News: M&M eyes mega US acquisition

(HT 31/07/2006) New Delhi - The $3 billion Mahindra & Mahindra group is all set to make a mega acquisition in the United States in the auto-engineering segment. According to highly-placed sources, the deal size would be in the vicinity of $500 million and is expected to close shortly.

Hemant Luthra, president of Mahindra Systems & Automotive Technologies, when contacted, refused to comment on the issue. He, however, said the group was looking at acquiring an engineering company in the US and a tractor company in China. “We are conducting due diligence at many companies in US, Europe and China,” he said.

In addition to this, the company is also in advance stage of acquiring a listed company in India, which is engaged in the forging business, sources said. “The Indian acquisition should be in the vicinity of Rs 150 crore,” they said. As the company is cash surplus, all these acquisitions will be funded through a combination of internal accrual and loans, sources said.

Sources in the investment banking said the company has already completed the due diligence for the US acquisition and the negotiation was in final stage. “In all probability, the deal is expected to be closed by August end unless some unforeseen event happened,” they said.

Sources in Mahindra said they are aggressively looking at acquisitions in the developed market particularly in the auto ancillary segment. “This would give them captive clientele and good technology, which can be leveraged by the existing operations of the company,” they added.

The auto major has set an aggressive target of reaching billion dollar revenues by 2010, which is not possible through organic growth, although company is growing aggressively. “In fact, the company is looking at the mix of big-ticket and small-size acquisitions simultaneously. So that it can blend and synergise the operations at global scale, sources said.

The acquisition of engineering company is key for the growth of auto ancillary business, they said. “The agenda is to achieve the critical mass and become reliable and sustainable to provide services to the major auto giants globally. Although the group itself has also the proven technology, but it will take time in case it want to widens its offering range,” sources said and added further that the acquisition will help the company in squeezing the timeline.

Once the ancillary business achieves the critical mass, it will be hived off from the flagship company–Mahindra & Mahindra, sources said.

News: 'Indian Govt must cut deficits before free float'

(RTR 31/07/2006) New Delhi - The government needs to cut its fiscal deficits further and strengthen financial regulators before moving towards a freer float of the rupee, an industry lobby group said on Monday.

A six-member committee appointed by the central bank delivered a report on moving towards greater convertibility earlier on Monday and the central bank said the findings would be released "in due course".

However, the Associated Chambers of Commerce and Industry (ASSOCHAM) said India should tread this path with care.

ASSOCHAM president, Anil K. Agarwal, said in a statement India's fiscal deficit must be kept in check with stringent discipline on government spendings.

"The combined fiscal deficit of the centre and states at around 7.7 percent is still a cause of concern while the ratio of public debt to GDP has increased from under 65 percent in 97/98 to over 83 percent in 05/06," the statement said.

Forex and interest rate markets should be liberalised gradually through more sophisticated hedging instruments and steps should also be taken to control money laundering, he said.

The regulators -- the Reserve Bank of India and SEBI -- needed to be strengthened, he added.

News: Pantaloon Retail, Blue Foods in restaurant JV

(RTR 31/07/2006) Mumbai - Pantaloon Retail India Ltd. said on Monday it would set up an equal joint venture company with Blue Foods Pvt. Ltd. to set up food courts and specialty restaurants. No financial details were disclosed.

Blue Foods runs a chain of about 50 restaurants in the country. Pantaloon, India's top retailer, operates department stores, hypermarkets and discount stores in 30 Indian cities.

News: Air-India float to follow merger with Indian

(BS 31/07/2006) Kolkata - The initial public offer (IPO) of Air-India (A-I) has been put on the hold as the civil aviation ministry is currently focusing on the merger of Indian and A-I.

Union civil aviation minister Praful Patel said while Indian was strong in the domestic market, A-I had a strong international presence, and consolidation would help achieve a critical size.

The minister was in Kolkata for the inauguration of the train service between Netaji Subhash Chandra Bose International Airport and Dum Dum Cantonment.

“At present, we are looking at the merger that would make the merged entity a formidable carrier. Then we may go in for the IPO and it may also be more meaningful at that point of time,” Patel said. Also, the current market scenario was not ideal for an IPO, he added.

DSP Merrill Lynch had been appointed to advise the airline on the offer. Patel also spoke aabout the development of non-metro airports.

He said 35 airports have been identified for development and would require an investment of Rs 10,000 crore. The minister said, “These airports will have to be developed to world standards, and the project was likely to be completed by 2008-09.”

“The entire project will be executed by the Airport Authority of India. Part of the project will be financed through internal accruals while the remaining money will be raised from the debt market and bonds,” Patel added.

The prime objective was to create a navigation-grid in the country with six major metro airports, 35 non-metro airports and upcoming airports in the tier-III cities.

Without referring to the Union ministry’s difference in opinion with the West Bengal government over modernisation of Kolkata airport, Patel said, “Creating a world-class airport is a challenge. We want co-operation from stakeholders for achieving it. We want to create an infrastructure for Kolkata that will last at least 30 years.” he said foreign airlines like British Airways and Lufthansa have been asked to increase their flights to Kolkata.

However, the minister indicated that, given the low traffic, a greenfield airport in Kolkata might not be necessary at the moment.

News: Anglo French to foray into four speciality segments

(BS 31/07/2006) Mumbai - Anglo-French Drugs and Industries, one of the leading vitamin formulations company in India, is planning to enter four new speciality therapeutic segments adding gynaecology, gastro, diabetes and cardiovascular into its portfolio.

The company will also almost double its work force by adding over 50 people every year in the specialty divisions in the next three years beginning from now the second half of 2006.

The company's fresh investments in this three to four year expansion plan including the manufacturing plants upgradation, is expected to be in the range of Rs 80 to 100 crore.

"We will now enter the specialty segments like gynaecology, diabetes, gastroenterology segments, which has high growth potential in India. And also would expand to new export market in a phased manner with these specialty products," said Abhay Kanoria, chairman and managing director, Anglo French.

The company is planning a substantial investment in the proposed expansion plan, which includes upgradation of existing manufacturing plants and also adding additional capacities to achieve the revenue target of Rs 500 crore by the end of 2008, he added.

This year, the company launched products like L-Beplex, a combination of lacto-acid bacillus with b-complex and zinc. Mycol, an injectable of Mecobalamin 500 mcg/ml in a patient friendly pack.

There are more introductions in the pipeline in pain management and gynaecological products range, expected to be launched in this calendar year.

Supporting the expanded product basket will be an enlarged field force, with a planned increase of 15 per cent in the beginning of the next year.

Credited with being the first company in India to manufacture single vitamin injectables and a combination of B Complex vitamins, Anglo-French has now emerged as a brand leader in the B-complex market in the country. Currently, the company is present in therapeutic groups, such as Sleep Inducing Agents, Anti-malarials, Protein food supplements, Anti-epileptics, Anti-Cold and Cough preparations, Digestive enzymes, Antioxidants and NSAIDs, Muscle Relaxant Analgesics.

Though Anglo French commenced operations in India with importing and selling pharmaceutical products, the company soon established its own manufacturing facilities in Mumbai.

The success of the venture resulted in an association with Swiss pharma giant, F-Hoffmann-La Roche in 1959 and in 1985 it was acquired by the progressive Kanoria Group of Industries. Since then it has been growing at a much faster pace .

With operations in Africa, Russia and CIS, the exports division too is poised to leap forward, with products being registered in the West Asia, south East Asia and Latin America. The company has it splants currently at Pithampur, Madhya Pradesh caters to both the domestic and export requirement.

News: Super quarter for India Inc

(BS 31/07/2006) Mumbai - Sales highest in 5 quarters but margins under pressure.

India Inc has put up its best show in recent times in the April-June quarter. While the sales growth rate has touched a five-quarter high, net profit has zoomed to its highest in four quarters.

The performance has been powered by metal, cement, information technology, telecommunication, capital goods, auto ancillary, sugar and chemical firms.

The net sales of 1,023 companies that have announced their quarterly performance so far have risen by 31.7 per cent, and net profit by 29.7 per cent. Strictly comparable figures for the previous four quarters are not available at this point of time.

However, a performance analysis of a sample 854 companies (out of the 1,023 firms) — common in all five quarters beginning April-June 2005 —shows that this is the best showing put up by corporate India in terms of sales growth since the first quarter of 2005-06.

In terms of net profit growth, the companies have shown a substantial improvement over the last three quarters.

The 854 companies have shown a 31 per cent rise in net profit, and a 30.4 per cent rise in net sales. For the purpose of this study, only manufacturing and services companies were considered.

The eight high-growth sectors have registered a 45.5 per cent rise in net sales, and a hefty 98 per cent rise in net profit. If one excludes these sectors from the sample, the net sales growth for the residual sectors is marginally lower at 28.7 per cent, though the net profit growth is sharply down to 11.7 per cent.

With highly profitable firms commanding a 19.4 per cent share in sales and a 33 per cent share in profits, the overall profit margin of India Inc is down by over 50 basis points.

One basis point is one-hundredth of a percentage point. The operating margin has declined by 65 basis points to 18.84 per cent, and net margin by 14 basis points to 9.67 per cent. The interest cost of the 1,023 companies has risen by 24.1 per cent, depreciation provision by 17.86 per cent, and tax provision by 38.7 per cent.

Riding high on soaring metal prices and burgeoning demand, copper and zinc firms have reported a 445 per cent rise in net profit, on the back of 136-per-cent growth in sales, while aluminium firms posted 79 per cent growth in sales and a 105 per cent rise in net profit.

Integrated steel companies also surprised the market with 10 per cent profit growth, after three quarters of decline in net profits.

Due to the construction boom, cement producers recorded a 200 per cent rise in net profit, on 40 per cent growth in sales. Telecom firms have posted a 63 per cent rise in net profit and a 34 per cent rise in sales, while capital goods firms have come out with yet another good quarter. Their net profit growth has risen by 55 per cent for four quarters in a row.

Information technology, services, sugar and chemical sectors, too, ended their quarters with robust growth in sales and profit. However, oil marketing companies, and fertiliser, power, shipping, cotton textile, tea, alkali, sponge iron, entertainment and tyre firms have recorded a decline in net profit.

Pharmaceuticals (net profit up 14 per cent), automobile (net up 8 per cent), personal care (net up 1 per cent), and food products (net up 6 per cent), too, have a poor quarterly showing.

News: UK's Hamleys planning to set up shops in India

(TNN 31/07/2006) New Delhi - One of the world’s oldest toy retailers — Hamleys — is planning to enter India. Initially, the UK toy retailer is expected to set up two stores in the country. The retailer which stocks multi branded toys sells a variety of products, including soft toys, movie merchandise, computer & board games, fancy dress and model kits.

The toy retail market in India has remained fragmented even as lifestyle retail kicked off in the country. The organised sector business is primarily rolling out from gift-chains such as Archies apart from departmental stores. Entry of Hamleys would be a significant mark for toy retailing in the country.

Responding to an ET questionnaire, Hamleys CEO Nick Mather said: “We are intent on opening in India but this will be subject to the completion of further detailed market research in Delhi and Mumbai, identifying and signing up with the right partner and selecting the right locations in consultation with our partner.”

On the number of stores being planned he said initially, we will open two stores in Mumbai and Delhi and phase II could see us open up in five or six other key city locations. The stores are expected to come up within the next two years.

Apart from its flagship store in London located at Regent Street, Hamleys has nine smaller stores in the UK. This apart it has three stores in Denmark which marked its first international moves.

Now, Hamleys is expanding out of Europe. It has recently struck franchisee deals in the West Asia and is eyeing India and China. Hamleys’ non-British outlets are based on the franchisee model.

While the existing multi-branded toy retailing model would be followed in India, the British retailer is looking to increase the proportion of Hamleys branded products in the international markets apart from adjusting to reflect local cultural differences.

Hamleys which is named after its founder William Hamley set up the first shop in London in 1760 selling rag dolls and tin soldiers and named it Noah’s Ark. Currently it is owned by Iceland based Baugur Group.

News: House of Pearl Fashions eyeing Indian retail business

(TNN 31/07/2006) Mumbai - Deepak Seth is the man behind many a brand. From JC Penny and Banana Republic, Macy’s, Espirt, Abercombie & Fitch Liz Claiborne to Tesco, Wal-Mart and Next among many others.

Behind the well-recognised names is Seth’s two decade story to rise to a Rs 800 crore turnover company, The House of Pearl Fashions (HPF), with operations spread over 12 countries, including India.

Today, Seth and his two sons, vice-chairman Pallak Seth and managing director Pulkit Seth, are looking to increase the HPF’s investments and presence in India, with an eye on the growing retail opportunity, specially for foreign players.

The investment could be in the tune of Rs 400-500 crore, over the next five years spread over 300-400 retail stores across the country. Seth is in talks with two of UK’s leading brands to get them to India, a deal which he expects to close within this year. The stores which Seth is looking at are not small, as his minimum requirement would be at least 3,000 sq ft.

The man, who has a pulse on the garment retail trade across 12 countries, sees a business opportunity for a range of mid-market women’s casual western wear as well as in woven (Rs 600-900), and T-Shirts (Rs 250-300) a niche which Seth feels does not have much competition.

The confidence in the opportunity comes after research done by a leading UK agency, who did not know their client. Seth himself, including his sons and his top management team, including his group financial officer Vineet Mathur have been travelling to and fro from London for the same.

Seth’s strength comes from his unique business model, with HPF’s biggest asset being its strategic relationships with over 150 fully compliant manufacturing units spread across India, Bangladesh, China and Indonesia. “These manufacturing units help us ramp up production enabling capacities in excess of 120 million pieces in addition to out existing 20 million pieces in-house at very short notice and do not even require us to increase our capital,” said Pallak.

With headquarters in Watford, a multicultural workforce spread over 9,000 employees, a presence in every segment of the value chain right from global sourcing and design to processing and manufacturing the product and finally managing the logistics and distribution to branding too,

Seth’s company has emerged as a preferred solution by global buyers as it means dealing with a single entity for all its buying decisions and fits nicely with the attempt by global companies to trim their vendor base in an effort to ensure quality.

There is very little that a retailer may want which Seth does not offer and his logistic operations for his clients makes him the only manufacturer group in the world to offer goods to its customers on landed duty paid (LDP) terms in the US (constitutes over 60% his business) and the UK.

The company actually has its own warehousing and processing set-up in the US and UK supported by distribution and infrastructure to handle close to two million garments per month. Recently, Seth company invested in a new warehouse in the UK.

Established in 1987, Seth’s tryst with the stock market began when he listed Pearl Global in 1994. After which began his global journey. He set up his first sourcing and distribution business of the group in Hong Kong, then expanded to Bangladesh and China while he made strategic acquisitions in the UK and the US, where he owns two brands, namely DCC and Kool Hearts.

Hailing from the famous ‘PearlPet’ family, Seth is the only one of his five brothers who moved into garments and even as Seth plans his retail foray into India, his dream is to move back from London and concentrate on his educational ventures, like the Pearl Fashion Academy and Retail School which are in Delhi and Jaipur and expand them into other metros as well as set up his Pearl School of Business Studies, for which Seth has signed a MoU with Babson College, Boston.

News: Birla retail plans rule the rumour circuit

(TNN 31/07/2006) Mumbai - With every corporate entering the fast-growing retail space, companies in India are trying every trick in the book to score over others.

With big business houses including the Tatas and the Reliance group having publicly announced their moves to start retail operations, the latest entrant, the Birlas are adopting a different strategy — by not talking. Although group chairman Kumar Mangalam Birla vaguely hinted that retail is “an interesting option”, there hasn’t been anything more from this metals-to-telecom conglomerate.

But behind the scenes, there has been some fervent activity, with the idea that they (the group) should not be left behind in the race for retail space. Hiring specialist people and entrusting senior group executives with the overall charge of looking after this new operation, are some of their moves.

Although the group is unusually silent, it is rumoured that group finance president Sumant Sinha has been given the task of spearheading the retail foray. When contacted, senior group executive Sanjeev Aga declined to comment. However, there is talk that the group has been recruiting people from consumer goods companies such as ITC and Godrej for its proposed retail business.

With the group’s unit Madura Garments doing well and consolidating its position as the largest branded apparel company in India, it would seem a natural extension for the group to get into retail. Guess, we’ll have to wait for some more time before the group finally decides to publicly talk about its retail plans.

News: Indian Central Bank bought $504 m in May

(BL 31/07/2006) Mumbai - Country’s central bank said it had bought $504 million from the foreign exchange market in May, its fourth straight month of purchases, data released in its monthly bulletin at the weekend showed.

The dollar purchases came despite a sharp sell-off in the stock market during the month when foreign investors pared their investments in India amid growing risk aversion towards emerging market assets.

The central bank bought $4.31 billion in April as it had stepped in to rein in rupee appreciation and maintain country's export competitiveness.

It bought a net $8.14 billion in the financial year to March 2006, lower than $20.85 billion in the same period a year earlier.

News: Idea Cellular eyes pan-India footprint

(BL 31/07/2006) New Delhi - The Aditya Birla Group promoted Idea Cellular has applied for 12 more GSM-based cellular licences. The move will give the cellular company a pan-India footprint to compete with the likes of Bharti Airtel, Hutch and Reliance Communications.

The company at present has licences for 11 Circles of which eight are operational. The expansion comes after the Birla Group got management control of the cellular company following the exit of the Tata Group. Idea Cellular has also taken the letter of intent for a long distance telephony licence and is set to become an integrated telecom services player.

Major expansion

Senior company sources confirmed that applications on behalf of Idea cellular have been sent to the Department of Telecom for offering mobile services across the country. Company officials said that Idea Cellular was embarking on a major expansion plan over the next six months, to be funded through an Initial Public Offering.

Analysts pointed out that the move to go pan-India will give the company a lot of advantage, as it will not have to depend on other operators to carry its telephone calls. It will also give Idea access to lucrative markets.

For instance, the company at present does not have operations in any of the metros, except Delhi. The bigger size will also give it more leverage in negotiating deals with equipment vendors and revenue sharing business arrangement with other operators.

Competitive market

The long distance licence is also part of the company's strategy to become competitive in a market dominated by large integrated operators such as Bharti Airtel and BSNL. Market watchers pointed out that small operators such as Escotel, BPL and Spice have been acquired or are on the lookout for a merger with larger operators.

Idea has nearly 10 million subscribers across Delhi, Maharashtra, Gujarat, Kerala, Uttar Pradesh (East and West), Rajasthan and Madhya Pradesh.

News: 'India infrastructure sector needs reforms'

(RTR 30/07/2006) New Delhi - India needs more reforms and lower taxes if the core infrastructure sector -- from energy to steel -- is to grow at more than 5 percent in 2006/07, the Federation of Indian Chambers of Commerce and Industry (FICCI) said on Sunday.

The infrastructure sector is key for Asia's third-largest economy to hit 10 percent growth, up from 8.4 percent in 2005/06.

Combined growth of six infrastructure sectors -- oil and gas, crude oil, electricity, coal, steel and cement -- was 4.9 percent in 2005/06.

The FICCI said higher core growth would also benefit the engineering and services sectors.

An FICCI survey of Indian business shows the oil and gas sector growing at 0.8-1.4 percent in 2006/07, versus a 1.4 percent fall in output in 2005/06.

Crude oil production should rise 0.5-1.2 percent in the year to March 2007, versus a 5.2 percent drop a year earlier, it said.

India imports about 70 percent of its fuel needs, and rising world oil prices will push up its import bill and put pressure on the rupee. Higher domestic output could help India trim imports, the federation said.

The FICCI said a new exploration and licensing policy (NELP) was yet to yield results and the government should introduce more liberal packages to boost domestic production.

The coal sector is projected to grow at 6.5-7 percent in 2006/07, up slightly from 6.4 percent a year earlier, the FICCI said, while electric power should grow 5.5-6 percent, up from 5.1 percent in 2005/06.

Steel output should rise 7-8 percent, up from 6.5 percent.

News: DNA’s 50: Ratan Tata, Mukesh, Amitabh Bachchan lead the list

(DNA 30/07/2006) Mumbai - Just who are Mumbai’s influentials? Who are the super-individuals that impact our daily lives? And who’s Influential No.1?

DNA’s Top50 answers those questions and comes up with a collection that reflects the character of Mumbai. Entrepreneurs and entertainers dominate the list, but lawyers, builders, doctors, social activists and a dabbawalla complete the Mumbai mosaic.

The list is topped by a man who has set benchmarks for India Inc: Ratan Tata. He’s Mr. Auto, Mumbai’s most admired CEO, and an empire builder.

At No.2 is a man who has become the face of new Mumbai: Mukesh Ambani. He’s the economy’s pace-setter, its mega projects manager, and a mover and shaker.

At No.3 is an artiste who has become synonymous with cinema: Amitabh Bachchan. He’s a reinventor of his own roles, a telly superstar, and a Gen-Ex to GenX icon.

As you go through the rest of the Top 50, you’ll see how each candidate has made a difference to Mumbai and how each one stands out in his/her sphere of influence.

DNA’s Top50 have been reviewed by other influentials: peers, spouses, rivals, or close acquaintances.

Here’s what film-maker Mira Nair says fondly about her class-mate, banker Naina Lal Kidwai: “As we’ve rocked and rolled through the years, the warmth in Naina, her commitment to a decent world, her dedication to so many relationships, has just simply grown.

Here is a woman who can lead banks and companies and quite possibly our country.” nnnp22

Rating the influentials

How did we define influence? Influence is based on a candidate’s impact on public policy; his/her impact on public behaviour; people’s perception of the candidate; and his/her global image.

Little wonder, then, that dabbawalla superboss Raghunath Medge-whose simple and effective logistics have now become a global case study-is part of the exclusive list.

The ombudsman

Project Top 50 began as far back as March. Prospective influentials were thoroughly researched by our editors. The methodology was then vetted by a distinguished referee, Infosys CEO Nandan Nilekani, who further refined the process.

The final list of candidates was selected by the editorial board chaired by Gautam Adhikari.

The filters


We decided to include politicians and bureaucrats-people who impact day-to-day Mumbai-in our list. We left out personalities associated with the Zee and Bhaskar Groups, owners of DNA, and with DNA itself.

The experience

Every project is an experience. Amid the checks and counter-checks which went on for two months, the flurry of calls to get peer reviews, and the constantly changing photo sessions, we have our own short and sweet anecdotes to recount.

Double take

We ended up having two reviews each for Samir & Vineet Jain, Naina Lal Kidwai, and Kumar Mangalam Birla. Naina was profiled by her class-mate and friend Mira Nair and by her colleague at HSBC, Sandeep Pahwa; the Jains were profiled by Star India CEO Peter Mukerjea and by Hindu’s editor-in-chief N Ram; and Kumar Mangalam Birla was profiled by grandfather Basant Kumar Birla and investment banker Hemendra Kothari. Each review is a fresh take on the candidate.

Nair’s review got late, says colleague Gayatari Jayaraman, because she was out in the bush in Uganda. And there were problems in transmitting e-mail.

But Gayatri tried harder, and the mail came, finally. We have published on this page the three reviewers that had to be left out from the special supplement [Ram, Pahwa, and Kothari] because of our deadlines.

Match point

In the final days of production, colleague Harshita Rao suddenly dropped out, saying she had to rush to Pune. Her parents wanted her to meet a prospective groom. She cut short her visit though, saying ‘marriage can wait’, and helped us send The Influentials to the press in the nick of time.

Lens Nayaks

Photographers Sherwin Crasto and Rajan Chaughule said they would never do it; they would never shoot people who prefer not to be shot.

“But why can’t you shoot them quietly and secretly with your telephoto lens one early morning, when they get out of their home for a jog?” we asked. “No way, we just can’t cross the line.”

Too preoccupied
As if this wasn’t enough, one colleague was being wooed by a rival publication even as The Influentials was being put to bed. All that she had to say about the offer: “I haven’t responded yet. How do I? I don’t have the time. I get home these days at 4am.”

We hope she stays back and helps us to compile the Top50 list next year, on our 2nd birthday.

News: Tatas to invest Rs 100 cr in leather SEZ, AP

(BL 30/07/2006) Hyderabad - The Union Government has announced that an exclusive leather SEZ (special economic zone) will be set up at Tada (Nellore district) in Andhra Pradesh with an initial investment of Rs 100 crore from the Tatas.

Announcing this here on Saturday, Jairam Ramesh, Union Minister of State for Commerce, said the SEZ would be developed by a joint venture comprising a consortium of shoe manufacturers, the Tatas and the AP Government.

Tata International, A V Thomas and India Shoes Ltd have already indicated their willingness to set up plants in the SEZ. To be operational a year after giving of permission, the SEZ was expected to contribute Rs 2,200 crore worth exports after three years of its existence.

Jairam Ramesh met Dr Y.S. Rajasekhara Reddy, Andhra Pradesh Chief Minister, Saturday afternoon and discussed the SEZ proposal.

He, however, said the proposed SEZ would not house tanneries, keeping in mind environmental concerns.

The Ministry would also help set up a National Centre for Sustainable Aquaculture in Kakinada.

Organic agriculture

The Ministry would launch a national project for encouraging export of organic agri products in eight States.

To begin with, the Centre would implement a Rs 12-crore project in Andhra Pradesh covering five districts in the first phase.

News: RBI may further hike interest rates

(BL 30/07/2006) New Delhi - Tightening monetary policies around the world coupled with surging global oil prices due to geo-political situation will continue to put pressure on interest rates in India with analysts expecting RBI to further hike short-term rates in its future reviews this fiscal.

