News: Lakshmi Mittal sets sights on China, India

(RTR 30/06/2006) London - Mittal Steel, the world's No. 1 steel company which agreed a 25.6 billion euro ($32.54 billion) deal to acquire rival Arcelor, has its sights set on further acquisitions in emerging markets such as China and India, its Chairman Lakshmi Mittal said on Friday.

"At this point, we will focus on China and India," Mittal told Reuters in an exclusive interview, when asked about the group's future acquisition strategy.

Mittal was speaking hours after Arcelor's shareholders rejected an alternate merger deal with Russian peer Severstal, clearing the way for a combination of the world's two largest steelmakers after a five-month bitter battle.

"We never expected it would be so difficult, with so many hurdles and obstacles," Mittal, the world's fifth richest man, said at his office in London's upmarket Mayfair district.

Mittal, 56, said the combined group would be "at least five years ahead of competition," and spur consolidation across the sector.

"It will also pave the way for other steel companies to take this sort of consolidation seriously," he said.

Despite the size of the deal, the Arcelor-Mittal group will control just 10 percent of the global steel market.

News: Indian tea brews ill on foreign shores

(DNA 30/06/2006) Kolkata - The volume and value of teas crossing the Indian shores are on the decline. Not only did exports fall short of the much-touted 200 million kilogram mark in 2005-06, but actually fell by 25 million kg in volumes, with the biggest hit coming from Russia, CIS countries and Iraq. In terms of value, exports fell by over 15% to Rs 1,631.60 crore.

According to the latest Tea Board data, the CIS countries, which still form the largest block of countries buying Indian tea, bought 10 million kg less in 2005-06. Exports to Russia and Kazakhstan and to once-sought-after markets like UK, Poland and Ireland also fell.

Teas exported to Iraq fell from 38.38 million kg in 2004-05 to 28.69 million kg in 2005-06. Industry officials said the decline was mainly because of it getting out-priced in international markets by Kenyan and Sri Lankan brews. In fact, as most of the teas exported to Iraq were through re-exports, lower imports of tea had an effect on the overall exports to this country.

A leading tea exporter-producer said, “The exact reasons for the decline on a country-specific matrix are being analysed, but overall, prices during the period have been low on account of excess supply, apart from the generally high prices of Indian tea compared to other countries. We are trying to cope up with the problem as the Indian tea industry happens to have one of the highest cost of production in the world.”

Industry officials are, however, betting high on exports to Pakistan, one of the largest tea drinking nations. The country has committed to buying 20 million kg of tea from India alone. The country exported about 10.57 million kg of teas to Pakistan last year.India has also set its eyes on the Egyptian tea market this fiscal.

News: Heineken goes long on hop, is braced to uncage the Tiger

(DNA 30/06/2006) Mumbai - International brewer Heineken NV’s Asia Pacific Breweries (APB) venture made its second investment in as many months in this country, when it announced that it will set up a joint venture with Jaipuria Beverages & Food Industries for a greenfield brewery in Andhra Pradesh.

The international brewery major said APB will own 67% of Pearl Breweries the new joint venture that the Heineken unit is setting up with Jaipuria Beverages. It is speculated that APB may initially introduce Tiger beer in India, a brand launched in 1932 and a best-seller in south-east Asia. The other leading brand in APB’s portfolio is Anchor beer.

The Indian partner is the biggest soft drinks maker, and has been eyeing acquisitions in the beer segment for some time now.

“They want to make their presence felt quickly,” says an observer tracking the Dutch brewer’s moves in India. The new brewery at AP, is expected to start production by end-2007, and is estimated to cost Rs 69 crore.

It will build a greenfield brewery with an initial brewing capacity of 250,000 hectolitres just outside Hyderabad. The brewery is expected to commence operation by end 2007.

Significantly, APB’s move comes close to the May 2, 2006, deal last month, when the regional unit of the Dutch brewer acquired a 76 % stake in Aurangabad Breweries for about Rs 83 crore.

APB’s move into this part of the world comes after acquiring a 60 per cent stake in a Sri Lankan brewery in September last year. It also has recently announced plans to build a brewery in Mongolia.

By moving quickly to wrap up another deal in the country, this time with a leading bottler for beverages, the foreign brewer has clearly revealed its serious intent to make its presence felt in one of the fastest growing beer markets in the world.

India’s beer market has been growing at a compound rate of more than 7% cent annually and growth is expected to accelerate, as deregulation gains momentum across the Indian states.

The logic behind the Dutch brewer’s move to enter into Maharashtra and Andhra Pradesh is clear. “Andhra Pradesh and Maharashtra are known to be beer guzzling states and are the most lucrative brewery territories in the country,” the observer added.

Once the projects are in stream, it will in no time catapult APB as one of the leading players in the Indian market. While the total beer consumption is only around 8 million hectolitres per annum, which is less than 1 litre per capita.

News: RIL retail foray to create 0 to 100m sqft in 3 yrs

(TNN 30/06/2006) Mumbai - Mukesh Ambani’s announcement of a Rs 25,000-crore war chest for Reliance Industries’ retail foray may have set the cat among the pigeons. But that isn’t the only mind-boggling statistic which reflects the size of Reliance’s mega ambitions.

ETIG estimates that Reliance will set up nearly 100m square feet of space by ‘10 — the size of nearly 465 football fields. So, if Pantaloon takes 16 years to reach 30m sq ft by ‘10, Reliance aims to reach more than three times that size in the next three years.

Yet, most property consultants expect that the total retail space which will be available in the market by ‘10 may not be more than 100m sq ft. So, the moot point: is there enough available land for the Reliance group to keep its scale up plans on course?

Clearly, the odds are stacked against it. For one, Pantaloon, which currently has retail space of 3.1m sq feet, plans to edge up to 30m by the end of ‘10. Out of the 300-odd malls under development in the next three years, Pantaloon has signed up with 100 of them.

So, with nearly 33% of the total retail space already blocked out, Reliance will also have to contend with other rivals like Shoppers’ Stop, Lifestyle, Trent, RPG Group and Metro. Given just how scarce prime retail property is likely to be, it is unlikely that any of them will shy away from a dogfight.

Reliance has announced plans to launch its foray in the Tier II towns, before it enters the metros. On the face of it, it seems a sensible strategy, given that large parcels of land ought to be more easily available in the smaller towns than it is in metros.

Here too, it is likely to run smack into Pantaloon. After having built its presence in the metros, Pantaloon is now consciously expanding into the Tier II towns.

For instance, in Ahmedabad, Surat and Baroda, where Reliance is likely to hit first, Pantaloon expects to have nearly 4 lakh sq ft of retail space by ‘08.

Therefore, a huge war for retail property is clearly on the cards, according to experts. A recent JM Morgan Stanley report suggests that rentals have increased by 80-100% over the last one year.

So, while Pantaloon has already signed up some of the best locations at reasonably attractive rates of about Rs 45 per sq ft, Reliance will now have to up the ante to stay in the hunt. Yet, at the same time, it can’t afford not to rein in real estate costs.

News: BBC may expand in India and US

(UNI 29/06/2006) London - The commercial arm of British BBC is in the process of expanding its international activities, which could lead to it starting as many as six channels in the US and India.

It believes that it can boost last year's trading profits of 89.4 million pounds by selling British television, magazines and new media to the world, providing a top-up to its 2.9 billion pounds licence-fee income.

John Smith, the Chief Executive of BBC Worldwide, the commercial business, said that there was scope for ''five BBC branded channels, in addition to news in any major market'' offering a mix of content from the BBC and other British broadcasters.

Already it is active in India, where the World Service has been operating for 75 years. Last year, the corporation in partnership with Mid Day Multimedia, won seven FM radio licences in cities including Delhi, Mumbai and Bangalore. Smith said that India was ''looking interesting'' but added that there were ''three or four parts of the world where we are putting our focus''.

The new channels will be funded by advertising and will initially be in English. But the BBC is interested in offering foreign language channels ''an echo of the World Service's planned Arab news service'' because, insiders say, ''that will help to bring the service closer to the local market''.

News: ‘India a potential threat to China in textiles’

(BL 29/06/2006) New Delhi - Indian textile industry has the potential to take on competition from China, whose exports of textiles and clothing have surged after dismantling of quota system in early 2005.

According to United Nations 2006 Human Development Report for Asia-Pacific, most studies have concluded that India would benefit from lifting of quotas, and some consider that India alone has the ability to compete with China, whose potential revenue gains have been put at $2 billion per annum.

India seems to have gained in both textiles and clothing. Between 2004 and 2005, exports to both the EU and US jumped by 22 per cent in value and over 11 per cent in volume.

In 1990, textile's share to India's total export was 2.1 per cent and clothing was pegged at 2.3 per cent, while in the year 2004, a year before MFA regime, textile export improved to 4 per cent and clothing contributed 2.8 per cent of global trade.

The total global textile and clothing export was pegged at $453 billion and India earned $13.5 billion out of its shipment.

The UNDP report noted large producers such as China and India emerged major gainers with quota regime coming to an end.

News: India is the place to be now, says sales guru

(IANS 29/06/2006) New Delhi - India is the place to be now, says a world-renowned marketing and sales guru, and the Indian business leadership needs to know that sales is not only setting targets but understanding the client's needs.

Matthew Ferry, an American in his early 30s, is into the business of training sales people the world over. He has trained over 75,000 salespersons and boasts of an impressive clientele that includes Fidelity, Goldman Sachs and many other such financial services conglomerates.

This is his first trip to India that has been inspired from his quest of knowing people from various cultural ethnicities.

"India is the place to be in now, where a lot of activities are going on", Ferry said in a chat in between his training sessions.

The training module, called "Neuro Linguistics", was conducted Tuesday in New Delhi and organised by Quantum Abundance, a human resource training body. Entrepreneurs and sales experts from all across the country attended the seminar, which is also scheduled to take place in Mumbai on June 30.

"I have conducted training sessions in Singapore, Tokyo and Shanghai before coming in New Delhi. And I believe Indian (corporate) leadership needs to learn how to effectively crack a sales deal with proper customer relationship management", said Ferry.

"I have seen that all over the world, including India, the bosses just set targets for their sales guys, they do not really teach them how to connect with the client or how to penetrate the client's mind which is very crucial for running any business."

Ferry feels India is now a hotbed for business process outsourcing, and so he intends to come back to the country with a module called 'Over the Phone' which will cater to the ever-increasing employees of the sector.

He emphasises that the big bosses who head the call-centre business have not rightly understood the essence of the trade which he thinks is the main reason for large-scale attrition in the sector.

His module will, thus, primarily be focused on teaching the leaders how to manage difficult callers and provide viable solutions.

Ferry is currently working on two books -- 'Mental Journey to Millions' and 'Art of Inspiring Leadership' through which he plans to teach salespersons across the globe how to mange a group of people who do not want to be managed.

News: Pvt equity bemoans price of Indian developers

(RTR 29/06/2006) Singapore - Private equity funds looking for deals in an Indian property boom are complaining that developers are sticking huge price tags on themselves to take advantage of billions of dollars of promised investment.

Since India eased rules on foreign finance of construction early last year, several funds, especially from the United States, have been trying to invest in projects and companies.

Nipun Sahni, India country head for the property arm of GE Commercial Finance, a unit of US conglomerate General Electric Co, said $10-12 billion had been committed by domestic and international property investors.

But even though the economy is growing at over 8 per cent annually and property prices in parts of Mumbai have jumped 60 per cent in a year, Sahni said developers were asking too much.

"There's a valuation mismatch," Sahni told a conference in Singapore this week. "How much future growth can you price in today? Every Indian company can be worth billions of dollars."

In recent months a few deals have been sealed.

US investment bank Morgan Stanley invested $68 million for a stake in Mantri Developers Private Ltd., compatriot developer Tishman Speyer tied up with India's ICICI Bank to pour $1 billion into the country and US pension fund CalPERS has put $100 million in an Indian property fund.

Private equity arms of JPMorgan , Lehman Brothers and Merrill Lynch are waiting in the wings.

Kurt Roeloffs, Asia chief executive of RREEF, the property asset management arm of Deutsche Bank , blamed high valuations on India's rigid procedures and rules for foreign direct investment.

The market was skewed because many foreign funds had instead applied for approval for venture capital status, which is more flexible because it lets investors divest within three years.

"Now the window's too narrow and it's forcing a huge amount of money on certain developers, certain regions and creating imbalances," Roeloffs said.

"A NEW COUNTRY"

The rush for property is reflected on India's stock market, where high valuations are especially pronounced because so few developers are listed. New Delhi property firm Unitech Ltd, for example, trades at 477 times earnings.

GE Commercial Finance signed a deal last year to invest $63 million in a fund that invests in business parks with Singapore's Ascendas PTE Ltd Sahni said the firm now wanted to partner developers in fast growing Bangalore and Hyderabad.

"I have a hunch real estate will have bumps and cracks in micro markets, but you're literally creating a new country. After the Moguls and the Britishers there's been no building," he said. "You have to create places for people to work, live and shop."

India's property industry is hampered by poor foreclosure laws, tedious property registration processes, tax and transaction laws that vary by state, and frequent contests over property ownership. But investors are excited about internal rates of return of 25 percent.

Roeloffs said RREEF would team up with "second tier", but not completely inexperienced, developers to build townships.

He said overbuilding of shopping centres -- around 500 are being built in a country that had only 45 a couple of years ago -- and the poor quality of many of them, would give private equity funds restructuring work.

"There are too many undifferentiated malls, in Gurgaon there are 17 malls in a row, all the same," he said.

"It's going to be a good opportunity for people doing it right and for people who pick up the problems later.

News: Ghaziabad is 'India's hottest city'!

(TNN 29/06/2006) New Delhi - Believe it or not — and many inhabitants who have to battle pathetic infrastructure, chaotic traffic and soaring crime probably won’t — Ghaziabad is in Newsweek’s list of 10 most dynamic cities in the world. For good measure, it has also been billed ‘‘India’s hottest city’’.

Based on an advance copy of the latest UN forecasts for cities with populations greater than 750,000, Newsweek’s list encompasses the fastest-growing cities in each of the world’s 10 most important economies. Only two major capitals — Moscow and London, which continue to outpace smaller rivals for unique national reasons — figure on it while the rest are aspiring middleweights like Toulouse, Munich and Las Vegas, or unknowns like Florianspolis (Brazil), Goyang (South Korea) and Fukuoka (Japan).

Sanjay Verma, joint managing director of Cushman & Wakefield, attributes the rapid growth to Ghaziabad’s excellent connectivity with Delhi, which creates more new jobs per year than Bangalore and Hyderabad, as well as an established IT destination like Noida. ‘‘It’s very strategically located on the old Grand Trunk Road. Not only does it attract a sizeable IT/ITES workforce from Noida, it is affordable for those who can’t afford Delhi prices,’’ he says.

R C Mishra, Ghaziabad Development Authority secretary, doesn’t deny that the rapid industrial development in Ghaziabad is the result of a spillover from Noida and Greater Noida. ‘‘Sahibabad was conceived as an industrial estate but Ghaziabad’s growth has been quite recent,’’ he says. Today, the city has more than 14,000 small-scale industrial units and larger plants run by giants like Coca-Cola and ITC.

News: Pantaloon to focus on health business

(BS 29/06/2006) Mumbai - Pantaloon Retail is looking to expand into health and beauty sector with large outlets comprising pharmacies, beauty salons and fitness centres, according to Sanjeev Agrawal, president-marketing, Pantaloon Retail.

This expansion will be in both product and services. Called Health Village, the first such outlet is scheduled to opened in Ahmedabad next month and will be spread across 8,000 square feet.

The second outlet will open in Bangalore in three months and will be spread across 10,000 square feet. Pantaloon is planning to open three more outlets by July 2007. Agrawal, however, did not disclose the other locations or investment details.

The pharmacy, which will sell prescription drugs as well as homeopathy and ayurvedic medicines, will be called Tulsi. At present, Tulsi operates out of Big Bazaar in Mumbai. Pantaloon is also looking at having in-house doctors in Tulsi.

Having entered a joint venture with upmarket fitness centres, Talwalkars, Health Village will sell fitness related equipment and products. There will also be provision for gyms, yoga and spas.

Pantaloon's Tumeric brand will sell beauty products such as cosmetics, skin care, fragrances and aroma therapy. Beauty salons will be called Star and Sitara.

The company is also considering the option of opening standalone pharmacies and beauty salons with the same brand name.

News: RIL plans Rs 3000 cr Venezuela JV

(BS 29/06/2006) Mumbai - Pequiven to use Reliance expertise in making petrochemicals from refinery by-products.

Reliance Industries is in talks with Venezuela's state-owned Pequiven to form a joint venture to manufacture plastics, resins and other petrochemicals from refinery by-products.

A Reliance delegation is expected to visit Venezuela in the next few weeks to sew up the deal, sources close to the development said.

The plan is to set up a project at Paraguana in Falcon state of Venezuela, utilising Reliance's experience in producing petrochemicals from refinery by-products, they said. The by-products would come from the 9,56,000 barrel-a-day refining complex in Paraguana.

According to the sources, RIL could invest anywhere between Rs 2,000 crore and Rs 3,000 crore for the project. Reliance officials were not available for comments.

State-owned profit-making firm, Pequiven (Petroqu¡micas de Venezuela), is the largest petrochemical company in Venezuela, incorporated in 1977.

The invitation to Reliance is part of Venezuela's plans to more than double petrochemical production – from 11.4 million tonne to 25 million tonne – by 2012 at an investment of $10 billion. About 50 per cent of the investment will be made by the state, and the rest will come from foreign investors.

Venezuela, an OPEC (Organisation of Petroleum Exporting Countries) member, is among the world's top 10 oil producers and top five oil exporters.

The proposed expansion of Venezuelan petrochemical industry will come from expansions of old plants and greenfield projects on the western Paraguana peninsula and in the eastern city of Jose, where US oil major Exxon Mobil has proposed a $3 billion plant.

Venezuela sells much of its petrochemical products as raw materials to other countries, where they are converted into final products.

The country seeks to increase output from its petrochemical and natural gas industries to help decrease its reliance on oil sales, which currently account for about half of government revenue.

Pequiven's major plants in Venezuela are at El Tablazo, Mor¢n and Jos. El Tablazo, the largest complex, produces ammonia, urea, polystyrene, ethylene and propylene.

The Mor¢n plant manufactures fertilisers, chlorine, caustic soda and sulphuric acid. The Jos complex manufactures LNG, methanol and methyl-tertiary butyl ether, primarily for exports. Venezuela has enough gas reserves to meet the energy needs of the country till the next century.

News: Sequoia Capital India to raise $400 mn

(BS 29/06/2006) Hyderabad - Sequoia Capital India, a venture capital firm, is raising $400 million from global investors.

Sandeep Singhal, managing director of Sequoia Capital India, said: "We have a corpus of $350 million and are raising another $400 million. We hope to close in the next 2 months and intend to invest this amount in Indian companies in the next 3 years."

Sequoia Capital India, formed with the merger of Sequoia Capital and WestBridge Capital Partners, is being led by 4 managing directors of WestBridge Capital Partners - Sumir Chadha, KP Balaraj, Sandeep Singhal and SK Jain. The 2 firms had earlier also co-invested in Bharti Telesoft and Mauj.

The portfolio of Sequoia Capital India today includes ICICI OneSource, Shaadi.com, Royal Orchid Hotels, marketRx and AppLabs Technologies among others. Its total investment in Indian firms is around $250 million. Globally, the firm has $2 billion worth assets under management and has invested in companies like Cisco, Google, Oracle, Yahoo! and Electronic Arts.

"We are in advanced stages of evaluation of 3-4 companies operating in infrastructure, retail and media space," Singhal said with regard to the new companies on their radar. The VC firm would invest $1 million-$10 million in younger companies and move on to $15 million-$20 million investments at later stages. "Now we are willing to invest large, even in the $10 million-$50 million range," Singhal said.

News: AMCs await SEBI norms on real estate funds

(BL 29/06/2006) Mumbai - SEBI guidelines on Real Estate Mutual Funds (REMFs) have prompted most asset management companies (AMCs) to plan a foray into this new area of investment. But they sound cautious and are awaiting detailed guidelines on the issue.

AMCs such as Quantum Mutual Fund, BoB, ING Vysya and Fidelity Fund Management Pvt Ltd are keen to venture into this segment.

"ING is the world's largest player in real estate mutual funds, so we will certainly look at it at some point," said Kavita Hurry, CEO, ING Mutual Fund.

"The notification of guidelines for REMFs by SEBI is a very welcome step that will help expand the industry as we will be able to increase our product offerings. Investors too will benefit as they will have another asset class that will help diversify their portfolio," said Ashu Suyash, Country Head, Fidelity Fund Management Pvt Ltd.

Sandesh Kirkire, CEO, Kotak Mahindra AMC, said REMF schemes are very necessary for diversification of a company's products.

Awaiting expertise

While Quantum Mutual Fund has raised funds overseas forreal estate MFs in India, other mutual fund houses are looking at generating the right kind of expertise to get started in REMFs.

"Real estate is a different ball game to understand. Mutual funds are not like stock exchanges; here the valuations are more word of mouth and trades do not happen everyday, so these grey areas need to be looked at," said T.P. Raman, Managing Director, Sundaram BNP Paribas Mutual, which will enter the segment once it has proper expertise.

Areas of concern

The areas of concern that mutual funds feel are tradability issues along with technicalities. Chavali, Managing Director, BoB AMC, feels that real estate fluctuations happen when stories on property prices or price hikes appear.

"Real estate funds will require long-term investors, one cannot enter and exit everyday and also awareness will have to be created in the investor's mind since Indian investors are used to investing in one property. All this can be achieved with expertise like property developers, lawyers and mutual fund people for REMFs," said Vivek Kudva, President, Franklin Templeton Asset Management (India) Pvt. Ltd.

The major concern of mutual fund houses was over SEBI guidelines regarding valuations and price discovery of real estate. "Daily NAV is a little difficult," said Ashwin Ramesh, Director, Primary real Estate Advisors of Quantum AMC. "Valuation of unlisted securities is the most important concern," said Kavita Hurry.

Kirkire said: "Real estate is not an organised and transparent sector, so there is a need to put in place an NAV mechanism. Also, the there is bound to be some degree of subjectivity in valuation."

News: A one-billion middle-class deluge from India, China

(BL 29/06/2006) Singapore - The collective might of the middle-class - annual income above $5,000 - in India and China is estimated to explode to the one-billion mark by 2020, with China having 650 million and India 350 million individuals in this income group, estimates an independent research report complied by the Masterintelligence Knowledge Panel of MasterCard, the global payments solution company.

In 2004, this number was 79 million in China and 12 million in India, said Dr Yuwa Hedrick-Wang, Economic Advisor (Asia Pacific) of MasterCard International, who heads a panel of economists conducting research on the business environment in the Asia Pacific region.

Economic editors' meet

Presenting the salient features of its latest study at a Roundtable of economic editors in Singapore, Dr Yuwa said: "The demand and supply shock" of the burgeoning millions in China and India has already been felt by the global, particularly the US economy.

The $5,000 figure is an important benchmark in any community. When annual income is below this threshold, "household consumption tends to be dominated by expenditure on basic necessities, which have relatively less business and economic impact. As soon as income exceeds the $5,000-threshold, marginal expenditures shift quickly to discretionary appending such as dining out, personal travel, auto purchases etc and these have a huge business and economic impact," says the report.

India is of specific significance to the users of such surveys because by 2015, it is estimated that beyond the "middle classes", the rich - those earning $2,20,000 and above per year - will rise from an estimated 53,000 in 2005 to 1.5 lakh in 2015, with half of them being located in the cities of Delhi and Mumbai.

At the end of the spectrum, families earning less than $2,000 a year (or a per capital of $400 a year) will fall from 80 per cent of all Indian households to about 52 per cent in 2010, pushing upmarket demands from Indian consumers.

Dr Yuwa said the danger lay in "over-simplification" of the impact of the rise of India and China on the global economy platform. Discussions are often framed in two polar extremes: hype and scepticism. On the hype side, we have popular titles like the `Chinese century' and `India unbound'. On the other hand, there is no shortage of sceptics who continue to question Asia's future viability; hence warnings of the `coming collapse' of this and the "imminent crisis of that."

Balanced views

He added that his survey took a balanced views of things, going beyond hype and scepticism to identify and expose specific economic dynamics and fundamentals in Asia that are changing the global market.

"The report questions many myths about China such as the suggestion that Chinese exports are cheap because labour is cheap there. This was too simplistic as see from an analysis of the textile and garment industries, where China was an acknowledged global leader. Wages in these industries are higher in China than in Pakistan, India, Bangladesh, Vietnam and Indonesia, China's competitors."

But despite higher wages Chinese garments and textiles were more competitive because of its better infrastructure and logistics, greater production scales and often advanced technologies, added Dr Yuwa.

News: Indian realty MFs entry may trigger land buyouts

(ACERC 29/06/2006) New Delhi - The entry of real estate mutual funds (REMF) could trigger land acquisition by realty developers across the country, cutting down time and cost over-runs, according to players in the real estate segment.

Land acquisition has slowed down over the last couple of months after RBI norms virtually discouraged banks from providing funds to developers for purchase of land. Banks are allowed to lend only after developers get all the necessary approvals from the state and local authorities, which can happen only after the land is acquired.

The central bank's discomfort over the build-up of an asset price bubble also prompted it to raise the risk weight on exposures to commercial real estate from 125% to 150% in April this year.

REMFs will come in handy for land acquisitions, irrespective of the project size, according to Lalit Kumar Jain, president, Promoters and Builders Association of Pune. According to him, Pune will require around 30m square feet of IT space and 3,00,000 residential units over the next three years. The total fund requirement is estimated at around $2-3bn, and a good chunk of this funding could come from REMFs.

Besides, they will be able to trade in land and fund relatively smaller projects. Rohit Gera, director (operations), Gera Developments, is of the view that the entry of REMFs will further professionalise the construction industry.

These schemes can invest directly in real estate properties within the country or in mortgage (housing lease)-backed securities. They are allowed to invest in equity shares, bonds and debentures of listed or unlisted companies that deal in property and undertake property development. The structure of the REMFs, initially, shall be close-ended. The units of REMFs have to be compulsorily listed on the stock exchanges. Besides, the net asset value of the scheme shall be declared daily. Realty experts are of the view that this will make both REMFs and developers more accountable to retail investors.

News: Tanishq to dazzle in US

(TT 29/06/2006) Calcutta - Tanishq, the branded jewellery from the house of Tatas, is going to the US. It is talking to local players to open two pilot stores on the east coast.

The company hopes to touch Rs 1,000 crore turnover this fiscal with contribution from eastern India pegged at Rs 150 crore.

“We already have stores in places like Dubai and other regions but this would be our first foray in USA which has one of the world’s largest branded jewellery markets. The target clientele would be the large NRI population as well as the mainstream American jewellery space,” said C.K. Venkataraman, chief operating officer, Tanishq.

Currently, 5 per cent of total sales comes from exports and once the brand is established in the American market, the company does not rule out the possibility of expanding footprints through inorganic growth in the second phase.

The Indian jewellery market growing at 10 per cent for the last 2-3 years is estimated to be worth Rs 60,000-70,000 crore. The Calcutta market is worth between Rs 3000 and Rs 4000 crore. However, the branded jewellery is still a minuscule portion at under Rs 2000 crore of the total jewellery market.

Venkataraman said there are few branded jewellery companies and all of them have a national presence. Depending on the region, local jewellery companies are brands by themselves. Tanishq gets 30 per cent of its revenues from the sale of diamond jewellery.

According to the World Gold Council, although rising gold prices had an adverse impact on initial demand, branded jewellery proves to be a better bet in such situations due to its adherence to quality standards, Venkataraman said.

News: Indian economic reforms show signs of revival

(RTR 29/06/2006) New Delhi - India's decision to sell stakes in two state-run firms could mark a revival in the government's reform agenda as the ruling communist-backed coalition seeks funds for projects to aid the poor.

When the Congress party-led government came to power in 2004, it promised to spend billions of dollars on the poor to secure a parliamentary alliance with communist parties.

But the communists have balked at the coalition's efforts to fund projects for the poor by selling stakes in government firms to private investors for fear of job losses.

Now, some analysts suspect the decision last Thursday to sell 10 percent stakes in two state firms indicated the communists had tacitly accepted sales like these were needed if the projects for the poor were to be funded.

"I think there has been prolonged negotiations with the left. The stake sales have the left's approval although their public position may be different," said Abheek Barua, chief economist with ABN AMRO Bank.

"And I think this is the beginning of a process by which stake sales would be revived otherwise it is difficult to get the money."

The government under Prime Minister Manmohan Singh see reform as vital for the economy because it struggles to attract foreign investment to help sustain strong economic growth and cut poverty. The stake sales, including in India's second-largest aluminium maker National Aluminium Co. Ltd. (NALCO), are expected to net about $543 million.

Proceeds from such sales are supposed to end up in a new national investment fund, and returns from the fund would then be used to finance projects for the poor.

The government is in a hurry to build up a large pool of cash but has not set a target for the year.

HELPING THE MASSES

The government agreed a policy blue-print with the left when it came to power that called for increased spending on health and education, as well as cheap credit for poor farmers and a job guarantee scheme for the rural unemployed.

The deal allowed for the limited privatisation of state firms, and Barua said selling small chunks of both NALCO and Neyveli Lignite Corp. was probably the result of horse-trading centred on that original programme.

He said the coalition has probably agreed to meet leftist demands not to sell stakes in profit-making state firms nor to sell strategic stakes, in exchange for being able to sell small stakes in other state firms.

"We make social-sector spending, stay off the crown jewels, stay off the profit-making firms, no strategic sales in state firms but sales of reasonably small percentages would continue -- that's the way I read it," he said.

The shift in the left's stance may have resulted from election wins by the communists in stronghold states in May, political commentator Mahesh Rangarajan said.

That has eased pressure on leftist parties from supporters keen to see Congress regularly challenged on the pro-poor agenda, he said.

"They will of course continue to organise protests to address their cadres, but it will be more of posturing," Rangarajan said.

Rangarajan said the privatisation of smaller airports and ports would soon be on the agenda.

"Once these two sales go through there will be more reforms. Whatever reforms they can get through executive decisions, they will do it," he said.

The government earlier this year forced through a plan to modernise the country's two largest airports in the capital, New Delhi, and the main financial hub, Mumbai, using private capital.

But the move triggered protests from the left and a four-day strike by airport workers.

INSURANCE, PENSIONS, RETAIL

Analysts say that once the two stake sales go through, the coalition will look to test the waters in other areas of its reform agenda.

This includes raising the threshold for foreign ownership of insurance firms to 49 percent from 26 percent; allowing overseas investors to own 26 percent in pension fund management firms; and opening up the tightly-controlled retail sector.

But some analysts had doubts that last week's decision to sell the stakes marked a significant leap forward for economic reform.

"I think that's just the bare minimum. Maybe there is some life there. I don't think it's going to be any strong life," said Rajeev Malik, an economist with JP Morgan Chase in Singapore.

"At best I would say it is marginally positive. The issue is whether or not they can sustain it."

The government plans to spend about $15 billion on the poor in the fiscal year to March 2007 -- including on a job guarantee scheme that offers 100 days of paid work each year to hard-off families in selected areas -- and is averse to raising money from financial markets or imposing a greater tax burden.

T.K. Bhaumik, chief economist at conglomerate Reliance Industries, said the stake sales would help the government raise vital resources, but they also raised another issue.

"The broader question is why should the government be in the business of making steel and aluminium?" he said.

News: 'Goldman eyes Indian commodity bourse stake'

(RTR 29/06/2006) Mumbai - Investment bank Goldman Sachs is close to buying up to 10 percent in an Indian commodity exchange in probably its biggest deal after it decided to go alone in India, a source involved in the talks said on Thursday.

Goldman, which said in March it aimed to invest $1 billion in private equity over the next two years in India, is likely to buy the stake from one of the shareholders in National Commodity & Derivatives Exchange (NCDEX), he said.

There will be no fresh issue of shares by the unlisted exchange, where about 48 commodities including coffee, palm oil, gold and silver are traded.

"The negotiations are in an advanced stage, I would not be surprised if a formal announcement of the deal comes out in the next 48 hours," the source said. "ICICI would be selling between 5-10 percent."

ICICI Bank Ltd., India's second-largest lender, which is under pressure from rising cost of funds could get about 1 billion rupees ($22 million) from the sale, he said. The bank holds about 15 percent in the unlisted commodity exchange.

An ICICI spokesman declined comment, while Goldman Sachs could not be immediately reached.

Commodities trading in India has been booming after India eased controls in April 2003 and launched derivatives.

FUNDS BUY

In January, Fidelity Funds-India Focus Funds bought a 9 percent stake in NCDEX's rival, Multi Commodity Exchange of India Ltd., for 2.16 billion rupees ($47 million), valuing the bourse at about $518 million.

NCDEX is unlikely to get such a valuation, the source said.

"At that time, the market situation was different from what it is now," he said, citing a global meltdown in commodities and stocks.

"Moreover, Goldman is going to be a strategic investor, and not a financial investor," the source said. "Goldman is in commodities, what Citibank is in banking."

Goldman ended a more than decade long partnership with India's Kotak Mahindra group in March, selling its 25 percent stake in both merchant banking and broking ventures to Kotak Mahindra Bank for $74 million.

The U.S. investment bank said it wanted to pursue opportunities in India on its own.

Other big shareholders in NCDEX include, India's National Stock Exchange, state-run Punjab National Bank, unlisted National Bank for Agriculture and Rural Development and government-owned Life Insurance Corp. of India.

The total value of trading on India's 24 commodity exchanges jumped to 13.8 trillion rupees in the nine months ended Dec. 31, 2005, from 5.71 trillion in the financial year ended March 2005, according Forward Markets Commission.

CASHING IN

ICICI Bank has sold investments at a profit over the past year, boosting its earnings at a time when rising interest rates are putting pressure on profits.

In March, it sold 8.4 percent of Mysore Cements Ltd. for 350 million rupees to a clutch of mutual funds. It had earlier sold stakes in South Indian Bank and Federal Bank.

"When the going is good just capitalise on the investments," said Arun Kejriwal, strategist at research firm KRIS. "If they manage to get about 15 billion rupees this year through this route, that would be good enough to show decent earnings growth."

ICICI and its units hold stakes in companies worth 50 billion rupees.

Shares in ICICI, which have slid about 15 percent so far this year against a 9.5 percent rise in the benchmark BSE index, were trading up 1.9 percent at 498 rupees in the afternoon.

News: GAIL secures exploration deal in Oman

(DNA 29/06/2006) New Delhi - GAIL (India) Ltd, along with its consortium partners, signed the exploration and production sharing agreement (EPSA) with the Sultanate of Oman for Block 56 in Muscat on Wednesday.

GAIL and Videocon will hold 25% in the block, with Oilex Australia holding 25% along with the operatorship. Other partners include HPCL and BPCL, with 12.5% holding each.

Block 56, an onshore block located in the South Oman Salt Basin area, located in the eastern flank, covers an area of 5,809 sq km. The block, adjacent to existing producing fields, was the consortium’s first choice block and the highest rated of the blocks on offer, in the bid round that closed on January 1, 2006.

The Sultanate of Oman had offered five blocks (Block 54, 55, 56, 57 and 58) in the fringes of the south Oman salt basin under the competitive bidding round. Blocks 54, 55 and 56 were in the eastern flank, whereas Block 57 and 58 are in the western flank.

As per the consortium’s commitment under the EPSA, work will commence with the reprocessing of existing seismic data, followed by the acquisition of 2D and 3D seismic in the last quarter of 2006, depending on the availability of seismic contractors. Drilling in the block is expected to start in the first half of 2007.

The consortium has assessed the potential of the block, based on the possibility of salt-related structures that are similar to the producing blocks in the west flank of the basin.

With the award of this block, GAIL’s total exploration acreage has increased to 91,350 sq km. GAIL now holds a participating interest in 16 exploration blocks.

The various consortium partners of the company in these blocks are ONGC, GSPC, Gazprom, OIL, IOC, Hardy Exploration & Production, Enpro Finance Private Ltd, ENI India Ltd, Jubiliant, GGR Canada, Daewoo, OVL, Korea Gas, Oilex, Videocon, BPCL and HPCL. GAIL’s participating interests in these blocks varies between 10-80%.

GAIL has been looking to widen its E&P horizons to include strategic regions beyond Indian shores. GAIL’s earlier international foray in E&P in Myanmar has been quite successful, with large gas discoveries in the A1 & A3 Blocks.

GAIL plans to aggressively pursue various exploration avenues and acquire E&P acreages in the international arena in consortium with international E&P players, said a company statement. GAIL has also been pursuing several “farm-in” opportunities worldwide to gain a strategic position in the international E&P market.

News: Non-traditional private equity is streaming into India

(DNA 29/06/2006) Mumbai - Private equity is turning hotter by the day, with more players sloshing into India.

Only this time, the demographic quality of the funds is changing - it has a more global feel to it. Unlike the earlier bursts of largely US-based private equity firms, today, Japan, Middle East, Far Eastern and European firms are pitching their tents in India.

Some of the new names include Mitsui and Sumitomo from Japan, Ishtamar and Abraj Capital from the Gulf and Khazanah, the equivalent of Singapore’s Temasek in Malaysia.

There’s also Citron Capital, Whiterock Partners, New Enterprise Associates, Trinity Hunt Partners, Battery Ventures, Matrix, Benchmark, Graylock and Sutterhill from the US, and global firm Apax Partners. In May this year, WestBridge Capital Partners (promoted by four Indians) was merged into Sequoia Capital to form Sequoia Capital India, in a move that marked the latter’s long-term commitment to India.

Like the earlier converts, the India growth story continues to be compelling.

In the last six years, private equity investments grew from barely $500 million in 2000 to breast the tape at $2.3 billion last year, according to Venture Intelligence India. Even the number of deals went up from 68 deals two years ago to 147 last year.

“By the end of this fiscal, we could see the capital committed increase by around 30-40%,” said Shahzaad Dalal, vice-chairman and managing director of IL&FS Investment Managers.

Amrish Baliga, head of the private capital practice at ICICI Securities, said that nothing had changed regarding private equity in India.

“The players have been pouring in through pre-IPO placements, block trades or limited minority stakes with minimal rights. The one with the more flexible investment philosophy will be the winner.”

Also, what’s made them lick their chops is last year’s sensational deal, when Warburg Pincus sold a chunk of its stake in cellular player Bharti Tele-Ventures for $560 million.

This, when its investments between 1999 and 2001 in Bharti was a mere $300 million. So far, Warburg has made $1.1 billion selling two-thirds of its 18% stake in Bharti.

Or look at Kohlberg Kravis Roberts’ (KKR) entry into India by acquiring 85% stake in Flextronics International for $900 million including its Indian operations.

It became the largest private equity buyout in the Indian information technology (IT) space and the first by KKR in the country.

At the same time, there are others like Blackstone and Carlyle’s premier private equity arm that are yet to strike a deal.

“That’s because company valuations were too high or they just haven’t found the right company,” said Nitin Deshmukh, head of private equity at Kotak Mahindra Bank.

Column: Fuelling the retail boom

(FE 29/06/2006) Mumbai - India is in the midst of a retail boom. Organised retailing is growing at the rate of 20% and many Indian business houses and foreign retailers have already invested/shown interest in investing in this sector. There is no doubt that the sector is growing on its own. However, one cannot deny the fact that the growth has been much slower as compared to the rest of the world. Over a 10-year period (1995-2005), the share of organised retailing in total retailing has grown 40% in Brazil and 20% in China. In India, it is only 2%.

Government, as a facilitator, plays a significant role in the growth of this sector. Positive interventions are needed since the sector has huge employment potential and substantial backward linkages. At present, there is no clear policy on retailing. Although 51% FDI is allowed in single-brand retailing, it is unclear whether the policy would be extended to multi-brand outlets and, if so, when? Rather than a piecemeal effort, the government should come up with a comprehensive policy for opening up the sector with clear timelines. This would make it easier for domestic players to plan their future growth.

Many laws relating to retailing, such as the Agriculture Produce Marketing Committee Act (1976) and Essential Commodities Act (1955), are outdated and should be amended. Although franchising is an important mode of conducting business, unlike countries such as the US, India does not have a comprehensive legislation governing franchising. Such legislations should be implemented for protecting franchising rights.

Certain legislations in the real estate sector (e.g. Rent Control Act, zoning regulations) limit the availability of land for retail use and increase the prices. Regulations relating to land ownership should be made more flexible. Appropri-ate urban planning and supporting infrastructure (approach roads, transport, parking, etc) is needed for the sector’s healthy development.

A retailer requires 12 to 15 clearances at the central/state/local levels to conduct business. A single- window clearance process would immensely reduce uncertainty, delays and red tapism. There are various restrictions on inter-state movement of goods, especially foodgrains. This forces retailers to source locally and they are not able to reap the benefits of economies of scale.

For retailing to succeed, India should be treated as a single market. Uncertainty relating to lack of land ownership , vendor-owned and fashion driven inventory, etc makes it difficult for retailers to access bank loans in the absence of collaterals. The government should set up a separate bank on the lines of the Small Industries Development Bank of India for meeting the financial requirements of this sector.

By Arpita Mukherjee, senior fellow at Icrier

Column: FDI walls restrict retail competition

(FE 29/06/2006) Mumbai - For all those politicians and academics opposed to allowing foreign direct investment in the retail sector, Mukesh Ambani’s announcement on Wednesday should come as another wake-up call. His Reliance Industries is to invest Rs 250 billion over the next four years in establishing a chain of retail stores, backed by an elaborate supply chain, through the country. Earlier, there was the news that Sunil Mittal’s Bharti group was firming similar plans, with an initial investment of Rs 60 billion. Shoppers’ Stop and Pantaloon are expanding with urgency; Godrej and Bombay Dyeing are moving into investing in malls. In sum, the anti-FDI rationale of protecting traditional retail and its associated jobs is idiotic — all you are accomplishing is to ensure a protected market for Indian corporates. This is the folly of the 1950-1990 regime repeated all over. Competition and market entry were restricted then and India kept in an artifical time-warp, in the name of the greater good, the Indian consumer’s affordable range and access to good products and services restricted, industry starved of ideas and the need for innovation.

To reiterate the point about organised retail: it forces producers to look at every single process to see if it adds value or not and how to do it better. Companies in countries where this is a settled process are constantly scouring the entire world to search for lower-cost, higher-quality products. We are talking here of hooking our manufacturers and our farmers to consumers through the planet. Supply chains will get upgraded on a scale we have never seen. Take the current national worry about rising vegetable prices and reflect that the difference between what is charged at even the wholesale markets and what the farmer gets can easily be around 400%. It is the farmer and the consumer who hugely benefit by reforming this chain; it is precisely this opportunity that has corporates so excited.

We’re talking of dramatic changes in technology through the chain, of hugely augmenting our productive capacity—retail has the potential to do to manufacturing and agriculture all that IT has done to services and on a vastly bigger scale. And that means the creation of jobs on the same scale—in factories, in fields, in transport, in supply, in servicing. There is an imperative need for the more far-sighted among our political leaders to realise the transformation is already on and to help those affected to cope. Integrate a phasing-in of full FDI as part of the transition.

News: McDonald's plans expansion in East India

(PTI 28/06/2006) New Delhi - Looking to double its turnover every alternate year McDonald's India has charted out expansion plans to cover East India and said it will add 25 new restaurants this year to take its total to 110.

"This year our expansion is focussed on East and to an extent in the North region. We intend to add 25 new restaurants by the end of this year, of which 65 per cent will be in the East and North India," McDonald's India (North and East India) Managing Director Vikram Bakshi told reporters here on the sidelines of Retail Forum - The Shop.

He said the company, which had initially set a target of having a presence in Kolkata by next year has preponed it. "It may happen by the end of this year itself or latest by early next year."

"In another 4-5 years time we are looking at having 10 outlets in Kolkata," he added.

McDonald's India, which had recently announced Rs 400 crore investment for the next two years, is also looking at increasing its turnover.

"Considering the way we have grown at about 40 per cent every year, going forward we expect to double our turnover every alternate year," Bakshi said, however, declining to disclose the figures.

He said the company was already in talks with vendors in East India for supplies.

News: Inorbit Malls to invest Rs 1,500 cr in 3 years

(PTI 28/06/2006) New Delhi - Bullish on the growth of retail sector in the country, Raheja group company Inorbit Malls on Wednesday said it would invest around Rs 1,500 crore over the next three years to build malls in west and south India.

"We plan to build 10 malls in the next three years and would be investing close to Rs 1,500 crore for this," Inorbit CEO Yogesh Samat told media on the sidelines of a retail summit 'The Shop'.

Inorbit, which currently runs a mall in Mumbai, will be opening a second one at Navi Mumbai within the next six months. "We are looking into expanding into other cities like Hyderabad, Pune, Bangalore, Chennai in the coming months," Samat said.

The company buys land and develops malls which it later rents out to various retail players. "We are in talks with various retail chains for our upcoming projects like Lifestyle, Fame Multiplex," he said. Asked if it would also be speaking to Reliance Retail, he said, "We will be speaking to all the players in the retail format."

Samat said the retail segment in India was on a high growth path and there were no chances of a glut with the entry of a number of players, including formidable ones like Reliance and Bharti.

"The segment is witnessing 100 per cent growth and this will continue for the next three years as well," he said.
However, he listed high land acquisition prices as one of the big concerns that could slow down the growth momentum.

Asked about the revenue model for Inorbit, he said it would primarily be through rents. "However, we are also looking at getting into a revenue-share model with some retailers," he said.

On the source of funding for the future projects, he said it would be generated internally. On whether the company was looking at getting in a partner for FDI, he said, "We have no such plans as financing locally is not an issue for us. It all depends on what value the foreign partner brings."

News: China and India eclipsing Japan for property funds

(RTR 28/06/2006) Singapore - Booming China and India appear to be eclipsing an increasingly expensive Japan as the favoured Asian property markets for global funds, but some money managers worry big inflows of capital will underprice risk.

Four property industry executives speaking at a conference in Singapore on Wednesday pinpointed either China, India or both as the "most exciting" markets, whereas Japan had generally been preferred by fund managers at the same event last year.

While fast climbing prices for buildings in Tokyo and rising borrowing costs are making Japanese deals more difficult, building housing in two of Asia's fastest growing economies promises internal rates of return of 20 percent.

"If you're not in those markets you'll miss some of the best opportunities," said Jack Foster, head of property investment at New York-based Franklin Templeton Investments.

"But clearly it's a moving target, and our exposure to India and China is still pretty minor. It's still early days."

Foster said he would like the proportion of Franklin Templeton's property funds allocated to Asia to double to 50 percent from 25 percent over the next 10 years.

India eased rules on foreign investment in property last year to help local developers finance the building of an estimated shortfall of 20 million homes, as well as new shopping malls and offices worthy of an economy growing at 8 percent a year.

Overseas developers have been active in China for a decade, but Western funds are arriving en masse this year, to buy existing commercial buildings as well as to build housing at a time when some 8 million people are flocking to cities each year.

Fearing a bubble, China's government has introduced several measures to promote affordable mass housing at the expense of luxury apartments.

"China mass residential housing has the best risk adjusted returns," said Timothy Bellman, strategist at ING Real Estate, which is closing a fund next week to build apartments in many of China's 23 cities with a population of more than 2.5 million.

FROTH?

Ben Sanderson, director of property research at Britain's Prudential Property Investment Managers (Prupim), said he was generally on the lookout for low-risk "core" investment opportunities in Asia's more mature markets -- Japan, Hong Kong, Singapore and South Korea.

He said China and India were both attractive for anyone willing to take on development risk, but believed the massive inflows of foreign funds might misjudge how fast the societies were changing.

Some $5 billion has been pledged for immediate investment in Indian property, for example.

"I'd say that China and India excite me, people are going to make a lot of money in those countries," Sanderson said. "But many people might not be pricing risk appropriately," he said.

"When the dust settles after this period of strong liquidity, it'll be interesting to see how much change was structural and how much was just froth."

Prupim, which manages 17 billion pounds (US$31 billion) of assets in Britain, has allocated around 1.5 billion pounds to investment abroad, of which a quarter is in Asia.

David Schaefer, Asia head of Citigroup Property Investors, picked India as his most exciting market, Thailand as his favoured "minnow" Asian market, and the Philippines as the market he feared most.

ING's Bellman said Japan would still be attractive for long-term "core" investors, if private equity firms that borrowed heavily for property purchases decided to sell because of rising interest rates.

News: The accidental developers - India's emerging elite

(RTR 28/06/2006) Hong Kong - In a rush to build shops, offices and houses worthy of a thriving economy, a new elite is emerging in India -- young men asked to turn plots of family land into a property business.

The 30-something businessmen have set their sights on capturing a piece of an estimated $2 billion of annual inward investment earmarked for property in India, which eased rules on foreign financing of construction in 2005.

They are inexperienced. But they are accumulating valuable land in a billion-person economy growing at more than 8 percent this year but which is suffering a shortage of good quality housing for its burgeoning middle-class.

Shrirang Sarda, 34, describes himself as a "reluctant developer" whose 83-year-old family business, Sarda Group, employs 16,000 workers making bidis, cigarettes rolled in dry leaves that are hugely popular in India.

When his once-serene ancestral house in Nashik, between booming Mumbai and Pune, found itself on the main street of a horn-honking city of one million people, Sarda pulled it down and built the city's first modern cinema complex.

He sold the cinema and is now moving to develop a shopping centre and a township with big-name foreign investors, which he declined to identify because a deal was imminent.

"There's a huge change happening in India, with a wave of consumption," Sarda said. "And if you enter the property business at a chaotic time, you've got a good chance of making it."

Some of Asia's biggest fortunes were made that way.

Hong Kong tycoon Li Ka-shing snapped up land in Hong Kong four decades ago when riots inspired by China's Cultural Revolution sparked a property slump.

Now only a small club of developers have the clout to compete in the cut-throat Hong Kong market.

And Li's empire has grown to include property developer Cheung Kong (Holdings) and ports-to-telecoms conglomerate Hutchison Whampoa Ltd.

China's private property market, barely a decade old but booming, has also spawned a group of mega-rich businessmen in their thirties, leading companies such as Shanghai Forte Co. Ltd. and China Vanke Co. Ltd. Many owe their beginnings to close links with local Communist party officials.

COLONIAL BUILDER

In India, success is more haphazard and often begins with the good fortune of owning prime plots of land.

Daleep Akoi's great, great grandfather was a contractor during the British Raj who built a forest research institute and a military academy in Dehradun in northern India and picked up land across the country along the way.

Now Akoi, 30, is giving up journalism and 11 years living abroad, mostly in New York, to turn a former British officer's mess in central New Delhi into a boutique hotel before developing other parcels of family land.

India, which hosts the Commonwealth Games in 2010, has just 12,000 high-quality hotel rooms, while tiny Singapore has 70,000.

"I'm excited," Akoi said. "There's liberalisation of foreign capital coming in, confidence in the economy -- you really feel it now -- and the government is more open to new ideas."

He said young developers were also more open minded.

"They've been abroad and have seen what value-added stuff you can do with property," Akoi said.

"And the younger generation have no barriers of culture, caste and language," he said. "You can shed that baggage and go to Mumbai, Kolkata, anywhere to do projects."

THE INDIA BUS

The property sector, with only a couple of listed firms, has few billionaires because a tangle of red tape and poor finance prevented firms from expanding beyond their local base.

The industry is hampered by poor foreclosure laws, tedious property registration processes, tax and transaction laws that vary by state, and frequent contests over property ownership.

In a Forbes magazine list of India's top 40 richest people, dominated by pharmaceutical and technology magnates, the only top-placed developer is Kushal Pal Singh, chairman of DLF Universal Ltd., who comes in fifth.

DLF, which turned a sleepy New Delhi suburb into a bustling zone of malls and offices, wants to raise $3.5 billion in what is expected to be India's biggest share offering. The sale in June of a 12.8 percent stake could value the firm at $25 billion.

Sarda and Akoi hope foreign capital can some day help them achieve the same as DLF and are encouraged by recent deals.

This year, U.S. bank Morgan Stanley has invested $68 million in Mantri Developers Private Ltd., compatriot developer Tishman Speyer tied up with India's ICICI Bank to pour more than $1 billion into the country and U.S. pension fund CalPERS has put $100 million in an Indian property fund.

Private equity arms of JPMorgan, Lehman Brothers and Merrill Lynch are waiting in the wings.

Sarda said old-style wheeler dealers were losing out to businessmen like him, who attract foreign partners because they understand concepts such as cash flow predictions and internal rates of return.

"Two years ago there was no market, it was just very traditional, handshake-driven," said Sarda, who travels to conferences in the region to network and learn more.

"Because the funds are coming in there's a lot more transparency now. But they're also being very flexible because they're not willing to miss the India bus."

News: Ford to sell Volvo cars in India

(RTR 28/06/2006) Stockholm - Ford Motor Co.'s Volvo Car Corp. said on Wednesday it would begin selling cars in India during the fourth quarter of this year.

The company said it would introduce its S80 and XC90 models, and planned to begin selling more models in the Indian market "in due course".

"India is experiencing very favourable economic growth with low inflation and a stable currency," the company noted in a statement.

"Total new car sales on the Indian market are expected to increase from 1 million cars per year to 1.6 million over the next few years. This gives us an excellent foundation for starting sales of Volvo cars on this market."

The car maker, which said in March it would begin making cars in China this year, would establish three dealerships in India in 2006, it added.

News: Reliance unveils 3-pronged push

(DNA 28/06/2006) Mumbai - Reliance Industries will unleash a three-pronged approach as it rapidly expands and consolidates and enters new economy businesses.

Chairman Mukesh Ambani said the strategy would be to forge new growth avenues in urban infrastructure and special economic zones, found new-economy businesses in life sciences and health care and develop options for cross-border acquisitions in existing and new businesses.

Ambani also announced a new crude oil discovery in the Krishna Godavari Basin at the 32nd annual general meeting in Mumbai on Tuesday.

“RIL recently had a crude oil discovery in the MA1 well in the deep water D6 Block in the basin,” he said. Testing was done in two zones located three kilometres below sea level.

For Reliance, the discovery more than size signifies a large geological play that result in future discoveries.

“As Reliance moves ahead, oil and gas exploration and production would undoubtedly be the highest value creating business. Reliance has embarked upon an aggressive exploratory drilling program,” Ambani said.

Meanwhile, the company is planning one of the largest gas development projects in the world to transport gas through a 48-inch, 1,386 kilometre east coast to west coast pipeline, which will traverse Andhra Pradesh, Karnataka, Maharashtra and Gujarat.

Reliance is implementing this project through Reliance Gas Transportation Infrastructure Ltd in a contract and common carrier framework, he added.

RIL’s exploration for oil and gas is about a third of India’s prospective areas. Testing in two zones, located three kilometres below sea level, has shown significant presence of oil.

The potential of this discovery is under evaluation, he added. RIL also had crude oil discoveries in two wells in the KG-III-6 shallow water block.

The Directorate General of Hydrocarbons has declared the six gas discoveries in the NEC25 block of the Mahanadi basin as commercial, he added.

Reliance is working on the expeditious monetisation of the discoveries made in the Krishna Godavari and Mahanadi basins.

The project is on schedule, Mukesh said, and added that major contracts awarded and delivery to consumers envisaged to take place by the second half of the financial year 2008-09.

This delivery time target represents less than six years from the time of announcement of the discovery and ranks among the fastest turnarounds for deepwater gas development projects in the world.Reliance also continues to make good progress with the coal bed methane project as well as with production from the Panna-Mukta Tapti fields.

News: Reliance Retail will straddle 1,500 towns

(DNA 28/06/2006) Mumbai - Organised retailing is “the next big idea” at Reliance Industries, declared chairman Mukesh Ambani.

Announcing the setting up of a 100% wholly owned subsidiary Reliance Retail, Ambani said Reliance will “spearhead this revolution as an overarching theme of the expansion and growth of Reliance.”

The ambitious plans, which he unfolded a wee bit today, will make available under one roof a slew of items from apparels and footwear, to groceries, farm implements, entertainment, travel services, consumer durables, food and grocery and the works.

Reliance Retail will spend more than Rs 25,000 crore on the initiative.

For Reliance Industries, the investment in equity alone will be to the extent of Rs 10,000 crore over time, the chairman told shareholders at the company’s first annual general meeting since the de-merger of power, telecom and finance businesses in February this year, following a bitter feud between the two Ambani brothers.

The retail venture already has 2,000 professionals to implement plans for organised retailing. The number would soon swell to about 10,000 as the initiative progresses.

Mukesh said Reliance Retail will have a pan-India footprint covering 1,500 cities and towns.

News: ‘We will strive to become one of the top 100 companies’

(DNA 28/06/2006) The man at the helm of India’s largest private sector company, Reliance Industries Ltd, exuded oodles of knowledge and confidence at the company’s 32nd AGM on Tuesday. Flanked by Y P Trivedi and M L Bhakta, both independent directors, CMD Mukesh Ambani told shareholders that 2009-10 will see a quantum jump in revenues at RIL, as revenues from new projects start flowing in. He also assured shareholders that he was personally in charge of value creation for shareholders and declared that the next big energy company will come from the agro-sector. Excerpts from the AGM:

On projects

We are clearly embarking on a growth path. Earlier, it’s true that we went for one project at a time. We are now investing in three large businesses: 1) The refinery project, 2) Oil & gas exploration 3) Retailing. All these initiatives will bear fruit by 2009-10, which will be a significant year for Reliance when we’ll see a quantum jump.

On the RIL share

It’s our job to perform. It’s for the market to decide on the valuation. In the long run, I am sure that the markets will recognise our performance.

I can assure you that we will put the performance. Rest will come automatically. As papa (Dhirubhai) used to say, we are on the same side. Personally speaking, I am the largest shareholder and therefore we share the same interest in the company performing well.

One thing I would like to say, shareholder value creation is central to everything that we are doing today. It’s not from today that we are looking at it, it was from papa’s (Dhirubhai’s) time when Reliance Industries was born.

As regards shareholder value, let me confide that I am personally in charge of shareholder value creation in this company. I can look into your eyes and say that this will be my endeavour.

On preferential offers for RIL shareholders for the retail and SEZ projects

Let me assure you that as Reliance Industries shareholders, we own all these companies. While we have noted your request on par, there’s one more option that we can consider and that is on how we can get the shares (Reliance Retail and SEZs) for free. The time has come back to give back to shareholders.

We (RIL) will find our place in the world. We’ll strive to become one of the top 100 companies in the world

On acquisition of oil & gas exploration blocks overseas

We are very committed and focused towards the domestic market. We are very selective about the acquisition of overseas oil and gas assets. As and when we close in on something, we’ll share it with you.

On de-merger and merger strategies

Whatever action we take is after ensuring that it is value accretive to our shareholders. All the mergers and de-mergers in the past have created value. World is moving very fast. We have to respond to acquisitions etc.

On India’s GDP growth

India is on an unstoppable growth path. It’s driven by the youth of India and it represents the aspirations of the youth. By the decade 2020-30, the world is going to rebalance itself. There are 6 billion people on this globe and one billion of the people own 80% of the wealth. That’s going to dramatically change in the future. India is going to be in the forefront of this rebalancing. Dhirubhai betted on the youth, I was only 23 years old when he asked me to join him.

While the world grows at 2%, we are growing at 10%. So, naturally, we’ll increase our per-capita income. Our farmers are the most competitive in the world. The arable land is the highest in the world. It is the beginning of the trend.

On bio-diesel and alternate fuel technologies

The next big energy company will be an agro company. As the world runs out of oil in 30-50 years, technology and human innovation will have to come from the agro-industry. Keeping with the trends, we are personally excited with our agro-retail initiatives.

On setting up ethanol plants in Maharashtra and getting into sugar

Our only interest is in ethanol. In sugar we have no interest. Of course, we’ll be selling sugar through our retail network.

On setting up a new refinery

There are some 800 odd refineries in the world. Out of this, only 30 odd refineries can process heavy crude. This is because most of the refineries in the world were built 20-30 years ago. We will have a very competitive refinery. Also remember that all the new crude that is flowing into the market is of the heavy sour variety.

On oil & gas finds

The commercial production will start by the second half of fiscal 2008-09. It will give RIL a substantial contribution.

On energy self-sufficiency

We are embarking on a massive drilling program for the next three years. But I’ll be realistic here, we cannot be self-sufficient ever in the near future. It may take 5-7 years for us (Reliance Industries) to become more self-sufficient. We’ll continue to import crude.

On hedging crude oil prices in view of the market volatility

We only take hedging for refinery margins and that to on a 12 month basis, as per RBI norms.

On investment in tax havens

Let me remind you that we are largest taxpayers in the country. But we will invest solely based on the economic merit of the project, rather than on tax benefits.

On being compared to Hrithik Roshan in ‘Krissh’ and footballers scoring goals

I do watch football. I guess, I’ll now have to watch Krissh too.

News: 'Foreign investors still bullish on India'

(BS 28/06/2006) Mumbai - The stock markets may be going through turmoil in the short run but thanks to the long term growth story foreign investors are still looking at India positively, said Arshad Zakaria, president and chief executive officer of New Vernon Capital and former Merill Lynch honcho.

A private equity and hedge fund managing large sums of money for long term institutional investors such as endowment plans, pension funds and investment trusts, Zakaria said, "We have received no phone calls yet (for redemption). Though the recent selloff appears big, on a year-to-date basis, it is the not as big long-term investors are still optimistic about India."

Addressing an august audience of professional investors gathered at a meet organised in downtown Mumbai by domestic securities firm Motilal Oswal in which New Vernon has recently acquired a stake, Zakaria said India is poised the way the US was in the early eighties.

Though certain concerns such as infrastructure, fiscal and current deficit will have to be addressed over time, the growth prospects looked bright for corporate India.

