India’s monetary policy went through a greater-than-expected tightening this week. On Tuesday the RBI increased its policy rates as part of its efforts to control inflation. Along expected lines was the hike in the repo rate by 25% to 5.75%. The surprise was the reverse repo, which was increased by 50 basis points to 4.50%. The repo is the rate at which the RBI lends to banks, while the reverse repo is the rate at which banks park their excess cash with the RBI.
Fortis Healthcare admitted defeat the battle to control Singapore-based hospital chain Parkway. On Monday it announced it was withdrawing from its bidding war with Malaysia’s Khazanah. The move came after Khazanah offered to buy all of Parkway for a new high price of S$3.95 per share. Earlier Fortis had offered to buy every Parkway share at S$3.80. Unwilling to match that bid, Fortis will now sell its 25% stake in Parkway for a profit of about S$116 million. Fortis chairman Malvinder Singh now says he’s hunting for other acquisitions in Asia armed with about US $900 million dollars in cash and a strong line of credit.
In other news from the week, the government plans to make it easier to re-finance power projects. It’s looking at setting up a Rs50,000 crore debt fund that can raise long-term money more cheaply. At the heart of the proposed fund will be so-called take-out financing, which is expected to encourage long-term lending. The take-out system allows financial institutions like IIFCL buy an existing loan off the books of a bank.
Reliance Industries posted record profits on Tuesday. Net profit for India’s biggest company rose 32% to more than $4,851 crore. Revenues did even better, shooting up eighty-five percent to nearly sixty thousand.
RIL’s profits were boosted by its oil and gas business. The company’s gross refining margins recovered to $7.30 a barrel in the first quarter. In 2009’s first quarter, those margins were at $6.80 per barrel.
While RIL’s profits are looking up, some brokerages are downgrading shares of the company. They predict a fall of Rs20-39 from their initial projections of the company’s target price. The downgrade has been prompted by delays in ramping up gas output from RIL’s KG basin fields.
BlackBerry users watch out. The home ministry is once again threatening to shut down services for the smart phone. It says BlackBerrys are a potential security risk because the company RIM is not sharing information about its users. At present, Indian intelligence agencies cannot decrypt data sent on BlackBerrys. India has more than 400,000 BlackBerry users. RIM has partnered with Indian telecom operators to increase local services.