Business Breakfast -1

1. Business Breakfast -1 A Consult Club Initiative

2. Week in Business National-ECONOMY • Economy PE Phenomenon 2006 -> $8.0 billion 2007(till date)  $8.5 billion Highest proportion going into infrastructure Leaders -> Carlyle Group, Blackstone, Temasek Forex Touched $219 billion What can be done next ? • Investment in infrastructure • Move towards capital account convertibility ? • Lower trade barriers • Strategic Investment Abroad (China which invested in Blackstone) • Recapitalization of banks

3. Week in Business National-ECONOMY Economy Inflation Current 4.28 % expected to come down 4.00 % Interest rates are expected to come down in near future Export Package for exporters to counter rising Rupee This involves Interest Rate Relief Swifter Reimbursements Competitiveness VS Profitability Soaps increases profitability but affects Competitiveness Example of Germany - 8 Appreciation still 9% Export Growth Effect on IT companies revenues Infosys, Wipro, Satyam Affected TCS Shielded some loss Import Import of auto components and tyres killing Indian manufacturers OEM going heavily for imports

4. Week in Business National-INFRA • Too Much of Gas !! • What is REL gas controversy ? • How price discovery is difficult? • What Anil Ambani has to do ? • Telecom Spectrum Efficiency COAL VS RCOm RCOM  37.2 Mhz/135 Million = 3.62 Mh/Miilion China  8.5 Mhz/Miilion COAL New Measure Erlangs/Busy Hour/ Mhz/Km 15 Mhz/48.8 = 3.2 Million/Mhz (Expected 5 Times ) RCOM Acquired Yipes Entry into Enterprise Data Communication in US Reliance + FLAG + RCOM Erickson-Bharati Deal $ 2 billion contract for network expansion

5. Week in Business National - FMCG FMCG • Wipro going for overseas shopping • Acquired UNZA • Why going overseas ? • How it will help wipro ?

6. Week in Business International Sequence of news: • Mergers & Acquisitions • FDI • Global Markets

7. Hypocrisy reigns supreme in anti-takeover defence strategies • Countries like Saudi Arabia, China, Russia, etc have vast reserves • Central Bank Reserves in these countries are being used as ‘sovereign wealth’ funds. These could be used for trans-border takeovers

8. Hypocrisy reigns supreme in anti-takeover defence strategies • The West has always been outspoken in its support for globalisation, but has frequently opposed takeovers that affect its constituent countries • A lot of Western countries today (EU, Canada are examples) are reviewing state policy regarding foreign ownership • Countries like China, Russia themselves are also not far behind in interfering in the ‘free’ market

9. The Barclays vs. RBS Struggle for ABN-AMRO • Barclays offer of approx €67bn in mostly stock • RBS Consortium’s offer was of €71.1bn with relatively much more cash • The market prefers the RBS bid • More cash • Hedge funds and speculators, who hold upto 40%, would prefer cash today

10. The Barclays vs. RBS Struggle for ABN-AMRO • The board prefers the Barclays bid due to synergies • The opinion is that breaking up the bank is not preferable • The fact that RBS says fewer jobs will be lost doesn’t have buy-in with the board • Interestingly, Barclays has been talking of conditional donations to the University of Amsterdam

11. Murdoch’s News Corp vs. Dow Jones • Internet entrepreneur Brad Greenspan appealed to the Bancroft family to reject Murdoch’s bid to take over Dow Jones • Proposes to fund a buyout by the family • Says he has new media strategies to realise better capital appreciation • But Murdoch also has a history of reviving dying organizations

12. Murdoch’s News Corp vs. Dow Jones • His point that Dow Jones cannot compete by itself in this era has revived the meandering company • A fear is that he will tilt the Wall Street Journal to serve his own political and business agenda

13. Wipro goes shopping In Germany; Lines Up € 500m War Chest • Could be looking at IT businesses of companies where it is not a core business • Lufthansa (airline) • Bilfinger Berger (construction) • Gauselmann Group (gaming) • Significant entry opportunity into Germany (80% of European revenues from UK)

14. Wipro goes shopping In Germany; Lines Up € 500m War Chest • Captive IT businesses of companies chosen to obtain entry into those niches • Possible hypothesis that these are under-valued by the parent

15. Unsure Starbucks defers India entry • Due to the government’s flip-flops on regulation of FDI in retail • Speculation is that the government might tighten franchisee regulations, which was the preferred entry method

16. Unsure Starbucks defers India entry • Was asked to resubmit bid in 2006 due to ‘lack of clarity’ and non-compliance with the 51% limit on FDI • The new bid, which was to license the brand to New Horizons Retail, was also rejected • Carrefour and Tesco also have postponed plans for entry

17. Stocks tumble on lackluster earnings reports • After record-breaking day, Dow Jones Industrials fell nearly 150 points on Friday • Disappointing results from Caterpillar and Google triggered the drop • The index breached 14000 for the first time on Thursday

18. Stocks tumble on lackluster earnings reports • Caterpillar had always been a stand-out performed among the index’s constituents • Technology shares took a hit after less-than expected profits from Google and Microsoft • While the Dow is a narrow index, broader indices also took a fall

19. Stocks tumble on lackluster earnings reports • A number of other issues • An increase in volatility due to option expiries • An increase in expectations over the recent past had increased possibility of such a correction • The sub-prime lending market is unraveling slowly

20. China hikes interest rates to cool economy • For the third time since March • To cool the fastest pace of economic growth in 12 years and restrain inflation • The aim is to slow lending, and therefore, investment • Will alleviate fears of overheating, which huge exports and investment this year have created

21. China hikes interest rates to cool economy • Comes after other similar measures • Increase of stamp duty on share transactions • Increase in CRR (its Chinese equivalent) • Plans to drain cash from the economy by selling bonds • Effect on the markets?

22. The Hedge-Fund 'Clones' • A complex new product being pitched by Wall Street • Claims that it will mirror hedge fund returns, but with lower fees • Very simply put, these products try to duplicate historical returns of hedge funds, using more easily traded assets

23. The Hedge-Fund 'Clones' • A number of issues exist • The asset classes invested in are completely different • The risk is reduced, therefore, so will the returns • The over-dependence on history is a gross mistake, given that hedge fund portfolios are rarely static • The diversification aim of investors will not be satisfied by clones

24. Issue of the Week – 10 Years of South East Asian Crisis Before the Downfall What kicked the downfall How the currencies crumbled ? The various school of thoughts for analysis • Total factor productivity • Behavioral Economics • Asymmetric Information Why not India ? Learning for India ….should we go for capital account convertibility ?

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