Last week RBI announced the first quarter credit policy Review for 2006-07 and driven by the global pressures from surging oil prices and hardening interest rates, the Central Bank hiked the key interest rates at which banks park their short-term funds with Reserve Bank and vice versa, called Reverse Repo and Repo--by 25 basis points.

The overall macroeconomic and geopolitical global environment is admittedly indicative of marked downside risks, which prompted RBI to hike reverse repo rate to six per cent and repo rates to seven per cent, global equity research firm Mogan Stanley said.

"We believe that the RBI is likely to make two more rate hikes of 25 basis point each over the next six months in line with the 50 basis point hike in the US Fed rate as expected by our US economics team," Morgan Stanley said and maintains that current global financial markets conditions and concerns on runaway credit growth are key drivers in influencing RBI's decision.

However, DSP Merrill Lynch Managing Director and head of Global Markets & Investment Banking Amit Chandra told PTI, "We expect rates to remain unchanged. However, risks come from any unforeseen global developments."

The RBI stance is in line with the its global peers as a host of central banks, including US Federal Reserve, European Central Bank and Bank of Japan, have raised their interest rates from the unusually low levels that they had reached earlier in the decade. Jammu & Kashmir Bank Chairman and CEO Haseeb Drabu said that another hike of 50-75 basis points was likely in the next 12-15 months.

With the global interest rates continuing to move up and the risk reduction trade underway, the RBI needs to keep taking rates higher to avoid a disruptive rate rise at a later date, Morgan Stanley said.

The first quarterly review of the 2006-07 monetary policy said much more attention will be given to global factors now than before.

Announcing the policy, RBI Governor Y V Reddy said the average international price of the Indian crude basket increased from $ 60.1 per barrel in January-March, 2006 to $ 67.3 per barrel in April-June, 2006 and further to $ 71.4 per barrel in July 2006 (up to July 21).

The RBI Governor said fuel prices, which account for about 35 per cent of the increase in WPI, constitute a major risk to headline inflation.

Domestic prices of petrol and diesel on average were increased by nearly 9.0 per cent and 6.5 per cent, respectively, in early June. However, international crude oil prices continue to be volatile and rising.

Leading brokerage firm Karvy said that increase in short-term rates would tame inflation risk caused by upward trend in Indian crude oil basket price and double digit growth (of 10.9 per cent) in manufacturing sector during April-May 2006.

News: 'India could stop importing mobile phones by 2007'

(PTI 29/07/2006) Chennai - India could stop importing mobile phones by the second quarter of 2007 with telecom majors setting up their production units in the country, Union IT and Communications Minister Dayanidhi Maran said.

"Nokia is already producing over two million phones from its facility in Chennai every month and Motorola, which is expected to begin operations on January 14, 2007, is expected to produce about 1.3 million phones every month," he said.

Speaking at the Regional Annual Meeting of Indo-German Chamber of Commerce, Maran added that 80 per cent of mobile phones needed in the country will be manufactured in Chennai.

Maran said that Germany is India's fourth largest trading partner after the US, UK and Japan. "It has crossed record $8 billion last year. Indian imports grew by almost 35 per cent, while India's exports to Germany rose by 12 per cent."

He said that it was time for the small and medium entrepreneurs to make their mark in the Indo-German trade relations. He also called upon the German companies to participate in developing the infrastructure in the country.

Bernd Muetzelburg, Ambassador of Germany to India, said his country wanted India to continue the reforms process it started in the early 1990s.

He said India has to overcome the "red tapes" that still existed in its system.

"You will have to improve conditions for inclusive growth. Connect the 800 million people in villages with the 200 million who are enjoying the economic miracle that is happening in India," he added.

News: Why cos are shutting their Indian BPOs?

(TNN 29/07/2006) Mumbai - BPOs are booming and everyone wants a share of the pie. But operations with a manpower of 30 or 100 are not necessarily a viable option. Even as the BPO bazaar is rocking, biggies like Apple and others like PowerGen and Belair had to shut shops in India, one of the world’s fastest growing BPO markets. Because by the time these firms realised the feasibility of small BPOs in India, it was too late as costs had run high and so did attrition. This left them with no other alternative but to close their call centres here.

Analysts say that a call centre is a scaleable business and so it does not make sense to start operations with an employee base of 30 or so. Kapil Singh, country manager, IDC India, says, “For a captive call centre to sustain operations in a long run, minimum 400-500 people are required.” The possible reason for closure by these MNCs could be their inability to scale up and high costs of course, says Siddharth Pai, partner and MD, TPI India.

Before a company starts operations, it has to decide the reason for outsourcing — whether it is skills or just call centre work. If captives open here to do high-end work, then a number of 30 can sustain operations but MNCs who came, were doing fairly low-end call centre work.

“If you play in the market with 30 people or so and try to compete with companies with strength of 1,000 or more, the business will not last,” adds Mr Pai. The exact reason for these companies shutting shops here is not scaling up, as a result their fixed costs ran high and cost arbitrage disappeared.

Another reason for closure, says Alok Shende, director, Frost & Sullivan, could be quality delivered from the Bangalore centre. Big brands are very sensitive towards the quality and so are their customers. This could have also led to the closure. However, Mr Shende denied any wage pressure saying, “There is still a good wage differential between the US and Indian salaries. So there is no way they could not have afforded decent salaries.”

Steve Dowling of Apple clarifies, “We re-evaluated our plans and decided to put our planned support centre growth in other countries.”

Burying the past, Mr Shende says there are certain lessons to be taken from these sudden closures. First, the senior management of the parent company should act as internal spokesperson and sell the outsourcing success story to their employees.

Also, the top management hired in India should be experienced enough to handle various problems that arise in a new set up.

He also feels that the companies who have exited India may have gone wrong in their teething exercise. There are chances that top management that was recruited didn’t have right business depth.

News: RBI okays $2bn foreign investment by mutual funds

(TNN 29/07/2006) Mumbai - The RBI on Thursday doubled the aggregate ceiling for investment by domestic mutual funds in overseas securities to $2bn.

The central bank also removed the requirement that mutual funds can invest in overseas securities of only those foreign companies with a 10% shareholding in a Indian company listed at the domestic bourses.

Finance minister P Chidambaram had proposed this measure in this year’s budget. The notification also states that a limited number of “qualified Indian Mutual Funds” can invest cumulatively up to $1bn in overseas Exchange Traded Funds.

Fund managers said the norm that needed a foreign company to hold a reciprocal 10% stake in an Indian company was the main hindrance to investments overseas, than the overall investment ceiling of $1bn. This had limited the scope for investments to a handful of multinational companies with subsidiaries in India.

Fund managers said the relaxation of investment norms has opened up options for mutual funds to unveil new products for overseas markets and spread risks, especially when valuations of domestic stock markets are higher than most other emerging markets.

However, mutual funds which have a foreign partner are seen as the likely gainers of the new investment norms, as domestic funds lack expertise to invest abroad.

“There are several costs attached to investing abroad such as hiring competent fund manager, which may not be viable for domestic funds,” said a CEO with a foreign mutual fund.

News: McDonald's gears up for Indian home run

(TNN 29/07/2006) New Delhi - After making its way to your hearts through your stomachs, fastfood major McDonald’s is now planning another strategy to build its brand across India.

The company will soon have a national footprint for its McDelivery format. The quick service restaurant (QSR) chain will be rolling out its home delivery format across the country within the next few months.

Soft-launched in ’04, the company had maintained a low profile on the home delivery channel. “We were soft-pedalling it (the channel) because we were deliberating on a uniform model for all our stores.

Having finalised the systems, we are now ready to make that channel more visible,” said Vikram Bakshi, managing director, Connaught Plaza Restaurants, Mcdonald’s franchisee for north and west India, told ET. The effort would result in incremental sales of 15% of its total revenue.

The fastfood chain has finalised one toll-free number, which will lead all the calls for home delivery to the store in the respective areas. The orders would be recorded accordingly.

Both the Indian franchisees of McDonald’s are jointly making some substantial investment in telecom and logistics for the effort. Mr Bakshi, however, declined to share the figure. For areas, which are congested and where access is difficult, for instance, the Chandani Chowk area in Delhi, the company has flagged off McDelivery on bicycles.

The ongoing initiative coincides with McDonald’s ten years in India. The fastfood chain has lined up major expansion plans in the coming months. “We plan to add 30 new stores this year and set foot in the East,” Mr Bakshi said. The company has just signed up for two stores in Kolkata.

McDonald’s is quiet bullish on the Indian market as a whole. While the parent company is making huge investments in supply chain and media communication, it has now begun to help the back-end supplier through direct investments in the joint ventures with them.

“While India is the youngest market for the Big Mac in the Asia Pacific region, the penetration it has achieved in the country matches most of the countries, where the chain is 20-30 years old,” Mr Bakshi said.

That is probably the reason why, while McDonald’s had put a cap on rapid store expansions across the world, it desisted from putting any such restrictions on the Indian operations.

News: Goa opts for monorail

(BS 29/07/2006) Mumbai/Panaji - Setting aside Konkan Railway Corporation’s (KRCL) ambitious skybus project, the Pratapsingh Rane government in Goa is likely to go ahead with the monorail project.

In a written reply in the state assembly, transport minister Pandurang Madaikar said monorail, a mass rapid transit system (MRTS) based project, is being considered for the state.

“Tender process for this public transport project is underway. However, bids for the feasibility report is not floated,” he added.

The state cabinet had approved the proposal on September 12, 2005, to float global expressions of interest to design, develop, construct, finance, operate and maintain elevated MRTS on built-own-operate-transfer (BOOT) basis, the minister noted.

News: Mukesh gears up for retail tryst in Kerala

(BS 29/07/2006) Mumbai - Mukesh Ambani-owned Reliance Industries (RIL) is set to make its presence felt in God’s Own Country with its retail business.

With the Vizhinjam port close to Kovalam, providing ample potential as a transshipment spot for its retail activities, Reliance is understood to be considering making the most out of it from here. The development of the port by the company with an eye on this venture is also not being ruled out.

Confirming that the company is seriously mulling over possibilities to make a mark in Kerala, a senior Reliance Industries official told Business Standard from Mumbai, “We are looking at various options in Kerala before we take a final decision.”

Adding that Kerala was indeed part of the company’s plans for its upcoming retail business, he said the investment part will be worked out only after the various options to begin operations is finalised.

Going by the RIL chairman’s statement at the recent AGM that the company’s retail focus entails Rs 10,000 crore equity investment and that Rs 25,000 crore would be spend in the years to come, the company is expected to do all what is needed to see its retail initiatives blossom. The chairman had also said that the retail presence would be pan-Indian covering 1,500 cities.

News: Slow push for rupee full float

(BS 29/07/2006) Mumbai - The second Tarapore Committee on capital account convertibility is unlikely to aggressively push for the full float of the rupee at this juncture. The committee will submit its report to the Reserve Bank of India on Monday.

Bankers feel that the committee may link the road to full convertibility of the rupee to lowering of fiscal deficit. They also say a lower inflation rate will hold the key to making the rupee full float.

India has made considerable progress in cutting the fiscal deficit of the central government. It has fallen from 5.9 per cent of GDP in 2002-03 to 4.1 per cent last year.

However, the combined deficit of states and the Centre was estimated to be 7.7 per cent in 2005-06. The RBI has projected an inflation rate band of 5-5.5 per cent for this year.

The RBI had set up the committee in March after Prime Minister Manmohan Singh asked the central bank to consider a new roadmap on convertibility.

Other members of the committee are Surjit S Bhalla, MG Bhide, RH Patil, AV Rajwade and Ajit Ranade.

Tarapore also headed an earlier committee on CAC in 1997.

One of the terms of the committee is to provide a comprehensive medium-term operational framework, with sequencing and timing, for “fuller” CAC after taking into account the revenue and fiscal deficit of both Centre and states.

The mandate also includes examining implications of “fuller” capital account convertibility on monetary and exchange rate management.

“As you have noticed, the panel has been asked to lay the road map for ‘fuller’ convertibility. This itself shows the gradualism of the approach. We do not expect a definite, near-term time-table for making the rupee full float,” said the chief financial officer of a large corporate.

Apart from the critical fiscal deficit and inflation targets, most of the preconditions laid down by the first Tarapore report have been met, including those concerned with debt service repayments, volatile capital flows, such as short-term debt and portfolio investments, and a minimum net foreign assets to currency ratio.

Under the Tarapore-I parameters, the ideal pile of foreign exchange reserves varied between $22 billion and $30 billion. India's foreign exchange reserves are now $163 billion.

Tarapore-I had suggested that short-term debt and portfolio investments by foreign institutional investors (FIIs) should be 60 per cent of the reserves or even lower. Currently, it is around 37 per cent of the reserves.

The net foreign exchange assets to currency ratio is around 150 per cent now against the Tarapore-I precondition of not less than 70 per cent.

The panel was also in favour of the 10th Finance Commission recommendation of setting up a consolidated sinking fund (CSF) for public debt. This has not yet been done. However, the Fiscal Responsibility and Budget Management (FRBM) Act, which the panel had pitched for, is in place.

The committee was in favour of greater independence for the RBI and an average mandated inflation rate of 3-5 per cent. The average inflation rate in 2005-06 was 4.45 per cent but no mandate has been given to the central bank for inflation control.

Sanjeev Sanyal, senior economist of Deutsche Bank, says the targets have shifted over the past decade and the RBI would need around $300 billion worth of reserves today for a credible war-chest.

In one of his recent speeches, RBI Deputy Governor Rakesh Mohan said the impact of a freely floating exchange rate in developed countries was different from an emerging economy like India and hinted that the central bank might not like to loosen its grip over the rupee.

News: India Inc on renaming spree

(BS 29/07/2006) New Delhi - Indian companies seem to have realised that there is a lot in a name after all — and even more so in a brand name — if the spate of name changes in recent times is anything to go by.

In many of these attempts at an image make-over, the brand has become the corporate identity or been added to the existing name of the company.

The latest to join the rank is Satnam Overseas Ltd, which sells and exports rice under the Kohinoor brand name. Come September, the company will start calling itself Kohinoor Foods Ltd.

Earlier this year, millions of Airtel subscribers realised that their service provider was no longer Bharti Tele-ventures but Bharti Airtel. Airtel, of course, is the brand that is more easily recognised than Bharti in several pockets.

Vijay Mallya’s Kingfisher Airlines had its origin in air-taxi operator UB Air, branded after the parent company, liquor-maker United Breweries.

But somewhere along the runway, perhaps as an acknowledgement of the brand loyalty to his best known beer, Mallya opted for the name of Kingfisher Air when the time came to take off.

Similarly, Asahi India Glass Ltd, the country's largest glass company, identifies itself as AIS, the same as its flagship brand. “We want the brand identity and the corporate identity to be the same,” sources close to the company said.

Much before this spree, seeking a more dynamic image than suggested by the unwieldy Birla-AT&T-Tata, the cellular service provider renamed itself as Idea, which is also its brand.

Calling Satnam Overseas' plan sensible, Jagdeep Kapoor, chairman and managing director of Samsika Marketing, said, “What is the point in having a solid asset in a trusted brand and not incorporating that in the corporate name.”

News: Indian network congestion is only getting worse

(DNA 29/07/2006) New Delhi - India’s teledensity is improving by the hour and the country has joined the prestigious 100-million mobile club. Good news both. But the bad part is, the level of congestion between telecom operators is getting worse.

The number of point of interconnections (PoIs) having congestion has increased 58% from 390 in January, to 616 in May, according to the Telecom Regulatory Authority of India (Trai).

In July 2005, the regulator had notified that a congestion level of over 0.5% between networks would be a breach of quality of service standards.

The Trai parameter implies that not more than one call out of 200 should face any congestion problem.

However, in reality, the congestion levels are alarming, at times even touching 100% — or nearly every call facing a hiccup — in some parts of the country.

The Trai congestion report for January to May 2006 shows that phone subscribers are facing congestion due to lack of interconnection with Bharat Sanchar Nigam Ltd (BSNL), which has the largest network in the country.

For instance, Bharti Airtel’s congestion level, where the PoI is with BSNL, touched a high of 86.21% in Sasaram (Bihar); 94.4% in Jaunpur (Uttar Pradesh); and 89.11% in Churu (Himachal Pradesh).

In the case of Hutchison Essar, the congestion level was recorded at 87% in Gazipur, where again the PoI is with BSNL.

Similarly, with BSNL as the PoI, Reliance Infocomm reported 100% congestion at Durg, and 95.40% at Pune. Others such as Idea Cellular and Tata Teleservices have also shown over 80% congestion levels in some parts of UP and Bihar, when PoIs are with BSNL.

But there’s some good news as well. Bharti’s congestion level in Shimla dropped from 19% in January to 11.66% in May.

Also, in Bikaner and Kota, congestion has been reduced from 38.28% and 41.53%, respectively, to 0% each.

In the case of Tata Teleservices, Alwar has shown a drop from 19% congestion in January to 9.65% in May. Reliance Infocomm’s congestion level in Patna has reduced from 20.5% in January to 1.4% in May.

PoI congestion in the network is due to inadequate junctions between the two networks and this leads to loss of calls and also results in poor quality of service to telecom consumers.

Teledensity of the country is pegged at 13.95, and there are a total of 153.37 million telecom subscribers. While there are only 47.42 million fixed phone users, the number of mobile subscribers is much higher at 105.95 million.

The private telecom industry is discussing ways to set up an interconnect exchange, on the lines of the “Telehouse” in Europe, US and Canada.

News: IDBI, IL&FS, ING get demat breather

(DNA 29/07/2006) Mumbai - Industrial Development Bank of India (IDBI), Infrastructure Leasing and Financial Services (IL&FS) and ING Vysya Bank can now open new demat accounts.

In its second interim order, pending enquiry, the Securities and Exchange Board of India (Sebi) lifted the ban on these companies that prohibited them from opening new demat accounts. Though Sebi was not satisfied with the submissions made by these firmss, it said the prohibition came as a preventive step.

However, the breather to these entities may be temporary, taking into account Sebi’s consideration of their submissions and that the regulator is awaiting completion of inquiry proceedings for a final verdict.

Sebi said that the IL&FS scheme wouldn’t have been possible if the demat accounts of its clients were with a depository participant other than IL&FS.

“It is observed that, in respect of these accounts, correspondence address of IL&FS was mentioned, which thereby implied that KYC (Know Your Client) documentation is merely a paperwork and the requirement of ensuring the identity of the clients is to safeguard the interests of IL&FS and not to establish the genuiness of the clients,” said Sebi in its interim order.

News: Indian forex reserves gain $689 m

(BL 29/07/2006) Mumbai - The forex reserves have gained by $689 million due to an increase in foreign currency assets.

According to the Reserve Bank of India's Weekly Statistical Supplement, the reserves rose by $689 million to touch $163.35 billion for the week-ended July 21. In the previous week, the reserves had fallen by $601 million to $162.66 billion.

Foreign currency assets increased by $682 million to touch $156.40 billion during the week. Foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of non-US currencies such as euro, sterling and yen.

According to the chief forex dealer with a private bank, while the euro was unchanged during the week under consideration the British pound had gained. "The pound had appreciated from $1.8383 on July 14 to $1.8590 on July 21.This could have caused a revaluation effect and led to a slight rise in the reserves," said the dealer.

Market participants said that the central bank had not intervened in the forex market during that week.

There was, however, an FII outflow of around $112 million from the equity market during the week under consideration.

Gold reserves remained unchanged at $6.18 billion while SDRs increased to $7 million. The reserve position in the IMF was unchanged at $763 million.

Dealers said the rupee could appreciate to 46.50 next week if the US GDP data released late Friday evening were unfavorable to dollar.

News: Deutsche Bank India to focus on retail biz

(BL 29/07/2006) Mumbai - Deutsche Bank India plans to launch consumer finance business in the next six to eight months, said Gunit Chadha, MD and CEO, Deutsche Bank (DB) India.

He said that consumer finance would be a standalone business within the bank and would include auto and housing mortgages.The bank, which entered the retail business around six months ago, currently has around 30,000 customer accounts. Chadha also said that the bank had applied for a licence to set up an NBFC 12 months ago and was awaiting approval from regulatory authorities.

Colin Grassie, CEO, Asia-Pacific, DB, said that India along with China were considered priority markets for the future in terms of expansion. "Asia is a significant contributor to DB's global financial business. The importance of India can be assessed by the fact that retail operations were launched for the first time outside Europe in India," said Grassie. Taking their retail initiative forward, the bank recently launched a suite of credit cards - the Classic, Gold, Platinum and Corporate Credit Cards.

News: 'Indian FDI flow $10.3 bn in FY'06'

(PTI 29/07/2006) New Delhi - The Government on Friday had said 10.3 billion dollars of FDI, including money raised from ADRs and GDRs, flowed into the country country during 2005-06.

The FDI constituted 37.12 per cent of the total capital flow of 27.7 billion dollars, Minister of State for Finance P K Bansal informed Lok Sabha.

He said the government has undertaken a comprehensive review of Foreign Direct Investment policy and associated procedures in Februray 2006.As a result, a number of rationalisation measures have been taken including doing away with the multiple approvals by the regulatory authorities, he said.

News: 'India wave' in global fashion, a long way to go!

(PTI 28/07/2006) New Delhi - Designers being invited to showcase abroad makes one think that the Indian fashion story is going global, but experts say that India is yet to influence global fashion trends in a major way.

"After the Gandhi cap and the Nehru jacket Indian fashion has not influenced the world in a big way," says Rathi Vinay Jha of Fashion Design Council Of India (FDCI).

From Paris to Singapore, Europe to Middle East, Indian designers are making a presence on the global ramp, but it is not their creations which are creating waves, but 'brand India' which is an all time favourite, says Sunil Sethi who heads Alliance, a buying house.

"The Indian wave in global fashion is not the creation of any Indian designers. Foreign designers have an India look to their collection and that's been responsible for the buzz," he says.

Both Rathi and Sethi feel that putting a show abroad "is aspirational" and "lends certain credibility to the designer."

Rathi says that her "guessestimate is that 80 per cent of sales for all Indian designers come from the domestic market."

However Sethi says that it is important that Indian designers make their presence in fashion abroad. "One designer's show may expand the pie for all Indian designers. Should a designer put up an impressive show, it creates an interest for works of the entire industry."

Also only once the buyers abroad decide to do business with you do they give you exact sizes, Sethi explains.

"Shows abroad help create brand awareness and generate buzz. The consumers know who you are and where you are available," says Deepika Gehani who was at the Los Angles Fashion Week recently.

"It's a great way to identify, understand and interact with potential consumers and buyers and get enquiries from them," she adds.

Gehani says though that she's had to reconcile to the fact that even haute couture from India is "expected to be cheap."

She confesses that buyers abroad are wary of working with Indian designers, as they are unsure of "quality standards and ability to meet delivery targets."

She says that for her the most important learning has been that NRI in the US are caught up in a time warp in terms of fashion. "They still want loud colours and heavy work. On the other hand the middle East is probably the most fashion forward."

Speaking about her experience, Kiran Uttam Ghosh who was in Italy on an invitation by Alta Roma (The Indian FDCI Of sorts), says that India is miles ahead in terms of embroidery and surface texturing but needs to put in work in terms of "pattern, cuts and garment construction. I haven't heard of one buyer not complaining about the arm hole," she says.

Sethi says that shows abroad may even lead to the realisation that a designer is best suited to the local market.

Sethi says that the exposure has brought a sense of professionalism among designers. "They have factory managers and CEOs to look into their business."

Jha says that finances are the main constraints for designers. "It is expensive to travel abroad. Hence most designers prefer to sell from stores abroad than set up their own retail units."

News: Indian govt clears FDI proposals worth Rs 245 crore

(PTI 28/07/2006) New Delhi - The Government has approved 14 Foreign Direct Investment proposals totalling Rs 245.483 crore, including one by Singapore-based AAPC Hotels Management Pvt Ltd for building a hotel at an investment of Rs 150 crore.

The proposals were cleared by Finance Minister P Chidambaram on the recommendations of Foreign Investment Promotion Board, an official release said.

AAPC Hotels has formed a joint venture -- Express Call Pvt Ltd -- which would construct, develop and own a hotel project.

Besides the hotel project, other proposals related to broadcasting, information technology, small scale industries, telecom and economic affairs have been approved.

The proposal of ILM Trichy (Mauritius) Ltd to fund the Trichy Tollway road project in Hyderabad at an investment of Rs 93.865 crore was also cleared.

Chidambaram also approved increase in foreign equity holding from 49 per cent to 68 per cent in Hutchinson Telecom. The proposal did not involve any fresh inflow of foreign investment, the release said.

The proposal of New York-based Conde Nast Asia Pacific to publish and print speciality fashion magazines Vogue and Glamour in India was approved as well.

Singapore-based MCN International's proposal to set up a wholly owned subsidiary for TV broadcasting at an investment of Rs 1.50 crore also received government nod.

News: 'Indian companies have to bulid nation's brand overseas'

(BS 28/07/2006) Kolkata - India Inc will have a critical role to play in building brand "India" on a global scale.

Marketing guru Kevin Lane Keller said, companies like Tata and Reliance have a strong reputation in India but how they play their cards internationally and capture people's minds would determine India's brand equity.

He cited examples of Samsung and Nokia, which had helped in highlighting their respective countries. "Often the image of a country can be influenced by a strong brand that achieves global leadership," said Keller.

He was speaking at the Brand Conclave organised by the Confederation of Indian Industry (CII) eastern region. Keller is a professor of marketing at the Tuck School of Business at Dartmouth College and has served as a consultant and advisor for brands like Accenture, American Express, Disney, Ford, Intel, Levi Strauss, Procter & Gamble and SAB Miller.

"Every contact point, direct and indirect affects the brand image of India. A company on a global scale sets expectations about that country," he said.

