Hold Tata Motors, says Mohindar

Rahul Mohindar of Viratechindia is of the view that one can hold Tata Motors.

Mohindar told CNBC-TV18, "In Tata Motors I think a trading bottom has been found, Rs 120 to Rs 130 that is an area that is the bottom, which should probably stay for a couple of months. I think it is an interesting spot because we have got very good support when we go back into decades of history. My sense is from here this is not a level where you want to definitely short such a stock, which is already been beaten down 80-90%. So I think definitely it is a hold, its probably a buy on declines, from a short to medium-term if I am above Rs 150, which I am for the last couple of days, Rs 150 would work as a trend decider. So since we are above that one is fairly comfortable, one could head into Rs 220-230 as a target from a 3 to 6 months type of perspective. So I would probably hold a buy on declines with a stoploss much below Rs 150."

Buy Bajaj Hindusthan, target of Rs 85: Karvy

Karvy Stock Broking has maintained its buy rating on Bajaj Hindusthan with a target price of Rs 85 in its December 24, 2008 research report. "For Q4FY08 (standalone), Bajaj Hindustan Ltd (BHL) reported marginal revenue increase of 7.1% YoY (QoQ increase of 1%) to Rs 4.63 billion, 9.9% lower than our estimates of Rs 5.1 billion. We have revised our cane cost from Rs 132 to Rs 140 per quintal for FY09 and assumed cane cost Rs 145 per quintal in FY10."

"We have revised our sugar realization estimates from Rs 16.9 per kg to Rs 19.5 per kg in FY09 and assumed Rs 20.5 per kg in FY10. We have changed FCCB (Rs 5.3 billion) accounting from equity to debt considering significant deference between CMP and conversion price of Rs 465 per share. We have changed our valuation from EV/ Ton of Rs 0.31 to 0.8xBV (book value) due to high leverage (2.8X) and low earnings over next two years makes. We maintain BUY with target price of Rs 85 (previous Rs 140)," says Karvy's research report.

Buy IDFC, says N Pillai

Neppolian Pillai of Modern Shares & Stock Brokers is of the view that one can buy IDFC between Rs 56-46.

Pillai told CNBC-TV18, "IDFC within the non-banking financial company (NBFC) sector is a one stock we would try to back up with a buy. It has fallen from Rs 72. That is a one of the few stock, which has gone into a weekly buy. So these kinds of collapses like 13% yesterday at about Rs 58 are going to be buy opportunities. The range to buy will be anywhere between Rs 56-46. Though the range is broader, Rs 45 has been the all time low for this stock. So you take this Rs 10 band to buy into. I think eventually this stock is going to go towards Rs 72-77 again. So that should give an Rs 20 upside from here. So the next Rs 10 band on the downside will be a very clear buy on it."

He further added, "Unitech had a resistance between Rs 49-59, this time the top has been Rs 49 and it’s falling off from there. I think Rs 38-32 will be a trading band where one can probably again build a buy position there."

Disclosure: It is safe to assume that analyst and his clients may have an investment
interest in the above stock/sector.

Infosys BPO inaugurates second center in China

BANGALORE, INDIA: Infosys BPO Ltd, the business process outsourcing subsidiary of Infosys Technologies, today inaugurated its second delivery center in Hangzhou, China.

Amitabh Chaudhry, CEO and MD, Infosys BPO and Allen Lam, VP and Centre Head, Bangkok, China and Philippines inaugurated the new center.

"China is the center of choice for our customers in the APAC region as well as Infosys BPO's second global delivery hub," Amitabh Chaudhry said.

He added that it has seen rapid growth in the last two years and would continue to sustain its high growth over the next three years to become one of the most profitable international centres for Infosys BPO.

Infosys BPO's expansion plan in China is a step-up investment to leverage two years of success in transforming the China center into an alternative global hub for its customers.

"The second centre will extend our global brand into China with focused marketing and branding strategies and continue our vision to contribute significantly to Infosys BPO's revenue and profit," said Allen.

The new centre would seat up to 1,000 people, the release added.

And finally India goes 3G

NEW DELHI, INDIA: The Prime Minister of India, Dr Manmohan Singh, today launched the country's first third generation (3G) mobile services in New Delhi that will provide high speed transfer of voice, data and video.

He also inaugurated India Telecom 2008, India's leading international conference and exhibition for the entire telecom system.

The two-day event is jointly organized by Department of Telecommunications and FICCI. The Prime Minister released a report prepared by Capgemini, the knowledge partner for this year's Telecom summit on the Indian telecom market.

