News: India to emerge as biggest labour pool

(DNA 31/05/2006) Bangalore - Doomsayers may be talking about how India's cost advantage due to cheap labour is about to disappear as Indian salaries catch up with salaries in the western countries, but, leading US-based Boston Consulting Group (BCG) begs to differ.

A study carried out by the management consulting firm reveals that India's surplus population in the working age group is nowhere near depletion. In contrast, it will see the biggest surge in the world by 2020 as the surplus workforce moves to 47 million, while China faces a shortage of 10 million people by that year. USA's working age population will shrink the most, with a shortfall of 17 million, while Japan will be short of 9 million people, discloses the study.

"What this means is that, even in 2020, India's workforce supply will outstrip demand. This will pin down the rise in Indian salaries, and maintain the present gap between the Indian salaries and salaries of other countries, giving companies working out of India the same cost advantage they enjoy today," explains BCG director James Abraham.

Going by the BCG findings, India would have the maximum labour cost advantage by 2020, compared to other countries. India's surplus is way ahead of other countries with excess working class population, including Pakistan (19 million), Bangladesh (7 million), Indonesia (5 million), Vietnam (4 million) and Egypt (4 million). Countries that would face employee crunch include France (3 million), Spain (3 million), Russia (6 million), UK (2 million), Italy (4 million) and Germany (3 million).

"Those talking about the shortage of working age population in India are taking a myopic view. If the current level of 8% GDP growth rate is maintained, then this is the kind of surplus workforce that we are likely to see by 2020," says Abraham.

However, there's a catch here. Of the total surplus workforce that India will have in another 14 years, a very small proportion will be skilled.

Abraham feels the Indian industry, especially the knowledge industry, may not be able leverage this advantage to the fullest if the current education standards remain.

News: Hat-trick of highs in private capital flows

(DNA 31/05/2006) Mumbai - Flows of private capital to developing countries touched a record $491 billion in 2005, soaring for the third consecutive year, even as official flows of grants and loans fell for the fourth consecutive year.

Calling 2005 a landmark year in development finance, the World Bank’s World Development Finance 2006 report notes that the increase in private capital flows were broad-based across debt and equity instruments.

Long-term bonds, bank lending and portfolio equity showed particularly robust growth. At the same time, the report warned that developing countries must learn to manage capital flows effectively if macro economic stability is to be maintained.

Sudden changes in exchange rates and global interest rates could cause volatility in these flows, the report notes.

It particularly points to the surge in portfolio inflows associated with a dramatic increase in stock market prices, especially in Asia.

This could raise the risk of asset price bubbles, it cautioned. The report suggests that international efforts are needed to maintain a financial environment conducive to a balanced expansion and deployment of capital flows.

Interestingly, capital flows - especially FDI - between developing countries are growing more rapidly than flows from developed to developing countries.

Along with that, official flows of grants and loans fell for the fourth consecutive year.

What’s driving this surge in private capital flows?

Robust global economic growth, for one, especially in developing countries who’ve been growing faster than developed countries.

The other driver is financial innovations, especially local-currency financing, and structured financial instruments like credit default swaps.

This has helped investors manage their exposure to risks associated with emerging market assets, the report notes.

The report identifies the policy agenda for managing the volatility of capital flows.

The gradual opening of capital accounts, it says, must be accompanied by a further strengthening of macroeconomic policies, the development of local capital markets and regulatory institutions and risk management systems. It, however, rejects the idea of a return to capital controls.

Noting the huge accumulation of foreign exchange reserves - far in excess of liquidity and intervention requirements - the report suggests that countries would be well placed to allow local institutional investors to diversify their investment portfolio globally.

This, it says, could transfer currency risks from central banks to investors with a longer investment horizon. Besides, retail investors, it suggests, could also be allowed to invest in approved international assets.

It also recommends that developing countries strengthen corporate governance norms, as this will boost investor confidence and help the stability of capital markets.

News: India's GDP grows annual 9.3 pct in Jan-March

(RTR 31/05/2006) New Delhi - India's economy in the January-March quarter grew a faster-than-expected 9.3 percent from a year earlier, data showed on Wednesday, raising expectations for further interest rate rises.

The expansion rate in the fourth quarter of India's financial year, which runs from April to March, was higher than the revised October-December rate of 7.5 percent and above analysts' forecast for 7.8 percent annual growth in gross domestic product.

Analysts said the faster pace of growth, led by strong farm, manufacturing and services output, boosted the argument for higher interest rates in July when the central bank reviews monetary policy.

"It's a big positive surprise on the growth front. The strong report comes on the back of higher-than-expected farm sector and manufacturing growth," said Shuchita Mehta, economist at Standard Chartered Bank in Mumbai.

"It strengthens the case for a rate hike in July and is negative for bonds."

Agriculture -- which accounts for about 23 percent of GDP -- grew an annual 5.5 percent in the January-March quarter, compared with a downwardly revised 2.9 percent annual growth in the previous three-month period.

Manufacturing output, which accounts for nearly 15 percent of GDP, expanded 8.9 percent, faster than a revised annual growth rate of 8.3 percent in October-December.

Full-year GDP growth for 2005/06 was revised to 8.4 percent from a previous estimate of 8.1 percent.

The benchmark 10-year bond yield inched up to 7.6611 percent from 7.6552 percent after the data and the rupee gained to 46.35/37 per the dollar from 46.44/45 beforehand.

India's main stock index was down 4.8 percent, trimming losses of as much as 5.5 percent earlier in the day.

Indian policy makers forecast expansion in 2006/07 of 7.5-8.0 percent. Prime Minister Manmohan Singh has said growth should reach 10 percent in two to three years, although analysts say India's poor infrastructure could hinder long-term progress.

The figures are provisional. India does not release seasonally adjusted data to show change between quarters.

News: Bankers bet on India riches despite skinny fees

(RTR 31/05/2006) Hong Kong/Mumbai - Investment bankers are accepting lower pay cheques and taking on more risk as they ramp up operations and fight for deals in India.

"It is survival of the fittest," said Uday Kotak, vice chairman of Kotak Mahindra Bank.

"There have been players who have been in and out of the Indian markets from time to time, but long-term commitment is the key to success."

The allure of India, Asia's third-largest economy, is a market where investment banking revenues rose 79 percent in 2005 to nearly $375 million, according to research firm Dealogic.

"There's obviously pressure because of the increasing competition, but I don't think the fees are going to go down any further," said Vishal Kampani, executive director at JM Morgan Stanley, a joint venture between India's JM Financial Group and Wall Street heavyweight Morgan Stanley.

Nowhere is the competition more fierce than in the market for convertible bonds, where banks already generate narrower margins than they do underwriting stock sales or mergers.

"There's some inherent natural fee compression, but they certainly haven't gone the way of Taiwan," said Ronnie Potel, vice president and equity-linked specialist at Citigroup Inc.

Traditional convertibles pay roughly 1 percent in India, and have fallen to as little as half that in recent years in Taiwan.

"We aim to be number one but to also be profitable," said Potel, whose firm has generated the most net revenue from Indian convertibles this year, according to Dealogic.

Indeed, issuers don't always get their way.

When Jet Airways Ltd., India's top domestic airline, tried to squeeze bankers on fees for a $500 million convertible bond offering in March, investment banks said a rare "no thanks".

Jet Airways is still looking for banks to do its deal, a source familiar with the situation said this week.

INCREASED RISK

Some banks have put aggressively priced deals on their own books -- a dicey proposition if prices fall.

So far, the market boom has protected banks from getting caught out when holding on to deals. Barclays made a big return after being stuck with part of a Vedanta deal in January, bankers say.

Even with the recent market slide, stock prices have more than doubled since May 2004 as investors seek more exposure to a country with 8 percent economic growth.

As a result, convertible issuance has risen to $4.5 billion so far in 2006, surpassing the total of $3.6 billion for all of last year, Dealogic said.

"The sector leaders in raising converts out of India have been autos, pharmaceuticals and telcos," said Ashok Pandit, managing director, equity capital markets for Deutsche Bank, which has about 1,800 staff in India.

"Further issuance will be driven by how the markets perform," he said. "The underlying fundamentals remain strong."

Straight equity deals are getting competitive, too.

Reliance Petroleum Ltd. used nine underwriters for its $600 million IPO earlier this month, while real estate firm DLF Universal Ltd. has hired eight banks to work on its upcoming $3.5 billion offering, potentially the largest ever from India.

By comparison, Bank of China needed just three investment banks to lead its $9.7 billion IPO.

COVETED FOOTHOLD

Banks such as Macquarie Bank and Lehman Brothers are expanding in India to jostle with stalwarts such as Citigroup, Deutsche and Morgan Stanley.

"We have an early mover advantage having a track record and a strong onshore banking team," said Chris Hui, head of Asian structured corporate finance for Barclays, which does not compete for IPOs or merger deals.

Firms like Merrill Lynch have started shying away from traditional convertibles in favour of bigger paydays.

Merrill, which recently paid $500 million to boost its stake in its Indian joint venture to 90 percent from 40 percent, has changed its focus to structured deals such as pre-IPO financing for smaller, high-growth companies.

Lehman plans to set up an investment banking unit in Mumbai this year. Credit Suisse is relaunching its brokerage arm, dormant since 2001, while Goldman Sachs is ending its tie-up with Kotak Mahindra Bank Ltd. to go at it alone.

The only people who have moved faster into India are overseas investors, if the convertible bond market is any indication.

"Every deal we do, we add a couple more investors to the order book," said Doug Decker, global head of convertible bond origination for Barclays. "In an order book of 100 names, it may be two or three new ones."

News: Indian shares drop 6 pct, rupee hits 3-yr low

(RTR 31/05/2006) Mumbai - Indian shares fell as much as 6.25 percent on Wednesday joining a drop across world markets, with a pullout by foreign investors pushing the rupee to a three-year low.

A stronger-than-expected 9.3 percent economic expansion in the January-March quarter from a year earlier, along with central bank intervention, helped pull back the rupee slightly.

But expectations the robust growth would push up interest rates weighed on stocks and bonds.

Dealers said investors were nervous after an emerging markets sell-off this month caused by concerns about high valuations, rising interest rates in Japan and the United States and volatile commodity prices.

"The fall in Indian market is related to global liquidity movement," Swati Kulkarni, a fund manager with UTI Mutual Fund, which controls assets worth $6.8 billion. "Other variables like the strength of the economy and structural advantages remain intact."

The 30-share BSE index was down 5.72 percent at 10,176.41 points by 0805 GMT, after falling as much as 6.25 percent. The benchmark has lost more than 20 percent from its all-time high of 12,671.11 points on May 11.

Shares in Japan and Singapore were down 2.5 percent after Wall Street fell 1.6 percent on Tuesday on concerns of a slowdown in U.S. consumption.

India has borne the brunt of a foreign sell-off, with outflows of $2.47 billion in 13 sessions to Monday. This has sliced net foreign fund investments to $2.38 billion since the start of January.

"The market will continue to be volatile. The recent fall has brought the valuations down to around 16 times forward earnings and we expect it to remain in a band of 16-19 times in the short-term," Kulkarni said.

Bellwether Infosys Technologies Ltd., India's No. 2 software exporter, lost 5.5 percent to 2,860 rupees on concerns about U.S. consumer spending that faces a potential slowdown due to high oil prices.

Top bike maker Hero Honda Motors Ltd. fell more than 7 percent and number two Bajaj Auto Ltd. lost 5 percent on concerns higher fuel prices would hit demand. India is expected to review domestic retail fuel prices by Friday.

The economic expansion in the fiscal fourth-quarter was higher than the revised October-December rate of 7.5 percent and above analysts' forecast for 7.8 percent annual growth. Analysts said this would boost prospects for an interest rate increase.

"The central bank may raise interest rates by 25 basis points in its next review," said Abheek Barua, chief India economist at ABN AMRO Bank. "We expect a GDP growth of 7.5 percent for the current fiscal year that began April 1."

RUPEE SLIDES, BONDS YIELDS RISE

The rupee dropped 0.6 percent on the day to 46.57 per dollar, its lowest since June 2003, according to Reuters data, before central bank intervention pulled it back slightly. At its lowest, it was down more than 3.0 percent this year.

Traders said the equity outflows made the rupee vulnerable to a widening trade deficit caused by high oil prices and rising imports to feed a robust economy.

"Recent trade data suggest further trend deterioration in India's external balance. Moreover, renewed oil price gains may exacerbate this," Standard Chartered Bank said in a report.

"In the immediate term, this may mean that the rupee may continue to underperform."

Oil is India's biggest import and analysts expect the rising oil bill to widen the trade gap to $59.1 billion in the year to March 2007 from $55 billion a year earlier. The trade deficit was at $4.21 billion in April, higher than $2.90 billion in March.

Federal bonds yields climbed to four-year highs on worries the central bank may raise short-term interest rates to defend the rupee and as investors braced for a fresh bond auction of $2.2 billion.

News: 'Indian economy not overheating'

(RTR 31/05/2006) New Delhi - There is no evidence of overheating in the Indian economy, which grew at a faster-than-expected annual rate of 9.3 percent in the January-March quarter, the deputy chairman of the Planning Commission said.

Montek Singh Ahluwalia also told reporters that there was scope for further expansion in the manufacturing sector.

News: Tesco close to deal with Bharti for retail bang

(TNN 31/05/2006) Mumbai - Tesco, the world’s third-largest retailer, is understood to be finalising an agreement with Sunil Mittal’s Bharti Enterprises for a separate retail venture to cash in on a surging, consumer-driven boom in Asia’s third-largest economy.

Tesco proposed JV with Bharti Enterprises, the holding company which is controlled by Sunil Mittal’s family, will focus primarily on selling fresh foods, staples, grocery and other convenience foods across cities and towns in India.

Sunil Mittal, chairman and group managing director, Bharti Enterprises, said that the company had yet to finalise a foreign partner.

“We are in talks with a few of them and will finalise it in the next few months,” he said. However, sources said that Bharti had finalised Tesco as its retail partner and that negotiations were in final stages. Officials of both the companies are believed to have spent the past four months hammering out the details.

The joint venture vehicle will be a separate retail company. The agreement is being structured in a different manner to ensure that Tesco does not own any stake in the front-end, retail arm and that it does not violate any existing rules. Sources close to the discussions said that there would be a profit-sharing agreement between Tesco and Bharti and clauses to enable Tesco to pick up a stake in the retail venture as and when FDI rules are changed.

On one hand, India does not allow FDI in multi-brand retail stores. On the other hand, foreign companies can own up to 51% in single-brand retail stores. Tesco is very clearly focusing on building up capabilities in the country and preparing for a strong presence in the Indian market until the FDI rules in retail are relaxed, the sources added.

Tesco is the UK’s biggest retail chain employing more than 2,50,000 people, with annual sales of more than 40bn pounds and a pre-tax profit of over 3bn pounds. Its imminent entry signals, the strong interest among global retailing giants for a presence in India which today offers more opportunities for growth, thanks to its growing middle class and consumption-driven boom.

But Bharti is not the only group in Tesco’s sights. The UK-based giant is already believed to have entered the Indian market through an understanding with Home Care Retail Mart, founded by a former promoter of D Mart. Home Care has already launched a hypermarket format called Magnet in Mumbai, the sources said.

Ashok Maheshwari, one of the main promoters and managing director of retail chain D Mart, quit to start Home Care Retail Mart sometime ago. A prominent NRI business group is understood to be a strategic investor in the new retail venture, the sources said.

Tesco, the sources said, is believed to have invested in the venture through a structured arrangement to ensure that no FDI norms are violated.

The Magnet retail chain is expected to be scaled up to 50 stores by ‘10. The 50,000 sq ft Magnet with 23 product categories and 26,000 stock keeping units (SKUs) has on display everything from fruits to furniture and fixtures. Bharti Enterprises has forayed into agri business through FieldFresh Foods, a 50:50 joint venture with the Rothschild Group-controlled ELRo Holdings India.

The company, a back-end supply chain, exports fresh fruits and vegetables to markets in the European Union, the UK, South East Asia and West Asia. Fieldfresh Foods is handled by Sunil Mittal’s brother Rakesh Mittal, while the retail venture is handled by Rajan Mittal.

The country has embarked on the process of opening up the retail sector by allowing up to 51% foreign equity in single-brand retail in February. Bharti and Tesco already have business dealings as Bharti supplies fresh products through its company, FieldFresh Foods to Tesco.

US billionaire investor Warren Buffett has invested $329m in Tesco which operates across 10 markets. The first Tesco store was opened in 1929, but it is only since the 1990s that Tesco significantly increased its retail focus. In addition to food, the company now covers non-food products, personal finance, internet retailing, home shopping and petrol retailing in the UK, with Tesco.com and home shopping also operating in the Republic of Ireland and South Korea.

Tesco’s Hindustan Service Center in Bangalore has developed an integrated suite of applications called `Tesco in a Box’ which is shipped to any country where Tesco opens a new store, like it did recently in Turkey. Also, the Bangalore centre supports the British retailer’s US operations.

News: Full float of rupee after proper checks

(PTI 31/05/2006) New Delhi - Government on Wednesday made it clear that full float of rupee would be allowed only after putting in place a regulatory mechanism to ensure financial stability and creating congenial atmosphere like containing revenue and fiscal deficits.

"We are gradually moving towards full Capital Account Convertibilty, but first we have to create conditions congenial for that," Minister of State for Finance P K Bansal said in an Assocham seminar here.

Fiscal deficit and revenue deficit are matters of concern. But "we have reason to be optimistic to achieve three per cent fiscal deficit and zero per cent revenue deficit by 2008-09," he said.

With the implementation of fiscal responsibility and Budgetary Management Act, both the centre and state governments are serious about fiscal consolidation.

India is a strong economy, that is the condition which has to be created before moving to full CAC, which has to be gradual, he said.

Bansal said at present India has permitted limited capital flow into many sectors and talks are on for allowing foreign investment in retail sector.

He said the government has also liberalised the borrowing norms for raising capital from overseas market.

He said public expenditure is a matter of concern but with implementation of outcome budget, the ministeries have been made more accountable.

News: Rolls Royce launches Phantom in India

(PTI 31/05/2006) Mumbai - European auto major Rolls Royce on Wednesday launched the `Rolls-Royce Phantom' luxury car in the Indian market aimed at tapping the growing consumer demand for luxury vehicles in the country.

The car is priced at Rs 3.5 crore, a company release said here.

Rolls Royce has opened the first showroom in India and Navneet Motors Pvt Ltd would be the authorised car dealer in India, it added.

News: India's FY06 GDP gowth at 8.4%

(BS 31/05/2006) Mumbai - India has sustained its high economic growth clocking a growth of 8.4% for 2005-06 compared to 7.5% the previous year.

According to the advanced GDP estimates released today, the high growth rate is on account of a 12% growth in construction and a 11.5% in busines services.

Manufacturing sector registered an increase of 9.7% while electricity, gas and water supply witnessed an increase of 5.3%.

News: Restaurant chain TGI Friday's plans Indian expansion

(BL 31/05/2006) New Delhi - Restaurant chain TGI Friday's has picked up a 25.1 per cent stake in its Indian master franchisee firm, Bistro Hospitality (P) Ltd, for an undisclosed sum. TGI Friday's, which is owned by a subsidiary of Carlson Restaurants Worldwide, has charted out expansion plans. Richard Snead, President and CEO of Carlson Restaurants Worldwide, said: "Our purpose for investing is to create a catalyst for growth and our goal is to more than triple our investment and the number of restaurants in the next five years." The company plans to open 25 restaurants in Chandigarh, Jaipur, Pune, Hyderabad, Chennai and Kolkata, besides Delhi and Mumbai at an estimated investment of Rs 100 crore. "Each outlets costs us around Rs 2-4 crore depending on the location," Rajan Jetley, Chairman Bistro Hospitality (P) Ltd, said. The chain, including the upcoming project in Delhi, has six restaurants in the country so far. However, in the long term, the company is looking to open nearly 60 restaurants in the country and is targeting an annual turnover of around Rs 100 crore from the current Rs 25 crore in the next five years. Currently, for the US-based chain, the UK and Korea are the largest international markets and according to Snead, the company wants to develop the Indian market to be one of its largest international businesses.

News: SBI to buy 2 banks overseas

(BL 31/05/2006) New Delhi - State Bank of India expects to complete the acquisition of Giro Commercial Bank of Kenya and PT Bank IndoMonex of Indonesia in the next two months.

"We will acquire these two banks in two months time," A.K. Purwar, Chairman, SBI, told reporters on the sidelines of a function held for the release of commemorative coins as part of the bicentennial celebrations of the bank.

Asked about recent rupee movements, Purwar said that it's a market-determined movement and that the bank was doing its normal commercial operations. "We are an open market economy," he said.

He said that the fundamentals of the economy are strong and that there was good credit growth in retail, corporate sector and small and medium enterprises.

On the recent slide in stock market indices, Purwar declined to comment on the quantum of purchases that had SBI made but added that it was a good buying opportunity.

News: Shoppers' Stop to bring in more global brands

(BL 31/05/2006) Mumbai - Shoppers' Stop is planning to ramp up the presence of its international brands at its stores.

Currently the licensee brands comprise only 5 per cent of its total business and the retail chain is planning to introduce more brands at its stores, which includes roping in the existing stand alone stores as in-store labels within its premises.

B.S. Nagesh, Managing Director & Customer Care Associate, told Business Line: "Being one of the largest retailers, there have to be better offerings at our stores."

In the recent past Shoppers' Stop has been adding the number of licensee brands at its stores, which include brands such as Mother Care and Mac.

It now intends bringing in a jewellery brand from Dubai. Govind Shrikhande, Customer Care Associate and CEO, Shoppers' Stop, said: "We intend bringing in more licensee brands and these would include categories such as footwear, watches and jewellery."

Besides, there are plans to bring stand-alone stores such as Tommy Hilfiger into its large format stores.

At the same time, the retailing chain has also taken the onus of creating stand-alone stores for its licensee brands.

For instance, in the case of Mother Care, Shoppers' Stop would be creating 20 stand-alone stores for the brand while in the case of the cosmetic brand - Mac (with brands such as Clinique and Estee Lauder) - there is a target to make 10 independent stores for the brand.

Notwithstanding the steep import duties on cosmetics (110 per cent), Shoppers' Stop finds it rewarding to create these brands in the Indian market.

"We will go slow and steady in building these brands, especially Mac, in India," said Shrikhande, who said that his chain is already making money on the licensee brands.

Meanwhile, a new company called HyperCity Retail (India) Pvt Ltd has been floated by the K Raheja group as it makes a foray into the hypermarket model.

Having opened its first HyperCity outlet in Malad recently, there are plans to increase its presence by opening 3-4 stores every year.

Shoppers' Stop is also looking at picking up a 51 per cent stake in the venture.

Nagesh, who also doubles up as Vice-Chairman of Hypercity Retail, said: "The expansion for Hypercity will be funded through Shoppers' Stop as well, where we might pick up stake in the company."

News: India witnesses over $1.2 b foreign funds outflow

(BL 31/05/2006) Mumbai - India and Korea bore the major brunt of the recent sell-off by foreign funds in emerging markets. It is estimated that foreign funds pulled out about $5 billion last week from emerging markets with India alone witnessing an outflow of over $1.2 billion.

According to data filed with the Securities and Exchange Board of India, the total sell-off by foreign funds in the last eight trading sessions accounted for $2.5 billion (Rs 11,131 crore).

The pull out from Korea was higher during last week at $1.549 billion, according to the Emerging Portfolio Fund Research, which tracks foreign fund flows into emerging markets.

The other major markets that have witnessed sell-off include Taiwan ($1.185 billion), followed by Thailand ($555 million).

"India has been receiving out of proportion inflows by foreign funds," said Chetan Ahya, Executive Director, JM Morgan Stanley, a leading investment bank. According to him, Indian equity markets were receiving about 20-25 per cent share of overseas funds dedicated to emerging markets.

With foreign funds turning net sellers after the rise in the US interest rates, it was only natural that the sell-off is on a larger scale in India, Ahya said.

However, according to analysts, the sell-off by foreign funds may have stopped for the moment. "Any major impact on the stock prices will have a drastic impact on the existing holdings by foreign funds," said a research analyst in a local broking firm. "Long-term players will stay invested, while short-term participants like hedge funds move out in search of better returns," he said.

At present, foreign funds hold over $43 billion worth stocks in India (after the recent trimming in holdings) and fall in prices would mean that the value of their holdings come down. The benchmark BSE-30 Sensex has shed 1884.48 points or about 15 per cent from the peak of 12,671.11 points on May 11.

