Monthly Archives: December 2011
The problem isn’t opportunity, he said. It’s India.
“Every large investment, there was no transparency,” Piramal said.
His dilemma is a worrying sign for India. With the country mired in corruption, bureaucratic red tape and unclear and changing government policies, many of the men who made their billions here are saying maybe it’s time to quit India. It’s got to be easier to do business elsewhere.
In May last year, Piramal’s healthcare business sold its generic drug operations to U.S. pharmaceutical giant Abbott Laboratories for $3.8 billion. Piramal, a tall big man in a country that still measures prosperity by girth, was eager to set that cash pile to work. He wanted to expand one of his chemical plants, but was told it would take five years.
“The same plant could be set up in China in two years,” he said. “I love India, but my customer is not going to wait.”
India, still a beacon of relatively fast growth despite a troubled world economy, should be a magnet for capital. Instead, since the beginning of 2010, the amount that Indians have invested in businesses overseas has exceeded the amount foreigners are investing in India, according to central bank figures.
In part this reflects the confidence and aptitude of India’s maturing companies and the current malaise in the global economy and financial markets. But it also reflects deep problems at home. India’s big coporations may be cash rich but the failure to invest that money domestically is bad news for a developing country that needs capital to build the roads, power plants and food warehouses that could help lift hundreds of millions out of dire poverty.
The frustration of India’s business elite with corruption, political paralysis, log-jammed approvals, regulatory flip-flops, lack of access to natural resources and land acquisition battles — to pick a few of the top complaints — has reached a pitch perhaps not heard since India began liberalizing its economy in the early 1990s.
“If you are an honest businessman in India, it’s very difficult to start up anything,” said Jamshyd Godrej, chairman of manufacturing giant Godrej & Boyce. “Companies are going to operate where they see the best opportunities and efficiency for their capital.”
Increasingly, that’s outside India.
In 2008, foreigners poured roughly twice as much direct investment into India — $33 billion — as Indians plowed into businesses overseas. By 2010, that had reversed: Indians invested $40 billion abroad — twice as much as foreigners invested in India — a trend that’s continued this year.
There is another, unspoken element to all the complaints. To the extent that business in India ran on corruption, some of the old, dirty ways of doing things are being disrupted, freezing India’s already glacial bureaucracy, business leaders say.
Scandals in the staging of the Commonwealth Games, the pilfering of homes meant for war widows and the irregular auction of cellphone spectrum that cost the country billions has sent parliamentarians and even a Cabinet minister to prison.
With Indians tiring of the incessant graft, tens of thousands of middle-class protesters poured into the streets and pushed an anti-corruption bill onto the floor of Parliament.
Steelmakers can’t get enough iron ore because a massive mining scandal in the southern state of Karnataka prompted a court to order the closure of illicit mines that account for a fifth of iron ore production in the country.
The bureaucrats — even the honest ones — are reportedly so scared of being punished they are refusing to make the decisions needed to make the country run.
Piramal is not unpatriotic. Each room in his executive suite is named after an Indian epic hero: Arjuna, the most pure; Dhananjay, acquirer and master of wealth. There’s a quote from the Upanishads scriptures on the wall.
His office sits in a one million square foot office park in Mumbai his family built. The buildings around him — white with blue glass that flashes back the unforgiving sun — bear his own name in large black letters: Piramal Towers.
Piramal had the will and the means to build power plants and roads.
Instead, his Piramal Group’s largest investment to date has been in one of the office park’s tenants: the Indian subsidiary of the British telecom giant Vodafone Plc.
Last September, when he got the first payout, of $2.2 billion, from Abbott, the phone started ringing.
“Because people knew we had money, we had so many people approaching us for projects in the infrastructure sector,” he said. “These people had no experience and no knowledge and no track record of having built a business in any area. And yet they were coming to us saying we have licenses and approvals. That just didn’t sound right or smell right.”
Each day, they paraded through his office: The investment banker who decided to build a 500 megawatt power plant, the coal trader assured of a government coal allocation, small-time miners with pretty presentations promising land, licenses and financing.
“They’d name politicians from the center and the state who had it all tied up for them,” he said. “It didn’t sound right. Obviously there were things going on in the system.”
Road and port projects weren’t much better, he said.
Piramal also looked at investing in engineering and infrastructure services companies, but couldn’t make sense of their books.
“We couldn’t find anything,” he said. “People get greedy. In their desire to get good valuations they resort to, if I can say, creative accounting.”
Today, India’s infrastructure companies are known as great wealth destroyers.
“Infrastructure investment has become untouchable, a sure way of losing money,” said Jagannadham Thunuguntla, head of research at SMC Global Securities. He calculates that four of India’s top infrastructure companies — GMR Infrastructure, GVK Power and Infrastructure, Lanco Infratech and Punj Lloyd — have lost over 80 percent of their value since 2007. A fifth, Larson & Toubro is down 50 percent.
Piramal may have dodged a bullet, but shareholders in Piramal Healthcare aren’t happy. Despite a $600 million special dividend and share buyback, the share price has sagged since the Abbott deal was announced on May 21 last year. They’d like to see the Abbott cash productively deployed. Instead, much of it is sitting in fixed deposit accounts.
Piramal said he really does want to run a pharmaceutical company and be the first Indian company to discover a world-class drug — despite his dabbling in telecom, financial services and real estate financing. It’s just that pharma can’t absorb all his cash. He plans to sell the 5.5 percent stake he picked up in Vodafone Essar for $640 million in a few years, when Vodafone Essar issues shares in an initial public offering, he said.
He has also launched Piramal Capital, to make real estate and infrastructure loans, and spent about $50 million to acquire IndiaReit, a real estate investment company.
