Norway’s Central Bank Excludes Jockey Page Industries from Investment by GPFG, the World's Largest Sovereign Wealth Fund, for Human Rights Abuses
Norges Bank, the central bank of Norway, has decided to exclude India-based Page Industries Ltd from investment by the Government Pension Fund Global (GPFG), the world's largest sovereign wealth fund. This decision is an outcome of a recommendation by the Council on Ethics of GPFG to exclude from investment Page Industries due to an 'unacceptable risk that the company is responsible for systematic human rights abuses'. 
 
The Council, in its report had stated, "Investigations into working conditions at one of the company’s factories identified numerous labour rights violations, including verbal and physical harassment of employees and occupational health and safety hazards. The company also seems to restrict employees’ rights to organise."
 
The Council emphasised that Page Industries has not provided any information to help clarify the case or how it works to prevent norm violations at its facilities. In practice, it seems as though the company does little to prevent the abuse of labour rights in its operations. 
 
Post the recommendations, Norges Bank decided to exclude from investment Page Industries, the exclusive licensee of JOCKEY International Inc for manufacture, distribution and marketing of the JOCKEY brand in India, Sri Lanka, Bangladesh, Nepal, Oman, Qatar, Maldives, Bhutan and the UAE.
 
Established in 1990 to invest the surplus revenues of the Norwegian petroleum sector, GPFG has over $1 trillion in assets, including 1.4% of global stocks and shares, making it the world’s largest sovereign wealth fund.
 
The Council on Ethics says it assessed the risk that Page Industries is contributing to or is itself responsible for systematic abuses of internationally recognised human and labour rights. The Council defines 'systematic' as abuses that do not appear to be isolated incidents, but rather constitute a pattern of behaviour. In its assessment of the future risk of human rights abuses, the Council says it attaches important to what the company has done to prevent norm violations occurring again.
 
The report from the Council on Ethics, says, "The Council has based its assessment on its own investigations into the company’s garment factory Page Unit 3 in Bangalore in India. 
 
"The Council attaches importance to the employees’ reports of humiliating verbal and physical punishments when employees return from lawful holiday or sick leave, fail to meet their production targets or make production errors, and the fact that this seems to be a well-entrenched practice among managers at the factory. This must also be seen in in light of the fact that the workers themselves seem to be obliged to bear responsibility for reaching the production targets even when production is halted for reasons that are neither their fault nor within their power to control."
 
"An aggravating factor is that the harassment is directed at subordinate employees, who are unable to defend themselves without being punished for it and must, therefore, be classed as vulnerable. The Council also attaches importance to what seem to be violations of national regulations relating to fire safety, personal protective equipment, electrical hazards and equipment maintenance, and indoor air quality that may pose a hazard to health. In the Council’s opinion, the company’s practices constitute a violation of the right to safe and healthy working conditions, including the right to freedom from harassment," the report says.
 
According to the Council, Page Industries has failed to help clarify the case or give it the permission to inspect the factory. It says, "...the company explained this refusal by saying it could not permit an inspection due to its agreement with the licence issuer. This proved not to be correct. Page Industries has further failed to comment on the draft recommendation to exclude it from investment by the GPFG. In consequence, the Council has had access to less information in this case than in other similar cases it has assessed. The information deficit applies to both the scale of the norm violations and what the company is doing to prevent norm violations." 
 
In keeping with Report No. 20 (2008-2009) to the Norwegian parliament (Storting), the Council says it "takes the view that a lack of information about a company’s behaviour and, not least, a lack of willingness on the part of the company to provide information, may, in and of itself, add to the risk of contributing to unethical behaviour being deemed unacceptably high."
 
"In the Council’s opinion, it seems as though Page Industries does little to prevent the abuse of labour rights in its operations. The Council considers that the company does not in practice have a system capable of preventing, uncovering or remedying labour rights abuses in its operations. When the company furthermore fails to provide information about the matters in question or measures to safeguard acceptable working conditions, the risk of systematic labour rights violations becomes, in the Council’s view, unacceptable," the recommendation report says.
 
According to a report from Economic Times, following recommendation from the Council, Page Industries' partner Speedo International said it would investigate the report. As per a Reuters report, the company manufactures Speedo products in only one Indian factory. Page Industries denied the allegations and said the report does not reflect the correct state of affairs of the units of the company, the newspaper says. 
 