"There are always some new funds waiting to enter once the stock prices fall to a certain level. It is wrong to categorise FIIs as just one segment," said Rajan Krishnan, Business Head (Asset Management), Principal PNB Asset Management Company.

Two years ago there were 552 registered FIIs in the country. Today, the figure has risen to 916, according to SEBI.

News: Indo Fair 2006 on in Trinidad

(TTG 30/05/2006) Port of Spain - In a bid to strengthen relations between India and Trinidad, a 125-member Indian delegation, supported by the Trinidad High Commission in India, arrived here last week to explore areas of mutual interest for possible joint ventures to promote bilateral trade.

In a release from International Business Promotions, managing director Jagnanan Sookoo said his company was facilitating the businessmen of both countries in this endeavour.

IBP is also hosting Indo Fair 2006 at the Centre of Excellence, Macoya.

More than 50 Indian companies are participating in the fair, showcasing a variety of merchandise including hand-carved furniture, handicraft, apparel, jewelry, home furnishings and kitchenware.

Sookoo plans to make the trade fair an annual event to commemorate Indian Arrival Day (today) and to strengthen ties between both countries.

Indo Fair 2006 ends June 4.

News: Indian shoppers set for mall-a-mall weekly

(TNN 30/05/2006) New Delhi - After the spurt in the number of discount stores, the new concept making way into India’s retail space is discount malls. With retail heavyweights such as the Hiranandanis, Essel Group and Vatika Group of companies planning to make their foray, some small players have already made a beginning.

Mall goers, can therefore, look forward to discounted rates ranging from 25-60%, while they shop for their favourite brands under one roof. Discount malls would primarily constitute of factory outlets of various brands in categories such as apparel, cosmetics, electronics et al. Some existing names in this space are KK Bazaar in Pune and Huma Mall in Mumbai.

Spurred by international success many Indian builders are now betting big on these specialised malls. The concept behind a discount mall is to get the surplus production of leading brands and eliminate the middleman. One such mall coming up in Mumbai is Orchard Road Mall by Royal Palms Estates.

“Our mall is designed keeping in mind the issue of location and overhead cost vital to factory outlet concept at the same time complementing existing distribution streams for maximum revenue generation,” says Dilawar Nensey, joint managing director, Royal Palms Estates.

Orchard Road Mall is designed with four distinct areas, two housing all the brand outlets, one that functions as a food court and for hosting cultural events and one housing the anchor tenant — HomeMakers.

“We would be offering space in our malls on an ownership basis at an affordable price so that they benefit from the marginal costs and give consumers a discounted price,” he adds. Provogue is one such brand, which has already insured its presence in Orchard Road Mall.

Property consultants Knight Frank India estimate around 10 such discount malls to come up in the next 2 years in cities like Mumbai, Delhi, Chennai and Bangalore.

“Although this concept has been around for a while internationally, there is no such format in place in India as such. But with many builders showing an interest in such consumption centres we expect a rise in number of these malls,” says Prakrit Mehta, head of retail division, Knight Frank India.

When contacted, the Vatika Group spokesperson said that the finances of the discount mall project are yet to be finalised but the process is under way. “We are into malls in a big way right now and discount malls would be one such foray,” he says.

An existing player in the discount mall space is Huma Malls, which houses factory outlets of brands like Nike, Adidas, Wrangler amongst others is planning another two malls in Thane and south Mumbai very soon.

“We offer discounts in the range of 25-60% and during festival time there is a flat 50% discount on all brands,” says Mohammad Khalid Sidiqui, CEO of Huma Mall.

News: Pantaloon arm raises $400 m

(TT 30/05/2006) Calcutta - Indivision Capital, a private equity fund launched by the Pantaloon group targeted at the domestic consumer goods industries, has raised $400 million with some of the world’s well-known families investing in the fund.

Global financial powerhouse Goldman Sachs has come in as the anchor investor with a commitment of $100 million.

Group CEO Kishore Biyani said the fund would be closed in a few days. He, however, declined to identify the investors.

“They are all high net worth individuals,” Biyani said on the sidelines of a seminar on retail in Calcutta on Saturday.

The fund would pick up stakes both in listed and in private companies in the consumer sector and it will be controlled by the present management.

The money would be deployed within two years. Biyani said he is expecting a return of 30 per cent annually. “We will invest in 20-25 companies.”

Although there is a green-shoe option to raise more money, the fund has decided to go against it.

Pantaloon has roped in Atul Kapur, managing director and principal strategist of Goldman Sachs’s private equity fund, to head Indivision Capital as the managing director and chief investment officer.

Indivision will provide guidance to the firms where it will invest. Also, the invested firms will get a national distribution network for their products through Pantaloon.

Bengal plan

Pantaloon will invest Rs 500 crore in Bengal in the next two years to develop property and take space on rent to launch its different retail formats. Its pan-Indian investment would be close to Rs 2,500 crore.

Biyani said 30 lakh square feet of retail space would come up in Calcutta alone, while another 4-5 lakh would be in districts.

The group would set up 11 Big Bazaar, 20 Food Bazaar and six Pantaloon shops during this period.

Presently, it has 2 lakh square feet of space.

It is planning a 30,000-sq-ft facility in Haldia, 50,000 sq ft in Burdwan and 100,000 sq ft in Kharagpur. Apart from this, it has planned various retail formats for Darjeeling, Siliguri and Guwahati.

The company is also set to launch its high-end electronic brand, Sensei, in the coming months.

News: Adidas India to invest heavily in retail operations

(F2F 30/05/2006) Mumbai - Sports goods and footwear manufacturer adidas India is to open flagship stores in the metros and will make hefty investment in retail operations, informed Andreas Gellner, Managing Director.

Speaking to media, he conveyed that India is very important market and will emerge among top 10 revenue generating markets for the company.

adidas India has been growing with compounded annual growth rate of 50 percent, sources revealed.

Company started operation in India way back in 1996. Gellner stated that in India 100 percent FDI is not allowed, so they will adopt franchisee route and will open stores in Chennai, Mumbai, Delhi, Hyderabad, Kolkata and Pune.

Though company has 30 percent market share in India, it contributes less than 1 percent of adidas's global revenue at €6.6 billion.

adidas has 110 stores; some monobranded and others multibranded and the former contributed 60 percent of total sales in India.

Company also plans to launch retail management education partnering with leading educational institutes to train its manpower for the growing sector.

adidas is a name that stands for competence in all sectors of sport around the globe. The vision of company founder Adolf Dassler has long become reality, and his corporate philosophy the guiding principle for successor generations.

The idea was as simple as it was brilliant. Adi Dassler's aim was to provide every athlete with the best possible equipment.

News: India to drive Unilever growth

(TNN 30/05/2006) Mumbai - Hindustan Lever, that has seen its profits dipping since the early 2000s due to a slowdown in consumer demand, now sees India as the growth driver for its parent - Unilever.

Thanks to rising incomes, robust economic development and changing lifestyles that would augur growth for the company and for the FMCG sector in the coming years.

For Unilever, developing and emerging (D&E) markets like India, China, Africa among other countries have contributed over 67% to its turnover in 2005.

"By 2010, consumer spending in D&E markets will overtake that in developed countries. Hindustan Lever is positioned to capture the opportunities in India with its vast and differentiated brand portfolio. Also, with its innovation and R&D capabilities it would be able to straddle the entire pyramid,"said Harish Manwani, chairman of HLL.

The socio-economic break-up of India, expressed as a pyramid, would drive consumption and uptrading across categories, Manwani added.

Meanwhile, Hindustan Lever has created separate sales team to cater to the different channels of retail trade. For instance: Organised retail.

This segment currently constitutes just 3% of its FMCG sales but is growing at 25% per annum. HLL brands are sold through a distribution network of 6.3 million outlets across the country.

News: Street stores are a threat for Indian retailers

(IBN 30/05/2006) New Delhi - The Commerce Ministry believes that Indian high street stores are as big threat to unorganised retailers as foreign players. But Pantaloon's Managing Director Kishore Biyani begs to disagree.

This isn't the true face of Indian retailers. Barely two per cent of retail establishments in India look like this.

According to the Union Commerce Ministry, there are close to one-and-a-half crore retailers in this country.

Addressing a congregation of retail biggies, Secretary of the Union Commerce Ministry, Ajay Dua, said that the likes of Pantaloon and Shoppers' Stop are as big a threat to unorganised retailers as foreign players looking to enter India.

"The emotions become less intense if it is domestically-owned rather than it being a foreign one. So, to that extent there is a difference that you are being displaced by a local person and not a foreign one," said Dua, Secretary, Department of Industrial policy and promotion, Union Ministry of Commerce and Industries.

That's been the view of the Union Commerce Ministry, which is now looking at ways to protect small retailers from the onslaught of organised players. But Pantaloon's Managing Director, Kishore Biyani disagrees.

He claims that his company's expansion didn't hurt unorganised players and Pantaloons has never been seen as a threat, anywhere in the country.

"We bring in a lot of local trade to partner with us. I think that helped us in creating a lot of respect for us. And nobody has ever thought that we are a threat for them," said Kishore Biyani, Managing Director, Pantaloons.

Clearly, the Left alone isn't opposing FDI in retail. Organised Indian retailers, too, are not willing to let foreign players in, not just yet.

But most of them are already making preparations to compete with the likes of Walmart and Tesco, because it might not be too long before they scale the barriers and march in its money control story... just change the headline and put.

News: Chinese airline to deploy Indian stewardesses

(PTI 30/05/2006) Beijing - China Eastern Airlines Co. Ltd, the only Chinese airline that operates a direct flight to India, will deploy Indian nationals as airhostess for the first time on its Beijing-Shanghai-New Delhi flight from June 3, the company announced on Tuesday.

China Eastern, based in the eastern Chinese metropolis, Shanghai, announced that 16 Indian girls had completed professional training as air stewardesses and would work on the Beijing-Shanghai-New Delhi route.

They are the first group of Indian stewardesses ever hired by a Chinese air company, Xinhua news agency reported. Their monthly salary will be USD 800, a spokesman for the China Eastern Airlines said.

China Eastern Airlines opened flights from Beijing to Shanghai then to New Delhi in March 2002. Now there are four weekly flights on the route.

The air company also began to provide air services for passengers from Beijing and Shanghai to Mumbai and vice versa in April last year, increasing its flights between the two nations to seven a week.

To recruit foreign stewardesses is one of the measures China Eastern Airlines has taken to further localise its air services.

Currently, the company has recruited 100 in-flight attendants from foreign countries including Japan, South Korea and India. It is planning to recruit more attendants from Russia and the Philippines.

News: GM India to launch 'mini car' next year

(BL 30/05/2006) Kolkata - General Motors India will introduce a "mini car", to be called the `Chevrolet Spark', in the first half of next year.

The `B' Segment car will be "two generations ahead of the Matiz," and will be positioned alongside the Wagon R and Hyundai Santro and will be priced competitively, Rajeev Chaba, President & Managing Director of General Motors India, told newspersons after inaugurating the company's second dealership outlet here in city.

Chaba said the company had just launched the Aveo, which is the first Chevrolet product to debut in India in the first six months of 2006. The Aveo will be joined by the Optra SRV (Sports Recreational Vehicle) and the Aveo U-VA within the next few months. Towards this end, the capacity of the company's manufacturing facility in Halol, Gujarat, was being ramped up from 60,000 units at present to 85,000 units annually. While a total of Rs 1,200 crore has been invested in the Halol plant, an additional Rs 100 crore each was being spent on the introduction of the Aveo range and the capacity ramp-up at the plant.

GM vision

According to him, it was General Motors India's "vision" to manufacture and sell 200,000 units across its product offerings in 2010. In 2006, the company has set for itself a sales target of 50,000 units - 20,000 each of the Tavera and Aveo and 10,000 units of the Optra. In 2005, General Motors India sold 30,000 vehicles manufactured by the company.

Chaba said that to be able to manufacture 200,000 vehicles, the company would have to expand its manufacturing footprint. A decision in this regard would have to be taken in the months ahead.

News: Reliance wins oil block in East Timor

(PTI 30/05/2006) New Delhi - Reliance Industries Ltd has won an oil exploration block in East Timor, taking the number of its overseas oil assets to three.

Reliance, which currently has oil properties in Oman and Yemen, had bid for two of the 11 offshore blocks tendered by East Timor but could manage only one contract area, an industry source said.

"The company had bid for Area 'K' and Area 'E' but won only the former when the awards were finalised last week," the source said.

A Reliance spokesperson could not be immediately contacted for comments.

The company is building a 29 million tonnes per annum refinery adjacent to its existing 33 million tonnes a year refinery at Jamnagar in Gujarat. Besides foraying into domestic oil and gas exploration and production in a big way, it is acquiring assets abroad to supplement its crude needs.

Of the 11 offshore contract areas offered by East Timor in the bidding round, six received a total of nine bids by the deadline of April 19, 2006.

The blocks represented frontier acreages spread over some 30,000 sq km in East Timor's territory and were put up on offer in the second quarter of 2005, alongside four blocks in the Joint Petroleum Development Area, a known petroleum province jointly administered by East Timor and neighboring Australia.

East Timor awarded Eni Areas A, B, C, E and H. Reliance lost out on its bid for Area E as Eni's work program for the block was more extensive, the source said.

East Timor's model production sharing contract offers producers 60 per cent of profit after cost recovery and "uplift", with the government taking the remaining 40 per cent.

Uplift refers to an annual payment to the contractor for unrecovered costs, and has been set at an interest rate of US 30-year bond rate plus 11 per cent.

State royalty has been set at 5 per cent of gross production, and the contractor will pay 30 per cent income tax on profit from its share of output. The exploration phase runs over seven years, with the budgeted spending for the first three years fixed in the bid commitment.

News: Hypercity eyes Kolkata foray

(BS 29/05/2006) Kolkata - Andrew Levermore, chief executive officer, Hypercity Retail (India) Pvt Ltd (HRIPL), said, "We will be in the city by the end of 2007."

At present, there is just one Hypercity which opened on May 1 this year in Malad, a suburb of Mumbai.

Levermore, speaking on the sidelines of "The shop", an Images Retail seminar on retailing in eastern India, said the second Hypercity will open in Gurgaon before the end of the year.

The company is also targeting tier-II cities and has fixed on locations, from 120,000 sqft to 165,000 sqft, in Lucknow, Aurangabad, Coimbatore and Ludhiana.

HRIPL plans to have 14 Hypercities all over the country in the next 10 years with eight in Mumbai itself and perhaps four or five in Kolkata.

Each store will require an investment of around Rs 15 crore, which will be raised through equity financing or bank loans.

For its Kolkata store, HRPIL is looking for a developer which will provide the company with a 100,000 square feet area on a single floor, where Hypercity could anchor a mall or be the only store.

Alternatively, the company would like to have four acres on the edge of town where it will develop the store itself.

Hypercity has been well received in Mumbai, said Levermore, with footfalls even on the quietest day hovering around 7,500, and far above the 3,500 that had been anticipated.

Conversions and billing rates too have been a high, he said.

Besides apparel, home-decor, home entertainment, fresh food items like fruits, vegetables and meat made up a large part of the stock at Hypercity, accounting for as much as 30 per cent of the display and 18 per cent of the sales.

With restrictions on sourcing directly from the farmer or venturing into contract farming, HRPIL sourced its perishable food items directly from the local markets now.

Hypercity also had a tie-up with Waitrose, a food supermarket chain in the United Kingdom.

News: UB to unveil Taittinger plan this week

(BS 29/05/2006) Mumbai - The Vijay Mallya-owned UB group will announce this week a plan aimed at addressing concerns raised by the French industry and labour bodies over its bid for the champagne company, Taittinger.

UB has emerged the highest bidder for the world’s sixth-largest champagne company, though industry bodies in France are averse to selling the company to a non-French group, according to an investment banking source.

The source said UB may formally announce its bid on Taittinger in the next two to three days.

The source said UB had clearly outbid its closest bidder, French regional bank Credit Agricole du Nord-Est, by pegging its bid at $752 million (nearly Rs 3,000 crore). Credit Agricole du Nord-Est, the regional branch of Credit Agricole SA, is learnt to have offered $656 million.

In addition to the two bidders, Spanish wine company Freixenet SA is also in fray for the champagne house, which Starwood Capital has put on the block, they said.

However, what queers the pitch for UB is that its bid covers both Taittinger and its Californian winery, Cearneros, while other players have bid only for the champagne company. Also, selling the champagne firm to a non-French company may stir a national outcry, the source pointed out.

A UB group spokesperson declined to comment on the development.

Mallya’s bid may face the same rough weather as LN Mittal’s attempt to acquire Arcelor. However, there is a key difference between Mallya’s bid for Taittinger and Mittal’s bid for Arcelor. UB group had put in a bid after Starwood Capital had put Taittinger up for sale, while Mittal Steel offered an unsolicited bid.

In fact, the Taittinger family had sold the company to the American firm, Starwood, last year kindling a similar national outburst.

Credit Agricole du Nord-Est has teamed up with some members of the Taittinger family, led-by Anne-Claire Taittinger, who was running the family holding before it was sold to Starwood Capital for Euro 2.6 billion last year. Starwood Capital short-listed six candidates from 40 in mid-May.

Investment funds Butler Capital Partners and CVC Capital Partners were among the private equity houses which had expressed interest in Taittinger. Butler Capital Partners, however, did not submit an offer.

Another champagne company, Thienot, had put in a binding offer.

Mallya aimed at acquiring Taittinger to come close to the world’s largest spirits company Diageo in the stacking order. At present, the UB group is the second largest spirits producer in the world.

After announcing a brand ambassdor for his Romanov vodka, Mallya had said last week the Taittinger acquisition would give him a network and distribution channel in all over Europe. Taittinger sells around 4.5 billion bottles of champagne and wine a year.

News: Indian govt to allow FDI in retail gradually

(PTI 29/05/2006) Kolkata - The government would further open up the retail sector for foreign direct investment in phases, a senior official said here.

“FDI in retail would be gradual and calibrated,” Ajay Dua, secretary in the department of industrial policy and promotion said at a seminar here.

Dua said the government was fully aware of the concerns of the country’s traditional shopkeepers. The government was not yet ready to assess the impact, he said, adding the issue was now between unorganised and organised players.

He said the government had received applications from three overseas firms for single brand retailing in India. The application of Nike had been cleared and that of LVMH and Lladro were pending with the government.

Kishore Biyani, head of Future group, said that retailers were targetting Tier II cities in the country.

Biyani said 97 per cent of the Indian retail scenario was unorganised and added that it was a challenge for retailers to tap the mass market.

News: Blue and Blues to set shops in India

(PTI 29/05/2006) New Delhi - Italian leather accessories brand -- Blue and Blues -- is all set to enter the Indian retail market with its entire range and plans to open at least 18 exclusive outlets across the country in the next three years.

"The brand of international repute is opening its first exclusive store at Gurgaon within the first week of June. We plan to open at least 18 exclusive retail outlets in the next three years and two manufacturing units within a year," Unique International Pvt Ltd (UIPL) Director Praveen Agarwal told PTI.

The Kolkata-based company UIPL, which had bagged global rights for manufacturing and marketing Blue and Blues, intends to tap the market with its premium products such as ladies hand bags, wallets, men's wallets, belts and portfolio bags that "are not yet available in the country".

Blue and Blues, the brainchild of two Italian experts-Late Francesco Rovaris and Fulvio Rovaris, is present in markets such as Italy, Austria, Switzerland, Belgium, Greece, Spain and many other countries. It would be launched in UK and USA this year, he said.

With its premium products backed by an international brand, the company aims to garner about Rs 40 crore in the next three years. "Three years down the line, we are looking at garnering about Rs 40 crore," he said.

The company already has a manufacturing unit in Kolkata and plans to set up another unit in the national capital region within a year, he said.

News: India Inc’s profit growth is slowing

(DNA 29/05/2006) Mumbai - The stockmarkets may have got the shivers last week, but the latest tally of India Inc’s results shows that corporate fundamentals are fairly sound.

A study of the annual financial results of 1,220 non-financial companies in 2005-06 shows that net sales have grown by a healthy 18.8% to an aggregate of Rs 7,75,314 crore. And even though total expenditure has grown faster at 19.7%, net profits rose by a robust 21.9%.

But there is one good reason for equity analysts to look at the recent results with some concern. When one compares results over a longer timeframe, the deceleration in profits is obvious.

In a separate sample of 990 manufacturing companies (a sub-set of the larger 1,220 companies sampled in the main study by DNA Money), net sales show a dip in 2005-06 after consistent growth from 2001-02 to 2004-05.

Equally worrisome, while net profits grew at a hefty 40%-plus rate upto 2004-05, in 2005-06 it is down to 16.1%. The bears weren’t entirely wrong in pushing stock prices to saner levels.

But the important thing is profits continue to grow despite cost pressures. So where did the higher net profits come from in 2005-06?

One obvious area is lower interest costs, which grew at just 3.6% in our larger sample of 1,220 companies. Another area could be taxes, where the growth of 14.6% is lower than the change in net sales.

The faster growth in expenditure has impacted operating margins, which fell from 16.8 % in 2004-05 to 16.3% in 2005-06, but margins at the net level are slightly better due to lower taxes at 8.2% (versus 8% earlier).

The aggregates hide more than they reveal, and the real performance of these 1,220 companies has been more uneven.

Broadly speaking, the sectors which outperformed in terms of net profits were cement (686%), electrical equipment (130.9%), construction (100.7%), mining & minerals (84.7%), textiles (76%), sugar, aluminium, computers, and telecommunications - among others. The laggards were steel (-20%), diversified companies (-15.9%) and refineries (-2.4%).

Interesting differences are also cropping up in terms of profitability among companies of varying sizes.

In the 1,220 company sample chosen by DNA Money, net sales growth shows more or less the same change (an average of 18%) for large (sales above Rs 1,000 crore), medium (Rs 250-1,000 crore) and small companies (below Rs 250 crore). But when it comes to profit performance, the smaller companies are doing much better.

Stands to reason, since growth is on a smaller base. Thus, while large companies reported a 18.1% growth in net profits, medium companies showed 31.6% growth. Small companies’ profits soared 179.3% rise.

Coming to specific companies, the largest profit growth was registered by Bharti Airtel (67.4%). The worst profit drop - unsurprisingly - was reported by the oil companies, with IBP plumbing the depths (-79.7%).

Most of the remaining loss leaders were also refining or marketing companies. With the government still dilly-dallying on letting them charge market-related prices for petro-products, that situations may not change anytime soon.

News: 'India is potentially a huge mkt' - Cathay Pacific

(BL 29/05/2006) Mumbai - "Outside our home market - China - India is Cathay Pacific Airways' top priority and we intend to focus our efforts on expanding our presence in this dynamic and fast growing market," says Rupert Bray, Country Manager, India, Nepal and Bangladesh, Cathay Pacific Airways Ltd.

The Hong Kong-based airline is more than doubling its cargo capacity out of India with direct flights to Mumbai and Chennai. In an interview with Business Line, he said: "Cathay Pacific is very bullish about the Indian cargo market and intends to continue growing rapidly." The airline plans additional frequencies to the Delhi service and also route all returning Europe to Hong Kong freighters via India.

Excerpts from the interview:

How many passenger services does Cathay Pacific currently operate into India? Are these turnaround flights? Has there been growth in the traffic during the last one year?

Cathay Pacific currently flies four times a week from Delhi to Hong Kong, and four times a week from Mumbai to Hong Kong, via Bangkok. We also operate four times a week between Mumbai and Dubai. Cathay Pacific has witnessed 25 per cent growth from India with passenger sales drawing over Rs 300 crore in 2005.

Has the airline optimally used its bilateral rights? Are bilateral negotiations imminent? If so, which are the points that Cathay would like to operate to?

Cathay Pacific uses its full entitlement under the current bilateral air services agreement. India is potentially a huge market and it is one of growing importance for Cathay Pacific. We believe there is scope for a significantly expanded air services agreement.

Over the last year, there has been a 35 per cent increase in traffic between India and Hong Kong. That said, the route continues to be under-served.

Because traffic rights are the preserve of government, which cities we plan to fly to will depend on the outcome of the talks but, clearly, opportunities do exist in the South.

A large percentage of passengers from India on Cathay Pacific will be transiting Hong Kong to either the US or mainland China. What are the advantages of Hong Kong airport as a ?

Hong Kong is the gateway to China, and Hong Kong International Airport is acknowledged as one of the world's best airports. As China's premier aviation hub, Hong Kong has more connections into China than any other city.

From India to the US/Canada, there is no faster way to travel than with Cathay Pacific Airways via Hong Kong. With our one-world partner, American Airlines, we offer a further 29 destinations in the US.

