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Wednesday, July 29, 2009
Tech exports seen rising 4-7 pct in FY10
India's software and services exports are seen rising 4 to 7 percent in the year to March 2010, sharply slowing from past years' robust growth on sluggish demand for outsourcing services, an industry body said on Wednesday.
Export of software and back-office outsourcing services will rise to $48 billion to $50 billion in this fiscal year, up from $46.3 billion last year, the National Association of Software and Service Companies (Nasscom) said.
A Nasscom spokeswoman said the growth in percent terms was calculated before rounding off the target of $48-$50 billion.
The sector's export earnings grew 16 percent in the fiscal year ending March 2009, having grown by more than 20 percent in previous years.
Nasscom said in a statement the demand environment remained weak and global information technology spending was expected to fall further this year and next, with Indian companies facing pricing pressure.
India's export-driven outsourcing companies have thrived for years by winning contracts from overseas clients, helped by a large pool of English-speaking engineering workforce and cheaper wages.
But a downturn in the United States, which accounts for more than half of the sector's export revenue, and turmoil in the global financial sector have halted the scorching pace of growth.
Infosys Technologies, India's No. 2 software services exporter, has forecast its first annual revenue fall for the year to March 2010 as some of its overseas clients cutback on outsourcing and demand fee cuts in a tough business environment.
Sector leader Tata Consultancy Services, Infosys and third-ranked Wipro offer services such as system integration, application development, supply chain design and back-office services.
The firms face stiff competition from bigger global rivals such as IBM and Accenture in winning large outsourcing deals.
Nasscom said total revenue of the export-driven sector, which employs more than 2 million people, grew by 13 percent to $58.8 billion in the year to March 2009.
Export of software and back-office outsourcing services will rise to $48 billion to $50 billion in this fiscal year, up from $46.3 billion last year, the National Association of Software and Service Companies (Nasscom) said.
A Nasscom spokeswoman said the growth in percent terms was calculated before rounding off the target of $48-$50 billion.
The sector's export earnings grew 16 percent in the fiscal year ending March 2009, having grown by more than 20 percent in previous years.
Nasscom said in a statement the demand environment remained weak and global information technology spending was expected to fall further this year and next, with Indian companies facing pricing pressure.
India's export-driven outsourcing companies have thrived for years by winning contracts from overseas clients, helped by a large pool of English-speaking engineering workforce and cheaper wages.
But a downturn in the United States, which accounts for more than half of the sector's export revenue, and turmoil in the global financial sector have halted the scorching pace of growth.
Infosys Technologies, India's No. 2 software services exporter, has forecast its first annual revenue fall for the year to March 2010 as some of its overseas clients cutback on outsourcing and demand fee cuts in a tough business environment.
Sector leader Tata Consultancy Services, Infosys and third-ranked Wipro offer services such as system integration, application development, supply chain design and back-office services.
The firms face stiff competition from bigger global rivals such as IBM and Accenture in winning large outsourcing deals.
Nasscom said total revenue of the export-driven sector, which employs more than 2 million people, grew by 13 percent to $58.8 billion in the year to March 2009.
Tirupati to get Rs 2,223-cr facelift
The temple-town Tirupati will get a facelift with the Centre including it in the Jawaharlal Nehru National Urban Renewal Mission scheme.
The State-level Monitoring Committee of JNNURM today approved Rs 2,223-crore comprehensive City Development Plan for Tirupati, Urban Development Minister Aanam Ramanarayana Reddy said. Under the project, Tirupati would get underground drainage system, n ew parks and enhanced drinking water supply. The town will also get 50 modern buses to cater to the needs of pilgrims, the minister said.
The State-level Monitoring Committee of JNNURM today approved Rs 2,223-crore comprehensive City Development Plan for Tirupati, Urban Development Minister Aanam Ramanarayana Reddy said. Under the project, Tirupati would get underground drainage system, n ew parks and enhanced drinking water supply. The town will also get 50 modern buses to cater to the needs of pilgrims, the minister said.
