India Inc cuts jobs, frills to stay in shape

NEW DELHI/MUMBAI: Layoffs, firings and salary cuts are increasingly becoming all too common across India Inc, highlighting a deepening slowdown in the economy that has forced companies to take the knife to costs to protect their bottom line.

From banking and finance to aviation, from manufacturing to information technology, no sector appears immune, as companies look beyond hiring freezes to job cuts, mirroring a trend across much of the developed world which has seen tens of thousands of people out of employment.

Admittedly India, among the few major global economies that will see respectable GDP growth this year, may not see job losses quite like that being felt in the West, it has nevertheless got policymakers worried.

Prime Minister Manmohan Singh earlier this week urged industry to desist from laying off people and promised to cut interest rates and levies to shore up the economy. The Reserve Bank of India (RBI) has already turned its attention to driving up growth from containing inflation, and cut key reserve ratios for banks and a short-term interest rate, signalling a bias in favour of lower rates.

Yet on Friday, news about job cuts came in from different directions. L&T Infotech, a wholly-owned subsidiary of the country's largest engineering company Larsen & Toubro (L&T), is shedding up to 5% of its workforce of nearly 10,000 employees, according to market sources.

"Rather than give out pink slips, people are being forced to hand in their resignations," said one person familiar with the development. The company declined to comment, but the move has a worrying significance considering that L&T Infotech gets much of its revenues from the manufacturing sector and outside the crisis-hit financial services industry.

The financial sector continued to see more blood-letting, as the blows from the axe wielded in New York and London were felt in India. The Indian arms of Goldman Sachs and Credit Suisse started retrenching employees while Merrill Lynch's operations in the country saw the second wave of firings.

On Thursday, Goldman slashed its workforce by close to a dozen in its Mumbai office, which has close to 100 employees. Goldman Sachs has also lowered headcount at its Bangalore operations by around 30.

There were grim warnings from the country's textile sector, where the industry body, the Confederation of Indian Textile Industry (CITI), said some 7,00,000 people had lost their jobs so far this year, and 5,00,000 more were likely to go in the next 2-3 months.

A majority of layoffs have affected daily-wagers who constitute about 25-30% of a company's workforce. The Indian textile industry employs some 35 million people. "Mills are running for hardly 3-4 days a week, or operating just 75% of their capacities or have reduced shifts from three to one," said CITI secretary general DK Nair.

Overseas, the gloom on the job front continued unabated as fund manager Fidelity Investments became the latest to announce that it was cutting nearly 1,300 jobs and warned of more layoffs early next year in response to declining markets.

Friday's closely-watched jobs data out of the US showed that employers cut payrolls by a much steeper-than-expected 2,40,000 jobs in October, as unemployment rate shot up to its highest in more than 14 years, Reuters reported. The US Labour Department's report showed that last month's job cuts followed a steeply revised cut of 2,84,000 in September, the most severe monthly loss since November 2001, just after that year's September terror attacks, the agency added.

Meanwhile, Indian steelmaker Tata Steel slashed about 400 jobs in the UK and Ireland at its Corus Steel unit, citing poor business conditions as a result of the slowdown in the steel industry. However, Tata Steel has firmly ruled out any job cuts at its Indian operations.

 

 

Source: ET

Brokerages Feel The Heat; Q2 Profits Down By 57%

A study of 10 brokerages shows that net profits are down 57% compared to the same period last year.

Broking and I-banking firms have started feeling the real heat of the bear market. A VCCircle analysis of the latest quarter results of ten broking firms show that while these companies had reported double digit decline in net profit in the previous quarter (April-June'08 vs Q1'08) itself income from operations was still growing. However, in the last quarter(Q2'09) income generation also dropped down while profits have more than halved.

The study included top firms such as Indiabulls Securities, Edelweiss, India Infoline, Geojit Securities and JM Financial besides Emkay Global, Networth, JRG Securities, IL&FS Investsmart and Pioneer Investcorp. The study left out companies for which comparable data was unavailable for the entire period.