Referring to the sharp correction seen of late, Zakaria said the period from 1982 to 2000 turned out to be the best period for the US markets despite the crash of 1987, when the market fell 22 per cent on a single day.

Three factors -- secular decline in interest rates, healthy corporate earnings growth and multiple sources of liquidity -- drove the US stocks during the secular bull run.

As long as these three ingredients are intact, Indian markets had a fairly good chance of replicating the same growth, he suggested.

Having said that, "India will not be immune to any change in global factors" but if the global environment remains reasonably stable, India should be firmly on the growth path.

Besides, dollar investors were currently looking at other currencies for diversification. This was working in favour of Asian markets including India.

"Since high teens in early eighties interest rates had fallen to 3 per cent in 2000 in the US. Though there were ups in between, the market performance was maintained as the secular trend in interest rate was downwards," he said.

Similarly, despite business cycles during the period, corporate earnings grew steadily backed by lower cost of capital and productivity gains. Different sources of liquidity, particularly the emergence of mutual funds and 401k plans provided the impetus for further growth.

News: RIL's retail biz to create 10 lakh jobs

(PTI 27/06/2006) Mumbai - Looking to cash in on the growth of India's consumer-centric economy Reliance Industries Ltd on Tuesday announced a big-ticket expansion in retailing business, which would have presence in 1,500 cities across India at an investment of about Rs 25,000 crore generating over 10 lakh new jobs.

Addressing the company's shareholders in its 32nd annual general meeting, RIL Chairman Mukesh Ambani said a new company Reliance Retail Ltd, a 100 per cent subsidiary of RIL, would spearhead the retail initiative in which it is expected to "expend more than Rs 25,000 crore in the years to come".

Ambani said Reliance's retail business would focus on several verticals, which includes food and grocery; FMCG; apparels and footwear; consumer durables; farm implements and inputs; travel services; entertainment and leisure; health and well-being products; and educational products and services.

He said the retail business of the company would adopt a pan India approach and have presence in over 1,500 cities and towns "embracing all strata of society".

To be rolled out in a mix format of neighbourhood convenience stores, supermarkets, specialty stores and hypermarkets, Ambani said the retail business would help in generating employment for about one million people in the ensuing years.

Besides, the company would also develop partnerships with international brands to bring them to India, he added.

Ambani said Reliance would also develop opportunities in agriculture and food processing that would support organised retailing business, which would help deliver "better returns to the Indian farmer and producer by connecting them directly to Indian and global consumers".

News: Indian real estate, a big bargain for foreign investors

(BL 27/06/2006) Mumbai - Indian realty appears to be truly going global, with many overseas investors looking to cash in on the burgeoning property scenario. Interestingly, this is in spite of the sharp run-up in property prices over the past several years and the steep rally on the stock market (before the sell-off).

Despite suspicion of a bubble, foreign investors believe Indian real estate to be a bargain with initial yields north of 15 per cent on developments and 10 per cent on acquisitions. While accepting that higher yields are not without risks, they believe that some of these risks are built into the high yields that can be found in emerging markets.

To provide an insight into the Indian property market, UBS Investment Research has decided to host a meeting with private real estate companies on June 29, to coincide with the last day of the real estate investment world conference in Singapore.

CLSA report

Citing the heightened activity in Indian real estate as a result of higher prices and genuine improvement in underlying demand conditions, a CLSA Asia-Pacific report maintains that an excess of $5-billion worth of funds is to be invested in the domestic market.

"Traditionally, Indian property market has been largely residential market and this segment still continues to be the most significant portion of the overall market. However, this is now changing with the emergence of IT/ITES sector and organised retail as big growth drivers," the report said.

Citigroup findings

A Citigroup Research report on real estate investment trust (REIT) strategy has identified over $15 billion of capital raised by opportunity funds targeted at India.

Identifying IT office space as the most straightforward investment option given the strong demand and defined rental rates of about $8-10 per square feet per year, Citigroup reports that India may need $1.5 billion of IT office space and a few billion more of other development.

As per UBS Investment Research, residential development should generate the most growth. The report cites a McKinsey and Co/National Council of Applied Economic Research study on new housing demand in India, which forecasts demand for 4-6 billion square feet of new residential housing by 2015.

UBS estimates office market in India has doubled over the past three years to 100 million square feet, an implied CAGR of 26 per cent. Demand is estimated to grow at an annual rate of 20-25 per cent over the next 10 years, which equates to 500-650 million square feet. It also anticipates India's favourable demographic trends to improve retail sector.

Citigroup on the other hand is of the view that while a substantial amount of retail is being built, identifying the best retail option is difficult as one must consider extremely low retail per capita, restrictions on entry by foreign retailers and challenges of design/layout of planned retail.

Industrial market

While the industrial real estate market in its current state is perceived as the slowest to develop, it has been pegged a growth area and should ultimately provide attractive opportunities for US industrial REITs.

In March 2005, the Union Government allowed FDI in real-estate development sector under automatic approval route for large projects. That the Government has not yet passed any form of real estate securities legislation remains an area of concern for the overseas investor.

News: Anil Ambani group to invest $60m in Saudi Arabia

(DNA 27/06/2006) Dubai - Reliance Communications will invest $60 million in Saudi Arabia to connect the Kingdom and other Gulf states with 53 countries around the globe on its fibre optic network and provide value-added services to its users.

The investment to set up submarine fibre optic cable landing stations in Alkhobar and Jeddah for facilitating access to international bandwidth was made through the FlAG Telecom, part of the Anil Dhirubhai Ambani Group, under its Falcon project.

Reliance Communications and its Saudi partner hailed the investment that comes in the wake of the landmark visit of Saudi King Abdullah to India in January.

More investments are expected to follow as both sides explore the possibility of diversifying their relations through strategic alliances.

The deal was unveiled in the presence of Ambani, Punit Garg, president of FlAG Telecom, a Reliance subsidiary, and Mohammed Hasan Omar, president and CEO of Integrated Telecom Co Ltd at its headquarters in Jeddah.

The Falcon project will connect the Gulf countries, including the Kingdom to India from the east, Egypt from the west as also with the rest of the world, Garg said.

The project will be completed by October. Landing stations will be constructed in Alkhobar, which is already operational, and another in Jeddah, which will be completed next month.

"We are exploring the possibility of strategic partnership options and to reinforce the alliance with ITC," Garg told the Arab News.

Omar said the deal would enable ITC to offer international access capacity in the Kingdom. "This also marks the launch of our commercial services to the market – the international bandwith and the Last Mile Connectivity Services to ISPs for wireless, fiber optic and other value-added services," he said.

This will put ITC on the global map and facilitate access for Saudi customers to any of the 53 countries served by the Reliance Group covering 200,000 km fibre cable network in India and across the globe.

Omar said the presence of Ambani in the Kingdom was intended to reassure the ITC management his company's full support to the ITC-FlAG Telecom joint venture project.

There was no global connectivity from the GCC countries.

Saudi Arabia and the UAE were the only countries where the submarine cables were available for connectivity to the global network.

"We are working on a virtual data center to provide access to global data network. We are working on setting up a regional internet center here which could be used by other countries in the region as a hub," he added.

News: Indian realty fund foundation laid

(TT 27/06/2006) Mumbai - You can finally afford to own a pie of the best properties in the country without burning a hole in your pocket.

The Securities and Exchange Board of India (Sebi) today approved the long awaited guidelines for real estate mutual funds. Such schemes will invest directly or indirectly in real estate properties.

Under the guidelines, the schemes can invest directly in real estate properties within India. They can also invest in mortgage or housing lease-backed securities, equity and debt instruments, including bonds and debentures of listed or unlisted companies which deal in properties and also undertake property development.

Apart from real estate securities, the schemes can also invest in other securities. The units of such schemes, which will initially be close-ended, will be compulsorily listed on the bourses and net asset values will be declared daily.

The schemes will be governed by Sebi (mutual funds) regulations and necessary amendments will be made to the guidelines therein.

A Sebi-registered custodian shall be appointed by the funds, who will safe keep the title of real estate properties held by such schemes.

Sebi has also marginally tweaked the guidelines for venture capital funds and foreign venture capital investors for shareholding in a company prior to an initial public issue.

Such pre-issue shareholding shall now be exempt from lock-in requirements only if the shares are held by them for a period of at least one year at the time of filing of a draft prospectus with Sebi.

According to Sebi, this would help to ensure only such venture funds, which have long-term interest in the company, are allowed to get the benefit of the exemption from requirement of a lock-in as intended by the Sebi (disclosure and investor protection) guidelines.

According to the guidelines, while the promoter’s pre-issue shareholding is subject to a lock-in of one year from the date of allotment of public issue, venture funds are exempted from it.

However, the restriction on venture funds is similar to that for the pre-issue capital with the board of the company. Shall we now witness a slew of real estate mutual funds? “This is a significant step. However, there are many technical and operational issues, which will evolve from here,” said Dhirendra Kumar of Value Research.

News: Investors demand more from Asia's property trusts

(RTR 27/06/2006) Singapore - After thriving for a couple of years, Asia's young property trust markets are wobbling, with investors worried by financial trickery, expensive building valuations and murky acquisitions.

In a wider stock market downturn, real estate investment trusts (REITs) are shelving IPOs planned in Hong Kong, Singapore and Japan at a time when the markets could do with high-quality listings to bolster confidence.

Many analysts say this is a time to buy, because of cheap valuations and low volatility of REITs in a rocky equity market.

Bankers insist there is a long-term future for REITs -- the market could grow five-fold to around $150 billion over the next five years -- because investors need a half-way house between stocks and bonds. By paying rent from their buildings as dividends REITs give steady income, while a flourishing property market can help deliver capital gains.

But last month's Hong Kong share offering by Champion REIT has left a bad taste, only seven months after a frenzy over the city's first property trust, Link REIT.

Investors were put off by financial engineering that allowed landlord Great Eagle Holdings Ltd. to effectively spin off Champion at a price reflecting projected higher rents in a couple of years time, rather than current levels.

George Pavey, head of equity capital markets at HSBC in Hong Kong, said the city's REIT market can revive if landlords do not insist on top-dollar prices.

Property firms should be happy that by retaining a stake in REITs they can keep control of their buildings and collect management fees, while raising capital for expansion plans in China, he said.

"The perception among investors, rightly or wrongly, is that if developers are prepared to part with assets -- there must be something I don't know," Pavey said.

"What developers need to do is strike a balance: Give money so people make money, and think more strategically."

SHELVED LAUNCHES

For now, Hong Kong developers are pulling their REITs rather than cutting prices, with Henderson Land Development Co. Ltd. and Sun Hung Kai Properties Ltd. getting cold feet.

But around a dozen trusts are in the inception stage, said Pavey, who believes Hong Kong REITs will now be aimed at institutional investors rather than individuals.

The more established Japanese REIT market was also shaken last week when regulators called for disciplinary action against the managers of Orix J-REIT and its parent company.

The Securities and Exchange Surveillance Commission (SESC) said the trust had not conducted proper due diligence before acquiring properties from its parent, and had not held as many board meetings as it said it had.

Many analysts believe the SESC will now examine other REITs, but say investors have over-reacted, because earnings will not be hit and more scrutiny will improve the quality of acquisitions.

Orix J-REIT has fallen 13 percent since last Monday's SESC announcement while the Japanese REIT index is down 1 percent, having recovered from a 3 percent one-day slide. Ecology Reit Corp. has since postponed an IPO set for next month.

"There is a lot of conflict of interest regarding companies which sell properties into their real estate investment trusts and people out there were quite nervous that Orix may be the tip of the iceberg," said Michael Coates, director of equity sales at KBC Financial Products in Tokyo.

"But really, real estate in Japan, for me, should be leading the market higher so just the concern there is holding us back."

Japanese REITs offer investors dividends of 180 basis points over 10-year bonds, compared with 300-350 bps for Singapore REITs. After a 23 percent share price slide since its debut, Hong Kong's Champion REIT trades at 220 bps above bonds.

DEJA VU

Singapore is experiencing the least of Asia's REIT problems, with the recent slide in equity markets to blame for the postponement of a planned IPO by Cambridge REIT, which owns industrial buildings.

Fraser & Neave and City Developments are still pushing ahead with REIT listings while CapitaLand Ltd. wants to offer Chinese shopping malls to the Singapore public this year.

Analysts point to Singapore's teething pains in 2002 as evidence that Hong Kong's REIT market can still blossom. Then, CapitaLand had to return to the market with a lower price, and higher yield, for shopping centres it spun off into CapitaMall Trust after failing with its first attempt at an IPO.

Since then, thanks to tax incentives and strong income growth by REITs, the market has caught on with Singapore investors.

"What we need in Hong Kong and Japan are very good quality assets with good operating strategies, then you'll sell REITs," said Craig Parker, director of corporate ratings at Standard and Poor's in Melbourne.

News: Global real estate investors need local partner

(RTR 27/06/2006) New York - Going global means not doing it alone but with a local partner, leading figures in real estate said on Monday while attending the Reuters Real Estate Summit in New York.

"We've decided to focus our attention on India as a place to get involved in real estate investing," said John Jacobsson, Apollo Real Estate Investment Advisors partner. "The partner is extraordinarily helpful."

Apollo has partnered with the Sun Group for its ventures in India, where Apollo is hoping to generate high returns on new developments and existing properties. Apollo is raising about $500 million in equity for an Indian fund -- buying power that could rise to $1.5 billion through debt financing.

Real-estate investors, searching for a way to diversify their holdings and boost returns, are increasingly looking abroad for investments. But real estate is a local business and requires local know-how and relationships, the executives said.

Good partners were the key to Wal-Mart Stores Inc.'s success in China, said the head of Jones Lang LaSalle Inc., one of the world's largest real-estate investment service firms. But Carrefour, the world's No. 2 food retailer after Wal-Mart, tried to go into Japan alone and the results were less successful, he said.

"The first thing retailers need is a good partner," said Colin Dyer, Jones Lang's CEO. "Wal-Mart found good partners, critical to navigating local environment."

Jones Lang formed a $1 billion opportunity fund earmarked for Asia. In China alone, there are currently 300 malls under development, he said.

Tishman Speyer, which owns and manages some of the most recognized properties in the world, formed a $1 billion-plus joint venture with ICICI Ventures, the private equity arm of ICICI Bank Ltd., to build both office and residential properties.

"We're headquartered in Bangalore, but we're looking at deals in half a dozen major Indian cities," said Rob Speyer, senior managing director. "We're certainly looking beyond Bangalore and Bombay."

But in China, Tishman Speyer is putting together its own pool of local real-estate talent.

"We are creating our own platform over there," he said. "We are partner with a U.S.-based investment company called GSC. We're opening a business there, but we're not partnering with a local Chinese operator."

News: RIL demerger creates $10 bn of shareholder wealth

(PTI 27/06/2006) Mumbai - The division of the Reliance empire has helped fuel the upward rally in RIL's market value as shareholders' wealth surged 100 per cent within a year of the demerger, while net profits doubled in two years.

The largest demerger in India's corporate history has generated an incremental value of Rs 46,000 crore or 10 billion dollars. This strategic move doubled the total wealth of Reliance shareholders in just one year, RIL chairman Mukesh Ambani told shareholders during the company's AGM.

Ambani said the market price of RIL, inclusive of the four entities that were demerged, was hovering at around Rs 650 a year ago. But, the combined current share prices of RIL and the four companies are about Rs 1,300 per share, he said.

This return of 100 per cent to RIL shareholders in just one year significantly outperforms the 40 per cent growth in the benchmark BSE Sensex as well as other peer group indices in India and globally, he said.

As part of the settlement of ownership issues between Mukesh and younger brother Anil Ambani, RIL had demerged its power, financial services and telecom businesses into four separate companies last year. Although the four companies were transferred to Anil Ambani, RIL shareholders were also given shares of these firms as part of the demerger process.

RIL share price has jumped nearly 66 per cent to above Rs 1,000 per share from about Rs 600 a year ago.

Reliance Communications was trading at around Rs 231 per share, Reliance Energy Ventures at Rs 31.55, Reliance Capital Ventures at Rs 24.20 and Reliance Natural Resources Ltd at around Rs 19 per share on the bourses, taking the combined market price of the five firms to above Rs 1,300 per share.

Talking about RIL's business performance, Ambani said the company's net profit has doubled to 2.03 billion dollars in just two years, while turnover has risen 58 per cent to 19.97 billion dollars or about Rs 89,124 crore.

Exports stand at more than 7.3 billion dollars or about Rs 32,691 crore and contribute 37 per cent of the company's turnover, he said, adding this represents 8.2 per cent of India's total exports. Moreover, the share of exports in total revenues has risen substantially from just 13 per cent five years ago, he said.

The company's robust performance and strong capital structure also enabled the company get credit ratings higher than the country's sovereign rating by leading agencies Moody's and Standard & Poor's, he said.

News: Reliance unveils retail plans, to pump in Rs 25,000 cr

(PTI 27/06/2006) Mumbai - Petrochemicals giant Reliance Industries on Tuesday unveiled an ambitious Rs 25,000 crore retail initiative to set footprint in 1,500 towns and cities across India and offer products and services, ranging from food and grocery to health and education.

"Organised retailing will be the overarching theme of the expansion and growth of Reliance in the near-term future," Reliance Industries Chairman Mukesh Ambani told shareholders at the company's 32nd AGM.

Outlining the contours of the "next big idea", Ambani said the company envisioned kicking off a "retail revolution" across the country involving farmers, small shopkeepers, consumers and the youth.

He said Reliance will develop opportunities in agriculture and food processing to support the retail business which is likely to employ one million people.

"A new company , Reliance Retail Ltd, would spearhead this revolution. RIL has a 100 per cent stake in RRL," he said, adding that it would entail an equity investment of Rs 10,000 crore which would gradually be scaled up to Rs 25,000 crore.

Simultaneously, the company would open up "three broad fronts" which include tapping opportunities in urban infrastructure and special economic zones and new economy businesses like life sciences and healthcare.

Besides, the company would also scout for cross-border acquisitions in existing and new businesses, he said.

Ambani said the products that would be offered on retail front would be food and grocery, FMCG items, consumer durables, lifestyle products and services, farm implements and inputs, distribution of travel services, health and well-being products and energy products and services.

"Reliance Retail will develop partnerships to bring the best of luxury brands from all over the world to India," he said.

On the company's partnership with Chevron for refining business, he said it would help Reliance optimise crude supply, product offtake and marketing from the refinery as well as collaborate in other areas of the energy value chain.

"In its own way, the Chevron relationship is a forerunner to the emergence of Reliance as a significant global player in the energy sector," he said.

In fuel retailing, he said the company had opened 1,218 outlets over the last two years, adding that Reliance was committed to delivering a strong consumer value in the petro-retail sector.

Ambani said the company was undertaking a "fundamental transformation" in its polyester business that would entail going beyond manufacturing scale to create a differentiated polyester portfolio.

"Reliance is building the next generation polyester business," he said, adding that the company will move to providing solutions to the packaging, paper and construction industries besides the textile industry.

"In addition to making apparel grade polyester, Reliance will develop a whole range of technical and performance polyesters," he said.

Reliance finds oil off east coast

Reliance Industries Ltd has discovered oil in its exploration block in the Krishna Godavari basin, off the east coast, Chairman Mukesh Ambani said on Tuesday.

“This discovery signifies a large geological play that could result in future discoveries,” he told shareholders, but gave no details about the size of the find.

Shares in Reliance were up 1.41 per cent at Rs 995 in a weak Mumbai market.

News: India rejoices over Mittal's takeover of Arcelor

(RTR 26/06/2006) New Delhi - Indian-born steel baron Lakshmi Mittal's successful takeover bid of European steel firm Arcelor on Monday was hailed in the country of his birth as a sign of the rise of Indian business leaders on the global stage.

Ministers feted Mittal, businessmen said he had made them proud to be Indian while newspapers and TV stations went into a frenzy reporting the culmination of a five-month battle that had triggered charges of xenophobia against Mittal's opponents.

The rejoicing came a day after Arcelor bowed to an improved 25.6 billion euro ($32.2 billion) takeover bid from Mittal Steel to create a global giant three times larger than its nearest rival.

Finance Minister Palaniappan Chidambaram led the country's praise for the British resident.

"We are happy and proud that an Indian-born entrepreneur is the biggest steel maker in the world," Chidambaram was quoted as saying in the Economic Times newspaper.

Trade Minister Kamal Nath, a supporter of Mittal's bid, said the deal demonstrated the "intellectual and entrepreneurial abilities" of Indians and people of Indian origin.

"There's a new economic architecture and countries which have had a different mindset now have to face this, that in the new global architecture, India is going to be a major player," Nath told Times Now TV channel.

Mittal's bid for Luxembourg-based Arcelor had faced stiff opposition from several European governments, including Luxembourg and France, which had initially vowed to fight what they said was a hostile takeover attempt.

Indian business leaders had called the European reaction xenophobic.

Mittal, the world's third-richest person, was born in a village without electricity in the western state of Rajasthan.

He began working in his father's small steel mill in the eastern Indian city of Kolkata, then known as Calcutta.

Mittal later left India and made his fortune by transforming ailing steel mills around the globe into money spinners. Mittal Steel has no business interests in India yet but it has proposed a $9 billion plant in the east of the country.

Newspapers splashed Mittal's victory across their front pages on Monday. "Mittal Gets What He Wanted", the Times of India said above a morphed image of Mittal wearing a viking's helmet made of steel.

'Indian industry is extremely happy that Mr Mittal has emerged as a global name in such a brief time. We are also proud that one of our members is a world leader," said D S Rawat, secretary-general of the Associated Chambers of Commerce and Industry.

"Mittal's takeover of Arcelor will have spin-off benefits for India and help in the acceptability of Indian firms and products on the world stage," he said.

News: 'Supply spurt to temper Indian real estate prices in 2-3 years'

(BS 26/06/2006) Mumbai - Realty prices across most Indian metros are slated for correction as supply outstrips demand in the commercial real estate segment, according to a yet-to-be published report by real estate consultants – Cushman & Wakefield.

For example, Mumbai, Bangalore and Delhi will see a downward pressure on realty prices in the next 24-36 months as close to 23 million sq ft of new supply is coming up in these cities.

While Mumbai and Delhi are expected to add 12 and 8 million sq ft of realty space, respectively, Bangalore may add 3 million sq ft by the year end.

With Mumbai adding around 12 million sq ft of space, prices will move down in the medium term. With new stock getting released in Lower Parel, Andheri (East) & Goregaon (East), realty prices in CBD (Fort area), Worli, Bandra-Kurla Complex (BKC) and Andheri (East) may come under downward pressure.

But the prices are likely to remain firm for Mumbai commercial space for offices in the short term given the crunch for grade A office space due to the scarcity factor, which may even cause capital and rental values across micro precincts rise significantly.

The report says that fresh supply of 12 million sq ft is currently under construction in the western suburbs adjoining the Western Express Highway, Goregaon, Bandra-Kurla Complex and Andheri (East).

The Western Express Highway and Goregaon (East) due to accessibility, lower costs and quality of development continues to be a favoured destination, says the report.

It points out that rental and capital value have appreciated by over 200 and 150 per cent in Lower Parel and BKC compared with 2003 levels.

The prices will come down only when the new supply comes in around 24 -36 months from now. Lower Parel is expected to see an addition of around 3-3.5 million sq ft.

On the residential front, the report says that the recent free-fall in the stock markets has dampened sentiments among buyers.

It points out: "The stock market index and property prices do not necessarily go hand-in-hand and the impact from any sustained volatility in the equities market could have a bearing on property prices only in the medium term."

The report, however, admits that there is an element of speculation in the market "from investors who are seeking to ride the positive market sentiment especially during the initial phases of construction wherein investors enter the market at lower levels and flip assets as prices firm up when projects are nearing completion thereby gaining substantially."

The office market in New Delhi has stabilised across major business districts. The report points out that the Gurgaon office market continues to remain buoyant as most commercial projects scheduled for completion this year are being committed to corporates.

The market has witnessed an increase in rentals by approximately 10-16 per cent in the last quarter. The Delhi market is expecting to add around 7.8 million sq ft for fit-outs during the year.

The announcement of special economic zones by various large developers and corporates such as DLF, Reliance, Unitech, Vipul, TDI, MGF, DMRC and Uppals will also impact the market in the long term as the supply will get augmented.

On the residential front, South Delhi has been witnessing a plateauing of values and price thresholds being established. "The huge disparity between the seller's and buyer's price expectation visible in the market in the last few months is dissipating," the report says.

Also, the trend of short-term speculators flipping properties and booking profits within a short span of 4-6 months has reduced considerably in the Delhi market, it says.

The Bangalore market is expected to witness increased demand for build-to-suit facilities along the Outer Ring Road (Marthahalli-Sarjapur - Hebbal) and also for small office spaces, especially in the CBD and off-CBD areas.

With stock in excess of 1.5 million sq ft to be taken up in this quarter and at least another 2-3 million sq ft to be delivered in the next two quarters, the supply is exceeding demand by a huge margin.

The report points out that there has been a rapid and visible transformation in the last one month for road infrastructure development in Bangalore and it is expected to continue at all critical and important junctions of the city.

It says that demand for office space has been relatively slower in the last two months. It points out that developers have also slowed down speculative construction and are concentrating on existing, under-construction and build-to-suit properties.

The capital and rental values have remained stable across all micro markets in the city, except Whitefield. Rentals in Whitefield stands corrected by approximately 10-15 per cent due to excess supply.

The real estate markets in Chennai, Hyderabad, Kolkata and Pune continue be driven by IT & ITeS sectors. As a result, the demand for commercial office space is likely to keep exceeding its supply.

The mismatch will continue for sometime in these cities. In Kolkata, expansion by major IT companies has resulted in even small plot owners developing office buildings suitable for IT/ ITeS occupants.

However, most of this stock is sub-prime. The next couple of quarters will see an increase in supply of space directed at IT/ ITES firms in suburban districts. Given the state government's initiatives, the city is expected to witness more investments in the foreseeable future.

News: Reliance Industries to unveil retail roadmap

(BS 26/06/2006) Mumbai - Reliance Industries chairman Mukesh Ambani is likely to make a major announcement when he stands up tomorrow to address the shareholders at the 32nd Annual General Meeting.

Sources in the know of the development said Ambani might unveil his mega plan on retail. He would also keep shareholders updated on the developments at exploration and production front. However, RIL executives were tightlipped.

The presence of Anil Ambani is doubtful as he is travelling abroad. Last year, he had attended the meeting as a shareholder but did not share the dias with RIL executives.

Last year, which was his first AGM after the settlement between Ambani brothers, RIL chairman announced investment of Rs 49,000 crore. More than half of this was meant for doubling petroleum refining capacity at Jamnagar.

Sources said Ambani, as a principle, had decided to use the platform of AGMs to share information with shareholders. Thus far, RIL had made it public that its retail initiative would be looked after by a wholly-owned subsidiary Reliance Retail.

It has also earmarked an investment of Rs 3,250 crore in retail. There is speculation that the retail activities would attract huge investment. Tomorrow’s AGM will shade some lights on this. The sources added that the annual report for 2005-06 indicated that an announcement on retail was due.

Ambani, in his letter to the shareholders, said : “ A revolution of rising aspirations is sweeping all parts of India coupled with rapid expansion and consumption at all levels. We are, therefore, planning a pan-India footprint of multi-format retail outlets to provide the customer with choice in products and services.

All the outlets will be connected seamlessly through a state-of-the art supply chain infrastructure. This initiative has been assiduously planned to connect the Indian farmer and producer with the consumer directly.” He had also told shareholders that RIL would emerge as a significant producer of energy, both oil and natural gas.

“This will enable us to enhance India’s status as an energy source in the world and without doubt, give a new dimension to our growth story,” he had pointed out.

Barring the expected announcement of retail and an update on exploration and production, the meeting is likely to be a tame affair.

The company will place four ordinary resolutions pertaining to the profit and loss account for 2005-06, to declare dividends, to appoint directors in place of those retiring by rotation and to appoint statutory auditors.

It will also seek the shareholders’ approval for a special resolution on employees stock option scheme.

News: 'Indian economy to grow over 8 pct in 06/07'

(RTR 26/06/2006) New Delhi - Finance Minister Palaniappan Chidambaram said on Monday the economy will expand more than 8.0 percent in the fiscal year which ends on March 2007.

"I am confident the economy will grow at a high rate. The manufacturing sector will also grow at a brisk pace," Chidambaram told a gathering of India's customs officials.

News: Tishman Speyer investing in India, China

(RTR 26/06/2006) New York - U.S. real estate developer and investor Tishman Speyer is moving aggressively to invest in India and has similar plans to be a player in China, a top executive with the company said on Monday.

"India is probably the most interesting place in the world right now," Robert Speyer, senior managing director, said at the Reuters Real Estate Summit in New York.

Tishman Speyer, which owns the New York Times Building and Rockefeller Center, and the private venture arm of India's ICICI Banking Corp. announced a joint venture in January to invest more than $1 billion in India over the next three to five years.

Meanwhile, in China, Tishman Speyer is launching a business in Shanghai that will develop commercial and residential property there, in Beijing and other large secondary cities.

The investments in India will focus on both office and residential properties, Speyer said.

"So many of the companies we do business with (in the United States) and in Europe are opening businesses in India, and there is an incredible shortage of quality real estate there," he said.

The venture is based in Bangalore and is also looking at Bombay, but deals in half a dozen other major Indian cities are being scouted as well, Speyer said.

In China, Tishman Speyer is taking a different approach, setting up a partnership with another U.S. firm rather than a local partner, he said.

"We want to be able to service our clients wherever they are in major cities around the world, so for us being in China is a very necessary ingredient of our business," said Speyer, citing similar motivation for entering China as India.

He declined to discuss whether the company is raising a fund for China as it has with India. "Unfortunately, because of securities law, we can't talk about private funds that are in formation," Speyer said.

He said Tishman Speyer is aggressively hiring workers in both India and China. Indian employees also will work in the company's U.S. and European operations, he said.

News: Apollo raising $500 mln India realty fund

(RTR 26/06/2006) New York - Apollo Real Estate Advisors LP is raising a $500 million fund to invest in Indian properties, managing partner John Jacobsson said on Monday.

"There's a flood of capital going into places like India and China ... We decided to focus our attention on India," Jacobsson said at the Reuters Real Estate Summit in New York.

Jacobsson said India's rapid economic development, established banking system and widespread use of English has made the Asian country an attractive investment location for the New York-based company.

Presuming that the company is able to raise twice as much money through loans, that would allow Apollo to invest about $1.5 billion in Indian real estate, Jacobsson said.

The company's initial focus will be on office and residential properties, Jacobsson said.

"Office and residential is where our expertise fits well. Like China, it's rapidly urbanizing," Jacobsson said. "Maybe a couple years down the line retail will be firing on all cylinders."

The company has already lined up a couple of Indian investments that it will be making with its own capital in advance of raising the fund, he added.

"There are so many cities that are growing very rapidly that I can't say we are ruling out one region or another," Jacobsson said.

Jacobsson said Apollo's assets under management are currently evenly divided between properties in the United States and abroad, with the bulk of its foreign investments currently in Europe.

News: 5 Indian firms in global 100 infotech list

(DNA 26/06/2006) New Delhi - Bharti Airtel, Tata Consultancy Services (TCS), Infosys, Satyam, and Wipro figure in the annual BusinessWeek list of top 100 infotech/telecom companies.

India ties Hong Kong in fourth spot with five companies in the top 100, after the US with 45, Taiwan (13), and Japan (9). As against this, there’s no company from mainland China.

Last year’s topper from Mexico, America Movil, holds on to its number one position this year too. Likewise, the number two, Taiwan’s Hon Hai Precision, ranked second last year.

Bharti Airtel is the only Indian company in the top 10, ahead of international biggies such as Motorola (11th), Google (13th), Microsoft (37th) and Hewlett-Packard (44th).

The factors that BusinessWeek focused on to rate the companies included return on equity, revenue growth, shareholder return, and total revenues.

The study describes Bharti Airtel as the largest cell phone player in India and says it created a trend when it outsourced its network management to Nokia and Ericsson. TCS has been described as India’s top tech player and the magazine says its focus this year will be on expanding deeper into Latin America and China.

For Infosys, BW said the company is expanding its employee base beyond India and hiring from top US and European schools.

While the US has the maximum number of companies in the top 100 list, it has only one in the top 10 — Apple Computers, occupying the fourth slot. India too has one company in the top 10 — Bharti Airtel. Only one of the five Hong Kong companies on the list is in the top 10 — China Mobile in eighth place. Japan, likewise, has nine in the list of 100 successful companies, but only one in the top 10 — Softbank. Taiwan is the only country with more than one company in the top 10.

The Top Ten

1. America Movil (Mexico)
2. Hon Hai Precision (Taiwan)
3. High Tech Computer (Taiwan)
4. Apple Computer (the US)
5. Softbank (Japan)
6. Telefonica Moviles (Spain)
7. Telefonica (Spain)
8. China Mobile (Hong Kong)
9. Nokia (Finland)
10. Bharti Airtel (India)

News: Ralph Lauren makes a quiet, slow entry into India

(DNA 26/06/2006) Kolkata - There’s a whiff of an Indian connection, they say, and could well be the tie that binds with the consumer of today. It all began, in any case, with ties. The men’s variety, that is. Way back in 1967, American stylist Ralph Lauren first introduced his now iconic Polo line of ties for men. More than a decade later, in 1978, he entered the world of fragrances, with his signature brands - Polo for men and Lauren for women, featuring the icon of the polo player as his flagship design.

And now, Ralph Lauren has made a quiet entry, riding on, what else, its Polo player, into India, the country in which, they say, the game originated.

But L’Oreal, which now owns the designer brand’s premium range of fragrances and skincare products, will use the signature Polo label as the mallet to gain an entry into the goalpost of the consumer’s mindspace.

“India is a strategic market and we will leverage on the Polo brand in the country,” Binita Cooper, general manager, L’Oreal luxury products, told DNA Money.

In fact a study on India, conducted by L’Oreal, has revealed that Ralph Lauren ranks at No 6 among the luxury brands that Indians would like to buy. A good case for including 13 products from the Polo range alone in a list of 23 to be retailed in India.

Fragrances, EDTs, aftershave, deodorants and shower gels will be available for men. The women’s range includes fragrances, EDTs, body lotions and deodorants. Polo Black, Polo Blue, Romance for Men and Ralph Lauren Blue will put up a scent-sational show.

There are no shop-in-shop format for this premium brand. Only multi-brand luxury outlets like the La Galleria at Bandra are on L’Oreal’s distribution radar. In fact, the Mumbai store is the only retail point for Ralph Lauren in India at present.

The target audience is the style conscious, urban Indians, who believe in style. It may as well be, because these are luxury price points — a Polo Black deodorant stick will cost Rs 1,050, while a 100 ml Romance EDP Vapo flaunts a price tag of Rs 4,700 at the upper end of the spectrum.

News: Indian realty funds will be closed-ended initially

(DNA 26/06/2006) Mumbai - Tired of equity and debt? There’s relief at hand, in the form of a new asset class.

The Securities and Exchange Board of India on Monday cleared the real estate mutual fund guidelines, perhaps offering investors a safe parking slot for their monies.

“This is good for retail investors. It throws open the doors for an asset class other than equity and debt. If the investor makes a return of 8-12% annually, it would mean that in 5-6 years, he can double his money,” said Sameer Kamdar, national head of mutual funds at Mata Securities.

“Participation by retail investors, which was restricted due to the high price of properties and the hassles involved in direct investment will now be a thing of the past,” Kamdar added.

The regulator said real estate mutual funds in India would be initially closed-ended with their units listed on the stock exchanges.

The funds can directly invest only in real estate properties in India. They will be required to invest a minimum of 35% of their in real estate properties. The balance can go into mortgage-backed securities, shares, bonds or debentures of companies dealing in properties and property development, and in other securities.

“Other securities would mean debt and money market instruments. Real estate mutual funds cannot invest in the shares of companies that do not deal in property or property development. They would need to invest a minimum of 35% of their corpus in real estate properties,” said a Sebi official. The Sebi board has approved the guidelines.

The board also decided that venture capital funds and foreign venture capital investors would be exempt from lock-in requirements during the IPO, if they have been holding the shares of the company for at least a year when the company files its draft prospectus.

News: Retail India gets a major cosmetic touch-up

(DNA 25/06/2006) Kolkata - With the retail revolution going big bang, India seems to have undergone some major cosmetic changes. A host of mid-line global cosmetic brands like Body Shop, Max Factor, Chambor and so on have entered the country. And it is the large departmental stores like Shopper’s Stop, Pantaloons and Lifestyle that have become their key sales channels.

It seems these brands are here to stay. And why not? If the cosmetics market is growing at around 25% per annum in India, colour cosmetics alone have grown at a whopping 387% from 1997 to 2004, according to Euromonitor.

And, by the look of things, the tempo has sustained. In organised retail, the share of mid-market cosmetic brands like Max Factor, Bourjois, Pupa, Chambor, L’Oreal, Arcanil, etc. have recorded a growth of approximately 40% since 2004 and this has been helped by the recent entry of newer brands.

The cosmetics and toiletries market in India is estimated at Rs 1,500 crore and has grown 62.6% from 1997 to 2004.

The brands have been quick to move in for the kill too. Most of them have very accessible and visible counters with trained beauty consultants with tester stands to offer high-quality service to customers.

Promotional activities include in-store makeover sessions, associations with women-oriented events, mall promotions to introduce the look of the season and new products. Bridal makeover sessions are also becoming common. On-counter promotions to offer value-additions to customers are available during the festive seasons.

News: CII forecasts India's growth rate at 8 per cent

(IANS 25/06/2006) New Delhi - India's economic growth will remain high at a notable eight per cent for the current fiscal but will slip from last year's 8.4 per cent, says the Confederation of Indian Industry (CII).

The manufacturing sector has shown considerable increase in its growth rate of 8.9 per cent in the fourth quarter of 2005-06, compared to 8.1 per cent last year.

A relatively better growth has been recorded by the electricity sector at 6.1 per cent.

A slowdown in the mining sector has been projected as a major concern by the industry association. The cause for this was the slow growth of IIP (index of industrial production) that fell to 8.2 per cent, from last year's 8.4 per cent.

The mining sector's growth rate has slipped to three per cent from previous year's 3.7 per cent.

The corporate sector performance has been evaluated on the basis of studies done on 3,018 firms by the CII.

The study has revealed a notable decline in the growth of net sales by about nine per cent. The service sector too witnessed a decline.

The CII has urged the Reserve Bank of India (RBI) not to continue with its policy of keeping inflation below its projected target due to this year's spiralling oil prices and fast changing domestic and global macro-economic conditions.

The CII observed that growth in imports has declined sharply and become less than exports.

It also emphasised the need to put a check on the growth of trade deficit, which grew to $39.6 billion in 2005-06 from $25.9 billion in 2004-05.

News: Indian economy to show 5.6% CAGR growth

(PTI 25/06/2006) New Delhi - Indian economy is likely to grow at the rate of 5.9 per cent every year between 2006 and 2020 and would contribute 12.2 per cent of the global economic growth in the next 15 years, according to survey by Economist Intelligence Unit.

"However, India's much-discussed IT sector accounts for too small a share of GDP to be a long-term driver of growth. Much more will depend on the modernisation of the country's agriculture and manufacturing," the survey, which was sponsored by Cisco Systems, said.

For the survey the EIU had interviewed more than 1,600 executives from 100 countries.

According to the survey, "The next 15 years will see significant outpacing by Asia and particularly the powerhouses of India and China of the rest of the world in gross domestic product (GDP), wages and consuming power."

The study projects the continued rapid growth of India as one of the fastest growing economies.

"By 2020 India as a trading nation will record the biggest jump in world ranking-from 24th to 10th. Propelled by fast growth in India and China, Asia will increase its slice of the world's GDP from 35 per cent in 2005 to 43 per cent by 2020 and India's share in the global GDP will rise from 6.2 per cent in 2005 to 8.8 per cent in 2020," it said.

Developing Asia will account for two-thirds of the increase in employment growth, with India alone making up 30 per cent of the net increase in global employment with 142 million new jobs, it said.

News: World Bank to double India loans to $3 bn

(BS 24/06/2006) New Delhi - The World Bank is likely to double its lending commitment to India this year up to $3 billion, Michael F. Carter, World Bank’s country director, India said.

The Bank’s financial year runs between July-June, and the $3 billion-commitments are expected to flow beginning next month up to June 2007.

The Bank’s lending is largely directed towards projects in the infrastructure sector, human development and projects aimed at improving rural livelihood.

Healthcare projects have been important recipients of the Bank’s funds, but fresh funding on healthcare projects has stopped following the Bank’s inquiry into allegations of possible corruption in India’s Reproductive and Child Health Project (RCH).

“I don’t know when the decision will be taken (to revive healthcare funding),” Carter said. The Bank’s and Indian government officials have engaged in talks for a while on the issue, but the final decision to revive funding will be taken by the Bank’s top brass in Washington.

The only healthcare projects in India that are being funded by the Bank are the ongoing ones is states like Uttar Pradesh. The World Bank’s commitment to these projects are spread over a five-year period.

Among the projects that received a World Bank commitment last year, infrastructure projects attracted the biggest amount.

The World Bank’s commitment to the power system development project, which received a commitment of $400 million in January 2006, was the largest of its kind in 2005-06 among all of the Bank’s power sector commitments across the world.

Among the other large commitments made by the Bank in India in 2005-06 were towards the third Tamil Nadu urban development project ($300 million) and the Karnataka municipal reform project ($216 million).

The World Bank’s commitment to projects in India would have been higher if the healthcare funding had not ground to a halt. The Bank recently issued a press release to clarify its position on healthcare funding.

According to the release, “To allow more time for discussion between the Bank and the Government of India on the most effective ways to address these issues moving forward, we have postponed consideration of a second RCH program and two other health sector loans by the Board of the Bank. These are the Second National Tuberculosis Control Project and the Karnataka Health Systems Project.”

Jairam Ramesh, Minister of State for Commerce, and Carter released a World Bank report “Reforming Public Service in India: Drawing Lessons from Success.” The report analyses 31 success stories in public service delivery across a range of sectors so as to distill common success factors.

News: 'India arriving in manufacturing'

(BS 25/06/2006) Chennai - Indian prowess in IT-ITeS is well recognised but there is enormous potential in a number of industry segments in manufacturing as well, a research study carried out by the Indian Institute of Management, Bangalore (IIMB) has revealed.

A wide range of activities in manufacturing are becoming increasingly tradable due to induction of better technology, opening up of foreign direct investment (FDI) and new kinds of organisational arrangements.

“Textiles, pharmaceuticals and biotechnology, auto components, leather and footwear manufacturing and gems and jewellery are some of the other sectors that are equally capable. For Indian companies to take proper advantage of this, certain changes are required in the corporate strategy and rules governing the manufacturing industry,” says B Mahadevan of the IIMB.

Mahadevan, who is also the IIMB Management Review editor, and his team have carried out extensive research into the non-IT sector industries which can grab global outsourcing projects.

For instance, in the textiles and garment sector, Indian exports are about $13 billion per year and are expected to rise to about $26-30 billion in the next couple of years.

“The factors working in favour are low labour cost, domestic availability of cotton and synthetics, removal of MFA under WTO agreements, and recent tie-ups between garment manufacturers and global brands with beneficial impact on quality, technology, design, productivity, retailing, product range and supply chain management,” Prof Mahadevan pointed out.

Yet, India accounts for only 3 per cent of world textile trade compared to China?s 20 per cent.

China’s advantages are a flexible labour force, cheapest in productivity terms, good infrastructure, facilitating official policies for FDI and scale economies.

“The challenges faced by the Indian textiles industry are many, including high capital costs, high import duties on raw cotton and man-made fibres for value addition, compared to China which has zero duties on cotton imports. The Indian textiles industry has to overcome these challenges if they have to bag outsourcing projects,” Prof Mahadevan contends.

In an effort to highlight such challenges faced by other industries and the enormous potential that India has in the manufacturing sector, the IIMB

Management Review will hold a conference on ‘Global Competitiveness through Outsourcing: Implications for Services & Manufacturing’ from July 13 to July 15 in Bangalore.

CEOs of Progeon, Wipro BPO, Value Leadership Group, Cognizant Technology Solutions, Deutsche Bank, Madura Garments, Ninestars, Office Tiger and Evalueserve are participating in the conference.

News: Mittal, Arcelor agree deal - Indian TV

(RTR 25/06/2006) Mumbai - Two Indian television channels on Sunday reported that steel makers Mittal Steel and Arcelor had reached a merger agreement in principle and the new company would be called Arcelor Mittal.

The channels cited unnamed sources for their reports.

They said the merger value was 43 euros per share and the papers would be signed shortly. Arcelor would also pay 130 million euros to Russia's Severstal, the channels said.

When contacted by Reuters, both Arcelor and Mittal declined to comment on the reports.

News: Tata Coffee acquires US co for $220 mn

(PTI 25/06/2006) Mumbai - The Tata Group on Sunday announced the acquisition of a US-based company for 220 million US dollars.

"Tata Coffee has acquired the US-based Eight O' Clock Company," a group spokesperson said.

The company informed the Bombay Stock Exchange that it has signed a definitive agreement to acquire the Eight 0'Clock Coffee Company (EOC), USA, from Gryphon Investors for a total acquisition price of 220 million dollars.

EOC has over 100 years of brand history and retail coffee experience in the US and is a leading player in the branded whole bean segment and a category leader in the value gourmet segment in the US retail market.

Within the broad US retail coffee category, EOC is the third largest brand by volume behind Folgers and Maxwell House, the statement said.

EOC had net sales of 109 million dollars and EBITDA of 27 million dollars in 2005.

The acquisition provides a sizeable entry platform and an established brand to Tata Coffee in the 21 billion dollar US coffee market, the company said.

News: ‘Mukesh changed non-compete pact’

(DNA 25/06/2006) Mumbai - As Reliance Industries prepares to hold its annual general meeting on Tuesday, the Ambani brothers are beginning to assume increasingly implacable positions on the non-compete agreement feud.

The agreement was originally created a year ago to protect the brothers' respective business turfs. Anil's camp, however, alleges that subtle changes were later made by the majority members on the boards of companies who were close to Mukesh Ambani. This changed the non-compete clauses to the advantage of RIL, claim Reliance ADAG sources.

"The non-compete agreement dated January 12, 2006 is irrelevant because it was wrongfully executed by RIL/MDA group, while the ADA group companies were still under the control of RIL/MDA group," says a source from Anil Ambani's group.

RIL, however, declined to comment on the latest salvos fired by Anil Ambani's group.

"The argument of Mukesh's RIL group that airports in SEZ can be built by them is untenable because there is no such exception provided in the agreement," a Reliance source said today.

"It is in any case completely misleading to say that building an airport is necessary, integral or incidental to development of an SEZ," Anil's group argues.

To be fair to RIL, they have also pointed to certain deviations from the agreement made by Anil's camp, such as in the pipeline project and the plans to enter the oil and gas exploration, sectors that exclusively come under Mukesh's purview.

News: Ambani brothers' war takes off yet again over airport

(UNI 25/06/2006) New Delhi - Part two of the Ambani war intensified on Saturday with Anil Ambani objecting to building an airport within the Mukesh Ambani-controlled special economic zone in Haryana, on the ground that the airport business was reserved for the Anil Dhirubhai Ambani Group, as per the non-compete agreement between the two brothers.

Anil Ambani has shot off a letter to the Mukesh Ambani-controlled Reliance Industries and the Haryana State Industrial Development Corporation pointing out that the power plant within the Rs 40,000 crore SEZ violates the NCA signed after the split.

''As per the agreement executed on June 18, 2005, airports are reserved for the ADA Group'', a source in ADAG Reliance Energy said. However, an official in the Mukesh Ambani Group said that for the Reliance Industries, it is a non-issue.

''Reliance has fulfilled all its commitments and obligations. It will follow the same principles in future as well'', he said.

But a source in the Anil Ambani group said the RIL/MDA Group cannot enter the airport sector.

As per the Agreement executed on June 18, 2005, airports are reserved for ADA Group; and the non-compete agreement dated January 12, 2006, is ''irrelevant'' because it was wrongfully executed by RIL/MDA group, while the ADA group companies were still under the control of RIL/MDA group.

He said the argument of RIL/MDA Group that airports in SEZ can be built by them is untenable, because firstly there is no such exception provided in the agreement of June 18, 2005; and secondly it is in any case ''completely misleading and false'' to say that building an airport is necessary, integral, or incidental to development of an SEZ.

''This is only a devious argument by RIL/MDA group to wrongfully enter a business reserved for the ADA group''.

The Reliance Energy source said an airport in an SEZ can ''by no stretch of the imagination'' be treated as a captive use for RIL/MDA group's own business, because it would obviously be used by all occupants of the SEZ.

Besides a 2000 MW power plant, the Reliance SEZ in Gurgaon, an agreement for which was signed in Chandigarh on June 19, will include building a cargo airport.

Incidentally, ADAG had made a bid for the modernisation of Delhi Airport. While he could not get the Delhi airport, his brother would enter the lucrative cargo airport in the Delhi periphery through the SEZ route.

News: Indian FDI inflows peak at $7.21 billion

(FE 24/06/2006) New Delhi - Commerce and industry minister Kamal Nath may have talked up FDI inflow numbers for 2005-06 to as much as $8.3 billion. But, the Reserve Bank of India’s provisional data released on Friday shows FDI has touched $7.21 billion.

While this is definitely about a billion dollar less, the RBI June bulletin shows that it is India’s highest-ever FDI inflow.

The previous high was in 2001-02, when FDI inflows touched $6.13 billion. The 2005-06 inflows mark a 27.5% jump over FDI inflows of $5.652 billion in the previous fiscal.

Direct overseas investments into equities jumped a whopping 57% to $5.75 billion from $3.7 billion in 2004-05. However, reinvested earnings (which India started adding to FDI numbers two years back) dipped 16% to $1.25 billion from $1.5 billion in 2004-05. Significantly, FDI inflows through acquisition of shares more than doubled to $2.18 billion from $ 930 million in 2004-05.

Portfolio investment during 2005-06 stood at $12.49 billion, an increase of 34% over $9.3 billion in the previous fiscal. Of this, foreign institutional investors pumped in $9.92 billion, up 14% compared with $8.68 billion in 2004-05. Indian corporates, too, raised a phenomenal $2.55 billion through ADRs and GDRs, the highest in the last 10 years. This was higher than what India Inc mopped up from overseas issues in the previous four years. In 2004-05, it raised only $613 million.

News: GoAir offers to buy Air Sahara

(BL 24/06/2006) Bangalore - Wadias' low cost airline GoAir has offered to buy Air Sahara if the price is 'right.' "We are open to it (acquisition) if the price is right," the GoAir Managing Director, Jeh Wadia, told Business Line. He, however, said that Air Sahara had not approached the airline yet. "It is too early for them to talk to anybody," he said.

Wadia, however, did not reveal the amount the airline was willing to pay.

"As we have not carried out due diligence of Air Sahara, we will not be able to talk about the price we are willing to offer," Wadia said.

Jet Airways had inked a deal with Air Sahara to buy the airline for $500 million (Rs 2,309 crore) before the deal fell through early this week.

Wadia said his airline is also in talks with a couple of domestic airlines for an interline agreement. The acquisition of Air Sahara would help GoAir to fly international routes much earlier than expected.

As per civil aviation norms, airlines can fly international routes only after completing five years of domestic operations. It will also help GoAir to get convenient time slots and access to Air Sahara's infrastructure at various airports across the country.

GoAir, which started operations seven months ago, is one of the latest low cost airlines to enter the domestic air space. It currently has three aircraft and plans to add eight more by October, another 18 by October 2007 and 33 by October 2008. "All these will be from the A320 family and will be either leased or those purchased by us," Wadia said.

For the first full year of operations, GoAir expects to post revenues of around Rs 500 crore and plans to break even towards the end of next year.

Wadia said the airline, which has a PLF (passenger load factor) of around 72 per cent, expects to double its market share to around 8 per cent by next year.

Currently, 2 per cent of its revenues are from advertisements on its aircraft, which is expected to grow to 9 per cent by the end of the year.

News: India to contribute 12.2% to global economic growth

(UNI 24/06/2006) Bangalore - Treading rapid strides in economic growth, India will leapfrog 14 places to garner tenth spot as a trading nation in the world by 2020 contributing 12.2 per cent to the global economy A study conducted by Economist Intelligence Unit (EIU) on sponsorship from Cisco Systems revealed that Asia, especially the power houses of India and China, would outpace the rest of the world, barring the United States, in gross domestic product (GDP), wages and consuming power.

The Study ''foresight 2020' said developing Asia would account for two-thirds of the increase in employment growth with India alone making up 30 per cent of the net increase in global employment with 142 million new jobs. Propelled by the fast growth of India and China, Asia would increase its slice of world's GDP from 35 per cent in 2005 to 43 per cent in 2020 with India's share increasing from 6.2 per cent to 8.8 per cent. In consumer spending, though the US would continue to be the largest customer market, China would emerge as the world second largest consumer market and India improve to a position to rival the bigger European markets.

India's share in world consumer spending would increase from 1.0 per cent in 2005 to 3.1 per cent in 2020, the study said. India's growing integration with global economy and favourable demographics would ensure a sustained 5.9 per cent growth in GDP during the next 15 years. However, The average GDP in India would remain less than one-fifth to that of the US, an improvement from the present one-seventh. Both India and China would remain very much developing countries in 2020, the study said. The EIU study, released today, surveyed 1656 top executives from 100 countries, conducting in depth interviews with executives, CEOs, Analysts and policy makers in late 2005.

News: PM for 'financial inclusion' of the poor

(BS 24/06/2006) New Delhi - Emphasising the need to extend banking services to all sections of society, Prime Minister Manmohan Singh today suggested that Finance Minister P Chidambaram constitute a group to promote “financial inclusion” of the poor. Addressing the valedictory of the centenary celebrations of Canara Bank here, the PM said: “I suggest the finance minister to set up a group with representatives from the Reserve Bank of India, Nabard and major commercial banks to formulate policies that will promote financial inclusion by stimulating financial services for the poor, particularly emphasising micro-finance, micro-insurance and new delivery models.” The poor need a range of financial services that are convenient, flexible and affordable and not just loans, he pointed out. “The focus on financial inclusion comes from the recognition that this can serve the interests of both society and the banking system,” Singh said. The PM is of the opinion that a key requirement of greater financial inclusion will be a reduction of transaction costs. “The RBI has taken several steps in this direction. I advise the banks to give the highest priority to customer service to lower transaction costs and to eliminate procedural inconveniences,” he said. Noting that there was a vast uncovered gap in extending agricultural credit, the PM exhorted the banks to reach out to every nook and corner of the nation and provide credit solutions to farmers’ needs. “Many regions and many classes of farmers are completely outside the institutional credit delivery system. High interest rates and a serious debt overhang still affects millions of farmers. This cannot be allowed to persist,” he stated. Cautioning domestic banks against showing complacency towards the growth of international banks, the PM said the domestic banks should devise effective global strategies to improve their international presence. “The roadmap on the extent of foreign investment in banks in India provides guidelines until 2009. The presence of foreign banks in the country has brought about greater competition. However, there is a need to seriously examine the possibilities for consolidation of PSU banks to give them both depth and reach,” he added. The PM commended the efforts of Canara Bank in emerging as the largest PSU bank in the country. Finance Minister P Chidambaram, in his address, said the growth of economy was propelling the inflation rate. “However, we will take steps to tame this inflation rate without affecting the economic growth. Even in the past when the inflation rate was ruling at 8 per cent, we were successful in bringing it down,” he added. He asked the banks to be become outward in lending loans. “Otherwise, it may look like certain sections of the society are being deprived of their opportunities to create wealth. I hope the banks realise the need to extend their services and products,” Chidambaram said. Canara Bank Chairman and Managing Director MBN Rao and Karnataka Chief Minister H D Kumaraswamy were also present.

News: Tata $2000 car's 30 bhp, 4-5 seater

(DNA 24/06/2006) Mumbai - There is "great speculation", acknowledges Ratan Tata, chairman of Tata Motors, on the proposed Rs 1 lakh small car.

"We believe it will be extremely attractive to the Indian consumer — particularly the younger families — at a price level of about Rs 1 lakh."

In a letter to shareholders of Tata Motors, Tata gives a brief update on the status of this project.

The speculation is mainly due to the terms of cost, driveability and fuel economy" of the proposed new car, he said.

So here's how it will be: To be launched in early 2008, the car will be a rear-engined, 4-door, 4-5 seater powered by a 30 brake horse power (BHP) engine, Tata said.

The car emerging out of Tata group's desire to service the aspirations of people at the bottom of the pyramid will not only challenge Maruti Udyog's most popular small car Maruti 800 which is powered by a 39 brake horse power engine and costs twice as much, but also the two-wheeler manufacturers.

"The styling and design of the small car have been completed and the prototype of the car is being tested," Tata said.

The surprise news comes from way beyond the shores, though. From Jeffrey Immelt, CEO of General Electric. In an interview, he said the powerhouse has assigned 50 of its staffers to work on the plastics for the car.

On the proposed strategic alliance with Fiat SpA of Italy, Tata said it will explore opportunities of mutual benefit whichcould include possible sourcing of technologies, power trains and major aggregates from Fiat, sharing of common vehicle platforms between the two companies and even possible jointdevelopment of models which could be badged and sold by both companies in different geographies.

Stating that rising fuel costs added strain on the automobile industry in both commercial vehicle and passenger car segments, the Tata chief said Tata Motors, like its peers, is exploring various new technologies to meet the new challenges arising from spiralling energy costs.

News: Tata group gets top conglomerate award

(PTI 24/06/2006) New Delhi - The Tata Group has been awarded 'India's Most Respected Multinational Business Conglomerate by United States-India Business Council (USIBC).

The award was presented to group Chairman Ratan Tata by USIBC President Ron Summers at the 31st Anniversary Leadership Summit held at Washington DC.

Ratan Tata said the success of Tata Group was due to the legacy and value system left behind by his predecessors and that has driven the organisation.

He said that 65 per cent of the company's profits were spent on charitable causes like health care, education, rural development and treatment of water in rural areas.

He attributed the growing trade relations between the US and India to the prevalence of "political will" in the leadership of both the countries.

The coming together of India and the US and the warm chemistry between President Bush and Prime Minister Manmohan Singh is reflected in the landmark India-US civilian nuclear agreement "which has taken away decades of distance between the two nations," he added.

He also expressed hope that the US Congress would endorse the nuke deal which would help India meet its energy needs.

News: Why Hindustan Lever is floundering in foods business

(DNA 24/06/2006) Mumbai - In a way, it's like getting rid of stale food. Hindustan Lever Ltd (HLL), the food, detergents and personal products company, may or may not be looking for a buyer for its bread and biscuits company Modern Foods, but there's little disagreement outside that it has little to show by way of success in this area.

Modern Foods was acquired by HLL from the government in the first round of disinvestment in 2000, but the company soon discovered that its finances were a mess and it had bought itself a can of worms.

But if divesting Modern Foods — which company sources deny — merely amounts to getting rid of trouble, its other food business acquisitions have floundered for want of a proper strategy and an unwillingness to bankroll long-term investments. Except for beverages like coffee and tea, which have been self-sustaining, the rest of the buffet has been unappetising.

Barring soap company Tomco, which HLL acquired from the Tata group in 1993, all subsequent acquisitions, largely in foods, have come a cropper. Even cosmetics company Lakme, bought again from the Tatas in the mid-1990s, makes more news on the catwalk than shop shelves.

Or look at the food parade. During chairman Keki Dadiseth's time, it picked up Kissan from Vijay Mallya, Captain Cook from DCW Chemicals, Kwality ice-cream from Ravi Ghai, Dollops ice-cream from Cadbury's, Milkfood ice-cream from Jagatjit Industries and Modern Foods from the government.

Except for Kissan and Kwality, which are just about there, the rest of the food brands have been phased out. And the food revenues have been gradually shrinking in the last three years, from 18.28% of the topline in 2003 to 15% in 2005. In the same period, the beverages - Brooke Bond and Lipton - have been guzzling share, accounting for 63% and 75% of HLL's food revenues respectively.

"The acquisitions were taken on to gain expertise and strengthen the food business, but they became a noose," says an HLL manager who was once involved with one of the foods businesses. Even its Annapurna atta (wheat flour) has been playing peek-a-boo with retailers.

Why has HLL not been able to handle its food platter as well as its soaps and detergents business? HLL managers say that there are host of reasons, particularly the company's reluctance to pump money in foods.

"Developing culinary needs and growing the market can be expensive. You have to understand the local palette and then apply global principles, and HLL wasn't getting it right," says a manager.

He points to ice-creams, where HLL with its unknown brand Walls bought out three other brands to gain a headstart. "We bought out competition, including Kwality, which had a 75% marketshare then, but were unable to build our own brand Walls against fierce competition from cheaper brands like Amul," says a manager involved with ice-creams.

As a result, Kwality Walls today is barely surviving in the deep freeze.

According to a research report by brokerage house SSKI, Hindustan Lever, unlike ITC, has not shown the requisite will to grow the foods business. In a 2005 report, SSKI says: "Both HLL and ITC operate in the foods business, though in different segments. However, the two are moving in exactly opposite directions. While ITC is increasing its presence in the business…

HLL has hived off over Rs 500 crore of foods business in the last five years. The Rs 1,50,000 crore Indian processed foods industry is highly fragmented (only 10% branded). The business entails low margins, but is quite lucrative as it is growing at 20% per annum. Therefore, a company has to stay invested in this business for at least 3-5 years and concentrate on topline before it can hope to make profits." The corporate culture is another issue, say managers. "HLL was, is, and will always be a soaps and detergents company. There is no room for foods there," says the erstwhile head of one of HLL's businesses. They also say that over the years, Bangalore has been losing its status as HLL's food headquarters, with large chunks of the business shifting to Mumbai. "This has caused a division in the ranks between Mumbai and Bangalore," reveals a manager.