India May ‘Reverse’ Rate Cuts as Food, Energy Stoke Inflation
India’s central bank may start reversing its interest-rate cuts in early 2010 as food and energy prices fan inflation, after it kept borrowing costs unchanged yesterday to bolster economic growth.
“On the way forward, the Reserve Bank will have to reverse the expansionary measures to subdue inflationary pressures while preserving the growth momentum,” Governor Duvvuri Subbarao said. Inflation may “creep up” to about 5 percent by March next year compared with an April estimate of 4 percent, he said.
India is vulnerable to inflation as it relies on imported oil and demand for food from its 1.2 billion people exceeds supply. The People’s Bank of China said yesterday that inflation may rebound in the second half, while Australia’s central bank said its economy may recover faster than anticipated from the worst global recession since the Great Depression.
“India may be the first one to raise rates,” said Chetan Ahya, a regional economist at Morgan Stanley in Singapore. “The wholesale price inflation that India looks at will be closer to 6 percent by March 2010.”
HSBC Group Plc economist Robert Prior-Wandesforde and Macquarie Group Ltd. economist Rajeev Malik expect interest rates in India to be raised from about April. Nomura Securities Co. economist Sonal Varma brought forward her forecast of a rate increase to January from April.
Besides being buffeted by higher global commodity costs, inflation in India is also fueled by congested roads and ports and power shortages that add to the cost of doing business.
Power Shortages
Almost every manufacturer in India including carmaker Honda Motor Co. has invested in power back-ups because of frequent outages. Peak power shortage for the year ending March 31 will widen to 12.6 percent from 11.9 percent a year earlier, according to the nation’s electricity regulator.
India’s key wholesale price inflation index, announced weekly, has been negative for the six weeks to July 11. The central bank said this was a “statistical effect” as prices included in the gauge rose faster in the same period last year.
Consumer-price inflation is running at between 7 percent and 10 percent, driven by high food costs, according to indexes that measure the cost of living for industrial and farm workers.
Goldman Sachs Group Plc and HSBC say the central bank’s 5 percent inflation forecast is conservative and was likely to be exceeded due to higher costs of oil, food and other commodities.
“We suspect inflation will rise faster, reaching 6 percent to 7 percent by March next year, and that this will prompt a relatively aggressive tightening of interest rates through 2010,” said Mark Williams, international economist at Capital Economics Ltd. in London.
Oil, Sugar
Crude oil, which India imports to meet three-quarters of its needs, has gained 53 percent this year.
India, the world’s biggest consumer of sugar, may need to import at least 4 million metric tons in the year starting Oct. 1 to meet a supply shortfall, said Bajaj Hindusthan Ltd., the nation’s biggest producer by capacity. India is importing the sweetener for the first time in three years and sugar prices are at a three-year high.
Palm oil, of which India is the biggest importer in the world after China, has gained 26 percent this year.
Indian policy makers are not alone in grappling with the prospect of accelerating inflation.
The Chinese central bank said yesterday that inflation may rebound this year, with the consumer-price index bottoming in the third quarter.
Asset Bubbles
China needs to end an excessively loose monetary policy that threatens asset bubbles, overcapacity, bad loans and resurgent inflation, He Fan, a senior researcher at the Chinese Academy for Social Sciences said in Beijing yesterday.
He cautioned that pumping up economic growth in the short term could lead to the nation’s recovery being followed by a second slump. CASS is a government-backed think tank.
China’s consumer prices fell 1.7 percent in June, the fifth straight decline and the biggest drop since 1999.
India’s Subbarao, while flagging inflation concerns, also raised the central bank’s growth forecast to 6 percent “with an upward bias.” That prompted economists to interpret the policy as switching its focus from growth to inflation.
“The RBI is becoming cautiously optimistic on the growth outlook and more concerned about higher inflation,” Varma from Nomura said.
For now, Subbarao said the central bank will continue to provide an “accomodative” policy because growth, constrained by weak global demand for exports and poor farm production on account of scanty rains, may start to revive only after October.
“The RBI statement gives more support to our view that the central bank will start hiking interest rates in early 2010, due to latent inflationary pressures and strengthening aggregate demand,” said Tushar Poddar, an economist at Goldman Sachs in Mumbai.
