Milan/Mumbai/Dubai/London, November 18
Aston Martin stands at the centre of an international takeover battle after Mahindra and Mahindra trumped an Italian bid for half of the iconic British luxury carmaker.

Italian private equity fund Investindustrial reached an agreement on Thursday with the owner, Kuwaiti investment house Investment Dar, but Mahindra and Mahindra made a higher offer on Friday, leaving the fate of the 98-year-old icon of British motor engineering hanging in the balance, sources familiar with the discussions said.

Aston Martin, founded by Lionel Martin and Robert Bamford in London in 1913, makes the cars immortalized by James Bond films down the decades in Gaydon, Warwickshire, the heartland of England's early 20th century motor manufacturing heyday.

The company was sold in 2007 by US-based Ford Motor Co for 479 million pounds sterling, to Kuwait's Investment Dar and another Kuwait fund, Adeem Investment Co.

The consortium was fronted by David Richards —former Formula 1 Benetton and BAR racing boss, who remains chairman.

Aston Martin Lagonda Ltd, with headquarters in Gaydon, Warwickshire, England, designs, manufactures and distributes luxury sports cars. It sells almost 15 percent of its DB9, Vanquish and other models in Asia. Wealthy Chinese buyers snapped up 110 cars in 2010 and sales are expected to have multliplied fivefold to over 500 this year.

"Talks are continuing through the weekend," said one source, who said Investindustrial had bid between 200 million and 250 million pounds for the stake, and is confident of winning the race because it sees its proposal as "technically" superior, including a technical partnership deal with Daimler AG's Mercedes.

The same source said manufacturing would stay at Gaydon under the Italian proposal.

A spokesman for Investment Dar, which went to the market for a $1 billion debt restructuring last year, was not immediately available for comment, nor could Mahindra be reached for comment. Investindustrial declined comment.

Investindustrial, owned by Italy's Bonomi family, is not new to luxury motor brands. In 2006, it bought Italian motorcycle maker Ducati and sold it for about 860 million euros last April to Volkswagen's Audi division.

Mahindra & Mahindra is the world number one tractor make. It also makes more sport utlitiy vehicles than any other Indian motor manufacturer, and controls South Korean car maker Ssangyong Motor Co Ltd.

A second source familiar with the process said Mahindra was keen to access the Aston Martin technology to upgrade its existing vehicle platform.

Another Indian motor company, Tata Motor, owns British luxury manufacturer Jaguar Land Rover, and has had even more success than Aston Martin in China, now Jaguar Land Rover's biggest market. — Reuters

New Delhi, November 25
Stock markets are likely to remain volatile this week as investor sentiment will be guided by the ongoing Winter session of Parliament as they track the progress on economic reforms, experts said.

The week will see truncated trading as stock markets will remain closed on Wednesday on account of a local holiday. Besides, the expiry of November derivative contracts on Thursday will also keep stocks volatile, experts said.

"The winter session of Parliament has begun but no business was transacted in the first two days, raising concerns over the fate of various Bills which are proposed to be presented and passed during the session," said Dipen Shah, head of PCG research at Kotak Securities.

Analysts also said global market developments will be key for domestic stock market. "Investors will also track the GDP data for the second quarter which is due on Nov 30," said Alex Mathews, Head Research, Geojit BNP Paribas Financial Services. — PTI

Mumbai/New Delhi, Nov 25
The slowing Indian economy is not responding to shock therapy. The stock market rally that began in September after the government unveiled its high-decibel reforms programme is fizzling out. The BSE Sensex failed this month to surpass its October peak — a bearish sign for chart watchers. The rupee has weakened 7% since October 4.

In some ways, the Indian selloff mirrors the fate of risky securities globally. The MSCI Emerging Markets Index is now lower than when the Federal Reserve launched its third round of quantitative easing on September 13.

Fears of untimely fiscal cutbacks in the US and a deepening of the sclerosis in the eurozone are weighing on sentiment. But skittish investors are only one part of the story. A much bigger challenge for India is the deteriorating financial cycle. That's hardly unusual. Financial downturns tend to last several years, while a typical business cycle recession tends to be over in about 12 months, according to a study by Bank for International Settlements researchers.

In a bank-dominated financial system like India's, the lending and borrowing cycle is of particular relevance to investors. The benchmark Nifty equity index more than quadrupled during the credit boom that began in late 2003 and lasted through early 2008. It is currently trading 11% below its Jan 2008 high.

