China to Dominate Outsourcing Sector

Global Recession is playing a major role in the evolution of Outsouring sector. According to research conducted by Professor Arie Y.Lewing from Centre for International Business Education and Research (CIBER), Offshoring activity is witnessing a prominent change. Companies in order to cut down their cost at the time of Worst Economic crisis will ultimately go the way of Outsourcing. Though companies perceive it as a form of cost-cutting tool they perceive it as important Business strategy.

With Barack Obama to be soon taking charge of Presidentship, this sector may undergo lot many changes in the wake of US Subprime Mortgage crisis.

China will be a dominant factor in Outsourcing business due to their edge in Product Development area which is the area where 50% offshoring is carried in 2008. Companies perceive China as best Offshoring place because of their Industrial Advancement. Though China is not perceived to dominate because of lack of English speaking skills in theri working population, the above reason overthrows this factor to favour China.

According to survey, clients in US are seeking more cost-reduction which affects Indian Outsourcing Industries which has relatively less share in “Product Development” area compared to China. Due to some clients seeking Financial support, Indian Outsourcing companies have more financial constraints at this juncture.

India’s GDP growth rate to go down by 2%

Topic: India’s GDP

According to recent analysis of Indian Economic status, one of the preferred or favoured measure of Economic Development, Gross Domestic Product (GDP) is estimated to fall by 2% in the 08-09. This fall in GDP is said to have direct impact on two major Economic measure firstly Household Income and second Per Capita Income (PCI).

As a result of 2% fall in GDP, in 2008-09 the reduction in Household Income would be to tune of Rs. 3200 (approx) and in 2009-10 it is predicted to reach Rs 7800 (approx). The loss in Per Capita Income is Rs 650 and Rs 1500 (approx) respectively in  2008-09 and 2009-10.

In reality, the 2% decrease in GDP is the difference between the best and worst case GDP Growth rate predicted by major Financial Research Organisation such as Centre for Monitoring Indian Economy (CMIE) and Goldman Sachs. Goldman Sachs predicted the lowest GDP growth rate for 2 consecutive years 2008-09 and 2009-10 to be around 5-7% while CMIE predicted highest GDP growth rate of around 8%.

Source: Economic Times, November 13, 2008

India’s Telelcom Sector undergoing major Changes due to Merger and Acquisition (M&A) Policy

Topic: India’s Telelcom Sector

NTT DoCoMo, Japan’s largest mobile operator as a part of its Strategic pact with Tata Group has decided to take up 26% stake in Tata Teleservices (TTSL) which is worth $2.7 billion. Tata Teleservices is the 6th largest operator in India. With this strategic pact that DoCoMo has pursued, it has been able to enter the worlds fastest growing Telecom Market. Tata Teleservices has a subscriber base of 30 million with its operation mainly concentrated in Maharashtra and Goa. The major stakeholders in TTSL are Tata Sons (45%) and Tata group companies. This deal with DoCoMo values TTSL at $10.4 billion, with each subscriber valued at $346. Bharati Airtel, India’s largest Telecom giant is valued at $24.3 billion.

Source: Economic Times, November 13, 2008

Mortgage Crisis effect on Merrill Lynch, Lehman Brothers

Topic: Mortgage Crisis

The repercussions of Mortgage crisis is devastating. The ill-effects is slowly moving into the Financial world. The day would not be too far when the negative output spreads all over the world affecting every aspects of the functioning of the financial world. Two of the major Financial Institutions facing the heat of Mortgage crisis is Merrill Lynch and Lehman Brothers.

The main reason for this fall is considered to be bad Mortgage Finance and Real estate Investments.

Merrill Lynch which was worth $100 billion last year is now taken over by Bank of America for $50 billion. This act of Merrill Lynch is considered to avert the huge financial losses that they have been facing. Lehman Brothers unable to find a company which could take over them has chosen the path of  Liquidation to avoid the huge Financial loss. According to leading Economists and other financial Institutions these two events would greatly affect the American Finance sector in a negative manner. With Lehman Brothers chosing the path of Liquidation, the Indian Stock market faced a severe downward movement losing nearly
Rs 2000 crores.

Another event which is expected to have ever lasting effect in American Finance sector is American Institutional Group a major Insurance Company seeking $40 billion from Federal reserve to sustain the losses from the credit crisis.

Bollywood turning out to be hot destination for Investment

Topic: Bollywood turning out to be hot destination for Investment

Multinational Companies are pooling in huge investments in Bollywood on account of better Return on Investments. They believe that there is a huge market potential in Bollywood that needs to be harnessed. The major Multinational Companies who are turning towards Bollywood are Tata Groups, Mahindra and Mahindra, Moser Baer and Ranbaxy.

“Mumbai Chaka Chak” happens to be the first venture for Mahindra and Mahindra media venture company. According to its CEO Entertainment Industry happens to be a hot spot for destination in the coming years. He feels that the Industry is in an Expansion state which happens to be a good sign for Investors in the Corporate sector. Bollywood’d present worth is $2.1 billion and is expected to reach $3.9 billion by 2011.

The key player who has already capitalized on this huge Business is Anil Dhirubai Ambani Group who have already bought Adlabs. More and more people are raising funds to invest in Entertainment sector to get a part of this rising profit. The corporates are trying only small and medium budget films at first to get a feel of the necessities for them to survive in this sector.

