News: Indian economy grows record 9.2% in July-Sept

(HT 30/11/2006) New Delhi - Fuelled by healthy double-digit growth in manufacturing and services, the country's economy clocked over 9 per cent growth in the first six months of the financial year.

During July-September this year, the GDP grew by a record 9.2 per cent. "Let us savour the moment," Chidambaram said.

While inflation at 5.23 per cent continues to be a "worry" for Finance Minister Palaniappan Chidambaram, experts caution on the possible overheating of economy and adverse impact of decline in agriculture growth.

"The growth story so far is okay. But, one has to exercise caution against possible overheating in the economy, especially with glaring mismatch in over-flow of funds into the stock market and under-flow into banks" said former Reserve Bank of India Governor Dr Bimal Jalan.

But the Finance Minister was not willing to buy this argument of overheating in the economy. Terming it "premature", Chidambaram cited a statement of the RBI Deputy Governor.

Briefing newsmen, Chidambaram conceded, "inflation at about 4 per cent is tolerable when the economy is growing at 9 per cent plus". All macro-economic parameters are good, but inflation is the only worrying factor, Finance Minister P Chidambaram said.

Chidambaram said that the robust growth was not accidental. Only twice in the past, the GDP growth was over 9.2 per cent as registered in July - September 2006. During fourth quarter of 2005-06, the economy clocked 9.3 per cent. And, the GDP grew at 11.3 per cent in third quarter of 2003-04 during the NDA regime led by then Prime Minister Atal Bihari Vajpayee.

While the UPA Government is gun-go about the healthy growth, agrarian crisis continues to be an issue the centre will have to deal with. Chidambaram cited the "supply side constraints" that were responsible for the recent price rise especially in wheat, sugar and pulses.

On Tuesday, the Congress President Sonia Gandhi had cited the twin issues of price rise and farmers plight at the meeting of parliamentary party. A day after Sonia flagging agrarian crisis as an issue to be dealt with, Central Statistical Organisation (CSO) reported that farm growth has fallen to 1.7 per cent during July - September 2006. In the first quarter i.e. April - June 2006, the agriculture growth was 3.4 per cent.

Planning Commission has targeted 4 per cent agriculture growth during eleventh plan to sustain the 8.5 per cent GDP growth in the medium term.

Chidambaram said, "second quarter is always a lean period for agriculture." He hoped that farm growth would improve with better rabi crop in the coming months.

"Economy drivers are definitely manufacturing and exports as there would be some problem in rural demand owing to lower farm sector growth" said Dr Shashank Bhide at the National Council of Applied Economic Research (NCAER).

In the medium term, Dr Bhide feels, "it is very important to boost agriculture growth to sustain the 9 per cent plus GDP growth".

Meanwhile, Chidambaram reported a 30 per cent growth in revenue collection so far this year while articulating hopes to meeting the revenue and fiscal deficit targets. "I believe we are on target to budget estimates," he said.

As per Finance Ministry data, the fiscal deficit as on October 31,2006 was compressed to Rs 87,100 crore as against Rs 92,068 crore in the same period last year.

Revenue deficit, during the period has been reported to be Rs 67,299 crore in the first seven months of this financial year as against Rs 70,284 crore in the same period last year.

News: Economy’s on Cloud 9.2, inflation remains the irritant

(DNA 30/11/2006) New Delhi - India’s economic growth unexpectedly accelerated to 9.2% in the quarter ended September 30, 2006, driven by government and consumer spending that may force the Reserve Bank of India to raise its key interest rate a fourth time in a year to curb inflation.

The growth, which equalled a 15-year-high in the first half, reflects rising incomes and near-record bank loans that have made India the world’s fastest-growing major economy after China.

That encouraged finance minister P Chidambaram to predict that the current year would be “one of the best for growth”.

The flipside to this is that such hectic expansion raises anticipations of higher interest rates and inflation.

“Accelerating inflation is a real threat now,” Shuchita Mehta, an economist at Standard Chartered Bank in Mumbai, told Bloomberg. “Demand pressures are strong and we see the central bank increasing rates by at least 50 basis points by March 31.”

Reserve Bank of India governor Yaga Venugopal Reddy in his monetary policy statement on October 31 said demand pressures exist in the economy and that production capacity must match economic expansion to prevent inflation flaring up.

Chidambaram on Thursday conceded that inflation was a concern, though he dismissed interest rates worries saying there was enough liquidity in the monetary system.

Bibek Debroy, economist and PHDCCI secretary-general, said the numbers were as per his expectations. “I have always projected a 9% plus GDP growth for the year as a whole.”

The hardening of interest rates, Debroy said, could be one of the downside risks, but at the same time, he did not see any real possibility of interest rates going up this year.

Rajiv Kumar, economist and ICRIER director, believes the country is in a “sweet spot”, pointing to the current high consumption and investment demand that is spurring the engines. He felt inflationary pressure was not enough to prod the RBI into going for a rate hike.

Chidambaram said “this is a moment to savour”, speaking to reporters soon after the Central Statistical Organisation put out that the GDP estimates for the second quarter of 2006-07.

He sought to drive home the point that “9.1% growth in the first half this year is the highest since economic reforms began in 1991”. This growth was not “accidental,” he said, claiming all economic parameters were in fine fettle. Only twice in the past has the quarterly figure of 9.2% been bettered. GDP grew by 9.3% in the fourth quarter of 2005-06 and 11.3% in the third quarter of 2003-04.

CII president R Seshasayee said the 9.2% second quarter growth, based on the sustained robust performance of the manufacturing and services sectors, is even more impressive as it builds on the high base of 8.4% GDP growth in the second quarter of 2005-06. There were, however, dark clouds around as concerns regarding agriculture remain, he said. The agriculture sector did not perform well at 1.7% growth in the second quarter this year on a base of 4% in the same quarter last year.

News: Vijaya Bank to open overseas branches

(UNI 30/11/2006) Bangalore - Public Sector Vijaya Bank is awaiting clearance from the Reserve Bank of India to open overseas branches in Dubai and Hong Kong and a representative office in China.

Disclosing this to newsmen here, after inaugurating the new premises of the Bank's Malleswaram Branch, Vijaya Bank Chairman and Managing Director Prakash P Mallya said the new offices could be opened during next year. The Bank had a target of total business crossing Rs 60,000 Crores as against the present Rs 52000 Crores during 2007, he added. Answering a question, he said the Bank was also exploring possibilities of striking strategic alliances with other Banks for its back end operations.

The Bank was also thinking about acquisition of a Bank which had its strong presence and network in North and Western parts of the country. However, he declined to divulge details saying that efforts would begin only during next year. On the much talked about consolidation of various Banks, he endorsed the views of Finance Minister P Chidambaram and said it was very much needed as the country had 27 Public Sector Banks and the number of branches exceeding over one lakh.

Too many branches posed a 'unwieldy' picture, he noted. He said the Bank had introduced Core Banking Solution in 380 branches and would ensure coverage of exceeding 500 branches by 2007. The total percentage of business done in CBS then would cross 85 per cent, he added. The total business of Malleswaram branch, started in 1958, had crossed over Rs 100 crores comprising Rs 70 Crores deposits and Rs 32 Crores advances. The Bank had over 10,000 accounts of various categories.

News: ING Vysya Life sets $1 b business turnover target

(BL 30/11/2006) Kolkata - ING Vysya Life Insurance, a joint venture of the ING group of the Netherlands, Exide Industries, Gujarat Ambuja and Enam, is looking at a business turnover target of $1 billion by the end of 2010.

As part of the aggressive growth plan, ING is planning to increase its paid-up equity from the present level of Rs 540 crore to Rs 1,400 crore by the end of 2009. ING Vysa Life is planning to expand gradually the capital to Rs 1,340 crore as it expects a three digit year to year business growth for the next couple of years.

News: Lanka firm plans $100 m India resort spend

(BL 30/11/2006) Colombo - Sri Lanka's biggest hotel chain John Keells Holdings plans to invest $100 million to build resorts in Goa and Kerala. John Keells, which runs nine hotels in Sri Lanka and five in the Maldives, hopes to develop three properties in India, the group's deputy chairman, Ajit Gunewardena, said. "Unlike the Maldives, at the moment, Sri Lanka doesn't look too good for us, because of the security situation," he said. Gunawardena says the Indian investment is part of the group's strategy to foray into South Asian markets. "South Asia has growth opportunities and we want to extend our hotel footprint into the region". In August, Aitken Spence, Sri Lanka's biggest resort operator, announced plans to raise up to $10 million in India, with its partner Floatels India, to fund new hotel projects in Kerala. Arrivals to Sri Lanka have dropped 12% to 38,815 as an escalation in violence between the government and Tamil Tiger rebels keep holidaymakers away. Officials say local hotel occupancy has slumped to about 30%, in what used to be the beginning of the highly profitable winter season.

News: Kotak Bank plans overseas expansion

(BL 30/11/2006) Hyderabad - Kotak Mahindra Bank has sewn up plans to expand its overseas operations, including centres in the West Asia, Far East and Japan. The bank plans to handhold overseas investors and help them tap into the India story. Currently, it is managing a portfolio of about $1.3 billion through its UK subsidiary, which is about five per cent of the bank's overall portfolio; it expects to increase this to about 25 per cent within next three-four years. The bank may raise about Rs 300 crore as Tier II Capital. The Vice-Chairman and Managing Director of Kotak Mahindra Bank, Uday S. Kotak, said India is at an inflection point of major growth phase and the potential has been barely tapped. Like the US market which first built its domestic presence and then expanded, India is at a similar platform that can only get better. Rural market "There may be minor issues of occasional turbulence and short term volatility from market point of view, but if you take a macro picture, the growth story is extremely bullish. A return of 15 per cent over the next five years and beyond is certain for a long-term investor. The financial services market is present only in the metros and confined to some select towns and cities. The rural market is out there to be tapped," he said. However, striking a note of caution with regard to overheated real estate market, Kotak warned of possible correction. The bigger the bubble, the impact would be bigger. Land values have become too exorbitant and there is excessive exuberance. Nikkei bubble The Japanese market as reflected by Nikkei hit a level of 40,000 about two decades ago. But the same market is now at 16,000. This only reflects how an overheated market could dramatically change. He warned investors to be cautious and not get carried away by fast buck makers. With a market capitalisation of about $2.7 billion, Kotak is now the fourth largest private sector bank and continues to expand operations both in the domestic market and overseas. From 84 branches now, it plans to increase this to 110 by March 2007. As the bank taps into the overseas markets, the accent would be on helping global investors to invest in India product, he said. Referring to inorganic options, Kotak said as the market opens up further, it won't be long before you see Indian banks buying into foreign banks. On ISB board The Dean of Indian School of Business, Dr M. Rammohan Rao, welcoming Uday Kotak on the ISB Board, on Wednesday announced that they would set up a trading lab that would provide live interface for students with markets. "Since the ISB is market-driven, we believe that there is immense scope for analytical finance, capital markets, regulatory frameworks, and micro finance," he said. Kotak said that the bank would seek to deepen its association with the ISB through executive and customised training programmes to groom finance professionals.

News: Kingfisher International seeks clearance for flights to India

(BL 30/11/2006) New Delhi - Faced with policy constraints here of not being allowed to fly out of India, the Chairman of Kingfisher Airline, Vijay Mallya, has mandated Kingfisher International Airlines - the new company floated by him in the US - to begin the process to get clearances to start operating regular flights to India.

Mallya told Business Line that a well-known law firm in the US had started doing the paper work for Kingfisher Airlines to begin scheduled operations to India. He, however, refused to disclose the name of the law firm.

"The law firm would be contacting the Department of Transport and other US Government Departments so as to initiate the process of getting clearance for the airline.

"After all, the wide body aircraft that have been ordered by the airline cannot sit on the ground. We will have non-stop operations and will utilise the Airbus A-340-500 aircraft to fly on this route," Mallya said on the sidelines of the ongoing World Economic Forum meeting.

New arrivals

The airline, that is now not allowed to operate in the international skies, has committed to purchase more than 20 Airbus wide body aircraft, including five Airbus A-380, five A-330 and five A-330, which would start arriving later next year. At present, the Indian Government has stipulated that only those airlines that have completed five years of operations in the domestic skies are allowed to fly on international routes. Kingfisher Airlines took to the Indian skies in May 2005.

The UB Group overcame stringent US regulations disallowing foreign nationals setting up an airline there as 75 per cent of the new airline is owned by Mallya's three children, all of whom are US citizens.

At present, American Airlines, Delta and Continental Airlines are the only carriers to offer a non-stop service to India. Air India plans to launch non-stop services to India after it receives the Boeing 777 aircraft that it is to purchase.

News: Pantaloon Retail plans to catch 'em young

(BS 29/11/2006) Mumbai - Pantaloon Retail India, the Future Group’s flagship enterprise, is launching Top 10, a brand exclusively for college students.

Inspired by Top 10 chartbusters or books that normally attract college students, the brand would include the best 10 styles and fashion collections for youth. The company is launching the first Top 10 store in Mumbai within a week.

Zahid Shaikh, chief of marketing, said, “Top 10 brand will have a special collection dedicated to colleges in Mumbai. It is well known that campus rivalry exists among college students and one always takes pride in wearing the college batch on their sleeves.”

Meanwhile, Indus-League Clothing, a part of Future Group, inaugurated the first Mumbai store of Jealous 21, a denim wear brand targeted at women between 17 and 24 years of age, Jealous 21 offers a range of casual, club and denim wear collection in the middle and upper middle segment.

Apart from the department and lifestyle stores, the company plans to retail Jealous 21 through 120-130 stand alone outlets over the next 3 years.

K K Pant, managing director, Indus-League Clothing said, “Jealous 21 focuses on the young Indian women and stand alone stores will give a stronger identity to the brand.

In the first phase the company plans to open 16 Jealous 21 stores by June 2007 in 8 bigger markets such as Mumbai, Bangalore, Hyderabad, Delhi, Chennai, Kolkata, Pune and Ahmedabad.”

News: Indian FII investment zooms past $50 bn

(BS 29/11/2006) New Delhi - Foreign institutional investors’ (FIIs) net investment in India has surpassed $50 billion.

Ever since the government opened the doors for the overseas portfolio investors in 1993, FIIs have invested $49.98 billion in the equities till date.

Taking into consideration their $1.08 billion investments in the debt market, total FII investment, as on on Tuesday, was pegged at $51.06 billion. In rupee terms, their investments were Rs 2,16,048 crore.

Between April 1993, when the FIIs started investing in Indian markets, and now, they have bought shares worth Rs 12,83,336 crore and sold shares worth Rs 10,67,319 crore.

Although their investment aggregated at $50 billion now, the market value of the investment at the current exchange rate of Rs 44.68 per dollar is a whopping $ 117.13 billion (Rs 5,25,280 crore).

This essentially means that apart from the huge dividend that the foreign players have received from the Indian corporations, the value of their investment in India has grown by 135 per cent.

After a decade of lukewarm existence, the FIIs stepped up their investments in Indian market in 2003 when the Indian corporate sector staged a dramatic turnaround, registering net profit growth of over 50 per cent.

The FIIs invested $6.59 billion in 2003 and stepped it up to $8.52 billion in 2004. FIIs’ investment touched an all-time high level of $10.70 billion in calendar 2005, when 170 new FIIs got registered with the capital market watchdog Securities and Exchange Board of India (Sebi).

Despite a $1.63 billion selloff in May this year when the benchmark Sensex lost over 30 per cent, their investment in Indian markets touched $8.88 billion in the current calendar year.

With the valuation of Indian shares becoming attractive post June 14 when the Sensex dipped below the 9000-mark after touching 12,600 in mid-May, the FIIs pored in $6.60 billion between July and November 2006. Overall, 993 FIIs have registered with Sebi and the list has been growing.

However, post May correction, FIIs have become a bit choosy. Almost three-fourth of their investment has been in frontline Sensex and Nifty stocks, while the rest of the investment is spread across 300-odd companies. Sensex comprise 30 stocks and the Nifty basket has 50 stocks.

FIIs currently hold over 40 per cent stake in 12 companies. Their holding in 45 corporations hover between 25 per cent and 40 per cent and in 243 firms it varies between 10 and 25 per cent.

Overall, they hold 10 per cent or more stakes in 300 Indian companies and 5-10 per cent stake in 181 companies.

“Going forward, their presence in India can only get strengthened as there are not too many markets that promise higher returns than India,” said the head of a local brokerage.

News: Tatas' have edge in Corus race

(BS 29/11/2006) Kolkata/Mumbai - Despite the bankers and advisors allied to Brazil’s Campanhia Siderurgica Nacional (CSN) having scaled up their equity holding in Corus Group to about 20 per cent, Tata Steel may have its nose just a bit ahead in the race to acquire the Anglo-Dutch steelmaker.

Investment bankers say Tata Steel is still ahead not only because it has obtained the support of the Corus board and its pension fund trustees, but also on account of the backing of Tata Sons, which controls a market capitalisation of about $50 billion and revenues of about $22 billion.

In comparison, CSN’s controlling shareholder has no other asset. Also, the company is ridden with debt, which stood at $10 billion for the September quarter. This will reflect on the merged entity’s balance sheet if CSN were to acquire Corus.

Corus, on its part, is burdened with over $3.1 billion of debt, against a cash balance of $558 million. The Brazilian company’s debt burden is one of the reasons why its bid to acquire Wheeling Pittsburgh of the US suffered a setback, point out steel analysts.

“Tata Steel’s 455-pence-a-share offer has got the support of the trustees of the pension fund, as well as the Corus board,” said a banker associated with the bid.

On the other hand, the CSN offer of 475 pence a share is subject to due diligence, finalisation of funds, and the support of the Corus board.

Tata Steel has received the nod of the trustees of Corus’ pension fund by offering upfront the deficit on the Corus Engineering Steels Pension Scheme with $241.22 million and to increase the contribution rate on the British Steel Pension Scheme from 10 to 12 per cent until March 31, 2009.

The Brazilian steelmaker has not yet made a commitment on the pension scheme, which may happen when the company makes a firm bid. It is learnt to have started discussions with the pension trustees, details of which are not known.

The buzz in the investment banking circles is that the wardens of the pension fund may not like the CSN offer if it depends more on debt.

The board of the world’s eighth largest steel company will have the last word in recommending a bid. It will recommend only one bid for shareholders’ approval.

In making the choice, the trustees of the pension fund will play a crucial role. Corus has three pension schemes with about $19.3 billion of assets, to cover payments for its 47,000-strong workforce and many more retired workers.

Tata Steel’s Achilles heel could be raw material, of which Corus has none. In fact, Tata Steel Managing Director B Muthuraman has repeatedly taken the stand that India must stop exporting iron ore.

Of course, Tata Steel has maintained that the synergies extend beyond the raw material advantage. Yet, CSN has claimed to be the better fit on account of its iron ore mines.

News: International universities waiting in the wings

(BS 29/11/2006) Mumbai - Stanford University, Georgia Tech University, British Columbia University, McGill University, Simon Fraser University, Cubec University, and Montreal University are some of the international universities awaiting the government’s nod to set up campuses in India.

As many as 40 international universities have sought land from the Maharashtra government in the Mumbai-Pune-Nashik belt for the purpose. The investments lined up by these institutions are substantial.

For instance, the UAE-based Higher Colleges of Technology’s Centre of Excellence for Applied Research and Training plans to pump in around $300-350 million to establish a campus in India.

The institution is looking for a huge plot of land in Maharashtra or Karnataka.

Georgia Tech University of the US also wants to set up a global research hub and is keen on land in Maharashtra.

The university is said to have made a pre-sentation to Maharashtra Chief Minister Vilasrao Deshmukh.

News: India okays FDI in higher education

(BS 29/11/2006) New Delhi - Days after Congress President Sonia Gandhi said that she personally favoured private sector participation in education, a Group of Ministers (GoM) today cleared a proposed legislation that will allow foreign universities to set up campuses in India.

Once approved by the Cabinet and passed as law, the Foreign Education Providers (Regulation) Bill will grant deemed university status to such institutions.

According to the proposal, the universities will have to set up campuses on their own and will not be allowed to adopt the franchisee route.

Prior approval of the University Grants Commission would be mandatory for such a project and the embassy of the country of its origin would have to certify the antecedents of any institution, sources said.

Making the announcement here today, Commerce Minister Kamal Nath said: “A consensus has been achieved on the ingredients of the Bill. It looks into all aspects of education in India, and the need for quality education. The details, including the foreign direct investment limits, will take a month or so to be finalised. The intent is to create more educational opportunities. A number of safeguards will be incorporated, including government supervision.”

The commerce and the human resource development ministries have been at loggerheads over the role of the private sector in higher education. Gandhi’s remarks were seen as having tilted the scales in favour of reforms in higher education.

Earlier this year, the commerce ministry had come out with a 24-page document — Higher Education in India and GATS — supporting FDI in the sector.