The Minister for Communications and IT, A. Raja made a video call to Dr. Singh using a 3G enabled handset signaling the debut of the high quality service in India.

The video streaming applications like 'live TV' was also demonstrated at the inauguration. The public sector MTNL is rolling out the 3G service in the capital making use of the necessary Spectrum allocated to it by DOT. The services will be available early next year in Mumbai and Chennai.

MTNL has used Motorola's next-generation 3G network infrastructure to implement the service. Speaking on the occasion, A Raja announced that within one year, all mobile phone subscribers in the country can switch from one operator to another operator providing better services while retaining their numbers.

He informed that the DOT has accepted the Mobile Number Portability recommendations, which were pending since 2006.

MNP is likely to be implemented in the Metros and category "A" circles by middle of 2009 and in the entire country by the end of 2009. Raja said that after migrating to revenue sharing regime, the telecom sector has contributed about Rs 50,000 crore through license fee, entry fee and spectrum charges till the end of last financial year.

During this financial year alone, it is expected that about Rs 16,000 crore will be collected from the license fee and spectrum charges, he added.

On the issue of new licenses, the Minister explained that the policy of "NO Cap" on number of service providers in a service area has been adopted as per the recommendations of TRAI.

On further reduction of tariff, he said, TRAI has been requested to re-look into the existing Mobile Termination Charges, as the cost per line has substantially reduced due to technological advancement and increase in traffic.

Minister of State for Communications and IT, Jyotiraditya M. Scindia and FICCI president Rajeev Chandrasekhar also attended the function.

Is Nortel on the verge of bankruptcy?

SAN FRANCISCO, USA: Networking equipment giant Nortel Networks Corp, which faced heavy loss in the third quarter, is seeking legal advice to explore the possibility of filing for bankruptcy protection should its planned restructuring fail, The Wall Street Journal reported on Wednesday.

Nortel, which was Canada's largest company till recently, has hired a legal counsel to explore bankruptcy protection, it said.

Nortel, however, still hopes that its restructuring plan will suffice to keep the company out of court, the newspaper said.

The company had reported a huge loss of $3.41 billion in the third quarter and its revenue fell to $2.32 billion.

However, a spokesman for Nortel said there was no imminent bankruptcy filing, WSJ said.

Meanwhile, National Bank Financial analyst Kris Thompson said Companies' Creditor Arrangement Act (CCAA) protection is premature at this point.

"With no short-term debt obligations and the possibility that Nortel can successfully restructure, we would not expect CCAA as a near-term consideration by the company," he said in a research note.

Nortel needs to take more time to sell one or more of its division before considering CCAA protection, he opined.

Financial crisis not to melt down offshoring

MUMBAI, INDIA: In the time of global economic meltdown, American companies feel it is better to continue their current strategies of outsourcing some functions, says a recent study.

According to a research by the Center for International Business Education and Research's Offshoring Research Network (ORN) at The Fuqua School of Business, Duke University and PricewaterhouseCoopers. The ongoing study mainly focuses on the effects of offshoring trends on American competitiveness.

It says that the financial downturn may even accelerate outsourcing plans. The survey, designed to capture business managers' sentiments in the midst of the economic crisis and the presidential election, was conducted during the first two weeks of November and queried nearly 100 firms from the US and Europe about their plans to source some job functions and business processes offshore, said a press release.

The survey on offshoring trends suggests that while cutting labour costs is the most significant factor driving offshoring decisions since the worldwide financial crisis gained momentum this quarter, many survey participants noted an increased urgency to improve efficiencies.

"Our research shows as companies grow the scale and scope of sourcing programs, average efficiency decreases," said Arie Lewin, professor of strategy and international business and executive director of CIBER. "Enhancing efficiencies has become more urgent in recent months as pressure on margins forces companies to increase productivity while spending less."

To cope with the slumping economy, companies plan to enhance efficiencies through business process redesign and by improving coordination and integration of offshoring processes, the study said.

"Redesigning business processes is not equivalent to end-to-end process re-engineering, which requires a significant commitment of resources and time," added Hari Rajagopalachari, executive director, PricewaterhouseCoopers.

"Our findings indicate companies can't wait that long and can't spare those resources; they want to improve their existing organizational capabilities for managing their offshoring strategies."

Forty-one percent of respondents report increasing speed to market is becoming a more important driver of offshoring. Meanwhile, access to qualified personnel has not increased in importance, partly because rising unemployment is widening domestic employment pools.

