SEBI Issues New Guidelines for SME Exchange

SEBI has come up with new guidelines for SME exchange. SEBI has set a post-issue upper limit of Rs 25 cr capital at face value for the companies that wish to get listed on such exchanges. If the company reaches this upper limit it wouldn’t be allowed any follow up issues, any follow-up issue has would only be permissible if new capital doesn’t not exceed Rs 25 cr.

In case companies listed on SME platform exceeds the Rs 25 cr limit, the company will be compulsorily shifted to the main board of the exchange. SEBI has absolved SME companies on SME exchange of requirement of submitting quarterly number, but they can do it on half yearly basis. Such companies are also will have privilege of forgoing the need to publish their results instead they can put their result on website.

German Government to sponsor training program for Indian SMEs

The German ministry of Economic Cooperation will sponsor training program to five MSME associations in the country to help them improve efficiency and their business expertise.

The German ministry has chosen five different associations from different states for this program. The associations from Madhya Pradesh, Punjab, Haryana, Gujarat and Indian Industries Association. The German government through two of organizations- the German Confederation of Skilled Crafts (ZDH), the apex body of the German Skilled Crafts-SEQUA will impart training to the Indian associations. The program is design to improve management expertise, to bring in more professionalism and help companies in improving their access to finance and other services.

The Indian association which are going to part of this program are Federation of Madhya Pradesh chamber of commerce and industry, Indian Industries Association IIA, Mohali Industries Association in Punjab, Gujarat chamber of Commerce and Industry and Faridabad Small Industries Association in Haryana.

MSMEs Big Potential of Pushing IT Spending: NASSCOM Study

Nasscom has come out wiht a study pointing towards huge gap in IT adoption Micro, Small and Medium Enterpises (MSMEs). It has has also pointed the huge untapped potential. According to Nasscom the IT penetration in manufacturing sector is abysmal and SME companies hardly make any major investment in IT.

The IT adoption amongst SME & MSMEs is very high in financial and accounting domain but lag behind in areas of CRM, procurement, production planning and supply chain management. SME companies hardly invest in automation and IT solution for enhancing production efficiency. The study found that though rate of IT adoption was at 75% in finance & accounting amongst companies but it just 18% in manufacturing process and even lower rate of 16% in ERP solutions.

Such low adoption of new technology imperil the chances of gaining competitiveness not just domestically but also in global markets as a lot of these SMEs compete in export markets. According to the study Indian SMEs & MSMEs spent meagre 1% of their total revenue on IT adoption, which was way below the global average of 4.5%. Lack of IT spending is crucial challenge for government which wants to improve both efficiency and competitiveness of Indian manufacturing and make India leader.

The Nasscom study also highlighted both demand side and supply side issues resulting in poor IT adoption amongst SMEs. While lack of internal IT expertise, affordable solutions, complexity of adoption, and lack of service providers was the issue with demand side, the supply side constrains were lack of last mile connectivity, support costs & qualified systems integrators.

A new TV show for SMEs

In line with the increasing importance of SME’s in the Indian economy, the country’s leading business channel CNBC Awaaz in association with Entrepreneur Magazine has launched a new TV show entirely focused on this segment. The show named ‘AWAAZ Entrepreneur’ launched on May 15 will focus completely on SMEs in India.

The business channel aims to reveal the arduous but rewarding journeys of various SMEs and also bring out various ideas, options & solutions available to various sections of our society who yearn to venture out and make it big on their own.

The show will profile SME’s and talk to various stakeholders. The series will also showcase the journeys of eminent industry figures, who have gone through the SME phase and have now transformed into larger businesses. Further, the show will also entertain queries of individuals across the country through an expert.

SEBI Sets Guidelines for Market Makers on SME Exchanges

After allowing exchanges to set up separate trading platform for small and medium size companies, the Securities and Exchange Board of India (Sebi) has issued guidelines for SME (small and medium enterprises) exchanges with respect to market making activity. Sebi has now made market making process mandatory for SME scripts and has laid down terms for members of the exchange who will be willing to engage in market making activity.

