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Sunday, October 17, 2010

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Thursday, October 14, 2010

INFOSYS NET RISES 16.7% TO 1737 CRORES

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Infosys set the tone for the results season by coming up with strong numbers on Friday. It reported a better-than-expected net profit of Rs. 1,737 crore in the second quarter, a 16.7 per cent rise from its first quarter net of Rs. 1,488 crore, buoyed by an increase in orders.

As compared with the same quarter of the previous year, it net profit posted a 13.2 per cent growth.Its revenues in the quarter ended September 30, 2010, rose to Rs. 6,947 crore, a growth of 12.1 per cent as compared to the first quarter.

"Though the economic environment continues to be challenging, we have leveraged our client relationships, solutions and investments to grow faster in this quarter," said S. Gopalakrishnan, CEO and managing director.

Infosys said that 27 clients were added during the quarter by the company and its subsidiaries and there was a net addition of 7,646 employees during for the quarter. As on September 30, 2010, Infosys and its subsidiaries had 1,22,468 employees.

"We have seen record hiring this quarter and attrition has decreased," said TV Mohandas Pai, member of the board and head – HRD and education & research. "Our new career architecture is showing positive results."

Despite its strong numbers, Infosys shares had moved lower in early trade on Friday. Infosys shares were down nearly 1 per cent. "Though Infosys numbers were better than expectations, it was not a blow-out performance. Most of it was factored in its price so the stock has seen some profit-taking," said Ambareesh Baliga, VP, Karvy Stock Broking. 

An NDTV poll of analysts expected Infosys to post a 16 per cent quarter-on-quarter growth in its net profit for the second quarter. The analyst expect Infosys to post a net profit of Rs. 1,726.15 crore in the second quarter of this fiscal as compared to Rs. 1,488 crore reported in the first quarter of this fiscal.
 



Read more at: http://profit.ndtv.com/section/earnings/news/infosys-net-profit-rises-16-7-to-rs-1-737-crore-108306?cp

Sunday, October 10, 2010

Govt auditor alleges harassment by RCOM

SLANGING MATCH: CHARGES & COUNTER-CHARGES
Parakh & Co, which had found under-reporting of revenues by RCOM in its audit, seeks protection from telecom ministry

AJAIPUR-based auditor that had examined the books of Reliance Communications, or RCOM, as part of a government-ordered investigation has sought protection from the telecom ministry, alleging a campaign of "harassment" by the Anil Ambani Group company.
    The auditor, Parakh & Co, wrote on October 1 to telecom minister A Raja and several senior
officials of his ministry, saying it had received a notice from the anti-extortion cell, crime branch, Navi Mumbai, asking for documents and records relating to the RCOM audit. The police was acting after a criminal complaint from RCOM, the audit firm added.
    The auditor has told DoT that it had examined RCOM's books on the department's directions as
part of its professional commitment. "In doing our duties as directed by the government, we have become unwillingly become victim of personal stigmatisation by a big industrial house," its communication added.
    ET has seen a copy of the audit firm's communication to Mr Raja. The letter claimed that
the firm had been at the receiving end of a barrage of allegations from RCOM and the police notice was the last straw.
    A spokesman for RCOM said the company was merely following through on a statement made by chairman Anil Ambani while addressing the media and analysts on October 15, 2009.
    Mr Ambani had said at the time that the company was taking all steps to counter what he described as a "vicious and mala fide campaign of falsehoods and disinformation conducted against the group". These steps included "lodging a for
mal complaint with Sebi to probe the hammering of group stocks", as well as "lodging a formal complaint with the cyber crime police authorities to investigate the dissemination of false and malicious emails against the group from bogus IDs".
    Mr Ambani had also promised to take up "the conduct and actions of the special auditors with the Institute of Chartered Accoun
tants of India through our statutory auditors".
    Following Mr Ambani's pronouncements, RCOM filed voluminous complaints with DoT, ministry of corporate affairs and other agencies in October and December 2009.

DISPUTED CALL
ABOUT THE AUDIT
DoT appointed Parakh & Co as special auditor after COAI alleged under-reporting of revenues by RCOM.
Parakh & Co said RCOM had failed to show revenues of 2,799.19 cr, causing losses of 315 crore to the government .
It had also accused RCOM of stating a different set of numbers to shareholders.
A 4-member DoT panel had endorsed Parakh & Co's findings .