During Q2'09, the ten companies in the sample reported aggregate net profit of Rs 84 crore on net sales of Rs 643 crore. While income from operations is down 10% compared to the same period last year, net profits are down 57%. During Q1'09, the same firms had recorded 30%
growth in net sales(Y-o-Y) with 10.4% decline in net profit.

Worse still, even operating profits have turned turtle. As against 11.8% growth in operating profit during Q1, the firms' operating profit slumped 27% during Q2. This is now reflecting in job cuts and branch closures in the broking space.

Looking at a sequential picture ie., financial figures of the companies during Q2'09 compared to Q1'09, net sales has come down by 3.6%, operating profit is down 7.3% and net profit has shrunk by 35.8%.

The good news is that the majority of firms are still afloat despite reporting drop in profits. Just two broking firms IL&FS Investsmart and Networth Stock Broking reported net loss. The only two companies which actually reported a growth in net profit Y-o-Y during the last quarter were India Infoline and Pioneer Investcorp.

World has 100 days to fix crisis: EU leaders

European Union leaders backed a 100-day deadline by which the world's leading economies should decide urgent global finance reform s, French President Nicolas Sarkozy said on Friday.

Sarkozy, who chaired a special meeting of EU nations, said the financial crisis and economic downturn required a quick deal on an overhaul at a Nov 15 summit in Washington bringing together leaders of the world's 20 largest industrialized nations and emerging economies.

"We are in an economic crisis. We have to take this into account," Sarkozy said. "We have to react and we have no time to lose." "I'm not going to take part in a summit where there is just talk for talk's sake," Sarkozy told reporters after talks between the heads of the EU's 27 nations.

The EU is calling for a second global summit next spring to flesh out changes to the way the world economy is governed. They want to see far more supervision of big financial companies and are urging governments to jointly monitor them.

They want to prevent a repeat of the Wall Street excesses that caused havoc in markets worldwide, and are bringing emerging economies China, India and Brazil on board for talks on shaping a new world economic order.

British Prime Minister Gordon Brown said the Washington talks should be a "decisive moment for the world economy." A text agreed by EU leaders says they want an early warning system that would watch for financial bubbles and prevent ``world imbalances'', such as the swelling US trade deficit.

They also suggest making the International Monetary Fund the world's financial watchdog, suggesting it be given more power to curb financial crises and give more money to aid countries in trouble.

The Europeans also want to close loopholes that allow some financial institutions to evade regulation, and ensure supervision for all major financial players, including ratings agencies or funds carrying high amounts of debt.

The leaders in a declaration called for greater transparency in markets that would no longer omit "vast swathes of financial activity from auditable, certifiable accounts." It also said "excessive risk-taking must be overhauled," a reference to the sale of high-risk debt securities and executive pay that may reward risk-taking.

EU leaders will call on the Nov 15 summit to agree immediately on five principles: submit ratings agencies to more surveillance; align accounting standards; close loopholes; set banking codes of conduct to reduce excessive risk-taking; and ask the International Monetary Fund to suggest ways of calming the turmoil.

To date, European governments alone have committed some 2 trillion euros ($2.6 trillion) in cash injections, bank deposit guarantees, interbank loan coverage and partial or full nationalization to prop up consumer and business confidence.

The damage done worldwide is fueling a search for a "new Bretton Woods", a reference to the post-World War II conference that shaped the international financial system.

In Washington, there is little desire in the waning days of the Bush administration for a major overhaul of financial regulations. But the United States and European nations are no longer the only players. China and Brazil and India are jumping at the chance to join a major international effort.

G-20 finance officials nations will meet this weekend in Sao Paulo, Brazil, to prepare next week's summit. This may pave the way for emerging economies to play a larger role in global finance talks. France is suggesting bring them on board as members of the exclusive world club of G-8 industrialized nations which regularly meets to discuss the global economy.

