Thursday, December 25, 2008

IPO Markets Hit 5 Year Low In 2008

Money raised through public offers in India has hit a new five-year low this year. This year saw companies raising Rs 16,927 crore through initial public offers (IPOs) and follow-on public offers (FPOs), a decline of 63% compared with Rs 45,137 crore that was raised last year, says research firm Prime Database. The last time Indian companies raised less than Rs 20,000 crore in a single year was in 2003 when firms mopped up Rs 2,179 crore through 14 issues.


Following the poor show of public offers and low-investor sentiment in the stock market, several Indian companies have withdrawn their plans to raise funds through new public issues.


The only significant factor in 2008, was the issue of Reliance Power, the largest ever IPO in India, which raised Rs 10,123 crore. This single IPO accounted for 60% of the year’s total fund mobilisation through public offers. As per the data compiled by Prime Database, there were only two issues of over Rs 1,000 crore each compared with six in 2007. In 2008, 22 of 38 issues raised less than Rs 100 crore, with 14 raising less than Rs 50 crore.


There was a significant decline in also the number of public issues this year. As against 106 public equity issues in the previous year, 2008 recorded only 38 issues, a drop of 64%.

This was partly due to the response from the public to the issues of the year, unlike 2007. Only six of the 37 IPOs received oversubscription of more than 10 times, compared with 50 out of 101 IPOs in 2007. Moreover, as many as 14 issues barely managed to get a one-time subscription. Worse, three IPOs had to be cancelled because of lack of response, including the Rs 5,436 crore issue of Emaar MGF and the Rs 564 crore issue of Wockhardt Hospitals.


Courtersy : Economic Times and Prime Database 

Thursday, December 18, 2008

Satyam-Maytas "unfair" deal off

Financial crisis call for desperate actions. India's fourth largest IT services firm Satyam Computer was trying to acquire 100% stake in Hyderabad-based Maytas Properties for $1.3 billion and was going to pick up a 51% in public listed firm Maytas Infra for $300 million. The total deal value was pegged at $1.6 billion (Rs 8,000 crore). The smart move by Satyam owners (hold just 8% ) to get the cash move into their pockets and in the process make Maytas  come out of the trouble times.
  
"Nobody can take shareholders for a ride"  that’s the message that’s gone out loud and clear to the owners , promoters of Satyam Computers. 

I fail to understand what are the Independent Directors doing  ? They are on the board on the company to take care of the interests of the company but it seems they failed in  their duties to voice concerns over the unfair deal.

Also a larger question about the corporate governance of Satyam ( it received award in September 2008 for good corporate governance ).

Where do Satyam go from here ? they may buy back the shares and it is difficult for the company to come out of this bad image it created for itself

Saturday, December 6, 2008

American Jobs Vanish


An alarming half-million American jobs vanished virtually in a flash last month, the worst mass layoffs in more than a third of a century, as economic carnage spread ever faster and the nation hurtled toward what could be the hardest hard times since the Great Depression.

Employment shrank in virtually every part of the economy — factories, construction companies, financial firms, accounting and bookkeeping, architectural and engineering firms, hotels  and motels, food services, retailers, temporary help, transportation, publishing, janitorial and building maintenance, and even waste management. The few fields spared included education, health care and government. 

How will this effect India ? Most of the companies which were in list of companies which are in serious down sizing have their offices in India and China. There will be collateral damage and IT & ITES will be worst hit. Many professionals may lose jobs in the next couple of months the effect will be more on non billable employees initially.

Tuesday, December 2, 2008

Detroit Three publish rescue plans


The so-called Detroit Three,Chrysler, Ford and General Motors have all submitted their proposals to Congress for multi-billion dollar loans that could decide the survival of the companies.US Carmakers have asked for a combined total of $34bn. General Motors asked Congress for a loan of $12bn , with an additional $6bn if necessary, to help it survive.Ford meanwhile requested a $9bn  bridging loan, which it hopes it will not need.Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.

Reducing costs, reducing debt levels  and investing in greener technologies form the centre-piece of each proposal. The chief executives of Ford and GM have even offered to work for $1 a year if Congress approves the emergency aid.Sales at all three of the carmakers have plunged as US consumers tighten their belts in the face of the severe economic downturn.

Analysts feel its a tough task. 

Monday, December 1, 2008

US Recession Began in 2007

Its official now, the Business Cycle Dating Committee of the National Bureau of Economic Research met on 28th November 2008 determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

Complete text is posted at http://oxdown.firedoglake.com/diary/2133

Post Crisis

I was reading through the speech given by  John Lipsky, First Deputy Managing Director, International Monetary Fund what could be the world economy post crisis and how one can find their answers.read him here 

"Growth prospects for emerging economies also have been undermined by the latest developments. Still, the new IMF forecast anticipates that activity in emerging economies will expand by 5 percent in 2009, although with considerable regional variation. Thus, it is expected that emerging economies will account for 100 percent of global growth next year. It is also true, however, that even this newly reduced forecast can't be taken for granted, as the downside risks to growth, even for the emerging economies, remain significant. Thus, actions to be taken by emerging economy authorities to bolster confidence in the appropriateness of their policies, as well as efforts by the international community to provide necessary financial support in this moment of crisis, will be critical in order to attain the hoped-for revival of global growth by 2010".

He ends his speech by saying that  IMF stands ready to use its financial resources and expertise to help pave the way toward a more resilient post-crisis global economy.

Photo courtesy : imf.org


Saturday, November 15, 2008

Financial Crisis in India

The storm of financial crisis hits India, for nearly a decade, companies in India have had a strong run of growth, pulled along by fast economic expansion and blessed with low inflation. World now is very different from what it used to be for the  10 years. There are some collateral damages which can happen.


There may be sharp decline in consumer spending on houses, cars and other consumer durables, following the sharp decline in lending to households, will cause a recession in the construction industry and also in  production of consumer durables.

 

Most of the loans on houses will default on their  payments and consumer loans, especially as house values will fall below the loan values.

 

Non Performing Assets (NPA's )  in the banking sector will increase as there will more write-off of bad housing loans and personal loans. These  losses to the banks will push  financial institutions into bankruptcy or forced mergers with stronger banks.

 

Then there will be retrenchment of lending even the smallest term loans, which banks and other institutions lend to each other for their  working capital.