Sri Lanka non-bank lenders urged to borrow abroad

Source  : Lbo :05 Dec, 2011 09:45:40

 Sri Lanka's non-bank finance companies should borrow abroad to increase resources they have to lend to the domestic economy, Central Bank Governor Nivard Cabraal said.

"We need new money coming into the country if we are going to achieve this growth that we are targeting," Cabraal told a forum of non-bank lenders in Colombo.

"We cannot do it with only the savings that we have in our own country."


Cabraal said the state has borrowed abroad and set a benchmark for private borrowers to go to international markets.


Leading the way


"Every time we go the market - mind you this is the government that is going to the market - we are telling them that the private sector is coming in and they will raise their own funds from international markets," Cabraal said.


"But I am sorry to say that although the government has been doing that the private sector has been slow to reach out to international markets.

"They are very quick to go right across the country in their nice T-shirts and to raise deposits but are very slow to go to the rest of the world in order to have new money coming into the country."
"We need new money coming into the country if we are going to achieve this growth that we are targeting. We cannot do it with only the savings that we have in our own country."


Sri Lanka is projected to grow at 8.3 percent in 2011. But strong credit growth has put pressure on the island's soft-dollar peg.


Unlike a hard peg which only targets an interest rate, a soft-dollar peg attempts to target both the exchange rate and keep low interest rates at the same time leading to high inflation, balance of payments crises or both.

In the 1980s amid high deficit spending and loose monetary policy, the currency was continuously depreciated to avoid balance of payments crises.


When foreign currency deposits are allowed it lead a build-up of forex holdings, a phenomenon known as deposit dollarization.


When the management of a soft-peg to improve a little and there is a period of exchange rate stability, domestic participants may be incentivized to borrow abroad due to interest rate differentials.


Liability Dollarization


The phenomenon known as 'liability dollarization' can result in large losses to borrowers when a soft-peg eventually breaks. A soft-peg breaks either because of outright deficit financing of the state by central bank credit or due to delays in allowing rates to move up.


But if exporters in particular, who have access to forex revenues can be encouraged to borrow in foreign currency, it could help temper continuous calls to depreciate the currency.
Classical economists have said that currency depreciation and inflation is the key tool states have to impoverish large populations.


Though Sri Lanka's monetary policy improved from 1995, the peg has experienced major balance of payments troubles episodes in 2000/2001 and 2008/2009 and less intense problems in 2004 and 2007.


In 2011 the peg has again come under pressure following a build-up of excess liquidity from foreign borrowing and delays in raising interest rates, analysts say.


Cabraal says banks have already begun to borrow abroad.


"We have asked the banks to do that, we've e seen the banks responding quite effectively," he said.


"Today they realize what strengths they have and that is important. I think some of the finance companies also have the strength to raise capital from outside. You need to do that."

Mukesh Ambani’s dream house is not yet his home

Source :The Week :Vikas Banaj :Saturday, November 26, 2011 16:55 hrs IST 




When the richest man in India completed his extravagant 27-storey house in Mumbai last year, it incited a public debate along the lines of‚ “What is he trying to prove?” Now, the chatter involves a different question: Why hasn't he moved in?

Mukesh Ambani and his spokesman have declined to discuss the matter, leaving plenty of room for theories. One popular explanation is that, despite the time and money lavished upon it, the building does not conform to vastu shastra. Certainly the home—named Antilia, which has three helipads, six floors of parking and a series of floating gardens—looks lived in.
 At night, the cantilevered tower is lit up top to bottom, inside and out. Members of the city's moneyed class report having attended movie screenings in its theatre and eaten dinners in the grand ballroom, served by staff trained by the luxury Oberoi hotel chain.





Yet, friends of the family say that after the last canapés have been served and the guests have bidden goodbye, the Ambanis often decamp to Sea Wind. 

That is the more modest, 14-storey apartment tower at the south end of the city that Ambani, wife, Nita, and three children share—on different floors—with his mother and his estranged younger brother, Anil, and Anil's family.





When does Mukesh Ambani plan to move into Antilia? “I have asked him the question twice,” said a friend who has attended several parties there. He asked not to be identified for fear of ruining his relationship with Ambani, whose net worth Forbes has estimated at $27 billion. “He said, ‘Yes, we'll go next month. Let it be done.' They don't talk about it.”