By pruning fuel subsidies, and announcing its decision to open up retail, aviation and insurance industries to greater foreign participation, the government has stoked expectations of an investment-led revival in an economy that grew as little as 5.5% in the June quarter, its worst fiscal first-quarter performance in a decade.

But recent economic data from New Delhi belie expectations of a quick recovery. Capital goods production, which has been lacklustre for almost a year now, collapsed in September even as the country's trade deficit widened to a staggering 14% of GDP on an annualized basis last month. With consumer prices rising about 10% year-on-year in October, investors are not expecting more than a couple of quarter-percentage-point interest rate cuts in H1 of next year.

A token reduction in the central bank's policy rate of 8% will have some impact on borrowing decisions; but it will be small and come with a considerable lag. Meanwhile, more existing bank loans will go bad. By March next year, 10 percent or more of Indian lenders' loan books will consist of either non-performing or restructured debt, according to Fitch Ratings. It isn't easy to revive investments when lenders, especially state-run banks, are struggling to cope with past mistakes.

Borrowers, too, are in dire straits. The most intrepid investors between 2004 and 2007 were homegrown entrepreneurs and business families. They behaved very differently from government-owned firms and multinationals by gallantly expanding into industries about which they knew little. These "growth champions" are today among the most indebted Indian businesses, according to research by brokerage firm Jefferies.

One obvious solution is for the government to inject fresh capital into state-run banks. The $3 billion that the government has set aside for this purpose in this year's federal budget is inadequate. Just one debtor — Kingfisher Airlines — owes lenders more than $1 billion. If the grounded carrier doesn't fly again, very little of this amount may be recovered.

As the controlling shareholder, the government should do much more to bolster the balance sheets of state banks. But it is also cash-strapped.

Chidambaram is trying a different strategy to end the credit downturn. He has asked the central bank to start giving out new banking licences quickly. Tactically, it is a smart ploy. New private lenders will bring in fresh equity and give the jaded banking system an additional loss-absorbing cushion.

But the RBI, which hasn't issued any new banking licences in 10 years, is holding up the finance ministry's plan, and for good reasons.

Pending an infusion of new capital into the banking system, the government is seeking to counter the cyclical downturn by cajoling cash-rich state-owned firms to speed up investments. A better strategy would be for the government to curtail its own consumption expenditure and reduce its borrowings. More household savings would then be freed up for corporate investments, and not just by state-controlled companies. But fiscal consolidation in a slowing economy has to be gradual, lest it makes the short-term growth challenge worse.

It's already been about five years since the end of the last big credit boom in India. On present evidence, seven lean years is not a far-fetched proposition. — Reuters

New Delhi, November 25
Capital markets regulator Securities & Exchange Board of India has begun prosecution proceedings against two Sahara firms and their top officials, while accusing them of failing to provide documents related to three crore investors as per a Supreme Court order.

The prosecution proceedings have been launched against Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHCIL), as also their promoter/directors — Ashok Roy Choudhary, Ravi Shankar Dubey, Vandana Bhargava and Subrata Roy Sahara, SEBI said.

The market regulator further said that "as Saharas did not submit the documents as per the order dated August 31, 2012 of the Supreme Court, Sebi has filed contempt application before the Supreme Court."

While the Sahara Group spokesperson did not offer any comment on the Sebi move, the companies last week approached Securities Appellate Tribunal seeking time till Jan 31, 2013 for submission of documents.

The Supreme Court had asked SIRECL and SHCIL to refund an estimated Rs 24,000 crore collected from about three crore investors, through red herring prospectuses (documents for raising public funds) in March 2008 and October 2009, along with 15% annual interest to SEBI by Nov 30, 2012.

The Sahara firms were also asked to furnish within ten days all documents in their custody, particularly the application forms submitted by subscribers, the approval and allotment of bids and all other documents to SEBI so as to enable it to ascertain the genuineness of the subscribers as well as the amounts deposited. The Supreme Court had also asked SEBI to identify the subscribers who had invested the money. — PTI

India’s export target for this year will be missed and the swelling trade deficit will have repercussions for employment and put pressure on the rupee, says Federation of Indian Export Organizations (FIEO) president, M. Rafeeque Ahmed. In an interview to Sanjeev Sharma, Ahmed talks about the trade deficit crossing US $200 billion, how slow manufacturing activity is hurting exports and the need to cut transaction costs to make exports more competitive.

Q: How do you view the slump in exports for the last few months?

A: The slump in exports have derailed our short-term target of reaching US $500 billion exports by fiscal 2013-14. Prior to the current slowdown, we were cruising well and with little more push may have reached the target. However, the continuous decline in exports in last seven months of the current fiscal, means that we would not be touching even close to our target of $350 billion fixed for FY2012-13. The slump in exports will swell the trade deficit, impact employment creation and will put pressure on the Indian rupee as well.

