Friday, 23 October 2015

Walmart bribery episode: Another wake-up call for India

Notwithstanding Walmart’s tainted history of kickback allegations, the recent revelations concerning the retail giant’s India operations have reinforced the need to build a culture of transparency and accountability to live up to our much-chewed promise of ‘ease of doing business’.


“I have always been driven to buck the system, to innovate, to take things beyond where they've been” - Sam Walton
There seems an ironic and eerie coincidence between the words of Sam Walton, founder of America's multi-billion retail chain Walmart, and the recent Wall Street Journal (WSJ) report alleging that the company paid bribes to Indian officials to "buck the system", which helped them in easier movement of goods through customs. In what is a far cry from the ethical business practices boasted by Walmart, WSJ reported that bribes were paid to low-level officials in India. “The vast majority of the suspicious payments were less than $200, and some were as low as $5, the people said, but when added together they totaled millions of dollars,” the WSJ stated.

The bribery allegations, even if proven true, might not attract any penalties for Walmart, as profits from Indian operations don’t fall under the aegis of Foreign Corrupt Practices Act (FCPA) of the United States. FCPA penalties, reportedly, are connected to the amount of profit from the alleged misconduct and Wal-Mart's Indian operations have not been profitable.

Walmart’s tainted history

When Krish Iyer, CEO of Walmart India, took charge of Indian operations in 2014; the company was undergoing a breakup. To increase its global foothold by venturing into the unchartered waters of India, as early as 2007, the retail giant found a partner in Bharti Enterprises. The joint venture was to build and operate cash and carry superstores in India under the name Best Price Modern Wholesale.A change of strategy, primarily by Walmart, played spoiler of sorts for the JV. Walmart wanted to adhere to the ‘cash-and-carry’ business, and had built up the entire backend for it including supply chain infrastructure, supplier development programmes, and procurement hotspots. However this was in violation of the law of the land. The Indian Government required retailers to source 30 percent from small suppliers which made operating conditions tough for Walmart to comply with.

The company was also embroiled in a controversy over flouting norms in some other countries like Mexico, Brazil and China, where it allegedly tried to bribe officials. As per a report in New York Times, Walmart had allegedly paid bribes to the tune of $24 million in Mexico to build stores there. Middlemen gained out of such deals, and facilitated the process of getting permits. This did not go well with Bharti Enterprises, as it decided to jettison the partnership, which when it had been announced, had all the makings of a “Retail liberalization” in India.

It seems though that Walmart has never been shy of bending the rules to get things in their favour. In order to establish supremacy in the retail world vis-à-vis competition, the American giant is resorting to all means, whether paying bribes, giving “donations” and altering legal documents to circumvent the transparent procedures, open debates and democratic voting. In that sense, it has been a serial deceiver.

The larger issue

Paying a bribe is not much of a rarity in India but the Walmart revelations of indulging in unfair practices have underlined the murky nature of the business dealings in India. While the exact amount of the bribes paid is still under estimation and it will take some time for the investigation to reveal the exact figure, it is imperative that we ask ourselves some fundamental, uncomfortable questions: Why did Walmart have to pay the bribe? Do we lack a transparent process in terms of obtaining clearances and licenses in matters like land, environment or customs, which force such foreign-based companies to resort to unfair means? Is the unease of doing business in India hurting our foreign investments, as more FIIs/FPIs pull money from the markets every day?

Of course, despite India’s exclusive problems, the onus is also on MNCs to stick to the basics of morality. Will they and can they afford to uphold their conscience is another question? But running the risk of a sympathetic view on the Walmart story despite incriminating evidence of bribes and flouting of norms, we need to raise even more fundamental questions on the ease of doing business in India.

Traditionally, India has never been an easy place to start and sustain a business. With the plethora of rules, age-old norms, dozens of clearances, permits, not-so-transparent taxation structure and to top it all, a sluggish bureaucracy that is grossly underpaid, the honest businessmen have to go through a lot of hurdles before they can create a successful enterprise, especially for the foreign players.

A survey by the Indo-German Chamber of Commerce (IGCC) on hindrances of doing business in India in 2015 lists bureaucracy (58 percent), lack of infrastructure (52 percent) and corruption (45 percent) as the main obstacles for companies, followed by tax disputes (32 percent) and lack of skilled people (35 percent). For foreign investors like Walmart and others, sectoral conditions like minimum capitalization and shareholding restrictions to gain parity with the domestic peers play spoil sport when the try to up investment in India.