As a result of the global economic crisis, renegotiating current contracts with service providers is emerging as a growing concern among companies.

Forty percent of companies said they have pressured or plan to pressure providers to offer more favorable contract terms in order to trim costs, the release said.

India’s stimulus package

Finally it’s here
After the RBI’s stimulus package announced on Saturday, it was the turn of the government. The central government introduced a 10-point Rs 320 bn package on Sunday to stimulate the Indian economy. Of this, infrastructure spending to the tune of Rs 200 bn over the next four months is on the cards. Central valued added tax has been cut by 4% across the board, other than valued added tax. Labour intensive exports such as textiles will receive sops. Small scale industries will be eligible for funding without collateral to the tune of Rs 10 m per entity.

The reaction to the package, has however, been lukewarm from the industry, which was expecting an even larger package. Although the government has not ruled further steps, it operates under severe fiscal constraints. It may be noted that the Rs 320 bn push will nearly double India’s fiscal deficit from an earlier projected 2.5% to 5% by the end of FY09. When viewed in combination with the RBI’s actions, we believe the effort definitely points towards the right direction. In fact, public sector banks are likely to announce measures to support home loans up to of Rs 2 m.

Obama will spend too...
It is not just China and India which plan to spend their way out of a slowing economy. The US, where the situation is much graver, has plans of its own. As per a leading business daily, President elect Barack Obama has said he will make the single largest new investment in roads, bridges and public buildings since the Eisenhower administration’s interstate highway program. While doing so, he intends to keep a close eye on results rather than just throwing money at the problem. Those states which do not use the money quickly stand to lose their share.

The thrust of his program will be towards aiding 2.5 m jobs. This is not surprising given that November 2008 witnessed the biggest decline in US jobs in 34 years. While a healthy US economy benefits global commerce including India, the focus on job losses is likely to darken the clouds building up on the poster child of India’s growth story - IT. 

RBI’s stimulus package is here

RBI’s stimulus package is here

While the recent inflation numbers have not particularly been a cause of worry for the RBI, a moderation in the real GDP growth, slowdown in industrial and infrastructural activity, muted prospects of growth in service sectors (hospitality, tourism, IT services, financial services) and absolute decline in exports for the first time in seven years seem to have necessitated a stimulus.

The RBI’s recently released data indicate that the demand for bank credit has slackened in November 2008 (from 25% YoY growth during the period April to September) despite comfortable liquidity. Higher input costs and dampened demand have also dented corporate profitability while the uncertainty surrounding the crisis has affected business confidence.

The following are some of the key highlights of the package

• The central bank has once again tweaked its oft-used tools of monetary policy to offer additional liquidity to the banking system. It has reduced the repo rate (rate at which it lends to banks) by 1% from 7.5% to 6.5% and the reverse repo rate (rate at which banks lend to RBI) by 1% from 6.0% to 5.0%, effective December 8, 2008. 
  
  

• To enhance credit delivery to the labour- intensive micro and small enterprises (MSE) sector, the RBI will provide refinance facility to the tune of Rs 70 bn to the Small Industries Development Bank of India (SIDBI) that is the prime financer to such enterprises. 
  
  

• To bring some relief to the real estate and housing finance sector, the RBI has allowed loans granted by banks to housing finance companies (HFCs) for lending towards houses costing less than Rs 2 m to be classified under priority sector lending. However, the eligibility under this measure will be restricted to 5% of the individual bank’s total advances. This dispensation will apply to loans granted by banks to HFCs up to March 2010. A refinance facility of Rs 40 bn is also being worked upon for the National Housing Bank (NHB) to lend directly to HFCs. Further to prevent banks from accumulating large real estate - linked NPAs, the RBI has extended an ‘exceptional/ concessional treatment’ to loans disbursed to the sector that are currently delinquent but can be restructured by June 2009.
  
  

• Proposals have also been put forward for easing credit to exporters and allowing repayment of foreign debt by Indian corporates.

While the package essentially caters to the sectors that are currently under stress, the central bank is hopeful that it will extend some respite to the others that have the potential to shoulder the revival of the economy during the slowdown.

Mere desh ki galti

"Mere desh ki dharti", proclaimed Manoj Kumar in the classic Upkar "will sprout gold, diamonds, and pearls."

But that was the patriotic Mr. Bharat.
The market cap focused Mr. India had other plans.
Large chunks of land were cornered by a few - with much help from friendly sources with political connections.
Land banks were built.

The sona, heeray, aur moti from the glorious land of India that was supposed to benefit all was hastily converted into Special Economic Zones.
The only thing "special" about these zones was that it was an area of land where the economic interest was to be shared by a few "special" people.

