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SMT. MMK COLLEGE OF COMMERCE AND ECONOMICS.: 

SMT. MMK COLLEGE OF COMMERCE AND ECONOMICS.

A PROJECT ON EUROPEAN DEBT CRISI AND RELIANCE: 

A PROJECT ON EUROPEAN DEBT CRISI AND RELIANCE YEAR : 2011-2012 SEMESTER : 3RD CLASS : S Y. BFM SUBJECT : CORPORATE FINANCE

Slide 3: 

European debt crisis

Group member’s: 

Group member’s NAME ROLL NO DIMPLE GANGLANI 10 PUJAN JOBALIA 20 SAMAY KOTHARI DIVESH SHETTY 44 SAMIKSHA SHETTY 45

Introduction: 

Introduction Historically, financial crisis have been followed by a wave of governments defaulting on their debt obligation FC leads to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt Greece is currently facing a classic sovereign debt crisis

Slide 6: 

Before one to could even think of the end of great recession of 2008, Greece gave birth to another crisis. Greece debt crisis is actually an evolution of the global crisis. Greece allowed deficits from Central bank and government bonds to pile up. Greece debt came to light in 2009.

CAUSES: 

CAUSES Years of unrestrained spending, cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck. The debt levels and deficits that exceeded limits set by the Euro-zone were revealed & exposed In the first quarter of 2010, the national debt of Greece was put at €300 billion ($413.6 billion), which is bigger than the country's economy. The country's deficit (its expenditure in comparison to its revenue) is 12.7%.

Slide 8: 

Greece’s current economic problems have been caused by a mix of domestic and international factors. Domestically, high government spending, structural rigidities, tax evasion, and corruption have all contributed to Greece’s accumulation of debt over the past decade. Internationally , the adoption of the euro and lax enforcement of EU rules aimed at limiting the accumulation of debt are also believed to have contributed to Greece’s current crisis.

Impact of European debt crisis on : 

Impact of European debt crisis on European countries Us economy Indian economy

Impact on European economy : 

Impact on European economy The Greek debt crisis has had a domino effect on Europe. It has reduced the confidence in European economies fiscal deficit and public debt have gone beyond the ceilings regulated by the Stability and Growth Pact (SGP). On April 27, Standard & Poor's decreased the Greek debt rating to "junk" amidst fears of default.

Slide 11: 

Yields on Greek government two-year bonds rose to 15 percent following the downgrade, and stock markets worldwide declined. On May 2 euro zone countries and the International Monetary Fund agreed to a €110 billion loan for Greece On May 9, Europe's finance ministers approved a comprehensive rescue package worth almost a trillion dollars aimed at ensuring financial stability across Europe.

Impact on US Economy: 

Impact on US E conomy An European sovereign debt crisis could at least affect the US economy in the following two respects. First, the devaluation of the Euro triggered by the debt crisis will make American exports more expensive. Euro  has depreciated against US dollar by nearly 15% (from 1.44 to 1.23). government spending and exports have been the only two growth engines of the American economy With tepid consumer demand and very weak labor market, consume- spending recovery is less likely to be quick and robust. One way to spur corporate spending is to sell overseas.

Slide 13: 

The second big worry remains with the banking sector The financial markets across the Atlantic are highly integrated with each other and hence affect each other

Impact on Indian Economy: 

Impact on Indian Economy A prolonged and widespread debt crisis in Europe could have a substantial negative impact on the Indian economy. ‘if the solution of the Greece crisis takes longer than anticipated or if the confidence crisis in Europe become more wide spread, there could be a more substantial negative impact to India. If the debt crisis spreads to other nations in Europe and their banking systems,european entities could start Repatriation of funds from Indian stock markets

Slide 15: 

This would negatively impact the Indian stock market and Lead to lower foreign currency reserves. Severe macro-economic impact due to the turmoil At least 27 percent of India’s trade is with Europe and the crisis will impact India’s export to the region

WHATS NEXT?: 

WHATS NEXT?

ITALY: 

ITALY Italy’s borrowing costs have soared and its stock market has tumbled during these past few days on concerns about Italy’s ability to deal with its large debt problem and concern over a growing rift between Italian Prime Minister Silvio Berlusconi and Italian Finance Minister Giulio Tremonti , a man who the markets hold in high regard . Italy is a country that top European officials should be concerned about since it has a lot of ongoing problems which could threaten the stability of Europe. Italy has a Debt to GDP ratio of 120% , which is treacherously high considering that 90% is seen by people as the threshold when a country is in dangerous territory. Italy's Debt to GDP ratio only trails Greece who has a Debt to GDP ratio of 160%.

