formation at current prices constituted 33.8% of GDP in 2005-06, while Gross domestic savings accounted for 32.4% of GDP as against 31.1%.
• S&P upgrade of India likely to sort out the pending issues with Singapore on CECA
• The Comprehensive Economic Cooperation Agreement with Singapore, which interalia provides for granting QFB (Qualified Full Bank) status to three Indian banks on a reciprocal basis, will get a boost. This would be because the S&P upgrade will make our banks pass the strict norms of the MAS (Monetary Authority of Singapore), the RBI equivalent of Singapore.