India’s bulls relish China inflows

By M H AHSAN
Retail and institutional investors staying bullish on Indian stocks despite recent steep declines are pointing to the first clearance given to a Chinese foreign institutional investor (FII) to invest directly in the Indian markets as one reason for their optimism. Market regulator the Securities Exchange Board of India (SEBI) has given the go-ahead to the Shanghai-based China International Fund Management (CIFM), with US$4 billion available for overseas investment, to buy into Indian stocks.

CIFM is managed by the financial wing of the Shanghai Municipal government and China’s third-biggest investment firm, Shanghai International Trust and Investment Company, along-with US fund giant JP Morgan. It was among the first few fund houses that the Chinese government permitted to invest in international markets following relaxation in overseas investments in June 2007. Last October, CIFM raised more than $15.5 billion from almost two million investors keen to ride the Asian growth story when it launched the first Chinese fund to invest in Asia-Pacific markets (excluding Japan). CIFM has identified Singapore, Hong Kong, South Korea and India as key markets. Chinese authorities have so far allowed overseas investments of $19.5 billion by indigenous Chinese funds.

Media reports suggest that this quota will be raised to $70 billion. Chinese investments in Indian stocks could scale $10 billion, if one also accounts for indirect routes from Hong Kong or global private equity firms, according to predictions that have appeared in some Indian financial papers. Net FII flows into Indian stock markets more than doubled last year to pass $17 billion. SEBI should also permit China Investment Corporation (CIC), with an initial capital corpus of over $200 billion, to pick up Indian stocks, according to reports in India. The Chinese government formed CIC last year to invest in global assets and help to invest the country’s rising foreign exchange reserves and counter the impact on them of a falling US dollar.

CIC has bought a $3 billion stake in US-based private equity group Blackstone, whose substantial investments in India include stakes in textile major Gokaldas, Nagarjuna Constructions and the Eenadu group, one of the largest media networks in southern India. In a recent research report on the CIC’s wish list, international securities firm Credit Suisse said it expects Indian software, pharmaceuticals and capital goods businesses to be popular. “It is highly unlikely that CIC could get its hands on India’s resources companies [oil and metals], considering that both countries are competing to acquire resources around the world, and it would be politically too sensitive in India for CIC to invest in Indian resources companies,” it stated.

Chinese funds may be kept away from investing in telecom, oil and gas, and port ventures due to Indian fears about security issues. Chinese firms have in the past been prevented from investing in these sectors following decisions by the federal Indian home ministry, but it is not yet clear how the government stands on this issue as it seeks to attract China’s giant investment funds. Certainly there appears a developing rapprochement between the two countries regarding mutual investment flows. Beijing has put in place statutes to enable Indian stock exchanges such as the Bombay Stock Exchange (BSE) and the broader National Stock Exchange (NSE) to set up offices in China to attract listings and investments by Chinese firms.

This follows an agreement between SEBI and the China Securities Regulatory Commission in 2006. SEBI has said that new statutes requiring overseas funds to register before investing in local equities are aimed at increasing transparency about the source of funds and improve the market. Bull runThough the benchmark Sensex measure of stocks listed on the Bombay Stock Exchange has fallen steeply to 17,000-18,000 levels in the last couple of weeks from historic highs above 20,000 amid weak global markets, the Federation of Indian Chambers of Commerce and Industry (FICCI) recently said the 30-share index should scale 25,000 within two years. The Sensex surged over 45% last year and hit the 20,000 mark for the first time in October.

The stock market gains will come despite some slowing in gross domestic product (GDP) growth to below 9%, compared with more than 10% growth in the last fiscal year. Finance minister P Chidambaram has underlined that the Indian economy remains robust, with strong real indicators, including a fundamentally good growth of over 8% growth, foreign exchange reserves of more than $200 billion and a fast-growing services sector. This optimism is shared by overseas investors, according to Merrill Lynch, which in a year-end analysis of the Indian economy, said: “Foreign investment in Indian equities is bound to rise. Most global fund managers are taking a longer-term shot on India.”

