Category: Breaking Corporate India Earnings News

YTD seasonal rainfall is 45% below normal. The Met department has indicated that the weakness could continue over the next week. It is early days yet, as June typically accounts for only 20% of the total south west monsoon. But a recovery over the next month is critical, in our view.

Structurally the importance of agriculture as a percentage of GDP has decreased over the past few decades, from nearly 50% in the early 1970s to about 17% now. But the monsoon is still important for the farm sector, as nearly 60% of India’s agriculture is rainfall-dependent.

An analysis of weak monsoons over the past indicates that the earnings impact has been mixed due to various offsetting factors. But consumption-related sectors, i.e. staples,discretionary and telecom, typically underperform both over the July Sept quarter and the fiscal year in which the monsoon has been weak.

Also, in the recent past, rural India has been driving consumption growth on the back of various government stimuli. This segment is vulnerable to a pull back.

Leading IT services business solutions andoutsourcing firm, Tata Consultancy Services (TCS), has kick-started itsthird global delivery center in Queretaro from Mexico.

TCSwill offer advanced IT services, consultancy, test factory, businessprocess outsourcing (BPO), contact center, IT infrastructure solutions,industrial and engineering services, and solutions to its existing aswell as new clients from the new unit.

It will recruit 500 professionals for the unit in the current financial year.

Themove will help the IT major to expand its rich in Mexico, where italready have over 30 clients from domestic market apart frominternational clients from industries like telecom, banking, finance,retail and manufacture while strengthening its global network deliverymodel.

TCS presently has seven global deliverycenters in Latin America, all with the highest quality standard in theindustry of ‘CMMi 5’.

Tata Communications is looking for strategic investors for undersea cable assets, as reported by Moneycontrol.com. This is attributed to the limited options the company has available to raise incremental debt or issue further equity. TCOM had purchased Tyco Global in 2005 for cUSD130m which connects the continents of Asia, North America and Europe. The company so far has invested cUSD600m in its cable assets (HSBC estimates). As per our analysis, the replacement cost of its present undersea cable assets is estimated at cUSD1.3bn.

Undersea cable assets are integral to TCOM’s core business and the distressed purchase of Tyco allowed the company to benefit from significant commercial advantages and scale. Moreover, the company has ramped up managed services capabilities in the recent past, which allow it to leverage its investments in undersea cable assets and drive margin expansion. An undersea cable asset is similar to spectrum (and not tower assets) with mobile service providers (which is the raw material for the mobile business), hence we believe the possibility of sale of undersea cable assets is remote.

India’s industrial production zoomed into the positive territory with the April Index of Industrial Production (IIP) recording a positive growth of 1.4% against a revised estimate of (-) 0.4% for March 2009.

The growth in the index is supported by all the constituents with electricity production witnessing a growth of 7.1%, manufacturing activity growing by 0.7% and mining output expanding by 3.8% on a year-on-year basis.

Looking at the use based classification, basic goods grew by 4.6% while intermediate goods were up by 7.1%. Capital goods however showed a negative growth of 1.3%, reflecting that despite positive signals being shown by the demand side of economy, investment will probably recover slowly. Consumer goods also recorded a negative growth of 4.7%, primarily due to negative growth in non-durable goods segment at 10.4% while the durable consumer goods grew at 16.9%.

Despite positive signals being seen in major economies around the world, the International Monetary Fund (IMF) and the World Bank seem to be not convinced about a possible turn around of global economy rapidly. The multilateral institutions said that the recovery process was still fragile and over optimism may soon turn into another disaster until the policy makers ensure that inflation stays out of the picture.

The IMF chief Strauss-Kahn said at a meet in Montreal that the forecast of IMF for recovery of global economic in early 2010 was intact although it may not be considered automatic and policy makers needed to ensure that suitable policies for a sustainable recovery were in place.

Some other economists have pointedut out a visible quick recovery in global economy may soon turn into another disaster through sharp rise in prices. If there is another runaway inflation story as was witnessed in first half of 2008, it may become very difficult for developing economies to ensure regular supply of even essential items.

The proposed tax breaks on natural gas production is likely to cost around Rs 40,000 crore to the government, as indicated by the finance ministry.

Last year, the finance ministry had conveyed that the income tax exemption guaranteed by the Cabinet, on the production of oil and gas from the areas allocated under New Exploration Licensing Policy (NELP), was only for oil production and not for gas. This resulted in a subdued response to the last leg of the auction and delaying of the current auction process.

The revenue secretary is believed to be negotiating with the petroleum minister for a grant of seven years tax break on natural gas production.

It is expected that the tax breaks to natural gas producers like Reliance Industries will put a burden of around Rs 40,000 crore on the tax revenues.

But industry experts opined that the figure is not a realistic one, as it will take around four years for the companies to recover their investments and only after this recovery income tax can be levied. Apart from this, at the estimated revenue of around $4.5 billion, the balance three years will fetch around $1.5 billion as tax to the government.