Commerce Secretary G K Pillai had then said the idea was to evolve a consensus on opening up higher education to foreign investment, even 100 per cent FDI.

He had pointed out that India incurred an annual outgo of $4 billion on education and this money could be saved by allowing foreign institutions to set up shop in the country.

In contrast, the Arjun Singh-headed Ministry of Human Resource Development has proposed a tougher stance on FDI in higher education. In fact, answering a question in Lok Sabha today, Singh said the GoM had not concluded its study yet.

The private sector, on its part, has been stressing the need for being allowed into the sector for some time now. Bharti Airtel Chairman Sunil Mittal recently said there should be a role for the private sector in the education sector.

News: TCS aims for $4-bn revenue

(PTI 29/11/2006) New Delhi - Tata Consultancy Services (TCS) aims to end this fiscal with a $4-billion revenue, which will require a 30 per cent growth rate over the next two quarters.

“We have a target to achieve $4 billion revenue by the end of this fiscal, growing at 30 per cent. For the last five years, we have been recording a compounded annual growth rate of over 30 per cent,” TCS managing director S. Ramadorai said on the sidelines of a Nasscom conference.

The TCS scrip closed at Rs 1149.60 on the BSE today against Rs 1157.75 on Monday.

TCS, a Tata group company, ended 2006 with a revenue of $3 billion. Consolidated revenues of the company for 2005-06 was Rs 13,386.23 crore ($3 billion). The company expects to achieve the vision 2010 target of $10-billion revenue. “The year 2010 is still sometime away … We have had a CAGR of over 30 per cent. We can achieve it,” he said.

The company had earlier won a $90-million Qantas deal. It is a seven-year deal and the largest ever for an Indian IT company in Australia. Satyam also won this contract along with TCS. But with Qantas being approached for takeover by the Australian investment bank Macquarie and Texas Pacific, it is still early for a clear picture to emerge and to take a final call on this deal, said an analyst.

TCS earlier said it would raise its billing rates for existing contracts, up for renewal, by 3-5 per cent; while for fresh contracts, the rates will be higher by 5-10 per cent. The move, depending on the nature of the contract, will have an impact on its topline.

The company, which recently bagged a $100-million outsourcing deal from US-based healthcare firm Kimberley Clarke, is close to bagging a multi-million-dollar deal from the IMF. However, it’s still awaiting confirmation.

Ramadorai declined to comment on the sustainability of the margins, which improved 300 basis points in the second quarter. The company also bagged a deal from Eli Lilly to establish a medical information science centre in India to advance Lilly’s clinical research and development. The deal is believed to be a multi-year engagement worth $35 million.

In one of the largest-ever outsourcing deals last year, TCS had won a contract from ABN Amro. The company improved its margins by over 300 basis points by ensuring revenue growth matches with profitability benchmarks.

News: India plans 50 food industry complexes

(RTR 29/11/2006) Mumbai - The government plans to set up 50 food industry complexes with a grant of 500 million rupees for each complex, Subodh Kant Sahai, minister of state for food processing industries, said on Wednesday.

The policy might be finalised in December and the government expected each complex to generate revenues of 10 billion rupees, he said.

News: Taqa to invest up to $1 bln in Indian power plants

(RTR 29/11/2006) Abu Dhabi - State-controlled Abu Dhabi National Energy Co. (Taqa) will invest up to $1 billion over three to five years in a joint venture to build power plants in India, the chief executive said on Wednesday.

United Arab Emirates-based Taqa signed a joint venture agreement with India's Infrastructure Leasing & Financial Services Ltd to build power plants across India with a total capacity of as much as 7,000 megawatts, Peter Barker-Homek told Reuters in an interview.

Abu Dhabi is the largest of seven emirates in the oil-exporting UAE federation.

News: Marriott in talks to start budget hotels in India

(DNA 29/11/2006) Mumbai - Marriott International is seriously looking at the budget hotels space in India. With a network of 700 Courtyard brands worldwide, of which 500 alone are in the US, the hospitality major feels, India, along with China, are the two best budget hotels markets in the world.

Marriott is already in talks with various partners in Amritsar, Kochi, Thiruvananthapuram and Chandigarh.

It is not only looking for a presence in some 20-25 major cities in India but also weighing options of starting at least 50 Courtyards (Marriott's full-service four-star category) over the next 3-5 years in the country.

Five new Courtyards are in the pipeline in Pune, Hyderabad, Kolkata, Gurgaon and Noida.

In fact, Pune will see heightened activity in the form of three Courtyards, adding 1,000 rooms over the next few years. The first Courtyard opened in Chennai recently.
Navjit Ahluwalia, vice-president, Marriott International, told DNA Money: "The only deterrent is the cost of land, which is very high in India and does not thus merit a mid-market hotel."

Marriott claims to be the largest international hotels operator in India with 1,534 rooms across its six properties in the country. It will be adding 11 hotels by 2009, taking its room count to over 4,200. It is also scouting for land in Delhi, a 300-room Renaissance.

Another five-star Marriott brand, is coming up in Bangalore, a JW Marriott in Pune and Chennai respectively. Marriott worldwide follows a business model of management contracts for its premium hotels and franchises out its brands in the mid-market category. In India, it already manages a JW Marriott, Renaissance and Marriott Executive Apartments in Mumbai, a Marriott each in Delhi, Goa and Hyderabad and a Courtyard in Chennai.

Column: India isn’t quite the open society some say it is, yet

(DNA 29/11/2006) Mumbai - How open is India’s economy? Many economists believe that India is quite open. But sociologists disagree. They believe that the openness of a society is best measured by other parameters like access to justice, education and statistical data.

Access to justice is very hard to quantify. Hence, even though this remains the most critical parameter, it may make sense to look at the other benchmarks first; which makes it necessary for us to take a harder and critical look at education.

Education, say sociologists, comes through two means - one through the formal schooling system, and the other through informal information systems like newspapers, radio, television, periodicals and even other well-informed people.

That is why the data presented before the world by an organisation called ‘Reporters without borders for Press Freedom’ become extremely relevant (). The website shows that even the US currently ranks 53rd in freedom of the press, far behind Panama, El Salvador, Chile and a number of former Soviet bloc countries. But, it is way ahead of India, which stands at a sad 105 of the 168 countries surveyed. Of course, India stands ahead of other countries like Thailand (122), Mexico (132), Sri Lanka (141), Singapore (146), Russia (147), and Pakistan (157).

That is why it may be necessary to look at formal education as well. And this is where alarm bells start ringing.

First, notwithstanding the government’s claims of having achieved over 65% literacy, it must be remembered that the government defines a person as being literate if he can read and write the alphabets of his (or her) own name. Thus, if Ram knows to read and write just the three alphabets of his name, he is considered literate. The definition is absurd. That is why many believe that actual literacy may be well below the 25% level.

Look at some more alarming data (table 1). In 1999, the total number of all graduates accounted for just around 2.43% of our population. This is far too small a number for any country to sustain a healthy economic rate of growth year after year. Unless this percentage goes up, India’s economic growth could falter. So is the government doing something about it?

The next set of data (table 2) is even more alarming: Clearly, while enrolment in higher education institutions has increased to 10.5 million, it has not kept pace with the growth in India’s population. Thus, while India’s population growth of 2% annually adds at least 22 million people each year, we manage to churn out just 10.5 million graduates.

What is worse, the quality of these graduates has been slipping alarmingly, causing the industry to reject at least half of them as being unemployable.

And yet, India’s ministers continue to talk about reservations on the one hand, and becoming a world power on the other! Something is horrifyingly wrong with our governance and planning. If some of these numbers do not change, India’s bid to become a world power might end of being just a joke.

By R N Bhaskar

News: TBWA toasts entry of Tequila in India

(DNA 29/11/2006) Mumbai - Salut to this potent launch. Tequila Worldwide, the $1.5-billion-plus global marketing services network, 100% owned by global ad network TBWA, has now rolled in here.

Awanish Kumar, who brings over a decade experience in the field with innings at Solutions Integrated Marketing Services and Euro RSCG, will head the unit. To begin with Tequila will operate out of three branches of Bangalore, Mumbai and Delhi.

TBWA India is looking at an 80 growth in billings, which is currently Rs 250 crore-plus, with the entry of Tequila.

Like its global parent, Tequila India will operate in non traditional advertising areas like direct marketing, customer acquisition and relationship, lead generation, events, promotions, direct marketing, interactive, retail channel development and management, activation and audience development.

Tequila’s major global clients include Adidas, Canon, Nissan, Sony PlayStation, Nivea, HP, and it is speculated that some of these may align with the new outfit here for some of the above areas of communications. Tequila’s India roster already includes Standard Chartered Bank, Bajaj Allianz, and all the clients of TBWA India. The unit will be looking at acquiring a client base beyond the captive client list of TBWA India.

Says George John, CEO, TBWA India, “Tequila is fully owned by TBWA and hence it shares the same P&L (profit and loss) sheet. We did set up a representative office of Tequila in India in 2001, primarily to coordinate local activities for a regional client of Tequila. This was increased to a team of four people in 2005 to support BTL activities of Standard Chartered Bank.’’And now a full-fledged Tequila India has just opened its doors here.

Global marketing communications networks are tapping the fastest growing engine of the ad business-non traditional and integrated. John and TBWA are obviously on similar track; “TBWA has been our jewel in this space,” says John.

The marketing network of Tequila was launched in Paris in 1986 by Jean-Marie Dru, the world’s father of creative disruption and president & CEO, TBWA Worldwide, and has since become one of the world’s fastest growing marketing networks with 48 agencies in 34 countries.

Tequila’s Asia network includes regions like Singapore, Japan, Taiwan, China, Malaysia, Hong Kong, Australia, Thailand, Philippines, New Zealand Indonesia and South Korea.

News: Where Brazil scores over India

(BL 29/11/2006) New Delhi - The Nasscom in association with Indian Institute of Management, Ahmedabad, the University of Sao Paolo and London Business School on Tuesday released a report stating the impact of ICT penetration on small and mid sized firms in India and Brazil.

The study found out that Brazilian firms used more ICT than their Indian counterparts. In Brazil small as well as large firms used ICT, while in India mainly large firms used ICT intensely than small firms. Further, in Brazil, older firms have higher ICT usage per worker and per unit of sales.

The report states that reduction in organisational hierarchies is associated with higher returns to ICT in Brazil and directly linked to productivity growth in India.

The findings acknowledged that impact would be felt after certain threshold level of adoption and in both the countries there still remained a major portion of small firms with low ICT usage.

In India, both weak institutions and infrastructure had resulted in lower adoption and lower returns among small and mid sized firms. Auto components, soaps and detergents, electrical, machine tools, apparels, plastic are the sectors that have the potential to increase output and employment in the manufacturing sector with greater ICT penetration.

In India these verticals account for nearly 17 per cent of total manufacturing employment and over 20 per cent of value added. In Brazil, it accounted for around 30 per cent and 32 per cent respectively, stated a release here.

News: India's powerful dilemma

(Forbes 29/11/2006) Mumbai - Over the past quarter of a century, India's energy consumption has tripled. The rate of growth is faster than China's, albeit from a lower base, though the causes are the same: rapid economic development, a large and growing population and increasing urbanization. So is the potential threat to air quality and water supplies.

Even under conservative estimates of growth, India's energy requirements are likely to increase by a further third in the second half of this decade, driven by industry, transportation and domestic electricity consumption as living standards rise. Yet India's ambition to grow its economy at a long-term annual rate of 8% is running up against an energy constraint.

Solving it will require continued reliance on fossil fuels--notably coal--greater energy imports and root-and-branch reform of electricity generation, which in India is an inadequate, insufficient and insolvent provision of power that is already causing environmental damage to water supplies.

India currently uses coal for about half of its energy needs. Few see that share changing much over the next two decades, even as overall energy use grows. The country risks creating the same environmental problems for itself that now confront China? India already has energy-related water shortages. The country's legions of small farmers are heavily subsidized to pump water for irrigation. This not only drains an unreliable and insufficient supply of rural power but also depletes water tables across the subcontinent. This creates a vicious cycle. Lower water tables require farmers to consume more energy to pump ever-deeper water supplies with ever larger pumps. This, in turn, puts more strain on power supplies and contributes to higher levels of greenhouse gases. Electricity reform is central to both India's economic development and its environmental protection. India produces a lot of electricity, but 30% to 50% is lost along the delivery chain. Utilities that collectively lose $7 billion a year not only fail to deliver the power needed but are soaking up billions of rupees in bail-outs--money that could otherwise be spent on education and health services. The government has been liberalizing the sector for the past 15 years, but progress is slow, despite the priority given to distribution reform. Thousands of villages are still off-grid, and power shortages in cities are common. Power generation accounts for most of the coal consumed in India, with heavy industry a distant second. Most electricity is generated from pollution-generating, high-ash coal. The government is promoting a switch from coal-fired to natural-gas plants for power generation and cutting subsidies for low-quality coal--part of a general move to market pricing for energy and anti-pollution measures. That is happening slowly, too. Replacing existing coal-fired plants is a capital-intensive and time-consuming process. Many of India's highly polluting, low-efficiency coal-fired power plants will stay in operation for years to come. The most feasible alternative, natural gas, has seen its share of India's energy consumption rise from 1.4% in 1980 to only 7% today. While natural gas is at the heart of the government's policy for cleaner power generation and fertilizer production for the country's huge farm sector, India faces potential problems. Its natural gas imports come from Turkmenistan, Bangladesh, Iran, Miyanmar -- all places that raise questions about the reliability of supply. India's own untapped natural gas fields lie under deep seas. Renewables are not seen to be feasible on a commercial scale in the foreseeable future. India has one of the largest national programs to promote the use of solar energy, but unlike many developed countries that have turned to solar energy mainly out of concern about the environment and energy security, solar power in India is seen as a cost-effective way to provide energy to small villages and remote areas off the national grid where there is a shortage of electricity. Nuclear power may by the long-term alternative to coal, but for now, there is little that will check the rapid growth of India's carbon emissions--rising faster than even China's. India has not made the same progress in energy efficiency as China. Its ability to wring economic growth out of each unit of energy it consumes has remained flat for two decades, whereas China has improved markedly. A big reason is the lack of energy efficiency and conservation measures in most industries at the local level. Ever since the Bhopal disaster in 1984, India has had strong environment protections enshrined in law. However, their effectiveness diminishes due to a lack of enforcement that grows laxer the closer administration gets to the local level. Thus, air pollution has become India's most severe environmental problem, and one that is likely to continue to worsen. India's per capita carbon emissions are relatively low, at 1.2 metric tonnes of carbon per person in 2003. (China's emissions were 3.2 metric tonnes per person, and the U.S.'s 19.8). But India's emissions are forecast to triple by 2020 due to the rapid pace of urbanization, increased use of cars and trucks and the continued use of older and more inefficient coal-fired plants for power generation. As in China, continued urbanization has exacerbated the problem of rapid industrialization. Cities are frequently unable to implement adequate pollution control, and some India cities--including New Delhi, Mumbai, Chennai and Kolkata--are among the world's most polluted. Urban air quality ranks among the world's worst. Also as in China, sheer population growth and urbanization make it all the more difficult to pull off the balancing trick of continuing to generate economic growth without destroying the quality of life in both the cities and villages. But unlike China, India has a strained power generation, transmission and distribution infrastructure that is already hampering growth.

News: ONGC wins oil block in Brazil

(PTI 29/11/2006) New Delhi - ONGC Videsh Ltd, the overseas arm of state-run Oil and Natural Gas Corp (ONGC), has won an oil exploration block in Brazil.

OVL won the offshore S-M-1103 block in the Santos basin paying 1.5 million reais (0.68 million dollars), a company official said.

The company was among the host of global energy giants that were awarded six blocks in Brazil's eighth annual auction of oil and gas concessions.

"S-M-1103 has potential for natural gas and light oil," he said.

Italy's ENI paid nearly 140-million dollars to outbid Brazil's state oil company Petrobras, a consortium comprised by Norway's Norsk Hydro and Sapin's Repsol YPF, and a separate bid by Shell to win the S-M-857 deep-water block.

The minimum bid for the block was 2 million reais while ENI agreed to pay 307.4 million reais ($ 140 million).

Petrobras one block S-M-982 on its own and three in consortia with Hydro and Repsol.

News: Indian exports to grow at over 20%

(RTR 29/11/2006) Mumbai - India's Commerce Secretary, Gopal K. Pillai, said on Wednesday he expected Indian exports to grow at little more than 20 per cent in the financial year to March 2007.

Exports in October rose 11.3 per cent from a year earlier to $9.62 billion, while imports rose an annual 36.8 per cent to $15.83 billion. The government's full-year export target is $126 billion, a rise of 22.3 per cent over the previous year.

News: Indian IT trio may join global top 10 m-cap league

(PTI 28/11/2006) New Delhi - On the back of growing clout of Indian IT sector, domestic giants TCS, Infosys and Wipro may soon join the league of top 10 most valued firms globally in terms of market capitalisation in the next 2-3 years.

Painting this rosy picture for the domestic IT space was none other than Wipro Chairman and India's richest tech titan Azim Premji while speaking at the India Economic Summit here today.

"Currently, Infosys, TCS and Wipro come in the top 16-17 companies globally in terms of market capitalisation," he said.

We are growing three times faster than our foreign counterparts, so in the next 2-3 years, the difference will be very less, we will be in the league of top 10 companies, he added.

Earlier in September this year, global financial services major Morgan Stanley ranked the three Indian companies in top five firms in global IT services space.

Infosys was ranked even above US-based IT major Accenture, while all three Indian tech giants were placed above US-based EDS and Computer Sciences Corporation as well as European giants like Cap Gemini and Logica Plc in the market cap league.

The three majors are continuing their leading positions in the global IT services space on the basis of their current market values.

Infosys and Wipro have a market cap of $29 billion and $22 billion respectively based on their ADR prices.

While TCS has a market cap of around $25 billiion based on its share price on the Bombay Stock Exchange, the most valued non-Indian IT services firm Accenture has a market cap of $27.4 billion which is below that of Infosys.

However, in terms of turnover Accenture is far bigger than Infosys and other Indian companies, while US firms' lower market cap is also due to slower price-to-earnings ratio, analysts said.

This could be also attributed to Accenture's lower profitability and growth rates compared to Indian companies, they added.

News: Now Indian investors eye Fiji Islands

(TNN 28/11/2006) Kolkata - A number of Indian companies have expressed interest in Fiji as a potential investment destination. According to the Fijian delegation currently down in India, potential Indian investors are slated to visit the Fiji Islands in the next two weeks.

"The Taj group is willing to set up an Exotica property in Fiji. This apart, there are certain pharmaceutical companies which are conducting feasibility studies while a number of IT companies have also shown interest in setting up base in Fiji," said Ms Adi Sivia Qoro, minister for commerce and industry, Fiji.

She was speaking at an interactive session at the Bengal National Chamber of Commerce and Industry (BNCCI) that was also attended by other members of the Fiji delegation. The Fijian government is working closely with the private sector to promote exports as well as attract investments. Currently, it is encouraging investment from countries like China and India.

Fiji is especially looking to promote bilateral trade with India, which was a mere Rs 132.40 crore in 2005-06. The country will now be focusing on areas like ICT (information and communication technology), forestry, fisheries and tourism.

"Tourism is one of our major foreign exchange earners and we are looking particularly at promoting health and ecotourism. For this, we have already begun talking to Apollo Hospitals to set up a hospital in Fiji. We are especially interested in retirement villages," said Ms Qoro. According to her, Apollo will begin construction from next year. This is part of the Fijian government's efforts to promote development of infrastructure in the country.

News: TNT to invest 100 mn euros in India

(HT 28/11/2006) New Delhi - TNT NV CEO and Chairman Peter Bakker is something of a 'Highway Man' for even though his company runs a fleet of 46 dedicated aircraft for running the express delivery business in Europe, he likes to put all his future bets on a network of highways enabling inter-border trade in the ASEAN region.

"Last year, we started a daily truck service connecting Thailand, Singapore and Malaysia to Vietnam. Next in January, we will connect Vietnam to China.

"And if all goes well with road connectivity between India and Pakistan, we would become market leaders in providing cross border road solutions to facilitate trade in the region," he told Prerna K Mishra on the sidelines of the World Economic Forum.

Indian market seems to have a unique set of challenges and opportunities for the express delivery market? How different is it from China?

The Indian market is very different vis-à-vis the Chinese market since the growth in China is export-driven contrary to India where it is driven by domestic consumption. Unlike our competitors in India, who are basing their business on running wide-bodied jets in and out of India, we are trying to make a dent into a reliable scheduled road services network.

In 2006, with the acquisition of Speedex, we took the strength of our depots from 20 to 614 and acquired a decent fleet of sub-contracted road liners. We will spend the next couple of years in integrating and upgrading the Speedex network into our global network.

What are your plans for India?

