News: Here's why western firms are heading towards India

(IANS 30/09/2006) Florence - Indians are great learners, India is a democracy and also a safe place to invest - this is the growing feeling among Western financial circles.

Aliza Knox, senior vice president of Visa's international commercial operations, says India is the other major source of interest at the moment.

"Indians have a strong desire to learn and to progress and are more adaptable to new ideas," she said. "Some of their bankers are even more sophisticated than their colleagues in Europe or the US."

Knox was among the more than 1,000 "money managers" from some of the world's most important companies who attended a meeting in this Italian city this week.

Now the world's fifth-largest economy - as measured by purchasing power parity - after the European Union, the US, China and Japan, India is attracting plenty of foreign direct investment. This is in part due to its strengths in IT and the ability of its workers to adapt to a changing world.

According to Harry Harding, head of research and analysis at Eurasia Group, a political risk advisory and consulting firm, India is also a safer place in which to invest than it was years ago.

"Relations with China have become more stable and terrorism still has only a limited impact. Let's hope it doesn't escalate," Harding said, while talking about India.

Harding said one of India's main attractions, setting aside its poor infrastructure, was represented by the fact that its leftwing parties were now beginning to embrace the market. "Of course there are backlashes, but India is a democracy and we are very optimistic. It is definitely a success story," Harding said.

China, without doubt, also remains a key attraction in Asia.

"Countries like China and India have enjoyed a huge amount of exposure and have attracted a lot of interest among participants," said Martin Giles, managing director of The Economist, the international affairs publication organising the Sep 27-29 Eurofinance conference.

The reasons are obvious enough.

With a gross domestic product (GDP) growth rate of 9 per cent over the past decade, China's economy is expanding fast. Joining the World Trade Organisation in 2001 and easing restrictions has reaped benefits, with a whopping $60 bn in foreign direct investment pouring into the country last year alone.

The fact that it has a population in excess of one billion means China has a huge domestic market that needs satisfying. Manufacturing in China is cheap and exporting easy.

But what are the main challenges and difficulties facing European and American companies that want to invest in China today?

According to Hong Kong-based Marlene Wittman, group managing director of Aquitaine Investment Advisors, an investment management firm that specialises in alternative investments in Asia, one of the main problems facing foreign companies is the fact that regulations in China keep changing.

"If the Chinese government needs to attract foreign investment, it will ease regulations, if it wants to protect its industries it will make them more stringent. Some call it the weathervane approach," Wittman said.

For instance, no less than six government ministers must now approve takeovers in China. "This makes things very difficult," Wittman said.

According to her, getting the support of a competent local partner is the key to doing business in China. "Spending lots of money on lawyers and accountants won't help."

But though red tape is still a major issue in China, the future looks bright.

"The business world is definitely pulling the government, and there is a new generation of civil servants who have studied in the West and will soon get into power," she said.

One company that is betting heavily on China and Asia in general is Visa, the credit and debit card company.

Visa's sponsorship deal with organizers of the 2008 Olympic Games in Beijing is obviously designed to increase its brand awareness and improve ways of penetrating those markets.

"The card business in China is growing tremendously, it's definitely looking up," said Knox.

Visa's latest figures indicate that the volume of transactions going through its electronic payment systems has hit $53.8 bn in Asia in the year ending June 2006, up 12 per cent from the previous year.

News: Indian FII inflows top $5bn in 9 mths

(BS 30/09/2006) Mumbai - Foreign institutional investors' (FIIs) investments in the domestic equity market has crossed $5 billion in the current calendar year. While it just took seven months to surpass this figure in calendar 2005, it took nine months in the current year.

FIIs' net investments touched $5.02 billion (Rs 22,814 crore) during the first nine months of 2006 compared with $8.60 billion (Rs 37,501 crore) during the period last year.

FIIs bought $274 million (Rs 1,275 crore) in the last two days. They bought $155 million (Rs 720 crore) of shares on Thursday and $119 million (Rs 555 crore) on Wednesday.

Their net investment in September 2006 at $1.17 billion (Rs 5,425 crore) was the highest in the last six months. Earlier in March, they had bought $1.51 billion (Rs 6,689 crore) shares from the Indian markets.

Net inflows in February stood at $1693 million (Rs 7,588 crore) and that in January $805 million (Rs 3,678 crore). FIIs made net investments of $1 billion in August.

New FIIs from the UK, the US, Germany, Singapore, Austria, Luxembourg and Oman have set up shop in the country in the last nine months.

In September, 13 new FIIs entered the market and 22 in August. In the current year thus far, 146 new FIIs have opened their offices, taking their tally close to 969.

FIIs pumped in a record $10.7 billion in 2005, making it their highest-ever investment in Indian equities since the markets opened up in December 1993.

According to data released by the Securities and Exchange Board of India, FIIs bought $8.5 billion in calendar 2004. They had bought $6.59 billion shares in 2003 and $740 million in 2002.

News: Piramyd to add 6 stores a year

(BS 30/09/2006) Mumbai - Piramyd Retail Limited is planning a rapid expansion of its multibrand stores in the next couple of years. The company would be adding four to six stores every year.

Company's chief executive officer Bipin Gurnani told mediapersons that besides growing in the north and west regions, Piramyd was considering entering into the south India market, with three stores on the cards.

The company opened its third store in Pune on Friday, which is located in the Kakade Magnum Mall in the city's busy Camp area.

Gurnani said the number of Piramyd stores in the country would reach 10 by the end of the current fiscal as it would open stores in Lucknow and Jaipur, and add one store in Delhi.

In the following fiscal, the company will go to cities like Chandigarh, Surat, Ludhiana, and also open one store each in Ahmedabad and Delhi where it has already a presence.

He said that the company's turnover, which was Rs 110 crore last year, was expected to rise to Rs 250 crore by the end of the current year, largely due to expansion of the stores network.

Besides stocking different retail brands in the apparel, accessories and footwear categories, the company also makes and markets its own brands, including Venti Uno in men's relaxed formals, and Boston Club in men's semi-casual, Enya in women's western wear, Rudra in women's ethnic wear and Peppermint in women's young fashion.

News: India's Leyland may bag Turkish firm

(HT 30/09/2006) Mumbai - The nation's second largest truck manufacturer, Ashok Leyland, is the frontrunner in a race to acquire Turkey's Doktas Casting Company, which has sales of 209 million euros, in one of the Indian auto component industry's largest acquisitions, investment banking sources said on Friday.

Doktas is Turkey's largest iron casting firm and the second largest aluminium wheel maker. Its global customers include auto giants such as Ford, Fiat, Caterpillar and Mercedes Benz. Ashok Leyland and fellow Indian firm Rico Auto Industries have submitted rival bids for the company after completing due diligence work, and the deal is expected to be clinched in the first fortnight of October, the sources said. Ashok Leyland's managing director R Seshasayee confirmed to Hindustan Times that his company had bid for Doktas. “I cannot tell you any thing more than this at this point of time,” he added.

Ashok Leyland has offered around $170 million (Rs. 779 crore) to acquire the entire 100 per cent stake, while Rico Auto has offered around $165 million, an investment banking source said. While refusing to divulge any details, Rico’s managing director Arvind Kapur confirmed that his company was in the race for Doktas Casting. In the past three years, Doktas Castings has reported a compounded annual growth rate (CAGR) of 25 per cent in revenues from 107 million euros in 2002 to 209 million in 2005. Since 1994, the company has invested 110 million euros.

The impending deal came a day after Mahindra & Mahindra Ltd. announced it would buy 68 percent in Germany's forging firm Jeco Holding AG, which has an enterprise value of 140 million euros (Rs. 812 crore).

Mahindra & Mahindra and Bharat Forge, however, have decided to keep away from the fray for Doktas. Bharat Forge’s chairman Baba Kalyani said, “We are continuously evaluating opportunities, but we have nothing do with Doktas.” Mahindra & Mahindra’s chief financial officer Hemant Luthra categorically stated that the company had not submitted a bid for Doktas.

Parent Doktas Holdings owns 51 per cent stake in the casting company, with the remaining 49 per cent is traded on the Istanbul Stock Exchange. Under Turkish stock exchange rules, the acquirer will have to make an open offer to buy out the entire 49 per cent floating stake of the company.

Leading auto ancillary companies from Germany like George Maria GMH have also evinced an interest in Doktas. In 2005, Doktas Casting reported an earnings before interest, tax , depreciation and amortisation (EBIDTA) of about 21 million euros. According to EFG Istanbul Securities, a securities firm, Doktas Casting has a total asset base of about 164 million euros.

News: 8.9% - Indian growth story only gets better

(DNA 30/09/2006) New Delhi - It’s been a busy summer for the hotel industry. There has been more than 12% growth in room nights. And enquiries are pouring in, says Rattan Keswani, vice-president, Oberoi Hotels & Resorts.

A clue to what’s happening: Siddharth Roy, economic adviser to Tata Services, has been meeting one foreign delegation every week. And domestic tourism has grown 40%, according to Ajay Bakaya, executive director, Sarovar Hotels.

At the end of August, India had 164.3 million telecom subscribers. Over the past year, the month-on-month growth in mobile subscriber numbers has ranged from 3.7% to 5.9%.

All that has added up to a mind-blowing 8.9% growth of the economy in the first quarter (Q1) of 2006-07 - among the fastest quarterly growth rates since the late 1990s - on the back of an 8.5% growth in Q1 of 2005-06.

Propelling this growth was a 13.2% surge in the trade, hotels, transport, and communication sectors. The other top performer was the manufacturing sector as factories churned out 11.3% more goods in Q1 this year. Services as a whole grew 10.5% on the back of 9.7% growth in last year’s Q1.

All this has improved the prospects of the economy growing at 8% in 2006-07. Investment bank JP Morgan has stepped up its growth forecast from 7.5% to 8%. But Ajit Ranade, chief economist, Aditya Birla Group, cautiously predicts 7.3% growth, factoring in some slowing later in the year.

If the economy does grow by 8%, it will be for the second consecutive year and third in four years. “This is one of the best phases the economy has ever had,” says Gaurav Kapur, senior economist, ABN Amro.

But most economists are blasé about the numbers. “Get used to it,” shrugs Surjit Bhalla, managing director, Ox[u]s Investments. “We’ve clearly moved on to a new growth trajectory.”

Finance Minister P Chidambaram has been quick to claim credit for his government. “In every quarter but one of the UPA government, GDP grew by over 7%,” he said at a press briefing.

Few, though, are willing to concede the point to him. “The difference in performance between government-controlled sectors like mining and electricity and those where prices are determined by the market is becoming sharper,” says Rajiv Kumar, director, Indian Council of Research in International Economic Relations.

But lagging agriculture has sounded a warning note. Sure, it sustained 3.4% growth for two consecutive years, but that is nowhere near enough, says Saugato Bhattacharya, vice-president of business and research, UTI Bank. Agriculture, he says, will be the key to sustaining growth and farm surpluses will be the next boost factor in the economy.

Nor can growth be sustained if the electricity sector continues to do poorly, notes Roy. A rise in interest rates could also spook the growth story.

Perhaps sensing this, Chidambaram promised to ensure that manufacturing gets the credit it needs and at reasonable rates. Kumar agrees: “The Reserve Bank should let the growth momentum continue and not do anything to disturb it.”

News: Ahmedabad may have India’s tallest hotel

(DNA 30/09/2006) Ahmedabad - The plans of Shree Raj Tours and Travels for setting up a 42-storey hotel, India’s tallest, in Ahmedabad, are taking shape.

The promoters have initiated talks with leading international players like Accor and its Novo Hotel, Four Seasons, Shelton and Sheraton, for construction, design and management of the Rs 350-crore project.

“We are in talks with a few international players. But we are yet to finalise a company. Raj will finance the project and also look after its promotion,” Lalit Sheth, chairman and managing director of Shree Raj Tours and Travels, told DNA Money.

“This will be tallest hotel, taller than the existing 39-storey hotel in Mumbai,” Sheth asserted.

The company is studying some locations and could settle for a five-acre patch off the Sarkhej-Gandhinagar highway, said sources. The land will be finalised by the end of this year and the hotel will come up in a year and half.

The first 20 storeys will house facilities including shopping centres, the largest spa and conventional centre in the country and other facilities. The remaining floors will have about 500 rooms.

Shree Raj Tours and Travels reported a turnover of Rs 200 crore last financial year and expects to push this up to Rs 300 crore this fiscal.

News: Indian forex reserves up $ 940 m

(BL 30/09/2006) Mumbai - Forex reserves increased by $ 940 million to touch $ 166.482 billion for the week ended September 22, according to the Reserve Bank of India's Weekly Statistical Supplement. In the earlier week, reserves stood at $ 165.542 billion.

The week saw good dollar inflows into the domestic bourses, explaining the rise in reserves, said the head of treasury at a private sector bank.

According to RBI data, foreign currency assets increased by $ 936 million to touch $ 159.175 billion during the week. Foreign currency assets expressed in US dollars include the effect of appreciation/depreciation of non-US currencies (such as euro, sterling, yen) held in reserves.

FII inflows into equities came to $ 311.3 million. Gold reserves and SDRs were unchanged at $ 6.538 billion and $ 1 million respectively.

The reserves with the IMF moved up by $ 4 million to $ 768 million.

News: Indian bank alliances, a positive development

(BL 30/09/2006) Chennai - Be it M&A (merger and acquisition) or `alliance', Basel or technology, many things have been happening in Indian banking these days. Business Line caught up with Sanjay Aggarwal, Head Financial Services, KPMG, for his views on the issues that concern banking now.

A fellow member of the Institute of Chartered Accountants of India, Aggarwal has been involved in the audit of banks such as ANZ, Citibank, Emirates Bank, Habib Bank and BCCI Bank during the period 1987-2001. Here is his take on a few questions:

What do you think of the alliances that banks are striking these days?

Very positive development. When capital and other resources are scarce, successful business strategies will definitely comprise alliance and collaboration strategies.

How would you describe the post-UWB-IDBI scenario? What has changed in the banking arena?

The immediate impact of the merger announcement is the increased awareness of the need for a framework for early identification and resolution of banks facing potential sickness. A proper framework will improve timely restructuring and action.

How long do you expect the current consolidation phase to last?

This is expected to be a regular feature. The environment is very competitive and business strategies could go wrong. Non-performers will, therefore, have to seek M&A to resolve crisis situations.

What are the key parameters that will force a bank to the M&A fold?

Most probable candidates will be the ones with low growth rates and low profitability. Being dependent on fewer customer segments is also a negative.

Assuming that banks merging have their own CBS (core banking solution), what happens after the deal? Will there be only one CBS after merger?

This would depend on the situation. All possibilities of synergies will have to be explored. For, there have to be good reasons to operate separately.

What according to you are the top three areas that Indian banks have to focus to increase their revenues?

Banks will need to continually be aware of customer needs and requirements and develop solutions. Banks will have to be clear on product profitability and distribution channels to be cost effective.

What does Basel mean for the customer?

Great opportunity to enhance risk management systems and operating effectiveness to create sustainable competitive advantage. Banks should look at this opportunity not as mere compliance but to develop and implement in substance better risk management systems in an integrated manner to achieve competitive advantage and improved profitability.

Where do Indian banks stand in terms of readiness for the next big thing in Basel?

We have just completed a survey of banks on this subject and the report is to be released shortly. The survey was aimed at assessing the level of preparedness of banks in meeting the requirements of the Basel-II Capital Accord. While the 1988 Capital Accord addressed market and credit risks, Basel-II has substantially changed the treatment of credit risk. It requires banks to have substantial capital to cover operational risks.

We find that there are a number of challenges around approach to Basel, understanding of Basel, and top management philosophy towards implementation.

Is Indian banking industry attracting the best talent these days?

It continues to attract the best talent. But retention is becoming a significant issue.

News: Three Indians voted best entrepreneurs in Asia

(PTI 30/09/2006) New Delhi - Three Indians were voted among the five best young entrepreneurs in Asia by readers of a leading international online magazine Business Week.

Andhra Pradesh-based 24-year-old Rama Krishna Gaddipati made it to the list as a co-founder of mobile applications and services outfit Bridle.

Mumbai-based Vishal Sampat and Divyank Turakhia for founding separate internet-based firms Convonix and Directi Group respectively.

The entreprenurial bug bit the 24-year-olds early on in their lives and with the advent of internet opening new avenues both Sampat and Turakhia got a taste of success while in their teens.

Gaddipatti, a student of Birla Institute of Technology and Science, Pilani, has also developed a service called SchoolMate, that allows parents to monitors their child's progress at school.

Sampat runs Convonix, an internet marketing firm that helps clients enhance their online traffic and get better placement in search engine results.

Turakhia's Directi Group has more than a million subscribers for its array of domain name registration, web hosting, and site building services.

Businessweek had asked its readers to nominate young entreprenuers and a team of editors of the magazines narrowed the list to a group of finalists who were put to vote on its website.

News: Indian gold demand affecting international prices

(PTI 29/09/2006) Mumbai - The gold rush during the ongoing festival season in the country is driving the firm rally in prices of the precious metal in international markets.

India is in a league of its own when it comes to the gold market, says World Gold Council (WGC) Investment Research Manager Natalie Dempster.

"The US is the biggest market in volume terms, but in tonnage terms India really dwarfs everyone else. Last year it accounted for around a quarter of total global demand in tonnage terms," she said in her report.

"Most of the international players are today looking at demand from India this festive season and demand from the rural India that have already firmed up the prices of gold in the international markets," Commodity Analyst Si Kannan told PTI.

Kannan said the demand for gold was seen increasing with huge offtakes in past weeks across the corners of the country. "It was reported that a trader at Delhi, whose offtake used to be 45 kg a day, is today selling 450 kg and similarly a trader at Mumbai, whose offtake use to be 300-400 kg of gold is today selling 700-750 kg.

When contacted WGC Joint Director Dharmesh Sodah he agreed that Indian demand has started creating an impact on the international prices but added "still majorly the international prices are ruled by investment demand from the West which in turn are governed by factors like crude, geopolitical tension etc".

News: Kolkata braces for mall mania

(BS 29/09/2006) Kolkata - Mall mania has gripped Kolkata, and the frenzy seems to be reaching a crescendo as the city readies itself for 46 malls by 2010.

Thereafter, prices might level out and finally drop after 2010 when new construction comes into the market.

The upcoming establishments are bringing brands like Globus, Spencer's, Fun Republic and Adlabs to Kolkata.

A few standalone mega stores and speciality malls are also in the offing.

These include one being promoted by the Avani Group that will host to high street fashion houses like Marks and Spencers.

Kolkata's projected requirement for retail space including malls and stand alone stores is expected to shoot up from 8,50,000 squarefeet in 2006 to 10 million squarefeet in 2010.

What is notable is the eagerness of developers to take the mall concept beyond the city itself and into the suburbs.

"The boom is not limited to Kolkata only. It is also catching up in the suburbs of the city. There are already two malls coming up on Jessore road and one in Madhyamgram in the north. Howrah in the west, too, will soon have its own mall. The latest trend shows a leaning towards developing speciality malls, but the only speciality mall that has a prospective future would be home malls that deal in home furnishings," feels Banerjee.

Mumbai-based K Raheja group is reportedly scouting for land in Kolkata to build another In Orbit in the city.

However, the shortage of large plots of land within the city might compel the promoters to consider land on the fringes of the city, say experts.

Land buyers and brokers in the city feel more and more available land will shift to use by the retail sector.

Consumer response to new shopping malls is positive and retailers are ready to pay for space.

News: Artiman Ventures to raise $175 mn second fIndia und

(BS 29/09/2006) Chennai/Bangalore - Artiman Ventures, an early-stage venture capital fund with a strong India play, is looking at raising its second fund which is expected to have a corpus of around $175 million.

Artiman is likely to exhaust commitments from its first fund, which also had a corpus of $175 million.

According to industry information, the process of raising the second fund had already been initiated with The Pennsylvania State Employees' Retirement System confirming that it would invest $25 million in Artiman Ventures II.

Artiman is venture fund put together by technology industry veterans such as Amit Shah of Cisco fame, besides Saurabh Srivastava (a renowned serial entrepreneur), and M J Aravind who was the co-founder of Daksh which was acquired by IBM.

Artiman investments range in the size from $100,000 seed to a conventional Series A investment of $2-4M. The fund prefers to limit aggregate investment over the life of a company to approximately $10 million in capital.

Artiman typically is the first institutional capital, most often at the 'concept stage' when entrepreneurs are still refining their key ideas and concepts. At the concept stage, the Artiman team acts as collaborative partners to give strategic direction to the venture.

During its first fund, Artiman funded companies such as NetDevices and Airwide Solutions besides a clutch of other companies which have significant development centres in India.

News: Pantaloon to open biggest Big Bazaar outlet

(BS 29/09/2006) Mumbai - Pantaloon Retail (India) Limited will soon be opening its second Big Bazaar outlet in city. Spread over 1.2 lakh square feet, the outlet, expected to open before Dasara, will be one of the biggest that the retailing major has in the country.

The outlet will come up in the swanky Poonam Mall complex which already houses Central India's first multiplex, Inox.

The complex will soon have a huge roof-top garden restaurant, the region's biggest bookstore and biggest entertainment zone, the first bowling alley, and Rajdhani Thali, the ethnic food joint that has all of Mumbai drooling. The employment generation potential even by most conservative estimates, has been pegged at 1,000.

According to Maneesh Gupta, store manager, Big Bazaar, the second outlet will have five floors (ground plus four) and will come up as part of the Poonam Mall at Wardhaman Nagar. The existing outlet covers 60,000 square feet and is located in the heart of the city at Ramdaspeth.

Gupta said that some innovative retailing formats, never tried before in the country, would be witnessed at the new outlet.

The store will have a live kitchen, a restaurant, a gymnasium, an entertainment hub and a saloon, besides the usual shop-in-shop counters. This would be the 32nd Big Bazaar outlet in the country and will soon be followed by another outlet which is to come up at Nashik.

The store will add buzz to a new area of the city. Wardhaman Nagar in east Nagpur is next to the business district of Itwari and is generally a residential area of the business class. Constructed by N Kumar Group, noted property developers and builders, Poonam Mall will be promoted as a "full day family outing place".

A movie, a snack, shopping for anything, including weddings, gaming, having a hearty meal and then browsing in the bookstore or on the Net is all going to be possible at the swanky mall. What's more, there are going to be several choices for doing any or all of these things.

Poonam Mall covers over two lakh square feet but some sharp designing gives the appearance of still more. The roof-top garden restaurant will be spread over 35,000 square feet. “The roof-top garden restaurant will be operated by a group company,” said Anil Kumar, director of N Kumar Group.

Such a huge complex would require more parking area than any other building in the city and traffic management would require more than available expertise, he said.

News: Carrefour to enter India as cash-carry

(BS 29/09/2006) New Delhi - The 75 billion euro multinational retailer Carrefour is planning to enter India via the cash-and-carry route. It will initially be investing $100 million and will start from the national capital region.

This will be the second instance of a global retail giant’s cash-and-carry operations here after Germany’s Metro AG. The bulk of Metro’s business comes from hotels, caterers, retailers and traders.

Cash-and-carry implies wholesale selling (business to business) and not direct sales to retail consumers, which is prohibited at the moment.

According to the existing guidelines on foreign investment, 51 per cent is permitted and that, too, only in single-brand retail. However, 100 per cent foreign investment is allowed in the cash-and-carry format.

When contacted, a company spokesperson in France said Carrefour had no comments to offer at this stage.

Globally, Carrefour has 120 cash-and-carry outlets. It already has a sourcing office in Gurgaon. Sources close to the Carrefour plan told Business Standard the retailer was keen to initially establish an extensive supply chain across the country using this route. Once the norms are eased, it will look at addressing the end consumer directly.

“Appointing a franchisee may be an easier option. However, the more tedious cash-and-carry route is a full-fledged investment, involving a far greater degree of control. It also provides an insight into pricing mechanisms and a better understanding of the market,” the source said.

Carrefour has already begun scouting for land and has appointed Jones Lang LaSalle as its real estate consultant.

Organised retail in India is estimated at $6 billion and is projected to grow at 20-25 per cent per annum. Other multi-branded global retailers like Wal-Mart and Tesco are eager to enter the country. Carrefour has a strong presence in China, among other countries. Just under 8 per cent of its annual sales come from Asia.

News: Indian airlines may face entry barriers

(BS 29/09/2006) New Delhi - Taking on the budget carriers, full-service airlines today demanded that the government should regulate prices and suggested that higher entry barriers for new players could be a way out of the present financial cauldron facing the industry.

The move, however, was vehemently opposed by budget carriers, which stated that the excess capacity was only a temporary phenomenon and would pass as the market grew on lower fares.

The government, which called a meeting with airlines to work out a method to solve the sector’s financial problems, told the carriers that it would not interfere in pricing, which will be left to market forces.

The budget carriers are Air Deccan, SpiceJet and GoAir, while the full-service carriers include Jet Airways, Indian and Kingfisher.

There was a lot of concern over capacity building in certain routes and this was seen as a major reason for a large number of airlines bleeding, said Ajay Singh, director, SpiceJet, who attended today’s meeting. Singh also said the carriers raised questions on rationalisation of fares.

According to industry estimates, the domestic carriers together are expected to make staggering losses of Rs 2,500 crore in 2006-07.

The meeting was attended by Jet Airways Chairman Naresh Goyal, Kingfisher Chairman Vijay Mallya, Air Deccan Managing Director GR Gopinath, SpiceJet’s Singh, Paramount Airways Managing Director M Thyagarajan, and Air Sahara President Alok Sharma.

The government, on its part, is planning a slew of steps to bring financial health back into the sector. The government is putting stiff conditions on the entry of new airlines that want to fly in the domestic skies.

These include enhancement of the minimum paid-up equity capital requirement, prior approval of business and fleet plans before permission is given to fly and directly linking an increase in fleet size with a commensurate increase in the paid-up equity capital norms laid out for carriers.

In order to ensure that the financial health of a carrier does not lead to bankruptcy, and also to curtail any example of predatory pricing by carriers, the government has proposed that it will review the business plans as well as the financials of the airlines every quarter and suggest corrective measures if required. This was a model the government said it was borrowing from the US.

The paid-up equity capital norm for new carriers will be hiked from the current Rs 30 crore to Rs 50 crore. For every five new aircraft inducted in a fleet, the airline’s paid-up equity capital will be enhanced by Rs 20 crore.

So for instance, a carrier that increases its fleet strength from five (which is the minimum needed for starting operations) will have to enhance its paid-up equity capital to Rs 70 crore if it has 10 aircraft.

In case it starts operation with 10 aircraft, it also has to pay the same amount. Earlier there were no such norms.

According to Civil Aviation Minister Praful Patel, the government has decided to step in to ensure that the Indian carriers remain in good financial health.

“There is massive growth, but at the same time, there are losses, too. We want to ensure better business conditions. The government does not want a repeat of 1991,” said Patel. In 1991, a number of private airlines went belly up due to bad business plans and mounting losses.

New applications to start airlines will have to wait for some more time for licences, as the government wants to evaluate the business viability of these companies before awarding them permission to fly. This has been done to ensure that only sound players enter the sector.

The government came under fire from the private players on higher jet fuel prices. The airlines had pointed out to the government that while prices were high, oil marketing companies passed on the increased price to the carriers, but no such step was taken when fuel prices were down.

According to airlines, the civil aviation minister has assured the carriers that the civil aviation ministry is taking up this issue with the oil and finance ministries. The contribution of jet fuel prices to a carrier’s costs is about 40 per cent.

In addition, the civil aviation ministry is also proposing a tax package to the finance ministry, including long-term waiver of aircraft leasing tax, financial transaction taxes and abolition of services taxes.

News: Legal prop for small, medium industries

(TT 29/09/2006) New Delhi - A new micro, small and medium enterprises act will come into effect from October 2. The act will give statutory safeguard to purchase preference of goods and services produced by micro, small and medium enterprises and incorporate stronger legal provisions to check the delay in payments to them.

The act also empowers state governments to exempt small and medium enterprises that employ up to 50 people from the provisions of existing labour laws. The government expects this to facilitate the graduation of small enterprises to medium ones.

The policy being introduced on the birthday of Mahatma Gandhi, keeping in mind his love for cottage industries, gives prominence for the first time to micro enterprises with fixed investment in plant and machinery of Rs 25 lakh. For small enterprises, the investment ceiling has been raised to Rs 5 crore, while for medium enterprises it has been fixed at Rs 10 crore.

It will introduce a new category of “service enterprises” which will have lower investment limits for the micro (Rs 10 lakh), small (Rs 2 crore) and medium (Rs 5 crore) categories than that stipulated for the “manufacturing” units.

The act will also give a statutory basis to ensuring the smooth flow of credit to these enterprises within the guidelines of the RBI. A fund for the development of micro, small and medium enterprises will be created under the act and all central government allocations for these enterprises will go into this fund.

The act provides for the creation of a national board for micro, small and medium enterprises to be headed by the central minister for small-scale industries and comprise 46 members which will include MPs, representatives of state governments, associations of small industries and trade unions.

News: M&M forges pact with German firm

(TT 29/09/2006) Mumbai - Mahindra & Mahindra today said it would acquire a 67.9 per cent stake in German forging company Jeco Holding at an enterprise value of 140 million euros (over Rs 816 crore).

M&M said it had decided to acquire the stake through its subsidiary and claimed that it was the largest outbound acquisition in the auto component arena.

Jeco Holding primarily focuses on the truck, bus and trailer market. While Scholz AG holds a 90 per cent stake in the company, the remaining 10 per cent is with the management.

Its major products include gear boxes, engine and axle pans, hubs, gears and piston heads and its customers include DaimlerChrysler, ZE Group, MAN Nutzfahrzeuge, Volvo, Linde, Renault, Agco, Kessler and Kolbenschmidt.

“With this acquisition, the Mahindra group has taken a decisive and important step towards creating a global class and global scale business in auto components. This creates a platform that enables us to pursue our vision of building the auto components business as one of the core businesses of the Mahindra group,” managing director and vice-chairman Anand Mahindra said.

According to Hemant Luthra, president, systems and technologies sector, the transaction will result in the group establishing a significant footprint in continental Europe.

“We would also be uniquely positioned to serve our customers from three locations — the UK, Germany and India — for their auto component needs, by driving synergies across the locations.”

“This acquisition is an important component of our strategy of building a global auto component business serving OEMs across geographies,’’ he added.

News: Indian developers queue for IPOs, foreign funds

(RTR 29/09/2006) Hong Kong - Tens, and even hundreds, of Indian developers are lining up to raise funds through initial public offerings in an attempt to ramp up construction to fill an estimated shortfall of 20 million homes.

Many of the companies are small and hope that by raising their profile, they will also attract funds from abroad.

Foreign property investors, who have earmarked around $5 billion for India's vibrant economy, are struggling to identify reliable local partners who can navigate through the country's notorious red tape and often dubious property titles.

Only a handful of developers are listed. And their scarcity during a property boom has contributed to up to nine-fold stock price gains for some firms since the start of 2005, when India eased rules on inward investment in the construction industry.

Anish Jhaveri, director of equity sales at HSBC in India, said hundreds of companies were hungry for funds. But they were small and might lack the skills and capacity to deliver rapid growth investors were after.

"Between 50 and 80 companies will be listed on a yearly basis in the next three years," Jhaveri said on a trip to introduce 11 Indian developers to private equity investors in Hong Kong.

"But we'll see a difference between the men and the boys, those who can execute projects, and those who can't. Ultimately, there'll be consolidation in around five years' time."

After heady gains, the Mumbai stock market slid in May and held up many IPOs this year, including a planned listing by DLF Universal, which developed the New Delhi suburb of Gurgaon.

But now the market has recovered, DLF is planning to resurrect a share sale it hoped would raise up to $3.5 billion.

Jhaveri said several other firms, including New Delhi-based Parsvnath Developers Ltd. and Sobha Developers Ltd. in Bangalore, have filed for IPOs, and Ambuja Realty Development Ltd. is expected to follow suit.

HOME IMPROVEMENTS

Hyderabad-based IVR Prime, a unit of listed construction firm IVRCL Infrastructure and Projects Ltd., is also preparing to file for a stock market listing within three months.

Shares in IVRCL have surged three-fold since the start of 2005, outpacing an 87 percent gain in the benchmark index.

But Ram Kumar, director at IVR Prime, said his firm also wanted to tap foreign investors for the funds it needs to expand.

He said IVR would quadruple revenue to around US$125 million in 2007, and aimed to develop 50 million square feet of land in Hyderabad, Bangalore, Pune, Chennai and New Delhi in five years.

"We've got the construction ability that small contractors don't have," Kumar said. "And we're concentrating on mass housing people can afford. Low salary people need to own houses too."

Such sales pitches have lured many big-name investors to India, including U.S. pension fund CalPERS, and the property private equity arms of Merrill Lynch, JPMorgan, and Morgan Stanley, which has taken a stake in two developers. But not all property funds are ready to jump in.

"Everyone is asking for us to take them to India, but it's not that easy," said David Blight, head of investment management at Netherlands-based ING Real Estate.

"Investing with partners you don't know well is not a considered way of entering a market."

In India, ING would follow its business model in China, where it is about to close an "opportunity fund" for development worth US$300-$350 million, but first tested the water with a couple of joint-venture projects with listed developers.

"It helps when companies go public, there's more transparency," Blight said of investing in India.

Foreign investors cannot own land or existing buildings, so they are forced to join local partners to develop, and keep their investment in the country for at least three years.

Risks include a morass of bureaucracy, difficulties buying land split among multiple owners for tax purposes and frequent contests over property titles. But projects can be lucrative.

Mumbai-listed Ansal Housing and Construction Ltd., which is planning to raise $25 million in the next two months through a preferential share placement and foreign currency convertible bonds, is touting its 30 percent internal rates of return. The company has seen its share price jump nine-fold since the start of 2005.

"The price of our land has doubled in the last two and a half years," said Ansal's vice president, Mohinder Bajaj. "And people are living in crumbling places and desperate to move."

HSBC's Jhaveri, whose income has risen 15-fold in five years, said he was a prime example.

"I don't want to live where I'm living," Jhaveri said. "I want my children to live somewhere like that," he said, pointing to a 35-storey apartment block perched half way up the Peak, a mountain that overlooks Hong Kong.

News: Birla Sun Life collects 4.05 bln rupees in equity fund

(RTR 29/09/2006) Mumbai - Birla Sun Life Asset Management Co. Ltd. has collected about 4.05 billion rupees in its close-end Birla Long Term Advantage Fund, Raghvendra Nath, vice-president - marketing and strategy, told Reuters on Friday.

"Over 100,000 investors have invested in the fund," he said.

The fund was open for initial subscription between Aug. 7 and Sept. 15.

The fund house managed about 171 billion rupees as on August 31, data from the Association of Mutual Funds in India showed.

News: India's net international investment deficit rises

(RTR 29/09/2006) New Delhi - India's deficit on its net international investment position widened to $46.07 billion on March 31, 2006 from $40.31 billion a year earlier due to the rise in the current account gap, the central bank said on Friday.

The net international investment position is the stock of a country's external financial assets less its stock of external liabilities.

India's total assets stood at $183.13 billion at the end of March, up from $168.9 billion a year earlier.

Liabilities, which include foreign direct and portfolio investments, were $229.20 billion at the end of March, compared with $209.22 billion a year earlier.

In a statement, the central bank said the deterioration in net position of about $6 billion during the year was attributable to the widening of the current account deficit to $10.6 billion in 2005/06 (April/March) from $5.4 billion a year earlier.

News: India needs reforms to sustain high growth - Chidambaram

(RTR 29/09/2006) New Delhi - India needs to speed up reforms and maintain fiscal discipline to sustain high economic growth, Finance Minister Palaniappan Chidambaram said on Friday as he hinted at more steps to keep inflation under 4 percent.

Government data on Friday showed that India's economy grew at an annual rate of 8.9 percent in the April-June quarter, and the minister said it was possible to maintain growth of more than 7.5 percent in coming quarters.

"We must continue to follow fiscal discipline and prudence," Chidambaram told reporters.

"Unless financial sector reform is completed, it will be hard to sustain a high growth," he said, but added a combination of reform and discipline could enable the economy to sustain growth rates of more than 8 percent.

India's gross domestic product (GDP) grew 8.4 percent in the fiscal year ended March 2006.

The federal deficit rose to 906.78 billion rupees ($19.7 billion) in the April-August period, 61 percent of the full year target, the minister said, adding the revenue deficit was 793.98 billion rupees.

But given the buoyancy in tax collections, Chidambaram said the government would meet its fiscal targets during 2006/07.

India aims to bring down fiscal deficit to 3.8 percent of GDP in 2006/07 from 4.1 percent in 2005/06.

PRICE PRESSURES

The government wants India to be a manufacturing hub in 12 to 24 sectors. To that end, it is setting up special economic zones for petrochemicals, information technology, electronics, pharmaceuticals and auto parts.

It has also promised tax breaks and access to bank loans to achieve high growth in manufacturing.

"The government will ensure that credit is not denied or delayed, and is available at reasonable rates to productive sectors," Chidambaram said.

The minister noted there was pressure on food prices, and said he would discuss further steps with the central bank governor to keep inflation in check.

Government data showed on Friday the annual inflation at 4.56 percent for the week ended Sept. 16, and Chidambaram said the government intended to keep it at 4 percent or less.

The Reserve Bank of India next reviews monetary policy on Oct. 31.

News: Logan doing the last laps before launch

(DNA 29/09/2006) Paris - Sylvain Blain remembers that day in mid-2004 well. A global survey on manufacturing abilities of countries was just handed over to him. One look at the contents, and the eyes of the chairman of Mahindra Renault popped: the report said India will be the top global manufacturing country in the world.

This month, Blain got affirmation. The $55 billion European auto giant just signed a deal to source two auto parts from India.

It’s a small beginning, but quite symptomatic of the way the French auto giant’s Logan car project has been going.

More than half of the parts of the sedan - 52% to be exact — to be launched in the first half of next year, will be local.

The engine will be imported from Romania, the sedan is doing the final rounds of testing on Indian roads, around 20 vehicles made at the joint venture’s Nashik plant have clocked 3,00,000 km on rough Indian terrain.

By the first year of the launch, the localisation would have increased to 58%, including engine parts.

“The first trials for the Logan in India started in May 2006 and we did 70,000 km, going through the rigours of summer and monsoon,” said Rajesh Jejurikar, managing director of the joint venture, Mahindra Renault.

“The engineering for the right-hand drive (Logan is sold as a left-hand drive elsewhere) is complete. Some work was also done in Romania using parts sent from India and the Logan is now ready for homologation,” said Jejurikar.

The company is also planning Logan variants and work is currently on on five derivatives.

Patrick Pelata, executive vice president, Renault, said the right-hand drive Logan would be steered into other right-hand drive markets across the globe.

Good quality parts and cheaper vendor sourcing means Mahindra Renault has already managed to bring down the costs. “Our expense data shows the project cost is down substantially,” he said.

The Logan project has an outlay of 125 million euros or about Rs 700 crore. “The quality of the parts is very good,” says Pelata.

So, will the Logan’s low-style-quotient work against the product - derived as it is from an East European milieu? Pelata says the car is based on the fundamental principle of “getting the basics right” - that of roominess, robustness and affordability.

Jejurikar says changes have been made to the Dacia Logan model sold in Romania to make it a more contemporary look and swisher styling, including interiors.

The pricing for the mid-sized sedan, analysts said, could come down following the high level of localisation. “It should be in the Rs 5-6 lakh range,” said an analyst with a foreign brokerage in Mumbai.

The Logan was launched in Romania in 2004 and sells in the $9,000-10,000 range. The joint venture will have the capacity to produce 50,000 cars a year.

“No C-segment car in India has that kind of sales at present. The highest seller in the segment, the Honda City, sells about 3,500 a month. So the production capacity can take care of the market needs now,” he said.

Will Renault, which has already started a beachhead in Mumbai for research, go alone some time down the line, considering the potential of the market?

Pelata says that’s no easy decision. “India is complex. There have been many who tried to go solo and did not succeed in the country. If you have a good partner, the value proposition just multiplies and the failure rate is drastically lower.”

Indeed, the auto major has operations beyond research and part-sourcing. The local entity also looks after CBU imports of the Renault range.

The auto parts promise interests Nissan, too

Renault’s sourcing from India is sparse now, just totting up to about 7 million euros. But Patrick Pelata, executive vice-president, Renault, believes this is just the beginning. This is because product development in India costs “much less”.

“We are asking for quotations for engine parts. We’re trying to send more of our managers to India for parts purchases,” Pelata said.

Pawan Goenka, president (automotive sector), Mahindra & Mahindra Ltd, said the development of outsourcing contracts take time. “They follow a one-and-a-half year cycle from product planning to validation.”

The outsourcing, though puny now, has elicited interest from even Nissan.

“Recently, some purchasing managers of Nissan asked us, ‘Hey, could we also share the parts made in India?” said Pelata. “This is good for all - for Mahindras, for Renault, and, of course, Nissan - to have a low-cost parts base.”

News: Indian economy grows by 8.9 pc

(PTI 29/09/2006) New Delhi - The Indian economy grew by 8.9 per cent in the first quarter (April-June) of this fiscal, compared to 8.5 per cent last year.

Inflation declined to 4.56 per cent for the week ended September 16 from 4.61 per cent in the previous week. It was mainly due to lower prices of food items and industrial fuel.

The wholesale price based inflation stood at 4.17 per cent during the corresponding week last year.

The economy grew on the back of a strong growth in manufacturing and services sectors.

While agriculture remained stagnant at 3.4 per cent during April-June 2006-07, manufacturing sector rose 11.3 per cent in the first three months of the current fiscal as against 10.7 per cent in the same period of 2005-06, according to government data released on Friday.

In the services, trade, hotels, transport and communications sector showed the highest growth of 13.2 per cent in the first quarter compared to 11.7 per cent in the year-ago period.

The construction sector, however, slowed down to 9.5 per cent this year from 12.5 per cent, while growth in electricity, gas and water supply slipped to 5.4 per cent from 7.4 per cent in April-June 2005-06.

The mining sector registered a growth of 3.4 per cent this fiscal compared to 3.1 per cent. Financing, insurance, real estate and business services grew marginally higher at 8.9 per cent as against 8.8 per cent, and community, social and personal services rose by 7.4 per cent from 7.3 per cent in the corresponding period of last year.

In rupee terms, GDP at factor cost stood at Rs 6,56,064 crore in the first quarter this fiscal as against Rs 6,02,476 crore in April-June 2005-06.

News: EurIndia plans to raise Rs 100 cr for real estate

(BL 29/09/2006) Mumbai - EurIndia, an early stage venture capital fund that recently raised a Rs 100-crore fund out of Mauritius to invest in the Indian real estate sector, plans to raise a similar fund later this year.

Vinod Ganjoor, key founder and CEO of EurIndia Ltd, told Business Line that this time round the company proposes to raise funds for a real estate multi-sector fund.

"We are looking at residential, commercial, hospitality, retail, etc. While we are looking to maintain a pan-Indian presence, our main focus would be Goa and the South."

The fund, which is well known for having invested in startups such as Allsec Technologies, Thinksoft Global and OnMobile, is in exit mode. It plans to exit from these companies over the next 12-18 months.

Typically, an early stage venture capital fund would invest in development stage projects in the residential, commercial/IT/BPO, and hospitality spaces and exit through sale of the units or IPO (say, in the case of a hotel or hotel operator).

"Allsec Technologies is our leading portfolio company and with Carlyle coming in, we are looking at landmark returns for a startup deal," Ganjoor said.

"We have stayed invested in this company since 2002 and are now looking to making 10x returns. With regard to OnMobile, at current valuations established on conclusion of pre-IPO private equity deal, we have established a valuation of over 5x returns. Over time we are targeting 12-15x returns. In Thinksoft we are looking at almost 6-7 times returns on our investment."

EurIndia's recent real estate fund has identified two projects for investment.

"One is a large hotel project in Goa where we have acquired land and are close to identifying a hotel operator to manage the hotel. This will be a Rs 150-crore project over time and we expect to close the deal with a hotel chain by November and start construction some time next year. About 38 crore has been invested so far in this project."

The fund is also close to finalising a multi-city hotel project with a reputed partner in Chennai.

"We will construct and operate 8-10 business hotels in the 3- and 4-star segment in southern India. The project will absorb over Rs 200 crore of equity capital and we will contribute half of that - so, about Rs 100 crore, over the next three years," Ganjoor said.

He added: "We will initially commit approximately Rs 20 crore seed capital to the second (3/4-star hotel) project by November when the deal closes. Another Rs 15 crore has been earmarked for deals that we hope to close before December. The rest will be deployed by June next year."

EurIndia is a Gibraltar-based fund while its hospitality fund is via the Mauritius-based Elliot Resorts. EurIndia owns 17.18 per cent of Allsec Technologies (before Carlyle) through its company, Euronet, and 31.2 per cent of Thinksoft Global through a company called Euro-Indo Investments Ltd.

News: ING Vysya's first asset allocation fund

(BL 29/09/2006) Mumbai - ING Vysya Mutual Fund has launched a new close-ended fund, ING Vysya Dynamic Asset Allocation Fund. The three-year close-ended fund has been given AAA (so) rating by Crisil.

The fund will invest in equity/equity-related securities and for defensive purposes, it may place funds in debt and money market instruments.

The new fund offer opens on September 27 and closes on October 19.

The scheme will have a pre-determined `floor' and `multiplier'. Also, the portfolio will be juggled every 15 days or every time the market turns volatile. The floor and multiplier will work on a formula seeking to protect capital at any given point and offer reasonable returns.

Thus, the scheme will lift its exposure in equities, every time the markets go up. "As the market is becoming more and more volatile, we should have a pre-determined rebalancing frequency in switching our portfolios from one segment to another for sustainable benefits to investors," said Ramanathan K. Head - Fixed Income, ING Vysya Mutual Fund.

The fund will invest up to 50 per cent in mid-caps and the rest in large caps. The fund is available in three options: Growth, Dividend and Bonus.

The fund will have a nil entry and exit load and the minimum investment will be Rs 5,000. It will be benchmarked against the Crisil Balanced Fund Index.

News: 'Indian economy can withstand global slowdown'

(PTI 29/09/2006) Mumbai - Country's economy, growing at a healthy eight per cent, will be less affected by a global slowdown due to its internal strengths and resilience, and inflation will remain in the broad range of 5.5 per cent, the RBI chief has said.

"Though there would be an effect, India is likely to be less affected and in the medium term can confidently aim to remain in the broad range of GDP (8 per cent) and inflation (5.5 per cent)," the RBI Governor, Dr Y.V. Reddy, told reporters here.

Considerable domestic demand, diversified external trade of institutions and limited exposure to foreign currency of the corporates and individuals are the factors that will safeguard India's economy from the global slowdown, he said on the sidelines of a FICCI-IBA global banking conference.

Reddy pointed to a global paradoxical phenomenon in which growth expectations were moderating and inflation was hardening.

"It is an interesting combination," he remarked.

News: Kalam launches LIC's micro insurance product

(TNN 28/09/2006) Newe Delhi - President A P J Abdul Kalam on Thursday launched a micro insurance product of LIC that targets to benefit economically underprivileged segments of society.

The policy -- Jeevan Madhur -- will cover individuals in 18-60 year age group and the minimum sum assured under the plan is Rs 5,000 while maximum is Rs 30,000.

The premium can be paid weekly, fortnightly, monthly, quarterly, half-yearly and yearly.

The minimum premium is Rs 25 per week, Rs 50 for fortnightly, Rs 100 per month and Rs 250 for other premium paying periods.

The term of the policy ranges between 5-15 years.

The likely maturity sum assured on a premium of Rs 1,200 per annum for a 15-year-term would be Rs 18,396.
The plan is being marketed through some micro insurance agencies.

Life Insurance Corporation is the largest life insurer in the country with a market share of about 77 per cent.

News: No word on Bharti’s retail partner yet

(DNA 28/09/2006) Ludhiana - With just a few days to go for Bharti’s retail plan announcement, group chairman Sunil Bharti Mittal is keeping everyone guessing about the joint venture partner.

Although Mittal had indicated recently that UK’s Tesco would be the preferred joint venture partner for Bharti’s retail project, on Wednesday, he said discussions were still on with three international players - Tesco (UK), Walmart (US) and Carrefour (France).

“The JV partner could be any of these three,” and an announcement is likely by the first week of October, he said on the sidelines of the inauguration of the R&D centre of FieldFresh in Ludhiana. Prime Minister Manmohan Singh inaugurated the R&D centre - FieldFresh Agriculture Centre of Excellence - here on Wednesday.

While the rules on FDI in retail sector only allow the franchise route for the Bharti JV project, the group is in the process of striking alliances for its agri-business, FieldFresh Foods, which is a joint venture with UK’s financial service giant, Rothschild. Even as the vision for the FieldFresh project is to link India’s fields with the world, domestic alliances are also big on the company’s agenda.

FieldFresh is open to supplying to all retail chains, according to FieldFresh director Rakesh Bharti Mittal. Among others, FieldFresh is likely to supply vegetables and fruits to Pantaloon and Mukesh Ambani’s retail venture.

FieldFresh is expected to export its products to major retail chains by February 2007. Pilots are currently on with some of them, including Tesco and Marks & Spencer, it is learnt. The target destinations for FieldFresh’s exports include the UK, the US and the Middle-East.

After the inauguration of the FieldFresh R&D centre, Sunil Bharti Mittal announced that the agri-project would over a period of time be spread across the country. While currently FieldFresh has over 4,000 acres under cultivation in Punjab, and growing partnerships in Maharashtra, Rajasthan and Uttaranchal, talks are on with the state governments of Bihar and West Bengal for taking the agri-project there too. Also, from the current 4,000 acres, there are plans to increase the cultivation area to 20,000 acres in the near future.

FieldFresh has an initial investment outlay of $50 million. According to Mittal, it is “effort intensive,” rather than a capital intensive business.

News: India keen to sell black tea in China

(PTI 28/09/2006) Beijing - Indian tea industry keen to forge a long-term relationship with its Chinese counterparts, is seeking market opportunities for its black tea in the world's most populous nation, Chairman of the Tea Board has said.

"Both our great nations share some common features like rich cultural heritage and the tradition of producing and drinking tea. While China produces world class green tea and India produces world class black tea," Basudeb Banerjee said at an 'India China Tea Symposium' held in the eastern Chinese metropolis, Shanghai.

"We would like to offer to them, through the importers, packers, distributors and retailers the wide range of Indian Black Tea," he said while making a presentation on the Indian Tea industry sketching out areas in which the Tea industry of both countries could collaborate.

The meeting was organised by the Consulate General of India in association with Tea Board of India and Tea Institute of Shanghai.

"The interaction was aimed at acquiring better understanding of business opportunities in both countries and forging new partnerships," official sources said.

In his opening address, Consulate General of India in Shanghai, Vishnu Prakash termed the initiative as timely and farsighted.

With rising affluence in both countries and a growing preference for health foods, consumption habits and preferences were undergoing a rapid change, he noted.

News: Mauritius woos the wealthy

(DNA 28/09/2006) Mumbai - Come October, the shimmering blue seas of Mauritius - an island state strategically located in the Indian Ocean midway between the continents of Asia, Africa and Australia - will look even more attractive for the wealthy. “We are opening up our country to foreign investors to buy property and become a permanent resident in Mauritius,” says Raju Jaddoo, managing director of InvestMauritius.

For those who came in late, the government of Mauritus has amended 15 pieces of legislation to free the country from red tape and give instant resident status to investors.

So far the island has been a tourist destination that doubled up as a tax haven for investors. Can Mauritius become a Bermuda or a Monaco?

Actually, Mauritius wants to become another Singapore. “Our country itself is an special economic zone”, declares Jaddoo.

Jaddoo’s in India to woo Indian bulge bracket investors to settle in Mauritius along with their stash of wealth. He is fully clued to the stampede of investors rushing in to set up SEZs in India.

A change in government this year brought about a chance to reinvent Mauritius, which has so far positioned itself as a kind of tax-haven for shell companies by signing a series of double taxation avoidance treaties with countries such as India. The shadow of terrorism and the insistence on transparency has practically made the secrecy laws for accounts difficult to sustain in the longer run.

Jaddoo says rich Europeans have already bought into the dream villas by shelling out half a million dollars (Rs 2.3 crore each), attracted by the sun-kissed verdant beaches situated around the island state.

Prince (Amir) al Waleed bin Talal bin Abdul-Aziz, the Saudi Arabian investor with stakes in Four Seasons hotels and Citigroup, has already jumped into the fray and is said to have acquired 60-70 villas, which he has leased to Four Seasons, the luxury hotel chain. The villa projects are worth US $ 500 million each and a series of projects are planned in the island state.

It is not the rich and the famous alone who can take up permanent residence permits. Even retired non-citizens can apply for the permit provided they can bring in US $ 40,000 annually (approximately Rs 19 lakh) in bank accounts in Mauritius.

“We have decided to invite people to come, live and work in Mauritius,” Jaddoo says.

Even businessmen can set up enterprises in Mauritius, if they can promise to generate revenues of US $ 1,00,000 annually. Salaried individuals can settle in Mauritius if they can ensure that they will earn US $ 14,000; self-employed people can do the same provided they can earn about US $ 20,000.

“The onus is now on the investor,” says Jaddoo. We have changed all the cumbersome legislations that took six months to process. It has changed to three days, and if you don’t hear within that period it is a silent consent to your residency.

For ease of doing business, Mauritius is 32nd in the rankings among all countries. “We want to be in the top 10. We are prepared to walk the talk.”

Mauritius is beckoning.. Is anyone interested? Check investmauritius.com.

News: India, Pak banks may open branches across the border

(BL 28/09/2006) Mumbai - Banks in India and Pakistan may open branches across the border in the near future, according to Dr Shamshad Akhtar, Governor, State Bank of Pakistan.

Speaking to reporters at a banking seminar, Dr Akhtar, not naming the banks, said banking regulators in both countries will have to endorse the move, she added. "We share cordial relations with the RBI," she said.

Talking about the banking sector in Pakistan, she said, "We are also trying to consolidate our banking system." They were also looking at floating GDR (global depository receipts) issues, she said. Habib Bank is looking at floating a GDR issue in the next three to four months, while Muslim Commercial Bank, will be coming out with a $100 million GDR issue.

Currently, money is tight in Pakistan. "It is very difficult to say when the situation will ease. We would like to see a decline in the core price index," Dr Akhtar said.

The inflation target for the current year is around 6.5 per cent and economic growth is expected at 7 per cent, she added.

News: ICICI to hire 40,000 annually

(PTI 28/09/2006) Mumbai - ICICI, the country's largest private sector financial services group, said it expected to hire up to 40,000 people a year for the next three to five years to service expected growth in the country's burgeoning banking and insurance sectors.

The recruitment drive by ICICI, which currently employs about 1,50,000 staff, is part of efforts by the country's financial groups to step up their retail banking services and to prepare for expected liberalisation of the insurance industry.

Indian industry is suffering from an acute shortage of skilled manpower as breakneck growth across a range of sectors, from finance and manufacturing to the IT and business process outsourcing industries, soaks up available talent. The country's banking industry has reported double-digit revenue growth over the last few years on the back of a booming consumer finance sector, with a newly affluent middle class buying homes, cars and appliances.

News: Indian real estate fund from HSBC Mutual

(ACERC 28/09/2006) Mumbai - In a bid to tap the booming real estate sector, HSBC Mutual Fund is planning to set up a real estate investment fund. Simen Munter, Deputy Chief Executive Officer, HSBC India, said this on the sidelines of the banking seminar organised by FICCI and IBA. Munter said the bank had seen heavy demands for investments in the real estate. However, he denied of any bubble existing in the same. The corpus for the fund was not yet fixed, he added. Commenting on the Indian operations, he said India is one of the key business areas for HSBC. It is among the top 10 profit contributors to HSBC. HSBC is pumping in $3 million for its Hyderabad branch expansion. The bank is planning to relocate its branch to a 50,000 sq feet premises very soon. HSBC is also setting up a processing centre at Malad in Mumbai. The 200,000 sq feet centre will take care of its BPO operations. HSBC has invested $10-15 million for the processing centre. On the branch expansion, Munter said the bank had got three licences this year, of which two branches, in Raipur and Patna, are already set up, while it is planning to set up a branch in Lucknow. Meanwhile, on the NBFC licence, he said it had not yet received permission from the regulator and once it is received they would relocate the consumer finance business of the bank to NBFC.

News: George Soros' fund hikes stake in Delhi realty co

(TNN 27/09/2006) New Delhi - George Soros’ investment fund has increased its stake in Delhi-based real estate company Anant Raj Industries. Soros’ Quantum Fund, which bought 1% equity of Anant Raj Industries last month, has picked up another 1% stake over the last two days through the open market.

Quantum Fund has been pretty active in the Indian stock market for the last 2-3 months where it has picked small chunks of shares in real estate and infrastructure companies including Unitech and GMR Infrastructure apart from Anant Raj Industries.

It is understood that the investment fund picked about 2.5 lakh shares through open market transactions for a price range of Rs 830-840. This would mean a total transaction value of about Rs 20-22 crore.

When contacted by ET, Amit Sarin, executive director of Anant Raj Industries, confirmed the development, “They have picked up another 1% equity from the secondary market.” Quantum Fund had earlier picked 1% equity in Anant Raj at a price of Rs 680 per share.

Anant Raj Industries, a major player in the ceramics tile industry in the past, now generates more than half of its revenues and a significant part of its profits from the real estate business. Within the real estate sector the company has an interesting business model that involves renting of commercial space which brings fixed revenues every month.

Moreover, a string of group companies which are in the real estate sector are being merged with the listed entity. The promoters, who own close to 60% stake in the company, today would be holding about 71% equity of the company after these mergers take place.

News: Oberoi to tap private equity cos for $100m

(TNN 27/09/2006) Mumbai - Another real estate mega deal is in the making. Mumbai-based Oberoi Constructions is raising funds to the tune of $100m from private equity firms.

Morgan Stanley Real Estate fund is the front-runner, according to the sources, while 14 other leading real estate funds like HDFC Real Estate, Banyan Real Estate Fund, IL&FS Realty and India Reit Fund, are also in the fray.

The race has now narrowed down to four players and the deal is likely to be finalised in the next four weeks. Sources also say that the company is valued at $1bn by the investment bankers. Kotak Mahindra is the investment bank brokering the deal.

When contacted, Vikas Oberoi, MD, Oberoi Constructions said, “We are in the process of raising funds through the private equity route. However, at this stage we are in talks with potential investors and are bound by confidentiality agreement and would not be in a position to reveal any details.”

The Morgan Stanley representatives, however, didn’t respond to ET queries. The company refused to divulge the percentage of stake to be divested in lieu of the proposed investment.

The Mumbai-based developer requires capital to pursue its aggressive growth plans. Currently, the company has ongoing residential and commercial projects in Mumbai’s suburbs — the Oberoi Mall in Goregaon, Oberoi Chambers and Garden Estate in Andheri, among others. It also has upcoming projects for NRIs that require funding.

Last year, the company had bought a unit and plot from GSK for development. The company is planning residential and commercial complexes in other metros as well.

The real estate sector is growing at 35-40% and has seen some big-ticket private equity deals in the last few months with nearly $350m in investments flowing into the booming sector. The action started in January with Siachen Capital investing $100m in Bangalore-based Nilesh Estates. Then Morgan Stanley Real Estate pumped in $67.4m to Mantri Developers. In yet another sizeable deal, HDFC Real Estate invested $35m in the Ansals IT City and Parks.

It also invested $31m in Pune-based developer Vascon Engineers. Other companies like L&T Urban Infrastructure, E-City, Vipul SEZ, SSI, and Suntech Project, have also raised Private Equity in the last few months. Experts say that with more than 20 real estate funds in the race, the sector will continue to be the flavour of the season for some months to come.

News: Reliance Retail to debut on Oct 18

(TNN 27/09/2006) Mumbai - Mukesh Ambani is a big believer in the power of number nine. The auspicious number or a factor of nine invariably crops up in various facets of his life. Be it the number plate of his car, his birthday or even the launch date for a major business initiative from the Reliance Group.

So it doesn’t take much to guess the proposed date that the chairman of the Reliance Group has chosen to kick-off his next big bet: the launch of Reliance Retail.

On October 18, ET learns that Ambani and the Andhra Pradesh chief minister YSR Reddy are expected to inaugurate the group’s first retail format — a basic fresh food & vegetable chain — in Hyderabad. Nearly 28 outlets in AP are expected to go live on the same day.

After AP, Punjab is expected to be the next stop for the Rs 25,000 crore retail juggernaut. As is widely known, Reliance Retail has plans to launch two different formats, ‘Feel Fresh’ and ‘Feel Fresh Plus’. ‘Feel Fresh’ stores will stock fresh fruits, vegetables and staples and will be spread over 3,000-5,000 square feet.

On the other hand, ‘Feel Fresh Plus’ stores will be spread over 10,000-15,000 sq ft, and stock fruit and vegetables as well as apparel, consumer electronics, FMCG items and even medicines. Both these formats will be entirely company-owned and managed.

After the launch in AP and Punjab, Reliance Retail will then spread out to other cities such as Mumbai and Delhi, where Reliance has identified up to 80 locations each. Reliance is also in the process of acquiring six acres of land in Hyderabad from Bhagyanagar, a real-estate developer in AP, for Rs 75-100 crore. RRL is planning a mall in the acquired land which will be the centre point of RRL’s operations in Hyderabad.

RIL spokesperson declined to comment on the development. The company has already signed agreements with the West Bengal and Punjab governments to tie up for procurements and roll out retail outlets. Sources said that after entering into an alliance with Sahakari Bhandar in Mumbai, the company had been looking at strategic alliances with other co-operatives too. However, the other initiatives are yet to fructify.

News: Tatas, Rembrandt may set up budget hotels

(TNN 27/09/2006) Ahmedabad - The Tata group’s Indian Hotel Company (IHCL) is entering Ahmedabad’s booming hospitality industry with its GenNext ‘Smart Basics’ Hotel —’Ginger’ brand in the budget hotel category.

Sources said the Tatas are in talks with the Rembrandt group, which recently acquired Natraj Cinema on Ashram Road for the project. “The Taj group will set up a hotel with the Rembrandt group, which will own the hotel,” a source said. Sources added the former owners of Natraj had also spoken to Taj for a possible venture, but it was later decided to sell off the property.

The Rembrandt group, which has developed the Rembrandt building on CG Road acquired Natraj theatre property 4-5 months back. According to the preliminary plans, the theatre site will house two separate towers. “There will be one commercial complex and a hotel at the location,” a source said. Amit Gajjar, the partner in Rembrandt group declined to confirm this but said, “The Tata group has shown interest but talks are at a very preliminary stage.”

The Ginger Hotels are budget hotels with around 100-200 rooms equipped with a gymnasium, yoga centre, restaurant, meeting rooms, ATMs. The plans will be drawn up in the next two-three months. On Monday, IHCL launched Ginger hotel in Mysore, its fourth such hotel in India.

Gujarat is already witnessing a hotel boom with several players such as Dawnay Day Group, IHHR Hotels, Mayfair hotels, DLF group and several others coming up with new hotel projects.

The demolition work at Natraj cinema is going on in full swing at the Natraj cinema. The decades-old single screen Natraj cinema like many other theatres in the city suffered huge losses with the entry of multiplexes and it was then that the owners decided to sell it off.

News: Reebok to open 1100 Indian stores

(BS 27/09/2006) New Delhi - Reebok has decided to step up the heat on its rivals in the country, its acquisition by Adidas last year notwithstanding. “We are going to increase the number of our stores from 350 now to 1,100 by 2010,” Paul Harrington, president and CEO, Reebok, today told Business Standard.

India is the only market in the world where Reebok has a higher share than Adidas and Nike. After last year’s acquisition, it was not clear with which brand Adidas would lead the charge in the country.

The aggressive growth plans outlined by Harrington clearly suggest the Adidas group does not wish to upset the applecart. In the last one year, Reebok has expanded its market share in the country from around 40 per cent to over 50 per cent.

To promote its brand, Reebok will kick off a new campaign ‘When Did I Know’ with cricketers Rahul Dravid and Mahendra Singh Dhoni from October 1. “This is part of our global strategy to go after individual athletes,” Harrington said.

Though it lost the kit sponsorship deal for the Indian cricket team to Nike, Reebok claims that it has, at any time, at least eight brand ambassadors in the playing eleven. The company also claims to have 25 per cent share of the bat market in the country.

Talking about new lines, Harrington said Reebok might introduce its Scarlett Johansson range of apparel in select stores worldwide in March next year. “We will have the range in some of our stores here as well,” he added.

It is worth noting that Reebok has withdrawn its watches from the Indian market as the segment did not fit into its mainline business.

On price points, Harrington said Reebok did not have plans to go any lower as consumers were showing evidence of moving up the value chain. “All our top-end products are doing extremely well,” he said. Although Reebok’s footwear line starts at Rs 1,099, the bulk of its sales is in the Rs 2,000-4,000 range.

News: India breaks BRIC ranks in competitiveness

(BS 27/09/2006) New Delhi - Ever since Goldman Sachs came out with its much-talked-about report saying Brazil, Russia, India and China will dominate the world’s economy by 2040, India has often found itself clubbed with the other three.

However, the World Economic Forum’s Global Competitiveness Index (GCI) gives India the chance to break out.

The rankings for 2006-07 place it 43rd, well ahead of Brazil (66), China (54) and Russia (62). Even last year, India, in 45th place, was ahead of the other three.

In fact, each of the other three slipped this year: China from the 48th place to 54th, Brazil from the 57th to 66th and Russia from the 53rd to 62nd.

Switzerland, Finland and Sweden are the world’s most competitive economies, according to the report.

Denmark, Singapore, the US, Japan, Germany, the Netherlands and the UK complete the top 10, but the US shows the most pronounced drop, falling from first to sixth place.

As in previous years, India continues to score well in indicators related to innovation as well as in the adoption of technologies from abroad.

However, a number of weaknesses remain. Efforts to reduce the high fiscal deficit — one of the highest in the world — need to be sustained, and, as in previous years, the lack of appropriate infrastructure impedes growth in more remote regions of the country.

Dealing with shortcomings in the provision of health services and education will ensure that the benefits of economic growth are more broadly distributed, the report says.

“The quality of the business environment in India has improved tangibly in recent years... The available evidence suggests that the Indian economy may have entered a high growth plateau — the challenge for the authorities will be to ensure that this process is sustained and that it precipitates further progress in poverty reduction,” said Augusto Lopez-Claros, Chief Economist and head of the World Economic Forum’s Global Competitiveness Network, in a press release.

The rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum, together with its network of partner institutes (research institutes and business organisations) in the countries covered by the report.

This year, over 11,000 business leaders were polled in a record 125 economies worldwide. The survey questionnaire is designed to capture a broad range of factors affecting an economy’s business climate that are critical determinants of sustained economic growth.

The forum annually delivers a comprehensive overview of the main strengths and weaknesses in a large number of countries, making it possible to identify key areas for policy formulation and reform.

News: Basel breathe-easy for Indian banks

(TT 27/09/2006) Mumbai - The Reserve Bank of India (RBI) may extend the deadline for banks to adhere to Basel II norms.

The final guidelines on Basel II will be announced by the central bank in the next few weeks. The Basel II regulations distinguish banks on the basis of their risk profiles and are slated to take effect from March 31, 2007.

“The RBI is constantly monitoring the state of preparedness of all banks. The latest indication is that there may be a marginal extension of the date,” RBI deputy governor V. Leeladhar told newspersons on the sidelines of the Ficci-IBA conference on global banking here today. Leeladhar, however, did not reveal the new deadline.

What is Basel II?

The Basel II regulations, drafted by the Bank for International Settlements (BIS), significantly upgrades the Basel I norms that are in place since 1992-93 in India.

The main difference is the measurement of risk in Basel II, which prescribes different levels of capital allocation on assets based on their risks as opposed to the broad measurement of risk in Basel I.

Slow but steady

The RBI would impose the new regulations gradually, Leeladhar said. He told the conference that the country’s approach to reforms was to align with global best practices but at a pace suited to the economy and the environment. “Therefore, we have consciously decided to mandate the standardised approach and basic indicator approach to all scheduled commercial banks in India as the first step in migration to Basel II,” he said.

Easier norms

As part of this approach, the RBI has decided to ease some of the rigorous rules, Leeladhar said.

It has allowed in the initial phase a risk weight of 100 per cent on unrated loan assets. This comes even as the central bank has tightened its risk weightages for loan exposures. It recently put the risks on loans to SEZs on a par with real estate by assigning a weightage of 150 per cent to such loans.

The relaxation on unrated loans gives banks some breathing space since only 10 per cent of loan assets are rated by independent agencies.

Rating riddle

Elaborating on the challenges in Basel II, Leeladhar said banks wanted to use their own ratings to assess loans of corporate houses that do not have an external rating, till such time the bulk of the issues of corporate houses get an external rating. The problem arises from the practice in India of rating individual debt issues of a company rather than rating its overall borrowing capability. This suggestion was however, not “accommodated’’ by the RBI.

Pak support

Both Leeladhar and State Bank of Pakistan governor Shamshad Akhtar said there were misgivings about the impact of Basel II on the financial systems of emerging market economies. This concern is shared by global banks like Standard Chartered which find themselves in an enviable position of having to churn out a large number of reports as 92 countries switch over to the new set of rules over the next five years.

Setting speed limits

“In Europe, you can race down the autobahn at a speed of 200 kmph which I did recently. But in countries like India and Pakistan you need to regulate speed with the state of the roads and its special circumstances. We need to follow different speeds in the adoption of Basel II norms as well,” said Akhtar.

News: Indian open skies fail to thrill western carriers

(DNA 27/09/2006) Bangalore - Like every year, the government is considering throwing open its skies to foreign carriers between November and February this year, too. But, not every overseas carrier is thrilled about the opportunity.

This is because some international sectors already have capacities more than the current market growth, so carriers would wait for the excess capacity to fill up before they take a call on upping their flight frequency.

Another reason is that route rationalisation on a medium-haul flight is easier than long-haul flights.

Also, the international traffic into and out of India is skewed towards the Middle East and South East Asia. According to figures available with Amedeus, around 40% of the overseas traffic is into the Middle East, 35% into South East Asia and the remaining 25% is to Europe and the US.

Ankur Bhatia, managing director, Amedeus India, feels the open skies opportunity during the peak season this year would be mainly utilised on the Middle and South East Asian sectors.

“Over the last two years, sectors like India-UK, and even some European and the US sectors have grown more than three to four times. This has led to capacity overtaking the market growth, which has resulted in price war on these sectors. So, we may not see many flights being added on these routes. This year, I believe, the action will be concentrated on the Gulf, Singapore, Malaysia, Thailand and other South East Asian destinations,” says Bhatia.

British Airways alone operates 42 flghts per week from five locations in India, but it has no plans of adding any extra capacity except for another daily flight from Bangalore in October.

“I won’t say there is saturation on the India-UK route… there is always scope for more. But we won’t be adding any more flights except for the one from Bangalore,” says a BA spokesperson.

Unlike BA, though, UAE budget carrier Air Arabia is very excited at the prospect of the four-month open skies. Last year, it had operated two flights a day from Mumbai instead of one during the open skies period.

“We will definite increase our flight frequency as the air traffic shoots up drastically during this period because many expatriates come home for Christmas and News Year’s holiday,” says Rohit Ramachandran, Air Arabia’s India manager.

Air Arabia, which currently operates 25 flights per week from Mumbai, Jaipur, Cochin and Nagpur, witnesses a jump in its inbound (into India) traffic between December 15 and December 28, while the outbound traffic shoots up between January 1 and January 13.

Another UAE carrier, Etihad Airways, which has 10 flights per week (seven to Mumbai and three to Delhi) to India, is also jumping at the opportunity. “It is a very big opportunity. Last year, we could not add more frequency because of limited fleet, but this year, if the government permits, we have our plan in place to increase both frequency and aircraft capacity on most routes,” says Neerja Bhatia, area manager, Etihad Airways.

Austrian Airlines, which operates 12 flights a week in India from Mumbai and Delhi, is planning to increase its flight frequency to Mumbai from five per week to seven per week in January.

News: Yes Bank to open 60 branches by June '07

(SB 27/09/2006) Mumbai - Yes Bank Ltd has announced that the bank has charted out aggressive growth plans and is making significant new investments in building a state-of-the-art retail banking framework.

According to a release issued in BSE, some of the immediate plans include; establishment of 60 bank branches and 75 offsite ATM centres by June '07, two processing centres at DLF cyber city centre at Gurgaon and Tiecicon House at Mahalaxmi, Mumbai and thereby ramping up the retail banking headcount (currently at 1000) to at least 1800 executives by March '07.

The bank has also further strengthened the retail banking team by nominating two top level executive sponsors and appointing three regional heads, who will be reporting into Rana Kapoor, Managing Director and CEO, who continues to directly oversee and is actively involved in building the retail and wealth management business, said the release.

Sunil Gulati who is currently the group president & head- risk management & corporate development will take on additional responsibility as the executive sponsor responsible for the retail risk framework, KYC norms and retail assets, while Ajay Mahajan, group president financial markets & investment management will be the executive sponsor for the development and execution of key differentiated product offerings and non branch channel distribution, added the release.

Commenting on the bank's retail banking plans, Rana Kapoor, Managing Director and CEO of the bank, said, "Yes Bank has set out aggressive retail expansion plans, we are determined to evolve an enduring service trust mark with excellence in service and product quality."

News: Indian BPOs can process 30% of US bank transactions

(PTI 27/09/2006) New Delhi - The BPO industry in the country has the potential to process up to 30 per cent of the US bank transactions by 2010, Nasscom President Kiran Karnik has said.

"Currently, 8 per cent of the US banking transactions are processed by Indian BPOs and the figure has the potential to rise up to 30 per cent by 2010," he said.

According to a research conducted by Forrester in 2005, there were more security breaches in the UK and the US than in India, he said.

Karnik said there have been two cases in India of breaches in data security in the last 18 months and in both instances arrests were made by the police.

The watchdog of the UK banking industry, banking code standards board, had announced that they had scrutinised Indian call centers and standards have yet again proven to be amongst the best in the world, he added.

An independent Self Regulatory Organisation (SRO) to establish, monitor and enforce privacy and data protection standards for the ITES and BPO industry in the country would be formed, Karnik said.

The SRO has already completed its initial round of funding and the final roll out phase, including industry memberships, is underway, he said.

Karnik said it would commence operations in the next 3-6 has already received approval of the Nasscom executive council.

News: Citigroup India to lend more to small businesses

(RTR 27/09/2006) Mumbai - Citigroup India, the Indian unit of Citibank N.A. sees a growth opportunity in lending to small businesses in the country, a senior official said on Wednesday.

"It is a significant focus area for us and a major growth segment not only in India but other countries also," Director & Business Manager, Commercial Banking Group, Sandeep Ghosh said on the sidelines of a seminar on global banking.

The lending rates for this segment are 1.5-2 per centage points higher than for a tripe-A rated large company. "The lending rates are competitive for a SME (small and medium enterprise) with a good track record," Ghosh said.

About 10-15 per cent of the multinational bank's corporate lending portfolio is for the small and medium businesses, he said. Citibank started lending to small enterprises in India in 1998.

"The spreads are not significantly higher in this segment, but we get higher yields over a period of time, we get stickier customers and regular annual revenues," he said.

"In order to have a sustainable revenue model for this segment, we have to grow the business at 30-40 per cent," Ghosh said, adding it was not always possible to get this kind of growth every year.

The bank plans to double the number of its 300 employees dedicated to the SME segment in the near future, Ghosh said.

News: LIC micro-insurance scheme for Indian poor

(BL 27/09/2006) New Delhi - A simple savings-related life insurance plan for the impoverished and the poor in the country is on the cards.

It is to be jointly managed by the Life Insurance Corporation of India (LIC) and NGOs operating in the rural areas, which would be the primary facilitator.

NGO sources told Business Line that the LIC will unveil the micro-insurance scheme on September 28.

The President, A.P.J. Abdul Kalam, will launch the scheme in the presence of the Union Finance Minister, P. Chidambaram, and the Minister of State for Finance, S.S. Palanimanickam.

LIC has entered into an MoU with the Confederation of NGOs in Rural India (CNRI), which would implement the scheme with its network of more than 3,000 NGOs/SHGs across 30 State Chapters and 400 districts.

CNRI functions under the Chairmanship of Dr Mohan Dharia, former Central Minister and Deputy Chairman, Planning Commission.

The scheme, named Jeevan Madhur, is a modest savings-linked life insurance plan where one might disburse premiums regularly at weekly, fortnightly, monthly, quarterly, half-yearly or yearly intervals over the term of the policy.

The minimum instalment premium for different modes would be Rs 25 for weekly, Rs 50 for fortnightly, Rs 100 for monthly and Rs 250 for quarterly/half-yearly/yearly.

The premium should be subject to the minimum and maximum sum assured of Rs 5,000 and Rs 30,000 respectively payable on death or maturity.

The sources said that member-NGOs of CNRI keen on popularising the scheme would have to undergo three-day or 25-hour training programme organised by the LIC in association with CNRI.

The certificates, on satisfactory completion of the training, would be issued by the LIC.

In order to preclude any hassles to prospective policyholders, requirements of proof of age and health status have been greatly simplified under the scheme, mainly with a view to include a large number of people from the disadvantaged sections, the sources said.

Subject to production of satisfactory evidence of continued insurability, a lapsed policy may be revived by paying arrears of premium coupled with interest within a span of five years but before maturity from the due date of first unpaid premium. The rate of interest applicable in such cases would be as fixed by the LIC from time to time.

When contacted, L.V. Saptharishi, co-Chairman of CNRI, said that 10 NGOs have been identified to implement the scheme in Delhi; the personnel have been given the requisite training.

After Delhi, it is proposed to launch the scheme in Lucknow, Kolkata, Guwahati, Bhubaneshwar, Chennai, Hyderabad, Thiruvananthapuram, Indore and Pune. The scheme would gradually be extended to the rest of the country.

News: DLF, Hilton to set up hotels jointly

(TNN 26/09/2006) Mumbai - Gurgaon-based DLF group and overseas giant Hilton have struck a deal to set up a chain of hotels across the country for an estimated investment of Rs 10,000-12,000 crore, people close to the transaction said. DLF will hold 74% in the JV with Hilton holding the rest. The foreign chain will have the option of increasing its stake to 49% after some years.

DLF, which will hold 74% in the JV, will be able to use its vast land bank effectively, riding on Hilton’s brand name and expertise.

If DLF’s hospitality plans, which include a presence through the five-star, resort, business and budget category spread over 25,000 rooms in five years comes through, Hilton’s presence in the country, would be substantially strengthened.

The deliberations, which were on for the past few months, have finally ended in a workable plan and the deal is expected to be announced in the next few days, sources say.

“The talks are at a very advanced stage,” DLF vice-chairman Rajiv Singh told ET. “We are exploring opportunities for strategic partnerships with leading developers globally and India specifically,” Faith Thoms, director communication, Hilton International, Middle East & Asia Pacific, told ET from Singapore. She added that it was too premature for details.

The JV with one of the most popular hotel chains in the world will help DLF utilise its vast land bank better, while Hilton will gain from the ready availability of prime land across the country in DLF’s possession.

India is a key growth market for the hospitality major and one in which the chain is very keen on significant expansion, Ms Thoms said. “Following the merger of Hilton Hotels Corporation with Hilton Group Plc in February ‘06, Hilton Hotels Corporation has a diverse portfolio of leading brands that extend from the luxury segment to business and focused-service hotels that we intend to launch internationally and adapt in key markets worldwide,” she added.

If DLF’s hospitality plans, which include a presence through the five-star, resort, business and budget category spread over 25,000 rooms in five years comes through, Hilton’s presence in the country, would be substantially strengthened. In April ‘04, Hilton International signed a strategic alliance with EIH Limited, giving the company presence in eight locations across India; seven of which was under the Trident Hilton brand and the eighth being Hilton Towers in Mumbai.

EIH manages all the hotels while Hilton is responsible for international marketing, promotion and reservations through the Hilton global network. While Trident Hilton Mumbai, a 500-room new property in north Mumbai, is scheduled to open next year, Hilton also has management contracts for three properties.

According to the arrangement that is being worked out, DLF would carry out the construction work and develop the hotel, with the day-to-day operations managed by Hilton. “We want to be principally the owners of the hotel assets because that is the business we are in at present. Hotel operating skills are a different game altogether,” DLF vice-chairman Rajiv Singh had said in July.

With much of the land already in the DLF kitty, the first hotel from the JV is most likely to be in the business sector, which is projected to grow 4% in the next couple of years.

News: Netherlands to ease stake norms for Indian firms

(TNN 26/09/2006) Mumbai - Netherlands is going all out to woo Indian investors by relaxing its tax treatment rules for holding companies. The country plans to reduce the present shareholding requirement for holding companies based there to 5%, from the current 25 %.

This would imply that if any Indian company goes and sets up a holding company even with a 5% shareholding, it would become eligible for exemption from capital gains and dividend tax, said Marc A Kuijlaars, tax lawyer with KPMG Meijburg.

Under a new law, Netherlands would also allow the concept of ‘passive-investment participation’. This will allow companies who do not have active presence to be taxed at lower rates, he said.

The new law is expected to come into effect from January 1, ’07, he said. The concept of non-business related investments is also being brought in from next year, which will facilitate all such investments to take advantage of tax breaks as non-business related investments. These could be characterised as passive investments.

Pointing out that even L N Mittal-promoted Mittal Steel had its holding company in Netherlands due to the benefits of being there, he said a large number fo Indian companies in IT, pharma, paper were already in the process of setting up a presence there. Netherlands offered a much more attractive regime than other European countries besides being a gateway to EU markets.

Column: Indians on a spending spree

(BS 26/09/2006) Mumbai - Global consumers’ confidence remains at 2005 levels, with Indians leading the world in the 2006 ACNielsen Global Consumer Confidence Index (CCI), followed by the Norwegians and Danes.

According to ACNielsen, the world’s leading market research and information company, the 2006 ACNielsen Global Consumer Confidence Index remained at the same level of 98 as in the November 2005 study.

By regions, North America has been at its November 2005 level of 107, while Asia Pacific showed a significant drop from 101 last year to 94. Europe more or less remained the same at 93 as against 95 last year.

India again tops the entire world for the third time in a row since the Index was established in early 2005. It scored a high of 131 in 2006 and is closely followed by the Scandinavian countries of Norway (130) and Denmark (127), which made their way into the ranking as the world’s second- and third-most optimistic markets respectively.

