17.08.2010

Finance & Economy

• Vedanta set to buy out Cairn India for $9.6 b
• Vedanta Resources agreed to buy as much as 60% of oil & gas explorer Cairn India for $9.6 billion. Vedanta proposes to buy as much as 40% of the company from Cairn UK at 405 a share, including 50 a share as non-compete fees. Sesa Goa (another of Mr. Anil Aggarwal controlled firms) would offer to buy 20% of Cairn India’s minority shareholders at 355 apiece to meet regulations.
• The deal may close by the first quarter of 2011, before which it has to convince many about the benefits, including the oil ministry, partner Oil & Natural Gas Corporation (ONGC) and Sesa shareholders. Also, there is the likely $1-billion tax bill.
• Vedanta, which draws most of its revenues from India in mining and producing copper, zinc and aluminium, may be the second global metals firm to expand into oil & gas after BHP Billion to smoothen earnings fluctuations. This may be in line with Mr Agarwal’s desire to dominate the resources business in India, but may lead to conflict with minority holders in Sesa Goa.
• Cairn India, the second-biggest private refiner in the nation, produces 125,000 barrels of oil a day from fields in Rajasthan. Vedanta believes it can more than double the output from those fields, which contain an estimated 6.5 billion barrels of oil and gas equivalent.
• AI’s Star entry faces delay again
• Air India's (AI) plans of joining the global airline network Star Alliance could get delayed again as the air carrier has not been able to get its employees appropriate training. The airline had fixed March 2011 as its outer deadline to join Alliance, which will open new routes and boost traffic for the carrier.
• The delay comes despite the airline setting up a three-member committee to chart a course for the training so that Air India could join the alliance on time.
• In November 2009, Air India signed an agreement with London-headquartered management consulting firm Mckinsey and Co to implement the training project at a fee of Rs. 12.86 crore.
• Ethanol pricing -- Government gives an interim price
• The cabinet committee on economic affairs on Monday approved an interim price of Rs. 27 per litre for ethanol, compared with Rs. 21.50 a litre earlier. The final price will be fixed after an expert group gives its recommendations for the mandatory blending with petrol up to a maximum of 10%.
• A committee chaired by Planning Commission member Saumitra Chaudhuri is looking into ethanol pricing. The government made the sale of ethanol-added petrol mandatory in 2007 to rein in fuel cost, reduce dependence on imported hydrocarbons and reduce pollution levels. The plan did not take off due to a shortage of ethanol and opposition from the chemicals ministry.
• The current production of ethanol is about 1.8 billion litres.
• Is inflation really a cause for worry?
• Take a look at this huge article in today’s ET. It wonders whether inflation ceased to be a worry for the common folk. Worth our attention.
• All that we need to know about RRBs
• This is a very good ET in the Classroom column on RRBs. Good one.
• Brokers hurt as FIIs go for direct punch
• With an increasing number of institutional clients warming up to the direct market access (DMA) concept, broking commissions are shrinking.
• In direct market access, a fund manager sitting abroad can place an order to buy or sell shares directly on the exchange’s trading system, using his broker’s trading infrastructure, but without any manual intervention. In the traditional method, the fund manager would have to call a dealer at the broking house in India, who would then punch the order into the trading system.
• The direct market access route for order placement was approved by Sebi in 2008. But it was only in 2009, that fund managers abroad started availing of this facility.
• Broking firms charge 20-25 basis points as commission on cash market trades placed through the conventional route i.e calling up a dealer in India, and placing the order with him. For trades done through DMA, the commission is 7-8 basis points, and is expected to shrink further as volumes rise.
• Market experts belieive that the catalysts for the further growth of DMA in India will be the omnibus trading and smart order router facility receiving regulatory approvals. The latter facility allows a client to look at two exchanges at the same time and enables the trading engines to decide the best price for the trader.

International

• China is the second largest economy now
• China surpassed Japan as the world’s second-largest economy last quarter. Japan’s nominal gross domestic product for the second quarter totalled $1.288 trillion, less than China’s $1.337 trillion. Japan’s annual GDP is $5.07 trillion, while China’s is more than $4.9 trillion.
• The country of 1.3 billion people will overtake the US, where annual GDP is about $14 trillion, as the world’s largest economy by 2027, according to Goldman Sachs Group chief economist Jim O’Neill.

Language Lessons

• epiphany: Noun
• A moment of sudden understanding or revelation; A divine manifestation
• eg: The point is to make Maoists irrelevant by removing the development deficit that sustains them, not to seek any Maoist epiphany.