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Chaanakya Tracking the economy….
A Wealth Incorporation
Publication
August 16, 2012
Vol. 6
Issue 10
Christ University
Institute of Management
2
Index
News
National 3
International 5
Rates and Graphs 7
Contemporary Articles
The Currency Enigma 9
Euro Crisis and its Effect on India 10
Debate
Is Mr. P. Chidambaram a Financial Wizard? 11
Stock Watch
CRISIL 12
Commodity Market
Steel 16
Scams
Unlisted Stock Scam 17
Did You Know
6 Weird Futures Products 18
Crossword 19
3
National News
Sanjeet Kumar [II MBA J]
Dry spell may limit growth to 6%: Montek
The Reserve Bank, known for its conservative estimates, recently scaled down the country‘s
gross domestic product (GDP) growth rate for financial year 2012-13 to 6.5 per cent from its earlier projection of 7.3 per cent. However, Planning Commission Deputy Chairman Montek
Singh Ahluwalia on 4th August 2012 pegged the economic growth at 6 per cent on the back
of severe impact of weak monsoon on farm growth and muted industrial expansion.
RBI relaxes provisioning norms for micro lenders
The Reserve Bank of India on 3rd August 2012 offered relief to stressed microfinance companies, especially those in Andhra Pradesh, by relaxing provisioning norms and
removing the 26 per cent cap on their lending rates.
The move comes almost a month after RBI Governor D Subbarao hinted the banking
regulator might relax a few stringent norms pertaining to net worth, capital adequacy and
provisioning to revive the ailing microfinance sector.
Top three private banks will need `70k cr: Fitch
India‘s top three private banks —Axis Bank, HDFC Bank and ICICI Bank — would need
about `70,000 crore ($12.5 billion) in capital by 2018 to meet the Basel-III norms, according
to rating agency Fitch.
Axis Bank, which manages capital tightly compared with the other two (HDFC Bank and
ICICI Bank), may need to start at the earliest to tap the market for capital.
Falling rupee hurts India Inc in Q1
The `4,800-crore hit on account of mark-to market (MTM) provisions for currency fluctua-tion and poor show by oil and gas sector have hurt India Inc‘s profit growth rate in the first
quarter. However, other income, with a 30 per cent share in net profit of 898 companies from
the manufacturing and services sectors, has come to the rescue.
The financial results of 1,061 companies have shown that sales growth has moderated to 15.7
per cent, from 26.4 per cent in the quarter a year ago.
‘PSBs need `1.75 L cr to meet Basel-III norms’
Reserve Bank of India (RBI) Governor D Subbarao on 4th August 2012 said the government
might have to reduce its stake in public sector banks that need to raise `1.6-1.75 lakh crore in
additional capital requirement for meeting the Basel-III norms by March 2018.
4
Fitch Ratings downgrades retail sector outlook
Global ratings firm Fitch Ratings has revised the outlook for the Indian retail sector for the
second half of this year from stable to negative, owing to a sustained fall in the discretionary
spending ability of consumers, which, according to the firm, is unlikely to improve over the short term.
$1-bn RIL investment in D6 gets nod
Reliance Industries Ltd (RIL) on 7th August 2012 got conditional approval to invest over a
billion dollars to arrest the sagging output at its KG-D6 gas block.
The management committee (MC) that oversees the working of D6 decided to approve the
annual operating and capital expenditure for fields pending for three years. It also
conditionally approved the ‗declaration of commerciality‘ for three finds in the block.
IIP shocker dims hopes of recovery
Industrial production contracted 1.8 per cent in June, official data showed on 9th August
2012. The contraction was in sharp contrast with the whopping 9.5 per cent expansion in the
same month last year. That prompted yet another agency, Moody‘s Analytics, to project sub-six per cent economic growth for India this financial year.
External headwinds, high interest rates and a weak sentiment pulled down manufacturing
growth to minus 3.2 per cent in June.
Capital goods production dropped by a huge 27.9 per cent and consumer non-durable goods
production fell by a moderate one per cent.
FinMin to reassess fiscal deficit target of 5.1% in mid-term review
Finance Minister P Chidambaram on 10th August 2012 said his ministry would reassess the Centre‘s fiscal deficit target of 5.1 per cent of the gross domestic product (GDP) for 2012-13
in the mid-year review of the economy. Already, fiscal deficit has touched 37 per cent of
Budget estimates in just three months of the current financial year.
