Chiddu presents the Indian Budget ..

Finally the budget 2007 is here and doesnt seem to have a major effect on my life. My tax deduction limit was raised from Rs 100,000 to 110,000 equating to a refund check of Rs 1000. Shoes, Watches and Plywood are expected to cost less and finally I can afford a nice pair of shoes after paying my taxes ;-)

I watched this speech for 15 mins and couldnt take it after the FM announced an allocation of Rs 22 Crores combined for 4 states and also took the time to name the states getting the funds. While he was busy talking about things that didnt matter, his colleagues were picking their noses without any realization that they are on National TV. Does 22 crores need a full country's attention ?.. Dear FM, come over to Hyderabad and sell 1.5 acre of govt land and you dont even need a budget to fund that project.

Some areas like Agriculture, Rural Infra, Healthcare received high funding making it a very good budget for India overall. There was even a program to stop dropouts at 8th grade [ I was not aware that this was an issue ], and also some merit based scholarschips along with an increase in education cess of 1% which are sure add fuel to the the inflation fire.

Infosys mentor Narayan Murthy's wishes to pay taxes in India were granted when the govt decided to levy a MAT on IT/ITES sector ( Minimum alternative tax.. similar to AMT in US 1040 ) . But this tax may not hurt infosys much since it pays most of its taxes outside India. Also ESOPS now fall under Fringe benefit tax.

Market fell 540 points today and can create further panic selling tomorrow unless the government and the foreign investors do something to create the support levels. Drops of 300+ points have the potential to destabilize the Margin players who are critical to the market.

Lending Rates raised again

In a surprise move yesterday, ICICI bank has raised its lending rates further, becoming the bank with the highest rate of 13% on Fixed and 11% on floating loans. Though HDFC is lagging behind, it is also expected to move higher by 100bps or a 1% soon. PLR ( Prime Lending Rate ) the reference rate has been left untouched , keeping the existing loans at the same rates as of Feb 6th 2007. Many feel that this move by ICICI is in line with its strategy to slowing down growth in home loan portfolio. Many state owned banks have also raised interest rates for new borrowers and the rates are expected to go further up.

On deposits banks are increasing it further with SBI, ICICI offering upto 9.5% interest as of today. Senior citizens get an additional 0.25% on their deposits generating an annualized yield of 11.75% at 9.75% savings rate.

In other finance developments, Forex reserves of India increased to $190b, creating some more issues for the financeministry. Rupee is being reigned in through various measures by the government but the fact remains that rupee has appreciated against the dollar from 46.9/$ [ when I landed at hyderabad in july] to 43.9/$ [ last week ] and this may continue creating margin pressures for exporters as well as the outsourcing industry.

Disclaimer : I dont claim to be an economist or even some one with formal finance education..

Fab City, Sem India, Semicon Policy.. What does it mean for Hyderabad ?

The hype and confusion still continue around the Fab City project of Hyderabad. Everyone was banking on the announcement of semiconductor policy in India which was finally revealed on thursday. Per the new policy, manufacturing plants in SEZS can avail 20% subsidy for semiconductor plants and those outside the SEZ's can avail 25% subsidy. This subsidy will be in the form of tax concessions, interest subsidy and interest free loans for subsidizing the capital expenditure incurred in setting up the manufacturing units for the first 10 years of its existence.

25% is exactly what SemIndia [ promoter of fabcity ] has been demanding saying that it needs atleast this much to sustain. New York state has recently granted a 28% subsidy to AMD to setup its fab in the state. So, what the Indian government is offering is no more than what a US state would offer. Korea is known to offer 80% of the costs incurred and malaysia is known to offer a double deduction for R&D etc.

In fab business companies operate at a 12% Margin irrespective of the location. About 88% of the cost of a chip fab are static and do not change regardless of the location the plants are in. So, India may serve as the testing, packing destination for a while instead of being a manufacturing site. A recent semiconductor vision summit also quashed some myths about the scale of initial operation. SemIndia's goals are to acquire fab's across the world , operate them as-is and then transfer them to India. One component that is guaranteed to come to Hyderabad is a chip design entity that will design chips for DSL Modems [ is that cutting edge anymore ?.. aren't there tons of these design shops in India already ? ], but the manufacturing will actually take place near Chennai in a 3rd party plant, followed by a semindia branding and sold to BSNL.

Recent and continuous announcements about an ATMP ( Assemble Test Mark Pack ) facility being the first in Fab City doesnt indicate that too much will happen in the near future in fabcity. No doubt, the growth will be slow, but dont be fooled by the hype around the 3 billion investments since it will be a long time before that really flows in.

While I really look forward to Hyderabad becoming a Fab center/Fab city, I do not see a clear roadmap to achieving the same from semindia. SemIndia from my research is not just focussing on Hyderabad, they have plans for other locations too..

1000 Employees Fired in Hyderabad ?

I some how missed to notice the news about 1000 employees fired in Hyderabad this week. Looks like companies are finally taking background checks seriously. Due to the serious security lapses leading to data theft, companies in India are actively supporting NSR, [ National Skills Registry ] Initiative. The following quote from Nasscom shows how serious IT/ITES industry is about data security to protect the honest people working in India.