How many freighters does Cathay operate into India and with this increase in cargo services, what will be the capacity out of India?

Currently, Cathay Pacific's freighter services to India include a three-times-a-week flight to Mumbai, which continues to Dubai and Paris and then returns to Hong Kong via Dubai.

The three-times-a-week Delhi service continues to London and then heads back to Hong Kong via Milan. Cathay Pacific will start a twice-weekly service Hong Kong-Mumbai-Chennai-Hong Kong from June 2, using a B747-200 freighter.

How much has Cathay invested in new equipment, and how many new routes have been planned?

Cathay Pacific has placed its biggest ever order for new aircraft.

The airline made commitments for 16 Boeing 777-300ER long-range aircraft and three Airbus 330-300s, which will be delivered between 2007 and 2010, and has purchase rights for a further 20 B777-300ERs.

Nine aircraft entered service in 2005, including the world's first B747-400BCF, or Boeing Converted Freighter, for which the airline has firm orders for five more and options for a further six.

One new B747-400F freighter, one B777-300, three A330-300s and three refitted second-hand B747-400 passenger aircraft joined the fleet.

Cathay Pacific's fleet will total 101 aircraft by this September.

News: 'India and China are complementary economies'

(RTR 29/05/2006) Hyderabad - Potholed streets, poor people's tents and ever-present beggars set this southern Indian information technology hub of 6 million apart from typical Chinese cities of similar size.

The differences between Asia's "elephant" and its "dragon" are striking, but so are their similarities.

Both India and China, which together account for two-fifths of humanity, are growing fast. Both are grappling with a widening wealth gap, a lagging rural economy and how to create millions of jobs a year for their billion-plus populations.

"Ultimately, I see India and China more as complementary economies than competing economies," said Pradeep K. Deb, a senior Indian finance ministry official.

China has roared ahead of India over the past 25 years when measured by per capita incomes by opening up its once-closed economy to trade and foreign investment, bringing in new technology and management talent that has helped transform the country into a global manufacturing hub.

India, in contrast, has been slower to embrace globalisation.

China's rapid urbanisation and good infrastructure helped lure $60.3 billion in foreign direct investment last year, which dwarfed India's $7.5 billion in the fiscal year ended March.

Prime Minister Dr Manmohan Singh, the father of India's market reforms begun more than a decade ago, tipped his hat to China's economic achievements, which he said made it a role model for its neighbours.

"There is scope for peer learning within the Asian region from the successes of other countries. The Chinese economy has performed exceedingly well over the last two decades, demonstrating growth rates which are now the envy of most other countries," Dr Singh told the annual Asian Development Bank (ADB) meeting in Hyderabad in early May.

Dr Singh said India was working on free trade pacts with China, Japan and South Korea as part of its "Look East" policy to boost manufacturing, while Indian officials have pledged to improve the country's infrastructure to help attract more foreign investment.

Whereas 91 per cent of China's roads are paved, the proportion in India is 46 per cent, according to the World Bank. China has 7 of the world's top 50 container ports; India has one.

But many Indian officials caution against trying to catch up with China in manufacturing, which accounts for a much bigger slice of the economy than it does in India.

They want India to focus on its own advantages, such as a well-educated workforce, to help develop software, services and other knowledge-based industries.

The ADB is forecasting that China's growth will average about 9 per cent from 2006 to 2010, faster than its projected growth rate of 8 to 8.5 per cent for India.

"I still think that China's economic growth will continue to be stronger than India in the next 20 years. Of course, it's on the assumption that everything goes well," said Masahiro Kawai, Head of the ADB's office of economic regional integration.

"China has been exploiting its competitive advantage by combining its well-trained, low-wage labour forces with foreign capital," Kawai told media on the sidelines of the ADB meeting.

Yet, some experts reckon India, with its younger population, well-entrenched legal system and globally competitive private firms, will give China a run for its money over the long haul.

Yasheng Huang, an economist at the Massachusetts Institute of Technology, says China should learn from India's "slow and quiet rise" and step up reforms to remove distortions in the economy.

While China invests close to 50 per cent of its GDP in plant and equipment, India gets by on just about half as much.

Despite the high investment rate, China's savings are even higher. As a result, it ran a current account surplus in 2005 of $160.8 billion, or 7.2 per cent of GDP, fuelling demands by the US that Beijing let the yuan rise faster.

Finance Minister, Jin Renqing, told the ADB meeting that China would push reforms to make the yuan more flexible and rebalance the economy away from a heavy dependence on exports in favour of domestic demand, but would not take orders from other countries.

Huang said China would be forced to examine the imperfections of its economic model and abandon what he called a sense of complacency it acquired in the 1990s.

"Unless China embarks on bold institutional reforms, India may well outperform it in the next 20 years. But hopefully, the biggest beneficiary of the rise of India will be China itself," Huang wrote in a recent article.

News: Indian cars ready for ethanol, supply tight

(FE 28/05/2006) New Delhi - Automakers in India will not need to make changes to the engines and fuel systems of cars and two-wheelers for fuel blended with up to 15% ethanol, setting at rest fears of cost escalation of vehicles on account of the government’s decision to make 5% ethanol blending mandatory with petrol in all states by the next sugar season.

The only constraint to a shift to ethanol-blended fuel is likely to be supply of the spirit from sugar manufacturers who find ready takers for the produce among distillers. The country has a capacity to make 80 million litres of alcohol annually, expected to rise to 200 million next year.

In contrast, at a 5% blend mandated in petrol sales across the county, ethanol demand is expected to be 600 million litres. Ethanol is a purer form of alcohol created by dehydrating rectified spirit.

Car industry sources said, unlike the change from leaded to unleaded petrol or the change in emission norms, engines need not be tinkered to accommodate this change. “Our engines are capable of meeting E15 (ethanol blend of 15%) requirement. So, this move wouldn’t impact us,” said Masahiro Takedagawa, president and CEO of Honda Siel Cars India.

“It is a eco-friendly step and we welcome it. We are also prepared for it since no technical changes need to be made,” said KK Swamy, deputy managing director of Toyota Kirloskar Motors Ltd.

Most of the carmakers in India have experience running their vehicles on ethanol-blended petrol given that such blending has been the norm in several other markets like the US, Thailand and Brazil for some time now. In Brazil, for instance, two-fifths of vehicles run on 100% ethanol while the rest use a 24% blend.

In 2003, the centre had announced it was making the blending of 5% ethanol with petrol mandatory in nine notified states and four notified union territories adjoining these states from January 1, 2004. That plan, however, didn’t take off since the industry wasn’t producing enough ethanol then, mainly due to 21% drop in sugarcane production in between 2001-02 to 2004-05.

Another stumbling block will be the price set by the government for ethanol offtake. At Rs 18.75 per litre, a 5% ethanol blend would reduce the retail price of petrol by Re 1. But oil companies, already suffering from huge losses due to administered prices, are demanding a much lower price. The success of the programme depends on how the government is able to broker a deal between these two industries.

News: Anil Ambani group gets new identity

(TT 28/05/2006) Mumbai - Less than six months after a new group was carved out of the mighty business empire that Dhirubhai Ambani built, younger son Anil today gave a new corporate identity to his conglomerate with a new logo and a signature tune that reflect the ambitious plans he has across various business lines.

The new logo — which reportedly has taken nine months to fashion — will replace the ubiquitous R symbol that represents the Reliance group. Sources said though the Reliance-Anil Dhirubhai Ambani group had the right to use this symbol under the demerger agreement, they decided to go in for a new look.

The new symbol consists of the word Reliance and spells out its lineage — Anil Dhirubhai Ambani Group — in a combination of red and blue colours. This new symbol will be launched across Anil Ambani's group companies from tomorrow. It will be initially visible in six major metros of the country.

On the eve of the launch of the ‘new corporate identity’, an exercise that may see the group spending over Rs 400 crore, chairman Anil Ambani urged the group’s employees, through a webcast, to celebrate the spirit of teamwork that lies at the heart of it.

“Starting today, we will have opportunity to get closer to our new identity, to reflect on the philosophy behind it. While embarking on this truly momentous journey, I look forward to working with each one of you — as we give life, body and soul to our new identity, our new vision — together,” he said.

Ambani termed the new symbol as Reliance Apex, which he said, is an embodiment of hope, optimism and success. According to him, while the Reliance typeface is a unique combination of upper and lower case characters representing the group's essential openness and accessibility, the colours of blue and red convey values of integrity, confidence, optimism, energy and passion.

News: Indian cos turn global turnaround specialists

(BL 28/05/2006) New Delhi - Domestic companies are making their mark as turnaround specialists across the globe, with a host of manufacturing sector firms successfully buying out loss-making companies abroad at throwaway prices with the aim of getting them back on track.

The underlying strategy behind the move is to gain easier access to restricted markets like the US and the EU using the target company as a foothold and then leveraging its brand value and customer linkages.

For instance, Gurgaon-based Continental Engines, which acquired loss-making European re-manufactured engines firm Vege in July last year, claims to have turned around the company in just six months through mainly cost control initiatives. The company will, however, retain its two units in Holland and Tunisia.

Packaging major Essel Propack, which acquired units of UK's Arista Tubes and Telecon Packaging, is on turn around mode in the both loss-making firms.

GHCL Ltd acquired a controlling stake of 65 per cent in Romanian soda ash firm SC Bega Upsom at $19.50 million in December last year. A month into the acquisition, GHCL managed to ramp up production in the Romanian plant to 650 tonne per day, a 34 per cent increase from the previous year's per day average of 486 tonne (from January 2005 to November 2005). In addition, GHCL after implementing cost reducing measures is eyeing profits from the unit in the short-term.

Around the same time as the Romanian acquisition, GHCL also acquired a 90 per cent stake in US textiles firm Dan River Inc for $17.50 million. The US-textile major had already shut down various operations in several of its plants after having filed for Chapter 11 bankruptcy in March 2004. GHCL gained from the move to take over Dan River as it got access to the US firm's existing marketing arrangements valued at around $250 million.

Among the early movers, Wockhardt acquired Wallis Laboratories, UK in 1998 for $8 million and successfully turned around this company in a year's time. NatSteel's acquisition by Tata Steel gave the latter significant growth opportunity from a long-term perspective, more so considering the ample scope of improvement in the operational efficiencies of NatSteel.

Tata Motors's acquisition of the Commercial Vehicles Unit of the bankrupt Korean group Daewoo has not only provided the company with an enhanced product portfolio but also allowed it to make a mark in the international market. The company is now using Korea as a base for commercial vehicle exports to Asian markets other than Korea.

Delhi-based medical devices firm Poly Medicure Ltd in February 2006, bought out American firm, US Safety Syringes, for $1 million.

The acquired company, which holds eight patents and two FDA approvals for safety medical devices, had slipped into the red since the manufacture of safety syringes needed manual operations, entailing high costs.

"We will now be entering the safety syringes segment, with the US being an accessible export market," said Himanshu Baid, Managing Director of the company.

News: Surge in FDI to India from Asia likely

(BL 28/05/2006) Kolkata - Outlining the Government's new approach to FDI policy, to be anchored on simplified procedures aided by e-governance and a favourable regulatory environment, Ajay Dua, Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce, said here on Saturday that the next surge in FDI, especially by way of equity, was expected from Taiwan, South Korea and Japan.

He said preparatory work by C-DAC had already started on a new e-Biz project (being executed by the industry ministry), for an online one-window approval system, and was expected to be completed by March 2007. Being taken up on a pilot basis, it will involve the four State Governments of Maharashtra, Uttar Pradesh, Haryana and Andhra Pradesh.

Big names such as Microsoft and Reliance Infocomm are associated with the pilot project. The new system is expected to facilitate a paperless environment for any one wanting to do business in India, including domestic companies.

FDI projections: The projected FDI inflow during the current financial year is expected to be around $12 billion. He said going by the FDI proposals received, investors abroad were now looking at India seriously, though concerns over infrastructure development still remain.

Speaking at an interactive session on "India's FDI policy - Present and future", organised by the Bengal National Chamber of Commerce and Industry, Dr Dua said while Taiwanese entrepreneurs, dubbed as aggressive investors, were expected to invest in computer hardware, the Koreans were looking at manufacturing in a big way.

He said total FDI into the country as on March 31, 2006, was around $8.15 billion, a "whopping" 60 per cent increase over the $5.3 billion in 2004-05. The bulk of the investments during 2005-06 were in the form of equity ($5.5 billion), to facilitate manufacturing and creation of more jobs, he pointed out. Some 70 per cent of the investments is said to have gone into manufacturing activities.

Viewing the FDI inflow as a sustainable process, Dr Dua said these were aimed at the large Indian domestic market with growing purchasing power. He, however, admitted that not too much of FDI was going into infrastructure, unlike in China where infrastructure had attracted huge FDI.

Regulatory environment: Describing the current regulatory environment for FDI as an evolving one, he said multiple stage approvals had now been done away with totally, and licences put on the automatic route. While 100 per cent FDI is allowed in civil aviation for Greenfield airports, and 74 per cent for existing ones, 100 per cent FDI is permitted for manufacturing, and also the road construction sector.

News: Maharashtra Govt to develop tier II cities

(PTI 28/05/2006) Mumbai - Aiming at a balanced development of the state, the Maharashtra government will develop tier II cities like Nagpur and Aurangabad for fresh investments, while placing Mumbai as the financial destination of the state's activities.

"The state government has decided to promote other cities in the state for fresh investment by providing ample employment opportunities and also help in the equitable development of the state. Mumbai would be placed as the financial destination," Maharashtra Development Commissioner (Industries), K Shivaji, told PTI.

The government is also offering special incentives to industries investing a capital of Rs 500 crore and generating employment for 1,000 in Vidarbha and Marathawada region and 500 in other parts of the state, he added.

Maharashtra has got approval for 27 SEZ's and the projects would take final shape in the next 2-3 years, said Shivaji.

Maharashtra has received FDI to the tune of USD 13.6 billion (Rs 3,767 crore) and has been placed at 38 position as a favourable investment destination by International Institute of Development, Switzerland, ahead of places like Greece, South Africa, Italy, Philippines.

The state was also expecting two international automobile houses to set up their shops. However, Shivaji declined to divulge the names of those since the negotiations were in the final stages.

News: India targets $12 bn FDI in 2006-07

(PTI 27/05/2006) Kolkata - India expects an inflow of $12 billion foreign direct investment into the country during the 2006-07 fiscal, a government official said on Satarday.

Last year, the FDI flow was 8.4 billion, Secretary in the department of industrial policy promotion, Ajay Dua said.

He said during the current year, out of the USD 12 billion, USD eight billion was expected to come in the form of equity and the balance from re-invested earnings and other capital inflows.

Speaking at the Bengal National Chamber of Commerce here, Dua said countries like Taiwan, Japan and South Korea would be investing in India in a big way.

According to him, the three nations would bring huge FDI inflows in the country. A few Taiwanese firms were already in the process of setting up manufacturing units in India, he said.

However, Dua said the US was the largest contributor, followed by European Union states and the Netherlands. He said that the government was also simplifying procedures as well to boost FDI inflow.

News: Indian govt readies 3-Pt plan for retail FDI

(TNN 27/05/2006) New Delhi - In case your are waiting to shop at Wal-Mart, Carrefour and other multi-brand retail stores in the country for your household needs such as grocery, you need to be a little patient.

The government is working on a three-pronged model for allowing FDI in retail in the multi-brand segment. The commerce ministry is looking for a model that can meet three conditions: employment, technology upgradation and increase in production capacity.

In fact, it is the first condition that is of utmost importance to the government. “The new FDI policy being explored needs to ensure that FDI in multi-brand retail adds to employment in the country and does not displace existing businessmen,” a senior government official told ET.

“As far as increasing the production capacity is concerned, it is a logical consequence of allowing big retail chains to operate in the country as these work on economies of scale,” the official added. However, to play safe, the government is working on a policy model that will incorporate the condition in the FDI policy for multi-brand retail.

As far as upgradation of existing technologies is concerned, experience tells us that post-liberalisation, new technologies have made their way into the domestic market, another official in the department of industrial policy and promotion added. But the government is still looking for a model that this condition is also met.

While experts formulate the policy for FDI in multi-brand retail, private retail players will be allowed to start operation. This will give policy makers a chance to assess the impact of big retail chains on the mom-and-pop stores, or kirana shops. Already, players such as Big Bazaar and Food Bazaar have opened outlets in various cities.

News: Starbucks Coffee firms up India plans

(BL 27/05/2006) Mumbai - Boston Gourmet coffee major, Starbucks Coffee Company, has firmed up plans to enter the Indian market within the next 18 months as part of its plans to expand its global footprint. "We are excited about the great opportunities that India presents to the company.

We are looking forward to offering the finest coffee in the world, handcrafted beverages, the unique Starbucks experience... to customers in this country within the next 18 months," an official spokesperson told Business Line. The company, however, declined to give further details of its India plan. "It is too premature to identify the cities in India that Starbucks will initially enter due to the fact that we do not have any announcements to make regarding this market at this time," the spokesperson said.

The Seattle-based coffee chain whose outlets are considered destination hangouts, is believed to be negotiating with a Mumbai-based realtor to enter the metro markets where a large chunk of its target audience exists.

Starbucks has ambitious growth goals for coming years and it is eyeing markets where it currently does not have stores for potential expansion. Its list of potential markets includes Russia, Italy, India and Brazil. The plan is to eventually operate 15,000 stores at home and another 15,000 abroad, increasing revenue 20 per cent and profit at a20-25 per cent clip annually over the next three to five years.

The domestic organised coffee retail market is currently dominated by CaféCoffee Day and Barista and has recently seen global names such as Costa Coffee and Gloria JeansCoffees announcing their entry into India with local partners.

While rumours of the coffee chain's entry into India has been the subject of much speculation in the market over the last few years, Starbucks Chairman, Howard Schultz, recently went public with its aggressive move into international markets including China.

During a speech at the Detroit Economic Club, Schultz said the company's goal is to make China its second biggest market behind the US. He said Starbucks currently has 200 stores in the country, compared to 7,600 in the US. It has more than 3,000 stores in non-US markets.

Performance

The company recently reported record fiscal second-quarter revenue and earnings and raised its full-year guidance. Revenue for the period ended April 2 rose 24 per cent from the year-earlier period to $1.9 billion, helping boost net income to $127.3 million.

News: 'Weak' Indian public sector banks to merge with stronger ones

(BS 26/05/2006) New Delhi - The government is expecting a couple of "weak" public sector banks to merge with stronger ones in 2006-07.

Addressing the annual general meeting of the Indian Banks' Association, Finance Minister P Chidambaram today said: "We expect one or two cases of consolidation this year, which would be driven by the need to acquire size and muscle and not driven by regulatory considerations."

He said weak banks have no option but to merge with banks which have excess capital. The finance minister did not specify how he defines a weak bank, but bankers said Chidambaram must have had in mind inability to grow as the criterion for describing a weak bank.

Consolidation is being driven by the need for revenue growth, savings in cost and to improve efficiency, he said.

He pointed out that Indian banks would need Rs 42,000 crore of capital by 2010 to meet the stringent Basel II norms. Basel II is the revised capital adequacy framework that requires capital allocation for operational risk, in
addition to credit and market risks and also allows stronger banks to make more efficient capital allocation.

The government has also appointed a committee headed by former Reserve Bank of India Governor C Rangarajan for ensuring greater financial inclusion. Chidambaram expects banks to give priority for financial inclusion and said banks need to find business opportunities at the bottom of the pyramid as poor are bankable and creditworthy.

He also said the government planning to bring a comprehensive legislation on micro-finance.

Earlier, addressing large tax paying units, the finance minister said companies need to improve tax compliance and pointed out that it has not become part of corporate governance.

Interview - S Ramadorai - CEO Tata Consultancy Services

(DNA 27/05/2006) Mumbai - Information technology is one industry where Indian companies are giving global majors an exhausting run for their money — and even pipping them at their game. However, the hurdles are likely to mount. Tata Consultancy Services (TCS) chief executive officer S Ramadorai speaks to Praveena Sharma on the changing scenario

With the imminent shortage of skills and rising salaries eroding the cost-advantage for Indian IT companies, how are they coping?

Any business model which is based purely on cost-arbitrage is not sustainable. Hence companies such as TCS have to engage with the clients at a strategic level, use our vast domain and technology knowledge to address the pain points of the customer, thereby enhance the business value for them. As an integrated full-services player in the global IT space, TCS is looking at developing its business around five growth engines — engineering services, infrastructure services, asset leveraging, platform-based business process outsourcing (BPO) and consulting, in addition to traditional IT services. These growth engines have the potential to grow and help align TCS strategically to cater to the business needs of the clients.

As IT-spend around the world rises, and the size of the addressable pie gets larger, TCS’ strategic moves on mergers and acquisition (M&A) front is filling key gaps in our portfolio of offering, adding muscle to our global capabilities and strengthening our ability to seize new opportunities in the marketplace - at home and abroad.

With rising operational costs, how are companies sustaining their margins in fixed-price deals?
Indian companies are making a shift to the higher end of the value chain through a host of services like consultancy. Moreover, we are building our own intellectual property (IP) constantly and creating re-usable frameworks, tool-sets and methodologies, which l help TCS maintain its margins in fixed price deals.

Besides, there is a tremendous potential to cross-sell higher value services to these customers. Indian IT services firms will have to slowly build a variant of the hybrid business model mindset to leverage existing potential. The hybrid model includes value offering elements in the services landscape which go beyond cost.

How competitive are they in the high-end segment?
The ABN Amro deal which was won predominantly by TCS positioned the Indian IT sector in the global play. Today, Indian companies are part of the boardroom discussion on mega deals that are coming to the market.

Are Indian companies enhancing their presence in the over $10 million deal market? How competitive are the Indian companies in this segment?
As a strategy, we want to go after larger deals. Nobody can afford to throw away an ABN Amro kind of contract, which gives us a sustained revenue stream, even if, for argument’s sake, it drops the margins by one percentage point. Since the revenue stream is guaranteed, we can make up by operational efficiencies.

Finally, using this volume contract as a base, we can sell the client a differentiated range of services like assurance and consulting that come under a different rate structure.

Aren’t multinationals ramping up operations a threat?
We welcome any type of competition and given our track record with clients (more than 95% of our business is repeat business from customers), we are more than capable of managing any tightness in the labour market. Besides, it is important to remember that our deep academic relationships in India and abroad give us the ability to attract and retain the best talent, evident from our less than 10% attrition rate, compared with an industry average of about 15%.

But MNCs are moving most of their work offshore with Indian delivery centres?
Competition has definitely increased in the last few years. However, most of the MNCs are still scaling up, and the India delivery is not the dominant story for most of them. Besides, having invented the off-shore model, we are always a step ahead of competition.

Will India be able to produce the huge people requirement in the IT industry in the next five years? Or would you have to look outwards to meet your workforce needs?
The Nasscom-McKinsey report released last year envisages that the IT/BPO sector will create 1.6 million knowledge professionals and give indirect employment to another 6.5 million people by 2010. The IT services sector will require 1,50,000 employees while the BPO sector will require 3,50,000 trained personnel.

Industry players are already recognising this challenge and working with increasing number of universities to enhance their quality and make their students aligned to the industry needs. Nasscom’s IT workforce development programme initiated in early 2004, endeavours to bridge the demand-supply gap of knowledge workers by encouraging industry-academia partnerships. Nasscom is focussing on training students and faculty members of tier II colleges and universities as well as students from cities like Lucknow, Guwahati and Bhubaneshwar.

What is your outlook for the IT industry over the next five years? What new trends are likely to set in?
Technology usage is slowly moving from being pre-dominantly PC-based to newer outlets like a cell phone or a personal digital assistant (PDA). Faster and cheaper telecommunications will only accelerate this trend and lead to quicker adoption of the “software-as-a-service” model. Widespread wireline and wireless telecom connectivity and simple devices, have a big role to play in increasing the penetration of technology in the semi-urban and rural areas, and touching the lives of more people.

IT services will grow slower because the base is high, but BPO, consulting, engineering and infrastructure services will grow faster. Engineering and industrial solutions are other opportunities. These are all at various stages of maturity from the customers’ perspective and also reflect what is possible from an offsite/offshore location. According to Nasscom, the offshore IT and BPO industries are expected to grow at a CAGR of 28% over the next five years, with IT growing at 25% CAGR and BPO at 37%.

News: Is a Retail policy on the anvil?

(TV18 27/05/2006) Mumbai - Commerce Minister Kamal Nath says that big Indian retailers are as much a threat to mom-and-pop stores as Wal-Mart and Tesco. CNBC-TV18 reports that a retail policy might just be on the anvil.

