23.11.2009

Politics & the Nation

• On curbing tax evasion
• Here is a good debate on the subject that is worth our attention. Take a look.

Finance & Economy

• RIL submits bid for LyondellBasell
• We have noted from ET about the possibility of RIL acquiring this big company. LyondellBasell is privately owned by ProChemie GmbH, a JV of Access Industries and ProChemie Holding. The company suffered a net loss of $7.3 billion on sales of $50.7 billion in 2008. It filed for bankruptcy in January. The company’s unsecured creditors have challenged the bankruptcy process. An attempt to resolve differences between secured and unsecured creditors by way of mediation is on.
• Analysts believe that RIL may not find it difficult to fund the purchase of LyondellBasell, although the target firm is 50% bigger. The deal could be in the region of $10-12 billion.
• RIL had recently raised about $660 million in a share sale and is sitting on $8 billion in treasury stock that can be sold, if required. Also, it has more than $4 billion in cash. If RIL wants to double its current net debt-to-equity of 0.35, it can borrow another $10 billion or around Rs 45,000 crore.

• This is one trend that we should not miss to take note of.
• Indian auto majors are hiring talent from Detroit! What a change in scene (umm...should we say fortunes?)
• Window to buy back FCCBs to close in Jan
• The government and the Reserve Bank of India (RBI) have reportedly decided to withdraw starting next January a facility that allowed Indian firms to buy back foreign currency convertible bonds (FCCBs) issued to overseas investors.
• This is yet another move to unwind measures introduced last year at the height of the global credit crisis.
• Companies that have issued such bonds, which have both debt and equity features, will have to convert them into shares or redeem them at face value, depending on investor preference.
• What prompted the move is the perception that the improvement in stock prices has brought about convergence between the spot and conversion price of these instruments.
• In November last year, the RBI allowed firms to prematurely buy back FCCBs that were trading at a steep discount — in some cases as high as more than 50% — hobbled by the freeze in global financial markets. The buyback was allowed on the condition that it had to be financed out of firms’ forex resources held in India or abroad, or from foreign borrowings. Initially, the RBI allowed companies to undertake buybacks worth up to $50 million, which was subsequently raised to $100 million.
• An FCCB is a bond to the extent that it has a principal and interest obligation, but it also gives investors an option to convert the maturity amount into shares of the company at an agreed price.
• When the open market price of the underlying shares is below the price at which bonds are to be converted, it does not make sense to exercise the conversion option. In such a situation, the conversion option becomes worthless and bonds start trading at a discount. The issuer can then buy them back and the difference, which represents a saving for the company.
• Profitable firms may have to earmark funds for CSR
• The Ministry of corporate affairs is reportedly working on the broad contours of a code that will require all profit-making companies to set aside an amount proportionate to their turnover or profits for corporate social responsibility (CSR) initiatives.
• The government plans to make the process consultative, rather than prescriptive, on the proportion of funds earmarked for CSR activities to make it acceptable for corporates. Once finalised, the code may be woven into the Companies Bill, 2009, that is currently being considered by a parliamentary standing committee.
• The proposal, if implemented, will see private companies stepping up their CSR activity. Currently, profit making PSUs across sectors are required to shell out up to 2% of their net profit towards CSR work.

International

• Is America suffering from a governance crisis?
• Yes; if you were to believe what Jeffrey Sachs is saying in this article.
• The reasons, in brief, cited by him include:
• First, America is a highly polarized society. This can be gauzed from the approval ratings for Obama among Republicans, Democrats and independents. Political divisions have widened between the rich and poor, among ethnic groups (non-Hispanic whites versus African Americans and Hispanics), across religious affiliations, between native-born and immigrants and along other social fault lines. American politics has become venomous as the belief has grown, especially on the vocal far right, that government policy is a ‘zerosum’ struggle between different social groups and politics.
• Second, the political process itself is broken because of filibustering -- a procedural attempt to prevent a proposal from coming to a vote. To overcome a filibuster, the proposal’s supporters must muster 60 of 100 votes, rather than a simple majority.
• Third, is the crisis stemming from the role of big money in politics -- through what is practised as lobbying.
• Finally, policy paralysis around the US federal budget may be playing the biggest role of all in America’s incipient governance crisis.

• Unofficial WTO talks at Geneva
• Take a look at this graphic which briefs us on the unofficial talks scheduled for November 30, the contentious issues and India's offensive and defensive interests in this round.

Miscellany

• If you are asked to name a few Indian spices, what will your answer look like?
• Looks like a silly question; doesn't it? While reading a story, we tried to answer the question ourselves, but couldn't come up with an answer that contained more than four names at a time. Here is a list of more than 10 Indian spices:
• cumin, coriander, turmeric, ginger, cardamom, clove, fenugreek, cinnamon, nutmeg, fennel, red pepper

Language lessons

• doff: Verb
• Remove
• "He doffed his hat"
• yen: Noun
• A yearning for something or to do something
• Verb: Have a desire for something or someone who is not present
• eg: India Inc’s yen for best security practices is bringing in big moolah for trainers in South Africa and Israel.
• wry: Adjective
• Humorously sarcastic or mocking; Bent to one side
• eg: In January 1938, The Chicago Daily Tribune offered a wry definition of a recession, calling it “a new word for depression, coined by those who don’t like to admit that we’re still in one”.
• self fulfilling prophecy
• This phrase was brought into prominence by the Columbia University sociologist Robert K. Merton in his 1948 article in The Antioch Review titled “The Self-Fulfilling Prophecy.” He used the Great Depression as his first example.