Today's Hot Stories - May 01, 2013 - PT education

Today's Hot Stories - May 01, 2013

10 Headlines for Today

(1) Coalgate: Dark clouds hover above Ashwani Kumar, PMO
(2) Sarabjit Singh is brain dead, Pak doctors say
(3) Third flag meeting fails; China wants India to dismantle security structures in Ladakh
(4) Petrol price cut by Rs.3 a litre
(5) Bengal chit fund operators to relocate business
(6) Petronet eyes 25% stake in GSPC terminal
(7) Dhoni, Raina star in CSK win over PWI
(8) Golf: Brett recovers to take Ballantine's title
(9) Hockey: Haryana win 3rd Women National C'ship
(10) IBM's movie enters Guinness World Records

5 Stories for Today

(1) All-out war: BJP says won’t do business with govt
(2) Mayor Bloomberg comes out in pugnacious defense of NYPD's stop-and-frisk practice
(3) Cyrus Mistry dismantles Tata’s key bodies
(4) With $145 billion cash, Apple could acquire Facebook
(5) India Inc should share risk in model concession pacts under PPP: Montek

(1) All-out war: BJP says won’t do business with govt

Opposition leader in Lok Sabha Sushma Swaraj went on no holds barred attack on UPA chief Sonia Gandhi and Speaker Meira Kumar, dashing the government’s hopes to bring Parliament back on track.

The House has been facing disruptions for the past week over the JPC report on 2G scam and CBI report on the coal scam.

After a stormy day in Lok Sabha, which saw the BJP and other opposition parties walk out over Supreme Court observations that CBI breached its trust, Swaraj told reporters, “No more business with the government. We would not even attend any meeting called by the Speaker or parliamentary affairs minister from now on.”

The staunch stand came even after the Prime Minister said that he would look into the SC observations and parliamentary affairs minister Kamal Nath said the government was ready to discuss the issues.

Referring to interruptions during her speech in Lok Sabha, Swaraj alleged Sonia Gandhi was provoking Congress members against her in the House and also accused the Speaker of not protecting her against Congress’s interruptions.

The government flayed Swaraj for her remarks, asking BJP to adopt “constructive” approach. “To say that Sonia Gandhi instigates Congress members to create trouble is nothing but condemnable,” I&B minister Manish Tewari said.

Swaraj’s counterpart in Rajya Sabha Arun Jaitley also attacked the government’s ‘interference with CBI and the law offices’.

Source: Hindustan Times

(2) Mayor Bloomberg comes out in pugnacious defense of NYPD's stop-and-frisk practice

Mayor Michael Bloomberg lashed out Tuesday at critics of the New York Police Department's stop-and-frisk practice and surveillance programs, in a pugnacious defense of what he called a police force bombarded by politics.

Stop-and-frisk – the practice of stopping, questioning and sometimes patting down people seen as doing something questionable but not necessarily meriting arrest – has become a flashpoint as the stops rose dramatically in the last decade, to nearly 700,000 in 2011. They dropped to 533,000 last year.

Critics say the stops treat innocent people like criminals and are tainted with racial profiling, noting that more than 80 per cent of those approached are black or Hispanic; these groups make up 54 per cent of the population. Civil rights and minority advocates and some lawmakers also see the tactic as ineffective because more than 85 per cent do not result in arrests or weapons being confiscated.

The mayor has long insisted the stops are based on suspicious behavior, not racial bias, and are a powerful tool for curtailing crime.

"The NYPD is under attack,'' the mayor said in a speech that lauded the department for lower crime rates, raised the specter of terrorism and excoriated supporters of legislation that would rein in stop-and-frisk. He also was critical of legal groups that have sued over the practice, mayoral candidates and the media.

"Stop playing politics with public safety. Look at what's happened in Boston. Remember what happened here on 9/11. Remember all of those who have been killed by gun violence and the families they left behind,'' Bloomberg said. "We owe it to all of them to give our officers all the tools they need to protect innocent lives or people will needlessly die, and we'll all be responsible.''

