Year: 2008

The filing of Chapter 11 by Lehman Bros and Bank of America’s buyout of Merrill Lynch has increased concerns about the possible impact on Indian IT leading to a sharp sell-off. Prima facie, expect a 2-3%/4-5% negative impact on FY09E/FY10E US$ revenues if the US financial sector continues to show more problems.

Lehman is not a big customer for any of the large Indian IT companies. Merrill is a big customer for Satyam and TCS and Bank of America is a big customer for TCS and Infosys. There could be some impact on Satyam over the coming 2-3 quarters.

Goldman Sachs just minutes ago removed Satyam Computers from favorite growth list due to stop loss. Satyam is down 15.4% since its addition to the favorite growth list on July-31, 2008, exceeding stop loss limit, vs. the S&P 500 down 5.9%.

American International Group (AIG) too has been facing liquidity crisis and has been working on plans to raise capital after its three straight quarterly losses totally $18.5 billion. It has also asked Federal Reserve for a $40 billion bridge loan. Below, we enlist the holdings of AIG in India, which could face pressure in case of liquidation.

Name of the Indian Company, Investment Arm of AIG and finally percentage shares held in the company.

AIA Engg AIG Global Investment Corporation 1.16
AIA Engg AIG Global Investment Corporation 1.26
AIA Engg AIG Global Investment Corporation 1.3

Bharati Shipyard AIG Trustee Company India Pvt Ltd 1.19
Bharati Shipyard Aig Trustee Company India Pvt Ltd 1.14
Bharati Shipyard AIG Trustee Company P Ltd – AIG India Equity Fund 1.32

Federal Bank AIG Global Investment Partners LP 1.0

Gayatri Projects AIG Trustee Company India Pvt Ltd 1.4
Gayatri Projects AIG Trustee Company India Pvt Ltd 2.07
Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.05
Gokaldas Exports Aig Trustee Company India Pvt Ltd 1.12

Indo Tech AIG Global Investment Corpn Asia 2.12
Ipca Labs. AIG Trustee Company India Pvt Ltd 2.0
Ipca Labs. AIG Trustee Company India Pvt Ltd 1.4

Kolte Patil Developers AIG Trustee Company India Pvt Ltd 1.06

Mindtree Ltd AIG Offshore Systems Service Inc 3.27
Mindtree Ltd AIG Offshore Systems Service Inc 3.28
Mindtree Ltd AIG Offshore Systems Service Inc 3.33

NIIT Tech. AIG Global Investment Corp 1.7
NIIT Tech. AIG Global Investment Corp 2.29
NIIT Tech. AIG Global Investment Corporation 1.5

Nucleus Software AIG Global Investment Corporation 1.58

Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.17
Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 1.81
Sun Pharma Advan AIG Global Investment Corporation Asia Ltd 2.39

Unity Infra AIG Global Investment Corporation (ASIA) 1.05

Here is the tentative holding of Merill Lynch in various Indian companies. Name of the company followed by stake in percentage.

Resurgere Mines 10.51 Intellvisions Sf 10
Kewal Kiran Clot 9.74 Taneja Aerospace 9.47
Parekh Aluminex 8.31 Vakrangee Soft. 7.74
HOV Services 7.34 Pratibha Inds 7.19
Broadcast Init 6.73 Classic Diamonds 6.5
Northgate Techno 6.06 Pokarna 5.95
Educomp Solution 5.7 Orchid Chemicals 5.31
BSEL Infrastruc. 5.18 Shree Renuka Sug 5.11
Horizon Infrastr 4.97 Tulip Telecom 4.88
Prakash Inds. 4.66 Arihant Foundatn 4.63
United Spirits 4.6 Marg 4.39
Divi’s Lab 4.33 Asahi Songwon 4.32
CHI Investments 4.21 Suprajit Engg. 4.2
Ansal Housing 4.18 Prajay Engg. 4.06
Panacea Biotec 3.95 Lancor Holdings 3.84
Matrix Labs. 3.74 Jupiter Bio. 3.72
Zodiac Cloth. Co 3.72 CEAT 3.69
HTMT Global 3.52 GRUH Finance 3.46
Unity Infra 3.33 Tanla Solutions 3.25
Bajaj Hindusthan 3.24 Nucleus Software 3.19
NIIT Tech. 3.12 Allsec Tech 3.11
Steel Str. Wheel 3.03 Ganesh Housing 2.95
MSK Projects 2.91 Cranes Software 2.9
Indiabulls Fin. 2.87 Stone India 2.86
Mahindra Lifespace 2.84 Wire & Wireless 2.77
Shasun Chemicals 2.73 Nitco 2.72
Asian Electronic 2.68 Action Construct 2.64
Indoco Remedies 2.62 Gremach Infra 2.6
Navin Fluorine 2.6 Bhagyanagar Indi 2.59
ICICI Bank 2.59 Ador Welding 2.57
Aptech 2.57 Infotech Enterpr 2.56
Bharati Shipyard 2.55 Rohit Ferro 2.44
Take Solutions 2.36 Deep Industries 2.34
Strides Arcolab 2.34 Modison Metals 2.28
J Kumar Infra 2.24 ICSA (India) 2.19
S Kumars Nation 2.18 Salora Intl. 2.17
IFSL 2.14 TTK Prestige 2.13
Patni Computer 2.11 Puravankara Proj 2.1
Bilpower 2.09 Royal Orchid Hot 2.06
Jyoti Structures 2.05 McNally Bharat 2.04
Redington India 2.04 Vimta Labs 2.04
Ansal Properties 2.02 Great Offshore 2
Prithvi Info 2 Sonata Software 2

We all know that the July-08 India Industrial Production was at 7.1% from 5.4% the previous month. The key reason for the higher than expected rise in the July was the rebound in capital goods up 22% – nearly twice the growth seen earlier this fiscal. Capital goods have a weight age of 9.3% in the overall index of industrial production. There are 53 items that are classified under capital goods and as seen in the table below, 17 of these items recorded growth rates in excess of 25% in Jul08 over Jul07. These include ship building, offshore platforms, turbines, and electric generators.

Rainfall during June 1 to Sept 10 remained 3% below normal. Crop sowing data is also unsatisfactory with sowing down 3% YoY. Our GDP forecasts for FY09 factor in marginally lower agriculture growth of 2% with headline GDP at 7.5%.