We sent an email to Page Industries. However, till writing this story, we have not received any reply from them. We will update this story as and when we receive any reply from Page Industries. 
 
After hitting a 52-week high at Rs26,891 on 24 January 2020, and a low of Rs16,186 on 24 March 2020, Page Industries' shares are on a roller-coaster ride. It has not been able to participate in the rally that took place post-COVID-19 crash.
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    COMMENTS

    cns

    3 weeks ago

    It is important for all corporates to adhere to or gradually align to the SDG's as announced by the UN. I believe, only Socially Responsible Companies will command a premium amongst investors as business needs to have a positive social IMPACT

    REPLY

    s5rwav

    In Reply to cns 3 weeks ago

    SDGs Highly Crucial for Humanity.

    Saket Jain

    3 weeks ago

    Is this decision based on 2008-9 report as provided in article?

    sheoratan

    3 weeks ago

    This is only Tip of Iceberg;All Textile cos use forced/bonded Labor and despite ILO reports, evidences,no action is taken.Ive proofs....can somebody take the activist role? I can be reached at my mobile 7822089800.The MODERN SLAVERY........

    REPLY

    s5rwav

    In Reply to sheoratan 3 weeks ago

    Please See Whatsapp Message from me. I am Babubhai Vaghela from Ahmedabad. Thanks.

    s5rwav

    3 weeks ago

    Dear #NSEIndia: Why Allow Human Rights Violators #BoardOfDirectors of Indian Oil Corporation Limited Headed by Mr #SMVaidya as the Chairman of Indian Oil Corporation Limited to Trade on NSE? I am Babubhai Vaghela from Ahmedabad. Thanks.

    India's 2020 auto sales expected to decline by 30%: Moody's
    India's auto sector is expected to face challenges this year, with the country's economy predicted to contract in 2020 amid the pandemic, Moody's Investors Service said on Tuesday.
     
    According to it, auto unit sales will decline at least 30 per cent in 2020, following a decline of over 40 per cent in the seven months through July.
     
    "The lower annual decline reflects our expectation of a pickup in economic activity during the remainder of 2020, which also includes the festive period - October through December," the Moody's Investors Service said in a report.
     
    "A second wave of infections and extension of lockdowns cast a shadow of risk on these forecasts. Also, tighter lending criteria could limit liquidity available for consumers and auto dealers."
     
    As per the report, looking ahead, unit sales will likely grow around 20 per cent in 2021, though clearly on a lower base.
     
    "Moreover it will take at least another four years for India's unit sales to recover to pre-pandemic levels," the report said.
     
    On the other hand, the global automotive industry's outlook has been changed to stable from negative.
     
    "The stable outlook for the global automotive industry reflects rising sales through 2021, with continued, but slow, increases through 2023," said Bruce Clark, Moody's Senior Vice President.
     
    "Nevertheless, auto shipments won't recover to pre-pandemic levels until the middle of the decade."
     
    The coronavirus-driven downturn in unit sales is significantly worse than the 2009 decline, Clark said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Indian IT Stocks Trading at 50% Discount to Their Fair Value and Global Peers: Edelweiss Research Report
    As per a research report released by Edelweiss Securities on 2nd September, Indian IT stocks are trading at a 40%-60% discount to their fair value and global peers, and this anomaly in valuation is likely to correct over the next three-four years. Edelweiss analysts see a lot more headroom for Indian IT stocks over the next few quarters.
     
    As of now, from January 2020 to August 2020, the Nifty IT index has already increased by 15.5% compared to over 5% decline in the benchmark Nifty50 index. Among Nifty IT companies, Mindtree has gained the most – higher by almost 50% year-to-date (YTD), followed by L&T Infotech, Infosys, Mphasis, and HCL Technologies. Since 23rd March, 26 stocks from the BSE IT index have more than doubled their prices (e.g., Tanla Solutions has increased by over 500%) and none of the stocks have given negative returns for the period. 
     
    The brokerage firm believes that the digital growth wave in India is building into a storm and is set to herald steep growth prospects for Indian IT companies.
     