The strength of the market is attracting more companies to list, with 95 companies raising $8.3 billion through initial public offerings last year, ranking India seventh in the world for IPOs, according to data by Ernst & Young. Foreign institutional investors continued to pour money into the country last year, encouraged by rising stock values and also the strengthening rupee. According to SEBI data for the third-fourth week of September, 2007, FII purchases resulted in the quickest ever 1,000-point rise in the Sensex. Net investment crossed $3.5 billion over eight trading sessions.

The strong market helped at least 13 of the country’s 200 mutual funds to roughly double their investors’ wealth last year, while more than 150 clocked returns of more than 50%, according to the Association of Mutual Funds in India. Total assets under management for the Indian MF industry have risen more than sixfold over the past seven years to more than 5 trillion rupees (US$126 billion).

Asia faces growing rice crisis

By M Raja & M H Ahsan
An Indian government ban of rice exports has plunged neighboring Bangladesh into crisis, in a grim preview of growing global grain shortages. Leading rice-exporting nations such as India and Vietnam are reducing sales overseas to check domestic price rises. Previously healthy buffer stocks in the world’s largest rice exporter, Thailand, are shrinking. The February 7 ban by India’s Ministry of Commerce and Industry intensifies a worldwide rice shortage that according to the Rome-based United Nations Food and Agriculture Organization drove up prices by nearly 40% last year.

Large rice importers such as Myanmar, Afghanistan, Pakistan, Bangladesh, Indonesia and Malaysia are worst affected. An additional 50 million tonnes of rice is needed each year up to 2015 to plug the demand-supply gap, according to the Manila-based International Rice Research Institute (IRRI), equivalent to a 9% annual production increase from current levels of 520 million tonnes. Intensifying price pressures, additional agricultural land for growing rice, a dietary staple for more than half the world’s 6.6 billion people, is extremely limited, say analysts, while rice consumption is growing worldwide and wheat stocks are hitting record lows. The US Department of Agriculture has reported three-decade lows in wheat stocks, and India – Asia’s largest wheat producer – expects lower production for 2008.

Unregulated private cross-border trading makes exact figures hard to come by, says Duncan Macintosh, director of the IRRI, told HNN from his Manila office. “Besides, Asian governments have a strategic interest in rice stocks and any declared shortage will send prices shooting up,” Macintosh says. India’s rice export ban seems born out of such price rice fears, and comes at a sensitive time ahead of the final annual budget to be presented by the ruling United Progressive Alliance government on February 28 before the country’s general election next year. India’s ban on rice exports follows a gradual limiting by the government of exports over the past few months. In October 2007, rice exports priced under $425 per tonne were banned and on December 31 the floor price rose to $505 a tonne. The February 7 ban extended to all exports of rice except government-to-government trading, but excludes exports of basmati rice, a more fragrant, long-grained and expensive variety.

The government will supply a previously committed 500,000 tonnes of non-basmati parboiled rice to Bangladesh at an average of US $399 per tonne, excluding insurance and freight. The exemption was not much consolation to Bangladesh, which desperately needs food grains after Cyclone Sidr in December destroyed $600 million worth of the country’s rice crop. Rice prices soared 70%, hitting hard a population in which the majority survive on less than $1 a day. In the rare years that the country is free of climatic disasters, Bangladesh produces 28 million tonnes of food grains, meeting 95% of domestic needs.

To cope with the rice crisis, the Bangladesh government in January floated global tender notices for 300,000 tonnes of various varieties of rice. The country is also importing 180,000 tonnes of white rice from neighboring Myanmar. The Kolkata-based national daily The Statesman reported that India’s export ban caused 300 rice trucks to be stranded in India-Bangladesh border zones such as Mahedipur land customs station in English Bazaar and other land ports in West Bengal. Rice traders on both sides face losses and are threatening to take to the streets if the Indian government does not reconsider the ban.

Worse, in a repeat of a disaster that last struck in 1959, a famine threatens remote areas of southeast Bangladesh after millions of rats devastated food crops as the rodents reproduced in dramatic numbers following a flowering of bamboo forests that happens every 50 years. The rat breeding out-paces the bamboo flower growth, and soon the animals turn to ravaging rice stalks and vegetables in the affected region. Northeastern India has been similarly hit after bamboo forests in Mizoram began blossoming in 2007. Local authorities declared the area a disaster zone but the Indian government has not yet announced plans to combat this bi-century rat storm. Long-term trends and short-term shocks are both putting pressure on rice prices.