In the Budget for 2011-12, fiscal deficit was pegged at 4.6 per cent of GDP.
Honda-Siel battle ends with buyout
The uneasy partnership between Honda Motor Corporation (HMC) and the Siddhartha
Shriram-promoted Shriram Industrial Enterprises Ltd (Siel) has come to an end, with the Japanese auto major today saying it has bought out the latter‘s stake in its Indian subsidiary
for `180 crore.
The announcement brings to an end the 17-year-old joint venture, Honda Siel Cars India
(HSCI), in which Siel through Usha International Ltd (UIL) had 3.16 per cent stake.
Inflation hits 3-year low, RBI unlikely to cut rates
The wholesale inflation unexpectedly fell in July to a near three-year low but economists doubt the drop will be enough to persuade the central bank to cut interest rates at its
September meeting to try to revive the struggling economy.
5
International News
Sanjeet Kumar [II MBA J]
UK service sector growth slows down
Growth in Britains dominant services sector slowed to a crawl in July, a survey showed on
Friday, casting fresh doubt over whether the economy will rebound from a slump in output in the first half of the year. The Markit/CIPS services purchasing managers index unexpectedly
fell to 51.0 in July from 51.3 in June, its lowest level since December 2010 and only
marginally above the 50-mark that separates growth from contraction.
Japan widens insider trading inquiry
A government investigation into insider trading in Japan has extended on to the trading floors of some of the largest Wall Street companies, including Goldman Sachs, UBS and Deutsche
Bank.
A governing party committee has asked regulators to scrutinise suspicious trading activity
before at least 12 public offering announcements over the past three years.
ECB saves Greece from bankruptcy
The European Central Bank (ECB) has saved Greece from bankruptcy for the time being by
securing it interim financing in the form of additional emergency loans from the Bank of Greece. The ECBs Governing Council agreed at its meeting on 2nd August 2012 to increase
the upper limit for the amount of Greek short-term loans the Bank of Greece can accept in
exchange for emergency loans.
China to fine-tune policy in second half
China‘s central bank pledged on 5th August 2012 to intensify its monetary policy fine-tuning
in the second half of this year and improve credit policy to bolster the real economy, echoing
earlier government commitments amid an economic slowdown.
StanChart faces NY suspension over Iran deals
Standard Chartered Plc conducted $250 billion worth of transactions with Iranian entities over more than seven years in violation of federal money laundering laws, a New York
regulator said in an order warning that its US unit may be suspended from doing business in
the state.
The London-based bank, which generates almost 90 per cent of its profit and revenue in Asia,
Africa and the Middle East, was ordered by the agency to hire an independent, on-site
monitor to oversee its operations in the state.
Apple, Google bid for Kodak patents
Eastman Kodak, which is planning to auction 1,100 digital patents, received two bids from
investor groups including Apple Inc and Google Inc of between $150 million and $250
million, the Wall Street Journal reported on 8th August 2012.
6
Goldman sees ‘mist’ rising as small markets outperform
Jim O‘Neill ushered in a decade-long investment boom in 2001 when he coined the term
BRICs for the largest emerging markets. This year, a lesser-known acronym that the
Goldman Sachs Asset Management chairman is helping to popularise has taken over for many investors.
The so-called MIST nations — Mexico, Indonesia, South Korea and Turkey — are the four biggest markets in the Goldman Sachs N-11 Equity Fund.
Bank of England cuts growth forecast
The Bank of England cut its growth forecast and said inflation will be below its target in two
years as the crisis in the Euro area and the UK fiscal squeeze weigh on demand. The central
bank sees annual gross-domestic-product growth of about two per cent in two years, compared with a projection in May of 2.5 per cent.
‘Morgan Stanley eyeing job cuts’
Morgan Stanley, under fire to boost profit margins in its retail brokerage arm, is considering
closing brokerage offices, laying off support staff and requiring some branch managers also to generate revenue as advisers under a cost-cutting drive, three people briefed on internal
discussions said.
UK goods-trade deficit widens
The UK trade deficit widened to a record in the second quarter as cooling global growth
sapped demand for British exports. The goods-trade gap increased to £28.3 billion ($44.3 billion) from £25 billion in the previous quarter, the Office for National Statistics said on 9th
August 2012 in London. Exports fell 4.9 per cent, while imports slipped 0.5 per cent. There
was a £5.81 billion surplus on services in June, which left the total trade gap at £4.31 billion.