 Another close family friend confirmed that the Ambani family did not live at Antilia but said members did sleep there “sometimes”. This friend, who also asked not to be identified to avoid offending Ambani, had no explanation.

Ganesh idles for the house

Tushar Pania, a spokesman for Ambani's Reliance Industries Ltd dismissed questions about whether the family was living at Antilia as idle gossip. “It's a private home. There is no reason to discuss it in public,” he said. He said they had moved in, but when asked whether the family still lived at Sea Wind, he revised: “They live in both places.”

But why would someone build what is widely considered the world's most expensive private residence and then use it as a pied-à-terre? Some friends, business associates and Ambani watchers offer the vastu shastra explanation, which gained wider currency earlier this year when a newspaper in Mumbai published an article about it citing “sources in the know”.

Basannt R. Rasiwasia, a vastu expert whose clients include prominent businessmen and their families, although not Ambani, said Antilia appeared to run afoul of one of the key principles of vastu: the building's eastern side does not have enough windows or other openings to let residents receive ample morning light.




“From the outside, what I see is that the eastern side is blocked, while the western side is more open,” he said. “This always leads to misunderstanding between team members. This also indicates more hard work to achieve moderate success. There is more negative energy coming from the western side.”

Rasiwasia cautioned that he could not provide a full analysis, as he had not been inside the building, which was designed by the architectural firm Perkins & Will and the interior design firm Hirsch Bedner Associates, both American. Officials from the firms declined to comment, citing confidentiality agreements.

Even before it was built, Antilia was clouded by controversy. Ambani acquired the plot where the tower sits, on Altamount Road, in 2002. He bought it for 021.5 crore, from a Muslim charitable trust. Muslim political leaders and other critics said that the land was sold for only a small fraction of its market value. Ambani acquired the property in an auction, and his spokesman has denied allegations that he paid less than the land's market value.





Last year, as Antilia was nearing completion, many Mumbai residents criticised the building as an ostentatious display of wealth in a city where more than half the population lives in slums. Gyan Prakash, a history professor at Princeton University in New Jersey who wrote the book Mumbai Fables, said the criticism could have influenced the family's decision not to make Antilia its full-time residence.


 “It is one thing to brashly announce your arrival in the billionaire's club by looking down on the rest of the city from your gated community in the sky,” he said via email, “but then you may realise that it is lonely at the top!”

But even if the Ambanis now have reservations about Antilia, the building appears to have some admirers. Eight hundred metres away, in the waterfront Breach Candy neighbourhood, another rich Mumbai business clan, the Singhania family, is building a tower with cantilevered floors.


 Many say it resembles Antilia.

The move-in date? Don't ask.

Character + Chance = Success, says Narayana Murthy

  Source : CNBC-TV18 ::Dec 03, 2011 at 12:38 

Narayana Murthy, a legendary and visionary in India, built a multi billion dollar empire stretching from Bangalore to Boston. He is the founder of Infosysand architect of the biggest wealth creation stories in this country.

Murthy is humble and said to live a simple life. But, beneath this exterior lies a champion entrepreneur and a powerful tech icon, who kicked of India’s first world class industry. He was recently honoured for his lifetime achievements at CNBC's Asia Business Leaders Awards.

Murthy attributes success to both character and chance. He says if hard work, sacrifice and deferred gratification  make a character, to be God's chosen one is critical to taste success.

Murthy described the best index of success of a corporation as its longevity. "One of the most important instruments for ensuring longevity of a corporation is a cadre of well trained leaders. Therefore, I am confident that we will do well," he elucidated. His influence runs deep even having stepped down as Chairman of Infosys.

The well read Murthy, who quotes legendary Presidents and Baseball Stars, built up Infosys into India’s second most valued tech company and a business that created thousands of jobs, boosted exports and raised India’s image to the world.

He co-founded Infosys with just only USD 250, developing a global delivery model that became the hero of India’s priced outsourcing industry. Though many now wonder if the best times for the country’s tech giants are over, things hardly looked like this – 30 years ago. The country was just starting to liberalise its economy at the cusp of change when a new industry was born. "It was a lethal combination. This is how we realised that we could leverage the power of the Indian engineering talent to service the needs of large corporations in the US," Murthy told CNBC.