We have an investment of 100 million Euros pledged for India for the next couple of years and we see ourselves as a leader in the Indian market. We have a dedicated fleet of 46 aircraft in Europe and we have ordered two Boeing 747s to connect China to Europe. We will have to make similar plans for the Indian market given the upswing in Indian trade with Europe. Till then, we will be entering into partnerships with domestic aviation players.

What are your expectations from the Indian government?

The Indian government is doing a commendable job in heralding progressive policies. But it needs to keep an eye on investment in infrastructure. Specific to the express business, India needs to become a single market.

To me India looks akin to the European Union where there are 25 countries. The only difference is that all the countries there have become a single market. We hope the Indian government also pushes in this direction as there are many hurdles in inter-state movement of commercial liners.

You have in recent times moved your corporate social responsibility initiatives away from sports to fighting global warming? What inspired the move?

When you run a fleet of 48,000 trucks and vans that are in a way contributing to global warming, you need to have the social consciousness to be proactive in doing whatever is required to reduce the problem and not wait for people to hold you responsible for it.

We want to be a solution and not a problem. In India, too, as a part of this initiative, we are starting a pilot from December 15 wherein we will move the four-wheel commercial liners plying between Bangalore and Mumbai from diesel to bio-feul. After studying the success in this region, we will roll it out nationwide.

News: 'Microfinance in India needs more commercial funding'

(IANS 28/11/2006) New Delhi - Microfinance in India, one of the largest emerging markets for it, is growing exponentially but needs more commercial funding to grow, says Vikram Akula, winner of the coveted Social Entrepreneur Award.

Hyderabad-based Akula, founder and chairman of SKS Microfinance Private Limited, shifted to the US at the age of three. However, he returned after his education in some of the top American universities, driven by an urge to do something to address the issues of poverty back home.

"Microfinance in India is a growing sector but it has a long way to go and much more needs to be done before we can successfully help our poor with the support of credit and microfinance," Akula said in an interview.

He was honoured as Social Entrepreneur of the Year 2006 in India award by Congress president Sonia Gandhi Monday. This is the second award being given by the Schwab Foundation and the Nand and Jeet Khemka Foundation in association with the Confederation of Indian Industries (CII) and the UNDP.

"The regulatory environment created by the Reserve Bank of India (RBI) is unfavourable for the growth and proliferation of microfinance in India," Akula, a Fulbright scholar and a product of Tufts, Yale and Chicago universities, pointed out.

India is one the largest emerging markets in microfinance in the world, but has been able to penetrate to only one-fifth of the country's poor. For the last two years, many public and private sector banks have been aggressively eyeing the market along with various overseas retail banks.

"It is true that all the major domestic and foreign banks have been actively involved in India's microfinance, but we need more commercial funding which is somehow not pacing up," Akula emphasised.

Known as the 'Starbucks of Microfinance', SKS automates microfinance through user-friendly back office and field technology reducing manual processing with minimal labour costs. The organisation has witnessed a growth rate of 300 per cent and has provided over Rs 3.2 billion in loans to 3,22,000 poor women in 11 states.

According to some experts, the microfinance model in India is slowing down due to lack of repayment loan capabilities by the poor who take loans to start up their own enterprise.

But Akula disagrees. "This is not true. This may happen in very rare cases. The current repayment rate is 90-95 per cent. Across the country, poor people do have the capability to repay their loans."

A former consultant with McKinsey, Akula was named by Time magazine as one of the world's 100 most influential people.

"Do you know washers, barbers and tailors contribute more to the country's GDP (gross domestic product) than the IT sector?," asks Akula.

The firm has elaborate future plans in its effort to create entrepreneurs from poor people.

"Our goal is now to reach out to 10 million households in the Indian hinterland and disperse funds over Rs 50 billion to them," he said.

Would he compare himself with Mohammad Yunus, who won the Nobel Peace Prize this year for his role in alleviating poverty in Bangladesh through microfinancing?

"They have a different model, and we have a different model," is all that the debonair Akula will say.

According to M-CRIL Microfinance Review of 2003, there are over 100 established microfinance institutions (MFI) in India that have been credit-rated. These MFIs have a combined outstanding portfolio of Rs 5.07 billion with cumulative disbursements of Rs.16.36 billion ($365 million).

News: Rivals ready to beat Wal-Mart heat

(BS 28/11/2006) Mumbai - Domestic retail majors have their scripts ready to counter the Bharti-Wal-Mart juggernaut.

Both Pantaloon and Shoppers’ Stop are eyeing opportunity presented by airport retail. Shoppers’ has signed a joint venture with the Nuance group, while Pantaloon has tied up with Alpha.

The Future group (Pantaloon), the biggest retail player at present, has announced plans to diversify into hospitality, contract farming, healthcare and even outdoor media.

The Pantaloon Retail board has also okayed an increase in borrowing limit from Rs 1,000 crore to Rs 2,500 crore.

The K Raheja group has diversified beyond the departmental store format, Shoppers’ Stop, through which it earned its spurs.

The group, which now has a presence in various speciality retail formats like home (Home Stop), books and music (Crossword) as well as hypermarkets (Hypercity), is banking on licensing agreements with international brands to bring in the differentiation in a fast changing retail scenario.

The company has already introduced brands like Mothercare and MAC to India and is said to be looking at increasing the number of licensee and high end brands in its portfolio.

“We have a number of operational formats, with a existing loyal base,” Shoppers’ Stop CEO Govind Shrikhande said.

The company plans to increase its floor space coverage from 1 million sq ft to more than 3.6 million sq ft in the Shopper’s Stop format, by 2010.

Similar growth is planned for all other formats as well. “We believe that there is space for at least 5 to 6 large players in the market,” Shrikhande said.

Over the past year, the Future group has diversified into several unrelated categories such as insurance and other non-banking financial services, in addition to launching its own real estate fund and mall management company.

This, says Kishore Biyani, chief executive officer, Future group, is his way of ensuring that he manages to get the largest share of the customers wallet – both the spending and the savings.

The company is also rolling out several speciality format outlets such as Home Town, Collection i and Depot. The group recently entered the hospitality sector through an agreement with Blue Foods to set up its own restaurants as well as food courts.

Piramyd Retail, which has so far been present in lifestyle retail (Piramyd) and food and grocery retail (Tru Mart), has said it is evaluating entering other retail formats through partnerships.

So far, the group has been largely focused on the western part of India and is moving closer to a more pan-India presence.

Trent, which is a Tata group company, has a network of department stores under Westside and hypermarkets under Star City along with a presence in books and music retail through Landmark.

The Tatas recently tied up with Australian retailer Woolworth to launch Croma, an electronics retail venture.

Reliance, which set up its first food and grocery outlet last month, is believed to be targeting a presence in 67 cities by June 2007 across formats ranging from hypermarkets to speciality retail to convenience stores and luxury retail.

News: US retail giant learns from past mistakes

(BS 28/11/2006) Mumbai - Wal-Mart’s entry into India through an agreement with the Bharti group is a first-of-its-kind for the US retailing giant. The Arkansas-based retailer has always preferred to enter a new market on its own.

But government regulations in India (which only allow foreign direct investment of 51 per cent in cash-and-carry and single brand retail), coupled with

Wal-Mart’s experiences in other markets, prompted it to tie-up with a local partner.

Wal-Mart, which first forayed outside the United States in 1991 with a Sam’s Club outlet (cash-and-carry format) store in Mexico, is currently the biggest retailer in the country. But it hasn’t been as smooth for the retailer in other markets.

In May this year, Wal-Mart exited its business in South Korea after selling its 16 stores to a local company Shinsegae for $ 860 million.

That was followed its exit from Germany in June, where it incurred a loss of $1billion and sold its 85 outlets to Metro AG.As analysts point out, in India, consumer preference varies across regions.

Even within a region, one sees different patterns, which make it imperative to have a local partner on board to understand the market.

However, for Wal-Mart, which already sources products from India and can bring in efficiencies in the supply chain, the benefits will not be as widespread as the company has seen in the US or Europe.

“There is far more similarity between different countries in Europe, where Wal-Mart can take advantage of a common supply chain,” said a retail analyst, adding that in Asia, it would be next to impossible to stock too many common products in different countries across the region.

In the early days, Wal-Mart made the mistake of taking its structure, product mix and corporate culture, the way it was in the United States, to other countries like Indonesia and Germany, where it did not work too well with the local staff.

Now, the retailer is wise from its experience and localised products form a significant part of its product mix in different countries.

News: 'India on cusp of retail revolution'

(BS 28/11/2006) Mumbai - Retail offers an opportunity to enhance purchasing power at the bottom of the pyramid, says RIL Chairman Mukesh Ambani

India stands at the cusp of an opportunity in organized retail given the growth in the economy and the increasing purchasing power of the masses.

Speaking at a session on whether there will really be a retail revolution in the country, participants including Reliance Industries Chairman Mukesh Ambani, Industry Secretary Ajay Dua, Emaar Properties Chairman Mohamed Alabbar and Godrej Group Chairman Adi Godrej said the sector had the potential to create employment for between one and two million people per year over the next decade.

Ambani was categorical in stating that there is potential for a revolution in retail. “India is on a super growth strategy. 7-8 per cent GDP growth is not enough though. We have no option but to grow at double-digit rates. India will grow on the basis of internal consumption and retail presents an opportunity for enhancing the purchasing power at the bottom of the pyramid”, he said.

Citing recent changes in policy, Ambani added that allowing corporates to buy agricultural produce directly from farmers would increase the latter's income manifold.

“The concept of farm to fork means that it will integrate the Indian user with the global chain. When US President George Bush came, the mango market was opened up. Walmart coming in helped us open the US market”, he added.

The organised retail market of $300 billion in India is growing rapidly- by some estimates at 10-15 per cent per annum. Dua said the future growth of the industry would depend on the macro-economic growth of the country and how companies tap the market.

Citing data, he said that there is reason to be optimistic about the sector. However, he said the companies would have to plan to not only address the metros and big towns, but also target the 739 cities, each of which have a population of 50,000 people.

On the best model for the retail sector, Ambani said partnering with small shopkeepers made sense. “The kirana store owner knows his customer. Partnering with him is an opportunity to build up the chain”, he said.

With regard to the challenges that could pose a hurdle, participants cited the availability of real estate as a key challenge. Giving figures, Alabbar said that the per capita availability of retail space was the highest in the US at 13 sq ft per person.

“In comparison, it is 7 sq ft in Asia, 3.5 sq ft in the Middle East and 3 sqft in India. The overall potential is good but there are some infrastructure constraints that need to be addressed,” he added.

News: New norms to boost foreign bank lending

(BS 28/11/2006) Mumbai - Barclays Bank’s total lending in India is just over Rs 4 crore, but its off-balance sheet liabilities are over Rs 2,50,000 crore. If the RBI goes ahead and implements its revised priority sector lending guidelines from April 1, 2007, then the British bank will have to lend over Rs 1,200 crore to priority sectors.

That’s because the draft guidelines propose to use either the net bank credit or credit equivalent of off-balance sheet exposure as the base for calculating bank’s priority sector lending obligations.

Barclays Bank is not much into lending activities, but its investment banking and derivatives business has seen a sharp rise over the last couple of years as Indian corporates went on a fund raising spree.

Foreign banks are required to lend 32 per cent of net bank credit or credit equivalent of off-balance sheet (OBS) exposure to priority sectors such as agriculture, small scale industries, small business/service enterprises, micro credit, education loans and housing loans.

For Indian banks, the priority sector obligation is 40 per cent of credit or credit equivalent, whichever is higher.

Barclays Bank’s off-balance sheet exposures jumped to Rs 2,60,241 crore at the end of March 31, 2006 from Rs 1,45,559 crore a year earlier, while its advances book grew from Rs 2.42 crore to Rs 4.33 crore.

Barclay’s priority sector obligations will rise by over Rs 1,200 crore taking into account the bank’s OBS as on March 31, 2006 and the credit equivalent is taken at 1.5 per cent of the total OBS.

The average credit equivalent of OBS for the entire banking system about 1.9 per cent of the total contingent liabilities.

Calyon Bank’s OBS exposure currently is at a level where it would not have to increase its lending to priority sectors.

But if the credit equivalent is around or higher than the banking sector level of 1.9 per cent, the bank would have to lend at least an additional Rs 300 crore more to the priority sectors.

The number of banks which are actively involved in these activities in India are only 15, most of which are foreign banks.

The combined share of these 15 banks in total off-balance sheet exposures steadily increased from 73.8 per cent in March 2002 to 82.3 per cent in March 2006.

The growth in OBS exposures in India has been fuelled by the phenomenal increase in derivatives segment.

Between end-March 2002 and end-March 2006, contingent liabilities of the banking system recorded an annual compound growth rate of 23.6 per cent, while contracts and derivatives increased at an annual compound growth rate of 55.5 per cent.

Credit equivalent is the potential cost replacing the contracts’ expected net cash flows in the event of default by the counter-party. At the system’s level, total credit equivalent of outstanding derivatives constituted 1.9 per cent of notional principal at end-March 2006.

RBI feels the proliferation of derivatives exposures inevitably poses a challenge to financial stability on account of the immense downside risks associated with them.

One important source of vulnerability in the Indian derivatives market relates to high concentration risk since the number of counter-parties (both banks and corporates) are limited.

The concentration of activity and knowledge among a small number of players raises the potential risk of systemic market crisis owing to default by a few counter-parties.

News: Godrej eyes buyouts in China, Brazil

(TT 28/11/2006) New Delhi - Godrej Industries Limited is looking at acquisitions in emerging countries, including China and Brazil, as part of its expansion strategy.

“We are looking at expanding our core business of hair colour and household insecticides in emerging markets like Brazil, China and some African countries like Nigeria by exploring acquisition opportunities in these markets,” Godrej group chairman Adi B. Godrej said on the sidelines of the India Economic Summit.

The Godrej group has acquired companies in the UK and South Africa. According to Godrej, approximately 25 per cent of the revenues in the FMCG goods segment come from the export market.

The FMCG market has been growing at 15 per cent and the company expects to better the industry growth, he said. Increasing input costs such as those for packaging and freight have forced FMCG companies to hike prices of products, he added.

The company has already increased its soap prices because of pressure on margins. However, Godrej declined to comment on a similar price hike in other segments.

Godrej is now focussing on real estate through group company Godrej Properties.

“We are developing about 20 million square feet of properties in Maharashtra, Hyderabad and Bangalore. Several of our projects have been completed,” he said.

The company’s profit after tax for the quarter ended September 30 remained unchanged at Rs 12.6 crore from the same quarter in the previous fiscal.

Total income in the quarter grew 6 per cent to Rs 207 crore from Rs 195.28 crore in the corresponding quarter of the previous fiscal.

For the half-year period ended September 30, the company recorded a 33 per cent increase in profit after tax at Rs 29.2 crore compared with Rs 21.95 crore in the first half of 2005-06.

Total income for the six-month period rose 9 per cent to Rs 394 crore from Rs 361.46 crore in the same period last year.

News: Wanted - 2.5 million pairs of hands

(DNA 28/11/2006) Mumbai - Sunanda Saini (name changed), is an architect with over a decade’s experience with a leading retail chain. She has designed and developed over a dozen projects from scratch in almost as many cities in India. And that’s what makes her invaluable to her employers and worth her weight in gold for her employers’ competitors.

“Not a week passes by when I am not offered twice to thrice my existing salary by consultants,” she says.

Welcome to the real world of retail, where talent shortage is as real as the potential of the sector.

According to a KPMG survey last year, 55% of the respondents said there is ‘significant shortage’ of retail managerial skillsets in India.

A couple of generation of youngsters, therefore, can safely bet on a career in the sector.

Consultant Technopak says 750 million square feet of additional organised retail space would come up in India over the next five years. At one employee for every 300 square feet of space, it translates into an incremental demand of 2.5 million pairs of hands.

No wonder, Pantaloon Retail honcho Kishore Biyani says organised retail can be a bigger employment generator, potentially employing 10-20 times what IT does. And this is where retail is getting hit by the strange paradox of not finding people, trained people to be exact, in the world’s second most populous nation.

“There is no supply pipeline for senior positions. They need to be headhunted and poached from competitors or other industries,” says Virendra Rastogi, managing director of placement consultancy Clarendon Parker Asia.

Dearth of trained employees means the salary levels have zoomed over the last two years, with the salaries of some of the vertical heads resembling the GDP of a small nation. At the corporate office level, a five-seven year retail stint could move you into the Rs 40-50 lakh per annum bracket. Did someone say IT pays better?

“The price of dynamism and high growth has been a dearth of professionals in the business today. Areas that are becoming critical and where the shortage is most acute are in the fields of technology, supply chain, marketing and operations,” says Neeti Chopra, head, marketing, Trent Ltd, the Tata retail arm.

And this has lead to analysts worrying. “Staff cost to sales ratio has moved up to 7% from 6% in just a quarter and it is inching towards 7.5% to 8%. I’d be worried for any figure over 5%,” said a retail analyst with a foreign brokerage.

KPMG estimates overall attrition at 40-60% with that at senior and middle level at 10-15%.

“However, at Rs 4,000-5,000 per month, salaries at the shop floor level haven’t changed much. It is the back operations like merchandising, category manager, logistics manager etc where salaries have moved up by 1.5 to two times in the last one year,” says Rastogi. But the industry cannot expect any respite in the near to medium-term.

“I have a tough time retaining my people. Retail is still not seen as a long term career option and with BPOs paying twice for almost the same skills-English speaking, good communication skills, and the ability thinking on your feet- and lesser hardship, churn at my shopfloor level is high,” says the floor manager of a retail chain.

And with the entry of bigwigs, the talent crunch is going to get even more acute.

News: Govt to examine Bharti-Wal-Mart deal

(PTI 28/11/2006) New Delhi - A day after global retail giant Wal-Mart announced its entry into the Indian market through a tie-up with Bharti group, the government today said it would examine whether "permissible limits" with regard to foreign investments were adhered to.

"We will have a look (at) whether permissible limits have been adhered to," Commerce and Industry Minister Kamal Nath told reporters on the sidelines of the India Economic Summit.

While India has not allowed FDI in multi-brand retail format, foreign investment is permitted in wholesale trade as well as logistics and back-end support.

As per the arrangement between the two companies, Bharti would manage the front-end of the business, while Wal-Mart would take care of the supply chain, logistics and other back-end operations.

Policy hurdles had earlier forced Wal-Mart to put its India plans on hold, but it has now settled for a collaborative venture.

Asked if Wal-Mart was making a backdoor entry into the burgeoning Indian retail market through its tie-up with Bharti, for which it is the first brush in the retail segment, Nath said, "We will see whether it as per rules and regulations."

Also, he said, the government will see whether farmers would benefit due to the agreement and what impact it could have on local neighbourhood stores.

The minister said the government was keen to attract foreign investment in logistics and supply chain.

News: ‘Spread of ICT a must for India’s growth’

(DNA 28/11/2006) New Delhi - Expansion of information and communication technology (ICT) in low-income markets is expected to increase the proportion of businesses operating in these markets by about 20% across industries in the next five years, according to a study conducted by consulting firm Accenture in collaboration with the Confederation of Indian Industry.

According to the study, based on a survey of more than 200 business executives in India across major industries, 94% of the respondents believe the usage of ICT has been a major reason for India’s recent economic growth, and 88% see ICT as a major driver of current and future development.

“Increasing ICT penetration is imperative to India’s economic growth,” said Sadeesh Raghavan, managing director, domestic businesses for Accenture, India.

A vast majority (87%) of the respondents believe that socio-economic disparities between rich and poor communities pose a significant obstacle to the sustainable growth of the Indian economy, and a similar number (88%) feel the increased usage of ICT will be a major determinant in overcoming these disparities. The findings suggest the next phase of ICT-led growth will come from three main sources — supply-side opportunities, catalytic impact of ICT and better access to education.

As access to ICT in low-income markets improves, the focus is likely to expand from well-known demand-side benefits to include supply-side benefits such as more efficient supply chains, better communication, improved productivity and lower input costs. Also, ICT will deliver spill-over and multiplier effects, which will bring new growth opportunities across all industries.

The study concludes with four imperatives for the Indian economy to capitalise on ICT-enabled growth, including investment in human capital by improving education, development of a coherent infrastructure, building partnerships between the ICT industry and government, and ensuring affordability and relevance of content that is delivered appropriately.