Higher incomes across Asia are leading to increased consumption of grains and vegetables and of meat, which leads to more grain being diverted for use as cattle fodder. Production of biofuel further squeezes supply, while the drift off the land by workers and into industry curbs the supply of labor. “There is less land, less water and less labor available for rice growing across Asia,” says Macintosh. “Agricultural labor in countries like Thailand is increasingly shifting to industrial sectors. And rice is the most labor- and water-intensive crop.” In the shorter term, prices can spike as natural disasters ranging from severe drought and floods cause havoc on agriculture. The recent three-week snow storms in China caused $7.5 billion in damages, according to early government estimates, including destruction of winter crops leading to a $700 million relief package for farmers. Asian countries are making different responses to domestic and international demand.

Vietnam in the third quarter last year suspended exports to protect domestic needs amid insect epidemics, while in the other direction Thailand plans to auction an additional 500,000 tonnes of rice to cater to increasing international demand, particularly from Bangladesh and Pakistan. Thailand exported 800,000 tonnes of rice in January 2008, a 25% year-on-year increase. As a long-term measure, food scientists are developing sturdier varieties of rice that can withstand climate challenges as well as higher yielding seeds. Asia averages 3.6 tonnes of rice per hectare, according to the IRRI.

Better yielding varieties will increase average output to six tonnes per hectare, particularly in Thailand, which grows rice across 9.8 million hectares but has the lowest rate of output in Asia – 2.6 tonnes of rice yield per hectare in the planet’s largest area of land made available for rice cultivation. In contrast, China’s produces six tonnes of rice per hectare and Japan has the global record at 6.2 tonnes. The world’s leading philanthropists are pitching in to combat the rising grain crisis, similar to supporting cancer and AIDS research. Leading the way, Microsoft chairman Bill Gates in January announced a grant of $19.9 million over three years to the IRRI.

The grant from the Bill and Melinda Gates Foundation aims to first help 400,000 small farmers in South Asia and sub-Saharan Africa access improved rice varieties and better growing technology. Farmers may increase yields by 50% by 2018, but “there are no short-term solutions,” says Macintosh of the IRRI.

Anil’s first float sinks Reliance image

By Indrajit Basu
More than five million investors waited in keen anticipation for the great man’s son to ring the opening bell at the Bombay Stock Exchange on Monday and the start of trade in a company that had attracted subscriptions worth US$190 billion. Anil Ambani, a break-away scion of India’s famed Reliance Group, had three weeks earlier overseen the $3 billion initial public offering – India’s largest – of Reliance Power Ltd (R-PL) and added billions of rupees to his own vast wealth as his fellow Indians bought into his aura of almost unearthly success.

Then the bell rang, and for the first time in history of Indian stock markets the Ambani magic did not work. Reliance Group companies are known for producing stock-market gains from the moment they are listed, and for a few moments on Monday money seemed there for the taking once more as Reliance Power surged 19% to 538 rupees from the IPO price of 450 rupees (US$11.42). The promise of lucre hung there for a few seconds, before the dream vanished and R-PL dived to 355 rupees per share never to return even close to the issue price in the next five and a half hours of trading.

By the close, it was down 17% at 372.50 rupees, $4 billion of its market capitalization wiped out and with it billions of rupees of investors’ wealth. And tarnished, if not also destroyed, was the invincible image carefully built over three decades by Anil’s father, the legendary Dhirubhai Ambani, that an Ambani-float never loses money. In the following days, the nightmare worsened as another $5 billion of the market capitalization was lost. By Thursday the stock was trading at around 364 rupees.

The sharp decline “was a big disappointment for millions of investors who applied [for the shares] with high hopes driven primarily by the high-profile marketing of the IPO”, said Mumbai-based investment advisor S P Tulsiyan. “But the worst fallout of the flopped listing is that retail investors have lost faith in the Reliance Group, particularly in the Anil Ambani faction.” The blow was severe and went far beyond Reliance Power. The listing affected not only the stock prices of companies controlled by Anil Ambani; it also impacted the share prices of the companies of Mukesh Ambani, who controls a slightly larger share of Reliance Group.