“On the way forward, the Reserve Bank will have to reverse the expansionary measures to subdue inflationary pressures while preserving the growth momentum,” Governor Duvvuri Subbarao said. Inflation may “creep up” to about 5 percent by March next year compared with an April estimate of 4 percent, he said.
India is vulnerable to inflation as it relies on imported oil and demand for food from its 1.2 billion people exceeds supply. The People’s Bank of China said yesterday that inflation may rebound in the second half, while Australia’s central bank said its economy may recover faster than anticipated from the worst global recession since the Great Depression.
“India may be the first one to raise rates,” said Chetan Ahya, a regional economist at Morgan Stanley in Singapore. “The wholesale price inflation that India looks at will be closer to 6 percent by March 2010.”
HSBC Group Plc economist Robert Prior-Wandesforde and Macquarie Group Ltd. economist Rajeev Malik expect interest rates in India to be raised from about April. Nomura Securities Co. economist Sonal Varma brought forward her forecast of a rate increase to January from April.
Besides being buffeted by higher global commodity costs, inflation in India is also fueled by congested roads and ports and power shortages that add to the cost of doing business.
Power Shortages
Almost every manufacturer in India including carmaker Honda Motor Co. has invested in power back-ups because of frequent outages. Peak power shortage for the year ending March 31 will widen to 12.6 percent from 11.9 percent a year earlier, according to the nation’s electricity regulator.
India’s key wholesale price inflation index, announced weekly, has been negative for the six weeks to July 11. The central bank said this was a “statistical effect” as prices included in the gauge rose faster in the same period last year.
Consumer-price inflation is running at between 7 percent and 10 percent, driven by high food costs, according to indexes that measure the cost of living for industrial and farm workers.
Goldman Sachs Group Plc and HSBC say the central bank’s 5 percent inflation forecast is conservative and was likely to be exceeded due to higher costs of oil, food and other commodities.
“We suspect inflation will rise faster, reaching 6 percent to 7 percent by March next year, and that this will prompt a relatively aggressive tightening of interest rates through 2010,” said Mark Williams, international economist at Capital Economics Ltd. in London.
Oil, Sugar
Crude oil, which India imports to meet three-quarters of its needs, has gained 53 percent this year.
India, the world’s biggest consumer of sugar, may need to import at least 4 million metric tons in the year starting Oct. 1 to meet a supply shortfall, said Bajaj Hindusthan Ltd., the nation’s biggest producer by capacity. India is importing the sweetener for the first time in three years and sugar prices are at a three-year high.
Palm oil, of which India is the biggest importer in the world after China, has gained 26 percent this year.
Indian policy makers are not alone in grappling with the prospect of accelerating inflation.
The Chinese central bank said yesterday that inflation may rebound this year, with the consumer-price index bottoming in the third quarter.
Asset Bubbles
China needs to end an excessively loose monetary policy that threatens asset bubbles, overcapacity, bad loans and resurgent inflation, He Fan, a senior researcher at the Chinese Academy for Social Sciences said in Beijing yesterday.
He cautioned that pumping up economic growth in the short term could lead to the nation’s recovery being followed by a second slump. CASS is a government-backed think tank.
China’s consumer prices fell 1.7 percent in June, the fifth straight decline and the biggest drop since 1999.
India’s Subbarao, while flagging inflation concerns, also raised the central bank’s growth forecast to 6 percent “with an upward bias.” That prompted economists to interpret the policy as switching its focus from growth to inflation.
“The RBI is becoming cautiously optimistic on the growth outlook and more concerned about higher inflation,” Varma from Nomura said.
For now, Subbarao said the central bank will continue to provide an “accomodative” policy because growth, constrained by weak global demand for exports and poor farm production on account of scanty rains, may start to revive only after October.
“The RBI statement gives more support to our view that the central bank will start hiking interest rates in early 2010, due to latent inflationary pressures and strengthening aggregate demand,” said Tushar Poddar, an economist at Goldman Sachs in Mumbai.