Big Indian retailers can now upset the apple cart. The Commerce Ministry is looking at bringing out a policy on retail. Commerce Minister Kamal Nath says that its not just foreign retailers that could displace mom and pop stores.

Big Indian retailers could have the same effect and the government will look into it. Currently, there is no policy for this sector. This comes at a time when companies like Reliance Industries and Bharti are drawing up big retail plans. For foreign retailers, the ministry is looking at a model, which would ensure that there is little displacement and adequate investments.

A few months ago, the government opened up single brand retail. Nath says that while proposals have been received from high end brands, none have been cleared so far. Nath says that FDI in single brand retail would ensure that sourcing and manufacturing would increase substantially.

Nath says that he expects investments to the tune of Rs 500 crore. India hasn't offered opening up retail in its initial services offer to the WTO. But Nath says that it could be used as a bargaining chip.

News: Harley Davidson hits the road to India

(AP 27/05/2006) Milwaukee/ Vietnam - With its foray into China under way and an eye toward boosting sales overseas, Harley-Davidson is looking to sell its iconic motorcycles in India and Vietnam.

Representatives from the company recently traveled to both countries to meet with government officials, said Tim Hoelter, vice president of government affairs for Harley.

The Milwaukee-based company is working with US officials as well to lessen what Harley sees as two major barriers to entering India; stringent emissions standards and tariffs of more than 90 per cent.

Vietnam recently agreed to do away with an outright ban on large motorcycles and lessen its tariffs more than 60 per cent over the coming years, as part of a trade pact with the United States, he said.

Hoelter declined to give a time frame for entry into either market but said Harley is farther along in its research on India, which he said has the world's second largest market of two-wheeler motorcycles.

"We believe with the closer ties between our two countries and the investment that certain other firms are making in India that there would be a real interest in Harley-Davidson's brand and the opportunity to ride one of our 'hogs' over there," Hoelter said.

The company is turning its attention to foreign markets as it anticipates that international sales will continue to outpace domestic ones. Foreign sales make up 20 per cent of the company's sales and grew by 15 percent last year.

That's more than three times last year's rate of domestic sales growth, 4.2 per cent.

CEO Jim Ziemer said earlier this year the motorcycle maker sees solid, long-term potential in the Asian Pacific and Latin American markets.

A dealership in Beijing opened in April, marking the company's first venture there since at least World War II. So far, the market has been strong, especially for apparel, Hoelter said.

"We're very pleased with the results and the dealer's having trouble stocking T-shirts," he said. "They're flying off the shelves," he added.

Hoelter said the company considers a trade negotiation reached earlier this month between the United States and Vietnam to be key to the entry into that country, which is considered one of Asia's fastest growing markets.

The tentative trade agreement which could be approved next month means Vietnam would relax trade barriers to U.S. products, a requirement it must fulfill to become a member of the World Trade Organization.

Congress must approve supporting legislation for the pact to take effect.

The communist country agreed to lift an outright ban on large displacement motorcycles, relax distribution restrictions and reduce tariffs on heavyweight motorcycles.

The penchant for Americana in that growing market and the use of motorcycles are both strong, Hoelter said.

News: 'Earn & burn' is new Tata credit card mantra

(BS 27/05/2006) Mumbai - Buy jewellery worth Rs 10,000 at Tanishq on a Tata credit card and drive down to the Taj coffee shop to instantly spend the Rs 500 worth rewards points earned.

This is being made possible by an “online earn and burn” programme soon to be launched on the Tata credit card.

The Tata credit card is a combination of a white label card and a normal Visa/MasterCard card and is issued by SBI Cards, a joint venture of State Bank of India and GE Money.

The launch of the “online earn and burn” programme is expected to double the redemption of rewards points earned on credit cards from the current usage of just 35 per cent.

Almost 65 per cent of rewards points earned by credit card holders are not used because of the cumbersome procedures for availing of the benefits.

“Other card issuers may also like to follow suit and offer customers avenues to spend the rewards points fast,” says a senior banker.

ICICI Bank has issued the maximum number of credit cards, followed by Citibank and State Bank of India. Normally, rewards points account for 1-2 per cent of the money spent on purchases made through credit cards.

Credit card holders need to get hold of a brochure listing out how one can redeem the rewards points, call up the call centre of the credit card company and then wait for receipt of the voucher to redeem it at specified outlets.

Till recently, customers used to redeem the rewards points against the annual fees for cards. This is no longer the case as most of the cards are now offered free and do not attract annual fees.

Once the “earn and burn” programme gets operationalised, rewards points will get credited immediately on making a purchase and the card holder can instantly get them redeemed.

“When a card holder goes to a coffee shop, the customer just has to say that the bill is being paid against the rewards points outstanding. The coffee shop will then choose the option of receiving the payment against rewards points on the PoS (point of sale) terminal,” says Vishal Pandit, GE Money’s president & CEO, India region.

The Tata credit card is the country’s first card offering a large-scale, multi-brand loyalty programme, called the Tata Privilege Programme, where the rewards points offered are in some cases five times that on a normal credit card.

Tata credit card holders are offered benefits from Tata Group companies like Tata Motors, Titan, Tanishq, Voltas, Tata AIG, Westside, Star India Bazaar, Tata Indicom and VSNL as also some non-Tata companies.

News: Salora to bring Japan's TEAC brand to India

(RTR 26/05/2006) New Delhi - India's Salora International Ltd. will make and distribute home audio and video products of Japan's TEAC Corp., the Indian company said on Friday.

Salora, which already sells its own branded televisions and DVD players, has spent 10 million rupees upgrading its factory to produce 350,000 televisions a year, up from 150,000. Its DVD capacity stays at 200,000 units.

"There is demand for these kind of products as the economy and lifestyle changes (in India)," said Gopal Jiwarajka, Salora's Managing Director. "Once they come in at an affordable price, there will be an explosion."

Salora has tied up with TEAC to sell its entire India range, but make only the television and DVD units, he said. The TEAC brand would enter India's home entertainment market with plasma and liquid crystal display flat-screen televisions and stereo separates, to be sold initially in 10 branded outlets in and around Delhi.

The cheapest TEAC DVD player would go for about 3,000 rupees and the fanciest plasma screen television for around 100,000 rupees.

Salora would also sell retro-styled stereo systems that ape the look of 1940s Bakelite wireless radios, including a vinyl record player that can record vinyl long-players onto compact disc.

TEAC products will compete in India against brands owned by Sony Corp. and Panasonic, a unit of Matsushita Electric Industrial Co. Salora shares were up 2.1 per cent at 99.50 rupees in the Mumbai market.

News: India says 2010 textile export goal remains $50 bln

(RTR 26/05/2006) New Delhi - India said on Friday that its 2010 textile export target remained $50 billion, after a senior textile ministry official said earlier in the week the target had been lowered to $40 billion.

A textile ministry statement on Friday said: "The textile exports target set by the government under National Textile Policy 2000 is $50 billion by 2010 and there is no change in the target set as above."

India's textile exports for the year to March 2006 stood at $17 billion.

News: Monsoon rains lash Kerala coast ahead of schedule

(RTR 26/05/2006) New Delhi - The annual monsoon rains hit the southern Kerala coast six days ahead of schedule on Friday, raising prospects of another year of robust growth for a country where most of the population relies on agriculture.

Asia's third-largest economy has expanded at an average 8 percent in the past three years after normal rains, and the central bank expects growth of 7.5-8.0 percent in the fiscal year ending March 2007.

Analysts and traders said the onset of the monsoon would have a positive effect, but its progress and spread over the four-month season would be the barometer to assess its impact on prices and the overall economy.

"The monsoon has hit Kerala on Friday," a weather department official told Reuters, saying conditions had set in over the last two or three days.

The Meteorological Department confirmed the onset of monsoon over the southern state and prospects of its rapid progress toward neighbouring Karnataka and the northeast regions.

The June-September southwest monsoon is the main source of water for farming, which generates about a fifth of gross domestic product.

With nearly two-thirds of India's billion-plus population dependent on farm-related income, the arrival and distribution of the rains play a major role in determining eventual demand in India's $700-billion economy.

"It is positive news," said Indranil Pan, chief economist with Kotak Mahindra Bank. "But we have to look at the performance of monsoon during the season to know its impact on the prices and the economy."

In April, weather officials forecast this year's rains at 93 percent of the long-term average, with a 22 percent probability of being well below average.

COMMODITY PRICES

Traders said the rains would halt a bull run in the prices of commodities and improve yields of oilseeds, rice, cotton and sugarcane crops that are highly rain-dependent.

The federal government, concerned by the sharp spurt in the prices of sugar and pulses, has already resorted to huge wheat imports to bridge a supply shortfall.

"It will have a salutary effect on the runaway commodity prices in India," said Atul Chaturvedi, president of Adani Exports, a top grains trading firm. "The market has already come down."

Traders said good rains would benefit farmers by allowing crops to be planted and harvested at the right time.

"If the monsoon now advances without any delay it will benefit the farmers and sowing of soybean and groundnut will be over by mid-June," Chaturvedi said. "But we will have to see the spread of the rains during the entire season."

Govindhbahi Patel, a leading oilseeds trader at Rajkot in the groundnut-growing state of Gujarat, said a normal advance of the monsoon would help oilseed sowing and the crop.

Earlier this month, the Meteorological Department had forecast the monsoon would hit the Kerala coast two days ahead of its normal onset date of June 1.

The monsoon usually arrives over the commercial capital of Mumbai by June 10, and brings respite from the summer heat in the capital New Delhi by June 29. Most years it covers the entire country by July 15.

News: Crocodile plans India expansion through new partner

(RTR 26/05/2006) Mumbai - Singapore-based apparel label Crocodile's Indian partner expects the brand's sales to grow to ten times the current level in five years and said it will invest 250 million rupees to open more retail outlets.

S. P. Apparels, which on Friday became the Indian partner by acquiring Shivrams Associates' 60.14 percent stake in the brand's Indian unit, said it would open 30 stores in three years to expand the network to a total of 86 outlets.

The brand's revenue in India would grow to 1 billion rupees in five years, Sanjay Chandrasekhar, retail vice-president, said.

Crocodile, with a global revenue of $350 million, has over 1,000 stores across Asia.

News: Medical transcription scripts a revival

(DNA 26/05/2006) New Delhi - You could call it the rise of the phoenix. A report by Pune-based research firm, Valuenotes, says the once written off medical transcription outsourcing industry is set for a major revival.

Revenues, the report says, could soar to from $195 million to $647 million by 2010. At that point, the report says, the sector will employ 52,000 people, against 18,000 now.

Industry players unanimously agree. “The potential is huge,” says Suresh Nair, CEO of Bangalore-based Spheris India. All the key medical transcription companies, he notes, have been logging 30-50% growth. “We are all scrambling for capacity and this is because transcription companies in the United States are scrambling for capacity.”

Indeed, that’s what is driving this growth. While the $12 billion medical transcription industry there (US), points out Veer Sagar, president, Gurgaon-based Selectronic Equipment and Services, is growing at 20%, the growth of employees is only 10%. The industry, says Valuenotes, will grow to $16.8 billion in 2010.

Around 30% of the work is outsourced in the United States, of which around 10-15% comes to India, which offers a huge cost advantage - work here is 30% cheaper. “There is a growing belief that it is possible to do this out of India,” says Nair.

Medical transcription was among the first IT-enabled services to be outsourced to India. It is the process whereby one transcribes medical records dictated by doctors and others, including history and physical reports. It is in demand in the US as the entire healthcare industry there is based on insurance and detailed medical records are needed for processing these claims.

After a boom in the mid-1990s, when a lot of mom-and-pop shops erupted on the scene, the industry went bust around 2001, following a huge decline in the quality of work.

Work, says Varun Goyal, executive vice-president of Bangalore-based Ajaxdotcom eServices, is beginning to come back. Agrees Nair: “The players who have been around for several years now have got over the credibility problem.”

Indian companies are also now focusing on spending on marketing, says Sagar, something they were not doing earlier.

But growth will bring its share of growth pangs. The main issue, all players agree, will be the availability of skilled workforce and the lack of training facilities. Companies have to invest nine months in training people before they are allowed to take on work and this means that keeping up with fast paced growth will be quite a challenge.

And though Nair is glad that there are no fly by night operators in the industry now, unlike in the earlier phase when they had the run of the field, Sagar, for his part, is worried that the huge demand will spur another rush into the industry. “Once again we will see a lot of people burning their fingers,” he warns. But if that happens, the bigger damage, he cautions, could once again be to the credibility of the country as an outsourcing destination.

That’s a sobering thought.

News: A hardware hub is emerging in India

(DNA 26/05/2006) Mumbai - IBM, LG, Hewlett Packard and Acer have all done it. A clutch of Taiwanese companies are waiting in queue to do it. Now Michael Dell wants to do it. Setting up a manufacturing plant, that is.

Welcome to India, the new manufacturing hub for PC makers. With mouthwatering growth figures, like those of the consumer electronics players, the list of companies wanting to set up electronics manufacturing operations here is only growing.

India’s PC market is estimated to be around 4.6 million units, which is galloping at 30% a year, according to IDC data.

The overall computer hardware sector including consumer electronics and components is currently estimated to be around Rs 2,000 crore.

An ISA-Frost & Sullivan study says that in the estimated $363 billion electronics market, the global semiconductor segment is likely to touch $36.3 billion or 6.5% of the global market.

While the overall hardware market grew 15%, personal computers and associate peripherals have been galloping at 25-30%.

That’s why the newest entrant, who also happens to be the largest PC maker in the world, has big India plans.

“We would like to have this facility up and running within this year,” says Paul-Henri Ferrand, Dell’s vice president for South Asia.

This will be Dell’s seventh manufacturing location in the world. Its three other Asian sites include two plants in China and one in Malaysia. Texas-based Dell has a 5% share of the domestic PC market.

“Dell’s decision to be present in India reaffirms the credibility of the growing market in India,” says Vinnie Mehta, executive director, Manufacturers Association of Information Technology (MAIT).

Already, Korean white goods major LG India, which has been manufacturing monitors since 2001 in India, began making PCs from its Noida plant two years ago.

“The thing that works in our favour is, unlike most PC makers, we have the maximum backward integration,” says R Manikandan, LG’s general manager - sales & marketing.

He claims that besides monitors, LG also makes optical drives like DVD Writers and PC cabinents, which not only helps it cut its import content, but also cater to consumers up the value chain.

What makes India a popular destination for these players? Well, there are the same clichéd reasons that they came down for in the first place. Cheap labour, a skilled talent pool, a proven software track record, cheaper finance and a burgeoning 200 million middle class are the oft repeated motives.

“It is slated to be amongst the fastest growing computer markets in the years to come,” says George Paul, executive vice-president, HCL Infosystems.

An industry analyst points out that even as growth rates are high, the PC penetration is pathetic. It is this potential that the players want to leverage.

The infrastructure for welcoming the big hardware merchants is also being readied across states - almost all of which are in the south.

The Karnataka government has roped in real estate firm Shapoorji Pallonji to build a hardware park in 1400-acres near the upcoming international airport at Devanahalli in Bangalore.

The joint venture project is likely to see investments of over Rs 8,000 crore and likely to be operational by 2008.

The state already has APC, Tyco Electronics, TVS Electronics, Flextronics and Elcoteq, whose total exports in 2005-06 was Rs 2,481 crore.

Incidentally, rival tech hub Hyderabad will also get a 5,000-acre hardware park, near the complex where the SemIndia semiconductor factories are being proposed.

Neighbouring Chennai is rapidly becoming a destination for electronic manufacturing in India with automobile majors like Ford and Hyundai, cell manufacturers such as Nokia and Samsung, other major players like Foxconn and Flextronics setting up base in the Tamil Nadu capital.

“What we are seeing today is a huge domestic market - manufacturing here is not just about exports -it is about addressing the Indian market which is becoming the second largest in the word,” Poornima Shenoy, president of the Indian Semiconductor Association said.

“Our “young” population (50% below the age of 30) and a growing “middle class” with high disposable income means a surge in the demand for consumer electronics (including gaming) and communications products besides automobiles and medical electronics,” she said. The government has to be aggressive on promoting good infrastructure like better road transport system, accessibility to cargo of air, rail and sea, single window government clearances and availability of power, land, water at attractive rates to attract the hardware investment in the country, Shenoy said.

News: Indian realty wakes up to market reality

(TT 25/05/2006) Mumbai - The volatility in the stock market is beginning to have some ruboff effect on the booming real estate business as well.

Industry sources say real estate developers who had seen great amount of money flowing into the industry are now witnessing a drop in inflows.

“The choppiness of the equities market will gradually have its effect on the real estate market. Not only will there be a stabilisation of prices, but there could be a slide in property prices,” said Ambareesh Baliga, vice-president, Karvy Stock Broking. The prices in the real estate market had risen because of the speculative investors in the market.

“Speculators generally have exposure in all the markets — equities, real estate and commodities. The past week has seen a downturn in two of these markets, the equities and the commodities market. As a result, investors will also reduce their exposures to the real estate market,” he added.

“I will not say that the money has totally stopped flowing. Demand today outpaces supply, but yes, there has been a little drop in the money coming into the real estate market from the stock market,” said Ram Prasad Padhi, a realtor from Mumbai.

“Usually, every week, there is some hike added to the cost of the property still under construction. In the past week, during the time that the market was volatile, developers have actually stayed away from any such hike. They will wait and watch for the market to stabilise to factor in any such hike,” said a real estate consultant in Mumbai.

The last few months have seen the real estate prices, both residential and commercial, rising steadily. A rising stock market has also helped in fuelling the real estate prices. It is estimated that close to 10 per cent of the money from the stock market was coming into the real estate.

The number of secondary market buyers, people who go in for long term loans to buy property, have stuck to the market.

“In the last twenty five years, whenever the stock market has fallen, the real estate sector has risen. This is the first time that the real estate market has risen along with the equity market. This doesn’t necessarily mean that it will also fall with the equity market,” said Mukesh Patel, head of the Neelkanth Group.

“We may see an effect of the falling equity market on the real estate market in some time, there will not be any immediate effect. We will have to wait and watch,” he added.

News: Pantaloon gears up for eastern push

(BS 25/05/2006) Kolkata - Pantaloon Retail (India) Ltd will be expanding significantly, both in terms of outlets and product mix, to achieve annual growth of 15-20 per cent in the eastern market.

Suresh Sadhwani, area manager-east, Pantaloon Retail (India) Ltd told Business Standard that within 2008, the company will be opening three new centres in Siliguri, Guwahati and Bhubaneshwar.

In the current year, two more centres would be coming up in Kolkata itself, one in Kankurgachi and other in South City, he added.

Each of these centres would spread over 60,000-70,000 square feet, confirmed Sadhwani.

Meanwhile, Pantaloon will also be expanding its product mix.

"We are planning to set up three new departments-mobile department, electronics department and, book and music section," he added.

The company has already set up furniture section recently and was expected to generate sales in the range of Rs 50,000 and Rs 60,000 every day, claimed Sadhwani.

The store was yet to put up its full range of products in this segment.

During 2005-06, the average monthly sales in Pantaloon centres in Kolkata was around Rs 7.5 crore including sales from Food Bazaar, he informed.

"This year, we are expecting to achieve around 15-20 per cent growth in sales from these centres," said Sadhwani.

Pantaloon was focusing on fashion conscious young customer segment for boosting up their sales further, he noted.

The Gariahat Pantaloon outlet that got renovated completely before the Pujas last year was experiencing tremendous response.

"We doubled the area by adding another 12,000 square feet (sq.ft) at our Gariahat unit. The response to this new look has been tremendous," he claimed.

The investment on the renovation was to the tune of Rs 3 crore. According to him, the Gariahat unit has registered year-on-year growth of 30-40 per cent as on April, 2006.

It is expected to grow at around 25 per cent, Sadhwani hoped.

News: DLF to take off with a non-scheduled airline

(BS 25/05/2006) New Delhi - Delhi-based DLF Universal will soon start a non-scheduled airline.

The company, according to civil aviation ministry sources, has got the permission to import aircraft, with the government's aircraft import committee giving its no-objection certificate last week.

With this, the real estate major will be able to kick-start its airline operations.

Government sources also said the company has indicated its willingness to import jets and other passenger aircraft to operate services between multiple cities.

As a non-scheduled airline, DLF will be able to operate services between any cities in the country, without sticking to a timetable.

The only difference between a scheduled and a non-scheduled airline is that the scheduled airline operates between airports governed by the route dispersal guidelines and a pre-approved time-table. The equity norms and other regulatory requirements are the same for both the categories.

As per industry estimates, in the Indian domestic aviation market worth about Rs 20, 000 crore a year, the non schedule operators have a share of about 10 per cent.

The venture by DLF Universal will be the second attempt by any company in the country to tap this market in an organised way. The first was Jagson Airlines, which started operations in 1992.

DLF Universal is the second non-scheduled operator approved by the government in the recent past. Swan Airways was allowed to start a non scheduled operation by the government recently.

In addition, the aircraft import committee has also about four existing airlines to import about 100 aircraft.

In the process, the government has also given permission to the start-up low cost carrier InterGlobe to import 2 Airbus A 320s, the first tranche of the 100 aircraft order it placed with the European aircraft maker Airbus.

Vijay Mallya's Kingfisher Airlines has walked away with the permission to import 80 aircraft -- 29 Airbus A 320s, 4 Airbus A 321s, 56 ATRs -- to straighten the carrier's fleet.

Column: The Other India

(BS 25/05/2006) Mumnbai - Recent weeks have seen substantial media coverage of the highly emotive and potentially volatile issue of reservations in institutions of higher education, especially the few that can be deemed as islands of excellence such as the IITs, the IIMs, and AIIMS. Even as the government gropes to deal with the Pandora’s box opened by an ageing and crafty politician, who is probably more driven by Machiavellian instincts than affirmative action, yet another politician now wishes to make her existence noticed by extending reservations to all public and private institutions. As was to be expected, the issue has again begun to create schisms in society, with the emergence of more organised pro- and anti-quota groups. Hopefully, this brinkmanship on the part of the UPA will give way to sagacity and a pragmatic solution will soon be arrived at which can meet the legitimate needs of the entire strata of the society.

Having said so, it is indeed a stark reality that in the days of wildly fluctuating fortunes on stock exchanges, stratospheric prices of property, dollar salaries for jobs being delivered within India, and skiing/piano lessons for the kids of those who have made it big in recent times, there is another India that needs some attention not only from the media, but also from all those who are fortunate to even dream of having their children compete in IIT/IIM entrance exams.

I will start with some raw statistics, largely culled from the government’s own surveys. Over 18 per cent of the 27+ million annual births happen to girls in the age group of 15-19, and over 49 per cent of all girls bear their first child before they turn 20 — a statistic that will horrify any reader of this financial paper who has a girl child in the age group of 15-20!

India has the largest number of malnourished children in the world, with as many as 60 million who do not have access to even two regular meals in a day. Over 25 per cent of all children in the age group of 5-11 years and 37 per cent of all children in the age group of 11-19 are not in school. This has lead to a spectre of having almost 125 million children, currently between 5 and 19 years, who are doomed to lead a life of total or near total illiteracy and who will never be able to participate in any future growth of the country.

Over 260 million Indians are officially eking out an existence below the poverty line. While in percentage terms, this has been a welcome decline over the last 10 years, nevertheless these are shocking in absolute numbers. The Shanghai dreams of the nation’s financial centre Mumbai have to be tempered with the reality that as much as 49 per cent of its population comprises slum dwellers. The City of Joy (Kolkata) has 33 per cent of its residents consigned to slums, while the nation’s capital, with acre-sized bungalows for many of its past and current members of Parliament, has almost 20 per cent residents living in slums (and Jhuggi Jhopri clusters as they are called there).

Notwithstanding the improved economic growth rate in the last 10 years, the official unemployment rate has inched up from about 6 per cent to over 9 per cent in 2005, (and this is excluding the tens of millions more who are classified as intermittently employed). Even now, over 200 million citizens are directly dependent upon farming. In the absence of any real reforms in the agriculture sector, it is no surprise that as per government’s own admission, over 100,000 farmers have committed suicide in the last 5 years.

Eighty five per cent of the rural India and about 60 per cent of the urban India is still dependent upon ground water resources to quench its thirst. With the rapid increase in population leading to a dangerous decline in groundwater table and with an ineffective water resources development policy, many of India’s poorest (and most populous) states such as Bihar and Rajasthan are witnessing an unprecedented shortage of even potable water, leading to deaths happening due to thirst.

