No one got this right. The pessimists said that India’s economic growth won’t last long, but it did. It even crossed the 10% GDP mark in a quarter. Then, the optimists said the Indian economy won’t slow down, but it has.
Companies
Infosys’ Axon acquisition: boosting its consulting business or simply buying growth?
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Finally, Infosys Technologies did it. For years, one has got tired of hearing that the company was waiting for the right acquisition at the right price. This despite having oodles of cash on its balance sheet that lowered its return on capital. It did make some small acquisitions but nothing which made analysts furiously rework their estimates.
This will be a large acquisition by its standard, it will pay about Rs 3,300 crore to acquire UK’s Axon Group, a business transformation service provider.
First impression
Companies
Novelis to restate financials, Hindalco’s results may get affected too
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Restatement of accounts is quite uncommon in India. Even if Indian companies discover bloopers they are either rectified prospectively in the P&L or retrospective effect is given through the balance sheet. The first practice will reflect in future financial statements and the second will not reflect in the profit and loss account, thereby not affecting the profit for the year. US GAAP in contrast requires companies to restate their financial statements.
Economy+Policy
The inflation-IIP double whammy
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The week has begun on a somber note. The political developments in Delhi, with the Left exiting the UPA and the Samajwadi party making an entry, will mean some changes ahead, some of them could affect business. Then, on Friday, inflation inched ever so closer to 12%. This was not as much a surprise but a confirmation that high levels of inflation won’t go away in a hurry. Indeed, if RBI’s level of 5.5% is taken as a benchmark, we have a long way to go before we can relax.
Economy+Policy
Ouch! India’s Inflation index at 11.42%
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Economy+Policy
India’s inflation: reining in the government
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Already, inflation is resulting in the government taking steps that don’t seem logical. The Finance Minister has for long been cheering the growth story and cautioning the central bank taking any monetary steps, which might hit growth. And, he has helpfully been ‘requesting’ public sector banks not to increase interest rates, for good measure. Though the RBI is an autonomous body, the pressure on it to ignore the warning signals of rising inflation was evident.
Finance+Markets
No credit derivatives for India: global financial centre a distant dream
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One drawback of the Indian corporate bond market is the absence of credit derivatives. Regulatory reluctance was a main reason for this phenomenon. This had changed over the years with strong lobbying from all interested parties and the government giving a go-ahead from its side. The government had made announcements to that effect in the 2006-07 Budget and even commissioned a report on making Mumbai a regional financial centre.
Companies
Tax on luxury cars will help no one, not even inflation
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Last week, inflation touched 8.75% confirming that inflation has perhaps crossed 9% and if you factor in the June 4 petroleum product price hikes, it will cross 10%. Everyone seems to be predicting that by November’08, the base effect will kick in and reported inflation will come down. Still, if the direction in which prices are moving does not change, it does not bode well.
Companies
HP-EDS deal: are Mphasis shareholders jumping the gun?
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Update on May 22: EDS has sent a clarificatory letter to the stock exchanges stating that it is not required to make an open offer, under Sebi’s existing regulations. That will disappoint retail shareholders who were hoping for a windfall, though instutional shareholders would have realised that an open offer was not on the cards. Read the text of the letter here.
Companies
Is Bolix a good buy for Berger Paints?
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Berger Paints will add about Rs 180 crore or about 13% to its existing turnover after the acquisition of Polish company Bolix. Berger bought out the company on April 28, 2008 giving an exit to private equity company, Advent International.
Bolix is in the exterior building materials business; it makes external insulation finishing systems (EIFS). It was acquired by Advent in 2003 when it had a turnover of $26mn, which has grown at a CAGR of 15% to $45.5mn in 2007. That is a smart growth rate, indicative of the demand for this business.