Sometimes these tracts of land were to be developed into massive townships that would give abnormal profits to the few. India has a housing shortage and the real estate developers were doing us all a favour by going through the painful process of jumping through the hoops of 62 approvals to give us our homes.
Of course, each of those 62 approvals was an opportunity to share the spoils and act as a barrier to competition. The end product - priced on the basis of "super built-up area" graciously asked us to pay for the price of air on which our dreams float.

For those with connections in the seedy corridors of power, the slum rehabilitation projects in crowded cities like Bombay were tweaked to create fictitious tenants.
These re-allotments would help enhance profits of the developers.

Brand name, reputation, and religion have little meaning when it comes to the world of money - the profit motive is the ultimate objective.

The slogan shouting of roti, kapda, aur makaan and the love for the "aam aadmi" are, eventually, slogans. Governments - across the political spectrum and across various time periods - have made a mockery of India’s need for housing with the land melas that have favoured the few at the cost of many.

Government steps in
But not every plan ends up the way it was supposed to.
Not every racketeering scheme generates the profits that were envisaged.
And so it is true with the real estate "business".
The mighty, with all their connections and all their exchanges of bagfuls of money, built these land banks - but don’t have the buyers.
The "discounted cash flow" model that was used by them to generate bubble-level share prices of their unreal estate companies has, well, been discounted to a fraction of what they were trading at.
The balloon has deflated.
A land bank is now a sinking hole.
Debts have to be repaid and interest needs to be paid.
Every month.

And no sane bank is willing to lend to the real estate developers.

So, what is the solution? That’s an easy one: use the political system to be bailed out.

Over the past few years, the Reserve Bank of India was trying to control the amount of money made available to real estate. And the cost of that money.
Now they are making a u-turn.
Statements from the usual, suspect politicians - possibly with connections to the real estate industry - are nudging the RBI to open the tap and ensure that loans are given to real estate companies.

These companies, after all, have the "sona, heeray, and moti" to be harvested.

Redefine the product
We are on a strange road in real estate. India has a shortage of tens of millions of homes. And, yet, the real estate companies are sitting on dud projects. They cannot sell anything. They are in deep trouble. They needed the help of the political friends to get the land banks and now they need the help of their political friends to ensure that the banks don’t end up seizing their land!
But, sadly, the shortage of homes still exists.

Mr. Chidambaram, when he was the Finance Minister, had a solution: "if they (the car manufacturers and home developers) cut prices I am sure that the demand will increase sharply. The ball is in their court."

This seemed like a reasonable solution. If you cannot sell something at a higher price, reduce the price and a buyer will emerge at some price.
But there is a problem with that solution: the profits that every real estate developer and investor thought they had would be wiped out. And the banks that lent all that money to real estate companies? Ouch! They would be hurt even more.

The developers went on the offensive. Their alternate solution was to have the RBI give them more money at lower cost - and also extend this courtesy to the potential buyers. Rather than accept that they had built over-priced product that could not be sold, they said "lack of availability of credit is the reason why demand is down. There is room for interest rate reductions on home loans to the 7% and 8% levels that existed 2 years ago."

So the rape of the desh ki dharti goes on. The politicians have stepped in to rescue the real estate developers and revive their disappearing profits. This means that you, dear customer, are the one paying the higher price for sub-standard housing sold on a super-built-up basis. But don’t worry - the banks will be more than willing to lend you money at these artificially high prices.

The new age banks will like that increase in activity. They are not used to sitting quiet. They miss the days when they lent money to those who cannot afford to repay the loans. Their "let’s go and get market share" model is at risk.
Promotions and bonuses are due. Something needs to be done to show how brilliant they are.

I don’t know, dear reader, I don’t know.

We seem to be willing to reward people and companies who nearly blew up the economy; who followed a growth for growth’s sake business model; who had this urge for market share.

The dangers of that business model are all around us. And before we have recovered from the first mistake, we are about to make another big banking bet by turning on the tap of cheap home loans for overpriced real estate. Just to save the profit margins of the real estate developers and their partners in the political establishment.

Don’t get me wrong. Giving loans at lower interest rates for buying homes is a great idea. But first the developers need to reduce the prices of their properties by 40% to 50%. The "political connection" premium linked to real estate projects needs to be eradicated.

Maybe the Finance Minister became the Home Minister to save us from the terrorism of artificially high real estate prices and to ensure that we get our homes a lot cheaper. Maybe.