Clearly, HLL's fumbling kitchen capers have been an exception, even as cigarette company ITC has been at work. With constant new launches, its fledgling food division has been keeping housewives busy.

All this when Unilever, HLL's UK-based parent, has an equal share of food and toiletries revenues globally.

News: Indian Singapore-type realty funds norms soon

(DNA 24/06/2006) Mumbai - The Securities and Exchange Board of India (Sebi) is expected to put out guidelines for Real Estate Investment Trusts (REITS), drawn on the lines of those in Singapore, early next week. The entry of mutual funds (MFs) into the real estate arena is expected to soften the rocketing asset prices in Indian metros.

It is expected to overpower the land lobbies to some extent and help strike a fair value for assets through an organised demand-supply balance. "REITS will increase supply of land and liquidity for investors. More projects will be funded, market volatility will come down due to transparency and there will be efficient flow of information. In short, there will be an all-round improvement in the real estate market," said Shahzaad Dalal, vice-chairman and managing director of IL&FS Investment Managers.

REITS would offer a steady and decent income to small investors, who, till now, were deprived of this opportunity because of the huge fund requirements. REITS would distribute 90% of their gains as dividends, mostly arising from rental income and some from capital gains.

Real estate is a relatively illiquid asset and most of the funds in this sector would be closed-ended. Since closed-ended, these funds would be listed and traded on the exchanges to provide liquidity to investors.

However, experts feel that, in the initial stages, real estate funds in India will not be given permission to invest in assets abroad.

When a real estate fund makes a purchase, the fund manager would call for a payment from the investor. This is called the acquisition fee, which would be a percentage of the deal size. This acquisition fee could prompt the manager to churn his portfolio. Hence, the regulator may cap it.

REITS investing in uncompleted property or taking up property for development stand the risk of below-expected realisations from these investments and, hence, they may be required to keep such assets at very low levels, say, at 10-15%.

Unlike MFs, which can borrow only on redemption pressures, REITS would be allowed to borrow for funding their investments.

But, a highly leveraged status could be similar to the highly leveraged Indian equity market, which drastically falls on across-the-board selling, triggered by margin pressures. If REITS run high on credit, any change in interest rate requirements would compel them to liquidate assets.

This would result in broad-based selling and pull down asset prices drastically.

Hence, the regulator may cap the credit limit at, say 50% of the asset value. Credit rating may also be a crucial element for funds in need of money, since those without a credit rating would receive lesser money. However, funds without a credit rating would be able get some loan, but at a lower level, of say 35% of the asset value.

News: India=US circa 2050

(PTI 23/06/2006) New York - As India moves towards becoming the third largest economy in the world, the country should have a long-term planning to ensure jobs for some 250 million youngsters expected to join the workforce in next three decades, experts have said.

Indian economy will be the third largest after China or the US by 2050 with some suggesting that Indian and American economies will be almost bracketed, the financial and banking experts said at a meeting organised by the Indian Consulate on Wednesday.

Charles Kaye, co-president of Warburg Pincus Llc who is also an expert of Indian Financial markets, said projections show that 250 million people would be added to the Indian work force in 25 years at a time when China's work force would stabilise at 60 million.

He cautioned that India would need to ensure jobs for young people who join the workforce in increasing numbers.

Otherwise it could result in social tensions, he said.

Amitabh Verma, Joint Secretary (Banking) in Ministry of Finance explained the steps taken by the government to make the financial and banking sector attractive for investors.

The steps include increasing competition, opening up the sector to private investors, improving efficiency, cutting down and eliminating the regulations that stifled their growth and taking steps to bring down the number of non performing loans, Verma said.

The experts agreed that India is on a high growth trajectory but suggested acceleration of the reforms process to enable the country take advantage of the current situation.

According to them, even if the projections don't materialise, the fact is that India would continue to have high growth rate for several years to come.

The mere size of the Indian economy would make it attractive for the investors, they said.

Most expressed the view that India's growing population is a major plus as over next few decades, it would provide a large part of the work force as it stabilizes in China.

The workforces in the United States too would grow but it would be immigrant driven unlike in India where it would be population driven, they projected.

However they stressed on the need to improve infrastructure in India for furthering the foreign investment.

Charles Kaye also identified poor infrastructure as the single biggest hurdle.

He specifically referred to the power sector in the country, saying it is not the capacity that matters but how much power goes on wires and how it is distributed.

He also called for India laying emphasis on education, healthcare, social issues and increasing the number of females in the labour force.

News: ‘India Inc need not be afraid of free mkt’

(PTI 23/06/2006) Washington - Noting that India is emerging as a "viable" partner of the United States, Tata Group Chairman Ratan Tata has said the two countries can work together as they have no fundamental differences.

The Indian business leader was speaking at the leadership summit of the United States India Business Council (USIBC) here last night where the Tata Group of companies bagged the leadership award for being "India's most respected multinational business conglomerate".

The association between India and the United States is "very dear to me", he said adding his passion was to "see our two countries come together" and in a context of putting away decades of mistrust and suspicions.

Tata stressed that Indian industry "does not need to be afraid or apprehensive about free market and that India was emerging as a viable partner to the United States."

Referring to the opportunities that have come by way of some of the landmark agreements that have been signed by the two countries, he said "it is a conviction that the United States and India can work together as there were no fundamental differences or different agendas".

In his welcoming remarks, the President of the USIBC Ron Summers said the bilateral relationship has a "very extraordinary bright future" with this month being a "defining moment", a reference to the markups or the fine-tuning of the legislation in US Congress to implement the Indo-US civil nuclear deal.

News: Ambani gambles on chance

(FE 23/06/2006) Mumbai - Close on the heels of its foray into film production and distribution and radio through Adlabs Films, Reliance Entertainment, part of R-ADAG, is now entering the online gaming business.

The company will launch a dedicated gaming portal by September this year for which it has recently poached senior officials from leading gaming company Level Up Network.

Reliance already possesses the infrastructure in its 'WebWorld' stores to be able to launch its own gaming portal. According to Angel Stock Broking research analyst P Phani Shekhar, "Infrastructure is the main hurdle for the gaming industry. Since Reliance already has it, it makes sense for them to foray into this space.” According to sources, Reliance's plans are still on the drawing board stage. Apart from casual games that will be offered on the gaming portal, Reliance may also look at acquiring licenses for massively multi-player online games (MMOG) and distribute them in India. The company is targeting an audience between five and twenty-five years of age.

The gaming market in India is a pre-nascent market and it is expected to show huge growth over the next three years. The online gaming industry alone is expected to clock revenues of $210 million by 2010.

News: Non-apparel lines drive growth for Indian retail majors

(BS 23/06/2006) Mumbai - Over the last few years, non-apparel categories or accessories have been posting far higher growth compared with apparel.

According to Govind Shrikhande, chief executive officer, Shoppers’ Stop, non-apparel categories such as handbags, footwear and cosmetics have been on a high-growth curve, partly as a result of international trends coming to India and getting accepted more quickly today.

While there are no accurate numbers, industry estimates peg the growth of non-apparel categories at between 25 and 30 per cent over the last three years compared with apparels segment, which has grown by 10-12 per cent on a like-to-like basis.

Kunal R Sachdev, chief executive officer, Hidesign, attributes the growth to the increasing purchasing power as a result of the buoyant economy along with the awareness and availability of choice because of the changing retail environment.

“We also see propensity to spend as against the earlier conservative and traditional saving dominated environment. Easy finance have brought purchase decisions forward and younger money is creating the base for rapid growth in street fashion,” he explained.

With the growing working women population, consumption opportunities for accessories have gone up, as a result of which it is not unusual to find people having a separate set of accessories for different times in a day and varying with the occasions.

While this may have always been the case, easy purchase opportunities with the growth of modern retail have led to an explosion of the trend.

Within accessories too, one non-traditional product which has seen maximum growth (47 per cent in 2005) is mobile phones. Cell phones have, within certain consumer groups, moved away from being communication devices to fashion accessories.

According to T N Pratap, CEO, Bin Hendi, what’s happening in the country is a reflection of international trends where accessories have grown faster than apparel, especially in the luxury segment.

In this segment, accessories are a cheaper way of buying into a brand and at the same time, it’s possible to flaunt, say a designer handbag more often than a dress by the same one.

Going ahead, most people expect this growth in the category to sustain, especially with newer brands coming in and consumer awareness growing.

News: Omega to expand Indian retail presence

(BS 23/06/2006) New Delhi - The Swiss watchmaker Omega plans to expand its footprint in India by adding three more brand stores. With this addition, the company will have eight brand stores by the end of the next year. The watch major has 100 mono-brand stores across the world.

One each in Hyderabad, Kolkata and Delhi will join the list of existing stores in Mumbai, Delhi, Chennai and Bangalore. Omega is also available at 52 multi-brand outlets across the country, and the company has no plans to increase this number.

“We expect India to be among our top five markets in the next three-five years. Indians have a tradition for appreciating quality products, and there is also a strong middle-class that is constantly looking at higher value products,” Omega President Stephen Urquhart said. At present, India is ranked between 12th and 15th among the company’s markets the world over.

Launched in India in 1998, Omega intends to straddle the middle ground between being a niche product brand and a mass market brand in India.

“While it will still remain an exclusive product, we don’t want to position Omega as a niche brand in India,” Urquhart said.

News: Mumbai is back among costliest

(BS 23/06/2006) Mumbai - Rentals moving northwards is not restricted to Mumbai alone. In New Delhi, supply lags behind demand.

With a 69 per cent increase in occupation costs in the last 12 months, Mumbai’s Nariman Point has seen the greatest rent appreciation in CB Richard Ellis survey of prime office space in 173 international markets. In this study, Nariman Point broke into the top 10 most expensive markets.

In the last quarter, rents in Mumbai’s central business district (CBD) grew by 31.3 per cent, largely driven by a broad-based demand from tenants varying from banks, securities and head hunters.

When Richard Ellis had conducted a similar survey 10 years ago, it had discovered that Mumbai was the most expensive city in the world for office rents. However, Mumbai’s property market is different today, with opportunities existing beyond Nariman Point.

“Mumbai’s CBD is in the phase of shifting from Nariman Point towards Bandra-Kurla Complex,” said Anshuman Magazine, India head of CB Richard Ellis.

The state-run Mumbai Metropolitan Region Development Authority’s auction of plots in the Bandra-Kurla Complex is likely to release one million square feet of built up office space by 2008.

Then, Supreme Court’s ruling favouring Mill owners and developers is expected to release approximately 2.5 million square feet of grade-A office space, retail and hospitality in the same time frame.

“While it might be too early to predict correction, the release of this office space will definitely ease off the pressure,” said Magazine.

Even in secondary markets such as Worli and Prabhadevi, there continues to be an upward trend of rentals and capital values due to lack of grade-A commercial office space.

For instance, since the first quarter of 2005, there has been a 50 per cent increase in capital values. From Rs 160 per square feet in December 2005, the monthly rental in Worli has risen by 25 per cent to Rs 200 per square feet in March, 2006.

Rentals moving northwards is not restricted to Mumbai alone. There continues to be an upward swing of monthly rentals in New Delhi as supply is not keeping pace with the demand being created by corporates, IT companies and BPOs.

Values in New Delhi are expected to remain buoyant as there will be no substantial supply in the next few quarters.

The first grade office space in Connaught Place has gone up from Rs 90 per square feet in December, 2005 to Rs 120 per square feet in three months. Rentals in South Delhi have appreciated by 50 per cent in the last one year.

Delhi’s suburb, Gurgaon, has seen an 8 per cent increase from Rs 35 per square feet from last December to Rs 38 per square feet. Rates have not risen so briskly here as there seems to be more supply.

News: US billionaire makes India call

(BS 23/06/2006) Mumbai - George Kaiser, the thrifty American billionaire who made his fortune by betting on the price of oil, has set his eyes on India after snapping up stakes in Australia and Israel during the last three years.

His investment fund, Argonaut Private Equity, will invest “a few hundred million dollars” of his nearly $2 billion it manages in Indian companies over two years.

Thanks to spiralling oil prices, Kaiser had found his net worth zooming 40 per cent in 2005 alone, putting him at the 132nd spot on the list of the world’s richest last year.

“The question everybody asked us when we announced that we were going to invest in India is -’but what about the funds who are already there’,” says Anil Khatod, the newly-appointed pointman at Kaiser’s firm in charge of Indian investments.

“But our idea is... we are not constrained by what our shareholders think, there is only one. So, our investments will be a lot quicker and more flexible. I think India is brimming with bright minds with bright ideas and all that is needed is to provide a runway for them to expand and develop,” he points out.

Kaiser, who is estimated to be worth well in excess of $5.5 billion, has already committed nearly $2 billion to the fund. “The least of our concern in India is availability of cash,” Khatod, a veteran of technology companies including communication major Nortel, says.

Over the last few years, the firm has already invested in Japan and China in Asia, but Khatod says India is going to be the theme for the next three years.

“Our eventual investment in India will be much bigger than that in China because we think India has got better companies and the right atmosphere for entrepreneurship to flourish,” he says.

Argonaut has already tied up with eight associates, including research wings of brokerages and private equity firms, to share intelligence on investible companies and works through a small team of employees in India.

Argonaut invests between $1 million and $200 million (Rs 4.5 crore to Rs 900 crore) in individual companies, holding specific investments for up to 8 to 10 years and plans to continue the strategy in India.

“Historically, nearly 60 to 65 per cent of our investments have been in technology companies since in the US, venture capital is usually provided to such. But in India, we see a great opportunity in domestic-market driven companies also. For example, from what I know so far, sectors like retail and infrastructure are poised for good growth,” Khatod points out.

News: India's AirTel to offer 'Triple Play' in 90 cities

(PTI 23/06/2006) New Delhi - After dominating the Indian mobile telephone market, AirTel is all set to launch 3-in-1 services -- phone, internet and cable TV -- across 90 cities to its fixed-line customers.

Bharti Chief Sunil Mittal told PTI here that the company was in the process of finalising commercial arrangements for offering 'triple play', which is currently being extended to its fixed-line customers in Gurgaon on a pilot basis.

"When we go into the final commercial mode which will happen in the next 4-5 months, then anybody who has an AirTel connection can get Triple Play," Mittal said.

The company currently has 15 lakh fixed-line subscribers and Mittal said this was expected to go up to 25 lakh by next year. "We are connecting about 60,000-70,000 new connections (on fixed-line) every month and this should take us to about 25 lakh by next year," he said.

Through its pilot in Gurgaon, where the company is offering the new service to around 500 consumers which includes 40 TV channels, Bharti is trying to gauge market preferences.

Apart from testing the product, it is trying to get feedback on channel preferences, surfing habits, channel bundling and, more importantly, pricing.

Mittal said Bharti planned to operate "like a cable operator" when it went full-throttle with the new services.

"We will take content from whoever sells it, on a revenue share basis. We will become like a cable operator," he said.

News: UK missing India growth ride?

(DNA 23/06/2006) London - The UK is missing the boat in the race to invest in India says a report by the trade and industry select committee published on Thursday. The report argues that the UK is wasting its “unique relationship” with India and lagging behind other nations.

The select committee made up of members of parliament feels UK firms have a limited understanding of the growing Indian economy and see India as just a source of cheap labour rather than as an emerging market.

“Levels of interest in the Indian economy are growing year upon year - but UK investors don’t yet really understand the opportunities that India presents,” said Committee chairman Peter Luff.

However, the Confederation of British Industry (CBI) feels the report has been too harsh on UK firms. “The report is too much of an exaggeration, a lot has already been done, but yes certainly a lot more needs to be done too and it is good that the government has recognised that we need to step up the game,” said Andy Scott, director of international and UK operations at the CBI.

The report criticises investors for only looking at India in terms of call centres and BPO providers, and hence remaining oblivious to its real potential.

“There are a lot more opportunities besides IT and BPOs, and UK is well placed to engage in these, but greater awareness is required,” admitted Scott.

“The CBI is already doing a fair bit with our partners in FICCI and CII, and we are now looking to see if we need a ground presence in India too,” Scott told DNA. CBI so far has only three offices outside of the UK - Washington, Brussels and Beijing - but is considering setting up an office in New Delhi or Mumbai to make more out of the economic boom.

Scott also blamed the UK department of trade and industry that has focussed on inward investment in the last year as opposed to outward.

The British Chambers of Commerce shared Scott’s view and argued that British exporters were not getting much help from the government. “They have seen export support reduced in recent years as the Treasury switched its focus to encouraging inward investment,” said BCC director general David Frost.

Mohit Sarobar, resident director of the Confederation of Indian Industry in the UK, argued that British firms had an ‘out of focus view’ of India that needs to be changed. “Indian corruption is a major deterrent for UK companies, but they don’t realise that India is as large and as diverse as Europe, and therefore all Indian states are not the same,” Sarobar told DNA.

While Tony Blair has been talking about opportunities in India in the same breath as China over the last year, UK firms have all headed for China in larger numbers than to India. “China is getting saturated now, but also with the Chinese, you say what you want and you get it. That is not the case with India,” said Sarobar.

In India, he argued, governments because of the compulsions of a democracy did not take rapid decisions and hence the results were watered down. “Companies in the UK want CEOs to produce results and hence the CEOs take short-term decisions which will get them quick results. India needs to position itself in that manner,” said Sarobar.

Sarobar felt UK firms would find clearances much faster if they went to forward-looking states in India. He also blamed the British for not doing their homework. “The Japanese and Koreans are very good at doing their homework, and that is why India has seen huge investment from them, UK needs to learn from them.”

News: Reliance Retail to get off the mark on Aug 1

(TNN 22/06/2006) Mumbai - RIL is set to make its retail foray on August 1, sources said. RIL may announce its retail plans at its AGM on June 29.

It has publicly said that it will invest $750m in the retail business. But the actual investments may be in the $5-6bn range, sources said. Reliance’s retail initiative will start in Tier 2 markets like Gujarat and Punjab. In Gujarat, it may launch in Ahmedabad, Vadodra, Surat, Jamnagar and Rajkot.

In Punjab, the choice cities are Ludhiana, Patiala, Fatehsinghgarh and Chandigarh. In the first phase, RIL plans to launch retail operations in 22 cities in Gujarat, Punjab, West Bengal, Andhra Pradesh and Maharashtra. Subsequently, the company will move to Delhi, Mumbai, Kolkata and Chennai.

In the long term, RIL is targeting a pan-India presence, with about 5,500 outlets.

News: New Zealand wakes up to India's potential

(IANS 22/06/2006) Wellington - New Zealand's business community has woken up, though somewhat belatedly, to the fact that business with India is not only profitable but also inevitable.

An article in the latest issue of the Global Indian magazine that comes out of New Zealand cites a recent seminar in Auckland titled 'India Ascends' in which over 100 participants were apprised of the huge potential for business that New Delhi's booming economy offers.

"We (in New Zealand) were late off the mark in realising India's potential," the article quoted Paul Vaughan, New Zealand's Trade Commissioner to India, as saying in the seminar, organised by the India-New Zealand Business Council. "But in the last 10 months alone, the workload at my office has doubled."

The article listed out the reasons for the hype behind India.

For one, it is home to about 450 million middle-class people with growing purchasing power. India's return on investment is the highest in the world at 19 per cent compared to China's (14 per cent) because capital is efficiently used.

Sunil Ashra, area chairperson (Economics) and associate professor at the Management Development Institute, India, pointed out that the country records 7-8 per cent growth despite attracting only a fraction of foreign direct investment compared to China last year.

Ashra also said that cost of doing business in India was also lower, with inexpensive labour and advanced telecommunications.

"The world's cheapest international call can be made from India," Ashra was quoted as saying.

Vaughan, on his part, also pointed out that India's world competitiveness ranking had improved to 29th this year from 55th two years ago.

On the question of what language is generally spoken in India, something potential businessmen in New Zealand are curious about, Vaughan said: "I haven't had to use any other language other than English in India. No other language is spoken across the country like English."

The trade commissioner told the author of the article that many New Zealand companies are already doing business in India.

"You name a sector, and I'll tell you a list of companies there," he said.

Among the sectors seen as offering huge opportunity to New Zealand business are IT, retail, health and biotechnology.

According to Malcolm Cone, senior lecturer, University of Otago, doing business in India was like a walk in the park.

"Business in China is dominated by state sector and overseas Chinese investors, where corporatist state prevails and network capitalism plays a vital role. India offers pluralist democracy," Cone was quoted as saying.

And the future looks even more promising for the $650 billion economy.

"By 2010, India will be the only country in the world where the number of people entering the workplace will be more than people retiring. Indians don't start to age until 2030," Vaughan asserted.

News: 'Quality is India's ropeway to wealth'

(BS 22/06/2006) Chennai/Bangalore - India lost the race to China and Asian tigers in manufacturing as they were more fleet footed. India had been comfortable with the domestic market size. Now, we have an opportunity to make a mark in services. We missed the bus once and we cannot afford to miss it again,” said Sandip Das, deputy managing director, Hutchison Essar and co-chairman of the Annual Service Quality Conclave (ASQC) 2006.

Are we ready to be services superpower? “For this we need quality,” said Das.

The ‘low-cost’ reputation of the country is not sustainable, thanks to competition from other low-cost countries like the Philippines, Mauritius and the East European countries.

It is the strong markets alone that can help the services sector grow. There is hence a need for selective outsourcing.

India has to make a choice and look at the services sector as the ropeway to wealth. Standardisation and differentiation are what the industry requires and we have to start with quality.

While brand China is known for low-cost, brand Japan for quality, Italy for style, Singapore for cleanliness and India should be known for quality, he stated.

News: Indian retail FDI - Plan panel calls for consensus

(PTI 22/06/2006) New Delhi - The Planning Commission has underlined the need to evolve a consensus on allowing foreign direct investment (FDI) in the organised retail sector.

In the draft approach paper to the 11th Five-Year Plan, the commission stated it must be recognised that modern and organised retailing brings many advantages to producers and also to urban consumers while also providing employment of a higher quality.

Foreign direct investment (FDI) in retailing has been allowed to a limited extent and foreign investors are interested in playing a larger role in it and also hyper markets and multi-brand retail stores.

However, this was an area where there were divergent views and so there was a need to evolve consensus for the balance of advantages and disadvantages that existed with modern retailing with FDI in most other developing countries, including China, the Plan panel said.

Organised retailing in agricultural produce can set up supply chains, give better prices to farmers for their produce and facilitate agro-processing industries.

Modern retailing can bring in new technology and reduce consumer prices, thus stimulating demand and thereby providing more employment in production.

Retail trade and services provide employment to hawkers and street-vendors and is a source of livelihood to almost anyone. At present, retailing in India is estimated to be worth around Rs 9,00,000 crore.

Out of this organised retailing a mere 3 per cent was in the form of shopping malls, supermarkets, hypermarkets, discount stores, specialty stores, convenience stores, department stores and e-tailing, the commission observed in the paper.

News: Jet, Sahara merger deal crash-lands

(DNA 22/06/2006) Bangalore - The Rs 2,300 crore Jet Airways-Air Sahara merger went kaput at the stroke of midnight on Wednesday on “technical grounds,” including lack of regulatory approvals for Jet chairman Naresh Goyal.

Both parties immediately moved courts to control the advance money already paid by Jet for the deal and placed in an escrow account with ICICI Bank.

But the Sahara group appears to have been a wee bit ahead in the game. It convinced a Lucknow court to temporarily restrain Jet from withdrawing Rs 500 crore from the escrow account till June 23. Jet, for its part, filed an arbitration petition before the Bombay high court seeking to protect the escrow account.

DNA Money first reported the impending collapse in its June 19 issue.

Wednesday’s developments, when the home ministry deferred a decision on giving security clearance to Jet chairman Naresh Goyal, effectively killed the deal. In the process, Jet may have escaped carrying a millstone, but it could still end up losing anywhere between Rs 100 crore and Rs 600 crore, depending on what happens to the escrow account money.

Apart from the advance money, Jet, which has been running the airline since January, is believed to have suffered operational losses, too - rumoured to be another Rs 100 crore. This red ink could seep into Jet’s books.

And even as officials from both the airlines unofficially claimed that the deal was off, till late on Wednesday night they declined to make the announcement official. Air Sahara president Alok Sharma, however, made it clear that from Thursday Sahara would be running the airline as before.

According to a source, Gaurang Shetty, Jet general manager, marketing, and his team, which had been running the Air Sahara operations after the deal was struck, have already moved out and Sahara has already taken over the operations.

“Unofficially, Jet has more or less terminated the deal, but it is not making it official. They do not want to buy Sahara at any cost, and are in consultation with legal advisers on what the next move should be,” said the source.

While Air Sahara claimed in the Lucknow court that Jet had terminated the agreement, Jet, in its own petition in the Mumbai high court, sought direction to stop Air Sahara and its seven directors from withdrawing Rs 500 crore transferred by it as part of the Rs 2,300 crore acquisition deal reached on January 19.

Jet Airways had paid Rs 500 crore on March 29 as advance payment to the escrow agent for purchase of Air Sahara. Jet has contended that it was entitled to close the agreement without giving a notice to any party if the conditions of the agreement were not fulfilled by June 21.

Jet alleged that Sahara has not fulfilled the conditions agreed upon, including transfer of infrastructure facilities like parking bays, arrival and departure slots.

Seeking to restrain Sahara from having access to the escrow account, Jet has stated that Sahara should not be allowed to issue notices to ICICI Bank to the effect that it has met all the conditions.

Jet held that under the agreement, Sahara was entitled to claim Rs 500 crore from the escrow agent only on completion of the takeover exercise. In case of termination of the agreement, Sahara has to repay Rs 500 crore within seven days of the termination without any dispute, Jet stated.

The Lucknow court’s interim order to freeze the escrow account till June 23 gives the contending parties two more days to work out a final compromise, but this appears unlikely since the Jet management appears to have decided that the deal is too costly. It was looking for ways to either bring down the price or opt out, and the security clearance issue has enabled the deal to become infructuous by missing the deadline of June 21.

“We had made an offer for a possible extension of 15 days’ deadline, which is still available with Jet. Moreover, our offer of four members on the board is also available,” Air Sahara president Alok Sharma said.

Jet had demanded appointment of five members on the board of Air Sahara. While four had secured official clearance, that of Naresh Goyal is still pending with the government.

News: ‘India still far away from 'real' SEZs’

(BL 22/06/2006) New Delhi - The two mega special economic zones being set up by Reliance Industries and a big rush to build other such projects has opened a new chapter in India's economy, but there is still a long road ahead when it comes to 'real' large SEZs, economists feel.

Ever since the new SEZ policy was approved in February this year, the Government has already received above 100 applications to set up SEZs, but no serious efforts are being made so far to build 'real' large SEZs and the policy needs to be reworked to achieve this target, global investment banking major Morgan Stanley said.

One of the key purposes of SEZs is to build scale-related advantages, but most of the proposed SEZs are minuscule in size, said Morgan Stanley's India-based senior economists Chetan Ahya and Mihir Sheth in a latest India-focused report of the US-based firm.

The report said many of these proposed investments could be mere substitution of investments that would have otherwise taken place outside the SEZ area and the new SEZ investments are unlikely to provide the much-needed boost to the Indian small and medium sector competitiveness.

Indicating that the current policies do not adequately promote large SEZs, the economists said small SEZs appear to have lost their relevance with the rapid globalisation of the manufacturing scale.

The existing policy allows the minimum area for the SEZ area to be 1,000 hectares for multi-product zones, 100 hectares for product specific zones and just 10 hectares for IT, gems and jewellery and biotechnology zones.

News: Indian cos in S&P BRIC index

(BL 22/06/2006) Mumbai - Indian companies, HDFC Bank Ltd, ICICI Bank Ltd, Infosys Technologies Ltd and Satyam Computer Services Ltd, figure in Standard and Poor's BRIC 40 Index, launched on Wednesday providing exposure to 40 leading companies from the emerging markets of Brazil, Russia, India and China, an official statement said.

The constituents of the index are large, well-traded, liquid companies currently trading on the developed market exchanges of the Hong Kong Stock Exchange, the London Stock Exchange, Nasdaq and NYSE.

"Securities in emerging markets are an increasingly popular option for investors, asset managers and plan sponsors; however, liquidity of the issues continues to be a cause for concern," the news release said quoting David Blitzer, Managing Director and Chairman of the Index Committee at Standard and Poor's.

"The construction of the S&P BRIC 40 Index accounts for both the liquidity of the underlying stocks, as well as the liquidity of the overall portfolio resulting in an index which is more efficient to invest in," he was quoted as saying.

The S&P BRIC 40 Index, which has licensed products based upon it, would be calculated by means of the divisor method used in most Standard & Poor's indices and rebalanced annually and treat corporate actions in a transparent procedure.

The index would use a modified market capitalisation weighting scheme, with modifications to market cap weights, if required, to reflect available float, reduce single stock concentration and enhance index basket liquidity.

Constituent companies are also members of the S&P/IFCI index series that meet minimum market capitalisation and liquidity requirements.

News: India's trade with Dubai up by 37.9%

(PTI 21/06/2006) Mumbai - Increased gold trade between India and Dubai scaled up trade between both the countries by 37.9 per cent at USD 11.8 billion in 2005, compared to the previous year.

Dubai recorded 30 per cent increase in its trade volume in 2005, with India overtaking China to become the biggest importing country.

Growth occurred in virtually every sector and total Dubai trade for 2005 stood at USD 76.4 bn, Department of Tourism and Commerce Marketing (DTCM) said in a release.

Dubai Ports, Customs and Free Zones Corporation (PCFC) said India's trade with dubai showed an increase of 37.94 per cent in 2004, compared to China's increase of 22.39 per cent in the same year.

Gold trade has increased manifold resulting in India's record performance. Dubai is an important global player, dealing in 10 per cent of the world's physical gold.

The UAE is the second largest destination for India's exports after the US at USD 8.5 billion in 2005-2006. India's exports to the UAE exceeded its exports to the rest of the West Asia including Iraq and Iran.

News: 'Everyone has eye on India...'

(RTR 21/06/2006) New York - While licensed products ranging from Superman coffee mugs to Jeep-branded strollers pervade US store shelves, the makers of such merchandise are studying how best to gain a foothold in the Chinese and Indian marketplaces.

"Everyone has an eye on China and India," said Charles Riotto, president of the International Licensing Industry Merchandisers' Association, or LIMA, at the Reuters Consumer and Retail Summit in New York on Tuesday.

Riotto said the two countries are still in the very early stages of licensing, given the countries' lack of a broad-based understanding of the concept and the prevalence of counterfeiting.

One turning point for licensing in China could be the 2008 Beijing Olympic Games, he said. The Chinese government owns the licensing rights to those games, and Riotto said the licensing industry is hoping those rights will lead to more widespread understanding in China of how licensing works and the necessity to crack down on counterfeit products.

Riotto said LIMA has an office in Shanghai, which gives it a chance to explain licensing to various Chinese government agencies.

"We entered that market with the understanding that this is going to be a long-term process," he said.

LIMA does not yet have an office in India, he said, because it would not support itself.

But he said makers of licensed products are eager to enter the market given the vast size of India's population and the high percentage of the population that speaks English.

In terms of U.S. licensing, Riotto said manufacturers paid $5.952 billion in licensing royalties in the United States in 2005, up 1.8 percent from 2004, according to LIMA's annual report on U.S. royalty revenues conducted by researchers at the Yale School of Management and Harvard Business School.

Riotto said this was the first time in the eight years that LIMA has conducted the survey that all categories of licensing -- from art to nonprofit to music -- showed growth.

"To me, that shows our industry is very healthy across the board," he said.

Entertainment and character licensing still dominates the field with a 44 percent share of the market, LIMA found. But corporations are becoming savvier licensors, with trademarks and corporate brands coming in second with an 18 percent share.

"What we've seen over the last couple of years is corporate brands using licensing to create a lifestyle image for themselves," he said.

News: Reliance to invest $435m in agro-retail

(DNA 21/06/2006) Kolkata - Reliance Industries Ltd will invest Rs 15 to Rs 20 billion ($326 million to $435 million) in agro-retail businesses in West Bengal, chairman Mukesh Ambani said on Wednesday.

“Our primary focus is going to be in terms of really transforming the agriculture sector in West Bengal,” he said. "We will set up an agro retail chain across all the districts in West Bangal, including Kolkata, with an investment between Rs 1,500 crore and Rs 2,000 crore over three years. Our primary focus will be linking farmers with consumers and transforming agro-business into agro-processing, " he said.

Ambani said RIL would also supply natural gas to Haldia from the Andhra basin in the east coast with an investment of Rs 2,000 crore.

The company had signed an agreement with the West Bengal Industrial Development Corporation in this regard.

Describing the day as "historic", Ambani said RIL was privileged to step in West Bengal and participate in agro-retail business and supply of gas in the state.

The chief minister said the agro-retail project of RIL would help the farmers as well as the consumers of the state and added that the proposed gas pipeline, originating from Andhra basin, would run through Orissa to reach Haldia.

Earlier, Ambani held a meeting with Chief Secretary Amit Kiran Deb over the proposed projects.

News: Indian media to see increase in FDI

(BS 21/06/2006) New Delhi - The information and broadcasting ministry, since the beginning of this year, has cleared 13 proposals for Foreign Direct Investment (FDI) in media and is examining another 22 proposals.

There have been eight proposals for FDI in the news and current affairs media including Mid-Day Multimedia Ltd, Business India Publications Ltd, Deccan Chronicle Holdings Ltd, Dhara Prakashan Pvt Ltd, Writers & Publishers Ltd and DT Media & Entertainment Pvt Ltd.

Midram Publications proposes to bring out a facsimile edition of IHT. Financial Times (India) Pvt Ltd has submitted a proposal for coming out with its newspapers and periodicals. Both are under consideration by the government. Details of the investment in these companies are not known.

Currently, the government guidelines have capped FDI inflow into the news and current affairs segment at 26 per cent FDI, with several riders like insistence on an Indian editor and single largest shareholder to have 51 per cent stake, among others.

“Owing to the strong impetus for growth from the economic and demographic factors coupled with some regulatory corrections, the sector has recently witnessed increasing foreign investment flows in most segments ...especially print media,” according to PWC-FICCI’s The Indian Entertainment and Media Industry report, 2006.

In the non-news media segment — scientific, technical, speciality magazines, journals or periodicals, which can obtain even 100 per cent FDI — five proposals have gone through while as many as 20 are awaiting the ministry’s nod.

A sector analyst commented that at a time when the stock market was swinging up and down, raising money from the market could be destabilising. “FDI, in that case, is a more stable investment for a company and can bring in expertise plus brand equity from the foreign partner,” he added.

While Worldwide Media Ltd would be getting FDI for Filmfare Classics, Filmfare Star Beauty and Filmfare Star Homes, Infomedia India Ltd and IDG Media Pvt Ltd have diluted their stake in Cricinfo Magazine and Indian Channel World.

Of the 20 proposals awaiting approval, the largest number — 12 in all — belong to Springer India Pvt Ltd, which is looking to start the Indian edition of international publications in niche areas like orthopaedic surgery, intensive care, neurology and cancer. IDG, which has already received the approval for Indian Channel World, is seeking another for PC World.

Then there are others like VJM Media, which is looking to bring out the Indian edition of the “OK” magazine, Ezyhealth Asia Pacific Ltd for “Medical Grapevine” and Prism Books for Annals of Clinical Psychiatry and British Journal of Neurosurgery.

In the last three years, some of the larger FDI investments have been in HT Media Ltd which sold off 24.64 per cent stake for Rs 193.99 crore and Jagaran Prakash which offloaded 26 per cent equity for Rs 3.21 crore. Business Standard too sold 13.85 per cent to Financial Times, for Rs 8.37 crore.

News: Volvo Construction may set up India unit

(BS 21/06/2006) Mumbai - Volvo Construction Equipment (Volvo CE), a wholly owned subsidiary of Swedish commercial vehicle major AB Volvo, is exploring the possibility of setting up a manufacturing facility in India.

Volvo CE, a leading player in the construction equipment space, sells products such as wheel loaders, excavators, articulated haulers, motor graders and compact equipment.

The company will, however, manufacture only select products in the proposed Indian manufacturing facility.

Cheap labour, good market and accessibility to steel and rubber vendors are key factors that attract the company to India.

Mrityunjaya Singh, vice-president — construction equipment, Volvo India, confirmed the development. "We are keen to have an own facility but that is far away from start," he said.

Singh said the company had not even prepared the blueprint for the proposed facility.

However, various state governments, including Karnataka, are pitching for the plant.

The company has a truck plant in Bangalore in 120 acres space, where half of the land is still unutilised.

Meanwhile, the company is also planning to start a training school in Bangalore for technicians and equipment operators.

"The school will impart formal training to Volvo construction equipment operators as part of its human resource grooming programme. While the construction equipment market is growing steadily at 30 per cent, human resource growth in the sector is only around 10 per cent," Singh said.

The first phase of the training school is slated for completion in the first quarter of 2007.

The company recently launched the EC 140 BLC Hydraulic Excavator to cater to the middle class equipment rental sector. At present, Volvo in India has nearly 12 per cent market share for excavator.

Volvo CE caters to roads construction, mining, irrigation, urban development and equipment rental segments.

News: HDFC Bk starts online money transfer for NRIs

(BS 21/06/2006) Mumbai - HDFC Bank today launched a service that allows non-resident Indians (NRIs) to send remittances online through the Reserve Bank of India's real time gross settlement system (RTGS).

The online money transfer through RTGS will be available for remittances from the USA, UK and Singapore, which will ensure the amount is credit to the recipients' accounts the same day or latest the next day, HDFC Bank said. In normal online remittances, it takes 3 days for the recipients' accounts to get credit.

This is an attempt by HDFC Bank to get more fee income through an increase in its share in online remittances, which is currently dominated by ICICI Bank and emit2india.com. Of the $22 billion inward remittances in 2005-06, about $2.5 billion were sent through online services. Half of the remittances are made through cheques and wire transfers and the balance through money transfer services like Western Union Money Transfer. Shyamal Saxena, senior vice president (retail banking), HDFC Bank said: "through Quickremit, the bank's NRI customers will be able to credit funds directly to the beneficiary's bank account even in other banks, as desired by the remitter." Almost 90% of the online transfers happen from the US because the NRIs there are more net savvy and belong to a younger age group. There is hardly any online remittance from the countries in the Middle East as the NRI population in this region is not so used to the internet. There are about 20 million NRIs in the US, the UK and the Gulf. "Most of the online transfers happen at the start of a month and towards the beginning of the second fortnight of a month reflecting the salary cycles in the US," Suresh Rangarajan, chief marketing officer at Remit2India.com, said.

News: 'Millionaires in India grew by 19.3% in 2005'

(HT 21/06/2006) Washington - India seems to be minting millionaires. Its millionaire population in 2005 shot up by 19.3 per cent over the past year, second only to South Korea’s 21.3 per cent on world charts.

The World Wealth Report, released by Merrill Lynch and Capgemini, says India had 83,000 millionaires (people with more than $1 million or Rs 4.5 crore in net financial assets, excluding their residence and consumables).

The rate at which India is producing rich people is hardly surprising, says the report. It goes on: “Also, according to the most recent Goldman Sachs projections, India has the potential to become the fourth largest economy by 2025 and the third largest by 2050, behind only the US and China.”

Worldwide, the number of millionaires swelled by half a million in 2005 and there were 8.7 million of them, more than New York’s population.

When it comes to the number of millionaires, the US tops with 2.67 million, nearly a third of the global millionaire population. Germany, the UK, China, Canada, Australia, Brazil, and Russia each have more than 100,000 millionaires.

The wealth of the millionaires totalled $33.3 trillion in 2005, up 8.5 per cent. The upper crust of this league is made of 85,400 “ultra high-net-worth-individuals” with financial assets of more than $30 million each.

The Asia-Pacific region, the report says, has surpassed Europe to become the second most popular region after North America for international investment. And if the report is to be believed the India story will get better. China and India are set to drive the Asia-Pacific region, helping it capture an increased share of global output.

News: Austrian construction co plans foray

(TNN 21/06/2006) Mumbai - Austria’s construction major, Ostu-Stettin Hoch Tiefbau is planning to enter the Indian construction market. The company is in the final stages of negotiations with the Mumbai-based Pratibha Industries to form a 50:50 joint venture.

“The Austrian company is negotiating with us for a long-term JV, based on exclusivity for submitting proposals for tunnelling jobs related to water distribution, municipal sewage and water treatment plants. A final decision will be taken soon,” said a senior official of Pratibha Industries.

Ostu-Stettin specialises in tunnelling technology. Pratibha Industries has been looking to form a partnership with foreign construction firms to strengthen its operational and technical capacities for projects. Construction activity in India is worth $50bn per annum and accounts for around 6% of Indian GDP.

Pratibha Industries is an infrastructure company that derives revenues from projects relating to water supply and distribution system. It is also into road construction, housing, environment engineering and design and manufacture of pre-cast concrete structures.

News: Interest rate hike unlikely to halt India Inc growth

(PTI 20/06/2006) Mumbai - The recent spate of interest rate hikes is unlikely to leave any major hole on the balance sheets of India Inc, as the sensitivity of corporate earnings to interest rates has declined over the years, country's leading private banking major HDFC Bank has said.

The bank said in its fortnightly newsletter for its customers that the recent rate hike announced by Reserve Bank of India could set the tone for further increase in lending rates of corporate borrowings, even as banks have already been pegging their prime lending rates higher over the past few months.

Any sharp jump in lending rates may increase the borrowing costs for the corporates, as companies are tapping on fresh debts to fund their capital expenditure plans.

However, the sensitivity of corporate earnings to interest rate increases has declined over the years, as the corporate balance sheets are underleveraged unlike in the past, HDFC Bank said.

Therefore, an uptrend in interest rates could have a relatively lower impact than a few years ago, it added.

The Reserve Bank of India raised the benchmark interest rates earlier this month on concerns of growing interest rates globally and growing inflationary pressure.

The RBI hiked the reverse repo rate by 25 bps to 5.75 per cent and repo rate to 6.75 per cent on June 8.

The rate hike followed the government's decision to raise petrol and diesel prices by Rs 4 and Rs 2 respectively, which would lead to rise in inflation rate by at least 40 to 50 bps, HDFC Bank said.

Analysts believe that increase in lending rates from the current levels can result in a higher borrowing rate for corporate India, which would increase their liabilities and in turn add to their vulnerability.

The companies have also started opting for different fund raising avenues other than debt as well, thereby reducing their susceptibility to rate hikes, market analysts sid.

A leading analyst cited the example of IT giant Infosys, which has zero debt ratios making the impact of interest rate hike marginal.

A recent study of Assocham also showed that corporates from various sectors such as telecom, cement, steel, textiles and sugar managed to cut their interest costs in the March quarter, despite the upward revision in the bank rates and is likely to maintain a healthy trend in the current quarter.

The cut in interest costs was contrary to the expectations that the corporates may have to bear a high burden on interest cost.

The corporates are likely to maintain their robust cash flows, net profits, demand and profit margins in the June 2006 quarter, which would enable them to successfully manage their debts and reduce their interest cost in this quarter.

News: 'India too hot to handle'

(Bloomberg 20/06/2006) Mumbai - Indian stocks may be too expensive even after falling from records set last month, and many analysts say the market will fail to extend the biggest two-day rally in two years.

Strategists at Deutsche Securities Asia Ltd, Merrill Lynch Asia Pacific Ltd, JPMorgan Chase & Co and Nomura International (Hong Kong) Ltd are among those who see share prices as too high relative to other emerging markets.

“I don't think that this market has finished falling,” said Spencer White of Merrill in Hong Kong. “I simply don't see enough factors to convince me that the 25% decline we have had in the last month really is the end.”

The Sensex has tumbled 22% from its peak on May 10, the biggest decline among Asian benchmarks. Last week, the Sensex surged 11% in the final two trading days as concern eased that rising interest rates around the world will limit economic growth. The rally was the biggest since May 2004 and resulted in a 0.8% gain for the week, the index’s first in six weeks, to 9884.51. The Morgan Stanley Capital International Asia-Pacific Index added 0.7%.

MSCI's Emerging Markets Index also snapped a five-week losing streak, adding 0.1%. The global index has fallen 20% from a record, reached May 8, on concern that higher rates will reduce demand for riskier assets. During that time, the Sensex has lost 21%. Indian stocks tumbled 10% on May 22, sparking one- hour trading halts by exchanges. Earlier this month, stocks fell after the RBI increased the repo and reverse repo rates. The Sensex is valued at 15.2 times estimated earnings for the current year, down from a high of 20.5 times on May 10. The price-earnings ratio is still above the MSCI emerging-markets index's 12.2 times.

Economists see India's central bank raising its key interest rate next month for the third time this year as the economy's expansion and higher oil prices spur inflation.

Domestic mutual funds were net sellers of stock from June 2 to 14, according to data from Sebi. The nine-day stretch, with as much as $475.4 million in net sales, was the longest this year.

Overseas investors have sold about $2.4 billion more stock than they bought since May 11, almost half their net $5 billion of purchases for the year through May 10.

Column: Plain English vs mumbo jumbo?

(BS 20/06/2006) New Delhi - The task now is to enact monetary responsibility legislation, which shifts from the RBI Act of 1934 to the ideas of the Bank of England law of 1998.

There is a traditional belief that monetary authorities have to be enigmatic, and that market participants have to then zealously watch the central bank to pick up crumbs of information and decipher cryptic clues. Modern monetary economics supports no such position, and there has been a powerful move towards central banks that speak in plain English and are transparent. In a well-functioning monetary regime, market participants would only zealously watch the economy, not the central bank. Sound institutions involve a nuanced relationship between data releases, rules, and rate changes.

Alan Greenspan, who is revered as one of the best central bankers ever, was famous for his power of poor communication, for the low signal to noise ratio in his speeches. It is said that when he proposed marriage to Andrea Mitchell of NBC, he had to say it thrice before she understood what he was asking. Greenspan’s reputation as a successful central banker has tempted many lesser mortals to follow in his footsteps by fostering poor communication.

Developments in monetary economics in the last 20 years have emphasised transparency and accountability of central banks. There are three levels of the question: What is the goal of the central bank? How will it set about achieving this goal? What will the central bank do next?

Goal. The first question is about the task of the central bank. In the bad old days, both fiscal policy and monetary policy involved considerable discretionary power. This led to three problems. Discretion introduces unpredictability, it can be used to achieve bad things (like winning elections) and it can be the stage for making mistakes. The two loose cannons of fiscal and monetary policy are responsible for a great deal of the macroeconomic problems worldwide, of the last century. Worldwide, fiscal policy has been increasingly tied down and made accountable by fiscal responsibility legislation. A parallel movement is taking place on similarly tying down monetary policy, by making the central bank accountable for hitting a transparent, publicly stated inflation target.

Procedure. How will the central bank set about achieving the inflation target? There is some algorithm whereby data about the economy are consumed, a judgement is made about fluctuations in expected inflation in the future, and the short rate is changed. The modern view is that the central bank must be 100 per cent transparent on its thought process. Every detail about how the central bank thinks, and how it would respond to various kinds of hypothetical scenarios, should be given out to the world in plain English. Divergent views within the monetary policy committee should be revealed. Diverse econometric models in the central bank should be released in public. The market should have a very accurate picture of how the central bank will behave in the future depending on how the data unfolds in the future.

Next rate hike. In mature market economies, there is a clear clock, such as monthly meetings, where the monetary policy committee decides on rate changes. The committee can obviously not be transparent about whether rates will be raised or lowered next time, for this depends on future data releases. This is the only limited notion of “non-transparency” that has analytical support: nobody can say today what the algorithm will produce at the end of the month, because the data releases till the end of the month are not known today.

At the same time, the market should have a very clear understanding of the mapping from data to rate hikes. Through this, the market should be zealously watching the data releases. Once the data have come out, it should be crystal clear how the central bank will behave. There should be zero surprise on the day of the rate hike. The market should not care about what the central bank says, because it knows exactly how the central bank will behave when faced with certain data.

This modern understanding supports explicit, transparent, plain English on the first two questions: What is the task of the central bank, and how will it set about doing it? That leaves only one area where the central bank cannot answer questions: about the next rate hike. Plain English is called for in all three steps; there is no case for old-fashioned central bank mumbo jumbo. The market should be able to build a very clear picture about what the next few data releases will do to the next rate change. In this world, once the market has paid the fixed cost of understanding the algorithm of the central bank, it should be zealously watching the data and not the central bank.

The translation of these ideas into real world practice began in New Zealand, which was the pioneer in holding the central bank accountable for hitting a publicly stated inflation target, and giving a bonus to the governor based on the extent to which this was done. The most important adoption of these ideas has been in the UK, which began with a CEPR project headed by Eric Roll, which produced a report titled “Independent and accountable: A new mandate for the Bank of England” in 1993. This report was translated into legislation by Tony Blair and Gordon Brown immediately after they won the elections. Today, the Bank of England is considered the global role model for a sound and well-designed monetary institution.

A practice of zealous “fedwatching” implies immaturity of monetary institutions. It implies that the market feels there is ambiguity about monetary policy; that the intentions and algorithm of the central bank have not been soundly communicated. Since the US does not have a sound inflation-targeting monetary regime, there is great uncertainty in the transition from Greenspan to Bernanke, since the market does not know Bernanke’s goals and algorithm. The test of sound monetary institutions is when speeches by central bank staff do not move markets. As Greg Mankiw said in his blog last week, in a mature market economy, data would move markets, not central bank staff.

In India, we have made progress on one piece of macro policy: the FRBM Act has tied down the loose cannon of fiscal policy. The second task, which needs to now begin, is to enact monetary responsibility legislation, which shifts from the primitive RBI Act of 1934 to the ideas of the UK’s Bank of England legislation of 1998.

By Ajay Shah

News: Reliance snares Wal-Mart honcho

(DNA 20/06/2006) Mumbai - After luring top talent available in the domestic organised retail segment, Reliance Retail has gone a step further - it has dipped into Wal-Mart's Indian talent pool.

The Mukesh Ambani firm is believed to have hired S Ramesh, who was heading Wal-Mart's sourcing business from India since the last four years.

Confirming Ramesh's move out of Wal-Mart, Colonel Asghar, a spokesperson for Wal-Mart, told DNA Money from Bangalore: "It will take little time before we could find a replacement for him."

Wal-Mart's sourcing business from India has grown over $2 billion in the last 8 years of operation in the country.

Prior to Wal-Mart, Ramesh had worked for the Hong Kong-based Pacific Resource Export Ltd, that worked as an exclusive buying agent for Wal-Mart. Known for his sourcing acumen, Ramesh is said to have joined Reliance Retail as the head of it sourcing division.

Ramesh could not be contacted and Reliance officials refused to comment on the development.

Ramesh's exit can prove to be a small setback to Wal-Mart's Indian plans because proliferation of organised retail has created huge shortage of seasoned professionals.

Over a month back Wal-Mart recruited the regional head marketing and product delivery of Whirlpool Asia, Raj Jain, as the retail giant's president for emerging markets, Asia-Pacific.

News: Reliance may acquire Subiksha

(TNN 19/06/2006) Mumbai - A rumour which refuses to die is that the Mukesh Ambani-led Reliance Retail is in talks to acquire Chennai-based retail chain, Subhiksha.

Although both have stoutly denied any such plans, analysts say Reliance Retail stands to gain from the South-based retailer’s supply chain and marketing reach, through either a JV or an acquisition.

Subhiksha MD R Subramaniam recently said the company has major expansion plans and is planning an IPO.

While the IPO plan has been on for a few months, it has been postponed because of ‘choppy markets.’ Observers don’t rule out the possibility of Reliance Retail subscribing in the IPO.

News: HyperCity to open 35 stores soon

(TNN 19/06/2006) Kolkata - The K Raheja group of Shoppers’ Stop fame is spreading its wings in retailing. The group plans to open 35 hypermarket stores across the country. The stores, called ‘HyperCity’, will sell a variety of goods from groceries, vegetables and meat to consumer durables.

The firm is close to finalising two properties in Mumbai and is also looking at Kolkata and some other cities for a slice of the country’s retail pie.

HyperCity Retail (India) chief executive officer Andrew Levermore said: “We are in an advanced stage of negotiation for two properties of more than 1,00,000 square feet (sq ft) in Mumbai.” Till now, the group has opened only one HyperCity store in Malad (Mumbai).

Mr Levermore added, ”We haven’t set any deadline for opening some 35 stores across the country but intend to do so as soon as possible. Our second HyperCity in Gurgaon will open trade by the ’06-end.” The third store outside Thane (Mumbai) will see HyperCity as the sole anchor of a mall covering some 120,000 sq ft of space.

Apart from tier-I cities like Bangalore, Delhi, Hyderabad, Chennai and Kolkata, efforts are also on to identify properties for outright purchase or lease Tier-II cities. It has identified properties in Lucknow, Ludhiana, Coimbatore, Mangalore, Jaipur and Aurangabad.

“The group is open to the idea of becoming anchor stores in malls or undertaking greenfield projects. If we take the first option, we will become the anchor only if the total mall development area is in excess of 6,00,000 sq ft,” Mr Levermore said.

News: Reverse flow - Indian firms get bullish on Britain

(PTI 19/06/2006) Mumbai - In a reversal of the trend where British firms took operations to India, it is the turn of Indian companies to set up shop in the UK, which receives 60 per cent of all Indian investment in Europe.

Over 430 Indian firms based in London account for 30 per cent of all foreign investment in the capital and more are queuing up, said a report in The Telegraph, ahead of the release of official figures for the current financial year in this regard.

UK Trade and Investment, the government-backed agency which encourages overseas companies to do business in Britain will reveal next month the number of Indian companies that have invested here in the year, up to April.

Last year, the number of Indian companies which launched UK operations grew by 23 per cent and there was no sign that this growth had slowed, the report said.

The growth rate is expected to be Himalayan, it said, adding that for the first time, the amount of money invested in the new UK developments by Indian companies up to March last year overtook the amount invested in India by British companies.

“There is much interest in the UK from Indian firms,” the daily quoted Anuj Chandem, international business partner at Grant Thornton as saying.

Nicolas Piramal last week announced it was buying a manufacturing plant from Pfizer, the drug giant in Northumberland. Tirupur Exporters’ Association (TEA), Tamil Nadu, will open a warehouse at Felixstowe, a joint venture with St John Freight Systems and the Indian company to supply clothing to Mothercare and GAP.

The growth in near-shoring has been equally robust. Indian companies are now employing British nationals in call centres based in the UK to do the same jobs.

ICICI One-Source, a Mumbai-based outsourcing company, last week announced it would build a 1,000-people call centre in Belfast, its first in the UK.

HCL Technologies has acquired a call centre in the area. “As we broaden our services, some components of what they want are more suitable to be done locally. A lot can still be done offshore but there are some things that are better kept closer to home,” Matthew Vallance, ICICI’s Managing Director for Europe said.

Call centre activity in the UK is growing by 5.5 per cent a year and is expected to employ more than one million people by 2007.

Phiroz Vandrevala, executive vice-president, Tata Consultancy Services, the first IT company set up here in 1975, said English language provided a common thread between the two nations. TCS recently formed a subsidiary in Peterborough to provide call centre service for Pearl, the closed-fund life assurance group.

Grant Thornton’s Chande was quoted as saying that the large Indian community in the UK has acted as a spur to investment.

“There is a significant Asian community in the UK and a lot of Indian companies have links in terms of relations to business contacts. Many Indians find it more comfortable to deal with the UK. There is cultural empathy,” he added.

Avestha Genraine, a Bangalore-based healthcare technology group that employs 215 people opened an office in Cambridge in 2004.

Pierre Socha, Avestha’s vice-president, corporate development, said although the UK office employed only three people, deals generated in Cambridge accounted for 35 per cent of the company’s entire revenue last year. “It works pretty well,” he added.

Paul Witeway of UK Tade and Investment said there were broad economic reasons for the Indian influx. “We have a stable economic framework, flexible labour laws and a skilled labour force.”

UK Trade and Investment is working overtime. Not only does it have teams in New Delhi, Mumbai, Bangalore and Kolkata, its website lists the benefits of doing business in the UK. Whiteway said 19 Indian companies were listed on the London Stock Exchange, more than on the New York Stock Exchange and Nasdaq combined.

News: Pantaloon, Big Bazaar enter Saurashtra

(BS 19/06/2006) Mumbai - After Adani and V-Mart, biggies like Big Bazaar, Food Bazaar and Pantaloon have made their foray in Saurashtra region by opening super malls at Iscon Mall on Kalawad Road, in Rajkot redefining the retailing experience in the city.

While speaking to Business Standard, Sadashiv Naik, western region head, Big Bazaar & Pantaloon Retail (India), said, "Rajkot is our second destination in Gujarat after Ahmedabad for Big Bazaar. We have launched our brands here as the availability of property was as per our expectation and choice.”

“However, we are targeting our presence aggressively in the cities having a population of 5 lakh and above,” he further added.

“Our aim is to reach out to our customers in each and every corner of the country and we are moving fast towards it,” Naik said while adding that this was the 29th Big Bazaar which is spread at over 35,000 sq ft.

"We are offering a wide range of 1,60,000 products which would be made available at prices lower than the MRP,” he said.

“With such outlets, we also empower the employment opportunities, as almost 90 to 95 per cent of the staff employed at Big Bazaar is from the local domain," he added.

Pantaloon also launched its operations on Saturday.

While talking to Business Standard, Sanjeev Agarwal, marketing head, said, "This is the 21st outlet in the country and 4th in the state. We realised that people of Rajkot have taste for high-end brands. Pantaloon products are 15 to 20 per cent economical in comparison to other brands offered in the market."

With the in-house expertise to cope with the demands of fast moving fashion requirements and also providing aesthetics for the products tagged under our brand, we have entered the city with an objective to cater to the requirement of all age-group, Agarwal said.

However, both denied to speak on the financial year projections and break-even details as far as the retail marketing business in Rajkot was concerned.

News: 'Time to think like TEAM INDIA'

(BS/PTI 19/06/2006) Mumbai - Mukesh Ambani, chairman of Reliance Industries, said it is time to think like TEAM INDIA, and compete with global centres of manufacturing and finance to attract investments to India. Ambani was addressing a press conference in Chandigarh after Reliance Industries and Haryana State Industrial and Infrastructure Development Corporation (HSIIDC) signed a joint venture agreement for setting up a Rs 25,000 crore multi-product special economic zone that has provisions for a cargo airport and a 2,000 MW power plant.

The agreement was signed between Reliance Ventures, a subsidiary of Reliance, and HSIIDC in the presence of Reliance Industries chief Mukesh Ambani and Haryana Chief Minister Bhupinder Singh Hooda.

Immediately after signing the deal, Ambani promised to develop the SEZ as a world-class hub for manufacturing, services and agri-based industries in the most competitive environment.

The board of directors of the JV, to be called Reliance Haryana SEZ, would comprise of three directors from Reliance and two from HSIIDC.

"The SEZ is going to create five lakh jobs and revenues up to Rs 10,000 crore, which will improve the per capita income of Haryana," Hooda said. Ambani said Reliance is investing such a huge amount (roughly Rs 25,000 crore) outside western India for the first time. "It is time for India to reap the benefits of globlisation. Our target would be Fortune 500 companies for Reliance Haryana SEZ," Ambani said. While adding that the SEZ would attract investments from high-growth areas like nano-technology and bio-technology, "we are also planning a cargo airport, if all the requisite approvals are in place, so that the SEZ can become an aggregation hub for North India."

Updated at 1400 hrs: Reliance to list Haryana SEZ in 3yrs

Reliance Industries is planning to list Reliance Haryana SEZ, its joint venture with Haryana State Industrial Development Corporation (HSIDC) for setting up India's largest special economic zone (SEZ), in three years. The SEZ is expected to generate a turnover of up to Rs 50,000 crore in the very first year of operation. RIL is setting up the SEZ, which would house an airport and a 2,000 MW power plant, with an investment of Rs 25,000 crore from its coffers while looking at another Rs 1,00,000 crore from third parties. While Reliance would hold 95% equity in the JV, HSIDC would hold the remaining 5%. HSIDC would complete the land acquisition in three years and development activities would be completed in another two years. Reliance might also tie-up with global giants such as Disney, Time Warner or Universal to establish entertainment centres for attracting domestic and foreign tourists. (PTI)

News: Reliance plans $5.5 bln Indian economic zone

(RTR 19/06/2006) Chandigarh - India's top petrochemicals firm, Reliance Industries Ltd., said on Monday it planned to invest 250 billion rupees ($5.5 billion) in a special economic zone in Haryana.

The deal includes building a 2,000-megawatt power plant, an international cargo airport, an inland container depot and a dry port, the company said in a statement.

India, Asia's third-largest economy, approved a law last year paving the way to set up special economic zones to boost exports, attract foreign direct investment and help setting up world-class infrastructure within these areas.

News: China, India remain investors' darling

(RTR 19/06/2006) London - China and India are the favoured markets of investors living outside their home countries, while fears about corporate governance standards in emerging markets have waned, according to a brokerage firm's survey on Monday.

Some 56 percent of investors said they were confident about putting money to work in China, up from 38 percent a year ago, while 43 percent of them said they were confident about India, unchanged from last year, according to a poll of 400 expatriate investors in June by Luxembourg-based brokerage internaxx.

Concerns about lax corporate governance standards in some emerging market economies also fell over the past 12 months, the survey found. Only 3 percent of respondents said they had concerns, down from 16 percent a year before.

"They feel there are fewer barriers to investing ... last year people were a bit concerned about corporate governance, such as in countries like China ... that appears to have been lowered," Robert Glaesener, general manager at internaxx, told Reuters.

Expatriate investors living away from their countries of origin are an increasingly important part of the investment population and typically take a more sophisticated and international approach to managing money, Glaesener said.

There are about 300,000 expatriate Britons living in areas such as the Middle East and Far East, for example, while the total number of expat employees and investors can be counted by the millions although exact figures are hard to pin down, he said.