Indians are exceedingly feeling bullish about the job market (with 90 per cent of the respondents rating it as excellent or good) as well as the state of their personal finances in the next year (86 per cent).

On the other hand, Portuguese and Koreans are terribly pessimistic about both the aspects in their country, with over 90 per cent of them saying that it will be bad.

The optimism amongst Indians also translates into their perception that it is a good time for the people to buy the things they want in the next 12 months.

India’s booming economy shows no signs of slowing down, which helps make the nation the world’s most optimistic country again. Along with the continued IT boom came the new generation with lots of spare cash and the willingness to experiment.

These well informed, well groomed consumers are now the target for all products from insurance to durables, and the marketers who can touch them first will reap the benefit in the long run.

While the level of consumer confidence declined slightly in Asia Pacific with New Zealand and Korea registering a significant decline, it remains the region housing the most confident consumers of all. Hong Kong (111), Indonesia (111), Singapore (110) and the Philippines (100) registered increases of five to seven points in their index scores respectively.

The least optimistic countries in Asia Pacific are Taiwan (80), Japan (79) and South Korea (54).

Major concerns
While overall consumer confidence has been sustained, globally, consumers continue to cite the economy (47 per cent), health (37 per cent) and job security (31 per cent) as their major concerns for the next six months with varied levels of importance by regions.

The concern about their economy ranks highly in Asia Pacific and recorded a major increase in North America. For Indians, too, the economy is a major concern.

While scaling crude oil price is one of the major concerns for Indians, the upward rising interest rates is probably the cause that has made the economy the biggest concern for Indians. About 30 per cent of consumers are willing to repay their loans to avoid steep interest fees. But the fact that the index is still over 100 is proof that consumers still harbour hopes.

Led by Thailand (77 per cent), Malaysia (71 per cent) and Indonesia (70 per cent), eight of the 10 markets expressing greatest concern for the economy originated from Asia Pacific.

Germany and Turkey are the only two European markets with a high level of concern about the economy, taking over from Greece and Austria, both of which made it to the top 10 list in the previous survey. Yet when compared with last November’s survey, people in Greece, the Philippines and Korea appear to be less concerned than before about their economy.

The level of concern about health has dropped among Indians, but it is still top-of-mind for consumers across Asia Pacific. Interestingly, compared to other regions, North Americans were the least concerned about job security.

With advanced healthcare benefiting people across the board, Indian consumers’ concern about health has gone down significantly. Yet they are now more sensitive about matters concerning health and are willing to spend on the best possible service when it comes to healthcare-related products.

For marketers belonging to this category, quality should definitely be the primary focus to lure the new age consumers.

Ever since reports of outbreaks of the avian flu first appeared in Europe, on the tail of an occasional mad-cow outbreak, consumers in the continent have shown increasing concern for health, surpassing their North American and Asia Pacific counterparts.

Nearly four in 10 Europeans cited health as one of their major concerns after the economy. Asia Pacific follows at 36 per cent and North America at 34 per cent. Topping the world with the greatest number of health-conscious consumers were Hungary, the Czech Republic, Slovakia and people in the Baltics.

Spending desires
Although putting spare cash on a savings instrument is still the most popular avenue for Indians, the bullish stock market also makes investment in mutual funds and shares favourable options (40 per cent).

In fact, preference for equity and mutual funds exhibited by Indians is matched only by those in Hong Kong among all the countries studied, which underlines the spread of equity culture in India. A seven percentage point drop is seen in Indians’ desire for holidaying, while an equal rise is seen in people’s fascination for out of home entertainment.

Time is a constraint for more and more people because of demanding career and family obligations; there is hardly any time to take planned holidays.

The mushrooming of multiplex theatres, theme parks and so on in city outskirts have offered Indian consumers more options to relax within the periphery of their own city, where they can relax by taking a day off rather than planning a long holiday.

By Sarang Panchal

News: Tatas will add 3,000 mid segment rooms

(BS 26/09/2006) Chennai/ Mysore - Roots Corporation Ltd (RCL), a subsidiary of the Indian Hotels Company Ltd (IHCL) is foraying into three-star hospitality category in a big way by targeting to add over 3,000 rooms with the launch of Ginger budget hotels at select cities across the country by March 2008.

Leading tourist and pilgrim cities to which it is foraying include Hardwar, Bhubaneswar, Thiruvananthapuram, Puna, Durgapur and Nashik. The Thiruvananthapuram Ginger is scheduled to be opened on September 29, the Poona hotel in the next two weeks, and Hardwar, Bhubaneswar and Pune cities by March 2007.

Work has commenced in Goa, Nashik, Pondicherry and Agartala, and will also commence in Tirupur, Varanasi, Pantnagar, Baroda and Ahmedabad, amongst other destinations in the next couple of months.

The Tata group’s IHCL operates Taj Hotels, Resorts and Palaces, and is one of the largest group of hotels in South Asia, with the earliest one being the Taj Mahal Palace Hotel in Mumbai which opened in 1903.

Briefing reporters on its future plans on the eve of the launch of the 100-room hotel in Mysore, RCL Chief Executive Officer Prabhat Pani said on Monday that the IHCL’s focus was on providing three-star hospitality to the mid-market segments — new business locations, new industrial hubs, SEZ, IT and ITeS centres.

“The biggest growth is in the three-star and below in India. In these cities, there is no market yet for the 5-star category. Therefore, the focus is on a GenNext category of hotels,” he said.

News: Reliance Retail eyes credit arm

(BS 26/09/2006) New Delhi - Reliance Industries is foraying into personal finance services, including the highly competitive automobile and consumer loan segment.

The service will be provided under the aegis of the company’s retail venture. An executive of a leading multinational financial services company has been roped in for the venture.

When contacted, a company spokesperson declined to comment.

A source said the aim was to provide Reliance Retail users with one-stop services at the stores. “The company intends to provide financial services on its own. If required, it may also rope in banks like ICICI Bank and HDFC Bank to complement the product portfolio,” he added.

Citing an instance, the source said in some of its bigger properties, where Reliance Retail would set up automobile marts, it would also provide the facility of car loans.

Reliance will have to float a non-banking finance company to provide these services. While the company says it is early days yet to incorporate a non-banking finance company, “it will comply with all the statutory legal requirements” for this venture. Other details, including the size of the lending portfolio, are not yet final.

The source added that Reliance Industries did not foresee any non-compete issues with Reliance Capital of the Reliance-Anil Dhirubhai Ambani Group. “Reliance Industries’ personal finance services will fit into the retail plans and, therefore, there is no question of violating any agreement between the two groups,” he said.

“Instead of customers running around for loans, Reliance Industries wants to provide these services on its own,” he added.

The investment for the personal finance venture will be separate from the Rs 25,000 crore that Mukesh Ambani has committed to his retail foray. That money is meant to be used to own retail assets as well as the supply chain.

The source said personal finance services would not be available in all stores and formats, because it would not make sense to provide them in supermarkets.

This is not the only retail venture planning to finance users’ purchases. The Future Group, formerly Pantaloon, which has a tie-up with ICICI Bank for retail financing, is also looking at getting into the business on its own.

Headed by Kishore Biyani, the group will hold a 74 per cent stake in Future Generali through Pantaloon Retail, while Generali will have a 26 per cent stake.

News: India keeps confidence in stride

(BS 26/09/2006) Mumbai - Country leads world in consumer confidence for third year in a row.

The ACNielsen Consumer Confidence Survey for the first half of 2006 shows India in the lead of both the 41-nation global survey as well as the 14-country Asia-Pacific study. This is the third time in a row that India is at the top of the Consumer Confidence Index.

While the global index has held at 98 points since the last round of the survey conducted in November-December 2005, India’s score is 131, down one notch from 132 in the last survey. (See Unrelenting Optimism in The Strategist, being distributed with today’s edition)

Conducted in May-June, the survey covered close to 22,000 people, including over 500 people from India.

For the first time, China and Vietnam were also included in the Asia-Pacific study, the results of which were made available exclusively to Business Standard.

The consumer confidence result for India is in stark contrast with that for the Asia Pacific, where the sentiment is turning negative — the index for the region fell seven points, from 101 to 94.

The survey shows Indians remain confident of the job market and personal finance: 90 per cent rate employment prospects as excellent or good, compared with the regional and global averages of 47 and 53 per cent, respectively.

Indian consumers’ perceptions of the state of their personal finances is also encouraging — 86 per cent rate them as excellent or good, while the corresponding figure for the region is 45 per cent.

In the Asia Pacific, the least optimistic countries are Japan (79) and South Korea (54), which is also the most pessimistic nation globally. South Korea was the least optimistic country in the region in the last round, too.

That sentiment has worsened, with the index for the country falling 12 points in this round. New Zealand also registered a sharp drop in consumer confidence, with its index moving down nine points to 114.

The survey also polled consumers on their major concerns. Compared with previous surveys, Indians’ concerns about health have dropped seven points to 26 per cent, although the economy remains a major worry for close to half of those polled.

Across Asia, 42 per cent of all respondents are concerned about the economy, compared with 41 per cent worried about job security and health.

Globally, 47 per cent respondents cited the economy as their biggest and second biggest concerns, while 37 per cent and 31 per cent named health and job security, respectively.

News: All engines firing as Google seaches India for takeovers

(PTI 26/09/2006) Hyderabad - Internet search giant Google is scanning India for potential acquisition targets as also the points-persons to drive its expansion in the region.

Google Inc is currently in talks with a number of start-ups with unique and innovative business models, particularly in areas like voice and SMS-based advertising, to expand its presence in the country, an official close to the development said.

A Google spokesperson told PTI: "Our M&A strategy has been to look for unique products, technologies and engineering teams that can help us provide innovative products to our users or enhance existing services."

However, the spokesperson of the search engine leader declined to comment on the issue that the company was talking to potential acquisition targets. "We do not comment on speculation," he said.

According to industry sources, Google has already identified some start-ups — based out of India as well as other markets — but with significant operations in the country.

The company is also scouting for some senior level officials to lead its investment and acquisition strategy in India and neighbouring countries.

The company has already advertised a job opening on its India website for the position of Corporate Development Manager, South Asia, to be stationed in Mumbai or Bangalore, who would look after the development and execution of market strategies that drive market expansion opportunities.

The managers Google is seeking to hire would also negotiate on investments, partnerships, acquisitions and creation of deal terms.

However, the job postings do not directly and 100 per cent correlate with the people that the company is actually hiring. "We hire the person, not the job at Google," the company said, while adding that the job postings are not an indication of what we are going to do in the future.

However, the company, which already has a big research team and a huge India manpower at its centres in Bangalore and Hyderabad, said that its "hiring continues apace" in the country.

When asked whether the company was talking with venture capital firms as well for its potential investment plans in India and other Asian markets, Google said: "As a matter of policy we do not share such information."

The company is reportedly planning to significantly expand its operations in the country, which could include continued hiring activities, acquisitions and investments in new-age technology segments particularly in the Internet and telecom areas.

The company had opened its Research and Development in India at Bangalore with starting strength of about 100 people in 2004, while it has another R&D centre at Hyderabad and offices in Delhi and Mumbai.

The company has been always known as an aggressive recruiter. It's full-time employee strength stood at about 7,942 people at the end of June this year, which was almost double of its year-ago workforce.

While the company declined to disclose its exact India workforce, the industry estimates Google's India strength at more than 3,000 people.

News: Dutch firm paints Indian expansion

(TT 26/09/2006) Mumbai - The Netherlands-based Akzo Nobel is eyeing the household paints market in India.

The 13-billion-euro company already has a presence in houseware and powder coating segments in the country. Coatings comprise the largest segment of the company with sales reaching 5.55 billion euro globally.

“For decorative coatings in India, we are making a business plan to cover products, brands, supply and sourcing strategies. This will take us a few months. We are interested in the decorative coatings market in India and will enter it soon,” said a company spokesperson in a written reply to The Telegraph today.

Akzo Nobel’s coating businesses in India is in excess of Rs 250 crore in terms of annual sales. In total, the company employs more than 1,000 people in the country. The total size of the paints market in the country was Rs 12,000 crore in 2005 and it was close to 1.4 million tonnes in terms of volume. The market is growing at a rate of 12-15 per cent.

Almost 78 per cent of this market in value terms consists of decorative paints and 22 per cent of industrial paints.

“So you can easily figure out how big a market it is. And international players have been eyeing this market for a long time,” said an industry analyst.

International players like Nippon and DuPont have already made their intentions clear.

There are five major players in the Indian paints market.

“The growth rate in the decorative market is much higher. In any developed market, one-third of the paints market consists of decorative paints,” said Sumeet Budhraja of Edelweiss.

Recently, Japanese paint firm Nippon Paints has also announced its intentions to set up manufacturing facilities in the country.

Nippon Paints plans to invest about Rs 160 crore to set up two manufacturing units in India. Proposed to be set up at Chennai and Gurgaon, the units will start production from 2008 and will cater to the decorative and automotive paints segments. Both the units are expected to have a minimum capacity of 20,000 tonnes and will have the provisions to scale up to 40,000 tonnes.

Currently, top five players in the paints market are Asian Paints (19 per cent), Berger (8 per cent), Goodlass Nerolac (9 per cent), ICI (5 per cent) and Shalimar (2 per cent) according to Cris-Infac figures.

Almost 70 per cent of the market consists of organised players.

News: Merrill taps Indian cash for overseas funds

(TT 26/09/2006) Mumbai - DSP Merrill Lynch plans to tap investors in India who will be offered investment opportunities abroad. Merrill will kick off with a feeder fund — for which it has filed a prospectus with Sebi — that will plug into the Merrill Lynch Gold Fund abroad.

The scheme is one of the first proposed by DSP Merrill Lynch Fund Managers to tap local money for overseas funds.

“We aim to be among the top five mutual fund houses in terms of assets under management over the next 18 months and have put together an aggressive business plan to achieve that,” said S. Naganath, president and chief investment officer, DSP Merrill Lynch Fund Managers.

At the end of August, the fund house ranked 12th with a corpus of Rs 10,980 crore, according to the figures of the Association of Mutual Funds of India (Amfi).

“We plan to offer innovative schemes to our investors and also have some overseas funds on the anvil. We have already submitted the draft prospectus for the world gold fund with the regulator,” said Naganath.

According to the document filed with the Securities and Exchange Board of India (Sebi), the scheme will invest in Merrill Lynch International Investment Funds — World Gold Fund, which invests primarily in the equity of companies whose predominant economic activity is gold mining.

“This will be a feeder fund which will invest in the Merrill Lynch Gold Fund abroad. The scheme does not hold any physical gold or metal but invest in equities of companies worldwide whose main business activity is gold mining," explained Naganath.

According to the prospectus, the parent scheme may also invest in securities of companies whose predominant economic activity is other precious metal or mineral and base metal or mineral mining.

“However, there is an individual fund house cap of $100 million on the amount raised in overseas schemes. As and when the limit is relaxed, we will have the flexibility to launch more such funds since Merrill Lynch has many such attractive funds in the global market,” added Naganath.

The fund house today launched the DSP Merrill Lynch Small and Mid Cap Fund after a hiatus of over two years.

News: More Indian women now buying gold

(RTR 26/09/2006) Mumbai - More women are buying gold in India due to greater independence, a shift in attitudes and increased personal wealth, a World Gold Council report said on Tuesday.

"The number of women falling into gold's core target group in India has increased to 32 million in 2005 from 25 million in 2002, contributing to the rise in gold purchases," the report, based on a recent study, said.

Between 2002-2005, Indian demand rose to 750 tonnes from 571 tonnes despite higher gold prices as many people became richer, it said.

"Indians are enjoying a rapid acceleration in income growth, which is supporting discretionary spending on consumer goods, including gold," it said.

News: ABN AMRO Mutual launches portfolio management service

(RTR 26/09/2006) Mumbai - ABN AMRO Asset Management (India) on Tuesday launched a new portfolio management service that targets high net worth individuals.

"The 'ABN AMRO Exclusive Portfolio' will normally invest in not more than 15 stocks," senior portfolio manager Sameer Narayan said.

The minimum investment needed to avail of this service would be 5 million rupees, he added.

The fund house had 40 billion rupees of assets under management at the end of August.

News: DSP Merrill launches Small and Mid Cap fund

(BL 26/09/2006) Mumbai - DSP Merrill Lynch on Monday launched the DSP Merrill Lynch Small and Mid Cap fund, an open-ended equity growth scheme.

It will invest almost 75 per cent of its portfolio in mid and small-cap company stocks. The new fund offer opens on September 29 and closes on October 16.

The fund portfolio will invest almost 55-60 per cent in mid-cap stocks and around 15-20 per cent in small-cap stocks. The rest of the portfolio would comprise large stocks to provide liquidity.

The fund house plans to raise around Rs 1,000 crore.

"Indian capital markets are undergoing a scale shift. The profitability of companies across sectors is increasing due to strong industrial growth and economic expansion. Several companies in the small and mid-cap category have yet to benefit from this structural change and our new fund will seek to identify and capitalise on such opportunities," said S. Naganath, President and Chief Investment Officer, DSP Merrill Lynch.

"Mid-caps are expected to outperform the market; also the number of sectors and companies will scale up," said Anup Maheshwari, Head- Equities and Corporate Strategy, DSP Merrill Lynch.

News: India Inc seeks to park money beyond metros

(PTI 26/09/2006) Mumbai - India Inc is rearranging its investment itinerary with little known investment destinations like Bihar, Assam, West Bengal and Orissa gaining a place on the country's economic roadmap.

An analysis of the recent investments made by big business houses reveal that corporates are getting attracted to these states, long known to have unrealised potential like abundant minerals, sufficient green cover and skilled and cost effective manpower but lagging behind on the investment scene.

However, the recently acquired investor-friendly attitude of the state governments, availability of resources, better accessibility and tax incentives are driving capital investments to these states.

Bihar could be a striking example of this shift in the investment paradigm after remaining out of the ambit of the corporates' investment radar for a long time, due to factors like socio-economic backwardness and infrastructure-related issues.

However, Bihar has recently played host to a number of big brothers of corporate India, like Ratan Tata of the Tata group, Max Healthcare Chairman Analjit Singh and Ashok Ganguly of call centre firm ICICI OneSource, while others like Mahindra and Mahindra's Anand Mahindra and Singapore's foreign affairs minister slated to visit the state soon.

Tata Group chairman Ratan Tata, who also holds the position of Investment Commission Chairman, said during his recent visit to Patna that the state offered great opportunities in areas of infrastructure, health, tourism, education, urban development and agriculture.

M&M Vice Chairman Anand Mahindra is also scheduled to visit the state soon and is said to be mulling over the possibility of a tractor production plant in Bihar. Max Healthcare too is looking to set up a super-specialty healthcare centre and hospital in the state.

The Max Healthcare proposal holds significant promise since more than 50 per cent of the patients coming to New Delhi's All India Institute of Medical Sciences (AIIMS) are said to be from Bihar.

The state, which is under a rebuilding phase, promises lots in terms of profit for corporate houses with cheap real estate prices, limited labour-related issues and a large educated manpower at nearly one-third the cost in cities like Bangalore or Chennai, experts believe.

However, Bihar may have to fight challenges like huge infrastructural requirements and socio-economic backwardness, law and order, over-population and poverty.

Bihar, accounting for a seventh of the country's population below the poverty line, also has problems like low investment rates, weak transport system, lack of water management and fragmentation of land holdings to resolve.

The state was ranked the third worst performer in terms of investments made by corporate houses in the June-August period in a recent study conducted by industry body Assocham.

India Inc has made investment announcements of over Rs 6,72,000 crore across the country in two and half months till August 31, with states like Bihar, Assam and Himachal Pradesh getting a total investment commitment of about Rs 1,600 crore only, the Assocham study shows.

While states like Orissa and Chhattisgarh have already started emerging on the investment landscape, with investment proposals worth between Rs 33,000 crore to Rs 47,000 crore, states like Bihar, Assam and Himachal are still trotting around to get actual investment commitments.

West Bengal has also started attracting huge investments from corporate majors like DLF, Reliance Industries Limited, Tata, Monnet Ispat Industries. In order to improve its image as a preferred investment destination, the West Bengal government has already announced incentive schemes like subsidies on capital investment, interest payments and waiver of duties and fees.

West Bengal's neighbouring state Orissa is also emerging as a major investment hotspot in sectors ranging from IT, power, hospitality and healthcare, while grabbing attention of industry giants like Mittal, Posco, Jindal Steel, Essar, TCS and Infosys.

In the healthcare sector, Apollo Hospital and Asian Heart Hospital are also looking to invest in Orissa while in the hospitality industry, Oberoi, Hyatt, Sinclair's and Best Western are looking at expanding their base in the state.

News: Indian organised retail changing FMCG cos' revenue model

(TNN 25/09/2006) Ahmedabad - With organised retailing coming up in a big way across the country, the revenue model of the fast moving consumer goods (FMCG) firms is witnessing a change. The Rs 3,700-crore co-operative dairy giant Gujarat Co-operative Milk Marketing Federation (GCMMF), which sells Amul and Sagar brands of dairy products through 5,00,000 unorganised retailers, is now generating 3% of its total revenues from organised retailers.

The biscuit manufacturer Parle Products, which sells its products at retail stores as well as the local paan outlets, is also benefiting as sales to organised retail chains grows. “Our revenues from these stores in the last two years have increased rapidly. But it is difficult to quantify it,” says Maria Iyer of Parle Products.

A local snacks manufacturer, Balaji Foods, has seen its revenues from organised players shoot up to 10% from a mere 3% in the last two years. “Earlier, neighbourhood kirana stores were the primary purchase point. But in recent times, there is a visible shift towards hyper markets for purchase of foodgrains and other grocery products,” says Piyush Sinha, professor of marketing at the Indian Institute of Management, Ahmedabad.

The revenues of the Vadodara-based Rs 200-crore Ashwin Vanaspati India, which sells the corn oil brand Korndrop, has seen its revenues from the organised retail stores go up to 5% from 2% of total sales in the last two years. GCMMF has joined hands with Pantaloon, Adanis and Shubhiksha for the supply of bulk quantity of its products.

RS Sodhi, CGM of GCMMF, feels that Amul is getting better mileage from the organised retail set up as there is no one to influence the consumer behaviour like kirana stores where shop-keeper pushes rival brands that might be fetching better margins for him. “Amul is a trusted brand and customers get an opportunity to use their discretion to buy it in super stores and hyper markets,” added Mr Sodhi.

News: Reliance to adopt retail as well as supply model

(TNN 25/09/2006) New Delhi - Reliance is not content with its massive plans to become a retail major in the country. The company is working on strengthening its procurement and supply chain efficiencies to emerge as a key supplier and exporter as well.

The company, as a way of practising its procurement tie ups, had earlier supplied fruits and vegetables to Big Bazaar. Ready to roll out its first stores- five large-format stores (5,000-10,000 sq ft) in size in Hyderabad in the third week of October, it is keen to continue supplying to other retail players here.

The company will soon receive a major consignment of goods from China, which will include electronics, apparel, stationery and also FMCGs. Sources say these goods will not just be for the retail venture and could be supplied to other buyers as well. Procurement is a separate division from retail and there will be cost advantages as the company builds up farm linkages, said a source.

Reliance is setting up rural business hubs in Punjab, Haryana, Himachal Pradesh, Uttaranchal and West Bengal. These hubs, which will come up in the next six months or so, will not only be procurement centres for grains and milk, but also house schools, medical care centres, apart from having weather and soil specialists to help farmers produce better yield.

Reliance is also keen to buy capacities, including food processing and FMCG manufacturing ones. It is learnt to have acquired a fewflour processing capacities in Punjab and is scouting for others in India and abroad.

News: Indian coffee retail mkt to witness Rs 350 cr invstmnts

(PTI 25/09/2006) New Delhi - As coffee culture gets bigger in India, a traditional tea drinking nation, domestic and international chains are lining up big expansion plans to the tune of nearly Rs 325 crore in the next 3-5 years.

Majors players like Barista, Costa Coffee, Cafe Coffee Day and Barnie's are already working overtime to expand their presence in the country and implement product portfolio overhauls. On the other hand, global player Starbucks Corporation is all set to make its India debut in 2007.

The latest to announce big plans for expansion in theIndian coffee retail market is UK-based coffee shop chain Costa Coffee. The company's master franchisee, Ravi Jaipuria group company, Devyani International Ltd (DIL) has earmarked an investment of Rs 150 crore to set up 300 outlets in the next five years.

DIL like other chains, is looking to cash in on the booming coffee retail in India, which is expected to grow at an annual rate of over 30 per cent in the next couple of years on the back of patronage from the young population in the 18-25 age bracket with a growing disposable income.

We will have 25 outlets by the year end, DIL president and ceo virag joshi said adding that outlets would come up at Jaipur, Agra, Lucknow and Punjab. The company is planning to invest over RS 20 cr in the next one year during which the chain would open 30-35 outlets in Mumbai.

DIL opened 15 stores in the first year of its operations, with an investment of about RS 15 cr, in Delhi and the national capital region and plans to add 10 more by December 2006

News: Indian hotels make room for more

(TNN 25/09/2006) New Delhi - Hotels in India are thriving like never before with average room rates (ARRs) skyrocketing and the second quarter growth pegged at 35-40%. No wonder then the hospitality industry wants to make it even bigger, by opening new hotels.

Hotel chains such as Marriott International, Claridges, the Oberoi group and the Clarks group are all busy expanding their operations in India. While Marriott International will be opening four properties, Claridges, Oberoi, and Clarks will be opening two properties each.

Claridges is inaugurating two properties on the outskirts of Delhi. Its Atrium Hotel is scheduled to open doors to customers on December 1. The second property will be a 5-star facility spread over 100 acres, at an investment of about Rs 100 crore (excluding the price of the land), and is scheduled to open in October ’07. “The next 4- 5 years is the right time to expand operations in India as the demand is more than the supply,” says Sanjeev Nanda, managing director, Claridges Hotel.

The Oberoi group of hotels has two projects in the pipeline — The Oberoi, Gurgaon, a super luxury hotel; and Trident Hilton, Mumbai, a business hotel. The investment in the Gurgaon property will be around Rs 400 crore.

The 150-room hotel will offer its customers the luxury of staying in a 600 sq ft room — perhaps the largest in India. Trident Hilton, Mumbai will have 440 rooms and the investment will be to the tune of Rs 600 crore( including land price).

Marriott International will be adding around 852 rooms under its brand, Courtyard. The 199-room Courtyard, Gurgaon and the 210-room Courtyard, Noida are scheduled to open in ’08 whereas the 250-room Courtyard, Kolkata and the 193-room Courtyard, Hyderabad are slated to open in ’09.

On the other hand, the Clarks Group is targeting tier 2 cities with its budget hotels. Clarks Inn, Gorakhpur, a 70-room hotel with investment per room of around Rs 5 lakh will start operations in November this year. With over 325m domestic tourists criss-crossing India, the group is having a special focus on them, while also targeting foreign tourists and business travellers.

“The growth of domestic tourism is humongous and the purchasing power of Indians is increasing. This is just the right time for expansion, be it the deluxe or the budget segment,” Rahul Maini, chief operating officer, Clarks Inn, told ET.

The Intercontinental Hotels Group is also in an expansion mode in India, targeting business centres such as Hyderabad, and tier 2 cities. However, the group spokesperson did not reveal any details as the deals have not been finalised yet. The group is likely to announce a couple of deals in the next few months.

News: RBI to clear $1bn foreign VC funds in realty space

(TNN 25/09/2006) Mumbai - Foreign venture capital investment in the real estate sector may finally see the light of day. The funds had been blocked due to differences between regulators.

The government has asked the banking regulator — the Reserve Bank of India — to approve proposals submitted over seven months ago by dozen foreign venture capital firms to invest in the Indian realty sector. These firms had lined up plans to invest over $1bn in real estate projects here.

Although the proposals were approved by the Securities and Exchange Board of India (Sebi), which regulates venture capital funds, RBI had objected to it saying it was not consistent with the foreign direct investment norms for the real estate sector. Subsequent attempts by the government to resolve the differences proved to be a failure.

According to senior government officials, RBI has now been told to approve the old proposals which have been stuck since they conformed to Sebi’s norms on investments by foreign venture capital funds.

Policy managers in Delhi are of the view that blocking these proposals could lead to credibility being impaired. Instead, the way out for RBI could be to propose amendments to the regulations now in force to prevent any norms being breached, an official said.

India’s FDI policy provides for 100% overseas investment in the realty sector, including housing, commercial facilities, resorts city and regional level infrastructure townships.

This is subject to a minimum capitalisation of $10m for fully-owned subsidiaries and on the condition that the minimum area to be developed under each project is 10 hectares for development of serviced housing plots and a built-up area of 50,000 square metres for construction of development projects. Sebi’s foreign venture capital norms were eased last year to allow overseas funds to invest in real estate.

The central bank has been wary of funds — both foreign and local — being poured into the real estate sector. It fears that the inflow could stoke a possible asset price bubble, a fact which has been borne out from the experience of the meltdown in some of Southeast Asian economies.

The funds flow from a variety of funds, including local ones, could drive property prices up, especially in the light of relatively poor valuation practices. Foreign funds, on the other hand, are keen to cash in on the potential to earn annual returns of well over 15% in one of the fastest growing economies of the world.

As the managing director of a US real estate firm said earlier this month, any one who does not have a toe hold in India may lose out on gains. Among the firms which had sought RBI’s approval for investing in real estate through venture capital funds are the Purnendu Chatterjee-Vornado Capital combine and firms promoted by Kotak and IL &FS.

News: Reliance, Pantaloon plan online retail blitz

(BS 25/09/2006) Mumbai - Fledgling online retail players in India better watch out. Reliance Retail and Future Group (Pantaloon) are building up significant online channel to run parallel to their physical formats, adopting the highly successful online model of Wal-Mart. Online sales of Wal-Mart has been growing faster than sales of eBay and Amazon.

Given the muscle of Reliance and the hunger for growth of the Future Group, these players are aggresively setting up online channel to tap the fast growing e-commerce pie.

Currently this market is worth around Rs 1,100 crore and is expected to touch Rs 2,300 crore in the one year. Though a majority of this is accounted for travel and ticketing, the retail sale through these channels is doubling.

While the Future Group is putting its weight behind www.futurebazaar.com, Reliance Retail is understood to have already set up a separate team to put in place the nuts and bolts for its e-commerce platform.

According to industry analysts, players such as Fabmall and Rediff are also sprucing up their strategies in an effort to be ready when the onslaught happens.

However, one critical element that the physical retail chains have to grapple with is how to establish the brand recall in the virtual world.

"Online retail chains have gone through this exercise over the past 5-6 years and they have a good recall. Reliance and Future need to figure this out and earlier the better for them," notes an industry analyst, adding that making a customer buy online is the most difficult part that these players have to face.

Fabmall's CEO K Vaitheeswaran is not unduly worried over these plans. "More than competing with each other, we should figure out how to grow this pie. The internet penetration has to be first increased which is expected to reach 100 million in two years time. The industry is growing at 30-40 per cent year-on-year and there is huge potential for all of us."

One more aspect that is fuelling this growth is that the attitude of citizens have changed over the past five years. "Indians are now ready to pay a premium for the convenience of online commerce.

They are now accepting the various services offered on the Internet and the increasing penetration of broadband at homes also promises to bring in more revenues. We are sitting on a pure gold mine," said an industry player.

News: Indian retail sector to offer two million jobs in two years

(BS 25/09/2006) Mumbai - The retail sector in the country will require an additional 2 million professionals in two years.The Retail Association of India (RAI), which represents the country's Rs 90,000 crore organised retail sector, estimates that the current personnel requirement at the front-end alone is about 1.25 million. It will go up to 3.25 million by 2008-09.

According to RAI, the total employee base in the organised retail sector currently is one million and it expects that the current initiatives will produce another 1 to 1.5 million trained manpower by 2008.

To meet the immediate manpower requirement, big retail houses such as Pantaloon, Wadhwan, Pyramid and Shoppers' Stop, Lifestyle, Arrow, Landmark among others have initiated massive recruitments and the newcomers, including Reliance, Raymonds, Aditya Birla and a few other corporates, are also on an extensive head-hunt. In addition, existing retail companies Westside, Spinach,Oddisey, Depot are also looking for countrywide expansion in the next few years.

However, the dearth of trained personnel and retail professionals in the country has just started.This has forced many retail houses to start inhouse training programmes as well as management courses with the support of RAI and various universities and business management schools.

While the existing majors like Future Group, Landmark and Pyramid have already joined hands with leading business management schools, the RAI has initiated a dozen new retail management and professional training programmes along with internships in large retail outlets.

Gibson G Vedamani, CEO, RAI, said,"The modern retail in India would require more than 5,00,000 retail-ready employees for the retail ventures coming up in the next one year." He added that in order to create such able human resources, the RAI has taken efforts to develop the right learnig and training modules at the entry level known as Professional Retailing Skills (PRS), and it has also tied up with Mudra Institute of Communications, Ahmedabad (MICA) and Gurukul Online Learning Solutions for certain other professional retail training and management programmers.

Since the RAI has also proposed the extension working hours with permission from the state governments, the manpower requirement would double from the current level due to different shifts in the major retail outlets.

"Since the malls and supermarkets are all set to work in shifts, if they are allowed to operate 24/7, it will also result in creation of more employment opportunities in the retail sector," says Vadamani.

News: India Inc's capex tops Rs 1 trillion

(BS 25/09/2006) Mumbai - Reliance, NTPC, Bharti, ONGC, Essar Steel top 5 asset builders in 2005-06.

Evidence that the economy is on a roll is getting stronger. India Inc’s capital expenditure touched a new high with manufacturing and services companies spending Rs 1,10,000 crore in 2005-06.

This is 29 per cent (Rs 24,608 crore) higher than the Rs 84,685 crore spent on expansion in 2004-05.

What is more, over half the total capex, or 52 per cent, was spent on plant and machinery. Of the rest, 26.5 per cent was spent on capital work in progress and 21.5 per cent on other fixed assets, such as land and buildings.

“This kind of spending on capital expansion has not been seen in recent times. It has been growing in tandem with growth in corporate earnings and this will increase further as some large companies are now eyeing overseas expansion,” said the chief financial officer of a manufacturing company.

The 1,425 firms studied by the BS Research Bureau aggregated gross fixed assets of Rs 7,67,104 crore last year, up 11.7 per cent from 2004-05. The capital spent on work in progress was up 32.2 per cent to Rs 118,497 crore.

Just 25 firms accounted for over 53 per cent spending on fixed assets and the top 100 companies’ share is 80 per cent.

Reliance Industries (Rs 9,427 crore), NTPC (Rs 6,696 crore), Bharti Airtel (Rs 5,252 crore), ONGC (Rs 4,630 crore) and Essar Steel (Rs 4,630 crore) were the top five asset builders in 2005-06.

Refinery firms continued to be the largest asset builders with purchase of fixed assets worth Rs 17,626 crore in 2005-06, up 36.25 per cent. However, there was a marginal decline in the growth rate of purchases, which was 50.6 per cent in 2004-05.

While Reliance, HPCL and Mangalore Refineries stepped up their capital expenditure in 2005-06, ONGC and IOC reduced it.

The integrated steel and steel products firms collectively spent Rs 11,719 crore in 2005-06, almost double that of the previous year. Power companies were third in the list (Rs 8,016 crore), followed by telecommunications (Rs 7,376 crore), textiles (Rs 5,280 crore) and information technology (Rs 4,863 crore).

While most of the capital expansion was seen in core sectors such as steel, engineering, cement, capital goods and telecom, other sectors that have stepped up spending were sugar (Rs 1,689 crore), automobile ancillaries (Rs 2,161 crore), chemicals (Rs 1,531 crore), paper (Rs 833 crore), construction (Rs 731 crore) and tyres (Rs 704 crore).

News: Indo-China trade to touch $20 bn by end of 2006

(PTI 25/09/2006) New Delhi - China on Monday said that its bilateral trade with India would touch $20 billion in the current year.

"Last year, we had drawn a five-year-plan for economic and trade cooperation. We had set a target of achieving bilateral trade volume of $20 billion by 2008," Chinese Ambassador Sun Yuxi told a trade cooperation conference organised by FICCI.

However, given the present situation, this year itself the trade is expected to touch $20 billion - two years ahead of the target.

At this pace, bilateral trade between the two countries will be around $30 billion by the end of 2008, he said.

By the end of 2010, this is expected to touch $50 billion against the earlier target of $30 billion, he added.

As compared to Indian presence in China, Chinese representation is comparatively low.

According to our statistics, only 15 Chinese companies have their presence in the country, he said.

Committed to providing all sorts of support to Chinese companies, Ministry of Commerce and Industry joint secretary Dinesh Sharma said there was greater scope of cooperation between the two countries and it was the right time to do business in the country.

There is quite a lot to make the trade more diversified, he said.

News: Foreign dream in reach of new Indian airlines

(TT 25/09/2006) New Delhi - The Congress-led government is likely to relent in the face of renewed lobbying by a crop of new airlines to allow them to fly abroad long before they fulfil a government-mandated criteria that requires them to possess five years of operational experience in domestic skies.

Top officials said the government might change conditions at least for the Asean region with which India has signed a treaty that opens up its four metropolitan cities to almost daily flights by any Asean carrier.

Airlines expect a decision to come through in December, which will allow them to plan schedules next summer.

“Several airline barons have approached us and pointed out that start-up airlines like Asian Air have been allowed to fly into India. Hence, it made no sense to block newer airlines out of India. We may look into this as it is a valid point,” top officials said.

New airlines like Kingfisher and SpiceJet have long been lobbying for permission to fly abroad. U.K. Bose, chief executive of Jagsons Airlines and former Air Sahara head, said, “It (the permission) may come as early as December. We have been asking for it for long. If a start-up airline from abroad that meets certain financial and safety criteria can be allowed to fly here, why should we not extend the same benefits to an Indian player?”

At stake is a host of profitable routes where seat occupancy is as high as 80-90 per cent on an average because of a shortage of flights on those sectors. While it is certain that Southeast Asian skies will certainly be opened up, the government has yet to decide whether to allow the newer players to operate flights to Europe and the US.

SpiceJet director Ajay Singh said, “We have always wanted to fly to Asean destinations.” However, most airlines want to touch down at lucrative destinations like Kuala Lumpur, Singapore and Bangkok.

Very few are interested in the other Asean destinations.

Current rules qualify only state-run carriers Air India and Indian Airlines and private carriers — Jet Airways and Air Sahara — to fly to overseas destinations. The state-run carriers, however, enjoy the exclusive monopoly to fly to Gulf destinations.

Jet Airways and Air Sahara are challenging this dispensation and have been pleading with the government to break the monopoly and to allow them into this lucrative sector.

The government had granted this monopoly to the state-run carriers as compensation for the losses they routinely incur in providing services to the government by flying troops and health workers to areas hit by natural calamities and flying out earthquake and tsunami-affected civilians.

A section of aviation ministry officials also feels the experience clause should not be relaxed as its imposition means India “exports air proven services”.

Their point is that things should be allowed to stay the way they are. “Let new players mature and then fly abroad. We do not know how many of them will be around at the end of two to three years.”

Although they have been allowed to fly foreign routes, the private Indian-owned airlines together operate only account for only 35-40 per cent of permitted capacity on these routes.

Foreign airlines are cornering an overwhelming 60-65 per cent of unutilised entitlements. With growing foreign passenger traffic demand due to opening up of the economy and foreign tourist flow, this asymmetry may well increase.

News: Media activities set to spice up Biyani malls

(TT 25/09/2006) Mumbai - Kishore Biyani, CEO of Future Group, has set his sights on mall media — a concept where the excess space within a mall is used for advertising and other media functions.

“We are planning a mall media company called Future Media Ltd, which will look after our mall media business,” Biyani told The Telegraph.

Biyani, however, refused to state when he plans to start the new venture.

In the meantime, the company plans to set up more retail outlets across the eastern region. “We plan to open stores at Siliguri, Kharagpur, Sealdah, Bhubaneshwar, Patna and Ranchi. We are looking at all formats in these towns,” said Biyani.

By November-December, the group plans to set up 100,000-sq-ft Home Town stores and E-Zones in Calcutta. Home Solutions Retail (India) Ltd, a group company of Pantaloon Retail’s E-Zone, deals with consumer durables and electronics. It already has two stores, one in Indore and the other in Bangalore. “We plan to set up six E-Zones in Calcutta,” he added.

It had recently proposed to raise about Rs 960 crore through various channels, including a private placement, a warrants issue, a follow-on public offer or a rights issue and a quasi-equity instrument such as fully or partly-convertible debentures.

Pantaloon Retail plans to expand to 30 million sq ft by 2010.

According to industry sources, the company had close to 3.2 million sq ft at the end of June 2006. It is believed that more than 50 per cent of the 30 million sq ft is already booked.

The company could be looking at around 80 Pantaloon stores by 2010 against the present 20. The total area will go up to 2 million sq ft from 0.5 million sq ft. The company aims to set up around 22 central malls by 2010 from three at present.

The number of Big Bazaar outlets will go up to 225 from 30 by 2010.

News: Reliance plans $500 mln private equity fund

(RTR 25/09/2006) Mumbai - Reliance Capital Ltd. plans to raise $500 million from foreign institutional investors by March 2007 for a private equity fund, a company official said on Monday.

"We have already had successes with private equity. This is the first time we will be raising funds from external investors for private equity investment," the official, who did not want to be named, said.

He said the company was in talks with JP Morgan and Deutsche Bank for the private equity fund, first reported by The Economic Times on Monday.

The company is a part of the Anil Dhirubhai Ambani group, which also has interests in telecommunications and power. It was formed last year after the Reliance group was split between Anil and his brother, Mukesh Ambani, who controls Reliance Industries Ltd.

Last month, Matrix Partners, a U.S.-based private equity firm, said it had set up a $150 million fund with an Indian partner.

JM Financial Ltd. said in August it had teamed up with U.S.-based Old Lane Partners LP to launch a private equity fund of $150-175 million.

Private equity deals have increased in India as companies seek capital to fund growth, acquisitions and expansions. A booming stock market has added to deal making.

Private equity deals rose sharply to $3.5 billion across 146 transactions in the first half of 2006, compared with $795 million through 67 deals in the same period last year, according sector tracking firm Venture Intelligence.

News: TCS to open new office in Colombia

(PTI 24/09/2006) Mumbai - Domestic IT major, Tata Consultancy Services will open office in Colombia to cater to the IT and BPO needs of Latin America-based global and regional companies. "The Colombia office will serve the sophisticated IT and BPO needs of global and regional companies based in Colombia. Colombia represents an important strategic market being the third-largest country in Latin America in terms of population and the regions fifth largest economy," Gabriel Rozman, president of TCS Iberoamerica, Latin American subsidiary of the company, said. TCS has also bagged three new clients in Colombia including the Ministry of Finance and two leading telecom companies, he said. TCS Iberoamerica currently operates in 14 countries across Mexico, Central America, South America as well as Spain and Portugal. "With the Colombian economy gearing up for further stability and growth, on the back on strong government policies and improved security, companies are looking forward to build world class IT systems for the future," he said. TCS has over 100 consultants providing application services to its clients in Colombia by leveraging its global delivery infrastructure in Latin America, primarily its center in Uruguay, which has over 550 local consultants.

Over 3,000 local consultants provide services to over 150 regional and global clients across the Iberoamerica Operations of the company, he added.

News: India to set up global nano research centre

(IANS 24/09/2006) Bangalore - India will soon set up an international nano-science centre for material sciences to undertake research and development (R&D) projects in the application of nano-technology.

Announcing this in Bangalore on Saturday, Minister of Science and Technology Kapil Sibal said the centre would be thrown open also to non-resident Indian (NRI) scientists and technologists to take up research projects and collaborate with other public and private institutes for developing nano products.

"We have earmarked Rs 10 billion for investing in nano-science and nano-technology over a five-year period. During the current fiscal (2006-07), Rs 1.8 billion are being spent to set up seven-eight nano-science and nano-technology centres in the country," the minister told reporters on the sidelines of a function.

Earlier, inaugurating the country's first nano lab at the Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR), Sibal said though India had missed the semiconductor revolution, efforts were being made by the government and the scientific community to tap the potential of nano-technology fully to develop a host of applications across verticals for the benefit of the common people.

"The nano lab at the JNCASR will focus on the energy sector to develop devices like super capacitors for batteries and photo voltaic cells to tap solar energy optimally. Similar nano labs in other cities will develop technologies to devise applications or sensors that can be used in healthcare, agriculture, electronics, hardware and life sciences," Sibal said.

The nano-science labs will undertake fundamental research to develop modules for using nano-technology in diverse fields, while nano-technology centres will device applications and products for mass production by the private sector.

CNR Rao, national research professor and chairman of the prime minister's scientific advisory council, said advances in nano-science and nano-technology during the last five years have brought about phenomenal changes in material manufacturing, electronics, pharmaceutical and catalysis industries.

"Nano-science and nano-technology pertain to the synthesis, characterisation, exploration and utilisation of nano-structured materials, which are characterised by one dimension in the nano-metre range. These constitute a bridge between single molecules and bulk systems.

"Individual nano-structures involve clusters, quantum dots, nano-particles nano-wires and nano-tubes, while collection of nano-structures involve arrays, assemblies and super-lattices in one, two or three dimensions," said Rao.

News: ‘Only 20% of the total insurable population of India is covered’

The insurance industry is in the limelight on account of innovative products being offered to people who want risk coverage as well as savings. Trevor Bull, MD, Tata AIG, spoke to Teena Jain of The Financial Express on various issues related to the insurance business in India. Excerpts:

India is an under-insured country. How are you planning to increase your base here?

The private insurance industry in India is still at a nascent stage and growing. To date, only approximately 20% of the total insurable population of India is covered under various life insurance schemes.

Given this, we have diligently worked towards educating the masses about life insurance and its relevance. We firmly believe that reaching out to people and educating them about the need for insurance will bear fruits in the long run. Our philosophy is to anticipate the needs of people and introduce innovative products and services to meet these needs. We also have many accolades to our name in terms of product innovation, servicing efficiency and training of our channel partners. We aim to build on the expertise of the partners to the joint venture, strengthen our distribution network and leverage our understanding of the Indian insurance landscape to provide need-based and innovative insurance solutions to the Indian masses.

Are the traditional plans fading away with ULIPs giving you benefits of both insurance and savings?

ULIPs have gained popularity due to the flexibility they offer to the policyholder in choosing the investment pattern along with the transparency in charges, besides the ease of comparison of the final illustrated values. Traditional products did not offer the facility to choose and change their pattern of investment in a particular policy. However, it is incorrect to say that the traditional plans are fading away with the emergence of ULIPs. ULIPs are best suited for those who have a conceptual understanding of financial markets and its operations together with a risk appetite and are genuinely looking for a flexible, long-term investment-cum-insurance. On the other hand, traditional insurance products are more suitable for investors who are financially more conservative and who are primarily looking at insurance as a means to secure their future.

How much is the premium coming from ULIPs and traditional plans?

At Tata AIG Life we have managed to strike a fine balance between all our plans. ULIP accounts for only 50% of new sales, as need-based selling is the belief of the company. Catering to multiple customer profiles, life + health + wealth solutions based on needs are recommended. "Solution flavour" is always put forth than the "market flavour" while guiding our customers.

Though allocation charges for ULIPs even out in the long term they are very high in the initial years. Does this make ULIPs less attractive as an investment tool vis-à-vis MFs?

ULIPs are not a proxy to mutual funds. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is and will always be 'protection'. The value that this provides cannot be downplayed or underestimated. As an instrument of protection insurance provides benefits that no investment can offer. It is important for an investor to understand that the allocation charges in ULIPs are high as it offers protection that a mutual fund does not offer. However, this does not make ULIPs any less attractive as they are long-term in nature, ranging anywhere between five years to whole of life. Over a longer horizon ULIPs provide attractive returns due to the fact that they also provide tax benefits.

In the private sector pension market where do you stand? What is the growth potential of this market?

Pension is the key area of business for insurers worldwide. Life insurance and pensions are closely interlinked - life insurance covers the risk of dying too early and pensions cover the risk of living too long - the risk of outliving one's financial resources.

India is one of the youngest nations in the world with average age of 26 years. Insurers have the responsibility to increase awareness about retirement planning, and come up with innovative products that meet young India's needs.

At Tata AIG we constantly strive to launch innovative products. For corporates we have the gratuity and superannuation schemes that serve as funding vehicles, to build a retirement kitty ensuring financial freedom for the participating employees. We are a leading private sector player in this space, and one of the few companies offering both unit linked as well as traditional funds for investment.

To help individuals build a nest egg for a dignified and financially independent retired life, we have Nirvana, Nirvana Plus and Invest Assure Plus products that serve as funding vehicles. We have been doing well in this area as well because by focusing on priority need of asset accumulation, first, we provide customers the ability to choose how they use these funds at a future date they have planned towards.

New players have innovative products and they are aggressively marketing them. How do you plan to compete with them?

We have always been committed to introducing innovative insurance solutions and are enhancing our product suite by leveraging the expertise of the partners to the venture to address the varying needs of Indian consumers. We have pioneered the concept of standalone health insurance policies in India with the launch of our products Health First and Health Protector.

We are the first life insurance company in India to launch a suite of micro insurance (MI) products and services that cater to the needs of the rural masses. And not forget the master products such as Maha Life and Maha Life Gold.

The focus of the company has always been on its customers and recommending appropriate solutions. Mere aggressive marketing has never been philosophy of the company.

How are your risk products -- Health first & Health Protector -- faring?

We are the first life insurance company in India to offer standalone accident and health (A&H) insurance products. We have pioneered the concept of standalone health insurance policies in India with the launch of our products Health First and Health Protector. These products provide comprehensive hospitalisation benefits as well as options to choose cancer care protection, family accidental death and dismemberment benefit and critical illnesses.

India still remains a hugely underinsured market and the A&H policies by Tata AIG Life, with its innovative features and competitive pricing, addresses the needs of a wide cross-section of the population. Both these innovative products have been very well accepted by the market.

Does launching a new product result into more business? What is your experience?

We believe that insurance is a need-based product. Our financial advisors are trained to understand the needs of our customers and provide them appropriate solutions keeping in mind their financial goals and objectives. Our focus is to develop a quality product portfolio. Thus launching a need-based product is of more importance than just duplicating the products already available in the market.

Tata AIG Life has a balanced portfolio that caters to the needs of individuals as well as corporates. It has been our constant endeavour to anticipate the needs of our customers and service them with innovative product offerings. We believe in providing the best of our services without focusing only on our end results.

Why are term insurance policies not so popular in India?

A term insurance policy is a pure risk cover without any element of savings or investment. Since this is a pure risk cover plan, no benefits are payable on survival at the end of the term of the policy.

Unlike saving plans like endowment and money back plans, an individual does not get his money back in term insurance plans. In India, there is a mindset against investing in a policy which provides only death benefit as the policy holder cannot enjoy the invested corpus. However, it's pleasing to note the change in the outlook of people and increasing acceptance of these products.

Is it true that even insurance companies are not pushing term products as the premiums collected are low?

We do not believe in pushing any single product in the market. Term insurance is a pure risk cover and it provides protection to the policyholder's family in case of his untimely death. The value that this provides cannot be downplayed or underestimated. It is important for an individual to evaluate their needs and requirements with a professional advisor and buy a life insurance cover based on that.

News: Mumbai rocks at night, Delhi by day

(FE 24/09/2006) Mumbai - The verdict is out. Amchi Mumbai has been voted as India’s most hip and happening city, closely followed by Delhi and Bangalore, in a survey conducted by The Financial Express and C fore among 20-30 year-olds.

Mumbai, the perennial favourite, topped the list of ten best cities with its trendy restaurants, buzzing nightlife and cosmopolitan lifestyle. And if Delhi’s shopping malls and sports facilities got it the second place, Bangalore’s pubs took India’s Silicon Valley to a respectable third place.

The survey asked the respondents to rate their favourite city on the basis of various parameters like nightlife, cultural haunts, eating out options, sports facilities, cost of living and law and order, among others.

The biggest surprise entrant in the list is Pune. Ranked fourth, the city is ahead of the other two metros, Kolkata (fifth) and Chennai (seventh). Hyderabad was at sixth place while Chandigarh, Ahmedabad and Kochi account for the rest of places.

Mumbai got the maximum points for nightlife, with Bangalore coming a close second. With dedicated jazz bars and watering holes dotting it, this city of pubs sports a nightlife that puts Delhi to shame.

The capital scores a poor fourth in nightlife. For eating out options in the city, Mumbai, once again topped the list, with Delhi coming a respectable second, followed by Kolkata, known for its popular street food.

Thankfully, Delhi’s ever-burgeoning malls and multiplexes saved the day for the national capital. Ranked as India’s shopping paradise, Delhi also took the honours for its better infrastructure. No longer a retiree’s paradise, Bangalore ranks second as the costliest city after Mumbai, with Pune fast closing the ranks. Kolkata continues to be the cheapest metro, where having a good time is easy on the pocket.

Chennai follows a close second. It is the same story for cultural activities, with bhadralok Kolkata taking first place and laidback Chennai coming second. The southern metro has also been voted the safest city with Kochi and Pune taking second and third places respectively, even as Delhi continues to be the wild West.

And if you have a bohemian lifestyle and don’t want nosy neighbours, then Mumbai is the place for you with the most liberal attitudes. Surprise again, Kolkata is number two (the bhadralok is not inquisitive), followed by Bangalore with IT geeks constantly trooping in. Patriarchal Delhi is at number four followed by Pune at fifth place.

Sadly, none of the big cities, not even the metros, boasts of world-class sport facilities. Bangalore, with its great weather, has given the outdoors a go-by. Looks like the young techies prefer to spend their days in front of their PCs. The surprise was Delhi, with all its big stadiums and now swimming pools, golf courses and pool tables, at number one.

News: Bajaj Auto, BHEL, RIL in Forbes’ Fab 50 list

(PTI 24/09/2006) Singapore - Bajaj Auto, BHEL, Infosys, ITC and RIL are among 12 listed Indian companies that figure in the latest list of Fabulous 50 of the Forbes Asia magazine.

This is the second annual Fabulous 50 list, the best of Asia-Pacific's publicly-traded companies with revenues or market capitalisation of at least $5 billion.

Other Indian companies are ICICI Bank, HDFC Bank, L&T, Satyam Computers, Sterlite Industries, Tata Motors and Wipro.

India has been represented by the maximum number of companies followed by Japan with nine and South Korea and Taiwan with six companies each and China and Australia with five each.

Bajaj Auto has regained momentum in the battle of two-wheelers with its main competitor Hero Honda, Forbes said, adding that "last year, Bajaj made $238 million on sales of $1.9 billion, ensuring a spot on Forbes Asia's Fab 50 companies list."

BHEL's heavy order book for its turbines, boilers, valves and pumps are up six-fold over last year as the government pushes to increase industrial capacity and improve infrastructure.

BHEL, with a market value of $11,835 million remains a favourite with overseas fund managers, says Forbes.

According to Forbes, every name in the list of Fab 50 had to meet a gamut of statistical measurements -- long-term profitability, sales and earnings growth plus projected earnings and stock price gains.

Most of the 12 companies listed in the Fab 50 have gained substantially on the bourses over the last year.

The Mukesh Ambani led Reliance Industries Limited ensured its spot in the list for its market value at $33,258 million.

"Chairman Mukesh Ambani doesn't do anything in a small way. Ambani is one of India's richest men... He is building the world's largest refinery in India and has announced plans for a new Reliance company to build a farm-to-fork distribution system for agricultural goods in India," the magazine said.

L&T, India's largest construction and engineering firm, builds everything from oil and gas platforms to stadiums and its shares have gone up by 80 per cent in the last 12 months.

L&T is also building a part of India's $6 billion Golden Quadrilateral highway linking the national capital New Delhi capital with Mumbai, Chennai and Kolkata.

Some of the leading and well-known MNCs are Australian mineral and metal company BHP Billiton, China Mobile of China, South Korea's Daewoo Shipbuilding and Marine, Hyundai Mobis and LG corporation.

Nidec (capital goods), Nitto Denko (chemicals) Konika Minolta (household and personal products), Toyota Tsusho (trading companies) and Yahoo Japan (software and services) are among the leading Japanese companies for registering their names in the Fabulous 50.

News: Bharti ranked 13th in 'Asia Business Week 50'

(PTI 24/09/2006) New Delhi - Leading telecom service provider Bharti Airtel has been ranked 13th among the best performing 50 companies in Asia by 'BusinesWeek' magazine, ahead of corporate giant Reliance Industries and Infosys.

The annual ranking, 'Asia Business Week 50', of best companies across all sectors in Asia ranked Bharti ahead of compatriots Reliance Industries (17) and Infosys (23).

Commenting on the ranking, Bharti Airtel CMD Sunil Mittal said it highlighted the company's relentless pursuit to create a world-class organisation providing best in class services.

Business Week said Bharti's plans to invest two billion dollars on network expansion and marketing to reach underserved markets in rural areas was "serious money" and a step towards Mittal's broader ambition to be the most admired brand in India by 2010.

"Investors already like what they see. Bharti Airtel delivered 30 per cent total shareholder returns in 2005 and a head-turning 493 per cent over the last three years," the release said quoting Business Week.

News: Reliance finds gas in KG basin

(BL 24/09/2006) Mumbai - Reliance Industries Ltd (RIL) has discovered gas in the Krishna-Godavari basin off the east coast of India.

The company has notified the Directorate General of Hydrocarbon about the gas discovery in KG-OSN-2001/1 (NELP III) block.

The discovery has been named Dhirubhai28. The notification was made in terms of the production sharing contract signed between RIL and the Government of India. A company press release said the potential commercial interest of the discovery was yet to be established.

News: Singapore co to invest $1bn Timil Nadu SEZs

(TNN 23/09/2006) New Delhi - Singapore-based property developer, Ascendas, has proposed to invest $1bn in two multi-product special economic zones (SEZs) in Tamil Nadu. The proposal will be taken up at the Board of Approvals (BoA) meeting for SEZs in October. The company’s Indian arm is already developing an international technology park in Chennai in a joint venture with the Tamil Nadu Investment Development Corporation (TIDCO), at the cost of Rs 450 crore.

Commerce ministry officials told ET, the interest of foreign players in Indian SEZs was growing. Apart from Ascendas, international majors, including South Korean steel company Posco and Indonesia’s Salem group, are also waiting to get their SEZ proposals cleared.

The BoA already has its task cut out with 200 pending proposals spilling over from its previous meeting. However, ministry officials said there will be no problem in accommodating fresh proposals. “As we have decided to hold five meetings to clear proposals state-wise, there will be no problem in taking up new applications,” an official said.

Interestingly, less than half-a-dozen new proposals have been submitted to BoA after the ceiling on the number of approvals was lifted last month. Officials said that the mad rush of applicants last month was because of the 150-cap imposed by the empowered group of ministers (EGoM) on SEZs. Once the cap was lifted, applicants became more relaxed.

The commerce ministry hopes to clear all pending proposals by October 10. Although the EGoM has removed the cap on the number of applications, it will relook at the situation in February ’07, or sooner if 70 SEZs get notified before February. As only 24 SEZs have been notified so far, it is unlikely that the next EGoM meeting will take place before February ’07.

News: Bharti's retail model to be finalised by October

(TNN 23/09/2006) Kolkata - Bharti Enterprises plans to finalise its retail business model this October, Bharti Enterprises chairman Sunil Mittal indicated on Friday.

“Currently, Bharti is in talks with all large multinational retail chains keen to enter India, including Tesco. Different business possibilities are being explored. A team of experts has been formed for the purpose.

They are examining various models and formats that can be adopted. This team will suggest the most appropriate retail model by October,” said Mr Mittal.

He was talking reporters on the sidelines of CII’s National Council meeting in Kolkata. It has been widely reported in the media that global retailers like Wal-Mart, Tesco and Carrefour have plans to enter India. “The retail venture will be undertaken by a new company that will be floated,” Mr Mittal said.

Regarding Bharti’s plans in the West Bengal region, he said, the group was exploring multiple investment opportunities in several states, although nothing had been firmed up yet.

Bharti has, however, entered contract into farming in Punjab over 5,000 acres of land. Mr Mittal also said: “About $2bn will be invested in various projects in ’06-07, primarily in telecom.”

News: Coming soon - Indian specialty malls

(TNN 23/09/2006) New Delhi - The retail story is not just about convenience stores and hypermarkets. Big action is taking place in the specialty retail space. The trend is spreading across sectors and includes some pretty offbeat categories that are coming out of the unorganised mom-and-pop stores.

While FMCG major Hindustan Lever is mulling a retail chain for — believe it or not — laundry products, some other categories, which are attracting early movers include electronics, office products, toys, lingerie, chocolates, electrical products, stationery and furnishings. Both big and small players are entering the electronics space.

The big names include the Dubai-based Jumbo group and the Tatas. Lifestyle segments, for instance, lingerie has attracted chains like Sensa, rebranded as Straps, and Marks & Spencer under Women’s Secret brand.

Thapars-controlled Bilt is planning a paper-products chain and Luxor Parker is looking to set up a stationery retail chain. Havells, Philips and Bajaj Electricals are among those interested in electrical products.

Meanwhile the Indo Rama Group has opened Office1 superstores for office products after striking a deal with US-based Office1 Superstore International. Then there are segments like candies, where Candico is already active, and toys where both local and international players, including UK-based Hamleys and Toys Kemp, are planning big moves.

“Internationally, specialised retail is a big business. Similar trends will emerge in India,” said Harminder Sahni, chief operating officer of Technopak Advisors.

In fact, some international majors have already started the search for real estate. They are said to be negotiating with mall developers. “Since most stores in these specialised categories will need much lesser space in comparison to the existing formats, such as lifestyle and hypermarkets, they will all come up in malls. There won’t be too many stand-alone stores,” says Abhijit Das, head of the Ansal Plaza Mall Management Co.

Some retail sector trackers, however, feel that success will depend on how mature the market is for a particular segment. “In some categories, the market has evolved enough to absorb a specialised retail chain, but in the case of some categories, the timing may just not be right. On a long term basis, there will be space for everyone,” says Deepankar Sanwalka, head of the consumer markets wing of KPMG India.

News: 'India needs more FDI in manufacturing'

(PTI 23/09/2006) New York - India is seeking major investments in the manufacturing sector as part of its effort to take the benefits of development to the poorest of the poor, Minister of State for Industry Ashwani Kumar said.

Speaking at a meeting with entrepreneurs and lawyers organised at the Indian Consulate here yesterday, Kumar said the government is trying to put on fast track litigations that affect investors. India is expected to have an economy $1.2 trillion in the next 7-10 years, Kuamar said adding the aim is that the manufacturing sector, which contribtues around 10% to the economy, should expand its share to 25%. Kumar said India could absorb around $240 billion over 8-10 years with the power sector alone requiring some $140 billion.

News: UAE property giants eye India

(PTI 23/09/2006) Dubai - Leading UAE-based firms, especially in the real estate sector, have joined the list of global companies, targetting investments in India in hotels, malls, healthcare, housing, IT Parks and integrated townships.

A booming economy and the huge middle class segment in India offers a lucrative destination for investors and several leading UAE real estate companies such as Emaar Properties, Al Ghurair Group's ETA Star, Al Rostamani Enterprises' KM Properties, Nakheel, and Dubai Properties have announced major plans in the country.

They are investing in hotels, malls, healthcare, housing, IT parks and integrated townships all over the country from Mumbai, Delhi, Chennai, to Hyderabad.

Emaar, the largest property developer in the Middle East, has announced a joint venture in India between Emaar and MGF Developments- Emaar MGF Land Private Ltd.

In December 2005, Emaar MGF announced India's largest foreign direct investment in real estate, for projects with a capital outlay of USD4 billion. Developments are planned in Delhi, Andhra Pradesh, Karnataka, Tamil Nadu and Maharashtra.

ETA Star is developing a mall in the heart of Chennai

and a one million-square foot tech park in the city's IT

corridor, Abid A. Junaid, ETA Star's executive director told the Gulf News.

The company has launched a 10-tower residential project in Bangalore, and in Mumbai's Juhu district, it has a joint venture with the Supra Group for developing service apartments, residential buildings and a mall.

"The company is also spreading its operation in cities including Kolkata and Hyderabad, where land acquisitions are in progress and projects will be announced early next year," Junaid said.

Better Homes, the UAEFs biggest real estate agency, this month opened offices in Mumbai, which will sell Dubai and Mumbai property to Indian residents and NRIs.

Ryan Mahoney, managing director of Better Homes, said the company will set up six offices in Mumbai that offer brokerage services for residential property.

"This is a turning point in the Indian economy as FDI restrictions have been relaxed and real estate sector now offers tremendous potential," he said.

Sudir Kumar, executive director for property at Dubai-based Morison Consulting, said the opportunities in India were too good to miss, a fact demonstrated by visits to India by global business leaders including Bill Gates.

KM Properties, another Mideast real estate major, has set up a huge real estate development fund for hotel and real estate development across Middle East and Asia. "We presently have property in Saudi Arabia and are exploring opportunities in India as well," Mohit Gupta of KM properties said.

News: Chicago Mercantile Exchange to enter India

(RTR 23/09/2006) New Delhi - The Chicago Mercantile Exchange could enter India's booming commodity derivatives market if the government relaxes its rules, managing director John Davidson said on Friday.

CME also plans to offer its expertise to exchanges in India, and is eager to help enable trading of Indian commodity derivatives elsewhere, Davidson told Reuters in an interview while on a trip to India.

"The Indian commodities market is growing at a remarkable pace," he said. "I think we will set up an office here sometime, but I don't know when."

"US investors will be interested in Indian commodity market as they have been in equities," Davidson said.

India allowed trading in commodity futures in 2002. Three exchanges -- the National Commodity and Derivatives Exchange, Multi Commodity Exchange, and National Multi Commodity Exchange -- were set up in 2003.

Trading volumes in these exchanges totalled 15.6 trillion ($340 billion) rupees during April to August. Volumes were 21 trillion rupees during the fiscal year to March 2006.

Asked if the CME would be interested in picking up a stake in any of the Indian commodity exchanges, Davidson said: "There is always a possibility, but there is no specific plan as of now."

Davidson met officials of financial and commodity regulators, and the finance ministry in the last few days.

A bill is pending in parliament to permit foreign players to pick up stakes in Indian exchanges and take positions in commodity futures. India's commodity market regulator does not allow banks and financial institutions, both domestic and foreign, to trade in these markets.

The CME could help Indian exchanges start trade in a variety of economic derivatives such as those based on inflation, housing prices and non-farm employment, Davidson said.

The CME, the largest futures exchange in the United States and owner of largest futures clearing house in the world, offers trading in derivatives of interest rates, equities, foreign exchange, agricultural commodities and alternative investments.

News: US House bill to knock India out of favour

(RTR 23/09/2006) Washington - A Republican bill to extend trade benefits for developing countries would knock key industries in Brazil, India and other countries out of the program, development groups said on Friday.

Oxfam America said it welcomed the bill introduced in the U.S. House of Representatives on Thursday by Ways and Means Committee Chairman Bill Thomas, a California Republican, but called for number of changes to be made.

"The exclusion of some developing countries from the GSP (Generalized System of Preferences) program is troubling, given the millions of poor people who are employed in sectors that directly benefit from duty-free benefits," said Raymond Offenheiser, president of Oxfam America, in a statement.

Oxfam said their initial analysis suggested that certain exports from Brazil, India, Argentina, Turkey and Venezuela could lose duty-free access to the United States under the legislation.

Democrats were expected to support the legislation in hopes of revisiting the issue next year, when they could control the House if they win a majority of seats in Nov. 7 elections.

The bill also provides new trade benefits for Haiti, which has been a priority for Rep. Charles Rangel of New York, the top Democrat on the Ways and Means panel.

Another section extends through September 2008 a provision expiring next year that allows African manufacturers to use fabric from Asian or other suppliers to make clothes they can sell in the United States without import duties.

That extension would allow thousands of African women to keep their jobs a while longer, but another provision requiring at least 50-percent African content beginning in October 2008 "could set the bar too high," Offenheiser said.

The United States' main trade benefits program for developing countries -- the Generalized System of Preferences -- expires on Dec. 31, as does a separate program for the Andean countries of Colombia, Peru, Ecuador and Bolivia.

The Bush administration favors renewing GSP, but is in the midst of a review that could kick many large developing countries like Brazil and India out of the program.

Many lawmakers, such as Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, no longer want to provide duty-free treatment to products from major developing countries that are resisting U.S. pressure in world trade talks to open their own markets to more U.S. exports.

The bill would exclude India's jewelry sector from the program by barring duty-free treatment for any product from a developing country that has annual export sales of more than $1.5 billion, said Viji Rangaswami, an associate at the Carnegie Endowment for International Peace.

Another provision aimed at developing countries with a per capita income of more than $3,400 would deny duty-free access for Brazil's auto parts exports and other Brazilian sectors by barring USTR from issuing certain waivers, Rangaswami said.

The bill would not extend trade benefits for Andean countries. Peru and Colombia have negotiated free-trade pacts that lock in their duty-free access to the United States, but Bolivia and Ecuador have not.

News: Bengal realty dawns on Godrej reality

(TT 23/09/2006) Calcutta - The Godrej group is planning a large-scale foray into real estate development in Bengal.

The company is developing two information technology parks of 3.5 million sq ft each at Salt Lake and a shopping mall of 4 million sq ft at Park Circus in joint venture with RPG group-controlled CESC. It now wants to develop a large residential project in the city as well.

“We are planning to develop a big residential project — over 10 million sq ft in size — in Calcutta,” Godrej group chairman and managing director Adi Godrej said after an interactive session with Bengal chief minister Buddhadeb Bhattacharjee. The session was organised by the Confederation of Indian Industry here today.

“Our large residential projects in Mumbai have got a good response and we see a lot of opportunity in Calcutta, too,” Godrej said.

“I have already spoken to the chief minister about it and he was very responsive,” Godrej added.

Godrej, however, hasn’t identified a location where the project will come up. “We have asked the government to find land for us and we will take a final call after that,” he said.

Investments required for the proposed project could only be estimated after the land cost is known, he added.

Like its IT parks and the shopping mall, Godrej Properties — the Godrej group’s real estate subsidiary — will develop the real estate project. The company will invest between Rs 300 crore and Rs 400 crore in the IT park and mall projects.

Interestingly, CESC-Godrej Plaza is the first shopping mall of Godrej Properties in the country.

Adi Godrej also plans to acquire companies making consumer care products both in India and abroad. “We have recently acquired two companies overseas. We are looking for more acquisitions, small or big, for our consumer care division. We are looking at both India and overseas for the buyout,” Godrej said.

Another group company, Godrej & Boyce, managed by Jamshyd Godrej, has already evinced interest in setting up a furniture manufacturing plant in the state.

News: Stock split, payout on Pantaloon agenda

(TT 23/09/2006) Mumbai - Pantaloon Retail, promoted by Kishore Biyani, may soon consider a stock split. In a notice to the Bombay Stock Exchange today, the company said it would seek the approval of its board on September 30 for the stock split. The company is also considering a dividend.

In the meantime, the shareholders of the company at the EGM today approved the issue of securities worth Rs 260 crore to investors.

The securities could be new shares or existing shares of the company or a rights issue; or convertible securities with or without detachable warrants; or convertible debentures. The prospective investors could be institutions, incorporated bodies or mutual funds.

The shareholders at the EGM also approved a preferential issue to the promoters in the form of 12,12,480 warrants with the option to acquire for every warrant an equity share of Rs 10 each at a price of Rs 1,635 per warrant aggregating to about Rs 198 crore.

An analyst said the company was keen on a stock split to raise its floating stock which is low, possibly, due to the high FII holdings in the company.

The shares of Pantaloon closed today at Rs 1,843.30, 5.61 per cent higher than yesterday.

Last month, the company announced it would divest up to 24 per cent in its subsidiaries, such as Home Solutions, Central Mall and Future Media and Future Logistics, to raise up to Rs 500 crore.

The market is abuzz with rumours that Biyani plans to hive off Central Mall as a separate company.

Considering that the company has drawn up an ambitious expansion plan of close to 30 million sq feet by 2010, Pantaloon is expected to need close to Rs 3,600 crore, believe retail analyst.

News: Indian Forex reserves increase by $ 404 m

(PTI 23/09/2006) Mumbai - Forex reserves increased by $ 404 million to stand at $ 165.542 billion during the week ended September 15, as against $ 165.138 billion during the week ended September 8.

The reserves had decreased by $ 1.320 billion during the preceeding week ended September 8, compared to a week ago period.

Foreign currency assets increased by $ 404 million to $ 158.239 billion during the seven day period ended September 15, according to figures released by the Reserve Bank.

Foreign currency assets in dollars include the effect of revaluation of non-US currencies such as Euro, Sterling, Yen held in reserves.

Reserve position in the IMF remain static at $ 764 million.

Gold reserves as well as SDRs remained static at $ 6.53 billion and at $ one million respectively.

News: Air Canada plans more direct flights to India

(BL 23/09/2006) Toronto - Air Canada is planning to introduce more direct flights from Toronto to Mumbai and other Indian cities from next year.

Robert Milton, Chairman of Air Canada said expansion of its services in India will be possible as the company will have new Boeing 777 planes next year.

The new aircraft would have a longer range, allowing Air Canada to fly to more destinations non-stop in India, Milton said while addressing a transportation conference sponsored by RBC Dominion Securities Inc.

Milton said the Air Canada would also benefit from the cargo services to and from India.

News: The great Indian dream gets a taste of foreign plots

(HE 22/09/2006) New Delhi - The reserve Bank of India does not allow Indian citizens to invest more than $25,000 per person a year in real estate abroad. That works out to Rs 11.5 lakh; one would not get even a decent apartment in a Tier II city in India with that kind of money. But Indians are still buying property abroad — often at top -end prices.

“Indians are next only to Malaysians among foreigners who buy real estate in Singapore,” says David Neubronner, executive director, Savills Residential-Singapore. Property rates range between 1,000 Singapore dollar (about Rs 30,000) per sq ft and 3,000 Singapore dollar.

The other top destinations? Dubai, London and New York. “The kind of Indian who wants to invest in property abroad is extremely affluent, has business interests at a particular place or visits that place often because of family or sentimental reasons,” says Pankaj Ranjan, regional director of global realtors Trammell Crow Meghraj.

Actor Shah Rukh Khan has purchased property in Dubai, which earlier did not allow foreigners to buy real estate. In 2002, it announced free zones for property holdings.

Most real-estate dealers shy away from discussing transaction details because there is a cloud over the purchase procedure. Kaviraj Singh, partner, Trustman & Co, a law firm specialising in real estate, says, "The RBI regulation basically means that if the valuation is below the cap, the approval is automatic; when the value is more, you may prepare a project report and make a case to the government — which may or may not be passed."

But usually, "people form companies in tax havens like Mauritius or the Isle of Man, and invest in personal properties under the company name," says a real-estate consultant. A favoured route, she says, is to purchase property through the hawala network, investing cash from real-estate sales in India in property abroad. The other option is to buy property in the name of friends or relatives — but there is a risk involved there.

Yet another option is the one devised by companies like UK Land Investments that offers land in the UK for less than the permitted $25,000. Many in the trade, however, feel that this is a highly suspect procedure as the land offered is usually farmland, not residential land.

News: Indian exports grow 20.5% in August

(BS 22/09/2006) New Delhi - India's merchandise exports of $10.38 billion in August represent growth of 20.5 per cent over the $8.61 billion clocked in the corresponding period last year.

According to provisional data released by the commerce and industry ministry, imports during the month increased by 11.67 per cent to $13.86 billion, as against $ 12.42 billion last year.

The higher growth in exports caused the trade deficit to improve marginally to $3.48 billion from $3.80 billion in August last year.

Cumulative exports during April-August increased by 21 per cent to $48.08 billion, as against $39.83 billion in the same period last year. Imports increased by around 18 per cent to$68.29 billion, against $58.01 billion last year. The trade deficit increased to $20.20 billion from $18.18 billion in 2005-06.

Oil imports in August were valued at $5.03 billion, 27 per cent higher than the $3.95 billion last year.

Oil imports during April-August were valued at $23.57 billion, 39 per cent higher than the $16.9 billion in the corresponding period last year.

News: Kumar Birla plans $2 bn retail foray

(BS 22/09/2006) Mumbai - With an eye on the nascent organised retail business opportunity, the Aditya Birla group will invest over $2 billion in the next five years for rolling out a mix of supermarkets and hypermarkets across the country.

A key element of the group’s strategy will be its focus on “private labels”, products that are sold under brand names owned by the company. The initial roll-out is expected to begin within 15 months.

Unlike the retail plans of other Indian corporates, the Aditya Birla group, headed by Kumar Mangalam Birla, is not looking at tying up with a global major. Project finances were being tied-up, sources said. Key resource people have already been hired from existing retail majors like Shoppers’ Stop and Pantaloon.

When contacted, the group spokesperson declined to comment.

Barring branded fast-moving consumer goods, the Aditya Birla group’s retail foray is expected to look at creating private labels in all categories such as food and groceries, apparel and homecare products.

Sources added that most of the sourcing would be from within the country, because the duty structure did not make imports a viable option.

The group has substantial experience in textile retail with Madura Garments, which has leading brands like Van Heusen, Allen Solly, Peter England, Louis Philippe and SF Jeans in its kitty. It is also the licensee for international brands like Esprit.

The booming retail sector is attracting the country’s leading business houses such as Reliance Industries, Bharti Enterprises, the Tatas and the Reliance Anil Dhirubhai Ambani Group. Organised retail in India is estimated at $6 billion and is projected to grow at 20-25 per cent per annum.

News: TCS overtakes Infosys in market capitalisation

(BL 22/09/2006) Mumbai - Tata Consultancy Services Ltd (TCS) has replaced Infosys Technologies as the country's biggest IT firm and second biggest private sector company in terms of the market capitalisation.

TCS, the country's largest software exporter, today achieved a market cap of Rs 1.02 lakh crore, surpassing Rs 1.01 lakh crore of its closest rival in the IT space Infosys.

TCS has also replaced Infosys as the country's fourth most valued publicly listed corporate entity after ONGC, Reliance Industries and NTPC. TCS had re-entered the Rs 1 trillion market-cap league earlier on September 20.

Wipro retained its position as the third largest IT firm with a market cap of Rs 74.5 lakh crore at the end of today's trading session.

TCS had attained a market cap of about Rs 1,00,550 crore with a surge of 1.71 per cent in its share price to Rs 1,027.50 at the Bombay Stock Exchange. The country's largest software exporter had first hit the 1 trillion bracket on April 18, 2006, but had failed to sustain at that level.

Currently, TCS and Infosys are the only two IT companies with a market cap of over Rs 1 trillion, while Wipro has also previously breached this level. Wipro, whose current market-cap stands at about Rs 74,000 crore, is the only company to have attained a market cap of Rs 2 lakh crore, which was achieved on February 2, 2000.

News: Pantaloon to open 17 Big Bazaar outlets

Bangalore - Pantaloon Retail (India) plans to open 17 new Big Bazaar outlets in the south in next one year, including eight-nine stores in Kerala, where it will make a foray, a senior company executive said on Friday.

The company currently has eight Big Bazaar outlets in the south, five in Bangalore, one each in Hyderabad, Vizag and Mangalore.

"We will have 25 Big Bazaar outlets in the next 12 months", company President (South) Vishnu Prasad said adding that the company spends between Rs 10 crore to Rs 20 crore to set up a store depending on its size.

The investment for expansion in the region is expected to be around Rs 200 crore, Prasad said. Eight-nine stores each would be established in Tamil Nadu and Kerala. "We will be present in A class and B class cities", he said.

Pantaloon is opening tomorrow its fifth store in Bangalore, it's the company's 32nd Big Bazaar outlet in India. Five more stores would be added in the city in the next one year.

The 1,60,000 sqft latest store here, spread across six floors, is the biggest one in India. Bangalore now has the highest number of Big Bazaars in India, company officials said.

Prasad said the five Big Bazaar outlets here expect total revenue of Rs 500 crore in the current fiscal.

News: Affluent Indians to grow 12% by 2009

(BL 22/09/2006) New Delhi - Believe it if you can. There are an estimated 7,11,000 individuals with liquid cash of over $ 1,00,000 in India, and the number is expected to increase to 1.1 million, growing annually at 11.6 per cent by 2009.

These individuals have cumulative liquid wealth of $ 203 billion, which is expected to rise by 12.2 per cent per year to $ 322 billion by 2009, says American Express' White Paper on `The Changing Lifestyle Expectations of the Affluent In India' that was released on Thursday.

Clearly, the affluent class is a fairly large chunk of the population and as a group, possesses both power and money and hence the demand it makes on the market is also top class. As a matter of fact, there is a fast emerging, young and dynamic affluent class in India for whom acquiring luxury is not an occasion, but something to be expected. Exclusivity is the mantra they follow.

According to the survey, affluent consumers seek the best brands, the best quality, and the best services. But in the midst of their pursuit of an exclusive affluent lifestyle, they have not lost sight of what they are. This class celebrates the fusion of global luxuries and indigenous Indian brands in their lifestyles. Shoddy products, sub-par services, unpleasant purchase experiences are no longer tolerated or forgiven.

All these facts, the survey points out, have opened a wide door for a number of premium brands, international and domestic, across all sectors - be it clothing, accessories, airline services or hotels. But with the huge growth in demand for such products and services, manufacturers and service providers also need to constantly prove their worth.

The survey, however, warns service and product providers that mass affluence doesn't mean mass marketing. Hence there is a need to focus on both a short and long term individual relationship building strategies with the class. The brands also must recognise that with growing competition it is imperative to maintain performance and customer satisfaction levels.

The survey also points out that since the Indian affluent class likes celebrating its `Indianness,' international brands need to create services and products that understand the Indian culture, create familiarity in the market place and earn the respect of affluent customers. Further, as the affluent Indian aspires to be extraordinary, all brands and services should endeavour to make the ordinary extraordinary to stay in the race.

News: TCS rejoins Rs 1 trillion m-cap club

(PTI 21/09/2006) Mumbai - IT major Tata Consultancy Services (TCS) today returned to the elite league of companies with a market capitalistion of over Rs 1 lakh crore (Rs 1 trillion) -- a feat currently shared by only four other Indian companies including ONGC, Reliance Industries, NTPC and Infosys.

TCS attained a market cap of about Rs 1,00,550 crore with a surge of 1.71 per cent in its share price to Rs 1,027.50 at the Bombay Stock Exchange.

The stock jumped more than 2 per cent to an intraday high of Rs 1,035 late in the trading session.

The country's largest software exporter had first hit the 1 trillion bracket on April 18, but had failed to sustain at that level.

Currently, TCS is the second IT company after Infosys to enjoy a market cap of over Rs 1 trillion, while Wipro has also previously breached this level.

