NEWSLETTER

10 Pages 14th June 2012 – 20th June 2012 www.xedintellect.com

BUSINESS NEWS

ECONOMIC INDICATORS 2 COVER STORY 3 PERSONALITIES OF THE WEEK 4

CORPORATE INTELLIGENCE 5 NEWS ANALYSIS 6

NEWS DIGEST…

IN BRIEF

PERSONALITIES OF

THE WEEK

CORPORATE INTELLIGENCE

91 Day T-Bills

Interest Rate 8.30% (expected)

Brent Crude $95.75 (as on Wednesday 0434GMT)

ECONOMIC

INDICATORS

Euro leaders take respite as conservatives form government in Greece

COVER STORY

Taliban praises India for

resisting US pressure

GLOBAL NEWS

BRICS offer $75 billion to aid EU

Jim Yong

Kim

Preet Bharara

LARSEN & TOUBRO

… a weekly news bulletin

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MISCELLANEOUS NEWS

1. Euro leaders take respite as conservatives form government in Greece 2. Fitch downgrades India’s sovereign credit outlook to negative 3. RBI offers no rate cuts, markets stunned with announcement 4. BRICS offer $75 billion to aid EU 5. Taliban praises India for resisting US pressure

ECONOMIC INDICATORS

91 Day T-Bills – Interest Rate 8.30% (expected) Source: Reuters The RBI is expected to sell the 91-day treasury bills at 8.30%, well above the cut-off of 8.14% in last week‘s sale, according to the median estimate in Reuters poll of 11 primary dealers and banks. RBI is expected to sell the 182-day T-bills at 8.25 percent versus the auction cut-off of 8.16 percent two weeks ago. The cut-off expectations for 91- and the 182-day T-bills are much higher after the RBI left interest rates unchanged on Monday. For the 91-day treasury bills, the highest forecast in the poll was 8.32 percent and the lowest was 8.27 percent. The highest forecast for the 182-day T-bills came in at 8.31percent, lowest at 8.15 percent. RBI will auction 90 billion rupees of the 91-day bills and 50 billion rupees of the 182-day bills.

Brent Crude - $95.75 (as on Wednesday 0434GMT) Source: Reuters

Oil hit multi-month lows this week on concerns that Spain's soaring bond yields could eventually lead to an international bailout for Madrid, but investors are hoping that any further monetary easing by the U.S. central bank would boost liquidity and support prices. Brent crude has already lost more than a quarter since peaking this year at $128.40 on March 1 as investors focused on the dimming outlook for global fuel demand rather than the supply disruption risks posed by sanctions on key producer Iran over its disputed nuclear program. Brent oil for August delivery was down 1 cent at $95.75 per barrel by 0434 GMT. It fell as low as $95.40 earlier, near Tuesday‘s trough of $94.44 – its lowest since January 10, 2011.

In the past year sales of American homes to foreign residents (and recent immigrants) increased by nearly a quarter to $82.5 billion, comprising almost 9% of the $930 billion home sales market, according to a recent survey by the National Association of Realtors. The sunny states of Arizona, California, Florida and Texas attracted just over half of these sales, but a state‘s proximity to foreign markets also makes a difference: Europeans tend to purchase homes on the east coast, Asians on the west coast and South Americans in Florida. Canadians are the biggest buyers, accounting for 24% of sales to foreigners, more than double the proportion five years ago, before the housing crash. In second place the Chinese are fast catching up; their share has increased from 5% in 2007 to 11% of sales. Both benefited from strong increases in the purchasing power of their currencies over this period, whereas Mexico and Britain, which saw their currencies slide, experienced sharp contractions in their share of foreign sales. France and Germany, the next largest European buyers, saw no change in their proportion of sales, but their shared currency did not move against the dollar either. Finally the Japanese, despite seeing the greatest benefit from currency movements, also had an unchanged share.

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HHHOOOMMMEEE AAAWWWAAAYYY FFFRRROOOMMM HHHOOOMMMEEE Graphic Detail: The Economist

Not many times, despite having loads of evidence, a judge wants an accused to walk scot free. Not many times a judge, while pronouncing the verdict, cries. The fall from grace of Rajat Gupta, charged for insider trading, has all the trappings of a blockbuster. Upholder of the law romancing the wrong doer does make for an interesting story. Rajat Gupta was the high and mighty of the American immigrant society. He counted the Clintons, Gates and other political and business elites amongst his friends. He held posts like

managing director of Mckinsey and later was appointed to the board of Goldman Sachs. He also served on the boards of the Rockefeller Foundation and the Bill & Melinda Gates Foundation. He co-founded Indian School of Business Hyderabad, a school that every management aspirant fancies. It‘s not only business Gupta is into, he has also raised tons of money for education and health care programs. He has also served as an adviser to the United Nations. So what went wrong? Gupta was sitting on the pinnacle of success. He was the poster boy of an Indian living the American dream. By any means he was rich, a really rich man. So what prompted him to flout the rules of the game in the twilight of his career? Money in this case does not seem to be the only answer. Gupta had a friend in Raj Rajratnam, owner of the hedge fund Galleon. Judges say, Gupta was a real friend and Rajratnam, a snake in the grass. Gupta was found guilty on four out of six counts leveled against him- three for securities fraud and one for conspiracy. The maximum sentence for securities fraud is 20 years and that for conspiracy is five years. So Gupta could get a maximum of 25 years in prison. Gupta, it was proved, called Rajratnam minutes after a board meeting of Goldman Sachs. He divulged the vital, sensitive and non-public information of Warren Buffet‘s Berkshire Hathaway investment of $ 5 billion in the firm. Rajratnam riding on this information, bought Goldman shares minutes before the market closed and pocketed a neat profit of $ 1.2 million. Rajratnam is already spending time in jail for Insider trading. Gupta was also accused of tipping Rajratnam of Goldman Sachs‘s quarterly earnings after a board meeting held on 12 March 2007. He was however acquitted of this charge. He was also accused of telling Rajratnam about the quarterly earnings of P&G in 2009. He was again found not guilty in this regard. Prosecution said Gupta helped Rajratnam because he wanted to start his own fund with Rajratnam‘s support and was to receive his share of profits made by Rajratnam. Unlike the Rajratnam prosecution, which was based on dozens of wiretaps of his mobile-phone conversations, the case against Gupta was circumstantial, built on trading records, business relationships and comments by Rajratnam or others about Galleon‘s sources of information. Then why the judges cried? Had Gupta made big money in lieu of divulging information, Judges or for that matter,