Among other findings, the survey showed that 81 percent of investors claim to have either beaten or matched performance by market indices.

Investors turned less confident about the British, U.S. and euro zone economies as places to put money, citing ageing populations, rigid labour laws and saturated home markets as reasons for their caution.

The most favoured sectors are energy and telecoms, while retail and mining were the least favoured.

internaxx is a joint venture between brokerage firm TD Waterhouse and Dutch-Belgian financial group Fortis.

News: Indian real estate prices are ready to burst?

(TNN 18/06/2006) Mumbai - The real estate market is on a roll. Land prices are spiralling, as are the interest rates. In many areas, demand is outstripping supply.

However, the turmoil in the stock market is causing apprehension that the bear hug might get extended to real estate also. While the sector has not felt any impact of the volatile sensex, brokers and dealers contend that the number of deals have declined in the last one month.

The general perception is that real estate prices have already peaked and prospective investors are not anticipating much gains from the present level in the medium term. So, they are waiting it to correct.

Market Tremors • Brokers say number of deals have declined in the last one month since the sensex turmoil began • Consultants deny any link between stock market and real estate, but warn of impact if stock market continues to fall • Some developers feel stock market trouble will help bring more investors into real estate market • But others say developers may feel

INFLATED PRICES

Investors fear that like the stock market, the real estate sector is also overheated. In the last three years, prices in the outskirts of Delhi, Mumbai, Bangalore and other cities have increased by two to three times. Also, there is no link between the market price of an apartment or villa and the rental income. In the outskirts of Delhi, the rental income of apartments is now just 2-3% of their capital value — earlier, it was 5-6%. On an average, the rental of a Rs 60 lakh-apartment is in the range of Rs 10,000–15,000 per month.

Many investors, consultants and builders feel that a correction is inevitable. Director of leading developer ATS Infrastructure, Getamber Anand, says, ''The sooner the correction comes, the better it would be for the sector as many buyers and investors are sitting on the sidelines waiting for it to happen.''

The steep rise in prices, in the last two years particularly, is because of the cartelisation created by builders, dealers and big investors. Through pre-launches, cartels hoard real estate stocks and jack up prices. The end users are forced to pay for profits earned by cartels.

A senior builder, who does not want to be quoted, says the market is overpriced by 15-20%.

Realty Bites • In the last three years, real estate prices in Delhi, Mumbai, Bangalore have risen by 2-3 times • The rental of an apartment does not reflect its real capital value now • Rising interest rates are likely to reduce customers' capacity to take housing loans and can place upmarket areas beyond their reach • Cartelisation by builders, dealers and big investors is the main factor behind the steep rise in real estate prices liquidity crunch and find it difficult to raise funds from equity market

RISING EMI

The rise in the interest rate would also have some negative impact. In the last one year, the interest rate has gone up by around 1.5 percentage points, from 8% to 9.5%. This has increased the equated monthly installment (EMI) of a Rs 60 lakh-loan for 20 years from Rs 50,186 to Rs 55,928. That means, the EMI has risen by over 10%. If the borrower does not want the EMI to be increased, the repayment period will increase from 20 years to almost 31 years. Bankers feel that any further rise in interest rates will impact on customer's capacity to borrow.

SENSEX WORRIES

Consultants and builders agree that there is hardly any link between the stock market and real estate. Joint managing director of global real estate consultancy firm Cushman and Wakefield, Sanjay Verma, says, ''Real estate might feel some impact due to sentiments in general in the financial market.''

MD of CB Richard Ellis, South Asia, Anshuman Magazine argues that the fall in the stock market was because of ''selling pressure coming from FIIs, which have sizeable holdings in the share market'', while FIIs have only just entered the real estate market. However, he also adds that if the fall in the stock market continues for long, it will have impact on real estate.

Some developers feel that the fall in the stock market would help them as investors would turn towards real estate for better returns. CMD of Parsvanath Developers, Pradip Jain, says that there has been no slackening in demand in the real estate market ever since the sensex turmoil began a month ago.

Director and CEO of Uppal Housing Rumneek Bava argues the undercurrent in the realty market is strong and demand is outstripping supply and therefore, the sector would continue to give better returns.

But a senior consultant feels the real estate market might start feeling the liquidity crunch if the stock market fall continues. He says many developers who had planned to raise funds from the equity market, are finding it difficult to do so after the stock market fall. If the share market conditions do not improve soon, it would hurt the expanding real estate sector, as many builders have overstretched themselves in the hope of raising funds through sale of equity.

News: Reliance to invest Rs 4000 cr in agri-retail in WB

(PTI 18/06/2006) Kolkata - Mukesh Ambani controlled Reliance Industries is expected to make an investment of Rs 4000 crore in West Bengal as part of its mega-retail plans which would be unveiled later this week.

Ambani is flying down here on June 21 to meet Chief Minister Buddhadeb Bhattacharjee after which the details of his plans in creating an agricultural retail chain would be announced.

West Bengal is part of Ambani's mega-retail plan and the company has sought nearly 10,000 acres from the state government with estimated investment in the first phase touching Rs 4000 crores, sources close to the development said.

The substantial investment in agricultural sector of the state by Reliance would also help the Left Front government to counter the attacks by opposition parties that agricultrual land in the state was being sacrificed for setting up industrial units.

This criticism had mainly come in the wake of Tata Motors announcing its plans to set up its small car project in the state over an areas of 1000 acres.

Ambani's agricultural retail plans envisages creating farm-to-the-shelf chains by setting up exclusive farms and opening a chain of hypermarkets and super-markets across the country on the lines of Walmart.

A team of Reliance officials have already done the spadework and have given a presentation to top state government officials here on June 1. It was learnt that the Chief Minister has given his go ahead to the entire plan and now only a formal announcement is awaited.

Harshvardhan Neotia of Ambuja Group is also likely to be a partner in Reliance's plans in West Bengal as during the presentation to the state government, he was also present.

It was learnt that Reliance has sought land in almost every district of the state where exclusive agricultural farms would be set up for different farming products. The company may also procure produce from local farmers and for which procurement depots would be set up in villages.

There are plans to set up rural business hubs on the lines of 'mandis' and bring in infrastructure services and technological support for it in rural areas of Bengal.

The company also intended to set up massive hyper markets in major urban centres of the state where apart from the perishable agricultural products and grocery other items like garments and FMCG items would also be sold.

This way Reliance has plans to create a farm-to-the-shelf chain across the state which would later be extended to other parts of the country.

Since the company would also procure agricultural produce from local farmers through contract farming, the state government has started working on a model to allow it so that it benefitted local farmers.

News: 'India fourth most attractive investment country'

(UNI 18/06/2006) Kolkata - The Ernst & Young European Attractiveness Survey 2006 has placed India as the fourth most attractive investment country in the world and as the most preferred location for call centres and back office functions.

The United States and China remained top two preferred countries for international decision makers with 41 per cent votes.

India's rating in 2006 is on par with the previous year, with 18 per cent of investors citing it as a key choice.

However, the survey ''Globalisation Act II: Team Europe Defends its Goals'' said the country shows few signs of being able to compete with China as an FDI destination.

The 2006 survey is also marked by a cooling off of China's attractiveness, to the benefit of more mature locations, notably Western Europe.

Whilst remaining attractive, China's pull has considerably reduced since the European Attractiveness Survey 2005 (52 per cent).

According to the survey, while SMEs are most attracted by China (46 per cent), there has been a decline in the level of interest expressed by multinational corporations (38 per cent) compared with (58 per cent) a year earlier.

News: Ambanis divided but still ruling

(DNA 18/06/2006) Mumbai - “This is just the beginning,” drawled Steve Ballmer, Microsoft Corp. chief executive officer as his speech was streamed live from Seattle on a giant screen at the Bombay Stock Exchange’s Rotunda Hall.

Ballmer wasn’t referring to Microsoft. His kudos was meant for Anil Ambani and his flagship company Reliance Communications, seconds before it made its sparkling debut at the bourses.

The Microsoft CEO’s remark holds true even for Mukesh Ambani, and Ballmer may as well take a few tips from the Ambani brothers as he puts Microsoft back on the path of blistering growth.

Exactly the same day last year, Kokilaben Ambani, the matriarch of the undivided Reliance group was among the very few who were confident that her sons would “enhance value” for its over three million shareholders of the group, after splitting the businesses between them.

After organising a truce between the brothers, Kokilaben had decreed in a letter, “Mukesh will have the responsibility for Reliance Industries and IPCL, while Anil will have the responsibility for Reliance Infocomm, Reliance Energy and Reliance Capital”.

Since then, the Ambani brothers have unlocked huge value for the Reliance group shareholders.

After Anil’s visit to the bourses, it was Mukesh’s chance to visit the Rotunda hall to list a new company -Reliance Petroleum - as he adroitly capitalised on a bull market to raise funds for a project that will start production two years hence.

Just as well. A divided Reliance has shareholders as the biggest gainers, having unlocked tremendous value for them. But it is not valuations alone where shareholders have gained. An opaque group seemingly became more transparent after the resolution of the “ownership issues”.

The gainers include the promoter family as they own 38% of the group enterprises and perhaps more in Anil’s group companies.

Shareholder wealth has swelled as the two brothers went their separate ways.

The brothers have been quick out of the blocks. Both groups have prepared blueprints for an unbridled expansion and diversification.

J M Morgan Stanley, a leading foreign brokerage says in a report - titled ‘Building core assets’ - released this week, “Reliance is one of the few Indian companies investing aggressively for growth with a capital spending plan of $9 billion (Rs 41,300 crore) over the next three years”.

Anil’s Reliance ADAG is not far behind. It has earmarked $13 billion (Rs 60,000 crore) investment in power projects with an ambitious plan to foray into nuclear energy.

“Reliance Energy is also keen to foray into nuclear power generation, as it has good experience in engineering and designing for nuclear power plants,” Anil told Reliance Energy shareholders recently. Reliance ADAG’s investments do not include other forays it plans to make, notably in metro rail and telecom, where investments exceeding Rs20,000 crore is envisaged.

Are these numbers too ambitious and are the brothers overstretching?

Mukesh has the advantage of massive cash flows (Rs42,000 crore) accruing from his petrochemical and refinery business and Anil has not done too badly either having raised funds at the right time for Reliance Energy and Reliance Capital.

“With cash flow from operations equating to $9 billion over the next three years, and a current conservative net debt to equity ratio of 0.72, the company has the ability to invest in new businesses such as retail and special economic zones”, says J M Morgan Stanley in its report on Reliance Industries.

It is not that the past discord is forgotten. It heightened at the time of the handing over of the four resulting companies that included Reliance Natural Resources. It became an ugly brawl which quickly subsidised as Reliance ADAG took control of the four resulting companies and changed some clauses in the agreement that were detrimental to its interests.

It came head to head, when Mukesh outbid Anil recently for the proposed convention centre in the Bandra-Kurla complex.

In less than a year, the de-merger has seen the two groups diversifying by entering sectors that are unrelated to their present businesses. Both seem to be in a hurry, as the brothers try to make up for the lost time.

Anil and Mukesh are incommunicado most of the time, preferring to speak to investors occasionally.

Anil timed another move very well. He seized an opportunity to step down as the member of the Rajya Sabha, coinciding with the time that Sonia Gandhi, chairperson of UPA chose to resign from the Lok Sabha.

News: India to become Nokia focal point

(TT 18/06/2006) Calcutta - India will become Nokia’s second largest market by 2010. The company plans to invest over $10 billion in the country, which is the fourth largest market in the world now. By 2010, India is expected to manufacture 10 per cent of the world’s mobile handsets too.

“Our Chennai plant, Nokia’s 15th manufacturing unit, was set up in a record 24 weeks. It was commissioned in January this year. We have manufactured 1 million handsets between January and March 2006,” said Devinder Kishore, marketing director of Nokia India Private Limited.

The company, which has already introduced more than 20 models in the first half of this year, plans to launch as many, if not more, in the second half.

About a million handsets were manufactured in the country last year, according to the Indian Cellular Association (ICA). This year, however, India should be producing around 15 to 20 million handsets, some of which will be exported. By 2007, the number should rise to 30 million.

Going by the increasing demand for mobile connectivity, with 4.5 million GSM users added every month in India, ramping up the operational facilities in the country in the coming years seems natural for Nokia.

ICA expects the handset-manufacturing sector in the country to produce 30 million handsets annually by 2009.

News: India top exporter to Dubai, overtakes China

(PTI 17/06/2006) Dubai - India has overtaken China as the main exporter to Dubai with a 30 per cent increase in trade in 2005, official figures reveal.

The Dubai Ports, Customs and Free Zones Corporation (PCFC) figures said that total trade increased from Rs 2692.62 billion (Dh 215.73 billion) in 2004 to Rs 3505.75 billion (Dh 280.46 billion) in 2005.

India's trade with Dubai accounted for Rs 540.75 billion (Dh 43.26 billion) in 2005, an increase of 37.94 per cent over 2004, compared to China's Rs 280.75 billion (Dh 22.46 billion), an increase of 22.39 per cent over 2004.

Increase in trade of gold is the main reason behind India's performance. Dubai is a very important worldwide player dealing with 10 per cent of the world's physical gold, Dr Eckart Woertz, programme manager for economics at the Gulf Research Centre, was quoted as saying in Emirates Today.

Dubai imported Rs 562.62 billion (Dh 45.01 billion) worth of semi-precious and precious stones and metals, including gold, and re-exported more than half, or a total of Rs 334 billion (Dh 26.72 billion).

News: 'India-US hold the key'

(PTI 17/06/2006) Washington - Cooperation between United States and India is important to the global marketplace and the relationship has the 'power to transform' the world using science and technology, a senior American official has said.

Addressing a symposium on 'India's Changing Innovation System: Achievements, Challenges and Opportunities for Cooperation', Energy Secretary Samuel Bodman yesterday said that America had opened a 'new chapter' in its relationship with India 'that is based not just on our mutual needs but on trust'.

Recalling President George W Bush's words that the US and India 'are closer than ever before, and the partnership between our free nations has the power to transform the world', Bodman said much of that 'power' of transformation comes in the areas of science and technology.

He said that the declaration of President Bush and Prime Minister Manmohan Singh to transform the relationship between the two nations in ways that support and accelerate economic growth through greater trade, investment and collaboration on technology will enhance energy security.

"It promotes the development of stable and efficient energy markets and will enhance the research and development of alternative energy sources already underway," Bodman said.

He added the US would welcome India's collaboration on the development of the proposed International Linear Collider, which would make possible new discoveries in particle physics.

"We intend the ILC to be designed, funded, managed and operated as a fully international scientific project, one I hope the Indians will join," he said.

News: Maharashtra govt halts development of mill land

(BS 17/06/2006) Mumbai - In a move that is likely to impact the sliding prices of real estate in Mumbai city, the Maharashtra government today issued an order stalling development of mill land in the city, pending the resettlement of chawls on premises.

In a surprise development, the state urban development ministry, headed by Chief Minister Vilasrao Deshmukh, issued an order saying, "Permission should not be given by the Municipal Corporation of Greater Mumbai to development plans of mill land unless it includes the rehabilitation of chawls adjacent to the mill lands."

The development of the chawls will be over and above the provision for one-third of the mill land being given to the Maharashtra Housing and Area Development Authority for low-cost housing.

According to the order, which comes into effect from June 14, the developer is bound to give a 225 sq ft flat to each tenement holder as of January 1, 2000.

The state government's order is likely to stall 30 million sq ft of development across both NTC and privately owned mill land that is currently coming up in the mill area, valued at Rs 15,000 crore.

These developments include the five mills NTC sold to private developers including India Bulls (Elphinstone and Jupiter Mills) and DLF (Mumbai Mills).

News: Mallya may taste French wine assets, after all

(DNA 17/06/2006) Bangalore - Over a fortnight after it backed out from a bid to acquire French champagne maker Taittinger, Vijay Mallya-controlled United Breweries Group is all set to buy a French wine company from Starwood Capital Group LLC for $15 million in cash.

DNA Money had reported on May 22 that Mallya was bidding for this winery.

UB will buy the wine company in the "next few weeks," Mallya told reporters, adding, the acquisition would be funded from internal accruals.

"The acquisition will get UB into high quality wines that we will import and sell in Indian market," he added.

The wine assets are also part of the Taittinger Group, which holds a champagne house that Mallya unsuccessfully sought to acquire. Starwood had bought Taittinger and Societe du Louvre SA last year for their real estate and hotel assets.

On whether UB was still in the race for acquiring the champagne assets of Taittinger, Mallya said, "We bid but Credit Agricole du Nord-Est was the winning bidder. There is a sentiment that champagne assets should remain in French hands. So, we gracefully bowed out of the process. I am not prepared to get into a bidding war because that would have diluted shareholder value of UB Group. That was something I was not prepared to do."

The UB Group, which has relied on acquisitions to expand market share, wants expertise and brands bought overseas to win more discerning customers at home.

News: 'Outsider can take over from me' - Ratan Tata

(DNA 17/06/2006) Mumbai - The search for his successor is on, but it's more of a "submarine search", says Ratan Tata, chairman of Tata Sons, the main holding company for the Rs 80,000 crore business group, the largest private sector business house in India.

The chairman of the Tata group, in an interview published in the latest issue of the Time magazine, said, "There is not an active search. There is a sort of submarine search."

He said the group will not restrict itself to a candidate from within the group.

"One would like to take someone from the group, but I don't think we're confined to that," Tata said.

"The board has given me until I'm 75. whether I stay that entire period or not… I reduced the 75 to 70 and then the board put it back. All it does is give me a little more leeway to put a successor in place", said Tata in the interview to the magazine's South Asia bureau chief Alex Perry.

The statement is significant say observers tracking the group.

One of the favourites for the post is Noel Tata who is being blooded. Noel is managing Trent Ltd, the group's retailing venture. He's also on the board of Voltas and Titan, the accessories company.

Speaking about his own tryst with the group, Tata confesses that "it happened by accident, in the sense that I may not have come back from the US. And so I could have had another life. If I look at my plan, when I was 23 or 24, at that point in time, it looked like a very pleasant life."

He came back because his grandmother with whom he was very close was ill. Speaking about his dream project- the one lakh small car, Tata Motors plans to produce all the high volume parts by itself. But only 50% of the total number of cars will be produced by itself.

The other 50% with very low cost, low break-even assembly facilities, we would franchise out to give young entrepreneurs who could assemble the cars and create a business for themselves," Tata revealed.

News: ONGC to become integrated energy co

(BL 17/06/2006) Kolkata - The new management in ONGC does not foresee any drastic change in ONGC's previously announced approach to emerge as an integrated energy company. What also remains unchanged is the vision to make MRPL as the downstream investment vehicle of the group.

The much publicised acquisition plan of SPIC Petro by MRPL, however, is reportedly put on the back burner.

A senior company official revealed that the committed projects like the 750-MW ONGC Tripura Power Company (OTPCL), Rs 12,800-crore aromatic product complex at MRPL and most importantly the auto fuel retailing are on course.

"While there could be some adjustments in the project planning, leading to some delay in commissioning, the proposed gas-based power project in Tripura is very much on course," a senior company official said. The project was conceived to ensure commercial use of idle natural gas reserves of ONGC in Tripura.

Talking on MRPL, the official said that since the proposal to set up aromatic complex was approved by the board there was little possibility of a rollback of the decision. Post implementation of the project the distillate yield of MRPL would reportedly improve to 83 per cent on crude. The ONGC subsidiary is also commissioning a project to expand capacity to 15 million tonnes.

While admitting that MRPL's performance has been lacklustre in the last one year, the sources said that high level of exports (40 per cent of production) and higher discounts had impacted the balance sheet of the company.

On the retailing initiative of MRPL, the official said that despite delay the project is on course. As per the previous plans MRPL was expected to be the value for money retailers of auto-fuel in Karnataka and parts of Western coast.

News: ABN-Amro keen to grow Indian private banking biz

(BL 17/06/2006) Bangalore - ABN-Amro Bank has indicated its intention to grow its private banking business by at least 300 per cent over the next five years.

The bank's Vice-President and Head, Private Banking, Ms. Sutapa Banerjee, said that currently the private banking operations had assets under management (AUM) of about $750 million (Rs 3,445.3 crore) in the country. "We would like to see the AUM rise to over $2 billion (Rs 9,186.9 crore) over five years," she said. For this purpose, the bank intends to look beyond the metros to class one cities. The cities being targeted include Hyderabad, Mysore, Pune and Baroda.

By the current financial year-end, the bank hoped to be in at least eight to nine cities in the country.

"We will also use the hub and spoke arrangement to reach out to customers, where the bank does not have branches," Banerjee said. This implied that the bank would reach to these customers from contiguous branches.

The bank would also increase its staff strength to 100 to conform to its increase in high networth individuals (HNI).

However, Banerjee said that in picking up these HNIs, the bank would look for individuals with assets in excess of Rs 2.5 crore.

ABN-Amro's focus would be heads of small and medium enterprises (SME). In building a critical mass of customers, the bank would also conform to internationally accepted `Know Your Customer' norms, she said.

"We had such norms in place even before the RBI's guidelines," she added.

Asked whether the focus was a departure from inclusive banking to exclusive banking, Bannerjee said that many of the bank's private banking customers were earlier customers of the bank's retail business.

In private banking business, which includes advisory services for management of investment portfolios, and asset allocations, the bank generated returns of about 100 basis points of the AUM.

News: Indian forex reserves fall by over $1.6 bn

(BL 17/06/2006) Mumbai - After a rise of about $2 billion last week, the country's forex reserves saw a total decline of $1.652 billion for the week ended June 9, 2006. This huge decrease was mainly on account of the euro weakening against the dollar, said dealers.

According to the Reserve Bank of India's Weekly Statistical Supplement, the forex reserves decreased by $1.652 billion to touch $162.876 billion for the week ended June 9, 2006. In the earlier week, forex reserves had risen by $1.937 billion to touch $164.529 billion.

Foreign currency assets

The foreign currency assets for the week under consideration fell by $1.651 billion to touch $155.087 billion. Foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of currencies as euro, sterling and yen. The euro dropped from $1.2960 to $1.2664 against the dollar during the week.

The week under consideration saw FII buying domestic equities worth $289.9 million.

There was no change in the gold reserves ($7.010 billion). The country's reserve position in the IMF declined by $1 million to $779 million.

News: Plan panel for ensuring 15 billon dollars FDI in 11th Plan

(PTI 16/06/2006) New Delhi - The Planning Commission has said that the level of FDI inflow is much below the country's potential and the nation needed to attract about $15 billion worth of FDI in the Eleventh Five Year Plan period.

In its draft approach paper of the Eleventh Plan, the Commission pointed out that a direct benefit from global integration was the increased FDI inflow which increased from $3.7 billion in the Ninth Plan to $5.4 billion during the first four years of the Tenth Plan which was below the country's potential.

In 2005-06, the FDI inflow was $8.2 billion and Commerce and Industry Minister Kamal Nath has indicated that the FDI inflow into the country could be pushed upto $12 billion.

"The National Common Minimum Programme (NCMP) stated that the country needs and can absorb three times the amount of FDI it gets. This remains a reasonable target and can be achieved in the Eleventh Plan," the Commission observed in the paper.

The plan panel pointed out that certain grey areas which remained areas of concern would have to be dealt with. The key area was the health sector.

"In the matter of health also, there are large gaps in the availability of healthcare and in related services such as maternal and childcare, clean drinking water and access to basic sanitation facilities for the mass of our population, especially the poor do not have even minimum basic access," the Commission observed and suggested since healthcare is costly and beyond the reach of the common man, public funding could be a reliable panacea to spread their ambit.

News: Hedge funds go hunting for Indian mid-cap stocks

(RTR 16/06/2006) London - Hedge fund managers are going shopping for Indian stocks, especially those of medium sized firms in the consumer, technology and infrastructure sectors with potential to become blue-chips.

Does that mean that they think the rout, which has seen the Indian market drop by about 30 per cent since May 11, is over?

Not quite. Managers think the market could slip by another 4 to 6 per cent as what is left of the hot money withdraws.

But that won't stop them looking for stocks that have high earnings potential and use the themes of strong domestic demand and government spending on infrastructure.

"There are some very attractive opportunities ... The market right now is in a healthy disposition," John Morris, president of US-based Fulcrum Investment Group, said.

"The immediate flow of funds will be back to large cap market leaders, that's the obvious play ... There were a number of mid caps that were extremely attractive to us before the correction, I think they were disproportionately sold off."

Belief in the potential of India's economy and companies to yield high returns was a major topic of conversation at an Indian hedge fund event earlier this week in Geneva, organised by Jetfin Events.

India is expected to account for around 15 per cent of world gross domestic product by 2025 from around 2 per cent now.

Valuations of Indian stocks as measured by price/earnings ratios are expected to fall further from averages around 15 now. Prior to May 11 the average was estimated at above 20.

"We could see lower valuations as the market falls further, but not much more," a hedge fund manager said. "The mid-cap space is bigger and more mid-cap stocks fit the consumer, technology and infrastructure themes."

The consumer theme is based on rising affluence in India, particularly the growing middle class, which is now estimated to account for more than 50 per cent of India's population compared with less than 40 per cent in 1995.

A recent McKinsey report said India's growing market for consumer goods could reach $400 billion by 2010 from around $250 billion in 2003. That would make it one of the world's five biggest retail markets.

"What will these people want? Televisions, phones, mobile phone, cars ... That tells you about the sorts of things we are looking at," another hedge fund manager said.

"Bigger houses, mortgages and banks are another theme as is the luxury goods market, which isn't so obvious ... Technology goes with economic maturity and the shift away from an agricultural-based society."

On the infrastructure side, the government plans to raise spending on things like roads, airports, utilities such as electricity and water, railways and telecoms by about 75 per cent in 2002-2007 compared with 1997-2002.

News: Mukesh to discuss agri-retail biz with Buddha

(PTI 16/06/2006) Kolkata - Reliance Industries chief Mukesh Ambani will meet West Bengal Chief Minister Buddhadeb Bhattacharjee on June 21 to discuss investments in agri retail business in the state, secretariat sources said on Friday.

On June one, Reliance Retail gave a presentation to the West Bengal government, detailing plans to set up rural business hubs on the lines of 'mandis' and retail outlets in urban areas to sell perishable agricultural products and groceries along with garments and other items.

The project is part of Ambani's mega-retail vision, envisaging creation of farm-to-shelf chains by setting up exclusive farms and opening a chain of hypermarkets and supermarkets across the country.

It was given the go-ahead by the RIL board in January this year. Reliance Industries has already finalised plans to set up similar agri hubs in Punjab.

According to reports, the company has approached the West Bengal government for 10,000 acres of land for the project.

News: Suncity to invest Rs 13,000 cr in various projects

(PTI 16/06/2006) New Delhi - Real estate firm Suncity Projects plans to invest a massive Rs 13,000 crore in next three years to develop a host of projects, including townships and shopping malls, besides venturing into hospitality sector.

"We have already invested about Rs 2,000 crore and plan to invest another Rs 13,000 crore in the next three years for developing 24 projects that are in various stages," Suncity Projects Chairman L N Goel told the media here.

Besides, the company is entering into the hospitality sector and plans to build three five star hotels in Mohali, Jaipur and Greater Noida.

"We are making a foray into hotels as it is a related business," Goel said.

On the source of financing the huge investment, Director Ajay Aggarwal said it would be met through internal accruals, bankers, mutual funds and FDI.

"We are in talks with global realty funds, which have shown interest in investing in our projects," Aggarwal said.

Suncity Projects is launching tommorrow a shopping mall in Shahadara, Delhi which is spread over 2.5 lakh square feet involving an investment of Rs 250 crore.

The 24 projects, which are in different stages, include developing townships in Jaipur, Rohtak, Gurgaon, Rewari, Indore and Kaithal and constructing shopping malls at Delhi, Mohali and Jaipur.

It also plans to develop two high-tech cities in Ghaziabad and Mathura in 5,000 acres each and has already acquired 1,000 acres each at both the places. These two hi-tech cities would take 4-5 years to get completed.

The company will also develop a amusement park in Greater Noida.

News: Brothers Ambani in race to make up for lost time

(BS 16/06/2006) Mumbai - The skirmish that rocked India’s most valuable business group seems a distant memory now, and the Ambani brothers seem to have only one thing in common these days — both are vigorously trying to make up for lost time.

In the one year after mother Kokilaben's announcement (made on June 18 last year) of the formula to split up Reliance, Mukesh and Anil Ambani have announced some of corporate India's most ambitious plans.

Mukesh's Reliance, for example, has plans to invest Rs 100,000 crore in the next three years. It invested the same amount in the last 30 years.

For Mukesh, annual general meetings are great platforms for big-ticket announcements. Last year in August — it was his first public meeting after the split in June — he unveiled his plans in the oil sector. He will use this year's AGM on June 27 to make mega announcements on retail.

Consider the speed at which the group is working. In January this year, it announced its foray into retail with an initial investment of Rs 3,250 crore, and the launch of a wholly owned subsidiary, Reliance Petroleum, to set up a $6 billion refinery at the special economic zone at Jamnagar.

Three months down the line, Reliance Petroleum launched its IPO and Chevron picked up 5 per cent in the company with a right to scale it up to 29 per cent.

Sources close to him say the elder Ambani conceived the idea of foraying into retail even before the split was announced as he knew that he would have to give up telecom.

A confident Mukesh is now riding the increased spending capacity of consumers and the groundwork done by established retail players (Pantaloon and Shoppers Stop).

The plan is to do a Wal-Mart in India by developing a low-cost supply chain model which will involve massive economies of scale. The strategy is to set up a chain of supermarkets, hypermarkets, speciality chains and convenience stores in 800 cities across the country.

In short, the largest retail chain the country has ever seen. The idea is to do things differently. For example, Reliance would sign an MoU with the Harsh Neotia-controlled Bengal Ambuja towards the end of this month wherein they will hand-hold each other.

This kind of partnership is unheard of in the industry. For example, the broad contours of the agreement (it is not yet signed) suggest that Reliance will set up anchor shops at Neotia's malls in West Bengal. Neotia will also have screens at the properties of Reliance. Neotia will be Reliance's vehicle for growth in east and north east.

Then there is his plan for special economic zones. RIL is setting up SEZs as large integrated world-class townships spread over 100,000 acres in Maharashtra, Bengal, Punjab, Haryana and Andhra Pradesh.

At least four time of that money would come in from third party investors wanting to set up projects. For example, companies like Exxon-Mobile etc would set up projects at Reliance Petroleum's Jamnagar SEZ.

If Mukesh is going great guns, brother Anil isn't far behind. Industry watchers say he wants to be the number one private telecom player in the country in the next three to four years straddling both GSM as well as CDMA technology.

He also wants Reliance Capital to be a one stop financial services house and is targeting to become a large scale infrastructure player, which will not be limited only in power but straddle newer areas like bidding for metro rail projects (it has won the Mumbai metro), roadways (it is undertaking a project in Tamil Nadu), airports and even SEZs (it has a project in Punjab in 5,000 hectares of land).

And he is spending over Rs 700 crore — one of the largest makeover budget in the country — to create a new identity and logo.

The change is clearly reflected in the telecom business — the junior Ambani does not want to be only an integrated telecom player (like Mukesh did) but converge it with the world of entertainment. In the last one year, Reliance's subscriber base has virtually doubled to 27 million.

In the same year, Anil's strategy of convergence of telecom with entertainment was unravelled with his acquisition of a majority stake in Adlabs — its key entertainment vehicle.

Reliance Communications is also planning a bevy of services — from IPTV on the broadband, mobile TV, video on demand services. It has a fibre optic backbone which can be used to distribute movies to the multiplexes.

On the energy front, the company is looking at setting up power projects in neighbouring countries like Nepal and Bangladesh and even in West Asia; it is scouting for partners to bid for gas exploration overseas and even look at acquisition of coal mines in global locations, which will feed the power plants in India.

Anil Ambani has of course fixed stiff targets. Reliance Energy for instance is already building over 2,850 Mw of new capacity and the target is that by 2011 it would double this to over 15,300 Mw.

In the financial services space, the group was able to raise a staggering Rs 5,759 crore from the market through over 900,000 applications in Reliance Equity Fund -- the largest resource raising effort by a mutual fund ever.

And with over Rs 24,000 crore of assets under management, Reliance Capital has emerged amongst the top three financial services companies in the private sector

News: Deutsche eyes India real estate

(TT 16/06/2006) Mumbai - The booming real estate industry has started to attract a number of global players that are sniffing for opportunities.

The latest to join the bandwagon is Deutsche Bank.

“We are considering the possibility of opening an office in India. We are looking at physical presence in the country. One of our colleagues from London will be permanently based here,” Venkateshwaran Raje, senior adviser, DB Real Estate, said on the sidelines of a CII-Mutual Fund seminar here.

Deutsche Bank Real Estate is the global division of Deutsche Bank Asset Management responsible for real estate funds management.

“We have a presence in almost 22 countries. Within the emerging markets, India and China are going to be our key investment areas now,” Raje added.

The investment in the country will be through the FDI route.

“Since all our investments in India will be through the FDI route, we will be looking at investing in new properties which are to be constructed and there are certain stipulations and regulatory issues that we will need to adhere to here,” he said.

According to the Deutsche Bank estimates, India has an investable market of $83 billion. Close to $4-6 billion of real estate, out of the country’s $83 billion so-called investment grade properties, are held by investors because 90 per cent of the assets are owned by occupiers.

News: Indian realty fund rules ready

(TT 16/06/2006) Mumbai - Sebi is set to unfurl a package of goodies for mutual funds that would not only extend their bouquet of offerings but also expand the customer base.

Sebi chairman M. Damodaran today said the guidelines for real estate mutual funds would be promulgated next week, while details of the much-awaited capital protection scheme — a type of safety net for investors in mutual funds — would be announced soon.

The regulator is also drafting the norms for gold exchange traded funds (ETFs) and expects to announce them by next month.

“The guidelines for real estate funds will be out by next week and we are closer to the launch of capital protection schemes,” Damodaran said in his keynote address today at the Mutual Fund Summit 2006 organised by the Confederation of Indian Industry (CII).

Damodaran, however, did not elaborate on the capital protection scheme. Sources from the mutual fund industry said the scheme would not offer a guaranteed return but protect the capital of an investor. Damodaran said Sebi intended to enlarge the scope of investments by mutual funds abroad following announcements by finance minister P. Chidambaram in the budget.

In his budget speech, Chidambaram had said the ceiling on investments by mutual funds in overseas instruments would be raised to $2 billion from $1 billion and the requirement that investments be restricted to only those companies that hold at least 10 per cent in an listed Indian company removed.

He has also said a few chosen mutual funds would be allowed to invest cumulatively up to $1 billion in overseas exchange traded funds.

News: With the stock market in a state of flux, Indian realty prices may fall 20%

(DNA 16/06/2006) Mumbai - With the stock market in a state of flux, real estate prices are likely to take a hit next.

Deepak Parekh, chairman of Housing Development Finance Corporation, expects real estate prices across the country to come down by 20 per cent from current levels over the next three to six months.

But this expected fall has nothing to do with the rising interest on home loans. “Investors are moving out of the market because they see the real estate fully priced,” Parekh said, though demand from genuine buyers remains.

He added that when prices were hardening, a lot of investors bought properties under construction and sold them on completion, booking up to cent per cent profits. Now, with higher interest costs and a meltdown in equity markets, these players are deserting the realty market, bringing a fall in demand and a drop in prices.

But Parekh ruled out an increase in HDFC’s interest rates in the immediate term.

Other industry experts agree with Parekh in principle, but differ on the details. “If the Sensex falls, there is a chance of correction as Mr Parekh says. But if the Sensex continues at the current level, then the market mood will continue,” said Joy Sanyal of Trammel Crow Meghraj, a global real estate consulting firm. Sanyal said that even if there is a correction, it will be in the range of 8-10 per cent, not more.

Real estate consultant Ashok Narang does not foresee any fall in prices at all, except in places where they are exorbitantly high. “Raw material and land scarcity are the main reasons for increasing costs in addition to the huge demand from developers in Bombay and across the country,” he said.

A consultant who did not want to be named questioned the logic of Parekh’s prediction of a decrease in prices, as his company has been financing several high-priced land purchases. “HDFC has funded a number of developers who have bought mill lands at huge prices. They have even estimated the price of Mukesh Mills at about Rs800 crore, which is about Rs14,000 per square foot.”

News: More Indian industries may be unshackled

(DNA 16/06/2006) New Delhi - More industries could be freed of shackles if the suggestions in the approach paper for the Eleventh Plan are taken seriously. The paper calls for the progressive elimination of entry barriers and various other controls in the sugar, petroleum refining, fertiliser, and drug industries.

But there's some bad news for India Inc's protectionist brigade. The paper also calls for the continuation of the reduction in non agricultural tariffs. At the same time, it says inverted duty structures must be gradually eliminated. "Taxes and duties should be made non-distortionary and internationally competitive," it says.

The paper also calls for a comprehensive review of the mining policy as the sector can attract considerable investment.

The paper sets a target of 12% growth for the manufacturing sector, within an overall 9.9% growth in industry, and identifies steps that need to be taken for this.

In an interview to DNA last week, Planning Commission deputy chairman Montek Singh Ahluwalia had said that policy impediments have made it more difficult for India to do well in manufacturing. Many of the suggestions in the approach paper have been made earlier.

The paper also lobs the ball in the state governments' court, asking them to work to ending delays in land registration, water and power connections, environmental and other clearances. It suggests that states set up Investment Commissions or Industrial Advisory Councils to the chief minister, which could sensitise state governments to the concerns of private investors.

Even as it insists that the infrastructure constraints must be "substantially rectified" within the next five to ten years, it also emphasises that efforts to promote general infrastructure should be supplemented by steps to do the same in special economic zones (SEZs) and special economic regions (SERs).

The paper talks about accelerating the process of de-reservation of industries.

The policy of reserving industries for the small-scale sector, it pointed out, was pointless, given the reduced barriers to imports. Reservations, it notes, affects their ability to modernise and compete.

The vexed issue of labour law reforms is deftly sidestepped after being flagged. It admits the need for greater flexibility in labour laws to boost labour-intensive mass manufacturing.

However, it doesn't go beyond calling for the "need to consider appropriate amendments" in the Industrial Disputes Act and the Contract Labour Act. The Central government, it says, must initiate a dialogue to evolve a consensus on the issue, it recommends.

Within the overall industrial growth 9.9%, the paper, officials explained, targets a 14% growth in construction and 8.5% in electricity.

News: Japanese industrial cluster in India soon

(BL 16/06/2006) Tokyo - The Government is working on plans to set up a Japanese industrial cluster to streamline flow of investments from the country. The Japanese diversified conglomerate Mitsui and Company has been given the mandate to develop the "Japanese City". The project would be distinct from the special economic zone (SEZ) scheme and would cater to companies from Japan, especially the small and medium enterprises (SME), the Union Commerce and Industry Minister, Kamal Nath, said here.

Speaking at the sidelines of the World Economic Forum's East Asia Summit here, he said that a 2,000-acre site has been identified in Haryana for the project, a first in the country. "We are looking at flow of investments from Japanese companies, especially the SME sector, which are a repository of technology but have been slow to invest in India," he said.

He added that major Japanese companies such as Toyota, Honda and Suzuki have a significant presence in India already, but what India lacks is substantial investment by Japanese SMEs. "We are looking to scaling up their presence by setting up this industrial cluster," he said.

Ban on mangoes goes

Meanwhile, Nath's effort to get the Japanese Government to lift the ban on the import of Indian mangoes has also borne fruit. The Japanese Minister of Agriculture, Forestry and Fisheries, Shoichi Nakagawa, announced that it had lifted the two-decade-old embargo. Japan had imposed a ban on the import of Indian mangoes in 1986 because of suspected pest infestation by fruit flies. After the ban is lifted by July, the Agricultural and Processed Food Products Export Development Authority is planning a "mango festival" in Japan, which is likely to import mangoes from Andhra Pradesh, Gujarat, Maharashtra, Uttar Pradesh and West Bengal.

Funding for irrigation

Also, Japan Bank for International Cooperation has agreed to fund the Pench Diversion Scheme for Irrigation in Chhindwara (Madhya Pradesh). The Pench Diversion Scheme, which costs Rs 564 crore, will provide irrigation to almost one-lakh hectares in Chhindwara and the Seoni districts of Madhya Pradesh.

Nath also said that a joint study group to look into a Comprehensive Economic Partnership Agreement (CEPA) with Japan will submit its report in two-three months. "And by the year-end, we expect to see a CEPA with Japan in place," he said.

News: Indian real estate: New route for investments'

(BL 16/06/2006) Mumbai - The time to unveil real estate funds in the Indian markets has arrived as investors are ready to `lock-in' to realise the full potential of their investments.

The need to consider challenges while foraying into real estate funds was highlighted at the Mutual Fund Summit 2006 organised by CII.

Real estate funds globally have a huge potential market and India being a growing domestic market, real estate funds are the new route for investments. Milind Barve, Managing Director, HDFC Asset Management Co Ltd, said that the non-existence of an exchange, proper regulations and problems related to price discovery, settlement and liquidity would be of prime concern while dealing with real estate funds.

Since real estate funds involve physical assets, their valuation process becomes difficult. Barve suggested that the valuations be done at least quarterly from the date of purchase. Also, a panel of pre-approved valuers should do the valuations, and every fund should use at least two of these valuers. Disclosures of valuations need to be done, he said.

Real estate funds should essentially be close-ended funds as real estate is not liquid funds and a heavy exit load needed to be charged so that people stayed in.

"The key to garnering profits for real estate funds was diversification the risk of `concentration,'" said Barve. The funds need to be diversified geographically, in different projects as well as in different developers.

The low level of investor knowledge coupled with the dependence on tax sops could also affect returns, he said.

News: Indian real estate VC funds target 15-30% returns

(BL 16/06/2006) Mumbai - An indication of the kind of growth that can be expected of the Indian real estate market may lie in the returns targets that the real estate venture capital funds have set for themselves.

"The target internal rate of return of these funds range from 15 per cent to as high as 30 per cent," says the latest quarterly India Property Investment Review from property consultants Knight Frank India.

This report lists 12 funds, apart from HDFC India Real Estate Fund, and estimates that these funds will invest about $1.2 billion into real estate stock over the next one year.

Since the policy change last year that allowed venture capital funds in real estate, some 14 such funds are in various stages of getting organised, according to real estate experts.

The rate of return targeted - between 15 per cent and 30 per cent - is an indication of the unpredictability and non-homogeneity of the Indian market, they said.

"There is no homogenous Indian real estate market. Every city or area could be a market in itself," said Arun Goel, CEO, DHFL Venture Capital Fund.

"Our Fund cannot guarantee a return, but we think 20-25 per cent is achievable," he said of this seven-year fund, which has a corpus of Rs 350 crore (including a greenshoe option).

The real estate market is growing significantly, said Goel, whose fund will invest in residential projects, and commercial space specific to the IT/ITeS and BPO industries.

Since most funds are planning investments in residential and retail projects and the IT/ITeS/BPO space, the growth rate of these industries can be used as a benchmark to the funds' returns.

HDFC's domestic fund of corpus Rs 1,000 crore has already identified projects in Bangalore, Pune and the National Capital Region, said a senior official. By year-end, around 20 per cent of the corpus will be invested, he said.

HDFC's India Real Estate Fund officials are not willing to talk about target returns, but they are spreading risks by investing in completed, development-stage and planning-stage projects.

Some of the other proposed venture funds, all close-ended, listed by the Knight Frank report, are ICICI-Tishman Speyer (India Advantage Fund-111), Ascendas IT Parks Fund (which will invest in IT space only), Kotak Mahindra Realty Fund, IDFC, Kshitij Venture Capital Fund (from Pantaloon which will invest only in malls and commercial retail space.

On whether such a rush of funds would lead to more speculation in real estate and drive up costs, Goel said, "The maximum we see is Rs 3,000 crore invested in a year or two; this is a small amount compared to the investments the real estate sector requires."

At HDFC, he felt that speculation is happening in pockets anyway, with or without real estate venture funds. In Gurgaon and adjoining areas, he noted, plots are sold within a single day of being put up for sale. And some smaller cities are seeing appreciation of 40-50 per cent in pockets. With the right expertise one can identify the right projects for investment, he said.

News: Panasonic bullish on Indian market

(BL 16/06/2006) New Delhi - Bullish on the Indian market, Japanese consumer electronics major Panasonic is looking to rev up its marketing activities in the country to give a boost to sales.

The company today said it would increase its expenditure on marketing/advertising as well as roll out newer products in the Indian market.

"There is tremendous potential in the Indian market and we are ready to invest more," the Panasonic India Deputy Managing Director, Hidenori Aso, said.

The company, at present, is a marginal player in the consumer durables segment, which is dominated by South Korean companies LG and Samsung. Panasonic, which manufactures televisions at its Noida factory, had sales of Rs 150 crore from its consumer electronics (including home appliances) in the Indian market last fiscal.

"The Koreans did a good job in India and I feel we got a little delayed. But we will move aggressively now," Aso said.

Asked whether it had similar plans for televisions, the Panasonic India Managing Director, Shrikrishna G Kulkarni, said there were no plans to discontinue production at Noida.

The company today launched a range of plasma and LCD TVs in India, apart from digital movie cameras and digital still cameras.

Part of the Japan-based Matsushita Electric Group (MEG), Panasonic India is targeting to capture 25 per cent share of the Indian market and catch up with its Korean rivals.

News: Pantaloon joint venture to identify growth areas

(BL 16/06/2006) Mumbai - Cross-marketing their respective brands, Pantaloon Retail and the gym major Talwalkars expect its newly formed joint venture company to exploit synergistic advantages.

Having forged a 50:50 joint venture recently, there are plans to bring in the Pantaloon brands in areas such as apparel, shoes and food at the Talwalkar's retail outlets, while Pantaloon would use the gym company's expertise in sourcing fitness equipments for its own stores. The joint venture, which has been primarily forged to kick start Pantaloon's fitness brand - Roots, at its Health Village branded mall in Ahmedabad, would help Talwalkars leapfrog into the retailing business, courtesy the number of malls planned by the retail major.

Speaking to Business Line, Girish Talwalkar, Director, Talwalkars Better Value Fitness Pvt Ltd, said, "Through the Health Village malls, we would be present in all the malls planned by Pantaloon. Considering Pantaloon has planned malls in nearly 28 cities across the country, this should ramp up our presence in retailing." Health Village has already created `Roots' as a sub-brand for its fitness business and Talwalkar intends launching spas and gyms within its premises.

At the same time, the gym major, which expects to make a foray into retailing on its own, also intends vending Pantaloon's brands at its stores.

Explains Talwalkar, "We would sourcing some of Pantaloon's brands such as apparel, shoes and even food from Pantaloon's stable." For instance, Pantaloon could be used as a vendor to source gym wear, while Liberty Shoes which already has a joint venture with Pantaloon, could be made to manufacture sports shoes for Talwalkars.

Besides, Pantaloon is also expected to enter into a sourcing deal with Talwalkars for its gym and fitness equipment.

News: Dubai firm eyes 100 retail stores in India

(PTI 16/06/2006) Ahmedabad - Dubai-based retail giant Landmark Group will launch a chain of about 100 Max retail stores, which will sell apparels across 20 cities of the country including Mumbai and Delhi.

"We are planning to launch about 100 retail stores in the country within a span of five years," Vasanth Kumar, President of Max Retail Stores, said while addressing reporters here on Friday.

"The Landmark Group, which has 425 retail stores across the Middle East will initially invest Rs 100 crore in India for this purpose in the next couple of years," Kumar said adding that Max will spend about Rs five crore in building one particular store.

"We are planning to expand in a big way in India and capture a large portion of the unorganised retail sector in the country," Kumar said, adding that only four per cent of the retail market in India was in the organised sector.

Kumar was speaking at the launch of Max's retail store in Ahmedabad today. "This is the second store of Max to come up in the country after the one in Indore a couple of months back," he said.

Through these mid-market stores we are targeting the entire family. We will be offering contemporary fashion for men, women and children at prices less than Rs 599 at our stores, Kumar added.

News: Indian services sectors grow 20-60% in 2005-06

(BS 15/06/2006) Chennai/Bangalore - As many as 18 service sector segments of the Indian economy are projected to clock ‘excellent growth’ levels of 20-60 per cent in 2005-06 as compared to previous year (2004-05).

This impressive growth is being attributed to catalysts like the expanding of railway passenger network, production and sale of commercial vehicles and the addition to existing telephone connections, particularly mobiles.

Addressing a press conference here on Wednesday to announce the CII’s Annual Service Quality Conclave (ASQC), Vishal Bali, CEO, Wockhardt Hospitals Group and convenor-healthcare, CII(IQ), said the growth in the services sector continued to be broad based in 2005-06.

Trade, hotels, transport and communication services continued to lead by growing at double digit rates for the third successive year.

The Annual Service Quality Conclave (ASQC) is being held in Bangalore for two days from June 21 to 22.

Talking about the conference through a tele-conference, Chanda Kochhar, chairperson, ASQC 2006, said that the conclave is expected to be attended from across all service industries like hospitality, airlines, travel, tourism, financial services, courier, telecom and IT industries.

The conclave is also expected to help delegates to learn from innovative business leaders and service quality practitioners how to succeed in an ever-challenging business environment, she added.

For the ASQC, speakers are selected to ensure that the participants can answer questions companies face on service quality in a changing world.

These sessions will help to navigate through unpredictable consumer behaviour and increasing competition to build a strong foundation for reaching superior levels of quality service, she further added.

Giving details of the meet, K N Shenoy, past president of CII & vice chairman, Volvo India stated that the inaugural session will feature H D Kumaraswamy, Karnataka chief minister, Nolan Tan, CEO, Service Quality Centre, Singapore to speak on Global Services Expectations and Service Standards: and give an international perspective while Leo Puri, Director, McKinsey & Company to brief on India as a Home to Global Services.

News: Lock FDI in realty issues, says RBI

(BS 15/06/2006) Mumbai - The Reserve Bank of India (RBI) has suggested a three-year lock-in for foreign direct investment in the real estate sector through the initial public offer (IPO) route.

The central bank made these suggestions to the government recently. At present, funds brought in through the FDI route cannot be repatriated before three years, but there is no such restriction on subscriptions to IPOs.

However, if a foreign investor picks up a stake in any real estate company through the private placement route in the run-up to an IPO, there is a one-year lock-in.

The RBI’s suggestions are aimed at warding off speculative investments in the real estate market, which is already reeling under an “asset bubble”.

The central bank’s April monetary policy had hinted at the bubble and raised the provisioning requirement on standard loans in commercial real estate, besides increasing the risk weight for such loans.

Sources close to the development said the banking regulator felt that it would be difficult to ascertain whether the foreign investment was being used for the development of “integrated townships”, which is one of the preconditions for FDI in this sector.

“Funds are fungible and can be used for any purpose other than the proposed project. Therefore, there should be stringent norms to monitor the use of funds,” the sources said.

FDI in real estate has been allowed under the automatic route. According to the RBI, like in aviation and telecom, the FDI proposal should be routed through the Foreign Investment Promotion Board (FIPB) and not be put on the automatic route.

In its foreign investment policy for real estate, the government has allowed 100 per cent FDI in real estate under the automatic approval route. Foreign investors can enter any construction activity, but they will have to build at least 50,000 sqm within a specific timeframe.

After the FDI policy was cleared, various international investors, including Warburg Pincus, Blackstone, Morgan Stanley Real Estate Fund, Columbia Endowment Fund, California Public Employees’ Retirement Fund, Tishman Speyer Sam and JP Morgan Partners, among others are reported to have evinced interest in the Indian real estate market. Indian institutions like HDFC, ICICI Venture and Kotak Mahindra have also launched funds to invest in the real estate sector.

News: Apollo Tyres eyes buyouts in Europe, SE Asia

(BS 15/06/2006) Mumbai - Apollo Tyres, the country’s largest tyre manufacturer, is planning acquisitions in Europe and South East Asia in the current financial year.

“We will be interested in acquiring companies that will synergise the group’s expertise in the areas of manufacturing, overseas markets and new technology,” said Neeraj Kanwar, joint managing director, Apollo Tyres.

Acquisition will also be a strategy to increase the proportion of radialisation in the company’s truck and passenger car tyres.

In January, the company acquired South Africa-based tyre manufacturer Dunlop Tyres international, a radial tyre manufacturer for Rs 290 crore.

With the acquisition, it gained control of Dunlop’s plants in South Africa and Zimbabwe and access to Dunlop markets in Europe, West Asia and Africa.

Apollo Tyres will consider raising funds for acquisition and business operations through debt, internal accruals and through funds to be raised by way of Rights and public issue of equity shares.

The company’s board has recently approved the issue of equity shares of Rs 10 each for cash at premium, on a rights basis in the ratio of 1:6 and for every four equity shares allotted on a rights basis under the rights issue, the allottees will receive one warrant.

The board has also approved public issue of equity shares of Rs 10 each for cash at a premium, aggregating to Rs 200 crore.

The Dunlop acquisition has made Apollo largest tyre manufacturer in the country, with a capacity of 900 tonne, said company officials. The second largest tyre maker in the country, MRF is having a capacity of about 800 tonne.

News: Indian govt wants to do a BBC with Channel Asia

(PTI 15/06/2006) New Delhi - The country may launch an international news channel without involving Doordarshan, which will be modelled on the lines of the BBC and the CNN, a government official has said.

“We have had some initial discussions on the matter after the idea was raised by industry,” Information and Broadcasting Secretary SK Arora said.

According to sources, the proposal for Channel Asia can cost the government a whopping Rs 350 crore, which, among other things, would be required for placing correspondents in various countries and setting up infrastructure.

Arora said the matter was still in the conceptual stage and nothing concrete had been worked out on the launch of the channel, which aimed to project India “as it stands today” in the global context.

“The idea is to have an autonomous channel on the lines of the BBC and the CNN. If it goes ahead, it will have correspondents in all major cities of the world, including in Asia, Europe and North America,” Arora said.

Emphasising that the idea for an international channel was “nothing new,” he said it was a long-pending proposal which had been taken up for discussion.

On the reasons for avoiding the Doordarshan tag on the proposed channel, he said it was being done to help the channel get rid of the image of being a government mouthpiece.

“We would like to delink the channel from any such impression and are looking to make it a completely autonomous channel with a separate CEO and COO,” he said.

Sources, however, said no matter how ambitious the proposal might look, it had to be taken with a pinch of salt, considering the past record of the government with news channels and the performance of public broadcaster Prasar Bharati’s DD News.

With a major portion of funding coming from the government, the channel has been accused in many circles of being a mouthpiece of the government of the day and has been dismissed as uncompetitive compared with private channels.

Doordarshan has an international channel, DD India, which is available in countries like Canada, the US and the Middle-East.

However, Arora said DD India was targeted only at expatriate Indians. “It has special programming designed only for Indians living abroad and is of not much relevance to foreigners,” he said.

News: Saving grace for Indian growth

(TT 15/06/2006) New Delhi - Prime Minister Manmohan Singh’s dream of an economic growth rate of 8-9 per cent will go bust unless savings rates are heaved up to 32 per cent and FDI flows enhanced.

The Planning Commission in its draft approach paper to the 11th Five Year Plan has warned that the present savings rate of 28-29 per cent could merely ensure a GDP growth rate of about 7.5 per cent.

To touch 8-9 per cent growth, a pet theme of the Prime Minister, the savings rate requires a big push, according to the paper which will soon be circulated within the cabinet.

Plan panel advisers said, “The only way to push up the saving rate, will be to work out a package of fiscal incentives to get people and companies to save more.” This contrasts with the finance ministry’s manoeuvres to cut tax saving exemptions.

But officials said, “While multiplicity of tax saving schemes are not needed, a broad direction that it pays to save can be given by offering better incentives. We believe this should be done, especially in the pension and insurance sectors, which primarily finance long gestation infrastructure projects.”

Aware of such energisers, the UPA plans to push through a legislation to open up the pension sector, with up to 26 per cent FDI, to be followed by incentives in the next budget. “Opening up the sector will bring in more funds into play, besides attracting large amounts of FDI,” officials said.

The UPA is also likely to move ahead on FDI in retail in a limited format keeping Left sensibilities in mind. It also intends to lift the barriers before FDI in infrastructure, a sector where there are no policy differences with the Left.

A major thrust is higher FDI in mining and power. Multinationals are lobbying for 100 per cent FDI in mining, despite an upcoming review of the National Mineral Policy induced by domestic companies which are opposed to export of scarce minerals.

Steel majors like the Mittals and Posco prefer both iron ore and captive coal mining to be opened up to 100 per cent FDI. They want specialists to undertake captive mining. These units need not own the steel mills to which the ore from the captive mines will be supplied.

News: Tatas say no plan yet for GSM mobile service

(RTR 15/06/2006) Mumbai - The Tata group said on Thursday it had no immediate plans to embrace Global System for Mobile Communications, or GSM, for its mobile phone services and would stick with a rival broadband technology.

The group's firms offer services under Code Division Multiple Access standard, touted as a high-speed technology competing with GSM to attract users in India's booming mobile phone market.

"We firmly believe in the CDMA technology and remain committed to growing the business (in India)," Darryl Green, chief executive officer of Tata Teleservices Ltd., the group's dominant mobile services firm, told Reuters.

India had 101.17 million mobile phone users at the end of May, of whom 75.29 million had taken the GSM service and the rest opted for CDMA. The country adds more than four million users each month.

Tata's statement comes days after its main CDMA competitor, Reliance Communication Ventures Ltd., applied to the Indian government for GSM frequency as part of a plan to expand services.

Indian media have speculated that the Tata group might enter the GSM sector, but Green would only say, "we are watching the situation."

CDMA is a proprietary standard designed by Qualcomm Inc. and is the dominant network standard for North America and parts of Asia. GSM is widely used across most of Asia and Europe.

Green also said that Tatas would wait to see what Reliance Communication did with its CDMA network as it expanded in GSM.

Reliance Communication has 19.5 million users, while Tata group firms that operate under the "Tata Indicom" brand together have nearly 10 million users.

News: 'Japan, India could have trade pact by '07'

(RTR 15/06/2006) Tokyo - Japan and India could establish a free trade agreement by the end of the year, India's commerce minister said on Thursday.

Closer economic cooperation would be to the advantage of both Asian nations, Commerce and Industry Minister Kamal Nath told reporters during a visit to Tokyo.

"I think by the end of the year we should be able to put an economic partnership agreement with Japan into place," he said, adding that study groups had been discussing the issue for two years and were to make a report in two months.

Japan is already the fourth largest foreign direct investor in India and the largest institutional investor, Nath said.

Nath and his Japanese counterpart Trade Minister Toshihiro Nikai earlier announced an action plan to help smaller Japanese companies invest in India.

"Large Japanese companies have known India, been in India for a long time," Nath said. "But the small and medium-sized enterprises which are a repository of technology and innovation in Japan, we are looking at the Japanese government facilitating them, the Indian government facilitating them to invest in India."

Among other measures, the trade ministry will set up an investment promotion desk for Japanese investors interested in India, the two ministers said in a joint statement.

News: Hedge funds go hunting for Indian mid-cap stocks

(RTR 15/06/2006) London - Hedge fund managers are going shopping for Indian stocks, especially those of medium sized firms in the consumer, technology and infrastructure sectors with potential to become blue-chips.

Does that mean that they think the rout, which has seen the Indian market drop by about 30 percent since May 11, is over?

Not quite. Managers think the market could slip by another 4 to 6 percent as what is left of the hot money withdraws.

But that won't stop them looking for stocks that have high earnings potential and use the themes of strong domestic demand and government spending on infrastructure.

"There are some very attractive opportunities ... The market right now is in a healthy disposition," John Morris, president of U.S.-based Fulcrum Investment Group, told Reuters.

"The immediate flow of funds will be back to large cap market leaders, that's the obvious play ... There were a number of mid caps that were extremely attractive to us before the correction, I think they were disproportionately sold off."

Belief in the potential of India's economy and companies to yield high returns was a major topic of conversation at an Indian hedge fund event earlier this week in Geneva, organised by Jetfin Events.

India is expected to account for around 15 percent of world gross domestic product by 2025 from around 2 percent now.

Valuations of Indian stocks as measured by price/earnings ratios are expected to fall further from averages around 15 now. Prior to May 11 the average was estimated at above 20.

"We could see lower valuations as the market falls further, but not much more," a hedge fund manager said. "The mid-cap space is bigger and more mid-cap stocks fit the consumer, technology and infrastructure themes."

The consumer theme is based on rising affluence in India, particularly the growing middle class, which is now estimated to account for more than 50 percent of India's population compared with less than 40 percent in 1995.

A recent McKinsey report said India's growing market for consumer goods could reach $400 billion by 2010 from around $250 billion in 2003. That would make it one of the world's five biggest retail markets.

"What will these people want? Televisions, phones, mobile phone, cars ... That tells you about the sorts of things we are looking at," another hedge fund manager said.

"Bigger houses, mortgages and banks are another theme as is the luxury goods market, which isn't so obvious ... Technology goes with economic maturity and the shift away from an agricultural-based society."

On the infrastructure side, the government plans to raise spending on things like roads, airports, utilities such as electricity and water, railways and telecoms by about 75 percent in 2002-2007 compared with 1997-2002.

News: Ambani’s GSM move sets a cat among pigeons

(DNA 15/06/2006) New Delhi - Reliance Communications Ventures Ltd' application to the Department of Telecommunications (DoT) seeking spectrum for GSM services across the country has triggered a theory that the Anil Ambani-owned CDMA major may move over to GSM technology over a period of time.

A source in the government said, "the Reliance application suggests that the group wants to move over to GSM".

It is learnt that the group has sought spectrum for GSM services across the country, wherever it's available.

Also, Reliance Telecom, which already operates GSM services in eight circles with 2 million users, is planning a significant expansion with an investment of around Rs 1,500 crore.