FDI slips by over 43% to around $2.2 billion in May
India's foreign direct investment(FDI) declined by over 43 per cent to around USD 2.2 billion in May, 2009, compared to USD 3.9 billion in the same period last year on account of global recession.
"FDI was around USD 2.2 billion in May," Department of
Industrial Policy and Promotion Secretary Ajay Shankar told
reporters on the sidelines of a seminar organised by
CII-Institute of Logistics. And "we think that liquidity is improving and confidence in the economy is rising. These numbers (FDI) should pick up," Shankar said.
The government had scaled down the FDI target by USD 5
billion from USD 35 billion last fiscal. Cumulative FDI from
April 2000 to March 2009 stands close to about USD 90 billion.
Thanks to robust trends in the first six months of the
last fiscal, FDI in 2008-09 was USD 27.3 billion against USD
24.5 billion in 2007-08
"FDI was around USD 2.2 billion in May," Department of
Industrial Policy and Promotion Secretary Ajay Shankar told
reporters on the sidelines of a seminar organised by
CII-Institute of Logistics. And "we think that liquidity is improving and confidence in the economy is rising. These numbers (FDI) should pick up," Shankar said.
The government had scaled down the FDI target by USD 5
billion from USD 35 billion last fiscal. Cumulative FDI from
April 2000 to March 2009 stands close to about USD 90 billion.
Thanks to robust trends in the first six months of the
last fiscal, FDI in 2008-09 was USD 27.3 billion against USD
24.5 billion in 2007-08
Sun Pharma Q1 cons net profit down Rs 163.8cr
Sun Pharmaceutical Industries has announced its first quarter results. Its consolidated net sales were at Rs 787.6 crore versus Rs 1,041.8 crore. Its consolidated net profit was at Rs 163.8 crore versus Rs 501.4 crore.
ArcelorMittal Posts $792 Million Loss, Raises Output (Update3)
ArcelorMittal, the world’s biggest steelmaker, posted a third consecutive quarterly loss and said it plans to restart some shuttered output as demand recovers.
The second-quarter net loss was $792 million, or 57 cents a share, compared with net income of $5.84 billion, or $4.19, a year earlier, Luxembourg-based ArcelorMittal said today in a statement. The loss, which included $1.2 billion of inventory writedowns and provisions for job cuts, missed the $336 million median of eight analyst estimates compiled by Bloomberg. The shares slid as much as 7.9 percent, the most in two months.
“The second quarter was another challenging period,” Chief Executive Officer Lakshmi Mittal said in a conference call. “We are beginning to see more positive signals.”
ArcelorMittal, whose share price advanced 47 percent in the quarter, said this month it was restarting blast furnaces in Ghent in Belgium, Florange in France, and Gijon in Spain as customers buy steel to replace depleted inventories. The company shipped 17 million metric tons of steel in the second quarter, 43 percent less than a year earlier.
The shares were 1.025 euros lower at 24.30 euros as of 12:25 p.m. in Amsterdam trading. Earlier, they had their biggest intraday drop since May 21.
Higher Shipments
ArcelorMittal said today the first half will be “the bottom of the cycle.” The demand outlook is still “uncertain,” U.S. Steel Corp., the largest U.S. producer, said yesterday. Sweden’s SSAB Svenskt Staal AB posted its first loss in eight years on July 27 and said third-quarter earnings will be weaker. European demand is unlikely to recover until “well into 2010,” Moody’s Investors Service said last week.
ArcelorMittal forecast earnings before interest, tax, depreciation and amortization of $1.4 billion to $1.8 billion in the third quarter. Average steel selling prices will be stable or slightly lower, it said. Shipments will be least 1 million tons higher than in the second quarter, Chief Financial Officer Aditya Mittal said.
“If all the steelmakers increase production we’ll be back where we started,” Charlie Dove-Edwin, an analyst at MF Global UK Ltd. in London who has a “sell” recommendation on the stock, said by phone today. “There’s not enough real demand out here and making more steel will just send the price down.”