A recent report by World Economic Forum on the global competitiveness ranking slots India at 55th position out of 140 countries. A jump of 16 places from the last year offers little respite considering the alarming situation in the category of “ease of doing business” where India ranks 142nd among 189 nations. “India’s performance in the macroeconomic stability pillar has improved, although the situation remains worrisome (91st, up 10). Thanks to lower commodity prices, inflation eased to 6% in 2014, down from near double-digit levels the previous year. The government budget deficit has gradually dropped since its 2008 peak, although it still amounted to 7% of GDP (gross domestic product) in 2014, one of the world’s highest (131st). Infrastructure has improved (81st, up six) but remains a major growth bottleneck—electricity in particular,” the report observes. Although the Modi government is trying hard to come up with solutions, it would take considerable time to get transparent and accountable systems firmly in place.

Systematic failures of successive governments to provide a clear, transparent and favorable atmosphere for business development has indirectly forced many multi-million dollar corporations to bend the rules of the state to push their growth agendas. The Walmart story is a classic case in point. As India is trying to leapfrog into the band of developed economies of the world, there is an urgent need to address these grave concerns. Otherwise, ease of doing business will forever remain an uneasy target.

Symphony Q1 net profit at Rs. 28.8 crore

The total income for Q1 was at Rs.114.5 crore.


Symphony Ltd has posted results for the first quarter ended 30th September, 2015.

The net profit for the quarter was at Rs.28.8 crore.

The total income for Q1 was at Rs.114.5 crore. 

Aurobindo Pharma receives USFDA nod for Tramadol Hydrochloride Extended-release Tablets

The approved ANDA is bioequivalent and therapeutically equivalent to the reference listed drug product (RLD) ULTRAM ER (Tramadol Hydrochloride) Extended-Release Tablets 100 mg, 200 mg and 300 mg of Valeant INTL.


Aurobindo Pharma
Aurobindo Pharma Limited has received final approval from the US Food & Drug Administration (USFDA) to manufacture and market Tramadol Hydrochloride Extendedrelease Tablets USP, 100 mg, 200 mg and 300 mg (ANDA 204421). This product will be launched by Q4
FY 2015-16.

The approved ANDA is bioequivalent and therapeutically equivalent to the reference listed drug product (RLD) ULTRAM ER (Tramadol Hydrochloride) Extended-Release Tablets 100 mg, 200 mg and 300 mg of Valeant INTL.

Tramadol Hydrochloride Extended-release Tablets are used in the treatment of moderate-to-severe pain in adults who require around-the-clock treatment for an extended period of time. The approved product has
an estimated market size of US$56 million for the twelve months ending August 2015 according to IMS.

This is the 50th ANDA to be approved out of Unit VII formulation facility in Hyderabad, India for manufacturing Oral Non-Antibiotic products. Aurobindo now has a total of 217 ANDA approvals (189 Final approvals including 10 from Aurolife Pharma LLC and 28 Tentative approvals) from USFDA

Cairn India rises 3% post Q2 results

The Group has posted a net profit of Rs. 6726.70 million for the quarter ended September 30, 2015 as compared to Rs. 22778.80 mn for the quarter ended September 30, 2014.


Shares of Cairn India were higher by 3% at Rs. 158 after the company posted Q2 results.

The Group has posted a net profit of Rs. 6726.70 million for the quarter ended September 30, 2015 as compared to Rs. 22778.80 mn for the quarter ended September 30, 2014. 

Total Income has decreased from Rs. 45683.30 mn for the quarter ended September 30, 2014 to Rs. 27432.80 mn for the quarter ended September 30, 2015.

The scrip opened at Rs. 153.95 and has touched a high and low of Rs. 159.7 and Rs. 152.55 respectively. So far 668982(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 28882.11 crore.

The BSE group 'A' stock of face value Rs. 10 has touched a 52 week high of Rs. 292 on 27-Oct-2014 and a 52 week low of Rs. 121.25 on 24-Aug-2015. Last one week high and low of the scrip stood at Rs. 162 and Rs. 151.7 respectively.

The promoters holding in the company stood at 59.88 % while Institutions and Non-Institutions held 23.43 % and 16.69 % respectively.

The stock is currently trading below its 200 DMA.

Coffee Day sets IPO price at Rs. 328 per share

The IPO closed on October 16 and got oversubscribed 1.81 times.


Café Coffee Day has fixed its public offer price at Rs. 328 per share. 
The IPO closed on October 16 and got oversubscribed 1.81 times. 

The shares reserved for qualified institutional buyers (QIBs) was subscribed nearly 4.4 times. 

Coffee Day Enterprises Ltd. (“CDEL”) is the parent company of the Coffee Day Group, which currently operates in businesses such as coffee, development and management of IT-ITES technology parks, providing integrated logistics solutions, financial services, hospitality and investing in technology companies.
 