This has come as a surprise as Reliance Communications already has almost 20 million CDMA users in the country.

Tata Teleservices, the other major CDMA player in the country which would be left alone if Reliance makes a switchover to GSM, was not available for comment.

Reliance Communications, which has been tight-lipped so far, has come out with an official comment on the issue on Thursday.

A company spokesperson said, "We are committed to pursue the world's leading mobile technologies, whether CDMA or GSM, to provide the best and most competitive services to our many million customers".

Industry interpretation of this statement has been varied.

An analyst argued that "it's all about spectrum play" as telecom mobile players representing both GSM and CDMA have been demanding more spectrum than what they are being allocated.

However, a DoT official said, "It may not be easy for Reliance to get additional spectrum for GSM services, unless they surrender some of their CDMA spectrum".

DoT, it is learnt, has asked Reliance for details on their GSM rollout plan and as to where it would like to vacate its CDMA spectrum.

If it's not for more spectrum, the switchover to GSM could be for the high royalty fee being charged by CDMA technology licensor Qualcomm, a source said.

While in India, Qualcomm charges a royalty in the range of $13 to $15 per CDMA chip, it's much less at around $3 in countries such as China and Korea, the source added. Qualcomm officials refused to comment on any issue.

As against GSM's open platform, CDMA is a proprietary technology. That's the reason why a CDMA subscriber has to buy a handset from a service provider such as Reliance or Tata Teleservices.

Giving an industry view, Ernst & Young head of telecom practice (India), Prashant Singhal, said a CDMA operator may not logically like to switch over to GSM completely because there is a huge cost involved.

Singhal said that the two technologies - GSM and CDMA - can perhaps merge for 3G services.

Also, if Reliance has to exit from CDMA, it needs to refund the handset cost to the subscriber or provide him with a GSM handset, an industry source said.

In the case of Reliance handsets, they are network-locked. There's no grey market also for such handsets, it is believed. With 20 million CDMA subscribers, the cost for handset itself would alone come to around Rs 5,000 crore (if a handset costs Rs 2,500). Also, it would lead to a high-degree of customer dissatisfaction.

Another problem is that of equipment, if there's no exchange. It is learnt that Reliance sources its equipment from Lucent, which is only into CDMA. "So, exchange will be an issue," the source said.

Besides, CDMA players will have a 3G advantage when it is launched, it is understood.

Globally, the Spain-headquartered Telefonica, a CDMA player, is one of the operators to have made a technology switch of some kind. But in regions such as Latin America, where the operator got into GSM, Telefonica operates both GSM and CDMA.

India is a GSM-centric country like most in other parts of the world. The US and Korea are considered CDMA countries in a big way. In India, there are 75 million GSM mobile subscribers, against 26 million CDMA subscribers. Globally, there are 2 billion GSM users and 318 million CDMA subscribers.

Meanwhile, China, which is the leading mobile phone country with over 400 million cellphone users, is experimenting with a home-grown technology-TDCDMA-for launching 3G services later this year.

News: 2 Italian jewellers to set up shop in India

(BL 15/06/2006) Mumbai - Two Italian jewellery companies will be setting up shop in the Indian market, according to Vittorio Mecozzi, Italian Trade Commissioner.

He said: "Due to a positive response received from the Indian Jewellery market after IIJS 2006, Rossana Oro Fashion and Consorzio Oro Italia are in the process of establishing their presence in India." Rossana Oro Fashion has plans to unveil its Venetian glass, gold and silver jewellery collection.

Consorzio Oro Italia, which deals in finished gold (white, black, red, and natural) jewellery, will launch a completely new concept in the Indian market. Apart from this, other Italian companies are also currently in negotiations with major Indian companies in terms of distribution of their machine-made and handcrafted jewellery in India.

"With gold prices rising, it is expected that the Indian consumer will move towards 18k gold jewellery which in absolute terms costs 26 per cent less than 22k jewellery," he said.

News: India Inc most optimistic on hiring

(BL 15/06/2006) Bangalore - Amid rising petrol prices and falling stock prices, Indian jobseekers have something to cheer about: corporate India is most optimistic about hiring intentions for the coming quarter.

According to the Manpower Outlook Survey for the third quarter of 2006, covering 25 countries including India, Hong Kong, and Japan, the optimism is highest in India with the Net Employment Outlook at +43 per cent, followed by Hong Kong at +27 per cent and Japan +24 per cent. Among the seven sectors surveyed, services is the most positive with a bullish Net Employment Outlook of +50 per cent, followed closely by mining and construction at +49 per cent.

The survey covered 4,550 employers across seven sectors: finance, manufacturing, public administration and education, services, transport and utilities, wholesale trade, and retail trade.

The transportation and utilities sector has seen a fall of nine percentage points from the previous quarter, reporting an Outlook of +37 per cent.

News: 'India funds witnessed $1-b outflow in last 3 weeks'

(TV18 15/06/2006) Mumbai - India funds have seen almost $1 billion of outflow in the last three weeks, says Brad Durham, Managing Director at EPFR. He further says that emerging market funds have seen an outflow of $1.5 billion in the last week.

Excerpts from CNBC-TV18's exclusive interview with Brad Durham:

Is it getting worse because Taiwan and Korea seem to be taking quite a bit of an outflow, but what is the overall emerging market flow picture?

The last three weeks have been pretty harsh. Based on recent history and the collective emerging market equity funds that we track, funds have had about $8.5 billion of net outflows; these are funds with about $250 billion in total assets.

If one is looking at some bright side of the picture, I think the fact that the strength of the outflows in the most recent week had reduced from previous weeks, it may be an indication of some stabilising, but most of fund groups that are conduits of flows for India have been hit pretty hard. The India funds we track have lost about a billion dollars in outflows in the last three weeks.

Which funds in specific took the hardest hit for India?

Amongst the India country funds, mainly in the JP Morgan India Fund, all the share classes have seen significant outflows. The HSBC India Fund, which is one of the bigger ones, along with the DWS Asset Management managed India fund also had sizeable outflows.

According to your report, a large part of your outflows were due to redemptions from single fund; which fund would that be?

That is the Russia country fund called the Hermitage Russia Fund. It is about $4-billion fund. The reason why the flows were significantly strong out of that fund was that the fund manager is currently not on good terms with the Russian Government. He is detained in London and is not able to get a visa to get back into Russia.

Another reason is that the fund is open for quarterly subscriptions. Redemptions and some of the selling pressure built up was realised in a single week.

Is there a strong outflow situation in other developed markets as in emerging markets or are you seeing the flow getting stemmed at some end of this curve?

Outflows out of the emerging market funds are strong. But the US funds that we track, actually the large-cap funds, in most recent weeks had significant inflows.

Japan funds have fairly stabilised and fairly moderate outflows have been seen in the last week or two. The same is true for Europe funds. But significant outflows have been from emerging markets.

If one looks at the global sector funds that we track, energy funds particularly have been in favour with investors recently.

Do have any anecdotal evidence of what you are seeing across emerging markets from the hedge fund fraternity and the BRIC funds, and whether you have seen some kind of growing outflows in the last one week?

BRIC funds recently saw inflows, which was somewhat surprising. In the outflows seen in the last two-three week period, these emerging market funds have lost $8.5 billion, while the BRIC funds have only lost about $500 million, which is not that significant.

In the geographically-oriented hedge funds that we track, outflows have not been any more distinct than some of the long-only funds that we track.

Anecdotally, hedge funds maybe doing some significant de-leveraging right now, given the global liquidity tightening up and interest rate hikes across the globe.

News: 'Venture capitalists bullish on India now'

(BL 15/06/2006) Pune - Venture capitalists are now looking at India as a destination which cannot be kept on the sideline any longer, be it for reasons of cost arbitrage or even the human resources. Of this, about 16 per cent is likely go into the information technology segment. And according to venture capitalists "there can never be a better time for Indian entrepreneurs". This is the thought for food with which the Nasscom concluded its Product Summit in Pune.

Sridar Iyengar, President TiE, commenting on the global scenario, said that the Indian market was just waiting to be tapped. He said that initially there was a dip in the funding efforts as people were more interested in finding out what was the Indian scenario before pooling in their resources. Now the situation is such that the entrepreneurs know about their traditional market opportunities as also the requirements of the global market for which they are gearing up. Intel Capital, the Intel Technology's VC arm, has already announced a $250-million fund for India during last December. Kumar Shiralagi, Director, Intel Capital, commenting on the investments, said that it has already invested in five companies in India - Persistent Systems, Mobi Apps, Maya Entertainment, Real Image and Mauj.com.

Sandeep Murthy, Partner, Sherpalo Ventures, Indian representative for Kliener Perkins Caufield and Byers, said that there would be at least five different seed funds which would have about $30 million each, thus helping the start-ups, within the next 12 months.

News: Selling the India story in Tokyo

(BL 15/06/2006) Tokyo - Despite a continued spell of overcast weather conditions and Japan's recent loss to Australia in the World Cup soccer match, the mood here in Tokyo seems rather upbeat as the India-Japan Business Summit leads the way for the World Economic Forum's two-day East Asia Summit on Thursday.

With the world's number two economy reporting lower fiscal deficit and unemployment numbers, the next three days here are most definitely an Asian success story, replete with a reviving Japan and an emerging India. While Japan is playing the gracious host, India's presence is felt everywhere.

Strong Indian contingent

The `India Everywhere' campaign, which has had touchdowns in Davos and Hannover, takes a full circle here.

An Indian delegation led by the Commerce and Industry Minister, Kamal Nath, and a strong India Inc contingent are attempting to impart a fresh thrust to the campaign.

Apart from India's rise and its integration further into East Asia, the WEF deliberations on Thursday will be dominated by Japanese revival and the future of the China's manufacturing juggernaut.

With the theme, `Creating a New Agenda for Asian Integration', the India-Japan Summit, co-sponsored by the Ministry of Commerce and Industry and Japan's Ministry of Economy, Trade and Industry, saw much focus on renewed investment opportunities in India in sectors such as manufacturing, infrastructure, biotechnology and R&D, as well as India's commitment to open up markets to Japanese goods.

Massive potential

Speaking at the Summit organised by the CII, the India Brand Equity Foundation (IBEF), and the Japan External Trade Organisation (JETRO), Kamal Nath said that India in the next five years is likely to generate investment opportunities to the tune of $500 billion, of which infrastructure could provide $250 billion and manufacturing another $130 billion. He urged Tokyo to review its strategy to tap this massive potential.

India also envisages that the Comprehensive Economic Cooperation Agreement (CECA) with Japan, which would double the bilateral trade to $10 billion in three years, would be ready by this year. The Minister also invited Japanese SMEs to tap business opportunities in India and invest in the upcoming Special Economic Zones.

News: Investors seek to exit India focussed foreign funds

(PTI 14/06/2006) New Delhi - The stock market's continuing love affair with the bears is making investors shy away from not only domestic mutual funds, but also India-dedicated foreign funds that is evident from the redemption pressure on them.

According to the latest fortnightly report by Emerging Portfolio Funds Research, which tracks more than 15,000 international funds across the US and emerging markets, India-dedicated funds witnessed huge redemption pressure during the first two weeks of June.

The EPFR-tracked India dedicated funds witnessed redemptions aggregating to about $327.2 million (Rs 1,504 crore) during this period, the report added.

A plunge of nearly 27 per cent in the Bombay Stock Exchange's 30-share benchmark Sensex in just one month has seen domestic investors also joining the race to exit doors, EPFR said.

However, the data shows that the domestic investors are late in seeking fund withdrawals, as compared to the withdrawal from foreign funds.

Despite the sharp rise in both the Sensex and broader BRIC (Brazil, Russia, India and China) markets until early May this year, EPFR-tracked funds were net buyers of only $672 million worth of Indian equity during the first quarter of 2006 compared to $1.62 billion for Brazil, $2.5 billion for Russia and $4.52 billion for China.

Moreover, these funds were net sellers of Indian equity during April, with global emerging market (GEM) funds cutting their Indian holdings by 4.31 per cent and dedicated Indian funds turning net sellers for the first time since last June, the report added.

According to the report, the investors have been punished over the past few weeks for things that they had happily overlooked when the markets were soaring high.

The country's current account deficit, which has expanded as booming growth stimulated demand for increasingly expensive imported oil, is being reassessed in light of the role foreign portfolio capital plays in plugging the gap, it said.

A fresh scrutiny of the glacial pace of economic reforms and concerns related to infrastructure and inflation is on, the report said.

According to EPFR, the high level of skepticism has ironically come at a time when India's economic growth has accelerated to over 9 per cent and the government has raised fuel prices to curb the fiscal deficit, while RBI has taken an pre-emptive measure against inflation by raising the interest r ates, it added.

While, the recent correction has led to a sharp decline in the valuations, bargain hunters are still holding back, the report said.

The average price to earnings (P/E) ratio of the 30 Sensex-listed companies has dropped from nearly 20x in early May to below 16x currently.

Meanwhile, the fund managers are expecting further volatility until the US Federal Reserve's interest rate meeting late this month and the second-quarter corporate earnings results in the next month, EPFR said.

News: Ambani in Rs 2000 crore West Bengal retail plan

(DNA 14/06/2006) Mumbai - At a time when Reliance Industries' retail plans are facing stiff resistance from the government and farmers in Punjab, its retail initiatives are making big headways in West Bengal.

Mukesh Ambani's Reliance group is in talks for a partnership with key real estate players like Kolkata-based Harsh Neotia for Reliance's proposed retail supermarkets, hypermarkets and speciality stores that will dot across West Bengal.

"We have had a couple of discussions on the retail idea. Things are yet to be firmed up," Harsh Neotia told DNA Money.

Meanwhile West Bengal government sources confirmed that Mukesh Ambani will meet chief minister, Buddhadeb Bhattacharya on June 22 to finalise land acquisitions.

The picture will be clearer in the last week of June and official announcement for Reliance's proposed Rs 2,000 crore investment is likely to be made in the first week of July by the state chief minister. Sources said Reliance will acquire 30 lakh square feet of warehousing space, estimated at around Rs 500 crore, which would be part of the supply chain in infrastructural backbone for its retail ventures.

This infrastructure would enable the company to procure from farmers at remunerative rates through buy-back agreements. It is learnt that Reliance is looking to source its requirement of potatoes, tomatoes and select vegetables from West Bengal.

Some 60 outlets are on the drawing board which will sell agro products and export them too.

Apart from Reliance, Bharti group and Daburs too are foraying into retail ventures even as the issue of foreign direct investment (FDI) in retail is hotting up with the centre facing a storm over the issue.

News: Papa John’s to widen India’s pizza base

(TNN 14/06/2006) New Delhi - Papa John’s, the world’s third-largest pizza company with close to 3,000 outlets in 22 countries, is the latest entrant in the Rs 2-bn Indian pizza market.

Om Pizza Eats India, master franchisee in north India for the US-based pizza chain, opened the first Papa John’s store in Noida on Tuesday as part of its 100-store development agreement over 11 years. Om Pizza Eats already operates a Papa John’s outlet in Gurgaon as a test store.

It is also considering three other sites to open new stores, with plans to open five stores out of the planned 100 in ’06. In a market where Pizza Hut and Domino’s have established their presence, Papa John’s International CEO Nigel Travis said he’s confident the US-based pizza chain’s USP of ‘better ingredients, better pizza’ will help it make its mark.

Mr Travis said a booming economy, a young population, coupled with Papa John’s better quality pizza and a right local partner make him sure of Papa John’s success in India. “India is one of our top six priority markets, alongside China, Mexico, Russia, Korea and the UK,” said Myles A Felt, vice-president, International, Papa John’s.

As to why the pizza chain was focussing on only the Northern region, Mr Felt said it was a model followed by Papa John’s worldwide and it was the master franchisee’s choice to start with North, given the pizza consumption pattern in India.

“Our target audience is sec A and B,” said Mr Felt. He said the premium pricing would not deter those wanting to try better pizza. “Investment per outlet ranges from Rs 80 lakh to Rs 1.4 crore,” said Dan Deva, CEO, Om Pizza Eats, a subsidiary of US-based OM Enterprises. Break-even can take 2-3 years, he added.

While the first outlet is a dine-in cum delivery unit, the other outlet format will depend on the location, said Mr Felt.

News: Indian hotels jack rates up 20-40%

(BS 14/06/2006) New Delhi - These are curious times for travellers. While air fares have been falling, the average room rates of five-star hotels across the country are now 20 to 40 per cent higher as compared with rates a year ago.

The rates have been riding on the back of robust demand — fuelled by hectic corporate travel due to the booming economy in general and aviation, information technology and IT enabled services in particular.

Welcomgroup vice-president B Hariharan said the chain had increased its number of rooms by 3 per cent, in line with the rising demand.

Still, in the National Capital Region alone, estimates are that an annual demand of 8,000-9,000 rooms is not being met because of lack of rooms or rates being too high, according to Siddharth Thaker, associate director with HVS International, a hospitality consulting outfit.

Data for April show that ITC Welcomgroup has increased its rates by as much as 33 per cent in all the busy cities, such as Mumbai, Delhi, Kolkata and Bangalore.

In these cities, the rates now stand at Rs 6,500, Rs 8,000, Rs 4,400 and Rs 13,000, respectively, per night.

Oberoi's rates have increased by as much as 39.5 per cent in Kolkata (Rs 5,351), 29.78 per cent in Mumbai (Rs 10,972), 21.4 per cent in Delhi (Rs 9,990), and so on.

Leela has increased rates by 28.8 per cent in Bangalore to Rs 18,353, arguably the highest in the country, 38.6 per cent in Mumbai to Rs 7,806 and 13.4 per cent to Rs 6,799 in Goa.

The Taj group's figures could not be obtained officially. However, industry figures show a 33 per cent rise in rates of Taj Bengal, in Kolkata, 36.5 per cent of Taj Heritage in Mumbai, 30.9 per cent of Taj West End in Bangalore and 24.6 per cent in Taj Mahal, New Delhi.

The Park has raised its rates by 52.8 per cent in Delhi, 24.9 per cent in Kolkata, 40.86 per cent in Chennai and 58.38 per cent in Bangalore.

Hariharan pointed out that there had been a 50 per cent increase in the frequency of flights in the last 12 months alone.

Then, the old problem of seasonality -- which entailed long periods of low occupancy at the hotels -- seems to have resolved itself.

Instead, in the metros there is now a weekly swing -- high demand Monday to Thursday, a little lower on Fridays, and a sharp dip on the weekends. That again can be put down to the routine of corporates.

However, the weak weekend demand does not necessarily mean low rats. Instead, One can find hotels offering free lunch or free laundry on weekends.

News: Dutch firms bullish on India Inc

(BS 14/06/2006) Mumbai - Netherlands-based corporate houses have been strengthening their ties with India and are looking forward to establishing new relationship with their Indian counterparts.

"The possible business opportunities can be in agriculture, logistics, pharmaceuticals, entertainment and communication sector," said Hans Ramker, Consul General for Netherland at a meeting organised by the Mahratta Chamber of Commerce, Industry and Agriculture (MCCIA) on Monday.

"Indian agriculture exporters - especially flower and vegetable - are already active in the Netherlands and we can enhance the relationship with co-operating in processing, packaging and distribution of India agri-produce," he said.

Services business between the two countries, led by information technology, is expanding and there are strong signs of its growth, he said.

"The highest investments from Indian companies have come to the Netherlands in 2005-06 and it grew to $244 million. The trade between the country and the Netherlands is around $2 billion," he said.

He said Dutch multimedia companies were sourcing India's skills in design and printing and had partners in cities such as Ahmedabad and Mumbai. There are greater opportunities in movie making and processing," Ramker said.

Indian exporters can use the Netherlands as distribution base as it offers excellent connections to Europe and North America, he pointed out.

There is a significant scope for Indian bulk drug and generic pharmaceuticals companies to export to Netherlands.

News: '$100 bn exports for India'

(Bloomberg 13/06/2006) New Delhi - Indian factories are expected to double their annual exports to $100 billion in the next four years, replicating the success of a remote-office industry that has made the South Asian nation a services hub.

Low labor costs and a tradition in precision engineering will draw investments in the manufacturing sector in India, which will emerge as a sourcing destination for overseas companies looking to cut expenses, New Delhi-based Associated Chambers of Commerce and Industry of India, or Assocham, said in a study yesterday.

Textiles, engineering, pharmaceuticals and automobile parts are among the industries poised for the fastest expansion, Assocham President Anil K. Agarwal said.

``The perception of India as a manufacturing center has changed in the West and India is quite hot from the sourcing standpoint,'' Kavan Mukhtyar, Asia Pacific director for transportation at global research company Frost & Sullivan, said in a phone interview today from Malaysian capital Kuala Lumpur.

``Indian labor is still about 15 to 20 percent cheaper than Malaysia and the biggest strength is its engineering skills.'' India is trying to narrow the gap with its neighbor China and Southeast Asia as a manufacturing center, drawing companies such as Nokia Oyj, Ford Motor Co. and Toyota Motor Corp. to set up factories in the country. The federal government is keen to improve roads, ports and power supplies, moves that will enhance India's export-competitiveness and create jobs for the nation of a billion-plus people.

BOOSTING EXPORTS

India wants to increase exports to boost industrial growth to the 10 percent pace that Prime Minister Manmohan Singh's government says is required to spur economic expansion to more than 8 percent each year. Exports make up about a 10th of India's $775 billion economy.

A dominant player in the services industry, which accounts for more than half the output of India's economy, the federal government is trying to enhance the share of industry in the gross domestic product. A higher contribution from industry to gross domestic product will help absorb surplus agricultural labor in factories and boost disposable incomes in rural areas.

The contribution of manufacturing to India's gross domestic product is about 17 percent, compared with about a third for competing economies such as South Korea or Thailand, Agarwal said. New investments in factories are expected to add 25 million new jobs, of which as many as 10 million will be in textiles alone, he said.

`SOURCING'

"Global trends in manufacturing and sourcing of products to low-cost countries like India will gather strength over the next 10 years, particularly in skill-intensive industries, in which a country like India will have significant competitive advantages," Agarwal said.

The government is trying to unshackle manufacturing from bureaucratic delays and improve efficiency by creating special economic zones, or enclaves, modeled on China's Shenzhen.

Tax breaks and easier labor laws are being offered to draw investments to the China-style trade zones. The special zones, in which developers will get tax incentives and provide power, water and other utility services, are expected to enhance the export-competitiveness of a country trailing China due to its inadequate infrastructure.

News: India's FY07 growth to slow to 7.9%

(RTR 13/06/2006) Mumbai - India's growth rate is likely to slow to 7.9 per cent in the fiscal year to March 2007 from an earlier forecast of 8.0-8.25 per cent as manufacturing output moderates and farm production dips, a thinktank said on Tuesday.

The Centre for Monitoring Indian Economy (CMIE) said in its monthly report it expected the services sector, which contributes a little more than 50 per cent to gross domestic product, would be the key driver of India's growth.

It forecast services to expand 9.6 per cent in 2006-07, compared with 10 per cent a year earlier.

India's financial year runs from April to March and Asia's third-largest economy has expanded at an average 8 per cent in the past three years. It grew at an estimated 8.4 per cent in 2005-06.

"We expect agricultural and allied activities to grow by 2.5 per cent during 2006-07," CMIE said. "During 2005-06 its growth was better than anticipated at 3.9 per cent. We expect manufacturing to grow at a robust rate of 8.5 per cent against the higher growth of 9 per cent in 2005-06."

Despite a lull in the monsoon, weather department officials expect normal rains this year. This would help crops, which mainly depend on the four-month monsoon for irrigation.

This would also boost rural incomes of 600 million Indians who live off the land, a major driver of consumption and so industrial output.

India's industrial output in April rose a higher-than-expected 9.5 per cent from a year earlier, data showed on Monday, boosted by consumer spending on items such as cars and televisions. It was the fastest pace of expansion since October 2005.

Manufacturing, which makes up more than three quarters of industrial production, increased 10.4 per cent from a year earlier, compared with 8.9 per cent in March and 9.5 per cent in February.

CMIE said Indian industry was investing heavily to expand operations or build new ventures, with a survey it conducted showing fresh investments at Rs 1.57 trillion ($34.1 billion) in the April 2006 quarter.

The outstanding investment in all industries at the end of April was 28.7 trillion rupees, 43.5 per cent higher than a year earlier, it said.

News: Indian Finance Minister charms Brussels

(IANS 13/06/2006) Brussels - 'The India story' presented by Finance Minister P Chidambaram in Brussels has won over European Union officials, policy makers and members of the European business community.

"Infrastructure is a deficit for India but an opportunity for investors," Chidambaram told European business leaders at an investment meet Monday evening.

He also stressed that India was an exciting and interesting opportunity for investors owing to "reforms embedded in a democratic polity, equitable society and inclusiveness".

Attractive incentives for foreign investment, the finance minister noted, were India's commercial laws, its best banking system, the finely tuned financial services sector and its free imports and exports.

He underlined India's comparative advantage in the IT sector, announced plans to turn the country into a manufacturing hub and reassured the business community that the Indian rupee was virtually convertible for foreign investors.

Chidambaram also met the European commissioner for economic and monetary affairs, Joaquin Almunia, and discussed EU-India economic and commercial relations.

"The EU has expressed a desire for greater engagement with India," he said and mentioned the possibility of upgrading EU-India relations with an interactive macroeconomic dialogue.

Amelia Torres, Almunia's spokesperson, told INEP agency that the commissioner "enjoyed a good and fruitful meeting" with Chindabaram.

"One of the features of the dialogue is to meet regularly and discuss economic trends and common challenges of the world economy. This could add to the ongoing dialogue in the context of the action plan; the economic chapter focused on finance and regulatory issues," she said.

The minister managed to squeeze in a brief meeting with representatives of Antwerp's Indian community who control around 60 percent of Belgium's $36 billion trade in rough and polished diamonds.

Mukul Joshi, managing director of the Belgium-based diamond firm, Belindiam, as well as a board member of the diamond industry's main regulating body, the High Diamond Council, said the minister was updated on the Belgium government's initiative to stimulate Antwerp's diamond sector.

Chidambaram concluded his one-day visit with an impressive and lucid outline of Indian economy at a lecture organised by the Brussels-based think tank, the European Policy Centre, in cooperation with the Japanese Saskawa Foundation.

The minister noted that although India's gross domestic product (GDP) was growing at about 8 per cent annually, the manufacturing and non-industrial sectors reported a growth of 10 per cent over the last 11 quarters while the agricultural industry's growth was restricted to 4 per cent.

Growth, the minister said, was imperative to India's economy. "Growth is needed to fight poverty," he said, adding: "Only high growth would provide jobs for 8 million youth that enter India's job market every year.

Column: Can India fix its 'macro'?

(BS 13/06/2006) Mumbai - What does the average Chinese businessman think of India? I put this question two months ago to an Indian trader I met in China’s textile capital Shaoxing, some four hours south-east of Shanghai.

Over a vegetarian pizza, he told me that most of his Chinese clients considered India with respect, some even with fear. After all, Indians were teaching otherwise crafty Chinese entrepreneurs a trick or two about the textile trade. And then there was the tale of a school teacher’s son and his six colleagues setting out with $250 in their pockets 25 years ago and creating the $2 bn Infosys Technologies.

A few months ago, the owner of a large Chinese textile unit accompanied him on a visit to India. The mill owner was sewing up some big contracts with Indian garment exporters. And of course to see this “fast-growing nation” for himself. “Guess what,” said the Indian trader, “The moment we landed at Mumbai and emerged from the airport, something changed. I could see the Chinese mill owner breathing a visible sigh of relief.”

He said other traders had similar stories to narrate. Visiting Chinese businessmen would speak well of India for its market potential and entrepreneurship. But on India as competition, they changed their opinion the moment they cleared immigration. The perception they had built up did not match the reality they experienced. “‘We don’t have much to worry,’ the mill owner told me,” the Shaoxing businessman said, polishing off the last piece of the pizza.

Two weeks ago, GE Chairman Jeff Immelt towered over Mumbai’s corporate who’s who as he outlined his firm’s revised India vision. “$8 billion by 2010,” he announced to an attentive audience. How? “Well, for an economy to grow 8 per cent, you need power, planes.” Immelt said broad-based consumerism, which wants basics as power, transport and water supply, was the driver. “Once people have tasted an economy that grows at 8 per cent a year, they get used to it,” he said.

And then Immelt dropped his gem for the day. “The government and everything else work in China. The expressways and airports are just like those in Chicago and New York. China has got the macro picture right, India the micro picture. India’s pluses are fantastic companies and systems.” So, he said, with a flourish, India had to fix the macro picture. China has to fix the micro picture.

Since then, I’ve been posing that question to myself. Let’s for a moment focus on the perception of whether we can fix the macro rather than whether we will fix it. Let’s also assume, this writer’s perceptions are clouded by journalistic pessimism.

Take the case of Mumbai, the city I live in. After years of debates, protests and court cases, a “new” airport will rise in the place of the only, old one. Will it be bigger? Not sure, that depends on whether the slum dwellers who muscled in alongside can be rehabilitated. Will it have better access? Not sure, looks like I will have to pass the same shanty towns to reach the international terminal. And no direct road. So, it’s a look and feel show. A new airport is under consideration, though, for, possibly two decades.

A city metro system was under debate and discussion for as long, if not more. Work should start later this year. With the city’s population straining over 17 million inhabitants, a metro (as and when it sees the light of day) will help. Unlikely, it will change life much.

An island city like Mumbai needs a water transport solution: think Star Ferry in Hong Kong. We must be in the third, or is it the fourth decade of planning and announcements? No solution is even in sight. So, don’t expect dramatic quality of life changes for a few decades. What about power? Mumbai city scores here, though northern suburbs suffer. Let’s not even talk of Bangalore.

In my last column, I talked about how investors are pouring money into China’s mega bank IPOs. Only because they feel China is fixing its micro, to use Immelt’s term again—he spoke of airports like New York and Chicago. Actually, China might do a little better. Particularly, if you were to consider Shanghai’s Pudong International, which is going from two runways to five. Or the recently completed 1,142-km Qinghai-Tibet railway line, a massive engineering feat.

So, will India fix its macro? And, more importantly, when? If I haven’t seen real action for the past two decades, what do I see today that suggests a magical transformation in the next two? Very little. I’ve heard of the $150 billion opportunities number for a decade at least. Funny, the figure does not change. Shall we win the marathon against China in the next three or four decades? Probably. But chances are I may not be around. Nor, if you are reading this, will you. But China will fix its micro a lot sooner. That I am sure. And I am sure Immelt too is sure.

So, what should the average Chinese think of India? What should the average Indian think of India? The Shaoxing businessman tells me India has opportunity but should stop comparing itself with China. “Forget the infrastructure. Even we are treated better here,” he tells me. Now, is that a macro or a micro problem?

By Govindraj Ethiraj

News: 'Mumbai to be showcased as financial hub'

(BS 13/06/2006) Mumbai - Aiming to bring about balanced development and decongest Mumbai, the Maharashtra government has decided to showcase Mumbai as a financial centre while promoting other Tier II cities in the state as service and manufacturing destinations.

"We need to have all-round development of the state. As a policy decision, we have decided to promote places like Aurangabad, Nashik, Nagpur and other tier II cities as favourable investment destinations in the state. Mumbai being the financial capital would be the financial centre," said Maharashtra Chief Minister Vilasrao Deshmukh said.

"Mumbai and Navi-Mumbai have become saturated. We have other destinations which can be offered to industries and government is committed to develop infrastructure in these areas to attract investments," he added.

In the coming 3-6 years, 51 SEZs would come up in the state at an investment of Rs 89,000 crore and the overall investment, including infrastructure, stood at Rs 2,34,000 crore, industries secretary V K Jairath said.

In a survey conducted by Switzerland's International Institute of Development, Maharashtra was placed in 38th position as a favourable investment destination ahead of places like Greece, South Africa, Italy and Philippines, he said.

The state had received foreign direct investment to the tune of $13.6 billion, he added.

News: Piramal Group starts fun arcade in Ludhiana

(BS 13/06/2006) New Delhi/ Ludhiana - Wondering how to keep your children entertained this summer? The Piramal Group has the solution — it has launched its maiden family entertainment arcade called “Jammin” on the fourth floor of Ansal Plaza, Ludhiana.

After having started two such centres in Mumbai and one in Ahmedabad, this is the fourth Jammin centre in the country and the first in north India.

Jammin houses the largest collection of games under one roof. It has video games, simulators, redemption games, pin ball, a shooting gallery, and bumper cars among others.

Speaking to Business Standard, Milton D’Souza, business head of Jammin said this centre is spread over 6000 square feet and had games for the whole family. “It’s a complete family entertainment centre. The launch of the first entertainment centre in Ludhiana is the beginning of an exciting time for the city,” he said.

“Parents often complain that centres like these are a total waste of time and money. So as a responsible entertainment centre, Jammin has set certain rules to ensure a clean and healthy atmosphere. Instead of just making profit, we would discourage school children from playing during school hours unless under the supervision of parents or their guardians. We would also discourage them to spend excessive money without adequate supervision and no smoking and drinking will be allowed here,” said D’Souza.

Speaking on the future plans of the group, D’Souza said they planned to open 25 such centres all over the country in the next two years with an investment of more than Rs 50 crore.

“Because all the games are imported, it costs between Rs 2 crore and 2.5 crore per centre. All the games have been priced at Rs 20 per game and for the redemption games, one can easily win at least something from a pencil to a refrigerator”

Children from Ludhiana based NGO Nishkam Seva Ashram were also present for the inauguration of Jammin. Nishkam Seva Kendra is an Orphanage School near Ludhiana. The institute also runs an old age home.

News: McDonald's plans 40-50 restaurants in south India

(BS 13/06/2006) Mumbai - After focussing on the western region in its first ten years in the country, McDonalds is now planning a full scale roll out in the southern region.

"The company plans to open around 40-50 restaurants in the region in three years, focusing initially on Bangalore, Chennai and Hyderabad," said Amit Jatia, managing director and joint venture partner McDonald's India (Western&Southern Region).

Explaining why the company took ten years to move into the region, Jatia said that the logistics and supply chain are the key factors in the food retail business, which is why they follow a regional approach.

"We started with Mumbai before moving to the markets around the city. Similarly, we have started with Bangalore and have two outlets there and will gradually expand our presence to nearby cities," he said. The company would focus on self-owned restaurants, but it did not rule out the franchisee model.

McDonalds, which completes ten years in the country in October should end the year with about 115 outlets between both the joint venture partners, Jatia's Hardcastle Restaurants and Vikram Bakshi's Connaught Plaza Restaurants which handles the north and east.

At present, Hardcastle operates 34 restaurants which is slated to go up to 52 by year-end. Jatia pegged the per store investment at about Rs 30 crore.

He says that despite the company having 40,000 outlets globally, it does not believe in the numbers game. It would prefer to establish proper logistics and service standards before rolling out the stores. Regarding future projections, Jatia said that they were looking at aggressive expansion.

News: Louis Vuitton, Fendi arrive in India in style

(BS 13/06/2006) New Delhi - European high fashion just knocked on India's doors.

Louis Vuitton Malletier and Fendi —both part of the France-based Louis Vuitton Moet Hennessy — propose to pump in Rs 26.5 crore and Rs 32.2 crore, respectively, for buying 51 per cent equity in existing Indian companies and for scaling up operations here.

Louis Vuitton will buy into LV Trading, which already distributes its goods in India, and Fendi will buy into Fun Fashion India, promoted by Ashish Chordia and Sampat Chordia.

The only other multinational to have entered the Indian retail sector so far is Nike.

However, it has taken the indirect route by entering into an agreement with Moja Shoes to sell Nike's goods in India. Moja gets foreign direct investment from Tano India Private Equity Fund.

While Nike's application has already been cleared, the applications of Fendi and Louis Vuitton are awaiting the approval of the Foreign Investment Promotion Board.

Louis Vuitton Malletier, after picking up 51 per cent in LV Trading for Rs 1.5 crore, will invest another Rs 32.2 crore over five years.

The investment in LV Trading will be in the form of 51 per cent in the paid-up equity. It will also purchase 2,500,000 zero-coupon, redeemable, non-convertible preference shares for Rs 28.75 crore.

It will then subscribe to fresh issues of zero-coupon, redeemable, non-convertible preference shares worth Rs 1.32 crore. Fendi will invest Rs 26.5 crore in Fun Fashion India over the next five years.

After the investment by Fendi, the Indian company will work as a joint venture between Chordia Fashion and Fendi and distribute products through one of its stores in Mumbai.

Fendi plans to distribute products like ready wear cloths, bags, accessories, watches, jewellery and shoes through its store in India.

Fendi has also given an undertaking to the government that all products sold by the company in India through its store will be manufactured outside India and will be branded during manufacturing.

News: More Indian enterprises, more Indian jobs

(BS 13/06/2006) New Delhi - The number of new businesses floated in India over the last seven years has exceeded the Central Statistical Organisation’s projections, leading to a higher intake of people into the workforce.

The government today released the provisional results of the Fifth Economic Census 2005, which showed 42.12 million enterprises existed at the end of last year, with the number of people employed by these at 98.96 million.

The number of enterprises was around 5 per cent more than the number extrapolated at the end of the last economic census in 1998, a CSO official said.

Though the CSO had not extrapolated the employment figure, logically the actual number of people employed at the end of 2005 should also be higher than expected, he added.

The data revealed that the growth in establishment of new enterprises in rural areas outstripped the same in urban areas. Rural areas had 25.8 million enterprises at the end of 2005, up 5.53 per cent over the number in the previous census in 1998.

Urban areas had 16.3 million enterprises at the end of 2005, higher by 3.71 per cent over the previous census figure. The absolute number of people employed in enterprises in rural areas was 50.1 million, higher than the 48.7 million employed in urban enterprises.

Growth in employment between 1998 and 2005 was slower than in enterprises during the same period. This was because of the much larger base figure of employment than the number of enterprises.

Therefore, no meaning could be drawn from the slower growth rate in employment, the CSO official said.

State-wise data on enterprises showed that a shade over 50 per cent of the enterprises were concentrated in five states — Tamil Nadu, Maharashtra, West Bengal, Andhra Pradesh and Uttar Pradesh. The average employment level per enterprise was 2.35 at the national level.

An interesting trend that emerged in the fifth census was the relatively low level of hired workers in states with the highest number of enterprises, such as Tamil Nadu. Hired workers are those who receive a salary. The remaining workers could be family members of the entrepreneur.

News: Pantaloon Industries unit plans JV with Lee Cooper

(PTI 13/06/2006) Mumbai - Leading retailer Pantaloon Industries Ltd, on Tuesday said its subsidiary Indus-League Clothing will form a 50:50 joint venture company with Lee Cooper International Ltd to distribute and retail its brands in India.

The board of Indus-League Clothing approved the formation of JV company with Lee Cooper International to market and promote the 'Famous Basics' brand of eyewear and footwear, Pantaloon informed the Bombay Stock Exchange.

The JV company would distribute and retail products under the Lee Cooper brands in India from January 01, 2007, subject to necessary approvals, it added.

The shares of the company closed at Rs 244, down 5.43 per cent on the BSE.

News: India Inc raises Rs 79,446 cr via bonds

(BL 13/06/2006) New Delhi - India Inc's fund mobilisation through bonds shot up by 43 per cent to Rs 79,446 crore in 2005-06 as banks and financial institutions borrowed heavily to meet strong demand for credit in the economy.

The fund mobilisation of Rs 79,446 crore through private placement of corporate bonds was a record in 2005-06 as full 2001-02, 2002-03, 2003-04 and 2004-05 had witnessed raising of Rs 45,427 crore; Rs 48,424 crore; Rs 48,428 crore and Rs 55,409 crore respectively, according to Prithvi Haldea of PRIME database.

Only such deals, which have a tenor and put/call option of more than 1 year, are reflected in this database.

The major reason for this substantial increase was due to 80 per cent increase in mobilisation at 59,290 crore by the financial institutions and banks, compared to Rs 32,935 crore in the previous year.

The other sector, which witnessed growth was PSUs, whose mobilisation went up by 66 per cent from Rs 6,441 crore to Rs 10,719 crore.

On the other hand, a major fall in mobilisation came from state level undertakings, down by 75 per cent to Rs 889 crore compared to Rs 3,544 crore in the previous year.

State financial institutions also recorded a fall, down from Rs 2,381 crore to Rs 718 crore.

Significantly, a fall in mobilisation, according to Haldea, also came from the private sector, down by 23 per cent to Rs 7,829 crore compared to Rs 10,108 crore in the previous year.

News: Time magazine lauds India's growth

(BL 13/06/2006) New Delhi - Describing India as a country that can no longer be ignored, prestigious American news magazine Time has said the country's rise is for real but it needs to be careful about traps like the latest stock market slide.

"Once shunned for its hapless protectionism, suffocating bureaucracy and all-round commercial torpor, (India) can no longer be ignored," Time said referring to global IT major IBM's decision to invest $6 billion right after the stock market crash earlier in the month in a special report on India in its June issue.

"The country's growth rate is approaching that of Asia's other economic juggernaut, China. India is being remade, as it is increasingly integrated to the global economy," it added.

The report, however, cautioned that as the Asian Elephant awakes, there could be traps ahead.

"Yet, India's stock market slide may be trying to tell us something: Elephant traps lie ahead," it said, adding that prosperity and progress have not touched 5,50,000 villages where two-thirds of India's population live.

In many ways the country is growing in spite of itself, it said.

According to Time magazine, millions of women in India are not getting the education they need. Transportation networks and electrical grids, which are crucial to industrial development and job creation, are so dilapidated that it would need many years t o modernise them.

News: India 'the next big thing' in real estate

(PTI 13/06/2006) Jerusalem - India is being considered as "the next big thing" in real estate with many Israeli companies lining up for major investments, a media report said.

The latest addition to the growing list of possible investors in the Indian real estate sector is US tycoon Shaya Boymelgreen who recently bought Azorim Investment in Israel for $500 million from IDB Holding Corp Ltd.

He is joining hands with Nochi Dankner, a prominent Israeli businessman who briefed him over the prospects in the Indian market, business daily 'Globes' reported.

The two entrepreneurs are in contact and considering a number of joint investments in India, the daily said adding that Azorim Investment CEO, David Lev, is due to visit India in a few days in this regard.

Meanwhile, Big Shopping Centers (2004) Ltd has already set up an Indian subsidiary, Big India, with a local partner who owns 40 per cent of the joint venture, the report said.

Big India bought two half-acre plots on which it plans to build commercial centres at an investment of $40 million.

Another company's, Elbit Medical Imaging Ltd, Chairman Motti Zisser declared early this year that he planned to invest in India.

The company plans to build three commercial centres in India, which will become an important component of the company's real estate assets.

"India now resembles the real estate market in Eastern Europe ten years ago. Elbit Medical accumulated great experience in Eastern Europe, and it sees India as an excellent business opportunity," company sources told the business daily.

Alony Hetz Property and Investments Ltd controlling shareholder Natan Hetz also recently announced plans to invest $ 100 million with partners in Indian ventures.

The company will own 25 per cent in this joint venture, the report said.

Gazit-Globe Ltd, controlled by Chairman Chaim Katzman, and Ocif Investments and Development Ltd controlled by Doron Aviv and Dafna Harlev, are also interested in investing in India, it added.

News: New Indian airlines gain more ground

(DNA 13/06/2006) Bangalore - Challenger airlines like Air Deccan, Kingfisher Air, SpiceJet and Go Air continue to eat into the market share of incumbent carriers like Indian Airlines, Jet Airways and Air Sahara.

Statistics put out by the director-general of civil aviation (DGCA) on the airline market share, between September 2005 and April this year, show that all legacy airlines have lost market share even as challenger carrier are beefing theirs.

As per DGCA figures, the legacy operators have lost 14.26 percentage points as their share fell from 81% (September 2005) to 66.74% in April 2006. Of this, 4.56 percentage points were lopped off between January and April this year.

Interestingly, their loss has been start-up airlines’ gain. The share of new airlines has moved up 14.4 percentage point from 19% to 33.4% during the same period. In the first four months (January-April) of this calendar year, they have cornered 6.56 percentage points.

And who do you think is the biggest loser? It’s the one-time undisputed market leader -Jet Airways (which still is, but with a smaller lead). Its market share during the same period decreased 6.4 percentage points from 41% to 34.6%. The full service carriers’ share has been ranging in the region of 34% and 36% since January this year.

If the combined market share of Jet and Air Sahara (which was acquired by Jet in January this year for Rs 2,300 crore) is taken, then the fall is quite steep at nine percentage points, from 52.5% to 43.5%. Sahara’s market share has tumbled 3.1 percentage points since the takeover, from 11.6% in January to 8.5% in April. During this four-month period, Jet-Sahara market share has slumped 9.7 percentage points from 46.2% to 36.5%.

The airline that has bitten off the largest chunk of the aviation pie is budget carrier Air Deccan. It has scaled up its share by 6.8 percentage points to 16.7% in April from 9.9% in September last year.

This low-cost carrier, promoted by ex-pilot Captain G R Gopinath, is now missing Jet’s half market share size by 1.2 percentage points.

Another casualty among the new breed of airlines is state-owned Indian (Indian Airlines). Indian’s market share has eroded 4.86 percentage points in the eight-month period from 28.5% to 23.64%. Since January, it has dropped 1.36 percentage points from 25% to 23.64% in April.

Jet’s rival in the domestic market - Kingfisher Air - took 3 percentage points of the market as it increased its share from 4.6% in September last year to 7.6% in April. Last four months have seen its market hover between 7.6% and 8.7%. SpiceJet’s market share from September 2005 to April this year has also climbed 2.5 percentage points from 4.5% to 7.01%. Go Air, which has started releasing its market share figures since February this year, has seen its share rise from 1.8% in February to 2.09% in April.

News: Japanese firms to up investment in India

(BS 12/06/2006) Kolkata - India is likely to see a significant fillip in Japanese investment in the near future.

According to an India Brand Equity Foundation (IBEF) special report titled "Proven Strategies: Japanese Companies in India", 71% of surveyed Japanese companies in India are planning to increase their investment including majors like Suzuki, Honda, and Toyota.

The report was released today ahead of the World Economic Forum's East Asia Summit 2006 in Tokyo on June 15 and 16. The Japanese version of the report would be released in Tokyo on June 14 on the occasion of the India Japan Business Summit and would be presented to Toshihiro Nikai, minister of economic, trade and industry, government of Japan by Kamal Nath, minister of commerce and industry, government of India.

The report revealed that a majority of the Japanese companies were planning to expand their production capacity, increase their product portfolio, target new consumer segments and increase marketshare in India.

The study, which surveyed 25 successful Japanese organisations in India, highlights best practices adopted by Japanese companies to succeed in the Indian market. The report also includes profiles of 17 Japanese companies with businesses in India in diverse sectors.

"This report should serve as a strong proof point for Japanese companies looking at globally competitive investment destinations. The companies profiled here are a small sample of the 300-plus Japanese businesses that are thriving in India, today. I invite more Japanese companies to put their faith in the world's fastest-growing free market democracy," Nath said.

"There is an ideal match between the technology and finance of Japan and skilled and relatively inexpensive labour of India. This can be harnessed further to deliver quality products to the world at competitive costs," Ajay Khanna, CEO of IBEF, said.

News: Benetton plans to expand in India

(TT 12/06/2006) Calcutta - Benetton India Private Limited is on an expansion spree in India, more than doubling the number of its stores from 32 in 2004 to 80. The company, which started its operations in India in 1987, plans to set up 100 stores by the end of the year.

“We are in no hurry to apply for single brand retail in the country and would prefer to wait and watch the extent of the foreign direct investment relaxation until the end of the year,” said Sanjeev Mohanty, sales and marketing director of Benetton India Pvt Ltd.

Only three foreign brands — Lladro, Louis Vuitton and Moja Shoes Pvt Ltd — have applied for single brand retail till date. Moja has already received the permission, while the other two are having their applications processed. There is no minimum capital investment conditions put on the application process.

The company’s focus is to improve the quality of the retail presence besides expanding visual merchandising, such as point of sale, in-store ambience and shop windows. The employees will also be provided with training. Up to 35 per cent of their salary will be incentives.

The company has three stores in Calcutta, and plans to have 6-7 by the end of 2007. It is scouting for locations in central business district areas of the city. The franchisee outlets are between 1,500 sq ft and 2,000 sq ft.

The eastern region has 13 franchisee outlets and this is expected to go up to more than 20 by 2007.

Benetton has recently launched a loyalty programme in New Delhi and plans to roll it out in Calcutta before the Pujas.

“This programme is value-based instead of being point-based. There are niche programmes for various customer segments including children. The system tracks the purchases the customers make, and then depending on certain levels, extends various kinds of offers and gifts to them,” said Mohanty.

The company has a manufacturing unit in Gurgaon and sources women’s garments through third party manufacturing contracts.

Besides the apparels, the recently launched B06 range of shoes was doing extremely well in the shops, Mohanty said.

News: Pantaloon shield to ward off realty rates

(TT 12/06/2006) Calcutta - Pantaloon Retail (India) Ltd, on a 100 per cent year-on-year growth trajectory, is planning to cushion itself against the rising property prices with its own mall development and property management firm.

However, its lifestyle products might become costlier by 6-10 per cent due to fluctuating input costs. The value retail chain will remain unaffected this fiscal.

“We have been lucky to have signed with mall developers when the going was not so expensive. This is especially true in cities like Calcutta and Jaipur where property prices have gone through the roof. It is an area where Pantaloon’s mall development companies would help in absorbing the costs within the group,” said Rajan Malhotra, chief of value retail at Pantaloon.

According to industry estimates the property prices have gone up by 30 per cent in the last six months.

The company is cautious not to pass on rising costs this fiscal to consumers through its value retail chain formats, which include Big Bazaar, Food Bazaar, Electronics Bazaar, Furniture and Mobile Bazaar and Fashion Station. Pantaloon follows the July to June financial year.

“Since the last five years, despite the rising cost of plastic, steel and other commodities, Big Bazaars, which might comprise all other formats, have not hiked prices across the country. Nonetheless, strong inflationary pressures would be felt throughout this year,” Malhotra said.

Under such pressures it is important to have cost effectiveness built into the logistics system, he added.

According to a study conducted by the Centre for Monitoring Indian Economy, logistics cost account for 10-12 per cent of the GDP and inventory costs comprised $22 billion, or 22 per cent of the total annual sales in the economy.

The company caters to the lifestyle segment through its 18 Pantaloons stores and three Central Malls. The value chain has 27 Big Bazaar hypermarkets, 43 Food Bazaars and five Fashion Stations.

The company plans to have more than 70 Big Bazaars by July next year.

In 2006, Calcutta will get two more Big Bazaars, while Haldia, Darjeeling and Guwahati will have one each. The additional 40 Big Bazaars planned in 83 cities are in various stages of development.

News: ABG Shipyard bags contract from Netherlands co

(BL 12/06/2006) Mumbai - ABG Shipyard Ltd, the flagship company of the ABG group, on Monday said it has bagged a Rs 98 crore order for construction of a diving support vessel, from Netherlands-based Vroon Offshore BV.

The company has bagged the Rs 98 crore order for the construction of a unit of 78 metre length overall (LOA) diving support vessel, the company informed the Bombay Stock Exchange.

Another order of Rs 96.02 crore for construction of another vessel is in the pipeline from the Netherlands-based company, it said.

The delivery period for the order is 24 months from the effective date of contract subject to the availability of engine and propulsion package.

As it is an export order, it is entitled for subsidy as per the prevailing shipbuilding subsidy scheme of the government.

The aggregate of the orders in hand with the company would amount to about Rs 2,300 crore. The shares of the Surat-based company were trading at Rs 236, up 2.83 per cent at the BSE.

News: Rural India more industrious than urban

(BL 12/06/2006) New Delhi - Rural India is far more enterprising than urban areas, as it accounts for 61.3 per cent of the country's industrial units compared to just 38.7 per cent in towns and cities, says the Economic Census 2005.

The census document, released today, notes that Tamil Nadu was top in terms of states with highest number of industrial units - 44.5 lakh, while Maharashtra was the largest employer with 1.18 crore jobs.

Gujarat, supposed to be an economically advanced state, is conspicuously missing from the list of toppers in the Census.

Even in average annual growth in employment, rural areas fared better than urban areas with 3.33 per cent and 1.68 per cent, respectively. The share of urban and rural area in total employment is 49 per cent and 51 per cent, respectively.

"We have collected data from the largest number of enterprises and contacted 21.1 crore households," G K Vasan, Minister of State for Statistics and Programme Implementation said while releasing the Census document. The previous economic Census was conducted in 1998.

He said unlike previous Census, the fifth Census would have a directory of enterprises employing 10 workers or more to help undertake detailed surveys in respect of services sector, which contributes 54 per cent to GDP.

As per the provisional results (the final results would come by December), there are 42.12 million enterprises engaged in different economic activities other than crop production and plantation.

Andhra Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal together account for 50 per cent of the total enterprises in the country.

News: 'FDI cap in Indian insurance sector may be raised'

(PTI 12/06/2006) Brussels - The Government said on Monday that it planned to bring a Bill to amend the Insurance Act, which among other things, provides for increasing FDI cap in the sector from 26 per cent to 49 per cent.

The government plans to present the Bill to change the rules, Finance Minister P Chidambaram said in an interview without specifying the time-frame.

The insurance sector was opened to private players in 2000, ending the state monopoly of LIC and GIC, after much dilly-dallying in the 1990s that also saw the then United Front government dropping a bill for opening up just health insurance.

This led to setting up of several joint ventures between domestic and foreign companies in both life and general insurance sectors, including ICICI Prudential, Bajaj Allianz, and HDFC Standard.

However, the FDI has been capped at 26 per cent. Chidmabaram had announced raising the FDI cap in insurance sector in his first Budget as the Finance Minister in the UPA government in 2004. However, the Bill to amend the Insurance Regulatory and Development Authority Bill could not be tabled in Parliament.

The crucial Left supporters of the ruling coalition oppose any increase in FDI cap in the insurance sector.

News: Indian industry grows 9.5 per cent in April

(PTI 12/06/2006) New Delhi: Indian industry has logged a growth of 9.5 per cent in April 2006, compared to 8.1 per cent in the same month last fiscal.

The growth in the Index of Industrial Production was largely on account of manufacturing, which rose 10.4 per cent compared to 9.2 per cent in April 2005, according to official data released on Monday.

The Mining sector grew 4.3 per cent, while the electricity sector grew by 5.6 per cent. The corresponding growth in mining and electricity was 2.8 per cent and 3.1 per cent in the same period in 2005.

Column: 'Income, not caste, is the issue'

(BS 12/06/2006) New Delhi - While the government has made it clear it has no intention of re-visiting the debate over creamy layers in OBC reservations, it is making a huge mistake since it is incomes and not caste that are the major determinants of levels of education. Not just for OBCs or SC/STs, but even for upper caste Hindus. And this is something that is revealed by most surveys, whether it is the National Sample Survey of 1999-2000 or the Reproductive and Child Health Survey (RCHS), which was conducted over two years from 2002 to 2004 over 600,000 households across the country—the RCHS, in fact, has a sample size that is several times larger than the NSS.

If you look at the broad data, as the government and other pro-reservationists do, the RCHS data show SC children had an average schooling of around 3.2 years, versus 3.9 for the OBCs, and 5.6 for the upper caste Hindus. The rest follows from this—low years of schooling mean lower possibilities of going to college and hence, a poor probability of getting a good job. So, the case for reservations is self-evident. Though the government is keen on reservations at the graduate level, the real issue is the lack of adequate schooling since, without enough SC/ST/OBC passing out of high school, they cannot be admitted to college (see “Schooling acts as effective job quota,” Business Standard, May 8).

Analyse the mass of data, as economic research firm Indicus Analytics has done, and you get a totally different picture, a picture which shows that factors such as income levels, urban versus rural settings and location in different states are perhaps even more important determinants than caste.

Take the poorest income quintile (fifth) of rural population, and you find that there isn’t such a significant difference in the education levels across castes—it is 1.6 years for SCs, 1.7 for OBCs and 2.2 for upper caste Hindus. Take the same castes, the same lowest income quintile, but change the setting to urban areas. And you find that the same SC child now has 2.6 years of education, or two-thirds more; the increase for OBCs and upper castes is equally high (see table). While the difference between the SC and the upper caste Hindu in the lowest income quintile in rural areas is 37 per cent, the difference between the rural SC and the urban SC in the same quintile is 63 per cent!

Slice the data according to income, and you get a similar result. In the same rural setting, an average SC child in the top-most quintile, or the richest 20 per cent of the population, has 5.1 years of schooling, a figure that’s 3.2 times that for the SC in the poorest quintile. For OBCs, the difference between the top-most quintile and the bottom-most is also 3.2 while for upper caste Hindus the difference is around 2.7 times. In the case of urban populations, similar differences are to be seen across income groups.

The NSS data for 1999-2000, not surprisingly, show similar results—the NSS number-crunching, to present the data in the desired format, has been done by Surjit Bhalla’s Oxus Research. In the lowest income quintile, an upper caste Hindu has 87 per cent more years of education than an SC and 47 per cent more than an OBC. But, an SC in the upper-most income quintile in rural areas has 2.5 times the number of years of education as an SC in the lower-most quintile; for OBCs the difference is 2.2 times. Similar differences show up between urban and rural areas when you look at SCs or OBCs or even upper caste Hindus in the same income quintile.

Indeed, the NSS shows that if you take the poorest 1 per cent of SCs in rural areas, the average years of schooling is just 1.3 (it’s 1.7 for OBCs and 3.5 for Hindus). Now move up to the top 1 per cent, and the average SC has 5.9 years of education (it’s 6.3 for the OBC and 7.1 for the Hindu)! That is, the difference between castes shrinks dramatically as income levels rise.

If caste was to be the sole/major determining factor, then surely the difference between the education levels would be a lot higher between castes in the same income group than they are for the same caste across different income groups. The fact that there are such huge differences between rural and urban areas, it would appear, is also due to the income difference between rural and urban areas.

Examine the data across states, and they throw up equally interesting results. The average SC in Bihar has 1.9 years of schooling as compared to 2.9 for OBCs and 4.9 for Hindus (RCHS data). But, in Maharashtra, the figures are 4.4, 5.1 and 5.7—that is, the relative inter-caste differences don’t hold good across states. And for all the talk of south India being an OBC paradise, there are stark differences between various states like Tamil Nadu and Kerala. Sadly, the Manmohan Singh government is not paying attention to any of this and is just planning a one-size-fits-all approach.

By Sunil Jain, Business Standard

News: Bosch may set up production base in India

(PTI 12/06/2006) New Delhi - Looking to expand high-end component manufacturing from India, the ¤41 billion German major Bosch has said it would look at manufacturing electronic control units and anti-lock braking systems (ABS) in the country in the coming years.

“We are looking, (and) could look at electronic products, for instance electronic control units,” automotive group chairman Bernd Bohr said.

Bohr was in India for the commencement of production of common rail high pressure pumps from the company’s Bangalore facility.

Bosch is investing close to Rs 550 crore for manufacturing common rail diesel systems in India and this investment is part of the Rs 1,800 crore funds earmarked for the country till 2008.

Optimistic on the high growth rates as well as low manufacturing costs in India, he said it was the low-cost base for bosch in asia. “India is the low-cost base for Bosch in Asia,” he said, pointing out it is among other cheap manufacturing locations like Turkey, Czech republic, Mexico and Brazil.

Asked about the price benefits of locally manufacturing in India, against importing from a high-cost location, Bohr said it was in the range of 10-20 per cent.

Bohr said in future, Bosch would focus on technologies like ABS and electronic stability program (ESP) for the Indian market. “Bosch has played a crucial role in the development of automotive technology in India and will continue to do so in the coming years,” he said.

ABS could also be among the new products the company could contemplate manufacturing in India, though local demand levels needed to be sufficiently high for that, he said.

Bosch can use Indian group company Kalyani Brakes for manufacturing ABS. The company may use this to extend its worldwide manufacturing base for modern braking systems in India, including manufacture of ABS.

Kalyani Brakes manufactures conventional braking systems and components for passenger cars, tractors, three-wheelers and two-wheelers at its plants in Jalgaon, Chakan and Manesar.

Bosch did a business of around Rs 4,000 crore from India in 2005 through its various companies, including the flagship Mico.

“India is one of the growth markets for our business in the Asia Pacific and we expect business to increase to Rs 4,700 crore in 2006,” he said.

Bohr said india could be one of the world’s five most important automobile markets by the beginning of the next decade. He said india not only played a key role in the production network of Bosch but also in its development activities.

Robert Bosch India limited, a wholly owned subsidiary of Bosch in India headquartered here, is the company’s largest software development centre outside Germany.

News: Haworth plans manufacturing hub in India

(BS 12/06/2006) Mumbai - Haworth (India) Pvt Ltd, the wholly-owned subsidiary of Haworth Inc, one of the world’s largest office furniture manufacturers, has decided to make India its manufacturing hub for southeast Asia and the Middle East by 2010.

Kapil Agarwal, managing director, Haworth India told Business Standard that the company was gearing itself for a massive expansion to meet demand in both the Indian and international markets.

“India’s strategic location is ideal to make it the manufacturing hub for SE Asia and Middle East. Moreover, the Indian market is expected to grow significantly,” said Agarwal. Production at the Pune factory, which was recently commissioned, is expected to be trebled by 2007.

“We have invested around $10 million for our Pune factory. The production capacity of individual shifts will be doubled during 2006 and trebled in 2007,” he added.

At the same time, the company was planning to set up a second manufacturing unit in any of the special economic zones (SEZ).

“The company will be making a major investment to set up the second manufacturing unit in an SEZ area. It is likely to come up within the next two-three years,” he said.

The production from the second unit will not only cater to the international market in southeast Asia and Middle East, but also the company’s domestic clients who are based in other SEZs, explained Agarwal.

