India's limousine on its way - The 5 Minute WrapUp by Equitymaster
Investing in India - 5 Minute WrapUp by Equitymaster

India's limousine on its way 

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In this issue:
» Prima, India's limousine from Tata Motors
» Bill Gates is the world's richest person
» China will suffer the most
» UBS is 'extremely cautious' for 2009
» ...and more!

Tata Nano, which debuts in India later this month, will also be launched in the European markets sometime in 2010-11. This became evident at the recently held Geneva Motor Show, where its European sibling, Nano-Europa, a car with additional safety and comfort features than the Nano had become the cynosure of all eyes. Of course, the cost of the car will also go up but as per Ratan Tata's own admission, the company's aim would be to still have a fantastically priced car, lower than anything else in the market. The company's chairman was speaking to a leading auto industry magazine along the sidelines of the motor show and the Nano was not the only thing on his mind. He also spoke about a luxury car, Prima that is about to come out of the company's stable over the next 2-3 years and the company's plans to make it India's very own high-end limousine. On Jaguar Land Rover, the soft spoken Tata reiterated his stand that exciting times lie ahead for the iconic brands and also spoke about putting up a distribution network in place for them in India just as it is doing for Fiat currently. With the kind of plans the company has up its sleeves, the possibility of the company making a quick turnaround is getting stronger by the day.

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Jim Walker says that the recession will hit China the hardest. In an interview to a leading business daily, the founder of Asianomics says although many analysts are talking of a recovery in China, the situation is quite the opposite. Not only have Chinese exports declined, imports have collapsed - indicating falling domestic demand. Moreover, he believes that the private investment in the Chinese industrial sector has resulted in massive overcapacity. As a result, fresh investments will contract sharply. As for the 4 trillion Yuan stimulus package, he says, "The biggest danger is that it will go to the wrong industries and the wrong places, not the ones that are efficient or profitable, which means eventually they will become bad debts in the banking system."

As per Forbes, the number of billionaires around the world has shrunk by 30% from 1,125 a year ago, to 793 now. Bill Gates is still the world's richest man, despite losing US$ 14 bn last year. He is now worth US$ 40 bn. Warren Buffett is the second richest having lost US$ 25 bn to register at US$ 37 bn. Mukesh Ambani and Lakshmi Mittal are placed at number 7 and 8 in the list of billionaires with net worth of US$ 19.5 and 19.3 bn respectively. Clearly, the crisis has taken a toll on the very rich.

T.V. Mohandas Pai, head of human resources at Infosys says, "The market is cold and there are fewer jobs, for the next two or three years, salaries will be low." As quoted in a leading national daily, he believes, "Good people will not be laid off but the key challenge is compensation." However, headhunters believe that the job market will improve by the end of the year and compensation levels will be back on track. Only time will tell which of the two views turn out to be correct.

UBS announced a loss of US$ 18 bn for 2008, a bigger loss than expected. It also warned investors that its outlook for the coming year remained 'extremely cautious' due to risk from illiquid and volatile markets. In contrast, Citi has said it was profitable in the first two months of this year, easing fears about the US banking sector.

As per a leading business daily, the Institute of Chartered Accountants of India last week postponed the decision to relax the accounting standard 11 (AS-11) provision on mark-to-market (MTM) losses on foreign exchange fluctuations. Apparently, the decision was made on the grounds that it should not do anything that will be seen as benefitting a section of the society or the industry, in view of the upcoming national elections. It may be noted that around 150 Indian companies, who had raised overseas debt when the Indian rupee was relatively stronger, will have to book MTM losses with the currency touching 51 against the US dollar. In fact, several companies have instead chosen to deduct the loss from the cost of fixed assets as per the Schedule VI of the Companies Act.

India's national carrier, Air India (AI) has topped the list of 79 international carriers that operate to and from India during the December quarter in terms of both passenger carriage and aircraft movement. AI reported a 24% market share of international traffic in October-December quarter, while Emirates followed with 10.3% share. Jet is third on the passenger movement list with 9% market share, while Kingfisher, which started international operations late last year, figures at number 46. This comes as good news for the Maharaja, which is facing huge losses and pressure on volumes due to economic slowdown and higher competition.