Meanwhile, his thoughts have turned to Boston, where he set up IndUS Growth Partners with a professor from Harvard Business School to look for buying opportunities in the U.S., in security, financial services and biotechnology. And he said he’s still planning to spend over a billion dollars on biotechnology acquisitions in North America and Europe.
“India was going more towards capitalism than socialism,” Piramal said. “I think we’re going back. Capitalism went to too much excess. Corruption levels went to the extreme.”
He said he’ll announce his first overseas acquisition by March.
In a new report, Morgan Stanley analysts Chetan Ahya, Derrick Kam and Jenny Zhang write that they expect consumption to show resilience in China, while Indian consumption moderates.
In China, private consumption’s share of GDP fell to 34% in 2010, from 45% in 2001. In the past year, discretionary spending was checked by tighter monetary policy and higher inflation. Lower growth and inflationary woes will continue to impact the Chinese consumer for the next few months. But these pressures are expected to ease in the second half of 2012, as the Chinese government implements structural reforms which include steadily increasing minimum wages and lowering taxes. Morgan Stanley analysts cite three main reasons for this change:
- Consumption growth is expected to be driven by wage growth – “The government aims to grow household disposable incomes (wages) at a pace that at least matches nominal GDP growth.”
- The government is pushing for affordable social housing which will eventually drive consumption, as consumers begin to feel more secure about their homes.
- Disposable income is expected to free up as the government improves social security and works towards extending social services like public education, healthcare, and housing for more residents.
Meanwhile, Indian domestic consumption is expected to moderate. After the credit crisis, the Indian government increased its expenditure to GDP by 4 percentage points and most of it went towards boosting household consumption. It also increased rural wages, which have posted a 27% compound annual growth rate (CAGR) over the last three years. From Morgan Stanley:
“We believe that fiscal transfers have boosted rural household incomes and allowed rural consumers to raise their consumption levels. However, the macro feedback in terms of high and persistent inflation suggests that the boost to consumption growth will not be sustainable. Moreover, we expect the fiscal support to rural consumption to be gradually withdrawn.
…Signs of weaker rural consumption growth have already emerged. According to media reports (Business Standard), companies reported a slowdown in the rural sales of fast- moving consumer goods and household appliances in November, traditionally a good month for rural sales.”
Lorsque l’un d’eux est aspiré, il fait généralement trois balançoires de forme irrégulière autour de la Terre pendant un moment puis se précipite sur leur trajectoire propre.
Les scientifiques affirment que peu d’attention a été accordée à des satellites naturels de la Terre autres que la lune, en dépit du fait qu’ils sont sûrs d’exister. «Il ya beaucoup d’astéroïdes dans le système solaire, donc les chances de la Terre pour capturer un à tout moment est, en un sens, pas étonnant», a déclaré le co-auteur et astronome à l’Observatoire de Paris en France Jeremie Vauballion.
Le groupe dit des astéroïdes en orbite autour de la Terre sont temporaires pendant environ un an à compter de Juin 2006, quand un objet, étiquetés 2006 RH120, a été découvert par le Catalina Sky Survey en Arizona et estimé entre 3 et 6 mètres de largeur.
«Le RH120 2006 a probablement été découvert parce qu’il était légèrement plus grande que la plupart des autres lunes temporaire» qui plus tard sont venus dans notre système planétaire comme la plupart d’entre eux ne sont que d’environ 1 mètre de large », disent les scientifiques.
This new theory which says Earth’s gravity captures these tiny asteroids as they pass near the planet on their way around the sun.
When one of them is drawn in, it typically makes three irregularly shaped swings such as huge doughnuts around Earth for a while and then hurtles on its way.
Scientists claim that little attention has been paid to Earth’s natural satellites other than the moon, despite the fact that they are sure to exist.
“There are lots of asteroids in the solar system, so chances for the Earth to capture one at any time is, in a sense, not surprising,” said co-author and astronomer at the Paris Observatory in France Jeremie Vauballion.
The group says the temporary asteroids have orbited Earth for about a year starting in June 2006 when an object, labeled 2006 RH120, was discovered by the Catalina Sky Survey in Arizona and estimated to be between 3 and 6 meters wide.
“The 2006 RH120 was probably discovered because it was slightly larger than most of the other ‘temporary moons’ that later have come into our planetary system as most of them are only about 1 meter wide,” scientists say.
On assiste à un spectacle silencieux des dirigeants actuels, avec quoi la population du monde entier et surtout des pays développés, commence à se rendre compte qu’une conscience est une des armes les plus fatales en Politique… Read the rest of this entry
Ce qui se passe avec les “Air Crash” doit nous servir de bien reviser nos investissements et bien orienter les choix des etats, sinon chaque individu doit bien faire attention au voyage inter continentaus….
Je devine que ceux qui viennent des Iles Comores nous disent que les choses s’ameliorent, mais le danger est que les sortants ne font que parler, font beaucoup de bruit sans rien faire.. Et si on se taise et on laisse les actes parler.. Mon plan s’est de miser sur les technologies modernes, lancer la ville Virtuelle de Seleani et avoir un access satelitaire dans la region. c’est pas facile mais realisable.. d’ailleurs le plan electronique que SeleaniNews a mis en marche se passera en 3 par 3 ans de strategie. dans 2 ans on navigera Internet qu’aller demander ailleurs.. dans 1 ans, les Multimedias vont changer les donnees des Iles et je devine que Selani doit avoir ses mots.. ne soyons pas trop techniques, mais plutot tres pratiques, les erreurs de nos predecesseurs doivent etre des references pour aller de l’avant..
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