Though Agarwal was unable to project any investment figures for the second unit, he confirmed that investment could be anywhere between $10 million and $20 million.

Meanwhile, the company was gearing itself up to record a 50 per cent growth in its Indian turnover. “We are expecting to record sales turnover of $30 million in 2006 in India, 50 per cent higher than last year’s turnover of $20 million,” said Agarwal.

Haworth India enjoys a market share of 15 per cent in the country, claimed Agarwal.

The share of organised players in the Rs 4,000 crore Indian office furniture market was gradually increasing from the current figure of 25 per cent. The domestic market was growing at an annual rate of 25-30 per cent, Agarwal noted.

News: Pantaloon launches Fashion Station in Kolkata

(BS 12/06/2006) Mumbai - Fashion Station, the apparel and accessories retail format of Pantaloon Retail India Limited, has opened shop in Kolkata.

Located on the Eastern Metropolitan Bypass, the selection at the outlet is primarily targeted at the young family, said Rajan Malhotra, head value retail. Value for money is the USP here, with T-shirts priced as low as Rs 99.

This is the fifth Fashion Station in the country, the other four being in Mumbai, Delhi and Ahmedabad.

Pantaloon Retail has also brought in Gen-m, as a shop-in-shop within Fashion Station, its lifestyle telecom retail venture; m-bazaar, for the value segment, already has a presence in the Big Bazaars. Telecom retail segment alone has a potential to post a turnover of Rs 500 crore, the official said.

Malhotra also announced big plans for the group in Kolkata, the city from where Pantaloon Retail's success story started with the first Pantaloon in Gariahat. Kolkata is to get two more Pantaloons and four more Big Bazaars this year, he announced.

The group was also coming up with stores in Haldia, Bardhaman, Darjeeling, Siliguri in West Bengal. Further, another floor is to be added to the Big Bazaar in the Durgapur.

Then there is Kolkata Central, the large-format seamless mall, which will open in 2008. Kolkata Central will also being high-end lifestyle brands like Marks & Spencers, Guess and The Body Shop, to the city. At the moment, the company has 30-35 lakh sqft of commercial area in the city.

While the apparel business is a focus area of Pantaloon Retail, constituting 45-50 per cent of its EBIDTA, said Malhotra, the group was also diversifying into other areas.

Among these was futurebazaar, an e-portal, which is now being test-marketed in Pune. The company had also finalised the concept for smaller, 3,000 sqft-4,000 sqft stores, to take on the mom-and-pop stores.

News: 'Work on 2nd Mumbai airport after ICAO clearance'

(BL 11/06/2006) New Delhi - The Government plans to start work on construction of the second airport in Mumbai within the next two months after the International Civil Aviation Organisation (ICAO) gives the clearance for the project to come up.

"We have sent a communication to ICAO and hope to get a response in the next two months. Work on the second airport in Mumbai would begin then," the Minister for Civil Aviation, Praful Patel, told Business Line.

ICAO, a specialised agency of the United Nations to promote safe and orderly development of international civil aviation through the world, also sets standards and regulations necessary for aviation safety and security. The UN agency has already collected data simulating study for conflict free operations from the existing and the proposed new greenfield airports.

Growing traffic

The new greenfield airport is likely to come up in Navi Mumbai to meet the long-term requirements of air traffic of the Mumbai region, as the existing airport is likely to get saturated in the near future and there is little scope for further expansion there.

The new airport in Mumbai is among the several Greenfield airports that the Government plans to develop around the country including one on the outskirts of Delhi at Noida.

News: MNCs bet big on India operations

(BL 11/06/2006) New Delhi - If multinationals are sharpening focus on their India operations, it is not without reason. Indian subsidiaries of these MNCs have outshone their parent companies in recent times in terms of financial performance and are accounting for a greater proportion of global revenues.

The trend is not restricted to the IT sector, but is visible across auto, pharma, consumer durables and FMCG as well. In fact, FMCG giant Unilever recently stated that it sees its Indian subsidiary, Hindustan Lever Ltd (HLL), as a growth driver for the company. In the January-March 2006 quarter, while sales of HLL grew 11.6 per cent, Unilever's revenues increased by 8.6 per cent.

Similarly, in the same period, even as sales of German company Siemens grew by 14 per cent, sales of its Indian subsidiary jumped by 56 per cent. Engineering company ABB saw its sales grow by 2.5 per cent in the quarter, while its Indian subsidiary grew by 32 per cent. FMCG major Colgate too saw its worldwide sales rise by 4.5 per cent, even as its subsidiary in India recorded 26 per cent. According to analysts, Indian subsidiaries of numerous MNCs have been earning margins much higher than their parents with estimates that about 75-80 per cent of foreign companies in India are profitable.

An Indo-German Chamber of Commerce study shows that the Indian subsidiaries of a majority of German multinationals have outperformed the parent companies. The bullishness is all the more visible in the IT sector where the India operations have turned out to be profit spinners owing to low-cost, skilled professionals. Little wonder IBM recently announced plans to triple its investments in India to $6 billion in the next three years.

Global auto majors too see India as a volume spinner. While Suzuki plans to put its second Indian plant in operation by the end of this year, Nissan is to commence vehicle manufacturing here and Toyota is slated to put up a new plant in India next year.

It comes as no surprise then that a large number of firms have consolidated shareholding in their Indian subsidiaries during the last fiscal.

Pfizer and Glaxo are among the global pharma majors that have raised their stake in their Indian subsidiary. Merrill Lynch has also acquired controlling stake in DSP Merrill Lynch.

News: 'Mumbai to be showcased as financial hub'

(PTI 11/06/2006) Mumbai - Aiming to bring about balanced development and decongest the island city, the Maharashtra government has decided to showcase Mumbai as a financial centre while promoting other Tier II cities in the state as service and manufacturing destinations.

"We need to have all-round development of the state. As a policy decision, we have decided to promote places like Aurangabad, Nasik, Nagpur and other Tier II cities as favourable investment destinations in the state. Mumbai being the financial capital would be the financial centre," Maharashtra Chief Minister Vilasrao Deshmukh said.

"Mumbai and Navi-Mumbai have become saturated. We have other destinations which can be offered to industries and government is committed to develop infrastructure in these areas to attract investments," he added.

In the coming 3-6 years, 51 SEZs would come up in the state at an investment of Rs 89,000 crore and the overall investment, including infrastructure, stood at Rs 2,34,000 crore, Industries Secretary V K Jairath said.

In a survey conducted by Switzerland's International Institute of Development, Maharashtra was placed in 38th position as a favourable investment destination ahead of places like Greece, South Africa, Italy and Philippines, he said.

The state had received Foreign Direct Investment to the tune of $13.6 billion, he added.

News: PPP model for Indian metro airports

(TNN 10/06/2006) New Delhi - The government has adopted a politically-cautious, middle-path strategy to take forward its plans for developing airport infrastructure in the country. While it has approved modernisation of 35 non-metro airports by the Airports Authority of India (AAI), chances are that

Chennai and Kolkata may be developed in partnership with private players. There are indications that while the West Bengal government would prefer AAI to be the majority consortium partner, Tamil Nadu may be willing to have a private developer as the lead player. The decisions come even as the government is planning to take up the aviation policy with the Cabinet this month and the Aviation Regulator Bill in the next session of Parliament.

Speaking to reporters after the Prime Minister’s infrastructure committee meeting, civil aviation minister Praful Patel said, “The government will consult West Bengal and Tamil Nadu governments on the ‘way forward’ to modernise the Kolkata and Chennai airports on a priority basis in the forthcoming three months.”

The government is exploring possibilities of setting up a small group to study the various models of modernising the other two metro airports.Modernisation of 35 non-metro airports would also be taken up in one go, and tenders for the purpose would be issued shortly, he said.

The development of the airports, which would involve an estimated Rs 40,000 crore, would be completed by 2008-09. “We are taking up these (35) airports together as the domestic passenger traffic in the first quarter of 2006 has shown a whopping increase of 49%,” Patel said. While AAI will be responsible for the development of all the aeronautical services in the airports, the government has allowed the city-side development to be carried out on a private-public partnership basis.

AAI could involve private players for putting up hotels, parking lots and cargo handling systems in place on a PPP basis, a senior government official said.AAI will be funding most of the cost of modernising the airports from internal resources and borrowings. AAI hopes to rake in its high earnings from the metro airport operations to fund the modernisation of the airports.

However, if the states required a higher degree of modernisation, the viability gap funding could come in as a possible mechanism to meet part of the restructuring cost.

News: Complex laws hit pace of FDI flow into India

(TNN 10/06/2006) Chennai - While foreign direct investment from European Union to India has been more or less stagnant, outward flow from India has been on the rise. Complicated regulations and lack of information stand in the way of foreign direct investment flow into India, senior officials said.

Mr Narayan Valluri, team leader, EU-India Investment Facilitation Desk, speaking at a seminar in Chennai on Friday said FDI from EU has been stagnant around Euro 800 million from 1999 onwards.

However, FDI from India grew from Euro 25 million in 1999 to Euro 598 million in 2003. It was true with other developing countries as well, he said. World Investment Report 2005 too pointed out that developing countries are emerging as outward investors.

In fact, size of economy of one third of EU members and 7 of 10 new EU members is lower than that of middle income states like Andhra Pradesh and Tamil Nadu, he said. “We need not be overawed by size of EU as a whole,” he said adding that a number of European Union countries offered opportunities for Indian investments.

Dr Dietrich Kebschull, Chief Programme Co-ordinator, EU-India TIDP said 75% of the foreign funds flow into India were from institutional investors, and only 25% were direct investment. Compare this with China where FDI accounts for about 80%. “This is the direction we have to go,” he said.

However, the regulations — with respect to FDIs, SEZs etc — have become so complicated. “After India opened up for FDI, there have been exceptions to some of the rules, and exceptions to exceptions. There have been amendments and amendments to amendments,” he said. “What was 20 page document 10 years back, has become a library,” he told reporters later.

These regulations needed to be translated for the foreign investors, and Investment Facilitation Desk would help in that, he said. EU-India TIDP also inaugurated an IFD in Chennai. Mr A Sahasranaman, Advisor EU-India TIDP said the programme sought to upgrade regulatory infrastructure and inspection system to meet World Trade Organisation/European Union requirements, enhance training and capacity building and facilitate FDI.

News: How India can rival China as a manufacturing hub

(TNN 10/06/2006) New Delhi - 'Whither Indian manufacturing' was the question on everyone's mind after the manufacturing sector floundered in the late 90's.

Today, the manufacturing sector is back in the national mindspace. It is being looked at as a sector that could be a catalyst for fuelling GDP and is being talked about by the industry, industry associations and even the finance ministry.

This is not without any reason: the manufacturing sector contributes one-fourth of total GDP, employs 30 per cent of non-agriculture workforce. In fact, it is being increasingly felt that there is no reason why India should not challenge Japan, South Korea and China as a manufacturing hub.

Following the finance minister's assertion that the government is serious about propping up the manufacturing sector, the Federation of Indian Chambers of Commerce and Industry (Ficci) has come out with a 10-point agenda for 12 per cent growth in the manufacturing sector. The agenda takes a ten-pronged approach to rev up the manufacturing sector. It takes into account the views and suggestions from Ficci's top 100 manufacturing companies.

1) ON THE TAX FRONT

▪ Reduce revenue deficits at the earliest to release resources for accelerating public investment in infrastructure and social sectors. Sustained increase in public investment will create demand for manufactured products and help counter economic downswings.

▪ Direct taxes should be restructured to accelerate investments in manufacturing either by lowering the corporate tax rate or providing investment allowance and free depreciation.

▪ Tax exemptions for infrastructure and viability gap funding should continue.

▪ All inverted duty structures in excise and customs should be eliminated to encourage domestic value addition in manufacturing.

▪ State VAT rates should be harmonised across sectors. The CST should be phased out at the earliest. All local taxes such as octroi, entry tax etc should be made VATable. The combined impact of all indirect taxes (cenvat rate of 12 per cent plus state vat rate of 8 per cent) on prices of manufactured goods should be not more than 20 per cent. For this, indirect taxes should be reduced as needed.

▪ All tax laws should be simplified and rationalised to advanced country levels. All tax returns and collections should be made electronic. All customs and excise records should be computerised and supported by IT systems and databases.

2) EXIM POLICY

▪ Duty drawback rates should neutralise the impact of all central, state and local bodies taxes on goods and services. No taxes should be exported.

▪ Make substantial increase in government support to global marketing efforts of Indian manufacturing companies. Create brand India for Indian engineering and design capabilities.

▪ Create Virtual SEZs.

▪ FTAs should not be allowed to create unfair competition to Indian manufacturing and encourage movement of investment and plants to othercountries.

3) INFRASTRUCTURE & ENERGY

▪ Accelerate creation of world-class infrastructure to increase the speed of movement of manufactured goods at reduced costs.

▪ Benchmark costs and efficiencies that impact users of highways, ports, air cargo terminals and railways to levels prevailing in ASEAN countries and China.

▪ Aggressively promote public-private partnerships to build infrastructure. Reform land laws (Uniform for all states) to facilitate faster acquisition, usage and transfer.

▪ Implement the Electricity Act and accelerate power sector reforms and make power available to industry at rates prevailing in China and ASEAN.

▪ Create world-class infrastructure for industrial clusters.

▪ Create one Indian market for goods. Eliminate all state barriers for free movement of goods within India.

4) LABOUR POLICY

▪ Reform labour laws to introduce labour-flexibility as is the case in ASEAN countries.

▪ Elements of the National Rural Employment Guarantee Programme (NRLEGP) i.e.industry to provide minimum employment guarantee for 100 days should be implemented in labour-intensive industries such as apparel, leather-goods etc.

5) REGULATORY REFORM TO REDUCE TRANSACTION COSTS

▪ Benchmark entry and exit time and costs for investors in manufacturing and reduce them to global levels.

▪ Take measures to speed up bankruptcy proceedings for faster resolution at lower costs.

▪ Provide freedom to close loss-making units.

▪ Take measures for speedy legal enforcement of contracts through special courts or some fast-track mechanism.

6) FINANCE

▪ Accelerate financial sector reforms to reduce cost of capital and bring it down to global levels.

▪ Take measures to ensure better flow of credit to SMEs at lower costs.

7) SMALL & MEDIUM INDUSTRY

▪ Eliminate all product reservations.

▪ Launch state-funded technology upgradation programs for SMEs.

8) MINERALS & MINING POLICY

▪ Reform mining laws to make them investor-friendly and ensure faster clearances for investment proposals.

▪ Reform coal sector to increase investment and production.

9) MANPOWER & TRAINING

▪ Make large investments in modernisation and expansion of vocational and technical training facilities.

▪ Introduce standards specifying levels for facilities and for academic proficiency to improve the quality of technical education.

▪ Reform the education sector to facilitate investments for rapid expansion of higher education capacity.

10) TECHNOLOGY DEVELOPMENT

▪ Encourage higher investments in Indian R&D through long-term tax breaks or even expenditure support.

▪ Create public-private partnership for defence, nuclear power & aerospace applications that have future prospects for high value exports.

▪ Insist on offset clause with foreign suppliers to ensure transfer of technology.

News: India can free $48 bn of capital through reform

(Bloomberg 10/06/2006) London - India could free up 48 billion dollar of capital a year and raise economic growth by almost three percentage points by reducing government controls on the financial system, Mckinsey and Co said.

The growth would boost household incomes 30 per cent higher than current projections to more than 1,200 dollar a year by 2014, lifting millions out of poverty, Mckinsey said in a report.

“To achieve this, the government must loosen its grip on the financial system. This means lifting directed lending policies and restrictions on the asset holdings of banks and other intermediaries to release more capital for more productive investment,” the report said.

Government-controlled institutions such as State Bank of India account for 80 per cent of banking assets in Asia's fourth-largest economy, which grew 8.4 percent in the year ended march. He said might rise to 9.4 per cent a year from the current forecast for 6.5 percent by loosening controls.

Government-run banks give 57 per cent of credit to state companies, agriculture and tiny businesses, the consulting firm said. That impedes growth because such concerns are only half as productive as private firms and require twice as much investment to get the same additional output.

Similar policies have led to 90 per cent of the assets of provident funds and 50 per cent of life insurance assets being held in government bonds and related securities, the report said.

News: 60% of Indian IPOs fall below issue prices

(ACERC 10/06/2006) Mumbai - Over 60 per cent of initial public offers (IPOs) fell below their issue prices as the domestic equity markets reeled under the bear hug for the fourth consecutive day on June 8. Reliance Petroleum, the largest ever private sector IPO in the country, fell to Rs 59.50 compared with its issue price of Rs 60. The stock, however, closed at Rs 60.55.

Out of the 110 IPOs that hit the market in last two-and-half years, as many as 58 stocks on June 8 fell below their issue price during the intra day. Of these, 50 closed below their offer price. PVR, Inox Leisure, Nitco Tiles, Gitanjali Gems, Jagaran Prakashan, Lokesh Machinery, Uttam Sugar, Kewal Kiran, GVK Power and Infrastructures, Sunil Hitech, Mahindra and Mahindra Financial Services, Celebrity Fashions and Emkay Share are the majors currently available at up to 50 per cent discount to their issue price.

The aggregate market wealth of 27 IPOs which collectively raised Rs 2,934 crore eroded by 32 per cent to Rs 2,001 crore. Reliance Petroleum, Sun TV, Punj Lloyd, Plethico Pharma and Gujarat Petronet fell below their issue price during intra-day trades but finally closed 1-3 per cent higher than their offer prices. Punj Lloyd had hit Rs 690, 1.4 per cent lower its issue price of Rs 700. The stock, however, ended the day just one per cent higher at Rs 704.15. Similarly, Sun TV hit Rs 860, a good two per cent decline from its issue price of Rs 860, but finally closed at Rs 884.25 on BSE.

PVR is trading at nine per cent discount of Rs 205.10 as against its offer price of Rs 225. Inox Leisure is currently available 11 per cent lower at Rs 205.10 (issue price of Rs 120), Mahindra and Mahindra Financial Services at 15 per cent discount at Rs 170.10 (Rs 200), Nitco Tiles 25 per cent at Rs 126.15 (Rs 168), Celebrity Fashions 26 per cent at Rs 133.65 (Rs 180).

News: 'India's image as FDI destination needs change'

(BL 10/06/2006) Chennai - India has not been a success in attracting foreign direct investments largely because of its negative image abroad - it has failed to sufficiently promote its strengths as a market and a manufacturing hub to access the region, according to Dr D. Kebschull, Chief Programme Coordinator, EU-India Trade and Investment Development Programme.

"Some 100 millions (of dollars) is not what this country needs - it needs billions," he said.

Procedural hassles, concerns on intellectual property protection and poor information flow, particularly about the individual States and their investment promotion programmes, are the reasons for investors not coming here. But the momentum is picking up slowly and India needs to push itself in the market, he said.

At a workshop on foreign direct investment, role of EU-India Trade and investment development programme, he said that investors "still connect India with high risk and difficulties. These are perceptions that India has to change."

Amrit Pandurangi, Executive Director, PricewaterhouseCoopers Pvt Ltd, said that companies abroad were now "taking a second look at India and it cannot afford to miss the bus again."

Investors for their part have to understand that they cannot have a `one-India' programme. They need to understand the diverse nature of the markets and opportunities here and focus on their specific requirements. Initial costs of doing business with India may be high but in the long term the opportunities are good, he said.

The EU-India Trade and Investment Development Programme is a joint programme of the Ministry of Commerce and the European Union - Delegation of the European Commission in India and funded primarily by the EU. The objective of the programme is to assist India enhance its trade and investment performance with the EU.

A. Sahasranaman, Advisor, EU-India Trade and Investment Development Programme, said that some of the concerns are the quality of exports, lack of reliable information on policy, regulation and trade data and procedural delays.

News: TVS, Bajaj Auto in race for Indonesian market share

(BS 10/06/2006) Mumbai - Two-wheeler makers Bajaj Auto and TVS Motor company have a competing product strategy for their new base in Indonesia.

Venu Srinivasan, chairman and managing director, TVS Motor Company, said the company would only manufacture and market step-thrus in Indonesia, the third largest two-wheeler market in the world.

A step-thru (examples Bajaj M80 and Hero Honda Street) is a product modelled between a motorcycle and moped.

Step-thrus form more than 70 per cent of the Indonesian and the neighbouring Asean market. The Indonesian market sells six million two-wheelers. Only after gaining a substantial share of say 5 per cent, by 2009, that TVS would think of making motorcycles in the country, he said.

His rival, Bajaj Auto’s executive director, Sanjiv Bajaj, said since the Indonesian market was already saturated with step-thrus made by well-known players like Honda, Yamaha and Suzuki, it made lesser sense to enter the market with step-thrus. Therefore Bajaj would launch only its motorcycles in the market.

“If the strategy of selling step-thrus in Indonesia fails, it would be difficult for a come back with motorcycles,” said Bajaj.

However, TVS officials feel there is a big market in Indonesia for ‘less on expense yet high on quality’ TVS step-thrus. “We will be able to offer good step-thrus priced lower compared to Japanese ones,” they said.

According to a Mumbai-based two-wheeler analyst, the strategies of both the companies would succeed regardless of the two different segments their products cater to.

Both Bajaj and TVS will begin their Indonesian operations by the end of this financial year.

Bajaj has formed a joint venture with Indonesian company PT Abdi Raharja for setting up a manufacturing facility for two and three-wheelers in the country.

TVS Motor will invest $ 50 million (Rs 219 crore) in a two-wheeler facility in Indonesia.

Bajaj Auto’s two-wheeler exports for the financial year 2005-06 grew by 34 per cent at 1,74,907 units compared to 1,30,945 units reported in the previous year.

TVS exported around 80,000 two-wheelers during the year- ended March 2006. However, both the companies have negligible step-thru exports.

News: Cars beat bikes in May India sales

(TT 10/06/2006) New Delhi - The growth in car sales in May has been higher than the demand for motorcycles. While car manufacturers sold 30 per cent more, the growth in bike sales was 24.6 per cent in May.

According to the figures released by the Society of Indian Automobile Manufacturers (SIAM), 88,814 cars were sold in May against 68,519 in the same month last year, recording a growth of 29.6 per cent.

Eight of the 11 carmakers, including Maruti, Tata Motors, Hyundai, Ford, Honda and General Motors, saw sales going up substantially. However, luxury carmakers DaimlerChrysler, Fiat and Toyota Kirloskar Motors recorded a fall in demand.

The demand for Maruti grew 31.6 per cent as the company’s sales in the month stood at 45,267 cars against 34,382 in May 2005. For Tata Motors, the numbers increased to 15,253 from 11,511 in May 2005, SIAM said.

Motorcycles continued their strong run as sales jumped 24.6 per cent to 5,69,005 units in May from 4,56,565 in the year-ago period.

Hero Honda and Bajaj Auto emerged as segment leaders, while TVS also contributed significantly. Hero Honda sold 2,85,193 bikes in May 2006 against 2,16,971 in the year-ago period, registering a growth of 31.4 per cent. The demand for Bajaj rose 20.2 per cent to 1,72,847 units.

Scooter sales, however, fell 1.2 per cent to 73,919 units from 74,864 units in May 2005.

News: 'India favoured nation for FIIs'

(PTI 09/06/2006) New Delhi - The government on Friday said India continues to be favoured destination for foreign institutional investors, despite volatility in domestic and global stock markets.

"India still continues to be a favoured destination for foreign institutional investors," Minister of state for Finance PK Bansal told reporters.

Stock markets in India have been witnessing extreme volatility with the benchmark Sensex closing up 514.65 points on Friday after the loss of 1,555 points in the last four trading sessions.

Bansal said the Indian economy is expected to grow at more than eight per cent this fiscal. He said farm output is also expected to be higher if monsoons were normal.

On Thursday, the Prime Minister's Economic Advisory Council said if farm output grows at four per cent, which is desirable, the economy would grow at more than eight per cent this fiscal.

Even if the farm output grows at two per cent, which is not desirable, but other sectors of the economy maintain their robust growth, the economy would still grow at eight per cent this fiscal.

The economy grew at 8.4 per cent last fiscal, when agriculture growth was 3.9 per cent.

The Minister said the government would press on with reforms to the banking and pension sectors, and boost farm credit to ensure higher growth.

Bansal said the manufacturing sector was also doing well.

News: Land of chaebol is ready, Indians are game

(DNA 09/06/2006) Kolkata - Indians are getting increasingly carried away by wanderlust. Perhaps, the need to explore newer destinations is at an all-time high in the country. Consequently, this year, South Korea is emerging as a nascent tourist destination.

Moving fast, the official Korea Tourism Organisation (KTO) has singled out Bollywood as a potential segment, which could, in turn, lure leisure travellers into this highly developed South East Asian nation that rarely saw Indians among its tourist crowds.

Working towards this end, the KTO is actively wooing Bollywood producers. It is offering discounted airfares, organising hotel stays and even helping movie directors choose the right locales for their shoots.

To boost visibility and, simultaneously, target incentive groups, the KTO has initiated the "Korea Something More" campaign.

"Gangster - A Love Story", directed by Anurag Basu, has been extensively shot in South Korea. Prior to this, a song sequence had been shot for director Mahesh Bhatt's "Kalyug".

"KTO is in talks with several big banners in Bollywood, through which it aims to break into the Indian market," said Rajeev Nangia, associate director, Trac Representations, which is marketing South Korea in India.

Earlier, travel companies and tour operators offered no packages to Korea since the traffic was 80% business in nature. More than 58,000 Indians visited South Korea in 2005. KTO expects a 10% rise in this figure in 2006.

"South Korea can emerge as a key holiday destination for New-Age India because consumers here are already familiar with the branding, thanks to the presence of consumer electronic giants like Samsung and LG," said Nangia.

News: Pantaloon Retail May sales up 56 pct on yr

(RTR 09/06/2006) Mumbai - Pantaloon Retail (India) Ltd. said on Friday sales in May rose 56 percent to 1.95 billion rupees from 1.25 billion rupees a year earlier.

Sales at its hypermarkets and discount stores rose 72 percent to 1.41 billion rupees from 820 million rupees, while sales in its department stores climbed 27 percent to 547.4 million rupees from 431.2 million rupees.

During the month, the Mumbai-based retailer launched an e-commerce site and also set up a store to sell music, books and gifts, it said in a statement.

News: Here come the malls

(EH 09/06/2006) Mumbai - India is witnessing an invasion of malls but the question to consider is whether this radical boom presents more opportunities for hospitality businesses to chart the goldmine course. Savio Rodrigues investigates

It's a new India with an economy growing at a rate of nearly seven per cent. If (even by a modest estimate) a mere 10 per cent of the nearly 1.2 billion people in India have money to shop in malls, it would represent nearly 120 million people. This is a huge market by any standard and a reason for the emergence of so many malls in the country.

Paco Underhill vividly captures this mall phenomenon in India in his book Call of the Mall (Simon & Schuster) where he writes, "The mall is the venue where the young have their first taste of social freedom and the rest of us compare notes." He further elaborates, "Malls are very much like television. Another totally fake environment that attempts to pass itself off as a true reflection of who we are and what we want. We disdain it, and yet we can't stop watching. Or shopping."

But putting aside this psychobabble, it is evident that this is a golden opportunity for businesses in hospitality. Cashing in on this is McDonalds, which has earmarked Rs 2.5 crore towards acquisition of mall space for each of its outlet. Also encouraged by the boom in malls in cities across the country, Yum! Restaurant International's Kentucky Fried Chicken (KFC), has drawn up plans to branch out into other parts of the country. On a similar path are many hospitality companies both Indian and international.

Mall haul

The great Indian mall boom has arrived and it's bustling with activity both in metros and two-tier cities. Estimates indicate that over 280 malls are expected to come across the country by the end of 2006, a number expected to more than double by 2010 according to a recent survey conducted by KSA Technopak that predicts India to be home for up to 600 malls. In fact, according to Mohammad Ali Alabbar, chairman of Middle East-based Emaar Properties, the company is planning over 100 malls in India already.

So who are the real drivers of this boom? Anshuman Magazine, MD of CB Richard Ellis, feels that the apparel and F&B sectors are responsible for this rapid expansion. KFC director of marketing, Sharanita Keswani, says, "Our business is very real estate-oriented. We have to be present in a prime location or in a mall where turnouts are good." Mall construction in the country is expected to grow at a frenetic pace in Mumbai, Bangalore, New Delhi, National Capital Region (NCR) and particularly, Hyderabad and Pune. Popular tourist destinations like Goa and Jaipur too are expected to witness this development.

Industry sources observe that close to 100 million square feet of retail space is expected to come up in India within the next four years. And with the infusion of entertainment and F&B outlets, these malls are rewriting the rules and converting the fundamental activity of shopping into a lifestyle statement. A notable trend in the market is the development of integrated retail-cum-entertainment centres.

Will the future shock or rock?

Rising disposable incomes of Indian consumers and large investments ushered in by real estate companies are prime indicators to the fact that hotel and restaurant companies need to ride the mall boom. Either through the popular tried or tested modus operandi of an F&B outlet or through the 'Mall-O-Tel' concept, which is still at a nascent stage.

To some within the industry the opportunity is a goldmine, to some a landmine and to many an option that needs to be treaded with caution. Voicing a pessimistic tone, yet logical in his rationale, Vikram Bakshi, promoter of McDonald's (North India), predicts that if all the planned malls do come up, close to 70 per cent of these projects are most likely to fail. So while McDonald's will certainly expand further, it won't be per cent in 70 per cent of the malls."

Asserting himself further, Bakshi elaborates that the core problem facing malls is that it certainly experiences a lot of footfalls but not too many convert into actual business because consumers view it as an attraction and would not necessarily want to spend money. The most frequent visitor to a mall is the middle-class Indian and while disposable incomes might be at hand, many are still hesitant about spending at an F&B outlet in malls as they perceive prices to be high. While in most cases the perception is true, food outlets deliberately play the lifestyle card in order to ensure profits owing to the huge costs of acquiring a good retail space within a mall, feels H A Mishra, MD of Foodesign Systems.

Optimistically speaking

Delhi-based DLF Universal is very optimistic. It plans to build over 20 malls in North India over the next few years, according to Pia Singh, its director. "Stores in DLF malls, be it F&B outlets or apparels, have been doing considerably well. This positive feedback from companies keen to explore business opportunities in malls indicates that there is growing interest and related demand for malls within the country," she adds. Dharmesh Jain, MD, Nirmal Lifestyles, too is optimistic and predicts that the bulk of the country's retail business will move into malls within the next few years. He opines that more Indians are starting to buy and eat at malls, contrary to some beliefs.

As a recent India Retail Review Report by Knight Frank India points out, the success of large malls has encouraged a number of developers to join the bandwagon. The government too has taken an active interest in fostering mall development in India through its recent FDI allotment in the construction business particularly aimed at malls, multiplexes and hotels. Moreover, industry sources reveal that requisite government permissions to develop malls in the country are easier to procure than other real estate related projects. Though in most cases, the government has been friendly in its efforts to fuel the development of malls, introduction of a property tax system based on the market value of the property as against the earlier practice of calculation based on the age of the property, may lead to high rate of property taxes. This, says Amitabh Devendra, of Chesterton Meghraj, will discourage parties to take up space in malls and multiplexes. "Rationalisation of levies and taxes should be taken up on priority basis to encourage the development of retail properties," he adds.

Selecting a mall

Hospitality players eager to reap a harvest using malls as playing fields are poised to make good of the opportunity knocking at their door, with real estate developers out on frenzy with mall development plans. For hospitality businesses eager to set up shop in malls, the choices will be enormous with 600 malls in the offing by 2010. At most times it would seem cumbersome with 'too much to choose from' ringing at the back of your head.

However, the selection process can be simplified by taking into account these three vital parameters while selecting a mall for retail business:

• Potential of the location
• Consumer demographics
• Property developers' market reputation
• Property costs

According to Chanakya Chakravarti, joint MD at Cushman & Wakefield India, "Not all mall operators are likely to benefit equally. Only the ones in favourable locations and having the right format and suitable strategies are likely to remain long-term players." Speaking on the subject, Anand Sundaram, GM, Inorbit Malls, Mumbai says, "The feasibility of malls require to be analysed in great depth and would include factors like the nature of the catchment area, demographics and psychographics of prospective consumers, infrastructure of the city in that particular area and certainly the retail business itself."

After just a few years of operating in the Indian market, malls have touched the second phase of the category lifecycle. The novelty of the air-conditioned shopping and dining experience is now becoming the norm as more and more urban families drive out in their private transport to these hubs of activity. The next set of malls that will come up will be destination malls, specialty malls and leisure malls. Does this present an opportunity to the hospitality business? It sure does!

Mall-O-Tels: The next big thing

Touted as the next big thing after specialty and destination malls in India, mall-o-tels or mall hotels are inspired by Dubai and Thailand. For hoteliers, it's the best opportunity to be present at a premium location at relatively lower costs and have assured footfalls even on leaner days. It's the perfect synergy of components in terms of lease rates, occupancy levels and client profile.

Says K B Kachru, executive VP of Carlson Worldwide, "People are looking for better ways to spend their weekends. So if you were to go to a shopping mall, which is located far from your home and you don't want to come home that night, you can even check into a hotel in the same complex. It gives you a feeling of comfort and you can have a perfect entertainment option without having to rush back home."

The Clarion Group and Anumod Sharma's Galaxy Towers is also coming up with a five-star boutique hotel with a fashion-lifestyle shopping arcade, a few minutes from M G Road, Gurgaon. Spread over 1.6 lakh square feet in four levels, it's a grand construction with a glass curtain, a spacious atrium and multi-layered parking.

In Saket, South Delhi, three realtors are developing mall hotels on 51 acres set aside for commercial development. The Rs 350-crore Select City Walk project being developed by Select Infrastructure will be designed on the lines of New York's Time Square and will house a shopping mall, a business centre, a multiplex and a 100-room hotel. Barely miles away, DLF Retail Developers, is planning two projects called South Court and The Courtyard that will have hotels with 60 and 100 rooms each.

In Greater Noida, Omaxe Construction is building a mall called Omaxe Connaught Place covering an area of 14-lakh square feet. It will have a hotel to cater to corporate houses in the vicinity. "There is a demand in India and our first mall hotel should be ready in two years," says Kunal Banerjee, senior VP (Marketing), Omaxe Group. Not lagging far behind are Nirmal Lifestyles and Ruia Group that are coming up with hotels in their mall projects.

The profitability of the business model is not lost on the hotel industry either. While Sarovar Park Plaza is looking for mall space in East Delhi and Chandigarh, Choice Hospitality is considering upcoming projects. The mall-hotel arrangement suits both hoteliers and developers. For malls, hotels spice up the viability of commercial and retail space and add to the footfalls. Hoteliers can, on the other hand, leave the worry of getting approvals to the developers, avail ready space and above all enjoy a cost benefit of up to 25 per cent. Are we ready then for this new trend in realty?

News: Coffee shop buzz draw out India's young

(RTR 09/06/2006) Mumbai - It is not the coffee that draws Neville d'Souza to a coffee shop in Mumbai. It's the chance to cuddle his girlfriend.

"She isn't allowed outside at night. This is the ideal place to meet her during the day," the 22-year-old engineering student said, as he waited for his friend at an outlet of the Barista coffee chain.

"With a similar age-group crowd around, you can comfortably get cosy because no one's looking at you. These places are a boon for people who are in love."

The cafes are a boon too for growing Indian chains that have caught a liberal wave of changing social habits in a land more known for its tea drinkers. The absence, for the moment, of global competitor Starbucks has also helped.

Barista and rivals Cafe Coffee Day and Javagreen attract young people with good jobs and cash in their pockets, at a time when many traditional meeting places have been demolished to make way for new buildings in India's fast-growing cities.

From a handful of outlets six years ago, the three big chains have nearly 600 outlets between them, and plan many more.

Cafe Coffee Day is the oldest brand in the market. It has mushroomed to 288 outlets from just seven in 2000 -- and wants to expand to 500.

NO DRINKING PLEASE

Social change has helped Cafe Coffee Day, but so has lingering conservatism in a country where the young can escape the stern gaze of parents to a cafe but meeting in a bar is frowned upon.

"Hanging out with friends in a drinking place is never going to be as socially accepted as hanging out in a non-drinking place," said Sudipta Sengupta, Cafe Coffee Day's senior general manager of marketing.

Bangalore-based Cafe Coffee Day is just 10 years old but it has international dreams. It has opened a branch in Vienna, at the heart of Austria's cafe culture.

Young Indians seem happy to buy coffee at upwards of 40 rupees a cup, rather than tea from a street trader for as little as two rupees.

Barista, which opened in 2000 with the aim of attracting upmarket coffee drinkers, plans to nearly double its chain to 250 outlets in India by early next year.

It is fun rather than caffeine that drives Ruhie Kumar, a 20-year-old student, to Barista in Mumbai.

"I don't like coffee that much but I like to hang out with my pals," she said, sitting with her friends, sipping a smoothie.

"It's an ideal place to flirt, date, discuss things and -- most importantly -- chill out."

STARBUCKS LOOMS

Young spenders like Kumar attracted Reliance Infocomm to the sector. It hosts 125 Javagreen outlets in its telephone and Internet shops, hoping the aroma is good for business.

Javagreen Chief Operating Officer K.R. Chandrasekaran wants to expand beyond telephone shops to 400 to 500 outlets within a few years but the vision of the Indian firms may be countered by Starbucks Corp.

India and Italy are the only economies among the world's 12 largest without a Starbucks but that may be about to change.

A company spokeswoman said the Seattle-based retailer planned to enter South Asia within 18 months.

Chandrasekaran said the global rival could arrive in India as early as this year, perhaps through a tie-up with a local retailer such as Shopper's Stop.

Chandrasekaran expressed no fear of the huge rival, despite accusations from anti-corporate activists that Starbucks smothers local competitors.

"They will raise the profile of cafes. They will make it a little bit more aspirational," he said, adding that Starbucks might find it challenging to sell the high-margin food seen in its outlets elsewhere in the world.

FOREIGN INFLUENCE

Satellite television is credited with introducing young Indians to the cafe culture. When growing up in the 1980s in Kolkata Sengupta said she and her friends "didn't know what 'hanging out' was".

The cocoon fell away with the arrival of foreign TV shows. At the same time multinationals began hiring educated, tech-savvy Indians to write software and do back-office work and the government began freeing up the economy.

These moves opened the way to profound social change among a generation that increasingly prefers to sip lattes, rather than scan newspaper advertisements for arranged marriages.

"We don't have enough food to eat, but we all watch TV. And we talk on the mobiles," Sengupta said of her country of more than 1 billion people, which has more than 100 million TVs and nearly as many mobile phones.

"The young generation has really absorbed it. Now they look as if they've been born with a mobile phone and a laptop in their hand."

No longer content to meet under the watchful eye of parents or in school canteens, young people sought somewhere new, and Cafe Coffee Day was the beneficiary of that, Sengupta said. An old-style coffee house was not attractive.

"It wasn't hip at all. It was a preserve of leftist thinking, poetry-spouting people," Sengupta said.

"We just happened with the solution at the right time. It just so happened that it was coffee."

"It could have been something else."

News: Shopper's Stop in duty-free JV with Italy's Nuance

(RTR 09/06/2006) Mumbai - Shopper's Stop Ltd. said on Friday it had signed an agreement with Italy's Nuance group for a joint venture to set up duty-free stores in Indian airports.

The equal joint venture will distribute international brands, as well as operate food and beverage concessions, a statement from Shopper's Stop said.

No financial details were disclosed.

"India is currently one of the most promising markets as far as development in airports is concerned," the statement said.

"This process is further accelerated by the upcoming privatisation of several major airports as well as the fast expansion of various airlines," it said.

India's cabinet on Thursday approved a proposal mandating the state-run airport operator to modernise 35 airports in second-tier cities within the next two years at an estimated cost of about 70-80 billion rupees.

An estimated four million foreign tourists visited India in the year to March 2006, and India is the fastest-growing market for international tourist spending in the Asia-Pacific region, a recent study by credit card company Visa showed.

India's domestic aviation market -- which saw nearly 25 million passengers in the year to March -- is forecast to expand at more than 20 percent a year over the next five years.

A plan to privatise the country's biggest airports, in Mumbai and New Delhi, was approved earlier this year.

Shopper's Stop operates a chain of 20 department stores.

The Nuance Group -- owned by Italy's Gecos/Gruppo PAM and Stefanel SpA -- is the world's top airport retailer, operating 330 outlets at 59 airports, the statement said.

News: Reliance may bring The Home Depot, Target into India

(FE 08/06/2006) Mumbai - The Mukesh Ambani-controlled Reliance Group, which is giving shape to a major Rs 40,000-crore retail sector game plan, is likely to be the sole India franchisee for reputed international retail brands. Two names being mentioned in this context are those of US retail majors Target ($52 billion in revenue in 2005) and The Home Depot, a $81.5-billion company (2005 sales) with earnings of $5.8 billion in 2005.

Reliance might even consider the option of buying into Target, sources said. Reliance executives declined to comment on the issue.

Sources said Reliance was exploring the possibilities of bringing foreign retail brands into India. This will not only add muscle to its own retail game plan, but also bring in major gains in terms of its supply chain management plans.

Reliance may also consider similar acquisitions or alliances domestically. “We may bring in these brands into India and also have our own Fresh Plus line of products in such stores,” the sources said.

The Fresh Plus brand constitutes the ‘farm-to-fork’ initiative of Reliance Retail, and involves a strategy to source products from farmers by cutting out middlemen.

As part of its retail rollout plan, Reliance has already hired a number of retail industry heavyweights to head various verticals. Gunender Kapoor, formerly of Unilever, has been brought in to head the food and groceries initiative, Ninu Khanna (formerly Bombay Dyeing and Dabur) will head FMCG, and Sriram Srinivasan (formerly of Indus League) will spearhead the lifestyle and apparel initiative.

By 2010, Reliance expects to directly employ about 500,000 people for its retail foray.

News: Pantaloon Retail in pact with Talwalkars

(BL 08/06/2006) Mumbai - Country's leading retailer, Pantaloon Retail India Ltd has decided to form a 50:50 joint venture company with Talwalkars Better Value Fitness Pvt Ltd.

The company has entered into a memorandum of understanding with fitness centre chain Talwalkars to form the JV company, Pantaloon Retail informed the Bombay Stock Exchange.

The JV would engage in retailing fitness related products and provide health and fitness related services, it added.

Pantaloon Retail India, whose shares were trading at Rs 1,250, down 11.18 per cent at the BSE, has a retail presence across various segments including food, fashion and footwear, home solutions, consumer electronics, wellness and beauty.

News: Church's Chicken enters India

(IBN 08/06/2006) New York - Church's Chicken, one of America's leading fast food chains, is talking to a major Mumbai-based real estate and retail group, which also owns some restaurant brands, to be its master franchise in India.

Its Chief Executive Officer (CEO) Harsha Agadi says an agreement is likely to be signed in the next few weeks.

The US company, which hit a billion dollars in sales in 2006, plans to invest $100 million over the next five years to open around 300 stores across India.

"India is larger than China in terms of internal consumer demand. It might not be as large an economy as China, but larger in terms of consumer demand. And the rapid westernization is making it even more palatable for the American fast food companies to come into India," President & CEO Church's Chicken, Harsha V Agadi says.

The Atlanta based fast food chain serves American southern-style fried and spicy chicken dishes at its 1,600 stores in 16 countries.

It believes its main menu would be a natural fit with Indian tastes, and will also offer some localised items like samosas, fried okra and spiced bhajia.

"Spicy chicken is nothing but the closest imitation to tandoori chicken. Our flavors are actually very close to the Indian profile in terms of taste and flavor. This should be a perfect fit," Harsha V Agadi says.

Earlier in 2006, Church's Chicken outsourced its entire IT operations to the Hyderabad-based Sonata Software in a $5 million deal.

It is now planning to take this further by outsourcing customer services and technical support for its stores in English and Spanish speaking areas.

It will also use a bank of psychologists in India to handle the 200-300 complaints and calls it receives from customers around the world.

News: Don't fear the bear, bank on India

(IBN 08/06/2006) Washington DC - There is good news for the Indian economy as a recent World Bank report says that investors will continue to show strong interest in developing economies.

The sharp rise in capital inflows to developing countries last year came despite high oil prices, rising global interest rates and growing global payments imbalances.

Net private capital flows to developing countries reached a record high of $491 billion in 2005, up from $397 billion in 2004 according to the World Bank's Global Development Report.

For South Asia, the figure rose nearly three-fold, from $8 billion in 2003 to almost $24 billion in 2005 and most of the money poured into the strong equities market.

"One of the things we see in south Asia in general is that increase in flow towards that region has been in equities as opposed to foreign direct investment or bond-lending," senior economist, World Bank, Andrew Burns says.

"That's obviously a reflection peoples interest in stock market in the new dynamic companies that investors see in India," he adds.

However, recently that interest has turned into nervousness following the recent crash of most of the Asian stock markets including India and Japan.

Experts opine that it has put the brakes on the frenzied inflows.

"This is a cyclical market and the flows go up and they may go down. What we've observed over the last 6-7 weeks is a clear pause in flows towards developing countries but also in high income countries, so we've seen the stock market in US fall," Burns says.

Adding to the market nosedive, the impact of rising global oil prices has increased India's deficit by 0.7 per cent of the Gross Domestic Product (GDP) between 2002 and 2005 according to the World Bank.

The latest oil price hike could help ease that burden but would lead to an increase in inflationary pressures in the country this year.

However, despite these challenges, experts forecast continued growth in private investments in India, especially in the IT and service sectors.

News: India shining despite mkt plunge

(IBN 08/06/2006) Washington DC - There is finally some good news for the Indian economy. A recent World Bank report says that investors will continue to show strong interest in developing economies like India.

However, with the recent plunge in global markets, including last month's crash at the Bombay Stock Exchange, is the report being too optimistic?

The sharp rise in capital inflows to developing countries last year came despite high oil prices, rising global interest rates and growing global payments imbalances.

According to the World Bank's Global Development Report:

• Net private capital flows to developing countries reached a record high of $491 billion in 2005, up from $397 billion in 2004.
• For South Asia the figure rose nearly three-fold, from $8 billion in 2003 to almost $24 billion last year.
• Most of this money poured into India went into the country's strong equities market.

Says senior economist World Bank, Andrew Burns, "One of the things we see in south Asia in general is that the increase in flow towards that region has been in equities as opposed to foreign direct investment or bond-lending. That's obviously a reflection of people's interest in stock market in the new dynamic companies that investors see in India."

But recently that interest has turned into nervousness following the recent crash of most of the Asian stock markets including India and Japan.

Experts say that has put the brakes on the frenzied inflows.

"This is a cyclical market and the flows go up and they may go down. What we've observed over the last six to seven weeks is a clear pause in flows towards developing countries but also in high income countries, so we've seen the stock market in US fall," says Burns.

Add to that the impact of rising global oil prices that according to the World Bank has increased India's deficit by 0.7 per cent of the GDP between 2002 and 2005.

The latest oil price hike could help ease that burden but will lead to an increase in inflationary pressures in the country this year.

But despite these challenges experts forecast continued growth in private investments in India, especially in the IT and service sectors.

News: India flavour at OECD's Forum 2007

(IANS 08/06/2006) Paris - In keeping with its rising economic clout, India will be the country of focus at the next annual forum of the Organisation of Economic Cooperation and Development (OECD) scheduled for May 2007.

The 30-member club brings together the richest countries of the world and is emerging as a major platform in the ongoing negotiations on trade, environment and international law.

"Strong economic growth by China since the 1970s and by India over the past 10 years has been driving world trade and economic growth. It has been boosting economic prosperity in OECD countries, while also contributing to the pressure for structural adjustment," John West, director of the Forum, said.

China was the highlight at Forum 2006, with several sessions dedicated to that country's society and economy.

West said OECD had engaged with China in a strong dialogue over the last 10 years and these exchanges had led to the publication of five major reports on China, just as the country was emerging as a major player on the global scenario.

West said he wanted to repeat the experience with India next year. "A number of leading Indian personalities were also invited to OECD Forum 2006 with a view to exploring how India could become a leading feature of OECD Forum 2007 - drawing on the inspiration of China's experience in 2006.

News: 100 million mobile users push India into top league

(PTI 08/06/2006) New Delhi - The mobile revolution has come of age in India with the country's mobile subscriber base crossing 100 million and transforming the fast growing wireless market to become the fifth largest country in the world in terms of subscribers.

Telecom Minister Dayanidhi Maran will formally announce the achievement of the sector on Thursday.

The country's mobile subscriber base crossed 100 million in May, with GSM based cellular operators subscriber base touching 75.3 million while that of CDMA based operators touched 25.3 million.

China has the largest mobile subscriber base at 400 million.

The figures released by respective associations -- COAI and AUSPI stated that while cellular operators added 3.2 million subscribers, CDMA operators added about 1.1 million new users taking the total number of the addition to about 4.3 million.

But challenges of poor tele-density remain at 12 per cent. More worrisome is the rural telephony tele-density which is still below 2 per cent.

Currently, running into the 11th year of telecom reforms, the sector has seen a lot of controversy, litigation and major policy changes. From the corporatisation of the Department of Telecom to BSNL to the WLL controversy finally leading to full mobility and shifting of steep license fee regime to a flexible revenue-share are some of the crucial decisions taken by various governments to help facilitate growth in the sector.

Operators led by their respective associations are celebrating the 100 million mark where Telecom Minister Dayanidhi Maran would be present.

News: India Inc ready for fisticuffs

(PTI 08/06/2006) New Delhi - While the bulls of the stock market seem to have bowed under the ensuing bear pressure, country's corporate tigers are roaring in the global arena with as many as 21 Indian companies making it to the list of 100 top emerging global challengers.

Along with obvious names like IT majors Infosys, TCS, Wipro, Satyam Computer and the Reliance Group, their lesser known cousins like Bharat Forge and Crompton Greaves have also found place in the elite list of 100 companies from the rapidly developing economies prepared by the Boston Consulting Group, a US-based international strategy and management consulting firm.

The latest BCG study of emerging market leaders named "The New Global Challengers" reveals that these companies are on track to become major 21st century multinationals and would play an important role in the radical transformation of industries and markets across the world.

India stands only next to China in terms of the total number of companies present on the RDE-100 list -- with the latter topping the chart with 44 entries.

However, India scores considerably over China in terms of its participation from the IT, automotive and pharmaceutical industries.

In fact, the presence of the auto industry has also surpassed the much-hyped IT sector with as many as five Indian auto companies making it to the list, which includes Tata Motors, Bajaj Auto, TVS Motors, Mahindra and Mahindra and Bharat Forge.

News: Mumbai set to get third business hub

(BS 08/06/2006) Mumbai - After Nariman Point and Bandra Kurla Complex, Mumbai may get a third business district at Vikhroli in the eastern suburb.

A proposal regarding this has been prepared by the Mumbai Metropolitan RegionDevelopment Authority (MMRDA). The state government is expected to approve it soon.

“An industrial exhibition centre, the first of its kind, is being planned at Vikhroli. The proposal is with the Cabinet, which is expected to give it’s nod in three to four months,” said Sanjay Ubale, secretary, special projects.

The business district will be spread over 100 acres, he added. He was speaking at a seminar, “Maharashtra Vision: 2010 -Action and Strategies,” organised by the Maharashtra Economic Development Council (MEDC).

Elaborating the plan on the sidelines of the seminar, Ubale said, “This district will be much smaller compared with the BKC, which is spread over 350 acres.”

The main feature of the business district will be an industrial exhibition centre. Mumbai doesn’t have such a centre at present.

News: India Inc's 2-year profit rally snapped

(BS 08/06/2006) Mumbai - 60% of 1,550 firms posted 8.8 per cent decline in net profit in 2005-06.

After a two-year dream run, India Inc’s profit growth has faltered. Close to 60 per cent of a sample of 1,550 companies have posted 8.8 per cent decline in net profit for the year ending March 31, 2006.

The companies ranked at the bottom of the profit growth had recorded 3.75 per cent growth in net profit in 2004-05 and a hefty 31 per cent growth in 2003-04.

This study is based on two sets of samples – highly profitable companies that have posted over 25 per cent profit growth and loss-making companies as well as firms with net profit between 1 per cent and 25 per cent. All companies in the sample have their financial year ending in March.

The study reveals that only 35-40 per cent of the companies with profit growth of over 25 per cent have skewed the overall profit growth rate of the entire sample every year.

For example, 660 companies have posted 63 per cent profit growth in 2005-06 while the overall profit growth rate for 1,550 companies has been a modest 12.4 per cent.

In 2004-05, profit growth of 533 companies was 74.7 per cent while the aggregate profit growth of the entire sample of 1,550 companies was 34.13 per cent.

Similarly, in 2003-04, net profit of 555 firms rose by 54.25 per cent, while the growth for the entire sample was 43.8 per cent.

The results for the year ended March 2006 signals end of the two-year honeymoon of India Inc with higher net profit.

If 12.4 per cent rise in net profit for 1,550 companies looks healthy, after adjusting for extraordinary profits, the profit growth rate declines to almost 11 per cent. The profit drivers in 2005-06 are from sectors which account for 25 per cent sales of 1,550 firms.

Among the high profit growth sectors, IT, textiles, capital goods, engineering, metals, telecom and pharma have aggregate sales of over Rs 20,000 crore each.

However, profit growth in these sectors moved up between 35-45 per cent. The IT sector with an aggregate profit of over Rs 10,000 crore, capital goods (Rs 3000 crore) and metals (Rs 5,000 crore) have earned hefty profits.

The sectors with over 100 per cent growth in profits are from the small and medium enterprises sector such as granites and marble, leather, cables, housing construction, hotels, packaging and paper.

Other key drivers among the profitable sectors are cement (profit up 366 per cent), infrastructure (85 per cent), mining (84 per cent), oil drilling (60 per cent) and pharmaceuticals (53 per cent).

The sectors that have posted between 10 and 25 per cent growth in net profit are automobile (24.5 per cent), chemicals (23.9 per cent), shipping (22.7 per cent), tyres (12.2 per cent), power (11 per cent) and paints (10.8 per cent).

News: Reliance, Pantaloon jostle for space

(TNN 08/06/2006) Mumbai - The battle for the Indian retail market between Reliance and Pantaloon has picked up steam with both trying to corner space through strategic partnership with real estate developers, especially in cities where prices have hit the roof.

While Pantaloon is in talks with Unitech, Reliance is exploring options with DLF Universal and other leading real estate companies. These partnerships will help them leverage the huge land-bank of real estate developers without committing huge investments.

For the developers, these retailers provide a ready market for their properties without having to worry about identifying potential customers. Among other players, Pyramid Retail is also tying up with other developers and sister concern, Morarjee Realty. Retailers are also following differentiated strategies.

While Reliance is depending upon tie-ups, such as the one with DLF, in the metros, it is buying land in Tier II towns where land prices are cheaper. In the Tier II cities the retailers are turning real-estate developers themselves. Pantaloon’s promoter Kishore Biyani confirmed that talks were on with Unitech.

“We have a relationship with them and are looking at developing it further for a mutually beneficial deal. Prices in urban markets have touched crazy levels,” he said. Earlier seen as possible strategic partners, Pantaloon and Reliance have become fierce rivals, say sources.

With Reliance stepping up the gas on its retail venture, Pantaloon has been working hard on its corporate strategy in recent months, informed sources. Senior DLF officials confirmed the talks, while Reliance officials declined to comment.

In recent months, real estate prices in several small cities and towns including residential properties have shot up because of the growing interest of retailers.

Places such as Nagpur, Ludhiana, Chandigarh, Gurgaon, Thiruvananthapuram, Coimbatore, Ahmedabad and Pune are now focus areas for the industry. “These areas have been identified with a huge number of people with purchasing power. We are now grappling with the question of how best to develop and manage malls and are moving gradually away from the ‘build and sell’ model,” said the CEO of a leading retail company.

Nandan Piramal, MD, Pyramid Retail said the company is in talks with a few leading real estate developers . “That’s one serious focus area. Else, rising real estate prices will eat heavily into our margins,” he said. The Indian market currently has about 50m square feet of retail space to offer and local retail conglomerates are rising to the challenge and racing to capture the best locations.

News: Reliance may launch Fresh Plus by August

(TNN 08/06/2006) Mumbai - Reliance Retail’s fresh fruit and vegetable foray is going to be christened Fresh Plus. According to sources, the launch of Fresh Plus is expected in August or September. This follows Reliance’s decision to go in for acquisitions in the retail space after preliminary talks with strong regional players.

Reliance is also planning to ramp up its presence in the entire agri-foods segment, along with players like Pantaloon, Godrej, Bharti, Ballarpur, DSCL and Mahindra & Mahindra. No response was forthcoming to the ET e-mail sent to the Reliance spokesperson.

Sources say Reliance has already charted a course for its Fresh Plus venture by investing around Rs 4,000 crore in Punjab and Haryana. The company is believed to be in the process of tying up 900 acres of land in Punjab and is reported to be partnering with farmers to source fresh fruits, vegetables, food grains and processed foods directly.

Meanwhile, on the retail front, Reliance is believed to be scouting for acquisitions after a soft launch of its retail operations through the Maharashtra government-owned ubiquitous Sahakari Bhandar.

The company is said to be looking at similar arrangements with co-operatives in Delhi. One of the other likely tie-ups is with Kendriya Bhandar, which is a central government Employees Consumer Co-operative Society.

Partnerships with government-owned retail outlets not only allow Reliance to tap into an existing consumer base but also give it visibility at some of the best retail points across the country.

Reliance Retail plans to open 5,500 outlets across the country. In a letter to his shareholders, Reliance chief Mukesh Ambani said: “Reliance is planning a pan-India footprint of multi-format retail outlets to provide customers with choice in products and services.

All the outlets will be connected seamlessly through a state-of-the-art supply chain infrastructure. This initiative has been assiduously planned to connect the Indian farmer and producer with the consumer directly.”

News: Indian realty players strike it big in 'new' states

(TNN 08/06/2006) Mumbai - Big money lapping up chunks of land and growing migration to less disturbed destinations have triggered a realty boom in Uttaranchal, Chhatisgarh and Jharkhand. Business houses like Bajaj, Polar and Jindal Steel are stepping into these states, while more and more residents of Uttaranchal are moving to locations which are safer, offer more healthcare facilities and have more schools.

In Jharkhand, many early inhabitants are moving out of Naxalite-infested villages to cities.

In ’00, the regions were carved out of Uttar Pradesh, Madhya Pradesh and Bihar and given the status of independent states. “The property cost in Uttaranchal has shot up 10 times after it became a state. In ’00, a square ft of land in Dehradun cost Rs 12.04. In ’06, the same is for Rs 120.4/sq ft,” says Ramesh Dobhal, a Dehradun-based real estate consultant.

In Ranchi, the capital of Jharkhand, the property cost in the mid ’90s was Rs 500-600 per sq ft; it’s now up to Rs 1,200-1,500. People have moved to Ranchi from villages fearing Naxalites attacks, and have bought land in cities like Dhanbad and Ramgarh.”

“The property price in prime locations of Ranchi was around Rs 2,777.8 per sq ft, during the Jharkhand dispute. Now the same land costs about Rs 8,333.3 per sq ft,” says Rajkumar Tibrewal, manager, Ranchi Enterprises and Properties. Chhattisgarh is not far behind. Here, property prices have shot almost 400-500%, particularly after the BJP took over the reins. During the CLP regime, there were 61 villages under the Capital Area Development Authority (CADA), under which, a ban was imposed on property transactions.

After the BJP came to power, the ban was lifted, though construction of residential/commercial property is still prohibited. In Raipur and its outskirts, the property cost was Rs 40 sq ft in ’99. Now this is about Rs 400-500 sq ft. In posh localities, the going rate is about Rs 1,000-1,500 sq ft. Soon after the ban was lifted, prices soared and land changed several hands. Such multiple land deals, better known as the palti system, has destroyed many speculators, says Shailesh Verma, director, Partivi Constructions, Raipur.

In Uttaranchal, Rishikesh and Haridwar are costlier than the capital city Dehradun. “There is a rush to own land along the Ganges... so much so, that the river front up to Badrinath has been sold out. In Rishikesh, a 2 BHK flat near Lakshman Jhula is being sold at around Rs 70 lakh,” adds Mr Dobhal. In Ranchi, the property prices are higher than that in Bangalore. In Jharkhand, the rates have hit the roof and the government is doing little to check the price, says Mr Tibrewal.

In Chhattisgarh, land prices in Raipur and Raigarh have jumped with private investments in steel and mining. “In the absence of a refined realty policy, illegal constructions are proliferating. Also, ‘ashray shulk’, a shelter tax, has been imposed on the builders at the rate of Rs 200 per sq metre for any residential construction,” says Mr Verma. Thanks to this, the buyer will have to fork out much more.

News: India 4th most attractive investment destination

(PTI 08/06/2006) New Delhi - India has been ranked as the fourth most attractive investment country and the preferred location for call centre and back office activities, according to a survey by global consultant firm Ernst and Young.

The Ernst and Young European Attractiveness Survey 2006, which was released today in La Baule, France, said the US and China remained the top two preferred countries for international decision makers.

“India’s rating in 2006 is on par with the previous year,” the survey said, adding that the country still lagged behind China in attracting foreign direct investment.

While China achieved the lead position for manufacturing operations, India has emerged the top country for call centres and back office functions.

The survey findings also indicated a decline in India’s attractiveness for call centre functions. Germany and USA/Canada trailed India in BPO functions.

India was at number five among the top 10 countries for research and development centres.

India was placed after USA/Canada, Germany, the UK and France.

News: Motorola to set up Chennai plant

(BS 08/06/2006) Chennai - Motorola, the world’s second largest handset-maker, today said it will spend $100 million in stages to set up a manufacturing facility near Chennai, in an attempt to boost sales in one of the world’s hottest mobile markets.