Tata and Reliance apart, the services sector in India also had great potential in this respect, felt Keller. Holistic marketing practices was one of the ways of building brand India.

Keller spoke at length about holistic marketing and said that it could be seen as the development, design and implementation of marketing programmes, processes and activities that recognises the breadth and interdependencies of their effects. "A broad integrated perspective is necessary."

Countries are brands just like products, services and organisations. "They have associations and images, set expectations and affect perceptions and behaviours," he said. While speaking specifically about brand India he said, there was tremendous interest about India. "Over the last few months, India has been the cover story for several magazines in the US," he said.

Keller felt, as a country, India was going through a lot of positive changes and there was speculation as to which way it was headed.

Holistic marketing practices would ensure that strong brands were built.

But a note of caution from Keller : Building strong brands takes patience and hard work.

The silver lining: enormous gains.

News: Wal-Mart gets nod for Indian offices

(BS 28/07/2006) New Delhi - Even before India could open the doors for FDI in retail, Wal-Mart has made a quite entry into India. The government has allowed Wal-Mart to set up two offices in India.

The Indian offices, which are likely to be based in Delhi and Mumbai, will explore business opportunities for Wal-Mart in the Indian retail sector.

The offices will also undertake a market study regarding Wal-Mart’s strategy in India. It will also identity potential Indian partners for its retail foray as well as other investment opportunities here.

One of the other responsibilities of the Indian offices will be to increase the company’s sourcing activities in India. It is projected that Wal-Mart wants to source materials worth $4 billion from India in the near future.

Wal-Mart, which currently has sourcing arrangements with garment manufacturers and other suppliers in India, is keen to expand its network of sourcing partners in India.

All regulatory approvals, including one from the Reserve Bank, have been obtained by the company. The setting up of these offices, however, does not entail any inflow of FDI and is not meant to enter the Indian retail market.

Neither can these offices undertake any business in India.

This move by the world's largest company comes at a time, when the government is debating allowing foreign direct investment in retail sector.

Intense lobbying is also been undertaken by Indian companies entering the retail sector also to block the entry of foreign companies like Wal-Mart into India.

The Indian operations, which will be handled by the Hong Kong or Singapore offices of Wal-Mart will be operational by October-November 2006.

The model adopted by Wal-Mart is typical of companies operating in sectors with strict foreign investment conditions.

Such companies come into India by opening branch offices, which will be converted into subsidiaries as and when government relaxes FDI regulations. These offices, will be representing the company's business interest in India.

News: Heidelberg is hungry for more in India

(TNN 28/07/2006) Mumbai - Close on the heels of its Mysore Cement acquisition, German major HeidelbergCement is now planning to further increase its presence in India, a senior executive said recently.

“After our first step with Indorama, the planned majority takeover in Mysore Cement was vital,” HeidelbergCement chairman Bernd Scheifele told ET. ”In March, we had mentioned that the approval procedure for a clinker plant in Gujarat has been started.

Further expansion will also be taken step by step.” HeidelbergCement has a joint venture with Indorama for a cement grinding unit. Early this month, HeidelbergCement bought a majority stake in SK Birla’s Mysore Cement for $100m and is currently in the process of making an open offer to the Indian company’s shareholders.

Sources in the Indian cement sector said after Mysore Cement, HeidelbergCement could be looking at other local units also. “They may initiate the consolidation process once the Mysore Cement open offer is completed and its other expansion plans are in place,” the sources added.

The move is also in line with the German major’s plan of having close to 5 to 10 million tonnes cement production capacity in India. HeidelbergCement currently has a capacity of 3.5 million tonnes, including Mysore Cement’s 2.6 million tonnes. HeidelbergCement is expected to merge all its holdings in India into a single entity, which suggests that the German company will be keen on picking up majority stakes in all future acquisition targets.

Mr Scheifele was non-committal. “The takeover of the majority (stake) in Mysore is ongoing. Further activities will be taken step by step.” But Mr Scheifele is confident India would see large-scale consolidation. “The cement industry worldwide is experiencing a consolidation process. I expect a similar trend in India also. The speed cannot be predicted,” he said.

News: After a Lion, ING comes out with a Cub

(DNA 28/07/2006) Mumbai - The launch of new equity mutual fund (MF) schemes, which seemed to have stopped for sometime with the stockmarket going nowhere, is picking up again.

After the launch of Tata Capital Builder Fund last week, this week the ING Vysya C.U.B Fund was launched. ING Vysya already has a L.I.O.N fund, and the launch of the C.U.B fund should not come as a surprise!

Now, before you start wondering as to what lions and their progenies are doing in the MF industry, C.U.B stands for Competitive Upcoming Businesses. If there ever was a competition for the best product names that businesses give to their new products, the Indian MF industry would have won it hands down.

ING Vysya C.U.B fund is a three-year closed-ended diversified equity scheme (after which it becomes open-ended), which aims to provide long-term capital appreciation by investing pre-dominantly in a diversified portfolio of equity and equity-related securities of companies of small market capitalisation. So the question crops up, “How small is small?”

As per the offer document of the fund, companies that have a market capitalisation of up to Rs 950 crore would constitute the investment universe of the small-cap portion of the fund.

Given this, there is some sort of a definition in place and, hence, this fund is not a total name game, as has been the case with MF schemes launched in the past.

Small-cap stocks would constitute between 65-100% of the total investment of the fund. To shortlist th ese stocks, the fund plans to use what it calls the “Smart Funnel Process for stock selection”. This is nothing but a new way of representing the “top-down” strategy of stock selection that MFs follow.

The search for stocks to invest in would start from the entire universe of small cap stocks, and then on the basis of certain criteria, some stocks would be short-listed. Using this process, the fund plans to invest in around 50 stocks. It plans to invest the remaining part in stocks which do not fall in the small-cap space and money-market instruments.

For investors who are looking at some sort of exposure to small-cap stocks, and who do not have the time or the inclination to research, this seems like a good investment bet.

But they should well remember that such stocks fall the most when the markets fall. Other than this, the biggest issue against any new MF scheme is that it does not have a track record. Given this, it makes more sense for investors to invest in schemes that have performed well over the years.

Past performance does not guarantee future performance, but is better than no performance at all, as is the case with any new MF scheme.

The bigger question that fund houses need to answer is that why don’t they advertise their older schemes that have done well in the past? Why do they stress on raising more and more money on new schemes?

Another issue that the regulator possibly needs to look at is the offer document. “Mutual funds are subject to market risk. Please read the offer document carefully before investing,” goes the disclaimer.

But the fact is hardly anyone reads the offer document before investing. The offer document for the C.U.B is 111 pages long. Who has the time or the inclination to read such a long document? This is the case with most offer documents.

It would, therefore, be a good idea to try and summarise the most important parts of the offer document within a few pages, so that the investor has some idea of what he is getting into it. Right now, the investor mostly invests on the basis of what the distributor tells him about the new scheme, which may or may not be true.

News: India has the best and the worst

(DNA 28/07/2006) Washington - India is one of the world’s fastest growing economies at 8.5 per cent. But a typical doctor in New Delhi is less competent than his counterpart in Tanzania and much less so than a similar professional in Indonesia.

While Indian management graduates command an annual salary of up to Rs1 crore, two-thirds of India’s children cannot read a story, and more than 50 per cent cannot solve simple numerical problems.

These findings are part of the World Bank India Development Policy Review report published on Wednesday. The report was co-authored by three economists, including Lant Pritchett, the bank’s lead socio-economist for South Asia.

Pritchett said, “For India to improve the delivery of core public services such as water and power supply, health care, education, and transportation, systems of accountability have to be strengthened.” That is possible only through institutional reforms.

The report compares India’s growth with China’s, and says India has much to achieve.

For instance, India’s share of the world market in manufacturing exports is only 1.1 per cent while China’s is 6.3 per cent. India also trails in power generation, roads, and telecommunications.

The bank has come down heavily on India’s social sector reforms. Some states, it says, have rates of poverty that are worse than Malawi’s, an African nation with a GDP of just $7 billion compared with India’s $3.6 trillion. Even Bangladesh has a better record in reducing infant mortality rates, it says.

The report warns: “India in 2006 is not yet at, but is nearing a point where paths diverge. One branch of the path leads to a downward spiral into a vicious circle while on the other there is a positive reinforcing virtuous circle.”

It recommends immediate implementation of key infrastructure projects and social reform initiatives. It also recommends greater accountability to improve delivery of services in core areas.

News: India MFs' overseas investment norms eased

(BL 28/07/2006) Mumbai - The Reserve Bank of India has raised the ceiling for overseas investment by mutual funds from $ 1 billion to $ 2 billion. Select mutual funds would also be allowed to invest in exchange traded funds cumulatively for $ 1 billion, permitted by the Securities and Exchange Board of India, an RBI notification said. Mutual funds will now be able to invest in a broader horizon overseas, as the requirement for investing only in companies overseas that have 10 per cent share holding in listed Indian companies has been dispensed with. Detailed guidelines for implementation of the announcement including eligibility criteria, limits, identification of recognised stock exchanges, investible universe, monitoring of aggregate ceilings etc would be issued by SEBI. However, mutual fund houses such as Principal PNB, which have an existing overseas fund, are awaiting complete SEBI guidelines till they plan their next course of action. Rajat Jain, Chief Investment Officer, Principal PNB Asset Management Company, said, "This is a good step by the regulator, but till the guidelines are issued, nothing much changes. However, the removal of restrictions on investing in companies overseas will provide a diversified investment pattern in the best overseas companies abroad." The net asset value of Principal Global equity fund, which was established in 2004, is currently at 12.92. "Anything that helps broaden the markets and helps avail one of good opportunities is welcome," said Naval Bir Kumar, Managing Director, Standard Chartered Asset Management Company Pvt Ltd, on the guidelines. Mutual funds hitherto were allowed to invest in ADRs/GDRs of Indian companies, rated debt instruments and also in the equity of overseas companies listed on a recognised stock exchange overseas and having a shareholding of at least 10 per cent in a listed Indian company. The announcement was done in accordance to the Finance Minster, P. Chidambaram's budget speech earlier this year. However, despite being allowed to raise $ 1 billion overseas, only two AMCs, Franklin Templeton and Principal PNB, issued overseas funds. The reasons were primarily that fund houses did not have a diversified range of companies to invest abroad. "Investment was restricted to 30-40 companies abroad and these companies were doing better in India. Hence, these funds were not very popular with Indian investors. However, the softening of regulations will be critical now," said Sandesh Kirkire, Chief Executive Officer, Kotak Asset Management Co Ltd. Another reason is the superior performance of Indian exchanges, which have almost doubled from 6,000 points to 12,000. Thus, there are many opportunities for Indian investors to earn good returns in the country itself, which is unavailable in most other countries. As interests will now be generated in the field of investment overseas, managers feel that a proper vehicle is needed to channelise the fund outflow for issuing overseas funds.

News: Archies to open more stores in India

(BL 28/07/2006) Pune - Greeting cards company Archies Ltd is firming up a Rs 50-crore investment plan to grow its business from the current level of 73 company-owned stores to 200 such stores over the next two years.

The company will also leverage the huge retail boom in the country to grow exponentially by finding store space in hypermarkets and is already in talks with at least four retailers, Vijayant Chhabra, Executive Director, Archies, told Business Line.

The company is also simultaneously growing its second brand, Stupid Cupid, which retails fashion accessories and will take the number of exclusive brand stores from the current level of 7 to 15 by the end of the year, Chhabra said. "By the end of the current fiscal our turnover should cross the Rs 100-crore mark from last year's Rs 85 crore,'' he added.

Expand footprints

Archies, which already has more than 50 per cent of the organised market share for greeting cards, has over 400 franchisees but will now seek to expand its footprints into 18 other cities where it will set up about 120 stores over the next two years. The company opened two stores in Pune this week as part of the expansion drive, taking the number of company-owned stores in the city to six.

With shoppertainment being the current mantra for Indian families, the company is now looking at increasing its presence on retail shelves of large format chain stores and hypermarkets. While Landmark already stocks its greeting cards, the company has now entered into an exclusivity contract with South African chain Shoprite, which has set up shop in Mumbai, to stock its brand.

Retailer Pantaloon, which is testing its new concept, Depot, which stocks books, toys and greeting cards in Mangalore and Ahmedabad, has also started stocking the company's products, Chhabra said. "As these chains grow, we will grow with them and gather volumes," Chhabra said.

The company has also recently started test-marketing a range of premium imported greeting cards with handmade design elements in the Rs 150-plus range which is finding enthusiastic response in the three stores where they are being sold, Chhabra said. "If the response to the premium cards continues to be positive, we might consider getting into this segment and actually start manufacturing these in India," he added.

News: India's Mocha to open outlets abroad

(BL 28/07/2006) Pune - Coffee and hookah bar chain Mocha is firming up plans to froth up its bottomline and add some spice to the already steaming coffee bar scene across urban India. Coffee lovers in Dubai, the Philippines, Singapore and Sri Lanka will also soon get their coffee with a distinctive Indian flavour with Mocha outlets expected to be opened there early 2007.

Impressario Entertainment & Hospitality, the company that owns the buzzing Mumbai-based coffee bar brand Mocha Coffee and Conversation, plans to take the number of outlets from the current 12 to 65 by end-2009.

Next week, it will open the first of these 65 in Pune's Law College area with plans to open another at the upmarket Koregaon Park area by December.

The company already has a presence in Delhi, Hyderabad, Chennai, Jaipur and Ahmedabad in addition to its flagship outlet in Mumbai's Churchgate.

Not just a coffee bar

"We don't want to be just a coffee bar, we want to develop Mocha into a destination where like-minded people gather to discuss their hobbies and passions," says Riyaaz Amlani, CEO and Managing Director.

The company has already kicked off its strategy towards this end. Over the last two years, Mocha has been the venue for a number of events including a discussion by film maker Nagesh Kukunoor on his film Igbal. It is home to the backpackers travel club, where those bitten by the travel bug come together, discuss their experiences, share tips and take off for a break outside the city.

In Ahmedabad, its outlet is often the place where National Institute of Design students display their sculptures and paintings while its Delhi outlet hosts a weekly Salsa dance club. "Mocha is an extension of people's personalities and our idea is to build communities based on geographies and shared interests," says Amlani.

Meanwhile, the company, which also owns Salt Water Grill, the bayside fine dining restaurant in Mumbai, is now firming up plans to unveil variations of the brand into other cities.

In Delhi, it plans to open The Smoke House Grill, which will offer smoked cheeses and other delicacies, beginning September 15. Hyderabad city will be home to The Still Water Grill, with the company opting for a lakeside location for the brand which will debut there by end 2007.

The company's overseas ambitions will kick off with multiple outlets opening in Dubai by early 2007 after which it will take the brand to Singapore or the Philippines in end-2007. Says Amlani, "By 2008, we plan to be present in at least three countries."

Strategy

"Our strategy is to focus on the kind of products that have made us so popular - good food and beverages, good prices and great ambience. We don't believe that pubs and other hang-outs which are alcohol-centric have longevity," Amlani said.

The company's expansion plans will be funded by a combination of internal accruals and loans and the company is right now in discussion for private placement from people who share its interest in the business model, he added.

News: Microsoft to invest $150 mn in Pune

(TNN 27/07/2006) Pune - Microsoft is set to pump in $150 million (Rs 702.84 crore) in a mega software development centre in Pune, according to Arvind Kumar, IT secretary, government of Maharashtra.

When announced, this will be the single biggest IT investment coming into the city so far. TCS recently announced an investment of Rs 500 crore for Pune.

"This is only the beginning. We are hard selling Maharashtra to every possible MNC," Kumar said on Wednesday. He said the Microsoft investment would be announced soon and that it would be outside the Hinjewadi IT Park.

Kumar said the state is also in discussions with other multinational IT companies like Hewlett Packard and IBM to bring in their future investments into the state.

Senior state government officials recently met a delegation from IBM and laid out the red carpet to them, he said. Speaking to reporters on the sidelines of a meeting organised by CSI in Pune, Kumar said: "It's time we got out of the office and sold the state to these big IT investors."

"In fact, the state has thrown open its gates and is wooing investors in the sector, trying to offer them whatever they ask for," he said.

Later, at a meeting organised by MCCIA, Kumar said Intel and Advanced Micro Devices were also on the state's list of invitees.

According to him, these hardware majors will also be given the same fiscal benefits as the software ones. Kumar said a proposal to see if free land could be granted to investors in tier II and III cities, if not Mumbai and Pune, was being considered. The cities being promoted are Nashik, Aurangabad, Nagpur and Amravati.

News: UK cos seek a piece of Indian agri retail

(TNN 27/07/2006) New Delhi - UK-Based investors and retailers like the Rothschild group, Waitrose and the Hindujas are looking beyond their initial forays into the Indian farm sector. They are now also exploring opportunities in agri services and infrastructure and they are planning on doing it alone.

The Hinduja group is said to be finalising the details for its agri supply chain logistics business in India. The Rothschilds are looking beyond the joint venture with Bharti and are looking at investing in and establishing food parks across various states in India.

Minister of state for food processing Subodh Kant Sahai, who met Sir Steward Hampson of Waitrose, a Britain-based retail chain, and Sir Evelyn De Rothschild during his recent visit to the UK, said that Sir Rothschild was interested in making further investment in agri infrastructure.

The prospective investment targets included mega food park projects, development of backward and forward linkages and a complete supply chain mechanism. The Rothschild Group has been making discreet enquiries about state-specific special economic zone (SEZ) benefits.

The Hinduja group has expressed “keen interest in exploring business opportunities” in the supply chain logistics and agri business management and details of the project are already being worked out, informed a source in the food processing ministry.

According to an industry analyst, the retail players and investors are now hoping to fill in the larger spaces and delivery gaps in the Indian model.

Retail chains like Waitrose — which is supplying exclusively to Raheja’s hypermarket format retail chain HyperCity — are thinking of ways to expand direct sourcing from India.

Others, such as Tesco, who are said to be negotiating with a couple of Indian business houses for their Indian retail venture, are keen to invest in agricultural services and infrastructure.

Their UK-based Indian vendors — East End Foods, KTC (Edibles) — are also bullish on India and hope to set up food processing facilities in the country.

East End Foods is e94m ethnic food importer and producer that supplies to UK stores of Marks & Spencer, Tesco, Waitrose, Morrison’s/Safeway, Somerfield, Kwik Save, Makro and Aldi. KTC (Edibles) is one of the UK’s largest manufacturer and distributor of edible fats and oils.

News: India Inc to pay Rs 1,750 cr extra interest

(BS 27/07/2006) Mumbai - India Inc's interest burden is set to go up by about Rs 1,750 crore in this financial year following the two-stage 50 basis point increase in the Reserve Bank of India's reverse repo hike in June and July. One basis point in one hundredth of a percentage point.

This is assuming that commercial banks will hike their lending rates by an identical margin to protect the spread between their cost of funds and earnings on loans. If the banks raise their lending rates by a higher margin, corporate India will end up taking a bigger hit.

Data collected from Capitaline Plus, a corporate database provider, show that India Inc has borrowings of over Rs 400,000 crore in the form of secured and unsecured loans on its books.

Excluding the foreign currency loans of Rs 53,000 crore, domestic borrowings are to the tune of Rs 3,47,000 crore. A 50 basis point rise in the interest cost will translate into close to Rs 1,750 crore as additional interest burden.

The impact of the rising rates is already visible. The interest burden of 571 companies that have so far declared their first-quarter results, has increased by 26 per cent.

These companies had paid Rs 708 crore more interest to Rs 3,479 crore during the April-June quarter against Rs 2,771 crore paid in corresponding quarter of the previous year.

As a percentage of net profit, however, interest cost has not gone up as these companies have put up a better show. Interest cost accounted for 15.6 per cent aggregate net profit in the June 2006 quarter, compared with 16.46 per cent in the June 2005.

These 571 firms have posted a 32 per cent rise in aggregate net profit to Rs 22,287 crore against Rs 16,831 crore in the previous year.

During 2005-06, the interest burden of 3,019 companies increased by 4.81 per cent to Rs 29,771 crore (Rs 28,404 crore). Interest cost accounted for 23.5 per cent of the net profit of these companies in 2005-06 against 25.9 per cent in 2004-05. These 3,019 firms had posted Rs 1, 26,943 crore net profit in 2005-06 against Rs 1, 09,861 crore in the previous year.

The total borrowings of corporate India consist of short-term working capital loans, secured project loans, institutional loans, debentures and fixed deposits.

With the rates rising, along with bank loans, the cost of other financial instruments will also go up. Firms will also have to pay more for new loans.

Private sector petrochemical giant Reliance Industries' borrowing was to the tune of Rs 21,866 crore in March 2006. Pubic sector companies like Indian Oil Corporation, NTPC and ONGC have substantial borrowings on their balance sheets.

The rates started going up from the last quarter of financial year 2004-05 with the Reserve Bank of India (RBI) hiking its reverse repo rate by 25 basis points to 4.75 per cent in the last week of October 2004. That was the first of a series of six rate hikes.

In 2005-06, the RBI policy rate moved up by 75 basis points to 5.5 per cent through three hikes in April and October 2005 and January this year. Since then, there have been two hikes of 25 basis points each on June 8 and July 25, taking the reverse repo rate to 6 per cent.

Column: New vistas in micro finance in India

(BS 27/07/2006) New Delhi - Finally, there seems to be a will to take a re-look at financial services for the poor. Much lobbying with the government and the RBI by those who work with financial services for the poor resulted in the government announcing on June 26 that it had constituted a committee under the chairmanship of Dr C Rangarajan, chairman of the Economic Advisory Council to the Prime Minister, to prepare a strategy of “Financial Inclusion”. The ten-member committee is expected to submit its report by November 30.

The other members of the committee are Mr Vinod Rai, special secretary, ministry of finance; Dr (Ms) Rohini Nayyar, adviser, rural development; Mr M B N Rao, chairman and managing director, Canara Bank; Mr Yogesh Agarwal, managing director, State Bank of Patiala; Prof. Mahinder Dev, director, Centre for Economic and Social Studies, Hyderabad; Mr Vijay Mahajan, CEO, BASIX; Mr R Gopalkrishnan, executive director, TATA Sons; Mr A P Fernandes, director, MYRADA; and Dr Y S P Thorat, chairman, NABARD.

The terms of reference of the committee include:

i) to study the pattern of exclusion from access to financial services disaggregated by region, gender and occupational structure;

ii) to identify the barriers confronted by vulnerable groups in accessing credit and financial services, including supply-demand and institutional constraints;

iii) to review the international experience in implementing policies for financial inclusion and examine their relevance/applicability to India;

iv) to suggest (a) strategy to extend financial services to small and marginal farmers and other vulnerable groups, including measures to streamline and simplify procedures, reduce transaction costs and make the operations transparent, (b) measures including institutional changes to be undertaken by the financial sector to implement the proposed strategy of financial inclusion, and (c) a monitoring mechanism to assess the quality and quantum of financial inclusion including indicators for assessing progress.

While the emergence of a macro picture and the committee’s recommendations are essential in effecting policy level changes, what is heartening is that in recent years stimuli, often external to the government, have brought about sweeping changes in how the mainstream financial sector is viewing financial services to the poor.

As I have mentioned in several of these columns earlier, the nature of organisations which are being set up to cater essentially to the poor, the kind of people who are running them, and those that are funding them, are undergoing a qualitative change. Examples are quite a few of new micro finance organisations being set up by professionals who are venturing out on their own, having worked with banks or large micro finance organisations earlier. Those that come to mind are Sonata in Allahabad, set up by Anup Singh and Rakesh Dubey, ex-Cashpor; Ujjivan, Bangalore, set up by ex-Citibanker Samit Ghosh; Swadhar FinAccess in Mumbai, set up by ex banker Veena Mankar; and Jeevika in Jabalpur, set up by Ashish Gupta, ex-BASIX.

Instead of talking in the abstract, it may be worthwhile to share with readers my experience with one such company I have had the pleasure of watching closely as a member, first of its advisory council, and now after registration as a company, as a member of the board. “Arohan” was set up last year with 85 per cent funding from venture fund Bellwether, 7 per cent from renowned columnist Swaminathan A Aiyer, and 7 per cent from Shubhankar Sengupta, who is also the CEO.

The vision was to be based out of Kolkata and was to operate initially within a 50-60 km radius of the city, which constitutes 40 per cent of West Bengal’s population. Subsequently, it would cover other parts of West Bengal and eventually spread to other states in eastern and north-eastern India. In five years, Arohan aims at a portfolio size of Rs 43 crore and generate profits of Rs 2.8 crore, reaching out to 86,000 poor women across 30 branches with a staff strength of 195. It would break even in its third full year of operations.

Arohan wished to commence its lending operations in 2006-07 with five branches in and around Kolkata, i.e. Beleghata, Howrah, Barrackpur, Sreerampur, and Tollygunge. In the first phase, three branches would commence lending in April and another two from May. The plan was to lend Rs 4.5 crore in 2006-07 to 9,000 customers and end the year with a gross loan outstanding of Rs 2.7 crore.

At the end of the first quarter, Arohan had already opened four branches out of the five planned for the first year. In July the fifth branch too has started operations and started lending, and Arohan expects to end July with disbursements of Rs 100 lakh. The fact that bankers too are impressed with Arohan’s sense of purpose is evident from the fact that HDFC, ICICI and ABN Amro have sanctioned or are in the final stages of sanctioning loans.

Arohan’s entire operations are computerised with a specialised MF software package, developed for its use and all branch heads and field officers are trained in order to keep all accounts online. Enthused by the progress, Arohan is now planning to go beyond its five branches for the year and may open a few more.