Return to Profit
Analysts predict a return to profit in the quarter as demand recovers and prices increase. The cost of hot-rolled coil, a benchmark steel product used in cars and construction, gained 4.2 percent in the second quarter, the first such increase in a year, according to data compiled by Metal Bulletin.
ArcelorMittal said it achieved annualized fixed-cost cuts of $8.4 billion at the end of the second quarter. Sales declined 60 percent to $15.2 billion.
The steelmaker said July 17 there was a “positive outcome” to its request to lenders to amend terms on $31 billion of loan facilities. The ratio of debt to Ebitda on the company’s principal facilities will rise to 4.5 in December and will fall to 4 in June and 3.5 in December 2010.
ArcelorMittal spent $3.8 billion on acquisitions since the start of 2008, according to data compiled by Bloomberg, to gain greater control over supplies of iron ore and coking coal.
The company, formed by the takeover of Arcelor SA by Mittal Steel Co. in 2006, produced 101.6 million tons of steel in 2008, 7.7 percent of the world total of 1.32 billion tons, the World Steel Association said on its Web site.
The second-quarter net loss was $792 million, or 57 cents a share, compared with net income of $5.84 billion, or $4.19, a year earlier, Luxembourg-based ArcelorMittal said today in a statement. The loss, which included $1.2 billion of inventory writedowns and provisions for job cuts, missed the $336 million median of eight analyst estimates compiled by Bloomberg. The shares slid as much as 7.9 percent, the most in two months.
“The second quarter was another challenging period,” Chief Executive Officer Lakshmi Mittal said in a conference call. “We are beginning to see more positive signals.”
ArcelorMittal, whose share price advanced 47 percent in the quarter, said this month it was restarting blast furnaces in Ghent in Belgium, Florange in France, and Gijon in Spain as customers buy steel to replace depleted inventories. The company shipped 17 million metric tons of steel in the second quarter, 43 percent less than a year earlier.
The shares were 1.025 euros lower at 24.30 euros as of 12:25 p.m. in Amsterdam trading. Earlier, they had their biggest intraday drop since May 21.
Higher Shipments
ArcelorMittal said today the first half will be “the bottom of the cycle.” The demand outlook is still “uncertain,” U.S. Steel Corp., the largest U.S. producer, said yesterday. Sweden’s SSAB Svenskt Staal AB posted its first loss in eight years on July 27 and said third-quarter earnings will be weaker. European demand is unlikely to recover until “well into 2010,” Moody’s Investors Service said last week.
ArcelorMittal forecast earnings before interest, tax, depreciation and amortization of $1.4 billion to $1.8 billion in the third quarter. Average steel selling prices will be stable or slightly lower, it said. Shipments will be least 1 million tons higher than in the second quarter, Chief Financial Officer Aditya Mittal said.
“If all the steelmakers increase production we’ll be back where we started,” Charlie Dove-Edwin, an analyst at MF Global UK Ltd. in London who has a “sell” recommendation on the stock, said by phone today. “There’s not enough real demand out here and making more steel will just send the price down.”
Return to Profit
Analysts predict a return to profit in the quarter as demand recovers and prices increase. The cost of hot-rolled coil, a benchmark steel product used in cars and construction, gained 4.2 percent in the second quarter, the first such increase in a year, according to data compiled by Metal Bulletin.
ArcelorMittal said it achieved annualized fixed-cost cuts of $8.4 billion at the end of the second quarter. Sales declined 60 percent to $15.2 billion.
The steelmaker said July 17 there was a “positive outcome” to its request to lenders to amend terms on $31 billion of loan facilities. The ratio of debt to Ebitda on the company’s principal facilities will rise to 4.5 in December and will fall to 4 in June and 3.5 in December 2010.
ArcelorMittal spent $3.8 billion on acquisitions since the start of 2008, according to data compiled by Bloomberg, to gain greater control over supplies of iron ore and coking coal.
The company, formed by the takeover of Arcelor SA by Mittal Steel Co. in 2006, produced 101.6 million tons of steel in 2008, 7.7 percent of the world total of 1.32 billion tons, the World Steel Association said on its Web site.
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