PSU oil exploration major ONGC leads the pack with a market-cap of over Rs 1.67 lakh crore, followed by corporate behemoth RIL with Rs 1.56 lakh crore, state run power generation major NTPC with market cap of over Rs 1.06 lakh crore and Infosys with total shareholder wealth of about Rs 1.01 lakh crore.

After corporate behemoth RIL and another IT major Infosys, TCS has become the third private sector company to have gained a market cap of over Rs 1 lakh crore, while other two - ONGC and NTPC - are public sector undertakings.

ONGC and RIL had first reached market cap of Rs 1 lakh crore on December 12, 2003 and August 2, 2005 respectively.

Wipro, whose current market-cap stands at about Rs 74,000 crore, is the only company to have attained a market cap of Rs 2 lakh crore, which was achieved on February 2, 2000.

News: Merrill Lynch, Fidelity raise stake in Indiabulls

(RTR 21/09/2006) Mumbai - Indiabulls Financial Services Ltd. said on Thursday Merrill Lynch Capital Markets Espana S.A. SV and funds managed by the Fidelity group increased their stake in the company last week.

Shares in Indiabulls rose after the news and were trading at noon at Rs 445.90, or 7.95 per cent higher, in a firm Mumbai market.

Merrill Lynch Capital picked by 2.546 per cent stake to raise its stake to 8.853 per cent, Indiabulls said.

Funds managed by FMR Corp., Fidelity International Ltd. and their subsidiaries picked by 0.95 per cent stake to reach the level of 10.35 per cent, it added.

Merrill Lynch bought the shares from the market. The stake increase by the Fidelity group was achieved through market purchases as well as conversion of Global Depositary Receipts into equity shares.

News: Tatas plan mega foray into durables retail biz

(TNN 21/09/2006) New Delhi/Gurgaon - After Reliance Retail, Videocon and Pantaloon, the Tata Group is doing an encore. Following its tie-up with the UK-based retail major Woolworths, the Tatas are working out an aggressive foray into the consumer durables retail space in India.

The group, which has named its durable venture with Woolworths as Value Electronics, has already initiated an aggressive drive for the acquisition of real estate in various parts of the country and is in talks with consumer durables majors, LG and Samsung, for supply of goods.

The first of the retail stores will kick-start in Mumbai before the end of this year. When contacted, Anand Jadhav, marketing head of Value Electronics, said he was unable to comment on the developments.

According to sources, the company will also develop its own store-brand durables, and is already in talks with few big Indian electronics manufacturers, including Videocon, and may ink a sourcing deal with them later this year. The in-house brand will be marketed under the Millenia brand, according to sources.

Ravinder Zutshi, deputy managing director, Samsung India, confirms that his company has already tied up with the Tata-Woolworth joint venture for supply of its products. Value Electronics will be one of the largest consumer durable retail store chain in the country, with space ranging from 60,000 square feet to as much as 1.5 lakh square feet.

While the Tata Group is in talks with big mall developers in larger cities, its durable chain will primarily operate through stand alone formats in smaller cities. Industry sources peg the group’s overall real estate requirement by the end of this year to be at around 40-45 lakh square feet.

Meanwhile, the group is banking high on the inorganic route and is learnt to be in talks with a host of local consumer durable retailers in the metropolitan cities.

For Tatas, this will be the third in a series of retail ventures. While Value Electronics will mark the group’s maiden entry into the consumer durable retail space, it has already been present in the lifestyle retail area for more than six years with the Westside brand. Recently, the group had also launched its hyper-market chain Star India Baazar.

News: Foreign insurance cos capture 22% biz in India

(PTI 21/09/2006) London - Leading foreign insurance companies operating in India have captured 22 per cent of the total insurance business in the country within a short span of time, Minister of State for Commerce and Industry Ashwani Kumar has said.

"22 per cent of the Indian market has been captured by foreign insurance companies who are currently working with an Indian partner," Kumar said at an Interactive Session on Investment Policies and Opportunities in India, organised at the India House here last night, to attract foreign investments in diverse fields.

He said as a sequel to their success, the foreign insurance companies are keen to increase their investment in the Indian companies from 26 per cent to 49 per cent.

"There is a proposal under consideration but as of now there is no specific move in that regard," he later told reporters.

However, Kumar said, "Government is considering to increase the voting rights of the foreign companies in their ventures from the current 10 per cent to a maximum of 15 per cent. A Bill is before Parliament."

The minister's visit is being considered as a preparatory visit for Prime Minister Manmohan Singh's three-day visit to Britain from October 9 during which he will address an India-UK Investment Summit.

Addressing the gathering, Indian High Commissioner Kamalesh Sharma said India has emerged as the second largest investor in UK and more Indian companies were setting up their operations in Britain.

At present a total of 500 Indian companies are operating in UK and they have so far created 3,000 jobs in Northern Ireland, he said.

Lord Karan Bilimoria, Chairman of the India-British Partnership Network, said at present Britain's trade with India was less than one per cent of the global trade and there was vast scope to improve it.

"Potentiality in India in every field including manufacturing, apart from the knowledge-based industries is enormous," he said.

News: Indian govt to decide FDI in bourses within 10 days

(PTI 21/09/2006) New Delhi - The Government today said it will make it clear within 10 days whether foreign players be allowed to hold stake in stock exchanges or not.

The policy on allowing FDI in bourses will be firmed up in a week to 10 days time, Finance Ministry sources said.

The policy would make it clear if bourses can invite foreign direct investment while divesting brokers equity in them below 49 per cent, in line with SEBI guidelines on demutualisation.

NASDAQ has reportedly expressed its keenness to pick up stake in Bombay Stock Exchange.

The Finance Ministry officials already have two rounds of discussion with RBI Governor Y V Reddy and others. Another round of discussion will be with Sebi Chairman M Damodaran in 2-3 days, they said.

The need for FDI policy on stock exchanges were not felt earlier since most of them were not companies but associations of persons and not demutualised, which meant that traders held equity in these bourses.

But since, the Government has made it mandatory for all the bourses to corporatise and demutualise, the policy becomes inevitable, the sources said.

While the Finance Ministry will give inputs, the Commerce Ministry will frame the FDI policy, they said.

While the FDI policy will be framed by the Union Government, the market regulator SEBI would issue regulations on mechanism of demutualisation, which basically means that trading activity and the management should be controlled by separate entities.

Many stock exchanges like BSE are awaiting the FDI policy and regulations on demutualisation from Sebi.

BSE had reportedly made it clear that 26 per cent of the stake would be sold to strategic investors and the remaining 25 per cent through an IPO.

Over a month back Nasdaq official met their counterparts in BSE, giving rise to speculation that the technical exchange would pick up a stake in it.

BSE has appointed Kotak Mahindra Capital Company as its financial adviser for the demutualisation process.

However, BSE MD and CEO Rajnikant Patel time and again refused to specify whether Nasdaq has expressed interest in buying a stake in BSE.

He had also said IPO is linked to demutualisation regulations, which are yet to be finalised. May, 2007 is the deadline for BSE to bring down brokers stake in it to 49 per cent.

News: Diageo plans to set up Indian bottling units

(BS 21/09/2006) Mumbai - Diageo India is planning a manufacturing footprint across the nation in the near term. Asif Adil, managing director, Diageo India and South Asia, said the company would have bottling units in the north, south and east. At present, it has units in Aurangabad and Madhya Pradesh.

Adil said the move to consider local bottling units stemmed from the excise structure and regulations. The company has enough capacity at the existing bottling units.

Diageo could either set up bottling units or tie up with local bottlers. Adil was speaking on the sidelines of its brand launch, Shark Tooth, which marked the entry into the prestige vodka segment.

Shark Tooth, distilled and bottled in India, would be available in two variants, Shark Tooth and Shark Tooth Extra containing ginseng.

The company targets sales of one million cases of Shark Tooth. The priority would be Indian market and would then look at West Asia.

News: Reliance bid to get retail logistics right

(TT 21/09/2006) Mumbai - Mukesh Ambani’s retailing venture has decided to outsource a part of its logistics requirements to third party providers as it knuckles down to launch its operations later this month.

The exact numbers are not known at this stage, but if industry circles are to be believed, Reliance Retail, which is spearheading Ambani’s “revolution” in this front, has already initiated discussions with some of India’s leading logistics providers.

“The deal size could be worth hundreds of crores of rupees. Reliance Retail is already getting a good response and a few outfits have already made a pitch to bag the prestigious order. Negotiations are now in progress,” said a source in the industry who did not wish to be identified.

Some of the names that are doing the rounds include DHL and Gati. This, however, could not be independently confirmed.

Reliance Retail plans to have a pan-India presence in over 1,500 cities and towns and it plans to invest Rs 25,000 crore over the next few years to bring competitive offerings across a host of formats ranging from neighbourhood convenience stores, supermarkets, speciality stores to hypermarkets.

The retail initiatives would also have an array of domestic and international brands catering to both mass market and luxury segments.

It is the sheer magnitude of this retailing foray that had led Reliance to look at third party logistics providers to take over a part of the function that would also include supply chain management.

It is learnt that Reliance Logistics Ltd (RLL), a group company, which is now engaged in the process of ramping up its operations in the country, will also take this responsibility, though on a much smaller scale.

RLL provides third party logistics and it has created more than 50 distribution centres in 33 locations across the country.

Sources say an outsourcing order from Reliance could only be the beginning of a trend for the industry.

Logistics companies in India have lately been pretty gung-ho about business prospects with the economy growing at a fast clip and many companies outsourcing this function. In such a scenario, the booming retail sector is fast turning out to be a source for some big bucks.

“Several players are pumping huge sums of money into the retail sphere. Over a period of time, large foreign players will also be allowed to set up operations in the country. There is, therefore, a lot of potential for logistics companies as retailers will choose to concentrate on their core operations while functions like supply chain management and warehousing will be farmed out,” said an official in the logistics industry.

Attracted by such an opportunity, foreign logistics providers like the Panalpina group, based in Basel, Switzerland, has already commenced its operations here in the country. On the other hand, domestic companies like Gati are also in an expansion mode.

News: Move to regulate Indian microfinance units

(TT 21/09/2006) New Delhi - The government is likely to bring in a legislation to regulate micro-finance institutions in the winter session of Parliament.

The finance ministry has drawn up a draft to set a minimum threshold capital level of Rs 25 lakh for microfinance institutions, with the provision that they can also accept deposits only if their capital base goes up to Rs 2 crore.

The draft, which is expected to be put up before the cabinet next month, will give NBFCs engaged in microfinance three years within which they will have to declare themselves section 25 companies or not-for-profit firms or register themselves as NBFCs.

They will be allowed to accept deposits only if they turn into NBFCs. Not-for-profit companies will be allowed only to on-lend money to self-help groups. The company law board will allow self-help groups to be members of section 25 companies.

Capital adequacy norms for such NBFCs will be 10 per cent of risk weighted assets. This is far more stringent than formal financial institutions, but is considered necessary as all microfinance loans are collateral-free loans.

The finance ministry will also make suitable changes in income tax laws to allow section 25 microfinance companies accept tax-free donations and contributions.

Officials said the interest charged by NBFCs and not-for-profit companies will have to be made public under the new legislation and the method of fixation has to be transparent. The interest could cover the capacity building and management costs as well. This is being done as there were allegations of certain microfinance institutions charging high rates and making huge profits.

While there will be no limits to loans to SHGs, the new legislation, when enacted, will set Rs 50,000 as the ceiling for loans to individuals under microfinance schemes.

At the same time, the government will consider a blanket income tax exemption for section 25 companies involved in micro-credit, including exemption from tax for income earned.

However, the new law will ensure that the savings or profits of SHGs, promoted by section 25 companies, are maintained only with permitted organisations like government securities, small savings funds and scheduled banks.

News: IBM to add 3,000 new employees in India

(RTR 21/09/2006) New Delhi - IBM, the world's largest computer services company, will take in up to 3,000 new staff in Kolkata to meet robust demand for outsourcing, a company official said on Thursday.

"We are very bullish to fill up this capacity very soon because the business is growing and customers are showing more and more interest in sourcing of global delivery services," Amitabh Ray, vice-president for application services at IBM India, said.

The new centre at Kolkata, an emerging IT hub, will provide application development and application maintenance services. In June, IBM said it would invest $6 billion in India over three years as part of its move to increase outsourcing services and client management from Asia's fourth-largest economy.

"India is by far the largest global delivery centre within IBM," Ray said.

India's low-cost English-speaking engineering workforce has attracted a slew of global companies, which outsource services such as supply-chain management, payroll processing, handset designs and financial analytics from the country.

India's software services sector is likely to grow by more than a quarter in the year to March 2007, on rising demand for outsourcing, India's National Association of Software and Service Companies has estimated. Contracts worth a combined $100 billion are coming up for grabs over the next two years, it said.

News: Subhiksha to roll out 80 stores in Andhra

(BS 20/09/2006) Chennai/Hyderabad - Riding on the success of its sharp discount offers, Chennai-based Subhiksha retail chain is planning to launch 80 stores across Andhra Pradesh in the next four months at an investment of Rs 40 crore.

Of this target, it has already set up 53 stores as part of a soft launch in Hyderabad besides important cities in coastal Andhra in the past few months.

Addressing a press conference in connection with its Andhra plans, R Subramanian, managing director, Subhiksha, said the company was offering up to 10 per cent discount on products across all the four verticals, namely telecom, supermarket, fruits and vegetables and pharmacy.

According to him, the company has been pursuing a strategy for faster growth aiming at large turnover on lower margins as compared to the competition.

“Our business model appears mainly targeting the middle income groups but our 10-year experience in Tamil Nadu gives a different picture," Subramanian said, adding that sharp discounts on purchases are equally attracting upper middle classes as well.

He said the major benefit coming from bulk purchases by the company was being directly transferred to the customers through discounting instead of overspending on shop comforts.

While ruling out the possibility of entering into any kind of arrangement with Reliance retail business, Subramanian, however, said the proposed IPO is expected to happen in the next one year while it would become a 1,000-store strong company in the meantime.

Subhiksha's stores will have telecom divisions, which will offer products and services to the mobile customers, he said.

News: Indian retail sector wants to be open 24/7

(BS 20/09/2006) Mumbai - The Rs 90,000-crore organised retail sector has for the first time voiced a demand for flexible working hours across the country.

The Retailers’ Association of India (RAI) is negotiating with various state governments to allow “24/7” operational freedom to malls and department stores.

The body is talking to Maharashtra, West Bengal, Karnataka, Tamil Nadu, Kerala, Madhya Pradesh, and Andhra Pradesh for amendments in trade and labour rules.

“Four states, including AP, Maharashtra, West Bengal, and AP have responded positively to the proposal,” said Gibson G Vedamani, chief executive officer, RAI.

The demand stems from the widely varying timing regulations followed by different states, restricting large retail stores from keeping open beyond a certain hour (9 or 10 pm), especially in the metros and other cities. The regulations also call for a mandatory weekly off.

News: Hyundai chief shares India investment plans

(PTI 20/09/2006) New Delhi - South Korean car major Hyundai Motor on Wednesday sought New Delhi's support to make India an export hub for small cars, while expressing interest to bid for a 500 million dollar Delhi Metro contract for supply rolling stock.

Hyundai Chairman and CEO Chung Mong Koo, who called on Indian leaders including President A P J Abdul Kalam and Prime Minister Manmohan Singh, shared his company's investment plans for India, where it already has a car manufacturing facility.

"HMI will continue to be a responsible corporate citizen, creating additional employment in Tamil Nadu, contributing to the economy not only of the state but the Indian economy too," he was quoted as saying in a company statement.

Meanwhile, a Bloomberg report from Seoul quoting a separate statement said Koo told Singh that Hyundai's rolling stock affiliate, Rotem Co would bid for a 500 million dollar contract to build 400 trains for the second phase of the Delhi Metro.

As part of its global expansion strategy, HMI is setting-up a second car manufacturing plant with a three lakh capacity thereby doubling its production.

In addition to this, HMI will also set up an engine and transmission plant and a R&D centre in India, it added.

The setting up of the second plant and establishing the new R&D centre will increase the production as well as sales of Hyundai Motor India and also change the face of the company in India making it now a comprehensive automotive manufacturer, Koo said.

News: Mumbai developer mulls Calcutta foray

(TT 20/09/2006) Mumbai - The alluring Gangetic plains have caught the fancy of another big developer in Mumbai.

K Raheja Universal, a 50-year-old company, is looking at its first foray into the Calcutta market. According to industry sources, the company could be looking at residential developments near the Eastern Metropolitan Bypass. K Raheja Universal belongs to Suresh L. Raheja and his sons Rahul and Ashish.

“The urban land ceiling rules in the eastern market prevents the availability of quality land to the potential developers. Scarcity of good quality land is one of the biggest problems some prominent groups face,” said an industry insider.

The company officials, however, said although they are looking at the Eastern regions, especially Calcutta , nothing has been officially finalised yet.

The group has over 2,000 residential, commercial and educational buildings to its credit.

While developers from Delhi have already entered Calcutta, those from Mumbai have not been able to do so.

A lot of Mumbai developers such as the Hiranandanis and the Runwal group have expressed interest in the market, but nothing has fructified yet.

“A lot of Mumbai developers are interested in Calcutta. But Mumbai developers are more used to smaller projects with higher profits model. Calcutta is more of a high volume market. Developers from Mumbai are not accustomed with high volumes. To profit in Calcutta, the project size has to be big to ensure higher volumes. Rates in Calcutta are also not as high as in Mumbai. These are reasons for Mumbai developers taking so long to go there,” said Joygopal Sanyal, head (west India-land agency) of Trammell CrowMeghraj.

He said developers from Delhi have been more active in the eastern region, adding that Unitech and DLF have already entered the Calcutta market with Bengal Unitech and Bengal DLF.

Property prices in Mumbai are one of the highest in the country. “It is, therefore, very difficult to get the same rates anywhere else in the country. If the developers do not play the volume game, their profits suffer,” said an industry analyst.

“More and more developers in Mumbai are feeling the need to de-risk their business and spread across the country. They realise they have to increase their strength and depth. This is one of the reasons behind this interest in the Eastern Region,” Sanyal added.

News: India to have a tenth of Yahoo!’s global workforce

(DNA 20/09/2006) Mumbai - Internet major Yahoo! is looking at significantly ramping up its operations in India. Although its chief operating officer Daniel Rosenweig did not announce any multi-million dollar investment on his maiden visit to the country, he said India would be amongst the top investment destinations for the company, whose services one in every two internet users accesses at least once a month globally.

The company’s engineering centre in Bangalore, the largest outside the US, has 800 people on its roll, and is expected to rise to 1,000 by the year-end, representing one-tenth of Yahoo!’s global strength.

“Initially, when we started, it (the research and development centre) was strictly a back-end setup. Today, it is part of our global engineering set up, leading in innovation. In the future, there would be products developed completely out of India,” Rosenweig said.

Already, engineers in India are working on Yahoo!’s most popular services like search, mail, messenger, media operating system and mobile. The scope of work includes product engineering, technology research and market innovation, from conception to research, development and operations.

India’s contribution to its $5.3 billion global revenues may be less than significant today, but Rosenweig says he is “very satisfied” with the Indian operations. Low internet penetration in the country is the chief dampener for the company. But, with a population of over a billion people, it is a market nobody can take lightly.

Recognising that it cannot grow faster than the overall internet market, Yahoo! is breaking some boundaries here. Since along with connectivity, language is hampering growth, it would soon launch content in local language, as well as localise content to expand user base, says George Zacharias, head of Yahoo!’s Indian operations.

Also, the fact that India has more mobile phone connections - over 120 million and counting - than personal computers isn’t lost on Rosenweig. While Yahoo! mobile is already popular (by how much, he wouldn’t say), the company is entering into alliances with handset manufacturers and service providers.

“We realise that for many, their first point of contact with Yahoo! would be their mobile devices rather than the computer,” he says.

To gain market share, Rosenweing says the company follows the policy of ‘build, buy or partner’. Globally, it has gobbled up over two dozen companies over the last few years. Last month it acquired a stake in bharatmatrimony.com, a wedding site.

News: Jet eyes 50% revenues from overseas ops

(DNA 20/09/2006) Mumbai - How do you expect the shareholders of a company, who have seen their wealth erode by about half when the overall benchmark market has doubled, to react? Angry, agitated, and gunning for the management’s blood? Surprisingly, none of the above, if you were present at Jet Airway’s annual general meeting, its second since it went public, on Wednesday.

Intense competition (seat capacity is up 55%), high fuel cost (up 60% on-year), higher rental (+120%), increased selling and distribution cost (+40%) and high staff cost has taken a toll on the company. As a result, against an issue price of Rs 1,100 per share about a year and half back, the shares are now quoting at about Rs 650. But listening to the shareholders no one would have imagined that the counter has faced bloodbath on the bourses. Most reposed faith at the management .

Analysts’ call on the stock is more reflective of its performance on the bourses. Brokerage houses like Citi, SSKI, Enam, and Edelweiss have a sell/reduce/under perform rating on the stock.

The company said being sub-judice, it won’t comment on the blotched Air Sahara deal, on which it is reportedly losing about Rs 30 lakh a day purely as interest cost on the Rs 2,000 crore in the escrow account

Chairman Naresh Goyal offered no time frame as to when the company would raise $800 million by way of FCCB/GDR/ADR/ equity shares to finance its $2.5 billion aircraft acquisition plan.

“We are monitoring market condition and will revive our efforts to raise additional capital as soon as a window of opportunity arises,” he said. The company has raised debt in the interim to meet the pre-delivery payment commitments.

Expressing confidence that it would receive approvals for international flying rights before the airline takes delivery of wide-bodied aircraft next year, Executive Director Saroj Datta said in 2-3 years, half the revenues would come from international operations.

The airline is hoping to connect destinations like U.S, Canada, U.K, Africa, China, Europe, and South East Asia over the next few years.

News: Arcelor Mittal may form shipping JV in India

(RTR 20/09/2006) Mumbai - Arcelor Mittal is in talks with state-run Shipping Corporation of India to form an equal joint venture to transport raw material and steel for the global giant, The Economic Times newspaper reported on Wednesday.

The new company, which will be set up in India, will help the steel maker cut costs, while SCI, India's largest shipping firm, would gain as its ships would be used by the joint venture, the daily said, citing unnamed sources.

It said talks were at an advanced stage. Company officials were not immediately available for comment.

News: 'Indian realty sector emerging global investors' choice'

(BL 20/09/2006) New Delhi - The Indian real estate industry is poised to emerge as one of the most preferred investment destinations for global realty and investment firms in the coming three to five years, according to a survey done by the Federation of Indian Chambers of Commerce and Industry and Ernst & Young. Growth focus The focus for growth in the sector will be on product differentiation and quality, geographic de-concentration from metros to smaller cities, shift from regional developers to national developers, consolidation of large Indian business groups and their emergence as market leaders, shift from land transaction to development transaction, change in ownership to leasing, correction in supply format from investor to consumer driven, movement of construction giants up the value chain and the emergence of strong real estate capital market. According to the study, in the commercial office segment, the demand for office space is set to expand significantly in the next few years, primarily driven by the IT and ITES industry that requires an estimated office space of more than 367 million sq ft till 2012-13. Further, India's improving image, as a regional corporate base for Asian markets and strong growth in emerging sectors such as financial services, pharmaceuticals, telecommunications, and biotechnology will also boost demand and broaden the occupier base. Several upcoming special economic zones are also expected to provide the next generation impetus to the commercial office space development. Residential segment In the residential segment, rising disposable incomes, financing terms and increase in population will continue to drive housing demand in India. However, one phenomenon, which is likely to impact the housing market growth in the future is the trend of sub-urbanisation. Another growth catalyst for the residential sector could be the expected supply of prime land parcels in metros due to unlocking of land by leading public sector undertakings, which hold prime real estate assets in several urban centres. Other segments As far as the commercial, retail and entertainment segments are concerned, estimates suggest that by the end of 2008, the eight largest Indian cities will experience a supply of around 66 million sq ft of new retail space through more than 200 proposed retail centres. However, the operative fact that is likely to metamorphose the Indian retail market is the further relaxation in FDI guidelines. Though, according to the new FDI guidelines of the Government of India, foreign retailers are now allowed to invest in single brand retail outlets in the market to an extent of 51 per cent participation or through a franchisee route, the market is still restricted for large and multiple format retailers. However, there are certain factors that could act as an impediment for the growth of the sector. Though the commercial office segment is highly dependant on the performance of the Indian IT-ITES sector, any unforeseen downturn in the performance of IT-ITES industry will have a significant impact on the vacancy levels of the upcoming commercial office space stock in the country.

News: Hedge funds adopt 'wait and watch' approach towards India

(BL 20/09/2006) Mumbai - How are hedge funds viewing India currently and what is their strategy for markets here right now? James Breiding of Naissance Capital says that they have currently adopted a `wait and watch' approach towards India. He is waiting to see if the Sensex can sustain above 12000. Breiding further says that he has not seen much redemption pressure. Excerpts from CNBC-TV18's exclusive interview with James Breiding. You have got an exposure to Indian Hotels and MTNL, other than that there is not too much exposure to what people called the Indian consumption story, not too much of financial services, not too much of autos. You don't believe in that story? I think right now it's a wait and watch attitude. It's hard to imagine that India will decouple from the global equity markets. The market has been able to climb back quite well since the May-June correction. But the market does seem to be running out of steam and lacking conviction. At a time when there are some concerns about the growth in US economy, we are very pleased with what India has done. However, we have pegged back our holdings in general. This is just to wait and see whether like many others, the market can really break through this 12,000 levels or not, and continue its bull rally. The good news is that India has continued to exceed high expectations. As a percentage, how much cash are you sitting on at this point and what have you sold out of the past month or so? We continue to maintain our holdings. We are still very committed to these companies. We are quite tempted by the market mood right now. Though it is a very tricky time to really understand whether the market will continue to head upward or is vulnerable to corrections. So for the time being we are a little bit hesitant. Among institutional investors and foreign investors, the general perception is that India is quite well priced compared to other emerging markets such as Russia, Brazil, and China. Anecdotally, have you heard of any redemption pressures coming in across funds? I don't think we are seeing so much by way of redemptions. We have really come back 60 per cent; we have recaptured 60 per cent of the correction. It is good that the correction happened as quickly as it did. Because I think probably had it occurred in a more gradual way, a lot of investors would have lost confidence. As it stands, they were left a little bit shocked and held on to their investments, at least that is what we have seen. So any further move into or out of India will then depend on so much earnings or is it more about sustaining above a level and what is that level? I think as the earnings story continues to unfold then our view is that India has gone through an incredibly good run and investors should be quite pleased with what the results have been year-to-date and we are seeing the Nifty, which is up more than 20-23 per cent year to date, which is a pretty satisfactory return. We are at a point of the cycle where we had a huge amount of de-leveraging with lower interest rates and we have had greater utilisation of capital expenditures and a very good run with regard to consumption. I think the monsoon has been more or less benign although there have been excesses and shortages on a regional basis. So the earnings will have to continue to unfold and I think they will, but that will be a medium-term story as opposed to a short-term story.

News: Overseas firms vie for convention centre in Goa

(BS 19/09/2006) Mumbai/Panaji - Forty-three companies, including big names from Hong Kong, Singapore and Dubai have shown keen interest in putting up Rs 300 crore-plus international convention centre proposed at Dona Paula.

The Goa government had invited Expressions of Interest (EoI) from global parties last month and the government functionaries are elated by the positive response. Promoters of top convention centres in the country have also sent in their bids.

Situated on the 25 acre prime land near Goa University, the centre would consist of multi-purpose conference hall of 2,000 capacity, ballroom of 1,200 capacity, meeting rooms and exhibition halls.

The project will also have middle and high-budget accommodation of 350 rooms, an entertainment zone of 3 lakh sq ft and commercial space of 1.2 lakh sq ft including malls.

“The good response to the convention centre project has sent clear signals to the industry outside the state that Goa is emerging as a big destination for MICE. At present, the EoI documents are being examined,” the official said. In the second stage, parties would be short listed after which detailed technical and financial bids will be invited.

Officials are hopeful that work on the project would begin by the year-end. The convention centre which many governments in the last one decade had been talking about will now be built on BOOT (built, own, operate and transfer) basis on a long term concession.

It was also one of the so-called gifts announced by the Vajpayee-led NDA government three years ago for Goa.

Like the Sky bus, it was to remain only as a promise, until now.

This project comes close on the heels of proposals for cruise terminal for international cruise liners and marina (mainly for yachts) proposed at Aguada.

News: India Inc ad spend keeps pace with profit growth

(BS 19/09/2006) Mumbai - India Inc spent more than Rs 10,000 crore on advertisement and sales promotion last year. The advertisement expenditure (ad-spend) of 959 listed companies increased by 18 per cent to Rs 10,007 crore in 2005-06 against Rs 8,470 crore in 2004-05.

The growth rate of ad spend of corporate India is in tune with the rise in net profit. The aggregate net profit of these companies increased by 18.3 per cent to Rs 89,626 crore (Rs 66,847 crore).

Data extracted from annual reports of over 1,000 companies, of which 959 firms spent money on advertisement and sales promotions, reveal that the share of advertising to sales has remain unchanged to around 1 per cent during last three financial years.

Twenty-eight firms had spent more than Rs 100 crore on advertisement accounted 55 per cent of the total ad spend by these 959 companies during the fiscal.

Personal care products firms are on top of the list on ad spend during the year. Ten companies from the sector had spent Rs 1,563 crore on advertisement and sales promotions, followed by automobiles (Rs 1,174 crore), pharmaceuticals (Rs 729 crore), banks (Rs 702 crore) and telecommunications (Rs 686 crore).

Hindustan Lever, the largest ad-spender, spent 20 per cent more on advertisement to Rs 1,006 crore in FY05-06 against Rs 836 crore spent in FY04-05.

The new product launches leads most of the fast moving consumer to spent more on the sales promotions.

Colgate-Palmolive spent 45 per cent extra on advertisement to Rs 198 crore against Rs 137 crore in previous year, while Marico spent 44 per cent more on ad-spend to Rs 124 crore (Rs 86 crore).

The stiff competition in banking sectors leads the total ad-spend of twenty-one banks increased by 40 per cent from Rs 485 crore in FY05. Bank of Baroda (Rs 25.6 crore), Allahabad Bank (Rs 22.8 crore) and Syndicate Bank (Rs 13.1 crore) spent more than doubled, while ICICI Bank Rs186 crore (Rs 116.30) and State Bank of India Rs 109 crore (Rs 67 crore) spent 60 per cent extra on advertisement during the year.

The advertisement expenditure of four tobacco companies increased merely two per cent in FY05-06. ITC spent just 2.4 per cent more to Rs 225.73 crore against Rs 220.53 crore while GTC spent Rs 47.7 crore (Rs 47.2), one per cent more on advertisement and sales promotions.

Most of the automobile companies except for Tata Motors cut their advertisement expenses heavily to maintained their net profit growth.

Bajaj Auto reduced advertisement and sales promotion expenses by 26 per cent to Rs 107 crore (Rs 144 crore), Mahindra and Mahindra by 5 per cent Rs 139 crore (Rs 147 crore) and Eicher Motors by 3 per cent to Rs 21 crore (Rs 22 crore).

News: Videocon to set up 9 SEZs

(BS 19/09/2006) Mumbai - The Videocon group is on a roll. While it’s already within striking distance of the largest overseas acquisition by an Indian company, Videocon’s activity on the domestic front is no less spectacular.

Videocon is setting up nine special economic zones (SEZs) in Maharashtra, West Bengal, Gujarat and Karnataka with a total area of over 12,000 acres. J M Morgan has been appointed as advisor to chalk out strategies in setting up infrastructure projects for the group across the country.

Group chairman Venugopal N Dhoot will sign the memorandum of understanding with Maharashtra Chief Minister Vilasrao Dekhmukh late this evening for setting up two SEZs in the state. These SEZs will be set up in Pune over 3,000 acres of land and in Aurangabad over 6,600 acres. The group will set the up maximum number of SEZs — five— in West Bengal. However, the total size of these SEZs will be over 2,300 acres. It will set up two multi-product SEZs l— one each in North 24 parganas and Howrah district. A food processing and a IT-zone will come up in Siliguri.

It will also set up a sector-specific zone in North 24 Parganas. These SEZs are expected to create 50,000 employment in the state.

It will also set up one SEZ each in Gujarat and Karnataka which are yet to be finalised. The SEZ in Gujarat may come up near Gandhinagar on 100 acres of land.

Dhoot told Business Standard that the initial investment for the SEZs in Maharashtra would be around Rs 2,000 crore which might shoot up to Rs 25,000 crore in near future. These SEZs would create employment for 50,000 people in Pune and 75,000 in Aurangabad. They both would have captive power plants.

While the Pune SEZ would be a multi-product one, the Auranagbad zone would partially be developed for floriculture and horticulture including large scale orchid farms for export to the US and Europe.

Videocon Reality Infrastructure, an unlisted entity, will chip in with the bulk of investment while Videocon Industries, the group’s flagship entity, will invest Rs 50 crore to begin with and will have the right to purchase the entire equity at par within next five years. The state government’s investment in these zones will be capped at 26 per cent.

Videocon is also in talks with foreign investors for developing infrastructure and investing in SEZs. The group has started recruiting people from the UAE and China to meet the human resource requirement of its SEZ programme. Dhoot has been eyeing the SEZ sector for over two years when the sector was not on top of India Inc’s agenda.

News: Deutsche, Morgan Stanley close in on Indian fund

(BS 19/09/2006) Mumbai - Deutsche Asset Management and Morgan Stanley Investment Management are understood to be the two finalists for the Standard Chartered mutual fund business in the country.

The two mutual fund companies will be given access to Standard Chartered’s data room for due diligence shortly.

Once the two potential acquirers satisfy themselves with the quality of business and submit their final bids, the deal will be sealed. The sale is expected to be completed by the end of October and the business transferred within three months.

The deal could fetch over Rs 700 crore, among the highest paid for any mutual fund in the country. A Standard Chartered Bank spokesperson declined to comment on the development.

The Standard Chartered Mutual Fund brass was in London last week making presentations to the six potential acquirers. Of the 16 asset management companies that showed interest in the business, five were invited for final presentations by Standard Chartered at its London headquarters.

The five, ING Investment Management, Morgan Stanley Investment Management, Deutsche Asset Management, Schroder and UBS, were chosen for their commitment to business, employee retention and basic minimum bid, sources said.

Later, JP Morgan was also invited for a presentation after it raised its bid.

Lotus Asset Management, the joint venture between Temasek and Sabre Capital, rumoured to be a front-runner, did not figure in the short list.

Sources said bidding was aggressive — upwards of 5 per cent of assets under management — despite Standard Chartered having a significantly low proportion of assets under management in stocks.

The Standard Chartered mutual fund had Rs 15,551 crore of assets under management at the end of August. The average asset size during the month was Rs 14,304 crore and 5 per cent of this works out to Rs 715 crore.

Franklin Templeton had paid close to this, though for a far smaller asset base but with a significantly higher equity proportion, to buy out ITI Pioneer in 2002.

If Deutsche and Morgan Stanley do not come up with a satisfactory price, the other contenders may be given a chance.

Sources said a point in favour of the two final candidates was that both had a presence in India and would not have to go through too much regulatory scrutiny.

Schroder and UBS are not in India yet and they will need clearance from the Securities and Exchange Board of India, which will delay the sale. Standard Chartered wanted to speed up the deal, sources said.

The scramble for the acquisition reflects the growing desire of foreign firms to enter the Indian mutual fund business and the increased cost of raising funds because of new norms laid down by the regulator.

Deustche Asset Management manages a mere Rs 6,742 crore and Morgan Stanley Rs 2,688 crore in India.

While Deustche is struggling to expand its business in a fiercely competitive market, Morgan Stanley wants to rekindle its Indian fund business.

News: India's retail boom's the key to longer shelf-life

(TNN 19/09/2006) Mumbai - The organised retail industry holds great potential for SMEs, provided the latter do not look at retain chains as final customers, but as partners in servicing the final customer. SMEs that live this philosophy will be able to make the most of the golden opportunity for growth promised by the retail boom in the country.

SMEs are the backbone of the retail business in the country. SMEs today supply a wide range of products to the retailers, including garments, shoes, food-stuff and other items of everyday use.

Besides, SMEs also supply other not-so-common items like furniture made by local manufacturers or art items made by households. As organised retail develops across the country - with a large number of supermarkets and hypermarkets - the numbers of SME vendors who try to sell to them will also increase.

Anshuman Singh, CEO, Welspun India (domestic), who manages Spaces-Home & Beyond and the Tommy Hilfiger chain of stores across India, and who has considerable experience in handling SME vendors in retail, said: “SME vendors are increasing every quarter because our product categories are increasing every month and often, these products are manufactured by SMEs.”

The number of SME vendors is rising continually as emerging vendors offer new products. The modern retail formats offer greater opportunity to SMEs to market their products. Dharmender Jain, CFO and head-supply chain, HyperCity, which is one of India’s largest hypermarkets in Mumbai, adds: “We have 450-500 SME vendors. The numbers have risen over the last 5-6 months. Many new vendors are approaching us with their products.”

While large manufacturers and suppliers assure timely supply of large volumes of standard products across markets, it is the SMEs who can bring in customised products or goods that reflect the regional flavour.

The head of logistics of a national supermarket chain, said: “SME vendors are the guys who give the store the variety/depth and the regional flavour, which is very important.

Every store worth his salt will say how he is trying to be national, yet regional. So the modern trade ensures that you get the best of whatever is available at a national level, while you do not miss out on your regional favourites.”

In terms of numbers, about 70% of the sales is driven by national stock keeping units (SKUs), while regional SKUs account for the balance 30% sales. However, SMEs need more than just scale and a wide product range if they want to be partners in the retail success story. Retailing today is an extremely competitive businesses.

SMEs need to invest in technology and systems to ensure an effective supply chain management system that is in sync with the needs of the retailers. “We tell the SME vendor to align with our requirements. The IT system automatically generates a purchase order for required stocks to all the top suppliers. But for SMEs, we need to take prints and hand them over.

Some of them still do not have email. Since retailers hate to carry stocks, all retailers use IT extensively. SMEs need to gear up on the IT front (irrespective of whichever discipline they belong to),” says the head of a supply chain with a leading retailer.

Bar coding is very important in the retail business. Increasingly, retailers are doing away with the system of sticking bar codes on the products and are directly using a more modern alternatives. However, most SMEs have not been able to change to meet market needs.

While SME vendors are likely to continue to dominate certain categories of products with a short shelf-life, including bakery products, milk, paneer and others. But if they are not systematic and don’t professionalise soon, the retailers will eventually turn to national players for a steady supply.

“SME vendors must quickly adopt online communication practices with the organised retailers, or they risk being left out,” says Mr Singh.

It’s a win-win situation for both retailers and SMEs, provided the latter rise to the occasion. “As large retailers, we treat SME vendors as a critical part of our business and we ensure that they also grow with us.

We pass on the learning in terms of international exposure, which we gain through overseas sourcing and from other vendors, so that we all benefit from the knowledge. In turn, we are in a position to offer the best quality products at attractive prices to the customers and while continuing to be profitable,” says Mr Jain.

Over time, there have been improvements in that SMEs are now aware of the need to meet the retailers’ demands about design, packaging standards, quality aspects, statutory compliance and adherence to time lines, etc.

“They have been catering to our requirement and are willing to adopt the learning passed on by us. Our supply chain inputs are also a great value-addition to them in their processes and systems. Our quality benchmarks are helping them and in turn, us,” says Mr Singh.

The supply chain head adds: “Yes, there is an improvement. But far slower than what we would expect. However, the quality of in-processes and raw materials has gone up definitely. Some of them are taking ISO certification as well.” The fact is SMEs do have certain advantages that they must leverage.

For instance, retailers love the personal attention given by SME vendors/promoters. “They are flexible and are ready to work as per our requirements and also customise their processes/products as per our needs,” says Mr Jain.

SMEs are ready to meet the demands of the retailers when it comes to production, delivery, schedule, lot size, etc. Retailers who have to deal with large number of vendors, really appreciate those who go out of the way to accommodate their needs.

“The best aspect of dealing with the SME group is that they are more open to innovation. The products can be tried and tested with them quickly as the decision-making process is faster at the SME vendor level,” says Mr Jain.

This is one quality that SMEs can use to their advantage — speed of action and reaction. Often SMEs are able to test, try and deliver much faster than national players.

The other aspect is that SMEs must realise that they can offer a very strong regional flavour in products and display to the organised retailers, which is difficult for national players, who deal in standardised products. All supply chain managers surveyed want a high degree of customisation to make their stores stand out.

It is necessary that SMEs shift to a new way of working. Today, most retailers have ambitious growth plans accelerated by improving economic conditions. They have a very short attention span and even lesser patience.

SMEs must use organised retail as a dipstick to project customer preferences and thinking, so as to develop just the right product. “We want to see an inclination to move from a supplier approach system to a partnering approach with the objective of jointly serving the final customer and not us as the final buyer,” says Mr Singh.

SME vendors may be small today, but they should think big. And should have an attitude to learn and change. Then it will only be a matter of time before they catch up with success.

News: Hyundai to invest $700m in India, double production

(TNN 19/09/2006) Chennai - Hyundai Motor is set to invest an additional $700m into its Indian operations based in Tamil Nadu. The fresh investment will be used for expansion of Hyundai Motor India’s (HMIL) passenger car capacity to six lakh units per annum from the present three lakh, as well as in a new engine and transmission unit.

The expansion of HMIL’s car capacity as well as the setting up of the new engine and transmission unit, with an annual capacity of three lakh units per annum, is set to attract new vendors. Close to 20 vendors are expected to set up base near Chennai, resulting in an additional investment of over $200m.

“Hyundai Motor Corporation (HMC) will be making an additional direct investment of $700 million. However, the total fresh investments, including that of vendors, will be close to $1bn,” informed sources told ET. On Monday, HMC chairman Chung Mong Koo had called on Tamil Nadu chief minister M Karunanidhi.

The Hyundai chairman informed that the company has investment plans of about $700 million (Rs 3,220 crore) in Tamil Nadu. He requested the government’s support for the same and the chief minister assured that the government will consider it and extend necessary support for Hyundai’s new investments.

“During the meeting, Mr Koo discussed HMIL’s plans and also assured the chief minister of HMIL’s continued support for the local community of Tamil Nadu,” a statement issued by HMIL said. He also asked for the support of the state government in improving the state’s infrastructure such as roads, railways and setting up off a new port facility exclusively for car exports, the statement added.

“The Indian auto market has great potential and we are expecting more than 400% growth within the next decade. HMIL must be ready to meet the rapidly growing demands of the Indian car market and must play the role of the global export hub for Hyundai’s small car,” Mr Koo told HMIL’s workers at its Irungattukottai plant, while highlighting the importance of the Indian market.

He emphasised on the need for timely completion of the second plant, which is currently under construction to ensure the timely roll out of a new compact car in addition to the Santro Xing. “The second plant, which will be completed by October, 2007 will help increase the export volume up to three lakh units per annum,” he said. The company is aiming for an all time high market share of above 20% in the Indian market, Mr Koo told workers.

News: Real estate prices in Mumbai double in a year

(TNN 19/09/2006) Mumbai - Mumbai’s property prices have soared 100% in the past 12 months despite a crumbling infrastructure, crater-filled roads, the bomb blasts and the declining quality of public services. The trend is sharper in business areas like Nariman Point, Bandra, Parel and Worli. Foreign companies eager to cash in on the economic boom are snapping up office space, boosting property developers who are rushing to the stock market to raise funds.

According to trade watchers, a square feet of space in Nariman Point now fetches Rs 25,000-40,000. The price is higher for sea-facing properties. Some residential apartments in Nariman Point are known to have fetched as high as Rs 60,000 sq feet, but experts say that these were in new buildings or involved prime property. Commercial property prices in old buildings are also fetching a huge premium, they say.

Chetan Suchak of Suchak Realties cited the lack of new properties coming up in prime locations as a reason for rising prices. “There has been no significant addition of office space in Nariman Point. This is pushing the prices up,” he said. “The property which was sold for Rs 8,000 per sq ft in Nariman Point last October has now been traded for Rs 20,000 per sq ft,” Mr Suchak said.

Prices have also shot up in the suburbs, though not as high as in central Mumbai. Realty rates range between Rs 5,000 and Rs 6,000 per sq ft in the western suburbs of Goregaon and Malad. In central suburbs like Thane, prices are around Rs 3,800-4,000 per sq ft.

“Mumbai continues to attract business despite all odds,” said a state government official. There is a shortage of commercial space in the city though the housing segment is growing, he added.

“Many MNCs or business houses are scouting for space in Mumbai, further boosting demand,” an official from the industry department said. Lehman Brothers is among the major foreign players to have bought land in Mumbai. The US-based financial giant is understood to have signed a deal for a property at Worli for a price much above the prevailing rates, sources say. Another South India-based leading finance company has also booked office space at Nariman Point for a hefty price.

Says Sunil Mantri, vice president, Maharashtra Chamber of Housing Industry (MCHI): “There is a huge backlog for commercial space. With the economy booming, the demand has been phenomenal. It’s time the government considers raising office commercial space index,” he said. In New York, the FSI ratio for office space is 1:20 (a space of 20 sq ft can be developed on a piece of land measuring 1 sq ft) while in Mumbai it is 1:1.33. The MCHI has taken up the issue with the government.

An urban development ministry official credited a “resurgent Maharashtra” for the rising realty rates. He cited a “lot of activity that has been taking place in the state” to attract major investments. “We recently had Fiat-Tata Motors and General Motors, the largest car maker in the world, announcing their plans to set up units near Pune. This was followed by Mahindra and Mahindra’s expansion plans. Bajaj Auto and Bharat Forge also chose Maharashtra over other states. All this makes the state attractive,” he said.

The state has undertaken an ambitious plan to sell its Pune-Nashik belt to the manufacturing sector. The area is already home to several companies ranging from auto giant Mercedes to white goods major LG. The area has bagged all recent major projects. “With Expressway connectivity, it makes sense for companies to have units in Pune or Nashik and offices in Mumbai. It’s a win-win situation for both, Mumbai and Pune,” a industry department official reasoned for Mumbai’s soaring real estate prices.

News: Renewed bid to open Indian retail door

(TT 19/09/2006) New Delhi - The Congress-led government is ready to consider a plan to allow the world’s large retail players like Wal-Mart and Tesco limited entry into the country.

The proposal is hugely controversial but the government is hoping it will be able to address Left concerns over job losses that such a policy could precipitate even as it seeks to attract foreign investment in building back-end infrastructure like cold chains.

Top officials said the government has been informally sounding out both Left parties as well as domestic retail players and retail global giants to work out a compromise which allows limited entry for foreign investors into the lucrative Indian retail market.

The aim would be to limit retail format stores supported by global giants to upmarket products and to selected metropolises only, officials said. “This will not impact the mom-and-pop stores,” they said.

Officials refused to spell out whether such a move would also leave the lucrative market in large towns in the hinterland and in the lower price band to domestic retail giants such as Reliance and Big Bazaar.

Top finance ministry officials who support the move feel it could prove to be a “goldmine” in terms of foreign investment.

They say allowing up to 26 per cent in the current phase could meet objections posed against “giving away retail trade control to foreign investors”.

Retail trade in India accounts for around 11 per cent of GDP and employs over 25 million people or 8 per cent of the total workforce. Analysts contend this figure could change dramatically if transnationals came in and increased efficiency in this sector.

Last year, the Left had crossed swords with the Congress government over plans to allow up to 100 per cent FDI in retail. The Left felt that such a move could see millions of jobs being lost in the kirana stores across the country.

Officials say they are hopeful the compromise will work out as Bengal’s capital Calcutta, where some 7 per cent of the country’s buying power is concentrated, itself has emerged as a major retail hub, attracting the second highest investment in malls after Mumbai.

However, sections within the Left are still unhappy with the concept. They disagree with a McKinsey report which has projected addition of some 71 lakh jobs in the retail sector between 2000 and 2010 with some 8 lakh of these jobs being added by supermarkets. On the contrary, they feel the opening up will actually lead to job losses.

A note, prepared by the Left, had pointed out that the report is based on an incorrect assumption of 10 per cent GDP growth coupled with a 20 per cent of the share of retailing coming from labour displacing modern format retailers.

More realistically, average GDP growth during the decade is going to be about 6 per cent, given the poor monsoon years. Besides, if FDI is opened up even marginally, it would catalyse large format retailing to such an extent that its share of the market would be far greater than 20 per cent. This would imply greater job losses than envisaged by McKinsey's analysts.

News: Indian banks in a hurry to offer loans to the poor

(TT 19/09/2006) New Delhi - For 10 years, Ramesh Prasad, a 29-year-old mechanic in a small town of Uttar Pradesh, worked in a bike repair shop, struggling to save enough to start his own business. About three months ago, Prasad got a one-year loan of Rs 6,000 from ICICI Bank that helped him open his own shop, and he is now working seven days a week to keep up with the demand.

For ICICI Bank, forking out such a small amount as loan is common. Nowadays, books of more and more banks also reflect such small loan amounts.

Microfinance or lending money to the poor is evolving fast with big commercial lenders such as the State Bank of India, ICICI Bank, HDFC Bank and UTI Bank focusing on this sector.

Touching base

Since 2003, ICICI Bank has doubled the size of its rural banking activities to about Rs 157 crore and has outstanding microloans of some Rs 2,475 crore.

Even multinational banks with operations in India like HSBC, ABN Amro, Standard Chartered and Citigroup have entered this segment.

ABN Amro Bank began microfinance operations in September 2003, and has 24 Indian partners and Rs 10.3 crore in outstanding loans in this sector.

According to Sanjay Nayar, CEO of Citigroup India and area head of Bangladesh, Nepal and Sri Lanka, “The government and big banks are increasingly recognising microfinance as a solution that can dramatically improve the quality of life for the underprivileged and the underserved.”

On profit path

But analysts feel that more than philanthropy, big banks are attracted by the high profits in this business of small credit.

Although banks have a lending cap in the micro sector — they cannot charge more than the prime lending rate of 9.5 per cent for rural loans up to Rs 2 lakh — it is sheer volumes which make up for low interest rates charged.

“With about 350 million Indians living in poverty, and more than 100 million households with no access to credit, there seems to be a $30-billion market for this kind of lending,” said Nagesh Kumar, director-general of Research and Information System for developing countries.

It is a huge market, and bigger banks are finding that lending small amounts to creditworthy rural borrowers is lucrative as well as socially progressive.

Rate watch

Banks have also found a way around the cap by lending to micro-finance institutions (MFIs) and directly to self-help groups (SHGs) formed through village communities.

But, analysts said, what is dogging the business is the kind of margins that intermediaries (micro finance institutes) charge and get away with. Banks charge anything between 8-11 per cent to MFIs for loans, who in turn, could charge anywhere from 18 per cent to 24 per cent from its borrowers.

But even at these rates, borrowers lap up loans because it offers “hope to many poor people of improving their own situations through their own efforts”.

That marks it out from other anti-poverty policies, such as international aid and debt forgiveness, which are essentially top-down rather than bottom-up and have a decidedly mixed record.

Some analysts, however, term the high interest rate (18-30 per cent) imposed by the MFIs as exploitative.

They argue that raising interest rates too high could undermine the social and economic impact on poor clients.

“What they fail to understand is that most MFIs have lower business volumes. Therefore, their transaction costs are far higher than that of the formal banking channels,” said Udaia Kumar, who runs Share, a microfinance institute headquartered in Andhra Pradesh.

“Our loans cost about 21.5 per cent a year — not excessive, since the cost of funds is 11 per cent a year, the administration of a portfolio of more than 800,000 small loans in Andhra Pradesh is expensive, and not all loans are repaid,” he added.

Recent news of a dozen women committing suicide in Andhra Pradesh because they were unable to repay the high interest charged for their micro loans has further aggravated the exploitative image of MFIs. In the wake of this current controversy, Share has decided to cut its rates by about 4 percentage points.

Spandana, one of the largest microlenders in India, has also decided to issue a few group loans at a much lower rate of 10 per cent a year compared with 15 per cent that they were charging earlier.

Vikram Akula, founder and chief executive officer of SKS Microfinance, said: “If the size of operations was scaled up and operating costs reduced, MFIs can achieve their objective of bringing down lending rates to as low as 10 per cent in three years.”

Already, MFIs have huge sums under their charge. Take Spandana, for example, which has seen its disbursements soar from Rs 3 crore in 1998 to Rs 300 crore in 2005. It has 8,00,000 customers.

Or take Cashpor, which saw its loan portfolio grow from Rs 26.3 lakh in March 1999 to Rs 50.8 crore in March 2006, even as its client base swelled from 2,500 to 1,24,000.

Priority area focus

Why is the commercial banking system so interested in this bottom-of-the-pyramid group which it had till now regarded as not worthy of attention?

“Simply because intense competition has taken credit lending in the urban market to a saturation point,” said B.D. Narang, former chairman of Oriental Bank of Commerce. What has added to the attraction is the government’s emphasis on microfinance as a priority area, he said.

ICICI Bank has signed up micro-finance institutions as intermediaries for micro lending. “Their key strength is not their ability to manage capital and assume risk, but their intricate knowledge of clients and the geography in which to operate,” said an ICICI Bank spokesperson.

The bank has formed more than 100 tie-ups with small-town lending specialists and has about 3.2 million low-income customers.

The bank’s rural asset base is worth around Rs 18,000 crore and is expected to grow further.

HDFC is also planning to walk on the same lines. It has created a microfinance unit with more than 100 employees to complete its aim of doubling its lending levels in rural India to Rs 100 crore.

News: Indian Govt clears 26 FDI proposals worth Rs 992.84 cr

(PTI 19/09/2006) New Delhi - As many as 26 Foreign Direct Investment proposals have been cleared by the Government, which would bring Rs 992.84 crore, including Rs 342 crore by Japan-based Mitsubishi Chemicals Corporation, into the country.

The proposals, approved by Finance Minister P Chidambaram on the recommendations of the Foreign Investment Promotion Board, also included three plans by British Gas Energy Holding Ltd aggregating to Rs 405 crore to supply natural gas for domestic and commercial usage in three states of the country.

For this purpose, the company plans to set up three wholly owned subsidiaries in Andhra Pradesh, Karnataka and Tamil Nadu at an investment of Rs 135 crore each.

Mitsubishi Chemicals Corporation along with the six other companies of Japan is infusing additional capital in MCC PTA India Corp Pvt Ltd for manufacturing and marketing of purified Terephthalic Acid.

A proposal from Hutchison Telecom (India) Ltd for indirect foreign equity participation in six of its operating companies in India was also okayed. However, the proposal does not include any additional FDI inflow.

The six companies are Hutchison Essar Cellular Ltd, Hutchison Essar Mobile Services Ltd, Hutchison Essar South Ltd, Hutchison Essar Telecom East Ltd, Aircel Digilink India Ltd and Fascel Ltd.

Another big ticket approval cleared was that of JSC Technochim of Russia for manufacturing of Titanium Products. The company will bring in Rs 192.5 crore into India to set up a JV with 55 per cent equity participation.

Among other proposals cleared include Acer Computer International's plan to undertake wholesale trading on cash and carry basis of Acer branded personal computers and note book and UK-based Cairn UK Holdings Ltd proposal in exploration and production of petroleum product under the automatic route.

For manufacturing and marketing of highly engineered bearing product, the government approved Timkin Company's proposal to set up a wholly owned subsidiary in Chennai.

The US-based entity plans to invest Rs 49.50 crore in the country to set up manufacturing and distribution base in the country.

Besides, the government also approved Spheros GmbH's plan to set up a joint venture company to be engaged in the manufacturing of hatches, heaters, air-conditioners for buses.

The company plans to bring in an investment of Rs 1.02 crore into the country.

News: US names India among world's 20 drug 'majors'

(IANS 19/09/2006) Washington - The United States has named four Asian nations - India, Pakistan Afghanistan and Myanmar - among the world's 20 major drug transit or major illicit drug producing countries.

These countries have "failed demonstrably" to make substantial efforts during the previous 12 months to adhere to international counter-narcotics agreements and to take measures specified in US law, President George W Bush said in an annual report to the Congress.

Other 16 countries in the Presidential Determinations are: The Bahamas, Bolivia, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Haiti, Jamaica, Laos, Mexico, Nigeria, Panama, Paraguay, Peru, and Venezuela

On Sep 15, Bush had authorised Secretary of State Condoleezza Rice to transmit to the Congress the annual report on the Major Drug Transit or Major Illicit Drug Producing Countries for Fiscal Year 2007.

The report does not detail why India or Pakistan have been placed on the list, but says a country's presence on the Majors List is not necessarily an adverse reflection of its government's counter-narcotics efforts or level of cooperation with the United States, the presidential report said.

One of the reasons that major drug transit or illicit drug producing countries are placed on the list is the combination of geographical, commercial, and economic factors that allow drugs to transit or be produced despite the concerned government's most assiduous enforcement measures, it said.

These Determinations required the president to consider each country's performance in areas such as reducing illicit cultivation, interdiction, law enforcement cooperation, extradition, and measures to prevent and punish public corruption that facilitates drug trafficking or impedes drug-related prosecutions.

The president also considered these countries' efforts to stop production and export of, and reduce the domestic demand for, illegal drugs.

On Afghanistan, the report said although President Hamid Karzai has strongly attacked narco-trafficking as the greatest threat to his country, one third of the Afghan economy remains opium-based, which contributes to widespread public corruption.

The government at all levels must be held accountable to deter and eradicate poppy cultivation; remove and prosecute corrupt officials, and investigate, prosecute, or extradite narco-traffickers and those financing their activities, it said.

The US is concerned that failure to act decisively now could undermine security, compromise democratic legitimacy, and imperil international support for vital assistance, the report said.

News: Seven Indian cos crack S&P list

(BL 19/09/2006) Mumbai - What is common to Bharat Forge, Siemens India, Chennai Petroleum, UTI Bank, Punjab National Bank, Nicholas Piramal and Oriental Bank of Commerce?

These seven Indian companies are amongst the 300 mid-size companies in the world which are expected to emerge as challengers to the world's leading blue chip companies.

Standard & Poor's, a leading index provider, on Monday released the global challengers list, which identified these 300 companies from all across the globe as showing the highest growth characteristics, along with dimensions encompassing intrinsic and extrinsic growth.

"These companies, including the seven Indian companies, are expected to challenge the world's leading blue chip companies," according to the report.

Standards

An S&P press release said the Global Challengers List is based upon a robust methodology that applies consistent standards to multiple countries. The attributes used to identify the companies are share price appreciation, sales growth, earnings growth and employee growth. The 2006 class of S&P Global Challengers has representation from 32 countries and 10 sectors, according to the release.

Any company seeking inclusion in the list had to first meet the size criteria in terms of total market capatilisation, apart from satisfying some extrinsic factors such as sales growth and intrinsic factors such as EPS and employee count growth. "The quintessential quest for growth by corporate executives, consultants, marketers and investors needs a robust, globally consistent leader board," says Srikant Dash, Index Strategist at S&P, adding that the S&P Global Challengers fulfils this need.

S&P also announced the launch of the S&P Global Challengers 40 index, a "highly liquid and investable subset" of the broader S&P Global Challengers List. The index, which is an equal-weighted portfolio of the 40 fastest growing stocks with representation from around the world, will serve as an important, liquid and geographically diverse, benchmark for global investors.

News: Israel keen to set up mutual R&D fund with India

(BL 19/09/2006) Chennai - Israel is keen to set up a mutual research and development (R&D) fund with India. Under this fund, both nations could put in about $25 billion each to fund companies in R&D work, said Tzakhi Selzer, Counsellor for Economic Affairs, Embassy of Israel. A company in India could find a mutual project in Israel and jointly engage in R&D. "Up to 50 per cent of each companies' project expenditure would be funded by its Government. This is irrespective of success or failure of the project," said Selzer. To start with TN He said Israel was keen to set up such funds with some States in India starting with Tamil Nadu. "We will be speaking to the Tamil Nadu State Government soon," he said at a meeting organised by the Southern India Chamber of Commerce and Industry. Israel is keen on mutual R&D work in agriculture, biotechnology and telecommunications. "R&D products developed between our countries would be cheaper by up to five times as compared to buying them from other nations," he said. Exhibition in March The Embassy of Israel is organising an exhibition in India in March next year, showcasing products related to drip irrigation and other water technologies. Talks are on between India and Israel for a free trade agreement (FTA). "We are first looking at a preferential trade agreement where duty on specific products could be cut. Later an FTA would help double bilateral trade," he said. Currently, Indo-Israel bilateral trade is at $2.4 billion.

News: PVR Cinemas eyes tier II, III cities

(BL 19/09/2006) Mumbai - PVR Ltd has informed the BSE that PVR Cinemas, the largest cinema exhibitor in India, on September 19, 2006 has announced its strategic foray into tier II and tier III cities with the launch of the PVR Talkies in India.

According to a statement to BSE, PVR Talkies is aimed to resurrect the cinema experience in smaller towns in India and will kick-start with pilot projects in Aurangabad and Latur.

The theatres which are digital ready will have an unmatched price range between Rs 40 and Rs 60 and is slated to be operational from last week of September 2006, the release stated.

PVR Cinemas, which transformed the entertainment skyline of the country with pioneering initiative of multiplex culture in the country in 1997, is all set to bring in the next revolution with digital theatres. Once with technology is in place, these theatres will work on the principle of digitized content being distributed to theatres through satellite or fiber, upload to a digital cinema server, which serves it to a digital projector for screening and hence bridging the demand supply gap (movie prints vis-a-vis no. of screens), in the years to come and that too, at no additional distribution costs, added the release.

News: Goldman Sachs to invest $1b in India

(PTI 19/09/2006) New Delhi - Goldman Sachs will invest $1 billion in India over the next two years for expanding operations in sectors such as realty and infrastructure, L Brooks Entwistl, CEO of Goldman Sachs India, said.

"India is increasingly playing an important role in the world economy," he said.

Goldman Sachs also plans to set up its investment banking and asset management businesses in the country. "We are in the process of building all our businesses in the country over a period of time and we have long term commitment to the country," he added.

Currently, Goldman Sachs has offices in Bangalore and Mumbai

News: Philips to consolidate HQ in Delhi by '08

(TNN 18/09/2006) Mumbai - Philips India, one of the oldest multinationals in the country, is planning to shift to a new headquarters in the National Capital Region (NCR) in the first quarter of ’08.

The new campus, which will come up in either Gurgaon or Noida, will bring all the five divisional headquarters — lighting, consumer electronics, domestic appliances, medical systems and semi-conductors — under one roof.

Till now, these divisional headquarters were located in different parts of the country, with consumer electronics being based in Mumbai, lighting in Guragon, while medical systems and domestic appliances in Pune.

These divisions tended to operate as separate entities, while the corporate office under current MD & CEO, K Ramachandran functioned out of the western suburbs in Mumbai. The company has mandated real estate research firm, Cushman & Wakefield to identify the new location for its headquarters.

In the last six months, the research firm had involved senior managers across all the divisions in deciding the location for its new HQ. Last Thursday, a memo announcing the shift was sent out to all employees.

Confirming the development, Vineet Kaul, executive director and VP-HR, said the company has already informed its employees to prepare for the change. “With simplicity as the platform for Philips, we saw great logic in getting all the divisions together for improved employee collaboration, less hierarchy and progress,” he said.

All the senior managers from each of the divisions will now be based out of the new headquarters, while regional offices will look after sales.

The move is seen as part of a larger gameplan to bring the Indian operations back on track in what is seen as a priority market for the E30.4-bn Dutch multinational. As a run-up to the relocation, the firm has begun the search for a new CEO.

The incumbent CEO, Ramachandran, who has been at the helm for the past 14 years, is due to retire next year. Philips is said to have cast its net wide for an outsider who will spearhead the firm’s aggressive growth plans in the country.

As a group, Royal Philips Electronics, Netherlands is laying major emphasis on growth across the BRIC (Brazil, Russia, India and China) and Asean countries.

But having clearly listed India as a ‘priority market’ in its global portfolio, Philips is now in a hurry to catch up on missed opportunities in the past. The parent company has set the Indian subsidiary a target of Rs 5,500 crore in the next few years.

Philips India has around 4,500 employees, of which 1,600 are situated at its two lightings factories in Maholi and Vadodara. However, there is no plan to relocate the Bangalore-based software centre which houses 1,600 employees and its global shared services business in Chennai, which has around 400 employees.

Best known as the company which brought the radio to India, Philips has had a chequered history in the recent past. Despite the headstart it enjoyed both in terms of brand equity and distribution, Philips was unable to fend off rising competition from Korean players like LG and Samsung and domestic players like Videocon and Onida in the consumer electronics business.

In the colour TVs business, Philips share is now barely at 6-7%. While the firm’s dominance in the lighting business continues, with market shares hovering around 70%, medical systems and domestic appliances have turned out to be the new growth drivers for the firm.

Since ’05, Philips products sold in India are either imported or co-manufactured through local vendors. Like the parent company, Philips supplies the technology and design to the vendors, thereby outsourcing manufacturing to cut costs and help the consumer electronics division’s profitability.

In the last two years, Philips did make a serious move to revamp its fuddy-duddy image and unveil a new strategy of offering innovative products at affordable prices. By improving the price value equation, the brand was able to move up from the eighth position in the CTV segment to be the number four brand with a 7.8% market share in ’05.

In the DVD market, Philips’ aggressive pricing strategy helped it corner a 30% market share, but fierce competition, particularly from LG, in the past two months has almost halved its share.

News: Indian bank buys are flavour of the season

(TNN 18/09/2006) New Delhi - After snapping up United Western Bank (UWB) from an array of suitors, IDBI Bank is clearly bracing for something more. It has set sights on another acquisition of a small South-based bank by this year end.

“The bank will acquire a South-based bank with 50-60 branches by the end of this calendar year. It makes enormous sense for us, since we would not have to invest in developing a branch network to mobilise low-cost deposits,” a source at IDBI Bank said. When contacted, VP Shetty, chairman, IDBI Bank, refused to comment on the issue.

Sources said IDBI Bank has limited branch presence for an asset base of Rs 90,000 crore. So to that extent,acquiring a small bank will give it a larger footprint.

Though the bank can capitalise on its history as a Development Finance Institution, with expertise in project and long-term finance, its liabilities are not balanced. It does not have enough of low-cost liabilities, or deposits, sources said.

So, a larger branch network would give it a space to mobilise retail deposits to keep the cost of lending competitive. When IDBI was merged with IDBI Bank, it was understood that IDBI would not be converted into a commercial bank, but would undertake commercial banking activities, in addition to its Development Finance Institution functions.

Accordingly, banking activities, both development and commercial, are being undertaken under the IDBI umbrella. But the rationale for getting into commercial banking was primarily to raise low-cost funds.

It was only last week that the regulator picked IDBI Bank to take over the 230-branch United Western Bank, much to the surprise of other interested parties. This is the first instance in India where an acquirer bank — IDBI — is required to compensate the shareholders of a bank under moratorium.

Its merger with United Western Bank requires IDBI to pay Rs 28 per share aggregating Rs 150 crore, to take over the assets and liabilities of the ailing bank. The IDBI board meets on Thursday.

But sources pointed out that it still made tremendous sense to pay Rs 150 crore for 230 branches, since setting up a branch would have cost Rs 1 crore each. The bank inherits United Western Bank’s branch network in the affluent western Maharashtra and with a wide depositor base that will add to its retail portfolio.

News: Citi, HDFC Bank draw up plans for closer ties

(TNN 18/09/2006) Mumbai - Citi, the world’s largest financial services group, and India’s leading mortgage bank HDFC Bank are working to build closer ties. After Citi’s nearly $1-bn investment to acquire a stake and board berth in HDFC, contours are being drawn of a new relationship that will give HDFC access to a bigger market and resources, while Citigroup will derive certain business advantages.

Citigroup holds over a 12% equity in HDFC after it acquired 9.27% in the company from the secondary market last May. The amount Citigroup has spent to buy HDFC shares is almost equal to its investment in the Indian banking operations till now.

Later this month, HDFC will induct Vijay Kelkar, former finance secretary, as its nominee on the HDFC
board. Mr Kelkar is also the chairman of Citigroup’s local advisory committee.

Under the relationship that is being explored, HDFC will enjoy certain preference to borrow out of the fresh capital that Citigroup would bring into India; Citibank’s overseas branches with NRI desks may be utilised to mobilise resources for HDFC’s property fund and sell HDFC loan products. And, Citi will be the preferred investment bank for HDFC as and when the local institution goes for issuances like ADR, GDR, foreign currency convertible bonds and float property funds.

HDFC chairman Deepak Parekh said, “There would be an arms length relationship in all businesses that we do....the rates and fees should be acceptable to both the parties.” Citigroup did not comment on the subject. But is this the harbinger of a bigger deal in future, something that reflects Citigroup’s ambitions in India?

Even since Citi raised its holding in HDFC, there have been rumours that the US bank has its eyes on HDFC Bank — one of the country’s most valuable banks, where the promoter HDFC owns more than a 21% equity. Banking circles even talked about the possibility that Citi may enjoy the first right of refusal, if HDFC ever decides to sell in the bank.

However, HDFC categorically denies that there is any such understanding with Citi.

While present regulations will not allow any such deal, the industry feels that Citi’s presence even as a financial investor and subsequent relationships with HDFC could dissuade other global banks interested in HDFC Bank post-’09, when the sector is opened up for M&As.

As of now, the present relationships that are being struck would benefit both the groups. For HDFC, easier resources will soften the pressure on cost of fund in a rising interest rate regime, while many of the group’s investment banking mandates will go to Citi.

Already, Citi has been appointed as a banker for HDFC’s real estate fund. Over 50 Citi branches across the world have NRI desks. Given the severe restrictions on external commercial borrowings, HDFC may consider tapping the ADR market next year. The company is moving towards making its accounts US GAAP-complaint.

News: McKinsey to design Future Group's growth map

(TNN 18/09/2006) Kolkata - The Future Group, owners of Pantaloons, Big Bazaar and the Central chain of stores, has roped in global consulting firm McKinsey to assist and systemise the group’s future growth plans.

Apart from this, McKinsey has the mandate to recommend a model which will help the group attain its turnover target of $ 7bn (Rs 30,000 crore) by ’10.

Confirming McKinsey’s appointment, Future Group’s officer Kishore Biyani told ET, “McKinsey has been roped in to assist and systemise our future growth plans. They have already completed the first project and will work with us on more projects.”

Group insiders said McKinsey will advise the group on critical issues like streamlining of operations and ways of growing its businesses.

“It will also work on developing an organisation model, its preservation as well as identifying key skills required for the growth process when the group plans to increase its manpower strength to 1.5 lakh people by ’10.”

News: Indian malls to sport 'Ladies Only' tag

(TNN 18/09/2006) New Delhi - Girls just wanna shop till they drop. Guys call it the biggest threat to their credit cards, while women feel retail offers the best anti-dote to every depression under the sun. Suddenly that stereotype is spawning a brand new business model.

In a bid to generate female footfalls, retail players are coming up with concept malls which would be exclusively catering to women shoppers. The next 2-3 years would see about a dozen malls coming up which would target both house wives as well as working women.

The malls will offer not just women-centric goodies but also female staff. While some prominent real estate developers have already announced plans for women-only malls, a host of others are in the pipeline. Suncity developers have already started the first such mall based on this concept and plans to build five or six more on the same format.

“In the era of speciality malls, there are no malls especially catering to women and that’s the reason we have started these concept malls,” says LN Goel, chairman, Suncity Projects.

According to sources, Aerens group, owners of Goldsouk and Wedding Souk malls, is also likely to announce similar plans very soon. The group is likely to use its expertise in jewellery retail by building a mall targetted only at women shoppers.

The Omaxe group is also building a specialised mall based on the concept of “wedding & women.” Industry experts feel this model packs in immense growth potential, attributable particularly to the average house-wife's penchant for shopping.

“For anybody in the retail business, women form one of the most important target groups and this is where much of the volume is generated,” says Abhijit Das, head, Ansal Plaza Mall Management Company. Even general lifestyle malls such as Ansal Plaza are learnt to be working on creating special zones for women-related products.

News: US co Nelson to enter India

(PTI 18/09/2006) New Delhi - Bullish on the Indian market, US-based integrated services provider Nelson, which will launch its India operations later this month, is looking for inorganic growth in the country to expand its reach.

"We have resorted to strategic mergers as part of our growth strategy globally and this will be a practice we would follow in the Indian market as well," Nelson Regional Director and Country Head Anand D K told PTI.
He said the company was bullish, especially on the booming real estate sector.

"India's realty boom holds tremendous potential for us and we are looking to take advantage of this by providing services in strategies, workplace and information besides catering to the traditional portfolio of interior design, architecture and engineering," he added.

Nelson, which will set up a wholly-owned subsidiary, has already invested five million dollars in India and is looking at expanding at a gradual pace.

"Initially, we would open our office in Delhi and expand our presence across the country. We are looking to set up 2-3 more offices in a year's time," he said.

The company, which clocked 50 million dollars in revenues globally, would provide integrated services across six lines of businesses namely strategies, interior design, architecture, engineering, workplace services and information services, he added.

Commenting further on its plans in India, Anand said a company cannot depend only on organic growth and "we would consider mergers and acquisitions with similar companies to expand in the country".

News: Zee in content deal with China Central TV

(RTR 18/09/2006) Mumbai - India's largest listed media firm, Zee Telefilms Ltd., said on Monday it had signed a content sharing agreement with China Central Television.

The deal with China International, an English-language news channel, covers news, feature programmes and films, Zee said in a statement.

There will be no equity investment at this stage.

"China is an important market and we are optimistic about audience response there," Mukund Cairae, Zee's head of international business in Asia-Pacific, was quoted as saying.

Zee operates news, sports and entertainment channels in English, Hindi and regional languages.

Shares in Zee, India's second-biggest broadcaster, were up 1.4 percent at 324.10 rupees in a firm Mumbai market.

News: BMW reveals plan for Indian market

(BL 18/09/2006) Munich - The super luxury passenger car market in India has been starved for choice for years. While a few new cars have been launched in the performance sports segment and in the stratospherically priced super luxury car segment, there have not been any new cars in the relatively more affordable below Rs 50 lakh price range.

No wonder that there has been so much speculation about BMW's - the German luxury marque - plans for the Indian market. The company had revealed little more than sketchy details about the investments in a proposed plant near Chennai.

Roadmap

Though company officials continue to remain tight-lipped about the pricing strategy and the selection of engines for the Indian market, finally, there is more clarity about BMW's foray into the super luxury car market here.

Breaking the ice, while speaking to select presspersons from India, Peter Kronschnabl, President of the newly setup BMW India Pvt Ltd, revealed the company's roadmap for the Indian market.

BMW's India foray is slated for January next year, when the plant will be officially inaugurated and will begin production of the 3 Series models. By February 2007 the 3 Series will be available for entry-level super luxury car customers. Two trim options each will be offered for the petrol and diesel engine versions of the 3 Series.

Pre-assembled Engines

The 5 Series will then follow and may be available in the market by June 2007. This will be the new face-lifted 5 Series model with a new options package, which is yet to be launched globally, Kronschnabl said.

Both the models will be assembled and manufactured in India at the company's Chennai plant. With the exception of a few features that would either be useless without the necessary public infrastructure or legal clearances, most other current features will be carried forward into the models being launched in India.

So, leather seats will be part of the standard package, as would the company's much acclaimed i-Drive control, big screen displays and high-tech dashboard layout. The engines will come pre-assembled from Germany and only engine trimming will be put together in India, Kronschnabl added.

Localisation Strategy

As part of its localisation strategy, the company is targeting a 10 per cent domestic content in terms of value. Locally sourced parts for the two cars are expected to be the car seats, seat leather covers and electronic components for the seats.

The BMW plant in Chennai will be spread over 22 acres and will house departments that will handle logistics and administration, in addition to the assembly line and a small test track. The German parent will supply painted body panels, since setting up a local paint shop will be unviable. A minimum of 10,000 units is needed to make economic sense for investing in a paint shop that can cost upto 30 million, said Kronschnabl.

News: Tapping India's unorganised sector for micro-investments

(BL 18/09/2006) New Delhi - An ordinary investment counselor may want to discount them, declaring in no uncertain terms that they would not fit into his scheme of things. But he may well be advised not to do so just yet - for they bring with them a great deal of promise and optimism.

We are, of course, referring to the workers in the unorganised sector, people toiling hard to earn their daily bread with a little or no pension awaiting them when they retire.

Construction workers, artisans, milkmen, plumbers... people who cater to the more privileged among us would perhaps need to take care of their post-retirement days more than anyone else.

The fact that there is no organised, large-scale pension program in India to ensure this, is not a very happy thought. It poses a huge problem for policymakers, especially those who have to think about the economic advancement of the underprivileged.

We are raising this issue to give you a brief idea - not that you did not know it altogether - of what happens beyond our familiar world, made up as it is by investment strategies, asset allocation, profit-taking and the like.

Also, we are specifically talking about a proposal worked out by UTI Mutual Fund to tie-up with organisations formed by various sections of the so-called `informal sector'.

Micro-investments

To put it briefly, the proposal relates to putting in regular, micro investments in a scheme designated by the fund house, done with a view to secure income after the members attain a certain age.

That scheme, positioned in the pension funds space, provides the fund manager the scope to invest up to 40 per cent of the assets in equities. At the moment, equity exposure is about half of this. And, to use a cliché, the possibilities are endless.

Those who can join at an early age can stay enrolled in the programme till they reach the critical stage of their lives.

Now, we have heard investment planners talk in terms of mapping retirement goals. They all want us to think beyond typical, old-fashioned notions of financial planning and retirement. But even such typical ideas can often become a luxury, compared to the realities that underprivileged workers have to face after they retire.

According to an estimate, the pension burden on the Central Government was a huge Rs 28,000 crore in 2004-05, up from Rs 5,300-crore or so in 1993-94. For the States, the pension bill is bigger - roughly Rs 39,000 crore in 2004-05. Clearly, this makes the authorities very uncomfortable - they are in no position to meet the rising costs year after year.

Pension reforms

At this juncture, allow us to give you an idea of the pension reforms that have taken place. In January 2004, the Indian government started a system based on defined contribution for employees.

Now, more than 2 lakh government employees are under the new regimen. Well over a dozen State Governments have notified the system as well and more are expected to troop in.

In contrast, the informal sector accounts for as much as 85-87 per cent of the country's total workforce. And they have practically no pension to speak of.

At the other end of the spectrum are those covered by EPFO and other PFs.

In all, they constitute about 10 per cent of all workers.

News: IDBI Capital to invest in private equity funds

(BL 18/09/2006) Mumbai - IDBI Capital plans to invest in the private equity of companies through its internal funds. The stakes will then be offloaded by way of initial public offerings or sold to other equity funds.

Speaking to Business Line, S. Munhot, Managing Director and CEO, IDBI Capital, said, "We have already finalised an investment of Rs 10 crore in Vrajeshwari Textiles, to pick up around 6 per cent stake in the company. Other investments are in the pipeline." Munhot said the company was looking at companies with around 35 per cent returns.

IDBI Capital is also planning to launch Portfolio Management Services for institutional investors in six months with a portfolio size of above Rs 1 crore.

The financial house is planning to expand its reach in retail. "We are in talks with banks to work as partners and also with small and medium sized broking houses to offer its services through their portal, idbipaisabuilder.in," said Munhot. Currently, the portal has around 8,000 clients.

IDBI Capital Market Services Ltd was conferred the `CNBC TV18 Financial Advisor Awards 2006' for the `Best National Financial Advisor-Institutional' in India, on September 13.

News: Indian airline mergers take wing

(BL 18/09/2006) Chennai - The world over, airlines continue to be strictly controlled by governments, which make laws that prevent foreign airlines from taking ownership stake in their national carriers. The reason why the airline industry has not consolidated, as any other industry, such as media, telecom or insurance, is because of such ownership norms. The airline industry is at this time considerably fragmented, with far too many national flag carriers, subsidised and protected by governments. What was to have been India's first major airline merger and acquisition (M&A) deal - between Air Sahara and Jet Airways - is heading for a divorce even before the marriage vows were exchanged. The next in line is the proposed merger of the two state-owned airlines, Air India and Indian , also likely to be fraught with human resource challenges. The most common reason for M&As between airlines is the unviable operations of one of the entities. The airline that is taken over soon loses its identity, its excess staff is forced to resign or retire, and its profitable assets, such as real-estate and subsidiary companies, are sold to unlock value. For instance, two years after Air France acquired KLM in 2004, though the revenues of the merged entity have gone up marginally by about 20 per cent, its net profits increased eight times, at $3.2 billion in the last two years. Such one-time financial benefits of a merger may wear off in later years, often due to savings in staff costs, establishment costs, reduction in the number of flights on parallel routes, and revenues realised from the sell-off of assets such as office space. More capacity, less yields The year 2005-06 was a landmark in India's aviation history as there was a manifold increase in the number of airlines operating both on the domestic as well as international routes. As travellers enjoy good times, with better facilities and more frequent flights, airlines are unable to arrest declining yields. In India, with the entry of LCCs (low-cost carriers), air-fares are now much lower. In spite of the 100 per cent increase in fuel prices since 2004, airlines keep reducing fares. We live in interesting times, indeed! The only recourse seems to be for airlines in India is to avoid cash losses by reducing all controllable operational costs, such as non-operating costs. Cutting flab Most traditional airlines have a 60:40 ratio between flight-related variable costs and fixed costs, the 40 per cent being the "flab". These fixed costs are a drag on airline profitability. LCCs have demonstrated that these fixed operating costs can be cut to the barest minimum. Mergers between airlines help identify operating costs arising from duplication of functions and greatly reduce staff and establishment costs. MRO (maintenance, repair, overhaul), sales, ticketing, marketing, etc., use up about 60 per cent of an airlines' manpower, though synergies can be brought about in several common areas of work through a merger. Air Sahara and Jet Airways have identical aircraft - Boeing 737s - in their fleets. Most of the aircraft Air India has are long-range, large capacity Boeings, while Indian Airlines has mostly short-range Airbus-320s. Such lack of fleet commonality means there may not be much scope to reduce the M&E (maintenance and engineering) staff. However, ticketing and sales personnel comprise of another third of the staff strength, and this number too can be pruned by a merger. When merged, the combined Air India-Indian Airlines entity is expected to garner revenues of over Rs 13,000 crore - three times the size of its nearest competitor, Jet Airways. A merger is expected to cut the operating cost of the state-owned airlines by 10-20 per cent with more efficient use of all resources. M&A synergies Both the government-owned airlines, Air India and Indian, are no longer the sole owners of India's ASAs (Air Service Agreements). With increasing competition, all airlines, private as well as public sector, have to be among the low-cost offerings. The market share of Indian in the domestic skies has come down to from 62.9 per cent in 1997-98 to just 35.3 per cent in 2004-05. Air India's market share is also down to 19 per cent, as bilateral entitlements have been liberalised, as part of the open sky policy. Yet to be named, the Air India and Indian merged entity can ward off competition because of certain factors. These are: Economies of scale; Efficient use of capacity, facilities, infrastructure; Better yields due to dominant market share in India; Acquisition of ready pool resources such as trained manpower , and resources such as slots, maintenance hangars, parking bays; and Integrating aircraft schedules, corporate facilities; The theoretical benefits of merging both balance sheets, a common fleet, GHA (ground handling agents), the FFP (frequent flyer programme), and so on, are the low-hanging fruit. The second wave of the merger exercise must tackle more contentious issues such as reducing excess staff, shrinking the airlines' size by realigning airline divisions into SBUs (strategic business units), or profit centres. Once airline ownership norms are liberalised by the government, airlines may seek foreign capital by the M&A route.