    Edelweiss analysts wrote in the report that "We believe the COVID-19 pandemic has accelerated the demand for hi-tech by shrinking the human activity into a world of apps—and in many ways efficiently so. The explosion in online activity has galvanised massive cloud-led adoption, digital adoption, and transformation of the core. Global digital penetration has been reset at lower levels in light of emerging realities, thereby resetting the high-growth phase for technology from FY24 to up to FY27 in the least.”
     
    The report mentioned that structural cost savings from increasing adoption of work-from-anywhere (WFA) would also significantly help shore up the earnings of the companies. The report says, "Those structural cost savings from rising adoption of work-from-anywhere (WFA) on the back of reduction in travel cost, lower wages for talent in tier 3–4 towns, lower capital expenditure (capex) and resultant depreciation would follow are of no less significance and can power companies on their own standing—and our realistic optimism on the space."
     
    Edelweiss Securities expects margins for the key companies in their coverage to improve by 250–350bps (basis points) over the next three years. 
     
    The report noted "Digital revenues and growth rates of Indian biggies such as TCS, Infosys, and HCL Technologies are superior to global peers such as EPAM and Luxoft; yet they are trading at 20–60% discounts to their fair value and a 50% discount to these global companies. This anomaly in valuation, we argue, would correct as the digital wave builds up into a storm over the next three-four years and would effect a seminal change in investor perception.”
     
    The brokerage has raised the target price of Indian IT stocks under its coverage by up to 80%. From a purely returns perspective, they have pegged the order as follows: HCL Tech , Infosys TCS and Tech Mahindra among large-caps; Mindtree, L&T Technology Services and L&T Infotech in mid-caps; and eClerx, Cyient, and Persistent in the small-caps. (See Table 1 and Table 3).
     
     
    The brokerage firm shared that its in-depth analysis implies a jump in earnings at a compound annual growth rate (CAGR) f 17%-19% over FY21-22–FY24-25 from 6%-12% over FY17-18–FY20-21, indicating an uptick of at least 1.5 times in trading multiples—similar to that for the FAANGs [(Facebook, Amazon, Apple, Netflix and Alphabet (formerly Google)] ecosystem. (See Table 21 and Chart 9).
     
     
    The report says that "All in all, we strongly contend that a substantial re-rating driven by multiple earnings upgrades and higher price/earnings to growth (PEG) ratios—similar to what happened in FAANGs’ ecosystem—is in order.”
     
    The firm agrees with the view that the global dislocation caused by COVID-19 will speed up consolidation towards larger players but denied that such consolidation would go against or hurt medium and small Indian technology players.  
     
    Edelweiss Securities believes that a stormy demand will substantially lift the Indian technology players across the board. The firm says that “Lags may be in order in some cases depending on respective companies’ exposure to sectors; hence, the ones acutely afflicted by the current pandemic would be the last ones to recover, but strongly nonetheless”. They have clarified that they do not have a negative view or ‘REDUCE’ on any stock in Indian IT, and that they strong believe that each company stands to gain from the powerful tailwinds that would continue to strengthen.
    The brokerage also cautioned that there are a few key risks: 
     
    i) Serious data breach: The biggest risk to this digital-surge-driven thesis comes from any serious data breach at global tech companies primarily in the FAANGs ecosystem. Such events may significant bring down online web traffic and have a domino effect on technology spends owing to cautious traffic growth outlook. In fact, any major breach event could substantially reverse investments for a small period (say about two quarters).
     
    ii) Adverse currency movement: USD depreciation vis-à-vis INR and adverse cross currency movements would modestly affect growth and earnings estimates of the Indian technology companies (refer to EPS/currency sensitivity Table 4).
     
     
    iii) Budgetary allocations: A substantial cut in the US technology budgets, particularly in Digital, would mar the expected surge in growth at Indian IT companies.
     
    iv) Regulations: Any adverse regulatory provisions and visa restrictions in key client markets may affect Indian IT companies’ capability to execute profitably. 
     
    Edelweiss Securities has also mentioned risks specific to companies (subject to their vertical exposure/mix) They are: i) bankruptcy of a large client; ii) delayed revival of the travel, transportation, hospitality and retail segments. 
     
     
    These findings are in-line with the Goldman Sachs research report on Indian IT companies, which came out earlier in August 2020. 
     