It was tough doing business in India in 1980s. It took him one year to get a telephone connection and three years for a license to import a computer. According to Murthy, those were all extreme debilitating conditions. "When we released that we had the talent and there will be a huge market opportunity, we decided to demonstrate our willpower, resilience and commitment to build a viable business," he explained.

Here is the edited transcript of Murthy’s interview with CNBC’s Chirstine Tan. Also watch the accompanying videos.

Tan: You had very little freedom to grow in the early days because entrepreneurship was tightly controlled by the government officials in India. At any point, did you lose any hope of finding success in the early days?

Murthy: In 1990, after nine years of running the company, we had an offer by somebody to buy us out for a million dollars. All my colleagues got excited.

Tan: Were you excited?

Murthy: I was not much excited, but we sat down on a Saturday to listen to everyone’s comments. Then finally, I said that I had tremendous confidence that the future will be all right and I will buy you people out. Then, they were somewhat shocked because they knew I didn't have much money. I told them that we have faith in the future and we are extremely positive and optimistic about it, and hence, we'll never ever talk of selling the company from now onwards. As much as USD 1 million at that point in time today is something like USD 32 billion in market cap, which means for every dollar that we could have got in 1990, today it's worth USD 32,000.

Tan: Infosys has scored many firsts. The first to offer stock options to employees, the first Indian company to list on NASDAQ and the first to publish quarterly reports.

Murthy: My philosophy was very clear. If a CEO doesn't know what he/she will achieve in the next three months, then he/she is not worth being a CEO. Therefore, I insisted that right from 1993-to-date, we will continue to give guidance for both topline and bottomline, so that we can create a paradigm of full transparency to our shareholders.

Tan: This crisis that we are going through appears to be worse than the last one we saw in 2008. Your biggest market the US just got downgraded, you want to grow business in Europe to 40% from 20% at a time when the region is mired in a debt crisis. Are your clients being affected by all this bad news, do you think it is going to impact IT budgets in a big way?

Murthy: We are in the business of making corporations more and more efficient. Corporations have to invest in IT, and fortunately, our customers understand that this is the time when we have to strive, or they have to strive at bringing better efficiencies. Therefore, I believe they are all enthusiastic about mounting new projects.

Tan: But because of this very uncertainty, are they delaying their decision making process?

Murthy: There is obviously an environment of uncertainty and people tend to dither a little bit more than otherwise. But we have adjusted that in our projections and that is why we have said we will grow between 16% and 19%, so we have factored all of that.

Tan: Despite all the doom and gloom, the company still plans to hire about 45,000 employees by the end of the year, can you guarantee a good pipeline of contracts to justify those numbers?

Murthy: This recruitment decision was made based on the data we have got in trenches; in terms of growth and based on the utilisation factors. One of the principles that we have adopted is to under-promise and over-deliver, and we believe that we will be able to perform to the extent that we have promised.

Tan: In other words, you have been conservative in your guidance?

Murthy: We have so far performed at least as much as we have promised or most often better than promised. To that extent you could say we are somewhat conservative.

Tan: In terms of revenue how do you expect to do this year?

Murthy: Our people have said that we will be somewhere between USD 7.1 billion and USD 7.2 billion.

Tan: Where do you think the company will be?

Murthy: Now I am not part of the company in that sense. I am not on the Board of Directors, so I don’t have access to all the information. Therefore it will be wrong on my part to project.

Tan: You are leaving at a time of intense competition, Infosys has lost its number one position to TCS and rival Cognizant is slowly closing the gap, some say it could takeover Infosys in a couple of years. Are you worried about that happening?

Murthy: Not really, I see a lot of wonderful ideas being germinated in the company and a lot of enthusiasm amongst our people. We have in fact brought the biggest innovations in this industry, in this company. I believe that as long as we focus on our customers, treat our employees well and are transparent with our investors, I believe we will continue to have a good day.

Tan: You have always said you don’t believe in buying revenues but if it came to the crunch, would you be open to Infosys making one big acquisition to defend its position?

Murthy: As long as any acquisition fits in with our strategy, we have no problems in making acquisition. But I am against just buying revenues. In other words, our strategy is that it should complement our customers, complement skills, compliment geographies. We will acquire because we have USD 4 billion plus of cash in the bank. So it’s not an issue at all. But we just don’t want to do an acquisition because it’s fashionable. We don’t want to do an acquisition because that is how we become bigger than somebody else, we don’t do that.