India Eco Summit: Wipro eyes acquisition in BPO space

The country's third largest software exporter, Wipro Technologies, today said it is looking for an acquisition in the BPO space, which is likely to be the next engine of growth for the IT industry.

"The economy has improved. The IT demand situation is certainly improving. The deal pipeline is good, the demand environment is building up," Wipro Technologies Joint CEO Suresh Vaswani told reporters on the sidelines of the India Economic Summit.

He added the company is looking at acquisitions in the BPO space."BPO has strong performance... BPO will drive growth for the IT industry. Acquisition is part of our strategy we keep looking at it, he said."

The company is also bullish about the current quarter."We have given a fairly strong guidance for this quarter which is substantially more than what we gave last quarter," Vaswani said, adding, all sectors are likely to grow, including the Banking, Financial Services and Insurance.

About the pricing pressure faced by the company, he said customers are not looking at price discounts but are looking at substantial change in cost structure.

"We are doing more fixed price projects which now form 40 per cent of the contracts we have. The fixed price models gives both our customers and us a win-win situation."

Summer placements at IIMs leave winter behind

Return of banking and financial sector companies for summer internships may improve final placements too at the campuses.

The summer placement process, which gives first-year post-graduate students an opportunity to spend nearly two months during summer 2010 with companies that make them offers, has given the Indian Institutes of Managements (IIMs) much cause to cheer.

While all the IIMs maintain that happy days have returned, the placements scenario is still not up to the 2007 levels when growth was at its peak. However, unlike in 2008 — when companies left students out in the cold due to the Lehman Brothers collapse and the economic slowdown that followed (the IIMs had also extended the closing dates for placements last year) — it’s a different story this year.

While IIM Ahmedabad concluded its summer placement process in record four days this year, the relatively smaller IIM Kozhikode too wrapped up the process in eight days with the highest stipend offer at Rs 1 lakh. Other IIMs started the process later, and are expected to close the season within a week.

Following the crash of global banking and financial sectors, the IIMs, last year, focused on tech service firms to explore job opportunities. This year, the IIMs have all their regular information technology (IT) and IT consulting firms returning. Also, this year’s surprise is start-ups and IIMs have some non-government-organisations (NGOs) and sports-based companies showing interest.

IIM-Kozhikode (IIM-K) too has a lot of new sectors in micro-finance and NGOs. “These can add up to nearly 15 per cent of the placements,” said Rohan Jaikishen, placement committee member, IIM-K. IIM-Lucknow placements chairman, R L Raina, says: “The offers are expected to rise. This is a sign of economic growth.”

Students of batch 2009-11 of IIM Ahmedabad (IIM-A) heaved a sigh of relief after over 150 of a total of 315 students were placed for the summers by the end of second day. Marketing was a hot favourite with some of the most sought after recruiters being Diageo (of Smirnoff, Johnnie Walker and Guinness fame), Nokia and Coca Cola. Finance remained the top pick with 44 per cent of IIM-A students opting for roles in finance, investment banking, private equity, corporate banking and treasury roles. Marketing roles grabbed an 18 per cent share with positions in sales and marketing management, branding, business development and marketing research. Consulting and general management were the next two preferred domains followed by IT, at 11, 18 and 9 per cent, respectively.

IIM Kozhikode (IIMK), on the other hand, wrapped up 100 per cent summer placements for its 2009-11 batch in eight days with 120 firms making offers to the 309-strong batch. Global biggies such as Arthur D Little, KPMG, Hewitt, JP Morgan Chase, Citigroup, HSBC, Standard Chartered Bank, Deutsche Bank, HUL, Pepsico and Colgate Palmolive participated in the placements. The highest stipend offered this year was over Rs 100,000 inclusive of perks and allowances. “The participation of new recruiters in the emerging fields of media, sports management, hospitality and NGOs is indicative that our students are also willing to explore new avenues,” said Keyoor Purani, chairperson placements, IIM-K.