It was a message the mayor has sent before, amid an ongoing federal civil rights trial over stop-and-frisk and City Council hearings on setting new rules for the tactic. He also has repeatedly embraced the NYPD's surveillance and other counterterrorism programs after a series of stories by The Associated Press on the department's widespread spying on Muslims.

But the more than 20-minute speech and setting – at police headquarters, in front of a room full of uniformed officials – telegraphed a stepped-up, aggressive response to those who question whether the nation's largest police department has overstepped its bounds.

Some were quick to push back. Communities United for Police Reform, a coalition of civil rights and community groups backing the proposed legislation, said Bloomberg was engaging in "dangerous scare tactics.'' One of the measures' sponsors, Councilman Jumaane Williams, termed the speech "a pep rally for his failing proposition that our city has to choose between better policing and safer streets.''

Source: The Indian Express

(3) Cyrus Mistry dismantles Tata’s key bodies

In the biggest structural change since taking over as chairman of Tata Sons, Cyrus Mistry has dismantled the two decision-making bodies set up a decade ago by predecessor Ratan Tata and replaced them with a new 'Group Executive Council'. The council, which will be part of holding company Tata Sons, will decide the future strategic direction of the $100-billion conglomerate.

To begin with, the apex policy making body comprises Mistry and three Tata Sons executives, N S Rajan, Mukund Govind Rajan and Madhu Kannan. The new structure comes into play at a time when Mistry faces tough challenges like turning around Corus, boosting Nano sales, and bringing greater clarity to the telecom business.

After a period of studying the various Tata businesses, he now appears ready to make his mark on India's largest business house.

N S Rajan is a human resources veteran who will join Tata Sons from consulting firm Ernst & Young in the next couple of weeks. Mukund, who started his career with the Tatas, oversees the corporate brand as well as the CSR activities of the group. And Kannan, who recently moved from BSE, heads business development and public affairs at Tata Sons. The four-member team will be expanded in due course to include other Tata Group executives.

The council will work closely with the board and senior management of the various Tata companies, Tata Sons said in a statement. This will help the 45-year-old Mistry take a broader view of the group, review businesses and redefine goals even as he pursues the objective of a five-fold increase in revenue in the next decade.

The new outfit, according to Tata Sons, will assume responsibility for all the roles earlier performed by the Group Corporate Centre (GCC) and the Group Executive Office (GEO). It was in the early 2000s when the group was warming up to the game of acquisitions that Ratan Tata set up the two decision-making bodies not only to direct future business endeavours of the group but also streamline operations.

The GCC comprised eight members and were responsible for framing strategy for the group, while GEO had four members and was responsible for implementing the strategy drawn by the GCC. Some of Ratan Tata's key men like R K Krishna Kumar and Arun Gandhi played crucial roles in transforming the Tata Group from a largely India-focused enterprise into a global conglomerate through acquisitions. The group spent $15.5 billion buying assets in the past two decades.

The agenda of the council includes return on investment with a long-term perspective, supporting and shaping philanthropic activities, and preserving and enhancing the brand, besides driving a Tata way of working for group companies, the statement added.

Industry observers said Mistry appeared to be building his own team as the executive support infrastructure which existed during Ratan Tata's tenure had either retired or relinquished their executive positions at Tata Sons.

Among the immediate significant decisions facing Mistry is the roadmap for Taj's proposed bid for British hospitality chain Orient-Express, the group's aviation joint venture with Air Asia, and entry into banking.

Source: The Times of India

(4) With $145 billion cash, Apple could acquire Facebook

With a $145 billion cash hoard, Apple could acquire Facebook, Hewlett-Packard and Yahoo. Put another way, it could buy every office building and retail space in New York, according to city estimates.

Despite its extraordinarily flush balance sheet, the technology behemoth borrowed money on Tuesday for the first time in nearly two decades. In a record-size bond deal, the company raised $17 billion, paying interest rates that hovered near the low-cost debt of the US Treasury.

Apple's return to the debt markets raises a riddle: Why would a company with so much cash even bother to issue debt?

