NEWSLETTER

10 Pages 07th June 2012 – 13th June 2012 www.xedintellect.com

BUSINESS NEWS

ECONOMIC INDICATORS 2 COVER STORY 3 PERSONALITIES OF THE WEEK 4

INDUSTRY ANALYSIS 5 NEWS ANALYSIS 6

NEWS DIGEST…

IN BRIEF

PERSONALITIES OF

THE WEEK

INDUSTRY ANALYSIS

NIFTY

5121 pts NASDAQ Composite Index

2,816.61 pts (as on 13th June)

ECONOMIC

INDICATORS

BPCL & Videocon discover huge gas reserves in

Mozambique

COVER STORY

Panetta calls for deep

US-India defence ties

GLOBAL NEWS

China cut interest rates first time after 2008

Meher

Pudumjee

Dr. Kwon Oh-Hyun

CAPITAL GOODS INDUSTRY

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MISCELLANEOUS NEWS

1) BPCL & Videocon discover huge gas reserves in Mozambique 2) Investors in India spooked with S&P’s latest downgrade threat 3) Oil Ministry plans additional excise duty on diesel vehicles 4) China cut interest rates first time after 2008 5) Panetta calls for deep US-India defence ties

ECONOMIC INDICATORS

NIFTY – 5121 pts (as on 13th June) Source: The Hindu Business Line It was a lacklustre trading day on the bourses. The Nifty and the Sensex ended marginally positive. The Nifty closed at 5,121, six points over its previous close while the Sensex ended the day at 16,881, up 18 points. “Lack of interest was evident by the fact that indices opened flat, traded flat and closed flat,” said a Head of Research from a multinational brokerage. “Market direction would be set after inflation and tax numbers are announced in the next couple of days. Global cues that would impact direction are poll expectations from Greece and the fear of a spillover from Spain to Italy.” FMCG stocks were most sought after while real estate and auto scrips were the biggest losers of the day.

NASDAQ Composite Index – 2,816.61 pts (as on 13th June) Source: Reuters

Wall Street ended lower on Wednesday as fears ahead of the weekend elections in Greece finally drove down a market that had been treading water through most of the day. Volume surged after three weak sessions. About 7.1 billion share trade on the NYSE, Amex and NASDAQ, slightly above the 20-day moving average. Shares of JPMorgan Chase & Co (JPM.N) were a standout, rising 1.6 percent as the bank's chief executive, Jamie Dimon, defended the portfolio behind JPMorgan's recent multibillion-dollar trading loss, telling lawmakers it was a genuine hedge that would make the firm a lot of money if a credit crisis hit. In the overall market, the Dow Jones industrial average .DJI fell 77.42 points, or 0.62 percent, at 12,496.38. The Standard & Poor's 500 Index .SPX lost 9.30 points, or 0.70 percent, at 1,314.88. The Nasdaq Composite Index .IXIC dropped 24.46 points, or 0.86 percent, at 2,818.61.

he People‟s Bank of China cut interest rates last week for the first time since December 2008. Its one-year lending rate now stands at 6.31%, which still leaves room for further cuts to help soften the economic slowdown. Industrial production grew by 9.3% in the year to April, its slowest rate since 2009, but growth picked up to 9.6% in May. China's inflation rate also leaves room for looser monetary policy. Consumer prices

rose by only 3% in the year to May, down from 3.4% in April, the slowest rate since June 2010. That is well below the 4% threshold that has traditionally worried the government. Credit growth is also picking up. China‟s money supply grew by 13.2% in May on a year earlier, helped by financial institutions issuing new loans of 793 billion yuan ($124 billion), higher than analysts expected. China's banks have been helped by last month's cut in reserve requirements, another useful monetary policy tool the government can utilize.

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CCCHHHIIINNNAAA'''SSS MMMOOONNNEEETTTAAARRRYYY PPPOOOLLLIIICCCYYY Graphic Detail: The Economist

What happened: Adidas AG fired its Reebok India CEO Subhinder Singh Prem on grounds of commercial irregularities which cost the company 870 crore and might require it to incur a restructuring cost of 487 crore. Subhinder has out rightly denied such allegations and instead put the parent company in the dock for illegal indulgences. On the surface, it appears like a clash of cultures afflicting big acquisition deals where the employees of the acquired entity are often alienated and sidelined. This however is, by no means a certainty as the information revealed during the past few days is intriguing as well as illuminating. The truth will be revealed with time and is being pursued by investigative authorities, however, till

now they have failed to provide anything conclusive. What is known: The story dates back to 2005 when Reebok was acquired by Adidas AG. The two companies however continued to operate as separate entities. There were inherent differences in the way these two companies had previously worked. Foraying into the Indian Territory, owing to the perplexity of the market, through acquisition was bound to have brought some new things for Adidas AG. The integration was not seamless and the friction between the two companies became evident in the later years. Reebok is a company which is known for its aggressive expansion plans. It is the market leader in India, ahead of Puma, Nike, Adidas and others. It has over 1000 stores across India till 2012. When Reebok first set its foot in India, evidently with loads of shoes, it realized selling them was not the easiest of tasks. Indians were hard-pressed as far as shelling out the big bucks for footwear was concerned. Indian retailers, being aware of this fact, needed an incentive to make space for shoes in their shelves. Reebok came out with a „minimum guarantee model‟ to address this problem. It included taking care of rental and staff expenses of retailers in lieu of their agreeing to selling shoes. Reebok also trained their staff, provided them with promotional budgets and got into several (allegedly) undisclosed agreements with them. In return, the maximum profit these shops could make was capped at 30 percent. The result of this was the rapid growth of Reebok. Adidas too followed the „minimum guarantee model‟, but played the game within the rules. It is said that strict adherence was observed in making any decision regarding opening of stores and striking new deals. Reebok on the other hand could push the boundary just a little bit too much. Result; Reebok grew by leaps and bounds while Adidas barely crawled to the threshold. This was not a happy state for any parent company. The trouble began when Adidas came up with its „Route 2015‟ plan. Its shares had risen just 35 percent in the last five years as against a 100 percent increase in Nike‟s shares. The plan aimed to generate 11 percent operating margin and 50 percent increase in revenue by 2015. This simply meant more control over Indian operations and downsizing. Reebok India was told categorically to shut down unprofitable stores. Subhinder admits that several stores were unprofitable and he was devising a strategy to cut the headcount. What did him in however was the way in which the strategy was to be carried out. Adidas wanted it all gone at one go while he wanted to go slow, preserving the long held relationship with retailers. The friction between Adidas and Subhinder was evident but never did he imagine that he would get fired for this and be accused of criminal conspiracy and fraudulent practices. Subhinder replied back with two legal notices, one a Rs 15 crore defamation notice for tarnishing his image and the second to claim Rs 12.70 crore in dues including the severance package. Allegations and counter allegation: Adidas accuses Subhinder and Vishnu Bhagat (COO of Reebok India) of