Slide 18: 

Italy has struggled to grow its economy for the past several years, which has hampered its ability to pay down its debt . Italy's borrowing costs is seen as "unsustainable" over the long-term (10-year borrowing costs are over 5.6% at the time of this writing) . Italy’s economy is more than twice the size of the combined economies of Greece, Portugal, and Ireland. A recent article by Zero Hedge suggests that a default on Italy’s debt would cause much greater financial problems in Europe than a debt default by Greece and arguably could cause more financial problems in Europe than a debt default by Germany-Europe’s strongest and most important economy.

Slide 19: 

The recent events in Italy may be part of a bigger event that is beginning to impact the larger economies of Europe. The Royal Bank of Scotland’s Chief European Economist, Jacques Cailloux , was quoted saying that he and his firm believes that the larger European economies are beginning to experience the effects of the debt crisis that has impacted Portugal, Ireland, and Greece : " We believe the European sovereign crisis might be entering a new phase with contagion reaching the larger economies ”

SPAIN: 

SPAIN Spain’s borrowing costs are approaching unsustainable levels (its 10-year borrowing costs are above 6% at the time of this writing ) Spain is dealing with the aftermath of its real estate bubble bursting . The true debt/deficit levels of local governments in Spain are not fully known (in fact one region of Spain reported on Monday that its deficit is doubled what it previously reported ) . Spain has youth unemployment levels above 40%

Slide 21: 

The size of Italy alone is too large for the E.U. to bailout with the funds currently at its disposal. The German newspaper Die Welt reported on Sunday that the E.U.’s rescue fund is insufficient to handle a rescue of Italy. Die Welt suggests that the E.U.’s rescue fund may need to be doubled to 1.5 trillion Euros to handle a rescue of Italy . If Spain gets into more trouble the E.U. may need to increase the size of its rescue fund even more.

Slide 22: 

European countries have already committed hundreds of billions of Euros in the rescue of Greece, Portugal, and Ireland in the past 18 months. Despite the hundreds of billions of Euros that Europe has committed in the past 18 months, Greece now requires a second bailout and Portugal may soon need a second bailout .

CONCLUSION: 

CONCLUSION The crisis wont stop for a period of time till all the debt obligations in euro-zone are not cleared The situation is because the euro countries are dependent on each other. Hence the countries are not able to repay the debt to countries they borrowed from and hence the lender is in a threat of going into debt crisis.

RELIANCE INDUSTIRES : 

RELIANCE INDUSTIRES

CAREER GRAPH: 

CAREER GRAPH Dhirubhai Ambani founded Reliance Industries in 1958. After that it was a story of expansions and success. 1958 - Moved to Mumbai to start his own business " Majin " in partnership with Champaklal Damani , his second cousin, importing polyester yarn and spices made profit 1965 - Champaklal Damani and Dhirubhai Ambani ended their partnership and Dhirubhai started on his own.

Slide 26: 

1977 - Started his first textile mill at Naroda , in Ahmedabad and the brand " Vimal ", which was named after his elder brother Ramaniklal Ambani's son, Vimal Ambani . Dhirubhai Ambani is awarded with starting the equity cult in India with Reliance's IPO. 1982 - Ambani began the process of backward integration, setting up a plant to manufacture polyester filament yarn. He then diversified into chemicals, petrochemicals, plastics, power. The final phase of Reliance’s diversification occurred in the 1990s when the company turned aggressively towards petrochemicals and telecommunications.