The answer has a lot to do with the frenzied state of the bond markets. Companies are issuing hundreds of billions of dollars in debt to exploit historically low interest rates. They are also feeding strong investor demand for high-quality corporate bonds as an alternative to money market funds and Treasury bills, which are paying virtually nothing.

Apple's maneuver, however, also reflects the unusual challenges of a fabulously successful company with a sinking stock price. Apple is plagued by concerns that its growth may be slowing, and its shares have plummeted from a high last fall of more than $700 to less than $400 last month.

In an effort to assuage a growing chorus of frustrated investors, the company is issuing bonds to help fund a $100 billion payout to shareholders. Apple announced last week that it planned to distribute that amount by the end of 2015 in the form of paying increased dividends and buying back its stock.

Since that announcement, Apple shares have risen 10 per cent, closing at $442.78 on Tuesday.

Taking on debt can actually magnify the returns for shareholders and improve stock performance, financial specialists say. It can reduce the overall cost of the capital that a company invests in its business. In addition, after a stock buyback, there are fewer shares, which can increase their value.

Yet even as shareholders and analysts welcome the financial tactics, they emphasize that the maker of iPhones, iPads and Macs must continue to innovate and fend off increasing competition.

"This is a substantial return of cash and it's the right thing to do on many levels," said Toni Sacconaghi, an analyst with Bernstein Research. "But, ultimately, the company has to execute. This is no substitute for that."

By raising cheap debt for the shareholder payout, Apple also avoids a potentially big tax hit. About two-thirds of Apple's cash - about $102 billion - sits overseas in lower-tax jurisdictions. If it returned some of that cash to the US to reward its investors, it could have significant tax consequences for the company. In some ways, the bond issue is a response to that tax situation.

"They have been so successful with their tax planning that they've created a new problem," said Martin A. Sullivan, chief economist at Tax Analysts, a publisher of tax information. "They've got so much money offshore."

The $17 billion debt sale by Apple is the largest corporate issuance on record, surpassing a $16.5 billion deal from the drugmaker Roche Holding in 2009, according to Dealogic.

Apple joins a parade of large companies issuing debt with astonishingly low yields. Last week, Nike sold bonds that mature in 10 years that yielded only 2.27 per cent. In November, Microsoft set the record for the lowest yield on a five-year bond, issuing the debt at 0.99 per cent. In comparison, the yield on the 10-year Treasury on Tuesday was 1.67 per cent, while the five-year note yielded 0.68 per cent.

"If you look at these big companies like Apple and Microsoft doing these big, low-cost bond offerings, it's a way for them to raise money in an effort to create better returns for their shareholders," said Steven Miller, a credit analyst with Standard & Poor's Capital IQ. "The bond markets are practically begging these corporations to issue debt because of how cheap it is to raise money."

On Tuesday, Apple issued six different securities, with maturities ranging from a three-year note yielding 0.45 per cent to a 30-year bond that yields 3.85 per cent. The largest piece, a $5.5 billion issue, is a 10-year yielding 2.4 per cent.

While good for the company, longer-term bonds with yields this low can fall steeply in price if interest rates go up, hurting investors who hold them. Still, $3 billion of the Apple debt are notes whose interest rates are periodically reset.

Despite all its cash, the credit-ratings agencies have not awarded Apple their coveted triple-A rating, citing increased competition and a concern that its future product offerings could disappoint.

Moody's Investors Service gave Apple its second-highest rating, AA1, as did Standard & Poor's, rating the company AA(PLUS). (Microsoft, Exxon Mobil, Johnson & Johnson, and Automatic Data Processing have the highest credit ratings from Moody's and S&P.)

"There are inherent long-run risks for any company with high exposure to shifting consumer preferences in the rapidly evolving technology and wireless communications sectors," wrote Gerald Granovsky, a Moody's analyst.

Apple's less-than-perfect rating did not drive away investors on Tuesday. The offering generated investor demand of about $52 billion, according to Goldman Sachs and Deutsche Bank, which led the sale of the issuance.