operating secret warehouses which sold stocks that were not reported on Adidas‟ books and expanding the franchise referral program despite being strictly told not to do so. The executives are also accused of claiming incentives and bonuses based on inflated sales numbers, which resulted in a higher tax payout for the company. Delhi police did raid the four alleged secret warehouses but found nothing. Subhinder in his defense says every inventory was accounted for and the account books were not fudged with. He also says that every new Reebok store was opened after proper consultation with the parent company. Now there is a string of allegations and counter allegations from both the sides

adding more mystery to the unknown. Subhinder now alleges that Adidas asked him to manipulate account books to bring down the valuation of Reebok India. This was done so that the payout to its Indian joint venture partner Focus Energy is substantially reduced. Focus Energy owns 6.85 percent in Reebok India and is unwilling to sell this stake to Adidas for less than Rs 550 crore. Adidas‟s best bargain for the offer is a mere Rs 25 crore. Conclusion: Whether it is the classic example of post merger hangover where the big fellow says “It‟s my way or the highway” or is there something really wrong with what Reebok was doing? That being said, the strategic differences in the modus operandi of the two separate entities were apparent; differences which didn‟t get aligned even post acquisition and differences which resulted in everything that is out there. The sportswear maker could definitely have done without all this. Are there more revelations hiding in the closet? Only time will tell.

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Meher Pudumjee – Chairperson, Thermax Ltd

True leaders like Meher Pudumjee are rare to find – they hide in plain sight when the sea is calm, but rise to glory and make their mark during times, when even experts fail to “tread waters”. Pudumjee, one of the most powerful businesswomen in India, took over the helm of Thermax in 2005, when the company was struggling to survive in the domestic market. She steered the company through the crisis, putting its growth on the fast-track and transforming it from a $100 million company into a multi-national enterprise with staggering revenues of $900 million. Under her outstanding leadership, the company overcame plummeting share prices, survived the economic slump and grew with a CAGR of 40% evolving into a fast growing business providing innovative solutions in heating, cooling, captive power, water and waste management.

Claim to Fame… Pudumjee was born in a business family, her maternal grandfather & father had started the company Wanson India in 1966, which was later rebranded as Thermax in 1980. She graduated from Wadia College, Pune and moved to London to pursue her post graduate degree in chemical engineering from the Imperial College of Science & Technology. The Aga scion started as a trainee engineer in Thermax in 1990 and later undertook the responsibility of managing a UK based loss-making

subsidiary of the company. During the 1999-2000 economic turmoil, the company posted an operational loss for the first time in its history. Pudumjee bought in Boston Consulting Group to restructure & revive the ailing organization whose shares had hit an all time low, a move that saved the company from sinking into the pit. She also spearheaded the turnaround of Thermax by divesting in non-core activities and restructuring the business portfolio. Along with expanding the company‟s presence in 17 countries, she also made it one of the most reputed Indian companies in terms of corporate ethics. Under her stewardship, Thermax rose like a phoenix from its ashes and featured consistently in Forbes‟ “Asia‟s 200 Best Under a Billion” companies list. Pudumjee was honored with the Financial Express‟ Women in Business Young Achiever Award in 2006 & also won the Business Standard “CEO of the Year” award in 2008. Pudumjee is passionate about Western classical and is one of the most enthusiastic members of a Pune-based choir group.

Dr. Kwon Oh-Hyun – CEO, Samsung Electronics

Little is known about the newly appointed CEO of Samsung Electronics, Kwon Oh-Hyun, not because he is media shy, but because when his colleagues were designing strategies to drive the growth of the company & giving interviews, he was busy in his lab - building cutting edge technology for Samsung. Over the years, Kwon has cemented the company‟s position in memory chips – Samsung is sole supplier of mobile processors which powers Apple‟s products & it holds 50% global market share of memory chips. He also expanded Samsung‟s business in logic chips – which now accounts for 40% of the company‟s overall semiconductor revenue. The veteran, who has spent his entire life driving innovation and helping Samsung overpower its competitors with improved & cheap technology, has now a new role to play which is less of technical and more of

leadership – Kwon will oversee Samsung‟s component businesses & shall also handle corporate-wide affairs. Defining Innovation… Kwon holds a B.S degree in Electrical Engineering from Seoul National University. He completed his M.S degree in Electrical Engineering from Korea Advanced Institute of Science & Technology, and a Ph.D. in Electrical Engineering from Stanford University. Kwon joined Samsung as a chip engineer in 1985 and played a major role in rapid advancements in semiconductor technology. Within seven years he became a senior executive, heading the company‟s memory chip business & was responsible for developing the industry‟s first 64Mb DRAM in 1992. Since then Samsung has held the title of the world‟s largest computer chip-maker. He then moved to the System LSI division, where he gained special recognition for developing Samsung‟s “advanced display drivers” which acquired the largest market share in 2002. Kwon led the techie team that developed the “application processors” – on which modern day apps run. Yet again, Samsung became the leader in the navigational application processor market. While heading the Device solutions department, Kwon was appreciated for his contributions in product diversification & operational competitiveness. Thus Kwon has contributed immensely in Samsung‟s success in becoming the world‟s second largest cell phone manufacturer & becoming the world‟s top seller of cell phones, while ending Nokia's 14-year reign as the global handset leader.