News: Bharti, Wal-Mart deal - A promising partnership

(BL 28/11/2006) Mumbai - The Bharti-Wal-Mart deal promises to be the beginning of a fruitful partnership. The deal marks the Bharti group's entry into the retailing industry, at a time when several big players such as Reliance, which is already in the fray, and Aditya Birla Group set to enter. While these two have group companies to help bankroll their retail ventures, Bharti, however, may not have as much of this leverage to bank on. This, along with its relative inexperience could be a reason why it chose to enter the industry through a tie-up with a foreign retailer, rather than go it alone. A partner like Wal-Mart would certainly give Reliance, which is now ahead in the game, a run for its money. Significant for Wal-Mart But the deal is probably just as significant for Wal-Mart, if not more. India, with its strong consumption story, is likely to play an important role in Wal-Mart's international operations. Wal-Mart International, at $60 billion, contributes 20 per cent of Wal-Mart's overall revenues and is its fastest growing division. But its forays into international markets have met with mixed results. Earlier this year, Wal-Mart exited from South Korea, as the retailer's big-box formats failed to make an impact on customers. It also exited from Germany where it faced intense competition. The exits were, however, seen by analysts as an opportunity for the retailer to focus on high-growth markets such as China and India. Partnering with Bharti would help Wal-Mart reach out to Indian customers and understand their buying habits, considering that Bharti has successfully built up a strong franchise through its mobile subscriber base. Wal-Mart's franchise agreement with Bharti is a departure from its usual practice of entering countries through the acquisition route. The only other time it has used a franchise was with Indonesia in the mid-nineties. It made an exit two years later as FDI rules were yet to be relaxed and Indonesia was going through a turbulent political phase. Its decision to enter India through the franchise route reflects its eagerness to capture a share of the market when it is at a nascent stage - organised retail now penetrates a mere 3 per cent of the market. Wal-Mart has time to get its logistics and supply chain in order before the industry opens up to foreign investment. It would be interesting to see if the agreement provides scope for Wal-Mart to pick up an equity stake in the franchise operation once FDI is allowed. In the meantime, the franchise agreement could fast-track Wal-Mart's expansion in the country. Wal-Mart's penetration in China has been slow - it has opened only about 70 stores in the last ten years - as restrictions on cities in which foreign retailers could open stores were relaxed only last year. Wal-Mart would be free to expand both in small towns and big cities in India. If curiosity does not succeed in drawing customers to a Wal-Mart store, the promise of every-day low prices will. But as Wal-Mart has learnt from its experiences in Korea and Japan, fine-tuning its practices to suit local tastes will be key.

News: Shah Rukh's endorsements are on the rise

(BL 28/11/2006) Chennai - Actor Shah Rukh Khan, who's in the news for taking over from Amitabh Bachchan as the new host of TV game show Kaun Banega Crorepati 3 (KBC), has endorsed products as diverse as automobiles, biscuits, garments, computers, watches and talcum powder, not to mention social causes such as the Pulse Polio and AIDS control programmes.

AdEx India, in its Celebrity Track analysis, says the actor's basket of endorsements expanded to 21 products in 2005 from 13 in 2004, a 62 per cent jump. In the first quarter of 2006, he has endorsed 16 brands, 76 per cent of the 2005 figure.

Khan started his acting career with Fauji, a TV serial, sometime in the late '80s, and went on to become a superstar in Hindi cinema. He started endorsing products in 1999 for a few brands including Pepsi and Hyundai, whose association with him continues to this day.

In 2005, the ad spend on brands endorsed by Shah Rukh was Rs 6.05 crore. In January-March 2006, that figure stood at Rs 1.10 crore, AdEx estimates based on market rates reveal.

Last year was also significant for Khan as he featured in a substantial number of socially relevant advertisements. His share of such ads vis-à-vis commercial messages in 2005 rose to 20 per cent from 0.3 per cent the previous year. The total number of TVCs featuring him rose 43 per cent to 53,527 in 2005 from 37,436 in 2004.

News: Indians among top real estate investors in Dubai

(PTI 28/11/2006) Dubai - Indians are among the top investors in the booming real estate market here, a government official said.

Therefore, to tap the growing Indian interest, the Department of Tourism and Commerce Marketing (DTCM) here, in conjunction with the Dubai Properties Group will organise Dubai real estate road shows, conferences and exhibitions in India and Saudi Arabia in 2007.

"This is the first time the department is organising dedicated road shows, conferences and exhibitions to promote the real estate projects in overseas markets," DTCM Director Operations and Marketing, Mohammed Khamis bin Hareb said.

In India, the road shows will be held in New Delhi on August 20 followed by Bangalore on August 22 and Mumbai on August 24 next year, he said. More than 40 real estate companies will be participating in the exhibitions, he said.

"The series of road shows will help highlight the strengths and attractiveness of Dubai's booming real estate and the investment potential in this promising sector," Hareb said.

The DTCM also operates a representation office in Mumbai. Adel Lootah, Executive Director, Dubai Properties Group, said the road shows will attract more investors from India.

Ever since the emirate of Dubai opened its property sector in 2002, there has been a boom with some $100 billion worth of real estate projects under construction or in the pipeline.

News: 'Wal-Mart deal worth billion dollars'

(IBN 8/11/2006) New Delhi - Bharti Enterprises has signed an agreement with world's largest retailer Wal-Mart for a joint foray into India's retail space. The companies have inked an MOU and operations expected to kick off mid August.

Sunil B Mittal, Bharti Airtel's chief executive officer, declined to divulge the financial details of the deal, but said it would be a huge investment involving hundreds of stores in India.

This is going to be a very comprehensive joint venture and the investments will be much larger. I can’t put a number to it, but given the size of India, it’ll be fair to assume that we’re talking in billions of dollars,” he said.

Mittal was also asked if he has the blueprint been decided and if it’s going to be one single joint venture or more than one company, more than one joint ventures.

Since it’s a comprehensive arrangement, it’s got to be in the areas where the Government allows FDI. It’s got be a major joint venture, which is cash and carry. And Walmart does a very large portion of cash and carry. That’s one area where TESCO is not there. Logistics, the area of procurement, the area of linking up with producers around the country, so that joint venture will do the entire development in that area.

The front end where the Government has still restricted FDI, it’ll be a 100 per cent owned Bharti entity,” he said.

News: Volkswagen to invest $530 m in India

(AP 28/11/2006) New Delhi - Europe's largest car manufacturer Volkswagen AG plans to invest $530 million (euro400 million) to build its first plant in India, the German Embassy said Tuesday.

The factory will be built near the city of Pune in Maharashtra, the embassy said in a statement. An agreement between Volkswagen and the government of Maharashtra state will be signed Wednesday, it said.

On November 17, Volkswagen's supervisory board approved the company's plans to build the car assembly plant in India, a lucrative market where automobile sales are growing 25 per cent annually on the back of a booming economy.

The plant will employ around 2,500 staff and is due to start production of a compact vehicle in the second half of 2009.

Volkswagen-owned Czech carmaker Skoda Auto AS already has a plant in Maharashtra. That factory assembles the Octavia, Laura and Superb sedans.

News: ADB plans $1 b rural finance project for India

(BL 28/11/2006) New Delhi - Manila-based Asian Development Bank is likely to finalise a $1 billion rural finance project early next month to strengthen co-operatives to make credit accessible to India's poor, who often resort to suicides due to financial difficulties.

"We are looking at a $1 billion rural finance project, the largest such project ever by ADB, which goes to the Board on December 8 for approval," said Rajat Nag, Managing Director General (designate) Special Advisor to ADB President.

The project to be implemented with the help of National Bank for Agriculture and Rural Development (Nabard), aimed at strengthening the finances of ailing rural co-operatives in three years.

The project will sort out issues like access to credit and make the rural financial sector more efficient, he said.

Earlier, ADB had held negotiations with the Finance Ministry for the ambitious project and has already done due diligence of the proposal. The idea was to enable these financially stressed co-operatives turn-around and give succour to small and marginal farmers and other low-income rural population.

State and district co-operative banks and primary co-operative societies in the country are in shambles due to lack of sound financial practices.

ADB's assistance will be conditional and it will be obligatory for state governments to put in place good accounting practices and adoption of greater disclosure norms to be eligible for recapitalisation.

News: Hilton Hotels to form JV with DLF

(RTR 28/11/2006) Mumbai - Hilton Hotels Corp said on Tuesday it will form a joint-venture with Indian property firm DLF Ltd to develop 75 hotels and serviced-apartment complexes over the next seven years.

The US hotel group said it would invest up to $143 million over the next five to seven years in the joint-venture company, which would be 74 percent owned by DLF. Initially, 20 hotels would be developed in cities including Chandigarh, Chennai, and Kolkata.

"India is an outstanding market for hotel development, given its powerful combination of economics and demographics," Ian Carter, the chief executive officer of Hilton International Operations, said in a statement.

Hilton said the deal needed formal written approval from the government. Last week, the government said it had approved the proposal.

News: ‘India not in inflationary spiral’

(RTR 28/11/2006) New Delhi - India is not caught in an inflationary spiral despite a rise in prices since the middle of the year, a junior finance minister told parliament on Tuesday in a written reply to a question.

Wholesale price inflation was running at an annual rate of 5.3 percent in early November from under 5 percent in the middle of the year, official data showed .

"Government does not perceive any existence of inflationary spiral as the rate of inflation have not followed a unidirectional upward trend," Pawan Kumar Bansal said in his written reply.

Finance Minister Palaniappan Chidambaram, in a separate written reply to parliament, said rises in some food prices were mainly due to supply constraints, but added there were some favourable signs.

"While the rate of inflation for all commodities and foodgrains generally show a rising trend in the current year so far, the rate of inflation for vegetables and pulses have declined from their peak in August and September," he said.

To contain price rises, the government has cut import duty on wheat and allowed the import of essential commodities on easier terms, and also banned exports of some food items.

News: 'Economic growth to slow to 8% in 06/07'

(RTR 28/11/2006) Mumbai - Economy is showing signs of overheating, but growth will slow to 8 percent in the current 2006/07 fiscal year (Apr-Mar) and to 7.5 per cent in 2007/08 as tighter monetary policy takes hold, the OECD said on Tuesday.

The central bank is expected to raise interest rates at the beginning of 2007, the Organisation for Economic Cooperation and Development said in its twice-yearly economic outlook. The central bank's next policy review is on Jan. 30.

"Some signs of overheating have emerged: inflation has picked up to over 6 per cent, though food prices are in part responsible for this movement, and the current account moved into a deficit of 1.3 percent of GDP in fiscal year 2005 and is likely to widen somewhat in fiscal year 2006," the OECD said.

The OECD said the economy grew 8.5 per cent in 2005/06, and at an annual rate of close to 9 per cent in the April-June quarter.

"There is considerable momentum in the Indian economy at the moment that is likely to sustain growth into fiscal year 2007," the OECD said.

It expected growth in gross domestic product (GDP) to slow to 7 per cent in 2008/09, and inflation to moderate slightly to just above 5 per cent by then due to the current tightening in monetary growth.

The Reserve Bank of India has raised the key repurchase rate, at which it lends funds to banks, by 100 basis points to 7.25 percent this year. The reverse repo rate, at which it absorbs surplus funds, has been raised by 75 basis points to 6 percent in 2006.

The OECD said fiscal policy had become pro-cyclical -- that is, it was adding to growth -- in the first half of 2006/07 despite a law to progressively cut the budget deficit to 3 per cent of GDP by 2008/09.

"At this stage of the business cycle, the authorities need to avoid a pro-cyclical fiscal policy in which unexpected revenue gains are largely absorbed by increased government spending," it said.

The government aims to cut the deficit to 3.8 per cent of GDP this fiscal year from 4.1 per cent in 2005/06.

"Cyclical strength of revenues should result in the budget deficit falling below the targets set by the fiscal discipline law," OECD said.

News: 'Tatas offer for Corus still valid'

(PTI 28/11/2006) Kolkata - In its first official comment on the Corus deal since a rival bid came up, Tata Steel today said that its offer for buying out the Anglo-Dutch steelmaker remains valid in spite of a counter bid from Brazil's CSN.

"We made an offer for Corus on October 20. That remains valid," T Mukherjee, deputy managing director of Tata Steel, said today on the sidelines of a metals seminar here.

Asked whether Tata Steel would revise its bid to match the CSN offer, he refused to comment.

India's largest private steel manufacturer had offered to buyout Corus at a price of 455 pence per share with a total deal size valued at $ 8.1 billion.

Subsequently, CSN made a counter offer at a price of 475 pence per share, which valued Corus at $8.5 billion.

Before the CSN bid, Tata Steel's managing director B Muthuraman had said that 455 pence was a fair value to the investors of Corus. Standard Life, which holds 7.8% stake in Corus, was unhappy with Tata Steel's offer saying it undervalued the company.

News: Who is Sunil Mittal?

(BBC 27/11/2006) His pictures can be misleading. They tend to project him as a cold, stiff-nosed and arrogant CEO.

In real life, he's friendly and warm. He's one of those rare head honchos who'll personally return calls.

But more importantly, he's probably the most-successful Indian businessman in the post-reforms era, after the country embarked on the liberalisation path in 1991.

Meet Sunil Mittal, who controls the $2.5bn Bharti group in India with interests in telecom and retail, and has struck a joint venture deal with Wal-Mart, the US retail giant.

After leading the decade-long revolution in mobile telephony, and bagging the largest customer base of 27m, he's today enchanted with retail and agriculture.

"We're in the final lap of telecom. Now, new areas fascinate me. I am passionate about both retail and agriculture. It's the next big opportunity," he told a newspaper in April this year.

Unlike the huge European-style outlets, India needs the Thailand-type of stores that are "small, air-conditioned, comfortable and don't scare people away".

He's reiterated several times that a such a model would work in India.

First mover

The retail foray by Sunil Mittal - no relation to Indian steel magnate Lakshmi Mittal - is an indication that he can quickly spot opportunities in the sunrise sectors.

In the 1970s, he set up a cycle parts business in the Indian state of Punjab.

He came to Delhi in 1981, when he realised he could make a killing by importing portable generators from Japan, where the profit margins were as high as 100%.

During the 1980s, he lobbied the government to allow private firms to manufacture landline sets, and was the first to enter this booming business.

When India opened up the wireless telephony segment in the mid-1990s, he was among the first movers.

"Then, it was difficult to convince customers to buy a mobile handset for 40,000 rupees($890), pay 16 rupees (35 cents) a minute for outgoing calls and also pay for incoming calls," he told a news magazine.

Worse, policy changes and legal battles restricted the growth of the Indian mobile business in those early days.

But Mr Mittal knew it was only a matter of time before the mobile revolution took off.

Aided by recent policy changes, he slashed tariffs to a maximum of 1.20 rupees (two cents) a minute. What helped was that the price of a mobile set crashed to as low as 2,000 rupees ($44).

Today, Bharti (Airtel), his mobile telephony company, is adding a million customers every month.

Mr Mittal thinks retail is the next growth sector.

The potential can be gauged by the fact that India's retail market is pegged at over $200bn, and organised retail constitutes over $6bn.

Several Indian businessmen like Mukesh Ambani of Reliance Industries, India's largest private sector company, are pumping in huge sums to fulfil their retail dreams.

'Asian powerhouse'

For Bharti too, access to finance won't be a problem because Mr Mittal is known to be a finance whiz kid, an excellent negotiator and adept at raising cash.

In the past, he has sold stakes in Bharti's telecom ventures to several strategic investors at seemingly attractive prices. He has also innovatively financed his expansions.

Another advantage is that Mr Mittal has the ability to manage foreign partners.

He surprised most critics when he got SingTel to invest in his telecom venture.

He shocked them when he got a global competitor, Vodafone, to buy a minority stake.

"We have an Asian powerhouse and a global behemoth, this gives us the benefit of both worlds. We're creating value for them, I don't see either of them exiting," he said in a recent interview.

After bagging two of the most successful mobile firms, Bharti plans to spread its tentacles overseas, and buy out small and medium-sized firms in other emerging markets.

It also hopes to grab licences for mobile services internationally.

In the near future, however, telecom will take up only a quarter of Mr Mittal's time.

His focus will be on retail and agriculture, where he wants to be the pioneer to sow the seeds for India's second green revolution.

This is what he said of the future possibilities in a recent interview: "Many summers ago, it was telecom and, fortunately, I was there. Now the train is back at the station and I once again have an opportunity to hop onto it. Organised retail will change the face of this country."

News: Indian films find new markets

(BS 27/11/2006) Mumbai - With the Indian entertainment exports set to cross the Rs 1,500-crore mark this year and Indian films becoming popular in the international markets like north Europe, Germany, France and Japan, film Industry representatives said that producers should formulate a plan for distribution of their films in these markets.

Speaking to Business Standard, Amit Khanna, chairman of the Reliance Entertainment Ltd, said that Indian films were now finding viewers beyond West Asian countries, United Kingdom and North America.

“In the past three years, markets in Germany, France and Japan have opened up, which is indeed a good news for us,” he added.

The most encouraging aspect of all these developments has been the acceptance of Indian alternative cinema in foreign countries, according to Khanna.

“In China too, there is a huge untapped film market and the talks are underway with that country to allow more Indian films.”

Recently, the mainstream cable companies in the United States started a ‘Video on Demand’ for the Indian films, a step that would greatly boost the market for these films, as it would check piracy, he observed.

Latin America too is turning out to be a promising market for Indian films and the industry has a plan to dub its films in Spanish to cater to the needs of viewers there, he said.

Renowned film producer Bobby Bedi, however, stated that India still has just half per cent of the global film market share, a huge gap to be filled.

“Urgent strategies are needed for this purpose,” said Bedi, who is the chairman of the Confederation of Indian Industry’s (CII) National Entertainment Committee.

Bedi said that producers should not sell the total rights of their films to a single distributor.

News: Ficci boosters for FDI

(TT 27/11/2006) New Delhi - Indian industry has drawn up a nine-point fiscal agenda in the run-up to Union Budget 2007-08 to boost FDI inflow into the country and promote overseas investment by domestic companies.

Industry captains want the receipt of dividend and capital gains of the subsidiaries of Indian companies, which are present overseas and want to repatriate their earnings into India, to be either exempted from tax or taxed on a concessional basis.

The recommendation forms part of a detailed note prepared by the Federation of Indian Chambers of Commerce and Industry (Ficci) for the consideration of the government.

“This should be done to enable overseas holding companies that have their subsidiaries in India to offset the distribution taxes paid in India from tax payable by them in their respective countries,” the note says.

India Inc has also sought to re-look at the country’s transfer pricing norms that provide for a 100-300 per cent penalty on the tax payable on the amount of adjustment.

“Nowhere in the world are penalties so high. These need a second look,” said Ficci president Saroj Poddar.

Industry has called to introduce the concept of ‘participation exemption’ on the lines of provisions prevalent in other countries.

News: ICICI Bank, SBI likely to set up branches in US

(ACERC 27/11/2006) Mumbai/New Delhi - State Bank of India and ICICI Bank, the two largest banks, will spread their operations in the US. According to senior government officials, following the government's talks with the US authorities, India's two leading lenders may well be granted approval for fresh branch licences in the next six months. Both these banks had sought approval for fresh licences quite a while ago, but concerns expressed by US agencies about the money laundering controls of Indian banks had led to an impasse. A senior official said that these issues have been addressed and with India on course to further tightening its anti-money laundering legislation, the government expects to get the US approval soon. Part of the problem can be traced to the fact that SBI was fined $7.5 million in 2001 by the US regulators for what was seen as the bank's failure to put in place anti-money laundering safeguards. The bank subsequently agreed to pay the fine imposed both by the US treasury and the New York State Banking Department. SBI has operations in New York, Chicago, Los Angels and Washington, while ICICI is seeking an entry into the US after making some inroads into the UK and Canadian markets. Indian banks are increasingly looking to broaden their global operations in keeping with the aspirations of Indian corporates and the business opportunities on offer. Most of the leading Indian banks have projected a share of 20% of their total income from overseas operations over the next couple of years. While the US authorities have often pushed the case of its own banks in terms of a more liberal dispensation, their Indian counterparts have stuck to their stance of a reciprocal treatment to Indian banks in the home country. The government and RBI have said that they have been liberal in approving branch licensing proposals from foreign banks way above the annual cap of 12. Indeed, India has the right under the General Agreement on Trade and Services (GATS) to deny licences for foreign banks if the share of assets of foreign banks in the total banking assets in India exceed 15%. If the US regulator does approve the applications of the Indian banks, the focus could then be on RBI, which has laid down a road map for the opening up of the local banking sector to foreign investors, starting 2009. If the US relents for Indian banks, the Indian regulator may also be under pressure to open up the market further for foreign banks.

News: UAE group to open coffee outlet in Mumbai

(BL 27/11/2006) Dubai - Making a foray into the booming Indian beverages market, UAE-based Abbasi Group will open three outlets of the coffee chain 'Coffee Bean and Tea Leaf' in Mumbai next year.

The Mumbai launch will be followed by new coffee shops in Pune and Bangalore, according to the Chief Financial Officer of Abbasi Group, Jayant Gandhi.

The group holds master franchise rights for the Singaporean-based coffee chain for several Middle East countries and India. It is launching Coffee Bean in India in a joint venture with Indian hotelier SK Jatia Group.

"With the Indian economy booming, the Coffee Bean business model fits with market demands. This is the best time to be in India," he added.

Abbasi aims to develop and operate Coffee Bean outlets throughout India with the next phase expansion planned for New Delhi.