The fact that the demand for MF services is huge is no longer in question. What is now getting established is that the right professionals, and their orientation can make lending to the poor efficient and sustainable. By Keya Sarkar

News: Anil unleashes asset recast firm

(DNA 27/07/2006) Mumbai - In its quest to build a financial powerhouse, Anil Ambani’s Reliance ADA Group demonstrated its interest in the nascent asset reconstruction sector when it snapped Rajendra Kakker from Asset Reconstruction Company (ARCIL) to head its newly formed Reliance Asset Reconstruction Company.

Reliance Capital is the non-banking finance arm of the Reliance ADAG.

It is floating an asset reconstruction company - also called “vulture” firms - which will buy stressed assets from the system, and nurse them back to health.

Rajendra Kakker, former managing director and CEO of Asset Reconstruction Company (India) Ltd (Arcil), will head the venture and has been appointed as president. Reliance Capital will team up with Corporation Bank, Indian Bank, and General Insurance Corporation for the purpose. Reliance Capital will hold a 49% stake in the company, while the other three partners will hold 15% apiece.

Reliance Capital’s new vehicle is likely to acquire stressed assets at a steeper discount, as it plans to pay cash upfront.

News: Seed funds sprout as VCs prove big in India

(DNA 27/07/2006) Mumbai - India is still fashionable for US venture capitalists. So says Promod Haque, managing partner of US-based Norwest Ventures.

“There is $20 billion being raised every quarter by VCs in the US. And a part of this is making its way into India,” he said.

But the number of deals being closed is a tad too low for the kind of attention the country has been generating. This is where local seed funds have come in, filling the gap between ‘friends and family’ funding (in the range of Rs 40-50 lakh) and foreign venture capital funding.

“Venture funds from abroad are facing a problem of sorts because their fund sizes are too big, and because there are not too many Indian start-ups that can absorb the kind of money these funds are willing to invest,” said Arun Natarajan, founder and CEO of Venture Intelligence, a research firm focused on venture capital and private equity funds.

“Venture funds from abroad typically like to deploy between $5 million and $10 million in a company, which is why there are too few deals,” added Natarajan.

Bangalore-based Nadathur Holding and Pune-based Indiaco are among the seed funds that sprung up about two years ago. Meanwhile, among those that have made their presence felt in the past one year are names like the Mumbai-based Seed Fund, and Bangalore-based Erasmic Ventures and Mentor Partners.

For instance, Seed Fund is raising a corpus of $10 million and has decided to invest less than $1 million in companies they are funding. “We are going to fund early stage companies in the technology, internet and mobile telephony, which require less money for large play,” said Pravin Gandhi, general partner of Seed Fund.

The advent of these local angel funds is not to say that early stage funding of Indian companies hasn’t caught the imagination of all and sundry in the US.

“You hear about funds getting created in the US for India that have never made an investment before. That’s how stupid it gets sometimes. It is a bit of herd mentality. Everyone thinks it’s a good idea to do it,” said Haque.

But a problem faced by funds like his and those like Kleiner Perkins Caufield & Buyers, Sequoia Capital and Battery Ventures is that their minimum investment sizes are too big for an Indian start-up.

Will they graduate to becoming private equity funds? They are not saying.

News: Morgan Stanley has $1 billion for Indian realty

(DNA 27/07/2006) New Delhi - Morgan Stanley, the world’s biggest securities firm, said its property fund will invest as much as $1 billion in Indian real estate in the next five years, seeking to tap demand for homes in Asia’s fourth-largest economy.

Of that target, about $140 million has been invested this year in three projects — two real-estate companies based in Bangalore and New Delhi and serviced apartments in the western city of Pune, said Zain Fancy, head of Morgan Stanley Real Estate in the Asia-Pacific region.

“India is one of the most attractive markets,” Fancy said.

Relative to wages, India is among the affordable real-estate markets, which offers scope for growth, he said.

Rising demand for homes, offices and shopping malls is attracting banks such as New York-based Morgan Stanley and Goldman Sachs Group Inc into India’s real estate market, as the government eases rules on investment from overseas.

Increasing wages in India is boosting demand for more modern homes, especially in smaller cities.

Commercial and residential construction in India will surge to $50 billion by 2010 from $12 billion in 2005, a Merrill Lynch & Co report said last year.

Goldman said in March it would focus on real estate investments as it seeks to expand in India, after ending a 10-year alliance with billionaire Uday Kotak.

Morgan Stanley said this month that it invested about Rs 300 in Alpha G:Corp Development Pte Ltd, which has real estate projects in Gurgaon, Amritsar, Jaipur, Ahmedabad and other cities.

News: How Dr Reddy's became a $1-b company

(BL 27/07/2006) Hyderabad - A man who earned just Rs 500 a month 30 years ago went on to build a pharma empire and now owns a third of the company's market cap of Rs 10,000 crore. Dr Reddy's Laboratories, the company he started in 1984, is now a $1-billion company.

Recounting his experiences in setting up Dr Reddy's Laboratories and leading it on the road to becoming a pharma major, Dr K. Anji Reddy said that it was not a cakewalk.

He was addressing ICEM-2006, a two-day conference on entrepreneurship and management, at the University of Hyderabad on Wednesday.

"The atmosphere was completely different. It took us nine months in getting Rs 50 lakh to kick-start our operations. Now it is a different story; there are a number of venture capital funds chasing a few entrepreneurs," he said.

"I was getting Rs 500 a month at IDPL. After some time, I asked myself why I should work for such a small sum, and quit the job and started experimenting on a few entrepreneurial initiatives through partnerships. Then I quit that too and started the company in 1984. A year later it registered Rs 1-crore turnover, kicking off innovative drug manufacturing methods and setting precedents."

Taking a dig at those who copied some of Dr Reddy's works in the beginning, he said that copying would not lead anyone anywhere. "We thought we should move onto the next drug before someone started imitating."

Citing the successes of the company in the US market and other foreign markets, he said that it had occurred to him in the early 90s that the party might be over for Indian pharma companies as liberalisation unfolded, enforcing changes in the patent laws.

"No one was bothered about the future. They were enjoying the feast. They thought it would last forever," he said, and cited Dr Reddy's initiatives in pharma research.

The $1-b mark

Dr Reddy said that the company had crossed the $500-million mark last year. Two big-ticket acquisitions in one year added $300 million to the sales revenues.

"Our own sales would increase by $200 million, making us a $1-billion company this year. It took us 22 years to attain the $500-million mark. But in just one year, we achieved the other half."

He added that the path to success was ridden with risks. "One needs to aim for one's full potential."

K. Ramakrishnan, Chairman and Managing Director of Andhra Bank, said that the key differentiator to becoming a good entrepreneur was creative spirit. One should not have fear of failure and resource myopia.

News: AI, Indian outfits may also be merged

(BL 27/07/2006) New Delhi - The Government is likely to consider the merger of the two low-cost airline subsidiaries of Air India and Indian.

Official sources told Business Line that after the merger of Indian and Air India , the process of having one low-cost State-owned airline to address market needs would be considered.

"At present, there are two State-owned low-cost airlines - Alliance Air (AA) and Air India Express, which are subsidiaries of Indian and Air India. With the parents merger to be completed within the year, we could look at the merger of the low-cost subsidiaries into one low-cost State-owned airline to serve the market needs," official sources said.

The process began earlier this week with a consortium led by Accenture having been given the mandate to look at various models that could be adopted post-merger of the two State-owned airlines. The Accenture-led consortium was selected last Monday as consultants to draw up a roadmap for the merger.

A clear picture on the model to be followed is likely to emerge within the next six months with the consortium mandated to submit the pre-merger report within 26 weeks, the sources said.

Currently, while AI Express offers 15-30 per cent lower fares on limited international routes that it operates in West Asia and South East Asia, AA operates flights within India. The move would be in keeping with the international trends of several global airlines including Thai Airways International launching low-cost airlines.

The move would also allow the State-owned carriers to take on competition from not only the full service airlines but also international low-cost airlines that have started services to and from India.

News: Landmark eyes Rs 500-cr turnover in 3 years

(BL 27/07/2006) Chennai - Landmark, the book and music store chain that was acquired last year by Trent Ltd, is targeting a turnover of Rs 500 crore in three years from the current Rs 100 crore, according to the company's Chief Operating Officer, Himanshu Chakrawarti.

According to Chakrawarti, there are plans to set up 20 more stores in the next three years in all the major metros and smaller towns, too.

By September this year, there will be Landmark stores in Gurgaon and Pune. In the next 12 to 18 months, the company plans to invest Rs 26 crore to set up new stores and back office systems.

Landmark currently has seven stores - three in Chennai and one each in Bangalore, Kolkata, Mumbai and Baroda.

The stores are large formats with floor plates ranging from 15,000 sq ft to 45,000 sq ft.

Besides books and music, Landmark retails stationery, magazines, gifts, toys and also has a home store. While the key drivers were books and music, other categories such as gifts and home furnishing added to the shopping experience, he said.

Landmark has over a lakh of titles across best sellers, theology, literature, management, information technology and cinema, to name a few sections.

Chakrawarti said that Landmark's strength was the backlist of books of over 20 years. While English language books will continue as the core product, some efforts are being made to introduce Indian language books to the stores. In Baroda, for instance, six racks have been set aside for Gujarati books.

He said that the online store "landmarkonthenet.com,'' which is on the Sify platform is also being ramped up.

Last August, Trent Ltd, a part of the Tata Group, acquired 76 per cent in the privately owned book and music retailer, Landmark, and its subsidiary firms for a consideration of Rs 103.6 crore. (Trent Ltd operates the Westside chain and the Star India Bazaar, a hypermarket.)

News: Indian cos conclude 24 outbound acquisitions

(BL 27/07/2006) New Delhi - Indian entrepreneurs continued their overseas shopping spree with homegrown firms concluding 24 outbound acquisitions out of a total of 58 during May-June period, industry chamber Assocham said.

The mergers and acquisitions were mostly in engineering, IT-ITES, pharmaceuticals and energy sectors. There were three outbound deals in each of these areas in the two-month period, the chamber said quoting its Eco Pulse study.

Corporates such as Wipro, Tata Motors, Nicholas Piramal, Larsen & Tubro, Raymond's and Lupin Laboratories led the acquisition race overseas, it said.

In recent acquisitions, NIIT Technologies Ltd (NTL) took over UK-based insurance solutions provider ROOM Solutions Ltd for about $25 million in an all-cash deal, Godrej Beverages and Foods acquired Nutrine Confectionery company for about Rs 250 crore and Lupin Ltd purchased 51 per cent stake in Belgium's Artifex Finance CVA, the report said.

On the domestic front, cement, IT&ITES, telecom, pharmaceutical and retail sector witnessed maximum number of deals.

Energy sector accounted for eight deals, followed by engineering and technology (IT & ITES) sector with six deals each.

Pharmaceuticals sector struck out five deals during this period and Telecom and FMCG sector witnessed four deals each, it said.

News: Mall or nothing for India's elites

(BBC 27/07/2006) Calcutta - The City Centre mall was opened more than a year ago in eastern Calcutta. With its shops, restaurants, cafes and multiplexes, it has become something of a landmark in the city.

Glass facades of fast food outlets and designer shops beckon you to share what the mall advertises as a world-class experience in shopping.

During the weekends, families flock to the mall and spend the whole day there. For Mittali Srivastava, a housewife with two children, it is a sign of progress and development. "The service is good, it is convenient and definitely the future India," she says. "I can bring my whole family with me. "I can shop, take my kids to see a movie, let them play in the leisure zone, have lunch with friends. And I can do it all under one roof.

Sipping an espresso coffee, young, trendy businessman Moloy Ghosh just likes to hang out with his friends at the mall. "The choice of designer labels is great and there's even a cyber cafe," he says. "Globalisation has arrived. India is catching up with the rest of world."

Western habits

Ms Srivastava and Mr Ghosh are happy with their mall experience and would like to see the huge, unorganised retail sector in India - which includes hundreds of thousands of pavement sellers - brought under a more organised umbrella.

But Padmaja Krishnan, a fashion designer, believes malls will destroy the Indian way of doing business. She says she prefers going to her local fruit and vegetable sellers on the pavement near her home. Nothing is marked or labelled, everything is fresh and the best bit is the bargaining. "With the malls, we're seeing fixed prices and the standardisation and westernisation of products," she says. "We'll all soon be wearing denim jeans and white T-shirts."

Curse or blessing?

The debate over the future of India's retail sector has arisen because people are questioning whether the public land used for these malls, the ultimate symbol of consumerism, is being put to good use. Critics argue they have done nothing to change many people's lives.

In fact, because the malls are offering attractive prices, they are squeezing out the small traders who can no longer afford to compete - thereby sharpening the divide between the rich and poor in India.

At the moment, there are more than 100 malls in India. By 2007 there will be 300, according to the International Council of Shopping Centres. Economists say the boom is being driven by demand, the liberalisation in trade and because people in India have more spending power.

They say the march of market forces is inevitable, and as in the US and Europe, many small traders will lose their livelihood if the government does not control the situation.

Column: Retail boom - India is a hot bet

(II 26/07/2006) Mumbai - India is witnessing a period of boom in retail trade, mainly on account of a gradual increase in the disposable incomes of the middle and upper-middle class households. The country offers vast potential in retail business.

India tops annual list of most attractive countries for international retail expansion, as increasingly saturated Chinese market continues to decline, according to A.T. Kearney's Global Retail Development Index 2006.

"The Indian retail market is gradually but surely opening up, while China's market becomes increasingly saturated," said Mike Moriarty, vice president in A.T. Kearney's Consumer Industries and Retail Practice. "India is at the peak of attractiveness for retailers right now, with a $350 billion retail market expected to grow 13 percent this year," Moriarty said. "India's top five retailers together still account for less than two percent of the modern retail market."

By the end of 2010, the organized retail business in India is expected to emerge as a $300 billion industry. In the past five years, the cumulative growth in the sector has been 133%, said a study by McKinsey and the Confederation of Indian Industry (CII).

But, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) has predicted that the retail sector in India may grow at the rate of 7% by 2010-11 to enlarge its market share to $280 billion from its present estimated level of $200 billion. An analysis carried out by ASSOCHAM on Future of Retail Industry in India pointed out that the size of organized retail alone would almost triple in the next 4-5 years and touch a business of $17 billion as against its current size of approximately $6 billion.

Meanwhile a study by McKinsey points out that India's market for consumer goods could reach a whopping $400 billion by 2010 - making it one of the five largest in the world. The Economist Intelligence Unit (EIU) country briefing on India, 2005, estimates the retail market in India will grow from $394 billion in 2005 to $608.9 billion in 2009. In fact, KPMG finds that the organized retail sector in India is expected to grow at a higher rate than GDP growth in the next five years, driven by changing lifestyles, strong income growth and favorable demographic patterns. According to EIU, India currently has more than five million retails outlets, out of which 96 per cent are smaller than 500 sq. ft. But this scenario is changing fast. The structure of retailing is developing rapidly with malls becoming increasingly common in large cities, and development plans being projected at 150 new shopping malls by 2008.

The traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike introducing the Indian consumer to a shopping experience like never before. There are about 12million retail outlets in India, of which a vast majority is small mom & pop outlets. Now, the entire concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as evident from sprawling shopping centers, multi-storied malls and huge complexes offering shopping, entertainment and food all under one roof.

Growth drivers

• Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes.
• Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogg, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers.
• Increased per capita spending.
• Advent of dual income families also help in the growth of retail sector.
• Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.
• Consumer preference for shopping in new environs
• The internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets.
• About 47% of India's population is under the age of 20; and this will increase to 55% by 2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels, and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country.
• Availability of quality real estate and mall management practices
• Foreign companies' first attraction to India is the billion-plus population.

Organized sector has huge scope

The retail industry in the country is broadly divided into the organized and unorganized sectors. The total market in 2005 stood at $225 billion, accounting for about 11% of the country's gross domestic product (GDP). Of this total market, the organized sector accounted for $ 8 billion of the total revenues. That represents only 3.5% share of this market. According to AT Kearney, the organized retailing industry is expected to cross $23 billion revenue mark by 2010.

The organized retail business in India is very small. This is despite the fact that India is one of the biggest markets. Retail business contributes around 10-11 per cent of GDP. India also has the largest number of retailers, about 12 million, though they are mostly small. Most of the organized retailing in the country has just started recently, and has been concentrated mainly in the metro cities. Organized retailing in India has a huge scope because of the vast market and the growing consciousness of the consumer about product quality and services.

ASSOCHAM president, Anil K Agarwal says:"The organized sector retailing is all set to grow at much faster speed than unorganized sector and the higher growth speed will alone be responsible for its higher market share which has been projected for $17 billion by 2010-11. Cities and metropolis in which retailing will show booming prospects include Mumbai, Delhi, Chennai, Kolkata, Bangalore and Kanpur, said Agarwal adding that the popular mode adopted for building shopping malls in these cities will be based on build, operate, lease and sell basis"

The organized retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles, strong income growth and favorable demographic patterns, a KPMG report titled 'Consumer Markets in India: the next big thing' said. "The structure of retailing is developing rapidly with shopping malls becoming increasingly common in large cities, and development plans being projected at 150 new shopping malls by 2008," says the report, adding that the annual growth of department stores has been estimated at 24 per cent, which is faster than overall retail; and supermarkets have taken an increased share of general food and grocery trade over the last two decades.

Indian Retail Forum chairman Krish Iyer says, ''The organized retail industry in India is just 3 percent. This just highlight huge opportunity in the sector, which is poised to grow to $25 billion by 2010.'' However, huge investment is required to realize the potential due to which FDI in retail needs to be seriously looked into, he added. By 2010, Indian organized retail is expected to have a 9 per cent share from the present 3 per cent of the total retail industry.

A study conducted by Fitch, expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the growth in development of the retail-specific properties and malls. Fitch expects organized retail to capture 15%-20% market share by 2010.

A McKinsey report on India says organized retailing would increase the efficiency and productivity of entire gamut of economic activities, and would help in achieving higher GDP growth. The sector is the second largest employer after agriculture, although it is highly fragmented and predominantly consists of small independent, owner - managed shops.

With the organized retail segment growing at the rate of 25-30 per cent per annum, revenues from the sector are expected to triple from the current US$ 7.7 billion to US$ 24 billion by 2010, says AT Kearney.

Various agencies have made different estimates of the size of organized market in 2010. The one thing in common amongst these estimates is that the Indian organized retailing industry will be very big in 2010. The status of the industry will depend a lot on external factors like Government regulations and real estate prices, besides activities of the retailers and demands of the customers.

Indian Commerce Minister Kamal Nath says that big Indian retailers are as much a threat to mom-and-pop stores as Wal-Mart and Tesco. The Commerce Ministry is looking at bringing out a policy on retail. Commerce Minister Kamal Nath says that its not just foreign retailers that could displace mom and pop stores. Big Indian retailers could have the same effect.

Investment potential

Indian retail sector will see huge investments in the next 4-5 years, say market observers. Newer chains will come in and the present players will increase their penetration. By 2005, the established players would have reached saturation levels in metropolitans and will shift the focus of their investments to other Class 1 cities. By 2010, there will be little difference between the metros and the next 20 cities (the present million plus cities).

However, the investments would largely be private investments, or at best secondary markets. This will happen because expansion will happen through investments by business houses that will not sell their stakes. If any purely retailing company exists, it will be an exception. However, if the ban on foreign players holding a controlling stake is lifted, the sector could see drastic movements. The entry of foreign players will undoubtedly result in buying and selling and some businesses might withdraw their money in anticipation.

This year's decision to allow foreign direct investment of up to 51% in single-brand retailers has triggered market-entry announcements from retailers including Gap, Zara, UCB and Timex, among others. Wal-Mart has announced it will open an Indian office for market research, and Tesco has entered the market through a partnership with Home Care Retail Mart Pvt. Ltd., launching a hypermarket format called Magnet.

The world's largest retailer Wal-Mart has huge plans for India. It is moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India.

Leading global retailer Tesco is keen to enter the Indian retailing industry. The Chicago-based Sara Lee Corporation is planning to enter the Indian apparel market. Dior, the well known watch brand from the Louis Vuitton Moet Hennessy (LVMH) group, is planning to include India among its top 12 world markets. The Rosy Blue Group, the world's largest diamond manufacturer, is planning to invest in India.

New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi. Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months.

Domestic giants to retail biz

More and more corporate houses including large real estate companies are coming into the retail business, directly or indirectly, in the form of mall and shopping center builders and managers. New formats like super markets and large discount and department stores have started influencing the traditional looks of bookstores, furnishing stores and chemist shops.

As the corporates - the Piramals, the Tatas, the Rahejas, ITC, HLL, S.Kumar's, RPG Enterprises, and mega retailers- Crosswords, Shopper's Stop, and Pantaloons race to revolutionize the retailing sector, retail as an industry in India is coming alive. Over the last five years, these groups have set up a number of chain stores. For instance, West Side by Tatas, Foodworld by RPG, Shoppers' Stop (Rahejas), and so on.

Not to be outdone, local retail conglomerates are rising to the challenge and racing to capture the best locations. Indian heavyweight like the Reliance group is planning to do a Wal-Mart in India.

Reliance Industries has announced a $3.4 billion investment to develop about 1,575 stores between December 2006 and March 2007.

Conclusion

Currently, there is no policy for this sector. This comes at a time when companies like Reliance Industries and Bharti are drawing up big retail plans. For foreign retailers, the ministry is looking at a model, which would ensure that there is little displacement and adequate investments. A few months ago, the government opened up single brand retail. Commerce Minister Kamal Nath says that while proposals have been received from high end brands, none have been cleared so far. Nath says that FDI in single brand retail would ensure that sourcing and manufacturing would increase substantially. Nath says that he expects investments to the tune of $112 million. India hasn't offered opening up retail in its initial services offer to the WTO. But Nath says that it could be used as a bargaining chip.

"There will be more and more players entering the retail sector - we will see the global players joining up with local big business houses to start offering their services. This will happen at two levels - high-end exclusive stores and mass value-for-money stores. In fact, in the coming 5-10 years, we will witness a `retail revolution' in India at a scale which would be bigger than many developed countries put together," says Anang Dev Jena, Research Director at Synovate.

India is a rising star at the beginning of a growth cycle, with consumer spending increasing at a strong rate, and people seeking and demanding a better quality of life. Organized retailing is witnessing a wave of players entering the industry. These players are experimenting with various retail formats. The entry of foreign players will not only affect ownership, but also change the basics of business. Huge investments in stores and their supply chains can transform the entire scenario.

India's vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come. Investors would have to watch for these developments.

By Dr. Uday Lal Pai

News: India's earnings from foreign tourism double in three years

(PTI 26/07/2006) New Delhi - Reflective of India's growing popularity as a tourist destination, the country's earnings from foreign tourists has almost doubled between 2002 and 2005.

The foreign exchange earnings from inbound tourism, estimated at $2923 million (approx 13153.5 crore) in 2002 rose to $5731 million (approx 25789.5 crore) in 2005, showing a growth of 96 per cent in three years time, Union Tourism and Culture Minister Ambika Soni told Rajya Sabha in reply to a question.

Soni said her Ministry has taken several initiatives for promoting arrivals of foreign tourists and increasing earnings from tourism that include the 'Incredible India' campaign, creation of world class collaterals, centralised electronic media campaign, focusing on growth of hotel infrastructure and direct cooperative marketing with airlines, tour operators and wholesalers overseas.

Orissa: The Centre has identified the Bhubaneshwar-Dhauli-Puri-Konark circuit in Orissa for development as a major tourist draw.

Soni said the government has sanctioned Rs 720.09 lakh during 2005-06 for integrated development of the circuit.

In reply to another question, the minister said MoUs have been signed between the Orissa government and three hotel companies for setting up star hotels in the state.

Star hotels are proposed to be set up in places like Bhubaneshwar, Puri, Konark, Paradeep, Duburi, Jharsuguda, Satapda and Barakul within three years.

Soni also told the House that her ministry had prepared a 20-year perspective tourism plan for Orissa, which has been sent to the state government for their guidance.

News: India says free trade talks with ASEAN still on

(RTR 26/07/2006) New Delhi - Commerce and Industry Ministry said on Wednesday free trade talks with the Association of Southeast Asian Nations were still on and officials from both sides were likely to submit fresh proposals soon.

A spokeswoman for Malaysia's trade minister said on Tuesday that talks had been suspended because of India's reluctance to open its markets.

"We are surprised at the comments. The talks are still on and officials will present specific proposals within 15 days," a spokeswoman for the Commerce and Industry Ministry said.

The Malaysian trade minister's spokeswoman said India had demanded that some 850 goods which it imports from Southeast Asia be excluded from the pact. She said the goods on the exclusion list account for some 30 percent of Southeast Asia's exports to India.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Myanmar, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

India and ASEAN have been negotiating to get a trade agreement in place by the start of 2007 and Indian newspaper The Business Standard reported on Wednesday talks have been stuck on the issue of duty cuts by India on palm oil, tea and pepper.

It said India had made a revised offer to break the deadlock and that a new formula from India was likely to be submitted at an India-ASEAN trade ministers meeting on Aug. 23-24.

India has been working on free trade agreements with China, Japan and South Korea as part of a concerted effort to strengthen its regional ties.

News: Deutsche Bank launches credit cards in India

(BS 26/07/2006) Mumbai - Deutsche Bank has launched a full suite of credit cards in India.

According to an official release issued today, the features of Deutsche Bank’s suite of products consisting of Classic, Gold, Platinum and Corporate Credit Cards include personalisation with a wide range of images; saving with lifestyle specific savings plans and control finances and manage savings with flexible billing.