Former US Fed chairman Alan Greenspan says that his 'easy money' policy should not be blamed for the housing bubble. In an article on the Wall Street Journal, he wrote that the growth in China and other emerging markets led to excess savings and pushed interest rates down. In fact, he says that house mortgage rates got 'decoupled' from benchmark Fed-funds. Hence, the US Fed could not have prevented the bubble even if it had tried.

Everyone is familiar with the adage 'Prevention is better than cure.' But this will now be apparent all the more in the Indian pharma industry where the vaccines market is poised to grow by leaps and bounds. This is in sharp contrast to the scenario a few years earlier when vaccines were perceived to be a low margin business compelling many pharma companies to shun this segment. Now MNC pharma companies, which have a strong presence in the global vaccines market, are beginning to show visible interest in the growth potential of vaccines in India too. As reported in a leading business daily, at US$ 900 m in FY07, the Indian market represents one of the fastest growing vaccines market globally. There are a plethora of factors that will support the growth of this therapeutic segment such as increasing private and public healthcare expenditure, the birth of 25 m babies every year and increasing incidence of diseases. Amongst the MNC companies in India, GSK Pharma is already a very strong player and will most likely face stiff competition in the years ahead from Aventis, Eli Lilly and now even Pfizer (after the latter acquired Wyeth).

"An election cannot give a country a firm sense of direction if it has two or more national parties which merely have different names but are as alike in their principles and aims as two peas in the same pod." These are the words of Franklin D. Roosevelt, the 32nd President of the US, and are very close to the truth for India, where we have political parties with different names but similar ideologies contesting against each other.

Anyways, we Indians continue to look forward to the coming elections to see if the next coalition government can give us some sense of the direction we are moving in. Indian companies, in fact, are asking their employees to go and vote on the election day, given the angst they have against the current political bosses and their handling of the nation's financial, economic, and security issues.

As reported by The Times of India, "FMCG major Hindustan Unilever has internally sent out mailers, providing information on the electoral process and detailed FAQs list like how to get registered, what forms to fill up, where to collect voter identity cards, among other things." Vote, India vote!

Call it a mass exodus or a brain drain or a bursting bubble, but what the global investment banking sector is witnessing currently is something that the current generation of bankers will recollect for long. While Wall Street has announced thousands of layoffs since the beginning of the financial crisis, investment bankers are seeing their clan extinguish with the US government's intervention in the financial sector. The close scrutiny of the banks' book has spelt the end of the big-paycheck culture that had pervaded the firms for long. While some veteran investment bankers are reportedly trying to look for alternative vocations, there are many who do not wish to remain associated with the industry anymore. The best of B-Schools are no more allured by the fancy offers that these banks had to make until last year. And techies may finally find it more sensible to work on mechanics and coding rather than lock M&A deals.

Speaking of B-Schools, until last year PSUs were generally looked down upon by freshly minted MBAs. No longer. PSUs were the top recruiters at most top Indian B schools this year. How the tides change!

The slowdown seems to have had no impact on the IPL. As per a leading national daily, the contracted revenues for the season 2 are reported to be over Rs 100 bn, an increase of Rs 18 bn over last year. However, the security cost is also set to increase 10 times.

The Indian benchmark index, the BSE-Sensex gained over 2% today amidst a conflicting backdrop of lower inflation and negative IIP data. Inflation fell to 2.43% for the week ended February 28, the lowest since 2002. In fact, inflation is expected to enter the negative territory by the end of this fiscal due to a contraction in demand. Most of the Asian indices witnessed declines. All the major European indices are also trading in the red currently, as companies posted disappointing results and Japan announced its economy having shrunk at an abysmal rate in the December quarter. While crude oil rose on the back of speculation OPEC may cut output again, gold remained flat.

04:58  Today's investing mantra
"The best assets you can have during inflation are your abilities." - Warren Buffett
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