Slide 27: 

Individuals' from Tata group were never famous for their personal wealth because of their ownership pattern. But the company has been among the major conglomerates in the country. Now with the change in dynamic of the stock market , as a group of companies, their worth is more than that of the two Ambani brothers put together . Reliance Industries BSE 719.50 34.80 (-4.61%) NSE 719.40 34.10 (-4.53%) Tata Investment Corporation BSE 436.00 2.05 (-0.47%) NSE 435.45 1.85 (-0.42%)

Slide 28: 

The top Tata companies which have added market wealth over the past one year includes the name of TCS , Tata Motors , Tata Steel , Titan, Tata Coffee , Tata Chemicals and Rallis. But the Mukesh Ambani led, Reliance Industries lost approximately Rs 72,000 crore , and the only other listed firm Reliance Industrial Infra also lost nearly Rs 650 crore . Among the ADAG firms, the losses in the share price of Rcom stands at Rs 21,000 crore , nearly Rs 20,000 crore for R-Power, additionally Rs 14,000 crore for R-Infra and over Rs 5,000 crore for Reliance Capital. During this period when invetors ' interest in Reliance Stocks have reduced. Tatas are not the only gainers, many other groups have also gained likes of the Birla, Mahindra, HDFC, Adani , Bharti , L&T, Jindal and Bajaj groups experts.

Slide 29: 

A year ago, even with 30 listed companies the Tata group was smaller than the group under the leadership of Mukesh Ambani . The latest market valuation places the Tata Group at Rs 4,40,000 crore . The second best Mukesh Ambani group of Companies are worth at Rs 2,85,000 crore . The Anil Ambani -led ADAG, which was ranked in the third position last year, was no where to be seen in the top 10 also. The group's combined market wealth was reduced by more than Rs 60,000 crore . The Mukesh Ambani -led group's market valuation fell by about Rs 73,000 crore , but that of Tata's went up by more than Rs 1,00,000 crore in the same period Analysts claim this has been due to controversies surrounding the companies of the Ambani brothers. Shares of both the group companies -- Mukesh Ambani and Anil Ambani -- have been continuously falling. In the same time the Tata Group of companies have seen their share prices go up despite its own name being cropping up in scandals.

Slide 30: 

Ratan Tata was instrumental in ushering in a wide array of reforms. It was under his stewardship that Tata Consultancy Services went public and Tata Motors was listed in the New York Stock Exchange. 1971 - Ratan was appointed the Director-in-Charge of The National Radio & Electronics Company Limited ( Nelco ). Nelco had 2% market share in the consumer electronics market and a loss margin of 40% of sales when Ratan took over. 1975 - Nelco eventually grew to have a market share of 20%, and recovered its losses. 1977 - Ratan was entrusted with Empress Mills, a textile mill controlled by the Tatas . He managed to turn it around from being a sick unit to even declaring a dividend. 1981 - Ratan was named director of Tata Industries. 1991 - He took over as group chairman from J.R.D. Tata, pushing out the old guard and ushering in younger managers.

Slide 31: 

2007 - Under the chairmanship of Ratan Tata, Tata Sons successfully acquired Corus Group, an Anglo-Dutch steel and aluminum producer. 2008 , Tata Motors, under Ratan Tata, bought Jaguar & Land Rover from Ford Motor Company. Ratan Tata's dream was to manufacture a car costing less than 100,000 rupees. He realized his dream by launching the Tata Nano in New Delhi Auto Expo on January 10, 2008. Currently he is the chairman of major Tata companies such as Tata Steel, Tata Motors, Tata Power, Tata Consultancy Services, Tata Tea, Tata Chemicals, The Indian Hotels Company and Tata Teleservices.

CONTROVERSIES: 

CONTROVERSIES While Dhirubhai was accused of unethical business practices and manipulating government policies to suit his needs, Ratan Tata has never been involved in any such controversy. Ratan Tata’s plant for Nano production (the 100,000 rupee car) in Singur , West Bengal, was obstructed by Mamta Banerjee (leader of the Trinamool Congress and Leader of the Opposition in the state of West Bengal) on the grounds of forcing people out of their land. He moved it to project to Sanand near Ahmedabad , The Gujarat chief minister Narendra Modi granted him huge subsidy for building the facility, including free land.

Slide 33: 

RELIANCE Reliance communications is owned by Reliance Anil Dhirubhai Ambani Group. Had 109.15 million subscribers in May 2010. Reliance covers 24,000 towns and 600,000 villages in India. Reliance uses various technologies such as CDMA 2000 1x, GSM, WiMAX , EDGE and EVDO.

Slide 34: 

TATA TELECOM It has three operators: Tata Indicom , Tata DOCOMO and Virgin Mobile India. Tata Teleservices had subscriber count of 71.39 million in June 2010. It was first Telecom Company to launch CDMA mobile service in India (Andhra Pradesh circle). Tata uses CDMA in Tata Indicom , GSM in Tata DOCOMO and both these technologies in Virgin Mobiles.