Cricketing legend Sunil Gavaskar, who is Deutsche Bank’s product ambassador in India, was presented the Bank’s first Platinum credit card by Colin Grassie, CEO - Asia-Pacific for Deutsche Bank.

"An important element of our growth strategy in Asia is our strategic focus on the further development of our successful business in India, both in wholesale and retail banking. Today’s Credit Card launch in India is a first for Deutsche Bank in Asia and an important milestone for our business....the bank may also consider the launch of premium credit cards in China through its partnership with Hua Xia Bank," Grassie said.

Gunit Chadha, MD & CEO – India for Deutsche Bank said:” In its 25 years of presence in India, Deutsche Bank has built strong customer relationships. The launch of credit cards will play a significant role in our strategic focus of being a leading provider of end-to-end financial services for the retail customer in India.”

Shameek Bhargava, head of Cards – Asia-Pacific for Deutsche Bank said:” Our credit cards offering has been designed in line with Deutsche Bank’s customer-centric approach. We have introduced several unique features that enhance customisation and convenience. We believe that this will bring back the customer involvement in a category, which has become increasingly commoditised.”

Deutsche Bank’s product ambassadors in India - the legendary cricketer Sunil Gavaskar and tennis icon Sania Mirza – will promote Deutsche Bank credit cards in India.

News: Philips looking to make medical equipment in India

(TNN 26/07/2006) Kolkata - Philips Electronics is exploring opportunities to manufacture some of its medical equipment brands in India.

Philips has undertaken a feasibility study and is exploring several options to kick-start the manufacturing process of certain key products which have reached the critical mass in Indian market.

Philips has short-listed a portfolio of cash cow products such as ultrasound, ECG, patient monitors and X-Ray machines for production in India. “We may also look at manufacturing some of the hi-end patented products which are in the global pipeline,” said Anjan Bose, MD, medical systems, Philips Electronics India.

Philips is looking at various models of manufacturing the products. “We may set-up a greenfield venture or may even start with an OEM approach. We soon hope to arrive at a final decision on the proposed model,” Mr Bose said.

Philips globally makes bulk of its medical equipment at Netherlands, Germany, Finland, Israel, China and the US. The proposed facility in India will act as the hub for the Indian sub-continent. Philips saw phenomenal growth in its medical equipment business in India, post global re-positioning of the brand to ‘Sense and Simplicity’.

“The new positioning is much more than just our brand promise. Our product portfolio already includes many examples of how we are making simplicity the goal of our technology,” said Mr Bose.

The medical system division in India, which grew by 41% last year, has recorded growth of about 46% in the first half of the present fiscal (January-June). “We have about 50% market share in the patient monitoring system and market leadership in certain other segments like Cath Labs, CT Scan and hi-end MRI machines,” Mr Bose said.

The Indian subsidiary accounts for about 8-10% of Philips’ total medical equipment business in Asia. The division also contributes about 20% of Philips over-all turnover in India, making it the company’s second largest contributor to sales after consumer electronics.

The size of the Indian medical equipment and accessories market has been estimated at Rs 2,000 crore, growing at 12-15%. The prominent players in the market are Philips, GE, Siemens and Toshiba.

News: Mumbai metro gets Finmin’s preliminary clearance

(TNN 26/07/2006) New Delhi - The Mumbai Metro Rail project, promoted by Reliance Energy Ltd (REL) and the Mumbai Metropolitan Region Development Authority, has got a preliminary clearance from the finance ministry.

The finance ministry is learnt to have found the project eligible for viability gap funding. However, for a formal decision, the finance ministry has today asked the urban development ministry for its comments on the concession agreement. Sources in Urban Development Ministry — the nodal authority for the project — have confirmed that it is reviewing the project and examining the cost structure.

REL maintains that the Mumbai project costs are not comparable with those of the Delhi Metro for several reasons: the Mumbai project is quite small covering about 12 km whereas the Delhi Metro runs to 65 km; the Delhi Metro was built with soft loans from the Japan Bank for International Co-operation while the Mumbai Metro has no such soft funding options, the Delhi Metro had the full backing of the government and the railways, while the Mumbai Metro lacks these.

A company spokesman also said that the Delhi Metro enjoyed tax benefits not available to the Mumbai project. Allowing for these factors, he maintained, the Mumbai project’s costs are comparable with those of Delhi Metro.

News: Star hotels reap the benefits of Indian room shortage

(TNN 26/07/2006) New Delhi - India’s booming hospitality industry has kept pace with the West as far as increase in the average room rate (ARR) is concerned.

ARR of hotels in India is increasing at the rate of over 20% — almost equal to that of hotels in developed countries such as Europe and the US.

The growth in ARRs is a direct fallout of the shortage of five-star accommodation in India and high demand generated by the booming economy. However, the figure fluctuates largely when ARRs for various cities is taken separately. For instance, in Bangalore ARR of hotels is increasing at a rate of 50% annually due to a high demand-supply mismatch.

Same is the case for Gurgoan. Trident Hilton Hotel, the only five-star hotel in Gurgoan, witnessed an increase of 30% in its ARR. “Currently, there are 90,000 to 1,00,000 hotel rooms (three- to five-star category) in India. Another 1,50,000 rooms need to be added in the next five years considering the rate of growth in demand.

The room rates are hardening but will stabilise in the next three years as the supply increases. Hotels in India now meet international standards therefore the ARR is increasing and realistic prices are being charged.” a spokesperson of The Leela Palaces and Resorts said.

Most of the five-star hotels are witnessing an average room occupancy rate of over 80%, which is good considering the fact that July is a lean month for the tourism industry in India.

“There is a shortage of five-star accommodation in India especially in the key cities. Business travellers who do not book rooms in advance often have to opt for a higher category room which costs approximately $40 more than an economy class room.

The average room rate in our hotel in the month of July is $160 and is expected to rise in the subsequent months,” said Meena Bhatia, vice-president, operations and marketing, Le Meridien, Delhi. Post 9/11, room rates had hit rock bottom. A $200 room was available for $50.

However, with the resurgence in the economy, increasing purchasing power and growth in aviation, both room occupancy rate and ARR are increasing. The shortage of accommodation has stimulated investments in the hotel industry.

The Leela is planning a capacity addition of another 1,400 to 1,500 hotel rooms in the next three years by expanding its operations in Gurgoan, Udaipur, Chennai, Hyderabad and Pune.

Ansal API also has plans to set up malls with five-star hotels in various cities of north India such as Ludhiana, Jaipur, Jodhpur, Panipat, Agra and Sonepat.

News: Indian late-night shopping to be reality soon

(TNN 26/07/2006) Kolkata - Shop till you drop! Metros like Mumbai, Hyderabad, Bangalore, and Chennai may soon allow shopping malls and retail chains to operate their outlets till wee hours, say till 1 am.

Courtesy, constant lobbying by the organised retailers with state governments.

Retailers may be able to whet your shopping spirit beyond mid-night in just two-three month’s time. Those in the know said ‘the late night shopping saga’ will unfold sometime around October when festive shopping takes off.

In fact, Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu state governments are quietly trying to amend the Shop & Establishment Act in their states to facilitate this. “We have been trying to convince several state, labour and industry departments to allow 24X7 shopping for more than a year now.

It now appears that at least four state governments are all set to make the necessary changes enabling shops to remain open till 1 am over the next two-three months,” Gibson Vedamani, CEO, Retailers’ Association of India (RAI), told ET. A senior Future Group official said the flexible shopping hours will primarily target IT and ITeS professionals.

“Even if we are permitted, we will not keep all our outlets across all formats open since it will not make business sense,” the official said. The group will decide the outlets depending on the catchment area and seasonality. Corroborating, Spencer’s retail president JH Mehta said: “Retail outlets needs to extend their trading hours to cater to the working men and women.

To keep the rapid growth pace of retail, necessary changes should be made to accelerate growth.” RAI has initiated discussions with the West Bengal government, but is still awaiting for a response from them. States usually allow retail outlets to extend trading hours during festival seasons like Durga Puja and Diwali.

Apart from increasing business volume for retailers, extended trading hours will also help shoppers. “Currently, retail outlets in India see maximum footfall from 5 pm onwards till the shop closes,” said Mr Vedamani. In the US, shopping hours vary based on management considerations and customer needs.

Retail majors Wal-Mart and Meijer advertisements splash ‘Open 24/7 365-days-a-year’. Retail circles feel the idea of allowing shops to be open past midnight is likely to be music to several of the foreign players keen to enter India.

News: Tatas, Fiat team up to make cars

(BS 25/07/2006) Mumbai - Tata Motors and Fiat have scaled up their alliance that was forged last year. The two companies will now undertake joint production of passenger cars, engines and transmission systems in India.

While the memorandum of understanding to establish a 50:50 joint venture was signed today, the shareholder, licensing and other agreements are being finalised.

Both the companies will use the Ranjangaon facility of Fiat in Maharashtra. The facility, which has been lying idle for long, is expected to exceed an overall output of 100,000 cars and 250,000 engines and transmission system.

Fiat will introduce the Fiat Grande Punto and the new Fiat Sedan— its premium cars for the B and C segments — and its small diesel engines.

Both the companies agreed to study for the next 60 days industrial and commercial co-operation in Latin America.

“In particular, the study will focus on different vehicles, especially utility vehicles and pick-ups, and on exploring the opportunity of using the existing Fiat production facilities in Cordoba in Argentina. Products manufactured there would be sold in various Latin American and overseas markets under both the Fiat and Tata Motors brands,” Tata Motors said.

Ratan N Tata, chairman of the Tata group and Tata Motors, said, “This is the beginning of what promises to be a far-reaching, long term relationship between the two companies. They have complementary strengths, convergent objectives and shared values. Together, we can meaningfully address markets in India and other select geographies, combing technologies, products and human skills of both organisations.”

Analysts said the development marked a renewed attempt by Fiat to boost its position in the rapidly growing Indian car market.

On the other hand, the Tata group would have access to modern engineering to support its growth plans, which were hit last year by the collapse of MG Rover, its British partner.

News: India steps on the gas for regional trade deals

(BS 25/07/2006) New Delhi - With the collapse of the Doha round of WTO negotiations, India is likely to put its proposed regional trade agreements on the fast track.

New Delhi has made a revised offer to Asean to break the deadlock on talks for a free trade agreement. The agreement with South Korea has gathered steam.

Also in the pipeline are a comprehensive agreement on goods, investment and services with the European Union and a bilateral agreement with Japan.

Talks with Asean have been stuck on the issue of duty cuts on palm oil, tea and pepper. While Asean wants India to undertake steep duty cuts, New Delhi had proposed a regime under which import duty would be reduced only for a fixed quantity of imports every year.

Asean had rejected India's offer and had suggested pruning India's negative list to just 60 items against its offer of 854 items.

India last week agreed to consider a compromise formula to break the impasse. According to the formula, India’s negative list would be split in two — one with items where duties will never be cut, and the other containing sensitive items like palm oil, tea and pepper on which there would be no duty cuts for the first five years, followed by gradual cuts over the next 10 years.

The new formula is likely to be tabled at the India-Asean trade minister's meeting on August 23-24. Meanwhile India's Comprehensive Economic Cooperation and Partnership Agreement (CEPA) with South Korea is likely to be made operational by the second half of 2007. Both sides are working to conclude negotiations by then. The third round of talks for the CEPA concluded in New Delhi last week.

The contours of a comprehensive agreement with the EU are also expected to be finalised by the high level Inda-EU trade group ahead of the next India-EU summit in October.

News: Ambani row flares up

(BS 25/07/2006) New Delhi/Mumbai - The Reliance Anil Dhirubhai Ambani Group (R-ADAG) will soon release correspondence to prove, in its words, “the blatant violation of the June 2005 family agreement by the Reliance Industries Ltd-Mukesh Dhirubhai Ambani (MDA) group”.

In so doing, the group may take recourse to the fact that all its entities are listed on the stock market and therefore needs to make adequate disclosures.

R-ADAG has charged RIL with “systematically violating every major commitment of the family settlement”.

In response, RIL said if R-ADAG has any grievances, “it should approach the appropriate forum for resolution".

Sources close to the developments said the June 2005 agreement had an arbitration and reconciliation mechanism built in, but the matter could also be sorted out through talks.

RIL added that it had fulfilled all its obligations and commitments and would continue to do so. “The current set of issues raised by R-ADAG is an attempt to divert attention away from the shockingly petty acts of harassment of RIL employees at the Dhirubhai Ambani Knowledge City,” MDA sources said.

R-ADAG said the MDA group was desperately trying to divert attention to non-issues, and that it wanted to dishonour the June 2005 agreement on gas supply to Reliance Energy at prices agreed on and to dishonour commitment to supply gas to NTPC Ltd.

R-ADAG also said the Mukesh Ambani group was solely responsible for delaying NTPC's and Reliance Energy's large power projects. It has also accused the group of spreading misinformation on government approvals for the gas supply agreement.

In response, RIL said the "propagation of false and baseless allegations relating to RIL's intent to dishonour its commitments is clearly intended to instigate entities with whom RIL has a long history of excellent business relationship. These are malicious allegations and are denied".

News: Cairn Energy inks deal with 14 banks

(BS 25/07/2006) New Delhi - Cairn Energy Plc has signed a $1-billion agreement with 14 international banks to fund its oil field development plan in Rajasthan on Tuesday.

It also plans to mop up $1-4 billion via an initial public offering (IPO) and participate in the NELP-VI.

"We may raise anything between $1 billion to $ 4 billion through the IPO. All the money raised through will go back to the shareholders in the UK," said Bill Gammell, chief executive officer.

Gammell further added, "Depending on market conditions, we will go ahead with the IPO in October-December or January-March next year."

Of the $1-billion, around $150 million has been raised from International Finance Corporation via a nine-year loan, while the remaining $850 million have been raised from 13 other banks, which include ABN-Amro, HSBC Bank Plc and the Standard Chartered Bank among others.

The company also believes that depending on the oil prices, it will be able to repay the loans within 18 months from 2008.

News: Raheja, Unitech head for LSE to raise $1 bn

(BS 25/07/2006) Mumbai - Real estate companies have found an alternative way of raising money. Two realty firms — K Raheja and Unitech — are in the process of raising at least $1 billion from the alternative investment market (AIM) of the London Stock Exchange.

Real estate sources said the two groups would raise $500 million each from the AIM in three-four months. Sources close to the Raheja group said the company would float a special purpose vehicle (SPV) for a particular project that would get listed with the AIM in three months.

The group has appointed Enam Financial Consultants for the purpose, they added. They said the Unitech group would follow the SPV model as well.

Unitech, on its part, would be advised by J M Morgan Stanley.

“An SPV for a particular project tends to realise better prices if it is listed with an exchange, rather than what a private equity investor may offer,” explained the head of a Mumbai-based financial services company.

Sources said the primary advantage of listing with AIM was that it did not require a minimum public shareholding, prior trading record and minimum market capitalisation.

Admission documents are not pre-vetted by the exchange or by the UK Listing Authority in most circumstances.

With these advantages, AIM is fast becoming the Nasdaq for old economy companies.

The sources pointed out that raising funds from AIM through dilution of equity would also help companies overcome the liquidity problem, with the Reserve Bank of India asking banks to be more cautious in funding real estate projects.

In addition, listing with AIM would enhance the profile of companies as it would mean increase in status and credibility.

An AIM listing would also provide a range of tax benefits, including capital gains tax.

News: 'Tata investment will benefit Bangladesh'

(IANS 25/07/2006) Dhaka - Bangladesh should consider the economic benefits of the $3 billion investment proposal by India's Tata Group, instead of putting it off due to political expediency, the Asian Development Bank (ADB) has told Dhaka.

"People want to see politicians take decisions, considering the economic benefits of the country, not on political consideration," ADB Country Director Hua Du said here at a meet-the-press programme.

Not deciding on Tata's investment proposal does not make economic sense, said the Dhaka chief of ADB, which is a major international financial institution assisting Bangladesh, The Daily Star newspaper quoted her as saying.

She quoted Finance Minister M. Saifur Rahman as saying in a newspaper that the government would not take any decision before the next elections, while clarifying the government's stance about the Indian industrial giant's investment.

Hua Du said after reviewing Tata's last proposal that the ADB had found the gas price offered by the Indian conglomerate "is higher than what the government gets from existing foreign investors in Bangladesh".

This assertion flies in the face of claims made by various Bangladesh agencies, including the Bureau of Investment (BOI) which is handling the proposal, that Tata's offer was lower than the international price.

The proposal was "suspended" by both sides earlier this month after prolonged negotiations, nearly two years after Tata chief Ratan Tata visited Dhaka and offered to invest $2 billion in gas-related industries like fertiliser, besides steel and other infrastructure industries.

The proposal, revised to $3 billion, ran into some road blocks like a sustained campaign by former officials of Petrobangla, the state-owned oil major, and others raising "national interest" issues.

Tata agreed to suspend the proposal after three ministers of the Khaleda Zia government conveyed that this being the "election year" the situation was too volatile for an economic decision of this size.

Even while leaving a decision on it for the next government, which would take office after the elections, likely early next year, BOI and other agencies of the Zia government have been engaged in processing the proposal, media reports have indicated.

The proposal is to go before a ministerial team, headed by Industries Minister Motiur Rahman Nizami, who heads the Islamist block in the ruling coalition and is chief of the Jamaat-e-Islami, a party ideologically opposed to India.

Hua Du said that Bangladesh, as the hub of the sub-region and its gateway to global markets, should "develop regional economic cooperation with the neighbouring countries, including India, by keeping politics out of any economic decision".

Citing the long-standing political conflict between India and China, Hua Du said despite the discord the two countries are now developing economic relations.

She described the next general election as a "major internal challenge" for Bangladesh and said it is critical to keep up the reform momentum in the lead-up to the elections.

"A number of challenges continue to pose risks to the macroeconomic performance in the period ahead. These include political transition, weakness in the infrastructure and the under-pricing of energy products," she was quoted by the newspaper as saying.

News: Ranbaxy, on buying spree, eyes U.S.

(RTR 25/07/2006) New York - Ranbaxy Laboratories Ltd., which has been on a European buying spree, is also eyeing U.S. acquisitions as it seeks to become one of the five largest generic manufacturers within six years.

Ranbaxy Chief Executive Malvinder Singh described the United States as his company's most important market in an interview on Monday and said he was looking for deals that would broaden the company's product line and add new technological capabilities.

"We're interested. We want to do it. We keep evaluating opportunities," Singh told Reuters. "If there is a right fit and a good fit we will definitely look at it and go for it."

Singh, the 33-year-old grandson of Ranbaxy's founder, became chief executive officer in January. Since then, Ranbaxy has acquired generic companies in Italy, Spain, Belgium and Romania. At $324 million, its purchase of Romania's Terapia was the largest of the four.

Singh said the company overall is the world's eighth largest in generic drug sales and now has a presence in 21 of the 25 EU countries.

The United States, however, remains the biggest part of Ranbaxy's business, comprising about 30 percent of revenues.

Singh said he would like to increase the proportion of his company's sales that come from the United States to as much as 50 percent.

"We certainly see the American market to continue to remain the most important market for us," Singh said. "We are committed to increasing and strengthening our presence in this market."

Singh's eagerness comes as some analysts warn of price competition threatening the profitability of the U.S. generics market.

He acknowledged that prices fell sharply last year, and came down again this year, although less so than in 2005. The market is being affected by more companies selling more products, as well as greater aggressiveness by branded pharmaceutical companies in the generics market, he said.

Still, he said, the company can continue to be profitable even with prices low, having girded for such competition through its experience in its home market of India.

"When we go to international markets, even if it's the U.S. market, we see far less competition here than we do in India," Singh said. "You haven't heard of 100 players being in one molecule, have you?"

News: Sun, sand & a tax holiday

(TNN 25/07/2006) Panaji - Tourism and mining have, since ages, been the backbone of the Goan economy. During the last tourist season (October-April), 22 lakh people visited Goa, the highest so far. While there are no studies available to show the actual revenue generated through tourism, researchers estimate that 15% of the gross state domestic product (GSDP) comes from trade, hotels and restaurants; all of which depend on tourism.

Goa also earns a lot of foreign exchange from mining exports, especially export of iron ore to steel markets like China. Last year saw a record 35.4m tonne of mining exports. Of this, iron ore exports comprised nearly 23m tonne that brought in $733m of foreign exchange.

The last four decades have seen industrial sectors in Goa grow in leaps and bounds contributing to 33% of the GSDP. According to official statistics, Goa has 154 medium and large scale units, most of which are processing units providing value additions to export oriented units. Industries first came up in Goa around 1975. The period till 1991 witnessed a 28% growth in new companies across the state.

A major leap was witnessed during 1993 to ’04, when the state enjoyed a tax holiday. Many foreign multinationals like US-based Kodak, Richardson Vicks and Germany’s Benchemie, BASF group, Siemens and Cipla set up units in Goa. At present, Goa has 20 industrial estates, and the main thrust has been to develop pharmaceuticals, electronics and other non-polluting industries. The state is hoping to create industrial pockets that, in addition to earning foreign exchange, will also generate employment opportunities for local Goans.

According to industry analysts, Goa enjoys many inherent advantages like having an urban set-up, harmonious culture and a largely English speaking crowd, which makes it an attractive destination for companies, especially export-oriented companies. Besides, the state’s charisma as one of the most sought after tourist destination in India also makes it a doubly attractive proposition to set up a base here. According to N Sriram, Chairman, CII Goa Council, “People want to come to Goa as it is a tourist destination. We must capitalise on this advantage.”

Goa has a sizeable small and medium enterprises (SME) base spread across diverse industries. The pharmaceutical cluster in South Goa at Margao has reportedly about a 100 units that employ between 1,000-1,00,000 persons and have revenues of about Rs 10-100 crore, according to industry estimates. But Goa has a long way to go since it does not have too many clusters. A study of India’s clusters had shown only one cluster in Goa compared to some other states that had as many as 48 clusters.

However, Goa also suffers from lack of proper infrastructure and political instability that serve as major deterrents for further investments. Adds Sriram, “We need good quality power, water and also good roads. Besides, there needs to be consistency in the state’s policies which is not happening.” At present most industries have bore wells to meet their water requirements and purchase quality power directly from private players like Reliance at Rs 8.90 per unit as against the government’s Rs 3.60 per unit.

Ironically, while Goa’s airport and harbour are an hour’s drive from the most industrial estates, these places have not been notified by the central government, thereby barring import/export of pharma and bio-tech products. These companies currently are exporting their products from Mumbai.

The ending of the tax holiday changed the trend as many companies either put their expansion plans on hold or chose to relocate elsewhere. Proctor & Gamble and Dr Reddy’s are two companies that shut shop and moved to other lucrative options like Himachal Pradesh that still enjoys tax concessions. During the tax holiday, over 30 multinationals had set up shop. After the tax holiday ended, only seven have set up shop in India.

Nitin Kunkoliker, chairman of Goa Chamber of Commerce and Industries says, “India lacks a good export base and the special economic zone (SEZ) can be used to develop Goa into an internationally competitive exporting hub.”

The state government has drafted a policy for developing SEZ pockets to boost exports and industrial growth. The SEZs may provide several incentives, including full exemption of electricity duties, exemption on sales tax, turnover tax and other duties, income tax exemptions and creating offshore banking units.

Developing SEZs in Goa would help to improve its road, water and air linkages, thereby aiming for international competitive and hassle-free environment. The government plans to invite many international companies in sectors like food processing industries, pharmaceuticals and even an apparel park to boost trade and fashion.

Besides, plans also include an SEZ for education. Goa already has a premier institute for MBA — The Goa Institute of Management and India’s leading engineering institute, BITS Pilani, has a branch in Goa.

The state government is keen on developing bio-tech and IT hubs and has drafted policies for the same, which include sops like exemption of custom duties for research and development (R&D) equipment, exemption from entry tax, budgetary allocation for setting up world class accreditation agency for biotechnology products and also subsidy scheme allowing farmers to access generic seeds.

Talks are on with Wipro Technologies to begin Goa’s first BPO in the IT sector. The state government is also promoting bio-technology in areas like healthcare, vaccines, animal healthcare products, fermentation of beverages, bakery and dairy products and bio-energy besides areas like bioinformations and marine biotechnology.

Industrialists have welcomed the government’s initiative. They feel that the government should chalk out a road map for the industrialisation of Goa over the next 20 years.

Considering that Goa has a large number of small and medium category business enterprises, the SMEs could take the lead in making Goa more than just a tourist spot.

News: Mukesh Ambani eyes another record

(TNN 25/07/2006) New Delhi - Size does matter when it comes to Reliance, be it the largest refinery in the world, the biggest SEZ in the country or simply an office complex. The Mukesh Ambani-promoted Reliance Industries (RIL) is set to soon create yet another record by developing the largest single corporate office in the world, spanning over 2m sq ft in suburban Mumbai. The proposed Rs 150-crore office structure will be as large as four big-sized malls put together. It will headquarter RIL’s businesses of petroleum, retail and agriculture.

The office building, being built by Reliance Engineers Association, a group company which has developed many infrastructure projects of RIL, will be housed within a larger complex covering a total area of around 40m sq ft.

Sources in the know said that the dream project has drawn heavily from global corporate office structures like that of GE or Exxon Mobil in the US. The office complex, to be built on a theme titled ‘brilliance per square inch’, will include among other things a lake and a greenbelt. “The idea is to get the best brains in the country to share their ideas, and think together,” a source said.