News: Dubai's Emaar, Accor form hotel JV in India

(RTR 27/11/2006) New Delhi - The Indian unit of Dubai-based Emaar Properties has set up a joint venture with French hotel chain Accor to develop 100 budget hotels in India, the two companies said on Monday. The JV will invest $ 300 million over 10 years to roll out 10,000 hotel rooms in India, said Mohamed Ali Alabbar, chairman of Emaar, the largest Arab real estate company by market value.

Emaar is working on a series of property developments across the Arab world and South Asia.

News: 'India more capital efficient than China'

(PTI 27/11/2006) New Delhi - India, often compared with China in terms of attracting FDI or exporting goods, may have lagged behind on both counts but is more "capital efficient" as is evident from the narrow gap between the economic growth rates of the two countries, Commerce Minister Kamal Nath feels. "We often compare India with China... It (China) gets 10 times more FDI, has four-six times more exports (than India). But look at the GDP growth rate, its only 1.5% more than that of India," he said here today. "This means capital efficiency in India is higher. I am not saying its the highest, but India has a reasonably higher capital efficiency," Nath said at the launch of the India operations of private equity fund Apax Partners. While India received foreign direct investment of about $6.5 billion in 2005, China attracted about $72.4 billion, according to UNCTAD figures. Similarly, India exported goods worth $95 billion last year, but China was far ahead with more than $760 billion in 2005, as per WTO trade statistics. The two countries are among the world's fastest growing economies, with China's GDP increasing 9-10% and India registering a growth of 7-8% in the last 3-4 years. Nath also said India's economic engagement (in terms of trade in goods and services as well as investments) with the world would increase to more than $500 billion in two years from about $400 billion now. "As India signs new trade agreements, we must gear up to face competition from emerging economies such as Thailand and Vietnam and become globally competitive," he said, adding besides regional trade pacts, India was also committed to a rule-based multilateral agreement under the WTO.

News: Bharti, Wal-Mart in retail tie-up

(RTR 27/11/2006) New Delhi - Bharti Enterprises Ltd.and US retailer Wal-Mart Stores Inc have agreed to a joint venture to enter India's lucrative retail sector, Bharti's chairman said on Monday.

"The joint venture with equal stakes will operate in areas where the government allows foreign investment in retail like cash-and-carry and logistics," Bharti Enterprise Chairman, Sunil Mittal, said.

"The retail shops will be owned by Bharti Enterprises under the Wal-Mart franchise. The idea is to give Indians the lowest price everyday."

Foreign retailers are keen to enter India's rapidly growing retail market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, as Metro AG and Shoprite have chosen.

Bharti gave no details on investment and roll out plans.

Single-brand retailers are allowed to own a majority stake in a joint venture with a local partner, but India is widely expected to further ease rules on foreign investment.

The Indian retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.

Organised, or branded, retail makes up only 3 per cent of the market, compared to China's 20 per cent and Thailand's 40 per cent.

But that share is set to rise to 15-18 per cent by 2011/12, with the entry of large Indian firms including Bharti, Reliance Industries, the Tata group and the Aditya Birla Group.

Reliance Industries, the top petrochemical company, recently opened its first grocery stores and is investing $5.6 billion in formats ranging from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11.

Cigarette maker ITC Ltd. has also opened its first grocery stores and plans to add outlets quickly.

Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. Wal-Mart has a liaison office in India and expects to step up its sourcing of items such as apparel, textiles and shoes from India, which totalled more than $1.6 billion this year.

Tesco also sources food and non-food items from India.

News: 'Indian tax rates not to be raised'

(BL 27/11/2006) New Delhi - The Government is unlikely to go in for any hike in direct or indirect tax rates in the forthcoming Budget, but may initiate steps to widen the tax base by rationalising the tax exemptions. "I do not think raising tax rates for resource mobilisation is an option anymore. We are not going to raise it. We will have to look at systemic changes in the machinery for enlarging tax base. Tax exemptions have to be rationalised and business process restructuring have to be carried out in the tax system," K.M. Chandrasekhar, Revenue Secretary, said at the India Economic Summit here on Sunday. Recommendations He later told newspersons that Indian Council for Research on International Economic Relations and the National Institute of Public Finance and Policy have been asked to study the cost-benefits of various direct and indirect tax exemptions and come up with recommendations. Chandrasekhar hinted that there might be some lowering of indirect tax rates in the forthcoming Budget. The Revenue Secretary also highlighted that the share of indirect taxes in the overall revenues have come down from 35 per cent in 1990 to 17 per cent in 2006. However, the share of direct taxes in overall tax revenue of the Centre has grown from 19 per cent to 45 per cent during the same period. He also said that the country's tax-GDP ratio was likely to touch 11 per cent this year as against a level of about 10.34 per cent in 2005-06 and 8.12 per cent in 2001-02.

News: Indian mkt most volatile; but investors happy

(PTI 26/11/2006) New Delhi - It pays to take risk -- even in stock markets. Indian stocks might be the most volatile in the world, but returns for investors are also best among all the leading markets globally, including the US, UK and a number of Asian and European countries.

According to an analysis of the daily return and volatility in benchmark indices of major global markets over the past one year, investors on the Dalal street have reaped highest returns as compared to their global peers.

The Indian market has given a higher return than most of its counterparts despite an equally high level of fear factor -- as measured by volatility in daily market movements.

The Bombay Stock Exchange's 30-share benchmark index Sensex has given an average daily return of around 0.2 per cent over the past one year, which is twice the return given by its closest rival, the South African index.

All other major world stock indices including the US, UK, France, Hong Kong, Singapore, Australia, Malaysia, Mexico and Japan have given a daily average return of below 0.1 per cent.

Notwithstanding the high level of gains from the market, Indian investors are still the most worried lot as the volatility ratio of key stock index is the highest here.

The good news is daily average volatility has been on a gradual decline over the past few months after surging to as high as 3.25 per cent in June this year. It has been hovering around one per cent level over the past couple of months, except for a few days when it went up to nearly two per cent.

The volatility ratio had surged to an all-time high of 12.55 per cent on May 22 -- the day when Sensex recorded the highest intra-day fall of 1,111 points.

However, the current level of volatility in the Indian market is still higher than all the other major markets. Other than India, only Mexico, Brazil, Japan and South Africa have recorded an average daily volatility of more than one per cent over the past one year.

The volatility gauge has been below one per cent in relatively mature markets like the US, UK, France, Hong Kong, Singapore, Australia and Malaysia.

An analysis of the volatility index of BSE Sensex during the April-September period in 2006, shows it had peaked in the May-June period with values as high as 2.55 and 3.25. It then declined gradually on the back of strong FII inflows and improving investor sentiments.

Volatility dropped to 1.97 per cent in July and then to 0.67 in August. Since September onwards, it has hovered between 1-1.6 per cent.

"There was a general decline in volatility of major indices in September 2006 over the previous month. However, the Indian indices were comparatively more volatile over the previous month," market regulator SEBI said in its latest monthly report.

But a high level of volatility has not prevented BSE Sensex from outperforming the frontline indices of other major markets such as the USA, UK and Japan. The returns from Indian markets have outperformed other emerging markets of Brazil, Mexico and South Africa.

News: The new Jews of Antwerp

(HT 26/11/2006) Antwerp - We have seen Don and Umrao Jaan in the theatre,” lets in a smiling Sapna Mehta. Wondering why so much ado about Bollywood’s new releases? Simply because when you are talking about the Indian scene in Antwerp, you cannot skip mentioning Bollywood. According to Sapna, there are 23 cinemas in Antwerp where Hindi movies are regularly screened. These movies have a robust fan following in the neighbouring Moroccan community and also the Surinamese from Holland. But the stoutest fan base rests with the Indians of the area. And just who might they be?

They are the Gujarati diamond merchants. “Diamond trade in Belgium is controlled by two communities — the Jews and the Gujaratis,” says an official in the Ministry of External Affairs. Starting from the 15th century, diamond trade of the area was concentrated largely in the hands of the Jewish cutters and traders. And then one day, some time in the 1930s and ’40s, the Nawab of Palanpur, a small farming town in Gujarat, sent his Jain administrators to Antwerp to buy diamonds. Visits led to more visits, all of which generated a strong business interest.

“Today the Indian-Jew trade ratio in Antwerp is 60:40,” says Sachin D Mehta of Eurostar Diamond Traders. Sachin himself is a third generation diamond merchant hailing from Coimbatore. But these are not the only two communities involved in diamond trading. Raj Mehta, senior vice president of Rosy Blue (another diamond giant), says there are also the Lebanese traders. But the two big players are decidedly the Jews and the Indians.

Acknowledging the contribution of the 400-plus Indian families engaged in the trade, Sonia Gandhi had said in a speech at BOZAR, the Centre for Fine Arts, “Belgium is the second largest trading partner for India within the EU. Our bilateral trade crossed 8 billion euros in 2005, much of it contributed by the diamond trade. And here I would like to express my appreciation of the contribution that the Indian community in Belgium has made to our economic relations and to the Belgian economy.”

The growing economic clout is also evident in the increasing political recognition within Belgium. Earlier this year, diamond merchants from India won five out of 12 seats on the board of the HRD — Hoge Raad voor Diamant or Diamond High Council — breaking what was until now the monopoly of Jewish traders.

Also, Dilip Mehta, CEO of Rosy Blue, was awarded Belgium’s highest civilian honour. He became the first person of Indian origin to be titled Baron. The State Bank of India and ICICI have already set up shop in Antwerp and the coming months will see some other Indian banks also entering the country.

Culturally too, there is a growing awareness of Indianness. As Sapna points out, “We maintain very close ties with India. There is a paathshala every weekend where the children are apprised of their language and culture. Even local restaurateurs are now aware of our culinary tastes. Earlier, a vegetarian meal in Europe was a tough find. Now, not only do you get vegetarian food, a lot of places in Belgium also have a Jain menu.”

For Antwerp’s Gujarati diamond merchants, that is just another reason to say, “Saru che!”

News: 'West must prepare for Chinese, Indian dominance'

(AFP 26/11/2006) Sydney - Western nations must prepare for a future dominated by China and India, whose rapid economic rise will soon fundamentally alter the balance of power, former World Bank chief James Wolfensohn has warned.

Wealthy countries were failing to understand the impact of the inevitable growth of the two Asian powerhouses, Wolfensohn said in the 2006 Wallace Wurth Memorial Lecture at the University of New South Wales at the weekend.

"It's a world that is going to be in the hands of these countries which we now call developing," said Australian-born Wolfensohn, who held the top job at the global development bank for a decade until last year.

Rich nations needed to try to capitalise on the inevitable emergence of what would become the engine of the world's economic activity before it was too late, he said.

"Most people in the rich countries don't really look at what's happening in these large developing countries," said Wolfensohn, who is now chairman of Citigroup International Advisory Board and his own investment and advisory firm.

Within 25 years, the combined gross domestic products of China and India would exceed those of the Group of Seven wealthy nations, he said.

"This is not a trivial advance, this is a monumental advance."

Wolfensohn said that somewhere between 2030 and 2040, China would become the largest economy in the world, leaving the United States behind.

By 2050, China's current two trillion US dollar GDP was set to balloon to 48.6 trillion, while that of India, whose economy weighs in at under a trillion dollars, would hit 27 trillion, he said.

News: Executives, policy-makers debate India's economic future

(AP 26/11/2006) New Delhi - Hundreds of executives and policy-makers from around the world were gathering in New Delhi on Sunday to get a firsthand update on the country's sweeping economic transformation -- the opportunities it presents and the challenges it faces.

The three-day India Economic Summit organised by the Geneva-based World Economic Forum comes at a time when the Indian economy is growing by 8 per cent a year, driven by an unprecedented boom in consumerism and a surge in new investments.

A key issue at the summit is whether India can sustain, or even accelerate, its economic growth, said Lee Howell, the Forum's Asia head.

India has been among the world's fastest-growing economies for the past decade. Still, more than 300 million people live in abject poverty, earning less than a dollar a day.

Moving a substantial chunk of people dependent on agriculture to manufacturing and services and increasing farm productivity remain formidable challenges for policy-makers.

"Last year's summit focused on the positives of the Indian economy. This year, it will focus on the opportunities and challenges facing India's future economic growth," Howell said last week.

Infrastructure bottlenecks -- congested ports, ill-equipped airports, potholed roads, frequent power outages -- threaten to slow future economic growth. There also are other risks, such as the country's large number of people with HIV, which may affect productivity gains in the future.

Also, benefits from the rapid economic expansion over the past decade have been enjoyed mostly by a minuscule proportion of the country's 1 billion people.

On the opening day, the summit is focusing on how India can accelerate its economic growth to 10 per cent a year and make sure that gains from such an expansion are evenly distributed, Howell said.

Nearly 500 executives from 32 countries are attending the annual summit, where Indian leaders also are slated to speak on government plans and policies.

Interview: Seshagiri Rao MVS - Director-finance, JSW Steel

(FE 26/11/2006) Mumbai - The Indian steel industry is in the limelight on account of the intensifying consolidation and rising raw material prices. With the entry of new foreign players, the domestic players are strengthening their presence, increasing capacities and working towards integration. JSW Steel is one such integrated player with focus on flat products. Seshagiri Rao MVS, director-finance, JSW Steel speaks with Jitendra Kumar Gupta of The Financial Express about the recent developments in the industry and the company.

How much is your current market share in comparison to your immediate competitors?

JSW steel is a major player in flat steel products in India and the second largest steel company in the private sector. We have various flat steel products with different applications in different industries such as automobiles, housing, tubes and pipes, LPG cylinder and white goods industry.

We have a 3.8 million tonne steel capacity as on date. While in terms of market share, we have 12% market share in HR coil, in case of galvanised steel we account for 14% in the domestic market. We have the largest galvanised steel facility in India, in fact larger than SAIL. We have 9,00,000 tonne pa capacity.

The Indian steel industry has been in the limelight recently as the Indian players are acquiring companies globally. Do you intend to step up some of the organic or inorganic initiatives to grow?

India has the distinctive advantage of low cost base and we want to make India as a manufacturing hub for basic steel making. We have been on the lookout for acquiring value added facilities close to the markets. However, in the case of basic steel making capacity acquisitions overseas, we will not go for acquisitions until it is very attractive, having raw material linkages.

As far as the business model we propose to follow is concerned, JSW will continue to process basic steel in India and if any value added facilities are available overseas, we would like to make acquisitions in those areas. These facilities will be used for converting basic steel produced in India into value added products and selling directly in those markets.

Have you taken any step in this direction?

We have been working on these initiatives for the last one and half to two years, and looked at certain facilities, and are evaluating them. At this point in time the proposals are at various stages of evaluation.

Which are the demand drivers for the industry and how do you plan to grow?

The Indian steel industry has a bright future. The demand drivers are strong and these will increase the steel consumption in India. One of the major steel consuming industries, the automobile industry, is growing at more than 19% in India. The infrastructure sector is growing quite fast and a huge amount of investment is lined up over the next five years. Similarly, the housing and white goods sectors are showing a double-digit growth in India.

Last year, the flat steel demand has grown at about 17% in India. Generally, in an economy the steel demand grows in line with the GDP growth for some time and then it takes off and surpasses the GDP growth. Today in India we are building up our economy from an infrastructure angle. In the years to come one can expect the Indian steel industry growth surpassing the GDP growth. The Indian steel demand from the existing 40 million tonne today is expected to grow at not less than 10% pa in the years to come. By the year 2010-11 the industry will have at least 65 million tonne of demand.

As coal and iron ore happens to be key raw materials for making steel, the rising raw material prices have compelled most of the industry players to secure supplies. What are your initiatives to subdue the soaring prices?

We have one of the most integrated steel plants and our cost of production is significantly low. Our EBDITA margin is the sixth highest in the world as per our internal estimates.

We have the advantage of operating our plant in the iron ore rich belt in the state of Karnataka; about 11% of the total iron ore reserves of India are located in this state. While as far as our security of the raw material sources namely iron ore is concerned, we have about 25-30% of our total requirement being met from our captive sources.

Being in this rich iron ore belt we do not find any difficulty procuring rest of the iron ore requirement at a competitive rate, because of the locational advantages we have. However, we are also making efforts for increasing our captive sources from 25-30% in the years to come.

JSW currently imports coal from Australia and we have taken several steps such as signing a long-term M-U assuring supplies with the Australian companies. We are also looking at other countries like Indonesia and Canada to ensure that we secure the coal that will be required by the company in the years to come. We are also working to own coal mines, which will further save the cost of production.

What are your expansion plans? How are you planning to finance the same?

In India we have been growing and aggressively expanding our capacities. We were a 1.6 million tonne steel plant in 2003. Within just four years time, we have today become close to 4 million tonne capacity and are further expanding it to 6.8 million tonne. We aim to become a 10 million tonne steel plant by 2010. Considering the infrastructure growth in India we are also diversifying into long products having application in construction and infrastructure industry. We have incorporated 1.5 million tonne of long product capacity in our existing capacity expansion plan.

As the global steel majors are anchoring grounds in Indian steel market, how have you planned to take on the threat of the intensifying competition?

India needs about 65 to 70 million tonne of steel by the year 2010, and if we consider the brown field projects alone it would not be possible to meet the growing demand by the year 2010-11. So there is enough room for the green field projects in India, whether it is from the existing players or new players.

Steel prices have been stagnant for a long time. Besides this, there is ramping up of capacities in the industry. What is your take on this?

Compared to other commodity companies, steel companies are looked at in isolation, with low P/E multiple in the market. As aluminium companies command higher P/E multiple, due consolidation happened in the aluminum sector which has not happened in the steel sector. Now the activity of the consolidation is intensifying in the steel sector. The consolidation will result in stability in the prices of steel. Earlier, Japan used to lead price negotiations for buying iron ore. Now, it is China, being the largest steel producing and consuming country and accounting for almost 40% of the world steel production. Therefore, the power of negotiating increases being the largest player.

If we look at the recent past, the consolidation in the steel industry has helped in stabilising the steel prices. Whenever there was a fall in prices there has been discipline from the production side, nobody was willing to sell at low prices. This in turn resulted in prices again picking up in the market.

The steel prices cannot be expected to remain at $600-650 per tonne. The limited supply of iron ore and coal in the world keeps the cost of steel making with less scope for huge correction in the steel prices. In the long-run, I think $400-450 is the range in which the steel prices will stabilise. As far as additional capacities are concerned there is enough demand in the domestic market. India can absorb it and we will not have to rely on exports.

What is your take on full year revenue and margins?

If there is correction in the steel prices the margins will be under pressure. But we will continue our efforts to preserve our margins at current levels, as we are focusing to bring down the cost of production. And as our new capacities will be commissioned, our fixed cost, cost per tonne will come down drastically.

We have given our yearly guidance while announcing FY06 result, which we may not be able to achieve, because our expansion project of 1.3 million tonne was delayed and now it will be operational in November 2006. Due to this our full year production of crude steel or saleable steel will be in the region of 2.8-2.9 million tonne as against our earlier guidance of 3.1 million tonne, still showing a growth of 25% over the previous year. Considering the kind of plans we have, the company in the future can grow at 25-30% in volumes till FY09.

News: Tata may also make Rs 1 lakh car abroad

(FE 26/11/2006) Kolkata - India may not be the only country to drive the much-talked about Rs 1-lakh car Tata Motors is planning to make. In the near future, the company might collaborate with a few global automobile majors to manufacture the people’s car elsewhere, Tata Motors managing director Ravi Kant said here Saturday.

“It’s heartening to tell you that even before the world can see the dream car, whose prototype has been developed, we have proposals from several global original equipment manufacturers for collaboration with us to make this car in their own countries,” Kant told reporters in Kolkata, without naming the companies that have come forward with the proposal.

Kant was, perhaps, trying to put to rest apprehensions expressed by a section of the automobile industry, particularly Tata Motors’ competitors, about whether the car would be able to meet global emission and passenger safety norms.

In April, Osamu Suzuki of Suzuki Motors said that in the wake of stricter safety and environmental norms, making a Rs 1-lakh car is not possible.

Kant said the company has finalised 50% of the vendors for the project and the rest will be selected shortly.

Allaying fears the project planned at Singur in West Bengal might get delayed due to obstacles in the way of acquisition of agricultural land, following stiff resistance by opposition leaders like Mamata Banerjee, Kant said progress as regards this was ‘extremely encouraging,’ with consent for 90% or 927 acres already received. He, however, refused to comment on when the car would actually hit the roads, saying it would be sometime in 2008. Ratan Tata had earlier said mid-2008 will be the deadline.

The plant, he said, will have the capacity to produce 2.5 lakh units a year.

The company might explore the setting up of a ‘follow-up’ plant in other states, considering demand generated. “We have proposals from other states for setting up these projects, but Singur will be the mother plant,” Kant said.