 

 

Source: ET

Global recession has begun

Global recession has begun

LONDON: Yesterday's bleak reports on the state of US and European manufacturing confirmed that a global recession has already begun. The Institute of Supply Management (ISM)'s composite business activity indicator plunged for the second month to 38.9 - far below the 50-point threshold dividing expanding activity from a contraction, and the lowest level since September 1982. The 11-point plunge in the index over the last three months (Aug-Oct) has been equalled on only four occasions since 1945 (1949-50, 1959-60, 1974 and 1980-81). It dispels any remaining doubt that the United States has already entered recession - which the National Bureau of Economic Research (NBER) defines as "a significant decline in economic activity, spread across the economy, lasting more than a few months". The economy has been in troubled for more than a year. Manufacturing output peaked in Jul 2007 and had fallen 2.3 percent by Aug 2008 according to estimates published by the Federal Reserve. Private sector jobs peaked in Nov and were down 0.7 percent by Aug. Repeat claims for unemployment insurance had risen almost 1 million over this period, and the number of people in desperate poverty receiving help under the federal government's Aid to Families with Dependent Children (food stamp) program surged almost 2.5 million. But until the last two months, problems had been largely confined to the motor manufacturing and construction sectors. While production of cars and light trucks declined 28 percent between July 2007 and August 2008, output of other durable items intended to last at three years or more actually rose, albeit by a marginal 0.4 percent. Nonfarm businesses eliminated 815,000 positions on a net basis between November 2007 and August 2008. But most job losses were recorded in construction (-360,000) and motor manufacturing (-105,000) with fairly modest losses spread across the rest of the manufacturing and service industries (-349,000). THE DOWNTURN SPREADS In the last two months, however, the downturn has widened to the rest of the economy as growing financial turmoil and a darkening outlook have caused households and businesses to prepare for a long and deep slump by retrenching. Retail sales have fallen in each of the last three months (Jul-Sep). But the Census Bureau measures sales in cash terms rather than by volume, so the headline numbers tend to be distorted by changes in the price of gasoline, as well as financing programmes and deep discounting designed to shift auto inventories. A better guide to the underlying strength of the consumer sector is "core sales" of items other than autos and gasoline. Core sales fell in both August and September, the largest cumulative decline since the immediate aftermath of the attacks on the World Trade Centre and Pentagon, the first consecutive monthly decline in more than a decade. Core sales have risen on average just -0.12 percent in each of the last 12 months. Since even core inflation has been running faster than this, sales volumes have been flat or falling for a year. But the pace of decline has accelerated sharply in recent weeks. Slowing consumer spending and business investment is now working through to falling output. Manufacturing production slumped in September (-2.7 percent) and for the first time losses were concentrated outside motor manufacturing (-3.0 percent) as producers responded to falling orders by slashing output to prevent a build up of unsold inventory. ISM reports that 46 percent of survey respondents reduced production and 40 percent cut employment last month. Even so, 52 per cent of manufacturers reported a fall in new orders and 50 percent reported shrinking order books. The pace of job losses picked up sharply in September, with private-sector employers eliminating 168,000 positions (net basis) and most of the job cuts coming from industries other than construction and autos (-115,000). The market is braced for a further big fall in nonfarm employment when data for Oct is published on Friday. The downturn is now spreading internationally. Purchasing surveys show declines in output, orders and employment in all three of the major eurozone economies last month. The European Commission has already accepted that the eurozone economy is in recession. In the United Kingdom, with its construction and financial-services dependent economy, real gross domestic product fell 0.5 percent during Q3. Japan's economy was already shrinking in Q2 and the slide looks set to intensify during Q3, with the purchasing index falling further and further into negative territory. The main bright spot in an otherwise gloomy picture is continued growth in China and some of the other emerging economies of Asia and the Middle East. But even here, there are signs that export-led economies are slowing as the recession hits their main customer-base in North America and Western Europe. INFLATION RETREATS The other bright spot is a sharp reduction in inflationary pressure as the price of energy and other raw materials pulls back sharply from the summer's highs. For the first time since October 2006, the ISM's survey found more commodities declining in price (12) than rising (5) last month. ISM reported widespread falls in the price of energy (diesel and natural gas), steel (stainless and cold-rolled coil), and base metals (aluminium, nickel, zinc and copper products). Falling commodity prices will ease some upward pressure on manufacturing and transportation costs, and relieve the squeeze on margins. But it is unlikely to provide a substantial cushion for corporate cash flows amid a steep fall in demand, and further substantial reductions in output and employment appear inevitable in the next 3-6 months, intensifying the recessionary dynamic. The swift turn in the business cycle has banished fears of inflation and enabled central banks to focus policy on supporting the banking system and restarting growth. The global rate cycle has clearly peaked, with rate reductions in the last month across the United States, Canada, Eurozone, United Kingdom, Japan, Switzerland, Australia, New Zealand and China. But with the massive overhang of debt inherited from the boom years (especially in the United States and the Anglo-Saxon economies), bank balance sheets severely impaired, and extreme uncertainty about the outlook, demand for credit and lending activity looks set to remain weak, despite reductions in policy rates. A broad-based recession has already begun across the advanced industrial economies which looks set to be the worst since 1980-81, if not 1945. Sharply falling demand for energy and other raw materials used in manufacturing and construction has already pushed most markets from oil and refined products to steel, copper, aluminium, nickel and ocean freight into surplus. For the next 18 months, commodity markets will be shaped by an environment of weak demand and incipient surpluses.

