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: The new accounting norms issued by the Institute of Chartered Accountants of India (ICAI) late this March, could not have come at a more difficult time for Indian corporates. ICAI had, with immediate effect, asked corporates to follow an accounting norm, that forces companies to disclose and/or provide for all losses on derivative contracts that they would have incurred. According to estimates, the cumulative losses incurred by corporates in this respect last fiscal would be as high as $5 billion (Rs 20,000 crore).
This comes at a time when the global markets are in turmoil and the domestic market has tanked from its mind-boggling heights on global cues. The benchmark Sensex, that had at one point in January crossed 21,000 points, is now loitering at 15,000, and according to certain major brokerage firms, is expected to touch 14,000 soon. Apart from the thousands of small investors who have burnt their fingers in the stock markets, certain large corporates too had to bear the brunt - the lukewarm response to the Reliance Power IPO is a case in point. Certain companies like real estate giant Emaar MGF and Wockhardt Hospitals had to shelve their plans to raise money through initial public offerings (IPO).
Yet another factor that Indian corporates have been battling has been the recession in the US, although many companies still refuse to admit how much they would be hurt from the impact. Starting with the subprime crisis a few months back, which threatened to erode some of the high-value businesses of Indian corporates who have large exposure to the US market, the spate of bad news has taken its toll on some very large firms in the global financial sector. In the bargain, the Indian subsidiaries of these firms have been hurt. To add to the woes of companies, especially those into the commodities business, inflation has touched a new high of 7.41%, the highest in three years. The Cabinet Committee on Prices (CCP) has already taken measures to cool off prices, which include abolishing import duty on all crude edible oils, and a ban on the export of non-basmati rice and pulses. The government has also banned cement exports and is said to be considering a spate of measures to bring down the prices of steel. Steel prices soared to as high as Rs 40,000 a tonne for hot rolled coil, and now steps like putting restrictions on...
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