The market makers would bring in more liquidity and continuity in buy/sell activity on the exchange. Market makers would be required to provide 2-way quote for 75% of the time in a day. The minimum depth of the quote shall be Rs 1 lakh. However, investors with holdings of value less than Rs 1 lakh shall be allowed to offer their holding to the market maker in that scrip, provided that he sells his entire holding in that scrip in one lot to the selling broker.

The new Sebi guidelines also limit the number of market makers for a particular script; it has been set to five market makers. Sebi has also set several qualifying criteiras for becoming market maker.

Government to jointly develop Food Parks with Foreign Countries, SMEs to Benefit

Food Processing Industries minister Subodh Kant Sahai has said that government has signed a MoU (Memorandum of Understanding) with Italy and France to set up joint food parks. Mr Kant also stressed that this joint food park model will immensely help the food processing industry and will also be prove to be future model for food processing industry in India.

In an interview Mr Kant said that government was in opinion that country needed to develop its food processing industry with help of those who had most of the experience. Thus, government went in favour of aligning with countries like France and Italy which have vast experience in food processing industry.

He said that the foreign expertise will bring in both large investments and new technology to the food processing industry in India and will help the nation in developing mega food processing parks with the help of foreign capital and technology. The Food Processing Ministry has demanded ECB (external commercial borrowing) facility being extended for bringing equipment to the mega food processing parks by the companies involved in its development.

Highlighting the lack of capital financing in the food processing industry and reluctance by the financial institutions and the banks to fund SMEs in the food processing industry, he also stressed for the need of venture capital fund to inject growth into this sector, while mentioning the Rs 10 bn funding provided by the apex body NABARD.

SIDBI to receive $600 mn loan from World Bank and Japanese Agency

The Financial institution Small Industries Development Bank of India (SIDBI) is receiving loan worth $600 mn from two international development agencies to provide credit to Micro and Small & Medium Enterprises. These loans are expected to be received by the Indian financial institution during the period 2010-11.

World Bank, one of the providers of this loan, amounting to $300 mn, would be utlised by SIDBI solely for the purpose for providing credit to MSME and SME sector. The SME sector will account for the larger pie of $200mn while remaining will go to the MSME sector.

The other $300mn, which will be provided by Japan International Cooperation Agency (JICA), would be utlised by SIDBI for financing energy efficient projects of Micro and Small & Medium Enterprises. Such disbursement will be given to MSMEs which have incorporated energy efficient technology and require capital to further finance their projects. These loans will be soft loans and would be made available to the companies at concessional rate.

Both of these financing arrangements by SIDBI is going to benefit MSME and SME sectors, which are always in dearth of funding and have been suffering a lot for past two years due to financial meltdown. The measure to provide soft loan on long term basis will boost these companies not only financially but also technologically as they will be able to adopt new and efficient technologies for their production and services.

Factoring Services Mooted for SMEs

The Ministry of MSME has mooted the idea of allowing financial Factoring services for Micro and Small Medium Enterprises. It is in discussion with Finance Ministry on proposal for factoring services.

Factoring services are still niche domain in credit financing in India and is largely domain of a few international banks, though financial institutions like SIDBI along with nationalized banks have undertaken study of providing factoring services to various small and medium enterprises.

Factoring services involves raising capital through leveraging its accounts receivable (credit sales) to gain access to cash. The financial institution providing factoring services uses its own mechanism to provide upto 80% of accounts receivable to the client. But, such kind of services is yet to take-off for SMEs.

The ministry is examining the legal and regulatory aspects on the proposal, which would require legislative amendments in terms of taxation and financing.

The credit-deprived Small and Medium Enterprises (SMEs) are likely to benefit from the concept 'factoring services' as it would be an alternative window for SME financing in India. Dinesh Rai, Secretary, Ministry of MSME recently motioned that the Ministry of Financial Services are not too much in favor of legislative support. But, he feels that if there is no legislative support, it will be difficult for SME players to attain success in a big way.