anybody would have been happy. The fact however is, he didn‘t make any money. He didn‘t personally trade in Goldman Sachs‘s shares. As per the laws, a person is accused of insider trading if the information revealed is traded upon and the person stands to gain a profit. Here the information was indeed traded upon, but no gains were accrued to Gupta directly. Yes, the likelihood of benefit was indeed there but it wasn‘t proved beyond a reasonable limit of doubt that he would receive that benefit. Everything said, Gupta had done a wrong thing

in divulging secret information. However, the promise of unforeseen future gains is never a big incentive to commit a crime today. Judges knew this fact and hence felt pity. They believe Gupta played into the hands of a manipulative Rajratnam. Though they did not rule out the fact that greed is a strong push and Gupta might have fallen for that. They simply acknowledged that Rajratnam made it very easy for Gupta to cross the line. Why Insider trading is so prevalent? Seeing the fate of Rajat Gupta, it is easy to say crime doesn‘t pay; but on analysis it seems insider trading as a crime has an excellent risk adjusted return. Securities and Exchange Commision brought 57 insider trading cases in the year 2011. But when there are over a thousand companies that are publicly traded, the amount 57 looks no better than a joke. Consider this; S&P 500 alone has over 5000 directors. Then there are lawyers, consultants, sales executives, distributors, suppliers, analysts. All these hold, at some point during the year some vital and tradable information. So insider trading is not as risky as other crimes and hence more tempting and prevalent. In US, 1081 banks were robbed in the third quarter of 2011 according to federal statistics. 1335 thieves got away with $9.3 million, $1.9 million of which was recovered, meaning that they each risked up to 20 years for a mere $6,153 - a real risk, considering the fact that 60% of bank robbers are eventually caught. By contrast, Gupta alone earned his friend $13 million, more than 40% more than the take of all those bank robberies, at a risk of arrest that must be less than 1%. What lies ahead? Motive plays a significant role in establishing an act of crime. It might be Gupta‘s greed, carelessness or friendship that might have done him in. His conviction marks a tragic culmination of an outstanding career. Such high profile prosecutions will work as a deterrent to those who think they are above the law and can never get caught. Most importantly the case tells everyone to perform their duties with utmost sincerity, the lack of which may cause trouble; for even a sight of teary eyed judges is no proof of innocence.

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Jim Yong Kim – President Elect, World Bank

It was a surprise to all, when President Obama nominated South Korean born Jim Yong Kim to lead the ―world‘s largest development agency‖. On April 16, Kim – a global health expert, was elected as the head, breaking World Bank‘s trend of selecting US born financial experts or economists as its leader. He is the first Asian-American & physician-anthropologist to lead the bank which provided $57 billion last year to the developing countries. Kim, who has over two decades of experience in bringing up healthcare in underdeveloped countries, plans to reorient World Bank‘s role in global development. His focus is on delivering powerful results that would be backed by sustained growth of economies, shifting from ideology based solutions to evidence based ones & amplifying the voices of developing nations. Kim was born in Seoul and migrated to the US with his parents when he was five. During his school days, he excelled in both academics and sports. He was President of his class, a ―valedictorian‖ and played both football & basketball. He graduated ―magna cum laude‖ with an A.B. from Brown University in 1982. Kim earned a Medical Doctorate from Harvard Medical School in 1991 & a PhD in anthropology from Harvard University in 1993. Being Human!!! He co-founded Partners In Health (PIH)- a non-profit organization that provided low cost healthcare programs in Haiti & Peru in 1987; and designed the remarkable low cost ―treatment protocol‖ to eradicate tuberculosis. Within nine years, the PIH business model became very successful and was adopted by the World Health Organization in its centers across 40 countries. While working with WHO, he oversaw HIV/AIDS prevention & cure programs; and is credited for designing the ―3x5 initiative‖ that has till date treated more than seven million Africans. He served as a lecturer at Harvard Medical School & eventually headed divisions like Global Health, Social Medicine & Human Rights of the Harvard University. He has continually worked for improving health in developing countries and has also spearheaded a new field focused on ―improving health interventions‖ in poor communities. In 2009, he was named the President of Dartmouth College, becoming the first Asian-American to head an Ivy League Institute. Kim received the MacArthur ―Genius‖ Fellowship in 2003. He was also named one of America‘s ―25 Best Leaders‖ by US News & World Report in 2005 & one of TIME magazine‘s ―100 Most Influential People in the World‖ in 2006. He is a big fan of sports & hip hop music. Kim enjoys playing basketball, volleyball, tennis and golf.

