Shockmarket

FROM who has got the biggest pay packet to who8217;s been given the pink slip. The Indian Institute of Management Calcutta IIM-C campus has got a new topic of conversation. The institute, with its campus at Joka on the outskirts of Kolkata, followed the fall of the Lehman Brothers closely. After all, the investment bank was a big recruiter at IIM-C. Nine students had done their summer training at the bank and were expecting pre-placement offers from it. Last year, Lehman recruited about 10 IIM-C graduates8212;one for Rs 1.36 crore a year for a foreign posting. But he was laid off just a week after he joined. Being an IIM alumnus helped him find a new job but the pay packet of course was much slimmer.

Little wonder then that the campus is abuzz with stories of how their seniors were given pink slips at Lehman and anxious parents haven8217;t stopped calling to ask if placements were on track.

The gloom in the market has cast a shadow on campus placements. Those handling placements are doubtful this round of placements will match earlier ones.

Prafull Agnihotri, in charge of placements, says though no company has backed out so far, 8220;our concern is to see how many students these companies will recruit this year.8221;

The average salary on offer is expected to come down this year8212;last year it was Rs 16.4 lakh per annum for domestic postings. 8220;These were the students who were offered the highest package. I will be very happy if our students can reach last year8217;s highest pay package,8221; he says.

Insiders say that there is a general slowdown and not just financial institutions but even consulting firms will go slow on recruitment. Their future suddenly doesn8217;t look so rosy but students who have opted for finance are not keen to shift to other streams.

8220;As an institute, what we can do is to spread the right message to the people and bring out the best managers who can tide over the crisis,8221; says Professor Ashok Banerjee who teaches finance.

Usually, 30 per cent of IIM-C8217;s students pursue finance and 30 per cent go for consulting jobs. 8220;We are assured of our placements. The only thing that we are concerned about is whether the placements will be as good as last year,8221; says a first year student.

The faculty, meanwhile, is betting on the revamped curriculum it has just implemented. 8220;Management is a science and is based on strong foundations8212;the speculation that jobs will dry up is a knee-jerk reaction to the crisis,8221; says Saibal Chattopadhyay, Dean of Programme Initiative.

8220;We have implemented a thoroughly reformed curriculum this year with a consolidated training on traditional management areas like Human Resource, Behavioral Science, Marketing and Management Information System,8221; says Chattopadhyay.

The current economic situation could also even out the salaries offered to students. A senior official on campus says the expectations will be toned down now and the gap between salaries offered to students of derivative financing and those offered to students majoring in traditional segments will be bridged.

Campus interviews for summer recruitment will begin this month at IIM-C and the next round of interviews for final placement will be held in March next year. 8220;The imbalances will be removed and hopefully for good,8221; the official said. How good, only time will tell.

8212;Shiv Sahay Singh

Gloom outsourced

IT, Hyderabad

These days, Sidharth Rao has often had to walk down the road from his office in Hyderabad8217;s Hi-Tec city, the IT hub. With the lights streaming down the high-rises, his shadow struggles to keep him company, sometimes disappearing altogether. That8217;s hardly reassuring, especially in these times. His company, a premier IT firm, has done away with late-night cabs that take employees home after their night shifts. 8220;Cost cutting,8221; they were told, but Rao and his colleagues knew what it meant.

It meant long walks home after work, flagging down BPO cabs. 8220;There is no other transport available at that hour. BPO cab drivers agree to drop us somewhere on the way for around Rs 15. From there, we walk home,8221; Rao says.

The global financial meltdown that began in the US is beginning to give India8217;s IT industry the shivers. These companies get most of their revenue from the US and Europe, with a large number of their customers in the troubled banking and financial services sectors.

8220;If you leave out IT enabled services, major revenues8212;about 40 to 45 per cent8212;for Indian IT firms come from banking, financial institutions and insurance companies in the US which have gone bust. Which means, no new projects are coming and more and more employees are being kept on the bench as companies hope for the situation to improve,8221; said an HR official of Satyam.

Last week, the Associated Chambers of Commerce and Industry of India Assocham said the IT industry is among the sectors that are likely to cut more than 25 per cent of their staff in the next 10 days. Assocham later withdrew its report but the panic has set it.

