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To k n o w t h a t w e k n o w w h a t w e k n o w, a n d t o k n o w t h a t w e d o n o t k n o w w h a t w e
d o n o t k n o w, t h a t i s t r u e k n o w l e d g e . - Copernicus

VOL. 1 ISSUE 37 Weekly

Change
Keeping the growth story alive: 03rd May, 2008

By keeping the repo and the reverse repo

17,611  485
rates unchanged and increasing the cash
reserve ratio by 25 bps, RBI governor Y V 5,228  116
Reddy has done what is right in the current
situation—to control inflation he is drying up
the excess liquidity from the system. A 25
bps CRR hike implies a mop out of about Rs Inflation rises to 7.57 per cent for the week ended
9000 cr liquidity from the system. Monetary April 19, from 7.33 per cent in the previous week.
policy is never useful to contain inflation It is at a 42-month high.
arising out of supply side disruptions; fiscal
policy measures are more appropriate tool.
markets were expecting a hike in the policy
Under these circumstances, the governor did
rate. Despite a series of CRR hikes, liquid-
what is the best for the economy. He does
ity is comfortable. This will drive the growth,
not want to disrupt growth, but inflation
although at a slower rate. Credit growth
control is his prime agenda.
has moderated to 21%, which is in line with
RBI’s target of 20%. However, credit-deposit
Accordingly, the RBI is expecting an 8% to
ratio of banks would fall, as the CRR hike
8.5% GDP growth and targets inflation at
will leave less balances for banks to lend.
5.5%. Both look aggressive, but in line with
This will lead to lower net interest income
his action of keeping a status quo on policy
and spread, leading to lower profitability of
rates, he is sending a strong signal to the
banks over the medium term.
banking system not to increase the interest
rate.
Deposit costs also remain at fairly high lev-
els. We expect banks to roll back rate cuts
The governor has also emphasized on the
that they had announced in the last quarter,
quality of growth by directing banks to be
easing some pressure on margins. Banks
more prudent and review exposures to sen-
may also increase their lending rates to take
sitive sectors and off-balance sheet items.
care of spreads. We have seen that ICICI
RBI has decreased risk weightage for hous-
Bank has increased rates on auto loans and
ing loans between Rs 20 lakh and Rs30 lakh
other private banks are planning to follow
to 50%. This is a big positive for banks,
suit. cont...
as it would improve their capital adequacy
ratio. Projecting a strong 16.5% to 17%

Do you Know?
expansion of M3 and a 20% non-food credit
growth, the governor has indicated a strong
economic growth for FY09, allaying fears in
some section about an impending slowdown
in the economy. RBI has also shown firm The driest city in the world is
resolve to resort to open market operations Aswan, Egypt, which receives
to mop up dollars, thus signaling against an an average of 0.02 inches of
appreciation of currency going forward. rain per year.
RBI has surprised the equity market, as the
 Keeping the growth story alive: cont...

In summary, we feel that the monetary policy announcements will be cheered by the mar-
ket. It is a prudent policy directive, which attempts to keep the economic growth momentum
alive, but also keeps the global perspective in mind. With US rates cut on Wednesday’s Fed
meeting, the RBI treaded the path of caution by not increasing the policy rate in India now—
postponing the decision to a later date, if the situation warrants.

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LOSS
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10th April HCC 124.00 140 114 134 136 -
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10th April HCL 260.00 281 231 277 294 1 - 2 Wks
10th April ISPAT 33.00 45 - 36 35.20 2 - 3 Wks
21st April DISH TV 60 100 - - 58.40
21st April PRAJ 157 176 148 176 205.85 SAME DAY
21st April EDUCOMP 4036 4200 4007 4200 3997 3 DAYS
23rd April NIIT 139 165/180 121 - 151 2-3WKS
24th April APTECH 257/258 275/291 251 - 264 1MTH
29th April HINDALCO 191 205 188 199 185.85
The above mentioned investment were suggested by us during the last week. We are also currently following
those scripts in PMS maintanced by us. Editor

Which industrial
house has pledged to maintain the Taj Mahal?

a. Tata Group b. Reliance Group c. Birla Group

T i c k l e Yo u r B r a i n
 Alcohol production increasing in India:
News India is one of the largest producers of alcohol in the world
bite and there has been a steady increase in its production over
the last 15 years, according to fresh statistics.
India is a dominant producer of alcohol in the South-East
Asian region with 65 per cent of the total share and contrib-
utes to around seven per cent of the total alcohol beverage imports into the region.
More than two-thirds of the total beverage alcohol consumption within the region is
in India, according to figures in the newly-compiled ‘Alcohol Atlas of India’. There has been a steady
increase in the production of alcohol in the country, with the production doubling from 887.2 million
litres in 1992- 93 to 1,654 million litres in 1999-2000 and was expected to treble to 2,300 million
litres by 2007-08.

The prevalence of alcohol use is still low in India as per some studies done across the country. The
consumption is two litres per person per year. However, though the overall consumption is low, pat-
terns of alcohol consumption vary throughout the country.

Punjab, Andhra Pradesh, Goa and Northeastern states have much higher proportion of alcohol con-
sumption in the country. Women tend to drink more in Assam, Arunachal Pradesh, Sikkim in the North
East and also Madhya Pradesh, Chhattisgarh, Orissa and Andhra Pradesh.