Despite its growth and diversification into several business areas, RIL is yet to have a ‘proper headquarters’ for its operations. RIL is currently headquartered in its legendary Maker Chamber No IV in Nariman Point, Mumbai’s business district. Chairman Mukesh Ambani’s office is located on the fourth floor where the founder of RIL, and his father, Dhirubhai Ambani used to sit. The company occupies a couple of other floors in the same building and most of the petroleum and petrochemical business is controlled from there. Sources say that although the new headquarters is a dream project of Mukesh Ambani, he is unlikely to relocate completely from Maker Chambers as RIL’s roots lie there.

Reliance Infocomm, a pet project of Mukesh Ambani, was run from the Dhirubhai Ambani Knowledge Centre (DAKC) in the Mumbai suburb of Vashi. DAKC is now a part of the Anil Dhirubhai Ambani Group, as part of a family settlement. Incidentally, Mukesh Ambani’s new headquarters will be located barely a stone’s throw away from DAKC. The project is expected to start in six months and will be completed in the next 12 months.

The project is managed by Australian consulting firm Meinhardt. Meinhardt Singapore, which advised the government on Delhi and Mumbai airport modernisation projects, is also involved in integrated engineering of Reliance headquarters.

News: Two faces of foreign funds in India

(TT 25/07/2006) Mumbai - Fund flows from abroad have shown a mixed trend this fiscal with foreign direct investment on the up and foreign institutional investors (FIIs) beating a retreat from bourses, according to the RBI.

In its report, Macroeconomic and Monetary Developments-First Quarter Review 2006-07, the RBI said the weakness in domestic equities was in line with the trends in international markets.

“The stock market witnessed a correction beginning from May 11, mainly due to net sales by FIIs, fears of rising global interest rates, sharp fall in metal prices and fears of higher domestic inflation amidst weak trends in major international equity markets,” the report said.

However, mutual funds made net investments of Rs 8,311 crore in the fiscal (till July 14), substantially higher than the Rs 2,231 crore of net investments a year ago.

According to data from the Securities and Exchange Board of India (Sebi), FIIs invested Rs 522 crore in April, but turned net sellers in May to the extent of Rs 7,354 crore.

Though the FIIs invested Rs 480 crore in June, they remained net sellers by Rs 6,127 crore in the first quarter compared with Rs 7,366 crore of net purchases a year ago.

FDI, on the other hand, in April and May was Rs 1,199 crore against Rs 922 crore a year ago.

In addition to higher FDI, the report said net inflows under various non-resident deposit schemes in April and May were $816 million against outflows a year ago, reflecting higher interest rates.

News: RBI zoom captures bloom & gloom

(TT 25/07/2006) Mumbai - The Reserve Bank (RBI) today tossed a sweet and sour salad of prospects for the Indian economy: the good news is that the engine of growth is chugging along quite well with the central bank pretty confident that the growth momentum will be maintained in 2006-07.

In 2005-06, the Indian economy was among the fastest growing in the world with a growth rate of 8.4 per cent.

All the indicators seem to show that the economy will maintain at least an 8 per cent growth — and the forecast is predicated on some nifty growth in the manufacturing and service sectors.

The RBI also trumpeted the fact that inflation-fighting measures appeared to be working with the headline inflation rate well within the “indicative trajectory” during the first quarter of 2006-07. The RBI had earlier forecast that inflation would be kept within a tight band of 5 to 5.5 per cent at the end of March 2007.

“Inflation expectations remained largely stable, reflecting pre-emptive monetary policy actions which have helped in anchoring inflation expectations,” the Reserve Bank said in its document ‘Macroeconomic and Monetary Developments — First Quarter Review 2006-07’ which it released today, just a day before its monetary policy review.

But there are a couple of lingering worries: the rain gods haven’t been as benevolent this year. The cumulative rainfall recorded between June 1 and July 12 has been 10 per cent below normal compared with 1 per cent above normal a year ago. This doesn’t augur well for a monsoon-dependent agriculture sector.

There are two other big worries that the central bank highlighted: first, the already yawning deficits of the government have widened some more. Second, money supply is expanding at the rate of 18.8 per cent against 13.8 per cent last year. If there’s more money swilling about in the economy, there’s a danger that inflation could spiral out of control.

The RBI said the optimistic outlook for the economy depended a lot on burgeoning industrial production that registered a growth of 9.8 per cent. The manufacturing sector, which posted a double digit growth of 10.9 per cent, continued to be the key driver of industrial activity contributing almost 92.5 per cent of the growth in industry. This growth rate is the highest for this period in the last decade. However, electricity and mining sectors continued to exhibit subdued growth.

According to RBI, the robust performance of the manufacturing sector was largely led by chemical and chemical products, machinery and equipment, basic metal and alloy industries.

The one blip was the fact that the infrastructure sector recorded a growth of 5.9 per cent in April-May compared with 7.1 per cent in the same period last year on account of deceleration in all industries except petroleum refinery products. But the services sector — which accounts for 52 per cent of the gross domestic product —has recorded a double-digit growth during the last two years, proving that it is the major engine propelling the economy.

The RBI noted that confidence among the business community remained high.

“Various business confidence surveys suggest that economic activity is likely to remain buoyant in the near term. According to RBI's latest industrial outlook survey, the business expectations index for July-September 2006 quarter increased by 5 per cent over the previous quarter’s level,” it said.

The assessment of the overall business situation for April-June 2006 showed an improvement in confidence and responses to the survey suggested an improvement in expectations for the overall business situation, production, capacity utilisation, order books, selling prices and profit margins.

News: BW Microfinance invests $1.5 m in MAS

(BL 25/07/2006) Hyderabad - Bellwether Microfinance Fund (BW), the micro-finance venture capital fund with an existing corpus size of $10 million, has announced an investment of $1.5 million in the Ahmedabad-based Rs 100-crore non-banking finance company - MAS Financial Services Ltd.

An agreement to this effect was signed by the BW Co-Founder and Fund Manager, S. Viswanatha Prasad, and the MAS Managing Director, Kamlesh Gandhi, here on Monday.

Addressing a press conference, Prasad said the investment was aimed at facilitating MAS enlarge its commercial micro-finance portfolio. With this, BW contributes to 45 per cent of MAS' risk capital.

According to Gandhi, MAS, with 11 years of existence, has a significant presence pan-Gujarat in commercial micro-finance, personal and commercial vehicle loans. Through its alliance with BW, the NBFC aims to build its micro enterprise-lending portfolio making it more than 75 per cent of its portfolio in the next five years.

MAS is the first NBFC that is downscaling its operations to target the micro-finance segment, he said.

Investment in India

Stating that this is the 10th investment that BW has made in India in the last 14 months with an aggregate investment of $6 million, Prasad said the venture capital fund is currently at an advanced stage of negotiations with certain major fund houses for raising its corpus size to $20 million.

The Netherlands-based Hivos-Triodos Fund and the US-based Gray Ghost Microfinance Fund are the major investors in BW at present, he said.

He said BW has a long-term view of 15 years for its investments in India and proposes to stay invested in each of the MFI ventures for at least 4-7 years.

Exit route options

On the exit route options available for BW, Prasad said the MFI ventures financed it by could tap the equity market or large global fund houses could buy BW's investments or the MFIs could evolve into larger entities through mergers and acquisitions attracting the commercial banks to buy these MFIs at later stage.

Going forward, BW intends to partner with several NBFCs such as MAS and build them into successful micro-finance distribution vehicles, he said.

MFIs need to run like any other businesses to maximise the stakeholders' value, Prasad said, adding that the Indian micro-finance market is one of the largest in the world with a projected demand of Rs 40,000 crore of debt capital per year.

Given the size of the market, there is a need for many more MFI players, he said, adding that it was the objective of BW to promote professional MFIs that adopt a strategy that spells large-scale growth of the sector.

In its pursuit, BW not only brings in capital but also operating expertise into creating scalable MFIs.

News: New Balance to balance on Indian feet

(BS 25/07/2006) Chennai/Bangalore - American shoe major, New Balance, is planning to enter Indian mass shoe market (products of lower value) by coming out with a separate India-range.

The company will be introducing a complete range of footwear and apparel through distribution channels for the mass shoe market foray in India by devising a two-pronged strategy — wholesale trade backed by state distributors and standalone outlets in major Indian cities’ high street, said B D Nathani, director sales and marketing, New Balance.

New Balance has appointed Royal Sporting House (RSH) as the licensee, marketer, distributor and currently sells shoes at 54 RSH stores across India and at all the Shoppers’ Stop outlets.

News: Pondicherry invites private investment in tourism sector

(BS 25/07/2006) Chennai/Bangalore - In an effort to make the state an attractive tourist destination, the Pondicherry Tourism Development Corporation Limited (PTDCL) has drawn up an ambitious plan to develop tourism infrastructure in the state.

The corporation has invited the private sector to invest in developing the tourism infrastructure in the state. It is offering a host of incentives to make the state an attractive place for investment.

The government of Pondicherry is offering a 25 per cent capital subsidy up to Rs 1 crore, sufficient land and power to investors for setting up five-star hotels, develop beaches and to develop the temple town of Karaikal in the state.

The tourism corporation has proposed to develop the temple town at Karaikal, 135 km from Pondicherry at an investment of Rs 200 crore. Karaikal, a former French enclave, is known for the Sufi shrine and Shanishwara temple, the only one in the country.

Said PTDCL director P Gautam Reddy, “We have proposed to develop Karaikal into a modern temple town with all amenities for the travellers. We have commissioned the Housing and Urban Development Corporation (Hudco) to prepare a masterplan for the development. Their report is expected within a week and based on that a decision will be taken on the proposal.”

He said that the Pondicherry government had estimated the project cost at Rs 200 crore and the project would be completed in phases over the next five years.

The temple town would be developed on a public private participation (PPP) model. While the tourism department would be the nodal agency, all other government departments would be involved in the project along with the private sector, he said.

Reddy, who was in Bangalore to showcase the tourism potential of Pondicherry at the India International Travel Mart (IITM) during last week, told Business Standard, “We want private investors to come in without a second thought and invest. They will be given all the facilities including a 25 per cent capital subsidy.”

He said that the tourism corporation had also proposed to set up a five-star hotel jointly with private participation at Ariyankupam on the banks of river Murugapakam at an investment of Rs 10 crore.

The government participation would be in the form of land spread over 10 acres, while the private sector would pump in the money for construction. The government has already received expression of interest from 14 investors, which include Mahindra Group, Le Meridien and Savera Group. The bids will be finalised within a month.

The corporation also plans to develop a golf course and a family entertainment centre with Imax multiplex, and a restaurant at an investment of Rs 20 crore at Manapet in Pondicherry. Expression of interest would be invited shortly for the project, Reddy added.

The government also proposes to upgrade the existing airport at Pondicherry and has signed an agreement with the Airports Authority of India to develop it into a full-fledged airport. It is proposed to extend the runway to 7,000 feet.

Reddy said the government would provide 20 hectares at no cost to AAI and free electricity for five years, while the AAI will take care of the investment. Jagson Airlines has started operating flights from the airport at Pondicherry. The airport would soon be prepared for operating ATR flights, he added.

Last year, Pondicherry witnessed arrival of 5 lakh domestic tourists and over 50,000 foreign travellers.

Column: India, Latin America connect through energy

(TTG 24/07/2006) Port of Spain - India is emerging as a leading exporter of petroleum products. Provisional data for production of petroleum products for the year 2004-05 was placed at 120.47 million tonnes, up from the previous year’s 115.78 million tonnes.

Middle distillates, such as kerosene, high-speed diesel and aviation turbine fuel accounted for the largest chunk of total production, followed by light distillates. Provisional figures of exports of petroleum products in 2004-05 stood at US$6.8 billion.

The exports of petroleum products have increased by more than 90 per cent in 2004-05, over the previous year. As a result, petroleum products increased its ranking in India’s exports from eighth position in 2000-01 to fifth position in 2004-05.

In short, India has transformed itself into a surplus petroleum producing nation in the last three years, thanks to additional refining capacities created in this sector.

Its major export destinations for petroleum products include Singapore (25.5 per cent), Iran (9.8 per cent), United Arab Emirates (7.4 per cent), The Netherlands (5.1 per cent), Sri Lanka (4.5 per cent), Indonesia (4.4 per cent), Brazil (4.3 per cent), Nepal (3.1 per cent), South Africa (3.1 per cent), and Togo (three per cent).

These ten countries together account for over 70 per cent of India’s total petroleum products exports.

High-speed diesel (39.4 per cent), light oils and preparations (19.5 per cent), aviation turbine oil (13.8 per cent) and fuel oil (eight per cent) are the major petroleum products being exported from India. And India is still keen to secure more resources in order to meet its accelerating energy demands.

Latin America, however, is emerging as one of the prominent destinations of exports for Indian petrochemicals products.

Though the proximity to the US markets allows for US-based petroleum products to flood the Latin American markets, India’s contribution of exports has increased over the years.

With the steadying of the economic growth in Latin America and the emerging currency stability across Latin American countries, petroleum is emerging as an important industry.

The supply trend of crude oil has increased steadily over the last five years and is slated to increase substantially in the next few years, given the economic stability in the region.

Central and South America have an estimated 98.848 billion barrels of crude oil reserves, spread across the continent with Venezuela accounting for around 78 per cent of the total crude oil reserves.

India has a tremendous opportunity to increase its stake in Latin America and its exports in the energy sector to that region. India’s largest export market for petroleum products in Latin America is Brazil.

The most important commodity exported in terms of value to the Brazilian market is petroleum oils and extracts of petroleum oils. Exports in 2004-05 to the Brazilian market earned a whopping US$295.62 million, compared to the US$22.84 million earned in the previous year.

By virtue of economies of scale, the United States is the leading exporter of petroleum products to the Latin American region.

Free trade agreements (FTAs) and regional trade agreements (RTAs) between the US and the Latin American countries have also contributed to this trend. Trade between the Latin American countries is also significant with oil economies like Venezuela finding ready export markets within the Latin American continent.

According to the India Brand Equity Forum Web site, Reliance Industries Ltd (RIL) is in advanced negotiations with Mexican oil giant Petroleos Mexicanos (Pemex) for co-operation in exploration and development of oil and gas fields in shallow and deep waters off the Gulf of Mexico.

In September 2004, the Venezuelan foreign minister, accompanied by a high level delegation, visited India to revive both political and trade relations. The highlight of the visit was Venezuela’s offer to India of five oil fields—three for discovery and two for exploration.

As a result of negotiations at the highest level of the Government, India has begun investments in Venezuela. The single largest Indian investment in Latin America is the US$50 million project as a result of a memorandum of understanding (MOU) signed between Oil Videsh Ltd, a subsidiary of Oil and Natural Gas Corporation (ONGC) and Petroleos de Venezuela (Pdvsa), the Venezuelan State oil firm.

India has also signed a preferential trade agreement (PTA) with Chile on January 20, 2005.

According to the agreement, India has offered to provide fixed tariff preferences ranging from ten per cent to 50 per cent on 178 tariff lines at the eight digit level.

Similarly, Chile has offered tariff preferences on 296 lines at the eight-digit level.

The products covered in the agreement account for more than 90 per cent of the value of total bilateral trade amounting to US $447.54 million during 2004-05.

Though the products covered under this PTA are not specifically linked to petroleum, the possibility of extending this PTA to cover petroleum products will facilitate Indian petroleum exports to Chile.

One of the most important preferential trade agreements that India has signed is with Mercosur.

A framework agreement was signed on June 17, 2003 and, as a follow up, a PTA was signed on January 25, 2004. The region holds significant potential for Indian exports of petroleum products, as our share is just 0.83 per cent of the global imports of Mercosur.

In conclusion, as India continues to grow so, too, will her demand for energy. Undoubtedly, this will call for enhanced exploration and development activity to ensure greater self-reliance. Latin America is well poised to capitalise on the opportunities that will come its way.

By Nirmala Harrylal, Senior Associate, Centre for Leadership Assessment and Development, Arthur Lok Jack Graduate School of Business.

News: Indian auto sector set for investment boom

(DNA 24/07/2006) New Delhi - The Indian automobile industry is on an investment overdrive. Whether it is passenger car or two-wheeler makers, commercial vehicle companies or three-wheeler ones - everyone appears to be in a scramble to hike production capacities. Result? India is expected to witness over Rs 30,000 crore of investment over the next three-four years (or by 2010). And these mega bucks span all segments of the market, from small cars to heavy duty trucks and buses.

Not only Indian companies, several overseas automobile majors are also planning to put up capacities between now and the turn of the decade, according to estimates by the Society of Indian Automobile Manufacturers (SIAM).

And what does this kind of mega investment mean for you, the car buyer? Well, over the next one year, as many as 20 new cars could be unveiled. Sample this: After launching the new Wagon R, Maruti Udyog is coming out with a new Zen and the diesel Swift during the next few months; Hyundai will surely be unmasking the Verna apart from a brand new diesel car. The Rs 1 lakh Tata people’s car would have been unveiled two years from now; General Motors will launch a mini and maybe a compact car during this time whereas the Mahindra-Logan project will be up and running some months down the line.

In terms of investments, most companies in the automobile sector have made their intentions clear. While market leader Maruti Udyog has already set up its second car plant with a manufacturing capacity of 2.5 lakh units per annum with an investment of Rs 6,500 crore investment (Rs 3,200 crore for diesel engines and Rs 2,718 crore for the car plant itself) Hyundai and Tata Motors have also announced plans for investing a similar amount over the next three years. While Hyundai will bring in more than Rs 3,800 crore to the country, Tata Motors will be investing upwards of Rs 2,000 crore in its small car project.

General Motors (Rs 100 crore), Ford (about Rs 350 crore) and Toyota have also announced modest expansion plans even as Honda Siel has earmarked Rs 3,000 crore over the next decade for India - a sizeable chunk of this should come by 2010 since the company is also looking to enter the lucrative small car segment.

Some new entrants may also test the waters before long. They include Citroen, Volkswagen AG, Nissan (separately, apart from its tieup with Suzuki), Alfa Romeo, Maserati, Land Rover and Aston Martin are the big names being mentioned in passenger cars.

In the commercial vehicle segment, Ashok Leyland and Tata Motors have each announced well over Rs 1,000 crore of investment whereas M&M’s joint venture with International Trucks is expected to see an infusion of at least Rs 500 crore.

In two-wheelers, Chinese bike major Lifan and the iconic US brand Harley-Davidson are expected to enter the country soon. Market leader Hero Honda is looking at establishing a fourth manufacturing plant even before the third one has come up, whereas Bajaj Auto and TVS Motor are going to the excise-free zones of Himachal Pradesh and Uttaranchal for putting up new capacity.

News: Foreign funds fuel Indian realty boom

(BL 24/07/2006) New Delhi - The booming Indian property market could be in for a sustained bull run. Propelled by shortfall of around 20 million homes in the country, an estimated $10-12 billion of investment has been pledged by foreign and domestic funds over a year or two.

Global big names such as Morgan Stanley, Lehman Brothers, HSBC and ABN Amro are among those queuing up to pick up stake in local realty firms.

Analysts said that the private equity arms of JP Morgan, Lehman Brothers and Merrill Lynch are also on the lookout for deals while at least two dozen firms have already firmed up plans to invest in the realty sector.

These include the biggest US pension fund, CalPERS, hedge fund Farallon Capital Management, US-based developer Tishman Speyer and NRI fund Trikona Capital.

Domestic funds include Kotak Realty Fund, HDFC India Real Estate Fund, Pantaloon Retail's Kshitij Real Estate Fund and UTI Venture Fund.

High returns the draw

Commenting on the attractiveness of the sector, analysts put perceived internal rate of returns of close to 20 per cent or so for the sector as a big draw.

The recent SEBI guidelines allowing real estate mutual funds to invest directly in properties have also added to the surge.

Bullish forecasts by Merrill Lynch, which expects the Indian realty sector to grow almost nine times to $90 billion by 2015, has further spurred the growing interest, especially among the foreign players.

Deals, new funds

Recent deals in the realty sector include Morgan Stanley picking up stake in two local real estate firms within a space of a few months, while Lehman Brothers, ABN Amro and HSBC Investments together picked up about seven per cent in a Delhi-based developer.

In January this year Tishman Speyer's tied up with ICICI Bank to invest $1 billion in the country, while JP Morgan, Starwood Capital Group Global, and Knight Frank are among the list of foreign investors in the process of planning new funds.

The US-based Trikona Capital Group, started by two NRIs, has announced plans to plough in at least $1 billion through two funds launched in the US and UK.

Analysts forecast that the amount of money being raised for investment in the Indian realty sector could double over the next couple of years.

With the US funds clearly on the forefront, the Confederation of Real Estate Developers' Associations of India is now headed for the US with plans to organise a series of real estate exhibitions in American cities, including New Jersey, Chicago, and San Jose, from August 26 to September 4.

The deluge of capital inflows in the real estate sector has also sparked off concerns, including worries of a Hong Kong-type run seen during the Asian currency crisis.

The asset-price bubble has already prompted a caution by the RBI.

News: More grains getting diverted for bio-fuel

(BL 24/07/2006) Mumbai - From traditional use as food and feed, expansion of grain usage for industrial purposes is rapidly changing the market fundamentals of the grains sector. Industrial use is now the fastest growing sector of the global grains demand, with average annual growth rate estimated at about 9 per cent. Food and feed demand growth is at one per cent, in line with population growth.

Rising diversion of grains for bio-fuel is exerting profound influence on the global grains market. According to the London-based International Grains Council (IGC), industrial use of grains is projected at 186 million tonnes (mt) in 2006-07, up by 14 per cent on the year before, the biggest annual rise ever, and 61 mt increase over a five-year period.

Interestingly, a significant part of grain usage for industrial purpose is for production of ethanol or bio-ethanol, which is blended with gasoline.

Other sources of energy

Strength in the crude market is seen supporting larger diversion of corn (maize) for production of bio-ethanol.

A number of countries that use this energy source is increasing, especially with government support.

While this environment friendly renewable source of energy can be produced from sugarcane too, the US is by far the most powerful driver of bio-ethanol production (from corn) and consumption. Other countries, including China and the European Union, are also building grain-based ethanol production facilities. For 2006-07, the use of grains for ethanol is forecast at a record 65 mt. Global coarse grains output for the year is forecast at 693 mt.

Traditional use remains

Notwithstanding rapidly expanding use of grains for energy, the traditional use of grains for the manufacture of starch remains the largest. For 2006-07, worldwide grains usage for starch is estimated at 79 mt.

The largest users are the US and EU, and the sector's growth rate is 5 per cent a year, in line with the global economic growth.

Growing demand

Starch and its sugar derivatives have a wide range of uses, including in food, beverages, pharmaceuticals, chemicals, paper and textiles. Demand growth in this sector is directly related to economic growth.

Brewing use of grains, particularly barley for beer, is increasing by around 3 per cent a year, and is projected at 31 mt in 2006-07, according to IGC.

Demand for beer is either static or falling in some industrialised countries where alcohol markets are mature.

But demand continues to grow in a number of countries where the per capita use is comparatively low and disposable incomes are rising, especially in the CIS and Eastern Europe and in developing countries in Far East Asia and Latin America, IGC pointed out.

Global bio-fuel output

According to Worldwatch Institute, in 2005, world bio-fuel production from all sources exceeded 670,000 barrels a day, (about 33 mt of oil equivalent), having doubled since 2001. This is still less than 4 per cent of all transport fuel use.

The world's bio-fuel leader Brazil uses almost half of its cane for bio-ethanol production, while in the US corn is the base material.

Bio-fuels are set for even stronger growth over the coming years as the industry responds to higher fuel prices and supportive government policies, the report said, adding that in the longer term, there is potential to make bio-fuels from non-food feed stocks, including agricultural, municipal and forestry wastes as well as fast growing cellulose-rich energy crops such as switchgrass.

News: 'India could emerge as e-Publishing hub'

(BL 24/07/2006) Coimbatore - With several global publishers such as Oxford University Press, Cambridge University Press, Prentice Hall, Macmillan, and Pearson looking to India for outsourcing their e-Publishing projects, the country is set to emerge as a hub, according to A. Elangovan, Managing Director of Cadgraf Digitals. Speaking to Business Line, he said that the Indian companies in the e-Publishing space are currently working on books and journals for overseas clients. "Their process is completely different from ours. They have well-defined process flow, control and checks," he said, adding that the industry faces competition from East European countries. "It is no threat at this juncture, because Indian e-Publishing houses are able to meet the clients' requirements. While the opportunity is tremendous, the hunt is on for trained manpower. There is no formal educational institute on digital publishing. Pe ople are trained by companies." Stating that it has taken 15 years for the industry to reach the current level, he said: "Initially we did the data entry (low-end) job. Then we moved to typesetting before working on single colour graphics. Only in the last few years have Indian compani es forayed into copy-editing and the orders are really heavy. One of the major concerns for the industry is getting the right, quality manpower." According to him, besides copy editors, artists and other professionals with a high level of colour knowledge could look for opportunities in this space.

News: Indian apparel brand Stori on expansion spree

(BL 24/07/2006) Mumbai - The Rs 22-crore apparel brand, Stori is on an expansion spree. Not only is the company planning to expand its retail network, it is also going to foray into the women's (western formals) wear segment. Subsequently, it would also be getting into kid's apparels, but under a different brand name. On the retail front, the company is planning an investment of Rs 15 crore in the next one year. Chandra Prakash Bhutra, Manager (Marketing), Stori, said that the next few months would see six more standalone stores in cities such as Mumbai, Noida and Kolkata. It already has exclusive Stori stores in Chennai, Hyderabad, Ahmedabad, Pune, Delhi and Kolkata. It is also looking at increasing its presence in the smaller markets through multi-brand outlets. "We already a have presence in 100 outlets and we plan to step it up to 200 this year," said Bhutra. He said that the company plans to set up separate stores when it launches the women's wear brand. Also on cards is the launch of Stori winter wear for men and accessories such as wallets and belts. The company, according to Bhutra, also has an Rs 10-crore marketing and media budget. He said that apart from print and outdoor campaigns, the company is also planning to invest heavily on below-the-line activities. "We want to make our presence felt in the corporate space. We have recently tied up with a Bangalore-based band, Aukro, which has been formed by marketing and IT professionals." When asked how the company plans to raise money to fund its expansion plans, Bhutra said, "At present we have enough resources to generate funds, but we are toying with the idea of an IPO two years from now."