News: US airlines upbeat on India flights

(BL 18/09/2006) Chennai - The decision of the two US airlines, which are among the top 10 airlines globally, to launch non-stop flights between India and the US is paying dividends even before they have completed their first full year of operations. "The flight has surpassed our expectations, though it is not yet at a point where we can say it is making money. However, the passenger load on the flight has not dropped in off-peak seasons," said Nisha Maharaj, Regional Manager, American Airlines, Indian Sub-Continent. Airline officials added that it was rare for any airline to make money on a new flight during the first year of operations as there are normally huge start-up costs involved in launching any new route. While refusing to divulge financial details of the route, the Senior Country Director, India, Continental Airlines, Mr Laurent Recoura, echoed similar sentiments. "The flight has exceeded the airline's expectation in terms of quality of revenue and load factors," he said. Probably buoyed by the response in the market, Mr Recoura added that his personal goal was to see the Delhi-Newark flight in the third spot from among the close to 300 weekly departures that the airline operates from 28 cities in 15 countries in the Transatlantic region during 2007. Both the airlines refused to speculate on the number of passengers they carried during the year. However, during January-December 2004, there were close to 1.5 million passenger bookings and about 1,20,000 premium-class bookings on the US-India route. While American Airlines launched a daily non-stop service between Chicago and Delhi on November 16, Continental Airlines launched its daily non-stop service on November 2 last year. Shorter flight time The launch of the non-stop services has cut down the travel time between India and the US considerably. The launch of the American Airline flight to Chicago will see a passenger save between 1 hour 50 minutes and 2 hours 50 minutes, depending on which airline they are travelling to the US by. Officials indicated that while it would take a passenger 17 hours and 45 minutes to travel between India and Chicago on Air India (AI), the same journey would take 18 hours 45 minutes on the German airline Lufthansa while AA would get the passenger to Chicago in just 15 hours 55 minutes. Since the two American carriers started non-stop operations, another US-based airline, Delta Airlines, has also announced that from November 3, this year it would start a daily non-stop service between Mumbai and New York. In addition, Air-India is also planning to launch non-stop service between India and several US cities from next year after it takes delivery of the new Boeing 777 aircraft. Interline agreements However, at the moment, with the first year of operations fast approaching, both American Airlines and Continental Airlines are working on some modifications to further attract the customer. "We are re-designing our business-class seat, which should roll out early next year. Besides, the menu is also being redesigned to suit the north Indian market," said Nisha. Besides, the airline is working towards signing more interline agreements with both public and private sector airlines in India so as to offer passengers more options, including pricing options. "In the final analysis such agreements could help passengers save 15-20 per cent on what they are paying currently, depending on where in India these tickets are purchased and the travel originates. Besides, such an agreement would allow a passenger to check in baggage through to the final destination at the airport from which the travel begins," airline officials said. Also on the anvil are plans to link more cities within the country. "We are working on various scenarios. There is no specific agenda right now although we would like to fly to Mumbai," said Mr Laurent. American's plans include looking at the option of launching a flight from the US through a point in Europe to India. Officials indicated that the American Airlines flight to India could happen by next summer. But if, as a passenger, you are looking for some promotional fares or other freebies as part of the first-year celebrations, you may be disappointed. Both the airlines have no such plans. "By the time we get to the first anniversary, we should hopefully have the India Web site up and running," said Nisha.

News: Hyundai may set up engine plant in India

(RTR 18/09/2006) Mumbai - Hyundai Motor Co is expected to announce this week it will set up an engine and transmission plant in India, a source close to the company said on Monday.

"A decision has been made to set up a new engine and transmission plant ... the details will be finalised in a few days' time," the source said, declining to say what the plant's capacity will be or when it will begin operations.

Some local news reports indicated the plant is likely to have an annual capacity of 150,000-300,000 units and require an investment of about $ 500 million.

South Korea's top auto maker started making cars in India eight years ago, having invested $ 650 million in a 300,000-units-a-year plant outside the southern city of Chennai.

It is now building a $ 500-million factory at the same site with the same capacity. The new car plant will start operations in October 2007.

Hyundai -- India's second-biggest car maker after Suzuki Motor Corp.'s Maruti Udyog Ltd. -- expects its sales to reach 300,000 units in 2008, for a quarter of the market, up from its current share of about 18 per cent.

News: UTI plans to raise Rs 1000 cr via wealth builder fund

(ACERC 18/09/2006) Mumbai - UTI Mutual Fund (MF) plans to raise over Rs 1,000 crore through its new scheme UTI-Wealth Builder Fund launched on September 7. The scheme will close on October 11, 2006. Units can be purchased only during the new fund offer period - from September 7, 2006 to October 11, 2006.

UTI-Wealth Builder Fund is a close-ended equity scheme with a maturity period of 5 years with automatic conversion into an open-ended scheme upon maturity of the scheme. The objective of the scheme is to achieve long term capital appreciation by investing predominantly in a diversified portfolio of equity and equity-related instruments and will invest up to 65 -100 per cent in debt, while 0-35 per cent will be done in money market instruments.

News: Videocon plans multi-product SEZ in Aurangabad

(PTI 18/09/2006) Mumbai - The Videocon group is planning to set up a multi-product special economic zone (SEZ) at Shendra in Aurangabad with an investment of Rs 6,600 crore.

An MoU for the SEZ, which will have an initial investment of Rs 1,000 crore, will be signed today, a Videocon official said.

The SEZ, which will be spread across 3,000-5,000 acres, will generate employment for over 40,000 people, he added.

The SEZ will be a joint venture between Maharashtra Industrial Development Corporation (MIDC) and Videocon, and a special purpose vehicle has been floated for the project, the official said.

News: Indian oil blocks may draw $8-10 bn

(BS 17/09/2006) New Delhi - With an expected investment of $8-10 billion, the sixth round of auction of blocks for exploration of oil and gas - dubbed NELP VI - could be termed successful.

This investment is substantially more than the $6 billion that has so far come into the country from the five earlier rounds.

Indian and foreign companies bid individually and as partners for the 55 blocks on offer. Of these, the 24 high-risk deepwater blocks received 52 bids from energy majors like ONGC, Reliance Industries, BP Exploration, Gujarat State Petroleum Corporation and Cairn Energy. These are the blocks that will require the largest investments.

“NELP VI will lead India into joining the league of nations that will have one of the most extensive deep-sea exploration programmes undertaken by some of the world’s leading deep-sea exploration companies,” Anil Razdan, additional secretary in the petroleum ministry, told reporters.

There are 35 foreign companies in the list of bidders and these include some prominent first-timers like Total of France, Petronas of Malaysia and ENI of Italy.

The list also includes oil companies from the UK (BG, BP), Poland (PGNiG), Australia, Ukraine (Nafto Gaz), Panama (Hallworthy), Oman (Petrogas), Canada, Myanmar and Kuwait.

One absentee from the list of foreign bidders is the world’s largest oil company Exxon Mobil of the US, which was widely expected to bid, as were Chevron and Conoco Phillips.

The participation from the US is limited to a company called JTI.

Brushing aside the no-shows, the director-general of the hydrocarbon directorate said, “We are very happy with the response. It is a successful round.”

Interestingly, there are a few blocks in which two companies committed to a non-compete agreement, Reliance Industries, led by Mukesh Ambani and Reliance Natural Resources Ltd, led by younger sibling Anil Ambani, will be competing directly.

The government will now get down to evaluating the bids so that the blocks can be awarded by November 15. The next step, the signing of production sharing contracts, is expected to be completed by January 2007.

This is also the time the government is planning to initiate work on the next round of auction of blocks in under-explored India under NELP VII. This process is expected to be completed by end-2007.

News: India to get its own Millionaires’ Club

(HT 17/09/2006) New Delhi - Indian millionaires will soon have a common platform. MillionaireAsia, the quarterly magazine distributed to a select millionaires’ club across Singapore, Malaysia, Indonesia and Thailand, is making a low-key entry into India.

It will target 83,000 Indians who have at least $1 million in liquid assets and comprise a segment that is growing at 30 per cent annually — the figures come from financial management consultants Merrill Lynch, said the magazine’s publisher Brian Yim.

With the Indian edition in mind, MillionaireAsia has featured a story on the country’s ‘10 Richest People’ in its latest issue. How exclusive would the target group be? Subscription is by invitation only. But to be on the mailing list of a magazine that outlines how you should book a $500,000 super holiday, you have to answer a few questions.

These include “Would you be interested in ‘Unique Experiences Programmes’ such as visiting the RMS Titanic wreckage or fly in a MiG fighter?” and “Are you looking at purchasing a private jet/a boat/property overseas?”

The Indian edition will have localised content, and should be a marketer’s dream. Corporate bodies pitched their products at the Millionaires Summits held for the first time in India, in Mumbai on September 13, and in New Delhi on Friday. The summits discussed investment opportunities and wealth management for “high networth individuals”.

Among those who pitched was the Singapore Tourism Board, which is organising ‘A Luxe Affair’ through the next few months for the “premium-plus” segment.

"We will be looking at the new Indian millionaires' club as a high-growth niche," said Kenneth Lim, the Board's area director for northern India.

Lee Woon Shiu, ING Private Banking Asia's head-regional trust, said they would provide customised succession planning and wealth preservation solutions. And Diamond Information Centre's director Devika Gidwani invited millionaires to grab the first 100 personalised Forevermark sparklers from Diamond Trading Corporation.

Ready to hop on to the millionaire bandwagon?

News: 'China, India breaking economic ground in Africa'

(Xinhua 17/09/2006) Singapore - A massive increase in trade and investment by China and India holds great potential for economic growth and job creation in Africa, said a study released by the World Bank on Sunday.

The study, "Africa's Silk Road: China and India's New Economic Frontier", recommends an array of trade and investment reforms within and between the two regions to deepen the growing ties and address imbalances that could prevent African economies to benefit from the increasingly important roles China and India play in the global economy.

Based on new evidence on the operations of Chinese and Indian businesses in Africa, the study finds that Asia now receives 27 percent of Africa's exports, tripling the amount in 1990 and almost on par with exports to the US and the European Union, Africa's traditional trading partners.

Meanwhile, Asian exports to Africa are growing 18 percent per year, faster than to any other regions in the world.

China and India's foreign direct investments in Africa are more modest than trade flows, but they are also growing very rapidly, according to the study.

"This new 'Silk Road' potentially presents to sub-Saharan Africa, home to 300 million of the globe's poorest people and the world's most formidable development challenge, a significant and to date rare opportunity to hasten its international integration and growth," said Harry G. Broadman, World Bank Africa Region Economic Advisor and author of the study.

This new economic frontier extends beyond trade and investment in natural resources, according to new data presented in the study.

China and India's commerce with Africa is opening the way for the sub-Saharan continent to become a processor of commodities and a competitive supplier of labour-intensive goods and services to Chinese and Indian firms and consumers.

Moreover, more and more Chinese and Indian businesses active in Africa are operating on a global scale, working with world class-technologies, producing products and services according to the most demanding standards, and fostering the integration of African businesses into advanced markets.

Still, there is a major unevenness in the emerging commercial relationships between the two continents, said the study.

African exports to Asia constitute only 1.6 percent of what Asians buy from the rest of the world, and China and India's African purchases total only 13 percent of Africa's total exports.

"It is imperative that both sides of this promising economic relationship address asymmetries and obstacles to its continued expansion through reforms," noted Broadman.

News: Ruias step into wind power

(TT 17/09/2006) Mumbai - The Ruias of the Essar group have ventured into renewable sources of energy.

A subsidiary of group holding company Essar Global has joined hands with REpower Systems AG of Germany to design and manufacture wind turbines (1.5 mw and 2 mw capacities) in India. The turbines will be marketed in Southeast Asia.

In the near future, the two corporations plan to set up a joint venture that will allow access to 3 mw and 5 mw turbines and explore future developments.

The licensing agreement was inked on Friday and the plan is to set up the manufacturing plant in a port-based location which the group hopes to finalise soon.

The initial investment is expected to be around Rs 50 crore, which will be financed through internal resources. Essar expects to start commercial production by the middle of next year.

Essar Power director Anshuman Ruia said, “We are happy to be associated with REpower for our foray into the wind energy business. We are confident that this is the beginning of a long and mutually beneficial relationship. The agreement comes at a time when there is a huge demand for power in India and it also fits with our strategy of diversifying into renewable energy sources.”

The wind turbine technology is widely used in Europe and, according to the Essar group, REpower's turbines are ideally suited for Indian conditions.

Essar has been in power generation business for the last one decade. It currently operates four power plants with a capacity of over 1000 mw.

REpower Systems AG is one of the leading manufacturers of onshore and offshore wind turbines. The international engineering company develops, produces and sells wind turbines with outputs ranging from 1.5-5 mw and rotor diameters of 70 to 126 metres. It also provides a comprehensive service and maintenance range.

Listed on the German stock exchange since March 2002 and with around 700 employees worldwide, the Hamburg-based company has installed more than 1,400 wind turbines worldwide.

News: Barista to get an ally by year-end

(TT 17/09/2006) Calcutta - Coffee retail chain Barista is hoping to complete a private placement by the end of this year.

The Sivasankaran-owned company is looking at a 15-20 per cent equity placement to finance its rapid expansion plan. It has appointed Standard Chartered as the merchant banker.

The company was orignally floated by Amit Judge of Turner Morrison and the Tatas also had a stake in it.

Barista will offer fresh equity to a new investor and the money will flow into the company and not to the promoter.

“We are looking at 100-120 new outlets every year for the next three years. That, coupled with renovation of old outlets, will call for a large investment,” Partha Duttagupta, chief executive officer of Barista Coffee Company, said.

The company plans to invest around Rs 150-200 crore in the next three years. The stake sale will be a means of finance. Moreover, the new partner will also shoulder future expansion cost.

“We are now putting out the information memorandum for prospective investors. Then a valuation will be carried out,” he added.

Sivasankaran's Sterling Group is said to have spent Rs 65 crore to pick up a 100 per cent stake in Barista.

Barista, one of the leading organised coffee retailer along with Café Coffee Day, grew 22 per cent in the last fiscal. It is hoping to be EBIDTA positive by December this year and cash positive in the last quarter of 2006-7.

“The target is to earn net profit in fiscal 2006-07,” Duttagupta noted. The company started operations five years back. Barista’s private placement is taking place at a time when famed international coffee chains like Starbucks is planning to enter India.

The CEO claimed the strategic investor could be anyone, from a domestic financial institution to a foreign private equity player to a player in this field.

“The management will remain with Sterling Infotech which is committed to the company,” he said.

The existing promoter has committed Rs 50 crore for expansion this fiscal with some 100 stores to be opened.

Out of that at least 20 will be large format stores Barista Crème, one of which was opened in Calcutta today.

News: 'Investment boom continues in India; prices under check'

(PTI 17/09/2006) Singapore - India today said that strong fundamentals have helped the domestic economy to negotiate effectively recent stock market volatility and pressure on prices, enabling the investment boom to continue for the third year in a row.

"We are committed to continuing the process of fiscal consolidation in 2006-07 and thereafter," Finance Minister P Chidambaram said at the annual meeting of the World Bank and IMF here, exuding confidence that high economic growth of eight per cent achieved during the last three years would be sustained.

Portraying a rosy picture of the economy for the world community at the meeting of the International Monetary and Financial Committee of the Fund-Bank, he said inflationary pressures by and large have been contained in India by appropriate monetary and fiscal policies, ensuring adequate supply of essential commodities.

While committing to fiscal consolidation by meeting the deficit targets, Chidambaram said "the investment boom is continuing for a third year in a row. Strong fundamentals have helped the economy negotiate effectively the recent stock markets volatility, and underlying investment sentiments in the financial markets continue to remain positive."

News: Indian gems, jewellery sector to touch $20 b in 2007

(PTI 17/09/2006) New Delhi - Gems and jewellery exports from the country are likely to touch $ 20 billion by 2007 with buyers from the US and European Union increasing bulk purchases of diamond studded jewellery from India because of its affordability, according to a report.

The study by ICRA said India has achieved a reputation of being world's leading diamond cutting and polishing centre for smaller stones. Now industry leaders are looking to process larger stones to clock greater growth by utilising modern advanced technologies besides cheap abundant labour.

Quoting figures released by GJPEC, ICRA said exports of gems and jewellery were expected to touch $ 20 billion by 2007.

Although, the positive development in the industry has also been due to pick up in demand in major markets like the US, Belgium, Israel and Hong Kong and decline in growth of its major competitors.

The improved performance of the Indian GJ( Gold and Jewellery) industry is also due to the decline suffered by its competitors like Belgium whose polished diamond export declined by 3.8 per cent in 2005 to 9.36 million carats. The volumes of Israel's polished diamonds also decreased by 3.2 per cent in 2005 to 4.49 million carats.

Exports of gold jewellery have increased to Rs 17,015 crore in 2006 from Rs 5,220 crore in 2001, but are constrained by an inability to compete in global markets on the basis of price and superior design capabilities, the report said.

However, India has a positive future in gems and jewellery sector that would be driven by increased exports to the US and other markets and growth in domestic consumption, the report said.

News: Indian realty sector to attract global investments

(PTI 17/09/2006) New Delhi - The Indian real estate industry is poised to emerge as one of the most preferred destination for global investors, according to a study by industry body FICCI and Ernst & Young.

The study 'Indian Real Estate: Opportunities and Returns' pointed out that realty sector was poised to experience a landscape change in coming years, FICCI said in a statement.

Indian realty sector, which is estimated to be around $ 12 billion, is growing at a rate of 30 per cent per annum and contributes about 14-15 per cent of the national GDP, the study revealed.

Outlining the key trends that would shape the real estate business in next 3-5 years, the study said that the developers would go for larger project size with more focus on product differentiation and quality.

Besides, the shift in real estate activities from metros to smaller cities, preference for national developers, change in ownership to leasing and emergence of strong real estate capital market were some other key trends highlighted by the study that would shape the realty business going forward.

The study pegged the additional demand for office space at more than 367 million sq ft up to 2012-13, driven by the growth in IT and ITeS sectors.

However, the study cautioned that demand in this segment was highly dependent on the performance of the Indian IT and ITeS sector, which faces severe competition from other emerging countries such as China and Poland.

News: Five-star cuisine soon at Indian railway stations

(TNN 16/09/2006) New Delhi - Now, Rail Bhawan is all set to please the foodie in you. Very soon, you will be able to treat yourself to various five star delectable cusines — be it Chinese or Continental, Mexican or Indian — at both railway stations as well as on trains. The indulgence will also set you back by more than what you spent earlier. All this will be in tie-up with major five star chains.

Rail Bhawan will soon invite bids for around 10 railway stations — including the four metropolitan cities — from the major five star chains to upgrade the catering department of Railways.

It would be on a public-private partnership (PPP) model between private hotels and Indian Railways Catering and Tourism Corporation (IRCTC) — the Indian Railways’ catering and tourism wing. Besides providing quality meals on trains, they will also sell good quality food at the railway stations.

As per the guidelines of the new pantry car investment scheme, private players will buy stake in operation and maintenance of pantry cars. “Roping in private players will add a genteel touch to catering of the railways and boost the elite ridership. However, it will come with a costlier price tag,” said Rail Bhawan sources.

“We are following a two-pronged model where we will have both base catering (on trains) and cell catering (at stations), so that the commuters are not devoid of the five star food,” added the sources.

While it opens up an untapped market for five star caterers that can generate volume business, many in the hospitality trade feel that pricing will be crucial for success of the move. “It is more likely to work with premium class passengers who want value-added services,” said KB Kachru of Carlson Hotels Asia.

Shashank P Warty, a senior hospitality industry professional, noted that it would be a challenge for five star hotels to cater to a new set of customer profile at railway stations. Transit passengers, at stations, are likely to be key beneficiary of the move, said industry sources.

The Railways had earlier also planned tie-ups with Nirula’s and Taj Group, but none of them materialised due to lack of decision making. However, this time they are pretty confident of striking a tenable deal with the hotel chains.

News: Indian post offices to sell space to hotels

(TNN 16/09/2006) New Delhi - Post offices may soon be playing host to you. India Post is in talks with a host of hotel chains for leasing out space on the first and second floors of district general post offices (GPOs) all through the country.

Through public private partnerships (PPP) with these chains, the department of posts is looking at an additional revenue of around Rs 100 crore in the next 2-3 years. These will all be budget hotels with room rents in the range of Rs 1,000-1,500 per night in the metropolitan cities and Rs 500-750 in tier II and III cities.

This could perhaps be an interesting USP, as most GPOs are situated in prime district locations. For instance, in Delhi, there are around 10-odd two or three storey GPOs, in high-end areas like Hauz Khas and IP extension.

In all these PPP deals, India Post will just be the partner for real estate. All hotel chains, with which these deals will be signed, will be allowed to retain their brand.

At present, in most GPOs, this space is used by some government agencies. The department of post, however, now seems to be keen on using this surplus real estate as a source of additional revenue.

There are around 2,000 GPOs in various district centres of the country. There are at least half a dozen hospitality chains currently looking at setting up budget and economy hotels in country.

These include around thirty properties from Tata group’s Ginger brand, around two dozen Ibis hotels from European hotel major Accor, and eight hotels from UK-based Easyhotels over the next two-three years.

News: Yoga & ayurveda - New mantras of Indian tourism

(TNN 16/09/2006) New Delhi - The government is looking to attract tourist traffic towards niche areas. The second phase of the Incredible India campaign will focus on tourism segments such as medical, rural, heritage, ecological, MICE (meetings, incentives, conference and exhibitions), adventure and sports tourism besides others like spiritual, yoga and ayurveda tourism.

According to the ministry of tourism the first phase of the Incredible India campaign resulted in 45.5% increase in the inbound traffic in ’05 over that in ’03 and an additional earnings of Rs 8,274 crore for the tourism industry.

“By focusing on niche tourism we want to differentiate India as a tourist destination, from the others,” said Amitabh Kant, joint secretary, ministry of tourism. Over the next five years the Incredible India campaign will promote niche tourism segments by seeking PPP (public private partnership) as the ministry of tourism is not directly into tourism business.

To promote rural tourism in India the ministry has partnered with UNDP. Soon NGOs, rural artisans and women will also be involved in the campaign to promote rural tourism in 36 villages across the country. The website www.exploreruralindia.org will further help in attracting foreign travellers. “Homestay facility will be provided to tourists visiting rural areas,” said Sudhir Sahi, UNDP consultant. Medical tourism is the next big thing that Incredible India has to offer.

Cost of complex surgeries in India is 10-15 times lower than anywhere else in the world. “It is estimated that 6,000 to 7,000 patients (from developed countries) visit India each year for surgeries and this flow is expected to grow at a CAGR of 30-40% over the next five to seven years. The total treatment costs of such patients would add up to about an annual $125-140m (not including spends on non-medical related expenses),” says Zubin Daruwalla, Industry Manager, Healthcare Practice, Frost & Sullivan India.

How can one miss pilgrimage, spirituality, ayurveda and yoga — the USP of India — while promoting tourism? Last year the online yoga advertisement on the website www.incredibleindia.org registered 25,000 hits in just three months. The electronic campaign depicting India as the land of spirituality featuring Deepak Chopra, spirituality’s new age prophet, also gained huge popularity in the West. To attract pilgrims, a Buddhist circuit is now being promoted by the ministry in partnership with airlines.

Sports tourism is also likely to get a boost with 65 new golf courses coming up across the country. Add to this the state-of-the-art convention centres to woo business travellers, Incredible India indeed has lots to offer to its foreign tourists, besides leisure.

News: Qatar crown prince discusses investments in India

(IANS 16/09/2006) Havana - Indian Prime Minister Manmohan Singh met with Qatar Crown Prince Tamim bin Hamad bin Khalifa al-Thani on the sidelines of the NAM summit in Havana and discussed with him the possibilities of Qatari investment in India, including in energy.

External Affairs Ministry spokesman Navtej Sarna said that the two leaders discussed investments in infrastructure, energy sector and other areas and also conditions of Indians living in Qatar and provision of better amenities to them.

This is the first meeting that the 27-year-old crown prince had with the 74-year-old Indian leader. Both are here to attend the September 15-16 summit of the Non-Aligned Movement.

Qatar possesses the world's third largest natural gas reserves and has one of the highest per capita incomes of any country.

News: WiMAX India's answer to spectrum problem, rural connectivity

(PTI 16/09/2006) New Delhi - India is on the threshold of a new mobile technology revolution with WiMAX being considered as the new age reality by many mobile manufacturers.

WiMAX is not only being touted as 30 times faster than third generation mobile technology and 100 times faster than the wireless data rates, but is also expected to solve the problems of rural connectivity.

"It could also solve the 'last mile' connectivity problems that prevent internet connectivity in rural India," DoT Telecommunication Engineering Centre Sr Deputy Director General PN Padukone said at the Wireless Tech India 2006 meet.

With demand for spectrum soaring, WiMAX technology is becoming the way to avert the impending crisis.

"Spectrum is finite and the solution is increased sharing and have greater use of the available spectrum. Actually there are at least 40 services which need spectrum," Ministry of Communication and IT, wireless Planning and Coordination Wing Wireless Advisor PK Garg said, adding that spectrum requirements for WiMAX are under discussion.

WiMAX promises a seamless connectivity, high speed data, voice and multimedia services, mobility and affordability. Rural connectivity is guaranteed as long as availability of power supply, personal computers is ensured, content is developed in local language and people are given proper training of handling PCs.

Alcatel Research Centre is developing a product that would act as a receiver for WiMAX services. The product will be available by 2007 and cost less than $100.

News: Alto phase-out in Europe dents Maruti exports

(BS 16/09/2006) Mumbai - Maruti Udyog's exports have been hit badly due to phasing out of Alto in Europe by Suzuki after the introduction Swift.

Maruti's exports for April-August has fallen by 16.9 per cent to 13,195 units compared with 15,888 units in the previous corresponding period. Alto contributed more than 90 per cent of the company's exports to Europe, said senior Maruti officials.

"Subsequent to the global launch of Swift in mid-2005, Alto was gradually discontinued from the European market and was replaced by Swift, which Suzuki began sourcing from its Hungarian base. It has created a dent in the company's exports to Europe, which contributed to about 70 per cent of the company's total exports," said Maruti officials.

Consequently, Maruti's dependence on Europe has come down to as low as 10 per cent today regarding exports, and non-European market, which contributed to only 30 per cent for Maruti's exports a few years back, has grown to 90 per cent today. Maruti exports a whole range of its vehicles – Alto, Swift, Wagon R, Esteem and Baleno – to non-European market.

Its exports in August slipped 25 per cent to 3,596 vehicles, compared with 4,792 vehicles in August 2005. However, this decline has been mainly attributed to the "irregularity in car carrier shipments" during the month.

Nevertheless, the company has set high goals for augmenting its future growth, including exports. Maruti plans to increase its capital expenditure by Rs 3,000 crore to Rs 9,000 crore till 2010.

The additional fund will be spent on enhancing capacity at its new plant in Manesar from 1 lakh to 3 lakh units a year by FY08. Of the three lakh units, more than 50 per cent will be exported.

News: 'India needs to spend 12.5% of GDP on infrastructure'

(PTI 16/09/2006) Singapore - The World Bank today commended India for its high economic growth rate in the last couple of years, but said massive investments would be needed in infrastructure for it to come up to the level of China.

The bank also appreciated the Right to Information Act, which holds the potential for dramatically greater contestability of government decision-making and implementation.

A report, to be discussed tomorrow at the World Bank and IMF meeting here, said India and Pakistan had been averaging a GDP growth of nearly 7 per cent.

The agency said the most vivid demonstration of South Asia's lower investment rate was the massive infrastructure deficit that plagues countries in the region. It said: "India will have to invest 12.5 per cent of GDP per year until 2015, approximately four times its current investment."

Co-author of the report "Economic Growth is Creating 'Political Space' for Deeper Reforms in South Asia", Shekhar Shah, said growth should be more inclusive, boost human development and address governance issues. There has been a rise in inequality.

For example, the richer southern states of India are growing 3 per cent faster than the poorer and more populous northern states. In addition, confrontational politics plagues countries such as India, Bangladesh and Sri Lanka.

In recent times, countries are responding to citizens' demand for public accountability by putting in place new mechanisms of information disclosure like the RTI.

The bank appreciated publication of citizen report cards in Bangalore that the rate quality of public services.

News: Pact forges Indian bank powerhouse

(TT 16/09/2006) Mumbai - Three nationalised banks — Corporation Bank, Indian Bank and Oriental Bank of Commerce — today came together to form an alliance in certain areas to take on competition and cut costs. The trio will share resources, go for joint business syndications and venture into areas like capital markets.

Under the “collaboration and cooperation’’ agreement, the banks will share their treasury and IT resources and build a common e-payment system. Such a system will see customers of one bank paying less for using the other’s ATM.

Moreover, customers of these banks can also use the existing branches to remit money into each other’s branches in a different location.

This is for the first time that three domestic banks are coming together to form such an alliance rather than going in for a legal merger.

A memorandum of intent (MoI) was today signed by K.C. Chakrabarty, chairman and managing director of Indian Bank, B. Sambamurthy, chairman and managing director of Corporation Bank, and K.N. Prithviraj, chairman & managing director of Oriental Bank of Commerce.

Explaining why the banks went in for such an alliance instead of a merger, Chakrabarty said in present times, while size was a handicap, skill acquisition was also becoming difficult.

Moreover, technological adaptation is expensive. “Consolidation in the banking sector is not gaining strength as people have doubts in their minds,’’ he added. Given such circumstances, the Indian Bank chief said, smaller public sector banks will have to work out alliances that mitigate disadvantages of size.

Called the ‘OIC-Alliance’, the agreement includes building an e-payment system, sharing of IT resources and treasury resources. The other areas are a foray into capital markets, international and other financial ventures. The trio will also look at business syndications, sharing of training resources and a common procurement of IT and other assets.

Admitting that it could take a few months for the alliance to be visible on the ground, Prithviraj said the alliance did not mean that the three banks are going in for a merger.

“That is ruled out,’’ he added. Even after joining hands, the trio will not cross the 5 per cent market share, he added. Despite this, the alliance will lead to lower intermediation costs, apart from boosting the return on equity.

News: Ril wants 40,000 garment pieces daily

(DNA 16/09/2006) Ahmedabad - To cater to its mega plans, Reliance Retail has approached garment manufacturers in Ahmedabad for bulk orders.

However, with the Diwali season approaching, some manufacturers are already bursting with orders and are in no hurry to sign up.

RIL plans to set up more than 1,500 retail outlets across the country, and the company wants to outsource fabric production as well as garmenting. It has approached as many as 200 garment manufacturers in Gujarat, including around 50-60 in Ahmedabad.

“RIL wants a huge quantity and quality, and the company has decided to outsource,” says Sunil Gandhi, president of Gujarat Garment Manufacturers’ Association.

“They want us to supply 40,000 pieces every day from Ahmedabad. But currently all manufacturers are busy with other jobs till Diwali. We can start garment production exclusively for RIL only after Diwali,” says Gandhi.

RIL’s needs are huge because it is planning 35 retail outlets in Ahmedabad city alone. “No one can on his own fulfil all of RIL’s requirements,” agrees Gandhi. However, most manufacturers are waiting to see if RIL improves its price offer.

News: Anil Ambani weighs stakes in organised retail

(DNA 16/09/2006) Mumbai - Here’s something to set the cat among the pigeons: Anil Ambani, after all, will invest in the organised retail sector.

Sources in the know say the Reliance-Anil Dhirubhai Ambani Group (R-ADAG) is in the process of finalising a few strategic investments. They believe — and investment bankers concur — that the group may invest in one of leading incumbent retail chains. “As part of private equity business we talk to various entities,” an R-ADAG official said.

The needle points to Kishore Biyani’s Future group.

Pantaloon Retail recently announced to raise Rs 500 crore through sale of 24% stake in its retail formats Home Solutions and Central Mall besides its portal business Future Media and Future Logistics.

In fact, during the recently concluded India Retail Forum conference in Mumbai, there was a whisper that talks between R-ADAG with Pantaloon were already underway.

Folklore from the retail sector has it that Kishore Biyani had made a pitch to Mukesh Ambani for a strategic alliance well before Mukesh himself became seriously interested in taking a plunge.

Since then, the Pantaloon chief, known as a pioneer in the industry, has sounded very cautious about prospective investors. “So far there has been no talk with the R-ADAG group for the sale of stakes in any of the Pantaloon formats,” said Biyani, managing director, Pantaloon Retail, told DNA Money.

R-ADAG’s strategy to buy stakes in the companies instead of building their own infrastructure, seems to have stemmed from the time factor, as another source in the company said.

“Now it will be too late to start building our own infrastructure and establish a full fledged retail operation. The FDI is likely to be allowed and there are so many new players like Bharti and Birla groups coming to the competition.”

Another R-ADAG source said, “There is no infrastructure plan. We will invest through private equity and other options.”

Elder brother Mukesh, on the other hand, plans to invest Rs 25,000 crore to create a pan-India footprint of multi format retail outlets in 1,500 cities. It helps both that the sector has not been thrown open to foreign competition.

“A stake in an existing retail venture will also give Anil a headstart as the business and infrastructure is already in place,” the source said.

“Now it will be too late to start building one’s own infrastructure and establish a full fledged retail operation. FDI is likely to be allowed down the line and there are so many new players like Bharti and Birla joining the bandwagon,” the R-ADAG group source added.

Besides, there is already huge crisis of quality manpower in the country and it would be difficult for the company to build competency in retail operations at this stage. But, the growth rate of retail industry is too lucrative to be ignored and the younger Ambani is not willing to lose the opportunity.

News: Audi plans to set up manufacturing plant in India

(BL 16/09/2006) New Delhi - Carmaker Audi is considering the possibility of setting up a manufacturing plant in India. The company is also planning to add five more dealers in the country in the next two years taking the number to eight. It currently has dealers in Delhi, Mumbai and Bangalore.

"We are exploring the possibility of local manufacturing in India. But that will happen with the growth of the market for our cars," said Andre Konsbruck, Executive Director-Overseas Region, Audi. He declined to give further details on the manufacturing plant, only mentioning that it will happen on the company achieving "optimal sales volume".

The company is targeting sales of 300 cars in the current year and 600 cars in 2007.

Sports-utility vehicle

The company on Friday launched its sports-utility vehicle `Q7' with diesel and petrol variants of the engine. The 4.2-litre petrol version comes with eight cylinders and produces 350 bhp with a maximum torque of 440 nm.

The diesel version comes with six cylinders and produces 233 bhp with a maximum torque of 500 nm.

The diesel variant is priced at Rs 61 lakh (ex-showroom Delhi), while the petrol version is priced at Rs 77.5 lakh.

"We have received pre-orders. We are confident that we will sell at least 50 of them in 2006," said Rahil Ansari, Country Manager-India, speaking about Q7.

The company already has its A4, A6 and A8 models in India. It is also planning to bring its RS4 and the S8 models into the Indian market in the future.

"We feel that the market for luxury cars in India will expand in the coming years and thus it is an opportunity for us to bring in models here," said Konsbruck.

Globally, the auto manufacturer witnessed record sales in 40 countries last year.

News: 'AV Birla Group to be on Fortune-500 list by 2010'

(BL 16/09/2006) Ahmedabad - The Rs 38,000-crore Adiya Vikram Birla group is expected to be on the Fortune-500 list by 2010, said its Chairman-cum-Managing Director, Kumar Mangalam Birla.

Replying to queries after delivering the 27th Vikram Sarabhai Memorial Lecture at the Ahmedabad Management Association (AMA), he said the group, in fact, expected to make it to the list even by 2009.

The lecture was organised by the Vikram Sarabhai Memorial Trust at AMA, which is celebrating its Golden Jubilee this year. The subject of his speech was `Values: The Driving Force For Success'.

Replying to questions, Birla said his group did not want to join the current race to set up the special economic zones (SEZs). The SEZs were not a priority for him at present, but the group may consider it in the future, he added.

Competition and values do not go together, he observed, adding the AV Birla Group would stick to its values even if progress were slow-paced. "Our generation does not believe in being remembered by the future. It lives in the present," he remarked. Emphasising the long-term importance of adhering to value systems, he said performance could be highly regarded and even rewarded but not at the cost of values.

India vs China

Asked how India could beat China, Birla asserted that India could do so by beating China at the latter's own game - by keeping the cost lowest. He stressed upon the employees' commitment to work, loyalty and passion. "If you have them, you can sleep in peace."

About his future plans, he would not join politics, and continue to work for the next 25 years. The group has expanded from the Rs 8,000-crore bracket at the time of his father's demise in 1995, to Rs 38,000 crore now.

Earlier, in his 20-minute lecture, Birla lauded the multi-faced contribution to India made by Dr Sarabhai who set up around 30 top-level institutions to kick-start progress of the country in different areas soon after Independence. Stressing the need for corporate houses to make themselves socially relevant, he said although business saw maximum value as the highest objective, superior values led to superior value-creation for stake-holders.

`Inspire confidence'

He pointed out that the world of business was passing through a crisis of trust and was full of scepticism and cynicism. We must inspire confidence in values and the CEOs must inspire the organisations to put out their best.

He praised doyens of Indian business and industry such as JRD Tata, GD Birla and N.R. Narayana Murthy, for adhering to values and said the business world should be aware of the importance of values and morals in the long run. Success without values is short-lived, he said, while citing how unethical practices had stunted the growth of housing sector despite there being a huge demand in India.

Birla also underlined that values could be culture-specific and differed from country to country. What is considered a gift in one country may be scoffed as bribe in another. Different countries treated words like honesty, loyalty, opinion and solutions in their respective culture-contexts.

He also highlighted the steps taken by his group to restructure itself along moral, ethical and value-based lines in recent times, particularly after having on its rolls close to 82,000 employees from diverse cultures and nationalities and sorted out their "value dilemmas."

News: Indian auto delegation headed for Germany

(PTI 16/09/2006) New Delhi - A delegation of Indian auto and auto-components sector, which is gaining global prominence, will take part in Automechanika show in Frankfurt and the International Commercial Vehicles Exhibition in Hannover this month.

The delegation would also take part in the buyer-sellers meets at these shows during its seven-day visit to Germanay starting September 16, a release said.

A German delegation would later visit India to participate in 'Automation 2006' in Mumbai from Sep 27-30.

German companies such as Siemens, Rittal, Lapp, Leoni & IFM would participate in Automation 2006.

Global auto manufacturers have started looking at the Indian auto sector because of the cost advantages it offers.

The export of Indian auto components increased by 28 per cent in 2005-06 and touched $1.8 billion. Exports are expected to touch $25 billion by 2015, according to a study conducted by McKinsey.

News: SBI wants to unlock value of holdings in associate banks

(TNN 15/09/2006) Mumbai - State Bank of India (SBI) is looking at unlocking value of its holdings in associate banks once it gets legislative sanction for splitting shares in banks and restriction on ownership of shares is removed.

According to SBI chairman OP Bhatt, the bank would like to take advantage of a proposed stock split in the value of shares of associate banks from the current Rs 100 to a much lower denomination. Once the bill to amend the SBI (subsidiary) Banks Act is approved, some of the associate banks would go in for initial public offerings.

Mr Bhatt also hinted that he was personally in favour of a merger of the associates with SBI in the future once approvals are in place, as he sees only large players or niche banks surviving in a competitive banking industry.

The chairman of the associate banks feels that there are no cultural issues in the event of a merger and that the merged entity could offer better products. The present Act restricts the number of shares which an investor can hold to 200 with the voting rights also capped at one per cent of the paid-up capital. This is reckoned to be a hurdle to any future plans of these banks to raise capital although three of the subsidiaries are listed.

SBI controls the equity holdings in these associate banks ranging from close to 100% in some of them to 75% in others. Once the stock is split and a public offering follows, the promoter bank can cash in.

The associate banks of SBI are State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Travancore, State Bank of Saurashtra, State Bank of Mysore and State Bank of Indore. The associate banks have a branch network of 4,744 and all of them are full on core banking solutions.

These banks are well capitalised and profitability ratios are also impressive. State Bank of Hyderabad, for instance, tops the list with a net profit of Rs 427 crore and book value of shares of the banks is substantially higher. State Bank of Patiala’s book value of Rs 100 share was Rs 8,915 at the end of FY06.

Little wonder, SBI stands to gain when the IPOs hit the market down the line. Says Mr Bhatt: “The associate banks are all doing well with every passing year. However, small banks have to create a niche for themselves or else they do not have any future, unless they are supported by large entities like ours.”

Any possible merger of associates with SBI would have more pluses than minuses, he says. “There may be some HR issues, but no one will be worst-off. If at all the bank will only become stronger. Besides, there are no cultural issues,” he adds.

News: Retail MNCs rush to run outlets at new B'lore airport

(TNN 15/09/2006) New Delhi - A large number of multinationals like the Nuance Group, the DFS Group, Alpha Airports Group, Dufry Group and Gebr Heinemann have lined up to set up retail services, including duty-free shops, at the new international airport being built near Bangalore. Domestic majors like Shoppers Stop, Pantaloon and Oberoi Group are also in the fray to run retail services at the airport.

India Tourism Development Corporation (ITDC), which runs duty-free shops at most major airports, is missing from the list of potential contenders as it has not made it to the pre-qualification grade. Similar is the case with Arianta, a big player with a turnover of $900 million, industry sources said.

Officials of Bangalore International Airport (BIAL) met potential bidders at a tender meeting on Thursday and it has been decided that bids would be submitted by the end of October. BIAL has shortlisted five sets of potential bidders, the sources said. The packages for which bidders are being shortlisted include food retail and retail facilities at the city side of the airport.

The bids for food retail and city side retail may face a policy hurdle since foreign players are allowed only in single brand retail. In the case of duty free, foreign direct investment (FDI) is allowed. Therefore, foreign companies seeking to provide food and city side retail at BIAL may have to go through franchisees.

As of now, foreign investment in retail is restricted to single brand retail, that too only to the tune of 51%. The issue is of significance since global majors like Nuance are in the fray for food & beverage (F&B) retail at the airport.

Interestingly, the Nuance-Shoppers stop combine is being considered as the favourite to win all categories of retail at BIAL since the Nuance Group and Zurich Airports are quite familiar with each other. Zurich Airports is the airport operator of the Siemens-L&T consortium which runs BIAL.

The origins of both Nuance and Zurich can be traced to the erstwhile Swiss Air Group. Unless the hurdle posed due to ban on retail FDI trips it, the Nuance-Shoppers Stop combine is expected to emerge as the retail champion at the new Bangalore airport.

BIAL is also being watched with interest since it is the first greenfield airport in the country to tie up for retail services. The BIAL model is likely to set the trend for the proposed new international airport near Hyderabad and other similar projects.

News: India ranks 47th in list of corrupt countries

(AP 15/09/2006) Singapore - China and India must move to curb corruption or else their booming economies will likely falter, a senior World Bank official said on Friday.

The giant Asian neighbours are growing at annual rates of 10 per cent and 8 per cent respectively, the fastest among the world's major economies, but both score poorly on controlling corruption, according to a World Bank study on quality of governance across countries.

The report used six indicators, including the ability to control corruption, to rank quality of governance in more than 200 countries. China was placed at 31, while India ranked 47 in the list of most corrupt countries. Both countries also have a poor record of enforcing the rule of law, the report said.

"They are not in the right zone," said Daniel Kaufmann, director of global governance at the World Bank's research arm. To sustain their rapid economic growth and graduate to the next level of development, China and India must "pay priority to these issues," Kaufmann said.

Economies of both China and India have grown briskly over the past decade, despite the reported high levels of corruption and some experts have questioned if there is a clear link between corruption and growth.

But Kaufmann said widespread practices of graft will eventually slow growth in the long term. Corruption leads to poor enforcement of the rule of law, weakens regulatory systems, adds to political instability and makes the government less effective - all of which determine the quality of governance in any country, he said.

"A country could get away in the short term, and that short term could be 10 years," he said referring to China.

The World Bank study revealed that poor governance is not an exclusive challenge of the developing world, and that reforming countries can make significant improvements in governance and in curbing corruption in relatively short periods of even less than a decade.

Countries like Slovenia, Chile, Botswana and Estonia score higher in enforcing rule of law and controlling corruption than some industrialised countries such as Greece and Italy, it said.

Similarly, in Africa, countries such as Tanzania, Ghana, Nigeria and Mozambique have made progress in one or more dimensions of governance over the past decade, it said. For years, experts had given up on African countries, it said.

News: 'We look for returns in the 25-30% range'

(BS 15/09/2006) Mumbai - Eurindia, an early stage venture capital fund recently raised a Rs 100 crore Mauritius-based fund to invest in Indian real estate and plans to raise a similar fund later this year. Eurindia's CEO Vinod Gangoor spoke about the company's plans.

You said that Indian real estate is a potential growth market for your company. What makes it so? Why have you moved from funding IT/BPO companies to real estate?

Any sector that requires funding and provides an optimal risk-return balance is attractive for financial investors. Today, the real estate sector is capital constrained, and execution of projects is still constrained by a paucity of quality developers and builders. There is tremendous scope for residential and office space, as well as hospitality units, whether they be 4 or 5 star tourist-oriented hotels or 3 and 4 star hotels targeting the business traveller. As a private equity investor, we are keen to follow the medium term trends of investment, which was clearly IT/BPO from 1995 to 2005 and will be real estate (among others. Definitely, there are many services and industrial businesses worthy of funding) for the next five to 10 years. We also believe there is too much capital seeking to be deployed in the 'corporate private equity' segment where one invests $ 10-20 million per company/deal, compared to real estate where there are many more deals and fewer private equity funds.

As an early stage VC fund, what would you typically invest in? At what stage would you exit? How does early stage funding in the real estate sector work typically? What kind of returns would you look for?

We would invest in development stage projects in the residential, commercial/IT/BPO, and hospitality spaces and exit through sale of the units or IPO (say, in the case of a hotel or hotel operator). We look for returns in the 25-30 per cent range in terms of returns.

Have you identified any projects for investments so far?

Two projects for investment have been identified. One is a large hotel project in Goa where we have acquired land and have received strong interest from hotel chains that want to manage the property which we will construct with their inputs. This will be a Rs 140 crore project over time and we expect to close the deal with a hotel chain by November and start construction next year. Thirty crore has been invested so far in this project. The other project is a large, multi-city hotel project where we have tied up with a partner in Chennai. We will construct and operate 8-10 hotels in the 3 and 4 star segment in southern and western India. The project will absorb over Rs 200 crore of equity capital and we will contribute half of that, so about Rs 100 crore over the next 2 years.

You said that only a part of your earlier Rs 100 crore Mauritius fund was utilised. How much has been utilised? Any specific projects where you plan to invest the rest?

We have invested Rs 32 crore in the Goa projects on hand. We will initially commit approximately Rs 20 crore to the second (3/4 star hotel) project by November when the deal closes. Another 20 crore has been earmarked for deals that we hope to close before December and the balance will be deployed by June of next year.

What is the size of the fund that you are planning to raise later this year? When will it be raised? Will it be raised in India or in Mauritius?

It will be a large sized fund based out of Mauritius. An announcement will be made in the coming weeks.

Are you looking at investing in any specific sectors?

Hotel and hospitality, residential, commercial, retail/malls, infrastructure, these are the sectors we would be looking at.

News: IMF upbeat on India

(BS 15/09/2006) Singapore - India's fast-growing economy was likely expand by 8.3 per cent this year instead of 7.3 per cent as previously projected, the International Monetary Fund said today.

Interest rates might have to be raised further to check inflation, the IMF said in its twice-yearly World Economic Outlook, predicting that India and China would be the twin engines driving the roaring economies of emerging Asia.

In 2007, India's growth is forecast to slow down to 7.3 per cent, still higher than the 7.0 per cent projected by the IMF in April, after growth of 8.5 per cent in 2005. "On the upside, there is the possibility of even faster-than-projected growth in China ... And in India," the IMF said.

At the same time, higher inflation due to rising oil prices could pose a risk for India and the country’s monetary authorities might need to raise interest rates further to check an increase in consumer prices. The funding body’s report said there were signs of inflationary pressures edging up in some countries as sustained high growth absorbed spare capacity.

"In India, inflation has picked up with rising oil prices and strong domestic demand," the IMF said, projecting an inflation at 5.6 per cent this year and 5.3 per cent in 2007.

Inflation, based on the wholesale price index in the week ended August 26, rose to 5.01 per cent from 4.91 per cent a week earlier. The RBI has set an inflation target of 5.0-5.5 per cent for 2006-07. It is scheduled to announce a review of the 2006-07 annual policy on October 31.

"While the RBI has raised interest rates in recent months, further tightening may be needed to resist inflationary pressures," the IMF said.

The RBI increased the reverse repo rate (at which it lends overnight money to banks) by 50 basis points in two tranches in 2006-07 to curb inflation.

The IMF said countries like India, Pakistan and the Philippines, with high public debts or budget deficits should put their fiscal positions on a sustainable footing for the medium-term.

With pressure on the government to spend more, the IMF urged India to take measures to broaden its tax base and reduce state subsidies.

"In India, strong spending pressures have emerged, limiting fiscal adjustment in financial year 2006/07," the IMF said.

"With the general government deficit and debt still high, further consolidation is clearly warranted at both the central and state government levels, including through measures aimed at broadening the tax base and reducing subsidies."

News: Tata ring-fencing in full swing

(TT 15/09/2006) Mumbai - Tata Sons, the holding company of the conglomerate, is raising its stake in key group firms. After scooping up shares of Tata Chemicals and Videsh Sanchar Nigam Ltd from the open market, it will be picking up more shares in Tata Tea through a preferential share issue that is designed to raise the group’s holding from the present level of 29 per cent.

Tata Tea will issue preference shares with attached warrants to Tata Sons to finance the acquisition of Energy Brands Inc, US. Last month, the Tata group announced that it would be acquiring a 30 per cent stake in US-based energy drink maker Glaceau for $677 million (Rs 3,150 crore). Both Tata Sons and Tata Tea will jointly acquire this stake from TSG, a private equity firm. The acquisition will be done through Tata Tea’s UK subsidiary, Tata Tea (GB) Ltd.

Tata Tea today told stock exchanges that of the total equity contribution required for the acquisition, $192 million (Rs 890 crore) will be provided by the company and $58 million (Rs 270 crore) by Tata Sons.

At a board meeting held today, the directors decided that of a total amount of about Rs 890 crore that has to be invested in Tata Tea (GB), about Rs 420 crore to Rs 460 crore would be raised through a preferential issue of equity shares with attached warrants to the main promoter company, Tata Sons.

It is not known at this stage what the group’s holding would be after the conversion of the warrants. Tata Tea said shareholders’ approval would be sought to raise additional capital not exceeding 20 per cent of the existing capital, including the preferential issue. Initially, the company proposes to proceed only with the preferential issue. The remaining amount will be raised through the sale of certain investments and from internal resources.

According to Tata Tea, this method of financing will minimise the cost of the acquisition. On Wednesday, Tata Chemicals said Tata Sons had picked up a 2.97 per cent stake in the company through market purchases, taking its total stake in the company to 15.28 per cent.

News: Sequoia Capital India raises $400 million fund

(RTR 15/09/2006) Mumbai - Sequoia Capital India said on Friday it had recently closed a $400 million fund to invest in later stage and growth stage businesses in India.

This is an extension to the venture capital firm's historical focus on early to mid-stage firms, it said in a statement.

With the new fund the firm now manages about $750 million of venture capital for India and has invested in more than 25 firms in the last few years, including software firm Applabs, Bharti Telesoft, ICICI OneSource and Indiatimes portal.

The new fund has invested in Cafe Coffee Day, a chain of about 1,500 cafes, and in the buyout of Flextronics Software Services Ltd. by an affiliate of private equity firm Kohlberg Kravis Roberts, Sequoia said.

Venture capital firm WestBridge Capital Partners in May merged its operations in Sequoia Capital.

News: BP, ONGC, Cairn bid for oil, gas blocks in India

(RTR 15/09/2006) New Delhi - Global energy giants BP, BG, and Italy's ENI are among the bidders for oil and gas exploration rights in India's latest and largest yet licensing round, government officials said on Friday.

India closed the sixth round of its New Exploration Licensing Policy, launched in the late 1990s to introduce a more transparent, open bidding process.

It drew bids from 62 Indian and overseas companies at a time when foreign firms are struggling to gain access to promising parts of Latin America, the Middle East and Russia.

"Of the total 55 blocks offered by India, 52 blocks attracted 165 bids," said V. K. Sibal, a senior official at the Directorate General of Hydrocarbons.

Three blocks received no bids.

"The response is very good. We offered the highest ever acreage in this round. India has political stability and there is transparency in our system," Sibal said.

India, Asia's third-largest oil consumer, imports 70 percent of its crude and is keen to quickly tap any remaining domestic reservoirs to help offset its growing dependence on imports.

Top state-run Indian explorer Oil and Natural Gas Corp. Ltd. submitted bids for 45 oil and gas blocks in partnership with domestic and foreign firms, including BG, Cairn Energy, ENI and BP, officials said.

BP, which submitted an unsuccessful bid for a block in last year's round, expressed an interest in two deepwater blocks this time round.

"Our interest in the Indian upstream sector is driven by the market, particularly the gas market, and a very good framework for the upstream industry," said Sanjiv Lowe, vice-president at BP India.

India's top private energy company, Reliance Industries Ltd., bid for 21 oil and gas blocks.

Meanwhile, Canada's GeoGlobal Resources is looking for five onland blocks in a tie up with State-run Oil India Ltd., while Calgary's Niko Resources Ltd has entered solo bids for three blocks.

The government plans to award the blocks by Nov. 15 and is expected to sign contracts by Jan. 15, 2007. Details of the bids will be announced later in the day.

News: Air Deccan’s small-town plan works

(DNA 15/09/2006) Bangalore - It was a business trip to Coimbatore that Bangalore-based hotelier Pradhan Ganapathy could not cancel. There was no train ticket available, and a Tatkal booking would have cost him Rs 1,400. He checked up the Air Deccan website, and was able to fly for just Rs 1,200 the same day.

Like Ganapathy, hordes of businessmen and frequent travellers from tier II and remote towns have an option beyond trains and buses as airlines introduce flights on these routes and connect them to major airports in the country.

In turn, these virgin sectors have helped boost the volumes of the carriers. Budget carrier Air Deccan, which currently generates around 40% of its revenue from this segment, is today the second-largest airline in the country with a market share of 21.2% (June, 2006). Traffic on this segment has been growing at 50%, albeit on a smaller base.

“Today, out of the 55 airports that we fly to, 35 are small airports. We intend to tap more small airports with our additional 30 new ATR aircrafts. We plan to connect Kandla, Kullu, Jamshedpur and Pantnagar in the near future,” says Air Deccan managing director Capt G R Gopinath.

Indeed, as Gopinath takes delivery of more ATRs (which are ideal for servicing small towns because of their smaller capacity - 48 seats) more flight paths on feeder routes are likely to appear on the aviation map.

Kapil Kaul, CEO - Indian subcontinent and Middle East, Centre for Asia Pacific Aviation, expects traffic on these sectors to grow further. “With the economy growing at 8%, we should expect the aviation sector to grow at least at 15-20%. Irrespective of whether there are low fares or not, new capacity on these sectors will stimulate growth. This is where the future of aviation lies. The growth in the aviation sector is moving from tier I to tier II to feeder routes. Initially, however, there would be the cost of developing these routes,” says Kaul.

At present, besides Air Deccan, Jagson Airlines Ltd is the only other carrier tapping this market. Coimbatore-based Paramount Airways operates all-business class flights to small-town destinations with its 50-seater Embraer regional jet ERJ 145. Kingfisher Airlines, which will soon be taking deliveries of ATRs, is also eyeing this sector.

However, SpiceJet wants to keep out of this market because of the hassles involved in maintaining two types of aircraft. “It is very difficult to manage a two-type-aircraft fleet. We will continue to serve routes where we can operate our Boeing 737s,” says SpiceJet CEO and chairman Siddhanta Sharma.

So, for the moment, Air Deccan literally has the entire market to itself as Jagson is an insignificant player.

“Our only competitors are the smaller regional airlines like Jagson and of course, largely the Indian Railways,” says Gopinath. And he is aggressively growing this market by introducing more flights. “We opened up Hulbli airport three years back. Now, we connect it to Belgaum and Bangalore. Shortly it will be connected to Mumbai, too. Similarly, we opened up Jabalpur to Delhi and now we will connect it to Mumbai and are looking for other such intra-state connectivity,” says Gopinath.

The average capacity utilisation on these routes is comparatively higher. For instance, Air Deccan utilises an aircraft for close to 13 hours per day with an average load factor in excess of 70%. Even the operational costs on these sectors tend to be lower with a host of incentives offered by the government to attract regional connectivity. “Free landing, lower airport fees and aviation turbine fuel taxes give us the cost advantage to service regional airports,” says Gopinath.

Also, with no congestion, there is lesser fuel-burn as the holding time (circling over the airport) is nil, adds M Thiagarajan, managing director, Paramount Airways.

The only daunting task, like Kaul says, is the cost of developing the sector.

All the same, the small town aviation boom sure appears set for a take off.

News: 12K missed again, but optimism rules

(DNA 15/09/2006) Mumbai - The mood is upbeat on Dalal Street. On Thursday, the Bombay Stock Exchange Sensex touched the 12,000-mark yet again for the first time after May 17, 2006 (a gap of 86 trading sessions), fuelled by intense buying in index heavyweights. But the index failed to hold its perch above 12,000 and closed the day at 11,973.02.

Market experts say the Sensex, despite the resistance around 12,000 and an expected brief correction, will continue to inch closer to its all-time high of 12,612. But there is a hitch: if the Sensex fails to close above 12,000 once more, that could dampen sentiments and lead to a bigger correction. The Sensex had hit an intra-day high of 11,983.48 on September 6, 2006, before closing the day at 11,933.21 points. On Thursday, it hit an intra-day high of 12,003.68 before slipping

“This is the second attempt of the Sensex to close above 12,000. One more failure could lead to a sharper correction, of say, 500-600 points. The index has resistance in the 12,000-12,025 range, but a sustained move above 12,025 could see the market rising towards its all-time high, says Deepak Jasani, head of retail research at HDFC Securities.

The better part of this rally is that the combined average traded volume of both the major exchanges has picked up considerably. It has risen to Rs 10,000 crore in the current month till date, from the Rs 8,800 crore clocked in the previous month. This increased participation indicates that day traders, who fled the markets after the May mayhem, have started crawling back. But this time they are being extra cautious - which explains the relatively slow upmoves.

“Day traders are active in the market. But they are very cautious and are avoiding the futures and options segment, mostly index derivatives. They are taking stock-specific calls in the cash market and there is an increase in the number of stop-losses these days. And even with a small fall, they are squaring off their positions unlike before, when they used to wait till the end of the day on hopes that the market would pick up,” said a dealer with a domestic broking house.

FIIs are taking it easy this time. While their net buying in Indian equity registered an average Rs 221.1 crore per trading session in August, it has come down to Rs 194.85 crore in the current month.

However, Vijay Bhambwani of BSPLindia.com feels that the market has intrinsic strength and does not need too many triggers to continue this way. “The market should go up further. It is going up technically on buying and, hence, no specific trigger is needed. This is a bull market and corrections at any time will be very small.

“If the Nifty closes above 3,495, it could go up by another 2% in four-five trading sessions. The downside of the Nifty is limited to 3,300,” he says.

Geopolitical tensions may have eased and global economic factors have started showing signs of stability, much to the relief of players. But a comparison of the derivative and cash market during the last week reveals that short-covering has amplified the gains in indices. The Nifty future, which quoted at a four-point discount to the spot market as on September 7, 2006, was on a par with the underlying index on September 14, 2006, as investors covered their short positions in a rising market.

News: Indian online businessmen grow in number

(BL 15/09/2006) Bangalore - India is back to being a country of traders - over the online medium. About 12,800 people make their living from online shopping mall eBay India. 38 per cent of sellers have quit their jobs and are depending on eBay as a primary source of income, said Gautam Thakur, Country Manager, eBay India Marketplace, at the launch of an eCommerce guide in the city.

"eBay is becoming a source of livelihood to many unemployed graduates, the elderly, rural communities and minority classes, women," he added.

The eCommerce Guide spells out basic business models of eCommerce, benefits to users, profiles of sellers and buyers as well as listing industry statistics. In addition, there are chapters on tech trends and resources to assist the consumers in understanding the newer developments in eCommerce.

This is part of the Web Site's initiative to catch the attention of entrepreneurs in the country.

News: 'Look carefully at SEZs', IMF tells India

(PTI 15/09/2006) Singapore - The International Monetary Fund (IMF) has asked India to "very carefully" look at the much-touted Special Economic Zones, saying the give-aways and tax sops to the zones could divert industrial activity from the rest of the country.

"Overall, it (tax sops for SEZs) becomes yet another give-away which the government cannot afford," the IMF Chief Economist, Raghuram Rajan, told reporters here after the release of the World Economic Outlook by the Fund.

It seems that tax sops are the only reason for setting up smaller SEZs of 10 hectares, he said, adding it would be far better to make people compete on the basis of the quality of the infrastructure they create in such zones.

People should be made to compete on the basis of rules and regulations that are there in SEZs to attract capital than making them attract capital because the tax laws are more beneficial, he said.

"Clearly, when you have economic zones of the size of ten hectares being set up, it is not clear that all these benefits of infrastructure, regulation, and so on, can in fact be implemented in those 10 hectares," Rajan said.

Tax sops and give-aways may also divert a lot of activity from the rest of the economy into these zones, which creates problems of inequitable regional development, "also something that the Reserve Bank has focused on," he said.

Reserve Bank recently said in its annual report that SEZs could aggravate an uneven pattern of development, as they may pull out resources from less developed areas.

According to Finance Ministry's estimates, SEZs could lead to a revenue loss of Rs 1,75,000 crore in direct taxes, customs and excise duties over the next five years, while the Commerce Ministry says the zones will lead to Rs 44,000 crore revenue gain for the government in a year.

News: India to set up tea centre in Cairo

(PTI 15/09/2006) Dubai - India is planning to set up a tea centre in Cairo to promote exports of the brew to the Middle East.

Indian tea exports rose 26.89 per cent in July alone from a year earlier to 19.11 million kg.

"We're still taking advantage of the Kenyan drought and the markets for Indian tea in neighboring countries like Pakistan have increased significantly," Gangan Boriah, director of Tea Board, told Arab News.

"A delegation has also gone to Iran for export talks, and we also hope to tap the Egyptian market, where there is a great demand for our tea," he said.

India is projected to produce 930 million kg of tea in 2006 after the output of 928 million kg in 2005. It is forecast to export 195 million kg of tea against 192 million last year.

"Our initial reports suggest that we've done well in August as well and we hope to maintain the momentum and keep tea prices stable," he said in a report on Thursday.

News: Carrefour set to enter Indian market

(IBN 14/09/2006) Mumbai - The world's second largest retailer, France-based Carrefour Group is set to enter the Indian market.

Sources say the group has signed an exclusive franchise agreement with the $500 million Landmark Group to set up hypermarkets in India.

The Government's dithering on allowing foreign direct investment into the country isn't stopping the foreign retailers to get a slice of the Indian retail pie.

Sources have told TV18 that the French retailer, Carrefour is tying up with the Dubai-based retail group, Landmark for an Indian foray.

The duo will set up hypermarkets to sell an entire array of food and groceries, FMCG, apparel and electronics. A formal announcement is expected in 3 to 4 weeks.

When contacted, Landmark's director, H Ramnathan said, "We are in talks, but no comments on whether the deal has been finalised."

Currently, Landmark Group operates 10 lifestyle stores and 2 home stores across five cities. Last month, it has opened its first Max Retail store in Bangalore selling apparel, accessories and footwear. Landmark has also announced plans to launch hypermarkets and had booked properties in cities like Nagpur. Sources say the company will be looking to tap the same space for their French connection.

With the hypermarkets that Landmark sets up with Carrefour, it will enter food and grocery retailing, which is the fastest growing segment in India.

News: US realty firm Hines to invest over $300 m in India

(PTI 14/09/2006) New Delhi - Aiming to cash in on the bullish Indian realty space, US-based real estate company Hines plans to invest over $300 million (over Rs 1,300 crore) over the next 4-5 years to develop projects in association with local partners. Hines, which manages about $12.5 billion of property across various countries, is targeting to develop various residential as well as commercial projects in the country. It had opened its first office here in April. "In the next 4-5 years, it is our objective to make over $300 million investments," the Hines Managing Director, Daniel MacEachron, told media. However, he said the access to capital would not be a constraint, adding "if we get good projects, we can increase our level of investment. The company plans to develop residential, office, mixed use, township and SEZs projects and is primarily focusing on NCR, Bangalore, Hyderabad and select other major markets. "We expect to work with local partners on some or all of our projects," he said, adding that the projects would be announced in the next 6-12 months. On its foray, MacEachron said, "India, we believe will be one of the most important economies of the 21st century and... any firm which wishes to be a truly global company must be active in India." He also expressed concerns about the rapid escalation in land prices in the major markets. But, he said, "We expect that there will be some correction in land prices over the next 12-18 months." MacEachron said the company's experience in other markets shows that rapid escalation without fundamental supports was not sustainable. Hines portfolio of projects underway, completed, acquired or managed for third parties include almost 900 properties representing more than 345 million sq ft of office, residential, mixed-use, industrial, hotel, medical, retail and sports facilities.

News: 'India better than China in pharma sector'

(PTI 14/09/2006) Mumbai - India is better positioned than China on various parameters to reach the centre-stage in the global pharma industry, Brian Tempest, chief mentor of Ranbaxy said in Mumbai today.

The country however, needs to address issues like infrastructure and pollution to maintain the momentum. It is moving ahead at a rapid pace in the global arena and has the potential to become a 'global strategic asset' for the pharma industry, Tempest said at a CII-meet on pharmaceutical industry here.

"India's 50% population below 25 years will be its secret weapon in future, while the one-child policy in China will play spoilsport for it...Economic fundamentals are also expected to favour India in the days to come.

Maintaining that all the fundamentals were very strong in India and the regulatory framework has, over the years, changed a lot for the better, he said qualified scientists and engineers have made it a better place for R&D investments.

"However, infrastructure is a potential risk for India and if it does not improve in the next three to four years, it will really limit the growth of the industry," Tempest said.

News: UK insurance major Aviva to move 1,000 jobs to India

(IANS 14/09/2006) London - Insurance major Aviva on Thursday announced plans to cut 4,000 jobs in Britain and move nearly 1,000 of them to India by 2008 as part of its efforts to trim costs and streamline operations.

A company release said that another 500 IT posts would be outsourced. The move was part of earlier-announced plans to move 7,800 jobs overseas by the end of next year.

Aviva said it would look to "minimise the number of compulsory redundancies".

Aviva, which owns Norwich Union, hopes to reduce duplication and improve efficiency to deliver annual cost savings of 250 million pounds by 2008.

The company said, "Aviva's headcount in Britain of 36,000 will reduce by 4,000 by 2008 with up to 1,000 roles being offshored to India (in line with previous announcements that 7,800 roles will be located offshore by the end of 2007) and a further 500 roles being outsourced to third party IT suppliers.

"The company will seek to minimise the number of compulsory redundancies through natural staff turnover and voluntary measures. The savings primarily arise from cost efficiencies and reducing duplication in marketing, human resources, finance, and information technology, as well as applying a single approach to procurement and supplier management."

Patrick Snowball, Norwich Union executive chairman, said: "We have to ensure that Norwich Union remains a highly efficient and effective company in what is an increasingly competitive and dynamic environment.

"Customers' buying habits are changing rapidly as technology becomes more accessible. Already half our new direct motor insurance policies are purchased over the Internet. Consumers and brokers are increasingly operating in a self-service world.

"Norwich Union, with its strong and trusted British market brand will continue to lead the industry by adapting to these shifting dynamics. We will do this by leveraging the scale of our life and general insurance businesses and we have a proven record of delivering change.

"The integration and efficiency measures we are announcing today are part of a programme which will result in an increase in customer focus across our businesses along with better and more efficient use of technology."

Aviva is the world's fifth-largest insurance group and Britain's largest insurance services provider (based on gross worldwide premiums on December 31, 2005), and is one of the leading providers of life and pension products to Europe, with substantial positions in other markets around the world.

News: SBI to focus on big-ticket overseas buyouts

(TNN 14/09/2006) Mumbai - The country’s largest bank, the State Bank of India (SBI), will look only at fairly large-size overseas acquisitions the next time around. The bank is set to be a more aggressive player in the treasury segment which could feature greater direct exposure to equities and the emergence of this unit as a separate profit centre.

The directional shift may be evident soon, with the bank keen to regain its market share and to improve its earnings efficiency. And topping the near term agenda is retaining and expanding market share in all business segments, according to the chairman of the SBI, OP Bhatt. Powering this expected growth will be retail banking.

The man who will now oversee the fortunes of the SBI over the next five years says the management hasn’t pulled back on the two small ticket acquisitions it undertook last year. Instead, the bank will go for a buyout which is big or not. “We will look at acquiring a more significant size which fits in with our plans instead of spreading our management time and resources thin,” he told ET in an interview on Wednesday. The underlying message: No more buyouts of small-time overseas banks or entities in the size of $5-10m.

The SBI, however, is on course to meet its commitments relating to two acquisitions - one involving PT Indomonex in Indonesia where it will control 76% of the equity and 76% in the Kenya-based Giro Commercial Bank. Prior to that the bank took control of the Mauritius-based Indian Ocean International Bank by buying 51% of the bank’s holding.

Mr Bhatt added: “It is not that the SBI will not be expanding or acquiring banks. The issue is it should fit with our strategy. India is globalising and thus it would not be right for India’s leading bank not to be present in this scenario. But simultaneously, we are also looking at strengthening our existing operations overseas.” Local buyouts are not on the radar and integrating the associate banks which could add a lot of muscle to SBI’s balancesheet is a little far away, considering that the enabling legislation is yet to be approved.

With a balancesheet size of over Rs 5,00,000 crore, or over $110-bn, a retail branch network of over 14,000, and a share of 18% in total deposits and advances in the local banking system, the SBI is way ahead of other banks in the local banking pecking order. The management, he says, has also zeroed in on treasury operations as one segment which ought to be bolstered. “Our treasury operation is the largest, but not as aggressive. The question is how to make it more aggressive, and we will do something about it,” he said. In the local markets, the SBI is known among market players as a “peria anna” (big brother).

The bank is mindful of the risks involved in an aggressive foray and is also scaling up its participation in the equities market. “We need to take a medium-term view. It is an important activity for any bank and we want to support it,” he said.

Regulatory norms allow banks to invest up to 5% of their previous year’s advances in the equities market. However, SBI’s exposure to equities has been far below this mark with plenty of headroom available.

The bank’s growth has been good although profitability might have dipped during the last fiscal. Profits grew by just 2.37% last fiscal setting off worries in the government. In FY06, net interest margin was marginally higher at 3.40% compared to 3.39% in the previous fiscal.

Mr Bhatt said the SBI is not strained for capital to fund growth and a public offering may be way off. The amendments to the SBI Act which will enable transfer of the equity holding of over 59% held by the RBI to the government and prune the government holding to 51% are in the works. The modalities of transferring the holding which is valued at close to Rs 40,000 crore is also yet to be firmed up.

For now, Mr Bhatt’s top priority is retaining and expanding market share. “The bank has been growing. But we want to retain and regain the market share lost in the last few years. Why the bank lost market share needs to be examined,” he stressed.

On the information technology rollout, he said core banking was only on hold for 90 days and not stopped for ever. In the current scenario, it would be “foolish” for anyone to stop core banking forever. “I did not want any rollout till some issues were resolved. In fact, the last three months were a busy season for the IT division in resolving the internal IT-related issues. But now, we do not have any connectivity problems in any branches, all our associate banks and 3,400 branches are on core banking solutions. And more rollouts will happen now.”

According to Mr Bhatt, the key would be to raise standards of customer service. “We cannot talk about increasing market share unless we improve our customer service. We already have a large product range, we need to improve our branch ambience and response time,” he added.

News: AVB picks talent off rivals’ shelves for retail venture

(TNN 14/09/2006) Mumbai - Even before India Inc could recover from Reliance Retail’s talent poaching early this year, the threat of yet another round of talent hunt looms large. The hunter this time is KM Birla’s retail juggernaut, the AVB Group, which has already roped in six key executives from Shoppers’ Stop, said a source.

Earlier, Shoppers’ Stop’s HR chief Vijay Kashyap and property chief Sanjay Badhe left to join AVB Group. “Some 6-7 key middle-level executives from Shoppers’ Stop have crossed the floor along with Kashyap,” a source told ET. The good second line of executives at Shoppers’ Stop is believed to have caught AVB group’s recruitment team. “Shoppers’ Stop has good middle-level managers. Since the HR head in Birla retail is an ex-Shoppers’ Stop honcho, the company is now under scan,“ said a senior Mumbai-based head hunter.

The other company that Birla is eyeing for retail talent is South-based Food Bazaar. A couple of top executives are already learnt to have moved. Mr Kashyap will head the HR team for Birla’s retail venture, which is set to roll out sometime next year. The company has plans to invest over $1bn (Rs 4,500 crore) over the next 2-3 years.

Beginning with hyper market, the group plans to enter virtually all the formats and has already begun signing up properties across India. While the AVB Group is doing everything to keep its retail plans under wraps, sources say, its retail venture is being spearheaded by Sumant Sinha, CFO, AVB Group. “The group is creating separate teams for each retail function,” said a source.

AVB’s retail business will be a separate venture and not a part of its subsidiary, Madura Garments. For now, the biggest challenge before AVB Group is to bring in the right people for key positions in its retail venture.

Analysts say, new retail players don’t have much choice on the home-grown front. While Shoppers’ Stop and Food World are believed to be hunting ground for AVB Group, many say, Birla is also tapping the talent pool at Reliance’s petroleum retail and food plaza business, which has been put on soft pedal for now. The company has hired Pankaj Katiyal, who looked after the RIL’s filling stations.

News: Biyani set for big-bang discount retail play with fashion brands

(TNN 14/09/2006) Bangalore - Kishore Biyani is opening a new front for his retail empire. Tracking the emerging opportunities in value fashion retailing, Mr Biyani is set to unveil Brand Factory, positioned as a mega discount store chain offering fashion brands at factory prices.

This large format store chain's national roll out is being kicked off from Bangalore and Hyderabad. “The size of Brand Factory stores will fall between 60,000 and 1 lakh sq ft each. It will retail brands at factory pricing,” Mr Biyani, chairman & managing director of Pantaloon Retail told ET.

Brand Factory will be part of Pantaloon Retail and operate as an SBU within Mr Biyani’s flagship. It is learnt that Brand Factory would mainly bank on apparel and accessories, especially footwear, as the main revenue driver. The industry observers said the success of Mr Biyani’s latest retailing format would depend on the array of brands he is able to pull in, especially given the larger size of these stores.

Mr Biyani said that most of the brands that are currently present in Pantaloon’s ‘Central’ malls are going to be part of the new venture. Vishnu Prasad, currently president in-charge of Pantaloon Retail’s southern operations, will be the operational head of the new venture, which is expected to hit the market in the next few weeks.

Mr Biyani’s move comes at a time when value fashion retailing is picking up in the country with the Dubai-based Landmark Group showing up with a value fashion retail brand, Max, and Arvind Mills stepping up expansion of its Megamart stores. It must be mentioned that Megamart, which initially started off as a factory outlet of Arvind’s apparel brands, has now transformed itself into a distinct retail asset offering even outside brands at factory prices.

Meanwhile, Landmark’s Max chain is targeting 50 stores, each estimated at 20,000 sq ft, within four years. The industry figures suggest that apparel and footwear value fashion retailing alone — falling between Rs 200 and Rs 800 price bracket — is estimated at Rs 40,000 crore annually, and growing at 14-15%.

Till now, the action in the value fashion retail segment was driven by company specific factory outlets in the city suburbs, and smaller regional players with one or two city presence. The industry observers said the sector was poised to attract more biggies with a double-digit vault compared to 7-8% growth in the overall fashion retail sector.

News: India, Brazil, SA to develop new trade geography

(IANS 14/09/2006) Brasilia - The three-way cooperation among India, Brazil and South Africa (IBSA) stands for "new trade geography" to use one another as gateways to push intercontinental trade and investment, said Commerce Minister Kamal Nath.

"While India can provide an excellent staging post for South Asia and Southeast Asia, Brazil can act as the hub for Latin America as a whole and South Africa can do likewise for sub-Saharan Africa," he told the first IBSA meeting here.

Citing figures on the prospects of trade among the three countries, Kamal Nath said intra-IBSA trade was only $7.7 billion in 2005, representing less than 1.5 per cent of total trade of the three countries.

"The IBSA countries can reinforce each others' economic strength by creating a market of more than 1.2 billion people, a combined gross domestic product (GDP) of $1.8 trillion and trade of more than $600 billion," he said.

"None of the IBSA countries now feature as one of the 10 most important trading partner of the other two countries," he told the meeting organised by the three apex chambers of India, and Brazil's National Confederation of Industries.

Kamal Nath also underlined the specific areas for each of the three countries in terms of joint ventures, investment flows and technical cooperation.

The areas outlined for India included pharmaceuticals, biotechnology, wind energy, IT, tourism, entertainment and animation industries, and manufacture of jewellery using precious and semi-precious stones and gold.

The areas for Brazil included tourism, agriculture, food processing, packaging, nuclear energy, bio fuels and renewable energy, including hydro and ethanol.

"Sixty-two percent Brazil's energy requirement is met from renewable sources, of which 10 per cent is from ethanol. India has the largest area under sugarcane, though its ethanol cost is very high," he said.

For South Africa, he listed the areas as synthetic fuel, coal gasification technology, nuclear energy, mining technology and machinery.

News: India No 1 in spa destinations of the world

(PTI 14/09/2006) New Delhi - Marking yet another feat in the emergence of India as a preferred travel and medical tourism destination, Ananda Spa in the country's Himalayan region has been ranked as the top destination spa worldwide in a latest study.

Located amid the calmness of Himalayas, Ananda combines the traditional Indian systems of Ayurveda with the contemporary western spa approach in its numerous body and beauty treatments — earning it top honours from the London-based travel and tourism magazine Conde Nast Traveller.

The spa has also found a place in the top-10 best of the best category of the tourism world in the same poll, which has ranked India as the fourth most preferred tourism destination.

Another Indian spa, Serano Spa located at Park Hyatt Goa Resort and Spa has also been named in the top-10 overseas hotel spas worldwide by the Conde Nast Traveler Readers' Travel Awards 2006.

The Oberoi Rajvilas, Jaipur has been ranked as the fifth most preferred overseas leisure hotel in the Asia and Indian sub continent in the same survey, which has been published in the October issue of the magazine.

East seems to be the most preferred destination for spas globally, with second position being grabbed by Chiva-Som International Health Resort in Thailand.

Even westerners prefer the Asian destinations more due to the synthesis between traditional Indian sciences of Yoga and Ayurveda and modern spa technology.

This is one of the main reasons for the growth of Asian spa market — thus attracting the Westerners and bringing the East and West closure.

US-based Time magazine said in its Asia edition recently that Tokyo's five-storey 10,000 square meter Spa LaQua crams about 65,000 guests a month into its hotspring baths, pools, saunas, massage rooms and restaurants.

In Seoul, the popular Sports Club Seoul uses an extraordinary range of facilities as its lure: its 10 floors feature themed saunas, oxygen rooms, a golf practice range, a movie theatre and a karaoke room.

Today's spas are more like leisure entertainment complexes for the masses and they are fast becoming hotel alternatives too.

News: Five new airlines likely to join Indian skies

(PTI 14/09/2006) New Delhi - As many as five companies have applied for licences to launch new airlines in the country, Civil Aviation Secretary Ajay Prasad said on Wednesday.

While decision to grant them operating licenses have not yet been taken, new guidelines would be in place in the proposed Civil Aviation Policy, he told reporters on the sidelines of the Indo-US Economic Summit in New Delhi.

His remarks came in the backdrop of government sources saying that a fresh look was required to be taken in regard to the entry barriers for new airlines to come up.

Maintaining that there was no clampdown on issuing of fresh licenses to such aviation firms, the sources had said there was a need to revise the existing entry barriers to encourage "serious players" enter the aviation market.

Under the existing guidelines, a new airline has to have a fleet of five aircraft and an equity capital of at least Rs 30 crore, among other things, to get a scheduled operator license allowing them to operate in the domestic sector with a published timetable.

The sources had warned of a "shakeout" among the existing private carriers as was witnessed in the 1990s, if they did not take immediate steps to maximise their yield and meet at least their operating expenses when the dynamics of the aviation industry was changing very fast.

A large number of private carriers had folded up in the early 1990s, leaving only the state-owned airlines besides Jet Airways and Air Sahara in the field.

News: IMF raises Indian growth forecast to 8.3 per cent in 2006

(PTI 14/09/2006) Singapore - India's fast-growing economy should expand by 8.3 per cent this year instead of 7.3 per cent as previously projected, the International Monetary Fund (IMF) said on Thursday.

Interest rates may have to be raised further to check inflation, the IMF said in its twice-yearly World Economic Outlook, predicting India and China would be twin engines driving the roaring economies of emerging Asia.

In 2007, India's growth is forecast to slow to 7.3 per cent, still higher than the 7.0 per cent projection made by the IMF in April, after growth of 8.5 per cent in 2005.

"On the upside, there is the possibility of even faster-than-projected growth in China ... And in India," the IMF said.

At the same time, higher inflation due to rising oil prices could pose a risk for India and monetary authorities there may need to raise interest rates further to check an increase in consumer prices.