 

Source: ET

Core sector posts 5.1% growth in Sept

Coal, cement production better.

 

Our Bureau

New Delhi, Nov. 7 Buoyed by high growth in the production of coal and cement, the index for the six core sector industries increased by 5.1 per cent in September 2008, lower marginally compared with 5.8 per cent in the same month last year.

Coal production went up 10.7 per cent during the month against 6.3 per cent in September 2007 while cement output grew by 7.9 per cent in September this year as against 5.4 per cent in the corresponding month last year.

Power point

Electricity generation increased marginally by 4.4 per cent compared with 4.3 per cent.

3 sectors slowed down

The three sectors which slowed down during the month are crude oil production, petroleum refinery output and production of finished carbon steel.

Refinery down

The growth in petroleum refinery output and production of finished steel registered 2.8 per cent and 5.8 per cent in September this year against 6.9 per cent and 9.5 per cent, respectively, in the corresponding month last year.

In the case of crude oil, however, there was negative growth.

Crude oil production, which went down by 0.7 per cent in September 2007, declined again in September this year by another 0.4 per cent.

 

Source: Hindu Business Online

Forex reserves shrink by $5.5 b

Forex reserves shrink by $5.5 b  

Our Bureau

Mumbai, Nov. 7 The foreign exchange reserves continued to decline for the sixth consecutive week, falling by $5.532 billion to touch $252.883 billion for the week ended October 31.

The reserves have fallen by more than $31 billion in the past one month alone.

Sustained dollar selling by the Reserve Bank of India in the forex markets, huge amounts of FII outflow from the domestic equity markets, and the revaluation of the reserves have put pressure on the country's reserves, said currency dealers.

For the week ended October 24, forex reserves fell by $15.47 billion—the largest fall in a single week ever--to $258.415 billion.

RBI intervention

Intervention by the RBI in the forex markets to support the domestic currency caused the decline in reserves, said Mr Ashish Parthasarathy, Deputy Treasurer, HDFC Bank.

The RBI has been selling dollars on a sustained basis after the rupee breached the 50 level against the dollar in October.

In the week under consideration, the dollar strengthened against the euro and the pound in the overseas markets, which had a revaluation effect on the reserves, partly causing the decline, said a dealer with a private bank.

FII selling

According to the figures released by the Securities and Exchange Board of India, the foreign institutional investors have been net sellers in the equity markets to the tune of $809.10 million for the week ended October 31.

According to RBI's Weekly Statistical Supplement, foreign currency assets decreased by $5.349 billion to $244.045 billion.

While gold reserves fell by $183 million to $8.382 billion, SDRs remained unchanged at $9 million respectively.

The reserve position in the IMF decreased by $31 million to $447 million.

Bank credit

Bank credit increased by Rs 7,637 crore over the last fortnight, to Rs 26,15,041 crore as on October 24.

It had risen by Rs 64, 937 crore in the fortnight ended October 10.