The price of all Reliance stocks, including flagship Reliance Industries Ltd [RIL], were hammered for the next two days. It was a roll call of Indian industry – Reliance Petroleum (like Reliance Industries a Mukesh Ambani company), Reliance Communication [RCom], Reliance Energy, Reliance Capital, Reliance Natural Resources and all other Anil Ambani-managed companies shed anywhere between 6% to 25% of their market capitalization in the period. “The Reliance Power debacle has taught me to never take the Reliance Group for granted,” said Rajesh Patwa, an investor. “From now on I’ll think twice before investing in Reliance companies, particularly in their IPOs.”

Patwa was not alone in his reaction, according to Shankar Sharma, head of First Global Stock Broking Ltd, a Mumbai-based stockbroker and investment banker. “It is clear that the perception of a sort of infallibility the Reliance Group has been created over the years has been shattered with the debacle of the R-PL listing,” he said. “The next time, any IPO from this group has to be priced with some fundamental safety net.” Large scaleLike his elder brother Mukesh, Anil Ambani does everything at an absurdly large scale.

Where his brother’s Reliance Industries features as the largest private sector enterprise in India (and comfortably ranking in the Fortune 500 list) with over $27 billion in revenues, Anil had to make sure that RCom, the mobile telephony company he controls, is the largest in its sector. If Mukesh Ambani embarks upon building the world’s largest petroleum refinery – through Reliance Petroleum – Anil too has to build Reliance Power as one of the world’s biggest power plants using clean-burning natural gas.

Both brothers have cashed in on the goodwill of Dhirubhai, who died in 2002 after shaping India’s equity culture by attracting millions of retail investors in a market that was then dominated by financial institutions. Through repeated public offerings of Reliance Industries since its IPO in 1977, none of which went below their issue price, Dhirubhai revolutionized the country’s capital markets by generating billions of rupees in wealth for those who put their trust in his companies.

The IPO of Reliance Power, which had no assets and little cash flow to boast off, benefited from the Reliance brand name and also the present euphoria in India’s stock markets, attracting subscriptions for 73 times more shares than were available. It was the first company flotation by Anil Ambani’s ADAG (Anil Dhirudbhai Ambani) Group since he carved it out after splitting with his brother following the death of Dhirubhai in July 2002. The ADAG Group’s five previously listed companies were all spun off from Dhirubhai’s Reliance Empire when his sons formally split it in January 2006. The Reliance Power debacle is intriguing considering the fact that barely a month back, the announcement of the IPO had investors from around the world scrambling to get a piece of the company.

Qualified institutional investors poured in $100 billion to oversubscribe their share of the float by 82 times. Rich investors or high-net worth investors (HNIs as they are called in India) who had put in single applications worth $260,000 each were even more aggressive, bidding for 163 times more than the number of shares earmarked for them. Retail investors – those who had put in $2,500 worth of applications each – oversubscribed to the extent of around 15 times. So what went wrong? The debut was not helped by a souring in global market mood as the reverberations of the US subprime and credit crisis swept around the world.

Between January 4, when the IPO was announced, and the listing date of February 11, the benchmark Sensex index fell over 4,000 points, or almost 20%, from historic highs of around 20,686 points to 16,630.91 points. The Indian stock market was also particularly weak on February 11, when it fell by 8%. But that according to analyst that was due to the Reliance Power debacle as investors sold other shares to pay for losses after buying the stock on borrowed money. Some say Reliance Power’s downfall was linked to aggressive pricing of the IPO.

“As we have been warning right from the day the IPO pricing was announced, it was too richly priced,” said S P Tulsiyan in Mumbai. “According to our calculations, the IPO was at least 20% overvalued when compared with peer companies in India. For instance, the IPO price was assigned a phenomenal price-to-asset value ratio of 6, for a company that does not even have a power plant on the ground. Whereas NTPC (a local power company), which already has as as big a project as what R-PL proposes to set up by 2010, trades at around 3 times its present asset value.”