"In India, inflation has picked up with rising oil prices and strong domestic demand," the IMF said, projecting inflation of 5.6 per cent this year and 5.3 per cent in 2007.

"While the Reserve Bank of India has raised interest rates in recent months, further tightening may be needed to resist inflationary pressures."

India's central bank raised its key interest rate by a quarter point to a four-year high of 6.

With pressure on the government to spend more, the IMF urged India to take measures to broaden its tax base and reduce state subsidies.

"In India, strong spending pressures have emerged, limiting fiscal adjustment in financial year 2006/07," the IMF said.

"With the general government deficit and debt still high, further consolidation is clearly warranted at both the central and state government levels, including through measures aimed at broadening the tax base and reducing subsidies.

News: R-ADAG`s airport bid grounded

(BS 14/09/2006) Mumbai - Reliance Anil Dhirubhai Ambani Group’s(R-ADAG’s)foray into the aviation infrastructure sector has hit a roadblock again.

After losing the Mumbai and Delhi airport modernisation projects to rival bidders, group company Reliance Energy has lost the bid to set up ground handling facilities at the upcoming Bangalore international airport.

Bangalore International Airport Ltd (BIAL) has selected the consortium of Air-India/Singapore Airport Terminal Services (SATS) and Globe Ground India for ground handling. Globe Ground India is a joint venture between German airline Lufthansa and New Delhi-based Bird Group.

Reliance Energy had teamed up with Texas-based cargo handling major Worldwide Flight Services to bid for cargo handling and ground handling services at the airport.

Earlier, Reliance Energy had lost cargo handling to a consortium of Air-India/SATS and Bobba Group/Menzies Aviation.

BIAL CEO Albert Brunner has confirmed the development. Air-India is the country’s leading ground handling operator with a market share of 55 per cent.

"Air-India is earning a revenue of over Rs 500 crore per year from ground handling. It has a presence in Kozhikode, Ahmedabad, Amritsar and Pune. The airline is also saving as it serves own fleet too," according to industry sources.

Mumbai-based Cambata Aviation is the other market leader in ground handling.

Recently, Punj Lloyd entered into a joint venture with Swissport International, a world leader in the ground handling industry. The JV is looking at developing projects in Indian airports, leveraging on Swissport's brand and know-how and Punj Lloyd’s local expertise.

Meanwhile, the Air-India-led consortium has selected Singapore-based Architects Team 3 Pte for the design and construction of Bangalore international airport’s cargo handling infrastructure.

News: 'America biz coming to India'

(AP 14/09/2006) New Delhi - A large group of American businessmen are planning to visit India in November to look for opportunities to invest in the country, US Ambassador David Mulford told a gathering of Indian and American businessmen on Wednesday.

"We are in the planning stages of a US trade mission in November," Mulford said to the Indo-US Economic Summit in New Delhi.

"US business is looking to India and an impressive array of corporate leaders will be coming for that event," he said.

Up to 200 representatives of US businesses will take part in the mission, according to the US Commerce Department Web site. The group will participate in the Mumbai Business Summit, before heading off to cities of their choice.

Foreign investors are keen to play a part in India's economy that has been growing at some 8 percent a year.

Bilateral trade between the two countries in 2005 stood at US $26.8 billion (euro21.1 billion) and is growing at a rate of some 20 per cent annually.

However, Mulford cautioned the Indian government that delaying planned economic reforms could slow projected growth.

"It is important to bear in mind there are serious economic costs to any loss of momentum on the reform front," Mulford said.

Many of India's plans to privatise industries and open others to the foreign sector have been put on hold by pressure from the Left parties in the ruling coalition.

News: Three Indian state banks to form strategic alliance

(RTR 14/09/2006) Mumbai - Three state-run banks are set to form a strategic alliance on Friday to meet growing competition, in a step analysts say could be the first towards consolidation in the tightly regulated sector.

Corporation Bank said on Thursday Chairman B. Shambamurthy would meet counterparts at Oriental Bank of Commerce and Indian Bank on Friday to sign a deal for joint operations in some areas where customers were likely to benefit.

The Business Standard newspaper reported the banks, which collectively have an asset base of 1.4 trillion rupees, will cooperate to give loans, undertake fee-based business, and share branch and ATM networks and employees.

But the agreement does not include equity participation.

"This is definitely a unique model for growth and the success of this first attempt may spark attempts by other banks to join hands," said Kanan Shah, a banking analyst at Networth Stock Broking.

"It is probably a measure to fend competition among themselves as the competition in the banking sector is huge."

Although bank credit in India's robustly growing economy is expanding at 30 percent year-on-year, deposit growth is lagging behind at 20 percent, as banks struggle to attract savings.

As a result lending rate rises have lagged behind increases in deposit rates, squeezing bank margins.

TAPPING SYNERGIES

The collective asset base of the three banks will bring them nearer to India's largest private sector lender, ICICI Bank, which has 2 trillion rupees worth of assets.

But the deal will still leave the three behind the country's largest bank, State Bank of India, which has an asset base of more than 4 trillion rupees.

"There is a scope for geographical synergy, as except the State Bank of India, there are few banks with a pan-Indian presence. Consolidation would help as long as there is no overlapping of branches," said Ravikant Bhat, an analyst at IDBI Capital in Mumbai.

"From 2009, foreign banks would have more freedom to acquire local banks. Therefore Indian banks need to attain a bigger size, so they are not vulnerable to hostile takeovers."

India has 88 major banks, and more than 100,000 urban and rural cooperative banks, employing more than a million people.

The sector is dominated by state-run banks which have nearly three quarters of business. Foreign institutions are not allowed to pick up more than 5 percent in any private sector bank.

The central bank is due to review the policy on foreign ownership in 2009.

An expert panel on capital account convertibility -- headed by a former deputy head of the central bank -- has said foreign banks should be allowed to increase their presence, a suggestion the government's communist allies are likely to oppose.

The communists, whose main backers are trade unions and who provide the government with a majority in parliament, fear greater participation of foreign banks could lead to massive job cuts.

The convertibility panel's suggestions were made public a day before private sector lender United Western Bank collapsed. It is due to be bought by state-run IDBI Ltd.

News: India will see Manpower strength double in 2007

(DNA 14/09/2006) New Delhi - Employment services firm Manpower Inc is looking at doubling headcount to 1,000 in 2007 and setting up 20 offices in tier-II cities in India, its chairman and CEO, Jeffrey Joerres, said on Wednesday.

Sounding extremely bullish on the high-growth Indian market, Joerres said the company sees substantial revenue contribution from its Indian arm in future even though it currently contributes less than $1 billion to its $19 billion global pie.

“We have aggressive plans for India over the next three years, where we will be expanding our existing offices in the metros along with setting up new offices in small towns.”

He, however, declined to share investment plans.

Globally, it aims to be a $35-billion company in the next five years.

The Manpower chief feels that outsourcing is here to stay even though the labour arbitrage may not be as lucrative as it was earlier. “The shortage of people in US and European market is so great that services will continue be offshored to India which has more experience with the global economy as compared to other competing nations,” said Joerres. But, Indian companies need to keep up the quality of services if they want to embark on a natural expansion plan for the existing services, he pointed out. According to him, there could be a huge opportunity in India’s entry-level job market if growth in services sector can be combined with manufacturing boom.

“Globally, India is being looked at as a good brand. Though earlier brand India was in a delicate position because of a certain amount of envy due to job losses, the scene is different now,” said Joerres.

As companies overseas continue to be pragmatic about their goals, they churn out profits due to outsourcing, resulting in creation of more jobs there.

News: 'Booming India, China to underpin Asian growth'

(AFP 14/09/2006) Singapore - Asia is set for another year of robust growth as the twin engines of China and India drive the emerging economies and Japan extends a recovery from its long slump, the IMF said on Thursday.

Emerging Asia will see growth of 8.3 percent this year and 8.2 percent in 2007, after 8.5 percent in 2005, the International Monetary Fund said in its twice-yearly World Economic Outlook report.

The IMF had predicted growth of 7.9 percent in 2006 and 7.6 percent next year in its last report in April.

"Growth continues to run above eight percent in emerging Asia, with much of the momentum due to vibrant expansions in China and India," the Washington-based global economic watchdog and lender said.

"The outlook is for continued strong growth... reflecting more favorable global economic conditions, continued high growth in China, and moderate deceleration in India after the strong momentum in 2005 and early 2006."

China's economy, the fourth largest in the world, will grow 10 percent this year and the next, faster than the April estimates of 9.5 percent and 9.0 percent, the IMF said.

For India, growth is projected at 8.3 percent in 2006 and 7.3 percent the following year, it said.

In April it had forecast the South Asian dynamo's economy would expand 7.3 percent this year and 7.0 percent in 2007, after 8.5 percent last year.

Japan, Asia's largest economy, is predicted to grow 2.7 percent in 2006, up from 2.6 percent in 2005, before slowing to 2.1 percent in 2007.

For Asia's newly industrialised economies (NIEs) -- South Korea, Taiwan, Hong Kong and Singapore -- overall growth in 2006 has been revised downwards to 4.9 percent from 5.2 percent, and in 2007 to 4.4 percent from 4.5 percent.

The IMF said this softer outlook reflected slower import demand from advanced economies, especially the United States, a key market for them.

Indonesia, Thailand, the Philippines and Malaysia are collectively expected to grow 5.0 percent in 2006 and 5.6 percent next year against earlier predictions of 5.1 percent and 5.7 percent.

Despite the overall upbeat outlook, the IMF cautioned of several risks, including slowdowns in the United States and Japan, both key markets for Asia's export-led economies.

Asia is also likely to be vulnerable should China's red-hot economy hit a rough patch, it said.

Other potential threats are a widely-feared bird flu pandemic outbreak and a breakdown in efforts to revive the stalled Doha Round of trade liberalization talks, the IMF said.

Asia's substantial foreign reserves build-up and persistent current account surpluses have strengthened the region's ability to withstand financial market turbulence but the region should press ahead with structural reforms to improve its defences against external risks, the IMF said.

"Policymakers across the region should take advantage of the broadly favorable growth outlook to implement structural reforms aimed at promoting fiscal sustainability and reducing vulnerabilities," it said.

Asian economies with significant public debt or budget deficits, including the Philippines, Indonesia and India, should work at improving their fiscal positions, said the IMF.

For Indonesia and the Philippines, the "the structure of public debt is associated with foreign currency risks, and continued fiscal consolidation and improvements in the composition of this debt would contribute to reducing the vulnerability to swings in global investor sentiment and enhance monetary policy credibility."

News: India overtakes China in mobile arena

(BL 14/09/2006) New Delhi - Indian telecom operators added the highest number of new cellular users in the world in a single month in August.

With 5.9 million new mobile users, India has beaten China, which added 5.19 million new cellular users in the same period. Other countries in the top five include Russia with 3.6 million new mobile subscribers, Brazil with 2 million additions and the Philippines where 1.9 million new cellular subscribers were added in August.

Explosive Growth

T.V. Ramachandran, Director General, Cellular Operator's Association of India, said that this explosive growth in subscriber numbers was a direct result of the forward looking policies of the Government, the enabling regulatory structure and the commitment of the industry to deliver increased access to subscribers with ever improving affordability. "With this growth, India was well on course to exceed the COAI forecast of 130 million subscribers by December 2006," said Ramachandran

As per global analysts Wireless Intelligence, the last half billion cellular subscribers had come in a record time of 12 months and has been mainly added in the very high-growth emerging markets of China, India and Russia. According to Wireless Intelligence, the global mobile industry has been growing at around 40 million subscribers per month, which is the highest volume of growth that the market has ever seen. The share of the Asia Pacific region in this growth is 41 per cent with India and China alone accounting for 25 per cent of the total subscriber growth worldwide over the last year.

Going forward, it is estimated that the cellular mobile subscribers will grow by another 500 million to reach 3 billion by the end of 2007. As per experts, the contribution by India to this growth would be the maximum and is estimated to be 80 million new cellular subscribers.

News: Daimler plans to expand India operations

(BL 14/09/2006) Pune - DaimlerChrysler is firming up plans to expand and consolidate its India operations and is in the process of setting up a new plant in the country.

The company has requested the State Government for a large plot of land to locate its new facility, top Government sources told Business Line.

"We have identified a 100-acre plot at Vadgaon on the Mumbai-Pune route," they said, adding that the Government would be ready to hand over the land to the company in a couple of months once it gets the company's go-ahead.

"We are in the process of evaluating our expansion and consolidation plans and are looking at various options in terms of availability of land," Dr Wilfried Aulbur, CEO and Managing Director, told Business Line, when contacted.

The sources also said that the company was initially given the option of locating its new facility at Ranjangaon, which is already home to Fiat, but DaimlerChrysler favoured a location closer to the Mumbai-Pune expressway since it imports completely built up units (CBUs) of M, S, CLS, SL and SLK class cars and soon, the Actros truck.

"We are focusing on the Pune region; once a plot is available we will shift the existing facility to the new location, though it is difficult to put a timeframe to the move at this point," Dr Aulbur said.

The company's current facilities are located on a 20-acre plot at Chikhali near Pune where it assembles the S, E and C class cars.

The company is looking for a new location so that it can integrate its various operations in the country.

The existing facility is dedicated exclusively to its passenger car business.

DaimlerChrysler recently entered the truck segment with its Actros range targeted at the mining sector initially.

The company expects to grow this business by entering other segments of the truck segment.

Industry sources said that the company will also enter the bus market with its range and the new facility will be required to integrate all the operations under one roof.

Asked if the company will also house its truck and the future bus business in the new facility, Dr Aulbur said: "We have not finalised those decisions but it is always better to consolidate operations and leverage synergies. We are evaluating various options and will be working out the relevant decisions about such issues as we move along."

DaimlerChrysler India has a research and technology centre in Bangalore which currently has 350 people.

The industry sources indicated that the company, which sees the centre playing a greater role in its global engineering design space, is in the mood to eventually shift it to Pune too.

News: Israeli IT firm opens centre in Mumbai

(BL 14/09/2006) Jerusalem - Israeli IT services and solutions firm Ness Technologies has opened a new delivery centre in Mumbai.

The Mumbai centre was opened to facilitate a multi-million project Ness has signed with British firm Pulsic Limited, a media report said. The centre will also address the growing demand for offshore software development services from British customers, business daily 'Globes' reported.

The Israeli firm has hired several hundred new employees to augment its Indian workforce of 1,500 for the new project, the report added. Ness said that its new Mumbai centre would employ 480 people, to be hired in two stages, starting with 210 new faces.

The company is already providing offshore services from several Indian locations such as Mumbai, Bangalore, Hyderabad and Chennai, which serve 30 independent software vendors (ISVs) developing software. The centres also provide computer units for developing applications, support and maintenance.

News: Indianness will be our differentiator - Pantaloon

(TNN 13/09/2006) Mumbai - At a recent retail summit in Mumbai, he shrugged off talks of emerging competition from Reliance Retail and the Bharti Group with his characteristic dry humour: “Finally, I’ll find myself in elevated company.” It’s no empty boast, for the pioneer of organised Indian retailing has already proved detractors of his ‘pan-Indian retailing model’ wrong. In a freewheeling interview with ET, Kishore Biyani, MD, Pantaloon Retail (Future Group), shares his philosophy of 'Indianess' as the core value driving his company. Excerpts:

With RIL moving into the retail space, comparisons are being drawn with Pantaloon. Comments
It is an honour to be in the same league. Our industry will finally get the respect it deserves. As far as competing is concerned, I believe they are getting into the food space initially. We are not yet competing, our formats are in place and deals for space have been signed. It will be up to the consumer to decide which store to walk into.

What’s your biggest consumer learning after near-decade in retailing?
I think the biggest learning is about how the Indian consumer has never stops surprising (me). We have learnt that the consumer is always evolving faster than us in his needs and requirements. Whether it’s the requirement of basic needs or aspirational products, the consumer has kept us on our toes. They are clearly dual purchasers, as he value across traditional distribution and modern retail formats, alike. The consumer is always two steps ahead. Consumers are same everywhere, and seek value.

How do you see the brand evolving?
Indianness will be our differentiator, our understanding of reaching out to con-sumers in as diverse a market as in India. Respecting the fact that the money put across the counter is ‘hard-earned money’ and that we have to bend backwards to offer the value sought. We insist on training everyone across the spectrum to offer this perceptible value to the consumer. We have a price perception index and continuously create modules out of learnings from that index. The differentiator will be bettering the value offered each time.

Pantaloon Retail has diversified into unrelated areas like setting up real estate and other PE funds before consolidating its retail business.
I am aware of this criticism, but the fact is that we have been misunderstood. I am in the consumption business. Every strategic business move by the group has been an enabler to the consumption business. I have maintained that consumption will lead the GDP growth rate for years to come. GDP growth is predicted at 6-7% for the next few decades and private consumption comprises about two-thirds of it. Setting up real estate funds, funding small businesses through PE partnership and seeking partnerships across operations has been to meet (our) final retail goal.

Are retailers straddling consumers across the pyramid, the top end and the bottom-end?
There are two classes of consumers in India. Consumers with the ability to pur-chase and who’re very aspirational, the ones I call India One. And the serving class, India Two, with the likes of drivers or domestic help who are not really comfortable walking into the retail formats as yet. That’s the next challenge: To find out what excites India Two. We have begun the attempt through special offer days.

Players such as RIL are seeking control over back-end sourcing and supplies, either by taking over vendors or picking up stake. You seem more comfortable leaving the back-end to independent Indian entrepreneurs.
The point is how profitable is the collaborative partnerships for all the parties involved. It cannot be termed successful if I derive more profits than my partner from it. The challenge is not only to ensure a double deal, it is to offer a triple deal: to the retailer, supplier and consumer. We are looking at trailblazer partnerships where some new elements have to be brought in.

Manufacturers say Pantaloon’s back-end efficiencies are not comparable to global retailers like Wal-Mart for demanding higher business margins.
Modern retail formats have today clearly achieved the kind of scale to claim a change in the manufacturer-trade relationship. Business partnerships and equations change as markets evolve. Manufacturers have to learn to deal with the change in distribution structures and their equation with the trade and consumer. Modern retail formats have helped manufacturers scale up volumes and brand visibility significantly in the last few years.

How strong a grip does Pantaloon have on HR with competition rising?
I think HR is a hyped-up challenge. Retail is all about dealing with human beings. All it takes is the kind of mental and physical strength to cope with the demands. It is all in the training. India has such a young population, there is no shortage of talent if one knows how to tap it and build it.

News: Brazil, India agree to share energy technology

(RTR 13/09/2006) Brasilia, Brazil - The leaders of Brazil and India - two of the world's leading emerging markets - agreed on Tuesday to share technology for deep-water oil exploration and developing alternative energy sources.

Brazil's President Luiz Inacio Lula da Silva and India's Prime Minister Manmohan Singh also said they hoped for a successful conclusion to the WTO's Doha round of talks on reaching a global trade pact, which collapsed in July.

The two men signed a host of accords in areas from trade to security in a move to deepen their bilateral relationship.

Both countries are members of what economists call the BRIC group of top developing economies, which also includes China and Russia. They have also led the G20 group of developing nations in the Doha round.

Under the accords, they formed a joint biofuel committee to look at more efficient and cheaper energy sources, especially biofuels. Brazil is a world leader in both areas.

They made no specific mention of cooperating on nuclear technology, although India needs Brazil's support to gain access to US civilian nuclear technology.

In March, US President George W Bush agreed to allow India to access nuclear power technology even though India has not signed an international nonproliferation treaty and knows how to make nuclear bombs. The deal must be approved by the US Congress and also the Nuclear Suppliers Group of 45 nations led by Brazil.

Singh said both countries were united in their desire for the Doha Round to reach a successful conclusion.

Talks stalled in July as rich and poor nations failed to close ground on cutting domestic farm subsidies and opening up market access. At a meeting in Rio de Janeiro last weekend, top officials from the G20, Europe, Japan and the United States agreed to resume the talks but set no date.

Singh, who was accompanied by about 50 businessmen, will meet South Africa's President Thabo Mbeki in Brasilia on Wednesday at the first summit of the recently formed India-Brazil-South Africa alliance.

India is the world's largest democracy and Brazil the fourth largest.

News: PSU banks find NRI remittance red-hot

(TNN 13/09/2006) New Delhi - Public sector banks (PSBs) are making a strong pitch to tap the huge multi-billion dollar remittance business from NRIs to India. The business, estimated at a massive $25bn, is dominated by the private sector banks, with only the SBI having a footprint, while the hawala route is becoming increasingly popular with the expats.

An RBI committee has already submitted its report on the cost of NRI remittances. The committee, which had representatives drawn from private, public as well as foreign banks, examined at length the cost structure of remitting money and came up with ways of reducing the transfer costs. In his last meeting held with CEOs of public sector banks, finance minister P Chidambaram has impressed upon them on taking advantage of the growing business opportunities in this field.

At present, ICICI Bank commands 20% of this market with less than five years of experience, as against the SBI that commands 23% of the business with over 50 years of experience. But PSBs are waking up to the challenge. Punjab National Bank has just established a new subsidiary in the UK that plans to offer services including mobile alerts, debit cards to account holders. PSBs are also relying on new-age technology to step up their remittance business.

“We plan to tap into migrant Indian population overseas by offering debit cards. We would also study remittance patterns. Given that ATMs across the country are connected, PSBs can exploit this platform for faster transactions,” K Raghuraman, executive director, PNB, told ET.

After years of languishing as poor cousin of FII and FDI, remittance is now being seen as a stable source of foreign exchange inflow. India receives the largest amount of remittances in the world, getting over 10% of the $230-bn global market, according to World Bank estimates. For banks, remittances have the advantage that it is not affected by fluctuating business cycles and in fact, peaks when there are economic downturns.

ICICI Bank’s success story in the remittance business is attributed to product innovation, offering lower costs, quicker turnaround time, alliances and keeping a pulse on what the customer wants. Manish Misra, joint general manager heading global remittances in ICICI Bank, said: “Technology for the sake of technology is not the idea. We built our products based on local regulations and local clearing operations. Since the bank operations are centralised, we have greater control over tracking transactions.”

The banks plan to cut into the hawala option. Out of the $25bn that comes into India, an estimated $8-9bn comes from the US, and the next highest is from the Gulf.

News: Reliance Comm scouts for mobile licences abroad

(BS 13/09/2006) New Delhi - The Reliance-Dhirubhai Anil Ambani Group has lined up a raft of initiatives to give its telecommunications business a global footprint.

Spearheading them are plans to bid for mobile licences abroad and for providing high-end business process outsourcing services.

“Our aim is to extend all our value-adds in India to other parts of the globe. We will offer high-speed Internet and extend our next generation telecom network services to other countries through strategic partners,” PD Khurana, group president of Reliance Communications, said.

The company also plans to take Internet protocol television (IPTV) and other media services to consumers in foreign markets after it launches them in India.

To carry these services, the group will set up three broadband cable networks: one from India to China through Nepal; two, an undersea cable between Asia and the US; and three, an extension of its Falcon cable from the Maldives to East Africa. Industry analysts put a $1 billion price tag to these three cable systems.

The group is eyeing mobile licences in Kenya, Bhutan and Morocco. “We are evaluating opportunities for operating mobile services in countries that are opening to new competition,” Khurana said.

News: IDBI snaps up United Western

(BS 13/09/2006) Mumbai - IDBI to pay UWB shareholders Rs 150.55 cr at Rs 28 a share.

The Reserve Bank of India today told IDBI to acquire the distressed United Western Bank, which the central bank had put under moratorium on September 2.

In the process, IDBI bested a long line of suitors, including Canara Bank, ICICI Bank, Citibank, Standard Chartered Bank, and a consortium of HDFC and the State Industrial Investment Corporation of Maharashtra (SICOM).

Since IDBI is adequately capitalised, it will not have to pump money into United Western Bank, which has a net worth of Rs 70 crore.

However, IDBI will have to pay United Western Bank shareholders Rs 150.55 crore at Rs 28 a share, which works out to a 31 per cent premium over United Western Bank’s closing price of Rs 21.45 on the Bombay Stock Exchange today.

Both banks have till September 27 to consider the amalgamation scheme. The board of United Western Bank is likely to meet tomorrow or the day after.

With United Western Bank in its kitty, IDBI’s branch tally will swell to 425 from 195 now. The merger will also expand IDBI’s asset base by Rs 7,166 crore.

IDBI will have to open an “asset account” for crediting the value of the assets of United Western Bank.

Reacting to the development, Maharashtra Chief Minister Vilasrao Deshmukh said, "We will discuss the issue in the Cabinet and decide on our course of action." As a way out of the moratorium, United Western Bank had proposed a Rs 350 crore health pill jointly administered by the Maharashtra government, SICOM, HDFC and HDFC Bank.

Asked whether the state government was considering challenging the RBI's decision in court, Deshmukh said, "Legal options are always open."

R M Premkumar, chairman of SICOM, the largest shareholder in United Western Bank at 10.7 per cent, said it would negotiate for a good price because it still had time to contest the clauses of the amalgamation.

The valuation of assets and liabilities will be binding on both banks and their shareholders and creditors. All employees of the distressed bank will continue in service and be deemed to have been appointed in IDBI Bank at their current pay and perks, the draft scheme says.

News: Survey sees India Inc on a hiring spree

(TT 13/09/2006) New Delhi - India could see a 42 per cent growth in organised sector jobs on the back of strong hiring activities in finance, insurance and real estate sectors, according to a global survey.

The survey, conducted by global recruitment consultancy Manpower Inc, interviewed 4,732 employers in India, of which 45 per cent expected their staffing levels to increase while 41 per cent were expecting no change.

However, 3 per cent of the interviewed employers were expecting a decrease in the headcount, the survey said.

Though hiring intentions are strong in all parts of the country, the western region has the highest job growth potential with its net employment outlook (NEO) being placed at 49 per cent by the survey. This is an increase of 8 percentage points from the same quarter last year and 14 percentage points on a year-on-year basis.

The survey says region-wise, the east has the lowest NEO at 37 per cent, which is 5 percentage points stronger than last year. Analysts consider it to be a good sign that industry is taking off after years of stagnation in the east.

On a year-on-year basis, employers in all four regions have predicted positive hiring intentions with only the west and east reporting a higher NEO compared with the same quarter in the previous year.

The survey says employers in finance, insurance and real estate reported the strongest NEO of 50 per cent, closely followed by the services sector at 45 per cent.

Of the 26 countries and territories surveyed globally under the Manpower Employment Outlook Survey for the fourth quarter of 2006, Indian employers reported a strong NEO of 42 per cent, indicating that the strong hiring activity seen over the past six months should continue through the year-end.

Peruvian employers are the most optimistic globally with an NEO of 48 per cent.

Overall, the employment outlook is positive across the Asia-Pacific region where the most robust fourth-quarter hiring activity is anticipated in India, Singapore and Hong Kong.

News: India to contribute more to Commonwealth fund

(RTR 13/09/2006) New Delhi - India will increase its contribution to Commonwealth Fund for Technical Cooperation by 6.25 percent to 850,000 pounds ($1.59 million) in 2006/07, Finance Minister Palaniappan Chidambaram said.

The fund is used for developmental works in Commonwealth member nations.

"We would continue to support the initiatives... to promote the economic and social development of all the Commonwealth members," Chidambaram said in a prepared speech at a Commonwealth finance ministers meeting on Wednesday in Colombo, Sri Lanka.

A copy of the speech was released in New Delhi.

News: GAIL mulls oil, gas bids with 6 foreign cos

(RTR 13/09/2006) New Delhi - India's state-run gas firm GAIL Ltd. is in talks with at least six foreign firms to jointly bid for Indian oil and gas blocks that the government plans to auction, a company official said on Wednesday.

Talks were at an advanced stage with Italy's ENI, Oman's Petrogas E&P LLC, U.K.'s Foresight Oil Ltd., Calgary's Silver Bay Resources Ltd. and Australia's Tap Oil Ltd.

GAIL, which plans to bid for about 20 of the blocks on offer, is also looking at partnering South Korea's Daewoo International. Bids in India's largest ever exploration licensing round must be submitted by Sept. 15.

The firm is also in talks with several Indian firms, including Gujarat State Petroleum Corp., Jubilant Enpro, and Oil and Natural Gas Corp., India's most valuable company, for joint bidding, the official said.

It is concentrating on onland and shallow water blocks, but may look at others.

"We may bid for some deepwater blocks depending on the response from our likely partners," the official told Reuters.

Any bids for deepwater blocks would likely be in association with ENI. The acreage offered in the latest round includes 24 deepwater, 25 onland, and six shallow water offshore blocks.

GAIL's shares were up 0.7 percent in a strong Mumbai market at 3.19 p.m. local time.

News: Dr Reddy's eyes firms in Italy, Spain

(RTR 13/09/2006) Mumbai - Indian drug maker Dr. Reddy's Laboratories Ltd. is seeking acquisitions in Italy and Spain and will eye France next to expand in Europe, Chief Executive G.V. Prasad told Reuters on Wednesday.

"We are building up those countries. We have started an office in Spain, we are in the process of setting up in Italy ... We are on the lookout," he said in an interview.

Prasad said the company's acquisition of Betapharm this year placed it in a strong position in Germany, but revenue from the firm would be a little short of earlier estimates of $200 million for 2006/07 because of pricing pressure.

"Revenue side may be slightly falling short because of the pricing pressure. That is a one, one-and-a-half year problem, I think."

Prasad said he was upbeat about the company's key U.S. market.

"This year has been very good, next year will also be decent, but in the long term this is a tough market, and it is a very competitive market; we have to be constantly on our toes to create value here."

News: ICICI Venture plans 4 new specialised funds

(BL 13/09/2006) New Delhi - ICICI Venture is planning to set up four new specialised funds, including a small-cap fund, a mezzanine fund, a hedge fund, and a fund of funds. The size of the small-cap fund will be around $ 500 million. It will begin with a corpus of $ 200-250 million, which will be hiked to that figure within the next nine months. The mezzanine fund will have around $ 100 million. ICICI Venture has also tied up with seven of its key investors in its private equity funds that will co-invest with them in acquisitions and buying of stakes in companies. The need for a small-cap fund was felt because ICICI's current funds are for bigger deals, with an average size of $ 75 million. The small-cap fund will invest in smaller and emerging companies, which require a fund infusion of between $ 10 million and $ 50 million.

With many companies wanting expansion and fresh funds without losing control as a result of dilution of equity, ICICI also felt the need for a mezzanine fund, which would be a combination of debt and equity. It will protect promoters from losing control over their companies without compromising on growth. As a part of its strategy to become a one-stop shop for investors, ICICI is looking at setting up a fund of funds, an equity fund that invests in other funds. At present, ICICI Venture handles assets of over $ 2 billion, and is the largest equity fund operating from India. The existing assets include India Advantage Fund 2, aimed at buyouts and growth capital for small as well as mid-size and large companies and a $-500 million real estate fund that is looking to join hands with developers for commercial as well as residential projects.

News: 'India is one of the better growth stories in Asia'

(BL 13/09/2006) Hong Kong - CLSA has kicked off its 13th Investor Forum in Hong Kong. The five-day event has attracted over 1,200 global investors and some notable speakers are slated to speak at this event. Speaking about the event, Rob Morrison, CEO of CLSA, says that investors at the forum are still positive on India. He adds that India has been outperforming its other Asian peers.

Excerpts from CNBC-TV18's exclusive interview with Morrisson:

What is the mood towards India now and how are most investors approaching emerging markets like ours?

The mood is generally positive. India is one of the better performers in Asia here to date. I think the Sensex is up something like 30 per cent from its June lows.

We have 1,100 investors from global institutions around the world, and I think there are 20 Indian companies here, and the view is generally positive. The growth story looks very positive and from that point of view probably India is one of the better growth stories in Asia.

What is CLSA's call on India as a market? Do you expect it to continue this bout of out-performance and do you see new investors or existing investors willing to commit fresh cash to a market like ours?

India is one of our big picks. I think the top-line earnings growth from Indian companies is very good. Some of the valuations have probably again pushed out to be a little bit pricey.

India and China are two of our favourite long-term plays, and we are starting to see that from an investors' point of view. I think people do see that India and China are very important engines for future global growth.

Aside from the long-term outlook, in the medium term, would you say that for an emerging market like ours, we have probably seen our best times?

Medium term, I think the valuations have probably pushed through levels, where people are going to be pausing. But there is still a lot of positives there. Some of the agricultural output numbers have come through, and there is still a lot of demand side push. From a more defensive point of view, the Indian economy is more dependent on domestic factors rather than on the US.

You say that if interest rates in the US go up, it's not so much of a concern for India; but how does that effect flows into India and other emerging markets?

That's a good point. There has been tightening happening all over. Obviously if we move into a sort of higher interest rate environment, you are going to have an impact on liquidity flows. So you have to assume that we will see some slowdown in terms of turnover.

But on the flip side, a number of global investors are looking to increase their asset allocation into emerging markets. This is not just in Asia, but also in Latin America. Emerging Europe also has been a big beneficiary, particularly on the back of commodity plays.

Some people have been saying that in the last three years India has emerged as an asset class on its own. Would you agree that its an asset class on its own or is it just part of an emerging market?

It is, probably some of it is. There are a number of investors who will look to invest in Pan Asia where Japan and India will be part of that mix. The upside for India is that there are a number of specialist funds in India, and that number continues to grow.

We have had a lot of money coming in from the Far East and, of course, from the US as well, but are new markets getting interested in us now?

I think quite a bit of money - particularly retail money - has been coming out of Japan. In a global sense, the US remains a key investor base. We tend to see more of a US client base than a European client base.

So we are seeing more money come out of the Far East, and India is going to be a beneficiary of that.

News: Cades Digitech will make Fokker aircraft in India

(DNA 13/09/2006) Bangalore - Aerospace engineering firm Cades Digitech Pvt Ltd is in talks with The Netherlands-based Rekkof Aircraft, to manufacture under licence the family of Fokker aircraft in India for the airline market in the country.

Nadathur Holdings and Investment Company (NHIC), an investment firm owned by Infosys co-founder N S Raghavan, holds a 70% stake in the Bangalore-based Cades, whose customers include Airbus, Boeing and Hindustan Aeronautics Ltd.

Cades is planning to invest close to $300 million in an assembly plant for producing the family of 75-, 90- and 100-seater aircraft in India, industry sources said told DNA Money

“We are in talks to produce the Fokker aircraft in India. But we have not had any commitments,” Cades Digitech managing director and CEO Dataram Mishra said.

NHIC has invested $6.5 million in the 350-member Cades, which focuses on R&D and engineering services to aerospace and auto firms globally.

The Fokker family of aircraft once ruled the European and Asian skies, but after the original Dutch firm went bankrupt in 1996, it has made way to rival regional jets like Brazilian Embraer and French ATR aircraft, which dominate the segment, including the Indian skies.

Aviation industry sources estimate a requirement of around 350 aircraft in the regional jet category in India over the next two decades.

Several plans to build a 50- to 100-seater regional jet aircraft for the Indian market, including one of HAL with Franco Italian maker ATR, have not taken off in the past two decades.

A small group of private investors own Rekkof, which produces the work in a limited scale. The Fokker aircraft, whose initial designs go back to the early 1980s, has to be upgraded with new avionics and family of engines to meet the current requirements.

“The assembly line for the Fokker aircraft is likely to be located in Bangalore,” industry sources said, but Mishra declined to comment.

With revenues of $ 12 million in 2005-06, Cades hopes to grow almost double to touch a turnover of $ 20 million this fiscal.

News: ONGC signs pact with Petrobras

(PTI 13/09/2006) Mumbai - Oil and Natural Gas Corp (ONGC), India's largest oil producer, has signed an agreement with Petrobras of Brazil for cooperation in oil and gas exploration.

ONGC Videsh Ltd, the overseas arm of ONGC, signed a memorandum of understanding (MoU) with Petrobras at the Presidential Palace in Brasilia, Brazil yesterday, a company release said.

The MoU was signed by R S Sharma, Chairman OVL and ONGC Group of Companies, and Jose S Gabrielli De Azevedo, President and CEO Petrobras in the presence of Prime Minister of India, Manmohan Singh, and President of Brazil, Luiz Incacio Lula da Silva.

OVL and Petrobras would jointly pursue exploration and production opportunities in India, Brazil and third countries.

"The MoU encompasses strategic cooperation and participation in the exploration and production of hydrocarbon resources on-land as well as in shallow and deepwater areas," it said.

In April, OVL acquired 15 per cent equity in Block BC-10, located on the prolific Campos basin in Brazil's deepwaters for $410 millio. Shell is the Block operator, holding a 50 per cent participating interest, while Petrobras holds the remaining 35 per cent stake.

"The Block is currently under development and the production is scheduled to commence in the last quarter of 2009, with OVL's equity share at peak production expected to reach about 1 million tonnes per annum," it said.

Column: Brand India’s an idea in the right slot

(DNA 13/09/2006) Mumbai - Brand India is an idea whose time has come. One of those rare Big Ideas that means so much that everyone seems to have their own image in mind about it, yet no one can quite define it.

In fact, Brand India is a Big Idea that has successfully managed to absorb numerous other ideas over the centuries, and is now the convergence of lots of ideas whose time have come.

One of the biggest challenges is to start connecting the dots to tell the full story of this complex brand. What is Brand India doing to build brand equity in this age of globalised short-attention spans? Let’s do a quick review.

The Incredible India tourism campaign has made a mark globally. The India Everywhere economic campaign hijacked Davos 2006, imprinted India on the minds of the world’s power elite, and is now ‘on tour’.

So far, few Indian companies, products and brands have made it to global consciousness, excluding a few special cases like ‘Gandhi’. An example on many Westerners’ minds is Mittal, but let’s face it, that’s not really an Indian company.

Still, Mittal vs Arcelor brought the concept of ‘the Indian MNC’ to international media, CEOs and bankers. Indians are coming to get you an M&A closer than you’d like to think.

On the local advertising scene, where we might find future contenders for international mindspace, local spenders include the likes of Dabur, Bajaj, Paras, and Tata (and, interestingly, the government of India), and transnational joint ventures like Hero Honda and Maruti Udyog/Suzuki. And the usual multinational suspects like HLL, P&G, PepsiCo, Nokia and LG.

Neither has yet brought the world a strong global Indian consumer brand. Brand India, in that context, is a B2B rather than a B2C brand. Some industry sectors play a key role in changing the perception of India, e.g., pharmaceuticals, medical tourism, manufacturing, e-learning, creative services, and retail. Levis has their second-largest store in the world and the largest in Asia, in Bangalore, which is bound to send a strong message.

Look out for local brands with ‘bottom-of-the-pyramid’ propositions successfully combining very cheap and very useful = very good value, like micro finance or one-sachet products.

Other examples with potential include agri-business, wind power and the space programme. And NRIs add to the Brand India equity through people like Pepsi’s Indra Nooyi.

There is potential to carefully exploit those ‘soft and mystical’ aspects of India, like yoga and Ayurveda, e.g., medical tourism and experience-based offerings. Some say these stereotypes should be avoided since they will keep India’s image in its past. I think real value is being expropriated by other companies in other countries.

Why let them? On the downside, there are a number of challenges and threats, many being addressed slowly: poor infrastructure, inclusive growth, states developing at different speeds, and a reputation of corruption and red tape.

Some of Brand India’s strengths are its democratic system, the sheer number of consumers, human capital, and not the least, an emerging confidence and sense of opportunity of India taking its rightful place as a leader in the global economy.

In the 21st century, you have to compete on ideas. A Deutsche Bank advert said, “Ideas are capital. The rest is just money.” Brand India is an idea at the right place at the right time. The rest is just history.

By Niclas Ljungberg, strategist, advising brands in India and Europe, and author of upcoming ‘Brand India’

News: Indian life insurance industry grows by 177%

(PTI 12/09/2006) New Delhi - Robust growth by country's largest insurer LIC and private players led by ICICI Prudential pushed the life insurance sector growth to 177 per cent during April-July this fiscal.

Helped by an expanding insurance market, 15 life insurers mopped up Rs 18,096 crore in the first four months of 2006-07 as compared to Rs 6,522 crore collected in the same period last fiscal, according to data compiled by regulator IRDA.

Life Insurance Corporation maintained its recent high growth tempo, clocking 182 per cent increase in premium income at Rs 14,027 crore by selling 58.26 lakh policies.

The life insurance behemoth had a market share of 77.51 per cent alone, while 14 private players had 22.49 per cent collectively.

The private players grew premium collection by 162 per cent to Rs 4,069 crore from Rs 1,552 crore during the corresponding period last year.

ICICI Prudential led the private players pack after it collected Rs 1,157 crore by logging 149 per cent growth in premium collection and cornering a market pie of 6.39 per cent.

Bajaj Allianz Life Insurance was at the second rank among private insurers. Bajaj Allianz grew business by 205 per cent to mop up Rs 834 crore in premium and a market share of 4.6 per cent.

SBI Life collected Rs 407 crore in premium, followed by HDFC Standard (Rs 355 crore), Birla Sunlife (Rs 216 crore), Max New York Life (Rs 204 crore), Aviva (Rs 202 crore), Reliance Life (Rs 184 crore), Tata AIG (Rs 171 crore), ING Vysya (Rs 147 crore) and Kotak Mahindra Old Mutual (Rs 109 crore).

Following insurers' premium collection was less than Rs 100 crore each -- Met Life (Rs 61 crore), Shriram Life (9 crore) and Sahara Life (Rs 7 crore).

News: Yes Bank, Intel launch first wi-fi banking network

(PTI 12/09/2006) Mumbai - Newage private sector bank Yes Bank in collaboration with Intel Technology India Pvt Ltd, on Tuesday launched their wi-fi banking branch network, the first such network in the world.

Initially, 20 out of the total 30 existing branches of Yes Bank will have wireless local area network (LANs) within the branch premises to allow its customers access to the internet and to conduct wireless banking transactions in a fully secure environment.

"Wireless technology and mobility give many advantages to all businesses. But specifically in the banking and financial services sector, security remains a top concern," Intel Director Marketing and Operations South Asia John McClure told reporters.

Through the Intel Centrino mobile technology-based notebook computers, the bank staff can access the bank's secure internal wireless LAN within the branch.

"The wireless deployment adds tremendous business value. Customers can now access their account details, conduct transfers and online payment on their own laptops in the branch," Yes Bank Managing Director and CEO Rana Kapoor said.

He added that through a wireless network, one is rationalising the real estate cost and helps in much closer interaction with the customer.

It provides more footfalls, greater efficiency and a better dialogue, he said.

News: Cargill to buy into Indian asset revamp firm

(TNN 12/09/2006) Mumbai - The world of junk loans is witnessing big action. The investment arm of US-based seed company Cargill is set to acquire a 49% stake in an IFCI-promoted asset reconstruction company (ARC). Sources said that Cargill Value Investments will acquire a majority stake in Assets Care Enterprise (ACE), thus becoming the first foreign company to be the single largest shareholder in an ARC.

An ARC is an entity which buys bad loans from banks, and can issue security receipts to the seller instead of paying cash. Unlike banks, it has special power to change the management of a defaulting company. The ARC business is gathering pace in India, with several foreign players showing interest in the country’s bad loan market.

Senior IFCI officials confirmed that the financial institution is in the final stage of negotiations with Cargill. As per the agreement, Cargill will bring in fresh capital of Rs 49 crore and have the right to appoint a management team. This would be the second foreign investment in an ARC, after Barclays Capital’s acquisition of a little below 10% in Asset Reconstruction Company of India (Arcil) at a premium of Rs 20 per share.

Sources said that international distressed asset players like Matlin Patterson (based out of the UK and Hong Kong) and Concordia are also planning to enter India. As per government rules, foreign companies can acquire only up to 49% in an ARC. Already, WL Ross and Hong Kong-based ADM are in the market, acquiring loans of badly performing companies either from the management or from the lender.

Following the strategic tie-up with Cargill, the stakes of two key investors in ACE will come down. IFCI’s holding will fall to 13% from 33% and Punjab National Bank’s stake will drop from 26% to 10%. Other shareholders in the ARC include Tourism Finance Corporation, Life Insurance Corporation, Bank of Baroda and United Bank of India. Their stakes will come down from 10% each to 7%.

Cargill’s subsidiary, CarVal Investors, is active in the bad loan market. According to the company website, it has done over 2,000 transactions totalling more than $70bn (in face value) across 30 countries. Among other things, CarVal focuses on sub-performing, slow-paying and delinquent assets.

At present, ACE has a capital base of Rs 10 crore. As per RBI guidelines, ARCs are required to increase it to Rs 100 crore. Investments from Cargill and existing shareholders will help ACE improve its capital base. Although ACE is among the few ARCs which received a licence from RBI in ‘01, it has not started operations.

IFCI and the other shareholders are planning to offload a substantial portion of their bad loans in this ARC. IFCI is saddled with bad loans, (almost 9% of advances), which makes it difficult to expand its business.

News: Pantaloon plans logistics foray

(TNN 12/09/2006) Mumbai - Domestic retail major Pantaloon has finally decided to take the plunge in the logistics space. Sources said Pantaloon is currently in the process of initiating a new logistics division — Futures Logistics, for its huge captive business, which will be expanded later to provide third-party logistics services to the growing retail sector.

Company officials however declined to comment. Sources said total initial investment in Future Logistics will be around Rs 400-500 crore. The thrust at present will be on modes of surface transport like roads and rail only. However, at a later stage, sea and air modes might also be considered as per the requirement, said sources. “Futures Logistics will operate under Pantaloon Retail and will enable us to attain synergies of cost efficiencies with knowledge management. The idea is to cut cost and enhance efficiency,” a source said.

As part of the operation, Pantaloon is also undertaking to reduce its warehousing costs through a consolidation process. “We are trying to make our warehousing system more efficient. For example, in Bangalore, we have around 10 dispersed warehouses, which we want to bring under one roof. This will help us both cut costs and make major savings in time,” added the source.

Over a period of few years, Pantaloon may extend its expertise in this division as an independent logistics provider. “Initially, Futures Logistics will cater only to Pantaloon Retail, but after about one or two years of operations, we would surely like to move into consulting and being a service provider for others,” said the source.

While the proposed venture could manage its captive business well, analysts are unclear about the efficacy of the third-party logistics (3PL) by the group. “In all possibility, rival retail players are unlikely to outsource their logistics requirements to Future Logistics, for the fear of leaking out sensitive information regarding sourcing,” said an analyst.

With the retail boom awaiting to happen in India and venture models having already announced by players such as Reliance, Bharti and Shoppers’ Stop, logistics is going to be the next level of consideration for them.

“The challenge is not going to be in retailing but in operating those outlets and putting the products on the shelves. This is the area where logistics is going to play a major role,” said Ajay Gupta, CEO, Rural Management Consultants. While Pantaloon has made its plans clear, other retailers are considering and planning their approach.

News: Duncans eyes realty as tea turns sour

(BS 12/09/2006) Kolkata - Tea and fertiliser maker Duncans Industries is planning to diversify into the real estate development business and is, accordingly, in the process of changing its memorandum of association.

The special resolution will be placed at the company’s annual general meeting on September 14 for shareholders’ approval.

Both residential and commercial options will be explored for the alternative use of land.

Gouri Prasad Goenka, chairman, Duncans Industries, said, Duncans, to begin with, was considering converting one tea estate land for commercial or residential development.

He said the land identified at the north Bengal tea estate was not suitable for growing tea in the estate.

Duncans has 10 estates in the Dooars and Terai region spread over 6,108 hectares and two in Darjeeling over 468.49 hectares.

Goenka made it clear that the development would not be a tourism project. There could be other real estate development initiatives within the group under different companies.

The group has set up a team to evaluate the prospects of the real estate development business and the idle properties in the group’s portfolio.

Industry sources said rising labour costs and declining yields had made Indian tea uncompetitive in the world market.

The lower prices had rendered many tea plantations in Assam and north Bengal, accounting for more than half of the domestic tea production, unremunerative.

Duncans hopes to get a fresh lease of life on the back its foray into the real estate business.

The delay in disbursement of subsidy for the production period during 2005-06, coupled with the steep increase in naphtha prices, resulted in acute shortage of capital, and so, production was suspended.

Moreover, the 15-day strike during the peak season in the north Bengal gardens led to a huge shortfall in production in the company’s tea gardens.

On whether the entire real estate development in the group would be spearheaded by Duncans Industries, Goenka said each company now stood on its own.

The group has surplus land in Kolkata and Mumbai. While the group has 15 acres in north Kolkata, it has 10 acres in south Kolkata. In Mumbai, the group has two plots of land – one of 5-7 acres and the other 20 acres. The plots were under different investment companies.

NRC, a group company, entered into a memorandum of understanding earlier this year for sale of a part of the company’s land at Kalyan for a sum of Rs 167 crore.

News: Anil Ambani gets go-ahead for DTH

(BS 12/09/2006) Mumbai - The government has granted a letter of intent to the Reliance-Anil Dhirubhai Ambani Group (R-ADAG) for operating direct-to-home (DTH) broadcast services in the country.

Christened Reliance Blue Magic, it will be the fifth DTH operator after Dish TV (part of the Zee group), Tata Sky (an 80:20 joint venture between the Tatas and Star TV), Doordarshan’s plain vanilla free-to-air offering, DD Direct Plus, and the Kalanidhi Maran-promoted Sun TV. The platform is expected to become commercial by the middle of next year.

With over 3.25 million subscribers, DTH penetration is roughly 5 per cent of the 68 million cable and satellite homes. Subscriber numbers are set to take a quantum leap with Reliance’s entry into DTH and the Tata Sky launch just over a month ago.

PricewaterhouseCoopers estimates this figure will rise to 10 million by 2010, while some other industry estimates peg it at 15 million.

R-ADAG’s move into DTH is part of the group’s strategy to straddle the entire range of delivery systems through which content can be delivered to customers.

The group is already working on IPTV to deliver TV channels through broadband, leveraging the company’s fibre optic backbone. It also hopes to use data-rich CDMA as well as 3G services to deliver content on mobile phones.

It is for the same reason that the group has ventured into the multiplex and film exhibition business by buying a majority stake in Adlabs Ltd. It has also bid for and won 45 FM radio stations across the country.

The synergies are obvious. A movie shown in a multiplex can be offered on the DTH channel as pay per view, while its music can be played on FM radio.

R-ADAG is making a foray into the content business as well. Just a few days ago, it bought a majority stake in Synergy Communications, the company promoted by quiz master Sidharth Basu. It has also tied up with big producers like Ramgopal Verma to fund film production.

News: Baring Asia raises $ 490-m PE fund

(BL 12/09/2006) New Delhi - Baring Private Equity Asia Group announced that it has raised $ 490 million for a new Asian private equity fund, the `Baring Asia Private Equity Fund III', to target mid-sized companies in China, India, Singapore, Taiwan, Hong Kong and Japan that need equity for expansion or management buy-outs.

The fund received a strong investor response and was nearly twice the size of its predecessor, Fund II. Following the closing, Baring Asia's funds under advisory now total over $ 1 billion in assets, a Baring release said.

The fund attracted investment from a wide range of institutional investors including Invesco, Deutsche Bank, Pantheon, SEDCO, Dow Employees' Pension Plan, Singapore's TIF Ventures, United Overseas Bank, Pennsylvania PSERS and the Kuwait Investment Office, it said.

Interview: Sir Bill Gammell - CEO Cairn Energy Plc

(BL 12/09/2006) New Delhi - Brushing aside any speculation on Cairn Energy Plc's commitment to the Indian business, Sir Bill Gammell, Chief Executive of the Scottish exploration major says that he has no plans to sell off any of the company's Indian assets.

In an interview to Business Line, Sir Bill, while stating that the company plans to invest in those assets for the long term, also shared his views on the Indian business and on future strategies.

What is the rationale for coming out with an IPO for the Indian business? Do you think the market is right or is there any strategic reason behind it?

We have been focused on South Asia and India for more than a decade and this is a natural evolution to have the company listed in Mumbai and run from India. I see the opportunity to create two world-class businesses, one based in India and one in the UK. I think it's natural to provide more autonomy for the Indian business, to have the management team in India drive that business forward. We have a really exciting, resource base of oil and gas in Rajasthan. We have an emerging market in India that is very much energy hungry and we see it as a natural progression to partially float the Indian part of our business in India. This, actually, is going back to our roots. In the early 1990s we did the same thing with a North American business we had and I think it's very important that you develop a business with the people in the markets in which the assets should be quoted.

Post IPO would there be any change in the stake of the holding company in the Indian business or any change in business strategy?

No, we will continue to explore, develop and produce the hydrocarbons that we find. We continue to produce oil and gas in Andhra Pradesh and Gujarat and will bring the Rajasthan discoveries on stream in 2009. Post IPO, Cairn India will be an Indian exploration, development and production business and the remaining company will be a UK head-quartered business focused on exploration.

Your talks with ONGC on crude discount seem to be moving at a slow pace. Have the differences narrowed down? If the refinery does not come up, what is the line of dispatch Cairn is looking at? Who will build the pipeline if that has to be done?

We are discussing with the Government the possibility of Cairn getting involved in the midstream. We have control of the upstream and we're on schedule for the upstream project. But, as the project gets larger, we're looking for flexibility in the project and looking at integrating the project and the pipeline in the midstream. It has to be in the interests of the Government, it has to be in the interests of Cairn, it has to be in the interests of the shareholders and the State of Rajasthan, to bring this crude to market as quickly as possible. But, the liability under the contract for the taking away of the crude is with the Government. So for Cairn to back off that position, to be involved in the midstream, we need to negotiate with the Government to see if it's in their and our interest to be involved in that part of the business.

The first production from Mangala has been rescheduled again to 2009. Are you confident that it would not slip further?

Mangala is an evolving story. In fact, the whole of Rajasthan has been a large, growing story and continues to be so. When we first announced the discovery of Mangala, which, just to put it in context, was in January 2004, we originally said that Mangala, or the Rajasthan basin, we thought had potentially two billion barrels of oil in place, and maybe had the potential to do 60,000 to 100,000 barrels a day. Now, we see it as 3.5 billion barrels and maybe 150,000 barrels potentially more. Now, looking at the integration of the project leads us to look at possibly being involved in the pipeline. And that takes us into the project slipping into 2009.

What are your plans for NELP VI?

We have been exploring in India for the last decade. There are 26 sedimentary basins and Cairn currently has exposure in five of those basins. The discoveries made by Reliance and GSPC in the KG basin along with our finds in Rajasthan have made the industry possibly look at India in a different way. Naturally, I think it is a good place to invest and a good place to find hydrocarbons. We in Cairn Energy, and obviously in Cairn India, still see India as an extremely attractive place to look for oil and gas and indeed to do business. So, I hope, there are a lot of new entrants into India, and I obviously hope that Cairn India is successful in the bid round. But we'll just have to wait and see on Friday (September 15).

News: Videocon signs $700 m deal to buy Daewoo Electronics

(PTI 12/09/2006) New Delhi - Videocon has acquired South Korea's Daewoo Electronics in a deal which is reported to be worth around $700 million (nearly Rs 3,220 crore).

"We signed (the agreement) today morning," Videocon chief, Venugopal Dhoot, told PTI. He, however, declined to comment on the details of the deal, including the valuation, citing "no disclosure agreement".

Videocon had jointly bid with US-based equity fund Ripplewood for the debt-burdened Daewoo Electronics, which was put on the block by its lenders. The consortium reportedly offered $700 million for a 97.5% stake held by the creditors.

According to reports from Seoul, the consortium is 50.1% owned by Videocon and the rest by Ripplewood.

An AFP report, quoting a statement from Daewoo Electronics, said a takeover was the "only realistic option" to save the country's third largest electronics group, which is now in the seventh year of a debt workout programme.

Expressing strong support for the takeover led by Videocon, Daewoo's President Lee Seung-Chng said the reason for actively pushing for a merger and acquisition was the company's desperate need for investment in technology development.

The deal marks Videocon's third purchase in the last one year after Thompson's global picture tube business for 240 million euros (about Rs 1,260 crore) and the loss-making Indian subsidiary of AB Electrolux, Sweden.

Videocon had taken over Electrolux Kelvinator India in a cashless transaction wherein AB Electrolux agreed to subscribe to Videocon's GDR worth about Rs 406 crore as part of the deal.

News: 'India expects major investment from US, Japan'

(RTR 12/09/2006) New Delhi - India is expecting new major foreign investments from Japanese and United States firms in the near future, Finance Minister Palaniappan Chidambaram said on Tuesday.

India wants to attract more money from overseas to boost economic growth to 10 per cent in the coming years, from 8.4 per cent estimated in 2005/06. Foreign direct investment inflows were at $7.7 billion in the fiscal year to March 2006.

"I am told, foreign investors in U.S. have lined up India specific funds," Chidambaram said, but did not give any details.

A Japanese delegation will visit India soon to discuss projects, he said.

Industry Minister Kamal Nath said in August that General Motors Corp., Suzuki Motor , Nissan Motor Co., Honda Motor Co. Ltd. and Mitsubishi Chemicals were planning major investments in India.

Nath said General Motors was planning to set up a $300 million car manufacturing facility in the western state of Maharashtra.

Suzuki and Nissan have announced plans to jointly produce half a million passenger cars and mini-vans at a plant to be built near Delhi at a cost of $700-800 million.

News: India's industrial output surges fastest in decade

(RTR 12/09/2006) New Delhi - India's industrial production in July grew at its fastest annual pace in a decade, which analysts said could prompt the central bank to again raise interest rates over inflation concerns.

Boosted by healthy consumer spending on items such as cars and televisions, industrial output rose a higher-than-expected 12.4 percent from a year earlier as factories churned out goods to meet rising demand, data released on Tuesday showed.

Annual growth in India's industrial production was last at these levels in May 1996, Reuters data shows.

The annual rise exceeded the median forecast in a Reuters survey for growth of 9.9 percent. Industrial output has been strong for several months with growth rates of a revised 9.0 percent in June, and 11.1 percent in May.

"Overall, industrial data buttress our view that there are enough domestic reasons for the Reserve Bank of India to continue tightening, Fed pause notwithstanding," said A. Prasanna, an analyst at ICICI Securities in Mumbai.

But Finance Minister Palaniappan Chidambaram said he saw the numbers exerting no upward pressure on interest rates.

The central bank raised its benchmark short-term interest rate by 25 basis points to 6.0 percent on July 25, its second increase in six weeks, as it stepped up its fight against mounting price pressures in the fast-growing economy.

Federal bond yields rose after the data was released with the yield on the benchmark 10-year bond pushing up to 7.79 percent from 7.77 percent beforehand.

Some analysts said July's strong momentum was partly due to last year's low annual growth base of 4.7 percent. Output growth slowed in July 2005 due to floods in western states, the country's most-heavily industrialised region, and a fire at a key offshore oil rig.

GROWTH TO CONTINUE

Manufacturing, which represents more than three-quarters of industrial output, rose in July by 13.3 percent from a year earlier, accelerating from June's 10.5 percent.

Output of consumer durables like refrigerators and televisions rose 17.5 percent in July from than a year earlier, while the production of capital goods, a key barometer of industrial activity, rose 15.4 percent.

A rise in export shipments to India's key markets of the United States and European Union also helped industrial output, and analysts expect growth to be sustained in coming months.

But interest rates could be raised in the near-term as the strong momentum fuels expectations of higher inflation, they add.

Wholesale price inflation is presently at 5 percent, at the lower end of the central bank's estimate of 5.0-5.5 percent for the year ending in March 2007.

"The industrial output figures indicate growth momentum remains strong in the manufacturing sector, particularly in capital goods. This is due to strong investment growth, which is reflected in credit growth too," Shuchita Mehta, chief economist at Standard Chartered Bank based in Mumbai.

"The strong credit growth is likely to create buildup in inflationary pressures and prompt the central bank to raise rates by 25 basis points in its October policy review."

Factory output has been on the rise since a bumper monsoon in 2003 boosted farm production and spurred spending in rural areas, where about two-thirds of India's billion-plus population live.

Asia's fourth-largest economy expanded 8.4 percent in the fiscal year which ended on March 31.

News: Ranbaxy upbeat on U.S. growth, eyes more buys

(RTR 12/09/2006) Mumbai - India's top drug maker, Ranbaxy Laboratories Ltd., expects strong growth in the United States although pricing pressure in the key market would continue, Chief Executive Malvinder Singh said on Tuesday.

Ranbaxy, which has acquired several firms in Europe this year, is exploring more buys and has many opportunities on the table, he said.

But the United States will be a key market for growth.

"Competition is going to be there but we have a strong presence in that market. Over the next few years, we have a large number of products, that will get approval," Singh told Reuters in a telephone interview.

"There is larger value sitting in the pipeline, larger than what we have today," he said.

Revenue from the United States, which accounts for about a third of Ranbaxy's revenue, is expected to rise to 45-50 percent, Singh said, but he did not say when this will happen.

Ranbaxy is likely to report a net profit of $127 million in 2006, according to Reuters Estimates, more than doubling from a year earlier.

In 2005, the company's net profit tumbled 62 percent to $59 million and its shares lost 42 percent as lower prices in the U.S. market hurt Ranbaxy.

But this year, net profit rose 0.8 percent in the first quarter and 20 percent in April-June, beating analyst forecasts.

Shares in Ranbaxy, which has a market capitalisation of $3.25 billion, ended 0.75 percent higher at 405.15 rupees. In comparison, the main BSE index gained nearly 1 percent.

The company expects good growth in other markets also, Singh said.

"We see growth everywhere, even in Europe. With rising healthcare costs, they will encourage generics further. The number of patents expiring is very large," he said.

In Europe, the company's acquisitions this year included Romania's Terapia for $324 million and firms in Italy, Spain and Belgium.

Singh said Ranbaxy had appetite for more acquisitions.

"We continue to explore opportunities. We have a number of them on the table."

Singh said the company was on track to achieve its target of being one of the top five generic players with $5 billion in annual sales by 2012.

"Clearly a lot of work needs to be done to get there but if you look at the top 10, the first two are very large but the gap between the third and the tenth is not much.

He said Ranbaxy's presence in 49 countries and more acquisitions would help it grow.

"We are looking at doing things which will enable us to have strong organic growth, and complement it with inorganic growth," he said.

Although competition for sales of generics -- cheap versions of drugs out of patent -- remains strong, Indian firms such as Ranbaxy, Cipla and Dr. Reddy's Laboratories Ltd. are likely to show higher sales.

The generics market is expected to expand in 2006/07 with drugs worth $33 billion set to lose patent protection, offering an opportunity to Indian firms that have access to low-cost manufacturing and established production skills.

News: Patel Engg buys 51 pct stake in Michigan Engineers

(RTR 12/09/2006) Mumbai - Patel Engineering Ltd. said on Tuesday it had bought a controlling stake in Mumbai-based civil engineering firm Michigan Engineers Pvt. Ltd for an undisclosed sum.

"Michigan is a very niche player in dredging and projects involving micro-tunneling. With this acquisition we will be able to provide end-to-end solutions to our customers," Managing Director Rupen Patel told Reuters.

"We can also bid for larger contracts," he said.

Patel said his company had acquired a 51 percent stake in Michigan. However, he declined to give the value of the deal.

Earlier in the day, Saurin Patel, managing director of Michigan Engineers, had said the acquisition would benefit them by providing scalability.

Saurin Patel would continue to head Michigan, though the board of the company would be reconstituted to have a larger representation from Patel Engineering, Rupen Patel said.

Michigan Engineers is a 28-year-old company with annual revenues of about 400 million rupees.

News: Air India, Indian merger by March-end

(BL 12/09/2006) Kolkata - The cut-off date for the proposed merger of the two state-run airlines, Air India and Indian , has been fixed as March 31, 2007, according to Praful Patel, Union Civil Aviation Minister.

According to him, consultants are preparing both short-term and long-term reports of the proposed merger after studying the changing dynamics of the global and domestic aviation sector.

On Monday, he was talking to reporters after attending a meeting of the Parliamentary Consultative Committee on Civil Aviation.

Patel said that the initial public offer of Indian has been temporarily shelved. It would be considered only after the merger of Indian and Air India.

"Post-merger it would be a bigger and stronger entity. So, chances of getting a better valuation further increases. So, the IPO would come only after the merger," he said.

When queried about a time frame for the proposed merger, he said that it would be over by the end of the current financial year, 2006-07. "We have decided that March 31, next year would be the cut-off date," the Minister added.

AERA Bill ready

The draft bill for the formation of Airports Economic Regulatory Authority (AERA) is ready and would soon be placed before the Union Cabinet. Subsequently, the Bill would be placed before Parliament.

According to Ajay Prasad, Union Civil Aviation Secretary, the proposed authority would be a three-member body. Apart from the Chairman, there would be two other individuals with experience in this sector.

Prasad, who was also in the city for the consultative committee meeting, appeared unsure when queried whether the AERA Bill could be placed before Parliament in the Winter Session.

News: Indian banks bet on booming remittances

(DNA 12/09/2006) Mumbai - With an increasing number of Indians living abroad, either for work or having settled there, foreign exchange remittances into the country is likely to increase, market players say.

India receives the largest amount of remittances in the world, “getting over 10% of the $230 billion global market, according to World Bank numbers,” says Manish Misra, ICICI Bank’s head of global remittance. He expects the business to grow 15-20% annually in the next 4-5 years.

“It is inevitable that, with the need for overseas workers, India will remain a big market for the remittance business,” Misra says. The bank’s remittance service, Money2India, has a 22% market share in the Indian business.

“According to some estimates, the remittance market is expected to grow to $26-27 billion by 2006-07,” adds Anand Kute, head of marketing of online remittance company, remit2india.

The United States and Saudi Arabia are the largest sources of workers remittances to developing countries. Analysts expect that, in the next five years, Asia will be the top destination for Indians willing to migrate abroad.

“The region will become a powerhouse because of the economic boom here and the development in science and technology,” Misra explains.

Besides the Gulf, US and UK, Australia, New Zealand and Canada are also fast catching up because of the need for skilled labour there.

Out of the $23 billion, that comes into India, an estimated $8-9 billion comes from US, and the next highest is from the Gulf. India accounts for over 20% of remittances into developing countries. China received $21 billion of remittances.

Preliminary figures in the RBI annual report for the year ended June 2006 show that non resident Indian deposits were the third largest contributor to the total capital flows in 2005-06.

NRI deposits are expected to make up 11.3% of the total $24.693 billion capital inflows in 2005-06, behind portfolio and foreign direct investments at 50.6% and 31.1%, respectively.

For remitting money, the cheque/draft route is still the most popular. Exchange houses are also a popular means of transferring money, especially from the Gulf.

Some agencies such as Cash2India and Western Union Money Transfer deal only in remittance services. Several Indian banks also offer remittance services in alliance with foreign banks such as Citibank and HSBC.

Kute is confident that the online market will grow in the next few years as people get familiar with computers and the initial apprehensions about transferring money online vanish.

There are also unofficial channels (as hawala) used to transfer money which the RBI is keen to track down.

News: Indian car sales up 16%; bikes sales slow down

(BL 12/09/2006) New Delhi - Domestic car sales continued to be buoyant with double-digit growth in August while bike sales slowed to just 3.43 per cent during the month. According to figures released by the Society of Indian Automobile Manufacturers (SIAM), passenger car sales rose 16.01 per cent in the domestic market in August to 83,844 units from 72,272 units in the same month last year.

The country's biggest carmaker Maruti Udyog led the pack with 15.55 per cent growth at 41,728 units in August this year as against 31,117 units sold in the same month a year ago. Tata Motors clocked a 25.6 per cent growth during the month at 14,090 units as against 11,218 units last year while Hyundai Motor India registered a growth of 8.51 per cent during the month at 16,067 units as compared to 14,806 units in the corresponding period last year.

Slow growth

In case of motorcycles, growth in sales slowed to just 3.43 per cent during the month at 4,70,955 units against 4,55,311 units in August last year. The dip in sales of motorcycles was mainly on account of market leader Hero Honda, whose sales during the month recorded a decline of 15.91 per cent at 2,00,208 units as compared to 2,38,104 units in the same month last year.

Hero Honda had a week's plant shutdown during the month, which affected its sales. However, sales of rival Bajaj Auto grew by 18.66 per cent at 1,58,636 units as against 1,33,685 units in the same month last year. The gap between Bajaj Auto and market leader Hero Honda narrowed down to just 41,572 units in term of motorcycle sales during the month.

Top players comparison

Chennai-based TVS Motor Co registered a healthy growth of 34.26 per cent during the month at 74,426 units, as against 55,431 units in the same month last year.

During the April-August period this fiscal, Hero Honda saw a decline in market share even as the bike market registered a 17 per cent growth. The market share of the company, which stood at 51.6 per cent in April-August 2005, fell to 47.3 per cent during the corresponding period this year.

On the other hand, Bajaj Auto's share in the bike market grew to 31.4 per cent in April-August 2006 against 29.2 per cent in the corresponding period last year, while TVS Motors' market share was up to 13.7 per cent in the period from 12.2 per cent during the same months last year.

Scooter sales

Scooter sales in August stood at 72,391 units as against 76,426 units, down 5.27 per cent. The dip in scooter sales was mainly on account of Bajaj Auto, whose sales fell to just 1,442 units during August as against 14,351 units in the same month last year. Honda Motorcycle and Scooter India, however, maintained its positive growth at 38,094 units compared to 31,905 units last year, up 19.39 per cent. The total two wheeler sales, including mopeds, was up 5.89 per cent at 7,50,103 units in August this year as against 7,08,324 units in the same month last year, SIAM said.

Commercial vehicles

On the commercial vehicles front, total sales in the domestic market during August stood at 35,333 units, up 28.41 per cent from 27,515 units in the corresponding month last year. The commercial vehicles sales growth has been led by medium and heavy commercial vehicles, which clocked a total of 21,110 units as against 15,489 units, up 36.29 per cent. For the cumulative period of April-August 2006, the Indian auto industry registered a growth of 16.49 per cent, while the overall exports registered a growth of 28.13 per cent compared to the same period last year, SIAM said.

News: Volkswagen drives into Maharashtra

(BL 12/09/2006) Pune - Volkswagen has finalised an agreement with the Maharashtra Government to locate its Indian greenfield car manufacturing plant at Chakan in the outskirts of Pune.

Government sources told Business Line on condition of anonymity that the company has been given in-principle approval for 400 acres, adding that it is expected to ink an agreement and announce its plans in a few weeks.

The sources also said that a team of directors from the company has been in several rounds of talks with the State Government for a month now and finally thrashed out an agreement over the weekend.

Under the terms of the agreement, the State Government will hand over the land by November.

"The company wants to action its India plans as quickly as it can and what swung the deal in Maharashtra's favour is the fact that we were able to locate the right land for them and allot it within a month," the sources said. "The company is planning to start production by November 2007."

The company will invest an estimated Rs 2,500 crore in the facility and will initially manufacture small cars for the market, eventually broadening its portfolio to include models for other segments.

The Chakan industrial estate is already home to Bajaj Auto, which has located a motorcycle plant and recently acquired 250 acres for a greenfield plant to manufacture three- and four-wheelers.

The deal comes just over a month after General Motors announced that it would be setting up its Rs 1,300-crore second plant in India at the Talegaon industrial estate.

With Tata Motors and Fiat now inking a joint venture to make cars at the latter's facility at Ranjangaon near Pune, the region is developing into the auto industry's golden triangle.

The German company is believed to have been in talks with the Tamil Nadu and Punjab Governments for locating its facility.

News: Merrill unit buying $200 m loan portfolio from Shriram

(RTR 12/09/2006) Mumbai - An Indian unit of U.S. investment bank Merrill Lynch has agreed to buy a $200 million portfolio of truck loans from Shriram Transport Finance Co Ltd., a senior Merrill official said on Monday.

"Since India is a key market for us, we are developing various businesses, including fund-based business, and this is part of that," said Rajiv Garg, head of global structured finance and investments at DSP Merrill Capital.

"This would be the biggest asset-backed deal for Merrill," said Garg, who began the Indian asset-backed operations about four months ago.

"The quality of assets and the size were the attractions."

Merrill's activity in India is carried out through its 90 per cent-owned main unit, DSP Merrill Lynch. It has separate arms for securities, investment banking and funds management, while DSP Merrill Capital undertakes proprietary businesses.

In a statement, Shriram said it had sold the first tranche of $100 million earlier this month and the next tranche of $100 million would be sold later in the year.

Shriram Transport, in which private equity firm Newbridge has a stake, is a truck loan provider in southern India with headquarters in Chennai.

News: L&T ties up with Swedish firm Scania

(PTI 11/09/2006) Mumbai - Engineering and construction company Larsen and Toubro Ltd on Monday said it has entered into an agreement with Swedish heavy vehicle major Scania to distribute its range of multi-axle trucks in India.

L&T said the heavy-duty trucks, in the 300-500 hp range, would cater to the needs of the construction and mining sectors and would also complement the company's range of hydraulic excavators, which are widely used in mining and construction projects.

Scania is a leading producer of trucks of capacities exceeding 16 tonnes, heavy-duty buses and engines for mining, power generation and marine applications.

In a filing on the Bombay Stock Exchange on Monday L&T said the alliance with the Swedish firm would further strengthen the company's presence in the mining and construction sectors.

L&T's offerings to these sectors include a broad range of hydraulic excavators, loader backhoes, aggregate crushing systems, stacker-reclaimers and surface miners.

News: Leading foreign institutes may soon be in India

(TNN 11/09/2006) New Delhi - The stage is set for a battle royale between the department of commerce and the ministry of human resource development over opening up of the higher education sector to foreign players to attract foreign direct investment (FDI).

The ministry of commerce has issued a consultation paper titled ‘Higher Education in India and GATS: An Opportunity’ for comments from stakeholders.

The paper seeks to explore the opening up of higher education to foreign players for tapping the trade potential in education services under the WTO regime. It attempts to initiate a debate on how the country should allow foreign education providers in the sector.

The paper seeks to identify markets for Indian education services abroad, the barriers faced by Indian institutions, the role of regulatory bodies like the University Grants Commission (UGC) and finalise India’s response to the requests made by other countries for opening up the sector.

While the department of commerce has been pitching for 100% FDI in higher education, even suggesting education SEZs for foreign education providers, the HRD ministry has argued that it doesn’t want to allow use of concessions in the education sector as a bargaining chip for gains in other services sectors at WTO negotiations.

The paper informs the finance ministry that a liberal framework for foreign education providers would save India annually $4bn in foreign exchange. More than a lakh Indian students join foreign varsities to pursue higher studies every year. A number of foreign universities, including those from the US, the UK and Australia, are keen to set up shop in India.

The consultation paper suggests putting in place a sound regulatory framework and a viable financing model for higher education institutions. “A viable financing model, with a mix of public and private participation has to be put in place. Cost recovery through suitable tuition fees and access to loans for students would help in alleviating the financial constraints faced by higher education institutions.”

Interestingly, the HRD ministry had proposed a legislation — Regulation of Foreign University Entry and Operation (Maintenance of Quality and Prevention of Commercialisation) Bill, ’06 for consideration by the Union Cabinet. The bill was referred to a group of ministers headed by HRD minister Arjun Singh.

The bill was in response to the absence of a clear policy and an appropriate legal framework for foreign education providers in India. It proposes to treat foreign education providers in India as deemed universities under the UGC. The commerce department paper also attempts to address reservations in higher education institutions.

It argues that since this huge amount cannot be provided by the public exchequer at one go, the government should increase seats in colleges in a phased manner, allow institutions to raise own resources and provide a more liberal regime for private and foreign education providers.

The discussion paper makes a strong case for liberalising the sector for greater private and foreign participation so as to create enough skilled manpower in the country. “The fact that many Indian professionals do not possess global skills is also evident from the fact that despite the large pool of middle managers available at home, some Indian firms are recruiting from abroad,” the paper said.

India has the third-largest higher education system in the world after China and the US in terms of enrolment. However, in terms of number of institutions, India is the largest system with 348 universities and 17,625 colleges.

This means that the average number of students per institution in India is also lower than that in the US and China, the paper said. Global trade in higher education is more than $30bn a year.

The US, the UK, Canada, New Zealand and Australia are the major exporters of education, while China, India and the Philippines are the main importers. The US attracts about half a million students every year and the country generated $13.4bn export revenues in ’03, the paper said. In ’04-05, there were 80,466 Indian students in the US.

News: Dutch school prefers Goa over Gujarat for maritime institute

(TNN 11/09/2006) Ahmedabad - India’s first full-fledged maritime institute of a global stature, which was to come up in Gujarat, is all set to berth at Goa’s shores.

The institute, which is being touted as the country’s ‘maritime knowledge corridor’ by its promoter Sea King Infrastructure of Nikhil Gandhi and the leading Dutch school International Maritime Transport Academy (IMTA), was expected to anchor in Gujarat.

According to sources, the Dutch school is learnt to have finalised Goa as the location, after shortlisting Karnataka, Andhra Pradesh and Kerala. “Work is expected to begin next month. The first phase would be completed within 30 months,” the sources said.

To sprawl over 500 hectares of land, the university would impart courses in regular marine engineering, port management, shipbuilding and repair, dredging operations, logistics and transport, ship chartering and management and sea farers course.

IMTA specialises in short (1 to 5 months) high-level practical international post-graduate courses for port, shipping and transport managers.

In the first phase, it is expected to admit 1,200 students besides 300 faculty and support staff, which would later be enhanced to 6,000 once it begins functioning fully. Promoters say that students from as many as 15 countries are likely to take up maritime courses here.

SKIL and IMTA would invest Rs 75 crore each for this Rs 150 crore project. “The finances have also been lined up,” sources said. The university has been designed by Dutch architects.

Industry sources said that India desperately requires institutes to churn out graduates for maritime sector which is witnessing enormous growth. The increasing demand-supply gap can be narrowed and severe attrition woes being faced by shipping and ship-building companies can be solved, only by establishing more such schools, they said.

In ’00, SKIL had reached an understanding with IMTA when the former’s Rs 6,000 crore Positra Port & SEZ project was expected to take off. However, with Positra project meeting a rough weather, this education venture of SKIL was also went into the cold storage.

Interestingly, not only Gujarat’s maritime prowess failed to attract this important project, but Maharashtra too was not shortlisted. “Besides proximity to a well-established city for back-up facilities and a sea front, the easy availability of land and a token participation from the state government was also one of the requirements for this university,” said a source in one of the promoter companies.

News: Baring Private Equity sets up $490m Asian fund

(TNN 11/09/2006) New Delhi - Baring Private Equity Asia Group has raised $490m for a new Asian private equity fund. The new fund — Baring Asia Private Equity Fund III, will follow the strategy of targeting mid-sized companies in China, India, Singapore, Taiwan, Hong Kong and Japan, which need equity for expansion or management buy-outs.

With this Baring Asia’s funds under advisory now total over $1bn in assets. The new fund attracted investment from a wide range of institutional investors including Invesco, Deutsche Bank, Pantheon, SEDCO, Dow Employees’ Pension Plan, Singapore’s TIF Ventures, United Overseas Bank, Pennsylvania PSERS and the Kuwait Investment Office.

Jean Eric Salata, founding partner & CEO, Baring Asia said, “We are looking for firms that need an equity partner to achieve the strategic objectives for their business. We want to help firms grow faster & help them compete regionally and globally.”

Baring Asia has made investments in over 40 Asian companies. Its typical transactions have an investment size in the range of $25-$100m across sectors. In India, Baring Asia made its first investment in 1998 and has invested over $50m in companies like MphasiS BFL, Moser Baer & Celetronix, which was recently acquired by US-based EMS company Jabil Circuits for $155m. In June the firm announced it had sold its controlling stake in MphasiS BFL to EDS in a $380m deal.

News: Daewoo Elec buy gives Videocon the tech edge

(BS 11/09/2006) Mumbai/New Delhi - On Tuesday, Videocon is expected to make an official announcement on its acquisition of the troubled Korean chaebol (conglomerate), Daewoo’s consumer durables business. The value of the acquisition (largest by an

Indian private sector company and even the largest in Korea since Shanghai Auto’s acquisition of Ssangyong Motor in 2004) is estimated in the range of $680-700 million. But why exactly does Videocon need such a big-ticket acquisition?

The answer: access to technology. Daewoo Electronics possesses high-end technology in plasma display panels (PDP) TV, liquid crystal display (LCD) TVs, refrigerators, and washing machines.

For instance, it had introduced plasma display panel TVs way back in 1997, the glorious days when the chaebol was in its prime. Even now, Daewoo reportedly owns close to 10,000 domestic and foreign patents.

Market access: Apart from technology, Videocon can also access new markets. Daewoo has the largest share in the Polish TV market and leads the Vietnamese refrigerator segment for the last three years.

Analysts point out that the deal, coming after the company’s acquisition of Thomson and Electrolux, is another step in the direction of Videocon realising its dream of becoming an Indian multinational.

In 2005, it acquired French firm Thomson SA’s colour picture tube manufacturing business for $291 million and the Indian unit of Swedish firm, Electrolux for $76 million.

But these acquisitions have primarily been in the cathode ray tube (CRT) space, which is going out of fashion in developed markets.

Even Videocon had made announcements in this direction to diversify from CRTs when it announced the Thomson acquisition.

Beat Korea with Korea: Daewoo has a presence not only in flat panel displays, a category which is growing globally, but also in refrigerators and washing machines, where Videocon has its own brands.

The move is seen as highly synergistic with the company’s strategy of growing its domestic and international business, when Videocon brings the Daewoo brand home.

“The value of Daewoo may not just be for the physical assets, but also for the natural synergy that it would add to their business,” said CETMA secretary general Suresh Khanna.

Analysts say the brand would also enable Videocon to leverage the positive country-of-origin effect associated with other Korean durable brands such as Samsung and LG.

Brand bouquet: “The acquisition could be part of Videocon’s strategy to build up various brands,” says another industry expert.

Apart from the Videocon brand, the company also markets Japanese brands such as Akai, Sansui and Toshiba, Korean brand Hyundai and European brand Kenstar.

Other observers were not as charitable. “The acquisition does not seem to make much sense. Though Daewoo has some kind of a presence in Europe, it’s not at the cutting edge of technology. Daewoo has historically been into OEM supply. So it offers no great advantage for Videocon in the international market,” said another industry source.

But the Dhoots, who claim to have the largest capacity for colour picture tubes in the world, (in excess of 25 million units, they supply even to rivals) might be having other plans.

News: 'Goa not keen to have too many casinos'

(PTI 11/09/2006) Mumbai/Panaji - Soft-paddling the issue of setting up of off-shore casinos, the Goa government has said that they were not keen to have too many of them in the state.

“I doubt whether all those who are seeking permission to start off-shore casino, would actually be operational as it is unfeasible,” said Pratapsingh Rane, chief minister, Goa.