Budget gap narrows to $69.6 bn
The monthly US budget deficit shrank to $69.6 billion in July from $129.4 billion in the same month a year ago, reflecting a rise in government receipts and a drop in spending. The
Treasury on 10th August 2012 said receipts totalled $184.6 billion in July, up from $159.1
billion a year ago. Government outlays fell to $254.2 billion, from $288.4 billion a year ago.
Wal-Mart gets approval to raise stake in Chinese firm
Wal-Mart Stores Inc has received restricted approval to raise its stake in and become the con-trolling shareholder of a Chinese e-commerce company, China's Ministry of Commerce said
on its website on 14th August 2012.
With more than 200 million Chinese people shopping online, China is expected to become
the world's largest e-commerce market by 2015, Boston Consulting Group said in a report.
Wal-Mart had said in February it would raise its stake in online supermarket Yihaodian to
around 51 per cent by buying into its parent. Wal-Mart did not provide any financial details
of the deal.
7
Rates
Pankaj Sharma [II MBA J]
Repo Rate 8.00%
Reverse Repo 7.00 %
Call rate 7.05%-8.15 % Inflation 6.87% for July 2012
Forex Reserve $289.152 Billion as on 20th July, 2012
91day T-Bill 8.2692% IIP -1.8% for June 2012
8.28 GS 2032 8.5586%
Graphs
Pankaj Sharma [II MBA J]
54
54.5
55
55.5
56
56.5
57
1-Aug 4-Aug 7-Aug 10-Aug 13-Aug
Rs/$
Rs/$
28900
29300
29700
30100
30500
1-Aug 4-Aug 7-Aug 10-Aug 13-Aug
Gold(per 10 gram)
Gold(per 10 gram)
8
103
106
109
112
115
1-Aug 4-Aug 7-Aug 10-Aug 13-Aug
Oil(per bbl)
Oil(per bbl)
1000000
1200000
1400000
1600000
1800000
4600
4800
5000
5200
5400
5600
1-Aug 4-Aug 7-Aug 10-Aug 13-Aug
future rates open interest
4600
4800
5000
5200
5400
5600
16,500.00
16,900.00
17,300.00
17,700.00
18,100.00
18,500.00
01-Aug 04-Aug 07-Aug 10-Aug 13-Aug
sensex nifty
9
The Currency Enigma
Dhruv Chopra [II MBA I]
The epicenter of the recent recession is undoubtedly the United States of America but this financial
contagion affected the entire world in different magnitudes. In Europe, the crisis led to the other crisis
which impacted them in a real hard way and it is now becoming extremely tough for them to come out
of this situation, on the other hand the developing countries combated the American crises comfortably
but the impact on their financial health is quite palpable and deplorable. BRICS definitely need a life supporting system for survival at this point of time in terms of rapid public investment, more
employability and steep reduction in deficits but for all of it to happen the emerging economies has to
reign in the depreciation of their currencies.
And in the mean time after the American sovereign‘s downgrade it was somewhat nice to predict that
the capital flow in emerging economies was inevitable and which would boost the financial health of
the countries, a perplexing situation emerged which led the global investors to flock into the
(USA- where it all started) US dollar, which was considered as a safe haven and the other currencies
depreciated rapidly.
This was a stark reminder of the grim reality confronting the world – the lack of a credible alternative
to the US dollar even as the fundamentals of the US economy are no longer as strong as earlier.