Preetinder “Preet” Bharara – US Attorney, Southern District of NY

The financial press calls him the ―New Sheriff of Wall Street‖. The Times magazine addressed him as Zeus of Southern District of NY. Preet Bharara, the man with many names – each reflecting his achievements, is a high profile & successful attorney in the US. He acquired fame when he convicted hedge fund manager Raj Rajaratnam and; recently nailed America‘s poster boy & former McKinsey head Rajat Gupta in the Insider Trading case that has rocked the Wall Street. Out of 66 people charged with insider trading crimes, Bharara has won conviction on 60. Within 21 months, since his appointment as US attorney, Bharara has prosecuted the Time Square bomber, Guantanamo Bay‘s first detainee, Somali pirates; and crippled international criminal networks run by the legendary arms dealer Viktor Bout & indicted several drug dealers. Gotham’s Real White Knight!!! Bharara was born in Punjab, India. He grew up in New Jersey & graduated as a ―valedictorian‖ from high school. When one of his teachers in high school got fired, he showed courage to fight for the underdog & led a group of students to the headmaster‘s office – and asked him to revoke her termination. He graduated ―magna cum laude‖ from Harvard College in 1990 and Columbia Law School in 1993. While working as the Chief Counsel to US Senator Chuck Schumer, he played a pivotal role in the judicial investigation of the firing of US attorneys. During his five years as Asst. US Attorney, he brought down the Columbian & Asian criminal gangs operating in New York City. Unlike other federal prosecutors, who make all kinds of enemies, he is a person whom people across political & industrial spectrum admire & respect for his witty comments, unparalleled smartness and humble nature. Bharara oversees more than 200 lawyers handling many of the country‘s most important cases in terrorism, organized crime, public corruption and financial fraud. He headed the team which pursued the landmark insider trading case & relied on aggressive prosecutorial methods and unprecedented tactics like wiretapping. The classic squeaky clean attorney is a big fan of, Rock star & his neighbor, Bruce Springsteen, and loves the song 'Born To Run'. He was named by Time Magazine as "One of The 100 Most Influential People in the World‖ in 2012.

“All I want to do is train an army of

leaders to engage with the

problems of the world.”

“There's no reason why

you can't use

appropriate street crime

tactics to fight white-

collar crime.”

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Numbers speak for themselves

New order inflow at 1000000 million in CY as against 797684 million in PY: 25% y-o-y growth

Gross sales increased by 19% from 2010-11

Segment wise composition of gross revenues Engineering and construction sector

grew by 85% in 2011 Electrical and Automation segment

grew by 7.2% in 2011 Machinery and Industrial production

segment grew by 6.2% in 2011 Profit after tax has grown at a CAGR

of 28% during 2006-11

Founded: 1938 Head Quarters: Chennai Revenues: USD 12.8 billion (company estimates for 2012) Employees: 45,000 Executive Chairman: A.M. Naik Overview:

Larsen & Toubro (L&T) is a technology-driven company that infuses engineering with imagination. Larsen & Toubro is an engineering, technology, construction and manufacturing company which offers a wide range of advanced solutions, services and products. It is one of the largest and most respected companies in India which meets requirements in key sectors – infrastructure, oil and gas, chemical, petrochemical, power, mining and construction. The company has also emerged as a key player in shipbuilding and defence. The L&T group markets plants and equipment in over 30 countries. Within India, L&T is present virtually in every district through a nationwide network of distributors. In January 2011, Mr. A.M. Naik announced that the company will be restructured into nine virtual companies. Each will be called an independent company, and will have a CEO, CFO and HR head, its own profit and loss account, and a board of directors with at least three independent directors. Each board will not have any legal or statutory standing, but will merely advise management. This is similar in organization to the Mitsubishi Group with which L&T has close partnerships.

Successful Seven Decades: L&T was founded by two Danish engineers, Henning Holck-Larsen and Soren Kristian Toubro. In 1938, the two friends decided to forgo the comforts of working in Europe, and started their own operation in India. All they had was a dream and the courage to dare. Blessing in disguise: Initially they manufactured dairy equipment, but with the start of Second World War in 1939, the Danish Government banned imports which compelled them to start a work shop to undertake jobs and provide service facilities. In 1940 when Germany invaded Denmark, supply of Danish products was banned. Germany's invasion of Denmark in 1940 stopped supplies of Danish products. This crisis forced them to start exploring other avenues. They started manufacturing dairy equipment indigenously. These products were successful and L&T came to be known as a fabricator with high standards. In 1950, L&T became a Public Company with a paid-up capital of Rs.2 million. The sales turnover in that year was Rs.10.9 million. Prestigious orders executed by the Company during this period included the Amul Dairy at Anand and Blast Furnaces at Rourkela Steel Plant. L&T emerged as the largest erection contractor in the country. During the 60s and 70s, L&T witnessed the formation of many new ventures such as UTMAL, AUDCO and TENGL. In the decade that followed, the company grew rapidly and became one of the Top-25 Indian companies. In 1976, Holck-Larsen was awarded the Magsaysay Award for International Understanding in recognition of his contribution to India's industrial development. He retired as Chairman in 1978 In 2011, Mr. Naik‘s move to restructure the group into nine independent companies is expected to help L&T focus on individual sectors & thus increase their market share. Under the leadership of Mr. Naik, L&T has emerged as a significant player in the nascent indigenous defence manufacturing sector where it is working on projects like the multiple barrel rocket launcher system for the Indian armed forces, Pinaka. Delhi airport‘s impressive terminal three, as well as the current expansion of GVK’s Bengaluru International Airport, are projects with L&T‘s engineering expertise at the helm. INTELLIGENCE BYTES: 1) Mr. A.M. Naik was awarded the Padma Bhushan by the President of India in 2009. 2) L&T Infrastructure Development Projects (L&T IDPL) bagged two NHAI road projects worth Rs 4,800 cr. 3) L&T's order book on railway projects at Rs 1,700 cr. 4) L&T Construction has obtained orders worth Rs 1,076 crore across businesses in the first quarter of fiscal 12-13.

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A.M. Naik (Executive Chairman)

1) Euro leaders take respite as conservatives form government in Greece- Reuters/ET IMPACT: Most European leaders and the markets as well got a huge relief after the election results in Greece came out on Sunday, giving pro-bailout parties a narrow lead. Losing party SYRZIA, which had done quite well in some local elections, had earlier given a scare to economies around the globe by announcing its anti-bailout intentions. Now a coalition government under Prime Minister Antonis Samaras will take matters into its hands. In the swearing-in ceremony, he promised to re-establish lost Greek-pride. The government plans to re-negotiate softer terms on $165 billion bailout with the European Union and IMF. At the same time, there seems to be huge resistance from Germany‘s side towards bringing major changes in the bailout terms. Moreover, Germany is suspicious of the new premier who used to oppose bailout vociferously, not so long ago. The Greek-tragedy might be far from over; however the chances of a Greek exit and a possible euro collapse have become lower. Only three out of 19 economists in a Reuters poll now find the Greek exit a possibility. KEY PLAYERS: Greek Government, European Union, Antonis Samaras WHY IT IS IMPORTANT? This is the second election in the last six weeks in Greece as the last one was not decisive enough to form a government. A nation which has one in five workers jobless and where businesses are closed every day, an unstable government is the last thing one would like to see. Hence, the news improved the mood of investors for sometime as Euro soared while markets went up. 2) Fitch downgrades India’s sovereign credit outlook to negative- Reuters/The Hindu Business Line/ BS