Goa had faced criticism from various sectors following its newspaper advertisement announcing the policy to have 10 off-shore casinos in the state waters.

While BJP was the first to condemn the government, the NCP stated that the government had not taken them into confidence before taking the decision.

Senior government officials had also disclosed that six companies have already paid processing fees to start the off-shore casinos and that the government was awaiting their proposals.

Feigning ignorance on any such advertisement about off-shore casinos, Rane said that two casinos, one in the north and another in the south, were operational in the state.

“I doubt whether all those companies who have paid processing fees would be able to operate.... It requires huge investment including a vessel... At the most, two or three may start,” the chief minister said.

On security concerns, Rane said that once such casinos start the government will be able to take care of them.

News: Reliance Retail outlet debut in two weeks

(BS 11/09/2006) Mumbai - Though the September 1 deadline has gone by, Reliance officials have confirmed that the company will be rolling out its first retail outlet in Hyderabad two weeks from now.

The central team working on implementing these plans has been given a clear roadmap: 30 stores by end of September, 260 by November 15, 1,000 by March and 3,000 by June. And this is the bare minimum, the company intends to roll out by then.

According to people on the central team, Manoj Modi, who is overseeing the retail plans, has given his final approval to these estimates late Saturday evening with additional instructions that the company should roll out far more stores than the numbers projected.

Raghu Pillai, chief executive, operations and strategy, Reliance Retail, said on the sidelines of the India Retail Forum earlier in the day that the first store, Fresh, would open in Hyderabad.

This would be a food and grocery store. At 2,000 square feet, this is the smallest store that the company will be setting up.

By June 2007, Reliance Retail intends to have a presence in at least 67 cities with places like Jallandar, Ludhiana, Lucknow, Jamnagar and Delhi being among the first few cities that the company is targeting.

“By November, there will be Reliance Retail outlets in 13 cities,” said company officials.

The first hypermarket is slated to come up in Ahmedabad by December 15, which would be spread over 1 lakh square feet. Spread over three storeys, the hypermarket would also house a multiplex in addition to having facilities like an atta chakki, and auto accessory centre.

Reliance is believed to have acquired most of the real estate required for the 3000 stores, but the directive from the top is clear. Wherever you can expand, expand.

News: Bharti may run Tesco franchise

(BS 11/09/2006) New Delhi - What it involves: A mix of small and big outlets, hypermarkets and distribution centres.

Bharti’s foray into the retail space is taking shape in partnership with Tesco, the UK-based global retail giant. Although the complete strategy is still under wraps, it is possible that Bharti could become a franchisee for Tesco in the country.

At the moment, only 51 per cent foreign investment is allowed in the sector, and that too in single-brand retail. However, international retail chains are free to appoint franchisees in the country. India also allows 100 per cent foreign investment in cash-and-carry retail.

Bharti’s retail foray will involve a mix of store formats — small and big outlets as well as hypermarkets — supported by distribution centres. The initial rollout will focus on Delhi and the surrounding national capital region, as well as Ludhiana, the hometown of the Mittal brothers.

The venture will be under the aegis of Bharti Enterprises, the group holding company. Field Fresh, the farm produce joint venture between Bharti Enterprises and the UK’s EL Rothschild Group, will not be integrated into the company’s retail foray.

“Planning is under way and a team is carrying out extensive research and is testing various models. We had set a 90-day time frame and that ends on October 10. The details will be clearer then,” Bharti Enterprises Chairman and Managing Director Sunil Mittal told Business Standard.

A crack project team of around 30 people has been at work for two months now, studying consumer behaviour and scouting in the real estate market.

Drawing parallels to his telecom business, Mittal said he would gradually scale up the retail venture. Bharti started its mobile services from Himachal Pradesh and subsequently brought it to Delhi, before rapidly scaling up to gain a nationwide footprint.

While Mittal said work on the real estate component of the venture would begin later, industry sources said efforts were already on to acquire sites of varying sizes including 2-acre plots. He denied that Bharti was eyeing the mall business.

Due to the 51 per cent foreign investment restriction, foreign multi-branded retail companies would not have ownership of either the stores or the invoicing, Asitava Sen, principle consultant, PricewaterhouseCoopers, said.

Organised retail in India is estimated at $6 billion and is projected to grow at 20-25 per cent per annum. German retail company Metro AG operates as a cash-and-carry firm in India. Other multi-branded global retailers like Wal-Mart and Carrefour are eager to enter the country.

News: Essar Steel faces challenges in Trinidad

(PTI 11/09/2006) Port of Spain - Essar Steel is facing serious environmental challenges in its quest to construct a $1.2 billion steel plant in Central Trinidad.

Members of the Pranz Village Development Community are protesting the steel major's decision to construct the plant citing environmental, health and social issues. The community plans to go to court on the matter.

Councillor Shaffmoon Taj, a local government representative, said while she was not opposed to the plant, it "will surely disrupt the lives and health of the community."

Member of Parliament for the area, Kelvin Ramnath has been criticised for not supporting the residents in their quest to shift the project away.

Essar Steel, in response, has proposed a green belt with trees as high as 30 feet. "The plant would have gas extraction mechanisms to collect and recycle gases back into the processing system," the company said in a statement.

The company also said that it would also import iron ore, which will be transported from the Point Lisas Port, adding that the company was subject to a certificate of environmental clearance.

News: Jet inks e-ticketing deal with KLM, BA, NW

(BS 11/09/2006) Mumbai - Jet Airways today announced India’s first interline e-ticketing agreement with KLM Royal Dutch Airlines, Northwest Airlines and British Airways.

Gaurang Shetty, vice president (marketing) of Jet Airways, said: "Inter-line e-ticketing will expand Jet Airways’ existing e-ticketing capabilities and distribution. The latest in electronic ticketing method, which expedites checking and boarding processes, simplifies ticket purchase, reissue and refunds transactions."

News: Indian steelmakers to meet Mittal in his lair

(TT 11/09/2006) New Delhi - Who is afraid of L.N. Mittal? Not us: that seems to be the chorus from a motley group of steelmakers who are accompanying steel minister Ram Vilas Paswan on a trip to Mittal’s recently acquired Arcelor plant in Luxembourg via London and Amsterdam.

Although a formal meeting with the world’s biggest steel tycoon is still not officially on the cards, sources said Paswan and the steelmakers may meet Mittal either in London where he keeps a palatial home or in Luxembourg, which is the headquarters of the new entity that has been established by merging Mittal Steel and Arcelor.

Mittal, who owns steel plants in 16 countries, has turned into a bugbear for most Indian steelmakers who are worried about the competition he might pose with his plans to set up huge steel mills in Jharkhand and Orissa. Nor are they happy with his attempt to grab a slice of SAIL-run Chiria mines, which are known to have Asia’s largest deposit of high grade iron ore.

“But then, they say, it is better to fight an enemy about whom you have some knowledge ... and then who knows yesterday’s foes may turn tomorrow’s partners,” said a steel ministry official who is part of the entourage. Officials said there is a strong chance that a meeting will happen, but “right now nothing has been fixed and we are not saying anything”.

The team is slated to spend half-a-day at the Arcelor plant but this may not be the venue for the meeting between the richest man in Europe and India’s steel minister and his crew of steelmakers.

Paswan is taking the steel delegation, which has SAIL chief S.K. Roongta, Vizag Steel chairman Sagar Rao, Tata Steel’s deputy managing director, T. Mukherjee, Essar Steel’s J.K. Mehra, among others, on the European tour at the invitation from Luxembourg's Prime Minister Jean Claude Juncker to visit the tiny principality. The grand tour, which began on Saturday, will see the steelmakers on a week-long sojourn in Europe. Officials say Luxembourg is hoping to sell steel-making technology to Indian steelmakers who are in an ambitious drive to expand their capacities. SAIL itself has chalked out an ambitious Rs 40,000-crore modernisation cum expansion programme which Paswan wants to see completed before the present government ends its term of office.

The delegation will meet the top brass of Paul Wurth, a Luxembourg-based steel technology giant, which is rated among the world leaders in design and supply of complete plants as well as specialised mechanical equipment for the ironmaking sector, including blast furnaces and auxiliary plants, coke making plants and direct reduction plants.

Paswan and his team will also meet Corus Steel chief and his team in London.

Corus was formed in October 1999 by merging British Steel with Koninklijke Hoogovens. It is now a £10-billion steel and aluminium products conglomerate which also specialises in providing design, technology and consultancy services to steelmakers around the globe.

News: US outfits preferred catch for India Inc

(TT 11/09/2006) New Delhi - The US is the most preferred destination for overseas acquisitions by Indian companies, accounting for investments worth $225 million between April 2005 and January 2006.

This has been highlighted in a report jointly prepared by consultancy and audit firm Ernst & Young and the Federation of Indian Chambers of Commerce and Industry (Ficci) based on RBI data.

A break-up of the acquisitions made in the US between 2004 and 2006 shows that the software and BPO sector accounted for the largest share at 58 per cent.

This was followed by the healthcare sector comprising pharmaceuticals, biotech and healthcare services, which accounted for 17 per cent of the deals.

The remaining 25 per cent of the acquisitions were in telecom, textiles, automotive and financial services.

“Indian enterprises have contributed significantly to the US economy. They are no longer just outsourcing partners. Indian companies are assisting in enhancing productivity, managerial talents and bailing out bankrupt American companies,” the report said.

India Inc’s investments also increased exports and provided a global platform to small and mid-sized companies.

According to the report, key decision drivers for investing in the US are access to foreign markets, accessibility of funds and production facilities, presence of strong regional clusters in the US and access to technology.

“Not only are Indian companies creating jobs and boosting wages, investments from India are strengthening US manufacturing and contributing to rising productivity. Indian investments bring in managerial talent, provide quality training and help US companies penetrate foreign markets,” it added.

Indian investments in US companies give them access to the distribution network of these multinationals and knowledge about local tastes, enabling them to increase exports to newer markets.

News: Southern brand embarks on a new Odyssey

(DNA 11/09/2006) Mumbai - After being in the books, music and toys retailing segment for over a decade, Chennai-based retailer Odyssey is reaching out to new markets.

The company, which currently has presence in six southern cities — Chennai, Hyderabad, Salem, Coimbatore, Trichy with 13 Odyssey stores — plans to add another 17 cities to its existing network by 2008. The company has earmarked capital expenditure of Rs 95 crore in the coming years.

T S Ashwin, managing director of Odyssey, said: “Capital expenditure of Rs 77 crore will be required for expanding into new cities and states. Another Rs 20 crore will be used for upgrading and renovating the existing stores besides setting up of IT infrastructure to connect these stores and out e-commerce venture.”

Having embarked on a massive expansion plan, the company soon expects to hit the capital markets raise money for its expansion as well as other activities in the pipeline.
“We have filed the Draft Red Herring Prospectus already and are awaiting the Securities and Exchange Baord of India’s approval. The expansion will not be totally funded through the money raised from the IPO, we will use borrowed funds besides approaching financial institutions to fund the expansion,” said Ashwin.

The idea is to be pan India retailer. Odyssey plans to enter Bangalore, Kochi , Pune, Vishakapatnam, Mumbai, New Delhi and the National Capital Region, Chandigarh, Amritsar, Ludhiana, Mohali, Rajkot, Surat, Mangalore and Thiruvananthapuram.

Its existing network in Chennai, Hyderabad and Coimbatore will be spruced up, too. “This expansion will see us adding another 4 lakh sq ft of retail space in the next 2-3 years. Majority of these new stores will located in the shopping mall environment and will be operational by 2008 end,” said Ashwin. The company has approximately 60,000 sq ft of retail space in the network including stand-alone, in hotels and shopping malls.

The company is also in the process of setting up regional warehouses. “Each state will have a regional warehouse spread across 4,000 sq ft with a just-in-time stocking approach. In all we will have nothing less than six regional warehouses by 2008,” said Ashwin.

News: Volkswagen to launch small cars in India

(PTI 11/09/2006) New Delhi - German carmaker Volkswagen said it will start rolling out small cars first in the country and a final decision on the plant location was expected in "weeks" time.

"We have done a research of the Indian market and we would be rolling out small cars first here though we have a complete range of vehicles available," the Volkswagen Group Research Director (Powertrain) Ing, Wolfgang Steiger, said here.

He, however, declined to comment on by when the car was expected to hit the Indian market but said modifications in the vehicle was "inevitable" considering the Indian road conditions were far more different from that in Europe.

When asked where the company has decided to set up is manuacturing unit in India, he said, "A decision would be taken in weeks time and announced." The company has been reported to be in talks with various state governments, including Maharashtra, Tamil Nadu and Punjab, after the problems it had undergone while trying to set up in Andhra Pradesh.

News: 'India can’t build a Pudong overnight like China'

(BL 11/09/2006) Beijing - India cannot build infrastructure and generate economic growth at the pace of state-led China as it has a different model of growth where the emphasis is on people-oriented policies, the Minister for Science and Technology, Kapil Sibal, said here today.

"There is a different model of growth in our country. In a society which is somewhat different, you can get a lot of people to move out without access to courts of law, without stay orders from courts, get the system going," he said at a meeting organised by the World Economic Forum on the sidelines of the 'China Business Summit 2006'.

Referring to the gleaming financial hub of Pudong, he said, "We can't, for example, build a Pudong overnight. Our democracy tells us, our rural areas tell us, the electoral verdict will tell us that if you don't have growth with equity, we will throw you out of power," he told global business leaders at an interactive breakfast session on 'India: Opportunities and Challenges' organised by the Confederation of Indian Industry (CII) here.

China, where the land belongs to the state, has built world-class infrastructure and top-class buildings, often uprooting and relocating millions of peoples from their homes. Pudong, the gleaming financial hub in the eastern metropolis, Shanghai was buil t in a short time, pouring billions of dollars.

"You can build infrastructure and generate economic growth. I think in India, it is not going to happen. Economic growth and infrastructure will go hand in hand with opportunities and growth. It is not to come before growth because it is not an export-led economy. India is a home-based consumption economy," Sibal emphasised.

News: Chennai, Kolkata airports upgrade on the fast track

(BL 11/09/2006) New Delhi - The process for modernising the Chennai and Kolkata airports is being put on the fast track with the Centre planning to complete consultations with the Tamil Nadu and West Bengal governments to finalise the route to be adopted.

"The initial consultations with the two States will be completed this month. We can then go about finalising the roadmap that should be drawn up for modernising the two airports. The States would also have to look at completing various formalities like acquiring the land before the process can move ahead," officials said.

In August last year, the Prime Minister's Infrastructure Committee had given its in-principle approval for the modernisation of Chennai and Kolkata airports. Similarly, in February this year, while presenting the Economic Survey, the Finance Minister, P. Chidambaram, had said an in-principle decision had been taken to modernise the Chennai airport through the joint venture route.

Different modes

Asked whether different routes could be followed for developing the two metro airports, officials said such a possibility could not be ruled out.

"The Tamil Nadu Government is keen to follow the same route for modernisation as has been adopted for Delhi and Mumbai. In the case of Kolkata, however, there are divergent views that seem to be appearing. But one thing is clear that the traffic projections do not warrant a greenfield airport. Therefore, it is difficult to say just yet as to whether we would follow one or more routes for developing the two airports," officials added.

News: Biyani will take on Reliance, not Wal-Mart

(DNA 11/09/2006) Mumbai - Kishore Biyani says he sleeps well these days. Truth or dare? Hard to tell.

Dare he must, however, as sitting in the front row to hear him at the India Retail Forum on Saturday was Mukesh Ambani’s top team from Reliance Retail — Raghu Pillai, president and chief executive, retail operations and strategy; Bijou Kurien, president and chief executive, lifestyle and luxury’ and, Rajeev Karwal, president and CEO.

Then there is Noel Tata of Trent, standing on the sidelines as he finds all the seats in the over 10,000 square feet hall filled to the brim, till one volunteer finds him a place to sit.

Biyani says he is unfazed by domestic competition — Reliance’s Rs 25,000 crore plan notwithstanding.

He says the country should not allow the the Wal-Marts, Tescos and Carrefours — yet.

“They can come later,” he says. “The government shouldn’t let them in now”.

Why?

“If they are allowed now, they get a cheap entry — they can just buy out Indian companies for about a billion dollars (Rs 4,600 crore). Let them come after a few years, we’ll get at least $5 billion then,” he explains.

The Future Group honcho’s math is illuminating. He may have also thrown light on what’s going on in his mind here: is this a strategy to sell out big later?

Only time will tell.

A self-proclaimed black sheep of his family, Biyani first tasted the rigours of entrepreneurship as a garment manufacturer.

He let in on a little secret on why he entered retail. It’s all thanks to Shoppers’ stop.

“I have never told this before. I was a manufacturer of garments. Shoppers’ Stop declined to stock my products in their malls and that’s when I decided to set up my own retail malls,” Biyani said.

Later the Hindi film buff even produced Bollywood flicks as he embarked on setting up a chain of retail malls across the nation, that was 98% controlled by unorganised frat.
Would he prefer Reliance or Wal-Mart has competition, the Q&A anchor asks. “Reliance anytime.”

While he is furiously building scale to his retail business, Biyani is also diversifying into allied fields.

Into insurance and private equity as he tries to get a bigger share of the customer’s wallet. By next year, he declares Pantaloon’s revenues would double to $2 billion (Rs 9,200 crore). By 2010, Pantaloon they would cross $6 billion (Rs 27,600 crore).

He is not rattled by the Reliance Retail juggernaut moving in, buying out land and driving prices up. “People like us, believe in us and they give us the space. We have enough leased space for the next 3-4 years,” he says. The biggest challenges, Biyani says, come from “managing his business at the speed of change. We are being watched. We Indians are not the perfectionists that managements talk about and we should know which war to fight and which war to avoid.”

Someone in the audience asks him why he’s selling foreign brands when he’s against foreign retailers.

Yet another quizzes him that modern retail as a concept originated in the west. His stock replies do not seem convincing.

Later when DNA Money asks Noel Tata, managing director of Trent whether he agrees with Biyani, Tata shrugs. Those are “his views”.

The Tatas are building a partnership with the UK-based Woolworth’s for a consumer durables retail venture, so Noel Tata may have a different opinion on the topic, but he’s not talking yet.

Raghu Pillai of Reliance Retail is more forthcoming on the topic on whether foreign direct investment is to be allowed. “There is enough capital and talent in India to be able to take organised retailing to greater heights.”

Some, however, beg to demur.

As Arvind Singhal, chairman, Technopak at a panel discussion said that India will need an additional 600 to 700 million sq ft of retail real estate space to meet a likely increase of $127 billion in consumption in the next five years.

The growth in space and consumption will have to come from Tier 2 cities and rural hubs. Contrary to the belief that fashion is the largest segment in organised retail in India, Singhal said food & beverages was the largest segment, worth $195 billion.

Kamal Nath, the commerce minister, would surely agree.

News: Indian banks turn Singapore bound

(PTI 10/09/2006) New Delhi - Realising the strategic economic importance of Singapore, Indian banks are looking to expand their operations in the country.

Two leading domestic players -- ICICI Bank and State Bank of India have already sought "Qualified Full Bank" permission in the city-state.

Taking advantage of the Comprehensive Economic Cooperation Agreement (CECA) between India and Singapore, SBI and ICICI Bank are interested in joining the league of six global majors currently operating as QFBs there.

Citibank NA, HSBC, BNP Paribas, ABN Amro, Standard Chartered and Malayan Banking Berhad are the six banks enjoying QFB status in Singapore.

Given QFB status, which allows them to raise retail deposits and operate 25 centres in Singapore.

An ICICI Bank official told PTI that it has submitted request for QFB status to Monetary Authority of Singapore (MAS) -- the regulatory authority of Singapore.

Currently, ICICI Bank operates as an offshore branch in Singapore which offers financing to Indian corporates and serve Indian Community in general.

A MAS spokesperson told from Singapore that the country would grant Wholesale Banking licenses and up to three qualifying Full Bank licenses to Indian banks that meet its admission criteria.

However, the agreement does not provide for automatic entry, he said, adding that as with all Financial Institutions seeking entry into Singapore, "applicants need to meet our prudential standards."

Without disclosing the names of Indian banks which have applied for the status, the spokesperson said some Indian banks have applied and we are working with RBI to review the applications and will make an announcement in due course.

There are already eight Indian Banks licensed to operate in Singapore. "This is one of the highest number of banking entities from a single country," he said.

Of the eight, four banks - Indian Bank, UCO Bank, Bank of India and Indian Overseas Bank have full bank licenses and can access retail market by offering whole range of banking activities.

The other four banks - SBI, ICICI, Bank of Baroda and UTI Bank - operate in the wholesale segment, and are licencesed as merchant banks or offshore bank.

Bank of Baroda and UTI bank were admitted after CECA he said, adding in contrast, only one Singapore bank --DBS -- has presence in India with two branches.

News: ADB to lend India $1 bn for rural finance project

(TNN 10/09/2006) New Delhi - Manila-based Asian Development Bank is likely to lend $ 1bn (nearly Rs 4,670 crore) to the government to undertake a rural finance project through cooperatives in 2006.

"One specific project we are financing is rural finance through the cooperatives. ADB is providing assistance this year in the amount of 1 bn (about Rs 4500 crore)," said, ADB director general for South Asia, Kunio Senga.

Senga said the loan negotiations are expected sometime in October or November this year. It will be a 20-year-loan and the interest rate is likely to be 40 basis points over the six months Libor (London Inter-bank Offered Rate).

Senga said ADB is essentially aligning with government priorities and one strong priority of the government is rural area development.

"Government has now a national programme to improve the system of cooperatives. With the legal assistance provided by ADB, they have now come up with a good framework," he said.

It is a big project, he said, adding that ADB will continue to work for the improvement of rural areas.

Senga was recently in New Delhi to hold discussions with the finance ministry officials for finalising ADB's Country Partnership Strategy for 2007-09.

ADB's assistance to India is likely to increase from around $ 2.45 bn in 2007 to 2.85 bn in 2009. ADB plans to increase the level of lending to India by expanding assistance programme to cover some relatively-new areas besides core areas of transport, energy, and urban sector operations.

News: India hot on VC radar - $4.4-bn on the way

(PTI 10/09/2006) New Delhi - It's raining dollars for Indian entrepreneurs, with a large number of US-based venture capitalists lining up a huge kitty of about $4.4 bn (over Rs 20,000 crore) for investing in the country's startups and early-stage companies.

According to a new study, over 44 US-based VCs have either raised or are in process of raising between 40 and 400 million dollars for early-stage investments in Indian companies over the next 4-5 years.

The latest trend is being seen by the industry experts as a resurgence of VC activities in the country following huge losses incurred by the venture capitalists and private equity investors during the bust that followed the dotcom boom in late 1990s.

The firms have already raised about 1.75 billion dollars and an average of 100 million dollars each would take the total funds to about 4.4 billion dollars. This amount is equivalent to investment worth 22 billion dollars in the US or Europe on purchasing power parity basis, global research and analytics services firm Evalueserve said in a report.

While the renewed interest of VCs in the country could lead to a possible overheating of the market, it should not be taken as a "bubble", Evalueserve Chairman Alok Aggarwal, the author of the report, told PTI from California.

On the back of the resurgence in fund-raising and investment activities, an overheating of the early-stage VC market in India is more like to occur if VCs continue to focus on their traditionally favourite sectors like IT, BPO, telecom and internet, the report said.

"When markets overheat, they usually cause inflation and this may occur in India as well. So, if the VC market for early stage investment overheats then there would be more liquidity in the system and entrepreneurs based in India would have easier access to money and the valuations of their companies will rise," Aggarwal said.

The diversification process has already started with a number of firms branching out into new areas beyond the IT and related sectors, the report says.

"A very important feature of the resurgence in the PE activity in India since 2004 has been that the PEs are no longer focussing only on the IT and BPO sectors, Aggarwal said.

The latest surge in venture capitalists' interest in early-stage companies could not be termed as a bubble like the one at the time of dotcom boom, the industry experts argue, as the investments are not limited to the once-favourite IT sector and target fundamentally stronger companies across various sectors.

This shift is partly due to the Indian economy no longer remaining limited to the IT sector and spreading more evenly to sectors like biotechnology and pharmaceuticals, healthcare and medical tourism, auto components, travel and tourism, retail, textiles, real estate and infrastructure, entertainment and media and gems and jewellery, he added.

While, IT and ITES accounted for over 65 per cent of the total number of PE deals in India in 2000, it fell to about 23 per cent in first half of 2006. At the same time, the share of PE deals in sectors like financial services, manufacturing and healthcare increased substantially during this period, the Evalueserve study shows.

VC firms had started cozying up to India in late 1990s with the growth of India's Information Technology sector and the simultaneous dot-com boom, after almost no private equity or VC funding a decade ago in Indian companies.

While the VC firms started investing again by the end of 2004, after almost three years of sluggishness during 2001-03, early-stage investments continued to dwindle through mid-2006 or remained stagnant at the best.

After incurring huge losses during the dotcom-bust, particularly from the investments in startups and early-stage companies, VCs were seen focussing on late-stage companies on their return to Indian market in 2004.

Also, the renewed interest has followed an economic growth of 7-8 per cent per year, with sectors like services and high-end manufacturing sector growing at 12-14 per cent a year.

According to Evalueserve study, the number of deals and the total dollars invested in India has also been increasing substantially over the past few years with total investments surging by about 42 per cent to 1.65 billion dollars in 2004 from 1.16 billion dollars in 2000.

The investments surged further to 2.2 billion dollars in 2005, while VCs and PE firms have already invested 3.48 billion, excluding the debt financing, during the first half of 2006.

Evalueserve expects total investment this year to rise to 6.3 billion dollars, which would be over five times the amount invested in 2000.

News: Indo-China trade set to touch new high

(TNN 10/09/2006) Kolkata - India-China Friendship Year 2006 has already hit a high note with the bilateral trade targets of $20 billion between India and China for 2008, poised to be crossed this year itself. The bilateral trade volumes for last year surpassed $18 billion.

At India and China: The Next Decade, a joint seminar organised by Observer Research Foundation (ORF) and Centre for Peace Studies, Calcutta University (CU), defence minister Mr Pranab Mukherjee said that with the two countries set to emerge as economic superpowers, India and China have a lot to learn from each other.

Confidence-building measures including the opening of the Nathu La pass have helped erode the memories of times when Indo-China relations were not smooth. Now, developing a strategy to create stonger bonds with China is an integral part of India's foreign policy, said Mr Mukherjee.

Mr Mukherjee said that trade between the two countries will only gain momentum in the years to come. The main exports from India to China include iron-ore, cotton and processed minerals while the main imports are electronic goods, non-electrical machinery, organic chemicals, coal and coke.

Mr Ashish Kumar Banerjee, vice-chancellor, CU, added that India and China can also learn from each other about social issues, existing problems and ways to deal with them. He said that CU was, in fact, planning to set up a China Study Centre with help from the ORF. By 2015, India and China together are projected to account for 14% of the global GDP, while for 2025, the projected figure is 25%, said Mr. Vivek Bharati, advisor, FICCI.

However, both the countries need to deal with certain issues which include a rising problem of joblessness, other than low-paying jobs and health systems which are not up to the mark, said Prof Nirmal Chandra of IIM Calcutta.

News: Anil focus on Tamil Nadu

(TT 10/09/2006) Chennai - Anil Ambani today said his group would invest Rs 12,000 crore to set up a 1,000-mw power plant, an information technology park and a desalination project in Tamil Nadu, besides establishing a special economic zone.

“The power plant would come up in north Chennai. The desalination plant would be capable of meeting 30 per cent of the city’s drinking water requirements,” he told reporters after calling on chief minister M. Karunanidhi at the secretariat here.

Union communications minister Dayanidhi Maran was also present during the confabulations.

Both these plants would be set up at a cost of Rs 10,000 crore, said Ambani, whose Reliance ADAG has diversified business interests ranging from infrastructure to finance to media and telecom.

Besides, Reliance Communications would set up an information technology park in the city, which would have a convention centre on a par with international standards. The project would cost Rs 2,000 crore, he said.

Ambani, who appreciated the investment climate in the state, said he had discussed the projects with the chief minister and that they could be implemented quickly with the support of the state government.

He also said he was happy to visit the city after a gap of 10 years.

Connect 2006

Overcoming challenges facing ‘infostructure’ (communication infrastructure) will help drive growth and productivity and make India globally competitive, Ambani said today.

“Our surest way of global competitiveness lies with people having information and connectivity anytime, any place, any form and anyhow,” he said at ‘Vision 2011 for Tamil Nadu’ at Connect 2006.

Ambani, whose Reliance Communications is expanding into the GSM space after emerging as a leader in the CDMA segment, said there was a need to look beyond things that were easily achievable. “We should not be satisfied with setting achievable targets and getting there, but should set impossible targets and achieve it.”

News: India, Germany in alternative fuel pact

(PTI 10/09/2006) New Delhi - India and Germany today agreed to join hands to meet the auto-energy challenge through co-operation in developing alternative fuel strategies.

“Indo-German bilateral trade has been growing and the two countries are already working together in three other areas. We are adding a fourth joint working group in the auto sector, which will look into future alternative fuel strategies,” Union heavy industries minister Santosh Mohan Dev said while inaugurating a symposium.

A memorandum of understanding (MoU) was signed today between the Society of Indian Automobile Manufacturers (Siam) and its German counterpart Verband Der Automobileindustrie (VDA). According to the MoU, Siam and VDA will co-operate in areas such as diesel engine, alternative drives and fuels and will work towards fuel-efficient engines.

Stressing the need for the two countries to co-operate in the development of alternative fuel technologies, Ulrich Kasparick, German parliamentary secretary, federal ministry of transport, said co-operation should start right from the research and development at the university level.

“If the automobile sectors of both the countries are able to take a leading position in the global stage on the bio-fuel and alternative fuel technologies, it would be good for both the economies,” Kasparick added. Siam and VDA will assist each other in the development of fuel-efficient innovative drive systems, including clean diesel technology under the MoU.

Highlighting the importance of the co-operation between the industry bodies of the two countries, Siam vice-president Ravi Kant said the initiative will be mutually beneficial to both the countries and we would gain from each other’s experience and expertise.

He said the agreement would seek future co-operation especially in the areas of diesel engines, alternative drives and fuels and for working towards fuel-efficient engines. VDA president Bernd Gottschalk said the German automotive industry was looking to offer its technological competence to its Indian counterpart.

“It is a perfect start for intensifying our exchange of ideas and knowledge. Protecting the climate and environment and providing sustainable, clean and efficient mobility for future generations is a challenge for both Germany and India,” Gottschalk said.

The heavy industry ministry, which is taking the initiative for Indo-German co-operation in alternate drives and fuels, is looking at the co-operation between the two industry bodies to provide inputs to policy making in India.

News: Duke IndiaCo launches $300-m realty fund

(BL 10/09/2006) Pune - Private equity investment firm Duke IndiaCo has announced the launch of a realty fund with an investment size of approximately $300 million, raised exclusively from overseas investors including pension funds and large institutions.

The fund will invest in real estate opportunities in the industrial/commercial, residential and retail categories, Gopal Patwardhan, Managing Partner, Duke IndiaCo, said.

Chalking out the firm's investment strategy for the fund, Patwardhan said it would invest in Tier II and Tier III cities in the Mumbai-Hyderabad-Bangalore triangle where it will focus on residential projects targeted at the low and medium income group, with apartments costing between Rs 10-20 lakh.

"This will minimise our downside risk. India has a huge middle class population and that is where the growth is,'' he said.

Industrial segment

In the industrial segment, the company will focus on investing in, among other things, development of special economic zones, Patwardhan said, adding that this would be where the future employment will come from as manufacturing comes of age.

Duke IndiaCo is in advanced stages of negotiations for at least 5-6 projects including one in Pune and Tamil Nadu and a couple of them in Tier III cities and is also investing in a village resort in a south Indian city. Also on the anvil is an industrial-residential project near Delhi. "The $300 million will be invested in 15-20 projects over the next 24 months,'' Patwardhan said.

Meanwhile, the company also plans to tap the retail segment of the realty business and will focus on specialty malls.

Other investments

Currently, Duke IndiaCo has four operational funds with $475-million committed capital under management. Over the last three years, it has deployed over $30 million in listed and privately held companies and has invested in 18 companies.

Patwardhan said the firm would also focus on private companies in the auto ancillary sector industry and also on special opportunity infrastructure projects in India with investments in construction projects for roads and bridges, power plants and SEZs.

News: India Inc, an emerging business partner for US

(PTI 10/09/2006) New Delhi - Indian companies seem to be bullish on investing in the US with the regulatory authorities approving direct investments worth $225 million in the April 2005 to January 2006 period, a survey said.

Majority of the Indian investments abroad are in the US and home-grown companies have invested close to $2,159 million in the last decade, followed by Russia with investments to the tune of $1,763 million, Mauritius $1,038 million and Sudan $964 million, according to a survey conducted by Industry body Ficci and Ernst and Young.

The survey said that the Indian regulatory authorities are no different to the trend and give maximum approvals for investments in the US, the survey said.

Indian companies are investing in wide-ranging sectors including IT, healthcare, telecom, textiles, automotive and financial services among others.

In the 2004-06 period, software and BPO sector accounted for maximum, 58 per cent investments, followed by healthcare (comprising pharmaceuticals, biotech and healthcare services) which accounted for 17 per cent while the remaining 25 per cent of the investments were absorbed in sectors like telecom, textile, automotive and financial services.

The survey said that India Inc has contributed significantly to the US economy and Indian companies are no longer just outsourcing partners but their presence in the US is as competent business partners.

Indian companies are assisting in enhancing the productivity, managerial talents and bailing-out bankrupt US companies, it added.

The survey said that Indian investments and acquisitions in the US are likely to increase further with the government adopting a liberalised regime.

The next phase of investments is expected to be driven by the pharmaceutical sector due to the regulated developed economies of Europe and US becoming key markets for most Indian companies, with increasing generics opportunity in these markets, it added.

News: BWIA to be replaced by Caribbean Airlines

(TG 09/09/2006) Port of Spain - National airline BWIA will cease operations on December 31, 2006, after 66 years of service. It will be replaced by a Government-approved regional airline—Caribbean Airlines—which is officially expected to begin operating on January 7, 2007.

“Caribbean Airlines will have its base at Piarco, the international airport of Trinidad, and will, subject to local and international regulatory approval, commence operations early in 2007,” the airline said in a press statement.

“It will provide regional air transport within the Caribbean and between the Caribbean and major international cities. BWIA will continue uninterrupted service to its valued customers whilst management ensures a seamless transition to Caribbean Airlines,” the statement read.

But even as the BWIA management mark the “exciting phase in air travel and aviation history in T&T and the region,” unions were left with 14 days to negotiate voluntary packages (VSEP) for its workers.

Shafeek Sultan-Khan, BWIA’s legal and management consultant, said if negotiations were not completed by September 26, workers would not exact any VSEP benefit.

He said the airline had three options—the restructure of BWIA with its new mandate, which failed, and was now on its second option, attempting to close BWIA through VSEP.

“In facing this challenge, the reality is if we are unable to achieve this objective, it will inevitably lead to the first option, which is the closure of BWIA without enhanced severance benefits under the VSEP proposal,” he said.

He was speaking to reporters at a meeting between BWIA and its unions held at the Crowne Plaza, Wrightson Road, Port-of-Spain, yesterday.

But two of the four representatives did not agree with the timeframe set for them.

Clive Weatherhead, a representative of the Communications, Transport and General Workers’ Trade Union, said the timeframe was too short to properly negotiate VSEP.

“We have been negotiating for months and the collective bargaining has not been done in good faith,” he said.

Curtis John, president of Allied and Communications Workers’ Union (ACAWU), said he intended to set up meetings as early as next week to negotiate VSEP and other outstanding court matters with the company.

He said the company asked that workers engage in a seamless transition, but he could not grant the assurance.

“I cannot decide. I don’t know how my people will react. I will do my best to keep things calm as we negotiate and let good sense prevail,” he said.

John said he was disappointed that all the contracts the union now had with BWIA, like travel benefits for workers, would be terminated.

Last month, BWIA’s chief executive Peter Davies confirmed the Government’s decision to privatise the airline which was in line with his mandate to provide a safe, effective and profitable carrier to connect the Caribbean with the rest of the world.

The Government has already injected more than US$250 million for BWIA’s restructuring.

In June Cabinet approved an additional US$100 million to meet the equity injection in the recapitalisation of the airline.

Despite months of negotiations, BWIA and its unions failed to reach agreement on the restructuring of the airline. This led to chairman Arthur Lok Jack requesting Davies to present a report to the board with his analysis and professional recommendation as to the airline’s future viability.

Last November, BWIA board requested that the Stock Exchange suspend trading of its shares for a three-month period.

Sultan-Khan said BWIA would hold meetings with shareholders—less than three per cent—to discuss options.

All tickets already purchased for travel on BWIA will be honoured by Caribbean Airlines and BWEE Frequent Flyer air miles and Club BWEE memberships will transfer and qualify on the new airline to ensure customer continuity and confidence, the company said.

It said eligible BWIA employees will also be given the opportunity to apply for positions with Caribbean Airlines.

Davies said the mandate he received through the board allowed him, the management and staff of BWIA, to recognise the dynamic changes that are affecting the global airline industry and to position Caribbean Airlines in an ever increasing competitive context.

“We are looking to the 21st century whilst being empathic to our historical past; determination, passion and focus will allow us to build a future and respond honourably to the loyalty that customers have demonstrated over the years,” he said.

News: ONGC to sign Cuban oil exploration deal

(RTR 09/09/2006) Havana - Oil and Natural Gas Corp. (ONGC) has successfully negotiated rights to two Cuban deep-water blocks and will sign with Cuba's state oil company at the weekend, an Indian diplomat said on Friday.

"We have agreed to explore blocks 34 and 35 and will sign the agreement with Cuba Petroleo (Cupet) on Sunday," a senior diplomat said.

Cuba's Gulf of Mexico 112,000-square-km off-shore zone was divided into 59 blocks for foreign exploration in 1999.

ONGC Videsh, the overseas arm of the state-run exploration company, is already a partner with Spain's Repsol-YPF and Norway's Norsk Hydro in six blocks in an area where three years ago Repsol found indications of good quality oil.

The two new blocks are just below the other blocks and closest to the northwest coast where heavy crude is pumped from on shore.

Canada's Sherritt International has also signed for four blocks in Cuban waters.

The possibility of striking oil just 144 km off US shores at a time of soaring fuel prices and rising global demand has set off a political debate over whether US companies, sidelined by American sanctions, should be allowed to explore there.

The US Geological Survey estimated that the North Cuba basin could contain some 4.6 billion barrels of oil, with a high-end potential of 9.3 billion barrels.

US companies are barred from exploring for oil in Cuba under trade sanctions enforced against President Fidel Castro's government since 1962.

Industry experts said Cuba will have to find large deposits of light oil to make it worthwhile extracting oil so deep under water.

Cuba invited US exploration at a meeting with oil industry executives in Mexico City in February.

Cuba produces 60,000 barrels per day of poor-quality oil and imports about 98,000 bpd of oil and derivatives from its ally Venezuela.

China's giant oil and gas company Sinopec Corp. signed an agreement last year to produce heavy oil with CUPET in Cuba's westernmost Pinar del Rio province from on-shore wells.

China is renting towers for directional drilling in oil fields run by Canadian companies Sherritt International and Pebercan Inc. along the northwest coastal oil belt producing heavy oil and gas used to generate electricity.

News: GE India sales could grow 73% this year

(RTR 09/09/2006) Chicago - General Electric Co.'s Indian revenue could grow as much as 73 per cent this year, a top executive for the media and industrial conglomerate said on Friday.

GE expects Indian sales to be in the range of $1.6 billion to $1.9 billion, up from $1.1 billion last year, GE India Chief Executive Scott Bayman said in an interview, and it remains on track to hit a company target of $3 billion by 2008.

"The revenue stream is maybe a little less predictable right now, but we could be closer to $2 (billion) than we are to $1.5 (billion)," he said after a speech to the Chicago Council on Global Affairs.

"India can grow at 8 to 10 per cent a year on a GDP basis," he added. "We can grow much faster than that because of the need around infrastructure and how well we fit."

Bayman, who has been head of GE's profitable Indian arm for 13 years, said growth has been across the board but the biggest opportunities are in infrastructure -- aircraft engines, power generation, oil and gas, water and possibly locomotives.

A lot of the success GE has seen in India over the past year is in businesses such as engines and power generation, where orders get placed over two to three years, he said.

Even smaller businesses are growing rapidly, however. GE's Indian plastics business could reach $500 million annually from about $100 million now, Bayman said. Financial services, the medical sector and real estate are other good opportunities.

"It's only a matter of when these revenues start to come in," said Bayman, who is based in New Delhi.

Like China, India is a popular emerging market for multinational investment due to its strong economic growth.

GE said earlier this year it is targeting Indian sales of $8 billion by 2010. With infrastructure development outstripping demand, that should not be a problem, though it could be reached a year earlier or later due to the unpredictability of India's government bureaucracy, he said.

"What you have to pay attention to in India is, directionally, is it still moving?" Bayman said, citing the country's rule of law, strong banking and financial services, and regulated stock exchanges. "I've seen six Prime Ministers and five governments and not one of them has changed the direction of reforms.

"The Achilles heel in all this for India is the power sector," he added, "and whether it can get fixed and keep pace with the growth."

News: 'Get organised about unorganised retail'

(TNN 09/09/2006) Mumbai - Traditional family-run businesses, like that of the Ambanis and the Ruias have realised the importance of organised retail, and the onus is now on Indian co-operatives, railways, post offices and even airports to follow suit, according to the governor of Maharashtra, SM Krishna.

Exhorting the state-run bodies to bring in world-class retail concepts, the governor, speaking at the India Retail Forum (IRF) here, said, “This task is enormous and possibilities of a public-private partnership need to be explored, if necessary.”

While lauding the success of the organised retail sector, the governor told the audience, comprising leading retailers of the country, not to ignore the humble kirana stores. He said, “This unorganised retail segment provides a cushion against unemployment for millions of people. They have their own customer base and will continue to do so.”

The $300-bn Indian retail sector is set to grow by 40% to $427bn by ’11, according to Arvind Singhal, chairman, Technopak. Of this, organised retail, currently, comprises just 3%, or $8bn. However, organised players will make investments worth $22bn in the sector over the next five years, during which it may grow to anywhere between $60bn and $75bn.

Earlier, Krish Iyer, managing director (India), AS Watson Group, kicked off the retail summit by emphasising that retail should be the first point of contact with the consumer, not the last stage of the supply chain.

Added Mr Iyer, “Organised retailing has tremendous potential in India. Nearly 95% of Indian consumers haven’t shopped in a mall as yet.” Bhaskar Bhat, MD, Titan Industries, felt that the days of generalisation in retail were over, and that learning from every individual operation was imperative for retailers.

Citing the example of Spanish apparel retailer Zara, Mr Bhat said, “Zara will set up just one store in every new city or region they enter. They used this store as a listening post, learning consumer behaviour and the right product mix, and only then will they scale up.” He also added that the IRF should take on an integrated development model and create a retailing model that was Indian and not based on global experiences.

Giving a thumbs-up to the local organised retail, Kevin Moss, vice-president (operations), General Growth Properties (GGP), said, “The transformation that has taken place here is quite phenomenal. The evolution of retail in India is much faster than that in the US.”

GGP, a $37bn US-based real-estate investment trust, is scouting the Indian terrain for local partners for mall and shopping-centre development. Finally, Robert Spector, author of ‘The Nordstorm Way’, emphasised the need for customer service and how Nordstorm built its reputation, sans advertising, on customer service.

According to Mr Nordstorm, customer service doesn’t belong in the corner room, but is the responsibility of every single employee of an organisation. He added, “We often forget that we’re customers too. Our customer service should be exactly what we expect as customers.”

News: Taj Hotels announces golf resort project in Qatar

(PTI 09/09/2006) Mumbai - Taj Hotels Resorts and Palaces has joined hands with Qatar Sports Investment Company (QSi) to develop Qatar's first five-star golf and spa hotel in Doha.

Based at the Doha Golf Club, the only PGA standard 18-hole golf course in Qatar, the Taj Exotica Golf and Spa Resort will occupy a site at Doha Golf Club and represent an investment of approximately QR 220 million over 3 years, a release issued here today said.

Launching in early 2009, the Taj Exotica Golf and Spa Resort will be the first Golf and Spa Resort of its kind in Doha, offering a unique mix of access to Doha's world-class golf course and a Jiva Grande Club and Spa.

The proposed design comprises a luxury low-rise five-star boutique hotel complete with a host of world-class facilities, including 150 rooms and suites, restaurants and a bar, meeting and conferencing facilities.

Raymond Bickson, Managing Director and CEO, The Indian Hotels Company Limited, said: "We are very excited with this new project, which marks our foray into the golf resort segment, in this region.

Leisure and hospitality in this region is growing exponentially and it is important for the Taj Hotel to be present in these strategic countries of this region, which is rapidly morphing into a tourism hub of the future."

Abdulla Khalid Al Qahtani, Chairman, QSi, said, "our mission is to develop the reputation and stature of Qatar as a sporting nation through investment in exciting and innovative developments in the world of sports, leisure and entertainment."

The golf course at the Doha Golf Club encompasses an area of 150 hectares and includes a renowned PGA standard 18-hole championship course and a 9-hole floodlight academy course.

News: Goa to build global cruise terminal

(TNN 09/09/2006) Goa - Goa is to soon set up an International Cruise Terminal at Aguada beach in north Goa. The terminal to be built by UK based firm Ocean Cruise (which operates cruise liner Star Cruise) will also have a marina to dock small boats and yacht cruising along the western coast.

“Many cruise liners such as Star Cruise have expressed their interest to come to Goa, but we do not have a terminal to dock up such cruises,” said chief secretary JB Singh adding that a terminal would generate large revenue to the state apart from brining in many up-segment “high spending” tourist to Goa.

The terminal is likely to be a ‘mini township’ with hotels and bazaars in place and is likely to be ready within the next two years. With this, Goa expects to grow as a hub for travellers to dock whilst on the way to Singapore, Malaysia and Lakshadweep besides other tourist locales.

At present Goa has eleven yachts parked at the Panjim Port till September end.Ocean Cruise is to build the terminal on a BOT basis and was short listed amongst three companies that applied to state government’s global tender floated last year. An environment impact assessment study has already been undertaken by Ocean Cruise in collaboration with the National Institute of Oceanography. The government is now awaiting a business plan to check feasibility of the project.

News: 'India, China to lead in car parts supply'

(BS 09/09/2006) Mumbai - The Japanese, American, and European automobile industries are going to be mainly dependent on Indian and Chinese component suppliers in the near future, says a McKinsey & Company study.

“In the period of transition, Chinese and Indian suppliers and the global OEMs (original equipment manufacturers) are all working to position themselves for the future, as the cost imperative propels the migration of more and more parts and components businesses to low-cost countries (LCCs),” the study says.

The report points out that the era of an unequivocal dominance of global automotive supply markets by suppliers residing in western Europe, Japan and the US appears to be coming to an end.

Leading suppliers in China and India have started building their position in the global supplier industry, driven by the rapid growth in their domestic vehicle markets and a surge in global sourcing from them.

Apart from the cost advantage, Indian and Chinese component suppliers are rapidly developing into world-class manufacturers, having global customer access.

They are not only becoming important in physical assembly of proximate parts but are also becoming skilled in designing sub-systems that are integrated through technology. Some of the highly successful suppliers are pursuing aggressive step-outs towards globalisation, says the report.

In turn, they are demanding purchase price reductions from their suppliers, thus exacerbating the already cut-throat competition among supplier markets that are fraught with over-capacity.

Stricter regulations and increasingly demanding end-consumers have forced OEMs to provide more features at a time when these automotive OEMs are finding it hard to walk the “cost and productivity treadmill” to sustain their profitability, the study says.

As a result, many leading automotive suppliers of yesterday are facing extreme performance pressure and the need to find new sources of cost reduction or value enhancement, it says.

In 2004, the Vision 2015 effort for the Indian Automotive Components Industry (developed jointly by the Automotive Components Manufacturers’ Association and McKinsey & Company) had highlighted that India’s automotive components market would touch $33-40 billion by 2015, from the existing $5 billion.

News: Hyundai to set up new plant in TN

(BS 09/09/2006) New Delhi - Hyundai Motors India, the wholly owned subsidiary of South Korea's Hyundai Motors, has decided to set up a new plant in Tamil Nadu to manufacture engines and transmissions with an investment of $500 million.

The plant, which will include a foundry shop, will make aluminium cylinder blocks for the new small car, loosely referred to as the Santro's twin, that the company plans to roll out by the end of the next year or early 2008.

The new plant will have the capacity to churn out 350,000 systems a year, of which up to 80,000 will be exported to South Korea, Malaysia and, possibly, Russia. It will go on stream by 2007-end.

Some of the investment will be brought in by 20 of Hyundai's suppliers in South Korea. This is part of the company's expansion drive in the country. At present, 17 of Hyundai's suppliers from Korea are operating in India, having set up shop here along with the company in the late 1990s.

“Each manufacturer has its own strategy. We follow ours,” HS Lheem, managing director of Hyundai Motors India, told Business Standard.

Hyundai will continue with the Santro even after the launch of its twin, with both models targeting more or less the same segment. This move is on the lines of Maruti Udyog’s strategy with the Wagon R, the Zen and the Alto.

Similarly, said Lheem, the Accent, well over six years old, would continue to support the Verna, a roomier and more powerful sedan being launched on September 25.

While every other manufacturer is focusing on the domestic market, Hyundai has identified exports as the next big opportunity.

In two years, Hyundai Motors India hopes to export half of its production — compared with 30-35 per cent now — and earn 40 per cent of its turnover from overseas, as it becomes Hyundai's only global hub for manufacture and sale of small cars.

By that time, its car-making capacity in India will stand at 600,000 a year, as the second factory, with a capacity of 300,000 a year in three shifts, starts production in October next year. It is absorbing $500 million in investments.

News: Daewoo arm heads for Videocon stable

(TT 09/09/2006) Mumbai - Videocon Industries has been picked as the preferred bidder to buy Daewoo Electronics for a reported price of $700 million. Videocon had formed a consortium with the US private equity fund Ripplewood Holding (RHJ International) to take over the third largest home appliance manufacturer of Korea.

Woori Bank, one of Daewoo’s leading creditors, named Videocon and RHJ International, the holding company of US buyout fund Ripplewood, as the primary bidder. South Korean private equity fund MBK Partners was a reserve bidder.

Videocon chairman Venugopal Dhoot refused to disclose details about the bid price citing a non-disclosure agreement.

“The acquisition of Daewoo will help Videocon Industries set a firm global footprint. However, the management will take a call on the strategy if we win the bid,” said Anirudh Dhoot, director, Videocon International. If successful, the deal would mark Videocon’s third major acquisition after Thomson and Electrolux in less than two years. In 2005, Videocon, which makes televisions, picture tubes and home appliances, acquired TV tube operations of France’s Thomson for $291 million and the Indian unit of Swedish firm Electrolux for $76 million.

Daewoo was put up for sale by its domestic creditors, who own 97.5 per cent of the unlisted firm. According to media reports, a Woori Bank official said the creditors aim to sign a preliminary deal with the Videocon consortium this month.

Five bidders, including one local investor and four foreign firms, had presented final bids for Daewoo on August 17. ABN Amro, Woori Investment and Securities Company and Samil PriceWaterhouseCoopers are managing the sale. The company was placed under a debt rescheduling programme after its parent group went bankrupt in 1999 and has since streamlined its business, focusing on televisions, air conditioning units and refrigerators.

Daewoo, which competes with other South Korean brands Samsung Electronics and LG Electronics, operates six plants in South Korea and 18 overseas units.

The company posted a 94 billion won net loss in 2005 from a net profit of 30.4 billion won in 2004, according to the company's audit report. Sales totalled 2.16 trillion won last year.

The scrip of Videocon Industries today ended 1.49 per cent higher at Rs 414.65 from yesterday’s close of Rs 408.55. The stock hit an intraday high of Rs 421.

According to a sector analyst, Videocon wants Daewoo Electronics for its brand power and cutting-edge technology for LCD and PDP TVs, front-loading washing machines and two-door refrigerators.

News: FM cocksure of 8% Indian growth this year

(DNA 09/09/2006) New Delhi - Finance minister P Chidambaram on Friday confidently made three macroeconomic predictions: One, the economic growth this year will be 8% or thereabouts so as to maintain the UPA government’s record of 8% annual growth on an average.

Two, the inflation rate, which has crossed 5% for the latest week, will be contained between 4.5-5% and eventually brought down to 4%. Three, the government will maintain the sanctity of the budget, meaning it will spend within the budgeted limits and achieve the revenue collection and deficit targets.

At a news conference here, Chidambaram presented a strong report card on the economy for the first half of the year and asserted that the Prime Minister and he himself could take “this India growth story” to the world at large during their forthcoming visits abroad.

He said he does not see “any impediments” to growth as such, but is concerned over “too much of gradualisam” in India’s economic reforms process because of which “we are losing out on opportunities”.

“Gradualism has been the hallmark of India’s reforms process and gradualism is perhaps good in the long run”, Chidambaram clarified. “But sometimes I am impatient. I would personally like to see a bit more urgency injected into even that gradualism so that much-needed reforms are not put off indefinitely”, he said.

Asked specifically about the decision to put public sector disinvestments on hold, Chidambaram said he is not unduly concerned but felt the idea of disinvestment had not been properly understood.

“I am for competitive, efficient and performing PSUs. If the companies are listed in the market and if they have some private shareholding, there will be that much pressure on them to perform efficiently”, he said.

Chidambaram said the government continues to encourage foreign director investment (FDI) inflows although there may have been a decision in “one or two cases where one or two Chinese companies may have been kept out on national security considerations”.
He, however, made it clear that no legislation was being proposed to govern FDI proposals from a security angle. “I lean in favour of such investments from China. Each case must be seen in its merit and FDI should not be stopped unless there are overriding security considerations”, he said.

The finance minister conceded that the rise in the prices of essential commodities such as wheat and pulses “has pinched” the common man but he dismissed any suggestion that the high economic growth in recent years has not benefited the “aam admi,” as per the UPA government’s pledge in its Common Minimum Programme.

“There are better roads, better sanitaion, better school buildings, a rural employment guarantee law, more telephones and no hike in rail fares. All these have benefited the common man living in villages”, he claimed.

And for educated youth, there are more jobs and more industries and businesses. In the software sector alone, as many as 150,000 graduate engineers are being recruited this year and the annual intake of engineers will rise eventually to 300,000.

Column: ‘India plus China’ is better than ‘India versus China’

(DNA 09/09/2006) Mumbai - The reports of China being excluded from contracts to develop our ports comes as a surprise. This, after all, is the Year of India China Friendship, as proclaimed by the present government.

The exclusion is also inconsistent with our growingly amicable China policy over the last three years,and is strategically undesirable and unwarranted.

India and China have started to draw closer over the last few years. The first major initiative came in 2003 when Atal Bihari Vajpayee, the then prime minister, pledged during a visit to Beijing to respect China’s sovereignty over Tibet and not to allow “anti-China political activities” in India and curb the activities of Dalai Lama led Tibetan government-in-exile in Dharamshala.

This was inspired by common interests in trade, regional stability and the current threat of Islamic extremism.

That process has been continued by the present Congress-led government with even greater enthusiasm. In April 2005, after a summit between Prime Minister Man Mohan Singh and his Chinese counterpart, Wen Jiabao, the two countries announced a new ‘strategic partnership’ pledging to resolve long-standing border disputes and boost bilateral trade and economic cooperation.

China formally abandoned its claim to Sikkim and presented Indian officials a map showing that area as part of India. The two governments also agreed to address the age-old border dispute through peaceful and friendly consultations, on the basis of historical records, geography, security needs and the interests of people who live in the area.

They also signed agreements on trade, economic cooperation, technology sharing, civil aviation and other matters.

In November 2005, the two governments went further and agreed to celebrate 2006 as the year of mutual friendship.

This is why the exclusion of China from certain projects on the ground of security considerations is so odd. It shows the government’s distrust, giving a big jolt to all the recent initiatives.

One must conclude that what transpires in the ministry of foreign affairs does not reach the ministry of home affairs. The right hand does not know what the left does.

The two rising Asian powers, which together account for over a third of the world’s population, have no choice but to remain friends, given their respective needs. The cooperative relationship also has significant global implications, given their vast economic potential.

In fact, even the border conflict between the two arises from an old British blunder. The roots of the dispute extend back to the nineteenth century, when both laid claim to many remote mountainous areas in the North East Frontier but never drew a line.

The military confrontation in 1962 was an unfortunate outcome of a different perception of the Chinese leadership of those times. Significantly, however, China had then declared the ceasefire unilaterally. From time to time, both China and India have also said that they are not aggressors and have never occupied ‘foreign’ territories during their long political history of thousands of years.

The security threat from China is no more than other nations including the US. Border conflicts always are characterised by emotional issues and the reactions depend on the perceptions of those ruling the countries at a given point in time; even the 1962 incursion.

Today, times are different, and there is enough historical evidence that China has no imperialistic ambition.

But, clearly, closer ties between India and China will not be achieved without opposition, visible or otherwise, from a few other countries. Pakistan, for one, would not be happy with it.

The US and other Western powers would also feel uneasy about an alliance between two nuclear powers whose joint armed forces would in effect be the largest in the world. Add to that their growing economic success, which would further add to the discomfort of the western powers.

Friendship between India and China thus has no global appeal. The current threat perception could therefore be of foreign origin.

There are other more compelling reasons for the two countries to be not only friendly, but also culturally, socially and emotionally closer.

Social and cultural interactivity is almost a prerequisite as it would reveal to both the people their striking similarities as civic societies, in terms of social psyche, their traditional frugal lifestyle and deeply ingrained cultural traditions.

There are other vitally important opportunities for both to make IT more Asia-centric than US-centric. Wen Jiabao, China’s Prime Minister, during his visit to Bangalore said,
“If India and China cooperate in the IT industry, we will be able to lead the world. It will signify the coming of the Asian century in the IT industry.”

In the area of hydrocarbon fuels, too, the neighbours need to keep in mind the big picture - the evolution of an Asian market for crude and products with long-term supply contracts and stable prices, and, eventually, an Asian Energy Union.

Trade between India and China came to $17.5 billion in 2005, compared with about $22 billion between India and the United States. The neighbours also share interests on many key trade issues.

Tariff barriers, access to developed markets, environmental policy and patent protection are major irritants in both countries’ relations with the G8.

And they are better off being friends on either side of the Himalayas, rather than enemies. It is time is get rid of the baggage of distrust from 1962.

By P S Deodhar, President - India China Economic and Cultural Council

News: Emirates says it could invest in Indian carriers

(DNA 09/09/2006) Mumbai - Dubai-based Emirates Airline, which is rapidly expanding operations in India, on Friday said it was open to strategic investment in an Indian carrier.

“Emirates is always open to any such opportunities as and when they are provided. We will not shy away from it,” said Nabil Sultan, senior vice-president commercial operations (West Asia and Indian Ocean), Emirates. The state-owned carrier of UAE holds a 41.3% stake in Sri Lankan Airlines.

The airline currently has a code-sharing agreement with national flag carrier Air India and domestic airlines Jet Airways, Kingfisher Airlines and Indian Airlines to provide a wider network to its passenger. It offers close to 30,000 seats and 120 tonnes of cargo capacity per week from eight locations between India and Dubai.

“Indian air traffic is growing very fast. This year alone, we have added three destinations with 6,000 seats, and we plan to expand in this market very quickly. When we launched in Kolkata early this year, I was worried because of limited air traffic, but today we are logging over 70% load factor on the sector. Growth potential in India is phenomenal, provided there is capacity. We want to stimulate this latent potential by creating capacity,” said Sultan.

On Friday, Emirates announced the launch of eight-flights-a-week service to Bangalore from October 29. These flights will connect India’s IT capital to 13 gateways in the Middle East, 14 in Africa and 20 in Europe through 150, 82 and 211 weekly flights respectively.

The airline is offering promotional schemes ranging from economy fares of Rs 14,000 (return) to Dubai, Rs 38,400 to New York and Rs 20,000 to European cities. Its business and first class tickets to these overseas destinations are priced between Rs 27,000 and Rs 2.50 lakh.

Sultan said the airline is planning to next tap the market in Ahmedabad, Pune and Chandigarh. Over the last one year, the airline’s yields have been under pressure due to the entry of low cost carriers like Air Arabia, but the growth in volumes has, more or less, evened out the situation.

Sultan said the airline has discounted its fares by 20% on European routes and 5% on Indian routes over the last one year.

News: Retail tale retold - Forecasters line up optimism, players mega plans

(DNA 09/09/2006) Mumbai - The size of the organised retail sector in India is expected to touch $60-75 billion by 2011 from about $8 billion currently, says Arvind Singhal, chairman, Technopak, a retail consultancy firm.

During the same period, the overall retail pie would increase to $430 billion from about $300 billion currently, indicating that organised retail would corner 12-17% of consumer’s purse, up from under 3% currently.

A mind-numbing $22 billion worth of investment would be poured into organised retail over the next five years, against $2 billion that has been invested over the past five years.

Technopak is consultancy firm which tracks textile and retail space.

Singhal spoke to reporters on the sidelines of India Retail Forum, a retail conclave.
The company would formally present the report on Saturday.

But $22 billion investment would result in a topline of merely $60-75 billion?

“This is because initially a bulk of investment would go to the back-end and supply chain, which would improve efficiency and not add much to the sales. Impact on sales would be felt only later,” said Singhal.

Singh says there would about 40 odd organised retailers in the country, with the top seven alone accounting for $14 billion, or two-third of the investments.

Deepak Fertilisers in expansion drive

Deepak Fertilisers, which is setting up a home-improvement mall in Pune under the Ishanya brand, is in talks with an overseas player to set up a dedicated building covering a 1,20,000 sq ft, I S Narula, president & chief executive officer, Ishyana said on Friday.

The company is also toying with the idea of setting up a hotel in the adjacent plot.

“We haven’t finalised it (the hotel plan) yet. Due to the location, several players have come to us with proposals, but nothing has been finalised yet. What is immediately on the cards is the construction of a dedicated building for an overseas customer and the deal is likely to be signed soon,” Narula said.

Ishanya’s current gross leaseable area is 5,50,000 sq ft and the new building would take it up to 6,70,000 sq ft.

Ishanya is spread over 10 acres of land and the company has another 6.5 acres of land next to it, which can be commercially exploited.

Being close to the airport, a hotel project makes immense sense, and according to sources, the company has almost made up its mind in setting up a hotel once the Rs 110-crore mall project is complete.

The project has been funded through debt and internal accruals.

Inorbit to set up nine malls

Inorbit Malls, a member of the Mumbai-based developer K Raheja Corp, is planning to set up nine malls over the next three years at an investment of Rs 150 crore per mall, chief executive officer Yogesh Samat said on Friday.

The company currently operates one mall, spread across 0.55 million sq ft in Malad, Mumbai.

The new ones are coming up in cities like Navi Mumbai, Hyderabad, Pune, and Delhi. Samat said the new malls being set have 0.5 to 0.85 million square feet of gross leasable area.

Hathway’s cable TV services in Punjab

Hathway Cable & Datacom Pvt Ltd, a part of the Rajan Raheja Group, one of the largest and fastest growing cable networks in India and one of the largest MSOs (Multi System Operator) operating across the country, has currently launched its digital cable TV services in Jalandhar in Punjab.

Pantaloon Retail to invest Rs 4,000 crore

Pantaloon Retail, part of the Futures Group, plans to invest Rs 4,000 crore in expanding its retail coverage to 30 million sq ft by December 2010, MD Kishore Biyani said on Friday.

Topline by then is expected to rise to Rs 30,000 crore from Rs 2,000.

The company now has 4 million sq ft of retail space, which is seen rising to 16 million sq ft by December 2007. The company has got a board approval to raise over Rs 950 crore to fund expansion, though issue of rights issue, follow on issue and part sale of stake in subsidiaries.

Pantaloon Retail-promoted retail funds Kshitij and Horizon are developing 16 million square feet of retail space. Collectively the fund has raised $430 million, of which $85 million is the rupee fund.

News: M&M’s hybrid fare in 18 months

(DNA 09/09/2006) New Delhi - This would certainly accelerate the government’s recent move to incentivise indigenous development of hybrid vehicles.

UV major Mahindra & Mahindra says it would be ready with its indigenously developed hybrid Scorpio and a hybrid LCV over the next 18 months.

These vehicles would classify as ‘mild hybrids’, meaning, a vehicle that runs on petrol/diesel at high speeds but switches to an electric battery while idling and being driven at low speeds.

Says Arun Jaura, vice-president (R&D and product development), M&M: “We have already done a lot of work on developing the first hybrid vehicle and it should be launched over the next 18 months.

We are first bringing a mild hybrid, where the fuel engine is automatically cut off when the vehicle stops at a red light.

The thermal energy generated by regenerative braking is pumped back into the vehicle battery. When the vehicle starts again, this stored energy is used to push the vehicle at low speeds.

This technology enables efficient use of thermal energy while eliminating the need to buy an additional traction battery.”

Jaura said the mild hybrid would offer at least 10% higher fuel efficiency over the regular Scorpio and M&M plans to bring hybrids across UVs as well as light commercial vehicles.

Also in the pipeline are other forms of hybrids, including a ‘full hybrid’ which will eventually be offered across M&M’s entire product range.

The full hybrid could offer as much as 50% higher fuel efficiency compared to a regular vehicle.

M&M’s move comes even as the government is preparing a notification that could offer as much as 50% subsidy for institutional buyers of such vehicles.

At present, buyers of battery-powered vehicles are provided with 33% subsidy (which means 33% of the cost of such a vehicle is borne by the government) but no monetary incentive is available for development and sale of hybrids in the country.

News: Maxis to invest $300m for Aircel spread

(DNA 90/90/2006) Mumbai - Maxis Communications, Malaysia’s largest telecom company, plans to invest $300 million for network expansion in India.

The company, controlled by tycoon Ananda Krishnan, acquired 74% stake in Chennai-based cellular operator Aircel for $1.08 billion in January this year, against a rival bid from Telekom Malaysia.

D J Ibrahim, chief executive officer, Maxis Communications said, “We are looking to invest in the range of $300 million. The amount includes license fees for Aircel to expand its coverage to an additional 14 circles in India.”

At present, Aircel has presence in seven circles including Tamil Nadu, Chennai, West Bengal, Orissa, Assam, North East, and Jammu and Kashmir.

It has already received approvals for four new circles and would roll out services in Bihar and Himachal Pradesh by this December and Madhya Pradesh and Uttar Pradesh by the fiscal-end. Sources said the department of telecommunications has also given it the go-ahead for Mumbai and Delhi circles.

However, analysts feel it would not be easy for the company to make a dent in the already clogged Delhi and Mumbai markets, unless it went into third generation services once there is better clarity on the policy guidelines. The company can also benefit from infrastructure sharing among operators and save on capital expenditure. It also has to contend with the use of dual SIM cards as customers switch networks during promotions. Almost 20% of the subscribers in Malaysia are estimated to hold more than one SIM card, said Ibrahim.

Sources also said that the company has lined up an additional $1 billion investment over two years for expanding its operations in the country.

As on June 30, the group had 11.7 million subscribers, up 75% year-on-year from 6.66 million. This included Maxis Malaysia’s 8.47 million subscribers and Aircel’s 3.2 million.

News: Wraps&rolls unwraps global rollout plan

(DNA 09/09/2006) Mumbai - In a market place where international fast-food and restaurant chains are making a beeline for the burgeoning Indian food and beverage segment, a Mumbai-based snack food chain is doing just the reverse.

Not only that, the snack food chain that entered the Mumbai market three years ago, is all set to be a pan-India brand multiplying manifold by March 2007.

Aseem Dixit, the brainchild and promoter of wraps&rolls, told DNA Money that a private limited company christened Wrapsandrolls Foods Pvt Ltd has been instituted last year to facilitate the expansion.

“A master franchisee for the US has been finalised already and we are in the final stages of discussions for Dubai and England. The international roll-out is expected to kick-start anytime after November this year,” said Dixit.

Besides finalising the franchising agreement with the existing international promoters, Dixit said the company is in discussions with potential master franchisees from Australia and New Zealand.

Kick-starting the snack food venture with an investment of Rs 2 lakh and a kiosk at High Street Phoenix in Mumbai three years ago, the brand, wraps&rolls, currently has a presence in Mumbai and Chennai with 11 and five outlets respectively.

And with increasing interests from potential franchisees across the country, the brand is all set for a pan-India presence.

“By March 2007, we will be adding close to 80 outlets, which will be a mix of kiosks and stores with proper sit-down facility across the length and breadth of the country,” said Dixit. The new destinations that will be added to the network include Gujarat, Madhya Pradesh, Bangalore and Delhi among others.

Dixit has pumped in to the tune of Rs 75 lakh towards setting up two central kitchens in Mumbai. And to spruce up its offerings in the coming years, the company has earmarked around Rs 20 lakh towards setting up a research and development (R&D) centre on the outskirts of Mumbai.

Elaborating on the business model, Dixit said a wraps&rolls franchise costs Rs 5 lakh as franchise fees and a certain percentage of revenue sharing. The franchisor has to further invest in the region of Rs 2-5 lakh for the kiosk or the outlet (300 sq ft) based on his/her choice.

On an average an outlet can register sales of over Rs 20,000 per day and the breakeven period for an outlet is around 15 months.

On the company’s future plans, Dixit is getting set to diversify into ice-cream retailing business in a kiosk or ice-cream parlour format.

“We will be introducing a very different concept of ice-creams for the market. The kiosk is being designed at present and we have also finalised on the branding of this line of business,” said Dixit.

Christened Craemary, the roll-out is expected to happen sometime in October or November this year. The company has pumped in Rs 8 lakh in conceptualising the kiosk and the ice-cream range offering over 2,000-odd flavours will be retailed starting from Rs 30 going to over Rs 150 for a scoop.

Another development for wraps&rolls will be in the area of home delivery. The company has already acquired 32 vehicles and required manpower to launch the home delivery facility in Mumbai. The tag-line for home delivery will be ‘20 minutes or a roll free’.

News: 'India is 3rd most preferred Asian equity mkt'

(PTI 09/09/2006) New Delhi - The growth story of Indian stock market looks like it has come to stay going by a global survey of emerging market fund managers, which ranks the country as one of the favourite Asian destinations ahead of China, Russia, Thailand and Pakistan.

According to the survey, conducted by global equity research firm Standard & Poor's, India is the second most preferred market among the BRIC (Brazil, Russia, India and China) countries after Brazil.

Among the Asian equity markets, India has grabbed the 3rd position after Korea and Taiwan, S&P said in a report. The country has been placed at 9th position among the 27 emerging markets in the survey, while South Africa, Mexico, Israel, Brazil and Korea have grabbed the top five positions.

The report said, "The story for equities in emerging markets in the last couple of decades has been one of explosive growth. Not only are domestic investors in these markets finding equity investing an attractive option, but so too are investors from around the world."

News: 'India among top Asia picks'

(BL 09/09/2006) Kolkata - An international survey of 175 fund managers, conducted by Standards & Poor's, has placed India with a score of 2.8 compared to 2.5 in the case of China. It also suggests that emerging market stocks now account for a high 16 per cent of all global equities.

According to a worldwide survey, India is the second most preferred market among the BRIC (Brazil, Russia, India and China) countries after Brazil.

Among the Asian equity markets, India has grabbed the third position after Korea and Taiwan, S&P said in a report.

The global ratings major, which sought to cover aspects like market structures and regulatory and trading environments, asked respondents to rate 27 markets, using a scale of 1-5, where 5 would be the `most developed' on par with a market like the US.

The survey, which has examined the broad emerging market landscape, has further considered the roles played by government regulations on investment, public/private partnerships, structured finance and project financing.

A number of emerging nations are quickly scaling up the economic value chain, increasing the velocity at which they are changing and sometimes attracting foreign equity investment, the report, authored by Alka Banerjee, V-P, Index Services, S&P, has mentioned. It also includes the findings of the survey.

Emerging market equities are being noted by both retail and institutional investors, who are including them in their portfolios.

"Global investors are increasingly availing themselves of these investment opportunities, often higher rates of risk notwithstanding," S&P has pointed out. The report has further talked about the changing definition of emerging markets, the factors behind their growth (in terms of both size and liquidity) during the past 25 years and the reasons for the differences in the performance of various markets.

The distance still to be covered before an emerging market can be considered fully "developed" has also been mentioned. The S&P exercise has been done ahead of this year's meeting of the World Bank and International Monetary Fund in Singapore.

Here are some of S&P's observations about specific markets, including the BRIC countries:

Brazil established the Novo Mercado as part of the Bovespa exchange, where companies meeting certain rigorous standards of reporting and listing are listed.

South Africa focused on unbundling cross holdings among its companies, providing for transparency in the ownership structure.

India's trading cycle that would once extend to T (Trade day) +14 days between various exchanges, has been streamlined to T+2 days.

Russia has focused on establishing a futures exchange and stronger regulatory control.

China recently embarked on a large programme to transfer shares from Government hands to shareholders by a process of stock bonuses.

This enhanced share availability has substantially increased liquidity of the A-share market. Most locally listed shares of Chinese companies are called A-shares.

News: Stage set for HDFC realty dollar fund

(TT 08/09/2006) New Delhi - The cabinet today allowed the Housing Development Finance Corporation (HDFC), the country’s biggest home mortgage lender, to set up a $720-million overseas fund for investment in the Indian real estate.

HDFC will market the fund among banks, financial institutions, multilateral agencies and high net worth individuals in Europe, North America and Asia.

The approval is expected to bring in FDI worth Rs 3,240 crore in the real estate sector.

The Mauritius-registered and HDFC-sponsored India Offshore Real Estate Investments will invest $720 million, raised overseas, in units issued by the HDFC International Real Estate Fund (IREF).

IREF would, in turn, invest in Indian companies, an official spokesperson said after the cabinet meeting.

The rules on FDI in real estate will apply to the fund, including an embargo of three years on the repatriation of original investment.

The cabinet has also allowed the HDFC-sponsored fund to raise $30 million (nearly Rs 135 crore) from the domestic market.

Property funds are keen to join the real estate boom riding on the back of an 8 per cent growth of the economy.

The ‘Series A’ units that India Offshore Real Estate Investments would subscribe to will have a face value of Rs 1,000 each.

When news of the overseas fund reached the BSE, the HDFC scrip shot up 3.1 per cent to touch Rs 1,352.75.

Cabinet on coal

The cabinet committee on economic affairs (CCEA) today approved outsourcing of up to 20 million tonnes (mt) per annum of coal from the Bharatpur open-cast mines in Mahanadi Coalfields.

It also cleared simultaneous floating of tenders to outsource incremental overburden removal corresponding to 9 mt additional coal production for a longer duration of 10 years, an official spokesperson said.

The CCEA gave its approval to a Rs 1,389-crore proposal to convert the rail bridge over Ganga in Patna to a rail-cum-road bridge. The project will be completed in five years.

News: Indian auto czars in cash overdrive

(TT 08/09/2006) New Delhi - Indian automobile companies have chalked out a series of big-ticket investments of over Rs 18,000 crore, which will be spread over four years or so.

Tata Motors today said it would invest Rs 10,000-12,000 crore in India over the next three to four years. Speaking on the sidelines of the annual general meeting of the Society for Indian Automobile Manufacturers (Siam), Tata Motors managing director Ravi Kant said the company was looking at Russia and China for vehicle sales and component sourcing.

Maruti Udyog Limited (MUL), too, announced that it would be making fresh investments worth Rs 3,000 crore.

A year-and-half back the company had announced investments worth Rs 6,000 crore.

Next in line is Japan's Honda Motors. The company today said it would set up a second plant in India, which could involve an investment of $200 million over a period of five years.

“We are currently expanding the capacity at our Greater Noida facility to 1,00,000 units, following which we will set up a new plant with similar capacity,” Honda Siel India president and CEO M. Takedagawa said.

The Suzuki-controlled Maruti Udyog is ramping up its production keeping in mind increased demand in the local market as well as a pact signed with Nissan which will see it contract-manufacturing for Japan’s second biggest car manufacturer from 2008-09.

Suzuki chief Osamu Suzuki said, “Around 90 per cent of the new investments would be met through internal accruals while we may have to take loans for the remaining portion.”

He added Maruti’s new car plant at Manesar, which is expected to begin production soon, will manufacture one lakh units of the Swift and another 2 lakh units of a new “small car” that the company is developing in collaboration with Nissan Motors.

“Out of the production of the new small car, we will export one lakh units ourselves, while 50,000 would be exported by Nissan and the remaining 50,000 sold in the domestic market by us.”

Suzuki added the company was also in talks with Nissan for a new 2.5-lakh-unit plant which would cost Rs 2,500 crore, the location for which is yet to be decided.

He however, refused to say whether Nissan would join as an equity partner or just source vehicles.

Delphi plans big

US auto component major Delphi is planning to make India one of its global R&D hub and increase total headcount to 800 by 2008. “We are expanding our work here at the Bangalore technology centre and bringing in new work like application engineering and validation,” Delphi Automotive Systems India vice-president Prashant Saha said.

He said the company would increase headcount at its technology centre at Bangalore to 800 from the existing 500 by 2008.

News: Costa Coffee to invest Rs 150cr to open 300 outlets

(PTI 08/09/2006) New Delhi - UK-based coffee shop chain Costa Coffee is embarking on an expansion drive in India, which will see its master franchise Ravi Jaipuria Group company Devyani International Ltd invest Rs 150 crore to set up 300 outlets in the next five years.

"In the next five years, we will have 300 outlets across the country which will see an investment of about Rs 150 crore," DIL President and CEO Virag Joshi told PTI.

Asked about the funding for the investment, Joshi said the company would be financing it entirely through its equity.

The company opened 15 stores in the first year of its operations, with an investment of about Rs 15 crore, in Delhi and the National Capital Region and would add 10 to the number by December this year.

"We will have 25 outlets by the year end," he said adding that outlets would come up at Jaipur, Agra, Lucknow and Punjab.

DIL is planning to invest over Rs 20 crore in the next one year during which the chain would open 30-35 outlets in Mumbai.

"By the middle of next year, the chain, which is present only in Delhi and the National Capital Region, will enter the Mumbai market," he added.

He said the company is also weighing the option of opening outlets where stores like Pizza Hut and Costa Coffee, the franchisee of both is with his company, would be set up in a single space.

"There are models like these in the UK and we would like to try at least one such project here. But we still have to work out the details," he added.

News: Land prices in Goa to zoom

(TNN 08/09/2006) Panaji - Goa, once a haven for holidaymakers looking for a break, is now set to zoom up top retailers’ charts. The union territory will soon see an influx of major brands, with real estate giants. Not surprisingly, land prices are ready to shoot through the roof.

Goa is going through a ‘revamp’ with companies buying large spaces in its cities with ‘vast potential to grow’ to set up malls and shopping arcades. Builders like Gera developers, Parasvanath and DLF (all first time entrants to Goa) plan to develop offices-cum-shopping malls.

In addition, many branded retailers are mulling exclusive showrooms here. As a result, land value has shot up with average prices of Rs 2,500 to Rs 3, 000 per sq ft having doubled. In places like the capital Panjim, prices have increased five-fold. Land prices are expected to rise further in the next ten years.

“The Goa market is expanding very fast, much beyond our expectations,” says Sudipta Sen Gupta, senior general manager (marketing), Cafe Coffee Day (CCD), which now plans to shift its regional head office for Karnataka and Goa from Mangalore to Goa.

The company, which had initially planned to stay open only for the nine tourist months (late September to May) has received ‘tremendous response from locals’ with sales increasing to 175% of national sales. CCD plans to open more outlets, apart from setting up bases en route to Goa at places like Karwar and Hubli.

Subway too has decided to add six more outlets to its existing one at Baga beach –– a stark contrast to a few years back when coffee giant Barista shut shop soon after opening in Goa. The hosting of International Film Festival (IFFI) since December ’04 has created a ‘brand image’ for Goa, say market analysts, adding Goans are brand conscious. So, no time is wasted in ‘educating people about various products’.

IFFI, which brought the state’s only two multiplexes, has created a movie-going culture. Says Manoj Bhatia, CEO, Inox Leisure, “Flexible pricing and attractive schemes has helped sales move from 600 to 800 patrons to over 5,000 on weekends.”

Goa has the highest per capita income in India along with English speaking cosmopolitan set-up that allows people to experiment, thereby making it attractive to businessmen. In addition, the state government’s initiative to start SEZs is expected to move a large chunk of high-spending Indians from large cities to Goa.

Amar Yadav FMCG head of Vishal Mega Mart that recently opened the state’s only retail mall is overwhelmed by the response. “The spending capacity is very high here, we plan to open one more mall in south Goa,” he adds. Market analysts feel that influx of domestic tourists to Goa is driving the state’s growth story (18 lakh Indians visited Goa last year).

Indians’ familiarity with brands, coupled with lower land rates than big cities is attracting investors. But Devangshu Dutta, chief executive, Third Eyesight, feels investments into smaller places is a natural trend since expansion in larger cities has reached near saturation.

News: India Inc’s new mantra - float and grow

(DNA 08/09/2006) Mumbai - It’s time to let them fly the coop. Many Indian conglomerates are discovering that letting smaller business fly on their own can be healthy, both for the mother company and the offspring. The earlier idea of building synergy within the organisational fold is now giving way to a different thought: subsidiaries need space and independence to grow wealth.

S Subramaniam, head of investment banking at Enam Financial Consultants, an investment banker, calls this trend a “value maximisation strategy where conglomerates go on a journey to discover the (true) value of their unlisted businesses.”

Just look at the arithmetic. Mahindra & Mahindra recently listed two of its subsidiaries, M&M Financial Services Ltd and Tech Mahindra. The move has paid off in spades for the utility vehicle and tractor maker. As a group, M&M had a market cap of Rs 11,909 crore at the start of 2006. Now, the figure has more than doubled to Rs 23,971 crore. The group’s shareholder wealth has risen by Rs 6,269 crore following the listing of Tech Mahindra, its joint venture with British Telecom. And another Rs 1,955 crore came by way of the listing its non-banking subsidiary, M&M Financial Services.

The idea has spread. Companies such as Zee Telefilms, Tata Motors, Hinduja TMT and Pantaloon Retail are all said to be scrambling to list their subsidiaries. Analysts say a separate float can also lend more comfort to joint venture partners. But more than that, it’s a sign of the coming of age of the incubated business.