India’s Growth Fails to Enthuse Deal Activity

M&A activity has failed to ignite this year in India and has performed miserably compared to last year. Despite all the hoopla about India being second fasted growing economy in the world, the M&A activity this year hasn’t even been 50% compared to last year. Considering the fact that 2008 was written off financially, performance should have been better this year, a decline is certainly surprising. Last year, for first three quarters $30bn was spend on M&A activity in India and in comparison this year during first three quarters the figures were meager $13bn. The average deal value also fell by half to $33mn from $67mn last year.

Foreign acquires only accounted for just $3.9bn of all such deals this year, which is only 30% of the total deal value. Again this is lower than last year’s share of foreign acquirers in total deal value, which stood at $15.7bn, five times the present value. Last year, Asian countries had dominated the list of biggest acquirers, four out of ten. This year the figure fell to three out of ten.

Mauritius did the biggest turnaround from being at bottom of top ten foreign acquirers to number one this year with $1.2bn acquisition followed by France, which accounted for a quarter of all outside deals. The United States came third with $379mn worth of acquisitions of Indian companies. Japan which was the biggest foreign acquirer last year slid five places to sixth position this year.

This year, Infrastructure sector was the common target sector for both Indian and foreign acquirers, telecommunication and Electric, Gas & Water sector were in top five target sector for both domestic and foreign acquirers. Pharma sector, which was the biggest target sector for both foreign and domestic acquirers, retained its position but only for foreign acquirers, who invested $1bn this year. Indian acquirers made most of the acquisitions in Oil & Gas sector.

Retail food chain was the pick of foreign acquirers it hardly featured on the acquisition radar of domestic acquirers, but foreign acquirers made investment of $100mn. Similarly, domestic acquirers made acquisition worth $677mn in Business Services sector which was almost disregarded by foreign acquirers.

Clueless Congress Wins Election

Congress Party, which few days back was sulking for allies in post-poll environment and predicting its own lack of numbers to form next government, surprised everyone with election results. Congress party won 201 seats much above its own expectations.

At the end of fifth phase of polling Congress General Secretary Rahul Gandhi had made admission of his party’s impending failure and his desperation to form government with support from his opposition parties, he even went on to name his Andhra Pradesh opponent Mr Naidu as his next possible ally just before Andhra Pradesh went to elections and Rahul Gandhi hadn’t expected that his party will gain even 29 seats ( that it held in 2004) against 33 that Congress Party won in this election.

Confusion was not only about one state, Congress Party was unsure of its own gambit in Uttar Pradesh, it hadn’t imagined its wildest dreams that the party would end up winning 22 seats, Congress had even second thought about its own ally but was quite sure of stupendous performance by party’s opponents be it Mayawati in UP or Jayalalitha in Tamil Nadu.

Congress is now as much surprised at its win in several states like Tamil Nadu, Andhra Pradesh and W Bengal and as it is at the success of Rahul Gandhi’s strategy of going alone in UP. Congress in not basking the glory it hadn’t dreamed for long time.

The Rise and Illusion of Political Kingmakers

This nation of kings/rajas was replaced by the democratically elected representatives but now new political class is emerging all over India. This election has brought up hordes of politicians who now claim to be kingmaker for next government. Every party chief now seem to have become kingmaker in next government or so they claim.

It all started when the communist block leaders claimed that it will be they who will decide who will form the next government and who will be the next prime minister. Since then almost everyday one or the other head of a political party has started making such claims. First, it was Lalu Yadav, who claimed himself as kingmaker for being leader of the Fourth Front and decider of who will be prime minister. Then, it was turn of BJD leader Navin Patnayak, who claimed that he will become kingmaker in next government and it could be any one of his favorites –Prakash Karat or Sharad Pawar could be next PM, hurling more names to all ready overcrowded list of wannabe PMs in this country.