IMPACT: Global rating agency Fitch has downgraded India‘s sovereign credit outlook to ‗negative‘ from ‗stable‘, spoiling the market‘s mood which had just started improving after commencement of Greek elections on Sunday. Credit outlook of NTPC, SAIL, IOC, GAIL and three other PSUs has also reduced. The announcement comes just a week after S&P‘s warning that India might lose its BRIC nation status along with its investment grade rating. Government‘s denial was repetitive and similar to what came after the release of S&P‘s report. Chief Economic Advisor Kaushik Basu said that credit rating agencies have a ―herd mentality‖ and that the downgrade was not much of a

surprise. He seemed hopeful that India has potential to bounce back and that next six months will be crucial in this respect. However, the numbers provided by Fitch in support of its downgrade are hard to ignore. According to the agency, general government debt for India stands at 66 percent of GDP in FY 2011-12, which is in deep contrast to a median of 39 percent for other economies with BBB rating. Fitch also commented on high inflation rates, slow growth, political hurdles in policy making, delay in structural reforms & corruption as challenges for the Indian economy. KEY PLAYERS: Credit Rating Agencies, Fitch, S&P, Indian Government WHY IT IS IMPORTANT? With its recent commentary on Indian state of affairs Fitch has also warned that it could further downgrade the ratings if urgent steps towards reforms are not taken by the government. Indian government has time and again provided figures about increase in investment by FIIs; however such figures don‘t explain the delay in allowing FDI in different sectors. The news is important from macro-economic perspective and attracts scrutiny by people related with business. 3) RBI offers no rate cuts, markets stunned with announcement- Moneycontrol.com/BS/Bloomberg IMAPCT: Markets were pleasantly surprised in April when RBI announced a sharp cut of 50 bps in its interest rates. The surprise this time was not that pleasant. RBI has kept CRR and repo rate unchanged at 4.75 percent and eight percent respectively, which is against market expectations. Only 4 of the 23 economists in Bloomberg‘s opinion poll had predicted this inaction, while others were sure about cuts in some form or other. RBI has also gone on record saying that, most of the changes have already been done and that only changes in rates are not going to impact the growth & investment in the economy. With this it has smartly transferred the responsibility of bringing reforms to the government. Earlier last week, markets rallied building hopes over a very probable rate cut while the 10-year benchmark bond came down. The trend has reversed after the RBI announcement. KEY PLAYERS: RBI, Government WHY IT IS IMPORTANT? RBI Governor Duvvuri Subbarao has said that inflation is above tolerance levels. This seems to be one of the most critical factors behind RBI‘s recent inaction. WPI inflation is running above 7.5% while consumer price inflation has reached the double digit figure. Commenting on recent developments, a senior economist from Nomura said that the rate being unchanged is understood while government increasing minimum support pressures is not. This refers to government‘s recent decision on increasing Minimum Support Prices (MSP) by 20%. Such decisions add to inflationary pressures. The news is important from macro-economic perspective.

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4) SEBI gets strict on flourishing insider trading at bourses- TOI/BS/The Hindu Business Line IMPACT: There might not be any positives related with the Rajat Gupta‘s conviction in US, it certainly seems to be related with SEBI‘s heightened scrutiny on abnormal stock movement, in recent days. Insider trading was rampant & not illegal in India till 1992, when SEBI came into existence. Though, experts say that the situation still needs a lot of improvement. In FY10 10 cases & in FY11 28 such cases were identified by the market regulator. However, in 2012 alone, SEBI has found 60 cases with possible irregularities. Stock exchanges which also monitor the trade have identified additional 150 cases (60 by NSE, 90 by BSE) this year. In previous years, the average for such cases being identified was below 100. Incidentally, a lot of times media reports have been found influencing the trade. This has also come under scanner, though most companies have ignored speculations as well as SEBI‘s notices on this issue. So far, Data Analytics under SEBI‘s Integrated Market

Surveillance System (IMSS) has been responsible for identifying such cases. However, much will depend on the employment of newer surveillance systems as well as the speed of conviction in such cases. KEY PLAYERS: BSE, NSE, SEBI, IMSS (Integrated Market Surveillance System) WHY IT IS IMPORTANT? IMSS, along with some other departments, analyses stock movements to recognize patterns & detect possible wrong doings like insider trading, front-running etc. With latest developments ‗Business ethics‘ has again become a point of discussion. The news holds special interest for people involved with bourses. 5) Gloom on PSU oil cos, Boom for private counterparts- ET/Firstpost/The Hindu Business Line IMPACT: Usually in a slump, private oil refiners in India are making a quick buck these days because of yet another government policy debacle. The 70 percent difference in diesel and petrol prices has increased diesel demand to a level where PSU oil companies are forced to buy oil from private counterparts at international rates. Hence, a move which was supposed to benefit public units is helping private companies like Essar & Reliance. Figures suggest that PSU oil companies can process only 48 million tonnes (mt) of diesel, while the annual requirement stands at 64 mt. Remaining supply is fulfilled by buying oil from private companies. Revenue loss for state firms per litre of diesel sold in retail market is above Rs 10. This under recovery on diesel was above Rs 12, not so long ago. Incidentally, the combined losses for BPCL, HPCL & IOC due to under recoveries (including kerosene & LPG) during Jan-Mar in 2011 were at Rs 41,000 crore. KEY PLAYERS: BPCL, HPCL, IOC, Oil Marketing Companies (OMCs), RIL, Essar Oil, Indian Government WHY IT IS IMPORTANT? The only short term respite for oil companies comes in terms of compensation from the government. Normally, subsidy payments for Q4 are done in Q1 of the following fiscal. Hence, BPCL, HPCL & IOC will get Rs 38,500 crore to cover their under-recoveries. However, it‘s not only OMCs which have suffered the brunt of government‘s unstable & unclear fuel policies. Auto sector is perhaps the worst hit. Deciding investment strategies in India has become increasingly complex for the auto-companies in recent days. 6) BRICS offer $75 billion to aid eurozone- Reuters/BS