The Company also has investments in certain IT-ITES and other technology companies such as Mindtree in which it owns a 16.75% equity holding (effective holding being 16.04%) as of June 30, 2015 and in which the Promoter, V.G. Siddhartha, additionally owns 3.01%. Other investee companies include Ittiam, Magnasoft and Global Edge.

LIC in talks with PSBs to sell Nomura stake in MF arm

More clarity on the issue is likely to come after the LIC Board meeting scheduled for October 28, reports a business daily.


Life Insurance Corporation (LIC) has reportedly started talks with public sector banks (PSB) to sell its 35% stake held by its Japanese partner Nomura in its mutual fund arm.
LIC2
More clarity on the issue is likely to come after the LIC Board meeting scheduled for October 28, reports a business daily.

LIC reportedly does not want to increase its 45% stake in the MF joint venture any further.

According to the daily, Nomura India is unlikely to renew its five-year contract with LIC and is planning to completely exit its mutual fund business in India.

The five-year term comes to an end early next year.

The Japanese company holds a 35% stake in LIC Nomura MF, which had an AUM of a little over INR 11,157 crore as of September-end.

LIC's housing finance arm, LIC Housing Finance, holds a 20% stake in LIC Nomura MF.

Japan offers soft loan for bullet train project

Japan has reportedly offered to meet 80% of the Mumbai-Ahmedabad project cost, on condition that India buys 30% of equipment, including the coaches and locomotives from Japanese companies.


Train
Japan has reportedly offered financial support and technology know-how for India's maiden bullet train project.

Japan has offered to finance Mumbai-Ahmedabad high speed rail corridor estimated to cost ~INR 90,000 crore at an interest rate of less than 1%, Railway Ministry officials have been quoted as saying to a financial daily.

In its report submitted to the Railway Ministry, Japan International Cooperation Agency (JICA) has envisaged a reduction in the travel time on the 505-km long corridor between Mumbai and Ahmedabad to two hours from the existing period of over seven hours.

The bullet train is expected to run at speeds of around 300-350 km/hour.

Japan has reportedly offered to meet 80% of the Mumbai-Ahmedabad project cost, on condition that India buys 30% of equipment, including the coaches and locomotives from Japanese companies.

A decision on the project is yet to be taken by the Railways because it will be decided at the highest level in the Government, the business newspaper has reported.  

20 Stocks in focus today

Check out the companies which will be in focus during trade today based on recent and latest news developments.


Stocks to watch
Tata Motors: Singapore-based TML Holdings Pte Ltd, a subsidiary of Tata Motors Ltd. has raised a US$600 million loan from six banks. The company held road shows in Taipei on 19th October and in Singapore on 20th October.

Coal India Ltd: CIL is reportedly planning to put in place an Information Technology (IT) mechanism to monitor execution of mining projects that cost over Rs. 150 crore.  According to a CIL official, a tender document has been drafted by the company to set up an IT-enabled system to monitor and evaluate projects.

Wipro: The IT Company reported consolidated net profit of Rs. 2235.40 crore for the quarter, registering growth of 2.18% qoq and 7.22% yoy. Company’s revenue stood at Rs. 12566.80 crore, registering growth of 1.58% qoq and 6.35% yoy.

Cadila Healthcare: The pharma company reported 40.5 per cent rise in its net profit at Rs.3,909.10 million for the year ended September 30, 2015 as compared to Rs.2,780.90 million for the same quarter in the previous year.

JSW Steel: The company reported consolidated net profit of Rs. 116.95 crore for the quarter, registering decline of 84.38% yoy. However, the company reported net loss of Rs. 106.81 crore for the previous quarter. Company’s consolidated revenue stood at Rs.10906.90 crore, registering decline of 21.50% yoy and 5.78% qoq.

Sun Pharmaceuticals Industries Limited has announced that Sun Pharmaceutical Industries Ltd, along with its subsidiary ( Sun Pharma) has entered into a settlement agreement with Acorda Therapeutics, Inc. to resolve the pending patent litigation involving Ampyra (dalfampridine) Extended-Release Tablets in the US.

Strides Arcolab Limited: The pharma company has announced that it has strengthened India branded business through: (a) Acquisition of Seven brands from Johnson & Johnson and (b) Acquisition of majority stake in domestic branded business of Medispan.

Hero MotoCorp: Hero MotoCorp, Honda Motorcycle & Scooter India (HMSI), and several other auto ancillary companies are reportedly in talks with their respective labour unions for wage revision agreements in the Gurgaon-Manesar manufacturing belt.

Cairn India: The company reported consolidated net profit of Rs. 672.67 crore for the quarter, registering decline of 70.46% yoy and 19.43% qoq. Company’s revenue stood at Rs. 2242.14 crore, witnessed decline of 43.69% yoy and 14.65% qoq.