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“The role of hardware

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system performance will

continue to grow as the

increased level of software

sophistication.”

“Bring passion and commitment

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The capital goods industry contributes 12% to the total manufacturing activity (which is about 15% of the GDP). With a view to achieve 9% growth in GDP during the 12th Five Year Plan, Capital Goods

sector should grow at around 17% to 19%. (Report of the Working Group on Capital Goods & Engineering Sector for the 12th Five Year Plan (2012-2017)

Capital goods & engineering sector has market size at Rs.311515Cr,growing at a CAGR of 14.% Imports are gaining market share across all sub-sectors, with 30% of domestic demand met through imports

Overview: Capital goods include equipment, tools, machinery, factories and different buildings that are engaged in the production of various goods for public consumption. This industry plays a critical role in the manufacturing sector. Capital goods are important economic factors since they are integral to developing a positive return from manufacturing other products. From the list of classified segments, below are the five most representative segments and this segmentation is based on two factors- Market size and user industry, and IIP weightage of the segment. The five representative segments are as follows:

Textile Machinery Machine Tools Electrical and Power Equipment which includes Boilers, Turbines, Diesel Engines, Transformers, Switchgear,

Motors and Generators. Earthmoving and Construction Equipment Process Plant Equipment which includes Pressure Vessels, Cooling Towers, Furnaces and Heat Exchangers

Why Capital Goods industry is so important? Capital Goods is considered as a strategic sector as it makes a nation self reliant by enhancing domestic

capabilities which is important from security perspective. Capital Goods sector has multiplier effect and has direct influence on the growth of the user industries as it

provides critical input, i.e., machinery and equipments. CAPITAL GOODS INDUSTRY IN INDIA : Capital Goods and Engineering sector is important to manufacturing industry from a strategic perspective. Some countries like China, Korea etc. are growing by leaps and bounds in this sector. Other countries enjoy cost advantage as well as advanced technology levels vis-a-vis their Indian

counterparts. As a result, India‟s dependence is increasing on imports in manufacturing industry at an alarming rate. Poor IIP performance has made the matter worse. The Government too seems to have lost its focus on economic reforms. Now, the question arises where is India headed? Is there any hope? Is there light at the end of the tunnel? The answer is a yes. The government has planned to invest trillions of dollars in infrastructure. It has formed a working committee on Capital Goods and Engineering Sector for the 12th Five Year Plan(2012-2017). The Working Committee has suggested the following strategies:

The industry growth during 11th Plan stood is at 14%.There is a need for rapid growth of the sector, for

which it has proposed to initiate some national programmes. These in turn will create additional demand. It is also proposed to take steps to substitute imports by domestic production. This is expected to take the sector to Rs 6,81,000 crores in 2016-17 at a CAGR of 16.8%.

The current employment is 1.4 mn which is expected to reach 2.8 mn by 2017. In order to increase technology content in the domestic production, policy and programme initiatives are

proposed for R&D, education and training, technology development, technology purchase, technology development abroad on contract, technology acquisition, IPR purchase and ownership, joint technology development and funding for technology up-gradation.

Policy environment in respect of capital goods & engineering sector No industrial license is required for the sector. FDI up to 100% permitted on automatic route (through RBI) Quantum of payment for technology transfer, design &

drawing, royalty etc. to the foreign collaborator has no limit

Imports and exports are allowed freely.

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Major Capital Goods Companies *Source-Money Control

1) BPCL & Videocon discover huge gas reserves in Mozambique- ET/BS Impact Oil-rich Rovuma Basin is suddenly making headlines. Considered as one of the world's

biggest gas fields, it brings Mozambique at par with a gas major like Qatar and is probably the most pleasant solution to India‟s long running energy security woes. Videocon Hydrocarbon Holdings (a subsidiary of Videocon Industries) and BPCL have equal stakes of 10 percent each in the six oil blocks along the basin. US energy major Anadarko Petroleum, which is the operator for this block, holds 36.5 percent stake. Estimates by Anadarko suggest recoverable gas resource anywhere between 30 and 60 trillion cubic feet (tcf). All six blocks are estimated to hold nearly 100 tcf of natural gas.

Key Players Videocon Hydrocarbon Holdings, Bharat PetroResources, Bharat Petroleum Corporation (BPCL), Videocon

Industries, Anadarko Petroleum

Why it is important? Analysts have said that BPCL's exploration drive in Mozambique has turned it into a best-

performing energy stock on MSCI AC Asia Pacific Index. It‟s also one of the top performers on Nifty. Videocon is not losing either; its shares were trading at Rs 175, 3.2 percent higher than its previous close. Comparing this gas find with Reliance Industries‟ KG D6 fields, one of the officials commented "It is like 20 KG-D6 basins combined in one area. It is massive." 2) Investors in India spooked with S&P’s latest downgrade threat- Reuters/ TOI/ HT

Impact Standard & Poor has released a report named “Will India Be The First BRIC

Fallen Angel?". The title might appear speculative; though on reading the entire document, it appears that S&P is prepared for yet another downgrade. Thanks to its April downgrade, India sits at BBB minus which is the lowest investment grade rating in agency‟s books. The report goes on to explain - how the government is responsible for current economic situation and that “unhelpful opposition” or “obstreperous allies” could not be an excuse for slow decision making. All this commentary was enough for market to break its five-day long winning streak on Monday. BSE came down 50 points at the day closing. Pranab Mukharjee dismissed the report saying that “lot of steps”

are being taken by government to control Current Account deficit & fiscal deficit. Finance ministry responded further by terming S&P‟s rating procedures „not transparent‟ and that Indian economy is better than reported.