    Goldman Sachs had unveiled its report and stated that the current COVID-19 pandemic is expected to result in an increasing number of global technology roles finding their way to India as ‘work from anywhere’ becomes the new accepted norm.
     
    According to the Goldman Sachs report, in the past also, major crisis have led to a sharp increase in outsourcing and even offshoring particularly to India. This is mainly on the back of lower wages for technology developers as compared to developed economies, and an increasing annual base of engineering graduates. The global brokerage firm anticipates that the top-5 Indian IT service-providers are expected to grow at about 12.6% (in average) in FY22 as compared to earlier estimate of 9.7%.
     
    The report stated "Post Covid-19, we expect a third wave of outsourcing and an increasing number of technology roles globally finding their way to India as work from anywhere becomes the new accepted norm. With the most efficient supply chains, we believe India IT services companies are positioned favourably to benefit from a third wave of outsourcing after previous waves in 2000 (post Y2K) and in 2008-09 (post Global Financial Crisis)".
     
     
     
    During FY16-17-FY18-19, the base of digitally skilled IT employees in India grew at a compounded annual growth rate (CAGR) of 37% to over 600,000, making India the hub and even the largest beneficiary under the ‘work from anywhere’ norm. The report added that “We believe these digitally trained employees at Indian IT firms are likely to drive overall revenue growth, which would be the key reason for their increasing relevance amid the requirement for digital-at-scale solutions”.
     
    The report added that “We see TCS as one of the largest beneficiaries of these trends given its wide array of services/capabilities, geographic presence, wide client base, consistent strong execution and ability to work remotely at a large scale with 450K employees". TCS had announced a few months back that it plans to have 75% of its employees working from home permanently by 2025. 
     
    The report noted "This strategy, we believe would bring certain permanent cost advantages to the IT services firms around lower rental, facility expenses, including electricity, maintenance/repair and even lower capex around land/building required for extra seating arrangements. Some of these benefits though may be offset by additional capex for home IT infrastructure like desktops, more robust wireless/broadband networks and cyber-security tools."
     
    The Goldman Sachs report said that while the labour and cost arbitrage model had helped the Indian IT industry in the first two waves of outsourcing, the industry seems to have now graduated to a value-based model “with a consultative approach around the best digital solutions on offer.” Some of the recent deal wins, where the providers are managing the entire IT function for the clients as part of large managed service contracts, and selling vertical-specialised solutions are examples of this maturity level. The report added “Both of the above approaches require more fixed-price and outcome-based contracts with higher risk-reward.”
     
    According to KR Choksey brokerage, most IT services companies are likely to recover to some extent by the second quarter of FY20-21 as major countries emerge from lockdown and restart their economies. The firm stated “The criticality of technology to most firms’ operations across verticals, along with a further rise in digital and cloud spend post the pandemic, is likely to drive growth recovery from 2Q onward. However, the situation remains fluid and the pandemic is far from over; thus, recovery needs to be viewed with a hint of caution.”
     
    The RBI has also echoed this sentiment in its annual report released in August 2020. The report mentioned “While companies may have put their IT expansion plans on hold and cut back their overall IT spends, there could be pockets of opportunity in software and related services for Indian IT due to an increase in demand and usage for certain IT-enabled services among the consumers and companies impacted by the pandemic”.
     
    The fact that most brokerage firms are unanimous in their opinion that most of the IT services are expected to recover sooner or later is indicative of the resilience of the IT sector despite the fact that the current Covid pandemic has damaged the Indian economy severely.
     
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    COMMENTS

    ganesanjaicare

    3 weeks ago

    research report came at it index peak. may be pump and dump strategy.be cautious with this research report.already bharti airtel fell nearly 20 percent from peak after consensus buy report.be careful. dont overboard based on this report

    REPLY

    m.prabhu.shankar

    In Reply to ganesanjaicare 3 weeks ago

    Not only this report, But any report. Reports with some statistics seems to be the new technique to push stock prices up. COVID is still there. There is no way any company grow as long as this pandemic is eliminated. Who will give new projects to these IT companies. None.

    bhavnani2007

    In Reply to m.prabhu.shankar 2 weeks ago

    I work in the IT industry there are some large organisations who have down sized in US they have heavily out sourced to Indian Companies during the last few months.

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