IMPACT: India has decided to contribute $10 billion towards IMF‘s $456 billion precautionary fund for the Euro Zone. Brazil, Russia and host of the G20 summit Mexico have also pledged to provide the same amount. Though, said amount, as promised by PM Manmohan Singh, will continue to remain in Indian reserves until required by the IMF. Adding further, officials said that there is no urgency to transfer funds provided Euro Zone situation continues to improve. Altogether, the BRICs have agreed to contribute $75 billion to IMFs Euro Zone war chest. China has alone contributed $43 billion towards the fund amidst growing criticism back home. The Chinese government is facing criticism over helping a bailout for nations with higher standard of living. At the same time, People‘s Bank of China (PBOC) said that time has arrived for

voting quotas to be shifted according to economic weights of different countries. This refers to the growth of developing economies like BRICs which is in a striking contrast to the slow paced growth path European economies are on. KEY PLAYERS: IMF, BRICs, G20 nations, PBOC WHY IT IS IMPORTANT? In recent years BRICs and other emerging economies have always stood up to their global responsibilities. However, the long delay in implementing the 2010 deal (which is supposed to boost their voting power in IMF), is beyond reason for most of them. If implemented it would make China the third-largest voting member of the IMF.

7) “Fuel Efficiency Labelling” to be mandatory – BS/TOI/ HT IMPACT: The Bureau of Energy Efficiency (BEE) will make it mandatory to label cars according to their fuel efficiency, from next year. The ―Star Labels‖ would be mandatory from April 1, 2013. BEE wants to make travel more economical for car users & thus the cost of the car will also be based on the efficiency rating. The regulator‘s intervention to ensure fuel efficiency is not limited to star rating. It will be mandatory for automobile manufacturers to launch models that are up to the fuel efficiency standards, which would be monitored by BEE from 2015. The cars in five star category consume up to 7 litres fuel for 100 kms; while four star takes 7-9 litres; three star takes 9-11 litres & the ones guzzling 12 litres & beyond come under one star. Shockingly, only 9% to 16% car models are energy efficient in the country. Out of total 330 car models in India, only 32 fall under five star; 52 in four star; majority 105 in three star; 69 in two star & 72 models in one star. KEY PLAYERS: Automobile Manufacturers, BEE WHY IT IS IMPORTANT? This will increase competition amongst auto manufacturers, who are currently dealing with low sales due to high petrol prices. Companies like Maruti & Honda are planning to launch their diesel variants next year. The average weight of the cars has also increased significantly over the years, which has affected the fuel efficiency. Since BEE plans to achieve the reduction in fuel consumption per 100 km from present 6 litres to 5.1 litres by 2016, auto makers will now have to focus on manufacturing more fuel efficient cars. 8) India wants to ban imports of used plants & machinery – ET/TOI

IMPACT: The Indian government has come up with a new plan to safeguard the productivity & competitiveness of the manufacturing sector. It now wants to restrict the imports of used plant & machinery. The commerce ministry has been asked to either ban the imports of machinery more than five years old or spell out the age limit for machinery in each sector. The domestic capital goods industry says that imports are partly responsible for the drop in output; which can been seen from the data that showed production of capital goods contracted 4.1% in 2011-12. Also the manufacturing sector contracted by 16% in April 2012. The government is also reportedly planning to slap import duty on 75% of the original value of second-hand machinery proposed to be imported. Currently, the duty is levied on the value of machinery on the day. KEY PLAYERS: Ministry of Commerce, Manufacturing Sector, Imports WHY IT IS IMPORTANT? Such a ban is widely seen as something against the economy‘s

interest. There are several sectors like textile, wherein second hand shuttle-less looms constitute about 80% of equipment purchases. While the share is 40%-45% in the case of machine tools equipment, it is a high of about 80% for construction equipments such as cranes. Second hand machinery is opted because of its non-availability or to keep upfront cost low. However, restricting imports would limit production & ultimately diminish the demand of the producer goods. This would eventually lead to a high cost industrial economy. 9) India exempts rupee payment for Iran oil from hefty tax – Reuters/ Moneycontrol.com/ Livemint.com IMPACT: The Indian government has lifted a hefty tax of 40% on payments to National Iranian Oil Co for settling part of its oil purchases in Indian rupees. The Finance Minister had earlier proposed to exempt oil payments to Iran in rupees from a 40% tax in order to smooth payments. India and Iran in January agreed to settle 45% of oil trade in rupees, which are not freely traded on international markets. Iran planned to use the rupees to pay for imports from India but tax issues and lack of advance payments for Indian exporters were barriers. Earlier this week, Iran's Bank Parsian stopped issuing payment guarantees for Iranian importers who buy Indian goods, because its account for the rupee payment mechanism did not have the necessary funds. The news is a relief to Indian exporters who had hoped to boost sales under the rupee scheme and create a new market for their goods in Iran, which has reduced imports from western countries under pressure from the sanctions. KEY PLAYERS: Indian Government, National Iran Oil Corp WHY IT IS IMPORTANT? India is among the seven countries the US has exempted from imposing financial sanctions on, for significantly reducing the oil imports from Iran. The exemption is valid for only six months after which the US will again scrutinize whether the imports have further reduced significantly or not. Iran is under constant pressure from western countries, to halt its nuclear program and has faced decreased oil exports in June. Iran oil exports have dropped in May 2012, to 1.2 – 1.3 million barrel per day. Iran is losing around $90 million per day due to the reduced oil exports.