Key Players Standard & Poor, Indian Government, Pranab Mukharjee, Finance Ministry

Why it is important? Most of the analysts agree with whatever has been stated in S&P‟s report and also that the

discussion is a repetition of what came in April. It is pointed by analysts that economic conditions have not changed since April, when S&P downgraded India‟s sovereign rating. However, it is also noteworthy that Brazil, Russia & China are better placed than India on S&P‟s rating chart. Speculations about Indonesia becoming the new „i‟ in BRIC are also building up. S&Ps impact on market and Rupee is not significantly large this time. However, its repeated criticism about Indian governance probably makes a valid point. 3) Oil Ministry plans additional excise duty on diesel vehicles - ET/The Hindu Business Line/Moneycontrol Impact Petroleum Minister, Mr S Jaipal Reddy is planning to introduce additional excise

duty on diesel vehicles. His proposals, if accepted by the finance ministry, would impose an excise duty of Rs 2.55 lacs on diesel SUV‟s & other larger vehicles. Small diesel cars would also become costlier as the duty for those is proposed to be increased to Rs 1.7 lacs. The ministry reasons that these steps are required to prevent misuse of subsidized diesel. Moreover, government sees it as a strategy to reduce under recoveries of oil companies, expected to cross Rs 1 lac crore by the end of this fiscal. However, industry body SIAM strongly doubts government‟s calculations. It says that petrol car sales are already in slump and the move would further dampen the sales of diesel cars. As a solution, SIAM suggests a diesel price hike of Rs 4, which translates directly into revenue of around Rs 6000 crore. Further, it can enable a reduction in petrol prices, fuelling sales growth.

Key Players Petroleum Ministry, Mr S Jaipal Reddy, Finance Minsistry, SIAM, Oil Companies

Why it is important? The government‟s decision to increase petrol prices did cause a spurt of demand for diesel cars a

while ago. However, during past few days, there have been reports about slowdown in booking of diesel cars. The waiting periods for most diesel cars have come down significantly. Incidentally, companies are relying more on exports as car exports from India increased 34.16% last month. Hence hiking excise duty at this moment, as pointed out by SIAM is going to disturb the already troubled car market. Such proposals/decisions coupled with an unclear & unstable fuel policy are making it hard for companies to decide on their investment strategies.

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4) India and six other excused from Iran sanctions, China still not cleared- Reuters/Wall Street Journal

Impact The June 28 deadline for US sanctions on Iran oil-exports is coming near & US has increased its pressure on all oil importing nations to reduce oil imports from Iran. However, India which was under US scanner till date can take a respite as it is included in the list of 7 nations that stand clear of any import restrictions. It is because it has already reduced its crude oil imports from Iran. South Korea is another Asian giant which is included in this list along with Malaysia, Sri Lanka, South Africa, Turkey & Taiwan. US had exempted Japan and 10 EU nations earlier in March. However, China which accounts for nearly 20 percent of Iran‟s total Crude oil exports is still not cleared; Singapore is also kept aloof. There are reports, that China has almost ignored all US pleas to reduce Iran imports. It has even started

importing large shipments, disabling tracking devices at times. At the same time, Obama administration is cautious to enforce restrictions as there is risk of global economy plunging into a recession.

Key Players USA, Iran, Iran sanctions, China

Why it is important? The exemptions might have brought temporary relief to Indian oil companies but it appears that importing oil from Iran is not going to get any easier. The reason is that companies are not able to find shippers who are willing to sail in seas without insurers; which are entirely based in US and Europe. Getting insurance coverage for shipments is not an easy task anymore. Another issue is of payments, as sanctions already in place restrict dollar usage. Amid all this, Indian petroleum companies have reduced their Iran oil imports from 16 percent in 2008 to 10 percent recently. Only respite for the industry comes not from the US but from the fact that it has now better technologies to refine heavier & dirtier crude from countries like West Africa & Latin America. It is no more dependent on light crude imports of Iran.

5) Banks in Spain rescued by EU aid, for now- Reuters/BBC/BS

Impact Euro zone heads have agreed to provide a bailout of $125 billion to debt-stricken

banks in Spain, a development termed as a „victory for Euro‟ by the Spanish Prime Minister Mariano Rajoy. Though, masses in Spain and analysts world over would hardly agree with terming it as a victory. It‟s a temporary relief for a nation plagued with recession, towering unemployment & huge national and regional debts. With this, Spain has joined Greece, Ireland & Portugal – nations that have received EU aid. PM Rajoy, who dismissed any talks about Spain getting funds from EU, just few weeks ago, is now trying to explain that funds received are not meant for its public debt. PM‟s credibility at stake, some analysts claim that this step can only be seen as a prelude to an entire bailout of the state.