Purse strings are beginning to be tightened8212;fresh recruitments have been put on hold, promotions and hikes have been politely turned down and small conveniences withdrawn. 8220;We don8217;t get subsidised food coupons anymore,8221; says Amit Mishra, who works as an analyst in a software company in the city. 8220;And now, no cabs. Till a few months ago my company used to drop us home late in the night. Now many of my team members have started coming to office on their motorcycles even if it means driving 50 or 60 km,8221; he says.

Though there have been no large-scale firing of employees8212;not yet8212;employees say the pink slips come in the form of the dreaded 8216;Performance Improvement Programme8217;, in which they are assigned dummy projects to prove their competence and efficiency. 8220;It is a polite way of saying we don8217;t need you anymore. Most employees know they are on their way out when they are made part of the programme,8221; says Ippili Ram, who works for an MNC.

8220;Even top companies like Satyam, Infosys and Wipro have frozen recruitments for the time being. A number of engineers are already on the bench awaiting work,8221; says Satish Ambati, who works for a software major.

8212;Sreenivas Janyala

A cautious bid

Art market

8220;Art is unlike any other market investment8221;8212;this statement, by gallery owner and collector Arun Vadhera, during the art economy boom, rings true even now, when the market is down. The buying of art may have become more cautious and quality-centric than before, but the interest, both in India and abroad, has not tapered off.

Many from the bid and buy crowd leaned forward in their seats when the Sotheby8217;s auction in October, at Hong Kong, found an unsold Subodh Gupta, priced at an upper limit of HK16,000,000 Rs 102 million. Trade pundits are of the opinion that the work, a diptych canvas from his Saat Samundar Par series, was rather overpriced. Gupta, when contacted, said that a levelling of prices was inevitable, recession or not. 8220;I was uncomfortable about the prices they were quoting. I am happy that it8217;s becoming more realistic,8221; says Gupta, who is now involved in hosting a charity auction with Saffron Art in November.

8220;People are bidding, but for newer artists who are priced in the more affordable bracket. If they go for known names, they prefer to pick up the quality works,8221; says Dinesh Vazirani of Saffron Art, an online art portal.

It has been known that a few galleries have called up the likes of Harsh Goenka, offering 30 to 40 per cent discounts on a few names. Some collectors feel the works on discount may be inferior or mediocre. Abhay Maskara, a gallery owner and collector, says, 8220;One cannot generalise that a work priced lower than its earlier pricing is bad or mediocre. The art market is not infallible and has to adjust and reflect the realities that are affecting every other economic sphere, from realty to stocks. People do not have those indiscriminate amounts of money that they were earning from other markets, hence they will have to rethink and hold back.8221;

8220;I was in London Art Frieze and Art Zoo, and the impression I got was that good art will still find collectors who are not buying into the hype. Collectors who expect to buy and cash out in the next few years will not be in the market. People will buy a work of art because they like it and want to keep it. Fly-by-night operators will look at different avenues to make their big bucks,8221; says Maskara.

Just back from FIAC Foire Internationale d8217;Art Contemporain in Paris, Shireen Gandhy holds a similar opinion, having taken a selection of upcoming and established names; she was well received by collectors there. 8220;I had taken paper works, not because they are more affordable but because that is the aesthetic preference, and I found that people were interested in art that was priced around 30,000 Euro Rs 1.9 million. I did not give more than 10-12 per cent of discounts,8221; says Gandhy. Works by artists like Surkeha and Desmond Lazaro were offered alongside names like Hema Upadhyay and Jitish Kallat.

The general belief among gallery owners and even artists is that the slowdown in the market will be beneficial to the world of art. Besides weeding out the money-minded, it will also give an opportunity to upcoming and more affordable art to come into the limelight. Names like Thukral and Tagra are finding takers not just at the auctions, but among collectors. 8220;Art is not like other assets; there is the aesthetic value to it. The art market existed before the boom. It will continue to do so,8221; says Ranjana Steinruecke of Mirchandani Steinruecke, who promotes many young and upcoming artists. Some galleries might have switched from wine and cheese to coke and chips at openings, and not many shows boast of the lavish catalogue that marked the days of plenty. But the art world is certainly not downsizing on its collectors, artists or galleries. At least not for now.