Reliance Industries to enter solar energy market:

It is a new sunrise at the Reliance empire as the fuel to food conglomerate led by Mukesh Ambani
moves into solar energy.Reliance Industries Ltd (RIL), India’s biggest listed firm, plans an invest-
ment of $25 billion over the next five years in solar energy acquisitions and greenfield projects for
photovoltaic cells.
Contrary to popular belief, Reliance’s recent investment in semiconductor fabrication plants is not
for computer chips but mainly for solar panels. RIL has submitted the proposal for setting up two
units with a total investment of Rs 30,000 crore.
One unit will be for manufacture of semiconductor wafer fab with assembly, test, mark and pack-
aging facility at an investment of Rs 18,000 crore. RIL is in talks with states of Maharastra, Andhra Pradesh and Haryana to
set up a unit.
Another solar project will be located in Jamnagar with an investment of about Rs11,000 crore.
Reliance is already experimenting with a pilot project in Maharashtra where it is electrifying 84 villages with solar power.
Sunlight may be free but producing solar energy is an expensive business with a unit cost at Rs 12-15, which is why
RIL has sought a subsidy of Rs 3,394.5 crore for the semiconductor fab unit and Rs 2,326.2 crore for the solar project.
At the current pace of 20 per cent annual growth, experts expect India’s solar sector to emerge as the fourth largest
generator of solar energy after Germany, Japan and China in the coming years.

Rel Comm to enter 8 GSM circles in few weeks:

Anil Ambani, Chairman, Reliance Communications, said that his company’s shareholder equity or net-
worth crossed Rs 20,000 crore, which is more then USD 4.5 billion. Giving an out-
look on his company’s debt-equity ratio, as well as its borrowing capacity, he said,
“Our net debt to equity reduces further to just 0.07:1. Given our current balance
sheet strength, we can potentially borrow Rs 20,000 crore on a conservative basis,
or close to USD 5 billion and still maintain a debt-equity ratio of 1:1 for a company
growing as rapidly as Reliance Communication.
Ambani says that he expected the telecom service major’s capex to go up
from the current figures. He said, “Our capex for the year ended March 2007 is
now expected to cross USD 1.75 billion, which is about Rs 1000 crore, or USD
200 million, more than our capex guidance for the current fiscal.” The figure includes the network
expansion that the company is working on right now at eight GSM circles and should be completed
in the next few weeks. The company will be investing USD 2.5 billion, or roughly Rs 11,000 crore in
the coming financial year ending March 2008. The move, he said will support the
expansion of the company’s India focused businesses.
 Mukesh Ambani’s $2 bn home
world’s most expensive: Forbes
The 27-storey skyscraper being built in Mumbai by Mukesh Ambani, the richest per-
son in India, could be the world’s largest and costliest home with a price- tag nearing two
billion dollar, according to Forbes magazine.
“When the Ambani residence is finished in January, completing a four-year process, it
will be 550 feet high with 4,00,000 square feet of interior space,” Forbes said in a report on
its website.
Earlier in March, Mukesh Ambani was ranked as the fifth richest person in the world
with a net worth of 43 billion dollars by the Forbes magazine in its annual list of world’s
wealthiest billionaires. While Lakshmi Mittal, who is an Indian citizen was ranked higher at
fourth, he is a British resident. Among resident Indians, Mukesh was ranked at top.
“The only remotely comparable high-rise property currently on the market is the 70
million dollar triplex penthouse at the Pierre Hotel in New York, designed to resemble a
French chateau, and climbing 525 feet in the air,” Forbes said in its report titled, “Inside The World’s First
Billion-Dollar Home.”
Mukesh Ambani heads India’s most valuable firm Reliance Industries, an oil and petrochemicals giant.
“Like many families with the means to do so, the Ambanis wanted to build a custom home. They con-
sulted with architecture firms Perkins + Will and Hirsch Bedner Associates, the designers behind the Manda-
rin Oriental, based in Dallas and Los Angeles, respectively,” the report said.
“Plans were then drawn up for what will be the world’s largest and most expensive home: a 27-story
skyscraper in downtown Mumbai with a cost nearing 2 billion dollars.”
According to Forbes, Mukesh, along with his wife Nita Ambani and three children, currently live in a
22-story Mumbai tower.
The report further noted that the cost for the Ambani residence, called Antilla whose shape is based on
Vaastu, would be more than a hotel or high-rise of similar size because of its custom measurements and fit-
tings.
While a hotel or condominium has a common layout, replicated on every floor, and uses the same mate-
rials throughout the building, the Ambanis’ home has no two alike in either plans or materials used, it said.
“At the request of Nita Ambani, say the designers, if a metal, wood or crystal is part of the ninth-floor
design, it shouldn’t be used on the eleventh floor, for example. The idea is to blend styles and architectural ele-
ments so spaces give the feel of consistency, but without repetition,” it said.
“Atop six stories of parking lots, Antilla’s living quarters begin at a lobby with nine elevators, as well as
several storage rooms and lounges. Down dual stairways with silver-covered railings is a
large ballroom with 80 per cent of its ceiling covered in crystal chandeliers.”
The report said that Ambanis plan to use the residence occasionally for corporate
entertainment also and they want its interiors to have a “distinctly Indian” look and feel.
“The top floors of entertaining space, where Ambani plans to host business guests
(or just relax) offer panoramic views of the Arabian Sea... For more temperate days, the
family will enjoy a four-story open garden,” it noted.

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