Date:08/11/2008 URL: http://www.thehindu.com/2008/11/08/stories/2008110855881800.htm

Business

‘Cut waste, make acquisitions’

Special Correspondent

Venu Srinivasan calls for another 200 basis point cut in prime lending rate

CHENNAI: It is the best time to cut waste and make acquisitions in the automobile sector with surplus money, said Confederation of Indian Industry (CII) Vice-President and TVS Motor Company Chairman and Managing Director Venu Srinivasan here on Friday.

Talking to newsmen on the sidelines of Auto Serve 2008 conference, he said that due to the global financial crisis, most of the companies would either slow down or postpone their expansion programmes. Some might cut down capital expenditure, resulting in surplus cash that could be used for acquiring companies. Moreover, the price earning ratio of several companies which had reached high levels during the boom period had come down drastically.

Growth rate

“The present global financial crisis is greater than World War II, as it has affected almost all the countries in the World. The growth rate of developed countries will be in negative while that of developing countries might come down. There has been slowdown in the Indian economy since June and the growth rate will be anywhere between 5.5 per cent and 6.2 per cent. To improve the liquidity, Cash Reserve Ratio and Prime Lending Rate (PLR) have been cut. Automobile dealers in Tier-II and Tier-III cities do not have liquidity. Hence PLR has to be cut by another 200 basis points,” he said.