10) Moody’s downgrades Nokia to junk status after plans of major layoffs, cuts and poor outlook – FE/ET IMPACT: Moody‘s downgraded the debt-ridden cell phone maker Nokia to junk status, citing greater than anticipated pressure on the struggling cellphone maker's earnings. Nokia has recently announced major cost saving plans which also includes layoffs across the globe. Moody‘s kept the outlook negative, meaning it could downgrade it again. Moody‘s lowered the Finnish company's long-term senior unsecured ratings to Ba1 from Baa3, saying that Nokia's restructuring plan involved "drastically downsizing its infrastructure,'' an indication its problems were greater than expected. Moody's said Nokia Corp.'s plans to focus "its direct marketing on fewer markets, streamlining

support functions and reducing investments in certain R&D projects ... delineates a scale of earnings pressure and cash consumption that is larger than we had previously assumed.'' The restructuring measures aim to save $2 billion by the end of 2013. However, despite the downgrade, Nokia shares went up by 4% at $2.41 on last Friday. KEY PLAYERS: Nokia, Moody WHY IT IS IMPORTANT? Nokia, which was the biggest cell phone maker since past 14 years, has been having tough competition from Samsung & Apple. Nokia has consistently failed to come up with new models, where Samsung has now become a leader. The Finnish cell phone maker has also seen declining sales since last year & is struggling to survive in the highly competitive Smartphone market. Finnish Prime Minister said that the government will not consider purchasing Nokia shares, quashing hopes the government would help support the company's plunging stock. 11) India will edge out China as key hub for low-cost labour: McKinsey – The Hindu Business Line/ ET IMPACT: The new labour report by McKinsey is a mixed bag of surprises. The good news is that China will be replaced by India and the young developing economies of South Asia and Africa as the leading source of new workers in the global market. Nearly 60% of the 600 million net additions to the global labour force from 2010 to 2030 will occur in India, South Asia and Africa. This will bring the total global labour force to 3.5 billion in 2030. The bad news is that India will produce 58 million low-skilled workers, who will find it difficult to get jobs. The report has proposed that unprecedented action will be required on education and training to address global mismatches in supply of workers with skills needed to drive 21st century economies. India's strength will lie in its capacity to supply college-educated workers with 85 million additional college-educated workers by 2030 — likely the second-largest supplier of net new college-educated workers after China. KEY PLAYERS: India, China WHY IT IS IMPORTANT? For India, Mc Kinsey projects productivity growth of 5.9% annually to 2030, which will account for about 8% of forecast GDP growth of 7.4% per year. The Indian manufacturing sector will add 36 million jobs in the next two decades compared with just 8 million from 2000 to 2010. India will capture a larger share of global manufacturing jobs. At the same time, India's service sector is likely to continue to grow jobs in line with the historic trend. 12) UK fights euro zone threat with 100 bn pound credit boost – FE/ Reuters

IMPACT: The government and central bank will flood Britain's banking system with more than $155.43 billion, seeking to pump credit through an economy struggling to escape recession under the "black cloud" of the euro zone crisis. Bank of England Governor Mervyn King said Britain would launch a scheme to provide cheap long-term funding to banks to encourage them to lend to businesses and consumers. He also said the bank would activate an emergency liquidity tool. King said the case for pumping more money into the economy via further purchases of government bonds had increased as the outlook for the economy had worsened, although he again rejected calls for the central bank to buy private assets. The government has

sketched a plan to ward off the imminent impact of collapsing Eurozone economies – something that the Bank of England (BoE) detailed late last week. The BoE could pump in well above £100 billion into the country‘s banking system to ensure that banks do not shy away from lending them to businesses. These funds consist of a monthly £5 billion infusion just to ensure liquidity and an additional £80 billion of cheap credit to the banks. KEY PLAYERS: United Kingdom, Bank of England WHY IT IS IMPORTANT? Britain's action comes just before Greek elections this weekend that could determine the fate of the euro zone, as well as a meeting of the leaders of the world's major economies next week to find ways to tackle the currency bloc's crisis and spur the global economy. Britain which slid back into recession around the turn of this year, is taking action to protect its own economy. The government has also hiked taxes, cut rates to erase budget deficit which still comes at around 8% of GDP. RBS & Barclays shares jumped when Bank of England laid out its detailed plans to extend cheap credit to the UK banks.

13) Taliban praises India for resisting US pressure- HT/TOI IMPACT: In a rare commentary on Indian foreign policy, terrorist group Taliban has praised India‘s role of not giving in to US pressures on interfering with Afghanistan. The Islamist group which lost its power to US forces in 2001 has applauded India‘s stance on not allowing its land to build base for forces against Afghanistan. Commenting on US Defence Secretary Leon Panetta‘s recent visit, the website quoted "He spent three days in India to transfer the heavy burden to their shoulders, to find an exit, and to flee from Afghanistan...Some reliable media sources said that the Indian authorities did not pay heed to (US) demands and showed their reservations, because the Indians know or they should know that the Americans are grinding their own axe." India has in the past supported Northern Alliance during Civil war, which was replaced by the hard line Islamists in 1996. In recent years, India has restricted itself to developing infrastructure in the war torn country, while distancing itself from any major military engagement. KEY PLAYERS: Taliban, US Defence forces, India WHY IT IS IMPORTANT? Thus, the statement from a group which is believed to have close ties with Pakistan‘s ISI, might be of some interest to observers dealing with geo-politics. A former chief of India's intelligence agency has said that Taliban‘s statement is more of an implicit warning for India than praise. As US forces have planned to leave Afghanistan by the end of 2012, the statement probably warns India to stay away from Afghan matters. 14) Finmin asks banks to send “recovery agents” early – BS/ET/ The Hindu Business Line