AUDITOR'S ALLEGATIONS
Parakh & Co says it has been served a notice by anti-extortion cell, crime branch, Navi Mumbai, asking it to submit all documents and records of the special audit it had undertaken on RCOM's books.
It has alleged RCOM had filed 'false complaints' against it with ICAI in an attempt to harm the reputation of the firm and its partners.
DoT advice sought on sharing audit info
    THEgist of these complaints is that "the entire report was drafted for the purpose of sensationalising irrelevant matters". This was done "apparently at the instance of its corporate rivals to hammer down its stocks".
    On Friday evening, RCOM provided copies of these filings to ET. Though the police complaint was filed in October 2009, Parakh & Co received the police notice in the middle of September this year, said an official who spoke on condition of anonymity. RCOM officials had earlier accused Parakh & Co of leaking the report. The police had been asked to nail the culprits, said an official of the Anil Ambani Group.
    In its letter, the audit firm has asked the telecom department if it should
hand over the documents sought by the Navi Mumbai police as the agreement it had signed with the government bars sharing any audit-related information with third parties.
    A DoT official confirmed that the department had received a complaint from Parakh & Co, but declined to divulge any details or the government's stand.
    The Jaipur-based firm has alleged that RCOM had filed 'false complaints' against it with the Institute of Chartered Accounts of India in an attempt to harm the reputation of the firm and its partners. Its October 1 letter further goes on to say RCOM had filed complaints against it with the Registrar of Companies, terming it 'yet another attempt by the telco to play with the professional integrity of the firm and its representatives'.

    An RCOM executive who declined to be named trashed the charge of harassment because the company and its chairman had publicly announced that it would seek action against Parakh & Co. "The auditors' move to approach the government on this issue now is an attempt at sensationalising it. How can they claim harassment when we have publicly announced our intention to counter the auditors' attempts at levelling baseless allegations against us?" this executive said.
RCOM AUDIT
The auditor had examined the books of Reliance Communications at the behest of the department of telecommunications, or DoT, and had come to the conclusion that India's second-largest telecom company had under-reported
revenues in 2006-07 and 2007-08, causing losses to the exchequer.
    The report said RCOM had failed to show revenues of 2,799.19 crore, causing losses of 315 crore to the government in terms of licence and spectrum fees.
    The telecom department had appointed the special auditor after the Cellular Operators' Association of India, a grouping of GSM mobile operators, had alleged under-reporting of revenues by RCOM. The audit was later extended to RCOM's rivals, including Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices.
    But, a four-member telecom department committee set up to examine the special auditor's report on RCOM in August 2010 had endorsed Parakh & Co's findings that the country's second
largest telco had under reported revenues in 2006-07 and 2007-08, causing losses to the exchequer. This telecom department panel, headed by its member finance Vijayalakshmi K Gupta, has asked the ministry to refer its findings to the ministry's legal wing before raising any demand on RCOM.
    In December '09, the telecom minister had told Parliament that RCOM under-reported revenues by up to 1,500 crore to sector regulator Trai for 2006-07 and 2007-08, and DoT was examining the issue. "There was an under-reporting of 1,000-1,500 crore by RCOM to avoid payment of licence fees and the government may have lost about 250 crore due to this," Mr Raja had then told Lok Sabha during Question Hour.

Two Out Of Three IPOs Sink Below Their Offer Price On Friday; May Queer The Pitch For New Issues

IPOs feel the Oct heat, slip on debut    These kinds of steep pricing provoked Securities & Exchange Board of India, or Sebi, chairman CB Bhave to warn that investors would not be interested in IPOs if the trend continued. "In a bid to maximise returns for promoters, they (investment bankers) are not looking at the interests of investors," Mr Bhave said on September 24. "You need to introspect whether it is a healthy practice. If you keep investors disappointed day in and day out, the cause of investors will only be a lip service." Even top executives such as HDFC chairman Deepak Parekh are worried that the IPO market may be getting into a bubble zone.

