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.