Key Players European Union, ECB, Mariano Rajoy, Spain

Why it is important? Global Stocks jumped after the bailout news, though traders don‟t

expect rally to continue for long. Moreover the bailout does not guarantee cheaper borrowings on government bond markets, which can force Spain to look out for further international financial help. Moreover, markets are more concerned about the elections in Greece, as Greek exit is still very much possible. The news holds importance from macro-economic perspective. 6) China cuts interest rates first time after 2008- Bloomberg/Financial Times

Impact Global markets were pleasantly surprised when China‟s central bank announced

interest rate cuts for the first time since 2008. It is seen as sign pointing country‟s determination to boost its economy. Its GDP has slowed down to 8.1 percent in Q1 2012. The corresponding growth numbers in 2011 & 2010 were 9.2 percent 10.4 percent respectively. New lending rate, down by 25 basis points, stands at 6.32 percent. Cutting rates has become easier for China this year as inflation is down to 3 percent. As a ripple effect extending from Brazil to Australia, a lot of nations have followed Chinese precedent of rate cuts in last few days. Back in India, Rupee gained over dollar after the rate-cut news. Incidentally, Morgan Stanley, Bank of America and

Goldman Sachs have cut growth estimates for China to around 7 percent this year. Key Players Central Bank of China, Chinese Government

Why it is important? Though, most analysts have taken this news positively, a few are still practicing caution from

reading too much into the story. It is to be noted that China raised its interest rates three times in 2011. Further, Chinese officials have gone on record saying that the economy now needs “fine tuning” at best. Hence, expectations for any large-scale stimulus package might be misplaced. The move could be seen as a cautionary step against a persisting European crisis.

7) Hero seeks ethanol engine partners to tap Brazil, Kenya- Bloomberg/NDTV/BS

Impact India‟s biggest motorcycle maker, Hero MotoCorp Ltd is seeking partners for products such as blended-fuel compatible engines as it prepares to tap customers in Brazil and Kenya to combat sliding sales growth at home. There is a rising demand for blended fuel engine vehicles in the overseas market and in countries like Brazil & Kenya, it is mandatory to use blended fuel. The company plans to start selling vehicles in these countries by September 2012 and is trying to build its own technology & capability through partnerships. Hero wants to raise the overseas sales share from 2.7% to 10% this year and shall also expand its presence in Argentina & Nigeria. It is also seeking tie-ups with US based & Austria-based firms for motorcycle design and engine knowhow. Hero aims to triple its exports by 2017 as sales growth is slow amid intensifying competition in the domestic market. The company is also setting-up two manufacturing units & a R&D centre in India.

Key Players Hero MotoCorp, Honda

Why it is important? Hero, which exited a 26-year partnership with Honda Motor Co, has been unable to come up with

new competitive products in the domestic market and thus posted slowest sales growth in 13 quarters in fourth quarter of FY12. Honda‟s recent launch Dream Yuga, a 109cc bike, attacked Hero‟s dominance in the 75-110 cc space & Hero, which has a market share of 76% in this category, has been hurt. Hero is targeting exports as the Indian market is reaching a saturation point, with slow economic growth of 5.3% to fulfill its ambition of becoming one of the biggest global two wheeler manufacturers. 8) US dealers sue M&M for fraud- BS/DNA/Moneycontrol

Impact Automobile dealers from across the US filed a lawsuit accusing India‟s Mahindra & Mahindra (M&M) of „fraud, misrepresentation and conspiracy‟. The mass lawsuit was filed by dealers in New Hampshire, Florida, California, New Jersey and Washington. According to the lawsuit, M&M duped hundreds of dealers and walked away with more than $60 million in cash and trade secrets. The company had told dealers its light trucks and SUVs were ready for delivery in the US market. However, Mahindra intentionally delayed certification of its vehicles after obtaining the dealership fees and trade secrets, and began pursuing other partners in the US and elsewhere in clear violation of commitments. The dealers invested in building

showrooms, marketing activities & recruitment. M&M also obtained $9.5 million in fees from the dealers. Key Players Mahindra & Mahindra, US Government

Why it is important? M&M has been trying to enter the US market since 2008 with a range of pick-up trucks and SUVs

but was hit by delayed regulatory approvals. The company currently sells tractors in the US market, but has been facing roadblocks in the passenger vehicle segment. Scorpio-based pick-ups were ready three years ago for a launch, but the company had to delay its plans due to the Global Vehicles lawsuit, which M&M finally won in March. M&M has major expansion plans & is targeting markets like the US, Brazil & South Africa. It shall enter these countries by Mahindra products and would later introduce Ssangyong brand. 9) Axiata dials Birla for tower deal- TOI/ Wall Street Journal

Impact Malaysian telecom giant Axiata Group has approached Aditya Birla group-owned

Idea Cellular to build a transnational tower company, with operations across Southeast Asian markets. Axiata wants to acquire or merge more than 8,000 towers of the Indian mobile operator as it looks to create a unified tower entity with a presence in seven nations, said banking sources directly familiar with the matter. Axiata, formerly Telekom Malaysia, holds a stake of just under 20% in Idea Cellular. Aditya Birla Group, which controls majority interests in the third largest domestic mobile phone firm, has studied the Axiata but has not yet arrived at any decision. Due to regulatory uncertainties & high spectrum costs, Indian tower valuations have eroded in past two years. Birla Group has been looking for strategic value unlocking moves like one proposed by Axiata and the potential IPO of Indus Towers, where Idea owns 16%. Key Players Axiata Group, Idea Cellular

Why it is important? Axiata is present in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia through controlling

interests in mobile operations, while it is has significant strategic stakes in India, Singapore and Iran. Axiata holds a stake of little under 20% in Idea Cellular‟s strategic relationship was forged five years ago after a merger between Idea & Spice Telecom. Though the tower business sounds lucrative with a good financial model, but it has its own operational challenges due to its country-specific nature. Currently Idea has over 8,000 towers worth $600 million, apart from the 11,000 it transferred to Indus Towers, in which it holds a stake along with Bharti Airtel and Vodafone.