IMPACT: The finance ministry has come up with a new plan for speedy recovery of loans. It has said that the defaulters will only get three SMS & a phone call as a warning to repay the loans before it sends out its recovery agents. The directive comes at a time when banks are struggling with a sharp surge in their non-performing assets, or bad loans. Generally banks realize very late that an asset has become non-performing & then start taking requisite actions. These directives are part of the new recovery management guidelines banks have to put in place. Under these rules, state-run banks have to appoint a nodal officer for recovery and ensure that a separate group is looking at the recovery of loss assets at the head office level. The finance ministry has noted that banks need to be watchful of withheld payments,

return of debit cheques and withdrawal in excess of limits as signs that an account may turn bad. KEY PLAYERS: Indian Government, Banks WHY IT IS IMPORTANT? Gross non-performing assets of nationalized banks rose 3.1% of their total lending to 1.1 lakh crore in March 2012, from 2.31% of their advances, a year ago. Starting last fiscal, the finance ministry has set a 20% recovery target for every quarter. Unlike earlier, banks are now increasingly resorting to the use of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi) 2002 to recover their dues. The Act empowers banks and financial institutions to auction mortgaged residential/commercial property when borrowers fail to repay their loans. The Act can be applied to any loans/dues over Rs 1.5-2 lakh. 15) Microsoft comes up with Surface to fight the tablet war- Reuters/ TOI IMPACT: The launch of Microsoft‘s new Surface device was as much of a surprise for the world as it was for its longstanding hardware partners. The company is believed to have kept its personal computer partners away from any information regarding its plans to launch the device. Similar to an iPad, Surface comes with a screen cover which transforms into a keyboard when required. Microsoft‘ shares jumped almost 3 percent as Wall Street and investors welcomed the company‘s move. This launch is a strategic shift for Microsoft as it comes way ahead of the company‘s expected schedule for the launch of Windows 8 operating system. Some analysts fear that the recent launch has led to a "sense of betrayal" in the industry, where Microsoft‘s initial role has remained restricted to supplying software to OEMs. Microsoft‘s entry into hardware space is not going to make Dell or HP happier while they are already struggling with depleting PC demand. KEY PLAYERS: Microsoft, ipad WHY IT IS IMPORTANT? The success of this device depends largely on pricing, details about which are yet not disclosed. While the device has been launched in competition with iPad, it might have to compete with Ultrabooks which are becoming increasingly popular nowadays. It would be interesting to see if Microsoft is able to crack the hardware market where Apple has enjoyed customer loyalty for long. The news provides a good source to learn about brand building and marketing measures in the competitive personal computing industry.

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SOURCES SOURCES FOR ECONOMIC INDICATORS, STATS & GRAPHS

http://www.economist.com/blogs/graphicdetail/2012/06/focus-2 http://in.reuters.com/article/2012/06/20/idINL3E8HK27820120620

http://in.reuters.com/article/2012/06/20/markets-oil-idINDEE85J04420120620

SOURCES FOR COVER STORY

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIM/2012

/06/16&PageLabel=23&EntityId=Ar02200&ViewMode=HTML

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIM/2012

/06/16&PageLabel=23&EntityId=Ar02201&ViewMode=HTML

http://economictimes.indiatimes.com/news/international-business/why-didnt-rajat-gupta-plead-

guilty/articleshow/14186941.cms?curpg=3

http://www.firstpost.com/world/rajat-gupta-is-no-criminal-hes-just-an-indian-345926.html

http://www.4-traders.com/THE-PROCTER-GAMBLE-COMP-4838/news/Ex-business-titan-Gupta-guilty-of-insider-trading-14372463/

http://www.business-standard.com/india/news/inside-out/477652/

http://www.business-standard.com/india/news/a-conflicted-jury-finds-rajat-gupta-guilty/477572/

http://www.business-standard.com/india/news/the-road-ahead-for-rajat-gupta/477571/

SOURCES FOR PERSONALITIES OF THE WEEK:

http://en.wikipedia.org/wiki/Jim_Yong_Kim http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:23170638~pagePK:64257043~piPK:437376~theSitePK:4607,0

0.html http://www.telegraph.co.uk/finance/globalbusiness/9207686/Jim-Yong-Kim-chosen-to-lead-World-Bank.html

http://www.washingtonpost.com/business/economy/who-is-jim-yong-kim/2012/03/23/gIQAQyUwVS_story.html http://www.bloomberg.com/news/2012-03-23/obama-nominee-to-world-bank-said-to-be-dartmouth-s-jim-yong-kim.html

http://articles.timesofindia.indiatimes.com/2012-03-24/us/31233552_1_health-care-jeffrey-sachs-president-barack-obama http://en.wikipedia.org/wiki/Preet_Bharara

http://economictimes.indiatimes.com/news/international-business/ps-bharara-the-indian-icon-who-successfully-fought-wall-street-insider-trading-cases/articleshow/14200519.cms?curpg=1

http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=TOINEW&BaseHref=TOIPU/2012/06/17&PageLabel=11&EntityId=Ar01105&ViewMode=HTML

http://www.time.com/time/specials/packages/article/0,28804,2111975_2111976_2112129,00.html http://www.wnyc.org/articles/wnyc-news/2011/jan/27/preet-bharara-hard-charging-humble-prosecutor/

CORPORATE INTELLIGENCE

http://businesstoday.intoday.in/story/am-naik-larsen-and-toubro/1/23059.html http://en.wikipedia.org/wiki/Larsen_%26_Toubro

http://www.larsentoubro.com/ www.businessstandard.in/india/news/industrial-park...in.../389148/

http://economictimes.indiatimes.com/news/economy/infrastructure/lt-infrastructure-eyeing-250-300-million-from-pes-sources/articleshow/13452541.cms

http://content.standardcharteredtrade.co.in/fundamental.asp?location=HIS&ticker=L%26T

SOURCES FOR ARTICLES (1-30) 1) Euro leaders take respite conservatives form government- Reuters/ET

http://www.reuters.com/article/2012/06/20/us-greece-idUSBRE85H0HO20120620 http://in.reuters.com/article/2012/06/17/greece-election-eurozone-idINDEE85G03A20120617

http://economictimes.indiatimes.com/markets/global-markets/tokyo-stocks-jump-more-than-2-euro-soars-after-pro-bailout-win-in-greek-polls/articleshow/14223631.cms