8212; Georgina Maddox

The wheels are slowing down

Tourism, Rajasthan

The consequences of the global recession on tourism in Rajasthan8212;the picture postcard land of royal palaces, lakes and romantic deserts8212;are nothing short of 8216;devastating8217;, travel bigwigs in the state say. After cancellations by scores of tourists from Europe and the US, tour operators say there has been a considerable decline in inbound tourist traffic in Rajasthan, which has basked in the tourism industry bull run for five years.

According to Shwetank Maheshwari, MD, Rainbow Vacations Pvt Ltd, the recession has already cost travel operators 40 per cent of their business. 8220;Six months ago, you wouldn8217;t have been able to book hotel rooms in Rajasthan8217;s tourist destinations, but now hoteliers are willing to negotiate room rates,8221; Maheshwari says. Operators expect the slump to continue till February next year.

Operators have also lost out on commissions from the airline industry. Maheshwari says, 8220;Eighty per cent of the airline companies have decided not to give us a 5 per cent commission on the basic fare.8221;

Though tourists are downgrading from five star hotels to lower grade accommodation, several smaller entrepreneurs have also felt the pinch. Ashwini Vyas, who owns a small hotel in Jodhpur, believes the tourist traffic to Jodhpur has declined by 60 per cent. 8220;This season is our only source of livelihood. In October, there is usually a heavy influx of Gujarati tourists, but not this year. The number of foreigners visiting Jodhpur has also dropped,8221; Vyas says.

Rajasthan Tourism Additional Director Urmila Rajoria says, 8220;The percentage of inbound tourists has decreased, but we believe the recession has affected foreign tourists more than Indians,8221; Rajoria says. The famed Pushkar mela, which attracts droves of domestic and foreign tourists every year from November 5-13, will not be adversely affected, she says. The upcoming state Assembly polls on December 4 and the imposition of the model code of conduct will mean that there will be no intervention by the state.

Travel agents say the mela might escape the consequences of the recession, but only because of stringent cancellation rules. A travel operator says, 8220;This time, no refunds have been allowed in the event of a cancellation. This rule will probably still bring in the foreign tourists.8221;

8212;Apurva

Crumbling dreams

Real estate, Delhi 038; NCR

The phone hadn8217;t rung since morning and Amit, who sat facing a row of empty chairs, was beginning to get worried. Till about a month ago, this Direct Selling Agent was busy selling homes and dreams to people from his office in New Delhi. Not any more.

The real estate debacle across the Atlantic has finally started to resonate in India. Contracted liquidity8212;a consequence of the sub-prime disaster in the US8212;seems to have put dreams of building that first house, or buying a second, on hold.

The real estate market has shrunk by at least 40-50 per cent, interest rates have risen and banks are funding smaller and smaller amounts against mortgages. According to Harsh Roongta, a loan expert with apnaloan.com, customers don8217;t want to enter into a long-term financial commitment in this high-interest environment. 8220;The installment-to-income ratio has decreased, while the loan-to-value of the house ratio has also gone down to around 75-80 per cent as opposed to 85 per cent earlier.8221;

This means that not only has the income level at which banks start to give out loans gone up, the amount received as loan has also reduced. Banks are a lot more finicky about lending credit and are getting stringent about assessing the payback capabilities of every customer. In one public sector bank, the margin requirement the amount customers have to pay out of their own pockets has increased to 40 per cent for loans of over Rs 1 crore.

Customers looking to buy houses are put off by interest rates which are hovering around 10.5 per cent for loans below Rs 30 lakh and 12 per cent for loans of over Rs 30 lakh, according to a source from a leading public sector bank. NCR regions have taken the hardest hit. Luxury homes in Gurgaon, Noida, Manesar and Bhiwadi can8217;t seem to find buyers. Experts say the current lack of demand is likely to continue for at least the next few months, until interest rates begin to fall and developers begin to cut prices.

Roongta puts his faith in 8220;good customers8221;. 8220;Such an environment forces customers to put in more of their own money. Reduced eligibility might be disheartening but the ability of customers to pay the increased EMI has increased,8221; he says. The best prediction says that interest rates are bound to fall. But when?