Tulsiyan blames this overpricing squarely on the merchant bankers who marketed and managed the IPO, and on the market premium in the grey, or unofficial pre-listing, market where the stocks changed hands at prices that encouraged many buyers of the IPO to believe that they would easily get an immediate return on their investment. Critics add that Anil along with the merchant bankers also created hype through a pre-IPO advertising blitzkrieg that with the slogan “Power On, India On” tried to portray India’s scorching economic growth is solely dependent on availability of power.

Anil dismisses the allegation: “To say that nearly 500 sophisticated institutional investors from across the globe, and 5 million retail investors, were all taken in by hype to an extent that they committed a staggering $190 billion is an unfair comment on their collective intelligence and understanding.” Still,the Reliance Power listing would have missed disaster had not almost every investor who applied in the IPO done so just to make a quick buck, according to Sharma of First Global. “Everybody bought to flip and not as an investment,” he said . Flipping is the practice of buying IPO shares and selling as soon as trading begins, usually for a substantial profit and not just for retail investors lucky enough to get offer shares.

Institutional investors get most of the shares at the offering price and stand to gain hugely from the practice, particularly in a hot IPO market, when the price of a new company often rises dramatically above the offering price on the first day. “This includes everybody from the financial investors to high net worth investors to even retail investors. But what is very surprising is that the foreign institutional investors who claim to have great insight into financial markets, great modeling skills, and global investing experience could not pick wheat from the chaff,” Sharma said. The Reliance Power listing, debacle though it was, of course had an upside; it made Anil Ambani, already the world’s sixth-richest man according to the Forbes List, move a notch higher.

Rough calculations suggest that with the listing, Anil’s net worth surged $13 billion, closer to but still about $6.4 billion below his brother Mukesh’s $51 billion net worth. Even after the sale, Anil holds 46.96% of Reliance Power shares directly and 15.49% through Reliance Energy, of which R-PL is an offshoot. The new listing increased the market capitalization of ADAG Group by $21.5 billion to $78.77 billion.

The Welcome Group Graduate school of Hotel Administration

By Priya Mathews
The Welcome Group of Hotels, is today one of India’s finest hotel chains. Each hotel pays architectural tribute to ancient dynasties, which ruled India from time to time. The design concept and themes of these dynasties play an important part in their respective style and décor.

The Institute is known as the Welcome group Graduate school of Hotel Administration (WGSHA). WGSHA has linkages with international institute in USA and Switzerland.
Welcome group Graduate school of Hotel Administration was the first Indian Hotel Management Institute listed by the council of hotel restaurant Institutional Education (CHRIE). The institute was started in August 1987, its training and development activities are recognized by the International Hotel Association, Paris.

The collage has been securing a majority of the top university ranking over the years. The graduates have got placements in hotels like (Welcomgroup, Taj, Leela palace, Holiday Inn, Le Meridien), airlines (KLM, British Airways, Gulf Air, and Singapore Airlines), travel agencies (Sita travels, Thomas Cook) and other organizations such as Citibank, Blue Dart Couriers, GE Capital and International Services.

The institute offers 3 courses: Bachelors degree (4years) Masters Degree (2 years divided into 4 semesters) and Diploma (3 years divided in 6 semesters.)They have Facilities such as Library and Labs. The library has nearly 5,123 books on Hotel management and allied subjects.
They have three lab kitchens and bakery which are designed to meet the specialized training needs of the students. All of the facilities are well equipped according to the industry standard equipments.

A Computer lab with 25 PCs of various Pentium configurations and 32 workstations is operational and available to the students. Besides this, the faculty members are provided with individual laptops.

The collage has centrally air-conditions classrooms with latest teaching aids like LCD projectors, direct projectors, VCR etc.

They also have facilities for sports like badminton, basketball, volleyball, table tennis and separate gymnasium facilities for boys and girls. They also have two swimming pools and standard gymnasium.

All the students are covered by a Medicare Scheme which entitles them to the best of medical care and treatment at the Kasturba Hospital.

Leading organizations from the hospitality world visit the institute every year for campus recruitment. The placement cell assists in placement of students with these organizations or in admission for pursuance of higher education.

For inquiries on admission and any other information please contact: WGSHA, Valley View International, Manipal-576 104