News: Ericsson restructures Indian operations

(PTI 26/11/2006) Tokyo - Swedish telecom major Ericsson has given its nod for restructuring Indian operations shifting focus on the fastest growing segment multimedia in the telecom
sector and may tie up with local or global companies for providing content to telecom operators and subscribers.

"We have divided our entire business into three sub-areas, namely network, service management and multimedia and IT," Ericsson officials said, adding the new set up would come into force from January next year.

"Our strategy remains organic growth with bolt-on aquisitions," Ericsson President and CEO Carl-Henric Svanberg told media but declined to reveal exact plans on takeovers.

He, however, was upbeat on India's potential for growth in the telecom sector. "India's telecom story is fascinating... It may be a late entrant in mobile telephony
but is catching up rapidly and the potential is enormous.

"Ericsson will continue to play an important and significant role in this part of the world," he said.

Asked whether Ericsson was looking at increasing investments in its Indian operations, Carl-Henric said: "We shall keep investing as we grow."

Mats Granryd, Managing Director, Ericsson India said, "Ericsson is paving the way for telecom growth in India, these changes -- creating three separate business units will allow us to be even more responsive to the needs of millions of telecom subscribers in India."

According to P Balaji, Vice President Marketing and Strategy the Ericsson Board has cleared the proposal to create three different business units -- Business Unit Network,
Business Unit Services and Business Unit Multimedia.

"The new set up will come into effect from January 1, 2007," he said, adding the company may go for alliances with domestic and global companies for content.

Balaji said network business was "steady", services growing faster but multimedia was growing at the fastest pace.

Ericsson is targeting to have 55 per cent revenue share from its networking business, 30 per cent from service management and the remaining 15 per cent of business to come from multimedia services.

The company has already tied up with Sony and Nepstar to offer value-added services such as downloading of music and ringtones and could enter into more such alliances to offer a host of multimedia services to telecom operators and subscribers.

"Even Yahoo and Google can be our customers to offer such multimedia and IT services," Balaji said.

The reason behind Ericsson's strategy to restructure its business into three heads is to take advantage of an early entrant in the emerging segments. As and when multimedia and IT services are adopted by mobile operators, the company should be ready with all solutions, he added.

News: ICICI aims for TCX listing

(DNA 26/11/2006) Toronto - ICICI Bank, the country’s second-largest bank, is likely to the first Indian company to get listed on the Toronto Stock Exchange (TCX).

The exchange helped issuers raise Canadian $46 billion (one Canadian $ roughly equals one US $) in capital last year - the third highest value of financings among all major exchanges in the world.

ICICI Bank has a wholly-owned subsidiary in Canada, called ICICI Bank Canada. It has notched up business worth Canadian $1.6 billion in just two years of full-serving banking operations. It has a network of six branches so far. Exchange officials feel that ICICI Bank, the parent company, rather than its Canadian subsidiary, would be the potential candidate to list on TSX.

TSX senior vice-president, business development, Kevan Cowan, said that a number of Indian companies have shown interest in listing on TSX, but these are at a preliminary stage of exploration.

He indicated that ICICI Bank could be quick off the block as it has the advantage of being listed on the NSE. About 200 TSX issuers are inter-listed on US exchanges.

ICICI Bank Canada president and CEO Hari Pandey said the bank’s rapid expansion in Canada has required larger capital employment. The parent company has so far invested Canadian $125 million after having started with just Canadian $25 million three years ago. Pandey, however, made it clear that ICICI Bank Canada has no plans for going for an IPO. The parent company would continue to fund the business expansion. No dilution of equity is envisaged, he said.

The TSX CEO was in Mumbai recently to attract Indian companies to North America’s second largest exchange and the world’s biggest market for listing of mining and oil and gas companies.

News: Bharti to pick retail partner soon

(BL 26/11/2006) New Delhi - Bharti Enterprise Ltd is all set to announce an agreement with a foreign partner for its retail venture next week. The Bharti Chairman, Sunil Mittal, told Business Line that the deal was close to being signed, though he declined to name the partner. Mittal, however, said that Tesco was still in the race along with Wal-Mart. "I received calls from Tesco even today so they are not out of the race. We maintain that we are talking to a number of companies for a strategic partnership. An announcement is expected to be made next week," Mittal said. Bharti had earlier said that it was in talks with Wal-Mart, Tesco and Carrefour for its retail foray. Mittal's statement comes even as a Tesco spokesperson issued a statement in London that its discussion with Bharti had ended without an agreement. This practically clears the way for the world's biggest retailer, Wal-Mart, to get access to the lucrative Indian retail market. Tesco, however, said it was still interested in the Indian retail segment and would look at other opportunities to enter the market. Investment flows While foreign retailers are looking to enter India's rapidly growing market, Government rules allow only multiple-brand retailers to operate through franchises and licensees or a cash-and-carry wholesale model. Among the Indian companies Bharti, Reliance Industries Ltd, Tata group and the Birlas are also foraying into the retail space. A staggering $ 412 billion will flow in as investment into the Indian retail sector by 2011 as rapid economic growth, increasing disposable incomes and lavish lifestyle habits would see the format expand exponentially, a study by PricewaterhouseCoopers (PwC) finds. PwC states that a growing population, a youthful workforce and soaring consumer confidence are "solid arguments for long-term growth in India." The majority of the investment in retail will be directed toward the two most popular retail formats: hypermarkets and supermarkets, PwC says. Half of the investment could be directed to food-related retail and the remaining would be allocated to non-food retail, the study said. Convenience chains Although independently-owned local grocery stores are still the most prevalent format, larger supermarkets and convenience chains are emerging in organised food retailing, the study finds. Organised food retailing in India is worth $ 666 million and will increase to $ 33,333 million by 2015. The sector is estimated to grow at 30 per cent annually. Among the retail formats, hypermarkets are expected to fuel retail growth since food and grocery stores account for 76 per cent of consumer expenditure. Examples include Pantaloon's Big Bazaar, which is planning to triple total retail area by financial year 2008 to 6.5 million sq.ft., as well as Spencer and Trent's Star India Bazaar, which will have 17 stores by then. Pantaloon Retail's Food Bazaar is the largest supermarket operator in India in terms of value.

News: India Inc heads to south Russia

(BL 26/11/2006) New Delhi - Southern Russia seems to be a sought after destination for India Inc, which has a slew of major domestic players either starting or looking to set up operations in the region.

Attracted by the tax holidays and free trade conditions offered by the Government of the Takhtamukhai region, in the Republic of Adygeya (South Russia), several Indian companies are looking for business opportunities there.

Berger Paints has announced that it would start operations in its 6,000 kl per year manufacturing facility in the region by January 2007, for which it has already invested about $ 2.5 million. Subir Bose, Managing Director, Berger Paints, said, "We chose Russia since we have been exporting to the country for the past 10 years and have a sizeable market there. The paints produced in Russia will be sold in the local market and we plan to slowly expand our products to other parts of South Russia."

Berger Paints, which had a turnover of Rs 1,150 crore in 2005-06, is expecting an annual turnover of $ 3-4 million from the Russian plant.

Naresh Trehan of Escorts Heart Institute and Research Centre has also firmed up talks with Aslan Khuako, Governor of Takhtamukhai, to set up a medical facility in the region. "The Governor was very interested in setting up a medical facility on the lines of `Medicity'," he said.

Meanwhile, Punj Lloyd has also shown interest in the region. "The company wants to set up an oil refinery, for which formalities will be completed by January 2007," said Khuako. When contacted, Punj Lloyd declined to comment on the development.

News: Quebec calls for greater trade co-operation with India

(BL 26/11/2006) New Delhi - Emphasising greater co-operation in trade, the Quebec Minister for Economic Development, Innovation and Export Trade, Raymond Bachand, said, "I am not satisfied with the quantum of relations we have with India. We both wish to base our future growth on knowledge and innovation. We must enhance our co-operation in these areas". The Minister was speaking at a meeting organised by the Confederation of Indian Industry (CII) on Friday.

While deliberating on India's importance to Quebec, Bachand said: "India forms a core country for Quebec to concentrate on and we intend to increase our presence here substantially".

The Minister also emphasised the importance of freer trade, not only in terms of goods and services, but also in terms of freer movement of people, science, research and university exchanges. This is likely to lead to increased partnership in knowledge intensive industries with India.

The Canadian State's delegation has over the last one week also concluded a number of future steps for research exchange programmes with Indian small and medium enterprises in the area of biotechnology and aerospace.

News: India, China to form JV to acquire oil assets

(PTI 26/11/2006) New Delhi - Energy-hungry India and China, often fierce rivals in the race for global oil and gas supplies, have agreed to form a joint venture company for acquisition of hydrocarbon assets in Africa and Latin America. While the November 20-23 visit to India by Chinese President Hu Jintao produced plenty of economic commitments, the concept of increased collaboration on securing energy assets was clearly missing from the official agenda. But this did not deter Petroleum Minister Murli Deora from using his old friend Chinese Commerce Minister Bo Xilai to get a midnight audience with Ma Kai, the all powerful chairman of National Development and Reform Commission, China's top planning agency. Sources said Deora's unscheduled meeting with Ma Kai, who looks after seven key economic portfolios, including energy, brought about the critical meeting of minds on the need for the two countries to bid together for oil assets so as to avoid a price war. "Both countries have in-principle agreed to work out a mechanism to bid jointly for oil and gas properties in Africa and Latin America. Indian and Chinese flagship companies will pool resources together to form a special purpose vehicle or a joint venture company to scout for assets in third countries," a source said. An agreement for the purpose is likely to be signed in Beijing next month when Deora will visit to attend a ministerial meeting of oil importing countries. China is hosting a meeting of energy ministers of US, Japan, Korea and India on December 15. India and China have been aggressively competing to secure foreign oil and gas assets to reduce their import dependence. India imports nearly 70 per cent of its oil needs, while China relies on foreign producers for more than a third of its oil. Given their growing needs, Deora is keen to avoid cut-throat competition with Chinese oil firms. Sources said Deora impressed upon Ma Kai the need for both the nations to collaborate in pursuing foreign energy sources as fierce rivalry has benefited sellers. China has been regularly outbidding India, most recently last August when ONGC lost out on Kazakhstan's third-largest oil producer, Petrokazakhstan, a Canadian firm, to CNPC. A month later, the Chinese company outbid ONGC in buying assets of Ecuador's EnCana Corp. for $ 1.42 billion. India and China have till date jointly acquired properties in Syria, Columbia and Ivory Coast. India's Oil and Natural Gas Corp and China National Petroleum Corp are both stakeholders in an oilfield in Sudan, although they did not bid for it jointly. Teaming up would give Indian and Chinese more negotiating muscle as they buy up far-flung oil and gas fields, analysts say. Both countries have been scouting for oil around the world to meet their soaring energy demands. China and India, which consume 11 per cent of global oil production, need energy supplies to sustain growth in the world's two fastest growing economies. Energy takeovers announced by the two countries more than doubled last year to $ 16.9 billion. "Unbridled rivalry between Indian and Chinese companies for acquisition of overseas hydrocarbon assets is to the advantage only of the seller of the assets," a source said.

News: Tesco fails to clinch retail deal to enter India

(RTR 25/11/2006) London - Britain's Tesco Plc has failed to clinch a deal with Indian conglomerate Bharti Enterprises Ltd, clearing the way for the world's biggest retailer, Wal-Mart, to get access to the lucrative Indian retail market.

A Tesco spokesman said on Friday that Britain's biggest retailer had ended negotiations to form a widely-expected joint venture with Bharti, but said the company still planned to enter India's retail sector.

"We have decided not to progress talks with Bharti over a possible joint venture in India," the Tesco spokesman said, without giving further details.

"We remain excited by the opportunities available in India and continue actively to review how best we might enter the market. As this work progresses, we will be in a better position to give more detail."

Bharti Chairman Sunil Mittal told Reuters in an e-mail that a partnership would be finalised soon, but refused to say who it would be with. Mittal said last month negotiations were down to Wal-Mart and Tesco.

Wal-Mart Stores Inc. did not immediately respond to requests for comment.

Tesco, like Wal-Mart, is looking to expand to new markets to offset the possibility of future saturation at home and the end of talks with Bharti, which it was widely expected to win at the outset, is a setback.

Yet, analysts said there was a still time to enter India, while Tesco, which already operates in 12 countries, repeated it was on track to have 60 percent of its group space outside Britain by the end of year.

An industry source said Tesco had pulled out of the months- long talks, that originally included France's Carrefour as well as Wal-Mart, because Bharti's timing for store roll-outs did not coincide with its plans.

Indian newspapers last weekend reported that Bharti had decided Wal-Mart was a more suitable partner, but a spokesman for the Bharti group, which controls India's biggest mobile telephone services provider, Bharti Airtel Ltd., said at that time that no deal had been completed.

NEW MARKETS

Foreign retailers are keen to enter India's rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, such as Germany's Metro AG and South Africa's Shoprite Holdings have chosen.

The Indian retail industry is estimated at about $300 billion and is seen growing to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors, with the entry of large Indian companies, including Bharti, Reliance Industries Ltd and the Tata group.

Tesco's main focus now will be to open stores in the United States in 2007, a move that, if successful, is expected to be a big driver of its future growth.

The company has declined to comment on Polish newspaper reports this week that it is negotiating the buy 200 retail stores in Poland from Dutch retailer Ahold NV.

"In our view, the key to unlocking the true value of Tesco is the international business," HSBC analysts wrote last month.

India's Financial Express reported last weekend that Bharti and Wal-Mart had agreed on a master franchise deal that would include hypermarkets, supermarkets and grocery stores.

The two would initially invest $100 million, going up to $1.46 billion, the paper said, quoting industry sources.

News: Indian real estate fund norms soon

(BS 25/11/2006) Bangalore - The guidelines for launch of real estate funds are likely to be issued soon, said A P Kurian, chairman, Association of Mutual Funds in India.

“We along with Securities and Exchange Board of India have worked on several areas and we are expecting guidelines soon,” he said.

SEBI had in late June allowed fund houses to float real estate funds as close-ended schemes, which can invest in real estate properties, shares/bonds of real estate companies, and mortgage-backed securities.

The market regulator said these schemes need to be listed on the stock exchanges and declare net asset values on a daily basis.

Fund managers had voiced their concerns over various issues such as valuation of real estate, frequency of valuation, liquidity, nature of scheme, custodian, etc.

Funds were also concerned about meeting redemption pressures as real estate as an asset class is relatively illiquid compared with others.

Mutual funds are awaiting clarity on these aspects so as to offer these products which are likely to draw attention of high net-worth individuals, as against retail investors in the initial stages.

In the meanwhile, Kurian said there is not much of progress made in regulating mutual fund distributors.

“Sebi has to take a view on that. We will wait for Sebi’s further initiative. I think it will take some more time.”

Both mutual funds and distributors had welcomed Sebi’s move of regulating the distribution business as the same would help in curbing instances of misselling and prevent any other malpractices.

A fund distributor said, “If distributors come under purview of Sebi, that will lead to fear factor as the market regulator can check the account books and from there find out any instances of misselling.”

Another distributor said, “It will result in best practices and prevent instances such as rebating, as the regulator will take appropriate action against distributors engaged in rebating.”

Under rebating, distributors normally give a part of their commission to investors to attract of more investors.

News: Pantaloon to benefit from contract farms

(BS 25/11/2006) Mumbai - Pantaloon Retail (India), part of the Future group, is planning to make its presence felt in contract farming in the country. Kishore Biyani, managing director of Pantaloon Retail, said, “We have commissioned a pilot project for contract farming near Indore in Madhya Pradesh.”

Currently, the pilot contract farming project is spread across 5,000 acres of land and the company is targeting similar projects in other parts of the country.

“Initially, the company will enter Gujarat, Maharashtra and Punjab,” Biyani said. Under the contract farming, inputs will be supplied by the company to farmers and crops will be grown according to the needs of the company. “It is a good opportunity for the company and farmers,” added Biyani.

The company is also setting up a new retail chain, Home Town, a one-stop destination for housing requirements. The first outlet is likely to be opened next month in Bangalore. The company is also targeting Gujarat for its future endeavours.

Sadashiv Nayak, head of operations (west zone), Pantaloon Retail, said: “We will open our first Home Town store in Gujarat by the end of March 2007.” He further said store would provide all the solutions related to house construction or renovation.

“Our first store will come up in Ahmedabad in the Thaltej area. The company has acquired 70,000 -80,000 sq feet of space for its Home Store,” he added.

Elaborating further, he said the purpose was to provide wide range of choices to the customers under one roof.

Recently, the ICICI Venture Funds Management and Kotak SEAF India Fund have together invested over Rs 120 crore in Home Solutions Retail. ICICI Venture picked up to 15 per cent stake in Home Solutions, while Kotak SEAF held 6 per cent stake in the company.

The Pantaloon promoters have also invested in Home Solutions through warrants. Followed by Home Town, the company is planning to enter the beauty parlours and health clinic segments in malls shortly.

Other ideas in the pipeline include entering the hospitality business.

News: Indian govt may up FDI in aviation to 74%

(BS 25/11/2006) New Delhi - The government is considering a proposal to raise the foreign investment cap in domestic carriers from 49 per cent to 74 per cent. This has been necessitated following the failure of the existing regime to bring in substantial foreign direct investment in the sector.

The government is of the view that a more investment friendly system is required to help carriers raise funds for their expansion plans. Moreover, fund inflow will also help carriers tide over their financial woes.

It is expected that Indian carriers will acquire close to 400 aircraft — valued at over $15 billion — over the next few years as a part of their expansion plans. But, most such plans hinge on their capacity to raise funds.

However, foreign airlines looking to invest in India’s aviation sector still have to wait — the ban on their investing in domestic carriers will continue. Even foreign equity funds in which airline companies have a stake are barred.

On the other hand, the restrictions on the composition of an airline’s board are expected to be relaxed. The present policy restricts the number of foreign members of an airline board to a third of its total size.

It also prevents a foreign national from being the chairman of the board. The restrictions were put in place to ensure that control over airlines stayed in the hands of Indian nationals.

The proposed civil aviation policy is expected to detail such changes.

“We are trying to reach a broad consensus on the issue. Stakeholders will be consulted before a final decision is taken,” said a senior civil aviation ministry official.

News: GE plans to set up Indian real estate fund

(TNN 25/11/2006) Ahmedabad - GE India is planning to invest in a big way in real estate funds and may even consider setting up its own real estate fund in the country. It is also hoping to have its own bank in India by ’10.

“GE is bullish on India’s real estate market and has plans to invest in a big way in funds being set up for this sector,” said GE India president & CEO Scott Bayman at IIM-A’s annual festival, Confluence, on Friday.

It will also expand in a big way the network of its financial services company, GE Consumer Finance, better known to consumers as GE Money. It will grow in credit cards, home loans, personal loans and life insurance.

With its partner, State Bank of India, GE is a leading provider of credit cards, with over 2.5million customers. It plans to add 250 new GE Money retail branches over the next three years.

“GE India is targeting a compounded annual growth rate of 45% and by ’10 the revenues should be $8 billion,” said Mr Bayman. All of GE’s businesses will grow, but infrastructure will perhaps be the biggest contributor,” said Mr Bayman.

GE is one of the world’s leading providers of fundamental technologies to developing countries, including energy, oil and gas, and water process technologies.

“The restructuring of electricity boards would help in a big way to grow the power sector in the country,” he added. In the late 1980s, when most of the world viewed India pessimistically, GE felt there was a potential in this country. So, it entered India with its medical systems and finance businesses, he added.

News: Indian Forex reserves up $2 bn

(BL 25/11/2006) Mumbai - Forex reserves for the fortnight ended November 17 increased by a massive $2.071 billion to touch $170.355 billion, according to the figures released by the Reserve Bank of India. This is the fifth week in a row that forex reserves have climbed.

In the previous week, forex reserves moved up by $1.168 billion to touch $168.284 billion. This is probably the highest accretion to the forex kitty in the current year.

The huge increase in reserves was mainly because of dollar buying by the central bank, as a liquidity inducing measure, said V. Rajagopal, Chief Dealer, Forex, Kotak Mahindra Bank.

FII inflows into the domestic equity market during the week were Rs 803 crore.

As per the Weekly Statistical Supplement of the RBI, foreign currency assets increased by $2.074 billion to touch $163.637 billion for the week under review. Foreign currency assets expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies (such as euro, sterling and yen) held in reserves.

Gold reserves and SDRs remained unchanged at $6.068 billion and $1 million, respectively.

India's reserve position in the IMF fell by $3 million to touch $649 million.

Next week the rupee will see support at levels of 44.50, said R.V.S. Sridhar, Vice-President, UTI Bank.

Monday could see the dollar inflows doubling, as the US markets were closed for Thanksgiving on Friday.

News: Ambuja Cement gets court nod for merger

(BL 25/11/2006) Mumbai - Ambuja Cement Eastern Ltd said the Chhattisgarh High Court has approved the merger of the company with Gujarat Ambuja Cements Ltd, which will be effective from January 1.