Though because of immense liquidity of markets in dollar assets, the depth of the markets in dollar
assets that results in tight bid ask ratio and wide-spread availability of derivatives to hedge dollar
exchange-rate risk, proves that US dollar is the currency superpower but there are many economists
who believe that the dollar‘s hegemony wont sustain for long from now on. ―The Economist‖ has
recently estimated that USA has lost ten years of economic progress because of the Great Recession
meaning that its economy is back to where it was in 2002. And secondly ―Triffin Dilemma‖ has
become acute for USA with an urgent need to curb its twin deficits.1
It is likely that the US Dollar will no longer enjoy a pre-eminent status but will share it with other
currencies. The Australian Dollar, the Canadian Dollar, the Swiss Franc and the Scandinavian currencies have all attracted safe haven flows in recent years with central banks increasingly
diversifying their foreign exchange reserves into these currencies\assets. But by far the most serious
challenge to the dollar today is posed by the Chinese Renminbi.2
China has taken several strategic steps to promote international use of its currency. Entering into
currency swap arrangements with several developing countries in Asia and Africa. In April 2011 China
led BRICS initiative to establish mutual lines of credit in local currencies to protect intra-BRICS trade
from foreign exchange risk. Trade settlement is only one of the steps in internationalizing the
Renminbi. In January 2011, Bank of China started offering Renminbi deposit accounts in New York
and also took steps that included in approving the use of Renminbi for FDI in China.3
Though China is trying its best to make its currency the next internationally accepted currency but it fails to meet several criteria normally required of a reserve currency such as full convertibility, deep
and liquid bond markets and secure legal structure in the country.
This shows that the stage is now set for the emergence of multi-currency based global financial system
with several currencies competing for dominance and no single currency having the overwhelming
status enjoyed by the US Dollar since World War II.
Sources:
1,2 * Article - Currency Conundrum in ―The Indian Banker‖, June 2012 by Mr.Radha Syam Ra-
tho. 3* Article on Shadow Currency by Mohi-uddin, http://www.ft.com/intl/cms/s/0/c70e236a-bcfd-
11e0-bdb1-00144feabdc0.html.
10
Euro Crisis and its Effect on India
Vicky Crasto [II MBA I]
The debt crisis in Europe which started with Ireland, Portugal and Greece has also
engulfed the entire European Union in its clutches. Major European Powers like
Germany, France are trying to mend the Greek problem. These stronger economic
powers within Europe are trying to rescue Greece by buying Greek bonds at a
discount. However at the same time many countries like UK are facing the problem
of stagflation where in liquidity in the market is tight, global food and energy
shortage is on a rise and rising crude oil price has added insult to the injury.
In such global situation, developing nations like India is battered the most. With
rupee depreciating rapidly against the US dollar and rising crude oil prices, the
current account deficit in India increased to about 4.2 percent of the GDP, which is of
huge concern.
Most direct impact of the euro crises on the India economy is on the exports. India
exports about a sixth of its total exports to the European Union which mostly consists
of textiles. With the slump in the spending by the Europeans the economic slowdown
in India will be further aggravated.
Next Indian companies enjoyed low cost funds from European banks like Deutsche
Bank and many others. But the liquidity crisis has forced these battered lenders to
close the doors for the Indian firms.
With regard to flow of foreign direct investment no clear indication can be provided.
Even though the FII in January 2012 were about $2037Mn which increased to
$ 5127Mn in February, started decreasing with negative flows in April, May and June
to about $205Mn, $57Mn and $86Mn respectively. Therefore flow of foreign
investment does not seem to have positive outlook for India which has been suffering
with policy paralysis in the government machinery.
However if Greece exits Euro zone, the national banks of Europe and European
Central Bank will suffer huge loses. In this case Drachma would be severely devalued
and the US Dollar would emerge as the most secure currency. The fall of the Euro,
would make the US Dollar stronger against the Indian rupee which is already
depreciated to a historic low pushing it further lower.
Sources:
http://ibnlive.in.com/news/eurozone-debt-crisis-how-it-affects-india--you/259111-61.html
http://articles.economictimes.indiatimes.com/2012-06-15/news/32254595_1_eurozone-
crisis-indian-exporters-european-banks
http://www.thehindubusinessline.com/features/investment-world/article2288107.ece
http://www.careratings.com/Portals/0/CareAdmin/NewsFiles/Economics/Impact%20of%
20Euro%20crisis%20and%20global%20slowdown%20on%20India-12-05-2011.pdf
11
Is Mr. P. Chidambaram a Financial Wizard?
Bhavesh Dhanesha and Rohit Munka [II MBA J]
The state of our economy is in the doom and gloom, and the radical changes happening in the Congress party certainly shows lack of stability in their unity itself. The post of a Finance
Minister, is very crucial when the economy can just be a step short of entering into a
quagmire.
After our honourable Prime Minister became unsuccessful in one month of managing the
financial pressures, it is the chance of Mr. Reformist to call the shots for bringing a positive
change not only in the economy but also in the mindset of the Indian citizens. But all do not trust the present finance minister to bring a radical and positive change in the reforms; one of
the reasons known for downgrading our economy by S&P.
