22.10.2010

Politics & the Nation

• All eyes on Coal India Issue
• Coal India’s IPO is a grand success.  The public offer was subscribed 15.26 times.  It drew bids for at least Rs. 2.3 lakh crore, or $54 billion in cash—enough to build 25 airports similar to the sparkling New Delhi one.
• Coal India joins the league of top state-run companies in the world such as China's Agriculture Bank that sold $22 billion worth of shares and Brazil's Petrobras that raised $70 billion.
• At 245 apiece, Coal India would be trading at 12 times forward year earnings, compared with about 15 times for Australia's Gloucester Coal and 14 times for China's Shenhua Energy. Hypothetically, if the company gets to raise prices to global parity, its earnings per share may jump 323% to 84.2, potentially giving it a market value of $143 billion, closer to the world's biggest iron exporter, Vale of Brazil, that was privatised in 1997.

Finance & Economy

• Professionals are driving yacht sales in India
• It's a trend that is spotted of late.  Driven by the push given by highly paid professionals, the cumulative sales of the Indian yacht market have touched the Rs 900 crore mark. Given the Indian coastline of 2,700 km and the renewed momentum, market players expect this to increase by a multiple.
• But the growth of yacht sales / yachting in India is constrained by lack of infrastructure.  The crucial missing piece in the infrastructure is marinas — the docking bay for yachts. Mumbai, India’s biggest yacht market, doesn’t have a marina. In fact, India got its first marina, in Kochi, only this April. Goa is expected to get one in 2011.

• RBI throws a spanner in the LLP party
• It was about a year ago that the LLP structure was heralded in India with an intent to give smaller businesses and entities like law firms and accountancy partnerships a flexible business structure that is followed in many countries.  At that time it was not comprehended that this structure would be used by corporates as a tax planning tool.  You might remember that Mukesh Ambani had reportedly restructured his holdings in RIL extensively using the LLP structure.
• This rejig reportedly saves a fortune in tax savings for the richest man because the LLP structures are not liable for DDT (Divident Distribution Tax) of 16.6% and are liable to an income tax of only 30% as against 33% for corporates.  
• Now the RBI has woken up to this possibility and wants to plug the leakage.  It had mandated that corporates planning to convert their holding companies into LLPs have to obtain an NOC (No Objection Certificate) from it for the LLPs to be registered by the RoC (Registrar of Companies).  And it is not willing to give such NOCs in a hurry.  Because it contends that such LLPs are core investment companies and are akin to NBFCs.  Hence they have to get registered as NBFCs with the RBI, fulfil certain criteria and share information on regular basis.
• But the corporates are crying foul and say that for recognizing LLPs as core investment companies under the NBFC format, there has to be a change in the law.
• Currently, the definition of NBFC under the RBI Act does not specifically cover LLPs. Only companies registered under the Companies Act can form NBFCs.
• Decoding the savings rate
• This is a very good op-ed that explains to us the reasons behind the fantastic savings rate seen in India in recent years.  A very educative article.  A must read.

Miscellany

• About diamonds
• This is a very good graphic on diamonds.  It teaches us about identifying quality in diamonds.  Interesting.

International

• China slows down
• The world’s second-largest economy grew 9.6% in the three months to September, just two days after the World Bank pared its growth forecast for the year ending December 2011 to 8.5%. This is a tad below the bank’s growth projection of 8.6% for India during the same period.
• Faced with a 23-month-high inflation and growing pressure from the rest of the world to let its currency appreciate, China faces severe headwinds to growth.
• In absolute terms, however, China’s gross domestic product at $4.9 trillion is about 3.78 times that of India’s. The US economy, the world’s largest, is 2.9 times the size of China’s and 11 times India’s.
• The Chinese central bank raised the benchmark interest rate by 0.25% to 2.25% on Tuesday after nearly three years to rein in prices and inflation, which touched a 23-month high of 3.6%. The Chinese government earlier in the year had set a ceiling for inflation levels at 3%, and had predicted that inflation would moderate in the second half of the year.

Language Lessons

• faux: Adjective
• Not genuine or real; being an imitation of the genuine article
• eg: But some core concepts endure. The character of the malevolent matriarch is one such staple, whether clad in synthetic sarees with artfully grey-streaked hair or in faux-ethnic ensembles.
• pusillanimous: Adjective
• Lacking in courage and manly strength and resolution; contemptibly fearful
• eg: He despised himself for entertaining such pusillanimous considerations
• lachrymose: Adjective
• Showing sorrow
• flunkey: Noun
• A male servant (especially a footman); A person of unquestioning obedience
• cotton on: Verb
• Understand, usually after some initial difficulty
• eg: Unfortunately, the government has not cottoned on sufficiently to the fact that it is these micro reforms that are so critical to drive our continued macroeconomic growth.