Says Yagnesh Sanghrajka, global chief financial officer of the Hinduja group, which last week announced plans to hive off one of its businesses: “A lot of businesses in the past were nurtured under one umbrella entity. So the market valuation of the entity did not reflect the real value of the businesses of those specific sectors.” M&M’s recent success could prod it to list more subsidiaries - especially its hospitality venture and auto components business.

“Hiving off into standalone entities allows the stockmarkets to offer better price multiples to the resultant companies,” Sanghrajka says. Such a move also helps managements to “focus better on the specific lines of business.” An example is Hinduja TMT’s cable business, which last year turned around profitably.

The realisation that a sum of the parts can sometimes be greater than the whole dawned on India Inc after India’s largest private sector company, Reliance Industries, demerged into four to settle what was essentially a family dispute resulting from “sibling rivalry”. The spilt enriched shareholders so much, it has surprised stockmarket mavens.

Subramaniam sees an additional logic for separations. In some cases the parent (company) may not have enough capital to grow faster. “But more than the capital, sometimes the subsidiary is not a core business and it makes better sense to be listed separately,” he says.

Larsen & Toubro, for example, had to be practically forced to hive off its cement business. But once it did, partly to ward off a takeover threat, the value of both businesses soared. L&T’s market capitalisation was quoting at a bargain basement rate of Rs 7,904 crore at the time of the cement hiveoff in 2004. Now, it has peaked at Rs 45,654 crore, a more than four-fold gain over two years since the demerger. Ultra Tech, the company which now holds L&T’s former cement businesses, has, under the ownership of the Aditya Birla group, also gained by improving margins. It’s market-cap is now larger than the unified L&T in 2004 at Rs 9,903 crore as on September 6.

Tata Motors is also expected to hive off as many as four subsidiaries by diluting part of its stake to the public through an initial public offering (IPO). HV Axles and HV Transmissions will be the first off the block as the Tatas undertake a larger corporate restructuring programme to tap alternate options of raising resources to part-fund expansion plans.

Company officials say that they are “open to considering the induction of strategic partners or make a public float for the two subsidiaries to unlock value.” No timeframe has been set for the hiveoff, but analysts say the listing of the two subsidiaries makes sense. Market sources say Tata Technologies and Telco Construction Equipment are two other Tata group subsidiaries ready to float.

Kishore Biyani’s Pantaloon Retail is getting ready to fight the entry of heavyweights like Reliance and Bharti in retailing by hiving off three of its subsidiaries — Central Depot, Home Solutions and Future Media. This could be a strategy for raising resources even as the parent company may be chary of diluting more equity than necessary.

Reliance, which listed Reliance Petroleum in May, is incubating its retail venture currently. But Mukesh Ambani is expected to float separate listed entities for Reliance Retail and the special economic zone businesses when the ideas take concrete shape.

Hinduja TMT has already declared its intention to demerge its information technology and IT-enabled services undertaking into a separate entity called HTMT Technologies. The new entity will be more aggressive in making acquisitions abroad.

Another example is Aditya Birla Minerals, the mining subsidiary of Hindalco with mining assets in Australia. The Australian bourses give better valuations to mining firms than Indian ones and the company has had a great run since listing in July in Sydney.

In the near future, the public issue (IPO) markets may also see a slew of insurance subsidiaries of banks and non-banking finance companies getting listed. ICICI Bank and HDFC will look at unlocking value from their insurance subsidiaries, ICICI Prudential and HDFC Standard Life.

HDFC is also eyeing an IPO for Intelenet, a joint venture business processing outsourcing (BPO) with Barclays. A listed unit will be able to bring better focus and raise funds in the markets for growth, it is believed.

News: 'Indian goods exports may cross $126 b mark'

(RTR 08/09/2006) New Delhi - India's exports of goods could exceed the target of $126 billion for the year to March 2007 if recent trends continue, Commerce Minister Kamal Nath said on Thursday.

Exports of merchandise were up by 23 per cent to $103 billion in 2005/06 from the year before. In July they brought in $10.18 billion. The government is expected to release August's trade data next week.

India's engineering services exports were also on the rise and could bring in $40 billion a year by 2020, Nath said in a statement. The figure does not include India's booming software exports.

"Engineering process outsourcing (EPO) services from India will be a key element of the country's export strategy, and the development of the EPO sector will have a far-reaching impact on India's engineering industry as a whole," he said.

Engineering goods exports from India crossed $5 billion in the first quarter of the current financial year, showing growth of 20 per cent, he said.

But it the sector has the potential to grow at 30 per cent annually, the minister added.

News: Tata Group to set up SEZ in Orissa

(BL 08/09/2006) Bhubaneswar - The 2,500-acres of land that Tata Group had acquired at Gopalpur in Orissa to set up a steel plant several years ago will be used for setting up of a Special Economic Zone, the Chairman of the Group, Ratan Tata, said here on Wednesday. "We have approached the Central Government to re-designate the land to be used for developing of a Special Economic Zone," Tata told presspersons after his meeting with the Orissa Chief Minister, Naveen Patnaik. The proposed SEZ will house an Electro-Metallurgical Industrial Complex. Many world-class strategic developers have already shown interest to invest in the proposed project. The encumbrance free land, with rehabilitation completed, has been lying unused after the company dropped its proposal to set up a steel mill due to problems pertaining to infrastructure. Jaipur project The company, however, is seriously pursuing its proposed 6 million tonne (mt) steel plant project at Kalinga Nagar in Jajpur district. The work on the project had been delayed after the firing incident on January 2. The memorandum of understanding for the Kalinga Nagar project was signed in November 2004. The company plans to set up the steel mill in two modules of 3 mt each with a total investment of Rs 15,400 crore. As the head of the Investment Commission, Tata also held a meeting with the Chief Minister and discussed about the new investments that Orissa has been attracting in the recent years. The Investment Commission Member, Deepak S. Parekh, also attended the meeting. The investment proposals, including the steel projects of Posco-India and Tata Steel and thermal power projects of Reliance Energy and the AES Corporation, were discussed in the meeting. A Development Centre of Tata Consultancy Services, and Ginger, a `smart basics' hotel set up by a Tata Group company, was inaugurated by the Chief Minister in the presence of Tata.

News: AIG to foray Indian realty, consumer fin, asset mgmt biz

(BS 07/09/2006) Mumbai - Global insurance and financial services firm American International Group, Inc (AIG) is set to make an entry into three new businesses in India - asset management, consumer finance and real-estate development.

The group, which is awaiting license from the Securities and Exchange Board of India (Sebi) for its mutual fund operations, is ready to hit the market with equity and fixed income products soon after getting the regulatory clearance, Sunil Mehta, country head & CEO of AIG, India.

The group has appointed Ravi Mehrotra as regional head of AIG Global Investment Group Asia Asset Management Company. He was previously president of Franklin Templeton AMC.

Saurabh Santhalia, who was head of DSP-Merrill Lynch MF, has been made CEO of the proposed AIG AMC. "We will be a responsible player in the Indian financial services sector," Mehta told BS.

AIG, which is already into life and non-life insurance, private equity, software development and aircraft leasing business in the country, is also entering the real-estate development area in the country, building projects in partnering with local developers. As per the plans, the group is looking at "hard core real estate development" by building commercial, residential, hospitality and integrated townships.

News: Spencer`s to open 60 more outlets in India

(BS 07/09/2006) Kochi/Chennai - RPG Retail, owners of Spencer’s showrooms, is planning to set up 50 -60 more outlets on a pan-India basis.

The group has already opened 69 showrooms in the country including the one at Kochi, which was inaugurated recently.

Addressing a press conference on the occasion, J H Mehta, president of Spencer’s Retail, said that 10 more outlets would be opened in Kerala soon. The group has identified Thiruvananathapuram, Thrissur, Palakkad, Kottayam, Thiruvalla, Kozhikode, Guruvayoor, Allappuzha, Kollam, Alwaye and Kochi for the new showrooms.

At present, Kerala has five Spencer’s showrooms – three in Thiruvananathapuram and two in Kochi.

Column: An investment fund for India

(BS 07/09/2006) New Delhi - We must build a GIC-type fund for investment.

A general reserve …

There are at least four reasons for India to create a general reserve fund without any further delay. The first is the motivation for other country funds: diversified investments with good returns and reasonable safety are much better than government bonds with low returns—especially when they are bonds in America or some other country. There is one exception based on regional self-interest, and that is an investment such as in Asian bonds, if they were to develop as a viable alternative. Why provide cheap capital to others, instead of applying the lessons of well-run national funds over the last 30 years and profiting thereby?

The second is the rationalisation of the government’s holdings in public sector undertakings (PSUs), and distancing the government from direct management. Aggregating state holdings in an investment fund will facilitate less day-to-day political interference in PSUs as various committees have recommended, most recently the Arjun Sengupta Committee on Public Sector Enterprises. Although not strictly necessary, this could encourage a more public-interest oriented policy perspective for government, allowing for a broader, non-partisan approach. This would enable the strengthening of state-owned enterprises on conventional business lines, if possible.

… And an investment fund

Third, some of our burgeoning currency reserves (and future surpluses?!) could be channelled into an investment fund. Just 10 per cent of India’s foreign currency reserves will make for a $16 billion corpus. All we need thereafter are judicious investment decisions (!), the returns from which could finance development and infrastructure. Financing infrastructure with primary reserves, however, is definitely not advisable (see “FX Reserves & Infrastructure”, Business Standard, June 16, 2005).

These returns can be sizeable. Singapore’s Government Investment Corporation has funds about the same as our currency reserves. Under the chairmanship of Lee Kuan Yew, it earns 9.5 per cent, well over returns on our reserves, and has been doing so for 25 years. In 2005-06, the RBI had average foreign currency reserves of Rs 629,067 crore ($136 billion), and earned Rs. 25,569 crore (just over 4 per cent). Another 5.5 per cent would have added over Rs 34,000 crore.

With low inflation and interest rates The fourth reason has major implications for domestic investment: investing overseas would reduce our excess liquidity if the RBI took appropriate measures. If it could lower inflation through fine-tuning reserve ratios, jawboning, and well-applied lending norms (easily said, but so very difficult to do!), this would enable lowering interest rates. With that, we could ride the magic carpet of cheap capital, as Japan has done.

We have to make several critical choices though, once we choose this path. For instance, if inflation dropped but interest rates were not reduced, there would be no magic carpet ... Another decision is whether to make “strategic investments”, like the Kuwait Investment Authority or Singapore’s GIC, or to “decide that national interests should not influence investments, or to use a combination of financial and policy considerations. Alternatives include diversified investments on commercial considerations, as with Norway’s Pension Fund, or encouraging private sector investments overseas as an adjunct to foreign policy, as with America’s Overseas Private Investment Corporation. While a recent editorial in this newspaper referred to OPIC having a minor role in US FDI, OPIC’s facilitation of $164 billion in 35 years would be significant for India. A related choice is whether to manage by legislative committee as in Alberta’s Heritage Fund, or through financial managers as in Norway’s Pension Fund.

These dilemmas should not dissuade us from grasping the nettle in our best interests. In a way, this calls for a future orientation that we have long bucked against. Witness our preoccupation with building to meet historical capacity and always falling short, whether in energy and power, or in transportation or in communications, schools, sanitation … It is the same when we wrangle over sectarian rights for more of a share of what is available, reflecting a rationing-and-shortage mindset, instead of concentrating our efforts on creating more.

A strategic approach demands nurturing a long view, a capacity for deferred gratification, and, most of all, non-partisan collaboration for common goals. Equally, it requires the application of Deming’s “right knowledge”, as against the naïve assumption that good intentions will do. That is, we need to adopt a multi-disciplinary, collegial approach, with robust project management from goal setting to execution. Further, let us not be carried away by free-market rhetoric and naïve disregard for the realpolitik of public-private partnerships in world markets. This shows in suggestions that the World Bank’s Multilateral Investment Guarantee Agency already supports investments by smaller companies, or that our government should not champion national interests in investments. Ask yourself, why does the US have a national fund to promote private sector investment (OPIC)? Recognise that governments support national interests.

Alberta’s and Norway’s Funds It is instructive to consider the different approaches of some funds and their results. Two examples of similar size of capital sources and time frame are Alberta and Norway.

Created in 1976, Alberta’s Heritage Fund was set up with an overlay of political decision making. The plan was to allocate 30 per cent of annual energy royalties. An economic slump in the 80s led to this being cut to 15 per cent, with the balance going to fiscal expenditure. As the economy worsened, the allocation was cut altogether, with all the capital being used to develop infrastructure, provide incentives to the energy sector, and keep taxes low (including maintaining zero sales tax). The Heritage Fund, now a little over Canadian $14 billion, has averaged returns of 5.7 per cent annually, somewhat under half that of more successful Canadian pension funds such as the Ontario Teachers’ Fund.

Like Alberta, Norway initially spent its oil royalties on social programs and economic stimulation. There were sometimes mixed results, because the kroner appreciated, depressing Norwegian exports. About 10 years ago, Norway changed its stance, setting up the Petroleum Fund, later renamed the Pension Fund, which invests with geographic and sectoral diversification being key criteria. It is now Canadian $165 billion, with average returns of around 4 percent because of its conservatism. While governments still withdraw funds for expenditure, there is a (tough) formal process, and responsible governments limit withdrawals to no more than the returns. Norway’s strategy of putting everything into the fund and living off the returns is working. By Shyam Ponappa

News: India ranked world's 4th best holiday haven

(TNN 07/09/2006) New Delhi - India seems to have made its mark on the world travel map. Overseas holidayers and travellers have put India in the big league, ranking it as the fourth most attractive and satisfying holiday destination in the world. It stands ahead of several developed and traditional hot spots like US, France, Singapore, Thailand and South Africa.

According to the 2006 Conde Nast Readers’ Travel Awards, East was the flavour of the season among overseas holidayers, accounting for three of the top five slots.

Thanks to the government’s high-decibel ‘Incredible India’ campaign in the overseas markets, India has been climbing up steadily over the past few years. This year, it has vaulted to the fourth spot from 10th in 2003.

“This first class performance is largely because of the hard work and enthusiasm India has put into marketing itself to outside world. It is also because, as a leisure destination, India delivers what it promises: A fascinating culture, superb quality in resorts and an unforgettable experience. No wonder, India is on every sophisticated traveller’s lips. It has the potential to take the crown in the next few years,” said publisher Kate Slesinger.

India scored mainly on account of its hospitality facilities — including quality spas and hotels. Industry watchers said its growing air connectivity helped India move up the ladder. “India has now become far more accessible than it was even two years ago. Growing air links, government focus on tourism and a surge in quality hospitality properties have helped make a trip to India very satisfying for most of the holidayers,” said an analyst.

“We are focusing on infrastructure to create a unique experience for tourists and are confident that in coming years, India will emerge as the No. 1 tourism destination,” said tourism minister Ambika Soni.

News: 'India is top biz reformer in South Asia'

(TNN 07/09/2006) New Delhi - India is the top reformer in South Asia, according to the annual Doing Business Report, issued by the International Finance Corporation (IFC), the private equity arm of the World Bank.

The country has also got a pat on its back for sharply reducing the number of days it takes to start a business from 71 days in ’05 to 35 in ’06. But it still lags far behind the countries that have made it easy for business to set up shop, according to the annual survey that ranks 175 countries on the business friendliness of their policies.

Overall, India has improved its rank to 134th position globally from 138 last year. But this is still far lower than China’s rank at 93rd position. In South Asia, Pakistan has a far better rank at 74 while Bangladesh is placed at 88.

Globally, Singapore is the easiest place to do business, as per the report, followed by New Zealand, the US and Hong Kong.

Co-author of the report, Melissa Johns, Investment Policy Specialist at IFC, says improvement in business regulations creates jobs. “By making it easier for formal businesses to create more jobs, women and young workers benefit the most. Both groups account for a large share of the unemployed,” she said.

The five major reforms that put India in the top slot in South Asia include easing access to credit through making collateral simpler, new risk management procedures in customs and reforms in stock exchange rules that toughened investor protection.

But the bugs that affect the India story are the massive delays in enforcing contracts. The IFC report claims India is at the bottom of the global pile here, ranking 173 out of 175 countries surveyed. It takes about four years, 1,420 days, to get a verdict and costs 35.7% of the claim amount.

Businessmen have to make 59 trips to pay their tax dues, with the total tax rate coming to 81.1% of the total profits of the business. And the number of licenses still required to run a domestic business costs a whopping 606% of the per capita income.

Worldwide, the top reformers were Georgia, Romania, Mexico, China, Peru and France to mention a few. India stands at the 17th position. The report has lauded the cut-back in the corporate income tax rate for India from 36.59% to 33.66%.

Also, for the first time, Africa made to the top three among reforming regions, after Eastern Europe and the OECD countries. Two thirds of African countries made at least one reform. Some of the reforms eliminated a requirement to obtain government consent to transfer property, reduced minimum capital for start-ups and introduced electronic data interexchange and risk-based inspections at customs.

Overall the report finds that the greatest remaining obstacles in the South Asian region are slow courts and rigid labour laws.

In Bangladesh, enforcing commercial contract through the courts takes 50 procedures and 1,442 days. In Sri Lanka, an employer must pay 178 weeks in severance to dismiss a redundant worker.

News: Eicher looking for partners for Royal Enfield biz

(PTI 07/09/2006) New Delhi - Eicher Motors on Thursday said it was scouting for partners for its subsidiary Royal Enfield, which was hived off in July.

"We are looking for both financial and technical partners for Royal Enfield but we have not worked out the details as yet," Eicher Motors Managing Director and CEO Siddharth Lal said on the sidelines of SIAM Annual convention.

He said the company was willing to dilute its stake in Royal Enfield but "we would like to retain the majority to run the company".

Earlier in July, the company's board had decided to hive off its Royal Enfield unit and the proposal got the requisite shareholders approval last month.

News: M&M looking for acquisitions in European mkts

(PTI 07/09/2006) New Delhi - Mahindra and Mahindra on Thursday said it was looking for acquisitions in the auto components space in the European markets.

"We are always looking out for opportunities and we are trying for acquisitions in the European markets in the auto components space," M & M managing director and Vice Chairman Anand Mahindra said on the sidelines of the SIAM Annual Convention.

He, however, declined to comment on how big the size of the acquisition will be.

Mahindra and Mahindra, which had bid for the Romanian government's stake in the Brasov-based tractor manufacturer Tractorul, has not given up on the acquisition.

"The Romanian state authority is reworking on the Tractorul privatisation process and we are waiting to hear from them and are still hopeful of an acquisition," he added.

News: Hyundai plans to make India an export hub

(PTI 07/09/2006) New Delhi - Hyundai Motors India (HMI) is planning to export 50 per cent of production by 2008 in line with plans to make the country an export hub.

"We are exporting 33% of our production now, which we will increase to 50 per cent by 2008," Arvind Saxena, Vice-President (Sales and Marketing) of HMI, said on the sidelines of a SIAM conference.

Saxena said exports would be increased by enhancing production capacity at its plant in Chennai.

HMI currently has a capacity of 3 lakh units per annum, and is in the process of doubling capacity to 6 lakh units per year. Saxena said the company is targeting an export figure of one lakh plus units for the current financial year. Last year, the company achieved exports of around 92,000 units.

News: Bharti to choose foreign retail partner

(RTR 07/09/2006) New Delhi - Bharti Enterprises Ltd, a diversified telecomm conglomerate, is close to finalising an overseas partner for its proposed retail venture, the company chairman said on Wednesday.

Bharti is in talks with US-based Wal-Mart, Britain's Tesco Plc and Carrefour for its retail plans.

Sunil Bharti Mittal said Tesco is a strong contender. "We are coming close to finalising the partner," he told reporters.

It will happen by the end of this month, said Mittal, who also runs India's top mobile services provider, Bharti Airtel Ltd.

Once the partner is finalised, the retail venture will begin operations early next fiscal year starting April 2007, he said.

News: Indiabulls raises stake in real estate units

(RTR 07/09/2006) Mumbai - Indiabulls Financial Services Ltd, an electronic brokerage and property firm, is raising its stake in three real estate units to 51 per cent from 40 per cent by converting debentures, the company said.

The company has decided to convert its aggregate Rs 142 crore ($ 30.8 million) debenture holding in Indiabulls Infrastructure Ltd., Indiabulls Properties Pvt. Ltd. and Indiabulls Estate Ltd., it said in a statement late on Wednesday.

Investment company Farallon Capital, with assets worth more than $17.5 billion, will have a 49 per cent stake in all the three real estate companies after the conversion by Indiabulls.

News: Going bankrupt in India is still tough to do

(DNA 07/09/2006) New Delhi - First the good news. Starting a company in India has become easier, says the Doing Business, 2007 report, an annual publication of the World Bank and its private sector lending arm, the International Finance Corporation. The process now takes 35 days against 89 days in 2005.

But the bad news remains. India comes last among 175 countries in terms of efficient bankruptcy (closing a business takes 10 years) and is third from the bottom in enforcing a simple commercial contract (56 procedures and four years). Overall, though, India has improved its ranking in ease of doing business, from 138 in 2006 to 134.

What did India do to make starting new businesses easier? The ministry of company affairs’ MCA-21 initiative, for one, which provides a single window for online filing of various forms relating to registration of companies. That apart, notes Rahul Garg, executive director at PricewaterhouseCoopers, some regulatory approvals have been put on the automatic route and various tax-related procedures outsourced.

“The MCA-21 initiative has been a huge change, cutting down registration time and making touts redundant,” commends Anil Bharadwaj, secretary general of the Federation of Indian Small and Medium Enterprises. This was a promise the government had made when the Doing Business in 2006 report kicked off a row over India’s low ranking.

The government kept its promise on this one, but other much-needed reforms are completely stalled.

Closing a business is fraught with problems. Countries where it is easier include Chad, the Czech Republic, Turkey, Ecuador, and Mauritania. A Companies (Amendment) Act for, inter alia, setting up a National Company Law Tribunal (NCLT) to replace the Board for Industrial and Financial Restructuring (BIFR) and speed up the liquidation of companies was passed by Parliament in December, 2002, and received presidential assent in 2003.

Then the Sick Industrial Companies Act (SICA), under which BIFR had been set up was repealed and presidential assent given in 2004. But both these acts have not been notified, because the formation of the NCLT was challenged in court and stays there. So sick companies continue to be referred to the BIFR (which alone can recommend winding up of companies) and cases pile up there.

“This is the only case of a body being kept alive even after the final rites have been done,” rues Kishore Soni, chief executive, Sircons.

Or take the issue of reforming the judicial system, which Bharadwaj blames for the trauma of enforcing contracts. When contracts can’t be enforced through courts, firms resort to other means. “There is a cost attached to this and it affects competitiveness,” he contends. Countries that did better than India in enforcing contracts include Sierra Leone, Mozambique, Congo and Chad. The only two countries to do worse were Bangladesh and Timore-Leste.

Garg feels some of the blame lies with the litigation-happy businessmen themselves. “Companies are just not willing to accept arbitration awards and keep appealing,” he rues. The typical life of an income tax dispute case is 15-20 years. Enforcing court awards is even more difficult, with enforcement agencies not being very effective, he points out.

The report identifies reducing tax rates and the administrative hassles that businesses endure when paying taxes as the second most popular reform. The only reform against India’s name is the shift to VAT.

But Vivek Mehra, executive director at PwC, feels this is a step in the right direction but until a national VAT or goods and services tax is introduced, state VAT alone won’t helped integrate the country as a market.

The various state-specific indirect taxes will be a major irritant for a pan-Indian company. There’s also the lack of transparency in tax administration. “The taxman is unfriendly and the tax policy is not business friendly,” he says.

The low ranking of India in Doing Business in 2006 perhaps stung the government into speeding up the MCA-21 Initiative. Industry is hoping the lowest ranking on bankruptcy procedures provoke it to act on this front as well.

News: ‘The greatest guarantee investors have is that India is a democracy’

(DNA 07/09/2006) Hong Kong - On the sidelines of Euromoney’s Asia-Pacific Infrastructure Congress in Hong Kong, DNA Money spoke to Arvind Mayaram, joint secretary, department of economic affairs, ministry of finance, on a range of issues relating to infrastructure projects in India. Excerpts from the interview:

What is the level of foreign investor interest in India’s infrastructure projects?

There is a lot of interest: investors recognise there are a lot of opportunities in India. But there are also a lot of questions. There is still a lack of information on the legislative and regulatory frameworks, the availability of finance, and the kind of operational issues that may come up. Therefore, for interest to be converted into investments, we must make greater efforts to educate investors about the Indian system.

Far more than in China, for instance, the rule of law holds in India. So, why does this concern linger?

Even in the best of investors, there is a degree of ignorance about political systems. Investors, especially from the developed countries, have taken their political systems so much for granted that most of them don’t dwell on the fundamentals of their own political systems. When they look at countries like India, they are befuddled by what they consider the chaos in the political system.

There is a distinction between a very stable government and a very stable political system. India has a very stable political system. This is an aspect that most investors forget. From 1991 onwards, there have been different shades of government, but there is consistency in policy. There has been no major cataclysmic change in policy, which shows the stability of the political system. There may be ideological differences on issues, but there is only a spectrum of 5% left and 5% right.

Secondly, the Indian system may take longer to respond, to take diverse shades of opinions and build a consensus. But having done so, it is cast in stone. When we say that as far as systems and policies are concerned, investors can rest assured, it is because of this strength of consensus that underlies every decision of the government.

To my mind, the greatest guarantee an investor has in India is that the system is a democracy, and the rule of law is above everyone else.

Is the investors’ concern also an overhang from the collapse of the Dabhol power project?

Of course, Dabhol had an effect, but it also showed up a problem of credibility even on the part of the private party. And the collapse of Enron validates that.

Even now, if the private sector thinks it can have its cake and eat it too, it will be very difficult in India. In India, you have to do business as business, not plunder. I may sign anything I want, but the courts have the authority to judge if it’s within the law and the constitution. It is subject to public scrutiny, so you’d better keep your nose clean. That’s how it is in the US too, where the level of disclosures is stringent.

Anybody who wants to do serious business will find India a good place to work in, and get good returns. But if you want to be a fly-by-night operator, India is not the place.

In hindsight, however, it was good that Dabhol happened because it immediately pitch-forked us into a new paradigm. But that’s already changing. Now, more and more investors are coming in. Over time, when they start making money, they will be the real ambassadors who can tell the world that things work differently here.

Foreign investors frequently bemoan the absence of a deep enough and mature enough debt market in India.

The government has done much to deepen the debt market. The establishment of the Infrastructure Development Finance Corporation (IDFC) is one of them. In India, most of the debt paper in the market is for short tenures: 5 to 7 years. Appetite for long-term paper isn’t just about creating that instrument. We also allowed the ADB to raise rupee funds from the Indian market through issue of 20-year bonds. ADB has successfully raised two tranches of $100 million each.

These attempts to deepen the debt market will probably be followed by other intermediaries — commercial banks and so on. Once you have a fairly large number of players, the second stage of debt market will emerge. It is a process of evolution.

To what extent has the Viability Gap Funding (VGF) scheme helped enhance investor interest in infrastructure projects?

The VGF is a new scheme, and is fundamentally sound, because it takes into account a pragmatic issue: the capacity to pay.

In India, since we’re looking at inclusive growth, infrastructure should be available to everyone, and therefore the capacity to pay is a critical consideration. If you don’t do that, you could have highways on which no vehicles travel, airports where no aeroplanes land. But then if your tariffs are pegged low, you won’t get good returns. The government therefore steps in and says: we’ll give you the chance to bring your project cost down, and get better returns.

But the VGF scheme also enforces a lot of discipline. We ask for a number of things a priori: it should be a public, not a private, project; the tariffs should be determined up-front; it should be transparently bid out; the concession agreement should be known to everybody before the bid-out; the bidding process must be in a particular manner. When you’re asking for that kind of rigorous discipline, it takes time to develop projects in that format. But once a pipeline is built - which is what we’re trying to do - it will come to a takeoff stage.

We believe it will take about two years for projects to be conceived under the VGF and for them to fructify.

Even a couple of years ago, there was a proposal to dip into our foreign exchange reserves to fund infrastructure projects. But today, it appears, money isn’t a problem, but finding bankable projects is.

The RBI had some reservations on the proposal to use foreign exchange for projects; we also don’t believe there is such a shortfall as to require a major policy change. We haven’t found any project not being implemented for want of funds.

Till now, most public projects weren’t conceived in the way a bankable project has to be. But that’s changing.

News: Aegon to enter Indian life assurance market

(IANS 06/09/2006) London - Dutch financial major Aegon is to expand into India's life assurance market, company sources here said.

The Edinburgh-based Scottish office of the company recently signed an agreement with Indian conglomerate Ranbaxy Promoter Group to build an insurance and asset management business in the subcontinent.

Otto Thoresen, the chief executive of Aegon, UK, will draw together a management team from the firm's Edinburgh office to develop and manage the India venture, the company said. The team will include 12 senior managers from finance, actuarial, underwriting and regulation divisions led by programme manager John Mungall.

The tie-up with Ranbaxy will give Aegon access to 150 offices run by Religare Enterprises, Ranbaxy's financial services subsidiary. It also reportedly has nearly 300 partner locations.

Thoresen said: "Being given responsibility for the launch of Aegon's India joint venture is a great accolade for our UK team and reflects the growing importance of the UK within the worldwide group."

Aegon is one of a number of companies pushing into the Indian market. Standard Life currently has 26 percent of a joint venture with Indian banking group HDFC and intends to raise its stake to 49 percent when the Indian government grants regulatory consent.

Thoresen said: "The opportunity for our staff to develop their expertise in an international environment is a real benefit of being part of a global organisation."

Aegon, UK, has 45.2 billion pounds in assets under management and employs around 4,000 staff, 2,700 of them based in Edinburgh.

News: Sabre Capital to close PE fund next month

(TNN 06/09/2006) New Delhi - Rana Talwar-promoted Sabre Capital will close its private equity fund in the next one month. The fund, called the Sabre Abraaj Private Equity Fund, set up in partnership with a Dubai-based private equity firm, Abraaj Capital is expected to cross $300m.

“With the kind of commitments that we have got, the fund will cross at least $300m in corpus and will close in the next one month,” said Rana Talwar, chairman, Sabre Capital. The fund, which will primarily focus on the Indian market, will look at investing in mid-cap companies in the range of $20-35m.

“We don’t want to do big-ticket single deals, but rather invest in growth-oriented mid-sized companies,” Mr Talwar told ET. In fact, over the next three months, the fund is planning to start investing in Indian companies.

The fund had started due diligence and the process of investments would begin by December, Mr Talwar added. Real estate, retail, pharmaceuticals and bio-chemicals are the sectors the fund is currently putting a focus on.

The funds have been raised through institutional investors from West Asia, Europe and Asia, and road shows are being conducted all across the world.

News: Indian cos beat PEs at their own game

(TNN 06/09/2006) New Delhi - Indian companies on the prowl are beating the pros at their own game. The former looking for acquisitions in Europe are facing tough competition from global private equity players, but are often getting the better of them.

Take the case of Ranbaxy. In most of its four acquisitions in Europe this year, it found itself in the race against private equity funds. “We always face competition from PE firms and they generally are willing to pay a higher price than us. But the sellers realise that we will add higher value to them as compared to financial players,” says Ranbaxy CEO Malvinder Singh.

In the case of its largest ever acquisition, Terepia of Romania, the bids of private equity funds were higher than Ranbaxy’s but the seller, who was a buyout firm itself, decided to go with the Indian company.

But Ranbaxy is not the only example. Sources say that even in the case of Dr Reddy’s $570 million acquisition of Betapharm, the pharma company had to face competition from private equity majors. In other deals such as Tata Technologies’ acquisition of Incat International and Amtek Auto’s buyout of Zelter Gmbh, Indian companies had to ward off aggressive PE firms. United Phosphorus, during its successful bid for the Netherlands based Adventa Seeds, too had to counter competition from international private equity firms.

Investment bankers agree that this phenomenon is being increasingly observed in Europe. “Indian companies often compete for assets in Europe with PE firms. In Europe, the secondary and tertiary buyout market is well developed and PE funds often buy from other PE funds,’’ says Aditya Sanghi, country head, investment banking, Yes Bank.

Adds Rajiv Memani, CEO, Ernst & Young India: “Indian companies are a hungry bunch in Europe. And increasingly they come face to face with PE players in deals, and compete successfully against them.” While there have also been instances of Indian companies losing out to PE funds, the latter has been assisted by some external factors.

“In the last 6-8 months the interest rate in Europe has gone up, and easy availability of money is now a thing of past. So the PE funds have to re-calculate their equations in order to generate profits for their leveraged buyouts,” says Mukul Nag, VP ICICI Securities.

In addition, there have been instances where sellers have preferred Indian companies as they are less likely to destabilise existing management as compared to PE players. Indian companies often new to Europe like to retain the top management who are well versed with the company and the business environment. This is a factor that works in their favour.

The trend of domestic companies facing competition from PE players is being accompanied by another trend—that of the seller in many cases being PE funds. In addition, an interesting development is the new-found confidence of Indian companies. Now they don’t back off even if valuations are higher or a bit stretched.

Europe is an increasingly becoming a favourite hunting ground for Indian companies. In 2005, there were 50 M&A transactions in Europe compared to 38 in North America, and the trend continues in 2006. Firms like Ranbaxy, DRL, Aban Loyd, Videocon, and Suzlon have all made big ticket acquisitions in Europe in recent months. Simultaneously, private equity buyout activity has increased in Europe, with the continent accounting for nearly 68% of all PE investments in 2005, according to European Private Equity and Venture Capital Association.

News: Taj mulls JV with HK realty behemoth Sino Group

(TNN 06/09/2006) Bangalore - Taj Group's big moves on the global scene continues. Indian Hotels Company Ltd (IHCL), which runs hotels and resorts under the Taj brand, is exploring a joint venture with the Hong Kong-based realty and hospitality behemoth Sino Group (or its allied entities) for tapping opportunities in the Far East market.

The early discussions hinges on Taj managing some of the assets developed by Sino Group, which runs a chain of properties in the South Pacific region. Sino owns and operates about seven properties in the region, including Fullerton Hotel in Singapore and Conrad in Singapore, which are in the luxury segment.

Depending on the progress of talks, Taj could pick up an equity stake in a JV with HK$4.15 billion Sino Land Company, a Hong Kong-listed investment holding entity, or Far East Organisation, a Singapore-based sister company, sources said. When contacted, Taj Group declined to comment. It is learnt that both Taj and Sino could come together in developing new luxury as well as 3-4 star hotels in the region, including China.

Sources said the negotiations also pointed to Taj taking over the management of Singapore's Fullerton Hotel. "But with Fullerton being a consistently good performer, there is the question of what additional value Taj brings to the table in the event of it taking over the management contract," sources added. In context, it must be mentioned that Sino's Conrad Hotel in Hong Kong, the other top performing asset, is currently managed by Hilton.

Meanwhile, Sino Group, a mixed use developer, has been eyeing opportunities in the emerging hospitality markets like China, Vietnam and India. Besides the possibility of working jointly in some of these markets, the talks could also take the shape of Taj joining hands with Sino's sister company, Far East Organisation, for developing high-end service apartments in India, sources said. It must be mentioned Taj is currently not present in the booming service apartments segment, and Far East Organisation has specialised interests in service apartments and corporate housing.

Rs 1200 crore IHCL has been stepping up Taj's international presence in recent times and is currently in the midst of boosting it further though acquisitions in key markets like US and exploring strong business relationships in other emerging markets. It has identified South East and Fas East Asian markets as a big potential opportunity in its overseas plans.

News: FDI tightrope - Govt sours South African co's retail dish

(TNN 06/09/2006) New Delhi - With political criticism against FDI in retail trading weighing heavy, the government is cautious with proposals. The Foreign Investment Promotion Board (FIPB) has rejected South African cookware major AMC Cookware’s proposal to sell imported branded cookware through its 100% subsidiary.

The company proposed to target customers through agents but execute the actual sale directly. FIPB rejected the proposal since it amounted to retail sale though the customers were roped in through agents. “Since the applicant is for a 100% subsidiary, it is not eligible to enter retail trading as per Press Note 3 of 2006,” the board ruled.

The company was given an approval to set up a wholly-owned subsidiary with 100% equity participation in January ’00. The direct selling agents of the company were to get commission for identifying customers. The commerce & industry ministry opposed the proposal.

Officials said the proposal by AMC Cookware to sell branded cookware and tableware through its Indian subsidiary met a dead-end as it violated Press Note 3. AMC cookware had informed FIPB that it proposed to import kitchen appliances like toasters and juicers into India and target households through direct selling agents.

The agents would identify customers and AMC would sell the products to these customers. The company had also proposed to import tableware and kitchen accessories from manufacturers outside India and print and publish books advocating nutritional diets for sale as a complete package.

As per Press Note 3 2006, 51% FDI is allowed for single-brand retailing given that products are sold under a single brand only and products should also be sold under the same brand internationally. The term ‘single brand’ would hold true for products which are branded during manufacturing.

News: Gera, Citigroup Property form JV

(PTI 06/09/2006) New Delhi - Real estate firm Gera Developments and Citigroup Property Investors, a realty investment arm of Citigroup, have entered into a joint venture to develop a project in Pune, which would involve an investment of 125 million dollars (approx Rs 550 crore).

"The tie-up has taken place through foreign direct investment (FDI) route. The total value of the project will be about 125 million dollars (Rs 550 crore)," Gera Developments said in a release.

The JV would develop over two million sq ft comprising 600 high-end apartments, a country-club and a hotel, it said.

"We have chosen to join hands with Gera Developments as a joint venture partner owing to their experience and reputation of being a customer centric and quality conscious real estate developer," Citigroup Property Investors Managing Director- Head of Asia Pacific David Schaefer said.

Pune-based Gera Developments, which operates in western India, has projects of approximately Rs 400 crore to be completed within a year.

News: India,China to push Asia's eco growth to 7.7 %

(TNN 06/09/2006) Manila - China and India are expected to push developing Asia's economic growth to a better than expected 7.7 per cent this year despite high oil prices, said, the Asian Development Bank in a report.

The forecast is contained in an update of the Philippines-based lender's annual publication Asian Development Outlook, which projected 7.2 and 7.0 percent growth for the region in its earlier edition published on April 6.

The region's outlook "is supported by strong performances by (China) and India, since together these two economies account for over 50 percent of regional GDP (gross domestic product)," it said.

China's economy, which grew at 10.9 percent in the six months to June is now expected to grow by 10.4 per cent for the entire year and 9.5 percent in 2007, higher than the ADB's original forecasts of 9.5 per cent and 8.8 percent, respectively.

India's 2006 growth forecast was upgraded by 0.2 percentage points to 7.8 percent amid buoyant export growth, while the 2007 forecast of 7.8 percent was maintained. "The remaining economies of Asia are expected to grow by more modest averages" of 5.5 percent this year and 5.1 percent in 2007, it added.

The updated 2007 forecast "is predicated on generally favorable external conditions" while factoring in tighter global liquidity, softer growth in the industrial countries, and "oil prices staying high," the report said. However, it warned that if elevated terrorist threats persist over a prolonged period and disrupt international travel "this would clearly be a negative factor," especially on tourism-dependent countries like the Maldives and Thailand to a lesser extent.

The report said East Asia grew at a fast tempo and was expected to hit 8.2 per cent for the whole year, reflecting greater than expected strength of fixed investment and exports in China, which also lifted Hong Kong.

South Asia should grow by 7.5 per cent this year after averaging 7.7 per cent annually since 2002, outpacing Southeast Asia by about two percentage points and almost matching that of East Asia, it said. The bank slightly downgraded the 2006 growth forecast for Southeast Asia to 5.4 per cent form 5.5 per cent.

It cited political uncertainty and postponement of large infrastructure projects in Thailand, slowing domestic consumption in Malaysia, better farm output in the Philippines, and buoyant pharmaceutical and electronics activity in Singapore.

It said Central Asia should grow by 11.3 percent this year, one percentage point above the average for the past five years, lifted by oil-producing Azerbaijan and Kazakhstan, along with strong construction activity in Armenia. For the island economies of the Pacific, the oil price boost for Papua New Guinea should lift sub-regional growth to 3.3 percent this year, ADB said.

The bank said average inflation in the region should rise to 3.8 per cent this year from 3.4 per cent in 2005, though inflation pressures are ebbing in some countries while expectations are rising in others. "Monetary authorities continue to show vigilance and generally lean toward tightening. Policy rates have tracked up in many countries," it added.

News: ICICI Venture to float Rs 500-cr mezzanine fund

(TNN 06/09/2006) Mumbai - ICICI Venture, the largest domestic private equity fund, is floating a Rs 500-crore mezzanine fund to aid buyouts and help companies raise money without diluting too much equity.

The fund will target domestic investors, banks and institutions and will mobilise fund over the next six months, Renuka Ramnath, managing director and CEO of ICICI Venture Funds Management said. ICICI has over $2bn worth assets under management.

“It is a market opportunity. There are a number of big cap companies looking to raise money with minimal equity dilution,” Ms Ramnath said. This will be ICICI Venture’s third fund launch in the past one year. It has raised a $550-m real estate fund, the country’s largest and a $810-m India Advantage Fund for buyouts and growth capital. Mezzanine funds provide a middle layer of financing between senior debt and equity.

Characteristics of both equity and debt are present in this kind of financing. Typically, mezzanine finance is provided initially as debt with a certain coupon with an option to convert into equity after some time.

Ms Ramnath said that the fund would be ‘sector agnostic’ and would not restrict itself to just a few industries. “It is a structured and hybrid product targeted to provide growth and acquisition capital not presently available to midsize companies in India,” she added.

Private equity funds have raised huge amounts of money in the past year and a booming economy has sent companies knocking on the doors of private equity funds to finance new investments. ChrysCapital, ICICI Venture, Barings Private Equity are some of the firms that have raised large sums from investors. Some of the largest investments that have happened this year include US-based KKR’s over $700-m buyout of Flextronics’ Indian operations.

Some PE firms like Temasek, Citicorp VC and Newbridge have also raked in large profits through timely investments, underlining the fact that Warburg Pincus’ huge returns on the Bharti Airtel deal was not a one-off opportunity.

News: Indian metros can have second airports

(BS 06/09/2006) New Delhi - In a major shift in policy on airport infrastructure development, new airports will be allowed to come up within 150 km of existing ones.

This paves the way for clearance of a bunch of proposals for airports near or in Delhi, Mumbai, Kolkata and Chennai.

However, private companies that have been handed over the existing airports in Delhi and Mumbai (and in other cities like Bangalore and Hyderabad) as part of the government’s airport privatisation programme will have the first right of refusal to develop the second airport.

Some state governments have mooted proposals to develop a second airport close to an existing one for easing traffic congestion.

The Uttar Pradesh government has proposed an airport at Greater Noida (near Delhi), the West Bengal government in Kolkata, and the Maharashtra government in Navi Mumbai.

The four metros handle over 60 per cent of the country’s air traffic, often leading to choking of airspace and delays in aircraft landing and take-off. The existing policy was drawn up in the early 50s. With lack of further capacity at existing airports and the booming air traffic, a need was felt to remove the restriction.

Notably, the government had committed to existing private sector developers that a new airport would not come up within 150 km of an existing one, so that their revenue projections were protected. The ministry now hopes that the first right of refusal granted to these developers will ensure their agreement to the move.

The change is expected to resolve the serious infrastructure problem faced by airlines. The Delhi airport, for instance, handles over 15 million passengers a year, nearly double its capacity.

Though its capacity will increase to 25 million by 2010, following the modernisation (by the private developer), the projected traffic in Delhi at that time will be around 30-35 million. So, there is a justification for a new airport.

In Mumbai, too, with Reliance’s large SEZ zone coming up, which will be nearly one-third the size of the city, a new airport at Navi Mumbai seems economically viable.

Another beneficiary of the move will be low-cost carriers (LCCs), which can use secondary airports with lower user charges.

Airport infrastructure, including parking bays, landing and navigation charges, and rents for hangers constitute over 20 per cent of an LCC’s overall costs. This will go down with the latest development.

Across the globe, in cities with multiple airports, LCCs use secondary airports with lower parking and landing charges to cut costs. In fact, domestic LCCs have been pressing the government for multiple airports in busy cities.

News: Maruti gears up to sell 1 m cars a year

(TT 06/09/2006) New Delhi - Maruti Udyog has set a target to sell one million cars annually by 2010. At present, the country’s largest carmaker sells a little over half-a-million units a year.

Riding on an investment of Rs 6,000 crore, Maruti will launch five models in as many years and expand its manufacturing and sales network to achieve its target of doubling sales in four years.

“The company is aiming to sell one million cars per year by 2010. Investment in new facilities and in research and development are part of the strategy to achieve the goal,” Maruti chairman S. Nakanishi said at the company’s 25th annual general meeting here today.

Regarding the new models, he said, “This will be over and above face-lifts of existing models and launch of variants.”

“Besides increasing the number of outlets, the company will revamp the infrastructure and service at these outlets,” Nakanishi added.

The company wants to remain debt-free as it plans to fund expansion through internal accruals.

“We would like to be a debt-free company and, therefore, most of the new investments will be through internal accruals,” Maruti managing director Jagdish Khattar said even as he declined to respond to queries on demands of bonus shares.

Outlining the Rs 6,000-crore investment plans along with parent Suzuki, Maruti said the money would be used to set up a car plant, a diesel engine and transmission facility, upgrade the existing plant and launch models.

On Maruti’s diesel engine plant, Nakanishi said it would begin production this fiscal. “The plant will make 1.3-litre diesel engines for cars. It will have an initial capacity of one lakh diesel engines per year.”

According to officials, Maruti will launch an export model during 2008-09.

“This compact car model, while serving the Indian market, would be for export mainly to Europe. “The company will set a target to export one lakh units of this model annually,” he said.

The alliance between Suzuki and Nissan for synergies in manufacturing will help Maruti, said Nakanishi. “The increased scale of operations on account of the Nissan contract is likely to improve cost and quality competitiveness at the Maruti facilities, which in turn will benefit customers in the domestic market,” he said.

Suzuki and Maruti are also increasing collaboration in research and development. “Suzuki sees a major role for Maruti in R&D for cars in Asia.”

“The talent will be on tapping the vast pool available in India and develop people through extended training at Suzuki Motors Corporation, Japan. This, combined with augmentation of R&D facilities, will help Maruti acquire a pre-eminent position in Suzuki’s global research and development set-up,” he said.

According to Nakanishi, the Indian car market is on the threshold of an explosive growth trajectory with positive macro-economic factors, including GDP growth, bias towards lower taxes, a young population and focus on road and rural infrastructure development.

News: Reliance ADAG to launch radio station

(BL 06/09/2006) New Delhi - The Reliance ADA Group is to soon launch its radio station - Big FM. In a statement the company has said that in the first phase of the roll out would see the radio station covering Delhi, Hyderabad, Bangalore, Chennai, Mumbai and Kolkata before spreading into other cities.

"By early next year, we will be present across the country from Srinagar to Thiruvananthapuram and Surat to Guwahati.

We will be present in 1,000 towns and 50,000 villages across the country reaching out to 200 million people," said the Chief Operating Officer, ADLAB Radio, Tarun Katial.

News: Prestige Group to invest Rs 2,500 cr in malls

(BL 06/09/2006) Bangalore - The Bangalore-based real estate developer, Prestige Group, will invest around Rs 2,500 crore in malls across South India in the next couple of years.

A value mall, housing factory outlets of all leading brands, will be thrown open to Bangaloreans in December 2007, according to Susil Dungarwal, Head, Retail, Prestige Estate Projects (P) Ltd.

The Group forayed into the mall business a couple of years back with Forum in Bangalore and now plans to take the concept to Chennai, Hyderabad and Mangalore.

The Group, however, currently has no plans of entering the luxury mall segment "as this would require space on high streets which is scarce," he said.

Currently, seven malls are being planned at an investment of around Rs 300 crore each, he said.

Commenting on low (sales) conversion rates displayed in most malls in the country, Dungarwal feels malls have to exploit the impulse buying behaviour of customers through a good retail mix and interesting aisle events.

"Malls have to cater to the psyche of the people of the region, otherwise sales will dip."

This means that malls have to change their retail mix to suit the surroundings, he felt.

"Different cities display different buying behaviours. Even within a city, the psyche changes and therefore our retail positioning should change."

He agreed that HR continues to be a challenge in the mall management segment.

"While retail can poach talent from any other related sector, malls need to create a completely new set of talent, which is a challenge," he said.

News: Anti-Money Laundering norms hit rural insurance

(BL 06/09/2006) Mumbai - Rural insurance has been dealt a blow by Anti-Money Laundering (AML) regulation effective August 1 even as the Insurance Regulatory and Development Authority (IRDA) has been pushing for the interiors. The challenge for insurance companies is in seeking proof of identity, address and income of the rural populace.

"It is cumbersome getting the documentation done for policies where the premium could be as small as Rs 300-400. In cases where there is no proof of identity, one requires a letter from the panchayat with a photograph and photocopies may also have to be made," said Vijay Sinha, Assistant Director, Agency, Tata AIG Life Insurance.

`Tough to enforce'

"The AML guidelines will be tough to enforce in rural areas. For instance, one needs to track changes in residence and an individual might just have a post box as an address," said Rahul Sinha, Vice-President-Marketing, Kotak Mahindra Old Mutual Life Insurance.

Insurance officials dismiss money laundering in cases where premia are small. "Globally, there is a minimum threshold and `Know Your Customer' (KYC) norms apply only beyond the limit. One needs to make a distinction between money laundering and tax evasion," said the Chief Financial Officer of a private insurance company.

Administration cost

Officials also added that the cost of administration would be too high and make the policy unviable. For insurance companies, selling insurance in rural areas is a part of the minimum obligation stipulated by the IRDA. Despite the IRDA issuing micro insurance guidelines in November last year, not many companies have filed products as they find it unviable to sell small policies, given the high costs of distribution.

Since most insurance companies have tie-ups with NGOs, additional training would be required for KYC norms to be implemented, adding to the cost.

AML will also make it tough to tap rich farmers. "It will be particularly difficult to verify income from agriculture. In the case of rich farmers, there might be genuine income but no real tax records as they are exempt from tax," said Muralidharan, Chief Marketing Officer, SBI Life Insurance.

News: Finnair plans to fly to Mumbai, Chennai

(BL 05/09/2006) Helsinki - India's financial capital Mumbai and the home of Finnish mobile giant Nokia's production facility, Chennai, figure prominently in the expansion plans of Finnair.

The Finnish carrier, which would be launching its maiden scheduled air service to New Delhi on October 30, hopes to connect either Chennai or Mumbai starting summer 2007.

"Nokia would obviously like us to operate services to Chennai, but it alone cannot fill up our flights," a top Finnair executive said here.

He said a decision would be taken only after carefully studying the market. The airline is looking at wooing Indian corporate travellers by introducing lie-flat beds in the business class.

While the Helsiniki-New Delhi service is Finnair's first scheduled service to India, the carrier has been operating leisure flights to Goa in summers for many years now. It also uses Ahmedabad for technical landing for its leisure flights to Phuket and w ould start using Jaipur for the purpose in the days ahead.

The expansion of services would happen only after the airline increases the frequency of its Helsinki-New Delhi flight to five a week from the initial three.

"If we want to be a serious player, ideally the product would be seven flights a week," Jukka Hienonen, CEO, Finnair said.

The airline hopes to sell Helsinki-Vantaa as a convenient hub for travelling to European destinations, and pointed out that travel via existing hubs such as Frankfurt or Copenhagen has become cumbersome and time consuming.

News: Tatas to babysit technology firms

(BS 05/09/2006) New Delhi - Tata Industries Ltd will pick up between 10 per cent and 26 per cent equity, in the initial phase, in companies it has identified in the emerging areas of technology.

The plan is to fund such companies for the next 5-10 years, so that at least three or four of them are able to scale up as mega businesses.

Money is not a constraint and Tata Industries Ltd, the investment arm of the Tata group, could invest over Rs 1,000 crore in the next few years to help such companies scale up. It is also ready to hike its stakes later if the promoters want to dilute their holding.

The Tatas have identified alternative medicine and materials, non-conventional energy, agricultural inputs, biotechnology, and healthcare as areas to concentrate on.

Tata Industries Ltd is ready to put in equity in a company at different stages. It could pick up a stake in a company at the concept stage of a product, when it might require funds in the range of Rs 5-15 crore, fund entrepreneurs who want money for trial runs or commercialisation of a product, and, of course, support them in the phase of growth.

It may also look at investing in companies that have the potential to turn around, provided they are synergetic to its area of focus. Further, it may look at investing in 5-10 companies in one emerging area (like biotechnology), and merge them into one large company if the need arises.

Speaking to Business Standard, Kishor Chaukar, managing director of Tata Industries Ltd, pointed out: “We will look at investments in emerging areas of business, and our aim is to grow them and stay invested. We expect that in the next 5-10 years at least three or four of these businesses will become large — like our telecom business.”

Tata Industries Ltd is looking at a range of new areas, though it declined to name the companies it could invest in. In alternative materials, an area of interest is biodegradable materials, which could replace plastics.

In healthcare, remote diagnostics could be a key area for potential growth. In energy, there is potential for converting biomass into electrical energy cheap, generating energy out of hydrocarbons, or even finding ways to make solar cells from new materials and reducing costs.

In alternative medicine, there is potential in assimilating the knowledge of Indian systems like unani, homeopathy and siddha to come up with new products. An improvement in seeds could be an area of focus in the agricultural input space.

News: Chennai port project to go to Singapore

(BS 05/09/2006) Mumbai - China's loss is Singapore's gain. With security concerns blocking the way for Chinese major Hutchison Ports Holdings (HPH), the Rs 500-crore second container terminal at Chennai Port Trust is all set to go to the Singapore government's port operator Port of Singapore Authority (PSA).

According to sources, PSA, which has bid with Chennai-based SICAL Logistics, has quoted the highest revenue share of over 45 per cent to bag the project that has already been delayed by two years.

PSA-SICAL's revenue sharing quote is the second highest for Indian port projects. The highest was 48.99 per cent by ABG Heavy Industries for the Kandla Port container terminal. PSA-SICAL has pipped the consortium led by Emirates Shipping Lines with Gammon India.

Engineering and construction major Larsen & Toubro's bid was rejected as its management contractor Hutchison failed to secure security clearance from the government. The bidding deadline for the project was extended over a dozen times due to delay in security clearance for Hutchison.

Singapore already has a presence in India at the Tuticorin Port's container terminal.

At present, Dubai Port's Chennai Container Terminal is the only private container terminal at Chennai Port Trust. PSA is the world's busiest port in terms of shipping tonnage handled, with 1.15 billion gross tonne handled in 2005.

News: Carlyle invests $20m in Chennai e-publishing company

(TNN 05/09/2006) Mumbai - Private equity fund Carlyle has increased its stake in Chennai-based Newgen Imaging Systems, an e-publishing company, to about 50%. Carlyle is looking to hike its stake in Newgen further, sources said.

Newgen was founded by V Prabhakar Ram of Outfield Knowledge Works. Carlyle has been increasing its stake in the company slowly over the last six months and has already invested about $20m.

"The brand mileage of Carlyle has helped us win new clients and many professionals are interested in joining us because we are funded by such a big fund.

We have let go of 50% stake. Carlyle group is helping us open new offices in the US, which would not have been possible otherwise. So it is like you lose some and you gain some," company officials said. The investment has been made by Carlyle Growth Capital.

The fresh capital will be used to fuel Newgen’s aggressive growth plans. The money will be used to service new clients and upgrade the training infrastructure.

"The company is likely to issue rights shares, through which Carlyle will increase its investment in the company. The additional investment will go to help the company fund overseas acquisitions," said Shankar Narayanan, managing director, Carlyle India Advisors.

The Rs 22 crore-company is experiencing about 15% yearly growth. The company now employs about 875 professionals, up from around 500 in a few months time. Newgen is also building a 30,000 sq ft new facility to accommodate more work coming from new clients that the company has got recently.

The company’s client list consists of 12 leading global publishers, across Europe and the US. Some big universities like New York University, Duke University, Cornell University and Lund University also outsource work to Newgen. The company offers a range of traditional typesetting and modern high-end e-publishing services to its western clients.

News: News Corp, India's Nimbus in mega deal

(TNN 05/09/2006) New Delhi - Rupert Murdoch’s News Corp is close to buying a substantial stake, almost a third, in Nimbus Communications for upwards of Rs 400 crore. If the deal goes through, News Corp will be able to get lucrative telecast rights to the Indian cricketing action, which ESPN-STAR from the Murdoch stable had lost to Nimbus in aggressive bidding in February this year.

Nimbus is expected to announce a massive distribution arrangement with STAR shortly, which is being seen as a precursor to this equity deal. All the three proposed channels being launched by Nimbus — called NEO SPORTS — will be part of the STAR bouquet.

When contacted by ET, Nimbus Communications’ CMD Harish Thawani refused to confirm the developments. An e-mailed query to STAR TV’s official spokesperson in Hong Kong failed to elicit any response.

According to sources in the private equity space, Mr Thawani has been in talks with several players to offload equity in the company. The deal is extremely attractive for Mr Murdoch’s company because of the 4-year cricket global media rights that Nimbus won earlier this year. The deal is likely to be one of the largest in the Indian media space.

While Nimbus had shelled out $612m to BCCI for these rights, they are sitting on a veritable gold mine with about 23 Test matches and 56 one-dayers in the offing during the 4-year period from March ’06-10. The News Corp-owned ESPN-STAR Sports (ESS) combine had bid for the same rights at $401.8m.

If News Corp picks up a stake in Nimbus, it will be able to capitalise on these rights for just $90m. The deal that Nimbus won is a combination of terrestrial satellite, global satellite, global radio and broadband, which is in perfect synergy with News Corp’s existing assets.

Nimbus already has a clutch of investors — 3i had picked up 33% stake for $45.5m, Deutsche Bank invested $30m for an undisclosed stake and Americorp Ventures has a 10.57% stake, which it bought from Transatlantic Corp for Rs 30 crore.

In the post-deal scenario, it remains to be seen if Mr Thawani dilutes his stake further or the PE players partially exit.

Nimbus has been involved with the two largest cricket commercial rights deals - the ’01-07 ICC rights (as a Global Cricket Corp (GCC) mandated agency) and BCCI’s global media rights for ’06-10. GCC is incidentally a small slice of News Corp.

News Corp’s current revenues stand at over $24bn, making it the third largest media corporation after Time Warner and Disney.

While the STAR bouquet has been one of News Corp’s best growth drivers, it is cricket that is seen as the linchpin in Mr Murdoch’s plans for India. What is noteworthy is that it has been a while since ESS has won the rights to broadcast any Indian cricket matches, with the likes of Zee Sports and Ten Sports winning the bids.

The last series that ESS telecast was the India-Zimbabwe tour in September last year. Nimbus recently unveiled plans for three 24-hour sports pay TV channels for India. While Nimbus dabbles in motion picture production, sports - especially cricket - is the mainstay. It may be noted that while TV advertising is growing at 19-21%, cricket advertising is growing at 25-27%.

Apart from Sky, Mr Murdoch controls 20th Century Fox and Fox TV. His net has been cast wide in the print medium as well with the New York Post, TV Guide, The Times of London, The Sun and Harper Collins. He has media holdings across North America, Europe, Australia and Asia, which include STAR TV and STAR-ESPN, the latter being shared with Disney.

Some of the more popular properties in the News Corp stable are American Idol, Kaun Banega Crorepati and The Simpsons. But his major thrust area is sports: He owns broadcast rights for Major League Baseball, World Series, American Football, Superbowl and NASCAR.

News: The brewing biz of Indian coffee parlours

(IANS 05/09/2006) New Delhi - Coffee parlours are flourishing in urban India - not just for their aromatic beans and casual ambience, but also for the global lifestyle and culture they endorse. And the global players are avidly eyeing the Indian market.

According to a global retail consultancy firm, Technopak Advisors, the organised coffee retail business in India is over Rs.8 billion ($17 million), and the potential for coffee retail outlets is 3,000. The retail brands, however, say the figure is between 4,000 and 5,000.

Arvind Singhal, chairman of Technopak Advisors, told IANS: "In the organised segment there are three major players - Barista, Café Coffee Day and Costa Coffee. A few others are beginning to grow and India has a huge potential for retail outlets."

The good news also is that coffee consumption on the rise.

According to industry sources, coffee consumption has shot up from 55,000 tonnes to 80,000 tonnes since the liberalisation of the economy in 1991.

Sudipta Sengupta, marketing head of Café Coffee Day, said: "It is on the rise and with niche coffee parlours coming in, the figure is only likely to go up."

With the Indian middleclass ready to spend more and be a part of global lifestyle and culture, coffee parlours in the country are on an expansion spree.

"Between 2003 and 2005, domestic consumption went up by seven percent per annum and this has come after a long spell of stagnancy," said Barista chief Partha Dattagupta.

"The company plans to invest Rs.400 million in expansion. By the end of this financial year we plan to open 100 outlets and expand to at least 40 cities."

Likewise, Café Coffee Day, promoted by Amalgamated Bean Trading Company, plans to open 500 cafes by June 2007. Britain's Costa Coffee, promoted in India by the Rs.12 billion Ravi Jaipuria group's Devyani International, also plans to invest Rs.1.5 billion in the next four years.

"By 2010 we are confident of opening 290 outlets and we expect our growth to be much faster in the coming years," said Virag Joshi, chief executive of Devyani International.

Competition is going to get fierce with international retail brands Starbucks, Gloria Jeans, Berries Coffee eyeing India - even though they have not been able to fix the pricing.

However, almost unanimously, the Indian retail brands say there is enough space for all. "There is enough space for all of us. We have already carved a niche for ourselves, so we do not need to worry," Sengupta stressed.

"At Barista we have factored in the entry of big players in our strategic plans. The arrival of international players like Starbucks will stimulate growth in the coffee and hangout culture," Duttagupta said.

Technopak also believes that the impact on current players will actually be positive since the overall market will expand, and with a likely premium pricing and positioning of Starbucks, the current players will get a good "price shelter".

Since 2004 some new names have also come up with the mushrooming of the glittering shopping malls and cineplexes. One such player is Craze Coffee promoted by real estate firm Enkay Group.

Pawan Kohli, director of Craze Coffee, said, "We plan to expand to 20 new outlets by the end of this financial year from the present 13."

Tata Coffee Limited, after selling its stake in Barista, has opened up Mr Bean Coffee Junction in Kochi, Kerala, to understand the market. Others like Cha Bar, Coffee World and Passion have also jumped on the bandwagon.

So why are the masses actually flocking to coffee parlours given the fact that India is primarily a tea-consuming nation?

Said Joshi of Costa Coffee: "This has changed over the last three-four years. We have seen the emergence of coffee as the lifestyle choice of the new generation."

Puja Talwar, 24, a civil service aspirant, said: "These are cool places to hang out with family and friends. One can eat, read good books and listen to one's favourite music."

The coffee parlours, however, are aiming to provide not just that favourite cuppa. Also on offer is a huge range of lip-smacking snacks to complement a cappuccino or an iced mocha. "Sixty percent of our business comes from food," said Sengupta.

Technopak's Singhal believes "the business objective is about increasing the average bill size. Only coffee will make the entire business model financially unviable".

News: Chinese goods corner shelves in Indian malls

(TNN 05/09/2006) Mumbai - "Made in China" is now part of the retail mainstream. A casual stroll at Magnet, a hypermarket in Matunga, in central Mumbai confirms this. While attractively priced crockery sets are displayed in the home care section, their cases with labels of their origin are hidden unobtrusively in racks behind these sets.

Nearly 30% of all goods in Hypercity have been sourced from China, as have 20% each in Magnet and Big Bazaar. In fact, experts reckon that Chinese goods will be a huge component of non-food items in hypermarkets, going up to 50% of all goods.

To counter lower margins on food and grocery, hypermarkets across the country have looked at large-scale sourcing from China for goods as varied as toys, appliances, electronics, crockery and footwear.

Clearly, the cost differential is too good to resist for hypermarkets running huge private label programs. Citing an instance, Andrew Levermore, CEO, Hypercity, says, "Electronic goods sourced from China could be up to 30% cheaper than branded electronic goods."

The sourcing activities could take as much as 60 days, including 30 days just for shipping and customs clearence. Locally, it takes just seven days for hypermarkets to source goods from manufacturers. Yet, the prices of Chinese goods are low enough to justify this additional transportation cost.

Adds Ashok Maheshwari, managing director, HomeCare Solutions Pvt Ltd, which has the Magnet hypermarket under its fold, "Not only are Chinese goods much cheaper, they're also far ahead of local goods in design and innovation." Back of the envelope calculations suggest that even after pricing private label goods 15-25% lower than branded goods, retailers could still get 10-15% higher margins.

Recognising the impact that Chinese goods could have on their bottomline, hypermarkets have been putting a great deal of effort in their sourcing operations.

There are stringent quality processes that hypermarkets have put in place. For instance, Big Bazaar, with its advantages of scale, has independent agencies testing products that are sourced from China.

At Hypercity, most buying teams have one member who is a technical expert and would decide product specifications. Mr. Levemore adds, "For apparel and linen we normally won't need domain experts, we go more by the look and feel of the material."

A store like Magnet uses European and US benchmarks for electronic goods and gifting items, which most Chinese manufacturers adhere to. Virtually all hypermarkets send teams over to China to attend trade fairs and indentify.

Hypercity's buyers attend two Cantonese trade fairs, while Magnet teams attend three. This, they say, is easier than identifying and visiting individual manufacturers, and that they can also cut sweeter deals with manufacturers.

Yet, no Indian hypermarket chain can rely on direct sourcing from manufacturers, since nobody, barring perhaps Big Bazaar, has the scale that might interest high-volume manufacturers in China. Hence, all of them work with consolidators based out of either India, Hong Kong or China.

These consolidators buy goods in bulk and ship it over to the local hypermarkts, while also helping with logistics and customs clearance. Says Rajan Malhotra, head, Big Bazaar, "Consolidators allows us flexibility to decide how much inventory we want to hold, which would be less than what a manufacturer would want to supply."

Big Bazaar reckons that they could end up sourcing between Rs. 5000 - 10,000 crores worth of merchandise from China annually in the next 5 years. Says Mr. Malhotra, "We will set up a sourcing office in China soon to streamline our sourcing activities."

For this sourcing game to work, however a very strong backend and after-sales infrastructure is mandatory. Big Bazaar currently has the scale to handle after-sales queries, which it has done in-house.

Recognising this need, Hypercity and Magnet, currently single store entities, are looking at tie-ups with certain vendors that will take care of after-sales service, but Spencers hasn't towed the line. Citing an issue of scale, Jitu Mehta, President, Spencers, says, "We're currently not sourcing any items that require after-sales service."

Yet, the Chinese invasion doesn't spell the death-knell for local manufacturers. Hypermarkets confirm that Indian manufacturers still beat China on quality, especially in apparel and linen. Mr. Levemore says, "The only difference between Indian and Chinese goods are the margins." Once there's sufficient scale built up locally, Hypercity plans to meet all of its sourcing requirements from India.

News: State to rebuild Mumbai's crumbling buildings

(TNN 05/09/2006) Mumbai - The Maharashtra government has drawn up plans to demolish and rebuild over 20,000 dilapidated buildings in Mumbai in a massive 10-year reconstruction programme that is all set to be a bonanza for the real estate community.

The state government has asked real estate developers and infrastructure companies to submit proposals for reconstructing old buildings, including 17,000 cessed buildings, mainly in south Mumbai.

The cessed building are controlled by the Maharashtra Housing and Area Development Authority (Mhada), which collects cess from the housing societies for repairs and maintenance of these buildings.

The plan also proposes the development of modern infrastructure for the to-be-constructed buildings in partnership with the private sector. Real estate industry-watchers say that the move is part of a 10-year programme to be implemented in stages.

As per official records, more than 5,000 buildings in Mumbai are over 100 years old. Add to this another 5,700, which are between 70 and 80 years old. “Around 4,00,000 people continue to live in these decrepit structures despite being declared unfit for habitation,” a government official said.

The government is exploring the private-public-partnership (PPP) route for executing these projects. “There are two reasons. First, Mhada is facing acute shortage of funds, making it impossible to raise this kind of money. Second, the Centre’s insistence for the PPP route,” a government official said.

The offers seem to have started trickling in. “We are finalising a deal with the state government for constructing 15,000 flats on 55 acres of land in south Mumbai,” Lalit C Gandhi, chairman and managing director, Lok Housing and Construction, told ET.

The Rs 5,000-crore project consists of two phases. Redevelopment of 300 unsafe cessed buildings and the rehabilitation of tenants and the development of an additional 6m sq ft in the same area in association with the state government and Mhada.

The government will cross-subsidise the cost of redevelopment by sanctioning necessary floor space index (FSI). The developers can sell the FSI to a third party.

Mr Gandhi said that Singapore’s Government Investment Corp (GIC) has agreed to finance the project. “GIC has given an in-principal approval for financial assistance in the project. A final agreement will be signed soon,” he said.

PM Manmohan Singh’s vision to transform Mumbai into “another Shanghai” by ’10 seems to have prompted the move. This is a part of a larger plan of urban renewal. Last August, CM Vilasrao Deshmukh ordered the reconstruction of all old, dilapidated buildings.

“There is a need to rebuild the cessed buildings on a war footing”, Mr Deshmukh said. To begin with, he has directed the authorities to immediately start work on 80 buildings labelled “very dangerous.”

The government will try one of the following options to raze and rebuild the cess buildings: Mhada acquires the plot, vide a tripartite agreement between tenants, landlords and developers under the Development Control Rule 33 (7) or it may get into a joint venture with developers, tenants and landlords as partners under the DCR 33 (9).

Mhada will eye buildings that have been short-listed as “beyond economical repairs” and start the process of acquiring these properties. “It’s a long term project,” chief engineer of Mhada’s concern department told ET.

According to him, it will be difficult to set a time-frame to complete the project and the plan could run over into ten years. “We can’t demolish all these buildings in one stroke. There is a human angle to it,” he said.

News: Lufthansa eyes expansion in western India

(BL 05/09/2006) Hyderabad - After opening the eastern sector in December by adding Kolkata on its map, Lufthansa will probably focus on the western India to add capacity or expand to other locations in that region.

Besides, the German airline is also exploring setting up maintenance, repair and overhaul (MRO) facility in India.

Werner Heesen, Director (South Asia) of Lufthansa, said that the airline was looking at areas that were not served properly.

"Western India is one of the areas. We would like to add more capacity in that part of India," he said.

Heesen was here to take part in the 55th edition of Travel Agents Association of India's (TAAI) convention.

He said Indian operations contributed 21 per cent of its Asia-Pacific revenues.

Asked whether under-pricing was hurting the industry, he felt that it was the question of yield mix that one should look at.

"If you are only focussing on low-yield segment and lowest fare, then it will hit you," he pointed out.

It was not Lufthansa's policy. "Our policy is to serve the upper end of the market," he said.

Long-term outlook

Asked about infrastructure constraints, he said increases in the aviation sector on yearly basis were dramatic as India's share in the global aviation sector was as low as 0.1 per cent.

But the Civil Aviation Ministry had understood the needs and it took the right decisions.

"In the long term, we have a solution. But for the mid term, the country needed to struggle with the existing facilities," he said.

News: VF Arvind Brands open to buying Indian brands

(BL 05/09/2006) Bangalore - VF Arvind Brands, the newly formed joint venture between Arvind Brands and the US-based branded lifestyle apparel maker VF Corporation, said it is open to acquisition of local Indian brands. "We will be interested in acquiring strong local Indian brands," VF Corporation President and Chief Operating Officer, Eric Wiseman, who is also the Chairman of the joint venture, told Business Line. The $7-billion VF Corporation itself has grown through acquisitions and has so far acquired 11 international brands.

There are several unique features of the new venture. This is the first time VF Corporation, considered the largest branded apparel maker globally, has entered into a joint venture. The valuation of $33 million for the existing brands is also considered the new benchmark for the domestic branded apparel industry. For example, the $33-million, which VF Corporation gave to acquire 60 per cent in the joint venture, is at least two times the topline figure of the existing brands.

According to market sources, when Color Plus was acquired by Raymonds, the valuation was 1.5 times the topline of the brand. Once the merger and acquisition hits the industry along with the retail boom, the valuation is expected to be seen as a benchmark for all future takeovers.

Textile sourcing

Even with the new joint venture, VF Corporation will continue to source textile through its sourcing office from India, which it opened two years ago. During this year, VF International expects to source $40 million worth of textiles f.o.b. (free on board) from India, thereby, doubling the amount from last year.

Wiseman said there were no current plans to take up manufacturing through the joint venture. Arvind Fashions has transferred the entire existing business to the new venture, except the manufacturing facility, which is based out of Bangalore.

He said that both the partners were in talks for setting up a new joint venture for over a year. "India is a perfect market for us," he said. He added that China and India's share in total revenues of the company may be small but they are the fastest growing markets for VF Corporation.

The joint venture's Chief Executive Officer, Darshan Mehta, said the decision to set up its first joint venture reflects the confidence VF Corporation has for the existing marketing team of Arvind. "We did not resort to milking the brands. Instead, we built the brands as if they were our own," Mehta said.

Wiseman himself acknowledges the role played by Arvind. "They did a great job for us. Our relationship with Arvind has been extremely successful," he said.

Mehta said Lee, Wrangler, Nautica, Jansport and Kipling brands, which is worth $40 million business at wholesale prices, have been growing at around 25-30 per cent with most of the business coming from Lee and Wrangler. Lee itself will add 10 to 11 stores more this year to reach 74 stores totally, while Wrangler will have 10 more stores to reach 50 stores. Nautica will have six stores from the existing two, while Kipling, which does not have a single store, will have five. Jansport will not have any standalone stores.

Apart from being the new CEO of the new venture, Mehta will continue to handle Arvind's other brands, Arrow, which is a Rs 140-crore brand, and Gant.

The other four mass brands of Arvind, which will all be merged with Arvind Mills soon, such as Excalibur and Ruf & Tuf and gets a total business of around Rs 120 crore, will be handled by another official of Arvind.

News: India ranks third in global M&A growth

(BL 05/09/2006) Chennai - In the global M&A (merger and acquisition) arena, India appears at the penultimate place, as per a recent ranking by Bloomberg.

New Zealand comes last, in terms of number and volume (dollar value) of deals, between 2006 and 2005. Its M&A volume growth is almost minus 50 per cent.

What is important in the data of `regional breakdown by target region/ country' is that with a 175 per cent volume change, India's M&A growth is blazing enough to take the country to the third slot, next only to France and Hong Kong, each of which have achieved more than 200 per cent growth.

Latin America and Canada are at distant fourth and fifth places, with 108 and 106 per cent increase, respectively. Volume changes range between 89 per cent and 9 per cent for Central Asia, Western Europe, China, Australia, UK, North America, Eastern Europe and the US. Germany saw less than 10 per cent change in volume.

India's deals numbered 255 in the first half of calendar year 2006, a mere twentieth compared to almost 5,500 deals in North America, and less than a half of Australia's. Though the number of deals in China, from January 1 to June 30, stands at 1,047 or nearly four times of the Indian tally, growth in value terms is just around 60 per cent, from $16 billion in the first half of 2005 to $26.5 billion in 2006. Closer home, the jump in deal value is from $6 billion in 2005 to $17 billion in 2006.

That the Asia-Pacific region has a long way to go is evident from the pie of the world M&A. The region has only 13 per cent share in the total M&A deal value, while EMEA (Europe, Middle East, Africa) and the Americas account for 42 per cent and 45 per cent share respectively.

Current year's global tally of transactions announced for the first six months is $1.8 trillion, a 41 per cent increase from the same time last year, says Bloomberg. In 2005, the total value of deals was $2.6 trillion; so, if the tempo of the first half of 2006 were to be maintained during the second half, the year may well wrap with more than $1 trillion increase in M&A deals. That may be conservative estimate, considering the fact that, in the second quarter of this year, "the number of mega-deals, with an announced total value of over $10 billion, rose to 17 from 14 in the first quarter."

News: Kingfisher gets late-night flying idea

(DNA 04/09/2006) Kolkata - Vijay Mallya’s Kingfisher Airlines (KFA) is planning to cash in on the marked rise in late-night travels. Come October-end, KFA is likely to start late-night flights to provide passengers with connectivity to other tier-II Indian cities from metros.

Initially, these may start from Mumbai and Delhi, but gradually, other metros are likely to be included in this network.

Another focus area for KFA, it is learnt, is inter-city day-return flights on any of its routes or what is known as same-day return connections. For instance, if a flight starts from Mumbai to Bangalore in the morning, a flight from Bangalore will take off for Mumbai at the same time and both return at the same time to help passengers return on the same day. Being in consolidation mode, the carrier is looking to build connectivity between metros and feeder routes. On Monday, KFA launched two flights — a thrice-daily Mumbai-Hyderabad-Mumbai and once-daily Mumbai-Jaipur-Mumbai. One of these flights is also being converted into a Hyderabad -Mumbai- Jaipur flight.

Recently, KFA and the North East Tourism Development Corporation signed a strategic alliance whereby KFA will help the tourism corporation promote the North East as the preferred tourism destination to holiday makers across the country. KFA will also provide dynamic and static advertising opportunities to the corporation via its in-flight entertainment - KFA offers five channels of FUN TV and 10 channels of music on Kingfisher Radio onboard.

The carrier, which currently services 17 cities through more than 100 flights, has been experiencing an average load factor of about 67%. It is expecting a 15% growth in traffic by the onset of the winter schedule, it is learnt.

It currently used a fleet of 16 ATRs and A320s. KFA follows a policy of using ATRS on new routes. Once these routes start maturing, the carrier switches to A320s.

News: Air Deccan now moots no-frills airports

(DNA 04/09/2006) Hyderabad - After low-cost airlines, it is now time for low-cost commercial airports. At least that is what Air Deccan managing director Capt G R Gopinath believes and is working on.

The uncharacteristic poster boy of the low-cost airline industry in India has kicked off an exercise to get state governments to invest in no-frills airports to expand the airline map. Gopinath kicked off the exercise with Andhra Pradesh on Sunday on the sidelines of the ongoing 55th Indian Travel Congress, organised by the Travel Agents Association of India. While small cities like Cuddapah and Warangal in the state are the immediate targets for such low-cost commercial airports, there is scope for at least six to seven such “bush strips,” Gopinath impressed upon Andhra chief minister Y S Rajasekhara Reddy.

The two are slated to meet again next week to take the proposal forward, with Gopinath presenting a detailed proposal.

In a bid to expand the airline industry’s footprint, Gopinath has also approached several other state governments including Madhya Pradesh, Chattisgarh, and Jharkhand to get them to underwrite 50% of the seats as an encouragement for LCCs to start services from the hinterland. Given the small size of the aircraft, this works out to just 25 seats per flight, he said.

The country has at least 450 airports, most of them grass strips, which are underutilised or in fact not used at all. Most of these can be effectively mobilised to cater to the burgeoning air travel industry, Gopinath stressed. He sought a time-bound action plan from Reddy to make this happen in Andhra Pradesh.

The growth is in smaller towns, Gopinath averred. At the same time, he made a case for budget terminals at airports in metros and other Tier-I cities. “We have already spoken to GMR for setting up such terminals at Delhi and the upcoming Hyderabad airport to specifications and designs provided by us,” he told reporters later.

“Great cities must have at least two airports so as to ensure that the monopoly situation is not exploited,” he said.

“As it is, our airport charges are higher than international airports, and we have asked for pricing as per the services rendered by the airports,” he said.

News: Pantaloon aims Rs 30,000 cr turnover by 2010

(PTI 04/09/2006) Kolkata - Retailing major Pantaloon Retail (India) Limited on Monday said it aims to clock a turnover of Rs 30,000 crore by 2010.

The company that has 100 stores in 25 cities across the country, plans to open additional 3,000 outlets in four years, Pantaloon Chief operation (East) Manish Agwarwal said.

The present turnover of the company is Rs 2,000 crore.

Pantaloon plans to open eight to ten more outlets in Kolkata, and one each in Haldia, Asansol and Burdwan, he said adding the retailing industry in India was growing by 22 per cent per annum.

The company has 12,000 people in its payroll and has a customer base of 120 million.

News: Philips' chip unit to invest 250 m euros in India

(RTR 04/09/2006) Bangalore - The semiconductor business unit of Philips Electronics will invest 250 million euros ($321.4 million) in India over the next five years to boost research and sales activities, an official said on Monday.

The semiconductor business of Philips Electronics will be named NXP after the Dutch electronics conglomerate sells it later this year. The new name is an abbreviation of Next Experience.

Philips has agreed to sell 80.1 per cent of the business to private equity investors Kohlberg Kravis Roberts & Co. (KKR), Bain Capital, Silver Lake Partners, Apax and AlpInvest Partners. Philips will retain 19.9 per cent.

"We are investing more and more in India and this is a part of our strategy. We are the second or third biggest research and development centre for the company," Rajeev Mehtani, vice president of NXP Semiconductors India, told reporters here.

He said the company would invest an additional 5 million euros in a second state-of-the-art campus to be set up in India's technology capital Bangalore.

Started in 1996 to save costs by hiring low-cost Indian engineers, the Bangalore campus has now become a key innovation centre for technology spanning digital televisions to cell phones and medical equipment.

NXP Semiconductors India has a total workforce of 700 engineers and plans to increase the headcount in the years ahead. Mehtani said NXP India would continue to work with Indian software companies for chip design and would raise the number of such partners to 20 in the next few years, up from 5 now.

News: Hindustan Lever to mull Modern Foods merger

(RTR 04/09/2006) Mumbai - India's top consumer goods maker, Hindustan Lever Ltd. said on Monday its board would meet on Sept. 8 to consider merger of Modern Food Industries Ltd. with itself.

The board will also consider spinning off some plantations in southern Tamil Nadu state to subsidiaries, the company said.

Ahead of the news, shares in Lever ended up nearly 2 percent at Rs 243.30 in a firm Mumbai market.

News: Holland open to more liberal visa regime for Indians

(PTI 04/09/2006) New Delhi - The Dutch government is open to a more liberal visa regime for knowledge workers from India to deepen economic engagement with India."Last year, we had taken steps towards liberalising our visa regime for knowledge workers. We see a scope for further liberalising it. We will discuss with our Indian counterparts," Dutch Minister of Foreign Trade C E G van Gennip said here following an interactive session organised by CII. "There is a scope for liberalisation of visa regime and I am glad that the Dutch government is looking at it," India's Minister of State for Commerce and Industry Ashwani Kumar said. With India companies emerging as major investors in UK, the Dutch government is also planning to woo them. "A senior official of the Foreign Investment Agency will be stationed in India to facilitate Indian investment in the Netherlands," van Gennip said. The Netherlands can be a gateway for Indian firms to Europe because of its strategic location and by setting up a base there they can address the 450 million strong market, she said. Apart from IT, the Netherlands is seeking cooperation with India in pharma, agriculture and infrastructure sectors.