In a filing on the Bombay Stock Exchange, Ambuja Cement Eastern said that consequent to the order passed by the Chhattisgarh High Court the board of directors today discussed the same. The company has filed the requisite form No 21 with the registrar of companies of Madhya Pradesh and Chhattisgarh, it added.

On September 13, shareholders and creditors had approved the scheme of amalgamation of Ambuja Cement Eastern with Gujarat Ambuja.

News: SAB Miller plans capacity expansion

(BL 25/11/2006) Bangalore - Beer maker SAB Miller is eyeing the top slot in the market as it is said to be firming up plans to expand capacities through four big projects. In another development, the beer maker has just completed the integration of Foster's with itself. Sources close to the company told Business Line that four more big projects are expected to roll out in another six months, which will add another 4.5 million hectolitre capacity. This would be through a combination of greenfield projects and brownfield expansion of the existing breweries. Investment The new projects could involve an investment of about Rs 200-250 crore. Sources said a decision on which of the breweries will be expanded and in which States the new breweries will be set up will be taken shortly. Typically, the new breweries will take at least 16 months to go on stream. Sources said Foster's is expected to roll out from around 10 breweries of the company. Foster's is expected to add 4.5 million cases every year, which will take SAB Miller's production to 35 million cases annually. Over the past one year, SAB Miller has more than doubled its capacity, sources said. The existing breweries in Aurangabad, Haryana and Rajasthan are already being expanded. The Aurangabad breweries, which recently underwent the first phase of expansion, are now being expanded further. The expansion and modernisation process is expected to be completed by Feburary. The expansion of the Haryana brewery is expected to be completed by January next year while that of Rajasthan will be completed by May. SAB Miller currently has nine of its own breweries and two more on contract. The Mohan Breweries in Chennai and the Tripti Brewery in Madhya Pradesh are on contract. Once the nationwide launch of Foster's happens, SAB Miller is expected to add 2 - 3 per cent more to its market share, which will then be around 37 per cent. If it bags the Mohan Meakins brewery business as well, the market share could go up by another 6 - 8 per cent.

News: Indian hospitality gets expensive

(DNA 24/11/2006) Kolkata - The world over, India is increasingly being viewed as an overpriced hotels market on account of the gross demand-supply mismatch. And the situation is expected to worsen.

According to HVS International, which tracks hospitality trends worldwide, some first-class and mid-market hotels in India charge huge room tariffs despite the fact that their services are way below global standards.

Bangalore is a classic example of a city turning away much of its MICE (meetings, incentives, conventions and exhibitions) travel and airline demand. Hyderabad is another city where it is pointless to have convention centres since hotel rooms with reasonable rates are not available.

Manav Thadani, managing director, HVS India, said: “Rates are already 50% higher than what they should be.”

He added: “Some mid-market hotels are currently charging $200-300 compared with say $100-150 overseas.”

An industry insider said: “Hotels are high-priced, especially in October-January.”

Navjit Ahluwalia, vice-president, Marriott International, said: “Whenever there is a scarcity, the product will sell at a premium.

The Courtyard, a full-service, four-star Marriott brand commands as much as $400-500 per room nights in New York while the super premium Ritz Carlton room tariff is as low as $100 in Kuala Lumpur, which has a greater number of hotels than New York.”

News: 'India may emerge as seed production hub'

(BL 24/11/2006) Chennai - India can become a hub of seed production for South-East Asian region and will also be able to supply African countries, Rabobank International has said in a study.

"The case for India emerging as a production hub is backed by the fact that the country has built up sufficient expertise and resources in both the private and public domain to become a strong ally in early stage contract research or late stage seed multiplication," the bank said in a market overview and outlook on Indian seed industry.

The trends

Stating that the cottonseed market was expected to be converted into a full-fledged Bt cotton market by 2008-09, the bank, dwelling on trends that will help shape future, said germplasm and varietal traits would continue to be key determinants of product performance.

"After cotton, hybrid rice, mustard and soyabean may be the next crops to drive industry growth," the outlook said.

An increase in replacement ration could give depth to the industry and it would help increase the size of seed sector and volumes in the mass market segment.

"Development, higher penetration and renewed focus are anticipated in States including Bihar, Uttar Pradesh, Madhya Pradesh and Orissa," it said.

Even if the Indian market reaches a point of saturation, the neighbouring markets such as Pakistan, Bangladesh, Sri Lanka, Thailand and Malaysia could become attractive destinations for export of seed for crops, including cotton, sunflower, sorghum, pearl millet and vegetables. "Access to these markets could help sustain the growth of Indian seed companies," the bank said.

Future growth

The seed sector is seen as a major driver of agriculture sector in the country and is expected to realise future growth due to increased seed replacement rate, higher conversion, wider use of proprietary hybrids, increased farmer awareness of new methods and introduction of technologically advances products that offer improved biotic and abiotic traits.

Stating that seed companies were currently spending around five per cent of their turnover on research and development, the outlook said the firms were expected to churn out more products with shorter life cycles in the future.

"This will keep R&D costs a high level. Companies may decide to work in alliance with biotech companies for R&D of new products," it said.

The private sector in the seed industry was highly fragmented with an estimated 300 players and the top 10 companies account for 25 per cent of the total volume. An estimated 250 companies operate as trading firms and these generate an average turnover of Rs 5 crore annually.

The commercial seed market in the country accounts for 25 per cent of the total market potential and the remaining 75 per cent is dominated by vareital seeds that farmers retain from prominent food and commercial crops.

The public sector, led by National Seeds Corporation Ltd and 13 other State seed corporations, supplies high volume and low value seeds of improved varieties of cereals, pulses and oilseeds, the outlook said.

News: 'Basel II pose challenge for Indian banking community'

(24/11/2006) Kolkata - Implementation of the Basel II Accord in India, being carried out under Reserve Bank of India's (RBI) guidance, is likely to trigger a wide range of business implications and management challenges for the banking community, according to a KPMG report. The report titled 'India: Ready for Basel II?' said Indian banks are looking at Basel II beyond just compliance. While RBI is encouraging banks to achieve the basic approaches, at a minimum, a number of banks seem to be setting their sights on moving to the more advanced approaches, the report said. Every bank surveyed claimed to have either already begun or is about to begin its Basel II programme. Compliance with regulation is driving the Basel II implementation programme in 46 percent of the banks surveyed. However, nearly 32 percent of the respondents ranked Enterprise Risk Management as their key driver Approximately 90 percent of the banks, across categories, believed that successful implementation would not just result in better compliance but also improve efficiency of capital,enhance shareholder value and lead to improved management of their operational risks. Over 95 per cent of the private sector banks surveyed view 'regulatory validation of their risk management systems and models' as their biggest Basel II challenge, which would be addressed gradually as more detailed guidance is provided by the Regulator. About 15 percent of the banks surveyed have yet not started planning for advanced elements of Basel II project plan, including collection of loss data, risk mitigation techniques and capital modeling, the report said. Commenting on the report's findings, Amreshwar Seth, Senior Advisor, KPMG in India, said, "Basel II substantially changes the treatment of credit and market risks and also requires banks to hold sufficient capital to cover their operational risks -- a new risk category." "Compared with the familiar territory of market and credit risks, operational risk although easier to understand, affects the entire organisation, and its assessment and quantification is considerably more difficult," he said. "Whilst banks may have the impression that they manage operational risks adequately, this perception may prove only partially accurate," he added.

News: Can India sustain 9% growth?

(BL 24/11/2006) Mumbai - China has maintained a GDP growth rate of 9 per cent plus for the last 25 years. A similar feat was performed by Japan earlier. Recently, an optimistic Planning Commission stepped up India's growth target from 8 per cent to 9 per cent for the latter years of the Eleventh Plan to be launched in 2007. But can India achieve this on a sustainable basis? What are the factors in its favour? First, the days of 3.5 per cent Hindu growth rate are long over. The average growth rate of GDP is 6 per cent plus for the entire post-liberalisation period. In the last four years, the average has been around 8 per cent. There is a belief that this steady acceleration in the growth rate is not accidental, but is the result of the economic reforms of the last two decades and hence the growth momentum can further pick up. Second, the global perception about India is changing. Foreign investors have started believing in the growth potential of a resurgent India. As a result, the Sensex is booming. Foreign direct investment flows have also been picking up. Third, India has already proved its prowess in such areas as information technolgy, ITeS (IT-enabled services), pharmaceuticals, auto components and financial services in a highly competitive global market place. It has huge potential in biotech, healthcare and medical tourism, higher education, films and entertainment, media, advertising and so on. Competitive across sectors India's engineering skills are available at low cost. It also has a large English-speaking population. These can make India competitive across a range of industries. In addition, the earlier stigma associated with the "Made in India" label has been largely eliminated by the much improved quality of Indian products, mainly as a result of stiff competition from world-class products and collaboration arrangements with multinationals. Apart from services, the manufacturing growth rate, too, has been picking up. India has the potential to become a small-car manufacturing hub in Asia. With domestic demand growing rapidly, several foreign companies in the consumer electronics space have started production in India (rather than importing) in a big way. Fourth, some economists think that India has more home-grown, world-class entrepreneurs than China. In fact, Indian corporates have now started acquiring foreign companies and brands - a total reversal of earlier roles. Faster growth than China Fifth, the widely quoted BRIC Report of Goldman Sachs projects that in the next 40 years, India will grow faster than China. This projection relies mainly on the so-called "demographic dividend". In other words, the ratio of working age population to total population will be higher in India relative to China. China will face a labour shortage in the coming years but India won't. The higher proportion of working people would also imply a lower dependency ratio (that is the number of non-working people supported by a working person), a higher output and income per capita and a bigger market. Sixth, the traditional constraints on growth - food, foreign exchange, savings and technology - are no longer a problem. India is mostly self-sufficient in food production. Its foreign exchange reserves are more than $165 billion. Indian companies have access to state-of-the-art technology as a result of free import of machines and technology and FDI from abroad. India's savings rate has gone up from 20 per cent in mid-80s to 29 per cent now. No doubt, China's savings rate is much higher at nearly 50 per cent. But, then, India's use of savings is more efficient in that it is extracting 8 per cent growth from 30 per cent savings rate whereas China is having 10 per cent growth with 50 per cent savings rate. This is all about the strengths. But what are the major problem areas that may slow, if not derail, India's growth engine? Problem areas First, the poor state of infrastructure - bad roads, congested ports and airports, power shortage. For example, even if one can produce cars at globally competitive costs, one cannot export them in large quantities, given the current condition of ports and cargo handling capacity. According to the Managing Director of Maruti Udyog, Jagdish Khattar, the transit time of cars from the factory to the ship is 48 hours in Japan. For Maruti, it is two months. Second, according to Planning Commission estimates, agriculture has to grow at four per cent if India has to attain an overall 8 per cent plus growth rate. This is well above the average agricultural growth rate of 2 per cent achieved in recent years. The major bottlenecks are inadequate irrigation and storage facilities, erratic power supply in rural areas and lack of connectivity to markets. Massive public investment All this requires massive public investment but neither the Centre nor the State governments have the resources. Third, the recent spurt in growth has been mainly consumption-driven, supported by cheap consumer credit and housing loans. Consumption- and real-estate-driven growth may slow as interest rates harden. The growth in the urban market is approaching a plateau. Consequently, sustaining a high industrial growth would require tapping the huge rural market - the so-called "bottom of the pyramid". Buoyant secondary market Fourth, the booming Sensex as a result of foreign funds flow only indicates a buoyant secondary market in stocks. This is not new investment. Moreover, the booming stock market poses another danger. Savings may go into stock market speculation, rather than into productive investment. For growth, more new investment is needed. China gets 10 times more FDI than India. Fifth, the labour laws. Many manufacturing industries prefer to go to China - not India. Labour is not cheaper in China but labour discipline and productivity are much better. No independent trade union activity is allowed in China. This is possible in a single-party "people's democracy", but not in a multi-party parliamentary democracy such as India. Flexibility in hiring and firing (including contract labour) is particularly crucial in export industries. Sixth, by all indications, the price of oil will rise in the medium term. Seventy per cent of India's requirement of petro-products is imported. This poses the double risk of raising the infltion rate by pushing up the energy cost and inducing a fall in demand through higher prices. A "stagflation" - combination of inflation and stagnation - may set in. Demographic divide The so-called "demographic dividend" is an advantage, provided labour can be productively employed. India needs employable labour with skill-sets comparable to workers anywhere in the world. The days of sheltered production and jobs are over in a globalised economy. There is an acute shortage of the technically skilled whose salaries are skyrocketing. This is eroding the price competitiveness. At the same time, India has thousands of educated unemployed or underemployed. Here, the quality and reach of the education system basically holds the key to stepping up the rate of growth along with making it more `inclusive'. Therefore, despite huge potentials, India cannot be too optimistic about achieving the 9 per cent growth target on a sustained basis.

News: Dena Bank to sell ING's mutual fund plans in India

(RTR 24/11/2006) Mumbai - Dena Bank has signed an agreement with ING Investment Management (I) Pvt. Ltd. for selling mutual fund products through some of the bank's branches, the companies said on Friday.

ING Investment Management is part of the Dutch financial services company ING Groep.

Ahead of the announcement, Dena Bank shares ended 0.15 percent down at Rs 32.95 in the Mumbai market.

News: What Bollywood can learn from Eisner's Hollywood

(HT 23/11/2006) Mumbai - Two incidents in the past week showed a contrast that helped me measure somewhat the yawning gap between Bollywood and Hollywood. One was a meeting with Michael Eisner, the former chief executive of Walt Disney Co and a legendary manager at Paramount Pictures.

The other was a post on an internet bulletin board from an acquaintance called Ms Kapoor, who was looking to download an old Hindi film song.

Ms Kapoor first. She wanted to please her ailing mother by fetching a song deep in her memory, "Bheega, bheega, mausam aaya..." from a movie called "Bhayanak" made in 1979.

She could not find the song online and even managed to call up its music director, Usha Khanna, who had no clue either on how to buy a recording. Then she cried out for help on the net.

I did some research and found on the Web that the movie was produced by Mr AV Mohan and found a list of phone numbers that could be of help to Ms Kapoor, who still has not found her song.

Now, Mr Mohan belongs to the family that owns Chennai’s legendary AVM Studios, which is as cash rich and business savvy as they come. However, despite a profusion of websites dedicated to Indian cinema and Bollywood, the system has not found a way to sell an old song to a fan. Bollywood is certainly far from organised.

A few years ago, I had to interact with some Bollywood figures on a possible business plan, and I was told that some of them think this is a creative world where management-style logic does not work Bollywood produces films under "banners" that seem to have no institutional quality, and film-makers, technicians and actors come together to make films like projects.

Hollywood does not think like that. Mr Eisner, speaking at the Hindustan Times Leadership Summit, was forthright about how creativity and business can and must mix, illustrating with an excellent sample from a movie called "Outrageous Fortune" how his team saved money by avoiding an outdoor shoot in Paris by merely altering the script to make it more humorous!

The same Mr Eisner brought down the average cost of a Paramount movie down to $8 million from the then average Hollywood cost of $12 million through such measures.

He said there was not a single movie that lost money during his reign there. Later, in Disney, he extended the company’s famous brand to reach a whole new set of avenues to maximize gains for stakeholders. And win new customers.

So, it seems, creativity and business do mix together, and our friends in Bollywood could well be excusing away their ad-hoc behaviour under the garb of being creatively messed up.

With more than 20 million people of Indian origin residing abroad, with iPods becoming ubiquitous and mobile phones getting equipped with MP3 players, one would expect more action from Bollywood than in the fights they show before a potboiler’s happy ending.

India has now its own set of pioneers who mix business and creativity rather well. Director Mani Ratnam is an MBA who shrewdly packages his marketing knowledge with his insights into the target audience.

Ronnie Screwala was long known as a theatre person before he built UTV and sold the Hungama channel to Disney. Bollywood has come a long way from the "banners" of yore to Ram Gopal Varma’s "factory" that makes films. We have companies like Subhash Ghai’s Mukta Arts and Pritish Nandy Communications that are listed on the stock markets.

However, there is still a long way to go before Ms Kapoor can buy her favourite music download. Mr Eisner, with his studio wisdom, shows the way in how Bollywood can put an Excel spreadsheet in front of a wide-angle lens. It is just the right time for lights, camera and action on that.

News: Indian realtors turn to foreign lands

(HT 23/11/2006) Mumbai - With the Reserve Bank of India (RBI) restricting banks from investing in real estate, developers are looking abroad to raise money.

Their valuations touching all-time highs, many firms are making a beeline for the London Stock Exchange’s (LSE’s) Alternative Investment Market (AIM) that allows smaller companies to raise money.

On Tuesday, the CL Raheja-promoted K Raheja Corp’s property investment company, Ishaan Real Estate, raised $341 million (Rs 1,534 crore) on AIM. The fund, that includes such assets like InOrbit and Mindspace, has an option to sell 15 per cent more. Ishaan will invest in eight select properties of Rahejas, who will retain 60 per cent of these properties.

The first to spot the opportunity was Trinity plc, which raised $460 million (Rs 2,069 crore) in April. Trikona Capital, Trinity’s asset management firm, has been promoted by two US-based finance pros, Rakshid Chugh and Aashish Kalra, who plan to plough over a billion dollars in equity into India’s real-estate sector through two funds launched in the US and UK. The other one is a private equity fund.

Trinity’s success has caught the imagination of several developers, who are making a beeline for AIM.

At least two other IPOs are in the pipeline — the Jatias-promoted Westfield Pioneer Properties that is cobbling together a $50 million fund (Rs 225 crore) on AIM, while Priya, daughter of developer Niranjan Hiranandani, is structuring a $700 million (Rs 3,149 crore) fund to develop a slew of projects.

“People pick up money where it is easily available and reasonably cheap,” said an investment banker requesting anonymity. Foreign investors feel real estate here is cheap, say bankers. And with raise money abroad, their cost of capital can go down.

Foreign investors have taken a fancy to India as the timing of liberalising foreign direct investment norms last March synchronised with the fall in realty returns in the US and Europe.

Unlike in private equity where they are locked in for a period, investors here can exit at will once the fund is listed. This route also allows investors to participate in an unlisted company, as well as at the project level, as the Rahejas have demonstrated.

But experts advise caution: "AIM is not the most sought-after exchange and requires lower level of disclosures than in India, Singapore or the main market on the LSE,” said a banker.

"So, while the big names will take care of investors, there could be many other firms that could raise money and vanish," warned another investment banker.

News: SocGen eyes Indian takeover tycoons

(HT 23/11/2006) Mumbai - Societe Generale (SocGen), the Paris based financial services giant, that advised Mittal Steel in its bid for Arcelor, is keen to work with other Indian companies eyeing global takeovers.

Deputy chief executive officer of Societe Generale, Patrick Soulard, who looks after corporate and investment banking, says "We were advisors to Mittal Steel for the Arcelor deal. This deal has created a mood for takeovers in India."

Twelve members of the SocGen are currently in India assessing the market. It has already announced the plan to enter retail banking in India. SocGen has already acquired a 75 per cent stake in Apeejay Finance, which will be its consumer credit arm in India.

Soulard said "Indian companies have started to think big after the Mittal takeover. We have received encouraging response from the clients that we have interacted with over the last few days."

He added that the eastern part of Europe will be a major area for takeover and acquisitions by Indian companies. Soulard said, "We already have a big presence in eastern Europe. We had moved into these markets with the help of acquisitions in 1999-2000 onwards and now we have a strong presence in these markets."

Soulard said that though SocGen is looking at doubling its Indian manpower over the next two years from 1,000 to 2,000 the investment banking services for Indian companies for mergers and acquisitions are likely to be led from overseas.

He said, "This is a global business and our global presence is important. We have a strong investment banking presence in Singapore and Hong Kong."

Soulard felt that the Indian market has been always very important for SocGen and the group has a presence across businesses in India.

Asked on whether the company may change the name of Apeejay Finance in India, Soulard said, "Well one thing I can say is that it will not be renamed Societe Generale. Whether we re-brand it depends on people who run the business. Consumer retail credit is a very local business, so there is no immediate need to use the Societe Generale brand."

News: Tier-III cities set for rapid growth

(BS 23/11/2006) Kolkata - The tier III cities of India are poised to emerge as one of the most preferred investment destinations for global realty and investment firms and is therefore likely to be transformed over the next three to five years.

These locations would include Jaipur, Coimbatore, Ahmedabad and Lucknow.

According to property sector surveys, availability of the requisite talent pool coupled with low cost real estate, there would be a growing interest in tier III cities from the technology sector players who seek to expand their operations into these previously untapped locations.

Based on the current and expected growth potential, various locations in the country can be classified as mature destinations, destinations in transition and emerging destinations.

Locations like Mumbai and Delhi can be classified under mature destinations.