Later, JD(S) chief Deve Gowda felt the need to be in space of kingmakers, though not in condition to play kingmaker himself, Mr. Gowda asserted that his party along with communist parties will play decisive role in next government. Following his footsteps Mr Vaiko perfectly timed his statement with Tamil Nadu reeling under Lankan tamil issue, Mr Vaiko claimed that Tamil Nadu will play decisive role in formation of next government and he would like Ms Jayalalitha to be next PM.

Almost every party, which is in governance or sulking loss of power has suddenly realised that they would be the next kingmaker in Indian politics none the less they fail to realise how narcissist they have become, who continuously fail to recognise not only country’s problem but also to get their politics right.

Alliances and Fronts for Fortune and Political Bargain

As India goes for polls, political parties are vying for electorate and even more for opponent political parities. Ever since alliances gained prominence in national governance, national parties have weakened. In last five years all the national parties, with exception of BSP, have lost their foothold and political might. This political development has made them increasingly dependent on regional parties.

This election, regional parties have gained a new prominence and notoriety in forming alliances some time multiple and confusing alliances. What is more atrocious about these alliances unlike the previous alliance formations like NDA/UPA, is that they have no agenda and political vision for this country nor do they intend to present the electorate with any vision document.

Parties don’t want to emphasize their development agenda as they are totally unsure of which political block they belong to, political parties such has BJD has created totally new political ideological dimension of “center-right-left” party where as NCP and RJD are toying with both right and left. Parties such as TDP, DMK,AIADMK, and numerous smaller parties with suffixes such as ‘lok dal’, “rastrawadi” and “samajwadi” don’t mind which party governs the nation if they get their political cut.

Then there is Communist block and BSP, who don’t mind anything about any political party if they are non-Congress and non-BJP. They have nothing do with the political ideology of such parties if they are willing to support their next government. No body seems to mind even if alliance partners are fighting each other unless their egos are satisfied. In some states BJP/Congress have to beg smaller parties to be allowed and accommodated with a few seats in such regions for promise of backing government at center.

This election almost every political party is worried about future of the party but not the country. Smaller regional parties have no vision for national development and they are not bothered either as their primary interest lies in the cabinet berth and sops for their region. None of them are interest in socio-economic plan of this country for next five years, which will benefit the nation as a whole and will percolate down to every state and region.

Will TechMahindra’s Satyam be Sundaram?

Tech Mahindra has finally emerged as new owner of Satyam, after competing with Satyam’s biggest strategic investor- L&T infotech. Tech Mahindra’s emergence as new owner of the beleaguered firm is good news for all the stakeholders of the firm, but how good is it for TechMahindra? The bidding details are yet to be out, which makes it unclear about how much liability TechMahindra is going to shoulder about Satyam’s past. But, as the bid price of other major bidders such as Rs 49 of L&T and Rs 20 of Cognizant suggests that TechMahindra has over-bid its rivals in its zeal to enter big league.

At the outset deals propels TechMahindra into league of big information technology companies with vast human resources and big clients. The huge clientele base of Satyam will raise the expertise that TechMahindra has, which at present is largely confined to telecom space at present. TechMahindra will also get it hands on vast and diverse human resource of Satyam therefore boosting its experience in handling large clients and big projects.

This vast human resource pool will also be TechMahindra’s challenge as most of its employees will see it as case of reverse merger and plump posting going into hands of Satyam employee because of their expertise. Similarly, some clients will be wary of new owners who have little experience in non-telecom based projects. How L&T plays with its stake in Satyam will also impact TechMahindra’s success on this deal.

Awaiting the Great Nano Flood of 2010

Potential consumer segments and its conversion to Nano market

Last year Bihar faced flood that it hadn’t seen for fifty years and no one had any clue as what measure would be required to curtail it. yesterday Tata motors launched it people car- nano, which will be available to public by mid this year. Government, public & private institutions seem to be unaware and under-prepared for the NANO flood, which will grip the nation 2010 onwards.