As many as 40 firms which include Biocon, Astra Zeneca, Singapore-based Tolaram group and Dubai-based Gargash Insurance recruited summer interns at IIM-K for the first time.

The story at IIM-Calcutta is no different. Around 90 students were placed on day 1. IIM-C has 408 students to place this year, around 100 more than last two years. Morgan Stanley recruited from IIM-C this year exclusively for its London desk. The absence of Lehman Brothers was no longer felt, with Nomura the firm that took over Lehman making five offers to the students. The banks offered profiles in investment banking divisions, global markets, equity research, sales and corporate banking.

Summer placement got underway at IIM-B on Friday with 15-20 companies reportedly on the campus on day one of slot zero, the most coveted slot of placement. Continuing the trend witnessed in other business schools, investment banks and consultancies formed the bulk of recruiters offering both domestic and international offers. Sapna Agarwal, head of career development services at IIM Bangalore (IIM-B), said, “Initially, the institute was apprehensive about placing 350 students this year as compared to 267 last year but the response of recruiters has been very encouraging.”

While there’s no official comment, average stipends are understood to be marginally higher than last year as are the number of offers. Recruiters like RBS, McKinsey, Goldman Sachs, BCG, UBS etc are expected to visit the campus.

Last year, 85 students from IIM-B took up international offers among the highest across the IIMs and the number is expected to be high this year too. At IIM-Indore too, summer placements are underway and the institute will reveal details only after the completion of the process.

Freddie Mac loses $6.3B in 3Q

WASHINGTON – Freddie Mac's losses narrowed to $6.3 billion in the third quarter, but the government-controlled mortgage finance company didn't need a federal cash infusion.

The McLean, Va.-based company has received about $51 billion since it was seized by federal regulators in September 2008, but said it didn't need any more money for the second-straight quarter.

"We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of the country," the company's new chief executive, Charles Haldeman, said in a statement Friday.

However, he cautioned, high unemployment and rising foreclosures will continue to "impede a full recovery," and the company may need more money from the Treasury Department to stay afloat. The government reported Friday that the unemployment rate hit 10.2 percent, the highest since early 1983.

Freddie Mac's quarterly loss works out to $1.94 per share and includes $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $25.3 billion, or $19.44 per share, in the year-ago period.

The results were driven by $7.6 billion in credit losses as the company continued to build its reserves for bad mortgages. About 3.3 percent of Freddie Mac's borrowers are at least three payments behind on their mortgages, more than double the rate last year.

The problems at Freddie Mac and its sibling Fannie Mae have proven far worse than most experts had foreseen. On Thursday, Fannie Mae asked the government for another $15 billion, bringing the tab for rescuing both companies to about $111 billion.

Fannie Mae and Freddie Mac play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

The two companies lowered their standards for borrowers during the real estate boom and are reeling from the consequences. High-risk loans, now defaulting at a record pace, have come back to haunt the companies. Worse still, the recession is causing formerly reliable homeowners with good credit to default.

Madras bourse seals trade access deal with NSE

Such pacts needed for regional exchanges to survive, says Bhave
The Madras Stock Exchange (MSE) is setting a target of 500 members by 2011, backed by the strategic tie-up it entered into with the National Stock Exchange (NSE) today.
According to the tie-up, the MSE members will be allowed to trade on the NSE platform, in cash and F&O segments, by issuing MSE contract notes.
The capital adequacy norms of the members will be placed by MSE, whereas the exposure and margining will be done in compliance with the rules of NSE.
For the first day, shares of 10 companies were allowed to trade on the NSE platform. Gradually, about half the companies listed in MSE will be allowed access to the trading platform of NSE, according to R K Pillai, executive director, MSE.
Speaking to reporters after the launch of the tie-up, S Venkateswaran, director, MSE, said the Madras Stock Exchange also plans to set up
its own trading platform within the next three years. “We would also make available more products for trading, including currency futures and interest trade futures. But we will be increasing the SME (small and medium enterprises’ participation in the bourse”, he added.
Speaking at the launch, C B Bhave, chairman of the Securities and Exchange Board of India (Sebi), said improvements in technology have disrupted the business model of regional stock exchanges and such strategic tie-ups are the way forward for the 20 RSEs in the country.
He also said the market regulator will be investigating the non-availability of refund for investors after public issues of companies.
“We should propagate a mechanism where an investor’s money is not taken out of his account till he is told how much shares will be allotted to him,” he said.
Running accounts that are kept between brokers and investors are also hurting the investors and Sebi will try to bring out solutions, he said.