   INVESTORS lost money in two of the three initial public offers that listed on Friday, and had meagre gains in the third, possibly making it tough for future issues if bankers and companies seek high valuation. Orient Green Power, a clean-energy company, and Ramky Infrastructure, a builder of roads and bridges, fell as much as 14% from their sale prices. Electrosteel Steels, which sold shares at 11, gained 2.2% to 11.25.
    "There is always a risk of an IPO not fetching good premium, if it is priced aggressively in the bullish market," said Devesh Kumar, joint managing director and Group CEO, Fortune Financial Services. The market has been in correction mode for past two days, and this affected sentiment towards the new listings on Friday.
    In a related development, BS Transcomm, a provider of telecom and power infrastructure, has lowered its IPO price band to 248-257 from 257-266 and also extended the issue by three work
ing days. The move could have been prompted by tepid investor response to the offer that had received only 60% subscription till Friday evening. The offer will now close on October 13. At the upper end of the revised price band, the company is expected to raise around 200 crore. Companies and investment bankers have been exploiting the dream run in the secondary market by pricing IPOs at a steep valuation, inviting a rare criticism from the market regulator. While some believe that it is investor greed that is leading to disproportionate demand, others say some losses would make it difficult for even good issues to go through. Many companies such as Jindal Power, Reliance Infratel, Sterlite Energy and Lodha Developers may raise funds in initial share sale amounting to more than 30,000 crore, analysts estimate. Apart from these companies, state-owned Coal India plans a listing that may make it the biggest ever in the country, with the IPO size estimated at 12,000-13,000 crore. Demand for IPOs seen strong
ALTHOUGH some issues have led to erosion of investor wealth, demand at this point of time remains strong. Oberoi Realty's 840-crore IPO ended with over 12 times subscription on Friday. Career Point, a company that trains students for engineering and medical entrance tests, doubled on listing.
    "The latest is not an indication of the easing of euphoria for IPOs in the secondary market, as there is enough liquidity," says Mr Kumar.
    Hyderabad-based Ramky Infra is estimated to have been priced around 21 times at 450 a piece. Orient Green Power, with a revenue of 56.2 crore, at 47 a share was valued more than 2,000 crore.

Wine is the new liquid currency

LAST YEAR THERE WERE MORE THAN 200 WINE AUCTIONS NETTING OVER $200 MILLION

EVERY dark cloud has a silver lining. Similarly, the economic slowdown taught us a few valuable lessons. First: diversification in your investment portfolio is critical. Second: low volatility is actually hard to find. Third: any asset that ticks the previous two boxes generally has unexciting returns. True?
    Think again.
    There is one asset though, which is an exception. It has a low correlation to the standard trifecta of equities, debt and gold, it's proven to be recession-proof and the returns are often spectacular. Ladies and gentlemen, raise a toast to fine wine.
    Fine wines have been in production for centuries and actively traded for the last 400 years. Christie's had its first fine wine auction in 1776. Last year there were more than 200 such auctions netting over $200 million. The fine wine market itself is worth $2-3 billion annually. There is even a global electronic exchange (www.Liv-ex.com) accounting for 80% of trades that is quoted on Bloomberg daily.
    Only 1% of the world's wines are investible. Such fine wines last between 50-100 years getting better over time, are from the top Chateaux in the world, are made in tiny quantities. They are highly sought after and have exceptionally high ratings from industry reviewers (similar to Standard and Poor's or Moody's ratings!). 90% of these fine wines originate from Bordeaux, and are
primarily red wine.
    Several economic studies (Mahesh Kumar's the most famous, Masset & Weisskopf the most recent) have shown that over the last 30 years an investment in fine wines outperformed equities, bonds and even gold and survived every recession. In no threeyear rolling period has fine wine ever lost money. The correlation between wine and equities is less than 0.03 ie negligible, making it the perfect portfolio hedge. Also, the volatility in the return profile is far lower than traditional assets.
    Let's take some examples. In the five-year period to June this year, an investment in the top fine wines yielded 29% per annum. A similar investment in the Sensex would have returned 18% and in the NASDAQ less than 1% per annum.
    If we factor out the recent bullish recovery, the facts are more startling. In the two-year period January 2007-2009, taking the worst of the sub-prime, an investment in the BSE would have lost 18% per annum and the NASDAQ would have lost 23% per annum. In this same period an investment in the top fine wines still yielded 10% per annum.
    So why are these returns so high? It is well known that the best wines in the world are rare luxury collectibles. Lafite Rothschild, Latour, Petrus, Margaux, Mouton Rothschild and Haut-Brion are some of the most famous examples. These are the Maybachs
and Hussains of the wine world. They are produced in very limited quantities, production being restricted by law and terrain. Chateau Latour only produced 9,600 cases of wine in the 2003 vintage. The demand on the other hand is global and growing. The fine wine market was traditionally dominated by the European, American and Japanese markets. In the last 10 years however Russia, Eastern Europe, Asia and now, spectacularly, the Chinese have caught on. China alone now accounts for over 30% of the fine wine market. In a two-day auction in Hong Kong this spring, $19.5 million worth of fine wine was purchased.
    All this has resulted in an inverse supple curve and remarkable price appreciation. But the real reason for fine wine's success as an investment can be summed up in one word: consumption. Fine wine is the only investible asset that is consumed daily and this is the main driver of dwindling supplies and rising prices. Imagine the effect on the prices of Picasso's paintings if one painting was burnt every year.
    So why isn't every one doing this? The simple answer is: access and process. You have to know what wine to buy, at what price and in what condition. A premier wine that has been lying at the back of your car (and probably now tastes like acid!) will have a very different value to one bought straight from a Chateaux cellar.