Though nano potential market in India has been sized by many investment firms, but as the product itself is evolutionary, so will evolve its customers. In a country where public transportation has been never been emphasized on the potential is enormous. India young population is filled with such potential, we at the potential buyers which will come into being once Nano hits the market.

Nano is most likely to emerge as second car of choice for the family, where even housewives would demand, from grocery shopping to mall shopping, Nano is going to emerge as the transporting alternative for shopping escapades of upper-class Indian housewives and middle-class families which have long been waiting for second cheap alternative.
A large number of collage going crowd which till now ply on two-wheeler ranging from Rs 50,000 to 1Lac. Soon, a large number of them would be turning towards Nano, this conversion would further flood not only the road but already cramped educational institutions, which may have to invest in parking lots than on labs.

Semi-urban areas are another two-wheeler bastion, which will get dismantled by introduction of Nano car. More are more people are likely to dump three-wheeler autos and expensive SUVs for tata nano, which for some-time will have smooth run in the narrow lanes of small cities. But,

Personal Computers Manufacturers Facing Tough Market Scenario

Personal Computer market in India is facing tough times as the Q3 FY09 sales have dropped by 19% and market is expected to remain muted with no growth for overall FY09.

Personal computer sales for the period Oct-Dec 2008 stood at 1.4mn units down from the 1.7mn units a year ago. Amongst the personal computers desktops witnessed decline of 15% while sales of notebooks declined by 30%. Desktops constitute 70% of the total personal computer market and remaining is held by notebooks. Branded desktops player constitute over 60% of 5.1mn unit desktop computer market in India.

Consumption of personal computers in Oct-Dec quarter was largely led by sectors such as Telecom, Banking, education and e-governance requirement of central and state governments. But, declining demand was witnessed from sectors such as Retail, IT and SME sectors.

As large percentage of hardware component is imported, rising rupee has deteriorated the margins of personal computer manufacturers. MNC biggies such as HP and Lenovo together with Indian major HCL constitute almost half of the desktop market in India, and are facing pricing issues.

Personal computer manufacturers are expected to face rough ride ahead as economic downturn has already affected the individual demand for personal computers, corporates on the other hand are trimming not only expenditure on IT hardware but due to low capex spending in the near future they have restrained the demand for personal computers.

Non-Planned Expenditure for a Successful Political Gambit

UPA is in full swing of unveiling pre-election sops to the people. It first went to declare Rs 30,000 crore tax deductions, which is loss to revenue receipts. Then government announced increased in dearness allowance of Central government employees. A few days before this announcement, UPA was playing parliamentary morality card for not having long-term mandate to fight recession in pre-election time frame.

This is the second time in the row that UPA government is dolling out sops which it claims is part of government’s economic agenda. But, at the same instance it fails to include all such economic programs under budget. Last year every one in the government played itself as pro-farmer but when it came to budgeting it such huge expense government just forgot it as part of budgetary expenditure. A lot of such programs were put under non-planned expenditure out of budgetary provision to make budget look good. This year to government has played the same card by announcing economic sops, which are not part of budget.

UPA Government wants common population to aware only of the populist economic measure but it does not want the people to know the cost, which it will have to pay it in future. It is smartly widening the budget deficit for which it does not want to be held accountable in future.

A few weeks after the budget announcement, government has forgotten its parliamentary principals to announce massive plans to largely rope in voters then to effectively tackle the grim economic scenario. Government’s bet on cutting may not be entirely fruitful if industry does not pass on this cut to the consumers, which has often happened in the past. Pre-election sops are not always successful; a lot depends on underlying economic scenario.

ADB and S&P Stretches Govt on Either Side on Economic Recovery of India

Manmonhan Singh team which has been facing unrelenting question about country’s financial health received a shot in arm from one of the major financial institutions, ADB, about country financial condition. ADB described India’s economy as one with resilience amid global economic downturn. This will help government to ward-off questions relating to economy which government is finding hard to explain.