Serving up a 'Super Ace'

Tata Motors’ decision to promote its mini-truck as an FMCG brand has worked.

The 1.5x2.2 meter area where Ravindra Salunkhe sells vegetables and fruits at the upmarket Cuffe Parade in South Mumbai may look like just another case of an unauthorised hawker occupying prime space.

But the mobile shop is actually a Tata Motors Ace, the company’s sub-1 tonne cargo vehicle.

Salunkhe, who hails from Kolhapur, borrowed Rs 1 lakh from his brother and the balance from ICICI Bank to purchase the Ace four years back. He pays an equated monthly instalment (EMI) of Rs 6,500 without any sweat. The reason: his mobile grocery unit earns him a monthly income much higher than his EMI payout.

No surprise then that about 90 per cent of Ace buyers are actually first time vehicle owners who want to start their own business, using the vehicle — something that has encouraged Tata Motors to go ahead with the launch of its one-tonne ’Super Ace’ truck in December.

The Super Ace will produce double the power of the existing 750 kg Ace, offering higher utility and costing 40 per cent more.

Ravi Pisharody, president (commercial vehicle business unit), Tata Motors, says, “A large chunk of those who wish to start a small business find Ace useful. The upfront payment of just Rs 50,000 adds to the attraction of Ace.”

Even though the vehicle was designed as a last mile solution in construction and building sites and factories, it has evolved as a vehicle that meets even individual consumer needs.

“We have to explain to the unsuspecting target customer who is otherwise a three-wheeler buyer that Ace is a very versatile product, which can provide employment to them too”, Pisharody added.

Buyers are obviously listening. Ace, launched in May 2005, recorded its 100,000th sale in less than 22 months even though it costs Rs 1 lakh more than the three-wheeler cargo vehicles. Ace now sells close to 200,000 units per year.

Tata Motors has laid extra emphasis on positioning the product differently than conventional three-wheelers. The company says the success of Ace proved beyond doubt that the Indian market is not as price conscious as is projected widely, if the consumer is convinced about the product’s quality and durability.

Ace, thus, has a 60 per cent share in the last-mile cargo vehicle segment that sells 18,000 units a month.

Marketing the product and creating a brand identity for Ace wasn’t an easy task as Tata Motors didn’t want to stretch the ad budget beyond a point. Traditionally, commercial vehicles are rarely advertised as they are marketed to large fleet owners. But the company decided to market Ace like an FMCG product without going in for heavy ad spend.

The solution, Pisharody says, was found in unconventional cost-effective methods like partnering with Moser Baer (for advertisement home video) as research showed that film viewership is quite huge among the target consumers. Ace was also promoted in a Marathi and Tamil movie as well.

To make sure that production kept pace with demand, Tata Motors handpicked a few dealers and equipped them to handle the increasing sales volume in the most efficient manner.

The other problem was that the traditional Tata Motors network of CV dealers was geared up to sell only large trucks and busses. The company solved the problem by setting up a single mother dealer in most popular markets with eight to 10 service branches affiliated to it.

The massive dealer channel expansion has led to a touch point base of 1,100 across the country, which is much more than what most three-wheeler manufacturing companies have.

Even as Bajaj Auto, Mahindra & Mahindra and Ashok Leyland plan a fresh foray into the four-wheel cargo segment, Tata Motors has gone in for the kill by launching fresh variants of the Ace.

The company has already launched a fuel efficient Ace (EX), which delivers 6-10 per cent higher mileage than the current Ace. It is priced Rs 10,000 more.