Yes, it is a wise step by the Congress:
His critics call him an artful finance minister, whose budgets are known to have devil in the
fine print. Mr.Palaniappan Chidambaram has once again become the finance minister of the county. But this time his task is to rescue a sinking economy and turn things around after the
last quarter growth of just 5.3% in the economy.
The period of 2004-2008 was one of the best years for the country when Mr. P. Chidambaram
was handling the country‘s economic growth. Chidambaram introduced the Fringe Benefit
Tax on perks, a tax on cash withdrawals and the securities transaction tax, which is the only
levy that Pranab Mukherjee, his successor in the finance ministry, has let survive. He knows how to get his bureaucrats to think straight, and no one can pull wool over his eyes by
proffering flaky policy options.
By inclination a reformist, Chidambaram, known for his quick decision-making, is an old
favourite of India Inc, which dubbed his 1997 budget as a "dream budget". Moreover, unlike
Mukherjee, Chidambaram is not one to shrink from bold decision. His 1990s dream budget turned into an economic nightmare, but this time we are already in a nightmare of epic
proportions – with inflation running riot and growth heading south.
No. He is not the Mr. Right:
It is believed that there is a fault in the party itself. The Finance Minister‘s hand are probably
tied by the party, as postponing the approval of financial reforms will happen now also. It is also believed that Chidambaram has taken aggressive steps in the past which were harmful
for many individuals and corporate, especially in terms of incremental taxes.
It is probably believed that many reforms that are to be approved, can be executed by him
well enough. One of the recent actions by him were taken against regressive taxes. Also it can
be inferred that UPA does not has any other choice better than selecting Mr. Chidambaram. Now the masses may atleast expect stability in the near future and help in mitigating the
problems suffered due to reform crisis existing in our country.
Sources: http://articles.timesofindia.indiatimes.com/2012-08-01/india/32980082_1_p-chidambaram-finance-ministry-north-block http://www.firstpost.com/debates/chidambaram-as-fm-will-bring-back-the-good-times_opinion-117.html?unid=20120808164501
12
CRISIL
Deebadwita De [II MBA J] and Shashank Mishra [II MBA N]
CRISIL is a global analytical company providing ratings, research, and risk and policy
advisory services. CRISIL is India's leading ratings agency. CRISIL is also the foremost
provider of high-end research to the world's largest banks and leading corporations. With
sustainable competitive advantage arising from their strong brand, unmatched credibility, market leadership across businesses, and large customer base, they deliver analysis, opinions,
and solutions that make markets function better.
Their defining trait is their ability to convert data and information into expert judgments and
forecasts across a wide range of domains, with deep expertise and complete objectivity.
At the core of CRISIL‘s credibility, built up assiduously over the years, are their values:
Integrity, Independence, Analytical Rigour, Commitment and Innovation.
CRISIL's majority shareholder is Standard and Poor's (S&P). Standard & Poor's, a part of The McGraw-Hill Companies, is the world's foremost provider of credit ratings.
Key Highlights:
India's first, largest, and most prominent credit rating agency.
`36 trillion of debt rated.
Market share in bank loan ratings exceeds 50 per cent.
Rates two-thirds of bonds outstanding in India.
Largest and top ranked provider of high-end research and analytics to the world‘s
largest financial institutions and leading global corporations.
Works with 12 of the top 15 global investment banks.
Client list includes 30 Fortune 500 companies, across a range of industries.
India's largest independent research house, providing comprehensive research
coverage to more than 1200 Indian and global customers.
90 per cent of India's commercial banks are CRISIL‘s customers.
Largest independent equity research house in India.
Official provider of valuations to all mutual funds in India.
Helps Employees' Provident Fund Organization (EPFO) select fund managers.
Largest independent equity research house in India covering more than 100 mid
and small cap companies; produce company reports on all 1,401 companies listed
and traded on the NSE.
Rates 2/3rd of India's corporate bonds and 45 banks that account for 90 per cent of India's banking.
CRISIL mainly operates in three verticals:
Ratings
Research
Advisory
13
Key Financials:
14
15
Key developments in the stock:
CRISIL has been able to achieve 30% growth in Revenue; 44.4% growth in
operating profit Y-o-Y basis.