10) Panetta calls for deep US-India defence ties- TOI/Reuters

Impact U.S. Defense Secretary Leon Panetta has recently assured to let India buy America's best weapons technology. He also stated that the two countries should jointly produce & develop defence equipment. India, the world‟s top arms importer, has deals of arms sales worth $8 billion with United States. The announcement comes as both the countries had defence issues in past decades & this year US had lost out on a major fighter jet deal after offering old technology. US is moving to reform exports control that limit weapons transfers to India & has also called on to modernize Indian defence procurement rules – cutting red tape & reform the defence liability legislation. Panetta is on week-long visit to Asia to spell out a new U.S. defence strategy to allies and partners in the region. The new

strategy calls for a shift in U.S. strategic focus to the Asia-Pacific. Panetta wants India and the United States to conduct more regular and complex military exercises. His remarks came on the same day as Russian President Vladimir Putin said he will boost military exercises and cooperation with China.

Key Players US, India, China

Why it is important? Some Chinese bureaucrats fear that India is part of a U.S. strategy to limit China's rise on the

world stage. India is spending about $100 billion over 10 years on modernizing the military. Chinese analysts say that “the US is forging a semi-circle of alliance against China from the South" as Panetta has attended the Shangri-La Dialogue in Singapore and afterward visited Vietnam and India. And that US efforts to make India part of its alliance against China will not succeed because India has its own national interests. 11) NTPC lashes government over power crisis- Reuters/Moneycontrol/The Hindu Business Line/ET

Impact The head of India's largest power producer blamed the government for chronic fuel

shortages that have exacerbated the country's energy crisis. Arup Roy Choudhury, chairman of state-run NTPC, said a climate of fear following a spate of corruption scandals had frozen officials into inaction on environmental clearances, land acquisition and allotment of coal mines. NTPC, which owns about a fifth of India's generation capacity, would miss its target of adding 25,000 MW to capacity by 2017 and was now aiming for just 14,500 MW, unless it is assured of fuel supply from Coal India in next six months. Choudhury said if CIL is increasing its production by 8-9%, one-third of the extra fuel produced should be given to NTPC. Only then it can meet the thermal power generation target of 25,000 MW by 2017. Coal shortages knocked 7.8 billion KWh off NTPC's capacity utilization in the past year, denting its profit. NTPC is now seeking for re-allocation of three blocks, located in Jharkhand, that were de-allocated by the Coal Ministry because NTPC earlier failed to develop those blocks.

Key Players NTPC, CIL, Coal Ministry

Why it is important? India relies on coal for two-thirds of its power generation, and will need even more for the additional capacity planned to tackle a power deficit that sometimes reaches as high as 13%, hampering industry and plunging millions into darkness. India sits on the world's fifth-largest reserves of coal. However, output of Coal India has stagnated and, combined with a slide in gas output, power producers have limited access to cheap local fuel supplies. The alternative is to import coal at higher prices that raises costs for struggling distribution utilities. 12) Rupee hits 2-week high; China rate cut helps- Reuters/ BS

Impact The rupee breached the 55-per-dollar mark on June 7,

hitting its strongest level against the dollar in more than two weeks. Apart from Foreign Institutional Investors (FIIs) buying shares worth over Rs 675 crore today, forex dealers said the rate cut in China - by 25 basis points to 6.31%, in late trade further boosted a revival in global risk-taking sentiment. Dollar sales by foreign and custodian banks tied to the rally in domestic stock markets also helped the rupee strengthen, although dollar buying by oil firms capped some of the gains. The rupee has now gained for four consecutive sessions, bouncing back from a record low of

56.52 hit a week ago, and analysts see further gains ahead if demand for global risk assets continues to improve. Key Players RBI, Indian Economy, Rupee

Why it is important? India is facing a couple of critical weeks; its annual industrial growth rate slumped to 0.1% in

April. Manufacturing grew 0.1%, mining contracted 3.1% & electricity production grew 4.6%. The wholesale price index, India's main inflation gauge, is expected to rise 7.60% in May versus a year ago, compared with April's 7.23%. With falling rupee, rising inflation & low IIP; the RBI is expected to cut domestic interest rates at its policy meeting on June 18, to improve confidence in the economy.

13) Financial studies set to become part of school curriculum- The Hindu Business Line Impact High school studies are going to get a whole new perspective on real world

economics and business. Financial education is going to be a part of high school curricula soon. Led by SEBI, National Institute of Securities Market (NISM) is working on preparation of course material for financial education. The planning is though in initial stages. Government ministries of human resource development and finance along with agencies like IRDA & RBI are working on this project since August last year. It is yet not decided that whether the studies would become a part of existing subjects or would be introduced as a new subject altogether. Besides, it would also require the school teachers to be trained. SEBI is hopeful of making it part of regular curriculum, which means it will become necessary for all students.

Key Players Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI),

Central Board of Secondary Education (CBSE), National Institute of Securities Market (NISM)

Why it is important? The debate about practical viability of Indian education system is not new. However, this step can

be seen as one of those which bring education closer to the real world happenings. The project is still a couple of years away from implementation. If included in regular high school course, it might revive interest in a subject which is otherwise considered dry by most. 14) Ad watchdog identifies 55 ads in May for possible misleading claims- The Hindu Business Line

Impact Advertising Standard Council of India (ASCI) has identified 55 commercials in

May 2012 which it finds misleading or away from truth in nature. ASCI has formed National Advertising Monitoring Service (NAMS), which monitors and restricts companies from making such commercials. NAMS in coordination with TAM & AdEx India monitored 40 print ads and 15 TV ads in the month of May. Consumer complaint council would handle further proceedings related with the matter. Moreover, advertisers are now asked to provide proofs substantiating their claims. In 2011-12, only 177 such ads were identified by NAMS. The council monitors advertisements from insurance, FMCG, consumer durables, educational institutions, healthcare products and services, telecom and real estate, auto, banking, financial services sectors.