With the launch of the new variants, Tata Motors will increase the production of Ace and its by-products to 250,000 units a year from 180,000 units currently.

Meanwhile, Salunkhe is planning one more Ace up his sleeve, quite literally. He is planning to buy another Ace – this time from his own resources. That must be music to Tata Motors’ ears.

Mahindra Satyam ties up with defence firm Saab

Mahindra Satyam ties up with defence firm Saab .

Mahindra Satyam today announced its plans to collaborate with defence and security company Saab to develop its operations in India for the global defence and homeland security market.

While the company did not give any official figure, the “ongoing-MoU” deal is reportedly worth $400 million (around Rs 1,850 crore) over a five-year period.

“It is difficult to put a number to this collaboration with Saab. The only thing we can say is that this is a first of its kind and has a huge market opportunity,” a company spokesperson said when asked to comment on the deal’s size.

By far, this is the biggest deal that Satyam has secured after it was acquired by Tech Mahindra about six months ago. Mahindra Satyam had 500-odd customers, of which close to 100 dropped their contracts with the then fourth-largest IT outsourcer after the confession by its founder, B Ramalinga Raju, that he had cooked the company’s books for several years.

After the acquisition by Tech Mahindra, Satyam won 30 new logos, most of them single-digit million-dollar contracts, besides a five-year SAP contract with global pharmaceutical major GlaxoSmithKline and a three-year extension of a contract from General Electric.

The collaboration with Saab would require Mahindra Satyam and Saab to jointly address the Battlefield Management System (BMS) for the Indian Army. The solution for BMS, proposed by Saab, is field-proven and deployed in many countries. Both parties intend to work together for the Indian BMS programme and would explore globalisation of co-developed artefacts.

Both the companies have already set up a Centre of Excellence for Network Centric Warfare (CoE-NCW) to offer comprehensive skills and a repository of tools, systems, middleware, integration platforms and system showcases in the NCW field.

This would be a development centre for mission critical applications and Command, Control, Communications, Computers and Intelligence (C4I) solutions for global opportunities accessible to either of the partners.

The CoE’s capabilities would also span into the homeland security arena, where the focus would be on end-to-end security solutions.

In the wake of the Indian government’s large investment plans for nationwide security, this CoE’s homeland security expertise would be targeted towards tapping this high potential market, according to Mahindra Satyam Chief Executive Officer (CEO) C P Gurnani.

Saab CEO and President Åke Svensson, in a press statement today, said: “We view this relationship with Mahindra Satyam as a strategic meeting of two highly skilled teams believing in technical and engineering excellence.”

Mahindra Group Vice-Chairman and Managing Director Anand Mahindra said the collaboration was a strategic step “towards synergising Mahindra Satyam’s unique strengths in mission critical systems, enterprise resource planning (ERP), engineering services, avionics and integration and Mahindra Systech’s manufacturing capabilities and engineering excellence. This would leverage Saab’s expertise in C4I programmes, network-centric warfare and special IT systems”.

Saab is one of the major European defence and security players with around 13,300 employees. It develops and manufactures the Gripen combat aircraft (one of the contenders in the IAF’s multi-billion deal for 126 jets), and other operations include command and control, electronic warfare, sensors, weapons and communications.

RBI purchases 200 tonnes gold from IMF

The Reserve Bank of India (RBI) today said that it had concluded the purchase of 200 tonnes of gold from the International Monetary Fund (IMF), under the IMF’s limited gold sales programme.
“This was done as part of the Reserve Bank’s foreign exchange reserves management operations. The purchase was an official sector off-market transaction and was executed over a two week period during October 19-30, 2009 at market based prices,” the central bank said in a statement this morning.
On September 18, to increase the availability of resources for lending to low-income countries, the executive board of IMF had announced its decision to sell 403.3 tonnes of gold as a central element of its New Income Model . It had also decided that the initial offer for the sale of gold would be directly to official holders, including central banks.