Companies & Sectors
SBI asks its deputy MD to go on leave following CBI raid

CBI had registered a case against Acharya, the deputy MD of SBI as well as KK Kumarah, former additional general manager at SBI and Piyoosh Goyal, chairman of Worlds Window Group for alleged graft in disbursing loan of above Rs100 crore

State Bank of India (SBI), the country's largest lender said it has asked one of its deputy managing directors, Shyamal Acharya to go on leave and also constituted an internal panel for probing the graft charges against him. The Central Bureau of Investigation (CBI) raided Acharya's residence in a case of alleged graft in disbursing loan of above Rs100 crore.


In a statement, SBI said, “We have been informed by the CBI that Shyamal Acharya, deputy managing director and group executive (mid corporate groups) of our bank, is being investigated. Acharya has been asked to proceed on leave.”


“We have also constituted an internal committee comprising two senior managing directors to investigate internally,” the statement said.


Yesterday, the CBI registered a case against Acharya as well as KK Kumarah,  former additional general manager at SBI and Piyoosh Goyal, chairman of Worlds Window Group for alleged graft in disbursing loan of above Rs100 crore.


According to the CBI, a team of its economic offences wing (EOW) in Mumbai has registered a case against them for alleged graft.


The agency sources said Goyal wanted a loan of over Rs100 crore from SBI for his firm when Kumarah got involved. They said Kumarah assured him of his contacts in the bank through which he could get that loan passed.


Sources said an arrangement was reached between Kumarah and Goyal under which he had to get Rs25 lakh for his services and Rs15 lakh for Acharya.


Kumarah allegedly purchased two high-end Rolex watches worth about Rs8 lakh to be given to Acharya for his alleged favours. Meanwhile, the CBI came to know about this deal and laid a trap.


Kumarah, who was coming out from the residence of Acharya after allegedly giving him watches, was nabbed by the CBI team.


The remaining cash of around Rs7 lakh was also recovered from him, the sources claimed.


The CBI teams carried out searches at the residences of Acharya, Kumarah and Goyal in Mumbai and Kolkata.


SBI said it stands committed to probity in its dealings and assured that it will continue to hold highest standards of honesty and transparency in its operations. The statement also said the bank is cooperating with the investigating agency in the probe.


India IT services: Improving demand but no spike in attrition, salaries

The bargaining power of Indian IT companies with respect to entry-level employees is at its peak with real wages at their lowest in more than 15 years

Indian information technology (IT) companies are witnessing improved demand without much pressure on wages due to significantly better supply of engineering students coupled with changes in business model. "This time the usual acceleration in wage pressure that accompanies improving demand seems absent. Attrition has remained low and wage inflation remains in single digits. We note the bargaining power of companies with respect to entry-level employees is at its peak with real wages at their lowest in more than 15 years. While some of the reasons for this may be cyclical and could reverse, we believe that part of the reason is structural, too," says Credit Suisse in a research note.


According to the report, a number of markers point to the lack of this pressure on IT companies. For instance, mid-sized companies such as Tech Mahindra and Hexaware have been able to postpone wage hikes without any significant increase in attrition. Tata Consultancy Services (TCS)'s guidance of entry-level hires is the same as FY09 despite twice the overall employee base and a vastly different outlook (more positive) on the demand environment. The necessity to hire from campuses 18 months in advance, as has been the case historically, seems lower now, it said.


An improving demand environment has not caused a spike in attrition this time

Significant improvement in supply of engineering talent

According to Credit Suisse, the capacity at engineering colleges in India has seen growth of over 20% CAGR over the past six years. While the quality of some of the colleges may be varied and the graduation rates may also vary, supply has increased over the past few years.

Intake capacity of engineering colleges saw an over 20% CAGR over the past six years

Given the significant oversupply, engineering colleges are now focusing on forging close relationships with the top-tier Indian IT companies. Industry efforts to incorporate their training programmes in the regular engineering degree curriculum are gaining traction. This can help companies reduce their cost of training employees and the time to ‘on board’ them, the report added.


Changes in the business model

Given the larger scale of Indian IT companies, Credit Suisse said, the higher proportion of fixed price work and some amount of automation, it believes that companies can continue to improve utilisation even beyond historical highs.


The companies are also focused on ‘non-linear’ avenues of revenue where revenue can grow much faster than headcount. Platforms are one such avenue. Also, the faster growing service lines such as infrastructure services are much less linear compared with traditional application development and maintenance, and package implementation. Further, the process of software development has become less complex in certain areas due to the reusability of code, and the development of tools and platforms. As a result, a number of positions can be filled potentially with non-engineering graduates, the research note said.


According to Credit Suisse, Indian IT companies have also stepped up overseas hiring. It said, the companies have entered new areas of IT services where local talent and expertise become important. Also, given potential immigration issues and the difficulty in getting visas, companies have ramped up hiring onsite at the cost of local hires. While this may create margin issues, it does ease the pressure on wages domestically, it concluded.


Letter from the Editor
Consumers are finding it easy to shop online, especially with the popular cash-on-delivery option, which accounts for more than 60% of transactions. It does hurt the margins of e-retailers but consumers can make hay while the sun shines. Make your online shopping a happy experience by following a few dos and don’ts. Understand that product returns for refund or replacement can take time and beware of online fraud too.
On a related note, R Balakrishnan warns readers not to fall for the ‘retail’ story manufactured by stock brokers to sell stocks of all sorts of companies that will ride an ever-prosperous and ever-expanding Indian middle-class. While consumer products companies will do well, there are other aspects of the ‘retail story’ that you should avoid. Turn to page 22 to find out more. 
In her Crosshairs section, Sucheta talks about a regulator that has not been discussed much in the mainstream media, viz., the pension regulator. The sudden exit of PFRDA chairman, Yogesh Agarwal, without any explanation, throws up pertinent questions on the transparency (or lack thereof) of how regulators are appointed and how their work is assessed. 
Since the National Pension System (NPS) has not taken off, PFRDA would need a lot more than just a retired bureaucrat, or a banker, as the new chairman. Interestingly, while the ministry of finance will deal with that, the Supreme Court will have to deal with one of most sordid cases of regulatory appointment, when CB Bhave was made the chairman of the Securities and Exchange Board of India, and allowed to continue, despite proven negligence as the head of stock depository NSDL in the public issue scam of 2006. 
We notice that fund houses have come up with a new fad: foreign fund-of-funds which have been doing well lately. But are they worth investing in? You will be surprised with our research which is on page 24. Happy reading and please do keep writing in with your views and suggestions.


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