And finally, the last miserable statistic pertains to the reality that one of the demographically youngest countries also has a very large absolute number of people above 60 years of age. The number of 60 and above will touch almost 100 million by 2016. Even at present, at about 700,000, India has only a third of the 2 million hospital beds needed to serve the current population, and just about 9 per cent of the entire population is covered under any kind of healthcare scheme.

It is in the context of these harsh realities that the ones (like the undersigned) who are fortunate not to be a part of this ‘other’ India should reflect on the subject of equal opportunities in some depth, rather than getting influenced with the superficial treatment this matter usually receives in our legislatures and the media. In our own myriad ways — both as individuals and as business enterprises — we can make some micro contributions to tackle these challenges, rather than participating in only armchair debates/sms campaigns, and doling out homilies such as those coming from some of the industry captains, who merely wish to cherry-pick the most talented and fortunate few tens of thousands on the pretext of having to compete globally rather than applying a part of their fortune (and their wisdom and managerial excellence) to enable the creation of more opportunities for many more millions.

By Arvind Singhal - Technopak

News: Dell to set up unit in India by year-end

(PTI 25/05/2006) New Delhi - The world's largest computer company Dell is setting up a manufacturing unit in India to be operational by the end of this year.

"Currently, we are looking for a location for the plant. It will be operational by end of this year," Paul-Henri Ferrand, vice president & general manager (south asia) for Dell, said.

Without disclosing the investment the company would make in the plant, Ferrand said, it would be on similar lines to the company's units operating elsewhere in the world.The company has seven manufacturing plants and is adding one each in the US, eastern Europe and India.

The manufacturing plant in India is an important element in the company's strategy - currently ranked number four with an overall market share of 5% - to become the number one computer brand in India.

The plant would reduce costs for company's customers substantially and would bring down delivery times. Dell will manufacture desktops and notebook computers at the facility.

"In the last four quarters, our revenues in India grew 40% to $ 270 million... in the coming years the company would accelerate its growth, Ferrand said.

To gain market share in India, Dell is on an aggressive manhunt for sales personnel. "In the last three quarters, the company's doubled its sales force in India," Rajan Anandan, vice president & general manager(India) for Dell, said.

The present numbers would double in the next three quarters. "The hiring is limited by the numbers we can find," Ferrand said.

News: Huge gas reserves found in Rajasthan

(IANS 25/05/2006) New Delhi/Jaipur - High quality reserves of natural gas Shahgarh has been discovered in the sub-basin of Jaisalmer district in Rajasthan, it was announced Wednesday.

Gas was discovered in Focus Energy's exploration block, around 25 km from the Pakistan border, in the same stratigraphic area as the one producing multi-trillion cubic feet fields of Sawan and Miano.

Focus Energy, formerly known as Phoenix Overseas, struck gas in its onshore blocks RJ-ON/6 in well SGL-l, the company announced Wednesday.

The company has informed the Directorate General of Hydrocarbon (DGH) of its "significant gas discovery" and is still to get an expert certification of the size of the discovery.

Official sources, however, estimated that the gas find is large and around six trillion cubic feet.

"The discovery was made in excellent cretaceous reservoir sandstones at a depth of 3,100 meters. The well flowed 15 mmscf/d (million standard cubic feet per day) of almost pure methane gas through a 48/64 choke. The discovery of the gas has been confirmed through conventional open hole drill stem test," the company statement said.

"Focus Energy hopes that the discovery would be commercialised at the earliest," said Ajay Kalsi, chairman of Focus Energy, which is part of the Rs.250 million turnover Phoenix group that was engaged in trading and shoe trade till venturing into oil and gas exploration in 2001.

Having struck it lucky in the fifth well drilled, the company was now planning to step up exploration activities with expectations of further gas finds in Rajasthan where British exploration company Cairn Energy has found large reserves of oil.

In Jaipur, Rajasthan's minister of mines and petroleum Laxmi Narayan Dave said it was the first time that such huge reserves of natural gas were found in the state.

"We are emboldened by the discovery of the huge and high quality gas reserves in Jaisalmer area," he said.

The minister also said that the flow rate of gas had been tested with 900 P.S.I. (pressure square inch) for about an hour and there was no drop in the pressure.

He said that a few more tests were to be done to ascertain the exact amount of gas in the area.

Dave said the new gas reserves would augment power generation in the state and promote exploration and investment for the availability of Hydrocarbons in Jaisalmer basin and other areas.

In Rajasthan, over 2,900 million cubic meter gas reserves have been found by ONGC, and 9,200 million cubic meter reserves by Oil India so far.

News: Is 10% growth a distant dream for India?

(DNA 25/05/2006) Hong Kong - A pioneering comparative study of the diverging patterns of economic growth of China and India identifies the challenges that the two Asian giants face in charting their future growth, and concludes that “if the current structures of the two economies, are maintained, India will not be able to catch up or surpass China”.

The study, by Dr Emma Xiaoqin Fan and Dr Jesus Felipe, economist and senior economist, respectively, at the Asian Development Bank (ADB), identifies “impediments to investment” as one of the biggest hurdles to growth in India.

India and China, the study says, “face very different challenges in their respective quests for economic growth. India must address impediments to investments so as to increase its investment rate. China must deal with the question of whether investment, the engine of growth, can continue running full steam.”

India’s problem, the study notes, is how to accelerate growth, while China’s problem is how to sustain it.

In an interview to DNA Money from his Manila office, Felipe noted that it would be “virtually impossible” for India to achieve 10% GDP growth rate in the next few years. “This doesn’t mean that it can’t grow by 10% in any one single year,” caveats Felipe. An exceptionally good monsoon could theoretically spike GDP growth for one year, he adds. But it would be virtually impossible, he says, for India to ramp up the investment rate and the rate of capital accumulation in the next few years to the levels needed for it to sustain double-digit GDP growth.

In fact, the study says, given India’s current growth statistics, its annual average growth rate in the medium term is unlikely to exceed 7.5-8%.

That’s not to say, however, that India’s growth story has nothing going for it, or that China doesn’t face challenges ahead.

News: Pantaloon to leverage Net, mobile space

(BL 25/05/2006) Mumbai - Pantaloon Retail is planning to step up its marketing and communication spends on the mobile and Internet space. Speaking to Business Line, Sanjeev Agrawal, Head, Marketing, Pantaloon Retail, said, "We plan to strengthen our presence in this space since this is an area which is growing rapidly. The plan is to innovate and experiment in Internet and mobile marketing initiatives."

In the recent past the company has already been engaging itself in some amount of Web-based advertising and has been doing projects through entities such as Hungama.com. "In the past, we have had vendors such as Hungama doing work for us but now we are looking for a long-term partner for our mobile and Internet marketing initiatives."

In fact, the company may also be considering the services of its empanelled agencies such as Mudra and Percept (H) for enhancing its Web-based advertising.

From its ad budget of Rs 100 crore, Pantaloon Retail now intends setting aside a substantial amount for its operations on the Web.

Adds Agrawal, "Today, the majority of our ad spends continue to be on the print media but we are looking at allocating reasonable spends behind mobile and Internet-based communication since it is still not a cluttered medium." Besides, the retail chain is also using mediums such as outdoors, television and may be radio in the future.

Meanwhile, Pantaloon Retail has extended its `Fresh Fashions' baseline to the Miss Ponds India beauty pageant whereby the three `Ms India's will be featuring in its campaigns. Explains Agrawal, "We have decided to use these ladies in our campaigns since they are fresh faces which go with our fresh fashions statement."

The retail company has also decided to consider using a new celebrity for its Central brand of stores. Considering it has been rapidly expanding its Central brand and has also attached the baseline of `Shop, Eat, Celebrate' for the brand, there is a likelihood of associating a celebrity with it. "We may look at a celebrity for Central in the future," says Agrawal. However, celebrities are not going to be the focus for its Big Bazaar retail brand of stores.

"We intend using direct communication for the Big Bazaar brand and there will be no third party used to communicate about the advantages of shopping with the brand," adds Agrawal.

News: ABN Amro starts Indian retail broking services

(BL 25/05/2006) Mumbai - ABN Amro launched on Wednesday broking services for retail investors under its arm ABN Amro Asia Equities, which currently offers institutional broking in India.

The retail broking services would be launched in 15 cities, where the bank already has its presence; it hopes to target its 1.3 million strong client base for the new service.

Speaking to reporters, Ramesh Sobti, Country Executive, ABN Amro India, said, "This was one service missing from our suite of products. Retail business forms 60 per cent of our business in India, while commercial banking forms 40 per cent. We are likely to maintain this ratio, as retail is growing faster."

The bank is also looking to offer commodity trading through a separate subsidiary under ABN Amro Asia Equities, Sobti said. "We will look at commodity trading in the second phase, once there is more clarity on the guidelines in this regard. This would be in another 12 months' time."

The bank also has plans to start a non-banking finance company after the Reserve Bank of India comes out with its guidelines, said Jeroen Drost, Chief Executive Officer, ABN Amro Asia. India has been on a good growth path for the last couple of years due to a strong domestic economy, he said.

The features of ABN Amro's retail broking include a three-in-one account for trading, demat and savings account, option to trade through multiple channels such as online, offline and on the phone, access to research and timely advice, said Chitra Shringare, Senior Vice-President and Head - Retail Brokerage Services. The products include equities, cash and derivatives, IPOs and personal financial services, which would be rolled out in a phased manner.

Tie-ups with other financial institutions would be part of expansion in the second phase as would be opening offices independent of the bank's branches, Shringare said.

News: Reliance eyes cane processing

(BL 25/05/2006) New Delhi - Reliance Industries Ltd (RIL) is slated to make a presentation before the Union Agriculture Minister, Sharad Pawar, on May 31 on its proposed foray into sugarcane processing.

According to sources, the company is planning to set up three units, each with capacity to crush over 10,000 tonnes of cane per day (tcd), in Maharashtra. Unlike normal sugar factories, these would convert the entire sugarcane juice to ethanol.

The Government's `gasohol programme' mandates oil-marketing companies to dope 5 per cent of their petrol with ethanol. The ethanol from the proposed units would basically meet Reliance's captive requirements.

The sources said that the first plant is to come up at Kurkumbh in Daund taluka of Pune. The other two units are in Kolhapur and Osmanabad districts, for which sites are apparently under finalisation.

The Kurkumbh site currently houses a mono ethylene glycol (MEG) facility, originally promoted by SM Dyechem Ltd and acquired by RIL in January 2005. RIL had justified the acquisition citing proximity to Maharashtra's sugar belt that ensured sufficient alcohol availability. The Kurkumbh facility is RIL's sole alcohol-based MEG plant, with all its other units using naphtha or natural gas feedstock.

From available information, it seems that Reliance plans to have the sugarcane processing plant in the MEG facility for meeting its captive ethanol needs. A key issue in this connection is the Sugarcane Control Order, 1966, whose provisions currently apply only in the case of cane used for manufacture of sugar, gur and khandsari.

But since RIL's proposal involves direct processing of cane for ethanol - which has never been attempted in the country and finds no mention in the Order - there is an interpretation that the company would be exempt from its provisions. These include clauses dealing with fixation of `reserved area' for factories to source cane, maintenance of 15-km minimum radial distance between neighbouring units and even applicability of Statutory Minimum Price for sugarcane.

"The May 31 meeting is likely to look into all these issues. There would also be efforts to address the concerns of existing mills on excess drawal of cane from their reserved areas," the sources added.

News: 500 mn phones for India by 2010

(PTI 24/05/2006) New Delhi - Telecom Minister Dayanidhi Maran today projected that India would have 500 million telephones by 2010, to facilitate which the government was making efforts to release 45 mhz of spectrum by the end of this year.

"The current subscribers base in the country is 150 million. The target for 2007, which has already been announced earlier, is 250 million new phone connections. Now we are setting a target of 500 million telephone connections by 2010," he said at a press conference outlining achievements of his ministry in the last two years.

He added that DOT along with Ministry of Defence had already taken up a Rs 1,000 crore project to release 45 mhz of spectrum, a key resource for the mobile telephone industry, by the end of this year.y 2007, mobile telephony will cover 85 per cent of the country.

Maran said the government will also make spectrum available for the third generation mobile services (3G).

News: Malls flash foreign tag, save shelf space for imports

(TNN 24/05/2006) New Delhi - The ‘Imported’ tag still rules the Indian psyche. The friendly neighbourhood retailer, who supplies the monthly quota of Malaysia-manufactured deodorants, Indonesian chocolates and made-in-China shampoos, has known this for long.

Now, the fact has been factored in by new-age retail shelves. Retail chains, both in fixed budget and niche high-end categories, are reserving more shelf space for specifically ‘not-made-in-India’ merchandise. In most cases, the brand barely matters.

“As long as it is genuinely imported, it’s okay,” says a merchandiser of an agency that picks up imported brands for small retail chains based in New Delhi and Punjab.

“There is a huge craze for imported products, especially in Tier II towns, where access to such products is a problem and buying options are limited. The brand does not really matter, because the general psychology is that the foreign products are superior to the domestic products,” says Vikas Gulaty, director and CEO, Mallz 99.

The retail chain is planning to expand to about 100 outlets in the next three years, has all its merchandise, from dog food to mascara, sourced from all over the world, but India.

“We have buying houses in Turkey, Europe, Japan, China, Indonesia and the US. We have 3,000 products in the portfolio and brands keep on changing. Sometimes, a particular brand does not make it back to our shelves. It depends on the global availability of the products,” he says.

The India-based franchise of One-Dollar stores US DollarStore, has everything shipped via Florida (though it is sourced from all over the world). “About 95% of the products in the stores are imported. The only brand which is made in India is Pepsi,” says Gautam Sahni, director, Nanson Overseas.

The craze for imported products is complimented by a high degree of brand recall, even for the lower-end brands. “It’s astonishing that people are aware of a lot of brands that are available in our stores, even though they have never been advertised here.

And the brand awareness is not just about expensive products. Even lower-end things like Pringle chips and Jack’s cleaner are identified and that creates more demand,” says Mr Sahni.

Similarly, the high-end Dr Morpene’s ‘Tango’ chain of stores and Ebony Retail, have both tied with luxury brands like Mineral Care and Southern Islands for their beauty sections.

“There is a demand for some of the products that our customers have tried during their sojourns abroad and have enough disposable income to try out others, especially in Punjab,” says an official from Ebony.

News: Smaller Indian retailers gear up to take on malls

(TNN 24/05/2006) Pune - The mall mania sweeping cities has hit the traditional shopping areas of most cities. Over time, though, these traditional shopping areas are hitting back, with their own snazzy premises, ready to take on the challenge of malls.

So, from a cramped, stocked-to-the-roof location, they have gone in for a complete makeover. To stand out in the clutter, some have gone for specialisation.

“We need to survive in the retail mania so we have chosen to specialise. We specialise in women’s, and young girl’s products,” noted Pramod Jain, a promoter of the family-owned Vama, a multi-storied exclusive ladies mall spread over 17,000 sq ft. In-house brands is the other aspect they are looking to develop.

While Vama is going in for HoneyBee, a brand for 2-14 year old girls, Jaihind Collections, a men’s wear shop has its own label, JC Studio, strictly for men’s ethnic wear. A major hurdle these stores face is the lack of space — a narrow frontage is what they have inherited.

Traditional wisdom mandates that to do justice, stores should be between 50-60,000 square feet space and just a women’s store, without anything for the rest of the family won’t do.

In makeover mode, stores on Laxmi Road, the traditional shopper’s paradise in Pune, do not believe in this. Having to cope with a narrow frontage, they have chosen to go vertical.

Split levels add extra space. Tathastu, another women’s mall, has about 16,000 sq ft in its four-plus ground storied building. And there is nothing cramped about it, either. Janardan Kurade, proprietor, maintained that just stocking what women want also sells.

Apart from its private label for men’s ethnic wear, Jaihind Collections was among the earliest to specialise and stock all that a man could require under one roof: from accessories like sun glasses to perfume.

Dinesh Jain, partner, Jaihind Collections noted, “In another couple of years, you can expect to see most stores on Laxmi Road have gone in for a face lift. We are all changing, in line with customers needs.”

Neither Dinesh Jain nor Pramod Jain are stopping at specialised stores, though. Having worked out private labels, the next thing is to move to the Internet although Pramod Jain accepted that it will take him time to build the label.

Another trend, important for a traditional shopping area, is that despite moving away from sarees, sales have not really dropped. That is because the saree has moved up, the value of each sale being higher, making up for any diminution in volume. “Segment-wise,

readymades and Western outfits are growing at 30-40% annually. However, the highest sale of sarees in the higher price range.

That is because of the party-wear segment, a segment which has marked the return of the saree. In this segment, the price ranges from Rs 2,500-7,000 each and we specially design sarees for this segment,” Pramod Jain observed.

The make over of the traditional shopping area has largely been driven by the second generation of the owner’s family coming into the trade, barring Mr Kurade who saw an opportunity in women’s wear, after having been in the shoe business.

Dinesh Jain remarked that their fears of a fall in sales at Laxmi Road stores would go down, following the appearance of malls and large format stores, were unfounded. Footfall and sales were not affected, he maintained.

While competing with malls on grounds of better, personalised service, the traditional stores are also learning from them. For instance, loyalty programmes and e-ordering. While ethnic men’s wear can be e-ordered, Vama will be able to offer this facility three month’s time.

News: Hyderabad turns new hotel hotspot

(TNN 24/05/2006) Hyderabad - Move over Mumbai and Delhi. Hyderabad has just checked in as the ‘numero uno’ hospitality destination in the country. Hyderabad is poised to have 6,507 star hotel rooms by ‘10 and attract the highest number of investment in the next few years, according to a study by HVS International.

As per the study, Hyderabad has overtaken cities like Mumbai, Goa, Chennai, Delhi and Bangalore. “We have worked on parameters like rate potential, demand growth, infrastructure, site availability and product orientation, replacement costs and induced demand to arrive at this conclusion,” said HVS International consultant Premal Zaveri in a chat with ET.

Business travel is said to be one of the main drivers of the growth in the hospitality industry.

Established in 1980, HVS International is a global consulting and services organization focused on the hotel, restaurant, timeshare, gaming, and leisure industries.

The demand now does not match supply. However, this is expected to change with many Indian and international chains planning to set up shop in the city. The star hotels in the city claim that almost 90% of the guests are business travellers.

The year-on-year occupancy rates, too, have been rising to over 80% in ‘04-05. “The Hyderabad International Convention Centre stabilizing as an international centre, and also the growth of the Genome Valley, Hitech City and ICICI Knowledge Park are positive drivers for increased occupancy in the first class business segment,” says Mr Zaveri.

The number of rooms in the city is expected to touch 2,461 by the end of 2006 and go up to 6,507 rooms by ‘10. The average room rate currently at Rs 5,000 is expected to go up to Rs 8,000 by ‘08-09. “There will be no downward price correction at all,” says Mr Zaveri.

Hyderabad is currently in a very strong position as its average room rates are still very low but its occupancy is high at over 80%. “Though the room tariffs are higher in other cities, considering the city’s performance against all other parameters, it is clearly in the number one position,” says Mr Zaveri. The construction of the Hyderabad international airport is also expected to spur the growth of hotels.

Currently, the city has approximately five five-star hotels including ITC Kakatiya Sheraton, Taj Krishna, and the Viceroy. Viceroy has chalked out an elaborate expansion plan and will be known as JW Marriott and is also planning to take the number of rooms up from 168 to 300 with an investment of Rs 80 crore.

Bangalore-based hotel group Royal Orchid plans to set up a four star hotel in Hyderabad by the end of 2006 and is also mulling the possibility of setting up a five-star hotel in the future.

Also, hotel chains like London based Le Meridien, the InterContinental group and Lemon Tree are keen to come to Hyderabad. The ITC group also has plans to build another hotel in the city while Tulip Manohar has tied up with Radisson.

News: Citi's bullish on India, sees GDP at 7.6%

(TNN 24/05/2006) Mumbai - Citi, one of the biggest investors in the market, reiterated its positive stance on the Indian economy with a GDP growth estimate of 7.6%. It also expects the rupee to appreciate in the long-term, though in the short term the Indian currency could be choppy, said the US bank in a report released on Monday evening.

It has also added that the key risks to its outlook remain unchanged at – politics, higher oil prices and their impact on rates and currencies, coal shortage, and the longer-term issue of job creation.

The sell-off, according to Citi, has been driven by a host of factors, including declines being witnessed in other emerging markets, a fall in global commodities prices, inflation concerns in the US and technical factors in the local market.

The positive stance on the Indian economy is due to key growth drivers — investment cycle turn-up, consumption, and outsourcing coupled with the trickle down impact coming into play.

It has also maintained its long-term appreciation view on the rupee, though near-term trends are likely to be choppy due to high oil prices and concerns on portfolio flows.

On the fiscal front, Citi said with the market expecting growth momentum to remain strong at 7.5-8.0% and gradual fiscal consolidation expected to remain intact, it expects S&P to upgrade India in the next 12 months.

Also it feels Fitch, whose sovereign ratings for Asian countries are typically either at par or higher than other rating agencies, will also feel some pressure to follow through on its rating and put India on positive outlook as well.

Citi added it expects India’s current account deficit (CAD) to widen to $22bn in fiscal 2007 (2.5% of GDP) as compared to $16.8bn (2.1% of GDP).

However, it has maintained its comfortable stance on the external as capital flows are more than sufficient to finance the CAD. CAD is mainly due to higher non-oil imports, which is indicative of the on-going economic activity and forex reserves are at a comfortable $162bn.

News: Centre approves Bangalore Metro project

(PTI 24/05/2006) New Delhi - After years of delay the Bangalore Metro Rail project is finally set to take off with the Centre giving the go ahead signal to the Rs 6,395 crore venture.

The metro project in the Garden City, first proposed in 1982, will now be implemented for a 33 km long route by Bangalore Metro Rail Corporation Ltd (BMRCL), which will be made a joint venture between the Centre and Karnataka government by enhancing authorised capital, sources said.

Currently, Bangalore Metro Rail Corporation is wholly owned by the Karnataka government.

The state government will hold 30 per cent stake (15 per cent each of equity and subordinate debt) in BMRCL, Centre will hold 25 per cent (15 per cent equity and 10 per cent sub ordinate debt). The remaining 45 per cent stake will be raised as senior term debt.

The Union Cabinet had already given its nod in April this year for the project that is expected to be completed by 2011.

As a part of approval by the Union Urban Development Ministry, the BMRCL board will also be reconstituted with 10 directors, each promoter appointing five directors.

Sources said Secretary, Union Urban Development Ministry will be the Chairman of the Board, while the state will appoint the Managing Director with consent from the Centre.

Keeping in mind the experiences of political wranglings and land acquisition problems that had plagued the project in its concept stage itself, the Centre has proposed setting up of three committees to tackle various levels of management of issues relating to the project, the sources added.

News: GAIL to invest $1.2 bln in petrochem project

(RTR 24/05/2006) Mumbai - State-run gas utility GAIL (India) Ltd. said on Wednesday it would invest Rs 5,460 crore ($1.2 billion) in a petrochemical project in Assam.

The project would produce 220,000 tonnes of ethylene and 60,000 tonnes of propylene, the company said in a statement.

Shares in the company were down 1 per cent at Rs 237 in a weak Mumbai market.

News: 'Financial sector reforms must for 8% growth'

(FE 23/05/2006) New Delhi - Finance minister P Chidambaram has made a strong pitch for reforms in the banking, insurance and pension sectors — partly held up because of the Left’s opposition — to sustain a 7-8% growth momentum.

In a 20-page presentation the titled “Overall economic scenario and way forward” to the UPA-Left coordination committee on Tuesday, Mr Chidambaram pointed out that the main constraint in the growth of bank credit and insurance penetration was capital.

While the banking system needed Rs 42,000 crore more capital by March 2010, the insurance sector required Rs 12,000 crore in the next four years.

According to Mr Chidambaram, the bank credit to GDP ratio in India was less than 50% and lagged behind developing economies in east Asia. The increase in credit to GDP ratio was essential for high growth of income and employment.

He also said credit to hitherto neglected sectors like agriculture and small-scale industry needed to grow further.

In insurance, he said penetration had gone up to 3.28% in 2003 from 1.93% in 1999. Stating that insurance was critical for social welfare, and also to provide long-term funds for infrastructure, he said, the target was to achieve 8-10% penetration in the near future. Though, the government had proposed a hike in the FDI limit to 49% from 26% now, it has still not been able to build a consensus with the Left.