News: SBI Life to foray into micro insurance

(ACERC 24/07/2006) Mumbai - SBI Life will enter the micro-insurance segment this year and infuse a capital of Rs 100 crore to increase its paid-up capital to more than Rs 500 crore.

SBI Life aim is to grow its aggregate premium collections 2.5 times to reach Rs 2,500 crore by March next year as against the Rs 1,000 crore collected last year. The company is in talks with few non-life insurance players to enter the micro-insurance market as per IRDA guidelines and is confident of starting the business in the next financial year.

SBI Life also plans to launch new ULIP-based pension schemes by September this year, besides new schemes for the Group Policy in the gratuity, pension and superannuation. The company also launched the 'Group Swadhan' scheme, wherein a policyholder can pay premium for a period of 5-10 years and if no claim has been made, the premium is returned. The scheme is mainly sold through SBI branches.

Currently, SBI sells 43 per cent of its products through its bancassurance network and expects this channel to contribute 50 per cent of its sales this year. The insurer also has covered around 36,000 lives through its tie-ups with around 3,300 self-help groups and collected Rs 209 lakh in premium. SBI witnessed a 22 per cent policy sale in rural areas as against the targeted 18 per cent.

SBI has been giving a return of more than 12 per cent on an average with the ULIP products playing a dominant role in its total sales. In the current month till July 21, the company had collected a premium of Rs 77 crore, out of which Rs 65 crore came from ULIP. SBI would also increase its agent strength from the current 8,000 to 20,000 this year and add another 2,000 employees to the present strength of 4,000 at SBI bank to sell its policies. Also the bank assurance channel would be further strengthened by bringing in an additional 1,500 branches to the existing 6,000.

News: International hotel brands to raise toast to India

(TNN 24/07/2006) Mumbai - The Indian hospitality sector is all set to witness a flood of the world’s leading hotel brands. New brands such as Amanda, Satinwoods, Banana Tree, Hampton Inns, Scandium By Hilt and Mandarin Oriental are planning to enter the Indian hospitality industry in joint venture with various domestic hotel majors.

Hotel developers like ITC, EIH, Bharat Hotels, Viceroy, DLF, Unitech and Royal Palms are currently in negotiations with various hotel brands. ITC wants to extend its existing tie-up with the US-based Starwood Hotels beyond the latter’s Sheraton brand and may bring other Starwood brands like W Hotels, Westin, Four Points and Aloft to India in ITC’s new projects.

Unitech which is setting up two hotels in Delhi, has already formed a joint venture with Marriot International to run its three new hotels in India, which are expected to start operations by ’08. “The three new hotels will be located in Kolkata, Gurgaon and Noida. We are investing around Rs 700 core to set up these hotels,” Unitech managing director, Sanjay Chandra said.

Mumbai-based Royal Palms is in talks with Anando, Starwoods, and Singapore based Banyan Tree for its three new hotel projects coming up in various parts of India. The firm has already tied-up with the US-based Carlson Hospitality and bought the Park Plaza brand to India recently.

“For the next decade or so, existing hotels will continue to flourish. We are planning to expand our hospitality business to other places like Chennai, Hyderabad and Kolkata in the next few years and we are in talks with leading hotel chains,” Dilawar Nensey, joint managing director, Royal Palms said.

Currently, over 142 luxury hotel projects are coming up in India with an investment of Rs 7,300 crore. The country is witnessing a spurt in hotels as India is facing a severe shortage of quality hotel rooms because of increased business activity and a spurt in leisure travel by the country’s burgeoning middle class, as well as international tourists.

“These factors have generated a great interest in the American and European markets and many hotel brands have been keen to enter the Indian hospitality sector,” industry analyst said. International tourist arrivals rose 13.2% in ’05 to 3.9m, the highest ever, and the government expects arrivals in ’06 to grow by 15%.

DLF sources said that Hilton International will be a minority stake holder in its hotel development company. The properties under DLF-Hilton joint venture would be managed and marketed by Hilton International.

DLF has chalked out plans to set up over 100 business and four-star hotels in 50 cities over the next seven to 10 years. Hilton may bring its other brands like Travel Lodge, Howard Johnson, Galileo GDS and Gulliver Travels to India.

Dubai based Kingdom Hotel Investments is looking at an investment $1 bn and is currently in talks with leading hotel companies in India and is looking out for land and hotel projects in the country.

InterGlobe Hotels has tied up with European player Accor to set up 12 hotels under the Ibis brand. UK-based hospitality chain Thistle and Guoman Hotels has tied up with Nijhawan Group as its sales and marketing representative in the country.

News: Religare to launch real estate fund

(TNN 24/07/2006) Mumbai - Religare Securities (RSL), a broking firm promoted by the Ranbaxy group, is planning to launch a real estate fund in joint venture with either a domestic or a foreign partner.

The broking firm, which has been mainly offering broking and investment banking services, has decided to raise funds to invest in real estate projects. Some of the biggest names in Indian business have either already launched such funds or have rolled out ambitious plans to do so.

“We are yet to work out details about the size of the fund. We have not identified any JV partner as the project is in a very preliminary stage,” said Kiran Vaidya, head of investment banking, Religare Securities. “The advantage of forming a JV is that both the partners can put in combined efforts to raise money and deploy it in an efficient manner so that investors are benefited properly,” said Mr Vaidya.

RSL also plans to become a member of an overseas stock exchange. “We want to create niche in the overseas market as no Indian brand has established its presence abroad,” said Mr Vaidya. The company has set up an office in London and also in Singapore, which started operating only recently, he said.

RSL has a wide network of over 200 branches spread across 190 cities. The company is part of Religare Enterprises group, which provides various financial services such as investment banking, corporate finance, portfolio management services, equity & commodity broking, insurance and mutual funds.

News: Realty is the next billion-$ baby

(TNN 24/07/2006) Bangalore - India’s real estate industry made impressive strides in becoming a more transparent sector over the last two years. India, along with others like Brazil and Japan, reported significant improvements on a few standardised parameters to move up from the low transparency markets (’04) to a semi-transparent markets list in ’06.

According to the latest edition of the Jones Lang LaSalle’s Real Estate Transparency Index (RETI), which is a biennial survey — the only index tracking transparency in commercial real estate across 56 markets across the world — attributed heightened cross-border investment interests and better business environment as the main factors behind the change. This could spur potential multi-billion dollar investments in the coming months.

JLL’s index slots the world markets into five tiers: opaque, low-transparency, semi-transparent, transparent and high-transparency. Its methodology addresses five categories of transparency, which are investment performance indices, availability of market fundamentals data, listed vehicles financial, regulatory and legal factors and professional standards and transaction process.

“Many domestic real estate companies now understand transparency as they need to scale up in a growing market, and they need equity to do that,” said Manisha Grover, head, strategic consulting & research, JLL India.

Notwithstanding some execution flaws, India’s legal-regulatory framework, professional standards and transaction process should count among the positives, while the main transparency concerns center on availability of fundamental data on demand-supply situation, for instance.

The RETI allows MNC occupiers with comparison costs of occupation and better structuring of commitments and exit routes. The index helps guiding risk premium assessment in the case of investors.

India figured among the top 10 improved markets jumping one full tier, and is currently placed ahead of China. This augurs well for investments — fairly committed ones estimated at around $4bn at present — waiting to pour into the domestic real estate business, as yields from emerging markets like India is far better at 9/11% compared to 4/6% from stable and high transparency markets like Hong Kong or the US.

“We expect India to do even better in our next edition two years later as it will then have more listed companies (helping matters like financial disclosures and corporate governance). We feel the progress that it is making is well explained,” added Ms Grover.

To put the investment possibilities in perspective, cross border real estate investments in Asia-Pacific region in last year was pegged at $65bn, with India hardly figuring in the action.

While China might still pip India in attracting the regional investment flows — such as capital migrating from Hong Kong to mainland — a more transparent domestic market would be better placed in swinging investments from US and Europe.

News: Nandan Bio to set up 8 bio-diesel plants in Gujarat

(BS 24/07/2006) Mumbai/Ahmedabad - Hyderabad-based Nandan Biomatrix plans to set up eight bio-diesel refinery plants in Gujarat in three years. Each Rs 8 crore refinery would produce 10,000 MT diesel per annum using jatropha seeds.

The company, at present, is looking forward to increasing its jatropha acreage to one lakh acres.

"We will outsource the farming and cultivation of jatropha on the one lakh acre land through our franchisees in Gujarat," said C S Jadhav, director-marketing, Nandan Biomatrix. He said cultivation of jatropha would be undertaken in various phases.

The company plans to start farming on 35,000 to 40,000 acre by March 2007, which will be increased to 70,000 acre by March 2008. In March 2009, around one lakh acre in Gujarat would be cultivated with the crop.

"We have a mission to outsource the jatropha cultivation in around six lakh acre of land across the nation within three years, which includes 2.5 lakh acre in the current financial year," he said.

After the phased cultivation, the company will start setting up its refineries for converting the seeds of Jatropha to diesel.

"To establish the capacity and manage the field operations, jatropha plantations will be clustered in catchment areas measuring 12,500 acre. Each bio-diesel extraction unit will cater to 12,500 acre of jatropha cultivated land," said Jadhav.

He said the company would also set up an R&D unit in Gujarat.

"The company has tied up with international institutions - Forestry Academy of China and Austrian Biofuels Institute for standardisation of refining technology for various feed-stocks. We will set up at least one R&D centre in Gujarat with latest technology," he said.

News: 'Manpower dearth may trip Pantaloon'

(BS 24/07/2006) Kolkata - Pantaloon Retail India Ltd (PRIL) has set lofty growth targets for itself, but execution of these targets may be jeopardised by a shortage of manpower, a research report issued by Deutsche Bank AG says.

The July 2006 report says that PRIL’s planned expansion to 30 million square feet (mn.sq.ft) of retail space by 2010 target would need around 200,000 employees while its current workforce strength is around 13,000.

“While PRIL has signed up the floor space, investments into processes are behind the curve, it seems”, says the report.

Valued at 38x on financial year (FY) 2007 earnings (E) and 25x FY08E, the stock was not cheap, with execution and inventory write-off risks, added the report.

PRIL was targeting a ten-fold increase in area by 2010. The DB report says the proposed ramp-up in area appeared doable given he mall construction boom in India. In FY07 itself, around 54 mn.sq.ft of new mall space was expected.

News: Indian insurers get full pricing freedom

(BS 24/07/2006) Mumbai - The Insurance Regulatory Development Authority of India (IRDA) has done away with the original plan of keeping a 20-per-cent band on premiums in the detariff regime set to kick off in January 2007.

This means that insurance companies will be completely free to price their products from next year.

However, the rider is that the insurers will not be allowed to change the terms and conditions for existing products within 15 months of detariffing.

Speaking to Business Standard from Hyderabad, IRDA Chairman CS Rao said: “We are relaxing the pricing norm, but the terms and conditions can’t be changed. This is being done to avoid confusion at the initial stage.”

In its first-draft guidelines, the IRDA had said that even though price controls would be removed from existing products from January 2007, insurers would not have the freedom to raise or cut premiums by more than 20 per cent of the existing price. “We have dropped this suggestion in the final draft,” he said.

The final draft on “file and use” requirements for general insurance products in the detariff regime says, “insurers shall not vary the scope of coverage, or terms and conditions of cover, or the wordings in respect of covers that are currently regulated by tariffs in respect of products sold until March 31, 2008. Insurers may file in due course their proposal for changes in cover, or wordings for products, to be sold after March 31, 2008.”

At present, about 70 per cent of the general insurance industry, generating around Rs 18,000 crore as premium, is under the tariff regime.

The portfolios under tariff are fire, engineering, and motor. While detariffing for fire and engineering will take place in January, a decision on detariffing of the motor portfolio may be considered at a later stage.

According to a senior official of a leading insurance company, confusion would be caused if insurance firms were allowed to change the scope of the coverage, along with pricing.

“The market should not be opened at one go. If all restrictions are removed at one go, some players may misuse the freedom and dupe unsuspecting customers. The conditions are being frozen to ensure a calibrated approach to detariffing,” he said.

News: Shareholders owe it to Ambanis

(TT 24/07/2006) Mumbai - The Ambani brothers may be battling each other even after the demerger of the Reliance empire, but the shareholders aren’t complaining.

When the group broke up in January, the Ambanis had said the demerger would unlock shareholder value.

Six months on, it’s time to take a reality check.

A quick back-of-the-envelope calculation reveals that the shareholders have made a 39 per cent gain in valuations since the carve up of Reliance Industries on January 18.

The incremental value generated is not only because the RIL shareholder obtained shares of the four entities that were spun off and now belong to the Reliance Anil Dhirubhai Ambani Group (R-ADAG) but also because the market’s confidence in a rump RIL (minus the value of the four interests of communications, financial services, and coal and gas-related energy business) has soared since the beginning of this year.

On January 17, RIL was traded for the last time as a combined entity on the bourses. The scrip had closed on that day at Rs 928.15 on Bombay Stock Exchange.

On the following day, a pre-market session was held to discover the price of a rump RIL stock. It fell by Rs 212.65 in the pre-market session. The stock has since clawed back all those losses as the markets continue to remain upbeat about the course that is being charted by chairman Mukesh Ambani.

In this process, the shareholder of RIL has gained the most. Even a person buying the scrip on January 17 is now earning a positive return on the investment. During the same period, the sensex has seen a gain of only 8.28 per cent. The index had on that day ended at 9314.13.

But had an investor bought 100 RIL shares on that day (which would have given him 100 shares each of the four demerged entities as well), one would be earning a return of almost 39 per cent inclusive of the 100 per cent dividend declared by RIL for the last year.

The RIL shareholders were allotted shares of Reliance Communication Ventures Ltd (now called Reliance Communications Ltd), Reliance Capital Ventures Ltd (RCVL), Reliance Ventures Ltd (REVL) and Reliance Natural Resources Ltd (RNRL). Now, RCVL and REVL are being merged with Reliance Capital Ltd (RCL) and Reliance Energy Ltd (REL) respectively.

Recently, R-ADAG said the amalgamation of REVL with REL has become effective from July 17 and the merger of RCVL with RCL has been completed from the same date.

Five shares of RCL will be issued for every 100 of RCVL and 7.5 shares of REL will be issued for every 100 of REVL.

The RIL scrip had ended at Rs 928.15 on January 17. Last Friday, it closed at Rs 967.55.

If one were to include the market price of the four demerged company shares as well, the cumulative price works out to almost Rs 2,080 per share. It would have been higher, had it not been for the sharp downturn in equity values seen last week.

Among the two groups, it has been the R-ADAG shares, particularly Reliance Communications and RNRL, which have witnessed some erosion in values from their highs. Although analysts are positive in their outlook for the companies over the long term, it has been the RIL share which has been able to withstand not only the market volatility but also disappointment that was generated from the first-quarter results (April-June).

The optimism of analysts has only grown since Mukesh threw light on the retail revolution plans. Corporate cognoscenti are equally positive about the prospects of RIL’s existing businesses.

News: Indians top Dubai's potential investors list

(BL 24/07/2006) Dubai - Indian entrepreneurs topped the list of foreigners queuing up to invest in Dubai, whose Department of Economic Development (DED) received 1,152 business licence applications from the sub-continent nation.

In all, the DED issued 8,318 licences for doing business in Dubai during the first half of 2006. While 1,152 applications were received from Indians, Iranians were a distant second with 578 investors applying for permits that are mandatory for running a business in UAE, according to Gulf News.

The Gulf Cooperation Council countries accounted for 364 applications, placing them third in the list. Saudi Arabia topped the list among the GCC countries, with 191 investors figuring in the applicants list.

The DED Deputy Director General (Executive Affairs), Ali Ebrahim was quoted by the daily as saying that the number of new licences issued did not indicate actual new business ventures in Dubai.

"Several factors including the macro-economic environment, the expected amendment of federal regulations and Dubai's competitive edge determine the growth of the business ventures," he said. The licences are divided into four categories - commercial, professional, industrial and intelaq (for UAE nationals wishing to run small businesses from home).

According to UAE regulations, every business needs to be fully registered by a local resident or partner.

News: ING Vysya MF launches close-ended equity fund

(RTR 24/07/2006) Mumbai - ING Vysya Mutual Fund said on Monday it will launch a close-ended fund which will invest in small-cap companies, marking its tenth equity fund in India.

The ING Vysya C.U.B (Competitive Upcoming Businesses) Fund will be open for initial subscription between July 25 and August 21.

The fund will be managed by Chief Investment Officer Paras Adenwala who oversees eight other equity funds and one balanced fund.

The fund can invest 65-100 per cent of its assets in small-cap companies, up to 35 per cent in other equity and equity-related securities and up to 25 per cent in money market instruments, according to its offer document.

It will be converted into an open-ended fund after 3 years.

ING Vysya Mutual Fund had assets worth Rs 3,600 crore .Rs 3,800 8 crore on June 30.

News: Indian airways hotting up

(HT 23/07/2006) Mumbai - India's airlines business is heading for a major shakeout as large number of private airline employees get set to join IndiGo, the latest venture with its 100-plane plans. IndiGo is potentially the biggest-player to start operations in early August.

“All of a sudden there is lot of excitement. Many of us are considering a shift as the offers are too lucrative to resist,” said a senior engineer of an airline on the current buzz in the job street. Bearing the brunt are smaller airlines managing now with shoestring budgets and wafer-thin margins.

After the Jet-Sahara break up, private airline employees once again find themselves on top of the food chain as IndiGo begins its hiring spree, sweeping up engineers, pilots and support staff in a sector that is critically short of trained personnel.

Ground duty engineers currently earning a monthly salary of Rs 80,000 are being offered Rs 1.30 lakh as monthly compensation, said market sources. IndiGo is making similar offers for other grades.

“We are certainly hiring and will be hiring more in the months ahead,” said IndiGo Chief Executive Officer Bruce Ashby to HT. Denying hiring on premium, he said, "We are only paying market rates."

News: Cambridge University Press to cash in on India's BPO boom

(IANS 23/07/2006) New Delhi - The Cambridge University Press (CUP), the world's oldest publishing house, plans to cash in on India's BPO boom by customising the English language for the burgeoning army of 20-something call centre employees.

The publishing house, which recently set up shop in India, will focus on customising a special type of English for call centres and BPOs as there are growing employment opportunities for those wishing to join this booming industry, CUP chief executive Stephen RR Bourne told said.

"It's mainly going to be about vocabulary and the structure of sentences. The idea is also to familiarise them with geography of different places in the world so that it doesn't matter which part of the world they are catering to," he maintained.

English language courses contribute a third of the nearly Rs 12 billion annual revenue of the 425-year-old publishing house that has published books by iconic figures like Isaac Newton, John Milton and, more recently, Amartya Sen.

A division of the venerable Cambridge University, CUP publishes nearly 2,500 books and over 200 journals every year that are sold in over 200 countries.

With the new venture in India, with its nearly 300 million strong middle class familiar with some form of English or other, the business is bound to boom.

Besides English for Special Purposes (ESP) courses, CUP's focus in India will be on publishing quality educational books. Bourne is excited about working in the Indian market and with Indian academics.

"We have been working with Indian academicians for a long time now. We will publish books in science and also mathematics in this country. Moreover, the books printed here would be exported to Arab and African countries," he said.

Impressed by the "growing educational publishing industry" in India - 20,000 new titles are published every year - Bourne waxed eloquent on the new "business culture" in the country that has encouraged CUP to set up shop in India.

"India is a vibrant educational and IT market. It's a great place to publish, to develop new products," the tall and dapper publisher said, contrasting the country he visited 25 years ago as a young man with a new India bristling with ideas and possibilities.

"In those days, it was a difficult country to do business in. Twenty-five years ago India was not associated with technology. It was associated with old things and not new things," he recalled.

"Till that point, it was quite inward looking. It was respectful of the empire. Now, it's coming into its own," Bourne said.

His enthusiasm for CUP's new venture - it acquired 51 per cent stake in the Delhi-based Foundation Books recently to enter the "vibrant" Indian market - was writ large on his benign face. "So much has changed. This country has come a long way in encouraging us to do business here".

CUP has been extremely successful in adapting to technology and has recently created a database of 15,000 digital files of books.

News: Tata MF to launch real estate mutual fund

(PTI 23/07/2006) New Delhi - Tata Mutual Fund is all set to launch a Real Estate Mutual Fund (REMF) scheme and is awaiting regulatory approvals.

"We are ready with our plan for the real estate scheme, however, awaiting market regulator to effect amendment in SEBI (Mutual Funds) Regulations," said Tata Assest Management Ltd, managing director Ved Prakash Chaturvedi.

The fund would be in the market for subscription two months after the final approval from SEBI in the form of necessary amendment, he said.

"Since guidelines were finalised last month, I believe by December the fund house will have its scheme in the market," Chaturvedi said.

He said, real estate is emerging as the new asset class and as part of Tata Group, which has a large asset base, it will definitely have an advatage over other mutual funds.

Fund houses like Prudential ICICI, HDFC and UTI Mutual Fund have already announced their plans to launch real estate mutual funds.

According to the guidelines issued by SEBI in the last week of June, the scheme will invest directly or indirectly in real estate property.

The structure of REMFs, intially, shall be close ended. The units of the scheme shall be compulsorily listed on the stock exchanges and NAV of the schemes shall be declared daily.

The REMF shall appoint a custodian who has been granted a certificate of registration to carry on the business of custody of securities by the board. The custodian will safekeep the title of real estate properties held by the REMF.

News: 'India could be global metal hub'

(PTI 23/07/2006) New Delhi - National Manufacturing Competitiveness Council has said it is quite puzzling to see India not emerging as the global metal hub despite possessing natural resources and world class engineering and metallurgical talent.

"We have the engineering, metallurgical talent and yet we are not growing. We are endowed with natural resources such as iron ore, coal, and other minerals. We have the capacity to design the equipment that goes into the plants," Council chairman V Krishnamurthy said at a CII meeting.

Tata Steel Managing Director B Muthuraman said India could also meet the needs of its neighbours like China and Vietnam as they don't have the resources but have the demand.

Government needs to recognise that metals industry could be a big engine for growth and look at it from that perspective rather than try to solve some transient problems. The target is to create a vibrant 400 million tonne industry, he added.

"We need to earmark specific tracts of land near the coast or near the source of raw material as the steel projects require large tracts of land.

Many states don't have rehabilitation policies, which are a hindrance for acquiring land for projects, Muthuraman said.

Industry specific infrastructure like roads, rail, ports connecting the mines and the plants should be created.

Water crisis is yet another factor that affects the industry, he said. "Steel production is a water guzzler therefore there is a need to have mega water projects. Unless the water problem is solved the steel industry could not achieve the desired growth rates”.

News: Do desi millionaires know how to live in style?

(TNN 23/07/2006) New Delhi - Did you know that India now has more than 61,000 individuals with assets exceeding one million US dollars ? Indeed, according to the World Bank, India has emerged as the twelfth wealthiest nation in the world, with its GDP touching Rs 35,34,615 crore in 2005. It seems, toss a solitaire in India today, and you’re bound to hit a billionaire, millionaire or other such high net worth individual (HNWI)! But do all these megabuck magnates know what to do with all the moolah? Going and blowing up a million at the mall may sound tempting, but is sooo pedestrian, if you know what we mean! Internationally, those who rake in millions live like a million dollars.

And so much of the world’s time is spent discussing which of these Ultra-HNWIs (those with more than $30 million in financial assets ) spends how much on what, that Forbes magazine has even calculated a Cost of Living Extremely Well Index (CLEWI), which measures how expensive it’s becoming to live the high life. So while an Ultra-HNWI would bear the collective cost of using a basket of products and services, including private jets, Rolls Royces and luxury yachts, the mere HNWI would use relatively lower-priced items in the same categories, such as first-class airfare, BMWs, motor yachts, etc.

So what does it take to really belong to the champagne set in India? Says Parvez Damania , executive director of Kingfisher Airlines: “Very few people in India live the lifestyle of the international super rich. You can have the money, but you have to have the taste and the heart to spend that kind of money. One person here who lives that lifestyle is Vijay Mallya. I’ve seen his taste in cars, art, yachts... that cannot be bought with any amount of money. Mallya truly lives like the global super rich. He’s the only person I’ve seen in India with an original Picasso.”

So is a Picasso what it takes to be the Richard Branson of India? Ask the quintessential king of good times who owns all the right trappings – from designer homes, thoroughbred horses, yachts, vintage cars and private jets to his own airline, a castle in the UK and the Art of Living cause to support. Or someone like Raymond’s head Gautam Singhania, who is just as famous for his luxury lifestyle and need for speed, driving F1 cars and racing boats. Add to that, a lavish display of wealth at special occasions – like Lakshmi Mittal, who spent a fortune on his daughter Vanisha’s $78 million-wedding and is definitely one of the uber rich after topping the Sunday Times London’s Rich List 2006 with his £14,881 million . Or Subrato Roy, Sahara CEO, who has created his own ‘city’ in Lucknow and threw open his sons’ most lavish double wedding celebrations to everyone in the vicinity as well as celebrities a few years ago.