Source: The Hindu, September 11, 2008

CHROME v/s Internet Explorer

Topic: CHROME v/s Internet Explorer

Google’s recent free Web-browser ‘CHROME’, according to its officials happens to be more superior than Microsofts Internet Explorer and Firefox browser. Google feels that with the increase in number of internet users, there is a great scope for scalability of its product. This web-browser can also be adopted in mobile phones to provide internet access to mobile users. This feature has brought about increase in the number who comes in contact with Web advertising, due to Mobile user community. This is a huge boost to Google’s lead in Web Advertising. Online search and Web Advertising happens to be the bone of contention for Microsoft and Google. Google has been competing with Microsoft in the areas of presentation software, e-mail software by providing a free or low cost effective packages. Until now Google has been backing Firefox browser which is also open source but due to the Introduction of CHROME, the situation has changed which implies an additional competitior for Internet Explorer.

In reply to Google’s CHROME, the official in Microsoft replied by saying that User friendly nature provided by Internet Explorer 8 along with the Security features offers a high resistance to any Web-browser.

Source: The Hindu, Newscape, September 3, 2008.

BioTechnology and LifeSciences gets huge Investments

Topic: BioTechnology and LifeSciences gets huge Investments

Venture Capitalist(VC) and Private Equities(PE) are willing to invest $8.5 billion in India in the key areas such as BioTechnology, Life Sciences, Logistics, Clean Technology, Entertainment. Due to reduced Regulations in these five key areas VC’s and PE’s are investing to tunes of billion due to huge Return On Investments(ROI).

BioTechnology and Life Sciences are estimated to get investments to tune of $2 billion alone. Due to rising demand for Imports and Exports in maritime sector there is huge investments in Logistics to about $2 billion. Clean Technology is a growing sector which will provide huge profits in near future. Film Production turning to be profeesional it takes a huge part in Investments. Education sector is growing rapidly with growing Poplulation and huge advancement in Science and Technology. Investments in Education sector is in area of Distance Learning, Virtual Classroom, vocational Training.

Source: The Hindu, Business, August 5, 2008

Slowdown in Aviation Industry

Topic: Aviation Industry Gasping for breath

The increase in crude Oil price in the International Market had a negative impact in the Aviation Industry, particulary the low-cost and domestic airlines operating in India due to rising aviation Turbine fuel prices. Reduction in the domestic passenger Traffic and the increase in operational, overhead costs have been another areas of concern for the Industry. Thanks to the Merger and Acquisition in the Aviation Sector which includes Kingfisher taking over Deccan and Jet Airways taking over Air Sahara that helped them increase their capacity of flying space thus helping them to overcome the onslaught to a slighter extent. All the airlines have recurred losses in all the quarters of 2007-08. ATF accounts for nearly 40% of overall operating costs by airlines.

The expansion plans for their operation, their orders for new aircrafts, their hiring of pilots and engineers to suffice the deficiency in the sector, the Airport Authority of India’s(AAI) plan to modernise 35 non-metro airports in the country are all under stake considering the slow down.

Due to increasing inflation and Nuclear deal crisis with the U.S, faced by the Government has stood as obstacles to provide help to airlines by the Civil Aviation Minister Praful Patel. The Minister has proposed to relax the five year norm followed to provide oppurtunities to Private airlines to fly on International Routes due to decrease in domestic traffic.

Corporate houses in order to reduce their operataing costs due to inflation and rising flying prices have gone on to adopt the teleconference method or other modes of Transport such as train for maintaining the work flow, which had devastating effect on Aviation Industry. To cope up with all such effects the airlines have gone in for reviewing their fleet acquisition, reduced the number of flights to some destinations, have opted to defer fund raising from abroad and other ways to cut costs and save fuel. Several non-airfare revenue such as Joint Venture partners for setting up Maintenance, repair and overhaul (MRO) units should be followed, as adviced by some leading Financial Consultants working in this field. The liberalization in FDI policy has to used to the maximum extent by the airlines.

Source: The Hindu, June 30, Business

 

Increasing Power Demand in India

Topic: Increasing Power Demand in India

According to leading International Consultant Mckinsey and Company’s report “ Powering India – the road to 2017”,  the need for investment in the power sector would be around $600 billion. The need would be around 3,15,000 MW supply compared to present estimates of 1,20,000 MW supply.

The demand is increasing at faster rate due to four key factors:
1) increasing demand in the Industrial sector
2) rapid consumption rate in the domestic sector
3) Governments initiative to provide electricity to all villages by 2012
4) Realisation of the growing demand in power sector

To achieve the target of 3,15,000 MW supply, the generation capacity should be around 4,15,000 MW which is nearly 3-4 times the present generation capacity of 1,40,000 MW. All these indicates a greater investments has to be made in the power sector in the coming days to come. A well planned strategy must come into existence to meet the growing demands.

Source: The Hindu, June 17, Business

IPO Market

Topic: IPO status in Indian Economy

Recent Economic slowdown in U.S, easy ECB( External Commercial Borrowing) norms, low investment in stock-market, high inflation rate,  has hugely affected the IPO market in 08.

According to Assocham Eco Pulse study, there had been decline in the primary markets and the number of offerings made are one each in April and May.

Companies are postponing their IPO offerings because of the slow down of economies among the leading powers of world and also because of ECB norms. According to some result the IPO market would return to its previous state in the last quarter of year, due to stability being reached with respect to inflation rate as a result of corrective measures taken by government. The number of offerings is only 19 compared to last year’s 44 in the first five months.

Source: The Hindu, Business