Key Players Advertising Standard Council of India, National Advertising Monitoring

Service, Adex, Advertising companies

Why it is important? ASCI sets guidelines for advertisers in India. It is expected from advertisers and marketers to

stick to a self-regulatory code of conduct. The news holds importance for people related with advertising or marketing field. 15) India frustrations send some foreign firms packing- BS/Reuters

Impact Frustrated by a lack of opportunities in India, Germany's Fraport,

the world's No. 2 airport operator, is shutting its development office in the country. Fraport had entered India in 2006 – when the market was bullish & government had plans to privatize airports in smaller cities. Those plans never saw daylight & regulatory uncertainty and policy gridlock have battered foreign corporate sentiment towards India. This is adding to a dramatic slowdown in economic growth & exacerbating a widening current account deficit that has knocked the rupee to record lows. Fraport, which owns 10% of the company that operates New Delhi Airport, is looking to sell its stake as its role as an operator will lapse in May 2013. Many foreign companies in other sectors including Etisalat & BahrainTelecom, have seen their India plans thwarted by sluggish or inconsistent policymaking. Telenor is still fighting the policy hurdles to maintain its presence in the country.

Key Players Fraport, Economic Growth, FII

Why it is important? Ongoing battles over taxes on foreign companies, regulatory flip-flops and a lack of progress on

key reforms have kept many foreign companies away and led others to scale back. India's economy grew just 5.3% in the March quarter & saw multinationals pulled $10.7 billion out of the country in 2011, up from $7.2 billion in 2010 and $3.1 billion in 2009. It faces the threat of more foreign companies exiting in the near future, as well as warding off new entrants unless it sends a very strong and immediate signal to boost foreign investor confidence.

MMMIIISSSCCCEEELLLLLLAAANNNEEEOOOUUUSSS NNNEEEWWWSSS

SOURCES SOURCES FOR ECONOMIC INDICATORS, STATS & GRAPHS

http://www.thehindubusinessline.com/markets/article3522405.ece http://www.reuters.com/article/2012/06/13/us-markets-stocks-idUSBRE84S0BG20120613

http://www.economist.com/blogs/graphicdetail/2012/06/focus-1

SOURCES FOR COVER STORY

http://forbesindia.com/article/boardroom/why-adidas-went-after-subhinder-singh-prem/32970/1

http://www.firstpost.com/business/reebok-under-tax-lens-adidas-confiscates-goods-from-warehouses-320690.html http://forbesindia.com/article/special/the-curious-case-of-the-empty-adidas-godowns/33012/1

http://www.business-standard.com/india/news/speedy-singh/474077/ http://online.wsj.com/article/SB10001424052702304707604577421620608248942.html

http://articles.economictimes.indiatimes.com/2012-06-05/news/32055991_1_reebok-india-subhinder-singh-prem-adidas-group http://www.hindustantimes.com/India-news/Gurgaon/KPMG-officials-grilled-in-Reebok-case/Article1-869084.aspx

http://timesofindia.indiatimes.com/business/india-business/Adidas-files-complaint-against-ex-MD/articleshow/13944863.cms

SOURCES FOR PERSONALITIES OF THE WEEK: http://www.thermaxindia.com/About-Us/Board-of-Directors.aspx

http://www.business-standard.com/india/news/meher-pudumjee-standing-tall/123263/on http://en.wikipedia.org/wiki/Thermax

http://www.india-inc.in/Meher-Pudumjee.html http://www.financialexpress.com/news/power-women/255634/0

http://www.asianenterprise.biz/meher-pudumjee-power-house/full.html

http://www.livemint.com/2007/12/20234406/Meher-Pudumjee--Pitching-it-r.html http://www.entrepreneursstartup.com/tag/meher-pudumjee/

http://in.reuters.com/article/2012/06/07/samsung-ceo-idINDEE85608W20120607 http://online.wsj.com/article/SB10001424052702303665904577451740983336150.html

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http://en.wikipedia.org/wiki/Samsung_Electronics#Semiconductors http://articles.economictimes.indiatimes.com/2012-06-07/news/32101122_1_geesung-choi-jay-y-lee-ceo

http://news.softpedia.com/news/Samsung-Goes-Green-At-Mobile-Solutions-Forum-224539.shtml

CORPORATE INTELLIGENCE http://webcache.googleusercontent.com/search?q=cache:http://articles.economictimes.indiatimes.com/2009-08-

23/news/28444333_1_order-book-capital-goods-companies-bgr-energy http://webcache.googleusercontent.com/search?q=cache:http://www.moneycontrol.com/news/brokerage-results-estimates/see-

capital-goods-sector-revenue-to-grow-109q4-angel_689862.html http://en.wikipedia.org/wiki/Capital_good

http://www.cii.in/Sectors.aspx?enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNvZLA9SDfkKBVbtDbF4KF89 http://www.indiainbusiness.nic.in/economy/indust_performance.htm

http://www.reuters.com/article/2012/05/02/idUSWLA740520120502 http://www.stockmarketsreview.com/recommendations/capital_goods_4qfy12_sector_preview_317306/

http://online.wsj.com/article/SB10001424052702303918204577446212830107248.html

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1) BPCL & Videocon discover huge gas reserves in Mozambique- BS 12 June http://www.business-standard.com/india/news/bpcl-videocon/s-mozambique-gas-reserves-more-than-kg-d6/477052/

http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/discovery-at-africas-basin-where-videocon-bpcl-hold-

stake-may-strengthen-indias-energy-security/articleshow/14007782.cms

2) Investors in India spooked with S&P’s latest downgrade threat- Reuters/ TOI/ HT http://timesofindia.indiatimes.com/business/india-business/Standard-Poor-method-not-transparent-