The finance minister also tried to impress upon the Left the need to expedite pension reforms through the enactment of the Pension Fund Regulatory and Development Authority Bill. He said the existing system suffered from limited coverage with just about 13% of the working population being part of some pension scheme. The combined pension payment of the Centre and states stood at over Rs 65,000 crore and was growing unsustainably, he said.

To consolidate growth at 7-8%, Mr Chidambaram said, investment needed to be stepped up from Rs 7.3 lakh crore in 2003-04 to Rs 16.3 lakh crore in 2008-09.

Besides, the government must create strong institutions to garner and allocate funds efficiently among sectors that are critical, he added.

Mr Chidambaram, however, admitted the government faced a fiscal challenge in terms of creating fiscal space to enhance public investment and simultaneously meet the commitment of eliminating revenue deficit.

There were looming concerns too of additional expenditure because of enhanced petroleum and fertiliser subsidies, revival of PSUs and interest subvention on bank credit to farmers at 7%.

News: Fed Bank, IDBI, Fortis in insurance JV

(FE 23/05/2006) Chennai - Federal Bank will join hands with IDBI and Fortis Insurance International to float a life insurance joint venture. Federal Bank will hold 25% stake in the life insurance JV while IDBI will be the majority partner with 49%. Fortis will hold 26% in the new venture.

When contacted M Venugopalan, chairman and managing director of Federal Bank, confirmed the development. “We expect to get all the regulatory approvals for the new JV in the next four to five months and will be in a position to launch the insurance JV by the third quarter of the current fiscal,” he said.

“It is too early to talk about the capital structure of the new company. Once the board clears the proposal on May 29, we will take up the matter with other partners,” Mr Venugopalan said. But market sources here put the capital base at between Rs 700-800 crore.

In March 2006, IDBI tied up with Fortis Insurance International for its life insurance foray. The alliance began scouting for a third partner with large network of branches and a pan-India footprint. It initiated parleys with Bank of Baroda (BoB) but talks did not fructify as BoB sought majority stake in the new venture.

News: FIIs bearish on India - JP Morgan

(BS 23/05/2006) Mumbai - Foreign Institutional investors (FIIs) continue to be bearish on India and expectations are that India would get less of net inflows into emerging markets, according to Adrian Mowat, chief Asia equity strategist, J P Morgan.

“All emerging markets, other than Chile, are cheaper than India even after the recent downward movement of the Indian markets,” he said.

Indian equity markets are ahead of the India growth story and the recent pullback by foreign institutional investors is indicative of the portfolio changes being made by global investors.

Mowat pegged that additional inflows into India till the end of the calendar year could be higher than $5 billion but less than $10 billion.

JP Morgan’s target for the Indian market is at 11,000 for the Sensex by the end of the calendar year and predicts earnings growth for corporates to be between 15 per cent and 20 per cent.

The growth figures for Indian corporates are stronger than other Asian emerging markets, other than Taiwan. Technology companies in Taiwan are turning around and posting better results, Mowat said.

About the recent downturn on the bourses, he said, “There has been a general outflow of money from emerging markets in the last week or so. I think that is a purely tactical portfolio trend and we will begin to see the continuation of existing trend that has been in place for a while, which is the net inflow into emerging markets.”

News: RIL wins exploration rights in East Timor

(BS 23/05/2006) Mumbai - Reliance Industries (RIL) has won petroleum exploration rights in an oil and gas offshore block in Timor-Leste, world’s newest nation, outbidding global oil majors.

Italy’s ENI SPA has won five blocks. Apart from ENI and RIL, global majors such as Indonesian state-run Petronas, Brazil’s Petrobras and Portugal’s GALP were in the race for offshore blocks in Timor-Leste— commonly called East Timor.

East Timor Prime Minister Mari Alkatiri said in a statement that Reliance and ENI would sign production sharing contracts with the government by next month.

Profits from these areas are to be split in 60:40 ratio between the operator and the government, with foreign operators also paying a 5 per cent royalty fee to the government. The size of the deal and the oil and gas reserve in these blocks are not known.

From the 11 contract areas available in the first bidding round, six had received offers from the international companies. The offer for these 11 contract areas covers a total 30,000 square kilometers.

The deadline for companies to hand in proposals for the Timorese offshore tenders ended on last April 19 and the East Timor government received nine proposals for the six blocks.

East Timor is planning to launch an international tender for onshore oil exploration by the end of this year also.

Among RIL’s overseas operations, it has exploration rights to one of the large deepwater blocks in the Sultanate of Oman.

In addition, it has a 25 per cent stake in an exploration block in Yemen, which has struck oil. Reliance is looking to expand its overseas ventures aggressively in Yemen, Sudan and Colombia.

News: Tata Intl recasts business

(BS 23/05/2006) Mumbai - Tata International (TIL), the Rs 7,000 crore business gateway of the Tata Group, has reorganised operations to focus on two business lines —leather and engineering.

Its steel and minerals businesses have been absorbed by Tata Steel, while the spare parts division of its engineering division will be a part of Tata Motors. The restructuring took effect from April 1, 2006.

Before the rejig, Tata International was into five business segments — steel, engineering, minerals, bulk commodities and chemicals.

“As of April 1, in line with the internationalisation methodology being adopted by the group, Tata Steel has absorbed Tata International's steel and minerals global business units (GBUs) back into its fold,” said a Tata International spokesperson.

“Similarly, Tata Motors, too, has absorbed the spare parts division of TIL's engineering GBU into their company. This is in order to streamline their internationalisation activities with their organic and inorganic growth plans,” the spokesperson added.

One of the country's largest trading companies, Tata International is into a gamut of activities — ranging from sourcing products to delivery. It has a global network spreading across more than 100 countries with major markets in Europe, West Asia, the Far East, Ocenia and the Saarc countries.

Tata International's engineering business is involved in international marketing, global sourcing, warehousing, distribution and supply chain management.

News: Foreign investors in go-slow mode

(TT 23/05/2006) Mumbai - Foreign institutional investors (FIIs) appear to be getting wary of Indian shares, while it continues to swoon over the charms of scrips in China.

“We had re-rated the Asian and the emerging markets at the beginning of the month and had gone underweight on the Indian markets,” said Adrian Mowat, chief Asian equity strategist, JP Morgan Chase. However, the foreign brokerage continues to be overweight on China.

Morgan also went bearish on Indonesia, Malaysia, Australia and Central Europe, while being upbeat on Taiwan, The Philippines, Singapore, South Africa and Turkey.

“While we have probably seen the worst in the Indian markets, it is going to be several months before we see an uptrend. We expect reasonable volatility in the markets. However, we believe that it is far too late to be selling ... the relative valuations which still remain attractive provide an opportunity to acquire stocks. A fair value of sensex would be 11000 by December,” said Mowat.

FII top gun CLSA had said yesterday that Indian shares were still at a premium compared with the Asian markets even after the hammering of the bourses over the past week. With F& open interest still high, volatility is expected in the near term.

However, stocks with strong fundamentals offer attractive entry points. These stocks include HLL, Cipla, Maruti, Wipro and Bhel.

Mowat said the fundamentals were still intact and the driving force would be corporate earnings which was expected to clock growth rates of 15-20 per cent.

“Going forward, the Indian markets shall get it cues from the domestic investors in line with the markets of South Africa and Russia where the domestic inflows constitute large part of the total inflows in the equities,” he added.

Morgan in a report had said the medium term economic outlook on India among investors ranged from ‘bullish’ to ‘super bullish’.

“The Indian economy has grown around 8 per cent annually in the last three years, driven in large part by higher consumption by a more prosperous and growing middle class. Growth is likely to be at least 7 per cent annually over the next few years, although faster implementation of economic reforms and improvement in physical infrastructure could result in even faster growth rates,” said Siddharth Mathur, strategist, JP Morgan.

“While the domestic investors can look at IT and pharma stocks, we like select banking and cement stocks. Though the Indian IT companies are some of the best managed companies in the world, they are dependent on the US markets, which might have some reflections on their income,” said Mowat.

Meanwhile, FIIs were net sellers to the tune of Rs 929.80 crore yesterday. Their net outflow in the past eight sessions was Rs 5,967.50 crore.

News: 'Indian govt yet to frame policy on FDI in retail'

(PTI 23/05/2006) New Delhi - Allaying fears of Left parties and Opposition BJP that FDI in retail would open flood gates to foreign companies, Commerce and Industry Minister Kamal Nath today said Government had not framed any policy yet.

Replying to a short duration discussion in the Rajya Sabha on FDI in retail sector, Nath said "there is no policy which we have framed. We have not agreed to opening up of the sector."

Observing that there was presumption in the House that Government had already made up its mind and put FDI in retail on fast track, he said Government was yet to find a model of FDI in retail which did not replace or displace existing employment but generate additional employment.

"We are looking at various models. Till now, we have all the bargaining chips in our hand. We have not committed any thing on retail at the World Trade Organisation in our offer on services," he said.

Government was committed to objectives laid down in the CMP relating to investment creation, technology up gradation and employment generation. Pointing that FDI in retail did not mean imports, Nath said after liberalisation goods can be freely imported after paying the customs duty.

However, he remained non-committal to demands by members that as and when the Government has a policy it will take the House into confidence before taking any decision. He said all aspects have to be taken into account.

News: 'India's growth to slow to 7 pct in 06/07'

(RTR 23/05/2006) Mumbai - India's growth could slow to 7 percent in the year to March 2007 from a 7.5 percent expansion in the previous year as tighter monetary and fiscal policy crimp investment, the OECD said in its economic outlook on Tuesday.

Slackening output growth is likely to keep inflation below 5 percent, while the current account deficit might stabilise at about 3 percent of gross domestic product, the Organisation for Economic Cooperation and Development said in its twice-yearly report.

"The economy has experienced extremely rapid growth in demand over the three years to 2005 that is to a certain extent cyclical," it said.

"While GDP growth picked up to 8.5 percent over this period, supply has not been able to match demand. Some slowing of output growth seems likely in 2006 and 2007 as the impact of higher interest rates, tighter fiscal policy and a possible unwinding of petroleum product subsidies is felt."

India, which imports about 70 percent of its oil, has not increased domestic fuel prices since September last year even though world oil prices have risen sharply to about $70 a barrel.

Prime Minister Manmohan Singh said on Monday the government cannot keep subsidising energy consumption at the current level.

Analysts say an increase in fuel prices could trigger inflation pressures in the robustly expanding economy prompting the central bank to raise interest rates.

The Reserve Bank of India kept its key short term interest rate unchanged at 5.5 percent in its annual monetary policy review in April but struck a hawkish note by saying global factors like oil prices and U.S. interest rates would play an increasing role in policy formulation in the next few months.

The central bank has raised the key rate by 100 basis points since October 2004.

"In the corporate sector, lower availability of finance and higher interest rates seem likely to reduce investment growth while the upswing in inventories may also end," the OECD said.

"During the projection period, the tighter stance of both monetary and fiscal policy is projected to slow economic growth."

The government estimates that India, Asia's third largest economy, grew 8.1 percent in the previous year to March 2006.

It aims to lower the federal fiscal deficit to 3.8 percent of GDP in the current fiscal year from 4.1 percent a year earlier mainly due to higher revenues on the back of robust economic expansion and some cuts in expenditure.

"State governments have also managed to reduce deficits, with the result that the combined central and state government fiscal deficit is projected to drop from 8.5 percent to 6.8 percent of GDP between 2003 and 2007," OECD said.

News: Generali signs JV with India's Pantaloon Retail

(RTR 23/05/2006) Milan - Italian insurer Generali has agreed to set up an insurance joint venture with India's Pantaloon Retail to be called Future Generali, with a starting capital of 2 billion Indian rupees ($43.88 million).

Generali will own 26 percent of the joint venture, its first enterprise in the Indian market, and Pantaloon Retail will own 74 percent, the insurer said in a statement on Tuesday.

"India is a very young country with 60 percent of the population below 30 years of age. These are the new insurance buyers of India tomorrow who spend a significant time at modern retail outlets (stores and malls)," Kishore Biyani, Chief Executive of the Future Group that owns Pantaloon, said in the statement.

The joint venture will offer life and non-life insurance.

The companies expect India's insurance sector to grow 15-20 percent per year over the next 15 years, due to the country's high savings ratio and deregulation of the market.

Premium income in 2005 totalled the equivalent of 17.5 billion euros ($22.38 billion) in India, with the life insurance segment making up two-thirds of that, they said.

At 1249 GMT shares in Generali were up 1.26 percent at 27.33 euros.

News: Pantaloon Ind plans 250 mln rupee insurance spend

(RTR 23/05/2006) Mumbai - Fabric and yarn maker Pantaloon Industries Ltd. said on Tuesday its board had approved investing up to 250 million rupees for its insurance foray.

Earlier on Tuesday, its associate company Pantaloon Retail India Ltd. agreed to set up an insurance joint venture with Italian insurer Generali, with a starting capital of 2 billion rupees ($43.88 million).

Generali would own 26 percent of the joint venture, its entry into the Indian market.

Pantaloon Retail would own 56 percent and Pantaloon Industries would hold an 18 percent stake, Managing Director Kishore Biyani told Reuters.

News: Indian govt draws fire over FDI in retail

(PTI 23/05/2006) New Delhi - Left parties and Opposition BJP today launched a frontal attack on government over its move to open up retail trading to Foreign Direct Investment saying this would shrink employment opportunities.

Participating in a short duration discussion on FDI in retail in the Rajya Sabha, CPI-M member Sitaram Yechury cautioned the government against opening up of the retail sector saying it would go against the commitment made in the National Common Minimum Programme.

He said the FDI in retail should be considered only if foreign investors agreed on augmentation of domestic capacity, technology transfer and employment generation.

Expressing serious concern over already declining job opportunities, Murli Manohar Joshi (BJP) said government should keep every aspect in mind before formalising the FDI policy in retail.

He said at least 16 crore people across the country were involved in the retail trading and FDI in retail would not help in creating jobs.

Praveen Rahtrapal (Cong) said government was aware of the need of retailers. Banwari Lal Kanchal (SP) said the move would not in any way help retail traders as multinationals were coming only for profit.

News: Amitabh Bachchan sinks Star TV

(FE 22/05/2006) New Delhi - The abrupt ending of Kaun Banega Crorepati (KBC-II) due to anchor Amitabh Bachchan's ill-health late last year has affected revenue growth of STAR TV Asia by 6-10%, reveals the latest report from Hong Kong-based research company Media Partners Asia.

While STAR network Asia was cruising at 20-30% revenue growth in first and second quarters of 2005-06 largely thanks to the the healthy advertising growth in STAR India, for the quarter ended March, 2006, the company registered only 14% revenue growth to $123 million.

"In Asia, STAR Group's operating income grew 28% year-on-year to reach almost $30 million, while turnover grew 14% to reach $123 million for the quarter," the report said.

The report cited KBC-II's absence as the primary reason for the decline in STAR Asia's revenue growth. "Revenue growth of 14% was below previous quarters (20%-30% in Q1 and Q2) due to an earlier than expected closure of the second season of "Who Wants To Be A Millionaire" on STAR Plus," the MPA report said.

KBC's first series of 309 episodes went on air in the middle of 2000 and met with phenomenal success. Its second innings of scheduled 85 episodes was launched in August 2005 and was supposed to go on till the end of February 2006 before the superstar anchor fell ill in early December.

Industry reports suggested the KBC-II was an even bigger commercial success than its earlier avtaar. Even before the launch, it managed to book over Rs 100 crore of advertising from sponsors and was estimated to rake in an additional Rs 55-60 crore in ad-spots. The per-10 seconds advertising spots were being sold for Rs 5-6 lakhs, making it one of the biggest money-spinning shows on Indian television.

The abrupt ending of KBC-II proved good for rivals Zee and Sony too, industry observers said. Since February, Zee TV, the entertainment channel from Zee Group, has been consistently getting higher ratings over Sony on several days during the prime time viewing band, TAM reports have confirmed that. Sony, too, managed to extend the popularity of `India Idols' with extended series to cash-in on the void created by KBC-II absence, industry sources pointed out.

The MPA report, however, indicates that STAR will bounce back with its reinforced programming strategy, especially with the success of STAR One and STAR Gold. The report also highlights a possible growth area for STAR in its proposed venture in direct-to-home segment through Tata Sky.

News: 'Indian share slide offers chance to buy'

(RTR 22/05/2006) Mumbai - A 22 percent slide in Indian shares over the past eight sessions poses a buying opportunity for long-term investors who are willing to stomach short-term risks, fund managers said on Monday.

India's economy, Asia's third-largest, has been expanding at about 8 percent annually for the past three years and there was nothing to suggest that growth will slow this year, they said.

"If I have 100 rupees, I will invest 10 rupees now. There are opportunities for the long-term investors in this market," said Ved Prakash Chaturvedi, chief executive of Tata Mutual Fund, which manages $2.4 billion.

India's main stock index fell more than 10 percent to a three-month low of 9,826.91 points on Monday, halting trading for an hour, as brokers dumped stocks to meet margins requirements of their clients.

When trading resumed, the market rebounded after Finance Minister Palaniappan Chidambaram said the banks would step in to help investors for margin calls.

Margins are part of the value of securities paid to brokers by investors before they purchase stocks.

When there is a depreciation in the value of stocks held in the name of investors, brokers seek more money or sell the shares to offset the depreciation in the value of securities.

The BSE index, which had slid more than 22 percent at Monday's low from an all-time high of 12,671.11 on May 11, retraced some of the losses to end 4.18 percent lower at 10,481.77.

The sharp correction was triggered last week by a sell-off in metals globally and sales by foreign funds concerned over rising interest rates and some earnings disappointments.

"All the bad news have come together," said Sashi Krishnan, chief executive at Cholamandalam Mutual Fund. "The metals crash, rising interest rates, tax issues and some earnings disappointments."

A proposal to tinker with the way stock trading has been taxed led to panic. But the government said that overseas funds would not be affected by the planned changes.

Quarterly earnings from India's top lender, State Bank of India, and the largest truck-maker Tata Motors Ltd. had also come in below analysts' expectations.

RISKS AND REWARDS

Fund managers said short-term risks to the Indian market included further forced sales to meet margin requirements, extended declines in global metals and a sell-off in emerging markets due to concerns over rising interest rates in the United States.

Other concerns are an expected increase in domestic fuel prices and the June-September monsoon, which is crucial to the performance of the farm sector that contributes a fourth of the gross domestic product.

Though the market had posted its biggest-ever one-day point loss at the day's low on Monday, many analysts believe the latest sell-off was due to the temporary mismatch between cash availability and the demand for margins.

"This was expected after what happened on Thursday and Friday," Chidambaram said. "Ample liquidity is there to meet margin calls."

"I still believe that, longer term, India offers attractive opportunities," said Antoine van Agtmael, president and chief investment officer at Emerging Markets Management LLC.

"The current correction is a very healthy one. Investors will find that painful, but for the longer term this is very healthy."

Rashesh Shah, chief executive at Edelweiss Capital, said, "it is near the bottom. The correction has got a bit stretched."

"...9,000 to 11,000 is a good range to have a re-look at the market for those who have been on the sidelines waiting to invest," Cholamandalam's Krishnan said.

News: Indian FM holds meeting on market situation

(PTI 22/05/2006) New Delhi - Finance Minister P Chidambaram on Monday held an emergency meeting with senior officials of his ministry to take stock of the situation on the stock market, which crashed by over 1,100 points in the morning.

The meeting was attended by Economic Affairs Secretary Ashok Jha, Chief Economic Advisor Ashok Lahiri and Joint Secretary (Capital Market) KP Krishnan.

Even as the ministry officials met, stock market authorities, including regulator SEBI and Reserve Bank of India, said they were watching the market movements closely.

Trading, which was suspended after the market hit the lower circuit, resumed and it recovered more than 60 per cent of the lost ground within a short time.

News: 'Indian business confidence index up 8%'

(BS 22/05/2006) New Delhi - Growth expectations for the current financial year have increased to over 8 per cent, reflecting a significant increase in business confidence compared with the scenario six months ago, the latest Confederation of Indian Industry outlook survey has said.

CII’s business confidence index (CII-BCI) at 69.3 was higher for April-September 2006 with an increase of 2.1 points, compared to the previous period of September 2005-March 2006.

The CII-BCI — constructed as a weighted average of the current situation index (CSI) and the expectations index (EI) — was significantly higher among non-manufacturing firms engaged in services compared with manufacturing firms.

The CSI, which compares current business conditions with the previous six months, has gained 1.6 points. This shows that a larger number of responding firms have appraised better current conditions for growth of the overall economy, the sector in which they operate and their individual company growth performance to be better, compared with the previous six months.

The EI that reflects the perceptions of the Indian industry with regards to performance of their company, sector and the Indian economy for the next six months is up by 2.3 points over the previous such survey. Non-manufacturing firms were more bullish about growth prospects compared with manufacturing firms on this scale as well.

The strong overall confidence is reflected in a similar trend for all the underlying components of the survey.

The survey said 88 per cent of the respondents plan to increase investments during April-September 2006. Capacity utilisation across the board has increased. About 75 per cent of the respondents have expressed confidence that capacity utilisation for April-September 2006 will be up to 100 per cent.

Yet another 25 per cent of the respondents expressed confidence that capacity utilisation will exceed 100 per cent.

The value of production is also expected to increase in the next six months. This was revealed by 81 per cent of the respondents. For 75 per cent of the respondents, production increased in the first half of 2005-06. Further increase in production is likely because of an expected increase in new orders.

The first half of 2006-07 is expected to be better in terms of an increase in new orders, as 83 per cent of the respondents expected new orders to increase in the next six months, while about 74 per cent of the respondents said new orders had increased in the second half of 2005-06.

Employment is also expected to increase in the second half of this financial year. This was expressed by 53 per cent of the respondents, who expected employment to increase during April-September 2006, while 50 per cent of them said employment had increased during the period September 2005-March 2006.

Regarding exports, 70 per cent of the respondents expressed confidence in exports expansion during April-September 2006. During October 2005-March 2006, about 55 per cent of the respondents said exports had increased.

However, 78 per cent of the respondents reported no reduction in procedural delays — a long-standing hurdle for exporters that raises transactions costs.

News: UB offers $752 mn for Taittinger

(BS 22/05/2006) Mumbai - Vijay Mallya-controlled UB Group has offered nearly £400 million for the acquisition of Taittinger, the world's sixth-largest champagne company.

Sources close to the development said the UB group had submitted its bid for the acquisition of the French champagne company last week.

Standard Chartered Bank is the advisor to the UB group for this deal. UB group officials declined to comment on the development.

Starwood Capital of the US, which had acquired Taittinger in July last year, recently put the champagne company on the block. Taittinger sells about 4.5 billion bottles of champagne and wine a year across the globe. Sources close to the deal said the UB group's bid was among the highest.

Other bidders include the Taittinger family, backed by Crédit Agricole; CVC Partners, the private equity group and Freixenet, the Spanish drinks group.

Sources said the deal would take two-three weeks to materialise. “The champagne business will be sold after the sale of Taittinger's Carneros vineyard in California. Bids for the estate were submitted in last week,” sources added.

News: AT&T to re-enter telecom in India

(BS 22/05/2006) Mumbai - AT&T Inc is planning to re-enter the Indian telecom market through a joint venture with Mahindra Air Services.

The venture, 74 per cent owned by AT&T Global Network and 26 per cent by the Indian partner, will offer Internet, international long-distance and national long-distance services.

The new company will be called AT&T Global Network Services India and AT&T will invest Rs 18.50 crore in the business initially as its equity contribution.

This will be AT&T’s second innings in the Indian telecom services market. AT&T Wireless had a 33 per cent stake in Idea Cellular Services along with the AV Birla Group and the Tata Group. The stake was sold in 2004.

As per the company's new plans, it will have a service mark agreement with AT&T Inc of the US to use the AT&T brand. The Indian company will pay a royalty fee of $5,000 initially and 4 per cent of the annual sales subsequently.

The new company will also offer services like global networking and broadband services, video multicasting and global scheduling.

According to government sources, the company has applied to the Foreign Investment Promotion Board (FIPB) for its permission to invest in the Indian telecom business.

As per the present policy, foreign direct investment upto 74 per cent is permitted in the business the company plans to enter. FDI upto 49 per cent is allowed in the telecom services through automatic route and upto 74 per cent with the permission of the FIPB.

In addition, the present policy also permits 100 per cent FDI in ISPs, without gateways, infrastructure service provider companies, electronic mail and voice mail services.

News: Profit pangs for India Inc

(BS 22/05/2006) Mumbai - Net profit growth at 4-year low in FY 06.