Food credit decreased by Rs 640 crore to Rs 48,255 crore while non-food credit increased by Rs 8,277 crore to Rs 25,66,787 crore .

 

Source: Hindu Business Online 

 

 

 

 

 

 

 

FDI rules in for major overhaul

FDI rules in for major overhaul

Surajeet Das Gupta & Rituparna Bhuyan

 

The government has proposed extensive changes in the guidelines for Foreign Direct Investment that could impact a range of industries such as telecom, infrastructure, real estate and broadcasting.

The changes include such measures as including investments by non-resident entities in sectoral limits, removing Foreign Institutional Investment towards calculating sectoral equity limits with caveats and withdrawing key norms in Press Notes 3 (1997) and 9 (1999) on 100 per cent foreign holding companies and their downstream investments.

These proposals were part of a note prepared by the commerce ministry and discussed by the Cabinet committee on Thursday. They are aimed at liberalising the FDI regime not only to attract more foreign investment against the background of a global liquidity crisis but to standardise procedures across various sectors.

FDI inflow touched $17.1 billion between April and September this year, a 137 per cent growth over $7.2 billion in the same period last year.

The relaxations will apply to those sectors that have composite limits (FDI plus FII) and for which there are no separate statutes or rules that specifically govern FDI.

If the new norms are cleared, companies will get six months to comply.

The note suggests that the changes be implemented in phases.

The first phase, which was discussed on Thursday, will finalise methods for calculating direct and indirect foreign equity in Indian companies.

This includes counting investments by non-resident entities (non-resident Indians and Overseas Corporate Bodies) directly in an Indian company as FDI. NRI investments currently do not figure in the sectoral FDI limits.

According to the proposed guidelines, if a company based in India declares that a foreign firm has a "beneficial interest" in it, any investment made by the Indian company in another domestic firm will be considered FDI.

Indirect foreign investment through an investing company would not be considered in   calculating foreign investment if it is controlled and owned by resident Indian citizens. This will apply if 50 per cent of the company is "owned" by a resident Indian citizen or the resident Indian has the power to name a majority of board directors in the company.

In the second phase, the government will consider the issue of excluding FII investment in calculating sectoral limits, but a deadline has not been given. This adjustment has been widely demanded by domestic and foreign investors.

The move will be a major plus for telecom companies many of which are close to their 74 per cent equity FDI cap because of FII investments.

Some exceptions, however, remain such as if the FIIs choose to invest under the FDI scheme or when they submit a declaration that they are acting in concert with any of the companies that have invested in the Indian company.

To simplify procedures, the government has proposed withdrawing Press Notes 3 and 9.

Press Note 3 of 1997 specifies that a foreign company will have to secure Foreign Investment Promotion Board (FIPB) approval to set up holding companies in India.

Press Note 9 of 1999 relaxed the conditions for setting up holding companies and said foreign-owned Indian firms need not take FIPB permission to make downstream investments in sectors open to foreign investment.

The note said these notifications would lose their relevance once the new norms for direct and indirect foreign equity in an Indian company come into force.

 

Source: Rediff 

 

 

 

 

 

 

 

Ten Commandments for Peace of Mind

 

1. Do Not Interfere In Others' Business Unless Asked.
Most of us create our own problems by interfering too often in others'
affairs. We do so because somehow we have convinced ourselves that our
way is the best way, our logic is the perfect logic and those who do not
conform to our thinking must be criticized and steered to the right
direction, our direction. This thinking denies the existence of
individuality and consequently the existence of God. God has created each
one of us in a unique way. No two human beings can think or act in exactly
the same way. All men or women act the way they do because God within them
prompts them that way. There is God to look after everything. Why are you
bothered? Mind your own business and you will keep Your peace.

 

2. Forgive And Forget.
This is the most powerful aid to peace of mind. We often develop ill
feelings inside our heart for the person who insults us or harms us. We
nurture grievances. This in turn results in loss of sleep, development of
stomach ulcers, and high blood pressure. This insult or injury was done
once, but nourishing of grievance goes on forever by constantly
remembering it. Get over this bad habit. Believe in the justice of God
and the doctrine of Karma. Let Him judge the act of the one who insulted
you. Life is too short to waste in such trifles. Forgive, Forget, and
march on. Love flourishes in giving and forgiving.