2) Fitch downgrades India’s sovereign credit outlook to negative- Reuters/The Hindu Business Line/ BS http://www.thehindu.com/business/Economy/article3543137.ece

http://www.business-standard.com/generalnews/news/fitchs-downgrade-action-is-herd-mentality-says-basu/22142/ http://in.reuters.com/article/2012/06/18/fitch-india-outlook-revision-idINDEE85H0A020120618

3) RBI offers no rate cuts, markets stunned with announcement- Moneycontrol/BS/ ET http://www.business-standard.com/india/news/rbi-pause-jolts-india-inc-govt/477778/

http://www.business-standard.com/india/news/rbi039s-communication-flip-flop-baffles-market/477793/ http://www.moneycontrol.com/news/economy/inflation-weighedrbis-monetary-policy-decision-pranab_719169.html

http://www.bloomberg.com/news/2012-06-19/india-s-inflation-rate-is-above-tolerance-level-subbarao-says.html 4) “Fuel Efficiency Labelling” to be mandatory – BS/TOI/ HT

http://timesofindia.indiatimes.com/business/india-business/Fuel-saving-power-of-cars-to-be-rated/articleshow/14108246.cms http://www.hindustantimes.com/News-Feed/Auto/Mandatory-fuel-efficiency-labelling-for-cars-soon/Article1-871147.aspx

http://www.business-standard.com/india/news/star-labelling-mandatory-for-passenger-carsapril-2013/174599/on 5) India wants to ban imports of used plants & machinery – ET/TOI

http://articles.economictimes.indiatimes.com/2012-06-14/news/32235804_1_ban-import-second-hand-machinery-import-duty

http://articles.economictimes.indiatimes.com/2012-06-16/news/32269319_1_ban-import-capital-goods-second-hand-capital 6) India exempts rupee payment for Iran oil from hefty tax – Reuters/ Moneycontrol.com/ Livemint.com

http://in.reuters.com/article/2012/06/14/india-iran-oil-idINDEE85D0CW20120614 http://www.moneycontrol.com/news/wire-news/india-moves-to-start-rupee-payments-for-iran-oil_718105.html

http://www.livemint.com/2012/06/12234853/US-exempts-India-from-Iran-oil.html?h=B

http://ibnlive.in.com/news/iran-oil-exemption-valid-for-180-days-only-us/266151-2.html 7) Moody’s downgrades Nokia to junk status after plans of major layoffs, cuts and poor outlook – FE/ET

http://www.financialexpress.com/news/moodys-downgrades-nokia-to-junk-status/962489/0 http://www.washingtonpost.com/business/moodys-downgrades-nokia-to-junk-status-after-announcement-of-major-layoffs-poor-

outlook/2012/06/15/gJQAGc4jeV_story.html http://economictimes.indiatimes.com/news/international-business/finnish-government-wont-buy-nokia-shares-jyrki-

katainen/articleshow/14306192.cms 8) India will edge out China as key hub for low-cost labour: McKinsey – The Hindu Business Line/ ET

http://www.thehindubusinessline.com/industry-and-economy/article3527363.ece?homepage=true&ref=wl_home http://business-standard.com/india/news/india-needs-to-retrain-285-mn-working-individuals-mckinsey/477401/

http://articles.economictimes.indiatimes.com/2012-06-14/news/32236153_1_mgi-shortage-of-skilled-workers-global-labour 9) UK fights euro zone threat with 100 bn pound credit boost – FE/ Reuters

http://www.financialexpress.com/news/uk-fights-euro-zone-threat-with-100-bn-pound-credit-boost/962449/0 http://www.reuters.com/article/2012/06/15/us-britain-economy-idUSBRE85D1RA20120615

http://uk.finance.yahoo.com/news/boe-split-5-4-june-more-qe-king-083732195--business.html 10) SEBI gets strict on flourishing insider trade at bourses- TOI/BS/ The Hindu Business Line

http://www.thehindubusinessline.com/markets/stock-markets/article3539406.ece?homepage=true&ref=wl_home http://timesofindia.indiatimes.com/business/india-business/Insider-trading-still-flourishes-on-Dalal-

Street/articleshow/14218269.cms http://timesofindia.indiatimes.com/business/india-business/Blocking-insider-trading/articleshow/14218084.cms

11) Gloom on PSU oil cos, Boom for private counterparts- ET/Firstpost/The Hindu Business Line http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/psu-oil-companies-forced-to-buy-diesel-from-ril-essar-

at-market-rates/articleshow/14252453.cms http://www.thehindubusinessline.com/industry-and-economy/government-and-policy/article3547522.ece?ref=wl_industry-and-

economy

http://www.firstpost.com/economy/guess-whos-smiling-at-govts-flawed-fuel-pricing-policy-348873.html

12) India offers $10 billion to aid eurozone- Reuters/BS http://in.reuters.com/article/2012/06/19/g2o-brics-statement-idINDEE85I03420120619

http://www.business-standard.com/india/news/india-may-not-inject-10-bn-into-imf-immediately/175387/on 13) Taliban praises India for resisting US pressure- HT/TOI

http://www.hindustantimes.com/News-Feed/afghanistan/Taliban-praises-India-for-resisting-US-pressure/Article1-873854.aspx http://articles.timesofindia.indiatimes.com/2012-06-17/india/32281402_1_afghan-taliban-mullah-omar-northern-alliance

14) Microsoft comes up with Surface to fight the tablet war- Reuters/ TOI http://timesofindia.indiatimes.com/tech/news/hardware/Microsoft-Surface-was-a-secret-project/articleshow/14299996.cms

http://in.reuters.com/article/2012/06/20/microsoft-research-idINDEE85I08W20120620 15) Finmin asks banks to send “recovery agents” early – BS/ET/ The Hindu Business Line

http://articles.economictimes.indiatimes.com/2012-06-18/news/32299571_1_public-sector-banks-state-run-banks-recovery-agents http://business-standard.com/india/news/sbi-rate-cut-hints-at-deteriorating-assets/175115/on

http://www.thehindubusinessline.com/industry-and-economy/banking/article3490632.ece