A drop in sales growth and rise in interest burden in 2005-06 have dented the net profit growth of India Inc.

A Business Standard Research Bureau study of 1,450 manufacturing companies, which have so far declared their results (both audited and un-audited) for 2005-06, has shown that the net profit growth reported by these companies is the lowest in the last four years.

These 1,450 companies have posted an aggregate net profit growth rate of 26 per cent from Rs 50,267 crore in 2004-05 to Rs 63,460 crore in 2005-06. A common sample of 1,354 (of the lot of 1,450) companies shows the highest net profit growth rate of 40 per cent was recorded in 2004-05.

In 2003-04, the growth rate was 39 per cent and in 2002-03, 36 per cent. In 2001-02, the sample of companies had posted a single-digit (3.69 per cent) growth rate in net profits.

These 1,450 companies account for 55 per cent of the total market capitalisation of the Bombay Stock Exchange (BSE). There are 2,700 actively traded stocks on the BSE.

Two significant aspects of their performance are a drop in sales revenue growth and a rise in interest cost. The total sales of these companies have grown 19 per cent to Rs 7,10,369 crore in 2005-06, against 21 per cent in 2004-05 (Rs 5,95,314 crore).

The aggregate interest burden of these companies rose 5 per cent at Rs 16,259 crore (Rs 15,497 crore) last year against a 3 per cent decline in interest cost in the previous year.

However, there is a drop in the growth of input cost. This cost rose by 17 per cent to Rs 3,72,185 crore in 2005-06 against 27 per cent (Rs 3,17,020 crore) in 2004-05.

The operating profit margin (OPM) of these firms, a parameter of efficiency, declined during the fiscal. The OPM fell by 30 basis points to 17.60 per cent in 2005-06 from 17.90 per cent in 2004-05. One basis point is one hundredth of a percentage point.

Their gross profit margin (GPM) has remained virtually unchanged at 15.31 per cent in 2005-06 against 15.30 per cent in 2004-05, but the net profit margin (NPM) rose almost 50 basis points from 8.44 per cent last year, to 8.93 per cent during the current financial year.

Refineries, oil and gas, packaging, entertainment and the forgings sector are the worst performers, reporting over a 20 per cent a drop in net profits during the fiscal.

On the other hand, constructions, non-ferrous metals, cement, steel, bearings, hotels, automobiles tractors, paper and cotton textiles have put up a good show, recording over 100 per cent growth in net profits.

Among other profitable sectors, pharmaceuticals, power, tea and coffee, mining, print media and food processing companies have reported 50-100 per cent bottomline growth.

Information technology, personal care products, engineering, sugar, shipping and paint industry have posted net profit growth rate of 20-40 per cent during the year.

Among individual companies, Grasim Industries, JSW Steel, Jindal Stainless, MTNL, Kochi Refineries, Bongaigaon Refinery, Biocon, Arvind Mills and BPCL reported fall in net profits during the fiscal.

On the other hand, net profits of Hindustan Zinc, NMDC,Suzlon Energy, Jaiprakash Associates, Eicher Motors, Lupin, Varun Shipping and Kirloskar Brothers have more than doubled in 2005-06.

News: 300% increase in FDI to India from Singapore

(PTI 22/05/2006) Chennai - India was expecting a 300 per cent increase in its foreign direct investment from Singapore in the first year of implementation of the Comprehensive Economic Cooperation Agreement (CECA), which was cleared by the Union Cabinet in June 2005, a top CII state official said today.

The signing of the CECA has paved the way for increased economic activity between the two countries said R Ramaraj, Vice Chairman, Tamil Nadu State Council, CII and Managing Director and CEO, Sify Ltd, at a special session here with the High level delegation from the Singapore Chinese Chamber of Commerce and Industry(SCCCI) and Singapore Indian Chamber of Commerce and Industry (SICCI).

"It is envisaged that by 2010, the two way trade between the two countries will cross USD 50 billion," he said.

Singapore will probably turnout to be Indias Hong Kong and there could be a shift in FDI from Mauritius to Singapore, he said.

Ajit Singh, Consul General Designate, Consulate General of the Republic of Singapore, said Singapore businesses have been expanding their operations in Tamil Nadu and also elsewhere within India.

India was Singapores fastest growing trade partner among major economies, outstripping even China, he said.

N Kumar, former CII President, said the bilateral trade between the two countries grew by 52.24 per cent in 2005.

"Singapore has maintained its position since last year as Indias largest export partner. Indias imports from Singapore were worth USD 2.58 billion, having grown by 23.94 per cent since last year," he said.

This is the largest delegation from Singapore to visit the country. Almost 56 representatives from various verticals in Singapore are part of the delegation.

Earlier in the day, the delegation met Chief Minister, M Karunanidhi, who had said that the investment framework would be transparent and friendly, M Rajaram, Chairman, SICCI, said.

News: Thomas Cook India plans acquisition-led growth

(RTR 22/05/2006) Mumbai - Thomas Cook India Ltd. has drawn up an acquisition-led growth plan involving retail expansion and a spreading of business risk beyond forex and travel services, the company's new managing director said.

The company expected its 2007 revenue to grow 20-30 per cent over 2006, when it would have an extended 14-month accounting period, Madhavan Menon, who took over the top job last month, told Reuters on Monday.

"We will not achieve the growth targets we are looking at just through organic growth," Menon said. "So, clearly acquisitions are the route."

Thomas Cook would also raise debt to fund acquisitions in the current business lines of the company, he said.

"We have an unleveraged balance sheet, we need to leverage our balance sheet and grow," Menon remarked.

The company, whose foreign exchange business is complemented by corporate and holiday travel business and a clutch of smaller segments such as cargo and travel insurance, would work to mitigate risk from volatility in travel and currency, he said.

"I intend to diversify my risk across three businesses rather than as it is today", he said adding the company's earnings in the February-April 2005 quarter was hit as people cancelled their travel plans after the December 2004 Indian ocean tsunami.

Thomas Cook reported revenue of Rs 131 crore and net profit of Rs 26.9 cr in the year ended October 2005.

The company derives more than half of its revenue from forex and handles $1 billion in currency each year.

"Ultimately the idea is to build robust streams across the three businesses and make sure they are dependent as well as independent."

The insurance-selling operation had seen a gross profit growth of 80-100 per cent over the last two years and the company was considering expanding in non-life insurance area, Menon said.

Thomas Cook is developing its 60 branches into uniform outlets, providing all services. All of the outlets deal in foreign exchange. 7-8 are now in the new format.

The company would add another 90 stores through organic or inorganic growth in the next three years, Menon said.

"I want to be a one-stop-shop for all the customer's travel and travel related services," he said.

Dubai Financial LLC, a subsidiary of Dubai Investment Group, acquired 60 per cent in Thomas Cook India in December and mopped up another 8 per cent through an open offer.

Thomas Cook shares fell 7.15 per cent to Rs 580.05 in a weak Mumbai market.

News: Sensex bounces back after 1,100 points crash

(DNA 22/05/2006) Mumbai - The BSE Sensex made a sharp bounce-back of 800 points after 1,100 points crash in the morning and was trading at 10,666, down by just 271 points, at 1338 hrs.

Earlier, the markets crashed this morning falling by more than 1,100 points to below 10,000 level on panic selling, induced by margin pressure.

The benchmark index of the Bombay Stock Exchange (BSE) crashed to a low of 9,827, dipping by 1,112 points, which led to suspension of trade.

The trading was suspended for one hour and resumed at 1300 hrs, leading to a bounce back by more than 500 points and the Sensex climbed back above the 10,000 level at around 1315 hrs.

The National Stock Exchange (NSE) S&P CNX Nifty index fell by 350 points to a low of 2,896. However, it came back sharply, too, to 3,161 points, but was still down by 85 points, at 1338 hrs.

Taking advantage of the situation, many mutual funds were also seen buying stocks at cheaper rates, an analyst said.

Life Insurance Corporation of India was also buying at this opportune moment.

Earlier, trading was suspended in the stock market on Monday, with Sensex crashing by 1,100 points as traders and investors were gripped by panic.

Facing an unprecedented situation and the sharpest ever fall, stock market authorities suspended trading for an hour, first time after May 17, 2004.

The crash followed a statement by Central Board of Direct Taxes seeking to dispel suggestions that its draft circular was ambiguous.

The worst ever crash coincided with the second year anniversary of the Congress-led UPA government.

Just before trading was suspended, the BSE Sensex was quoting at 9,826.91 while the NSE Nifty was at 2,896.45.

The market had opened strongly, recording over 200 points increase, but the slide started within minutes coinciding with CBDT statement thrashing media reports that investors would have to live at the mercy of the tax officials.

It was quoting at 10,274.66 at 1130 hrs.

While rejecting suggestions that the draft circular was ambiguous, the CBDT statement said: "Whether a person purchasing or selling shares/securities is a trader or an investor remains a question of fact.

"The assessing officer would have to take note of the totality of the facts and circumstances before reaching a conclusion," it said.

The benchmark Sensex has lost more than 2,000 points in the last few trading session, including today, following eruption of a controversy on taxation circular put out by CBDT.

The National Stock Exchange Nifty was down about 180 points at 3065.20.

News: Will common interests harm the Ambanis?

(TNN 22/05/2006) Mumbai - The paths of Anil Ambani-controlled ADAG group and Mukesh Ambani’s Reliance Industries (RIL) seem to be intersecting more often. The overlap is especially visible in the energy sector, where both brothers are trying to tie up with the same partners for business.

One example is Anil Ambani’s plan to bid for the latest round of NELP (new exploration and licencing policy). RIL has traditionally been a very bullish player in NELP and had won its Krishna-Godavari blocks after aggressive bidding about four years ago. The company has ambitions of being a global player in the upstream oil and gas production business.

RIL chairman Mukesh Ambani has recently said that the exploration and production business has the potential to be RIL’s biggest business in the future. The company will begin full-year gas production from the Krishna-Godavari basin from the fiscal ending March 31, ‘10, after spending Rs 17,600 crore ($4.1bn) in the next few years.

For the Anil Ambani group, the interest in oil and gas is in the linkage to power production. ‘From well-head to wall-socket’ was the famous motto of Reliance Industries, before the two brothers parted ways.


The Anil Ambani group has huge interests in the power business and is obviously looking for a fuel source. However, NELP exploration could yield oil as well as gas. Both RIL and ADAG sources refused to comment on the issue.

Another area where both companies are actively interested is city gas distribution. RIL has already stated its intention to invest in setting up a world-class gas distribution network in eight major cluster hubs in states through which the gas pipeline evacuating its K-G basin gas will pass. According to the earlier agreement between the two brothers, city gas distribution in Mumbai and Delhi was supposed to be reserved for the Anil Ambani group.

In the financial services business, Anand Jain — a close business associate of the senior Ambani — recently garnered Rs 5,000 crore through a new realty fund. The financial services sector, catered to by Reliance Capital, was earlier thought to be Anil Ambani’s exclusive domain. The overlapping of business interests is apparent in a host of other businesses as both groups scramble to grab new opportunities.

Earlier, there was also a disagreement on the status of airport projects. The boards of the four Anil Dhirubhai Ambani group companies had in February identified deviations from the agreed position on the non-compete agreements. The previously agreed position was that the business relating to airports and airports infrastructure was exclusively reserved for Reliance-ADAG, without any exceptions.

However, the subsequent agreement with RIL, stated that RIL can enter the business of airports and airports infrastructure — which is claimed to be incidental/integral or necessary for any of its businesses, or, where ADAG has not been successful in privatisation of airports. The Supreme Court hearing on the airport privatisation case is scheduled for June 1, though the government has already handed over the Mumbai and Delhi airports to other private players.

News: Indo-Asean FTA set for Jan takeoff

(TNN 22/05/2006) New Delhi - Here is the final word on the Indo-Asean free trade agreement (FTA) — bigger than any other trade pact that India has entered into so far.

With the controversy over impact of liberal imports on the Indian farmers and the domestic industry ebbing out, the Prime Minister’s Trade and Economic Relations Committee (TERC) has given the green light for implementation of the FTA with Asean from the beginning of ‘07.

The negative list of items which are not covered under duty concessions resulting from the pact would be reduced to 850 as compared to 1,414 originally proposed by India.

To protect farmers from import competition — an issue highlighted by Congress president Sonia Gandhi — it has been decided to impose tariff-rated quotas (TRQs) for import of palm oil from Malaysia and Indonesia; tea, coffee and pepper from Vietnam; and some manufactured goods from Thailand.

Following TERC’s decision to go ahead with implementation of the FTA from January ‘07, the agriculture ministry and the commerce department have been asked to work out TRQs for the identified items. It is understood that the quota ceilings for these commodities would be finalised in a couple of months.

There was strong pressure from Malaysia and Singapore to prune the negative list, highly-placed government sources said.

The TERC was of the view that not implementing the FTA would lead India to miss the bus on the proposed Pan-Asian Economic Community which also includes a common currency for the Asian region.

Apart from the 850 items on the negative list, all other items would be eligible for concessional import duty in India.

The TERC discussed all issues related to the Asean FTA at a meeting earlier this month and the conclusion was that dynamic effects of increased trade ‘outweigh’ micro considerations like notional revenue loss and impact on domestic industry and farmers due to increased competition.

The observation of the committee was in response to the finance ministry’s view that the estimated revenue loss would be Rs 1,400 crore in the case of palm oil alone even if TRQs are imposed and the reduction in duty is only 50%. India imports more than 5m tonnes of edible oil and the bulk of it comes from Malaysia and Indonesia.

On the domestic industry’s concern that duty concessions to Asean members may result in inverted duty on certain items, TERC has said that such issues should be looked into by the committee set up under Planning Commission member Anwarul Hoda.

The domestic industry is keen to ensure that effective customs duty on raw materials is higher than that of finished goods. While the primary concern over impact on imports from Asean is focused on agri products, India Inc is worried about imports from Thailand and the possibility of Chinese goods entering the country through Asean nations.

Initially, there were suggestions that sensitive items like palm oil, tea, coffee, rubber and pepper should be kept out of the Asean FTA. However, the TERC has recommended their inclusion in the pact since the key criteria of coverage of 80% trade would not be met if these items were kept out.

The framework agreement for India-Asean FTA envisages that tariff concessions should cover at least 80% of the trade between the two sides.

The TERC’s recommendations have cleared all doubts over the Asean FTA, the officials said. Doubts had arisen over implementation of the pact in view of the apprehensions over the impact on domestic industry and farmers.

Congress president Sonia Gandhi had also written to Prime Minister Manmohan Singh about the ramifications of FTA, particularly the proposed pact with Asean, on farmers. The Congress chief had called for safeguards which are being put in place now.

News: Expats too sing the retail desi tune

(BL 21/05/2006) Bangalore - It's not just Indians who are singing the new desi tune, but also scores of foreigners who are writing the notes for the Great Indian Retail Story.

The country is now playing host to scores of expats from key markets known for big format retail experience. Says Mr K. Sudarshan, Managing Partner, EMA Partners International, an executive search firm, "Expat hiring for mall management is definitely a trend. We need subject matter expertise from these countries, and they love to come here because it is an added dimension to their profile." Most of the hiring is obviously happening from proximal markets such as Malaysia, South Africa, Singapore, the UAE and other West Asian countries. For instance, Clarendon Parker Asia, a Dubai-based search firm, which recently launched its services in the country, has placed a top Filipino executive for an Indian retail giant. Shopper's Stop has hired Mr Andrew Levermore, a South African, as CEO for HyperCity, its hypermarket chain in the country. In fact, EMA Partners has set up `retail desks' in its offices in South Africa, Malaysia and Singapore to hire both Indians and non-Indians for the country's retail sector.

Mr Virendra Rastogi, Managing Director, Clarendon Parker, says that even Sri Lankans, Pakistanis and Egyptians have shown interest in an Indian professional stint.

Mr Sudarshan says that mall management companies in the country are also on the lookout for `recently retired' people from giants such as Tesco, Debenhams and Carrefour. "They will be hired as transition CEOs for 3-4 years. Generally they have shadow teams who take over from them in a couple of years." And with a compensation of $120,000-150,000 per annum, these CEOs do not need persuading to take up the offer.

What is interesting is that these expats have generally grown from the ranks and usually do not sport fancy B-school tags. But they are subject matter experts in mall management.

News: Mallya in bid for South African winery

(DNA 21/05/2006) Bangalore - Seems like it’s acquisition season for Vijay Mallya. The King of Good Times is in advanced stages of buying out a winery in South Africa — even as he has made a $767 million -- or €600 million -- bid for French liquor major Champagne Taittinger.

Sources in the UB group said the acquisition in South Africa is not as big as that in Taittinger, but it would easily be close to around $100 million, which is modest spend by Mallya’s standards.

The deal, sources say is expected to give UB group a substantial foothold in the Indian wine market, which is currently growing at around 25-30%.

Sources close to Mallya said these acquisition moves were being made to get the first mover advantage in the global market, which is going through a process of consolidation.

“He wants to be ahead in the takeover race. There would be very few companies left for acquisition, if he does not make his move now,” said the sources.

“The UB Group is pursuing significant international acquisitions in the spirits business,” is all Mallya told DNA Money, when contacted.

With these global buyouts, UB group, which controls over 60% of the Indian spirit and beer market, would be making its foray into the champagne and wine segment. Currently, Sula Vineyards is the fastest growing premium wine producer in the country, which manufactures around 11 lakh bottles annually. This year, it is planning to raise it production to 15 lakh.

News: Tatas still on retail recce, look for foreign brands

(DNA 21/05/2006) New Delhi - The Tata Group appears keen on carving out a niche for itself in the retail space. Which is perhaps why despite having a dedicated retail arm, Trent Ltd, the Group is going ahead with plans to begin a parallel retailing business under a different company. In fact, sources say that Trent - which has Noel Tata at the helm of affairs - will have nothing to do with the Group’s impending retail foray. To begin with, the Tatas are partnering with Australian major Woolworths for starting a consumer durables retail network.

Trent currently operates three retail formats - apparel chain Westside, bookstore chain Landmark and hypermarket Star Indian Bazaar. Sources say that the parallel retail foray of the Tata Group will most likely avoid these existing formats and instead look for foreign brands that want to establish a base in India. In fact, the Tatas are believed to be in dialogue with several other international majors to launch their brands in India besides Woolworths. Industry sources say Home Depot, the US-based do-it-yourself home hardware store and UK-based consumer electronics chain Dixons, are among the foreign retailers in talks with the Tatas for their Indian foray.

When contacted, a Tata Group spokesperson declined to comment on any retail plans. However, in an e-mail response, a Woolworths spokesperson said: “Woolworths is working with Tata to establish Dick Smith Electronic stores in the country. We are in the final stages of planning and intend on opening our first DSE store in India in the near future.”

While Woolworths will provide the backend support such as sourcing consumer electronics items from brands in India, the Tatas will handle the retailing aspect. The first Dick Smith Store, spread over 15,000-20,000 sq ft space in Pune, is expected to open by September, followed by 3-4 stores in other metros.

For now, consumer durable retailing is fragmented with local retailers like Vijay Sales and Viveks in the South. However, the Tatas will have enough competition, since Reliance Industries and Big Bazaar are also set to enter consumer durables retailing. Big Bazaar is believed to be readying stores spread over 20,000 sq ft across 25 locations.

News: Indian FM rules out reintroducing capital gains tax

(PTI 21/05/2006) New Delhi - After a nearly 1,300-point fall in the key stock market index, Finance Minister P Chidambaram on Saturday ruled out reintroducing long-term capital gains tax on equity transactions or unilaterally reviewing the double tax avoidance treaty with Mauritius.

"There is no intention to reintroduce long-term capital gains tax on securities traded on the stock market... The issue of Double Taxation Avoidance Agreement has been debated threadbare. Due to host of economic, political and diplomatic reasons, the treaty cannot be reviewed unilaterally," he told a news conference in New Delhi.

The bear run in the market was partially due to heavy selling by Foreign Institutional Investors on fears that the Central Board of Direct Taxes may levy higher tax from them.

The FII withdrawal had prompted the Finance Minister to clarify that no FIIs would be taxed and the fears were based on "uninformed reporting."

Following FIIs' pull out, the CPI(M) had demanded that the government reintroduce long-term capital gains and dividend tax, apart from reviewing the DTAA with Mauritius, which was being increasingly used by FIIs for avoiding tax.

Chidambaram's response came in the backdrop of CPI(M)'s demand.

He also allayed apprehensions about the economy, saying economic fundamentals were very strong and it did not undergo any change recently.

"The foreign exchange reserves were at $163 billion, inflation reined in below four per cent for several weeks, manufacturing sector is growing at over nine per cent and monsoon has set in, which is expected to be good," he said.

The markets had tanked nearly 1,300 points on Thursday and Friday, as panicky investors joined FIIs in selling activity.

The Finance Minister said the stock markets go beyond Sensex stocks. "In the last four trading sessions, 420 stocks have risen adding more than Rs 5,200 crore to their market capitalisation".

He said FIIs influence 10 per cent of volumes in derivatives market and 10 per cent of volumes in cash market.

"FIIs play a significant role in India like in any other market. I believe mutual funds also play an equally important role," Chidambaram said.

The Minister also said: "India growth story continues to be a growth story. It goes beyond stock markets and includes agriculture, services and manufacturing".

News: Fillip for new Indian airports

(TT 21/05/2006) New Delhi - The government is likely to relax the current norm of not allowing two airports within a radius of 150 km. If this happens, it will benefit metros like Delhi, Calcutta and Mumbai, which are planning to have a second airport.

Civil aviation secretary Ajay Prasad said at the chief secretaries conference today that the stringent norm was being reviewed in order to relax this restriction in the new civil aviation policy that would be announced soon.

Prasad made the disclosure in response to a question raised by a senior Haryana government official on whether the government had any plans to ease this norm in view of the “international experience” in this regard.

Prasad said the Centre was planning to set up three airports in the Northeast that would be able to handle 50-seater turbo prop planes. These airports would come up in Sikkim, Nagaland and Arunachal Pradesh.

The long-awaited civil aviation policy is likely to come up before the cabinet soon. Among other things, the policy envisages setting up an independent civil aviation regulator. The policy will also set the norms for mergers and acquisitions.

The policy also wants to retain the current ceiling on foreign direct investments, though the finance ministry wants it to raise the ceiling and allow foreign airlines to hold equity in domestic airlines.

The civil aviation regulator will set standards for the entire sector, issue licences to operators and personnel, regulate tariff, punish those who violate standards and ensure that there are no unfair trade practices and abuse of market dominance.

A comprehensive aviation law will be framed to replace the existing acts on aviation and security, which will legally establish the regulator.

The draft policy will also have a section on mergers and acquisitions in aviation, which will allow 100 per cent transfer of aircraft, flight rights and parking bays on payment of transfer fees.

It will, however, not allow, ‘grandfathering’ of these rights. This means these rights and slots cannot be on sold to another airline before or after the merger.

The civil aviation policy will, however, not push for relaxing FDI cap in domestic airlines.

The civil aviation ministry wants the current FDI cap of 40 per cent and ban on foreign airlines from owning stakes in domestic airlines to remain. However, the finance ministry, backed by the Planning Commission and the PMO, wants the Naresh Chandra committee recommendations of allowing foreign airlines to pick up limited stakes in local airlines to be accepted.

News: 'Poor infrastructure costing India growth'

(RTR 21/05/2006) New Delhi - The economy is losing 1.5-2.0 percent in growth annually due to the poor state of the country's infrastructure, Finance Minister Palaniappan Chidambaram said on Saturday.

Foreign firms often cite rickety infrastructure as the biggest challenge to doing business in India, Asia's third-largest economy, and analysts say its congested ports and poor roads are a major obstacle to it achieving double-digit economic expansion.

"The infrastructure gap is costing India 1.5-2.0 percent in gross domestic product growth annually," Chidambaram told a conference of state government officials.

India has grown at an average clip of 8 percent in the past three years, estimating GDP expansion at 8.1 percent for the 2005/06 financial year which ended in March.

The government wants to raise that rate to 10 percent by building better highways, airports and power supplies and Prime Minister Manmohan Singh has said the country needs investment of $150 billion in the next few years to do so.

Chidambaram urged state governments to tap the private sector for infrastructure projects but said the process had to be transparent.

"From bidding to tax concessions, there must be complete transparency. Only then will investors come in," he said.

News: 'India business confidence up on growth optimism'

(RTR 21/05/2006) New Delhi - Expectations of more than 8 percent GDP growth and higher exports this financial year raised confidence among Indian businesses for first half to September 2006, a survey by the Confederation of Indian Industry (CII) showed.