Reliance Communications: The company is planning to roll out a 3G ICR-like roaming agreement to continue 2G service in Bihar, West Bengal and Assam.

Maruti Suzuki: Maruti Suzuki’s royalty payments to its Japanese parent Suzuki are “extortive” and the amount paid has increased more than six times per car over the past 15 years, according to proxy advisory firm IiAS.

Bajaj Auto: The company has posted a net profit of Rs. 930 crore for the quarter ended September 30, 2015 as compared to Rs. 591 crore for the quarter ended September 30, 2014. Total Income has increased from Rs. 60767.00 million for the quarter ended September 30, 2014 to Rs. 62504.20 million for the quarter ended September 30, 2015.


KPIT Technologies Ltd: The company has posted a net profit after taxes, Minority Interest & Share of Profit of Associates of Rs. 750.877 million for the quarter ended September 30, 2015 as compared to Rs. 705.521 mn for the quarter ended September 30, 2014.

Idea Cellular Ltd : The IT Company has posted a net profit after tax of Rs. 8,092.60 million for the quarter ended September 30, 2015 as compared to Rs. 7558.80 million for the quarter ended September 30, 2014.

HDFC Bank Ltd: The bank reported 20.5%  rise in its net profit at Rs. 28,694.50 million for the quarter ended September 30, 2015 as compared to Rs. 23,814.60 million for the same quarter in the previous year.

Blue Dart Express : The net profit rose 74.46% to Rs 53.75 crore in the quarter ended September 2015 as against Rs 30.81 crore during the previous quarter ended September 2014. Sales rose 12.00% to Rs 651.44 crore in the quarter ended September 2015 as against Rs 581.66 crore during the previous quarter ended September 2014.

HCL Infosystems: The company reported to Rs 49.24 crore in the quarter ended September 2015 as against net loss of Rs 45.26 crore during the previous quarter ended September 2014. Sales declined 91.26% to Rs 147.06 crore in the quarter ended September 2015 as against Rs 1682.68 crore during the previous quarter ended September 2014.

Tata Coffee Ltd: The company reported its Q2 net profit at Rs. 27.5 crore for the quarter ended September 30, 2015 as compared to Rs. 32.4 crore for the same quarter in the previous year.

Aditya Birla Chemicals (India) Ltd:The company has  approved the firm's proposal to raise up to Rs 1,200 crore through private placement. 


Shriram Transport Finance Ltd: Shriram Transport Finance Company announced that Reserve Bank of India (RBI) has removed from the ban list - FIIs/RFPls the name of the Company. Hence the restrictions placed on the purchase of shares of the Shriram Transport Finance Company by FIIs/RFPIs vide RBI letter dated 20 October 2015 are withdrawn with immediate effect.

Coal India to rely on IT to track mining projects

In the first phase, the monitoring and evaluation system will be set up for projects costing INR 150 crore or more, the official has been quoted as saying.


Coal India
Coal India Ltd. (CIL) is reportedly planning to put in place an Information Technology (IT) mechanism to monitor execution of mining projects that cost over Rs. 150 crore.
According to a CIL official, a tender document has been drafted by the company to set up an IT-enabled system to monitor and evaluate projects.
In the first phase, the monitoring and evaluation system will be set up for projects costing Rs. 150 crore or more, the official has been quoted as saying. 
CIL accounts for over 80% of the domestic coal output.
CIL achieved an output of 229.54 mt in the first six months of FY16, missing its target of 235.49 mt. 
Coal India’s output target for FY16 stands at 550 mt as against the recorded figure of 494.23 mt in FY15.
In the last fiscal year, CIL added 32 million tonnes, more than the cumulative growth of four years

Smart gain! Rupee opens at 64.77/$

The currency touched a high and low of 65/$ and 64.79/$ respectively.


Indian Rupee today opened at 65.77/$ higher by 32 paise in early trade on Friday on fresh selling of the US currency by exporters and banks. On the global front, Global cues are healthy with the Dow gaining 1.87%, S&P 500 adding 1.66% and Nasdaq rising by 1.65%. Wall Street was boosted by better than expected corporate earnings by a couple of firms and among them was McDonald's. Asian markets are also well in the green. In addition, month end dollar demand for the greenback from the importers is also weighing on the domestic unit. However, the broader trend remains resilient thanks to persistent foreign capital inflows.

The currency touched a high and low of 65/$ and 64.79/$ respectively. The Reserve Bank of India’s (RBI) reference rate for the dollar stood at 65.15 and for Euro stood at 73.97 on October 21, 2015. While, the RBI’s reference rate for the Yen stood at 54.31, the reference rate for the Great Britain Pound (GBP) stood at 100.5350.