News: LBMA to hold 2007 gold conference in India

(RTR 04/09/2006) New Delhi - The London Bullion Market Association said it will hold its 2007 annual gold conference in Mumbai, India's financial hub, partly to highlight the importance of the world's largest repository of the precious metal.

The event, scheduled for November of that year, would be the trade body's "next big project," Stewart Murray, Chief Executive Officer, said at a gold summit on Saturday. "It will help the world to understand the Indian market and how big, wonderful and varied it is," he said.

The association sets the twice-a-day London fix, a key benchmark for the global gold trade.

News: Indian retailers turn local with kirana plan

(TNN 04/09/2006) Mumbai - Based on recent consumer learnings, modern retailers have begun following the kirana (local ‘mom and pop’ stores) business strategy of focusing on local catchment areas to set up food and grocery stores.

Positioning themselves as an upscale kirana with the back-end efficiencies of a large retailer, new formats like Trumart, Spencers Daily , Spinach, Vishal, D Mart and others are offering the kirana convenience of being situated locally and similar services like taking orders on phone and making home deliveries.

Most of them who had earlier set up stores in the larger malls, which are typically not in residential areas, hoping a higher conversion rate (consumers actually making purchases) from the footfalls in these formats, a strategy which did not prove too profitable.

Retailers say most consumers tend to visit these areas as entertainment zones and rather than making their daily basic grocery purchases. It is felt that large formats tend to attract consumers for purchases of furniture, home furnishings apparel and other lifestyle products.

“Instead of changing the Indian consumer’s habits, we are looking at adapting to their needs. Indian consumers are used to calling up their local grocer and expecting purchases to be delivered home. The differentiator for us from the local kirana would be the quality and variety of products and better prices,” said Kapil Wadhwan of Spinach.

Convenience formats are also able to get better bargains with suppliers and manufacturers by offering business scales higher than the local kirana. Consequently, manufacturers have also begun stepping up discounts to the new formats, industry players said.

Indians prefer proximity of store in residential areas to enable frequent purchases. After the initial excitement of frequenting malls for purchases, retailers are finding that the kirana style is best suited to the Indian consumer’s needs.

Food retail is currently growing at around 30-35% and retailers expect the pace to pick up in the near future. Traditional stores are making way for new formats across markets and as per AC Nielsen estimates, modern formats account for 10% of FMCG sales in 23 metros and over 20% in south metros.

Retailers are paying close attention to food formats given that foods account for 44% of the entire FMCG sales. Some of the larger formats like Food Bazaar and Giant say they continue to be profitable with the scale offered. Industry officials say the new formats have expanded the market and there is merit in following different strategies to cater to the Indian consumer.

Damodar Mall, president (foods division), Pantaloon Retail, says the large formats have changed the way Indian consumers behave. “We have brought the Indian husbands back into grocery purchases.

Unlike consumer abroad, Indians don’t tend to look at grocery purchases as an unpleasant or difficult chore. There are several consumers in the upper middle class or the more affluent who spend disproportionately higher than planned on the grocery bill,” he said.

However, the fact remains that the food and grocery which are primarily low margin-high volume businesses need economies of scale to be profitable.

Also, to succeed in food retail, Indian consumer should have access to good roads, cheap fuel or have larger refrigerators and storage space to stock up the big volume purchases. In the developed markets for instance, consumers go in for week-end purchases and stock up on bigger quantities.

“It is very difficult to change habits for foods and daily-use requirements. Aping the global strategy will not work in India. To get the scale, it is essential to ensure that the stores are closer to the consumer.

But by offering better supplies and lower prices by working closely with FMCG suppliers, the new formats offers a higher degree of promotions and builds loyalty around the store,” said Upamanya Bhattacharya, CEO, FHPC of Trumart, a Pyramid Retail subsidiary.

Most of the retailers are also partnering with Kiranas as their suppliers, by offering competitively priced branded and unbranded products. Retailers are willing to share the efficiencies gained through their supply chain with the Kirana owners and be an indirect part of neighbourhood sales.

News: Money supply growth at 20%, touches decade's high

(TNN 04/09/2006) Mumbai - Even after resorting to monetary tightening by hiking benchmark interest rates, the money supply growth continues unabated, and is inching towards the 20% mark. This is the highest growth witnessed since 1994-95. Such high money supply could cause further inflationary pressures in the economy.

As per the latest figures, the year-on-year (y-o-y) growth in M3 — a broad indicator of money in the system — was 20% as of August 18. All three components — currency with the public, demand deposits and time deposits — have recorded a strong growth.

Money supply has been growing way above 14.5% in FY06 and is expected to grow by 15% in FY07. However, much of the growth in the recent past is due to a pick up in government expenditure in the first quarter of the fiscal, according to Shubhada Rao, economist, Yes Bank. When the government spends the revenue it raises instead of parking it with the central bank, it creates liquidity in the system. A chain of spending activities by various entities adds to the total stock of money through what is termed as ‘credit creation’.

Besides, there is the component of money stock — currency with the public — which is directly supplied by the central bank in the system. This is rising due to conversion of foreign currency inflows through FDI and ECBs.

The current level of money supply growth, which is higher than the nominal GDP growth (8% real GDP plus 5% inflation), signals inflationary potential from the demand side or what is popularly known as demand-pull inflation.

A money supply growth that matches the nominal GDP growth is considered healthy as it absorbs the total output generated in the economy. And a growth rate in excess of the nominal GDP creates a situation of too much money chasing too few goods, causing a rise in the general price level in the economy.

News: India, Inc. shining, exceeds expectations

(TNN 04/09/2006) New Delhi - Despite higher fuel and power costs, doubling up with increased raw material prices and higher interest rates, India, Inc. has performed extremely well in the first quarter.

The CII State Of Economy report released on Monday, states that manufacturing companies have exceeded all expectations in FYI as compared with the same period last year. With marginal slowdown in the services sector, the GDP will be sustained at 8 per cent in FY07.

The report, however, points out that labour-intensive industries in the manufacturing sector need attention.

An analysis of 2,252 firms showed that profit after tax (PAT) went up by 38.8 per cent over the corresponding quarter in FY 06. Sales rose by over 28 per cent and expenses by almost 30 per cent. However, India, Inc. was able to overcome increasing material costs, constituting 70 per cent of expenses, with higher factor productivity,

The report points out that the performance of the manufacturing sector during Q1 of the current year over Q1 of last year is much better than that of the corporate sector as a whole. Manufacturing sector recorded a growth in PAT by almost 54.5 per cent, which was only 18.1 per cent, a year ago. This has been the result of heavy increase in growth of net sales (from 19 per cent to 29 per cent) relative to non-operating expenses. Operating expenses registered a faster increase because of more than proportionate increase in material expenses.

The Index of Industrial Production (IIP) came down from the level attained in the previous quarter at just over 10 per cent, compared to Q1 FY06. Sustained manufacturing sector growth of 11.2 per cent helped keep IIP buoyant, but mining and electricity sectors dragged growth rates down from 10.4 per cent to 10.1 per cent. In the use-based classification, the decline in growth of consumer goods from 18.4 per cent in Q1 FY06 to 8.2 per cent in this quarter may be an indicator of slowing down of consumption-led growth, especially as capital goods production grew by 23 per cent over 14 per cent last year.

However, sectoral growth analysis revealed that some sectors with high employment have decelerated, which is disturbing. The main industries showing low/negative growth included food products (-5.1 per cent), cotton textiles (2.4 per cent) jute textiles (-0.9 per cent), wood and wood products (-22.3 per cent), leather & fur products (-11.1 per cent)), metal products and parts, and mining (3.5 per cent). In order to promote job-oriented growth, it is essential that special attention be given to this aspect.

In the agriculture sector, normal monsoons over much of the country and improvement in acreage under kharif crops indicate continued growth of 3 per cent for the year.The total area under rice cultivation as on 21 July '06 was 143.7 lakh hectares (lh), which is higher than 132.0 lh of the last year. There has been a similar increase in areas under cultivation for pulses, led by arhar and urad.

The services sector continued to grow at a healthy pace of 10.9 per cent, led by IT, banking, tourism and telecommunications. The telecommunications sector was mainly boosted by jump in total cell phone connections and net addition in switching capacity by 167 per cent and 572.1 per cent in Q4 respectively. However, companies in the services space did not perform as well as their manufacturing counterparts, registering an increase in PAT from 12.2 per cent in Q1 2005-06 to just 15.2 per cent in Q1 of 2006-07. Services sector companies may have suffered from deteriorating productivity of energy, higher labour costs and rising raw-material prices.

While the global growth environment remains positive, it is important to balance weight of rising oil prices and maintain fiscal prudence. The liquidity position is comfortable and does not call for upward pressure on interest rates, which might constrain the emerging signs of investment-led growth. However, overspending by the government in Q1 as compared to Budget estimates may place pressure on the fiscal if not compensated in the remaining part of the year.

The report, however, points out that the trade balance is rising with growth in exports for the first quarter slowing down to 17 per cent from 35 per cent in the previous year. Deceleration is also obvious in the growth rate of non-oil imports from 51.7 per cent in Q1 FY06 to 9.6 per cent in Q1 FY07.

News: Tatas set sail into uncharted waters

(BS 04/09/2006) Mumbai - Close on the heels of getting into the enhanced water business, the Tata group is all set to enter water management which is being opened up for private players.

The group is expected to make a splash in the business in Bangalore where two bids are expected to be announced shortly, if not next week.

The vehicle for the proposed entry into water management will be Jamshedpur Utility & Services Company (Jusco), a wholly-owned subsidiary of the group's steel entity Tata Steel.

Confirming this, sources in the group said Jusco had put in two bids for participating in two projects in Bangalore. Bangalore Water & Sewage Board, a state government undertaking, had invited bids for two projects and would announce the successful bidders next week.

Jusco, the country's first and only privately managed utility services company, is keen on participating in water management projects in Mumbai. However, Brihanmumbai Municipal Corporation, the civic body of the state government, has not yet decided to launch tender for any project.

"In fact, we are open to participate in water management in any city where the sector is opening up, " they said.

Industry sources said the scope for water management in Bangalore where availability of water was less than national average was huge.

Bangalore gets water for 2.5 hours a day against the national average of 5.6 hours a day. Chennai is at the bottom of the list with water availability of 1.5 hours a day, then comes Ahmedabad (2 hours a day).

Delhi has availability of four hours a day, less than Mumbai’s five hours a day.

Tata Steel had formed its town division into separate entity called Jusco in August 2003. Tata Steel has been into providing municipal services through its town division since it was set up in 1907.

In Jamshedpur, Jusco's services include water and waste water management, power supply, public health, horticulture services, planning, engineering and construction. However, it will restrict its activities in water management only in other cities.

News: Taiwan chipmakers turn to Chennai, Hyderabad

(BS 04/09/2006) New Delhi - Bangalore too expensive for setting up manufacturing units.

For Taiwan’s famed chipmakers, champions of the high volume-low cost game, Bangalore appears a trifle too expensive for setting up manufacturing units. Instead, Taiwanese companies are scouting around for locations in Chennai and Hyderabad.

“Bangalore is an information technology hub, but it is as costly as Taiwan. In comparison, Chennai and Hyderabad are cheaper and good for setting up chip manufacturing units,” Taiwan Semiconductor Industry Association President TY Wu said.

He recently led a delegation of Taiwanese semiconductor industry executives on a visit to India.

TY Wu felt that though Taiwan had the required technology, it lacked chip design skills, something available in abundance in India.

“The two cities provide better infrastructure for packaging, system assembly, and system integration. Various chip manufacturing units can be set up at the SemIndia facility in Hyderabad, and the semi-conductor SEZ coming up in Chennai,” he said.

Windbond Electronics Corp, a Taiwanese company that was a part of the delegation, has had talks with two Chennai-based companies — Spel and Tessolve — for integrated circuit backend production, and very large scale integration design.

“Our plan is to outsource integrated circuit backend production to India. We are looking for partners for engineering co-operation, sales, and marketing in Chennai and Hyderabad,” said James P M Chen, Windbond vice-president (sales).

News: Anil Ambani has big retail plans

(BS 04/09/2006) New Delhi - Not wanting to be deprived of a slice of the retail pie, Anil Ambani is working on a blueprint for the sector. Retail industry analysts as well as realty sector sources have confirmed that the younger Ambani is looking at his group entering the retail space.

Reliance Communications already has a significant retail presence through its “Reliance WebWorld” outlets. Incidentally, the WebWorld chain of 241 outlets in 105 cities has recently been renamed as Reliance World.

While these outlets mostly offer broadband internet surfing, video games, e-ticketing, and TV news uplink facilities, they also provide tele-medicine and web shopping facilities. Many outlets are also billed as gourmet coffee shops under the Java Green brand.

Sources said the company was considering conversion of the coffee shops into full-fledged food and beverage outlets. When contacted, a Reliance Anil Dhirubhai Ambani Group (R-ADAG) spokesperson refused to comment.

The first signs of a retail foray were evident with group firm Reliance Capital investing in Giny & Jony and Vishal Retail, the promoters of Vishal Mega Mart.

Last year, Anil Ambani had spoken of investing in pharmacy chains, said a Delhi-based retail analyst. Ambani had even shown an interest in the consumer durables sector around that time.

In any case, his group was already present in the multiplex (general entertainment services) category, and that could be a launchpad for future growth, he added.

There is also news of Ambani joining hands with Starbucks, the famous coffee retailer. Another analyst said the group was exploring all options, from convenience stores and category-specific outlets to hypermarkets. Ambani was also negotiating with global brands and global retailers, he added.

Yet another expert claimed the junior Ambani had been in serious negotiations with Armani, among other luxury brands.

It was possible that the foray might be confined to top-end single-brand retail, given the presence of players such as Pantaloon Retail and Raheja’s Hyper City, and the upcoming Reliance Retail hypermarkets of Reliance Industries in the general multi-brand retail format.

News: Morgan Stanley raises Indian GDP forecast

(PTI 04/09/2006) New Delhi - Global investment banking and equity research major Morgan Stanley has raised its forecast for India’s economic growth in the current fiscal following stronger than expected surge in first-quarter corporate revenues, industrial production and automotive sales.

Morgan Stanley said it was raising its GDP growth forecast for the year ending March 2007 to 7.6 per cent from 6.8 per cent, notwithstanding the expectations for a slowdown in growth rate during the second half of this year.

Growth trend in the corporate revenue, industrial production and automobile sales indicates a rebound in the quarter ended June, Morgan Stanley’s India-based economists Chetan Ahya and Mihir Sheth said in a report.

Re-accelerated growth trends in the first quarter has prompted an upward revision to GDP growth forecasts for this fiscal, they said.

However, the analysts have cut down their growth forecast for the agriculture segment to 2 per cent from 3 per cent, primarily due to the erratic trend in the monsoon rainfall.

News: Indian consumer goods makers look beyond soap, tea

(RTR 04/09/2006) Mumbai - Indian consumer goods firms are looking beyond their traditional strongholds in packaged tea and soap and tapping emerging trends in health and personal care in search of bigger profits in an increasingly competitive market.

"The consumer goods space is seeing buoyancy, with younger consumers, higher disposable incomes, and the growth of organised retail," said Hemant Patel, an analyst at Enam Securities.

"But some categories like soaps are highly penetrated, while others like detergents are seeing pricing pressure," he said.

Tata Tea Ltd. the world's second-biggest branded tea maker, last month said it would buy 30 per cent of Energy Brands Inc., which makes Glaceau vitaminwater, for $677 million.

Leader Hindustan Lever Ltd. has launched a water purifier and a skin cream for men, while tobacco giant ITC Ltd. has rolled out foods and fragrances and is investing more than $1 billion on its rural shops and distribution centres.

India's branded retail sector, estimated at about $6 billion, makes up only 3 per cent of the total market, but is forecast to grow at 25-30 per cent a year over the next four years, with plush department stores and malls springing up across the country.

That has encouraged Marico Ltd., Godrej Industries Ltd., Dabur India and Emami to foray into areas including men's grooming and ready-to-eat food.

Hair oil major Marico has rolled out skin care centres and is testing baby care products, while Dabur has added packaged foods and beverages and Emami has a skin cream for men.

"Their bread-and-butter products provide the cash flow initially, and while immediate profitability is difficult, as a long-term strategy it works," Patel said.

Revenue from Marico's Kaya centres more than doubled in the fiscal year to March 2006 and Marico expects new products and services to make up one-fifth of its total revenue shortly.

"Increasing urbanisation, a focus on wellness and healthcare and a shift to services is encouraging concepts like Kaya," said Marico's Chief Financial Officer Milind Sarwate.

Soaps and detergents make up more than 40 per cent of Lever's revenue, while ITC's non-cigarette businesses -- including hotels, paperboard and foods -- now make up about half its net turnover, up from less than a third a few years ago.

Lever posted its first profit rise in six quarters in June 2005 after a fierce price war in shampoos and detergents with the local arm of Procter & Gamble.

Tata Tea's revenue now comes nearly entirely from its branded tea business (86 per cent) and plantations.

NEW BEGINNINGS

Tata Tea's purchase of Energy Brands -- the largest overseas equity investment by an Indian firm not controlled by the government -- came on the heels of the purchase of Czech tea firm Jemca this year and U.S. herbal tea maker Good Earth last year.

The latest move gives Tata Tea, which has been exiting its low-margin plantations business in India, a segue into a fast-growing, high-margin segment. The U.S. enhanced water market -- bottled water with added ingredients such as vitamins -- is forecast to grow to $8.6 billion in 2010.

"It is a lateral leap from the black tea segment -- growing at a benign 2 -- to a vibrant market with an estimated growth rate of 25 per annum through 2010," Patel said.

Lever, which has often been criticised for a lack of new growth drivers, has also extended its Ayush ayurvedic skin care range to therapy centres that also offer yoga and massages, and is expanding direct selling networks in urban and rural areas. Ayuverda is a traditional Hindu system of diet medicine and yogic breathing.

"There are new channels of sales, new product categories and new consumer segments that are emerging," said Dalip Sehgal, Lever's executive director of new ventures and marketing services, listing the reasons behind recent initiatives.

Today, its Shakti direct selling rural network covers 100,000 villages and contributes 15 of Lever's rural sales and 40 of rural growth.

But not all its new initiatives have succeeded.

"We will only take forward those that meet our topline and bottomline goals," Sehgal said in his office, where a statue of Ganesha, the Hindu god of beginnings, looks on a row of newly-launched products.

"But even if two to three of these is a blockbuster, that's good."

News: ‘Freeing the rupee not in India's interest’

(RTR 04/09/2006) New Delhi - Freeing the rupee is not in India's interests as it will encourage speculative flows into the country, a leading communist party official said on Monday.

D. Raja, national secretary of the Communist Party of India, told Reuters the rupee was not such a strong currency that the country could open up the capital account further.

"I do not think this step is in our interest. It will only help speculative capital and moreover the experience of many developed countries on this issue has not been positive," Raja said. "We must be realistic."

A road map to greater capital account convertibility drawn up by an expert panel was released by the central bank late on Friday.

It outlines a three-phase plan extending to 2010/11 which would allow greater movement of capital in and out of the local currency.

Asked whether the communists, who support India's coalition government from outside, will oppose any move to accept the convertibility report, Raja said: "They may discuss it with us but we will tell them that we don't think it appropriate for us to go for convertibility."

News: FIIs return, likely to continue selective investments

(BL 04/09/2006) Mumbai - FIIs seem to have recalled Baron Nathan de Rothschild's words: Buy to the sound of cannons, sell to the sound of trumpets.

Last week FIIs pumped in a net investment of Rs 1,416.01 crore (considering provisional figure complied by the NSE). This was roughly Rs 1,300 crore more than the previous week.

FII investment strategy, after massive pump-out in the second half of May and to a lesser extent in June, has been one of gradual return to Indian equities. The second half of August saw highest inflow since the meltdown.

Market fundamentals, they appear to feel, support the long-term uptrend in select emerging markets - India being one of the chosen few.

A number of managers of the overseas funds, after the deep correction, had spotted India in July as an opportunity to buy into the oversold equities at "attractive" valuations. A part of the India-specific money raised earlier is now being deployed.

This week, the general strategy for the FIIs on Dalal Street could be continuation of selective investments, mainly in the 66-stock MSCI India Index which include number of mid-cap stocks.

Global investors continued to pour in fresh money till end of August to funds directed toward Indian stocks.

Hedge funds, which quickly withdrew money in the period between mid-May and June, have started to come back. For example, the $6 billion hedge fund group, Optima Fund Management, recently launched 12 Asia-focused funds with 15 per cent of the assets meant for India allocation.

The overall investment sentiment is likely to remain mixed to positive for FIIs in the short-term. The Wall Street expects that the Federal Reserve might leave rates unchanged on September 20 like it did on August 8 and British Petroleum planned to restart half of the production at its Prudhoe Bay oil field by the end of this month. Nervousness among the global investors eased somewhat further last week after the Labour Department said 128,000 jobs were added, 3,000 more than expected, in August, bringing down the country's unemployment rate to 4.7 per cent from a five-month high of 4.8 per cent in July. Wages, highest since 2001, also bolstered the expectation that an US economic slowdown might not be as severe as some have predicted.

However, concern over resumption of an upward trend in the global crude prices (supply from Iran may stop; the US is in the midst of hurricane season and the peak heating season is approaching) exerting additional pressure on Indian economy and its influence on the corporate performance is likely to dominate the discussion over the medium-term outlook. The possibility of the United Nations imposing sanctions on Iran, a crude major exporter, is a dangling risk for the oil import-dependant markets like India.

The investment strategies for the local mutual funds, in the immediate term, also appear to be positive. After a sell-off in June and July, they turned net positive investors in August. Last week also they remained net investor.

This week, the benchmark Sensex is likely to consolidate further within a range of 400 points. The Nifty and the MSCI India Index may finish in the positive on measured liquidity flow.

News: 'Are low cost Indian carriers viable?'

(BL 04/09/2006) Hyderabad - "There is nothing low cost about low cost carriers. The cost remains the same. The difference is that they are offering lower fares now. But is this business model sustainable two years down the lane?" asked Vijay Mallya, Chairman of Kingfisher Airlines.

Speaking at the India Travel Congress here today, Mallya said, "it is to be seen whether this model that airlines are now offering is sustainable two years down the line. Will they be sustainable two years from now? What kind of business model is that if they cannot cover their operating costs?"

The Indian aviation industry is witness to rapid growth driven by IT, BTand KPO boom in the country be it in Bangalore, Hyderabad, Pune or Nagpur. However, it is wrong to take the 1.1 billion population into consideration to predict growth. Of this, the life of about 600 million farmers is confined to 100 sq miles.

Referring to the need to strengthen infrastructure, he said it is time to improve infrastructure and focus on the growth of tourism sector. This will bring in sustainability to the sector.

Reeling out numbers, he said that the domestic aviation traffic grew by about 50 per cent in the last one year if the January-June traffic of 2005 and 2006 is considered. This number is due to low fares and nothing else.

Since the launch of Kingfisher in May 2005, Kingfisher has flown about 2 million guests. It now has about 13 Airbus aircraft and 4 ATRs and has been chosen No. 1 across all categories of air travel.

News: 'Potential in Indian real estate enormous'

(BL 04/09/2006) Kolkata - JP Morgan Asset Management - Real Estate will try to partner with quality developers in India, says Arvind F Pahwa, MD. Its India Property Fund, which has just announced closure with about $ 360 million in capital commitments, intends to leverage the growth in demand for real estate in the country. "The potential here is enormous and investors have started eyeing higher returns", he notes. Pawha also dwells on some key aspects of the market, including imminent competition and the view that a correction of sorts is setting in.

Excerpts.

Is there realisation that property prices have spiralled quite substantially and that some form of correction will happen?

Yes, property prices have grown significantly over the last 2 years on account of great demand from actual users in all segments. There are a number of projects under construction and the coming years will see new supply. This will definitely have some rationalisation and stabilisation impact on the rents as well as on capital values. The effect will vary from market to market. Also, the increase in mortgage rates in line with the international trend will have some dampening impact.

Quite a few real estate funds have been set up or are starting operations. How do you see the competition that is building up?

It is true that a number of funds are looking to invest in India's real estate. I see this as a sign of maturity and the faith in the India story. The latter is quite compelling and driven by economic growth. More funds will result in creating high quality supply to meet international standards. Having said that, let me add that the need for capital in this segment is tremendous. With the advent of more funds, there will be a shift in the financing patterns from an un-organized form to a more organized form. The result will be clear - more transparency and maturity. Given this backdrop, funds like ours will seek to leverage our pools of professional talent and expertise. Incidentally, another differentiating factor will be the strength of the teams that the funds have on the ground.

What is your strategy with regard to the property fund's investments? In which areas segments will you be most comfortable?

We will look at partnering with high quality developers on a pan-India basis across all segments. The JP Morgan India Property Fund will invest in a broad range of development projects which are FDI-compliant. It will cover residential, office, retail, warehousing and hospitality sectors. For the developing Indian scenario, there are big opportunities to build quality real estate. This can then be leased and converted into core property with leases in place. The market may well give 20 per cent-plus returns.

The Indian metros are getting considerable attention already from large real estate investors. How about the smaller markets?

Right, our metros have hogged the limelight till now and will continue to do so. But there are several new growth centres too. The emerging ones are drawing the attention of all. I am referring to developers, funds, institutional clients and the like. Remember, this is a huge country with more than 40 cities boasting a population of 1 million plus. These merit serious consideration, in terms of both quality development and capital. Cities such as Chandigarh, Nagpur, Vizag, Mangalore and Kochi are coming up fast and needs special mention.

News: Govt clears Ganesh Bank merger with Federal Bank

(BL 03/09/2006) Mumbai - The Union Government has approved the merger of The Ganesh Bank of Kurundwad with the Federal Bank Ltd effective September 2. In a press release issued on Saturday, the Reserve Bank of India said all branches of Ganesh Bank would function as that of Federal Bank with immediate effect.

Customers, including depositors of The Ganesh Bank of Kurundwad, would be able to operate their accounts as customers of Federal Bank.

"The Federal Bank Ltd is making necessary arrangements to ensure that service, as usual, is provided to the customers of The Ganesh Bank of Kurundwad Ltd," said the release.

The Union Government had placed Ganesh Bank under a moratorium on January 7, 2006, while approving a proposal by Kochi-based Federal Bank to take over Ganesh Bank.

The Government had ordered the amalgamation of the two banks on January 25. This was, however, contested by a group of persons, including the chairman of Ganesh Bank, a shareholder, a depositor and an employee who filed a petition in the Bombay High Court.

The case moved to the Supreme Court, which, on August 28, 2006, upheld the scheme of amalgamation.

Ganesh Bank has 32 branches concentrated in Sangli. Federal Bank has 20 branches in Maharashtra.

The merger will help Federal Bank step up its agriculture and retail portfolio.

News: Air India, Indian may merge to consolidate

(PTI 03/09/2006) Varga (Goa) - Air India is looking ahead for its merger with Indian to make the entire group the “largest airlines in Asia”, Air India’s Chairman and Managing Direct or (CMD) Vasudevan Thulsidas said.

“We look ahead for this merger, which would further strengthen our market position,” he said. Thulsidas was addressing a conference on ‘logistics' organised by Goa Institute of Management in south Goa.

“Open sky policies have brought in challenges and also opportunities to the airlines companies. All airlines face tough competition,”, he said. Air India intends to further consolidate their position in the world market vis-a-vis open sky policy by having global alliances with other players, the CMD said.

“On cargo sector Indian government adopted open sky policy in 1990 while for passengers its coming now. Technically, India has open sky policy only with us while with the rest, it’s a liberal agreement,” Thulasidas explained.

Pointing out that Air India is being ‘rebuilt’, he said the airlines will add more muscles with induction of 68 brand new state-of-the-art aircraft. “They will start coming from November and will keep on adding for next three to four years,” the Air India CMD said. He said the new fleet would be the best in the world and at par with any global airlines.

News: CII study optimistic about India’s 8% GDP growth

(PTI 03/09/2006) New Delhi - India Inc has contributed significantly in the first quarter for the GDP to maintain a 8 per cent growth rate for the current year, according to a CII report.

The CII State of the Economy report analysed the performance of the economy, compared India's economic growth with other global economies and studied the manufacturing, services and agriculture sectors. It also examined money and inflation, interest rates and liquidity while keeping a watch on corporate performance.

In the corporate sector, profit after tax (PAT) of 2,252 firms have gone up by 38.8 per cent in April-June 2006-07 over the corresponding quarter in 2005-06. Sales rose by 28 per cent in the first quarter this fiscal compared to the year-ago period, the report said.

Manufacturing sector recorded a whopping 54.5 per cent growth in PAT, whereas it had recorded just 18.1 per cent in the same period a year ago. The impressive growth in PAT was the result of increase in net sales from 19 per cent to 29 per cent relative to non-operative expenses, the report shows.

Mining and electricity sectors dragged down the Index of Industrial Production (IIP) because their growth rate took a beating from 10.4 per cent to 10.1 per cent. The IIP could move just over 10 per cent because the manufacturing sector recorded a growth of 11.2 per cent, it said.

News: Israeli real estate JV to invest $100 m in Murugappa

(PTI 03/09/2006) Jerusalem - India's real estate boom is now attracting foreign players with two major Israeli firms joining hands to invest USD 100 million in its market.

The IDB group, one of the largest private business enterprises in Israel, has formed a joint venture with the Electra Real Estate in which both the Israeli companies will own 45 percent share each. An already active unnamed Israeli company in India would hold the remaining 10 percent stake, a media report said here.

The Israeli companies will be working with Indian real estate group Murugappa and are currently negotiating the construction of thousands of residential units and tens of thousands of square meters of commercial and office space, mostly in Chennai, daily Ha'aretz reported.

Nochi Dankner, the CEO of IDB Group, recently visited India and met with executives of the Murugappa group in this regard, it said.

The groups subsidiary, Property & Building, will be handling the Indian real estate venture. As per the arrangement being worked out, Murugappa, the Indian partner, will hold a 10 percent stake in a planned second-stage joint venture.

Murugappa reportedly has 28 subsidiaries and a payroll of 30,000 with an annual turnover of $1.5-2 billion.

News: Vulnerability of small Indian banks

(BL 03/09/2006) Mumbai - "Too big to fail" is an apt statement when one hears of another small bank being put to sleep by the Reserve Bank of India. All organisations are vulnerable to fail, but banks and financial institutions are more vulnerable than others. And, the world over, Governments, even in the citadel of capitalism (USA), bend backwards to save a bank, if it is really big.

Two decades ago, a big bank, Continental Illinois, was resurrected from doom by the US Government. The authorities there again launched a rescue act when Long Term Capital Management, a financial services firm operating a very big hedge fund collapsed.

While saving banks/financial firms, the US Government allowed a very big firm Enron and its equally big auditor, Arthur Anderson to fold up.

In India too, the authorities have been regularly saving commercial banks from failures, whereas innumerable NBFCs and co-operative banks have had a quiet burial. Big banks in Public Sector (PSBs) were given fresh capital by the Government to meet losses, whereas some small banks were merged with PSB or were taken over by other banks.

In Pix: Hotspot for bloggers

Cases that come readily to mind are Nedungadi Bank, Global Trust Bank, Centurion Bank etc. Banks are unique among all modern businesses in the sense that they operate extensively on borrowed funds. Till a decade ago, there was no limit to a bank's borrowing powers vis-a-vis its owned funds.

Lending Prudently

The fortunes of a bank are based entirely on the capability and willingness of the management to lend out depositors' funds in a prudent manner. Not that one should avoid risk, but quite often, the management is tempted to indulge in extremely risky lending. Such propensity is accentuated in smaller banks where the checks and balances inherent in a big bank might be missing or inadequate. One old bank was brought down because of losses in stock market operations, allegedly, because some influential stock brokers joined as Directors.

Another bank went down, reportedly, due to the overweening ambition of the promoter CEO who possibly wanted to become too big too soon. Another new bank that was started by an NBFC met its doom when the legacies of NBFC were perhaps transferred on to the bank. All small banks, where one person or a Group controls the levers of power, could indulge in imprudent lending, unless the top management is absolutely professional in lending operations.

Opportunities to throw away money are plentiful. To cite a few, stock market operations - in India banks can even play in secondary markets, or lend to known people irrespective of the viability of project (usual excuse of borrowers belonging to "our" community/State etc), or lend to the firms of other banks' Directors, irrespective of merits, as a quid pro quo for that bank lending to its Directors etc.

Executive fitness: Get set for the fitness routine

There were even reports of banks giving money to buy its own shares, which is specifically prohibited by the RBI. This rule was reportedly circumvented by giving unsecured loans for buying the shares. All these temptations are available to bigger banks also, but the scope for one person to call all the shots is somewhat limited. Yes, the entire capital of one big PSB was wiped out probably because the top man permitted unscrupulous lending; but such cases could be more in number in small banks, where most of the Executives owe personal allegiance to the CEO.

Basel Norms

The RBI is taking various measures to protect the integrity of commercial banks and have evolved a strict monitoring regime. But, like in other spheres, here too there is an uneasy feeling that political influence might be a constraining factor. If a person or group managing a bank indulges in unprofessional lending, corrective measures taken after the event are rarely effective. Proactive steps, as suggested by Basel norms, and lessons learnt from past experience should be put in place well before a bank slides down into bankruptcy.

News: RBI working on multi-purpose smart cards

(BL 03/09/2006) Hyderabad - To promote financial inclusion, involving provision of banking services to people, the Reserve Bank of India (RBI), along with the Institute for Development and Research in Banking Technology (IDRBT), is currently working on the use of multi-application smart-card systems, the RBI Governor, Dr Y. Venugopal Reddy, has said.

Addressing the bank chiefs and heads of their IT departments at the IDRBT here on Saturday, Dr Reddy said these smart cards can operate as a bank account and also store of electronic cash.

The multi-purpose smart cards can hold information relating to the cardholder and have security features such as biometric identification. They can also double up as an entitlement identifier or as a social security card, he said.

News: Family feud plagues Bhushan group

(PTI 02/09/2006) New Delhi - In yet another family dispute in corporate India, B.B. Singhal, who is heading the Rs 6,000-crore Bhushan group, has moved the Company Law Board (CLB) against elder son Sanjay Singhal for his reinstatement as chairman and managing director in Sanjay-controlled group company Bhushan Power and Steels Limited (BPSL).

CLB chairman N. Balasubramanian has directed the senior Singhal and his son not to intervene in each other’s business and ordered a status quo in the group companies.

In his petition filed before the CLB under section 396 (suppression of facts) and 397 (mismanagement) of the companies act, B.B. Singhal had alleged that son Sanjay removed him from the post of chairman and director of BPSL in the annual general meeting of the company on June 17, 2005.

Appearing for B.B. Singhal, senior counsel U.K. Chaudhary and Ranjana Roy Gawai contended that Sanjay has violated the provisions of company law by fraudulently removing his father from the chairmanship and directorship of BPSL.

He also removed younger brother Neeraj from the post of a director of BPSL “illegally and unlawfully”, violating the family agreement, Chaudhary and Gawai argued before the CLB during the proceedings held here last week.

Neeraj is the second son of B.B. Singhal and managing director of BSSL, another group company.

The senior Singhal has further alleged that Sanjay had seized documents of 19 investment companies belonging to the Bhushan group. According to the family agreement of June 2003, these companies were to come under his control.

News: Panel pill to please India Inc, shock FIIs

(TT 02/09/2006) Mumbai - India Inc will be pleased as punch. The S.S. Tarapore committee on fuller capital account convertibility (FCAC) has recommended that industrial houses be allowed to promote new banks and that limits be significantly raised for investments abroad.

According to the committee’s report, which was released by the Reserve Bank of India (RBI) today, limits for investments abroad should be raised in phases from 200 per cent of the company’s net worth to 400 per cent of net worth. The suggestion, if implemented, will clearly raise the bar for investments (read takeovers) abroad.

It was only last week that the largest cross-border deal done by India’s private sector saw the Tata group acquiring a 30 per cent stake in US-based energy drink maker — Glaceau — for $677 million.

The good news for India Inc is the recommendation that the RBI should evolve policies to allow, on a case-by-case basis, industrial houses to have a stake in Indian banks or promote new ones.

Under the current RBI regulations, corporate houses can only hold up to 10 per cent in a private sector bank.

If this was one positive aspect of the report, there was another suggestion which could give the equity markets a nightmare. The issue of participatory notes (PNs) came back to haunt foreign institutional investors (FIIs). PNs could be on their way out if the committee has its way. The committee has recommended that FIIs should be prohibited from investing fresh money raised through PNs in the stock markets.

The committee said the nature of the beneficial ownership or the identity is not known in the case of PNs unlike in the case of FIIs. It said these PNs are freely transferable and trading of these instruments makes it all the more difficult to know the identity of the owner. It is also not possible to prevent trading in PNs as the entities subscribing to the PNs cannot be restrained from issuing securities on the strength of the PNs held by them.

“The committee is, therefore, of the view that FIIs should be prohibited from investing fresh money raised through PNs. Existing PN-holders may be provided an exit route and phased out completely within one year,” the report said.

PNs are instruments used by foreign funds (but issued by India-based foreign brokerages) who are not registered with the market regulator, but want to take exposure in the country’s capital markets.

For many who have been advocating these instruments, found support in one member of the committee itself. Surjit Bhalla gave a dissent note. He said while the report misses the big picture, the committee, by recommending a ban on P-notes, is recommending a significant move backwards.

FIIs should also be worried over another recommendation. The committee felt that to the extent the capital inflows are exceptionally high and the economy is inundated with excess liquidity arising out of FII inflows, the authorities may consider, in very exceptional circumstances, the imposition of an unremunerated reserve requirement on fresh FII inflows.

Under such a dispensation, FIIs will be required to retain a stipulated percentage of the inflows with the bank and the bank in turn will be required to transfer these balances to the RBI.

The impounded balance will be released to FIIs after a stipulated period.

Task force

The RBI today constituted an internal task force to re-examine the regulations and make recommendations to remove the operational impediments to make liberalisation more meaningful. This follows Tarapore committee’s recommendation that a task force be set up immediately to identify the anomalies in the present regulatory framework. The task force will make recommendations on an ongoing basis and the process will be completed by December 4.

News: Infosys eyes buys in Germany & France

(RTR 02/09/2006) Bangalore - India's second-largest software services exporter, Infosys Technologies Ltd, is looking at acquisitions in Germany and France to expand operations in Europe, its Chief Operating Officer said on Friday.

Nasdaq-listed Infosys is also eyeing other European countries, besides expanding in China, S Gopalakrishnan said in an interview.

It also plans to step up its presence in Latin America, Japan, South Africa and the Middle East, he said.

"What we are looking for is more strategic acquisitions which allows us to expand faster in a market or in a particular industry," Gopalakrishnan said.

"So, we are looking at locations like Germany and France where the challenge is to recruit local people," he said.

However Infosys, whose clients include ABN AMRO, Goldman Sachs and Airbus, was not close to clinching an acquisition, he said.

Chief Financial Officer V Balakrishnan said in June Infosys was looking to acquire companies with an annual revenue of $100 million to $200 million.

Indian software services companies, which have been riding an outsourcing boom, have seen businesses from Europe growing faster than their main US market.

Clients in North America accounted for 64 per cent of Infosys' revenue in the June quarter, nearly flat from a year ago, while customers in Europe made up 26.2 per cent, up from 23.9 per cent.

RISING WAGES A CONCERN

Rising salaries are a concern for India's $23 billion software services exports industry, even though wages in Asia's fourth-biggest economy are about one-fifth of Western salaries.

"It is a concern in the medium to long term. We are managing it currently but over the longer term we need to figure out how this is going to play out," Gopalakrishnan said.

Infosys has been able to charge 2-3 per cent more from new clients and is looking to grab more outsourcing deals to soften the blow from higher staff expenses, he said. It has also raised charges for existing clients.

Industry leader Tata Consultancy Services Ltd, Infosys and third-ranked Wipro Ltd beat market expectations with their quarterly earnings in the June quarter thanks to robust outsourcing business.

Infosys plans to raise its staff in China, where it has a software development centre in Shanghai and plans to start operations in the eastern city of Hangzhou soon, to 2,000 by end-2007 from 800 now, Gopalakrishnan said.

"It is a development centre as well as a market for us. From a development centre perspective, we are already servicing about 15 clients from China. It is starting to pick up," he said.

Indian companies are expanding in China because of its strong potential, and as a hedge against rising costs in India.

Shares in Infosys have gained 21 per cent since the start of 2006, outpacing a 14.5 per cent rise in the BSE information technology index but below a 25.3 per cent increase in the benchmark BSE index.

News: Videocon, two funds for Daewoo Elec bid

(RTR 02/09/2006) Seoul - Videocon Industries Ltd., a Malaysian investment fund and a South Korean fund are the front-runners in the bidding for South Korea's Daewoo Electronics, a creditor source of the home appliance maker said on Friday.

Daewoo Electronics, which makes televisions, refrigerators and air conditioners, drew five bidders in August after its domestic creditors put their combined 97 per cent stake of the unlisted firm up for sale.

Local media estimated the deal could be worth up to $1 billion, or below its 2005 asset value of 1.65 trillion won ($1.72 billion).

"It was narrowed to the three," the source said by telephone, confirming the Chosun Ilbo newspaper's report that Videocon, a Malaysian fund and South Korean private equity fund MBK Partners were among the strongest candidates to buy the former unit of the bankrupt Daewoo Group.

He said he didn't know the English name of the Malaysian fund.

Another creditor source said it needed more time to examine acquisition proposals from the five bidders, so a preferred buyer could be announced after late next week.

The two sources declined to be identified or reveal which bidder offered the highest price.

The local newspaper quoted an unnamed creditor source as saying that the Malaysian fund had offered the highest price among other bidding firms and was most likely to be picked as a preferred buyer.

Daewoo Electronics is one of major companies spun off from the Daewoo Group that was bailed out by creditors, after the parent group collapsed in 1999.

Other former Daewoo units to be sold by creditors include Daewoo Shipbuilding and Marine Engineering Co. Ltd. and energy developer Daewoo International.

Former affiliates already sold include Daewoo Engineering and Construction Co. Ltd. in June and the former Daewoo Heavy & Machinery Co., now Doosan Infracore, in 2005.

For Videocon, which makes televisions, picture tubes and home appliances, an acquisition of the South Korean rival would be its third major acquisition in less than two years.

News: RBI panel suggests scaling up rupee convertibility

(HT 02/09/2006) Mumbai - In what could make buying properties and making investments abroad by individuals much easier, an RBI panel has recommended a slew of measures relaxing the norms for transfer of money from India.

The committee on full account convertibility of the rupee, headed by SS Tarapore, has recommended that the money allowed to be transferred for the purpose be increased in phases from $25,000 annually permissible now.

The committee's plan of action is to raise the limit to $50,000 in this fiscal itself, then to $1,00,000 in 2007-08, and to $2,00,000 by 2010.

The committee was tasked to look into the possibility of capital account convertibility - which essentially means that local financial assets can be freely converted into foreign financial assets and vice versa - and recommended measures needed to achieve that goal.

The committee also recommended that non-resident Indians (NRIs) be permitted to invest without limits in Indian stock markets, including mutual funds and portfolio management schemes.

The money, however, should be routed through bank accounts in India. Now, an NRI is allowed to own only up to five per cent of the paid up capital of a company; also no Indian company is allowed to sell more than 10 per cent of such capital to NRIs as a whole.

Simultaneously, the committee has recommended that Indian mutual funds be allowed to invest up to $5 billion a year in overseas stock markets by 2010. The current limit is $2 billion.

The increase is to be attained in a phased manner, the limit going up to $3 billion this year itself, to $4 billion in 2007-08 and to $ 5 billion thereafter.

To prevent slush funds coming into the Indian capital market, the committee has called for a complete ban on fresh inflows of participatory notes (P-notes). P-Notes are issued by foreign institutional investors (FIIs) to their clients against deposits.

The funds are then routed to the Indian stock market on the FII account in stocks specified by the clients. As a result, the Indian regulators never get to know the identity of the original investors. Currently a substantial part of portfolio investments is routed through P-notes.

The committee has further recommended that the existing P-notes be phased out over the next one year. Also, overseas corporate entities should be allowed to invest in the Indian stock market only if the funds come through identifiable bank accounts in India.

It has also called for a major relaxation of the foreign direct investment regime and recommended that all other regulations/restrictions be phased out in two years. If some of the regulations must continue, they must be notified afresh.

To enable Indian corporate bodies to tap overseas debt market on a larger scale, the committee has recommended that the overall ceiling for external commercial borrowings should be gradually raised.

In a key recommendation that will aid banking sector reforms, it has suggested that the government cut its stake in SBI and all other public sector banks to 33 per cent. Now, the law restricts minimum government holding in these banks to 51 per cent.

News: RBI panel suggests scaling up rupee convertibility

(HT 02/09/2006) Mumbai - In what could make buying properties and making investments abroad by individuals much easier, an RBI panel has recommended a slew of measures relaxing the norms for transfer of money from India.

The committee on full account convertibility of the rupee, headed by SS Tarapore, has recommended that the money allowed to be transferred for the purpose be increased in phases from $25,000 annually permissible now.

The committee's plan of action is to raise the limit to $50,000 in this fiscal itself, then to $1,00,000 in 2007-08, and to $2,00,000 by 2010.

The committee was tasked to look into the possibility of capital account convertibility - which essentially means that local financial assets can be freely converted into foreign financial assets and vice versa - and recommended measures needed to achieve that goal.

The committee also recommended that non-resident Indians (NRIs) be permitted to invest without limits in Indian stock markets, including mutual funds and portfolio management schemes.

The money, however, should be routed through bank accounts in India. Now, an NRI is allowed to own only up to five per cent of the paid up capital of a company; also no Indian company is allowed to sell more than 10 per cent of such capital to NRIs as a whole.

Simultaneously, the committee has recommended that Indian mutual funds be allowed to invest up to $5 billion a year in overseas stock markets by 2010. The current limit is $2 billion.

The increase is to be attained in a phased manner, the limit going up to $3 billion this year itself, to $4 billion in 2007-08 and to $ 5 billion thereafter.

To prevent slush funds coming into the Indian capital market, the committee has called for a complete ban on fresh inflows of participatory notes (P-notes). P-Notes are issued by foreign institutional investors (FIIs) to their clients against deposits.

The funds are then routed to the Indian stock market on the FII account in stocks specified by the clients. As a result, the Indian regulators never get to know the identity of the original investors. Currently a substantial part of portfolio investments is routed through P-notes.

The committee has further recommended that the existing P-notes be phased out over the next one year. Also, overseas corporate entities should be allowed to invest in the Indian stock market only if the funds come through identifiable bank accounts in India.

It has also called for a major relaxation of the foreign direct investment regime and recommended that all other regulations/restrictions be phased out in two years. If some of the regulations must continue, they must be notified afresh.

To enable Indian corporate bodies to tap overseas debt market on a larger scale, the committee has recommended that the overall ceiling for external commercial borrowings should be gradually raised.

In a key recommendation that will aid banking sector reforms, it has suggested that the government cut its stake in SBI and all other public sector banks to 33 per cent. Now, the law restricts minimum government holding in these banks to 51 per cent.

News: Mumbai's Shanghai dreams may remain just

(TNN 02/09/2006) Mumbai - Mumbai has to bear with its infrastructure woes for some more time. The Vilasrao Deshmukh government, which never gets tired of trumpeting its Shanghai dreams for Mumbai, admitted on Friday that the Centre is unlikely to sanction a majority of Mumbai’s infrastructure projects under the National Urban Renewal Mission (NURM) in ’06.

Jairaj Phatak, principal secretary, urban development, and also government spokesperson, told journalists that only two of the total seven projects proposed by the state are at an “advanced stage” at the Centre’s level. “The other projects are unlikely to be sanctioned this year,” Mr Phatak admitted.

This is for the first time that the state government has officially come out with information over the status of Mumbai’s NURM projects after submitting the proposals to the Centre. The two proposals that are at an advanced stage and being considered by the cabinet committee on economic affairs are Rs 1,600 crore Middle Vaitarana water supply project and Rs 2,376 crore sewerage disposal project.

It’s not, however, clear when these two projects would be given a nod. What is even more embarrassing for the state government is the Centre’s refusal to entertain three proposals on the ground they had several flaws.

“The Centre has pointed out several flaws in the detailed project reports (DPR) of three proposals that we had submitted. It wants us to send revised DPRs which we will do by October 31 this year,” Mr Phatak said. The government spokesperson did not elaborate on the “several flaws”.

The Centre has pointed out flaws in DPRs of Rs 1,834.69 crore Mumbai Urban Infrastructure Project (MUIP), Rs 1,298 crore action plan for development and projection of Mithi river, and Rs 852 crore Thane Metro project. Mr Phatak said Mumbai’s proposals of first phase of Mumbai metro project and Worli-Bandra sea-link project were being considered by Centre.

The Rs 1800-crore Brimstowad (Brihanmumbai storm water drain) project, which is key to Mumbai’s infrastructure overhaul, is not being considered by the Centre under NURM, Mr Phatak said. “We have urged the Centre to fully fund the Brimstowad project under some other scheme as projects under NURM are entitled for only 35% funding by the Centre,“ Mr Phatak said.

The government had submitted the seven NURM proposals in March ’06. In Maharashtra, Mumbai, Pune, Nashik, Nagpur, and Nanded are among the 63 urban conglomerates chosen under NURM. Besides Mumbai, Nagpur and Pune also submitted their NURM proposals in March ’06 and the Centre has even sanctioned them.

The government enlisted reasons why only Mumbai’s projects were put on hold for such a long time. “Each of Mumbai’s projects has an outlay of more than Rs 1,000 crore. The Centre’s scrutiny is lot more stringent for big projects,” Mr Phatak said.

News: Pantaloon looks at 40,000 stores by '10

(TNN 02/09/2006) Pune - Pantaloon Retail (PRIL), the Rs 2,000-crore retail major is in an expansion mode. The company has acquired 4m sq ft of land across the country and is planning to acquire another 46m sq ft by ’10.

PRIL plans to open over 4,000 stores in 90 cities under its various brands such as eZone, Collection I, Furniture Bazaar, Big Bazaar, Central Mall and Electronic Bazaar with a target of Rs 30,000 crore revenues by ’10.

Its two private equity funds, Kshitij (domestic) and Horizon (international) have raised $1bn. The proceeds have been used to finance real estate purchases.

By ’10, PRIL is looking to open 22 central malls, over 100 furniture bazaars, 85 eZones contributing Rs 1,600 crore, 130 electronic bazaars adding Rs 2,000 crore, said Atul Takale, head, corporate communications, PRIL.

Meanwhile, the wholly owned subsidiary of PRIL - Home Solutions Retail (HSRL) - is planning to launch Home Town. This will be an end-to-end home solution store that will offer customers services ranging from plumbing, electrical fitting, masonry to furniture, electronic appliances and interiors for houses.

“The first stand-alone store for Home Town will come up at Noida in November, followed by one in Pune in January and then a store in Bangalore,” Mahesh M, senior manager-Furniture, HSRL said at the launch of the first Collection I store in Pune.

News: India Inc`s offshore investment surges 62% to $2.67 bn

(BS 02/09/2006) Mumbai - Indian corporates are aggressively expanding their operations abroad in tune with their growing ambitions and zest to grab opportunities thrown up by globalisation.

The Indian outbound investments, which grew by 62.6 per cent in 2005-06 to $2.67 billion, are ample testimony to India Inc’s growing global presence.

Overseas investments from India have grown three fold since 2000-01. The investments in 2004-05 stood at $1.64 billion, while they were just over $700 million in 2000-01.

Almost 60 per cent of the investments in 2005-06 went into the manufacturing sector, recording a nine-fold growth in the six-year period beginning 2000.

Overseas investments are being funded through a variety of sources like use of foreign exchange in India, capitalisation of exports, balances held in exchange earners’ foreign currency accounts and swap of shares.

A part of overseas investment is also financed through funds raised abroad such as external commercial borrowings, foreign currency convertible bonds and ADRs/GDRs. Overseas investment also takes place through leveraged buyout by way of setting up special purpose vehicles (SPVs) abroad.

The Reserve Bank of India (RBI) has pointed out that overseas investments, which started off initially with the acquisition of foreign companies in the IT and related services sector, have now spread to other areas, particularly pharmaceuticals and petroleum.

Following the phased liberalisation in the regime for Indian investments overseas, investments in joint ventures and wholly-owned subsidiaries abroad have emerged as important avenues for promoting global business by Indian entrepreneurs.

These investments are also a source of increased exports of plant, machinery and goods from India.

The transfer of technology and skill, sharing results of research and development, access to wider global markets, promotion of brand image, generation of employment and utilisation of raw materials available in India and in the host country are other significant benefits arising out of such overseas investments.

News: 'Treat foreigners on a par with NRIs on taxes, convertibility'

(BS 02/09/2006) Mumbai - The report of the committee on fuller capital account convertibility (FCAC) has recommended bringing foreign (non-resident) individuals on par with non-resident Indians (NRIs) in terms of convertibility and tax treatment.

The committee has said the government should review tax benefits offered to NRIs for investments in foreign currency non-resident (banks) and non-resident (external) rupee account deposit schemes, while suggesting that foreign individuals be allowed to invest in these deposit schemes but without any tax concessions.

The committee said a movement towards FCAC implied that all non-residents (corporates and individuals) should get equal treatment. This means that the tax benefits extended to NRIs under these schemes should be removed.

The Committee recommends that these deposit schemes should be extended to non-residents (other than NRIs), in two phases.

In Phase I, non-residents could first be provided the FCNR (B) deposit facility, without tax benefits, subject to know-your-customer (customer identification) and financial action task force's (FATF) anti-money laundering norms.

Similarly, in Phase II, the NR(E)RA deposit scheme, with cheque writing facility, could also be extended to non-residents.

With respect to the capital market, at present only NRIs are allowed to invest in companies listed on the Indian stock exchanges, subject to certain stipulations.

The committee said all individual non-residents and non-resident corporates should be allowed to invest in the Indian stock market through Sebi-registered entities, including mutual funds and portfolio management schemes.

These entities will be responsible for meeting KYC and FATF norms and the money should come through bank accounts in India.

The committee recommended that the resident foreign currency (RFC) and RFC (deposit) accounts should be merged. The account holders should be allowed to move foreign currency balances to overseas banks.

For those wishing to continue with the RFC accounts, foreign currency current/savings chequable accounts should be provided, in addition to the foreign currency term deposits.

News: India Inc sees gain in institutional placements

(BS 02/09/2006) New Delhi - India Inc has started warming up to Qualified Institutional Placements (QIPs), which were permitted by the Securities and Exchange Board of India recently.

Delhi-based Spentex Industries was the first company to raise funds through QIPs. Now, at least five more are in queue to make use of the new share issuance route.

These companies include Apollo Tyres, Asian Electronics, Kalpataru Power and Ashapura Minechem.

Through QIPs, listed companies can raise funds by placing shares with Qualified Institutional Buyers such as foreign institutional investors (FIIs), domestic financial institutions, and mutual funds.

Sebi allowed listed companies to use the QIP route in May, after it was felt that several Indian companies were using the global depository receipt (GDR) and foreign currency convertible bonds (FCCB) routes to raise funds, resulting in an “export of domestic equity markets.”

While the board of Apollo Tyres will meet on September 4 to decide on QIPs, Mumbai-based Asian Electronics’ board met today to finalise plans in this regard.

Two other companies, Kalpataru Power and Ashapura Minechem, have submitted their draft offer documents for QIPs with the exchanges, and another Mumbai-based company, IOL Broadband, is also likely to raise funds this way. Gujarat-based Kalpataru Power hopes to raise about Rs 350 crore.

“We feel that over a period of time, funds raised through QIPs will overtake the mobilisation from the GDR/FCCB route,” said Rashesh Shah, CEO and managing director of Edelweiss Capital Ltd, which structured the Rs 64-crore QIP issue for Spentex Industries last month.

Cost is a major factor likely to shift companies’ preference from GDRs to QIPs. “The QIP route is at least 50 per cent cheaper for companies,” said Shah.

“To begin with, we will see mid-and small-cap companies using it.”

“We were initially planning to go in for a GDR issue. But, after Sebi issued rules for QIPs, we have decided to go in for this,” said Ramachandran, general manager (finance) of Ashapura Minechem, which plans to raise about $35 million to fund its expansion.

“Sebi deserves credit for pushing through the QIP concept. This will help companies to tap money from the domestic market faster, and in a cost-effective manner,” said Shah.

Another factor in QIPs favour is that it allows participation of retail investors through the mutual fund route, an option not permitted in GDR/FCCB issues. Under the rules, a minimum of 10 per cent of the QIP offer should be allotted to mutual funds.

The capital market regulator, while introducing QIP guidelines, said it was concerned about the growing number of Indian listed companies tapping overseas markets for funds, rather than the domestic market.

“Notwithstanding the robust growth of the primary market, an element of concern is the relatively low number of further public offers (FPOs) by listed issuers — more so in the backdrop of an increasing number of overseas offerings by Indian companies through GDR/FCCB issues. From 2001-02 to 2004-05, the number of FPOs increased from nil to 6, while the number of GDR/FCCB offerings increased nearly 14 times (3 to 42),” Sebi had said.

News: Movenpick moves in with Ramaiah deal

(DNA 02/09/2006) Mumbai - Swiss hospitality group Movenpick Hotels & Resorts, which had been eyeing India for over a year, has finally broken into the market. It has signed a management contract with MS Ramaiah Hotels, part of the MS Ramaiah Group, for a five-star, 220-room business hotel in Bangalore that will open in 2008.

India is part of a larger expansion plan, which includes Europe, West Asia, some parts of Africa and the Asia Pacific. The other Indian cities on Movenpick’s radar are Mumbai, Delhi, Goa, Pune, Chennai and Kolkata.

“Our plans are to actively develop and manage a network of five to 10 hotels in major Indian cities within the next two-to-three years, each property having 150-250 rooms,” the company said in an e-mailed message to DNA Money.

Movenpick’s strategy in India will focus equally on business hotels in key cities and resort operations in tourist destinations. “Our strength in this respect lies in our strong brand recognition and extensive sales network in central Europe — Germany and Switzerland - which are key outbound markets to India and can be further developed,” the company said. The management company has no plans to invest in projects, especially in West Asia, the Indian subcontinent and Asia Pacific. The group also has access to sizeable funds for its development.

News: 'India in top 10 developing nations' list'

(PTI 02/09/2006) New Delhi - India has emerged as among the 10 major developing country recipients of foreign direct investment but still lags far behind its neighbour China in terms of FDI inflows received, a UN report has said.

FDI inflows to India stood at $ 5.5 billion in 2004, making it the tenth largest developing economy in terms of overseas investment received, according to the United Nations Conference on Trade and Development's (UNCTAD) 2006 report.

China led the pack with $60.6 billion of FDI inflows, followed by Hong Kong with $ 34 billion and Mexico with $18.7 billion, the report said.

Developing countries across the world received $275 billion of FDI in 2004, of which the share of the top ten was $189.8 billion.

However, India did not figure among the top ten developing countries with the largest FDI inward stock. Hong Kong had a FDI stock of $ 456.8 billion, China $245.5 billion and Mexico $182.5 billion.

UNCTAD said the absolute amount of FDI inflows did not give a clear picture of the importance of impact of foreign investment in a country and compared FDI inflows to the GDP.

Inward stock of FDI in India as a percentage of GDP has risen to 5.9 per cent in 2004, from just 0.5 per cent in 1990, indicating the growing importance of overseas investment in the country's economy. China, on the other hand, saw its FDI stock as a percentage of GDP grow to 14.9 per cent in 2004, as against 5.8 per cent in 1990, the report said.

News: ‘29 foreign banks operating in India’

(BL 02/09/2006) Chennai - There are 29 foreign banks with 255 branches operating in India currently, according to the Reserve Bank of India's annual report. There are in all, about 288 commercial banks operating in the country having about 68,500 branches.

Under commitments given to the World Trade Organisation, the RBI has to allow 12 branches of foreign banks every year. In the calendar year 2006, so far, the RBI has already given permission to four foreign banks to open 13 branches. Seven other foreign banks have been given permission to open representative offices in 2006. Currently, there are 31 representative offices of foreign banks operating in India.

In 2005 also, RBI had granted permission to eight foreign banks to open 13 branches.

Under its branch authorisation policy, foreign banks will have to bring in an assigned capital of $25 million at the time of opening their first branch and are also required to submit their branch expansion plans on an annual basis. The RBI will take into account the track record of the foreign bank and the group to which it belongs, in compliance and functioning in global markets, the treatment accorded to Indian banks in those countries, as also accord consideration to the bilateral and diplomatic relations between India and those foreign countries.

News: ‘Indian economy logs 8.3% growth in Q1’

(BL 02/09/2006) New Delhi - The economic growth in the first quarter of the current fiscal stood at 8.3 per cent, according to the `State of Economy' report conducted by Confederation of Indian Industry. The industrial growth registered in the first quarter was 10.1 per cent compared with 10.4 per cent growth during the corresponding quarter in the previous fiscal, according to the report. The output growth in mining sector during the first quarter of the current fiscal declined to 3.5 per cent from 4.3 per cent in the corresponding period last year. Worries remain Growth in the electricity sector stood at 5.1 per cent compared to 7.7 per cent during the corresponding period in 2005-2006. Manufacturing sector growth, however, kept up its momentum, recording 11.2 per cent growth in the first quarter of the current fiscal, which was the same as that of the corresponding period in the last fiscal. However, the chamber has expressed concerns over achieving a higher growth rate. "The need is not to sustain the current rate of growth in manufacturing but to take it to 14-15 per cent. The declining growth in mining and power sectors, and inflexibility in labour laws are concern areas in that regard," said Subodh Bhargava, Chairman, VSNL and Chairman, Public Policy Committee, CII. The sector also needs supportive policies in sectors such as food, clusters among others, according to the chamber. The chamber has stuck with its earlier forecast of eight per cent GDP growth for the current fiscal with agriculture, industry and services logging a three per cent, 8.5 per cent and 9.6 per cent growth, respectively, for the year.

News: ‘India fourth most favoured country in US’

(BL 02/09/2006) Jerusalem - India is the fourth most favoured country in the United States, next only to Britain, Canada and Israel, a survey has found.

The Polling Institute of Quinnipiac University in Connecticut, which conducted the survey, asked Americans to rank 15 countries, as well as the Palestinian Authority and the United Nations, on a scale of zero to 100, the 'Ynetnews' reported.

Britain topped the chart with 78.3 points out of 100, Canada, America's northern neighbour, took second place with 71.7 points, Israel and India followed with 65.9 and 53.4 points respectively.

North Korea with 15 points and Iran with 13.9 points occupied the last two positions.

The Palestinian Authority with 22.8 points and Syria trailing not far behind with 21.7 points were also among those at the bottom of the chart.

News: ‘Allow industrial houses to set up banks’

(BL 02/09/2006) Mumbai - The Tarapore Committee on Fuller Capital Account Convertibility has recommended allowing industrial houses to set up banks.

The report of the Committee , which was released on Friday, suggested that RBI can evolve policies to allow, on a case-by-case basis, industrial houses to have a stake in Indian banks or promote new banks.

The policy could also allow non-banking finance companies to convert into banks.

These measures would address the capital requirements of public sector banks, said the report of the Committee chaired by S.S. Tarapore.

After exploring these avenues until 2009, foreign banks may be allowed to enhance their presence in the banking system.

All commercial banks, including public sector banks, should be incorporated under the Companies Act, as this would provide a level playing field, according to the report.

The Committee has also suggested that the share of Government or RBI in public sector banks should be reduced to 33 per cent from the current level of 51 per cent.

This was one of the recommendations by the Committee as part of measures for strengthening the banking system.

Currently, the minimum Government stake in nationalised banks is 51 per cent, and 55 per cent in the case of SBI.

Reduction in Government stake was also recommended by the Narasimham Committee on Banking Sector Reforms (1998).

According to the report, reduction in Government stake would not alter the positive aspects in the public sector character of these banks, which do have certain social objectives to fulfill.

The Committee has also recommended that transfer of ownership of SBI to the Government should be put on hold, given the imperative need for strengthening the capital of banks in the context of Basel II and FCAC.

This would ensure that increased capital requirement for a sizeable segment of the banking sector is met for the ensuing period.

As another measure to strengthen the banking system, institutions must be encouraged to set up new private banks, said the report.

In the first round of setting up new private sector banks, those with institutional backing turned out to be the successful banks.

With regard to public sector banks, the Committee said that issues such as powers of the Boards, hiring of personnel with requisite skills in specialised functions and succession planning require early attention.

Interview: Kishore Biyani - CEO Future Group

(BS 01/09/2006) Mumbai - His unassailable slot as the king of India’s organised retail looks shaky with the buzz picking up around Reliance’s mega retail plans. Kishore Biyani, chief of Future Group (formerly Pantaloon), says he’s targeting to increase his group’s turnover from Rs 2,000 crore now to over Rs 30,000 crore in the next four years. Though many believe the group doesn’t have the funds to make the investments needed to achieve this level of turnover, Biyani insists funds are not an issue. Sitting in his sparsely furnished office in downtown Mumbai, the 45-year-old CEO tells Shyamal Majumdar that the biggest challenge for him is managing the speed of India’s retail growth and catering to the “the greeds and needs” of young consumers. Excerpts: Is India’s largest retailer worried about the imminent entry of large players like Reliance? I never said I am the number one retailer in the country. I will be quite happy if I remain a formidable player. Competition will certainly make the market more interesting. Fortunately, we have the early mover advantage and are willing to learn every day. You have been talking to Reliance Retail till recently. How did the talks progress? I suppose it’s not uncommon for friends to talk to each other in informal forums. Is the market large enough for so many players? The market can accommodate many players and Reliance is just one of them. Look at the figures. Organised retail constitutes just about 3 per cent of total retail in India, and is poised to reach 15-20 per cent in the next few years, which translates into a 40 per cent annual compound growth. Since value retailing touches the mass of the population, it has the scope to almost double. For me, consumption is equal to development and retail will play a role in accelerating India’s economic growth. The big challenge is managing the speed of growth.

You announced your decision to raise close to Rs 1,000 crore last week. This is nowhere near what is needed to meet your turnover targets. Aren’t you being too ambitious? This turnover is not going to be achieved only through retail. It includes financial services and others as well. The financial services business alone can earn annual asset management fees of around $20 million. Significant cash flow will also come from leasing out 90 per cent of the mall space to others, at a profit. I will use only part of it. If I am able to convert even a negligible part of my footfalls to customers of my insurance business, there will be huge fees on distribution. We will raise close to Rs 1,000 crore over the next 18 months. While Rs 500 crore will be raised by divesting stake in some subsidiaries, we are also looking at a preferential allotment of around Rs 200 crore and a follow up issue of around Rs 260 crore. Money is not a problem for us but we have to raise it judiciously in view of our aggressive plans. Last year, we acquired 4 million square feet of retail space, we will acquire another 4 million square feet this year. The next year’s plan is to buy 7 million square feet more. All of this has been booked at rates far below the current costs at which our competitors will have to buy space. By 2010, the total space in our fold will be over 30 million square feet. As a strategy, we have always been aggressive on land and opening up of new stores. We are planning over 3,000 new stores by 2010 from 140 now. What’s the rationale for the diversification into insurance and other such sectors? Every retailer in the world has only one vision — to capture the highest share of the consumers’ wallet. I am just following that. We are in the consumption space — acquisition of new customers, be it in insurance products or washing machines — and our job is to facilitate that consumption through better lending. The point is we are not doing it alone. There are organisations which have the expertise and we are going to enter into economically beneficial partnerships with each of them. For example, we have tied up with one of the world’s largest insurance companies. We will do the same in the personal lending space also. We are talking to a few players right now. You are still perceived to be a big city player. Is that assessment fair? People keep saying this without realising that we are already in 29 cities and will be in 45 by December 2007. By 2010, we will expand to 85 cities and towns. We entered organised retailing with the first Pantaloon store in Kolkata — not a top-of-mind business location for anybody at that time. Today, Kolkata alone has the potential to give us Rs 1,000 crore business. Big Bazaar has been accepted as a fashion value-format across India. When we ventured into cities and towns such as Sangli, Durgapur, Nasik and so on, we were surprised to see the rising consumerism there. Your margins are under pressure and your cash flow is negative. These must be big concern areas. It’s a challenge and we have already put strategies in place. For instance, fashion garments give us the highest margin, and we have already raised their proportion to almost 40 per cent of the total sales at Big Bazaar outlets. That’s evened out the overall margin scenario. We have big plans to increase our presence in fashion through private labels, which already comprise around 65 per cent of the total fashion labels sold through our outlets. Profit margins on private labels are at least 10 per cent higher than those on outside brands. Second, our same-store sales have increased by 25 per cent, which is way above the inflation rate. Third, we have been able to maintain our occupancy costs and that’s the biggest achievement.

News: IMF wants India to focus on financial reforms

(PTI 01/09/2006) Washington - The International Monetary Fund has said India should make its financial system more efficient and hasten structural reforms to sustain high economic growth, which averaged about eight per cent in the last three years.

IMF Managing Director Rodrigo de Rato also cautioned about inflationary pressures in the Indian economy, but was appreciative of the Reserve Bank's efforts in this direction.

"There is need to make the financial system more efficient and with bigger competition there is the need for structural reforms to make India more capable of benefiting from the world economy," de Rato told a group of journalists from Asia Pacific.

He was previewing the forthcoming annual fund-bank meeting in Singapore later this month.

"Certainly structural impediments not only in terms of flexibility in the markets but also in terms of the structure are a key question in the Indian agenda for the future," the IMF Chief said.

He said though India's growth has averaged about eight per cent in the last three years, some inflationary pressures are building. "In that respect, monetary authorities and their efficiency is very important and has been shown already," he added.

"India is one of the countries that has been changing in a very positive direction recently. We see the government reform agenda as a very important one as the VAT reforms of last year showed. But the question here is not what has been done in the past... But how can we face the future," de Rato said.

News: Future Group to unveil national push for top labels

(TNN 01/09/2006) Kolkata - Future Group, owners of the Pantaloons, Big Bazaar and Central chain of stores, has plans to make it big in the fashion apparel and accessories segment. The group intends to make some of its top-line private label apparel brands like John Miller and Bare independent and national through exclusive retail brand outlets.

This apart, the group is also contemplating hiving off some of these brands into a separate division or a company. Elaborating on the group’s plans, Future Group’s CEO Kishore Biyani told ET, “While plans to take some of these high-selling private labels national through separate format stores of 1,500-2,000 square feet have already been finalised, we are toying with the possibility of hiving off these brands into a separate division or a company.”

For starters, the group has identified at least seven labels, which already occupy substantial mind space, and have sharp positioning in the apparel segment. Apart from John Miller and Bare, some of the group’s top-selling brands are Rig, Ajile, DJMC, Knighthood and Pink & Blue.

“These brands are already bigger in terms of sales than many of the apparel brands of other companies. Plans are afoot to develop them into bigger brands and subsequently, into power brands,” said Mr Biyani.

As per the group’s corporate plans till ’10, Bare is expected to generate sales of Rs 700 crore, John Miller sales are pegged at Rs 600 crore, and Rig is estimated to touch about Rs 250 crore. “Our corporate growth plans takes into account the opening up of exclusive brand outlets taking the total retail space to 30m sq ft by ’10,” Mr Biyani added.

Incidentally, the group is not looking at other multi-brand stores for retailing these private labels. Instead, it intends to continue retailing them from their own outlets.

Slowly but steadily, the group has been aggressively moving into the fashion apparel and accessories segment. The group’s fashion apparel business also includes brands like Indigo Nation, Scullers, Urban Yoga and Jealous. It also has joint ventures with Gini & Jony and Giovanni, and represents Marks & Spencer, Lee Cooper and ETAM.

A high-margin provider, the Future Group hopes to clock gross earnings of about Rs 5,000 crore by ’07-08. It hopes to achieve sales revenue of Rs 2,000 crore in the current fiscal compared to about Rs 900 crore recorded last year.

News: Levi's may exit Indian multi-brand outlets for exclusivity

(TNN 01/09/2006) Mumbai - In a bid to scale up its brand image and stem the erosion of its brand equity, the 150-year-old jeans brand Levi’s is doing away with its current strategy of marketing through multi-brand outlets (MBOs) and will instead ramp up the number of its exclusive outlets across the country.

The company has stepped up investments for setting up exclusive stores and is in the process of phasing out several of its 460 MBOs. The company is also converting some of the more profitable MBOs into exclusive Levi’s franchisees.

“Levi’s is positioned as an aspirational brand, and distributing it through multi-brand outlets, has eroded the brand equity. The feed-back from consumers is that an MBO approach does not deliver Levi’s feel and experience,” said Shumone Jaya Chatterjee, managing director, Levi Strauss & Co.

The company is increasing the number of its exclusive retail outlets from 110 currently to 250 by the end of ’07. By offering a 4% increase in business margins in an exclusive arrangement on the current margins of 26%, the company has succeeded in luring quite a few of the MBOs to convert into sole Levi’s franchisees. The company has managed to convert 50 such MBOs and is in the process of converting 50 more by ’07.

The retraction from MBOs has helped the company ensure a more personalised customer approach. “Our retail expansion plan is focused on the Tier 2 cities that are anchored by a major city, which will act as trend-setters. While Mumbai acts as the trend-setting city for the West, Gurgaon and Delhi act as the same for the North. In the South, we have the advantage of three trend-setting cities — Bangalore, Hyderabad and Chennai. However, the East is not so simple, as Kolkata seems to be stagnant in consumption and trend-setting,” he said.

Levi Strauss India is a Bangalore-based, wholly owned subsidiary of Levi Strauss & Co, San Francisco. The company markets Levi’s, Dockers, Signature, Sykes brands in India although it has been present in India for the last ten years, it is still struggling to be profitable. Till ’05, the brand recorded losses and its annual revenue is estimated at Rs 60-80 crore.

News: India to import tea to meet domestic demand

(IANS 01/09/2006) Guwahati - India will be importing an estimated 25 million kg of tea by the year-end to meet growing domestic demand and production shortfall due to scanty rains.

"The domestic consumption of tea is increasing at a compounded rate of 3.3 percent, while crop production has been hit due to inadequate rainfall leading to a gap in demand and supply of the beverage by about 25 million kg," Dhiraj Kakati, secretary of the Assam chapter of the Indian Tea Association (ITA), told IANS.

In 2005, Indian imported 16 million kg of tea with the country's domestic consumption pegged at 805 million kg.

India produced a record high of 928 million kg of tea last year compared to 820 million kg in 2004. India is the world's largest tea producer followed by China.

In 2005, India exported 192 million kg of tea. "Adverse weather conditions have hit production with estimates showing deficit of about 10 million kg so far this year compared to 2005," the official said.

The northeastern state of Assam that accounts for about 55 percent of India's total annual tea production is reeling under a severe heat wave forcing the local government here to declare the state as witnessing a "drought-like" situation. There has been a shortfall of monsoon rains by about 33 percent this year.

"Our export target is about 195 million kg this year although we might not be able to meet the demand due to falling supplies," Kakati said.

India had earlier estimated that tea production by the end of 2006 would touch a record high of 930 million kg.

"Bush mortality is more this year and we might be forced to close down operations for the season a little early due to scattered rains," the ITA official said.

India's $1.5 billion tea industry was facing a crisis with prices dropping in the weekly auctions since 1998 and exports plummeting as well. But, of late, prices are beginning to firm up.

A kilogram of good quality Assam tea sold at Rs.74 in the auctions last week. Last year, the average price in the auctions was Rs.62 a kg. Prior to 1998, good quality Assam tea sold at about Rs.90 a kg.

The slump in prices was largely attributed to cheap and inferior quality teas produced by many new tea-growing countries, thereby pushing premium quality Indian teas to face stiffer competition in the global market.

The Indian government recently announced a Rs.47 billion package to revive its tea industry blighted by plummeting prices and a downturn in exports. At least 60 percent of the package has been earmarked for Assam, considered the heart of India's tea industry.

News: Time Warner signal on Zee screen

(TT 01/09/2006) Mumbai - US media majors are looking to grab space on India’s small screens.

The Time Warner group is reportedly in talks to pick up a 15 per cent stake in Zee Telefilms. It could also pick up a larger stake in Zee’s cable business.

While no official confirmation was available on the development, market sources reveal that a financial and technical tie-up is expected between the two companies within the next two weeks.

Sources reveal that the investment is likely to be through Time Warner Investments.

According to the website of Time Warner, Time Warner Investments seeks to acquire minority equity stakes in private companies, whose operations have a strategic fit with an existing Time Warner business.

Recently, Walt Disney had picked up the 100 per cent United Home Entertainment, which owns Hungama TV. It also acquired a 14.9 per cent stake in parent company UTV Software Communications.

Zee Telefilms has a 74:26 joint venture with Turner International, a Time Warner group company, to distribute the Zee Turner pay channel bouquet in India and neighbouring countries.

Sources say the induction of the strategic partner was on the cards for the cable business of Zee Telefilms, as the company was looking forward to reinvent this business for substantial revenue enhancement.

In the last fiscal, the company decided to demerge its news and cable divisions into separate businesses.

While the news business was transferred to Zee News Ltd (ZNL), the cable business of the company and that of Siti Cable Network, a wholly owned subsidiary of the company, will be transferred to Wire & Wireless (India) Limited. It left Zee Telefilms as a focused producer of TV programming, movies and music.

The cable business of the company had stated objectives of pursuing new technology businesses with renewed focus, including cable digitisation, broadband and similar initiatives.

Time Warner Cable is the second-largest cable company in the US.

News: Investors keen on India's private banks

(TT 01/09/2006) Mumbai - Private sector banks are high on investors’ preference lists. While Chrys Capital has picked up a 5 per cent stake in UTI Bank for Rs 370 crore, a Rs 120-crore block deal in ICICI Bank today saw 20 lakh shares changing hands at Rs 600 apiece.

IndusInd Bank is also on the verge of roping in a strategic investor, which banking circles believe is a foreign bank.

Moreover, the proposed merger of Lord Krishna Bank with Centurion Bank of Punjab has also attracted investor interest.

Market circles feel the heightened interest is because of the bright outlook for the sector and better bank balance sheets. Though advances have been growing at over 30 per cent, the asset quality of domestic banks has improved in the recent past.

The Reserve Bank of India (RBI), in its annual report released yesterday, said the asset quality of banks improved during 2005-06 with gross and net non-performing assets (NPAs) reaching historical lows of 3.5 per cent and 1.3 per cent respectively.

The performance of domestic banks during the first quarter of the current fiscal only amplifies this point.

According to a recent report from Merrill Lynch, while the first quarter displayed a mixed bag of results, “bank earnings were better than we expected, especially the quality of the earnings appeared much better”.

“Net income growth was higher than estimates for most of the banks on account of strong loan growth at over 30 per cent, running ahead of our expectations despite a rise in lending rates,” the report said.

News: TNT acquires India's Speedage Express Cargo

(RTR 01/09/2006) Amsterdam - Dutch mail firm TNT NV said on Friday it has acquired Indian company Speedage Express Cargo Services, making it a major player in a fast-growing market.

TNT said the acquisition will put it among the top three companies in India's road express market. It did not disclose the price of the acquisition.

"The combined revenues in TNT in India after this acquisition will be approaching 100 million euros ($129 million) in 2007," Chief Executive Peter Bakker said in a statement.

TNT has said it aims to focus on mail and express delivery, which accounts for about a quarter of group revenues, and last month sold off its underperforming logistics business for 1.48 billion euros.

Speedage posted turnover of 17 million euros ($21.84 million) in the 2005/2006 financial year, TNT said.

News: Air France to operate 24 flights a week to India

(BL 01/09/2006) Chennai - Air France will operate 24 flights a week to India in the winter schedule this year, up from 19 last year, Jean-Louis Pinson, Senior Vice-President, Air France, said.

He said the airline would fly an Airbus 340, which has 291 seats, to connect Chennai with Paris, and would operate three weekly services from October 30. It would work towards operating daily flights out of Chennai, soon.

Air France would also start daily services to Bangalore from the current five. Currently with KLM Royal Dutch Airlines (which was acquired by Air France) 42 flights will be operated to India.

He said the airline is committed to business traffic, which is 50 per cent of the total travel. This is possible only if there is good commute traffic. Chennai too has strong commute segment and is backed by a more diversified economy, he said. The airline has a catchment mainly among the 300 French companies doing business in India and about 20,000 French citizens in Pondicherry, he said.

News: Coca-Cola to invest $ 120 m in Indian arm

(BL 01/09/2006) Bangalore - Brushing aside the `pesticide in colas' controversy, Coca-Cola has said it is investing $ 120 million (Rs 560 crore) more during the year in its Indian company Hindustan Coca-Cola Beverages (HCCB) to grow the per capita consumption of its beverages.

A Coca-Cola spokesperson told Business Line that the new investment in HCCB is expected to increase the urban and rural penetration of its brands and diversify its range of beverages. "All this has been designed to help secure a strong future for the company," the spokesperson said. The spokesperson said Coca-Cola during the last 13 years invested over $ 1 billion in its Indian operations. The spokesperson said Coca-Cola has 60 per cent share in the Indian carbonated soft drink industry whose current size is 500 million cases (each case consisting of 24 bottles).

The spokesperson said Coke would also expand its vended tea and coffee business, Georgia. Its `Georgia Gold' hot vending machines will be expanded further through a concept called `Georgia Junctions'. About 100 Georgia junctions will be rolled out within this calendar year in Delhi, Chennai, Mumbai, Bangalore, Kolkata and Hyderabad.

These would act as interceptors at high traffic areas and will be a one stop shop for the consumers. In addition to tea and coffee, they will carry the entire range of Coca-Cola India's beverage portfolio including carbonated soft drinks, juices and water.

High quality snacks and bakery items will also be on offer at these `junctions.' "These junctions are being put up at places frequented by consumers with high willingness to spend," the spokesperson said. There are also plans to push `Georgia Gold Frosts' which are cold coffee and tea vending machines. There are over 6,000 Georgia vending machines installed across the country.

On its other beverages, the company official said Coca-Cola has a higher market share than its other brand Thums Up, while its fruit drink brand, Maaza has a 30 per cent market share. Its bottled water brand, Kinley has a market share of over 22 per cent.

Investing in Research

Last year, a Coca-Cola official had said that the company wanted to transform itself into a total beverage company in India as it planned to launch a slew of health and wellness drink brands in the country. The official had forecast that over a period of time, the share between carbonated drinks and non-carbonated drinks could be equal.