    Finding wines from the premier Chateaux which make wine in such limited quantities isn't easy either. And even if you do have the relationships and network to find the right wine at the right price what then? Wine is a consumable and therefore needs to be stored in the right conditions (humidity and temperature controlled), and insured. All this can be daunting for investors who are new to the market.
    Fortunately help is at hand. There are a number of wine advisory firms globally that are helping wine-lovers and sophisticated investors alike to enjoy the fruits, both physical and financial of this fascinating world. Funds exist too but of course in recent years a fund has become somewhat of a four-letter word, investors being rightly wary of five-year lockins, high fees and crucially no direct access to the underlying stock.
    The key is to find an advisor who has both the right network and is independent ie is not pushing their own inventory, willing to create your own private portfolio and also help you manage the process from start to finish, ideally taking care of the storage and insurance for you as well.
    And the best bit? You can always drink it! According to recent medical reports, it may even be good for you...
    The writers, Ayesha Chenoy and Ishaan Ahuja, are the founders of .Drayton Capital, India's first Fine Wine collection and investment advisory firm.

J&K to tax water used to generate hydel power

JAMMU & Kashmir will be the first Indian state to levy usage of water for generating electricity.
    A Bill, which the legislature passed on Saturday, will set up State Water Resources Regulatory Authority (SWRRA) to manage water resources and raise revenue against its usage. Though the law would bring every water user under its purview, the immediate idea is to make NHPC, the national hydro power utility, pay for the water it uses to generate power. "Not just NHPC, we want everyone including the state-owned Power Development Corporation (JKPDC) to pay for the water it uses to generate energy," irrigation minister Taj Mohi-ud-Din told reporters after the passage of the J&K Water Resources (Regulation and Management) Bill, 2010.
    The passage of the bill was inevitable in the wake of the thirteenth finance commission putting a rider over spending from grants it recommended in absence of such an authority. "Even if we fix a rate of only 25 paisa for every cubic meter of water that goes in power generation, it should fetch the state Rs 848 crores a year." NHPC, he said, earns Rs 7,140 crores a
year from its J&K operations.
    The alleged exploitation of state's vast water resources has remained a vital ingredient of Kashmir's political discourse. Reference to New Delhi bartering Kashmir's interests to Islamabad in the Indus Water Treaty of 1960 is a common refrain.
    From an identified 14,275 megawatt potential, J&K has been able to harness only 2,456 megawatts. Of this, NHPC alone is generating 1,680 megawatts through its four projects—Salal, Dul Hasti, Uri and the just commissioned Sewa-II. It is adding 320-megawatt to its installed capacity in the city within the next one year when its three projects—one in Kashmir and two in Ladakh go into generation. NHPC is paying 12% of generations as royalty, but the state is seeking a hike but it has not been accepted in wake of presumptions that other states will also make similar demands. Taxing the generation may offer J&K one way of trying to compensate the losses it claims it has been suffering over the decades.
    "If we are levying water usage charges on the farmers for irrigating their fields or to consumers in the cities what is the harm in making the power generating corporations to pay?" asks Taj, who said his ministry has been working on the 118-page Bill for a year
and has consulted Central Water Commission. "Even the CWC is working on a similar law for consideration of the cabinet," he added.
    Insiders said there were many red faces in the government over the issue because no state in India is taxing the usage of water that goes to generate energy. "It definitely will trigger a controversy but may end up helping the state in strengthening its argument for more royalty," an insider said. NHPC could be hit by the new law as it has almost half of its generation coming from J&K.
    Taj, however, said the law is not all about making money. The Authority is mandated to a lot of activities for protecting the water resources and improving them besides monitoring the safety of the dams. "It is not regulation alone. The Authority that will come up by the end of the year will ensure judicious, equitable and sustainable management as well," he asserted. Most of the dams that the NHPC's projects have in the state have an inbuilt automatic mechanism of flushing part of the storage to manage silt load. "But there are no alarm systems installed," he said. He referred to the dam of NHPC Uri-I that releases 10% of the water storage to flush silt automatically.

FAO drops mention of
J&K, Arunachal as
separate countries
NEW DELHI: UN's Food and Agriculture Organisation (FAO) has dropped references to Jammu and Kashmir and Arunachal Pradesh as "independent entities" in its 2010 report and initiated a review of designating countries and territories. "In matters of this nature, FAO, as a specialised agency of the UN system, follows the principles and practice of the UN, specifically its Cartographic Section. The territories of Jammu and Kashmir and Arunachal Pradesh are documented by the UN as disputed ones," Gavin Wall, FAO representative in India said. "Nevertheless, references to these territories have been promptly re-moved from annexure five to the publication- Greenhouse Gas Emissions from the Dairy Sector," he said. —PTI


 

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