Or the Godrej weddings and parties, where the conspicuous consumption goes through the roof, with flowing Dom Perignon and charter flights for guests!

To live like the international rich, you need to make the right choices. Forget the cruise, buy a $10 million residence on The Orphalese, a luxury liner which will take you not merely to the world’s best destinations, but to the most exclusive and exciting international events! Don’t just buy a Louis Vuitton handbag; clear the interview and shop at Celux, the uber exclusive Tokyo-based LVMH store, which stocks only limited edition merchandise.

Forget that island holiday, do a Richard Branson and buy yourself a whole manmade island at Dubai’s The Palm or The World. Don’t just order takeaway; fly in a wood fire-baked pizza topped with fresh Italian white truffle shavings from chef Gordon Ramsay’s Maze restaurant in London. Don’t just buy five-figure-priced sports shoes for your kids; wangle an invite to Nike’s iD Design Lab in New York where you can custom design a special pair of sneakers. And charge it all to an American Express Black Card made in titanium, which you can only get after spending $250,000 on another American Express card!

Apart from the right possessions , you also need the right attitude. Anuradha Mahindra, editor and publisher of an upmarket women’s magazine, avers, “It’s important to exude a sense of comfort with the luxury product rather than be attached to the designer label. The brand should never overpower the persona.” According to her, benchmarking yourself against somebody else is pointless; it’s what the wannabes do. “The true uber set denizen uses luxury to add value to his or her own life, family or community.

For example, it’s clear that the person purchasing an island will surely invite family and friends to share the pleasures,” she says. This holds true for other things too. Anil Ambani’s yellow Lamborghini may give him a vroom with a blurry view, but the ones who enjoy this sports car the most are his two sons.

For some – like Bill Gates, Azim Premji or India’s richest woman, Kiran Mazumdar Shaw, who prefer to adopt a Spartan profile despite having access to the best – it’s a sort of reverse snobbery. Queenie Dhody, who embodies the good life, says: “Some of the very very rich people I know lead a very simple lifestyle, while some not as wealthy live beyond their means. So I think it’s a very individual thing.”

News: 'Japanese cos to invest $1.8 b in India in next 3 yrs'

(BL 23/07/2006) New Delhi - Japanese investment in India will rise three times to $600 million per year as a host of Japanese companies have expressed interest to collectively invest $1.8 billion in the next three years, said Dr Ajay Dua, Secretary, Department of Industrial Policy and Promotion.

While speaking at a press conference after Japan External Trade Organisation's announcement to set up a business centre in India, he said, "About 21 large Japanese companies have expressed interest in investing in India mainly in auto, telecom and chemicals."

News: 'We believe in India's potential' - Dell

(PTI 23/07/2006) New Delhi - World's largest PC maker Dell Inc has reiterated its confidence in the strong potential of the Indian market, notwithstanding the downward revision to the company's already sluggish forecasts for the second quarter.

Dell's share price plunged nearly 10 per cent on Friday after the company said it expected lower revenue and earnings per share for the June quarter due to "aggressive pricing in a slowing commercial market worldwide".

The company said in a regulatory filing with the US Securities and Exchange

Commission that it expected Q2 FY07 revenue at approximately $14 billion and EPS of $ 0.21-0.23, which were below the analysts' estimates for the quarter.

However, the company's vice president for corporate group communications, Bob Pearson, said from Texas the company was making right decisions to provide value to its customers and these efforts would boost its shareholder value in the long term.

Pearson said the company would continue to expand its business throughout the world and it expected to end this year with the broadest product line in its history.

"We believe in the potential of the India market for Dell and our customers," he added.

The company has witnessed a sharp plunge in its market valuation in the recent past on the back of intensifying pricing pressure in the personal computer market worldwide.

Dell's share price has dropped more than 50 per cent over the past one year, while wiping out nearly $ 50 billion from its market capitalisation.

News: Indian FMCG sector likely to grow 50%

(UNI 23/07/2006) New Delhi - The growing penchant of rural and semi-urban consumers for Fast Moving consumer Goods (FMCG) products, is likely to drive a more than 50 per cent growth in the sector, with its market size likely to touch Rs 1,06,300 crore by 2012.

The FMCG sector, which in totality is projected to grow at a Compound Annual Growth Rate (CAGR) of 10 per cent, will expand its market size to over Rs 1,06,300 crore, from the present level of Rs 60,000 crore, industry Chamber Assocham said.

Also, the urban population will develop a bigger craze for organic health products in the FMCG sector, which are not available in a large number, pushing this industry to look for a larger market size in the rural and semi-urban areas, the Chamber said.

In the rural and semi-urban areas, the FMCG market penetration is currently about 2 per cent as against its total growth rate of about 8 per cent, Assocham President Anil K Agarwal said.

The Indian rural market with its vast size and demand base offered huge opportunities, which the FMCG companies cannot afford to ignore. With 130 million households, the rural population is nearly three times its urban counterpart, Agarwal said.

The FMCG products that will catch the eye of rural and semi-urban folks, will mainly comprise soaps, detergents, cold drinks, consumer durables, toothpastes, batteries, biscuits, 'namkeens', mosquito repellants, refined oil, and hair oil.

In the semi-urban areas which include townships of larger sizes, the Chamber estimates that a good number of malls will have to be put up in the next 4-5 years, which will sell large volumes of FMCG products thereby increasing their demand phenomenally.

Big brands like Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola and Pepsi will grab the major share of the growth.

The rising rural and semi-urban income levels, coupled with massive advertisement of FMCG products in the electronic media, will also play a major role in awakening the rural and semi-urban folks towards FMCG products, resulting in enlarging their affordability for them.

Assocham has suggested that to tap the rural and semi-urban market, better infrastructure facilities like roads, better telecom connectivity in rural areas, proper sanitation and healthcare facilities should be created.

News: Pantaloon’s Food Bazaar to add 150 new stores

(UNI 23/07/2006) New Delhi - Pantaloon Retail (India) Ltd's Food Bazaar, which is planning to add 150 new stores in the next two years, will expand its presence in edible oil to generate 15 per cent of its total revenue from this growing business.

''We are excited by the opportunity in edible oil, which at present accounts for more than 10 per cent of our revenues, and will expand this category through our modern retail formats. Revenues from the edible oil business can go up to 15 per cent by partnering and experimenting with a large oil player,'' Pantaloon Retail India Ltd MD Kishore Biyani said here while announcing a strategic tie-up with Ruchi Soya Industries Ltd, a leading producer and supplier of edible oil in the country.

Encouraged by the consistent performance of its in-house Food Bazaar brands, Pantaloon is planning huge expansion in edible oil, through partnership with Ruchi Soya.

Food Bazaar stores are expected to grow to 200 in the next two years, from the present 50.

''The tie-up will help us cater to the growing demand for FMCG products and reap the benefit of rising disposable income,'' Ruchi Soya MD Dinesh Shahra said.

Pantaloon will also launch a private label by the name of 'Fresh and Pure' in the next two months, that will be manufactured by Ruchi Soya, while the the brand management and sale will be handled by Pantaloon.

Besides, Pantaloon has also announced tie-ups up with three other companies -- Fun Foods, S R Foils and Nepal's Wai Wai, just before the two-day vendor fair it is organising in Delhi, from July 21-23.

The alliance with Fun Foods will entail setting up of salad bars at Food Bazaar stores, which will offer customers fresh salads with an array of salad dressings, and will give them the option of either making their own salads or choosing from a ready set of recipes.

Food Bazaar and the S R group, manufacturers of aluminium foil, paper tissues and cling film owners of the brands -- Home Foil, Mistique and Clean Wrap -- will collaborate to lower prices in these categories and grow them by bringing supply chain efficiencies, thus generating revenues for both companies.

Under the partnership with the Chaudhary Group from Nepal, Pantaloon will sell the group's 'Wai Wai' branded noodles at all Food Bazaar stores all over India.

The alliance will give the noodles a strong platform alongside existing market leaders Maggi and Top Ramen, ensuring Food Bazaar will offer more choices to its customers.

Food, grocery and tobacco account for 72.2 per cent of the Indian retail market, and Pantaloon sells dal, spices, basmati rice, atta, salt, tea, masala and pulses, among others under Food Bazaar.

The company's in-house brands have garnered a market share of 25-40 per cent in its existing stores.

News: Pantaloon Retail June sales up 52%

(BS 22/07/2006) Mumbai - Retail sales of Pantaloon Retail (India) increased 52% to Rs 176.77 crore in June when compared with Rs 116.25 crore in June 2005, according to an official release issued today.

For value retailing, sales were at Rs 128.80 crore as against Rs.79.39 crore - a YoY growth of 62.24%. For lifestyle retailing, the company recorded sales of Rs 47.97 crore as against Rs 36.86 crore during the same period last year - a YoY growth of 30.14%.

Same store growth in value retailing for June stood at 10.83% and for lifestyle retailing at 18.83%. The above sales figures for the month of June 2006 and June 2005 include Shop in Shop (SIS) sale of Rs.5.06 crores and Rs.9.94 crores respectively.

News: Indian airlines take off into the heartland

(TNN 22/07/2006) New Delhi - Rural India is fast turning out to be a big money-spinner for the airline industry in India. With the galloping Indian economy taking rapid strides even in rural pockets, recent months have seen a spurt in demand from small towns in India for hiring private planes.

And these aircraft are being hired, not for transporting people or goods, but for showering flowers at birthdays, marriages and religious ceremonies. The recent marriage season alone saw chartered airline operators book over 200 orders for flower-dropping from these small towns spread across the length and breadth of India.

In comparison, the bookings last year for similar activities stood at under 30. “Flower-dropping at ceremonies was always considered a secondary source of income for small aircraft operators. But the surge in demand in the last few months has turned it into a primary revenue earning source for many an operator.

So much so, that some operators are now permanently parking aircraft at these small towns,” says Capt Yashraj Tongia of Yash Air. While bookings for such events have been flowing in from across the country, the cities leading this trend are Ujjain, Ratlam and Dewas in Madhya Pradesh, Solapur, Chandrapur, Akola and Yavatmal in Maharashtra, and Baroda and Anand in Gujarat.

Booking a small plane for flower-dropping costs between Rs 40,000 and Rs 1 lakh, depending on the location of the event. “This concept has become very popular in small towns, thanks mainly to the novelty factor. Besides, it’s a big show-off occasion for the rich and mighty in these cities.

It’s an interesting site and adds to the glamour part of the event,” says a city-based charter airline operator. This surge in demand has promopted the government to allow even flying schools to undertake such activities.

News: Indian BPOs look at low-cost countries

(ACERC 22/07/2006) Mumbai - Indian BPO companies are increasingly setting up shop in low-cost countries. If you can't beat them, join them, seems to be their motto. Countries in East Europe, South America, Canada are fast emerging as competition to India as a destination for the global BPO industry. Indian BPO companies have also started setting up their own operations in these countries to compete with global majors like Accenture, EDS, IBM, CSC and others.

Cities like Budapest, Bucharest and Warsaw, are being preferred due to their cosmopolitan population which is also multilingual. These cities can service West European destinations in 15 different languages including German, French, and Italian.

Indian BPOs are setting up operations in Dalian, China to service the Japanese and the Korean markets while near-shore locations like northern Ireland have emerged to service clients in UK. Moreover, opening these global centres help Indian BPOs showcase a robust disaster recovery and business continuity plan.

Multiple centres in different geographic locations brings down the overall geopolitical risk of operating as compared to a single-country operation. Wipro's BPO has set up shop in Romania and the reason behind this says Manish Dugar, CFO, Wipro BPO, is the multi-lingual capabilities of the place. Genpact, too, has around 500-1,000 seat centres in Budapest, Hungary, Romania and Bucharest for similar reasons. Apart from multi-lingual capabilities, it is the urge to service American markets that have drawn BPOs like Genpact, Transworks and TCS BPO to locations like Mexico, Canada and Chile.

News: Indian banks to raise hybrid capital overseas

(BS 22/07/2006) Mumbai - The Reserve Bank of India (RBI) today allowed commercial banks to raise capital funds through issue of foreign currency debt instruments. Foreign institutional investors (FIIs) can invest in these instruments.

The State Bank of India, Bank of India, and UTI Bank have lined up plans to soon tap the overseas market with upper Tier-II bonds and innovative perpetual debt instruments (IPDIs).

Following the RBI nod, banks will be able to raise about $9 billion of capital through issue of IPDIs and debt capital instruments overseas. The IPDIs will be eligible for inclusion as Tier-I capital, while the debt instruments will qualify as upper Tier-II capital.

Tier-I capital consists of equity and unimpaired reserves, while long-term subordinated debt and certain reserves constitute Tier-II capital, which can equal the size of Tier-I capital.

Banks can raise debt capital through issue of IPDIs up to 15 per cent of Tier-1 capital as on March 31 of the previous year, and only 49 per cent of this can be raised in overseas markets.

Debt capital can be raised through issue of upper Tier-II debt instruments up to 25 per cent of Tier-I capital. These borrowings will be over and above the foreign currency borrowing limit of 25 per cent of Tier-1 capital set for banks by the RBI.

FIIs’ investment in upper Tier-II instruments will be subjected to an overall ceiling of $500 million.

However, there will be no cap on investments by FIIs in IPDIs and upper Tier-II instruments raised in Indian rupees. At present, FII investments in corporate debt instruments are capped at $1.5 billion.

The RBI, in January 2006, had allowed banks to augment their capital funds through issue of IPDIs and Tier-II debt instruments, to meet capital requirements arising from the proposed implementation of Basel-II capital adequacy norms from March 31, 2007.

However, banks were required to take prior permission from the RBI for floating these instruments overseas.

The revised guidelines allow banks to raise foreign debt capital without such prior permission, subject to compliance with certain conditions.

The capital raised through these instruments will not be treated as a liability for calculation of net demand and time liabilities, and will not attract SLR and CRR, which are reserve requirements specified by the RBI.

A banker said that while the foreign currency funds raised earlier as 25 per cent of Tier-I capital were to be parked overseas and used for international operations, the new scheme permitted Indian banks to bring the funds into India.

News: Idle assets beat retreat

(TT 22/07/2006) New Delhi - State-owned banks have pruned further the burden of idle assets last fiscal.

Net non-performing assets of public sector banks “have declined to 1.4 per cent at the end of 2005-06 from 2.2 per cent in the previous year, signifying better credit appraisal and recovery by these banks,” finance minister P. Chidambaram said today.

“This means the banking system is stronger, credit appraisal and recoveries are better,” he added.

“Last year, I had said next year net non-performing assets would go below 2 per cent. It has actually gone down to 1.4 per cent,” he added.

The gross NPA of PSU banks went down to 3.9 per cent as on March 31, 2006 from 5.7 per cent a year ago and 8.1 per cent at the end of 2003-04.

The net NPA as a whole declined to 1.3 per cent at the end of 2005-06. The gross NPA too went down to 3.5 per cent, the minister said.

Chidambaram admitted that last fiscal was difficult as rising interest rates had affected the treasury management of banks and their net profits were hit.

Only five of the 27 PSU banks have achieved the net profit levels projected in the statements of intent they signed with the finance ministry for 2005-06, he said.

Others were “slightly lower” than the projections made by them.

News: Ambani factions start yet another conflict

(PTI 22/07/2006) New Delhi - A new round of conflict started on Friday between the Ambani brothers, with the faction led by Mukesh alleging 'harassment' of its employees by Anil Ambani group company Reliance Communication at its headquarter - Dhirubhai Ambani Knowledge City, a charge denied by the other side.

RIL sources said that its employees were harassed and were being denied access to cafeteria, temple and other facilities and wondered as to why its employees should be subjected to such a treatment on payment issues that are discussed at the management level.

When contacted, sources in the Reliance Communication (RCL) termed the allegations as fictitious, distorted and malicious and said that access to temple in DAKC has never been barred to anyone.

In its counter attack, RCL contended that RIL had defaulted in payments of nearly Rs 200 crore for use of facilities at DAKC for over a year in spite of several reminders.

Complaining of harassment for the last three days including denial of access to computers and software, RIL sources said that the treatment was against the cooperation nature and the spirit that exist between the two.

In an e-mail to its employees, RIL, headed by Mukesh, said: "The turn of events is most unfortunate and unimaginable. But, as RIL staff, RIL management is confident that all of us to be resilient and do not react."

"I am sure, your erstwhile colleagues, friends and relatives working in Infocomm would also share sympathies," the e-mail by a top executive of RIL HR department said.

News: Are FIIs done with the India story?

(DNA 22/07/2006) Mumbai - During the last 15 trading sessions this month, foreign institutional investors (FIIs) have been ambivalent to Indian equity markets. At one point, they had even sold more shares than what they bought in the whole of June. Fed chairman Ben Bernanke's comments on core inflation toning down in the US on Thursday saw FIIs coming back, but only to stay for a day.

While the FIIs bought shares worth Rs 479.50 crore net in June, they have already sold Rs 237 crore this month as on Friday. So, have the FIIs stopped buying the India story? Market experts say that the FIIs are turning away from equity in general, and not India specifically. "Hardening of interest rates and higher crude prices have made investors risk-averse. Hence, funds are flowing from equity to debt instruments, which have turned more attractive due to interest rate hikes. The outlook for equity as an asset class, thus remains hazy, but things will be clearer in about three months from now," says Manish Sonthalia, vice-president, equity strategy, Motilal Oswal Securities.

The FIIs invested a record Rs 47,181 crore in 2005, averaging net inflows of Rs 3,931.75 crore a month. However, in 2006, net FII investments have averaged only Rs 1,660.92 crore till date. Thus, this year will see much lower FII investments compared with 2005, unless there is a miraculous rebound in interest. To match last year's investments, the FIIs will need to invest an additional Rs 36,285 crore between now and December-end, or an average

Rs 6,615.45 crore a month. If inflows touch that level, the Sensex will be up there in the clouds.

Nobody thinks that is likely, but then nobody wants to say it's all over, too. "The next two months are crucial," says Kumar Nair, managing director of Transwarranty Finance, a Mumbai-based investment bank. Investors are on the back foot and they are closely watching the index of industrial production, which saw 9.8% growth in April-May this year compared with 9.5% last year.

The RBI's credit policy review meeting on July 25, which is widely expected to raise interest rates by a quarter percentage point, is also being closely watched for signals.

While rising interest rates are bearish for stocks in general, any major drop in market valuations could attract foreign funds, says Nair. On the valuations front, the price-to-earnings ratio of the Sensex has fallen from 22.95 on May 10, 2006, to 17.94 as on July 21, 2006. Since India Inc is projected to report an average profit growth of 15-20%, this ratio could drop further in the months ahead.

But valuation-driven buying can come only later, once there is clarity on the direction of oil prices, inflation and interest rates, says Sonthalia of Motilal Oswal.

In 2006, FIIs were net buyers of equity worth Rs 3,678 crore in January. They pressed the pedal in February as well, mopping up shares worth a net Rs 7,588 crore. However by April, they started showing signs of fatigue, and turned net sellers for the first time in May. They have only invested Rs 10,796.70 crore in 2006 till date.

News: India's Exim Bank to invest $10 m in Asian fund

(DNA 22/07/2006) Kolkata - The Export-Import Bank of India (Exim Bank) has decided to invest around $10 million into a $100-million pan-Asia development fund, which is being sponsored by IL&FS and Orix Corporation of Japan, to involve Indian companies in project-contracting capabilities, enabling them to participate in infrastructure projects across Asia.

Exim Bank is also aiming a target growth rate of 25% to raise funds worth around Rs 6,000 crore in Indian currency and $800 million of foreign funds this year.

It is likely to go in for innovative instruments like Samurai bonds and medium-term notes for raising the foreign currency capital.

To increase its support to Indian companies venturing abroad, the bank is also taking up equity exposures in companies on a selective basis, while also providing them lines of credit to do business.

"The objective is to support these companies in overseas markets and provide credibility and also have a local legal presence. But we are doing it on a selective basis.

"In most cases, the equity investments in companies is up to a maximum of five years, the time within which the companies back the shares," T C Venkat Subramanian, chairman and managing director, Exim Bank, said.

The equity exposure is generally restricted to $10 million in a single venture and 25% in a joint venture. Exim Bank has recently picked up a token stake in companies like Tata Coffee and Gujarat Heavy Chemicals Ltd.

Among some of the recent overseas acquisitions by Indian mid-size companies financed by Exim Bank include a Taiwanese company engaged in the manufacture of gelatin, soda ash facilities in Romania, a large home textiles company in the UK, an oil rig company in Norway and a major coffee brand in the US.

Subramanian was speaking to newspersons on the sidelines of a banking summit here on Friday.

"The proposed pan-Asia Project Development Fund will cover countries like Cambodia, Indonesia, Malaysia, Philippines, Sri Lanka, Thailand, Vietnam and India.

"And the projects developed under this fund will be first offered to Exim Bank for funded and non-funded financial support," the CMD said.

Exim Bank has also picked up stakes in some African banks. "Indian companies are a little apprehensive to go to West African markets. Hence, we are stepping in to provide credit facilities."

As part of its initiatives to help the Indian SME and rural enterprises get better prices in the overseas markets, Exim Bank is joining hands with SMEs and self-help groups (SHGs) for providing marketing support.

News: ICICI Bank Q1 net up by 17%

(RTR 22/07/2006) Mumbai - Country's second-largest lender, ICICI Bank, on Saturday posted a 17 percent rise in its quarterly earnings, beating forecasts, riding on strong loans demand from individuals and companies expanding capacity.

The bank said net profit rose to RS 620 crore in the April-June quarter, from Rs 530 crore a year earlier.

A Reuters poll of 10 analysts forecast a 12.36 percent rise in net profit at Rs 596 crore for the New York-listed bank.

The banking sector's loans grew 31 percent during the quarter, faster than the central bank's target of 20 percent for the year.

The buoyant loans growth reflected in ICICI Bank's total income rose 50 percent to 63.16 billion rupees, from 42.06 billion rupees a year ago.

Shares in ICICI Bank, underperformed during the June quarter, falling about 17.3 percent, lagging a 5.95 percent drop in the BSE's main index.

News: SatyaGiri's waterway is set for smooth sail

(DNA 22/07/2006) Mumbai - After a two-year delay, MSRDC awards contract to Satyagiri Shipping.

For a city with limited road space and the sea forming a border for enormous lengths, it has never been clear why the sea was not used for transport.

Theories have been floated for years but finally, they seem to have hit the water. The decks have been finally cleared for passenger water transport along the west coast of Mumbai. After a two-year delay, the Maharashtra State Road Development Corporation (MSRDC) finally gave the letter of award to a consortium led by Mumbai-based Satyagiri Shipping for the Rs1,100 crore project. Under this, commuters can travel between Nariman Point and Borivali in air-conditioned hovercrafts and catamarans. Time taken: 50 minutes. Time taken for the same journey by train or road: anywhere between an hour and half to three hours.

SR Srinivas, joint managing director of MSRDC, said, “We have issued a work order. After Satyagiri gives us a bank guarantee and deposits, work on the ferry terminals will start. It is still premature to talk about fare costs, but I assure you that they would be economical;

In the phase one, three terminals will be constructed at Nariman Point, Versova and Borivali, while the second phase will take in Bandra, Marve and Charkop. Juhu has been kept as an optional site.

The project will be implemented on a ‘Built-Operate-Transfer’ (BoT) basis, with a 30-year lease. However, the feasibility of this project as well as affordable fare prices lies on the concession agreement between Satyagiri and the Maharashtra government. The former wants the project to made part of the Inland Water Transport (IWT) policy so that it can avail of subsidies on fuel and reduction in import duties. “We need concessions to make it a public, eco-friendly transport system. We expect to sign the concession agreement by the end of the year and kickstart work in January 2007,” stated Nitin Joshi, chairman and managing director, Satyagiri Shipping.

All terminal buildings will have a passenger lounge, a bookshop and a cafetaria. Passenger amenities will be kept in mind and entertainment avenues will be explored to ensure that the operator earns revenue. The choice of the crafts has been solely left to the operator. They could use hovercrafts or catamarans or both.

However all crafts have to be chosen as per the International Standards of safety, comfort and size. There may be some suspension of services on heavy rainfall days during the monsoon.

“We have planned a 15 minute frequency during peak hours and 30 minutes at non-peak hours. The water is a very good and long overdue solution to the city’s traffic chaos. We can relieve quite a bit of pressure on existing transport systems. We expect to kickstart phase I of the project by 2008,” stated Joshi.

News: Wal-Mart knocks on Mukesh’s door for an alliance

(DNA 22/07/2006) New Delhi - Guess who’s among the companies that Wal-Mart is in talks with for its India foray? Topping the list is Reliance Industries Ltd (RIL), which itself is giving the finishing touches to its own retail juggernaut likely to be rolled out next month.

Also a surprise since RIL is planning to give India a Wal-Mart like presence in scale and size of operations and could well be a future competitor to the US giant.

An industry source pointed out that Wal-Mart is interested in partnering RIL in the area of logistics - which means sourcing items such as fresh fruits and vegetables, besides their transportation to the length and breadth of the country. RIL is readying a 40-plane air cargo fleet for its own logistical needs and this could serve Wal-Mart’s purpose as well! When contacted, Reliance officials declined to comment on the matter.

Wal-Mart has appointed management consultant McKinsey & Co to help find a suitable partner or several of them for its India operations. Despite several attempts, Wal-Mart India representative Lance Retigg could not be reached.

And it’s not just RIL. Wal-Mart is also believed to have approached ot