The Week in Review 29 June 2012

India’s economy may be slowing down, but imports still seem to be pouring in. New data out on Friday showed a sharp turn towards the negative in India’s trade balance. The country’s balance of payments deficit for the quarter ending March was $5.7 billion. That’s compared to a surplus of $2 billion in the same period in 2011. Meanwhile the current account deficit for the March quarter reached $21.7 billion, which amounts to 4.5% of GDP.

In other news, the Reserve Bank sounded a warning on Thursday with its latest financial stability report. The report said risks had increased because of the slowdown at home and the debt crisis abroad. It also said the critical concern was a fall in asset quality. But the report added that RBI’s stress tests showed a banking crisis was unlikely. RBI governor D. Subbarao said that despite the problems, India’s financial sector remained stable. He also stressed that banks were well capitalized and that leverage remained at healthy levels.

Moving to corporate developments, the Indian units of billionaire Anil Agarwal’s Vedanta Resources are finally set to merge. On Monday shareholders of Sterlite Industries and Sesa Goa agreed to create a new company called SesaSterlite. Among shareholder votes, about 79% of Sesa Goa’s and 92% of Sterlite’s were in favour of the merger. But the advisory firm I-I-A-S said some portion of votes had been rejected as invalid. The merger also includes other subsidiaries like Cairn India and Vedanta Aluminium. Vedanta had been counting on the new merger to simplify its business structure in India and reduce debt from large acquisitions like Cairn India. But some minority shareholders in Sesa Goa had criticized the plan as being against their interests.

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Coca Cola’s global chairman and CEO Muh-tar Kent announced the company would invest $5 billion in India by 2020. He said this would mean an extra $3 billion over what Coca Cola had committed earlier. At present, Coca Cola India stands at the seventh position in company’s global portfolio.

Hyundai is looking to introduce a range of new engine technologies to gain greater market share. It plans to bring its full range of diesel engines into the country. These will include a 1.1 litre engine that can fit into its popular i10 vehicle. At present, Hyundai has to import all its diesel technology into India.

And finally, search provider Just Dial may have delayed its IPO, but it has just raised money from private investors. Sequoia Capital has put in Rs305 crore and SAP Ventures, another Rs22 crore. Back in August, Just Dial had filed its draft red herring prospectus. The company postponed those plans, but will file a fresh prospectus in July and go public next year.