CRISIL‘s operating profit margin grew by 3.3%.
It‘s Revenue & EBIDTA growth: 29% CAGR (Compounded annual growth rate)
The stock of CRISIL has returned 69% of cumulative six-year PAT (2006-11) to
shareholders through dividends and two share buyback programmes.
Strong and highly profitable positions in established and growing businesses.
Very high degree of business and geographical diversity will make CRISIL
resilient to market downfall.
CRISIL has always taken initiatives to leverage promising new business lines.
CRISIL comprises of young, capable, and committed team who are highly
motivated for the growth.
Recommendation for the stock:
CRISIL is the biggest player in rating and research. With its unique value preposition
and huge market share, CRISIL is expected to outperform the market. Currently the
valuations look attractive. CRISIL has strong & sustainable growth in the company's
Research business with added traction from the Ratings segment. The
recommendation for the stock is ―BUY‖ for a period of 12 months with a target of
1020.
Call: Buy
CMP: `880
Target Price : `1020
Time Period: 12 months
16
Steel
Srinivas Prasad K [II MBA J]
Steel, an alloy, mixture of two or more components, mainly Iron & Carbon, followed with manganese,
zinc, lead, nickel, silicon etc. Across the chain, Steel is available in more then 2700 grades & forms,
shapes, sizes etc . Across the value chain Steel is classified broadly into two categories Steel Long &
Steel Flat. Steel is available in the form of ingots, blooms, billets, slabs, plates, CR coils, HR coils,
stainless steel, tin free steel etc. Out of given forms of Steel, lion share of Steel is consumed in
construction sector, followed by engineering use, automobile, consumer durables etc.
World Steel production was 1.4 billion tons during 2010, which was 15% increase over the previous
year. China is the worlds biggest consumer & producer of Steel across the variants. India is the fifth
largest producer of Steel, produces close to 60MMT annually and expected to reach 120 MT by 2020.
India`s 60% production of steel is for Long Products used mainly for the Construction activities with
different form such as TMT, Bars, Wire Rod, Channels etc. and the rest produced is for flat products,
used for the electrical, automobile & engineering purpose.………………………………………. .
Broad classification of Indian Steel Industry into two forms, Primary & Secondary producers, Primary
producers are manufacturers who have backward integration i.e. have their own captive mines, they are
the major producers for Flat products in India. Secondary producers seeks Sponge Iron, Scrap etc as
their raw material for making steel, these manufacturers are active in Long products & nearly 75% of
the long steel production is made through them.… ……….
Gobindgarh, Gaziabad, Raipur, Mumbai, Bhavnagar are the major trading & production centres
including semis (Ingot/Billet) &finish (TMT/Channels etc). Lot of sponge Iron producers are located
in the eastern part of the country, which facilitates sponge availability across the India. Whereas port
cities are used for scrap importing, this circulates it to the production centers. Scrap & Sponge are both used for Steel making & cost of economies are worked out on the current prices for Ingots/Billets.
Current steel crunch lead by Illegal mining of Iron ore that was addressed and stopped my Supreme
court July last year, Since then there has been no mining in Karnataka. Steel and pig iron companies
that depend on iron ore from Karnataka are facing closure due to a severe shortage of the mineral. The
state‘s steel industry, whose 21-million-tonne (mt) output accounts for 25 per cent of the national
production, is operating with just a 45-day supply of iron ore.
The Light showing up at the other end of the bridge: Proposed Joint Venture steel plant between India's
In a written reply in the RajyaSabha on Friday Minsiter for Steel Beni Prasad Verma said, NMDC has
initiated necessary action and approached the Government of Karnataka for allocation of land and other utilities like water, power, etc. or National Mineral Development Corporation and Russsia's
Severstal has gained a breather with both companies signing a Memorandum of Understanding to set
up a 3mn ton plant in Karnataka.
Steel making companies like SAIL and RINL both have launched massive expansion/modernization
programmes with a view to adopt modern technology which is energy efficient, cost effective and
environment friendly. Similarly, majority of Indian Steel Industry in private sector has also shown
keenness to adopt latest technologies to make existing steel manufacturing processes more efficient
and productive.‖ he added. Further, the Government has decided to disinvest 10.82% of paid up equity
in the Steel Authority of India Limited (SAIL) out of its shareholding of 85.82%.