"We will leave no stone unturned to make India the “Fort Knox” of security, positioning ourselves as the gold standard for security as we are today for quality. We hope that NSR will dramatically raise the level of security and protect all the honest people working in this industry".. Kiran Karnik - Nasscom

Today I received an email from my HR to complete the NSR registration. This has become mandatory for all levels within the organization. I logged into the site and completed the online part, but did not have the time to go to the kiosk setup in our cafeteria. I am supposed to go there with a photograph and also leave my fingerprint so that NSR can continue conducting a background check. The cost of this is borne by my employer and I will be receiving an ID card as well as an ITPIN that will allow any future employer to hire me based on the credentials validated by NSR.

Hyderabad Restaurant Review : Malgudi

Recent opening of the lumbini mall added 3 more restaurants in the Jubilee/Banjara area right around touch. These include Zaffran Laguna [ Mediterranean ], Malgudi [ South Indian ] and Basil [ Vegan Cuisine ].

The mall itself is still under construction, but this is a centrally located building very close to KBR and right next to touch. I envy the few friends who were able to grab some commercial space in this mall a long time ago.

Malgudi, a restaurant which claims to be specialized in southern delicacies, is located on the 4th floor in the mall. Interestingly all restaurants are on the same floor and malgudi doesnt have a restroom within its premises.. not sure how they agreed to that..

The interiors are very well done with traditional hardwood props and its very inviting. Once we settled down, I realized that it was the most confusing and interesting menu I have ever seen in a south indian restaurant. The menu was organized by state instead of the traditional starters, main course etc. Each page was dedicated to a state and it covered Andhra, Tamilnadu, Karnataka and Kerala

Now to the experience.. I scanned the menu multiple times to make sure that I was not missing the traditional souther appetizers and to my shock the waiter just recommended typical paneer tikka, spring rolls and other chinese starters. Followed by that we tried to order the maincourse from the traditional non-andhra stuff but were left scratching our heads since the waitstaff was of no help in recommending any of the dishes. When we tried to ask for help, they went back to recommending the Dal Makhni and Malai Kofta [ which was a story in itself.. ] instead of even trying to speak about or sell the traditional fare listed in the colorful menu.

After dinner, we decided to order a dessert, and since I had prior experience in Kerala with adapradhamam which was the only unique dessert on the menu for a Hyderabadi. As expected the waiter walked back to us to let us know that Kubhani-Ka-Meetha [ typical hyderabadi dessert ] was the only dessert available.. We decided to eat what ever they had since it was late to go somewhere else for a dessert and called it a day pretty dissapointed with the whole experience.

• Restaurant : Malgudi
• Affordability : 8/10 [ Around Rs 350 / head for a meal + soft drinks ]
• Food Score : 6/10 [ dissatisfied since we were literally forced to eat north indian food in a southern restaurant ]
• Ambience : 7/10
• Wait Staff : 5/10 [ friendly & confused about what they really serve in this place.. ]
• Overall : 6/10

Cash CRRunch in Hyderabad ?

Indian economy is overheated and its particularly visible in the metro's and Hyderabad. Frenzied M&A, Over valued real estate, Rising prices in commodities etc., shows why the finance ministry is worried. Inflation today at 6.75%, Recent increase in CRR and Repo rates by RBI is a very clear indication that the government is concerned about the common man not being able to afford anything anymore.

Bank lending rates have moved from a range of 8 - 10% to 10 - 14%. As banks are in a squeeze since increased CRR will drain 14000 crores out of the banking system as committments to RBI for their existing loan base. So, banks are willing to pay above 9% for deposits compared to the 5% they were paying when I landed here 6 months ago. May not be too long before it reaches the good-old 18% rate. It is not a distant possibility, considering the issues that RBI and the finance ministry are constantly warning about the over heated and overly liquid economy.

Hyderabad realestate prices according to realtors are still booming, but the reality is that they have softened more than I expected. Try to sell a plot and you will get a dose of reality. I have seen folks get offers of 50% of what the paper value was when they really wanted to get rid of it. In the recent days areas like Jubilee, Banjara, Kavuri Hills seem to have softened more than I wanted to see. 6 months ago no one was willing to even consider talking about less than 60-70K in these areas and now many options are available at 40 and above. Even gacchibowli and kondapur have pulled back considerably, and we recently took advantage of the low prices and acquired a small plot.

Coming to the builders, No doubt, there is a demand for apartments and houses, but with the interest rates inching up every day, there are very few people left with cash to invest. Anyone who has put into land is waiting for it to recover back to the 2006 levels. I dont mean any disrespect, but dont believe the realors and builders that are still looking for the 4000 - 7000 per sqft in Hyderabad. They must be really out of their mind. Recent announcement of L&T phase II at 4000/sqft and some complexes in Banjara Hills asking for 7000/sqft is way overblown. Villas are reasonably priced in the gopanpally area, but there is still room for negotiation since the area is not that close to the business areas like the builders seem to potray. Also, land around / behind chirec [ Some have clearances and some dont .. please be weary of narne and other lands with issues there.. but it may not make a difference in the long run since the govt is looking to get rid of ULC soon .. ] is available for good prices now a days if you look for bargains, you will certainly find them.

On the financing front.. I recently dealt with a large bank to get a loan to cover one of my apartment purchases from a long time ago. This was purely to get the basic deductions that I needed which I discussed in my prior post about tax deductions etc. Banks seem to readily agree to a loan of 60 times the net monthly income. Now lets take a techie who gets 50K Gross per month [ Which I feel is the median salary of some what experienced techies in hyderabad ], after taxes he/she ends up with 30K per month as net ... and that equates to a 18Lakhs of loan eligibility. How many sqft do you think they will be able to afford at the Rs4000/sqft ?.

That was a quick rant about hyderabad .. will try to blog more this week.. Keep reading..