Q: What are the main reasons for this trend?

A: The main reason for the decline is obviously contraction in global demand as global trade is expected to grow by about 2.7 per cent in 2012. Most countries with a few exceptions like China have suffered a setback in exports. If we analyze those countries that did well in exports, the list will reflect those that exhibited growth in industrial production. China’s Index of Industrial Production figure showed 9.2 per cent growth in Sept and export grew by 9.9% while robust growth of 9.6% in Oct pushed exports to 11%. In India September IIP numbers were down by 0.4%. IIP numbers for most of the months in this fiscal were discouraging. Therefore deceleration in manufacturing also contributed sizably to declining exports.

Q: The trade deficit is ballooning and putting pressure on the overall economy. What are the ways to tackle this?

A: India is a growing economy and despite slowdown in GDP growth, we are still clocking over 6.5 per cent, which is no mean achievement. A growing economy will see its imports also increase significantly. Therefore, only way to manage trade deficit is to increase exports to offset the deficit. If we look at profile of imports, oil would be the major culprit but we have little option to contain its imports. However, if the oil prices remain on an average at $100 per barrel, we may see significant value wise decline in imports. Gold and silver imports are already down and if the present trend continues, we may have roughly $30 billion saving from gold and silver imports. Expeditious allocation of coal blocks may reduce dependence on coal imports. However, going by the present trend, I am apprehensive that the trade deficit may cross $200 billion for the current fiscal.

Q: What can be done to incentivize exports?

A: Indian exports do not have demand side issues and most of the constraints are on the supply side. The government’s efforts should be focused to address supply side constraints on a long term and sustainable basis. This would mean improving infrastructure for exports including power, roads, ports, airports, cold chain facilities, etc. FIEO has done a study suggesting an investment of $537 billion in export related infrastructure only by 2020 if we have to achieve our long-term target of doubling our share in world trade. High transaction costs are equally worrisome for exports. The department of commerce’s report put the same between 8-10 per cent. If we are able to address the same by 50 per cent, we can provide $12-15 billion to the export sector without any cost to the exchequer, assuming exports remain at $300 billion. The government should provide EDI (electronic data interchange) connectivity amongst all agencies and expedite single window facility for exim transactions. With a view to incentivize exports, the government should provide credit at competitive rates. Most of the competing countries provide export credit at less than 6 per cent. Besides these, the government should also provide export credit at 7 per cent through steeper Interest subvention across all sectors of exports.

Q: There has been talk of diversification of the export basket to reduce reliance on developed economies. Has it worked?

A: The diversification strategy was adopted in late 1990s but the real push came in the current foreign trade policy by adoption of a focus market scheme and a market linked focus product scheme. We should also realize that diversification is a long drawn process over a period of time. This requires study of the market, identification of buyers, understanding of logistics, and country’s economic engagement with the rest of the world. Once the government puts its focus on some emerging markets, it takes little time for exporters to actually start exports to such markets. However, if we compare the data for exports over a period of ten years, the diversification policy has yielded the desired results. Advanced economies have vacated place for the new economies. The share of the European Union and North America has gone down while that of Latin America, Africa, the Gulf countries and the ASEAN (Association of Southeast Asian Nations) region has gone up.

Q: What about meeting the export target for this year?

A: Going by the export trend for the first seven months, it is a foregone conclusion that we would not be achieving the export target fixed for the current fiscal. According to our estimate, we may end up with exports of $300-320 billion by 2012-13. While the United States has improved in last six months, the reports from the European Union is still depressing and we may see further trouble in the EU in 2013 as well.

The festival and gifting season is just round the corner. From household utilities, clothes to gold jewellery, people buy a range of gifts for their loved ones. While material gifts like these can give happiness in the short term, the gift of a financially secure future can go a long way in ensuring peace of mind for you as well as your family. So, this festive season gift your family a better tomorrow by building a comprehensive insurance portfolio for yourself and secure them against the eventualities of life.

The cost of education has been going up steadily and it is becoming increasingly beyond reach for people with limited means. As the government has made it a priority to promote education in India, it has taken several steps which can take it a long way. One such measure is the provisions under the income tax laws allowing a rebate of up to Rs 100,000 towards tuition fees paid to recognized educational institutions in India by parents for education of their two children. Another measure under the income tax laws, in addition to tax rebates for tuition fees is rebates in respect of interest paid on education loans taken for yourself or for your relatives.