Source: http://www.commodityonline.com/news/nmdc-severstal-sign-mou-for-3mn-ton-steel-plant-in-south-india-49685-3
-49686.html http://www.ncdex.com/Index.aspx
17
Unlisted Stock Scam
Ankita Pagaria [II MBA J]
Dinesh Dalmia was the managing director of DSQ Software Limited. Dalmia‘s group included DSQ
Holdings Ltd, Hulda Properties and Trades Ltd, and Powerflow Holding and Trading Pvt Ltd. Dalmia
resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd, in the name of New Vision Investment Ltd, UK, and unallotted shares in the name of Dinesh Dalmia
Technology Trust.
The Dinesh Dalmia episode has been haunting the Indian capital market for nearly six years. It‘s a
classic case of forgery, cheating, fund diversion, price rigging and brazen violation of laws of the land.
Dalmia‘s `945 crore preferential allotment at the height of 2000-01 stock boom turned out to be a
massive fraud.
Dalmia owes money to dozens of entities (many of them have court orders against him). Despite
having a host of regulatory orders against him, Dalmia has been hiring and paying top lawyers in India
to fight long legal battles without so much as setting foot in the country. Two months ago, the
Securities Appellate Tribunal (SAT) ordered Dinesh Dalmia to buy back unlisted shares introduced by
him in the open market at the prevalent rates when these were allotted. The shares were issued at the
height of the Bull run, when DSQ Software traded at a high `2,800.
Dalmia took advantage of the euphoria in 2000-01 to increase DSQ‘s capital by 50 per cent without
informing the stock exchanges. He introduced these 1.3 crore shares in the market (originally allotted
to three Mauritius-based shell companies) without getting these listed. The ultimate beneficiary of this
allotment was Dalmia himself.
The SAT asked Dalmia to buy back shares from original allottees who continue to hold these today
and had bought them between May 20, 2000 and January 12, 2001. Dalmia has been asked to deposit a
first installment of `30 crore into an escrow account to finance the buyback, while the Securities and
Exchange Board of India (SEBI) has been directed to set up an authority to conduct this transaction.
The SAT order is a modified ratification of SEBI‘s earlier order, barring Dalmia from the capital
market for 10 years and ordering him to buy back 1.3 crore unlisted shares, place these in a separate demat account and extinguish them. SEBI had calculated the unjust benefit that had accrued to Dalmia
through the dubious issue of shares as `630 crore; the value of shares issued then was `945 crore.
Even after the scam came to light and Dalmia was absconding, he moved on to the BPO business and
was known to be running major call centres at Gurgaon, Bangalore and Chennai.
He was making news in the US also. With US investigators and lenders far more determined at hunting
down Dalmia‘s global operations, the default of his company Allserve in New Jersey and his claims to
the bankruptcy court made headlines there.
Companies allegedly owned by Dalmia have filed for bankruptcy in the US after failing to repay $83
million raised abroad through BPO companies. The actions against Dalmia and the DSQ group so far
include the hefty `630 crore penalty levied by SEBI along with a ban on Dalmia and certain persons
connected with DSQ Software and DSQ Holdings from accessing the capital markets for 10 years.
In addition, SEBI has imposed a series of lesser penalties on a dozen investment companies associated
with Dalmia. The Enforcement Directorate (ED) too has imposed a penalty of `64 crore on DSQ
Software and another `65 crore on its officials. ED has similarly imposed stiff penalties on Dalmia and
his associates in an associate listed company called DSQ Biotech, which is similarly in the doldrums
after several name changes.
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6 Weird Futures Products
Vinay Goel [II MBA L]
Freight Derivatives – The London based Baltic Exchange offers a trading on swaps for specific trading routes, known as forward freight agreements (FFAs). One party makes a
bet as to whether the rate to transport something One party makes a bet as to whether the
rate to transport something - such as crude oil from Brazil to Singapore - will be higher or lower in the future. Another party takes the other side of the bet, and the swap is settled in
cash when the future date arrives.
Weather Derivatives – It is quite difficult to bet on something as unpredictable as weather. The weather has a huge impact on business, especially industries like agriculture,
construction, energy, travel and insurance. Weather derivatives aren't as simple as buying
"rain tomorrow" and selling "a chilly Thursday". Instead, temperatures are averaged over a time period, such as the three months of summer and winter. These temperatures are then
sliced into "ranges" and packaged for trade.