On the other hand, leading financial rating firm S&P has concluded that Indian economy will grow somewhere between 5.8% and 6.3% in 2009. This is much below the continuous claims of 7% growth by the government. S&P also forecasted that India will be on path of recovery by September this year, if economic scenario doesn’t deteriorate further. This is beyond the expectation and mark set by the government which wanted to reap the benefit of economic recovery during parliamentary polls this year.

Government is facing increasing number of questions for its economic mismanagement. Though, it expects last year’s farm wavier and pay-commission hike, which was not accounted in budget, to go down well with voters. But, opposition is already making case for financial negligence and with economic recovery would not happen as timed by the government; it would be tough for government to use this bait for voters.

Easy Cash Turns Killers for Indian Retail

The retail boom has come to grinding halt in India. Just a few months back Reliance had announced restructuring of its retail business. Then Subhiksha problem appeared, it was unable to finance its operations. Now, Vishal retail has run into trouble. The company is also facing liquidity crunch and is shutting down a large number of shops and cutting its employee numbers to stay afloat.

Easy money had made it possible for Indian retail companies to go for expansion mode straight from incubation. This had become corporate philosophy for expansion programs of major retailing companies. Every company in hurried desire to gain the first mover advantage had indulged in aggressive expansion on borrowed money. Once the liquidity problem stated becoming apparent in Indian market, these companies started facing cash trouble to run their operations. Easy availability of cash had led to more companies becoming overtly dependent on borrowed money to run their operations.

Subhiskha, like other retail companies over-ambitiously expanded everywhere leaving the company totally starved for cash. They didn’t bother either about its cash flows or cash reserves. This left company bewildered about its future and how to manage the current operations. Vishal Retail another darling of markets, followed similar path of growth and couldn’t see the situation getting out of hands.

Easy availability of cash in the market made retail companies short sighted with assumptions that markets would continue to grown and cash would remain available. This hypothetical assumption got translated into the business model, for which companies are paying today.

Will Political Connection Save Satyam & Mr Raju?

SC has finally directed Andhra police to allow SEBI to question Ramlinga Raju. Andhra Police has been scuttling SEBI move to question Mr Raju for almost a month. Mr Raju’s deep connection with both the ruling class and opposition has given him enough time to avoid him falling into the hands of SEBI. Political clout has ensured Mr Raju a breather time, also he is under arrest on complaint filed by a shareholder. Mr Raju has been using this case to avoid falling into hands of central agencies. Andhra Police had raided and seized documents from Satyam’s office. No one really knows what is going to happen to the documents seized. Though, it would be really difficult for Rajus to destroy evidence of money siphoning between Satyam and other Raju owned firms.

Involvement of several Central agencies and state police has further complicated the issue. Several agencies, independent authorities and government ministries are looking into the case, which requires sharing of evidences. India is classic case of right hand not knowing left hand. Considering the fact that Mr Raju would use his political connections to prevent such evidences getting shared by different agencies, chances are there that some cases against him will be weaken in the court of law, the best place for our politicians and Mr Raju himself to absolve himself of some crimes. But, what is yet to be seen as how Mr Raju would evade the US watchdog – SEC.

Irda Allows Overseas Operations of Life Insurance Companies

But keeps hands cuffed from full fledged operations

Irda (Insurance Regulatory & Development Authority) has set new guidelines for opening up of overseas liaison offices by insurance companies. Only those companies, which will meet the guidelines such as solvency rate of 1.5, good financial condition and more, will be allowed to open such liaison offices.

But, Irda has laid many restrictions on insurance companies. Such companies are prohibited from contracting any liability overseas, no agent would be permitted for conducting business hence no such commission would be allowed. Further, such companies would be required to provide information pertaining to their liaison offices, details of complaints and any expenditure incurred, regularly on quarterly basis.

Though Irda has allowed Indian insurance companies to open offices overseas but it has not fulfilled the wishes of insurance companies which were more interested in increasing their presence globally and to raise funds for their companies.