“India is a vitally important market for Motorola and as a strategic manufacturing hub offers compelling value proposition and strong cost efficiencies,” Ron Garriques, executive vice-president at Motorola Inc, said in a statement.

Once its unit is up and running, Motorola would join companies like LG, Samsung, Elcoteq, XL Telecom and Nokia that have set up production facilities in the country.

All told, some 20 million handsets are expected to be produced in India this year, a figure that could go up by 50 per cent next year.

Motorola today signed a memorandum of understanding with the Tamil Nadu government for setting up its facility on a 300-acre Sriperumbudur Hi-Tech Special Economic Zone, where Flextronics and Foxcon will also have their facilities. Motorola will be allotted about 70 acres of land in this SEZ.

The company plans to make an initial investment of $30 million, which it expects to upscale to $100 million in the next one year. In the first phase, it will set up a facility over 2.5 lakh sq ft, which will manufacture mobile handsets, including sub-$30 mobile phones, and support production and assembly of network base stations for products across Motorola’s Network and Enterprise portfolio. It will also manufacture set-top boxes.

Addressing a press conference, Stu Reed, executive vice-president (integrated supply chain), Motorola Inc, said the manufacture of products like sub-$30 mobile handsets would go well with the government’s plan to offer rural connectivity.

He added that the plant would initially focus on serving the domestic market and later look at exporting products to neighbouring countries, West Asia and Africa.

The manufacturing facility is expected to be operational in early 2007 and will have a capacity to manufacture one million handsets per month. It is likely to employ about 3,000 people in the initial phase and the total employment is expected to go up to 7,000 in the second phase.

In addition to the company’s investment, it will facilitate its supplier to move into the park. Motorola’s manufacturing initiative will supplement its six R&D centres in India.

News: Indian telecom body sees bright future for handset makers

(TT 08/06/2006) Calcutta - India is poised to become an export hub for mobile phones and has the potential to manufacture around 100 to 110 million handsets or 10 per cent of the world’s requirements by 2010. This will entail an investment of more than $1 billion.

According to the Indian Cellular Association (ICA), 30 million handsets will be produced annually by 2009 valued between $2.5 and $3 billion. It also sees a growth in the component industry.

“This year the country should be producing around 15 to 20 million handsets, some of which are being exported. It had manufactured about a million handsets last year. We expect the number to go up to 30 million in 2007. The Manufacturing Advisory Committee has set a target of cornering a 3 per cent share of the world output by 2009 and is working towards increasing this share to 10 per cent,” said Pankaj Mohindroo, president of ICA and chairman of the advisory committee.

Nokia, Samsung and LG are already operating in the country and more handset biggies are expected to flock here in the coming years.

However, the government needs to improve customs clearances to attract investors. The government also needs to promote venture funds for manufacturing, value-added services and after-sales services.

Mohindroo said the domestic mobile market has witnessed an unprecedented growth after the grey market was curbed by lowering import duties from more than 40 per cent (centre and state combined) to the existing 8 per cent.

With less than 0.5 million handsets sold in 2001, the current year is expected to generate sales of 55 to 60 million handsets, of which 10 to 15 per cent would be through the grey market.

News: India says state-run firm to modernise 35 airports

(RTR 08/06/2006) New Delhi - India's cabinet approved a proposal mandating the state-run airport operator to modernise 35 airports in second-tier cities within the next two years, the civil aviation minister said on Thursday.

The modernisation process will cost the government between 70-80 billion rupees, Praful Patel told reporters after a cabinet meeting.

A decision to privatise Delhi and Mumbai airports earlier this year sparked mass strikes by airport workers who feared job cuts and who were supported by the ruling coalition's powerful communist allies.

"The development of 35 non-metro airports will be done by Airport Authority of India. Work will start within one year and will be completed by 2008/09," Patel said.

He said no final decision had been taken on modernising or privatising airports in two other major air hubs, Chennai and Kolkata.

The government has now decided to modernise the smaller airports using public funds after its consulting allies. Airport employees are heavily unionised in most Indian cities.

The country's air travel industry is growing rapidly with a string of new airlines launched in recent years putting massive strain on existing airport infrastructure.

The Delhi airport has been taken over by a consortium led by the GMR group and including German airport operator Fraport and Eraman Malaysia.

The contract to revamp Mumbai - the busiest airport in the country - was won by a consortium led by GVK Industries Ltd. and Airports Company of South Africa.

State-run Airports Authority of India now holds a minority stake in both the Delhi and Mumbai airports, which handled nearly half the estimated 50 million passengers who travelled by air in India last year but which fall well below international standards.

India, Asia's third-largest economy, has embarked on a drive to upgrade its creaking infrastructure of ports, roads and airports as it aims for double-digit GDP growth.

Estimates suggest an investment of $150 billion to $200 billion may be needed to upgrade infrastructure to the levels of leading Asian nations.

News: 'India cannot survive only as low-cost producer'

(BL 08/06/2006) Coimbatore - To characterise India merely as a low-cost producer is too simplistic a description of the potential of the country and India could not survive as a low-cost country alone, according to Dr Albert Hieronimus, Managing Director, Motor Industries Co Ltd (MICO).

He said the Indian companies of the Bosch group, of which MICO is a part, contribute nearly two per cent to the annual global turnover of Bosch group and this was likely to grow further, though he would not like to specifically mention as to how much the growth would be in the future.

Commissioning plant

Speaking to newspersons here after commissioning a parts manufacturing plant of L.G. Balakrishnan & Bros (LGB) Ltd, at Kovilpalayam near here that was dedicated to meet the needs of Bosch, he said a country should be more than low cost and should have engineers, should administer quality, have quality suppliers to survive. India met all these parameters. Even if one of the parameters was missing, one could not be successful.

He said MICO's presence as a manufacturing company in India was more than 50 years old and it was exporting about 20 per cent of its turnover to the Bosch group companies, mostly in Europe and the US. The biggest exporter to Bosch today was Robert Bosch India, the software arm, which has 3,100 engineers doing the software work for Bosch and the company was in the process of establishing an IT facility in Coimbatore. This only meant the `huge pool of talent available in India' he said. He replied in the negative when asked whether the company would list the Robert Bosch India since it was in captive business catering only to the needs of the Bosch group. Dr Hieronimus said 20 years ago, the `diesel cars were perceived to be smelly, noisy and non sporty' but this was no more the case. The new generation Common Rail Direct Injection (CRDi) diesel vehicles had engines that were more powerful and were fun to drive than petrol engines. The diesel engines consumed about 30 per cent less fuel than a comparable pet

rol engine and cost of diesel itself was about 30 per cheaper than petrol in India. Though diesel cars commanded a slightly higher price than petrol cars, they were cost effective if one logged 10,000-15,000 km a year. It was no longer true that the running cost of diesel cars was higher than petrol vehicles. The diesel market in India was growing and by 2010, Bosch would sell 6 lakh CRDi systems.

He said the Bosch group has planned an investment of about Rs 1,800 crore in 2005-08, including the Rs 550 crore for the CRDi fuel injection system manufacture. This would be adequate for the initial stage. But when the Euro 4 norms come into effect in 2010 in the country, the number would increase. The current capacity was 300,000 pumps a year and the capacity of injectors was higher because of exports also.

Flanges production

P. Prabakaran, Chief Operating Officer (Transmission Division), LGB & Bros, said the unit would manufacture flanges using precision machines to meet the requirements of Bosch. The company has invested about Rs 10 crore in the project and by 2010, the unit would achieve a turnover of around 6-8 million. The capacity of the plant was 60,000 flanges a month initially that would go up to 1.10 lakh a month from January 2007. Commercial production at the plant would commence from September this year. LGB has entered into a 10-year agreement with Bosch for supply of parts from this plant.

Future plans

The MICO MD said the total turnover of Indian operations of the group last year was about 750 million and the total turnover of the Bosch group was 41 billion. The share of Indian operations to the total group turnover was a little less than two per cent. Asked about the anticipated growth in Indian operations in the near future, he declined to give any guidance but said Bosch has `strong plans to grow' especially in Asia Pacific since it was a growing market and Bosch was focussed on this market. This share would grow in the coming years. The presence of so many German carmakers in India like Mercedes, BMW, Skoda and the likely entry of VW were good news for Bosch's Indian operations since they were customers of Bosch.

News: India a preferred location for call centre

(BL 08/06/2006) New Delhi - India has retained its rank as the fourth most-attractive country for investment and the preferred location for call centre and back office activities, according to a survey by Ernst and Young. The Ernst and Young European Attractiveness Survey 2006, released on Wednesday in La Baule, France, said the US and China remained the top two preferred countries for international decision makers.

"India's rating in 2006 is on a par with the previous year," the survey said, adding that the country still lags behind China in attracting foreign direct investment. While China achieved the lead position for manufacturing operations, India has emerged the top country for call centres and back office functions.

News: Indian biotech sector growing at 37%

(BS 07/06/2006) Mumbai - Indian biotech sector is growing at 37.42% and inching closer to $1.5 billion in revenues during FY06. The bio-pharma segment still dominates this sector with $1 billion in revenues.

All segments like bio-pharma, bio-services, agri-bio, bio-informatics and industrial biotech have seen good overall growth, Kiran Mazumdar Shaw, chairperson of the Karnataka task force on biotechnology, said at the inaugural session of BangaloreBio 2006 today.

Within this overall growth scenario, the western region dominates, generating 50% of Indian biotech revenues. The region also witnessed 50% growth to touch Rs 3,234 crore, followed by the southern region which grew 37% to touch Rs 2,367 crore and the northern region that grew 15% to reach Rs 920 crore in revenue.

Karnataka has developed itself to become the biggest bio-cluster in India with 175 of the country's 320 companies having set up base here. In Bangalore alone, 158 companies have their base. "Of the 28 new companies set up in 2005-06, 27 have been based in Karnataka,"Shaw said.

The bio-pharma segment witnessed 31.88% growth over last year to touch Rs 4,708 crore. This segment had clocked revenues of Rs 3,570 in 2004-05 and Rs 2,752 crore in 2003-04.

Following the bio-pharma segment is bio-services growing at 69.29% with revenues of Rs 720 crore during 2005-06. Bio-services clocked revenues of Rs 425 crore in 2004-05 and Rs 275 crore in 2003-04.

News: Indian mall owners find going tough in land deed muck

(TT 07/06/2006) Mumbai - Mall owners and retailers are finding their expansion plans badly stymied by the ever growing problem with dodgy title deeds.

“Every state has its own rules regarding land title. This does not come under the central government. As a result, it is very difficult for us mall developers to get good quality land with clear land titles,” Yogesh Samat, CEO of K. Raheja-promoted Inorbit Malls Pvt Ltd, said.

The problem is not just restricted to mall developers, say Shishir Baijal, MD and CEO of Pantaloon-promoted Kshitij, the real estate venture fund.

“We cannot get into a land that does not have clear title. We are a real estate fund and cannot get into any kind of legal hurdles in future that could emerge as a result of unclear title. As a result, sometimes we have to let go of very good properties. The problem is more rampant in the northern parts of the country,” he added.

The problem in the North is more acute because most of the land there was agricultural and procured from farmers. “Therefore, the legal titles are not clear,” Baijal added.

The problem has magnified as most mall developers are looking beyond one or two cities to a pan-India presence.

“The laws regarding land titles differ from city to city. Added to that is the deterring Urban Land Ceiling Act in Mumbai,” said Samat.

The company is currently in the process of spreading its wings across cities like Baroda, Nagpur, Pune, Bangalore and Mysore to name a few.

And it is not that the government is not aware of the problem, as Niranjan Hiranandani pointed out.

“The issue about unclear land titles was raised in the national housing policy in 2005, which had envisaged that certain processes should be put in place that can help the buyer verify the land titles. The government is aware that such a problem exists, but a lot needs to be done in this case,” said Niranjan Hiranandani, MD, Hiranandani Constructions Ltd.

There is some hope though. Some cities like Hyderabad in Andhra Pradesh and Thane in Maharashtra have taken the initiative to computerise all land records.

“This brings in more transparency in the system because every time a buyer wants to check the land records one can just go online and check. But, more states should take the initiative. One of the biggest factors that is hampering growth in real estate today in India is definitely lack of transparency in land titles,” said Anuj Puri, managing director, Trammell CrowMeghraj.

News: Tata Tea eyes more specialty buys overseas

(RTR 07/06/2006) Mumbai - Tata Tea Ltd. is scouting for more acquisitions in Europe and the United States to strengthen its position as the world's number-two branded tea firm, company officials said on Wednesday.

The Kolkata-based company has been exiting its tea plantations in India to focus on its high-margin packaged tea business, and is also looking to buy specialty tea firms abroad to give it a firmer footing in this fast-growing segment.

"The last two acquisitions we made were quite small, but we would potentially look at a much bigger one," said John Nicholas, managing director of developed markets for the Tata Tetley group.

"We've been under-represented in specialty teas and have several firms on our shortlist, but a lot of these firms tend to be family-owned, so the process takes longer," he said.

Tata Tea said last month it would buy herbal and fruit tea maker Jemca in the Czech Republic for an undisclosed sum.

Also in May, Moroccan state-owned tea and sugar company Somathes said it had received an expression of interest from Tata Tea among 25 firms, including Chinese and Moroccan firms. The minimum bidding price has been set at about $51 million.

"Eastern Europe is a hugely exciting market to be in because the economies are growing quickly," said Vijay Singh, managing director of developing markets for Tata Tetley.

"The bulk of the population is in developing markets and even though these are mostly markets for packet tea and tea bags there's long-term potential and opportunity for other segments as there is a large population of young people," Singh said.

Tata Tea, which acquired Britain's Tetley for $432 million in 2000, last year bought U.S. specialty tea brand Good Earth, which makes herbal and fruit-flavoured teas.

It is gearing up to launch Tetley Ice Tea in Britain this year, and is also looking to popularise chai lattes -- flavoured and herbal tea concentrates -- in markets such as Canada, taking the lead from Starbucks' Tazo brand.

On Tuesday, Tata Tea posted a 39 percent rise in group annual profit to 2.99 billion rupees ($65 million). Profit in the year to next March is forecast to rise to 3.24 billion rupees, according to Reuters Estimates, up 8.4 percent.

Its shares, valued at $782 million, have dropped by more than a third this year, while the main stock index has gained 6 percent.

Last year, Surrendra group, which partly owns Apeejay Tea Ltd., bought the tea business of Britain's Premier Foods Plc. for 80 million pounds, including Typhoo, the UK's third-biggest tea brand after Unilever's PG Tips, and Tetley.

Indians are the world's largest tea consumers, drinking about 450 billion cups a year. More than half its billion-plus population is below the age of 25, with a growing fondness for flavoured coffees, ice teas and fruit beverages.

News: Reliance Energy plans $13 bln projects

(RTR 07/06/2006) Mumbai - Reliance Energy Ltd. is pursuing power projects worth 600 billion rupees ($13 billion) and plans a foray into nuclear energy, Chairman Anil Ambani told shareholders on Wednesday.

Reliance Energy, which generates about 941 megawatts of power, is among many Indian and foreign companies that are making huge investments in the power sector in India.

India's rapidly growing economy is currently hobbled by severe power shortages. India has embarked on an ambitious plan that aims to add 100,000 megawatts of power generation capacity by 2012.

Reliance Energy's investment will include hydro, gas-fired and thermal power totalling 16,000 megawatts, Ambani said.

"Reliance Energy is also keen to foray into nuclear power generation, as it has good experience in engineering and designing for nuclear power plants," Ambani said.

The company is interested in setting up a 2,000 megawatt nuclear power project, he said. Last week, Reliance had proposed to form a joint venture with state-run Nuclear Power Corp. of India Ltd. for the project.

Reliance Energy is part of Anil Dhirubhai Ambani Group, controlled by Anil Ambani who broke away from elder brother Mukesh, chairman of Reliance Industries Ltd., India's leading private sector conglomerate.

Shares in Reliance Energy, which has a market capitalisation of $2.1 billion, fell 5 percent to 403.90 rupees in a weak Mumbai market.

Reliance Energy's rival Tata Power Co. Ltd. announced plans last month to increase its generating capacity by more than 4,500-megawatts from 2,300 megawatts with an investment of 180 billion rupees ($3.9 billion).

Reliance Energy is building the world's largest gas-fired power plant, worth about $3.45 billion, in Dadri in Uttar Pradesh.

When fully commissioned, the project is expected to produce 7,480-megawatts of power, large enough to light up a city three times the size of Mumbai, India's commercial capital.

The company also has plans to set up a 4,000-megawatts gas-fired power plant in Maharashtra, and another 280 megawatts hydro power project in northern India.

It has signed preliminary agreement to set up two hydro power projects of 1,000-megawatts and 700-megawatts in Arunachal Pradesh.

Ambani said Reliance Energy is in the fray for the Indian government's plans to set up new power projects. India in January invited expressions of interest for setting up five power projects, each of 4,000 megawatts capacity.

Reliance Energy has also expressed interest in setting up a 3,500-megawatt power project in Sasan in central India and another 3,800-megawatt project in Gujarat.

Ambani said Reliance Energy was involved in rural electrification and had, earlier this year, won contracts worth 7.90 billion rupees to electrify 17 districts in Uttar Pradesh.

"Of the 7,220 villages, about 2,500 have already been electrified and work would be completed by early 2007," he said.

News: Anil Ambani's Reliance group to create sub-brands

(BL 07/06/2006) Mumbai - With a master branding strategy in place, the Reliance - Anil Dhirubahi Ambani Group (R-ADAG) is planning to create sub-brands with some of its businesses.

Speaking to Business Line, Mr Sanjay Behl, Head of Branding, Reliance Communication Ventures, said, "We will be creating sub-brands with some of our products but the key equity will always come from the Reliance brand.'' For instance, some of its products in the wireless and mobile space such as R World and Hello would undergo a sub-branding strategy.

Adds Behl, "Depending on the genre of the product, there may a sub-branding strategy. But the purpose is not to have too many sub-brands as the equity of most of the products would go back to the Reliance brand.''

With the purpose of transforming its power brand into a customer-centric global brand in the future, the group has recently empanelled a set of six advertising agencies.

Behl further adds, "Reliance is the power brand and we want to make it an iconic, customer-centric global brand.''

Master branding

In fact like any other product, Reliance expects to have a master branding strategy whereby the power brand of Reliance would get used. Associating the brand with the icons in other industries, megastar Amitabh Bachchan, is currently featuring in its corporate film. "The contract with Bachchan is open-ended and flexible. He will not be featuring for every product and wherever there is s brand fit, we will be using him,'' claimed Behl.

Besides, Reliance ADAG has also roped in cricketer M.S. Dhoni as its brand ambassador in the recent past and is open to getting in more celebrities depending on how well they fit the brand. Recently, the group roped in O&M and Mudra to handle its corporate brand, while five more advertising agencies (Leo Burnett, Everest Brand Solutions, Mudra, Contract and Cartwheel) will be looking after the rest of its communications products.

Reliance Energy and Reliance Capital will be handled by Mudra and JWT, respectively.

'Club agency'

Adopting a 'Club agency' concept, Ajay Kakar, Head of Branding, Reliance Capital and member of the group brand team, said, "While we have appointed two agencies to handle the brand at the group level, we would like to consider the agencies across our group companies as `club agencies'. It is our commitment to keep them motivated and excited to give us their best.'' Meanwhile, the group is open to roping in more agencies, if required. As Behl says, "Although have about six agencies presently, we can always explore more and are open to roping in more agencies as and when we get into new segments.''Without specifying the ad budget allocated, Kakar adds, "We are going to be one of the largest spenders in the country. Considering we are in retail customer facing businesses and in the growth phase industry, we will not be cutting short on our budgets.'' Industry estimates put the Reliance ADAG ad budget at Rs 700 crore.

News: 21 Indian cos in global elite list

(PTI 07/06/2006) New Delhi - While the bulls of the stock market seem to have bowed under the ensuing bear pressure, country's corporate tigers are roaring in the global arena with as many as 21 Indian companies making it to the list of 100 top emerging global challengers.

Along with obvious names like IT majors Infosys, TCS, Wipro, Satyam Computer and the Reliance Group, their lesser known cousins like Bharat Forge and Crompton Greaves have also found place on the elite list of 100 companies from the rapidly developing economies prepared by the Boston Consulting Group (BCG), a US-based international strategy and management consulting firm.

The latest BCG study of emerging market leaders named The New Global Challengers reveals that these companies are on track to become major 21st century multinationals and would play an important role in the radical transformation of industries and markets across the world.

India stands only next to China in terms of the total number of companies present on the RDE-100 list -- with the latter topping the chart with 44 entries.

However, India scores considerably over China in terms of its participation from the IT, automotive and pharmaceutical industries.

In fact, the presence of the auto industry has also surpassed the much-hyped IT sector with as many as five Indian auto companies making it to the list, which includes Tata Motors, Bajaj Auto, TVS Motors, Mahindra and Mahindra and Bharat Forge.

News: Rabo India eyes 20% growth

(PTI 07/06/2006) Mumbai - Rabo India Finance Pvt Ltd (RIF) is targeting a 15-20 per cent growth in its business over the next five years and will focus strongly on new and emerging segments within its core business areas of food and agri-business as well as in media.

A wholly-owned subsidiary of Rabobank International, RIF is also looking to increase its fee-based income, which presently contributes around 30 per cent of its total income.

RIF Managing Director, Corporate & Commercial Banking Rajesh Srivastava said that the Rs 4,600 crore agri-business sector that was getting increasingly corporatised in India held immense growth potential.

"There's explosive growth potential in this sector and I won't be surprised if it touches the Rs 15,000-crore mark in the next five years," he said.

Within agri-business, RIF, which traditionally has been focusing on sugar, fertilizers, paper and alcoholic beverages, will now increasingly focus on emerging segments such as dairy, processed fruits and vegetables, juices, poultry and seafood.

"We will not only lend money to players entering these segments but will also play the role of knowledge partners to them," he said.

"We are building up our knowledge-base in these segments and we already have an eight-member team in place for emerging sectors," he revealed.

Some segments, Srivastava highlighted as having huge potential include the cheese segment which is presently estimated at a very low Rs 250-crore, ice-cream, flavoured yoghurt and other milk and milk-related products.

Srivastava also pointed to the poultry industry, estimated at $1 bn as having immense growth potential. "The industry can grow by at least three times more in the next few years," he said.

On seafood, RIF's plan is to advice clients to export their products to premium markets like Japan and South Korea.

"We should aim to capture the Japanese market," he said, adding, “ this, however, calls for our players to lay tremendous emphasis on quality, for Japan is a quality-conscious market.

News: Escada set for debut in India

(TNN 07/06/2006) Mumbai - International luxury women's fashion wear brand Escada will now be available in India. The brand has tied up with S Kumars Nationwide.

Exclusive marketing of Escada apparel and accessories is to be the prime responsibility of Brand House Retail, a subsidiary of S Kumars.

The 700-million euro brand is the first super premium brand that Brand House Retail is bringing to the country. Tarun Joshi, CEO of Brand House Retail said, "Though womens' wear is a fast growing segment internationally, in India, very few brands are present in apparel that have made it to the top of the line. We decided to fill in the lacuna."

The first Escada store will open in Mumbai, in November. "We plan to open seven stores in four to five years, one each in Mumbai and Delhi and then double it,"said Joshi.

News: JHP delivers revolution in Indian retail industry

(CM 07/06/2006) Mumbai - One of India's biggest retail companies, the K Raheja Corporation, has launched HyperCITY - the country's first hypermarket, designed by London-based agency JHP.

The hypermarket, based in Mumbai, aims to create a world-class shopping experience for its consumers.

According to HyperCITY's vice chairman Mr. BS Nagesh: “Through our partnership with JHP, we have created a retail environment where the store, atmosphere and planning are all anchored around the brand promise of ‘there is more to discover’.

'We are about three weeks into launch and are absolutely delighted to know that the customers love the entire experience. The design philosophy we have adopted is that of a fresh and modern look incorporating a number of first-of-its-kind features in India. All of this together brings alive our brand promise.'

The 120,000 sq ft store is designed to make shopping fun and enjoyable, with 'experience builders' such as demo kitchens, mock rooms and gaming zones punctuating the customer journey, encouraging the customer to interact more closely with the products on offer.

The store also offers Indian consumers a 24-hour pharmacy, a bakery, two in-store coffee shops, and express checkouts for speed of service.

HyperCITY has an exclusive tie-up with Waitrose, the UK based supermarket, retailing their products along with HyperCITY’s own private labels.

JHP joint Managing Director, Raj Wilkinson, who attended the launch, commented: 'On opening day customers came in, looked around in awe then picked their trolleys up and shopped as if they had done it a thousand times before. The standards of consumer expectation are getting higher and higher in the Indian retail sector'.

Austin McGinley, JHP Marketing Manager, said: 'It was an intensive and highly focussed collaboration, especially at the creative briefing stage. At the first meetings, we were actively sketching ideas and concepts. The uniqueness of this particular project was that both the brand and the infrastructure to support the hypermarket were being built at the same time. Everything from the brand identity, logistics, distribution, packaging, store design, etc was running in parallel. We believe the store is without compare in India, and has set the standard for market entry strategies for both those already retailing in India and those who want to enter from abroad.'

JHP has been working with retailers in India since 2002 and is currently advising non-Indian retailers on their market entry strategies.

News: Overseas investors to return to India?

(Bloomberg 06/06/2006) Mumbai - India's rupee rose for a third day on optimism global investors, who have been net sellers of the country's stocks for the past three weeks, will buy back shares given the pace of growth in Asia's fourth-biggest economy.

The rupee also gained as some traders sold dollars following a drop in the US currency against the yen and the euro. Traders may have judged the rupee's 3.1 per cent decline versus the dollar in May as excessive after a report last week showed India's economy was expanding at a rate second only to China among the world's 20 biggest countries.

``As we see dollar supplies improving, we can see the rupee gathering more strength following its recent fall,'' said B.

Satyanarayana Rao, a currency trader at state-owned Andhra Bank in Mumbai. ``The dollar's weakness overseas has also resulted in some benefit for the rupee.''

The rupee gained as much as 0.3 per cent to 45.78 against the dollar before trading at 45.8625 as of 3:27 p.m. in Mumbai, according to foreign-exchange Broker Kanji Pitamber & Co.

It may advance to 45.50 in coming days, Rao said.

India's economy grew 9.3 per cent in the three months ended March 31, the Central Statistical Organisation said May 31, rounding off growth of 8.4 per cent during the financial year ending March.

Overseas investors sold $2.66 billion of stocks between May 11 and June 1, more than half the $5 billion they purchased from the start of the year to May 10, according to the stock market regulator, Securities and Exchange Board of India.

Opportunity

The benchmark Sensitive Index, or Sensex, dropped 19 per cent since closing at a record high on May 10, along with a decline in emerging markets worldwide. The 30-stock index rose 95 per cent in the 12 months to May 10.

``Even with very high valuations, we are consistent with the scale of the growth story,'' said Christopher Wood, an equity strategist for CLSA Ltd. in Hong Kong. Investors should seize the opportunity to buy shares in one of the world's fastest growing economies, he said.

The rupee pared gains on concern a widening current-account deficit will boost demand for dollars. Stock purchases by global funds helped offset almost four-fifths of the deficit during the past two years, according to UBS AG.

Faster economic growth has increased demand for imports, including oil, boosting the need for foreign currency.

Spectacular Growth

``The spectacular growth in equity inflows concealed the true magnitude of the problem with the current account,'' said Siddharth Mathur, a currency strategist in Mumbai with J P Morgan Chase & Co., who expects the rupee to fall to 47.50 against the dollar by the end of the year.

The current account, a broad measure of trade that includes services, tourism flows, employee remittances and investment income, is used by many traders and strategists to determine the underlying strength of a currency. The wider the gap, the weaker the currency may get.

The rupee also advanced after the US dollar snapped a two-week rally against the yen and the euro, as signs of slowing growth cut expectations the Federal Reserve will lift interest rates for a 17th straight time this month.

``As the dollar gets weaker, we can see more strength in the rupee,'' Andhra Bank's Rao said.

News: Giordano to wait, watch & then weave from India

(TNN 06/06/2006) Chennai - After dressing up people in almost 30 nations worldover, Hong-Kong-based retail giant Giordano is adopting the ‘wait-and-watch’ policy on outsourcing its products from India even as it has lined up plans for expanding its footprint in the country by opening about 20 stores by ’08.

“India is now the focus of every international retail chain because of its accelerating economic growth. While, we see good opportunity for ourselves in India, we want to first study the market closely before we take a decision on outsourcing,” Peter Lau, chairman and chief executive, Giordano International told ET in Chennai.

Observing that, “Textile infrastructure in India is yet to meet the global standards in terms of quality and scaleability of products compared to China,” he said the dragon land’s textile sector has been present in the global market since the last 25 years.

“Japan and Korea have invested heavily in the textile sector in China giving the sector an upward thrust. India, however, has not cooperated with the global investors, thereby losing out on the infrastructure need for its upliftment,” Mr Lau pointed out.

The apparel major, which opened its first store in Chennai recently at City Centre , is ‘bullish’ on its growth in India. It plans to open stores in Bangalore, Hyderabad, Mumbai and other major cities.

“Currently, we will concentrate on south India, the retail hub of the country, and then move on to other regions in a phased-manner,” he said, adding, “we want to test the market with our initial 20 shops and then may be scale it up to 150”.

On whether its pricing would be similar to that in the Middle East and Southeast Asian countries, Mr Lau noted that the prices may be marginally higher by 10-20% in India due to the high customs duties. “However, as far as possible we try to maintain the same price structure globally.”

He also noted that the Indian customers were aware of the brand because of the company’s strong presence in the nearby GCC, Australia and Asian markets.

“Giordano’s success is driven by its core values of quality, knowledge, innovation, service and simplicity and we will follow the same policies here to ensure consistency in quality and service,” he added.

The company, which closed the year with a turnover of ‘half-a-billion dollars’ has earmarked around $5m as its capex for its expansion plans in India. Started in 1981, Giordano currently operates in over 1,800 stores in more than 30 countries, including China, Japan, Singapore, Korea, Taiwan, Australia, the Middle East, eastern Europe and Central Asia.

The company also plans to open its first store in South Africa this year. Giordano Fashions India, based in Chennai, will be the country’s exclusive distributor for the brand and will house the latest collection besides the complete range of its core products.

News: Cookie Man to bake more for India

(TNN 06/06/2006) Chennai - The delectable aroma of cookies hooks men, women, children and even die-hard dieters. Australian cookie major, Cookie Man India is pegging its growth horizon on the footfalls in malls across the country, besides non-traditional set ups like airports and petrol bunks.

“We are aggressively tying up for space with multiplying malls in the urban landscape across India. Mall mania is shifting to tier II cities and we want to ride on it as well. We are targeting 14 ‘mother shops’ and 40 express shops by ’07,” Sandeep Sewal, senior vice-president(retail) told ET.

The Cookie Man brand is present in 20 countries and in India through a 50:50 joint venture with an Indian group. Noting that setting up its stores in malls was necessary as the aroma of baked cookies travelled well in an air-conditioned, enclosed environment, he said airports and petro bunks figured high on its branding agenda.

“In fact, we have blocked spaces in places like Pune, Ludhiana, Indore, Jaipur and Chandigarh where a number of malls are coming up. In the South, we are evaluating places like Coimbatore and Mysore to expand our presence,” Mr Sewal said. Cookie Man is eyeing the institutional business, corporate and festive gifting as key drivers for its growth.

“New age sectors like IT, BPO and insurance prefer cookie as a gift choice which is why we are targeting this segment,” he said. The cookie chain also plans to make India its ‘dough base’ as a significant chunk of its revenue is generated from selling dough and the rest from contract manufacturing of cookies.

“Since dough is paramount to the cookie, we ensure the stores are provided with the right dough,” Mr Sewal said. The organised biscuit/cookie market is estimated at $500m and “we want to garner a significant portion of it,” he said adding the chain has a coffee chain tie up with Barista and Java Green.

On the revenue model, he said the franchisee rents the company’s proprietary Autobake oven and buys raw materials from it. While the franchisee invests in the retail space, the company undertakes the marketing.

Cookie Man’s open format shops does a constant ‘menu-engineering’ and quality analysis at all its outlets to test the consumer preference. “Our R&D centre at Ambattur does frequent quality analysis,” he said.

“We have set a target to open two-three factories by ’11,” he said. The six-year-old company, which closed the year with a turnover of Rs 15 crore, is looking to double it this year. On the company’s India-inspired savoury line, he said Cookie Man is retracting the product line as it “did not go well with the masses.”

News: Gammon India bags order from Senegal

(PTI 06/06/2006) Mumbai - Gammon India Ltd on Monday said it has bagged e25.20 mn order from Senegal for construction of a container terminal.

The order bagged by a consortium of the company with Somagec SA and Drapor SA is for constructing the container terminal including dredging and back-fill at Senegal's Port of Dakar.

The company informed the stock exchanges that a consortium of Gammon India with its subsidiary Gammon Infrastructure Projects Ltd has also bagged two orders worth Rs 1,080 crore from National Highways Authority of India.

The secured orders entail the Kosi river bridge project and Gorakhpur bypass project.

These projects are on annuity basis and a part of the East-West Corridor of National Highways Development Project (NHDP) - Phase II.

News: Tighter Indian money laundering norms soon

(BS 06/06/2006) False currency declaration may soon be a criminal offense attracting severe penalties including a jail term.

This is at present a civil offense and attracts a fine. The department of economic affairs would examine the proposal shortly, a finance ministry official told Business Standard.

False declaration refers to misrepresentation of the value of currency or bearer negotiable instruments being transported.

It also covers misrepresentation of relevant data which is asked for in the declaration or is otherwise requested by the authorities. This includes failing to make a declaration.

The official said this was a crucial step in attempts to clamp down on money laundering.

The government has also decided that details of all money transfers (remittances to India from overseas) of Rs 1 lakh and above will have to be provided to the financial intelligence agency, which will make the details available to the security agencies.

Even if the transaction is below this threshold, the unit can ask for the data from money transfer agents and sub-agents, who will be required to keep a record of all transactions.

The finance ministry officials feel these changes will meet security concerns. “There have been incidents of terrorist organisations misusing the money transfer facility. The measures will address these concerns”, the official added.

Money laundering is a process of converting the proceeds of crimes into legitimate money through a series of financial transactions.

The absence of laws against money laundering in the Indian banking system can come in the way of international banking transactions and relationships as global banks are uncomfortable doing business with countries which do not have these laws.

In the United States, which has some of the most severe laws on money laundering, false declaration attracts a nine-year jail term.

News: India Inc plans to shop big

(TT 06/06/2006) New Delhi - India Inc is likely to spend up to $4.5 billion this year to acquire foreign firms, according to investment analysts.

Domestic companies had acquired 42 foreign firms last year at a cost of $2.3 billion.

In contrast, Indian bigwigs have made around 29 acquisitions worth $ 2.1 billion in the first four months of this year.

“While Indian companies in the recent past have accumulated a lot of wealth and wish to deploy it cautiously, American firms are also keenly watching India’s growth story and want to be a part of it,” said Anil Kumar Singh, managing partner of Virtus Global Partners, a NewYork-based investment banking firm.

Singh said the ballpark figure of $4.5 billion is supported by studies made by other research analysts, including those by KPMG.

Virtus Global provides crossborder transaction and advisory services to companies in the US and India who are actively considering mergers and acquisitions. The company offers services to firms with revenues in the range of $40-$150 million, Singh said.

“At present, we have sale or merger mandates from a handful of companies, including six US-based technology firms. These are two pharmaceutical companies and one each in the auto, candy and nut processing segments,” said Singh.

On an average, the completion of a merger or acquisition can span from four months to even a year.

Stating that India has immense growth potential over the next eight to 10 years, Singh admitted that the merger and acquisition industry has some challenges ahead.

“A due diligence exercise, deal structuring and a straightforward attitude is what one looks for,” said Singh. “The process of due diligence in India is a nightmare when compared with the US and UK,” he added.

The majority of overseas acquisitions by Indian companies are in Europe, which comprises nearly 50 per cent of the total merger and acquisition industry, he said.

The acquisitions made in the US represents about 24 per cent of the total pie. This is expected to grow to 35 per cent over the next one year.

US firms are interested in information technology, pharmaceutical and auto component companies in India, said Singh.

News: IBM to invest $6 bln in India over three years

(RTR 06/06/2006) Bangalore/San Francisco - IBM, the world's largest computer services company, announced on Tuesday plans to invest nearly $6 billion in India over three years, underscoring the country's growing importance as a global hub for information technology expertise.

IBM said it planned to expand its services, software, hardware and research businesses in India, where it is already the largest multinational firm with 43,000 staff in 14 cities, up from 4,900 in 2002.

"India and other emerging economies are an increasingly important part of IBM's global success," Samuel Palmisano, the firm's chairman and chief executive, told a meeting of more than 10,000 employees in Bangalore, India's IT hub.

"IBM is not going to miss this opportunity."

The cash, almost triple the $2 billion that IBM has invested in India over the past three years, is the biggest investment by a multinational firm in India in recent years.

It dwarfs the $3.9 billion combined investment announced last year for India by three U.S.-based companies - Microsoft Corp., Intel Corp. and Cisco Systems Inc..

International Business Machines Corp. of Armonk, New York, is among a growing number of multinational companies boosting investments in India, whose economy expanded nearly 8 percent last year as demand surged for its vast pool of English-speaking and relatively low-wage technical workers.

ONE-STOP SHOPPING

Palmisano said IBM's plans in India include centres to automate information technology services and provide clients with "one-stop shopping" for hardware information and products.

IBM said it would develop a telecommunications research and innovation centre at its laboratory in Delhi and establish a hub linking IBM consultants, developers, engineers and researchers.

The firm opened this year a centre in Bangalore that combines its business consulting, research, software and hardware capabilities to help customers improve supply chain functions.

In 2004, IBM bought Daksh, an Indian back-office consulting business that now employs about 20,000 people, for $160 million.

Although IBM does not reveal its Indian sales figures, some estimates have pegged them at more than $1 billion. Revenue has been growing at high double-digits over the last six years.

"IBM is excited by the opportunities in India over the long term and we are also encouraged by the domestic opportunity that India offers," said Palmisano, on his fourth visit to India in as many years.

The company employs more people in India than in any country outside the United States, with its workforce in the South Asian country exceeding IBM's combined strength in Brazil, China and Russia.

IBM's business in India grew 61 percent in the first quarter compared to a year earlier, the firm's highest growth rate among emerging economies. India's $15-billion domestic market for services and hardware is expanding at about 25 percent a year.

This, coupled with a global reputation for developing software cheaply, encouraged IBM to hire 15,500 staff in India last year even as it shed roughly 10,000 in Europe.

BILLIONS UP FOR GRABS

Although there is an escalating fight between tech companies for talent, wages in India are still a fifth of salaries paid in many western countries. IBM serves 225 clients globally from Bangalore, and nearly 16,000 work in the southern Indian city.

Palmisano said on Tuesday India would have 21 million college graduates by the end of the decade.

India's software services sector is likely to grow by more than 25 percent for the year to March, 2007, on rising demand for outsourcing, according to an industry body.

Contracts worth a combined $100 billion are coming up for grabs over the next two years, the body estimated recently.

In information technology consulting, IBM's competitors in India include Tata Consulting Services Ltd., Infosys Technologies Ltd., and Wipro Ltd..

Computer services such as consulting, outsourcing and system maintenance accounted for $47.4 billion of IBM's revenue last year of $91.1 billion.

The company in April reported a 22 percent increase in first-quarter net income on lower costs and increased sales of advanced microprocessors for video game machines.

News: 'India is the best emerging market'

(BL 06/06/2006) Mumbai - The Chief Economist of CLSA, Jim Walker, expects Fed to raise interest rates by 25 bps within a month. He says that the global liquidity conditions are tightening; hence the scepticism in emerging markets is justified.

Walker also adds that European Central Bank and the Bank of Japan would hike their interest rates soon; in fact Bank of Japan is considering of hiking it by 75 bps.

According to Walker, the risk appetite for hedge funds is waning. He expects a risk of recession in the US and exporters would be hurt in the bargain.

Walker believes that India is not as badly placed as other Asian countries. He expects RBI to raise interest rates by 50 bps in July.

Excerpts from CNBC-TV18's exclusive interview:

Emerging markets across the board have been fairly apprehensive about the global liquidity picture now. Do you think that the caution is justified that things may not be the same as they have been for the last couple of years?

I am afraid to say that this scepticism is justified. Global liquidity conditions are certainly tightening. US have been on a strike over two years now; I think it has still a little further to go. But starting this week, European Central Bank will begin to raise interest rates in a serious way. Then within the next 4-5 weeks, Bank of Japan will follow suit. So, we have all the major central banks raising interest rates at the same time. I think the outlook for the next two years is that of a tightening global liquidity and weakening appetite for risk.

What does RBI have to do now because last time you said it had fallen a little bit behind the curve?

It is a 50 bps rise in July and that is really backed up by last week's numbers on the last quarter of the fiscal year. The first quarter of 2006 GDP growth, at around 9.3 per cent was stunningly good growth for India. That was obviously helped by an excellent agriculture sector with the monsoon coming through.

Loan growth is extremely strong and inflation rates are rising across the world and also in India.

More work needs to be done on rising fuel prices in India. I think the central bank needs to get its act together and start rising, as it should do in an economy that is growing as fast as Indian economy. I think 50 bps is on the cards for July.

With your expectations on global liquidity, would you predict a bearish kind of market for global emerging markets and for global liquidity in the foreseeable future?

It is difficult to make a call but I am a bit concerned about the emerging markets when risk appetite is falling globally. I would like to say otherwise, because most of the markets we cover are accompanied by emerging markets. It has never been the case before and I don't think things have changed that dramatically.

I think there is a better quality of earnings results coming through from emerging markets. I think they might not under perform as they usually do in a tightening liquidity environment. But, the best of the market rallies are over for 2006.

News: 'Indian biotech sector to generate 1 mln jobs'

(UNI 06/06/2006) Bangalore - The bio-technology sector in the country is expected to generate over a million jobs in agriculture, pharmaceutical and medical segments by 2010, Biocon India's Chairperson and Managing Director, Dr Kiran Mazumdar-Shah, said today. Briefing newspersons before the sixth edition of the three-day international mega event Bio-2006 from June seven here, she said the sector had the potential to touch business worth over $5 billion by 2010. Dr Mazumdar-Shah, also the Chairperson of Karnataka Vision Group on Biotechnology, said that despite facing shortcomings in the form of inadequate infrastructure facilities and skilled labour, the biotech industry in the country was poised to make big strides. ''The country had better opportunities in the sector by offering clinical research, clinical services, R&D and development of medicines. It also had huge potential to offer in the field of agriculture sciences, genetically modified crops and related areas,'' she said. She said the industry was growing at the rate of over 30 per cent per annum and appreciated the Karnataka Government for taking the initiative to set up the country's first Biotech park in the city at a cost of over Rs 103 crore. The industry, a capital intensive sector, needed all cooperation and support from the Governments concerned, she opined. She said the main focus of the Bio-event would be agricultural biotechnology as the country was making rapid strides in the sector. Agri-Biotech day at Bangalore Bio-2006 had been conceptualised to strengthen transnational partnerships and it would throw light on the recent advances in molecular genetics, informatics and genomics research that had created many new possibilities for applying biotechnology in agriculture. Leading bio companies, academicians, scientists and all stakeholders would participate in it, she added. Karnataka IT and BT Principal Secretary, Anup K Pujari, said the State's decision to approve setting up of bio-tech park and release necessary funds for the venture capital fund for the IT and BT industry would provide the required fillip to the sector. Tenders have been finalised for the civil works of the proposed biotech park, he said, exuding confidence that within 18 months the building would be ready for the biotech park. He said the proposed biotech park would house the country's first human genetic centre, common facilities for incubation and research and development centres and related amenities.

News: Reliance's retail plans for Bengal

(TV18 05/06/2006) Mumbai - Mukesh Ambani is planning to enter West Bengal in a big way. His group, which will foray into retailing soon, is giving finishing touches to a partnership agreement with a key real estate player in Kolkata, CNBC-TV18 reports.

Pantaloons, Kolkata's oldest High Street retail store, is also the first outlet of the chain, which has a presence in 25 cities today. The management of Pantaloons has always been bullish on Bengal.

It has committed to acquire nearly 30 lakh square feet retail space in Kolkata in the next few years. And this, according to the Pantaloons management, could cost up to Rs 500 crore.

Pantaloons isn't the only retailer looking to expand in Kolkata; name any chain and it's on the look out for more space. And the latest entrant in this rush for mall space is Mukesh Ambani, whose group is foraying into retailing soon. And it is in talks with a key real estate player in Kolkata for partnership.

Harsh Neotia, is likely to be Reliance's partner in Bengal. His men are giving final touches to a partnership deal at present, and within a couple of weeks, the plan for Reliance's entry would be cast in stone. And Bengal Chief Minister Buddhadeb Bhattacharjee is already on cloud nine.

He is hoping to hear Reliance announce its plans for his state early next month.

News: Asia proves hip for designer wallets

(PTI 05/06/2006) Singapore - Asians buy more designer wallets than any other region but luxury-brand loyalty varies from country to country, with Indians preferring Armani and Versace, a global consumer survey revealed on Monday.

In China, fashion-conscious buyers go for Chanel, Louis Vuitton and Versace, in that order, while in India, consumers prefer Armani and Versace, the survey said.

The survey of 21,000 internet users in 42 countries conducted by research firm ACNielsen showed that the most popular designer brand globally is Ralph Lauren followed by Gucci, Christian Dior and DKNY.

In Asia, Hong Kong and Japan form the largest overseas markets for Louis Vuitton, while South Koreans are the biggest buyers of Ferragamo products.

The Philippines was the largest overseas market for Ralph Lauren.

When it comes to future purchases, the most desired brands globally are Versace, Dior and Chanel.

ACNielsen said Asia is the world's largest buyer of designer wallets with nine of the top 10 markets for such products located in the region, which also happens to have the biggest money savers.

News: India Inc prepares to face Mumbai's monsoon blues

(IANS 05/06/2006) Mumbai - India Inc is readying plans to beat monsoon blues in Mumbai after the first showers last week led to water-logging - a grim reminder of last year's floods that had brought the metropolis to a grinding halt.

Corporate firms have begun to put into place "business continuity" plans to handle emergency situations like the ones that arose last year when employees were unable to reach their offices for close to a week as the city's transport system was badly affected by incessant rains and resulting water-logging.

"The monsoons have already hit the city. The back-up process is invaluable for any tech company like ours. We have in place several physical and technical back-up exercises in our offices in Bangalore, Chennai and Hyderabad," Kapil Kapoor, who works for a leading software firm, said. "If our Mumbai office cannot operate on any particular day, these centres will then take over," he added.

"We are discouraging employees to work beyond office hours, lest they get caught up in the rains. In case of emergencies and employees not being able to reach the office, we allow them to work from home. They are also allowed to carry home their office laptops," said Raju Hote, who works for a public relations firm.

"We are, however, ensuring that our communication system does not fail. And praying to rain gods that we be spared from another deluge," he added.

Their panic is understandable, as authorities were yet to complete pre-monsoon road repair works.

When this year's first showers hit Mumbai on Tuesday evening, they caught the government by surprise. Just days earlier, Chief Minister Vilasrao Deshmukh had extended the deadline for repair works from May 31 to June 5 - the predicted onset of the rains.

It cost both the executing agencies, the Brihanmumbai Municipal Corporation (BMC) and the Mumbai Metropolitan Region Development Authority (MMRDA), dearly.

As rains lashed the island city and its suburbs May 31, unfinished work on arterial roads and debris lying around caused widespread flooding leading to traffic bottlenecks, rekindling fears of a repeat of the July 26, 2005 disaster.

"Road concretisation is nearing completion and the dry spell from Friday to Sunday has given us the much needed respite. Water has receded from areas that were flooded. We are now hopeful to meet the June 5 deadline," said BMC chief engineer (roads) Mohan Kadam.

"Even if there are heavy rainfalls, BMC is prepared to meet the situation," he said.

"The May 31 flooding happened because all the waste is washed up with first showers and clogs the drains. Once we clear this up, the drains will function properly," Kadam said.

The official said newly laid concrete roads needed curing and early rains have helped.

"The curing period was almost over, but rains arrived early. This is, however, good for the roads," he added.

Residents, however, are not convinced, and quickly point out large stretches of unfinished roads.

Terming the busy Bandra-Kurla Complex road as a driver's nightmare, Hote said: "It is criminal that BMC officials have not bothered to repair patches of this lifeline between Mumbai's business hub and the suburbs for over six months."

A resident of Andheri complained: "The storm water drain along the Eastern Expressway is still being dug. When will the repairs work be completed? Let's hope the dry spell continues till the BMC's work is completed."

News: 'India world No. 2 hotels market'

(FE 05/06/2006) Shanghai - China is Asia's hottest spot for hotel development, accounting for nearly half of all new projects in the region, according to an industry report.

Of the 386 hotels being actively pursued throughout Asia, 188 are in China, and 134 of those are rated four- or five-star, according to the report released late on Friday by U.S.-based industry tracker Lodging Econometrics.

Most of the new projects are going into China's large coastal cities and manufacturing centres slightly inland, said Patrick Ford, Lodging Econometrics' president.

"It's a development period like none other," he said. "China ... has the fastest-growing inbound tourist inflows of any country and is projected to be the largest tourist destination in the world by 2020."

He added that Beijing's rush to build enough quality hotels for the 2008 Olympics is helping propel the boom, with 25 new hotels in the pipeline in the Chinese capital alone.

Most of the world's major hotel operators are active players in China, including U.S.-based Marriott International Inc., Hilton Hotels Corp. and Starwood Hotels & Resorts, as well as Britain's Intercontinental Hotels Group Plc. and France's Accor SA.

China also has a number of homegrown players trying for a piece of the action, including the nation's top chain, Jinjiang International Group, which is planning a $300 million initial public offering in Hong Kong as early as September.

The industry has also been helped by the rise of domestic online travel agents, led by Ctrip.com and eLong Inc., which act as central booking centres for an industry that is otherwise still highly fragmented.

Asia's second most active market after China is India, with 78 projects containing 12,244 rooms in the pipeline.

Of those, 44 percent are near outsourcing office centres in cities like Bangalore, Chennai, Hyderabad and Mumbai.

News: India's DLF may raise $3 bn

(FE 05/06/2006) New Delhi - DLF Universal Ltd., the real estate developer owned by Indian billionaire K.P. Singh, plans to raise as much as $3 billion in the nation's biggest share sale, bankers involved in the transaction said.

The company, which announced the sale in April, will begin marketing the shares to international investors after receiving regulatory approval, said the three bankers, who asked not to be identified before an announcement. The sale may raise as little as $2.5 billion, they said.

The IPO will test investor confidence in India's stock market after the biggest monthly slump in two years. A jump in demand for homes, offices and shopping malls is drawing banks such as Goldman Sachs Group Inc. and Morgan Stanley into the real estate market, and attracting investment in the stock of Indian developers such as New Dehli-based DLF.

``The size of the issue is large and the market doesn't look great, but it's in a very specific sector where there is a lot of foreign investor demand,'' said Murthy Nuni, Singapore-based managing director at Marshal Fund Partners, which invests in Indian companies. He said he plans to buy DLF's shares.

FALLING STOCKS

The Mumbai stock exchange Sensitive Index has fallen 17 percent after rising to a record on May 10. The index fell 14 percent last month, its biggest decline since May 2004 and the first monthly drop in seven. The drop has taken the price-to-earnings ratio of the index to 18.9 times from a high of 25.2 times in April.

``The real estate sector in India interests me,'' said Claudio Bernasconi, who helps manage about $280 million of emerging market stocks at Banque Cantonale in Lausanne, Switzerland. ``For investors, it will perhaps be better'' to purchase DLF's IPO shares after the market slump.

Goldman said in March it would focus on real estate investments as it seeks to expand in India, after ending a 10-year alliance with billionaire Uday Kotak. Morgan Stanley said earlier this year that it invested 3 billion rupees in Indian property developer Mantri Developers Pvt., its first real estate investment in the nation.

DLF hired Merrill Lynch & Co. and Uday Kotak's Kotak Mahindra Capital Co. to manage the share sale.

DLF plans to sell 202 million shares, of which 187.1 million will constitute new stock, the company said in a draft share sale document that it filed with the market regulator last month. It has also retained the option to sell an additional 17 million shares. Including the additional shares, the sale would constitute a 12.77 percent stake in the company.

APPROVAL RECEIVED

The developer expects to start offering the shares to investors later this month or in early July after receiving regulatory approval as early as next week, said Vancheswar, a New Delhi-based spokesman for DLF.

``We aren't in a position to comment on pricing,'' Vancheshwar said.Accelerating economic growth and easing of rules to allow overseas companies in more industries is generating demand for real estate in the nation with an expanding middle class estimated by New York-based consulting firm McKinsey & Co. at 216 million people.

``Construction has been neglected for a long period of time in India,'' Marshal Fund Partners' Nuni said. ``There is a huge amount of demand for quality construction which is just now coming up.''

FASTER GROWTH

Prime Minister Manmohan Singh's government wants to accelerate economic growth to as much as 10 percent a year over the next decade from an average 8.1 percent in the previous three years.

DLF's share sale may exceed the 105 billion rupees ($2.3 billion) raised by the Indian government from the sale of a 10 percent stake in Oil & Natural Gas Corp., the nation's biggest explorer, in March 2004, DLF's Chief Financial Officer Ramesh Sanka said on April 20.More than 70 Indian companies raised about $5.9 billion selling shares this year as of June 1, more than half of the record $10.5 billion raised in the whole of 2005, according to data compiled by Bloomberg.

DLF Chairman Singh, 74, and his family's ownership in the company will fall to 86.06 percent if the additional share sale option is exercised in full, from 98.66 percent.

DLF will use the proceeds to purchase land, fund development and construction projects and repay 136 billion rupees in loans, according to the share sale document. It will spend 65 billion rupees buying land in and around 62 cities including the financial hub Mumbai and the capital New Delhi, the document said.

LEASING TO SALES

DLF, which more than doubled its net income to 1.99 billion rupees in the year ended March 31 and sales to 12.59 billion rupees, is shifting from leasing office and retail space to selling them in a bid to realize the value of its developments in a ``more expeditious manner,'' its share sale document said.

This shift ``may increase the volatility of our revenues and profits by replacing relatively stable rental income with less predictable sales income,'' it said.

DLF had 1,372 acres of land, representing about 102 million square feet of developed area or area available for development, as of April 30, the company said. The land reserve has been valued at 1.06 trillion rupees by Cushman & Wakefield, the world's third-largest commercial real estate broker by revenue.

In addition, the company has made ``partial payments'' to buy 2,893 acres, which can be developed into about 118 million square feet of saleable land, across India, it said.

UBS AG, Morgan Stanley, Enam Financial Consultants Ltd., ICICI Securities Ltd. and Citigroup Inc. are book runners. SBI Capital Markets Ltd. will also help sell the shares.

News: India-focused hedge funds under strategy spotlight

(RTR 05/06/2006) London - Funds using a hedge fund banner to charge higher fees while only betting on India's rising stock market are likely to come under the spotlight at a conference in Geneva later this month.

About 20 hedge funds focus purely on India and about another 700 funds concentrate on Asia Pacific, according to data provider HedgeFund Intelligence.

"Over the last three years, most so-called hedge funds have been sitting long ... It's shocking how many have underperformed the market," one investor with Indian hedge fund investments said.

India's stock market has been on a three-year bull run but prices have tumbled around 20 percent since a May 11 peak. The general upward trend is expected to resume, albeit with more volatility.

Hedge funds can typically charge annual management fees of between 1 and 2 percent and up to 20 percent of any outperformance of pre-set targets such as money market rates.

In contrast, traditional fund managers can sometimes barely muster half a percentage point of management fees and rarely charge performance fees.

"It will be interesting to see what the mood is like, some (India-focused) managers may well be facing redemptions," Sanjiv Shah, portfolio manager at Noble Asset Management, said.

TURBULENT TIMES

How to preserve and make money amid turbulence will also be a key question for investors at an Indian hedge fund conference on June 13 in Geneva organised by Jetfin Events (www.jetfin.com).

"This conference is timely ... The correction we had in May was the sharpest in a long time," said Shah.

Most hedge funds are registered in lightly regulated offshore centres such as the Cayman Islands, which allows them to use derivatives and short sell to protect the downside.

Strategies that could be used include long/short, which is buying securities seen as cheap and short selling those seen as expensive, and market neutral, where longs offset shorts, leaving little or no exposure to overall market trends.

Also hedge fund managers could switch all their assets to cash if they see trouble ahead, unlike their counterparts in the traditional world, who are mandated to keep only a small percentage -- often around 5 percent -- of their assets in cash.

"We have investments in Asia and India and we will invest more there for our clients ... That is why we are going to the Jetfin event," one Swiss private banker said.

"As shown in the recent market swings, we prefer to invest in funds with less directionality, hence hedge funds."

Hedging in India is possible through derivatives like index and stock futures. But short selling in the cash market is more difficult at the present time as it involves borrowing stock.

"In India it's difficult to short most stocks ... There are restrictions for foreign investors and a lot of things need to change," said Pierre Lavaud, chairman of Jetfin events.

"But international players are in India, this is going to get bigger ... May was a correction, not a bear market."

News: S Kumars plans 1 bln rupee retail expansion

(RTR 05/06/2006) Mumbai - Textile firm S Kumars Nationwide Ltd. will spend one billion rupees ($21.8 million) in 2006/07 on its retail unit as it signs up more international labels and prepares to launch its own brands, an official said.

S Kumars expected sales from the subsidiary, started in early 2006, to reach 1.15 billion rupees for the year to March 2007, Nitin Kasliwal, vice chairman and managing director, told Reuters in an interview on Monday.

"Our retail arm will sell the entire range of textiles across price points," he said.

S Kumars would open 113 stores in the current financial year to take the total number of stores to 129, Kasliwal said.

The company aimed for a revenue of 9 billion rupees and operating profit of 1.25 billion rupees from the retail unit by 2009/10, he said. It would have a store space of one million sq. ft in about four years, he said.

S Kumars, which already markets the Reid & Taylor suiting and casual clothing brand in India, would have a mix of licensed and owned brands in the clothing and home textile segments, he said.

The company is already investing 4.5 billion rupees to raise its fabric, garments and home textile capacity over four years.

Backed by rising middle class incomes and consumer spending in Asia's third largest economy, firms such as Himatsingka Seide. Welspun India and Pioneer Embroideries are investing heavily in retail expansion.

Shares in S Kumars fell 5.6 percent to 50.20 rupees in a weak Mumbai market.

News: Foreign banks target small businesses to push growth

(TNN 05/06/2006) Kolkata - It is a major shift in stance for foreign banks operating in India. Banks like Citibank, HSBC and Standard Chartered Bank, which have for so many years been catering to the affluent strata of the society, are now ready for offering their services to a vastly under-served segment comprising mostly of small business enterprises, mom & pop shops, salaried individuals working with government organisations, small private limited concerns and factory workers.

The reason is quite apparent: In light of an increasing squeeze in their interest rate margins, these banks have found serving this vast segment a lucrative proposition.

This is mostly a neglected segment as many of these businesses get only transactional banking services, because of their size and relatively low cash flow requirements. “Typically these are customers who do not have access to loans from private and nationalised banks based on their income,” Nicholas Winsor, HSBC India’s head for personal financial services, in an e-mailed response to ET.

While HSBC and StanChart started catering to this strata of society in August 2005 and October 2005, respectively, Citibank has announced this business initiative only recently.

StanChart is offering this service through a separate business unit called Standard Chartered Investment & Loans Ltd (Scill), currently present in 16 cities. The bank has drawn up a road map to extend Scill’s network to 60 cities by the end of this fiscal.

HSBC is offering this mass-banking service through its 21 branches in 16 cities across the country. The minimum income level required for getting a loan from HSBC is just Rs 3,500 per month for salaried employees and Rs 10,000 per year for the self employed.

This segment offers huge potential for banks. According to a survey commissioned by Citibank in November 2005, small businesses and professionals (SBP) community in India is estimated at more than 3 million, representing over 98% of business enterprises locally.

Small and medium size enterprises make up 95% of businesses in Asia Pacific and they are to be found in every market. Citibank launched ‘CitiBusiness’, a suite of business and financial solutions targeted at the SBP community.

“We are offering SBP segment the full range of banking services - current account, savings account, credit card, secured and unsecured loans, working capital loans. This is an underserved segment as many of these businesses get only transactional services,” said Mr Rajiv Jamkhedkar, Citibank’s business manager for this service.

Meanwhile, HSBC has also approached the Reserve Bank of India (RBI) for an NBFC licence, as NBFCs do not require regulatory clearance for setting offices.

“Once we get the clearance, we will expand into new markets. The NBFC will become the vehicle for expanding HSBC Group’s consumer finance business in India. In the interim, we will continue to focus on developing our existing business,” Mr Winsor said.

News: India Inc recipe to spice up growth

(TT 05/06/2006) New Delhi - The economy requires a set of structural reforms not just to improve performance but also to create inclusive growth, according to the Confederation of Indian Industry.

The revised estimates of the GDP and other growth figures released by the Central Statistical Organisation on May 31 are a clear pointer to this fact as mining and power sectors were a big drag on the industrial growth, said CII president R. Seshasayee. The Central Statistical Organisation has revised the GDP growth for 2005-06 to 8.4 per cent from the earlier 8.1 per cent.

To combat the slack, the CII has suggested deregulation of the power and mining sectors.

The chamber has proposed an energy commission to develop and implement an integrated energy policy covering power, coal, oil and natural gas, non-conventional and nuclear energies.

In addition, there is a need to create a competitive and vibrant wholesale power market.

The CII also suggested incentives from the Centre to those states that expedite reforms.

Talking about the power crisis affecting various parts of the country, the CII president said, “There is a need to create an environment for greater power generation either by public or private companies.”