The CII survey of 254 companies released on Sunday showed the main business confidence index rose to 69.3 points for April-September 2006 from the September-March 2005/06 level of 67.2 points.

A score above 50 indicates "positive confidence" while a score above 75 would indicate "strong positive confidence", the industry lobby group said in a statement.

The higher confidence level revealed in the 65th survey of the country's largest industry lobby group, published every six months, comes despite expectations of an increase in input costs that may put pressure on profit margins.

"Prices of raw materials have increased in the past six months. The prices are expected to increase in the next six months also. There is a likelihood of pressure on margins especially in (the) manufacturing sector," the CII survey said.

Prices of key industrial inputs like furnace oil and metal prices have surged in the past few months, but the Indian government has held back from raising retail fuel prices.

The federal government is now discussing whether to raise fuel prices -- or cut duties -- to stem the losses of state-run oil firms.

The CII survey showed the expectations index, which reflects firms' outlook for the next six months, also increased to 70.8 points for April-September 2006, from 68.5 points in the previous half.

CII's current conditions index also increased to 66.3 points from 64.7 points as most respondents expect the Indian economy to grow by more than 8 percent in 2006/07.

The survey showed 88 percent of respondents willing to make additional investments during 2006/07. About 57 percent of them expects 75-100 percent capacity utilisation during first half of 2006/07.

Indian businessmen also expect higher exports although 83 percent of respondents complained of procedural delays that were raising transaction costs.

News: Tourist outflow from India has doubled

(PTI 21/05/2006) Kolkata - Tourist outflow from India to Singapore, Thailand, Hong Kong, China, USA, Malaysia, Sri Lanka, Nepal, Bangladesh and Australia has doubled in the last three years.

There would be 6.9 million outbound tourists from India by 2006 with the growth set to expand at 5.7 per cent annually, managing director of escorted tour company 'Globus and Cosmos' Gouri Jayaram told the regional conference of the Travel Agents Association of India (TAAI) yesterday.

Tourist in India which had declined in the recent past due to terrorism, increase in fuel prices, health hazards including bird flu and unpredictable natural disasters, Jayaram said had bounced back because of the 30 crore affluent middle class people living in the country and the growing number of low cost airlines.

The growth rate could be accelerated with modernisation of airports and improved services by travel agencies, she said.

She also said that over 11 million tourists arrived in the Asia Pacific region last year and the figure was bound to rise. By 2020 there would be about 17 million outbound tourists from South Asia.

Tourist growth in the Asia Pacific region, she said, was envisaged at nine per cent against world tourism at the rate of four to five per cent in 2006.

She said that only 16 per cent of the total growth was focussed in business tourism against a spectacular growth in leisure tourism.

PATA, she said, had predicted a major growth in the Asia Pacific region during 2005-2007.

News: Global brands rushing to groom Indians

(PTI 21/05/2006) New Delhi - With Indians seeking newer products and services as they move up the wealth ladder, up market global brands like Nautica and New Balance are entering the country to cash in on the opportunity.

The global companies are playing on the psyche of the brand-conscious modern Indian, who has no qualms spending a fortune on overhauling the wardrobe.

Though the market is already teeming with international brands, new entrants are dime a dozen, given the Rs 500 crore market for the premium grooming segment.

Estimates suggest that this market is growing by 45-50 per cent annually. The apparel segment alone is expected to grow to Rs 300 crore in the next three years.

In May so far, two new players - New Balance shoes and lifestyle major Nautica - announced plans to set up shop here.

Nautica, for instance would pump in Rs 30 crore in the next three years to set up 12 stores across India.

"Getting the Nautica brand in India would be a step closer for us in bringing world class brands here," said Darshan Mehta, President of Arvind Brands Ltd, which would retail Nautica in India.

Nautica would offer its exclusive range of men's and women's apparel and accessories and would soon launch its women's sportswear and home collection in India.

Besides for the fitness freak, US footwear company New Balance has just the right 'walking and running shoe'.

"With fitness mania gripping the country, we estimate a good market for running and walking shoes in India," New Balance Asia Head Darren Tucker said, adding his company plans to open 50 exclusive outlets in the country by 2008.

News: DLF to invest Rs 1,00,000 cr

(PTI 21/05/2006) New Delhi - Real Estate major DLF Universal may invest over Rs 1,00,000 crore in next seven to 10 years in both its existing and new business ventures.

As per available information, bulk of these investments would be made in the three new businesses -- hospitality, SEZs and infrastructure. In each of these businesses, the Group, which is coming with a mega IPO in next couple of weeks, would take leading global players as partners.

"We are in the business of real estate development including residential, commercial and retail properties, and we intend to diversify into new businesses such as hotels, SEZs and infrastructure," DLF said in a draft prospectus submitted the market regulator SEBI.

In the core sector of the business like house, offices and shops and other purely real estate development, the company will be go on its own, but in new businesses, DLF is planning to enter into partnership for each category.

According to sources in the know, the new business would have an investment of up to Rs 60,000 crore and DLF would have majority stake of 51 per cent or more in the partnerships.

Although the company has begun looking for partners for each new business, sources declined to divulge details. In the hospitality business, DLF has tied up with global hotel chain Hilton.

The company is also talking to various other global brands like Four Seasons and Peninsula for luxury hotel segment, sources said.

News: Now realty takes space in Indian ad mkt

(TNN 21/05/2006) New Delhi - Struck by the number of real estate ads vying for your attention in the newspapers and even on TV and radio? Real estate is, in fact, now a major driving force in the advertisement market — the sector’s ad spends have gone up to Rs 12,051 cr in 2005 from Rs 9,232 cr in 2003, contributing over 11% to overall ad revenue in 2005, as compared to 7% in 2004.

Says K V Sridhar, national creative director, Leo Burnett: ”The kind of branding and marketing exercises that we are now seeing in the real estate sector is unprecedented. Not only are ad spends increasing, but the sector is becoming much more corporatised and organised.”

Buyers are getting brand conscious too, what with the target audience for property developers shifting to 25-30 year olds. “What’s more they are now selling lifestyles rather than mere properties. And though the marketing and branding exercises are at a local level now, the next step for developers will be to compete at a national level.”

In the last three years, the sector has witnessed 25%-30% CAGR in market volumes, with approximately 24 million sq ft of new commercial estate market being absorbed in 2005, equalling a capitalisation of Rs 6,600 cr.

Says Siddhartha Mukherjee, director, TAM Media Research: ”With consumers getting more brand conscious, developers are increasing their expenditure on advertising and even tapping different media like the internet and radio.

Since action is at a localised level, radio spends have been increasing. As developers move from their current domain to the national level, this sector will continue to generate increasing ad revenues.”

The increase in activity in this segment can also be attributed to the governments green signal to 100% FDI under the automatic route. Says Sanjay Chandra, MD, Unitech Group: ”With FDI opening up, Indian developers have the opportunity to work on largescale projects which require a lot of awareness and publicity.

In the past, the availability of capital in real estate was restricted — now with lots of funds being generated by this sector it is bound to have its effect on other sectors also.”

Agrees Harish Bijoor, marketing expert and consultant: “There is a paradigm shift from commodity selling to brand selling in the real estate segment which was missing earlier. Marketing is not only revving up in the segment, but is also becoming focused.”

News: 'Indians can emerge as global traders'

(FE 20/05/2006) Mumbai - India is set to emerge as the most trading savvy nation in the commodities arena compared to its other Asian peers in the near future. Language skill in English is expected to be the driver just as it did for the information technology and software industry in the nineties.

“I see a huge potential in India for both its domestic and global markets. Indians have a knack for trading and wide spread knowledge of English can actually aid boost trading,” Charles Farra, managing director, Business Development-Asia Pacific, Chicago Board of Trade (CBOT) told FE on the sidelines of a presentation organised by Kotak Commodity Services.

The 158 year-old CBOT that has gained a market share of 40% in the US market is extending its reach to various countries. The volumes on the exchange jumped after it introduced e-CBOT in October 2005, the 22 hour electronic platform for futures trading.

Mr Farra is in India to encourage the country’s trading community to trade on CBOT which is providing a diverse mix of financial, equity and commodity futures and options-on-futures products.

Agreeing on the fact that Indians were trading savvy, Suresh Kotak, chairman of Kotak Commodities stated that he too earlier used to trade on US markets for cotton and Brazilian markets for castor.

Indians have been trading on overseas commodities markets using different channels to hedge risk in absence of domestic facility till 2003. However, on reports of unofficial trading on foreign exchanges from India, commodities market regulator Forward Markets Commission (FMC) reiterated that such trading was illegal unless approved by the government of India.

Investors, companies or institutions wishing to trade on overseas exchanges have to get Reserve Bank of India (RBI) approval. Though, individuals can invest upto $25,000 under the liberal forex provision.

Meanwhile, CBOT announced that its 100% electronically traded precious metals complex set an all-time high, as volume reached 1,02,237 contracts at the close of trading on Thursday. The previous record, 1,00,589 contracts, was reached on May 11, 2006.

In addition, for the second time this week, the exchange set a new record for total open interest. The new open interest record 1,70,13,590 contracts, tops the earlier record of 1,68,41,302 contracts set on Monday, May 15.

The CBOT’s gold futures complex set a new volume record of 90,021 contracts, a 10% rise compared with the old record of 81,797 contracts set May 11, 2006. Volume in the CBOT full-sized gold (100 oz) futures increased 11%, climbing to 62,003 contracts on May 11.

News: VF Corp unit eyes 10% of Indian premium mkt

(RTR 20/05/2006) New Delhi - A unit of apparel firm VF Corp, which owns lifestyle brands such as Nautica, plans to win a tenth of India's booming premium apparel market as it opens huge stores in Asia's third largest economy, it said on Friday.

"India is the next frontier of growth," Denise Seegal, president of the wholly-owned subsidiary VF Sportswear Inc., told Reuters in an interview.

A fast expanding economy, dual incomes and rising aspirations are fanning 50 percent annual growth in India's 0 million premium clothing and accessories market, where almost half the sales are apparel.

A growing middle-class, estimated at more than 200 million, is the target audience for dozens of global brands faced with tepid demand in many western markets.

"We are looking at a 10 percent market share in 3 years. India is just beginning the same growth cycle that China began 10 years ago," Seegal said.

The Nautica brand would invest about 300 million rupees (.5 million) in India over three years, she said, opening 12 stores in seven cities selling Nautica products such as sportswear, tailored clothing, eyewear and accessories.

India allows foreign chains selling single brands to own up to 51 percent of their local joint ventures. They cannot set up wholly-owned retail formats and have to use franchisees to tap growing demand.

VF Corp is partnering Arvind Brands Ltd. part of the textile group led by denim maker Arvind Mills Ltd.

VF Corp's portfolio includes Lee, Wrangler, Vanity Fair, Lily of France, Bestform bras and other lingerie. VF Corp has 122 shops in China, mostly 500 square feet each.

"Shanghai and Beijing are much further developed (than India) in the retail scene," she said. But Seegal added the India strategy would be different and stores here would be large. The company opened its largest single brand store, 6,800 square feet, in Bangalore, India's silicon valley, on Thursday.

Another 3,700 square feet of space opens in an up-market tony shopping area in New Delhi, the capital, on Saturday.

Seegal declined to say what percentage of global sales were expected from India, but said 15 percent of billion retail sales came from outside the United States in 2005.

Many global brands, especially in apparels, follow a twin pricing strategy in India, selling clothes at a discount to woo first time customers and build brand awareness.

But Darshan Mehta, president of Arvind Brands, said Nautica would maintain its premium image in India and clothes will retail at "New York prices". "The premium consumer is not looking to buy last season's product at a lower price," he said.

He said Nautica's core audience was about one million households with an annual income of 4 million rupees growing at 30 percent a year, adding another 4 million households earning more than 1 million rupees annually was the aspirational segment. "This next layer is also coming up very fast," he said.

News: Caribbean executives endorse economic initiatives

(PL 20/05/2006) Kingston - Executives from the Caribbean Development Bank put forward mechanisms to prevent a drop of profits and promote the sustainable economic development of the region, during the 36th Annual Meeting of this financial institution.

The two-day meeting, held at Jamaican Montego Bay resort, gave the current situation of finances in the region a priority for discussion.

According to figures, only five Caribbean countries reported a financial increase in 2005, while the rest of the countries in the region did not raise their profits compared to 2004.

However, the president of the CDB, Compton Bourne, warned there are several opportunities despite the structural changes in the commercial relations between the Caribbean and Europe.

An important point to start off is admitting the potential of our regional markets, as well as the sort of joint ventures in the tourism field, added Bourne.

Among the proposed initiatives to boost the economic increase highlight the modernization of the viable companies and the recovery of firms.

News: Indian food retailers bet on bigger stores

(IBN 20/05/2006) Mumbai - Twenty minutes before the doors open at HyperCity, suburban Mumbai's new hypermarket, a long line of shoppers wait restlessly while employees stock shelves with everything from fruit to decorative fountains.

First-time visitor Mariam Ghoghawalla said she had only come to see the store, but added she was open to buying "something small".

HyperCity, owned by K Raheja group and sprawling across 120,000 square feet, is symbolic of major Indian retailers' efforts to expand their meagre slice of the market.

Other firms including Pantaloon Retail and Trent are also setting up more hypermarkets, targeting economies of scale and bigger profit margins on non-food items.

India's major retailers have an annual turnover of an estimated $7 billion, but that only accounts for 3 per cent of the overall retail market, compared with 20 per cent in China and 40 per cent in Thailand.

The Raheja group, which also owns part of department store chain Shopper's Stop, plans to open six to eight more hypermarkets over the next 18 months.

The group has seen some encouraging signs at HyperCity.

"The response to the packed fruits and vegetables was an education for us," said Chief Executive Andrew Levermore.

"We were led to believe Indian women wouldn't buy them if they couldn't touch and feel them, but we can't keep up: we're replenishing these shelves at least eight times a day."

Still, the big retailers face a number of hurdles.

The rising cost of real estate and scarcity of large plots of land in big cities pose a challenge, while poor roads and transportation are a deterrent to development in the suburbs.

"Convenience and proximity are very important to the Indian shopper. Even those who have a car don't want to spend hours to get to a store," said Anil Rajpal at consultancy KSA-Technopak.

"The Indian consumer is also quite pampered. We can call and have groceries delivered at our door and get even very small packs, which hypermarkets would find difficult to do," he said.

Furthermore, competition is heating up, with regional retailers such as RPG Group's Spencer's, Subhiksha and Nilgiri's looking to expand beyond their bases in the south as supply chains and distribution improve and investor interest in Indian retail grows.

Small and Big

The food and grocery sector, which makes up nearly 77 per cent of the total retail market, is dominated by small local stores.

"Our competition is not other formal retailers. We are going head-on with the traditional mom-and-pop stores," said managing director of Chennai-based Subhiksha, R Subramanian, which has a chain of discount supermarkets and pharmacies.

At the other end of the market, foreign investors are also keen to move into India.

After the Indian government allowed single-brand foreign retailers to take up to 51 per cent stakes in joint ventures earlier this year, there is growing speculation that it will soon also open doors to multiple-brand retailers like Tesco Plc, Wal-Mart and Carrefour.

Major retailers' turnover is forecast to grow at 25-30 per cent a year over the next four years, attracting big players such as Bharti Enterprises and Reliance Industries Ltd to the market.

Reliance is investing $750 million initially and has started managing the supply chain for about 20 state-owned supermarkets in Mumbai.

For midsize players like Subhiksha, that may be bad news, but Subramanian is confident.

"Large-format retailers are being forced to set up in expensive in-city locations, which impacts efficiency, whereas small guys are fairly efficient in the back-end, and score in proximity," he said.

Analysts say hypermarkets can thrive in suburbs that are not too distant, partly by striking land deals.

Raheja is also a realty developer, while Pantaloon has a joint venture with Singapore's CapitaLand to manage malls.

The bigger retailers are also differentiating themselves in terms of store size: Spencer's, which previously had a franchise deal with Dairy Farm International Holdings Ltd, has hypermarkets that measure about 25,000 sq ft each, while Pantaloon's Big Bazaars range from about 30,000 sq ft in the city to 65,000 sq.ft in the suburbs.

"There is scope for both - for consumers it's a question of all under one roof or convenience and proximity," KSA-Technopak's Rajpal said.

The task for Raheja's Levermore, then, is to give shoppers like Ghoghawalla reason to buy everything she needs at HyperCity.

News: Fox Mandal, Little to form India’s largest law firm

(TNN 20/05/2006) Mumbai - FoxMandal and Little & Co on Friday announced they were merging to form India’s largest law service firm under the ‘Fox Mandal Little’ (FML) name.

That they would come together was first reported by ET in its 17 May edition. The combined entity will have 37 partners, more than 250 lawyers and around 150 support staff.

Existing restrictions that limit the members in a partnership to 20 will force FML to forge multiple partnerships in some locations. The partners of Little & Co will join Fox Mandal in Delhi. In Mumbai, those with Fox Mandal will move to Little & Co, which has a larger practice in the city.

The names of the two firms will not change. Instead, they will have a common brand under ‘FML’ logo, except in Kolkata.

Dara P Mehta, managing partner of Little & Co, said the merger will enable FML to reap synergy and achieve economies of scale for its clients. Little & Co specialises in IPOs. Fox Mandal’s strengths lie in M&As, infrastructure and intellectual property.

“Economic liberalisation, coupled with inflow of foreign direct investment, have brought about a huge change in the services sector. Law firms are growing bigger to face competition,” Som Mandal, managing partner of FoxMandal, told reporters in Mumbai.

FML will focus on corporate and commercial, banking, finance and insurance, IPRs, real estate, taxation, admiralty, arbitration and dispute resolution, anti-dumping, environment and labour matters.

News: Dubai realty group to foray in Gujarat

(BS 20/05/2006) Ahmedabad - The world’s largest real estate company, Emaar group along with its Indian partner, is knocking the door of realty market of Gujarat.

Emaar MGF Land Private Limited is planning to invest over Rs 1,000 crore in townships, hotels, malls, and IT parks in the state. In the subsequent phases, the group plans to pump in more money as company is bullish about the state.

Emaar MGF Land Private Limited is a JV between Emaar Properties PJSC Dubai and MGF Development of India. Emaar Properties has a market capitalisation of over $40 billion and is the world’s largest real estate company.

It has to its credit projects like Burj Dubai project, regarded as the tallest building in the world which will be ready by 2008.

Talking to Business Standard, Shravan Gupta, managing director of Emmar MGF Land Private Limited said, “Gujarat appears in the second phase and intially we will pump in Rs 1,000 crore. We are planning to come with a township in Ahmedabad which will be spread over 400-500 acres.”

The phase two for Gujarat will begin after two months and the company is in the process of scouting land in various places of Ahmedabad.

“A four or five star business class hotel will to be a part of the township in Ahmedabad,” Gupta further said.

Going by the previous track record of Emaar Properties, the company has a tie up with Armani Group and Armani hotels have been a part of many of their projects be it even the Burg Dubai building. “In India we have plans to set up Armani hotels only in Delhi, Mumbai and Bangalore,” according to Gupta.

Gupta further said, “We have a panel of world class architects and the quality of our design in Gujarat will be without any exception of international standards. Ahmedabad has very good architects so we might rope them in.

Also, we are open to enter into a tie-up with a local developer, given that he has a good track record.”

The township will also have educational institutes, besides it will pave way for better parks and roads.

Emaar MGF will also set up a mall in Ahmedabad. “The mall will be two notches above the rest and will be spread in over half a million square feet,” according to Gupta.

Plans are also afoot to set up an IT park for which the company is actively considering the Gandhinagar area. The IT park is driven by end-user hence the scale and size will be lesser than Bangalore or Hyderabad.

Talking about the IT prospects in the state, Gupta said: “It is only a matter of time before it finds its rightful place in the sun.”

Emaar MGF is also scouting for land in Vadodara, Surat and Rajkot for setting up townships, hotels and malls.

“After Ahmedabad, our next preferred destination in Gujarat is Vadodara. Simultaneously, we will also concentrate on Surat and Rajkot,” Gupta said.

News: 'India still remains a growth story'

(BS 20/05/2006) New Delhi - Finance Minister P Chidambaram categorically said that India continues to remain a growth story, and asked retail investors to take "informed judgements" while dealing in the stock market. Addressing a press meet in New Delhi this afternoon, Chidambaram said: " Economic fundementals have not changed over the last four days. Forex reserves have moved past $163 billion, and inflation continues to remain below 4%. The manufacturing sector is growing at 9%. The India story continues to be growth, and there is no change in that." Chidambaram said the government had no intention to reintroduce long-term capital gains tax for securities traded on the stock market.

The left parties had, on Friday, demanded the re-introduction of the tax on account of the Sensex falling over 800 points. One of the factors behind the fall were reports that the government was planning to issue guidelines to check tax evasion by foreign institutional investors (FIIs).

The left also demanded a review of the double taxation avoidance agreement (DTAA) with Mauritius. Responding to a query on this demand, the Finance Minister said: "The India-Mauritius treaty has been debated thread-bare. Due to a host of economic, political and diplomatic reasons, we are not proposing unilateral revision of the treaty. Every political party is entitled to their opinion," he said.

Chidambaram clarified that the decline in the benchmark indices was not in any way connected to the Central Board of Direct Taxes (CBDT) circular, which was an update of a 1989 circular incorporating court judgements of the intervening period. He said the decline in the stock markets have been due to the fall in metal prices, attractiveness of other markets and hardening of interest rates.

"The circular nowhere mentions FIIs, the circular nowhere mentions any tax rate. The circular simply refers to a 1989 circular, and this circular has been culled out of that, " he said, adding that FIIs were aware of their legal position.

"Around 70 FIIs have filed returns and declared themselves as traders, but they are not taxed because they have no permanent establishment in India. Some do declare investment income, but many of them benefit from DTAA," Chidambaram said.

He said FIIs have been net sellers while the mutual funds have been net buyers since May 15. "While FIIs sold stocks worth Rs 2,500 crore in the last four sessions, mutual funds bought stocks worth Rs 2,803 crore," he said.

News: Tata takes the Beetle route

(DNA 20/05/2006) Kolkata - Ratan Tata's people's car will be made in the Marxist bastion of West Bengal. But the car, which will have a rear engine and seat five people, may cost a bit more than Rs1 lakh when it hits the roads in 2008.

A Tata Group source told DNA that two prototypes of the car have been built at the Tata Motors facility in Pune. One is a two-seater and the other a four-seater that can actually accommodate five. The indicative cost tags are currently Rs1.20 lakh and Rs1.50 lakh, respectively. Efforts are on to squeeze costs further so that the final price is closer to Tata's vision.

Tata Motors engineers are working frenetically to give finishing touches to the prototypes as they have been targeted for unveiling at an auto show next year.

While no formal decision has been taken on commercialisation of the two-seater, the four-seater will have four doors and a rear engine.

Many all-time favourites, such as the Volkswagen Beatle, the Fiat 500 and 600, the 1970s model of Skoda, and almost all thoroughbred racing cars have sported rear engines.

Why so? Apparently, when the engine is at the back, there is no need for a bonnet and a drive shaft, which means a saving on costs. Says car enthusiast Tutu Dhawan: "A rear-engine car needs lesser spare parts. Besides, it ensures efficient use of power."

All the weight in the Tata car will be borne by the rear axle, thus ensuring little loss of power while driving. "In fact, every ounce of power developed in a rear-engine car has to be used to propel the wheels because of the small engine," says another automobile expert.

Tata has said that he is looking at a 'gearless' vehicle. While it will be a full-fledged car in every definable way, the dream machine may not have the finish or high speed of a larger car.

The Rs1,000 crore project will be located in Hooghly district, Tata announced in Kolkata on Thursday. It will be spread across 1,000 acres and have additional facilities for an integrated vendor park.

A source said the financial viability of the car hinges on very efficient inventory control and vendor management system. The system will have to ensure almost nil carrying cost of components and raw materials. While most vendors of auto companies are located in close geographical proximity to the production line, locating most vendors within the plant site will maximise inventory control and production planning.

Tata said the decision to locate the project in West Bengal "is a reflection of the confidence of the Tata Group in the investment climate and the Government of West Bengal. We look forward to the opportunity of revitalising the automotive industry in the state."

He said the plant will initially employ 2,000 persons directly but will create employment in excess of 10,000 amongst vendors and service providers in its vicinity. The plant will be commissioned in 2008.

News: Decoding the Indian realty boom

(DNA 20/05/2006) Mumbai - A decade ago, when consumer products company Procter & Gamble (P&G) wanted to relocate its prime cent