Government/articleshow/14076194.cms http://timesofindia.indiatimes.com/business/india-business/Pre-2003-growth-rates-to-be-new-normal-for-Indian-economy-Ruchir-

Sharma-Morgan-Stanley/articleshow/14012626.cms http://timesofindia.indiatimes.com/business/india-business/Sensex-closes-50-points-lower-on-SP-

warning/articleshow/14027861.cms http://in.reuters.com/article/2012/06/12/sp-india-may-become-first-bric-rating-idINDEE85A05O20120612

http://www.hindustantimes.com/business-news/WorldEconomy/Pranab-rejects-S-amp-P-s-India-downgrade-threat/Article1-869621.aspx

http://articles.timesofindia.indiatimes.com/2012-06-12/india/32193911_1_long-term-sovereign-rating-outlook-revision-bric-nations 3) Oil Ministry plans additional excise duty on diesel vehicles - ET/The Hindu Business Line/Moneycontrol

http://www.thehindubusinessline.com/industry-and-economy/article3520240.ece http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles/maruti-toyota-hyundai-mm-and-other-carmakers-

witness-slowdown-in-booking-of-diesel-cars/articleshow/14006415.cms http://www.moneycontrol.com/news/business/car-exports-rise-34demandnon-european-nations_716233.html

4) Hero seeks ethanol engine partners to tap Brazil, Kenya

http://www.bloomberg.com/news/2012-06-06/hero-seeks-ethanol-engine-partners-for-brazil-corporate-india.html http://profit.ndtv.com/News/Article/hero-motocorp-to-invest-rs-2-575-cr-in-new-plants-r-d-centre-305545

http://www.business-standard.com/india/news/news-analysis-hero-motocorp/167012/on

5) US dealers sue M&M for fraud

http://www.business-standard.com/india/news/us-dealers-sue-mm-for-fraud/476583/ http://www.dnaindia.com/money/report_us-dealers-sue-m-and-m-for-fraud_1699098

http://www.moneycontrol.com/news/business/us-auto-dealers-sue-mm-allege-fraudconspiracy_714340.html 6) Axiata dials Birla for tower deal

http://timesofindia.indiatimes.com/business/india-business/Axiata-dials-Birla-for-tower-deal/articleshow/13882043.cms http://blogs.wsj.com/dealjournalindia/2012/06/07/axiata-eyeing-idea-cellulars-towers-report/

7) Panetta calls for deep US-India defence ties http://articles.timesofindia.indiatimes.com/2012-06-06/india/32078280_1_huanqiu-shibao-chinese-media-south-china-sea

http://in.reuters.com/article/2012/06/06/usa-india-defence-idINDEE8550AC20120606 8) NTPC lashes government over power crisis

http://in.reuters.com/article/2012/06/07/india-power-ntpc-idINDEE85609K20120607 http://www.thehindubusinessline.com/companies/article3524202.ece?homepage=true&ref=wl_home

http://www.moneycontrol.com/news/business/ntpc-forced-to-cut-capacities-due-to-coal-shortages_717321.html http://economictimes.indiatimes.com/news/news-by-industry/energy/power/ntpc-25000-mw-by-2012-possible-if-coal-india-assures-

fuel-supply/articleshow/14095429.cms 9) Rupee hits 2-week high; China rate cut helps

http://in.reuters.com/article/2012/06/07/markets-india-rupee-idINDEE85602H20120607 http://in.reuters.com/article/2012/06/08/china-economy-rate-cut-idINDEE85700320120608

http://www.business-standard.com/generalnews/news/industrial-growth-dips-to-01-pc-may-prompt-rbi-to-cut-rates/19917/ http://in.reuters.com/article/2012/06/14/india-economy-wpi-preview-idINDEE85D02020120614

10) India and six other excused from Iran sanctions, China still not cleared- Reuters http://in.reuters.com/article/2012/06/11/usa-iran-sanctions-india-idINDEE85A0DR20120611

http://blogs.wsj.com/indiarealtime/2012/06/13/iran-oil-imports-vex-india-despite-sanctions-reprieve/ 11) Banks in Spain rescued by EU aid, for now- Reuters/BBC/BS

http://www.bbc.co.uk/news/world-europe-18385634

http://in.reuters.com/article/2012/06/10/eurozone-spain-idINDEE85906T20120610?type=economicNews

http://www.business-standard.com/india/news/world-stocks-jumpspanish-bank-bailout/174273/on http://www.business-standard.com/india/news/bank-rescue-may-not-ease-spains-troubles-for-long/174321/on

12) China cut interest rates first time after 2008- Bloomberg/Financial Times http://www.ft.com/intl/cms/s/0/4d86b866-b092-11e1-a79b-00144feabdc0.html#axzz1xkWdYUpb

http://www.bloomberg.com/news/2012-06-07/china-cuts-interest-rates-for-first-time-since-2008.html 13) Financial studies set to become part of school curriculum- The Hindu Business Line

http://www.thehindubusinessline.com/industry-and-economy/article3516095.ece 14) Ad watchdog identifies 55 ads in May for possible misleading claims- The Hindu Business Line

http://www.thehindubusinessline.com/industry-and-economy/marketing/article3505006.ece?homepage=true&ref=wl_home 15) India frustrations send some foreign firms packing

http://in.reuters.com/article/2012/06/08/india-investment-exits-idINDEE85708Y20120608 http://www.reuters.com/article/2012/06/08/us-india-investment-exits-idUSBRE8570XV20120608

http://www.business-standard.com/india/news/fraport-to-exit-delhi-airport-by-next-may/476803/