 

3. Do Not Crave For Recognition.
This world is full of selfish people. They seldom praise anybody without
selfish motives. They may praise you today because you are in power, but
no sooner than you are powerless, they will forget your achievement and
will start finding faults in you. Why do you wish to kill yourself in
striving for their recognition? Their recognition is not worth the
aggravation. Do your duties ethically and sincerely and leave the rest to
God.

 

4. Do Not Be Jealous.
We all have experienced how jealousy can disturb our peace of mind. You
know that you work harder than your colleagues in the office, but
sometimes they get promotions; you do not. You started a business several
years ago, but you are not as successful as your neighbor whose business
is only one year old. There are several examples like these in everyday
life. Should you be jealous? No. Remember everybody's life is shaped by
his or her previous Karma, which has now become his destiny. If you are
destined to be rich, nothing in the world can stop you. If you are not so
destined, no one can help you either. Nothing will be gained by blaming
others for your misfortune. Jealousy will not get you anywhere; it will
only take away your peace of mind.

 

5. Change Yourself According To The Environment.
If you try to change the environment single-handedly, the chances are you
will fail. Instead, change yourself to suit your environment. As you do
this, even the environment, which has been unfriendly to you, will
mysteriously change and seem congenial and harmonious.

 

6. Endure What Cannot Be Cured.
This is the best way to turn a disadvantage into an advantage. Every day
we face numerous inconveniences, ailments, irritations, and accidents
that are beyond our control. If we cannot control them or change them, we
must learn to put up with these things. We must learn to endure them
cheerfully thinking, "God wills it so, so be it." God's plan is beyond
our comprehension. Believe in it and you will gain in terms of patience,
inner strength and will power.

 

 7. Do Not Bite Off More Than You Can Chew.
This maxim needs to be remembered constantly. We often tend to take more
responsibilities than we are capable of carrying out. This is done to
satisfy our ego. Know your limitations. Why take on additional loads that
may create more worries? You cannot gain peace of mind by expanding your
external activities. Reduce your material engagements and spend time in
prayer, introspection and meditation. This will reduce those thoughts in
your mind that make you restless. Uncluttered mind will produce greater
peace of mind.

 

8. Meditate Regularly.
Meditation calms the mind and gets rid of disturbing thoughts. This is the
highest state of peace of mind. Try and experience it yourself. If you
meditate earnestly for half an hour everyday, your mind will tend to
become peaceful during the remaining twenty-three and half-hours. Your
mind will not be easily disturbed as it was before. You would benefit by
gradually increasing the period of daily mediation. You may think that
this will interfere with your daily work. On the contrary, this will
increase your efficiency and you will be able to produce better results
in less time. 
 

9. Never Leave The Mind Vacant.
An empty mind is the devil's workshop. All evil actions start in the
vacant mind. Keep your mind occupied in something positive, something
worthwhile. Actively follow a hobby. Do something that holds your
interest. You must decide what you value more: money or peace of mind.
Your hobby, like social work or temple work, may not always earn you more
money, but you will have a sense of fulfillment and achievement. Even
when you are resting physically, occupy yourself in healthy reading or
mental chanting of God's name.

 

10. Do Not Procrastinate And Never Regret.
Do not waste time in protracted wondering "Should I or shouldn't I?"
Days, weeks, months, and years may be wasted in that futile mental
debating. You can never plan enough because you can never anticipate all
future happenings. Always remember, God has His own plan, too for you.
Value your time and do the things that need to be done. It does not
matter if you fail the first time. You can learn from your mistakes and
succeed the next time. Sitting back and worrying will lead to nothing.
Learn from your mistakes, but do not brood over the past. DO NOT REGRET.
Whatever happened was destined to happen only that way. Take it as the
Will of God. You do not have the power to alter the course of God's Will.
Why cry over spilt milk?

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