India Inc is also concerned over the lack of growth in the mining sector.

“There is a need to urgently de-regulate, particularly in the coal sector,” he said.

The industry body has suggested policy changes like public and private participation in the mining sector and removal of hurdles in obtaining approvals and establish an independent regulator.

News: Economist backs FDI in Indian retail

(BS 05/06/2006) Kolkata - Opening up of retail in India may bring economic development in the country through its strong linkage effect and removal of distortions that are in the existing system, feels Abhirup Sarkar, eminent economist and professor of economics at the Indian Statistical Institute, Calcutta.

Speaking on the sidelines of a panel discussion on 'The Historic Visit of President George W Bush Jr. to India: New Directions in US-India Relations' organised by the American Centre, Calcutta, Sarkar explained that entry of major global players like Wal-Mart in the Indian market will bring competition in the market thereby benefiting consumers.

Meanwhile, the presence of global players will in no way harm the marginal small retailers.

"The common notion that entry of global players will extinguish small players in India is perhaps not correct as these people have a separate customer base to serve. If any category is open to a negative hit, it is the 'large' domestic players. Customers at large will be significantly benefited," Sarkar claimed.

Moreover, it is likely to benefit farmers also ."Marketing has always been a problem for Indian farmers and is highly dominated by handful of private traders. Once a major international player comes into the picture and starts procuring for local farmers, the welfare loss that arises from the presence of traders will cease," he explained.

At the same time, the presence of a strong retail chain would lead to an increase in consumer demand and the linkage effect would be enormous, hoped Sarkar.

Prices of goods could also see significant decline with the advent of foreign players, he hinted. Sarkar said he does not feel that India is ready yet for full capital account convertibility (CAC).

"Even without full CAC, inflow of capital into India is significant. Countries who have adopted full CAC have not seen substantial increase in their economic growth. It does not seem to be necessary for India to have full CAC," he said.

He also pointed that there still lacks complete trust in Indian capital market among the foreign institutional investors and given such a scenario full CAC might not be necessary.

News: Mumbai realty catches bourse flu

(BS 05/06/2006) Mumbai - Prices begin declining in suburbs; upmarket deals frozen.

After the steep correction in stock markets in the last two weeks, property prices in Mumbai suburbs are headed southwards.

While prices have started to climb down in the suburbs, transactions at the upper end of the market, in south Mumbai areas, have stalled as buyers wait for prices to cool. Land prices too are on a downward trend, especially in the overheated Navi Mumbai areas.

In areas like Worli, Cuffe Parade and Colaba, brokers report that there have been few transactions since the stock market crashed.

In the mid-market segment, from Belapur in Navi Mumbai to Kandivili and Borivili in the western suburbs and Thane, Mulund and Vikhroli in the central suburbs, buyers have reported softening of prices for residential properties.

Several prospective buyers have had builders or property agents, who were originally reluctant to cut prices, call back with significantly lower offers.

Industry watchers in the city have been saying for a while that the valuations are inflated in some areas and are due for a correction. The areas where a correction was predicted included the suburbs of Borivali, Kandivali, Thane, Mulund and Belapur and Panvel in Navi Mumbai.

At the height of the real estate boom in the city, prices of prime property in the suburbs had touched Rs 60 lakh. South Mumbai saw the Bombay Dyeing scion Jeh Wadia’s flat going for an unheard of Rs 35 crore.

Said Rajesh Prajapati, president of the Navi Mumbai Builders’ Association, “Prices had shot up beyond the reach of buyers in many areas. Those areas are now seeing a correction. Also, builders who need liquidity in the short term as their stock has piled up are off-loading some of it. I see this trend continuing till Diwali, Diwali, after which there should be an upswing”

He also pointed out that in areas like Kharghar where land prices had heated up, there was some correction as land had been over-sold.

On the other hand, Arun Goel, CEO, DHFL realty venture fund, is sure that the trend will continue for some time.

“All indications suggest that it is time that prices climbed down and that is what we are witnessing. The market has been on an upward trend since 2002 and we saw a rapid rise, not typical of this asset class, in the last two years. It escalated much more than was expected or was healthy. The writing has been there on the wall for sometime now, with the RBI also tightening liquidity. Also, no serious player wants this kind of a prolonged boom as the fall, when it comes, will be that much sharper.”

With market sentiments ranging low in the last couple of weeks, city brokers admit that few property transactions are being recorded in the city.

They admit that there is tremendous resistance to the current prices and most buyers are waiting for the prices to cool and the only way builders can off-load built-up property is to offer discounts.

Prices in the city had heated up as many buyers in the last couple of years were using their stock market earnings to buy real estate. This, combined with a low interest rate regime, saw a huge buying interest and prices spurted by over 20 per cent in these suburbs.

But as interest rates are hardening and returns from the stock markets are diminishing, liquidity is also drying up and the price resistance is more pronounced now, analysts said.

Industry insiders also say that builders who were sitting on built-up properties were keen to sell off before the impending correction. “This is the reason they are calling prospective clients and offering the same properties at 10-15 per cent discounts,” said an analyst.

Another reason for the phenomenon is that the difference in prices of older buildings and new constructions has shot up significantly, making buyers prefer 5-6 year old buildings which are cheaper by 15-20 per cent.

“If you are buying a property for Rs 60 lakh and have to put in 15 per cent of the money, you will obviously go for a 5-year-old property that is going for Rs 51 lakh,” said Sunil Jain, a Bandra-based broker.

News: 'Reliance retail chain to feed rising aspirations'

(BS 05/06/2006) Mumbai - Reliance Industries chairman Mukesh Ambani said his company is planning a pan-India, multi-format retail operation. All these outlets will be connected seamlessly thorugh a state-of-the-art supply chain infrastructure, he promised. In a letter to shareholders, Ambani said this initiative had been "assidiously planned to connect the Indian farmer and producer with the consumer directly." A revolution of rising aspiration is sweeping all parts of India coupled with rapid expansion and consumption at all levels in our society, he said.

Mukesh Ambani also said Reliance's exploration programme was going on full throttle and the signs were very encouraging. "We believe that we will emerge as a significant producer of energy, both of oil and natural gas. This will enable us to enhance India's status as an energy source in the world and without doubt, give a new dimension to our growth story," he said.

Mukesh Ambani also said Reliance has the capacity and the ability to emerge as a significant player on the global energy scene. "To that effect we are also pursuing global opportunities in exploration and production. We will share our progress in this area with you in the days to come," he said.

News: India Inc goes 'Green'

(BS 05/06/2006) Hyderabad - The ‘green building’concept is gradually gaining momentum in India. Already, there are five green buildings certified as per the rating system of LEED (Leadership in energy and environmental design), developed by the US Green Building Council. Around 25 other buildings in the country are now registered for such certification.

Prominent among them is the IT park - Technopolis in Kolkata that is likely to be certified by LEED shortly. Also on the list are Hyderabad International Airport and Microsoft India Development Centre’s third building in its Hyderabad campus that are being built as per green building requirements.

A green building typically applies practices like harvesting energy and water and using environment-friendly materials in its design, construction, operation and maintenance so as to maintain and sustain the environment.

Speaking to Business Standard, on the sidelines of ‘Save the environment’ seminar organised by the Taj Group of Hotels, Hyderabad, S C Kumar, senior advisor, Confederation of Indian Industry and a LEED accredited professional, said, "In countries like the US, tax and insurance incentives are given to promote the concept of green buildings. We need to provide such incentives in India as well." The seminar was organised on the occasion of World Environment Day today.

However, Kumar added, that the awareness level with regard to the green building revolution was catching pace in the country. "For instance, in Chennai, the government has made it mandatory for every building to indulge in rainwater-harvesting. The central government also has recommended the use of fly-ash in construction of future buildings," he said. Fly-ash is a waste product generated by thermal power stations.

The Hyderabad International Airport is also eyeing a green building certification from LEED. According to Vishwanath, lead-safety, health and environment, Hyderabad International Airport Ltd said, "We will have a sewage treatment plant to recycle waste water and are also proposing a reverse osmosis plant in the passenger terminal building. We are trying to ensure maximum utilisation of sunlight in the building as well."

Keith Dias, senior manager, corporate affairs, Microsoft Corporation (India), said at the seminar, "The third building at our Hyderabad campus is slated to be ready in 2008. This will take our total built-up area to 1.3 million sft in Hyderabad. We will be going for a gold rating for the third building. Our initiatives for environment protection and sustenance include rain-water harvesting, waste paper recycling, power saving techniques and the likes."

News: Foreign fund biggies plan to enter India

(BL 05/06/2006) Mumbai - At least four foreign fund biggies would soon enter the Indian mutual fund industry, a sign that re-affirms overseas interest in the country's stock markets though indices continue to sway.

US-based American International Group and JP Morgan, British fund house Dawnie Day and Singapore-based Temasek are learnt to have drawn out their plans to enter the Indian mutual fund industry. They are expected to get operational in the next five-six mo nths.

"A few foreign fund houses such as Temasek, JP Morgan, AIG and Dawnie Day have plans to enter the Indian market. They are working towards the same and are likely to make it in the next five or six months," the Chairman of Association of Mutual Funds in India, A P Kurian, told PTI here.

They would enter India, after getting required approvals, either by starting their own arm or in collaboration with some other companies, he added.

"We are planning to enter the mutual fund business very soon. We have applied to SEBI for approval and are awaiting it. We also plan to launch a realty fund and are in talks with potential market players of the same," the AIG Country Head, Sunil Mehta , said.

AIG, besides starting an asset management company in India, has plans to start consumer finance, mortgage guarantee and capital recovery businesses.

News: Rolls Royce likely to outsource R&D, design services to India

(BS 04/06/2006) Mumbai - Super luxury carmaker Rolls-Royce Motor Cars is likely to source design and R&D services from India.

“Rolls-Royce would look at the option of outsourcing some of the designing, prototyping and R&D to our parent BMW’s R&D centre to be set up in India. This will help us in achieving a high degree of customisation of our cars to Indian conditions, without compromising on the quality,” said Colin Kelly, regional director, Asia Pacific, Rolls-Royce Motor Cars.

Kelly, however, denied Rolls-Royce having plans to manufacture or assemble units in India.

He was in India to inaugurate Rolls-Royce’s first dealership in Mumbai, which will be owned and operated by Navnit Motors. Earlier, Rolls-Royces were sold through Navnit’s BMW dealership.

Rolls-Royce has sold seven Phantom saloons in India in the last 18 months, priced in the range of Rs 3-5 crore. Its parent, BMW, will invest Rs 110 crore (¤20 million) to build an assembly unit near Chennai and a wholly-owned sales subsidiary in Delhi. It will also spend money to set up an R&D and design centre in the country.

BMW will employ 200-300 people in the country. Another 600-odd jobs are likely to be created through the dealership and sales network. The production and sales subsidiary will be fully owned by the BMW Group and is expected to roll out its first vehicle by early 2007.

News: Reliance retail hub in Thailand

(BS 04/06/2006) Mumbai - Reliance’s retail division will make Thailand its procurement hub for consumer products and will set up a warehouse in that country.

Sources close to the development said Reliance would source a bulk of fast moving consumer goods (FMCG) and consumer durables from China and other countries in South East Asia like Thailand and Indonesia, which it would stock at its warehouse in Thailand before bringing them to India.

Some local companies said the Reliance move to source a large part of the products internationally was a cause for concern.

“Products, mainly toiletteries and food products from South East Asia, are available at organised retail chains and even neighbourhood outlets, which are cheaper than their Indian counterparts. With Reliance coming into the picture, the prices of these products will go down even further,” industry analysts said.

The company, it may be mentioned, plans to open about 5,500 outlets across the country. Reliance sources refused to comment.

The company has also started working out agreements with local FMCG companies to source products. It has sent out detailed mails and questionnaires to the companies, outlining its plans, and asking for details on their products.

The company is believed to be pushing for heavy discounts of about 40 per cent on the maximum retail price or MRP of products, far higher than the 20-30 per cent that is generally given to modern trade.

But sources indicate that Reliance has been open to negotiations and the discounts have been agreed upon more or less in line with those given to most modern retailers.

Considering that in case the rollout goes as planned Reliance will soon control about 1 per cent of retail outlets in the country, this is one chain suppliers cannot afford to miss having their products in.

News: Pepe Jeans unzips big plans for India

(DNA 04/06/2006) Mumbai - Pepe Jeans London has laid out its expansion plans for India which will commence within the next few months.

Launched in 1989 in the country, Pepe Jeans currently has a 25% market share in the premium jeans and casual wear segment, which makes up 15-20% of the Rs 2,000 crore denim market.

Vicente Castellano, licensees & international director, Pepe Jeans International, describes India as one of the three largest and fastest growing markets worldwide for Pepe Jeans.

“Pepe is competing with European brands. Since none of the major ones like Ms Sixty and Diesel are here or have a strong position in the market as yet, it is a good time for Pepe to form a strategy to expand its own market share as well as target new customers,” says Castellano.

Wanting to cash in on the “big changes in the market in the next few years”, Castellano sees Pepe targeting a new set of consumers. “Though we will stick to our old target group of 23-26 year-olds, we also want to draw in the younger crowd.”

To do this, they will be opening up a minimum of 90 and a maximum of 110 stand-alone stores across India. Offering a “younger and more hip-shopping experience, Pepe has already opened two of its new concept stores, one in Bangalore and another in Mumbai, to a positive response,” says Castellano.

But Pepe is no longer just about jeans and apparel. Castellano plans to bring in accessories and shoes; along with PUIC, the international global distribution licence holders for brands like Caroline Herrera and Paco Rabanne. They will be bringing these names to India and distributing accessories such as sunglasses in the market. Castellano also adds that they will be bringing in shoes in to the India market within the next year.

Pepe Jeans has always been positioned as an international brand, with its campaigns and ambassadors always being international models and football players shot in foreign locations. Castellano says, “As we get deeper into the local market, there might be a need to localise our advertising. Thus, we will be looking at possibly tying up with a brand ambassador who would have to reflect the values of our brand while also providing it with some local flavour.” But Pepe will continue to have its worldwide campaigns released here in India as well, to maintain consistency with its international look and association.

At present Pepe is a $500 million dollar denim and casual wear label in Europe, with a presence in over 80 countries. In India the denim market is growing at roughly 15% annually. However, according to Castellano, since Pepe is seeing a 30%-40% annual growth, it makes India one of the most lucrative markets for the company. Currently Pepe has 45 stand-alone stores, 55+ plus large format store locations, and 1,200 multi-brand premium outlets across the country.

News: India story remains hot, Deal St will buzz despite entry of bears

(DNA 04/06/2006) Mumbai - As share valuations “correct”, will mergers and acquisitions (M&A) start losing lustre? This question is being asked on Deal Street because sellers, typically, tend to delay deals if they think they are not getting a good price for their shares at current market conditions.

The consensus among M&A mavens is that the action need not taper off, even though bullish spells tend to quicken the deal-making impulse. According to them, the M&A game is played on the basis of fundamental valuations, where earnings per share and future earnings take centrestage. And on that score, the dealmakers’ call continues to be to go long on India Inc.

Says Ajay Garg of Mape Advisory, which was ranked 11th among Indian M&A advisors by Bloomberg in 2005: “Conceptually, when there is high volatility in the stockmarkets, sellers may want to wait and see valuations improve before selling out,” he says.

But, as Garg is quick to point out, in a bull market, buyers could also do the delaying. “Conversely, we could also have a scene where, when prices are high, there are fewer buyers. But that’s not how it works,” adds Garg.

Udayan Bose, veteran investment banker and chairman of Thomas Cook in India, says Deal St is a paradox: “When stockmarkets throw up higher valuations, more M&As are consummated than under a bearish spell.”

Girish Vanvari, executive director, (M&A - tax), at KPMG India, believes that “corrected” stockmarket valuations could also spur more M&As. “Promoters,” he says, “will get realistic and will be more willing to part with their stakes in favour of acquirers, such as private equity investors, at more reasonable valuations.”

Private equity has been one busy cog in the M&A wheel. In the past couple of years, this segment has witnessed an incredible amount of activity. According to Sanjeev Krishnan, associate director, PricewaterhouseCoopers, which was ranked No 8 M&A advisor by Bloomberg last year, “private equity has become very expensive. Look at the Prime Focus and Deccan Aviation public issues. These are not private equity deals, but they make the point. The companies had to lower the price band and extend the subscription period.” Krishnan believes there could be a “correction” in the private equity pricing math from here onwards.

Currently, a significant portion of M&A activity remains outbound - where Indian companies acquire firms abroad. In inbound M&As, financial services, information technology and media remain in the strobe lights.

In fact, there is an expectation of consolidation in the domestic information technology space.

Vishesh Chandiok, international practice partner, Grant Thornton, who tracks M&A deals, says this will kick off with larger Indian technology firms gobbling up smaller ones. He believes there is also a slew of deals waiting to be struck in the auto components sector, where European companies are taking on domestic firms for acquisition of assets.

Chandiok says the pace of M&A activity will pick up strongly.

The current fiscal could also see a few Indo-Chinese M&A deals being consummated. “This is an area where we have seen very few deals and is at a nascent stage,” says Chandiok.

PwC’s Krishnan, however, is not as bullish. He points to a rather quiet Deal St these days. “If you exclude outbound M&As and private equity, there isn’t much happening. Domestic consolidation is far and few between, unlike last year, when we saw the last round of telecom sector consolidation.”

Why? “The opportunity is when the economy is on an upswing - when everyone is trying to expand. We had a situation some years back when “core business” was the mantra and companies started divesting their non-core businesses. Now the boot is on the other foot. Business houses are back in diversification mode. Both, by way of M&As and organic expansion.”

Krishnan believes more joint ventures will be taken over by foreign partners. “The 26% and 49% guys” will exercise their purchase options or negotiate deals for picking up a higher stake because the Indian story is rock solid. This will happen notwithstanding the swings on the bourses.

News: Indian FDI, FII inflows may slow down

(DNA 04/06/2006) New Delhi - If you think 2006 has been a bad year - so far - for foreign investor inflows, you are in for more bad news. According to the World Bank’s Global Development Finance report for 2006, even 2007 may not be a great year for foreign private capital flows to developing countries.

The report says the outlook for 2007 would be mixed, with both foreign direct investment (FDI) and foreign institutional investment (FII) inflows being subdued, though they will continue to grow.

Equity markets in developing countries would be better placed than those in developed countries in 2006-07, the report admits.

This is because of fundamental macroeconomic improvements and the prospects of growth above 5%. However, the pace will not be as frenetic as in 2005.

That year, portfolio equity flows to developing countries rose a mammoth 64% to $61 billion from $37 billion in 2004, thanks to sound fundamentals. Three countries - China, India and Thailand - together accounted for 94% of equity flows into Asia, which itself pulled in the lion’s share of 63% of equity flows. Most of these were in the form of international corporate equity placements in emerging markets and foreign investment in emerging market stocks.

Stockmarkets in emerging markets did far better than in other regions through 2005, on the back of an expanded investor base and attractive valuations, with 10% of the transactions accounting for 64% of the total volume, the report noted.

The bulk - 63% — of equity transactions in emerging markets were in the form of initial public offers (IPOs) against 47% in 2004. China took the lion’s share - 21% of global IPOs and 61% of those in emerging markets.

FDI inflows into developing countries also logged robust growth, touching what the report calls a record level of $237.5 billion, which accounts for 2.8% of the aggregate gross domestic product (GDP) of developing countries.

But there has been some change in the pattern of FDI flows. The share of the top 10 countries fell from 75% in the late 1990s to 65% in 2005. The 10 countries are China, India, Russia, Brazil, Mexico, Czech Republic, Poland, Chile, South Africa and Malaysia. The share of low-income countries, on the other hand, increased to 10%.

An interesting trend the report points to is increasing FDI flows among developing countries. South-South FDI, the report notes, increased from $14 billion in 1995 to $47 billion in 2003, while the share of such flows in total FDI to developing countries rose from 16% to 36% over the same period. In fact, Brazil, Chile, India, China, South Africa and Thailand are now giving aid to other developing countries.

What’s driving the financial integration of developing countries is being driven by increased opening up of economies as well as the growing number of regional trade agreements.

What needs to be done to keep these greenbacks flowing in? Ensuring macroeconomic stability is the first and most important step, the report cautions. In addition, domestic financial markets and institutions need to be strengthened to cope more effectively with the risks associated with growing capital flows and to maximize the efficiency of capital allocation.

News: 'Structural reforms needed for higher Indian growth'

(PTI 04/06/2006) New Delhi - Indian economy needs a set of structural reforms, not just to improve the performance of the economy and in particular the industry, but also to create inclusive growth, said industry body CII.

The revised estimates of GDP and other growth figures released by the CSO on May 31 are a clear pointer to this fact as mining and power sector were a big drag on industrial growth, said CII president R Seshasayee.

Taking serious note of this slack, he shared the CII suggestions for these two sectors, where structural reforms are required. It has suggested deregulation of power and mining sector.

It is important to have a comprehensive vision for the entire energy sector, while focussing on energy efficiency, the CII president said, adding this will be important since India is taking the issue of energy security seriously.

CII has suggested creation of an Energy Commission for developing and implementing an integrated energy policy, creation of a competitive and vibrant wholesale power market and increasing the role and guidance from the centre through stronger incentives for states that expedite reform; and increase CERCs mandate over SERC.

Similarly, for mining sector it has suggested policy change like private and merchant participation in the mining sector and removal of hurdles in obtaining approvals and establish an independent regulator.

News: Fujitsu sets up brand retail presence in India

(UNI 04/06/2006) Chandigarh - Fujitsu, global provider of IT and communications solutions, has announced setting up of brand retail presence in India, in line with its growth strategy for the country.

The first retail concept store of the company was opened here yesterday. This store has been set up in association with Fastrack Computing, Chandigarh.

This concept store will offer consumers a wide range of Lifebooks, Tablet PC's, desktops and other computing products from Fujitsu.

''India is evolving as a market for computing products. Fujitsu had anticipated the importance of Indian market a long while back and is today ideally placed to meet consumer's expectations,'' Fujitsu India Ltd Head PC Division Ramanjeet Singh said.

He said this store was the first in the line of such concept stores and was a part of an aggressive marketing campaign for Fujitsu in India.

It would enable the company to establish direct customer contact and get feedback and will pave the way for many hi-end Fujitsu products, he added.

Singh said the company's next concept store would open in Lucknow shortly followed by New Delhi and then other major cities of the country.

In all the company would open 12 concept stores in the first phase, he added.

News: India Inc still bets on foreign money

(TNN 03/06/2006) Mumbai - The markets may be sliding, but Indian corporates of all hues continue to tap the overseas loan markets. In the next couple of months, around $4bn of foreign borrowing is being raised by large and mid-sized corporates.

Despite the weakening of the rupee and the rise in interest rates overseas, corporates are finding it cheaper to raise money abroad.

Top tier or AAA corporates raising money from the overseas market are able to raise funds at around 7.75%, which includes a hedging cost of around 1% and a withholding tax.

These corporates would have to pay around 8.5% in the local markets to raise five-year money. Other than capital expenditure, they also want to acquire financing through this route. Overseas loans is growing even as domestic credit has slowed down in the last one month.

Those looking overseas include Reliance Energy ($500m), Dr Reddy’s ($400m) and Iffco ($250m). Mid-corporates such as Wockhardt ($250m), Dishman Pharma ($60m), Renuka Sugar ($40m) and a host of others are also looking at raising finances. Refinancing transactions include those from Genpact ($250m) and Sterlite ($90m).

Compared to last year, the level of refinancing has come down this year. Incidentally, a host of smaller corporates are also raising money through this route. “While interest rates are rising internationally, the ECB market still remains attractive because of the relatively low hedge cost and favourable availability.

The local credit markets are not conducive for private sector banks at this juncture,” says Monish Tahilramani, head (global markets), HSBC India. Adds Atul Sodhi, head (corporate banking), Calyon, India: “The margins for banks that were shrinking have now stabilised.

Mid-tier corporates also access the ECB market for deals of smaller sizes. Reliance Energy is looking at raising money for its Dadra project. Around 12 banks have been mandated for this issue including Citi, Calyon, DBS, HSBC, StanChart, RBZ and others. The issue is likely to be priced at around London interbank offered rate (Libor) plus 65 basis points. The six-month Libor is currently at around 5.38%.

Dr Reddy’s is in the process of raising around $400m. It is raising a part of this money on the Betapharm balance sheet, which it had acquired early this year and the remaining on its own balance sheet. Even Wockhardt is currently in the market for a $250-m acquisition financing.

It is likely to be priced at around Libor-plus 125 bps. RPL’s $1.5-bn syndication, which was announced earlier, will hit the market in the next few weeks. The loan may be in a mix of seven-year ($950m) and 10-year ($550m) tranches.

After the completion of the project, there would be a step up in the rates.

The all-in-cost for the company is at around 130 bps above Libor. Iffco is looking at raising $250m at around Libor-plus 100 bps. Calyon and ICICI Bank have been mandated for the issue. Genpact wants to refinance a $250-m loan.

Bank of America has been mandated for the issue which may be priced at around 70 bps above Libor. A host of public sector banks like Union Bank of India, Bank of India, Canara Bank are also looking at raising money for the one-to-three year period.

News: German kidswear major Hucke AG plans India foray

(BL 03/06/2006) Hyderabad - HUCKE AG of Germany, one of the largest European clothing manufacturers, is all set to foray into the Indian kidswear market in alliance with domestic partner - Novotex Exim - with the launch of its popular brand `Whoopi'.

Addressing newspersons here on Thursday, the Novotex Managing Director, R.V. Venkat, said the Indian foray would take place through a mega flagship store at Prasad's Imax in Hyderabad this week.

The company plans to open 12 exclusive outlets across the country during the current year. Of this, two each would come up in Hyderabad, Chennai and Ahmedabad and six in Delhi. The company, which has a three-tier plan for outlets comprising exclusive shops, shop-in-shops and multi-brand outlets (MBOs), has earmarked an investment of Rs 6 crore for setting up 12 exclusive showrooms, Venkat said.

Novotex is also setting up a modern manufacturing facility at a cost of around Rs 5 crore at Balanagar here with a capacity of 50,000 pieces per month. Stating that the plant would be operational by next month, he said apart from being a master franchisee for India and South Asia for Hucke brands, Novotex Exim would also be catering to the requirements of Hucke world over. It would export 80 per cent production to Hucke and sell around 20 per cent in the domestic market.

The company targets to achieve a turnover of Rs 25 crore in the first year of operations, which includes an export turnover of around Rs 15 crore. "Over the next three years, we expect the turnover to touch the Rs 100-crore mark, with about Rs 30 crore of domestic sales," Venkat said. The Indian kidswear market, currently estimated at Rs 8,500 crore, has been fast growing at around 30 per cent per annum.

In terms of the long-term alliance with the Hyderabad-based company, Hucke would share its longstanding expertise in fashion by bringing in a brand new expression of international clothing for children in India, he said. The Whoopi brand would offer a wide range of clothing and accessories for boys and girls in the age group of 0-12 years with highly fashionable and advances styles in 100 per cent cotton garments. The range of accessories includes sun goggles, belts, sandals etc. Next year, the company proposes to set up more exclusive stores in cities such as Bangalore, Kochi and Kolkata. It also plans to open 50 shop-in-shops and associate with leading MBOs.

News: India confident of $96 bln in tax receipts in 06/07

(RTR 02/06/2006) New Delhi - India's government is confident of achieving 20-percent growth in gross tax receipts in the 2006/07 fiscal year to reach its target of more than 4.4 trillion rupees, revenue secretary K.M. Chandrasekhar said on Friday.

"This fiscal, our target is more than 20 percent growth in tax collections... Income and corporate tax collections in April were strong and May collections were also good," he told reporters after launching a new income tax return form.

Gross tax receipts more than doubled to 149 billion rupees in April from 65.3 billion in the same month last year.

Gross tax receipts were estimated at 3.7 trillion rupees for the last fiscal year.

After providing for refunds and transfers to states, net tax receipts are budgeted at 3.27 trillion rupees in 2006/07.

India is trying to simply tax laws and streamline procedures to bring more people into the tax net and cut its fiscal deficit.

At present, only 30 million people pay income tax, just 3 percent of the population of more than one billion.

Chandrasekhar said the government planned to simplify tax laws and then come up with an exempt-exempt-tax (EET) model so that all savings instruments had the same tax treatment.

The EET model, prevalent in developed nations, stipulates that savings instruments are taxed only during the withdrawal stage and exempted during collection and accumulation.

At present some savings instruments like provident funds are completely exempt while tax is deducted at source for bonds and bank deposits.

The new tax return form provides for a cash-flow statement and taxpayers have to state their income and expenditure for the financial year along with investments and savings.

News: Gucci CEO upbeat on designer brands, readies India

(RTR 02/06/2006) London - Luxury goods giant Gucci Group is gearing up to launch in India next year and is confident smaller designer brands will meet profit targets as its three-year growth plan bears fruit, CEO Robert Polet told Reuters.

Niche brands Bottega Veneta and Balenciaga are growing rapidly - by more than 100 percent in Balenciaga's case in the first quarter. Both reached profitability two years ahead of schedule.

"We are ahead with the Gucci brand, which is growing much faster than we set out to do. Bottega Veneta has performed better almost two years earlier than planned. The same is true for Balenciaga," Polet told Reuters in an interview.

"We are well on track but it is very important that we remain disciplined and focused on implementing the plans as we formulated them."

Polet added he was confident smaller brands Alexander McQueen and Stella McCartney would move into the black next year.

Gucci Group, which is half way through a three-year growth plan, plans to open stores in India early next year in a deal with the New York-based Murjani Group.

Because of the group's foreign exchange hedging policy and its ability to raise prices to protect margins Polet said he was "not overly concerned" about recent currency swings.

Gucci Group sales rose 11.9 percent in 2005 to 3.036 billion euros ($3.89 billion), or 17.1 percent of the sales of French parent company PPR.

Like-for-like revenues at the core Gucci brand grew 18.4 percent to 1.807 billion euros. Sales in 2003, the year before Polet took over and set a goal to double the brand, were 1.522 billion euros, although comparing the figures is complicated by changes to Gucci's financial year and accounting standards.

"We are well on track to grow our gross margin towards the 70 percent in the plan period," he said, referring to another objective set in his December 2004 plan.

Big challenges remain. Yves Saint Laurent, until last year the goup's second largest fashion brand in terms of sales, remains deep in the red and PPR has declined to forecast when it might reach breakeven.

The group also recently announced a restructuring of its cosmetics arm, YSL Beaute, which seems certain to weigh on results this year, although the company has not commented.

Polet confirmed the hope that Bottega, some of whose bags retail at over 50,000 euros each, could eventually achieve annual sales of 500 million euros. Bottega's CEO has said sales of Bottega bags could reach 200 million euros already this year instead of in 2007 originally.

When he became CEO in 2004, Polet grouped Balenciaga along with other brands such as Alexander McQueen and Stella McCartney which, as he put it, had "to prove they were viable".

"Balenciaga has proven that," he said, adding he was "very confident" the other brands could also meet their targets to be profitable next year.

NEW STORES

In the second half, Gucci will open three major stores with a new look as it celebrates its 85th birthday this year.

A first glimpse of the concept - which Polet declined to comment on - will be given at the end of October when Gucci opens its biggest store yet (11,000 square feet) in Hong Kong.

A few days later in November Gucci plans to open a seven-floor shopping temple in Tokyo's exclusive Ginza district and another shop later in Nagoya, the fourth biggest city in a country which is already the brand's biggest market.

Stores would follow in India at the beginning of 2007.

"We strongly believe in the Indian market. We are really committed to it. We think it's time and I think we have the right partners," Polet said, declining to discuss the financial details of its partnership with Murjani.

He pointed to a recent ACNielsen opinion survey that found Gucci was the brand most Indians would buy if they could afford to, even though it is not yet in the country. "This shows the power of the brand is huge," he said.

News: Reliance Industries looks at retail sector buyouts

(BS 02/06/2006) Mumbai - Reliance Industries is looking at acquisitions in the retail space, having held preliminary talks with several retail chains with strong regional presence.

Though Reliance executives declined to comment on the issue, sources close to the development said Chairman Mukesh Ambani was expected to make “major announcements” regarding the company's retail operations at its annual general meeting on June 27.

Reliance is looking at some convenience stores in Chandigarh, Delhi and Mumbai. The retail business of a Tamil Nadu-based company is also on its radar.

The sources pointed out that an acquisition at this stage would be a logical step forward for the company as it wanted to reach sizeable scale within its first year of operations.

Reliance will look at acquiring or picking up a substantial stake in some smaller regional players that have a well-established presence in the areas of their operation.

“However, valuation plays a crucial role in these acquisitions. Some of the smaller retailers are looking at strategic partners. The actual acquisition depends on the kind of valuation they are expecting,” they said.

Acquiring an existing chain will provide basic infrastructure as well as real estate for Reliance to build its plans upon. It will also mean a ready customer base for the company.

The latest move of the country's largest private company comes within a month of the soft launch of its retail operations through a supply chain arrangement with the Maharashtra government-owned Sahakari Bhandar.

The company is looking at similar management agreements with other co-operatives in Mumbai and Delhi.

One chain that it is likely to tie up with could be the Central Government Employees Consumer Cooperative Society, which operates under the name of Kendriya Bhandar.

It operates a total of 112 stores and 42 fair price shops in cities like Chennai, Kolkata and Bangalore, besides Mumbai and Delhi.

However, nothing has been finalised on this front.

Reliance is likely to launch its own stores in either Gujarat or Hyderabad by October this year.

The company plans to have a presence across different formats in the retailing space, including hypermarkets, supermarkets and convenience and speciality stores. It has been actively hiring people from both within and outside the industry to head its different operations.

In his letter to shareholders, Mukesh Ambani had said: “Reliance is planning a pan-India footprint of multi-format retail outlets to provide the customer with choice in products and services. All the outlets will be connected seamlessly through a state-of-the-art supply chain infrastructure. This initiative has been assiduously planned to connect the Indian farmer and producer with the consumer directly.”

News: UK's Dawnay, Day to launch hotels in India

(BL 02/06/2006) Mumbai - The UK-based Dawnay, Day Group today announced plans to enter the hospitality sector in India by launching a chain of hotels in the metros and mini metros.

The company intends to have 30 three and four-star business hotels in India over the next 3-5 years. Dawnay, Day would initially invest about $200 million in the business, Peter Klimt, Chief Executive, Dawnay, Day International said at a press conference here. Dawnay, Day Group would fund the business through debt and equity.

The hotels would target corporate executives and foreign tourists. Each hotel would have 100-125 rooms of around 30 sq m. The average price of the rooms would be about $100, Mandeep Lamba, Managing Director, Dawnay, Day Hotels-India said.

"We believe there is tremendous potential for growth in the business segment of the hospitality industry and we expect to mark a substantial presence in the market by offering the business traveller a superior product," Alok Vajpeyi, Vice-Chairman and Managing Director, Dawnay Day AV Financial Services, Private Ltd, said.

The company is currently in discussions for acquiring properties in Pune, Mumbai, Chennai, Hyderabad and New Delhi. It expects to set up the first hotel in the next six months and have 10 hotels by 2010. The company intends to acquire land at key locations in metro and mini metro cities, Klimt said.

According to Lamba, Dawnay, Day is open to acquisitions to expand its brand profile.

News: India's first 'designer mall' to open in Ahmedabad

(BL 02/06/2006) Ahmedabad - Cash-rich Gujaratis, who were hitherto buying international brands at Singapore, Hong Kong or Dubai for festivals or weddings, would no longer have to go abroad: they can do so right in Ahmedabad at what is being billed as `India's first designer mall' - Gallops - scheduled to open here on June 10.

There are three malls in Ahmedabad already - and three more are coming up. But Gallops claims to be different - its USP will be the imported offering, with many options available under one roof.

"The difference between a mall and a designer mall is that the latter is theme-based and each of its showrooms will showcase its particular theme," said its promoter, N.G. Patel, who heads the Rs 200-crore N G Corporation, well-known for its construction business in Gujarat. He told Business Line that the Rs 100-crore mall has already attracted international lifestyle brands - more than 45 brands have set up shop at Gallops in a 3.5-lakh-sq-ft area, including 2.5-lakh-sq-ft shopping area, the rest being used for facilities.

The centrally-airconditioned, three-storey has a 12,000-sq-ft and its two-layer underground parking can accommodate some 750 four-wheelers.

Gallops will have four anchor stores such as Lifestyle, Max, Globus and Foot Mart. In all, the mall will offer more than 170 international and around 800 national brands.

The mall also has 12 outlets in its Food Court (about 35,000 sq ft) and will offer Indian, Continental and Mexican food.

About the group's recent foray into the Special Economic Zone (SEZ), Patel said 157 hectares of land had already been acquired in an SEZ, 26 km from Ahmedabad, for developing engineering and ancillary industries.

This was for the first time in India that a private sector company, N G Realty Ltd, would be offering these facilities in an SEZ for which both the Central and State Governments have granted approval.

It will be completed in the next 18 months, he added.

News: 'Indian economic growth to decelerate to 6.6% this fiscal'

(BL 02/06/2006) Mumbai - India's economy is heading for a deceleration on account of the rising global interest rates, slow pace of infrastructure spending and lack of political will to take bold decisions, said Chetan Ahya, senior economist and Executive Director of JM Morgan Stanley.

For the current fiscal ending March 31, 2007, the economic growth will be just 6.6 per cent, much below the Government target of about 9-10 per cent, he said, sharing the contents of Morgan Stanley's `India and China: New Tigers of Asia, Part-II', a special economic analysis of the two Asian countries.

The report is an update on its earlier report on India and China published in June 2004.

"A 3-4 quarters of deceleration is possible in India. Global rate cycle has reversed and this will have a cascading effect on the system," Ahya told Business Line. "Economic growth could dip below 7 per cent in India, before the long term path of strong economic growth are resumed," the report said.

Highlighting some of the key challenges that India faces in the short term, the report pointed out the slow pace of infrastructure spending, weak public finances, difficulty in augmenting reserves (through privatisation and FDI) and lack of effort in pushing labour law reforms.

Macro constraint

"We believe that the single most macro constraint on the Indian economy, limiting its average growth rate, is the low spending on infrastructure. We estimate India is currently spending a miniscule amount compared to its needs," the report notes, adding that the country needed a national plan to increase infrastructure spending to 7-8 per cent of GDP, from an estimated 3.6 per cent of GDP in 2005, to push the economy onto a sustained growth path of 8-9 per cent a year," it said.

Ahya also felt that only a crisis-like situation would force the Government to push through with reforms on key fronts including divestment, FDI and infrastructure spending.

Unless India "pre-empt and act quickly", he said, the economic growth may dip below seven per cent in the next 18-24 month period. China, on the other hand, is more proactive in terms of policy interventions, he pointed out.

Growth story

Over the long-term, however, the India growth story continues, the Morgan Stanley economist said.

Considering the increased weight of Left parties, Ahya said the Government was unlikely to go farther in terms of labour reforms and privatisation. "Politicians who oppose privatisation claim that the policy hurts the welfare of the labour force.

In our view, this argument misses the big picture and focuses on a very narrow section of the population," the report said, pointing out that PSU workforce constituted just 1.6 per cent of the total work force.

Fiscal deficit

Another area of concern for India is the fiscal deficit, which is the highest among those in major emerging markets and about two to three times those of major developed economies as a percentage to GDP basis.

The combined fiscal deficit (central plus state governments' deficit) is estimated at 7.8 per cent of GDP for 2006 fiscal, including off-budget items like oil subsidies and State electricity board losses totalling about 1.9 per cent of GDP, the report said.

News: 'India can free upto $48 bn every year'

(BS 01/06/2006) Mumbai - India could free upto $48 billion of capital a year or 7% of GDP. This could raise the country's real GDP growth to 9.4% a year, a McKinsey research study has said.

The report, titled Accelerating India's Growth Through Financial System Reform, focusses on and debates the strengths and weaknesses of the country's banking and financial system.

In a somewhat harsh comment on the banking and financial sector, McKinsey says the Indian financial system intermediates only half the country's total savings and investments, and it channels the majority of funding to the least productive parts of the economy.

The report was specifically prepared by McKinsey's economics think-tank, the McKinsey Global Institute (MGI).

The MGI report highlights the fact that Indian banks lend just 6% of their deposits, a much smaller fraction than banks in other counries.

Moreover, according to the report, the value of India's corporate bond market amounts to just 2% of GDP. The report says Indian companies rely heavily on retained earnings as a source of funding, much more than companies elsewhere. And, that, Indian companies pay much higher rates in every sector of the economy than Chinese or US companies.

"India's private sector receives just 43% of total credit, while the remaining 57% goes to state-owned enterprsies, agriculture and tiny businesses in the unorganised sector," the report says.

The MGI report says this pattern of capital allocation impedes growth because state-owned enterprises are only half as productive as the private corporate sector and so require twice as much investment to get the same additional output, while, productivity in agriculture and the unorganised sector is 1/10th as high.

The report concludes by saying India needs to reduce the role of government in its financial system. Government restrictions on banks and other financial intermediaries limit competition, lower performance and serve to channel the majority of funding to the government itself and to its priority investments, many of them with a social welfare element, it says.

"Reforms to lessen government influence would result in more efficient use of savings and faster growth. That would raise tax revenues, allowing the government to spend directly on welfare programs, rather than diverting resources from the financial system and so holding back growth," the report says.

News: Reliance eyes agri-retail 'mandis', malls in Bengal

(BS 01/06/2006) Kolkata - Mukesh Ambani, chairman of Reliance Industries, is interested in investing in West Bengal, according to the state government.

"Mukesh Ambani has sent two proposals: setting up a special economic zone (SEZ) and an agri-retail chain across the state, Chief Minister Buddhadeb Bhattacharya said, at a felicitation function organised by different chambers of commerce and trade bodies, here today.

Ambani is likely to visit the West Bengal and meet the chief minister in the third week of June.

Announcing a slew of proposed investments in the state - including a downstream project from Sajjan Jindal, a chemical hub to be partnered by IOC and Mitsubishi's Rs 1,600 crore second phase of expansion- Bhattacharya said, a number of projects are also likely to come up on the infrastructure front. The Planning Commission has floated a tender for studying the feasibility of a deep sea port in West Bengal. A global tender been floated for a mass rapid transit system also.

Moreover, the state government had engaged a consultant for studying the feasibility of a greenfield airport which would be managed by private companies. An expressway from Barasat bypassing Kolkata was also in the offing.

The ambitious plans for beefing up infrastructure were aimed at creating a climate conducive to attracting more investments, Bhattacharya said.

Reliance Retail, the wholly owned retail arm of Mukesh Ambani's Reliance Industries, is planning to create hi-tech 'mandis' in rural West Bengal as a part of its retail business in the state.

The company would pursue a two fold strategy for its retail business in West Bengal, agriculture procurement and retail malls.

A three-member team of RRL accompanied by Bengal Ambuja group chairman Harsh Neotia met the state chief secretary Amit Kiran Dev today.

Reliance is keen to create agri-product procurement hubs in the villages through local 'mandis'. The hi-tech 'mandis' would not only procure foodgrains from the farmers but would also help the farmers to increase productivity. The company will not only create infrastructure but will give technical help to farmers on items like agricultural machinery. The state agriculture department would coordinate with RRL for the hitech 'mandi' venture, Sabyasachi Sen, industry secretary for West Bengal, said.

Sen said that besides 'mandis', Reliance Retail was also interested to set up retail malls in the state. "It has proposed to set up retail malls in Kolkata and other district headquarters," he added.

According to Sen, RRL said in its presentation that 50% of the products to be sold through Reliance retail malls would be food products.

Reliance Retail recently submitted technical bids for two real estate projects in Asansol and Durgapur, among the fastest growing towns in the eastern region.

When contacted, a Reliance spokesperson only said that it was looking at West Bengal positively for its retail business.

News: Monsoon hits Mumbai, hard

(FE/PTI 01/06/2006) Mumbai/Thiruvananthapuram - The South-West monsoon entered Mumbai today — 10 days earlier than usual and earliest in 10 years — with torrential showers lashing the metropolis and injuring six persons even as incessant rains continued to pound Kerala and Goa claiming 11 lives so far and leaving a trail of destruction.

Heavy rains pelted Maharasthra’s coastal Konkan region, where the monsoon was vigorous, hitting train services as the weather office predicted more showers in the state.

Three people were injured when lightning struck them and an equal number in a wall collapse in Mumbai where the rains were preceded by gusty winds that uprooted trees and knocked out power at many places.

Monsoon had set over Mumbai, coastal Konkan and parts of south-central Maharashtra, Deputy Director (Meteorology) C V V Bhadran said in the metropolis.

Konkan and central Maharashtra had widespread rains since last evening with Ratnagiri recording 64 cm. Several trains were left stranded on the Konkan railway section owing to waterlogging.

Twenty-two fishermen, who ventured into the sea, were reported missing in Kerala where 11 people had perished in heavy rains slamming the state for the past few days. The fishermen ventured into the sea in two groups on May 25 and 26 from Beypore coast and had not returned to shores so far.

The rains had wreaked havoc in Kerala extensively damaging houses and standing crops and inundating low-lying areas throwing normal life out of gear.

Mumbai on alert for mayhem

India's commercial capital of Mumbai was on alert for very heavy rains on Thursday, almost a year after a sharp cloudburst crippled the metropolis for days and killed hundreds of people in the region.

Weather officials have warned of heavy showers in the next 30 hours, saying the monsoon rains, vital for the economy, have reached Mumbai 10 days ahead of schedule.

The alert put authorities on notice as they scurried to check drainage systems, traffic management and the suburban railway that is a vital lifeline for most of Mumbai's 17 million people.

"We have prior warning and we are prepared this time. We had no warning last year," said Johny Joseph, Mumbai's top civic official.

But memories of last year's deluge returned late on Wednesday after a brief spell of rains brought parts of Mumbai to a halt. Some roads were submerged under water and trains were delayed.

"The first rains and already our infrastructure cannot cope. What will happen in the next two months?" asked Sumana Dey, a regular commuter on Mumbai's suburban trains who was stuck in the rains for two hours on Wednesday.

Thousands of people waded through flooded streets and railway tracks to reach their destinations and dirty rainwater entered homes in some northern neighbourhoods. Parts of the city went without power.

Last July, two days of heavy rains exposed the underdeveloped infrastructure and dismal emergency response in India's richest city that shutdown for almost a week.

Millions of dollars have been sanctioned to overhaul Mumbai's 150-year-old drainage system, but experts say flooding from rain is difficult to prevent because builders, in league with politicians, had built on wetlands, the city's natural drainage system.

Interview: K. Radhakrishnan - CEO Reliance Hypermarkets

(BL 01/06/2006) Mumbai - At a relatively young age of 47, one could well call K. Radhakrishnan one of the wise old men of Indian retailing. As Vice-President (Merchandising) of Foodworld Supermarkets Ltd, Radha, as everyone in the industry calls him, was part of the founding team of Foodworld along with Pradipta Mohapatra and Raghu Pillai, and oversaw the expansion of India's first chain of supermarkets to a 90-store, multi-city chain spread over the South and west of India. Radha transitioned from Foodworld to RPG's Spencer's Retail when RPG pulled out of Foodworld and decided to expand under the Spencer's brand.

The retailer put in his papers at Spencer's recently and has thrown in his lot with what promises to be the Big Daddy of Indian retail - Reliance. As CEO, Hypermarkets, Reliance, Radha has to oversee a frenetic roll-out of Reliance hypermarkets in several score cities across the country. While between jobs, he spoke to BrandLine on the state of organised retail in India, its impact on the corner kirana store and on some myths of modern trade. Excerpts:

There is an ongoing debate on the impact of organised and big-box retail on the corner store, that it can wipe out small traders and so on. What has been the impact of organised retail on the local stores, the regular mom-and-pop stores, especially in a city like Chennai where penetration by organised retail is a lot more?

In Tamil Nadu, because of the cooperative stores' movement, it's one of the most competitive markets and it was strange that one would start a chain like FoodWorld here. But over the 10 years we've seen the market, I cannot recall significant number of moms-and-pops closing down; maybe some have. But the ones that we've seen closed are not them, but the other supermarkets, like Vitan in Chennai, Nanz in Delhi, MyHome in Bangalore. Those closed not because of competitive reasons but other management reasons; we don't know. But, mom-and-pop or small kiranas are clever businessmen, because they have to survive and do business and they are profitable. They borrow to buy goods, turn it around, manage their cash, so they are clever business people; they offer credit, phone service, door delivery... so in a sense organised retail has not hit them. I don't agree that it has hit small kirana shops. Also, the market is so huge that it is unlikely that someone can come and close down scores of shops. So, I am not so sure. Also, the fact is, our cities are fairly cluttered; you don't drive huge distances of 10-15 km to shop. So location strategy is critical and with petrol prices going up, even more so.

So, what happens to the concept of destination stores and hypermarkets?

That will still be there but what categories drive destination stores will determine their growth. That is the trick - you need to know what will drive destination footfalls. That's critical and that's the sleight of hand of the retailer.

So, what do you make of this whole debate of FDI in retail which makes out that the impact of organised retail will be on the small kirana store?

I tend to disagree with that. The formats which are coming in are large formats and not the mom-and-pop stores; they're going to be larger stores — definitely more than 25,000-30,000 sq. ft. stores and they will have a different position and the consumer will see them differently, whereas the mom-and-pop stores will be closer home and they will be a different proposition for sure. But, the nature of the stores and what they sell may change. And, even the existing supermarkets may have to change what they sell, how they sell, their pricing strategy.

The other thing is: take the example of a city like Chennai, about 6 million people, about 30,000 mom-and-pop stores. Are we saying that all these people will be served by these stores? Very unlikely. Don't forget that there is a huge wet market out there. They are smaller than kirana stores — there's a huge wholesale market too — Parry's Corner in Chennai is a huge wholesale market. People go there to buy commodities from there. So, when modern retailing grows, more and more people will shop from some kind of organised retail. Whether it's mom-and-pop or self-help, and that's the way it's going to grow, people will get converted to this kind of shopping.

Take the case of meat and fish, 99.9 per cent is from the wet market, we haven't even got anything into the stores; that's a huge market. And, what about vegetables? I would believe 85-90 per cent of vegetables is from the wet market. Take wheat, only 4 per cent is packaged atta and the rest is from the wholesale market.

And, what about the number of rice merchants in the city? They are category experts, but they are all in the wet market and all that can be converted into modern trade. Modern trade and kirana can grow, by bringing more and more people into over-the-counter purchase or self-help.

Have you seen an example of any local store which spruced up its act because of modern trade coming into its area?

Without exception, every store of FoodWorld which opened upgraded every kirana store in the area — they gave better service, put better lights, more range, reduced price, home-delivered, created a customer data base and in their own way ate into the market of the FoodWorlds, Trinethras and Subhikshas. They are extremely clever retailers, so we are underestimating their ability to adapt. I've seen them adapt and I've seen smart retailers in every city who pose a threat to modern trade.

Can you give some examples of this reverse impact?

There are a couple of local stores in Arumbakkam and Besant Nagar (both residential areas of Chennai) which have been around for a long time. They spruced up their act and made it partially self-help and they've started affecting the big stores. And the chain stores are having to match their prices and presentation; it's been a challenge.

The common perception of organised retail is that they are air-conditioned stores, self-help, bright lights, but that's a simplistic view; isn't organised retail all about the back end?

Organised retail is quite a few things: it's got to be self-help, the consumer must be able to pick up the product. If you can't do that you're taking away the main edifice of organised retail. So, anybody who doesn't allow products to be picked up is not allowing the consumer to optimise among brands; that is the first aspect. The other one is it has to be a chain of stores; you may be one good store, but the moment you become a chain of stores the demands on the retailer became bigger and thirdly you need to have a distribution centre, you need to consolidate and you kick in a lot of advantages. But if you don't have that and you don't consolidate you cannot compete by buying higher volumes, buying cheaper; you won't have bargaining power, these three things are necessary and at the back end the trick is about size, how quickly you resource yourself and how quickly you expand the brand name, both these must happen. And, you need great back end IT systems and people who know the domain. You need pricing flexibility while maintaining tight controls as well.

Going by the Chennai experience there are single stores which have some IT, offer lower prices, offer home delivery, are open long hours, and if an organised chain comes to that area, how does he beat this USP?

The victory has to be at the back-end. If you're a single store, the consumer experience is all right, but is your ranging good enough, is your pricing and sourcing good enough? Because the key to modern trade is disintermediation, you've got to pass it on to the consumer; that's what modern retail does. It doesn't matter how evolved a country you are, price is still an issue. The first choice of purchase, especially so in grocery, price is the first criteria or can be the biggest threshold for not picking up a product.

Organised retail, would you say, has mostly made a dent in branded products?

There are only a few players today, and other than FoodWorld and Spencer's, none of the others do grocery and vegetables in a big way; rather, they have not invested in that category in a big way as yet. You've got to do staples and fruit and vegetables yourself instead of contracting it out, and only then you can say you're a good organised retailer. To say that modern retailing has found its place, it's only in staples and FMCG branded products, except for these two companies. They've invested hugely in commodity and fresh business and these are destination drivers. Branded goods are not a differentiator and it is also not a price differentiator because the ceiling and the bottom is fixed by the FMCG company because of the MRP regime.

Therefore you don't have the capability to optimise between categories and brands, push one up and another down so that you can make higher weighted average margins; that's not possible today. Therefore victories in branded goods is not a big one, you will not find range differences in branded goods between all the retailers; they almost always carry the same thing, but when you talk of fruit and vegetables and staples, there are huge differences. So, only those retailers who can invest in staples and fresh can really make any impact and that is where the battles are to be won.

What's the next big horizon for organised retail ?

Apart from making a dent in the wet market, the other category are products which are amenable to imports, like garments, DIYs, general merchandise, electricals... these are not traditionally part of Indian hypermarkets today, and there's a huge demand and that could be a differentiator. These don't have supply chains like FMCG; they are very erratic. You've got to know how to manage these categories. Imported processed foods is another big area. One other area which could make a significant dent is private labels; it could make big inroads into existing branded players, so without increasing categories you could increase your margins and increase value.

News: Shopper's Stop to serve it hot, too

(DNA 01/05/2006) Mumbai - With the battleground shifting from market share to loyalty for organised retailers, Shopper's Stop is taking a gourmet route to enhance the shopping experience of customers.

The retail chain is planning an array of food outlets for its different formats.

Govind Shrikhande, chief executive officer, Shopper's Stop, said, "Currently 2% of customer spend in our chain of stores comes from food items. We aim to increase this to over 5%."

The company, with a turnover of Rs 675 crore last fiscal, owns around 9.8 lakh sq ft of retail space, spanning departmental stores, hyper malls and specialty stores.

Currently, it has three gourmet continental fast food outlets under the Brio brand name and one Indian fast food outlet, Desi Café, inside its retail stores. "We will soon be taking Brio to all the outlets and Desi Café to 20 other retail outlets," said Shrikhande.

The company's departmental stores chain includes 20 Shopper's Stop outlets that it aims to increase to 40 in the next 30 months. It also wants to raise the network of its hyper mall format, HyperCity, from one outlet now to four in the next 15 months. In the specialty stores format, the Crossword network would go up from 30 stores today to 60 in the next 30 months and Mother Care Store from 5 now to 40 stores in the next 45 months.

The company's food business also includes Fresh Basket, a specialty bakery store in HyperCity, which the company plans to take to 10 other retail outlets.

Shopper's Stop is also looking to venture into food court operations in some of its large format stores. These will see the launch of a few more food and beverage brands serving a variety of cuisines.

"In a couple of months, we will be introducing some new restaurant concepts that will offer Chinese and Mexican cuisine. There will be a brand new Indian fine dining restaurant as well," added Shrikhande. The investment required for setting up of these outlets will be in the range of Rs 10 to 15 lakh for the small outlets going up to Rs 35 lakh for the larger formats.

To service these food and beverage outlets, Shopper's Stop has entered into a tie-up with Mumbai-based Blue Foods that operates chains like Copper Chimney, Noodle Bar, Bombay Blues, Cream Centre etc.

"Food helps to enhance the shopping experience of the customers, and thus helps us in building greater loyalty for our stores," he concludes.

News: India, China could inspire Africa's economy

(PTI 01/06/2006) Durban - Acknowledging the growing economic prowess of India and China, a regional conference of World Economic Forum in Capetown has said they would determine whether both countries could be catalysts in unleashing growth in the African nations.

The weeklong conference has attracted more than 700 business leaders, politicians and academics from 39 countries including representatives of India's Tata group.

The World Economic Forum Director for Africa, Haiko Alfeld, said the conference would aim to determine whether the booming Chinese and Indian economies could play the role of catalyst in economic growth of Africa.

A co-chairman of the conference, Jim Goodnight, of the US software firm, SAS Institute, said the emphasis on education by India and China was the main reason for the economic surge in both the countries.

"It's an educated workforce, one that can feed the knowledge economy, the biotech industry, the telecom industry. These are the great engines of growth and that's what I fear more than anything else from China and India," he said.

"The fact is that they're producing students of a higher calibre than those in the United States," he said. Goodnight said the rest of the world must learn from emphasis on education by India and China.

The CEO of South Africa's Transnet company, Maria Ramos, said shorter-term fears about the impact of China and India were beginning to give way to a realisation of longer-term opportunities.

"What is happening in those countries and what they're doing for global growth is critically important", she said.

News: Sugar foray by Reliance not ruled out

(BL 01/06/2006) New Delhi - Reliance Industries Ltd (RIL) has apparently not ruled out producing sugar from its ethanol manufacturing facilities slated to come on steam from the 2007-08 crushing season (October-September).

"To begin with, the three proposed sugarcane processing units in Pune, Osmanabad and Kolhapur will only manufacture ethanol through direct fermentation of the cane juice. But they have not ruled out entering sugar as well at an opportune time," sources said, following a meeting between RIL officials and the Union Agriculture Minister, Sharad Pawar, in Mumbai on Wednesday.

The meeting, held at the office of the Maharashtra State Co-operative Sugar Factories Federation Ltd (MSCSFF), was also attended by representatives of the Indian Sugar Mills Association and companies such as Praj Industries Ltd, Shree Renuka Sugars and Ugar Sugar Works Ltd.

Maharashtra's leading sugar barons, including the Finance Minister, Jayant Patil, and the Rural Development Minister, Vijaysinh Mohite-Patil, were also present at the two-and-a-half hour long `brainstorming session'.

The RIL side was represented by the heads of its agri-business and speciality chemical divisions, Sanjeev Asthana and R.P. Sharma, respectively.

In its presentation, RIL is said to have indicated that the proposed three plants would have capacity to crush between 10,000 and 12,000 tonnes of cane daily (tcd) each.

Apart from sugarcane, the plants would also use other substrates, including sweet sorghum and damaged grain, for which companies such as Praj have already developed technologies.

More to assure co-ops

"This was more to assure existing sugar co-operatives that RIL's entry would not have an adverse impact on their cane supplies," the sources added.

The sugar industry has, in fact, expressed apprehensions on this count, as the Sugarcane Control Order, 1966, is applicable only to units making sugar, gur and khandsari from cane. Since the order does not mention ethanol, RIL's plants would technically not be bound by regulations reserving cane zones for individual factories and stipulating a 15-km minimum radial distance between neighbouring mills.

Preparing for competition

When contacted, the Managing Director of MSCSSF, Prakash Naiknavare, said the co-operative mills would undertake an internal review of the presentations made. "Today's meeting was our own initiative to understand RIL's plan. We have not taken any final view, though probably we may have to be prepared for competition ahead," he told Business Line.

Ethanol is basically rectified spirit dehydrated to yield 99 per cent plus pure alcohol, which can be used for blending with petrol. Spirit, in turn, involves fermentation of sucrose (sugar), followed by distillation. Currently, sugar mills in the country produce spirit by fermenting the sucrose remaining in molasses, a by-product during sugar manufacture. RIL's proposed venture aims at using up the entire sucrose present in the cane (about 13 per cent against two per cent through the molasses route) for fermentation. This would yield roughly six times more ethanol than what sugar mills are now able to produce.

News: 'India will continue to attract FIIs'

(BL 01/06/2006) New Delhi - The Finance Minister, P Chidambaram, today expressed confidence that the country would continue to attract foreign institutional investors' capital even as he asserted that temporary net selling by such investors does not mean that there was outflow of foreign capital.

"My information is that there is lot of foreign capital waiting to come through FIIs. We will continue to attract FII capital. We also need to attract more foreign direct investment (FDI) and we will attract more FDI in the current year than that of last year," Chidambaram said, when asked about net selling undertaken by FIIs during the last 11 trading days.

He also attributed the slide in stock indices to global factors. "Global markets are down and this is partly reflected in the Indian markets also," he said.

On the recent movement of the rupee, Chidambaram said that rupee is market determined and that there was huge demand for dollars for import of capital goods to support manufacturing. "I don't see any reason why we should be unhappy. There is no reason to be concerned about exchange rate. So long as the movements are orderly both ways, it is not a cause for worry," he said.

Asked whether any increase in international oil prices would impact GDP growth of fiscal 2006-07, Chidambaram said that if oil prices rise and if that rise is reflected in the domestic prices, then it will have some impact on inflation.

"There is no reason why it will impact growth rates. Rise in oil prices will not impact growth if industry is able to absorb increasing costs and remain competitive," he said.

Chidambaram said that in the short, medium and long term, the country requires larger capital investment, which is only possible if reforms continue at steady pace in every sector.

"Foreign capital goes to that country where governments carry out structural reforms, legal reforms and administrative reforms and that is the road we have taken so far," he said.

Meanwhile, the Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, told presspersons that there was no evidence of the Indian economy being overheated and that "all macro indicators are in reasonable okay shape."

He also said that GDP growth of more than 8 per cent could be sustained during the 11th Plan period of 2007-2012.