8212; Poorna Bhattacharjee

Frayed seams

Textile Export, Ludhiana

Dozens of large and medium-sized yarn mills and knitwear factories dot the industrial landscape of Ludhiana, Punjab8217;s largest city and one of India8217;s largest textile and export hubs. It is here that apparel and hosiery majors like Monte Carlo, Casablanca, Pringle, Octave, Madame and Trident chose to set up shop, pioneering textile design and building a market share in India and abroad.

But in the last two years, Ludhiana8217;s Rs 5,000-crore Rs 2,000 crore in exports hosiery industry has been hit by a double whammy. Last winter, the constant appreciation of the rupee against the dollar rendered its exports uncompetitive in the global market. And now, the industry8217;s hopes of gaining lost ground this year have been dashed due to a sombre global economy and an associated slowdown in demand.

The US accounts for about 30-35 per cent of India8217;s garment exports. And America8217;s biggest brands, including Gap, JC Penny, Abercrombie 038; Fitch, Saks and Neiman Marcus Sarah Palin8217;s current favourite, have lowered their sourcing from India by 10-15 per cent in September alone. In the coming months, things may worsen for the garments sector, according to the Textiles Ministry. The US demand for textiles and garments is down 4.2 per cent as per US commerce department data this year. 8220;By year-end, we expect this to fall to a negative six or seven per cent,8221; a senior government official said.

Vivek Verma, of Synergy Exports, who exports yarn to countries in Asia-Pacific and Korea, says that in the last two years, his orders have gone down by 50 per cent. 8220;In the international market, the buyer has several options. He knows that exporters are desperate to sell and he exercises his negotiating power. Buyers are asking for hefty discounts. Recently, we decreased prices by as much as 20 per cent in some cases, which made a big dent in our margins.8221;

A Union Textiles Ministry official said that against the 20 per cent growth target for the industry as a whole, it is now expected that Indian garments will be able to increase their exports by just about 10 per cent during the current calendar year. 8220;Garment exporters in India have been asked to go slow on orders. Consequently, job creation in the sector has taken a hit. However, people aren8217;t being laid off as of now,8221; a senior government official said. During 2007-08, the country8217;s textile exports stood at 22 billion, which fell short of the target of 25 billion. The situation has worsened in the current fiscal. Cotton yarn exports have dropped by 19 per cent and man-made yarn has seen a drop of 17 per cent in September.

The recession has left the most prominent of players in Ludhiana worried. S.P. Oswal, chairman and managing director of Vardhman Group8212;which exports goods worth 120 million to Europe, Japan, China, Hong Kong, Latin America, Mauritius and Korea every year8212;says profit margins are set to shrink. 8220;The effects will be far reaching. In the times to come, it may become difficult to open letters of credit in dollars. Earlier, our dealings with banks were very easy. We would submit export documents and banks would willingly act as facilitators, but things won8217;t be so smooth now,8221; he says.

Not only have margins taken a direct hit, but capacity expansion has taken a backseat too. 8220;It is a circle. If the firms don8217;t get new orders, they will not invest in increasing their capacities, which in turn would mean that a lot of new jobs which could have been created won8217;t be created,8221; says Rajeev Gupta of Venus Garments.

Businesses are also apprehensive of any drastic step by the Government. As Kamal Oswal, CMD of Cotton County, says, 8220;These are desperate times and governments aren8217;t averse to taking desperate steps. The Brazilian currency, for instance, has been devalued by 30 per cent. Our margins vary between 20 and 30 per cent.8221; He adds that there have been reports of delays in payment and firms wriggling out of deals on the flimsiest pretexts.

The slowdown is all-pervasive, but industry players maintain that the textile sector has taken the hardest hit. Sandeep Jain of Oswal Woollen Mills8212;the company behind the Monte Carlo brand8212;says the margins in the sector are much lower than in IT or biotech. 8220;Experts chastise us for not utilising the slowdown to upgrade machinery. They feel we should import it when it is priced low. They conveniently ignore the fact that if capacity expansion itself is unsustainable, why would we need new machinery?8221; he says.

Fears that China will flood India with its goods8212;for lack of a strong market in the West8212;have combined with the liquidity crunch and the increasing cost of credit to create a thick cloud of gloom, which looms large on the textile horizon.

8212;Dinker Vashisht, Amrita Chaudhary 038; Gunjan Pradhan Sinha