Hurricanes – These contracts are based on how many hurricanes will hit a specific
geographic region of the country. These contracts are useful for insurance companies and
oil producers, both of them can incur huge losses if several big hurricanes cause damage or
shut down operations during the annual hurricane season. The futures are offered on the CME alongside the temperature based futures.
Carbon Credits – Companies that emit carbon dioxide as a course of business are given an initial allowance of carbon credit. If they produce more carbon than allowed, they must
purchase carbon credits to make up the difference. While the carbon credit system is
enforced in Europe, in North America we are just beginning to test out some pilot
programs, such as the Regional Greenhouse Gas Initiative, or RGGI. .
The CME is setting itself up to trade RGGI futures (pending regulatory approval), while
European-based futures can already be traded.
Movies - Investors will be able to buy and sell futures whose value is based on how much
money a movie makes during its first month in the theaters. The exchange, based on the existing entertainment site Hollywood Stock Exchange, will offer trading on the 30-50
movies either in the theater now or premiering in the next few months. Investors can bet on
both surprise hits (buying a future) or surprise duds (selling a future).
Payroll Figures - The CME also offers trading on derivatives based on one of the most
sensitive parts of our struggling economy - jobs. Non-farm payrolls are a highly watched
economic indicator that tracks the change in jobs from month to month. The derivatives based on this indicator see their value rise $25 for every 1,000 new jobs over the prior
month.
The World of Trading Anything - It must be stated that these are fringe markets. Many
are inefficient and rife with volatility. Others require specialized knowledge and/or
investor credentials. But they are not small markets. Tens of billions pass through them
annually, and all are showing immense growth.
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Crossword
Reddy Sreedhar T [II MBA L]
Across 1. 'Syed Nasim Ahmad Zaidi‘, a 1976 batch IAS officer of UP cadre, was appointed as an
‗ ...........Commissioner‘ on 7 August 2012, who retired as Civil Aviation Secretary on 31
July .
5. The former chief economist of International Monetary Fund (IMF) who was appointed as the Chief Economic Advisor in the Finance Ministry of India.
8. Ravneet Gill was appointed as the new CEO of this Indian operated germany‘s largest
lender bank. 9. The State Govt of this Indian State launched 'Ladli Laxmi' Scheme on 6 July 2012 which
aims to prevent female foeticide in the state.
10. The Jet Airways tied up with the ‗ ...... bank‘ in order to launch the ‗Jet Privilege-‗…….‘Bank Credit‘.
Down 2. India and this country signed an agreement to avoid double taxation and prevent fiscal
evasion with respect to taxes on income on 27 July 2012. 3. '......... Mahindra‘ stepped down as the Chairman of Mahindra & Mahindra on 8 August
2012, who held the position for nearly 48 years, and would continue to be Chairman of the
Group. 4. This Canada-based investment and research agency,recently criticized the policies and
corporate governance of Indiabulls, a conglomerate dealing in financial services, among
other sectors.
6. This country's Deputy Prime Minister and minister of Foreign Affairs, Foreign Trade and European Affairs 'Didier Reynders' visited India recently and discussed bilateral,
regional and international issues of mutual interest and an MoU was signed between
Ministry of Railways, Government of India and the Ministry of Mobility of this country. 7. The first meeting of the India-CELAC (The Community of Latin American and
Caribbean States) Troika foreign ministers was held in ‗.......‘ with an objective of
strengthening India-CELAC
20
Kritika Banerjee
Editor
Sanjeet Kumar
News
Reddy Sreedhar T
Crosswords & Quiz
Pankaj Sharma
Graph & Rates
Arnab Basak
Investors check
Bhavesh Dhanesha &
Rohit Munka
Debate
Vinay Goel
Did You Know
Dhruv Chopra
Contemporary Articles
Ankita Pagaria
Scams
Srinivas Prasad K
Commodity Market
Debadwita De &
Shashank Mishra
Stock Watch
Prachi Sharda
Buzz Words
Vedang Dave &
Sandeep Kumar
Boyapati
Review Committee
Kritika Banerjee
Creative Head &
Design
Team Members
21
About Us
Chaanakya is the official Finance Magazine of
Wealth Incorporation, the Finance Club. It is released fortnightly.
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and events of the world of finance.
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