Desperate for returns in a yield-starved world, investors like insurance companies, pension funds and foreign governments have been snapping up corporate debt. Individual investors are also driving the demand: This year, through last Wednesday, a record $55 billion has flowed into mutual funds and exchange-traded funds that invest in corporate debt with high-quality ratings, according to the fund data provider Lipper.

Steve Jobs, Apple's co-founder and former chief executive, had long resisted calls to dispense big sums to investors. In 2010, when Apple's cash stood at $50 billion, he rejected pressure to make large distributions to shareholders. The company's cash balance continued to grow after Jobs' death in 2011, as it generated billions of dollars in earnings each quarter. Over the last 12 months, Apple operations have been generating about $150 million of cash a day.

A year ago, the new chief executive, Tim Cook, announced a decision to start returning $45 billion to shareholders. But that did not satisfy everyone. David Einhorn, chief executive of the hedge fund Greenlight Capital and an Apple shareholder, pressed the company to do even more.

The excitement surrounding Apple's bond deal on Tuesday stood in stark contrast the gloom that hung over the company when it last issued debt. In 1996, Apple faced a crisis, with shrinking sales of its niche computers and a weakening balance sheet that earned a junk credit rating. In the middle of the year, its shares reached a 10-year low.

"Will Apple Computer run out of cash soon?" asked an article in The New York Times on April 7, 1996. That summer, it tapped the bond markets, raising about $600 million and averting a crisis.

Later in the year, Jobs, who had left Apple more than a decade before, returned to the company.

Source: The Economic Times

(5) India Inc should share risk in model concession pacts under PPP: Montek

Planning Commission Deputy Chairman Montek Singh Ahluwalia, on Monday, made it clear to India Inc. that the GDP (gross domestic product) growth target of 8 per cent set for the XII Plan (2012-17) period would have to be scaled down if the private sector failed to contribute half of the estimated $1 trillion investment in infrastructure development.

Inaugurating Federation of Indian Chambers of Commerce and Industry’s (FICCI’s) ‘India PPP Summit 2013’, Mr. Ahulwalia pointed out that while private sector participation in infrastructure projects in public-private partnership (PPP) mode had grown substantially from 10 per cent of the required funding during the X Plan to 37 per cent in the XI Plan, no less than 50 per cent of the estimated investment would have to necessarily come from the private sector during the XII Plan.

“This [8 per cent annual average economic growth rate in the XII Plan] will not happen if roughly 50 per cent [of investment target of $1 trillion] cannot come from private sector…We should be clear about it that there is no prospect or zero prospect of the government being able to finance such projects. If it can’t be done, then we had better lower the growth projection,” Mr. Ahluwalia said while pointing out that the possibility of a significant increase in government contribution towards investment in infrastructure simply won’t be there as the demand for resources for health and education was huge.

Mr. Ahluwalia maintained that the economy would have to grow at 9 per cent in the last few years of the Plan period to achieve the 8 per cent average growth target. “If the intention is to put the economy on to a path which is outlined in the XII Plan that you would have average of 8 per cent [growth rate] in the five-year period, then you have to put the economy on 9 per cent growth rate in the last couple of years,” he said.

The private sector, Mr. Ahluwalia said, should share and absorb the risks that were normally associated with model concession agreements under the PPP mode, and expressed his regret that very little thinking had been done by the private sector on such agreements.

In his special address, DEA (Department of Economic Affairs) Secretary Arvind Mayaram underlined the need for adequate resources to maintain the existing infrastructure even while scouting for funds for creating new assets. Both the government and the private sector, he said, were beset with the problem of lack of institutional capacities to manage concession agreements over a 20-year period, and called for an urgent re-look at such capacities for managing and maintaining PPP projects. Dr. Mayaram pointed out that after construction and stabilisation of a project, there should be easy exit for the developer and an easy entry process for a competent facility manager to come in. He also stressed the need for more regulators of different infrastructure sectors with clearly defined terms of reference.

Source: The Hindu

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