With their metropolitan character, Mumbai and Delhi have been traditional business destinations and have a favourable track record in attracting investments.

However, factors such as increasing operating costs, real estate supply constraints and socio-political risks are the potential impediments in sustaining a high rate of growth.

Commercial real estate growth in Mumbai and Delhi is expected to be range-bound and focussed mostly around the suburbs and peripheral locations in the coming years.

On the other hand, Bangalore and Gurgaon could be classified under destinations in transition category as they offer a large captive human resource potential, availability of quality real estate and operating cost advantages.

These are locations that are best positioned to attract investments in the coming years.

However, infrastructure bottlenecks form the main hurdles in their growth path.

Emerging destinations in the real estate market comprise Pune, Chennai, Hyderabad and Kolkata.

Growth in emerging destinations can be attributed to cost-advantages, well-developed infrastructure, limited real estate supply constraints and city governance.

Growth of these locations is also led by expansion and consolidation of corporates in the IT and ITeS sectors.

Though the number of large occupiers in these locations are yet to reach optimum, these locations feature predominantly on the investment map.

News: Starwood to invest $300m in India in next 18 months

(BS 23/11/2006) Mumbai - Starwood Capital, a US-based global real estate fund, has lined up $ 300 million for investment in Indian real estate over the next 12-18 months.

Much of this money is likely to be invested in top 20 cities in the country including tier-2 and tier-3 cities.

The projects where Starwood plans to include Special Economic Zones (SEZ), residential properties and IT parks.

Starwood is also looking to launch its hotel brands in the country - Hotel de Crillon, the luxury brand, 'I'- the ecotel brand and the budget chain, Campanile. Starwood also owns the Sheraton, St Regis and Westin brands.

Of these Hotel de Crillion is likely to be launched first as a part of a global push.

Said Balaji Rao, managing director Starwood Capital India, "We are looking at properties across the spectrum including launching our hotel brands and wherever we find maximum returns and a clear exit route, we will invest in those properties."

However, the company's initial forays in the country are likely to be in mid-sized projects, between 1-3 million sq ft of space.

"Our first investments will be in IT parks and residential projects where the of take is assured and we can exit in 5-7 years time," said Rao.

Starwood Capital has currently about $2.5 bn in capital under management.

It has invested over $5 bn in equity and $14 in debt till now.

Rao indicated that the company would not just invest in property unlike other funds.

"We have worldwide experience in developing property and we would like to bring that to India too.

Therefore, ideally we will for properties or partners with whom we can develop a property jointly in addition to investing as a fund. But this is a tricky market so we don't want to get into it by ourselves, at least for now," said Rao.

News: Reliance Retail scouts for more partners

(BS 23/11/2006) New Delhi - After tie-ups with various companies such as Dabur, Sanyo, Godrej and Timex, Reliance Retail is talking to some more companies for roping them in as suppliers to its organised retailing initiative that recently took off from Hyderabad.

As part of the strategy, the company is reviving the popular ‘Vimal’ brand with a Rs 40 crore marketing and advertisement campaign. A new brand ambassador is also being appointed to popularise the brand. Company sources added that various small garment manufacturers in Gujarat were also being roped in to participate in the supply chain.

Meanwhile, following the Hyderabad launch, the company is planning to launch Reliance Retail stores in Delhi and the surrounding national capital region by December 28. The plans are to roll out 22 stores with one each at the Star City Mall in East Delhi, Noida, Paschim Vihar and Gurgaon among other locations.

The company is expected to kick-off its stores in Bangalore and Ahmedabad in the same month.

The feedback from the Hyderabad launch has been encouraging for the company. Of particular interest seems to be the business-to-business sales strategy.

Under this, the Reliance stores in the city open up at 4 am in the morning, with the buyers including small time shopkeepers who pick up stuff at small discounts. This ‘wholesale within a retail store strategy’ is of particular interest to the company as it feels that this unexplored segment will help it expand its sales and presence.

The response to the loyalty programme has also encouraged the company.

At the moment, nearly 27,000 members have signed up for the Reliance One card. The card is currently available free of cost for six months. Consumers gain 1 point for every Rs 100 spent, with the points being redeemable at any Reliance store.

As in the Hyderabad Reliance Fresh stores, the Delhi stores will also provide users the opportunity to sample packaged foods like dal, rice etc from small sample bowls kept on the racks.

News: Tata readies to knock out CSN

(BS 23/11/2006) Mumbai/Kolkata - Tata Steel is bracing to deliver what investment bankers say will be a knockout punch to its competitor, Brazil’s Companhia Siderurgica Nacional (CSN), which made an initial offer last week for taking over Anglo-Dutch steel giant Corus Group.

The Tata Steel board today discussed at Bombay House, the headquarters of the group, issues relating to the deal, including the timing and price of a revised offer and the ways to fund it.

Though the company remained tight-lipped on the issue, sources familiar with the situation said it would scale up its offer, though it would not do anything which could hurt its shareholders. It had made an initial offer of 455-pence-a-share for Corus.

“Tata Steel will come out with a one-for-all offer, if CSN puts in a firm bid,” they pointed out.

Although the sources were reluctant to divulge the amount that Tata Steel would be willing to pay, analysts said it could spend $1 billion more than its earlier offer of $8.04 billion without hurting the interests of its shareholders.

The fact that the Corus share had been traded at around 500 pence meant the markets were expecting a revised offer from Tata Steel at that level.

Today, the Corus stock was trading at 506.25 pence at the time of going to the press. This is its highest level since May 2000.

Meanwhile, according to agency reports, Tata Steel has approached European regulators on its proposed bid and the European Commission will rule on it by January 3. The company is also reported to have informed Corus that it was willing to match the CSN offer provided it got the backing of the Corus board.

Investment bankers close to CSN said the company would come out with a firm offer towards the end of next week.

When asked if CSN would announce its firm offer before December 4, a CSN spokesperson told Business Standard, “Due diligence is progressing, and we will make the offer as quickly as possible.”

The Corus board will put before its shareholders a resolution pertaining to the Tata Steel offer at an extra-ordinary general meeting on December 4.

The sources also said Tata Steel had begun discussions with its bankers, asking them to scale up the loans they had promised.

Tata Sons would also increase its contribution to fund the enhanced offer. If there was any shortfall, Tata Steel would mop up funds through bridge loans.

Tata Steel UK, a company recently floated to execute the acquisition of Corus, had arranged for a loan of $3.06 billion, a $670 million revolving credit facility, and a $2.58 billion mezzanine bridge loan through Credit Suisse, ABN Amro, and Deutsche Bank.

Tata Steel had committed to chip in $3.51 billion in cash to Tata Steel UK. Also, Standard Chartered Bank had provided $375.24 million of subordinated debt financing to Tata Steel UK.

Tata Steel had also offered to pay upfront the deficit on the Corus Engineering Steels Pension Scheme with $241.22 million and to increase the contribution rate on the British Steel Pension Scheme from 10 to 12 per cent until March 31, 2009.

An investment banker said the Corus board might give “the first mover advantage” to Tata Steel, which had a documented and recommended bid passed by regulatory processes.

The Corus board, he said, had had discussions with CSN four years ago on a possible merger, which did not materialise. One of the reasons for the abortive attempt was CSN’s debt-laden balance sheet. CSN already had a net debt of nearly $3.19 bn at the end of the third quarter and total debt worth about 1.4 times the equity, while Tata Steel is largely debt-free.

In fact, CSN might find it difficult to pursue the deal to acquire US-based steel services company Wheeling Pittsburgh due to its huge debt.

News: IDBI, Federal Bank, Fortis sign JV for insurance biz

(PTI 23/11/2006) Mumbai - In a significant deal, IDBI Bank, Federal Bank and Fortis have entered into a joint venture to establish a new life insurance company.

The new company would have the majority share of 48 per cent to be held by IDBI, while Federal Bank and Fortis Insurance International will own 26 per cent equity stake each.

The JV, incorporated following a MoU signed by the parties on July 11, 2006, would offer a full range of life insurance and long-term savings products to the Indian market, a release here stated.

The new company is likely to become operational by around mid-2007 subject to regulatory approvals.

Among the various products, the company would offer traditional and unit-linked savings plans, protection, health and disability covers, available on an individual and group basis. The products would be promoted through various distribution platforms including bancassurance, agency and direct sales.

However, in view of Fortis' global experience in bancassurance and the strengths of the bank partners, the company will see bancassurance as a key distribution strategy.

Commenting on the venture, IDBI Chairman and Managing Director V P Shetty said life insurance is a high growth business in India.

"We are excited about creating value for customers by leveraging our brand value, capital strength and the track record of innovation in retail banking," he said.

The global expertise of Fortis and the substantial regional franchise of Federal Bank add great strength to the partnership and we are very pleased to have been able to build a fruitful relationship with them, he added.

Federal Bank Chairman M Venugopalan termed it as a landmark event in efforts to diversity into complementary areas.

Fortis Insurance CEO Peer Van Harten said that the JV is an important step for Fortis in terms of having a leading presence in Asia and we are very excited about being involved in the Indian life insurance market which has huge potential.

News: Micro-finance institutions under RBI lens

(BL 23/11/2006) Mumbai - Micro-finance institutions (MFIs), financed by banks or acting as their partners, have come under the scanner of the Reserve Bank of India.

In many cases, banks have not made any review of MFI operations after sanctioning credit. "Banks, as principal financiers of MFIs, do not appear to be engaging them with regard to their systems, practices and lending policies with a view to ensuring better transparency and adherence to best practices," said a joint fact-finding study on micro-finance conducted recently by RBI and a few major banks.

Many MFIs have been criticised for focussing on relatively "better banked" areas, including those covered by the SHG-bank linkage programme. The study also pointed out that MFIs were disbursing loans to the newly formed groups within 10-15 days of their formation, unlike the SHG-bank linkage programme, which takes about 6-7 months for group formation and nurture. "Many MFIs supported by banks were not engaging themselves in capacity building and empowerment of the groups to the desired extent," it said.

News: A-I set to join Star Alliance

(PTI 23/11/2006) New Delhi - State-owned carrier Air India is set to join Star Alliance, one of the leading groups of international airlines, as a part of its global expansion plans.

"We would be making a formal announcement on joining an international alliance in December," Air India CMD V Thulasidas told reporters here.

Although he declined to name the alliance, sources said AI was on course to join the Star Alliance and a non-disclosure agreement has been signed.

Thulasidas said the decision to join an alliance was taken before the proposal to merge of AI and Indian was mooted. He said joining the international alliance would help the carrier increase its load factor by 5-6 per cent.

"It would also help us in getting a much wider coverage across the world through member airlines of the alliance," he added.

Air India had been conducting due diligence to join an international alliance in order to strengthen its global position. Currently there are three major alliances in the world--Oneworld, SkyTeam and Star.

Star Alliance has Lufthansa, Singapore Airlines, Air Canada and United Airlines among others as its members.

He said, while Air India would be joining the alliance on its own, post-merger the new entity would become member of the alliance.

Commenting on the merger of the two state-owned carriers, Thulasidas said the eGoM was likely to take a formal decision at its meeting to be held later this week.

He also ruled out any retrenchment or downsizing of staff as a result of the merger.

News: 'Ovearseas acquisition new facet of India, Inc.'

(PTI 23/11/2006) New Delhi - Indian companies raring to go for overseas acquisitions have emerged as the new facet of the globalisation process, Finance Minister P Chidambaram has said. "Indian companies are hungry to go abroad, acquire manufacturing firms as well as technology, R&D capabilities, patents, brands and position themselves as serious players in new markets," Chidambaram said at the New Zealand Institute of International Affairs in Wellington recently. India is now increasingly regarded as a capable and dependable centre for research and development and a source of new ideas in science and technology, he said. "A large number of companies that feature among the world's largest corporations have established a research base in India," he said. The outward investment by Indian companies in the last three years has been estimated at $ 1.5 billion, $ 4.5 billion and $ 7.5 billion. "The numbers may still be small by the world standards. However, in my view this is only a beginning," Chidambaram said. Besides, there is a remarkable revival of interest in Indian culture, music and movies, he said adding this has been spurred by the Indian diaspora. To sustain high growth, India requires $ 320 billion investment in infrastructure in the next five years, which also offer an opportunity for foreign investors, he said.

News: Major world banks join microfinance revolution

(GM 23/11/2006) Halifax - In the district of Kanchipuram in southern India, groups of silk weavers are using small loans to diversify into new designs of scarves. Repayment rates are high, but a new challenge has emerged -- some of the impoverished borrowers are defaulting because of poor health.

The solution? Micro-insurance.

The Kanchipuram project is part of a new trend in financial services that is bridging the gap between world's biggest banks and the world's poorest people. Citigroup Inc., the largest U.S. bank, is forming local partnerships in the microfinance sector, and not just because of altruism.

"There's an enormous need and a tremendous opportunity to provide services to people -- credit, but also insurance and savings," said Robert Annibale, global director of Citigroup's microfinance group. "I hope one day we'll reach as clients many of today's unbanked people." Citigroup may be just the tip of the iceberg. Barclays Bank and Goldman Sachs are getting involved, and so are large institutional investors.

Other financial companies, such as Visa International and the big insurers, are climbing aboard. Foreign funding for microfinance is expected to soar sixfold over the next several years as the likes of Bill Gates, Warren Buffett, e-Bay founder Pierre Omidyar and, Vinod Khosla, a pioneer at Sun Microsystems Inc., allocate money to the sector. At the other end, as many as 10,000 microfinance institutions have sprouted to reach the estimated three billion people globally who are "unbanked."

In September, U.S. pension plan giant TIAA-CREF announced a $100-million (U.S.) global microfinance investment program and Citigroup said it's jointly launching a $100-million program.

Scores of retail investors are also piling in, keen to put their money into a feel-good place where it can also generate small returns.

The idea of giving a hand, rather than a handout, is prompting droves of entrepreneurs and bankers -- plenty of whom turned up at the Global Microfinance Summit in Halifax last week -- to leave their day jobs and work exclusively in the sector.

Officials from Deutsche Bank, Citigroup and ING Bank say they are inundated with applications for jobs in the field. Deutsche is using about 100 volunteers -- some of them managing directors from its own bank -- to help review loans.

Marco Coppoolse is one of many entrepreneurs enamoured with the concept.

He was formally chief financial officer of the world's No. 4 car leasing company in the Netherlands, where he oversaw a $17-billion portfolio. Now, he hopes to use his business smarts to raise equity for microfinance institutions.

Expansion plans are also transforming microfinance organizations. Many began life by helping people with health care or education, but soon realized they would be more effective if they could grant loans and offer savings accounts and insurance.

Kenya's Jamii Bora Trust is one. It plans to convert to a full-fledged financial institution to better assist its clients and widen its scope.

Ingrid Munro founded Jamii Bora by offering loans to 50 beggars in the slums of Nairobi in 1999. It's now a celebrated microfinance institution, having kept its focus on the poorest people while becoming self-sufficient and growing to 130,000 clients.

Ms. Munro's biggest concern isn't growth so much as "mission drift" -- a fear that all this money won't get to the poorest of the poor, who by definition are harder and more time-consuming to reach.

"If you get investors in whose interest it is to earn money, then they are likely to pull us away from our mission," she says.

The other problem, she says, is that all this money isn't reaching smaller institutions that are innovative and successful, but don't have a high profile. Studies show that most funding goes to just 250 microfinance groups.

Some see a risk that pots of capital are set to move to a sector that's not ready.

Peter Wall, head of the Microfinance Information Exchange Inc., has seen some financial bubbles in his times and worries one may emerge from microfinance, as programs grow too fast, and defaults and losses mount.

Mr. Wall, a former capital markets specialist at the International Finance Corp. in Washington has crunched numbers on everything from profitability to the number of clients at microfinance institutions.

By his measure, about $1-billion has flowed into the sector from international banks, pension funds, government agencies and individual investors. He figures that number will swell to $6-billion in the next five years.

"If it had the opportunity to grow more slowly, it would work better," Mr. Wall said in an interview at last week's Halifax summit.

He likens the situation to a bottleneck, where capital is set to move even though many microfinance institutions aren't yet tracking their financial performance, nor quantifying whether they're helping the poor, he added.

"It's something microfinance institutions really need to guard against," Mr. Wall said. "Is it really possible to grow at 100 per cent a year in terms of clients and not have defaults?"

The problem could have wider implications.

Russia and China are two vast untapped markets for microcredit, but any sudden jump in the number of borrowers will likely correspond with a rising number of defaults -- and potentially rattle the economies.

Foreign-exchange is another risk. It's unclear who's left on the hook if a country's currency suddenly moves -- the investor, the microfinance institution, or the individual borrower.

Mr. Wall, for his part, is trying to make the sector more transparent, so that institutions can better demonstrate their progress to investors. And he hopes microfinance will surmount its growing pains.

"I've seen good ideas pushed beyond all reasonable limits before," he notes.

News: Takeover battle for Corus looms large

(BL 22/11/2006) Mumbai - A price war between Tata Steel and Brazilian steel-maker CSN appears to be on the cards for the takeover of Anglo-Dutch steel company Corus. Reports from Bombay House, the corporate office of Tata Steel, and CSN headquarters indicate that both the rivals are in no mood to walk away from the deal at this stage, suggesting that they are preparing to enter into a long drawn battle by increasing their respective bids. The situation arose after CSN came up with a 475 pence-a-share offer for Corus last week, trumping Tata's earlier offer of 455 pence-a-share. Tata Steel, which has scheduled a board meeting on Thursday to take stock of the situation post CSN offer, is however not expected to make a move until CSN places a final bid on Corus's table. Also, the response of Corus to the CSN offer will be taken into account before Tata makes public its next move. In pix: IPO dreams of realty cos Analysts tracking the development say that Tata, after having invested so much time and energy on the deal, is preparing to increase its bid, but to what extent would depend on the length CSN is willing to go for Corus. Reports in the British media indicated that CSN is prepared to further increase its bid for Corus control. A senior official of CSN was quoted in a British paper as saying that the company has been offered financing for much more than 100 per cent of the proposed purchase value, clearly sending signals that it was prepared to further increase its bid if Tata upped its 455 pence offer. S&P rating Standard & Poor's kept its `BBB' long-term corporate credit and senior unsecured bank loan ratings on Tata Steel on CreditWatch with negative implications, following CSN's counter-bid. "The size of the acquisition and the potential cash outflow that Tata Steel might experience from its existing or revised offer for Corus could have an adverse impact on its financial risk profile. A successful acquisition, however, can potentially improve the business risk profile of the merged entity," an S&P note said. At the same time, it kept its `BB' long-term corporate rating on Corus on CreditWatch with developing implications, following CSN's counter-bid. S&P has pointed out that the proposed new offer from CSN has "increased uncertainties over the potential outcome for Corus".

News: Air Deccan to connect 7 more tier-II cities

(PTI 22/11/2006) Pathankot - Aiming to expand air connectivity on feeder routes, particularly those connecting small cities to a metropolis, low cost carrier Air Deccan will launch flights to seven new destinations soon.

This initiative will help tap market opportunities in regional routes, G R Gopinath, MD of Air Deccan, said in Pathankote this morning. The private carrier is launching a commercial flight to this city from today.

"We are starting our flight service to Dharamsala, Jamshedpur, Bodhgaya, Kuchbihar, Mysore, Salem and Ludhiana. The facility will be in place within 2-3 month time," he said.

Gopinath said the feeder routes have remained unexploited. About 60% of the country's aviation revenue is from the Delhi-Mumbai route. Now less than 2% of the country's population travels by air, he said.

"You cannot have a Mumbai-Delhi economy. You have to look for the entire country and see that people from all parts get air connectivity. If the feeder routes are activated, they will supplement to the trunk routes," he said.

Air Deccan has presently services to 61 airports. It has dropped its service on three routes due to "technical problems."

News: India eyes $ 7 b leather export

(UNI 22/11/2006) New Delhi - The Government said it is targeting an export of leather products worth $7 billion in the next five years.

The present export stands at $2.7 billion. The new target is to be achieved before 2011, Council for Leather Exports Executive Director, Dr K Elangovan, told UNI, in an interview.

As a first step, the Chennai-based Council, under the Ministry of Commerce and Industry, yesterday launched a three-day "India Leather Summit-2006" here to evolve an action plan to almost triple its leather exports.

The summit, being attended by international experts in the field, leather industrialists and other stakeholders, would identify constraints in the way of achieving the goal and work out a strategy to overcome them, Council Chairman M Rafeeque Ahmed said.

The speakers were unanimous that appropriate measures should be taken to increase the capacity for manufacturing leather products as there was no shortage of raw material, tanning capacity and human resource.

This, according to them, could be realised by inviting more investment in leather manufacturing sector, including Foreign Direct Investment (FDI).

There is no shortage of hide of buffalo and cow and skin of sheep and goats. India accounts for 21 per cent of cattle population in the world. At the same time, India's exports of finished leather products accounts for only 10 per cent of the total global production.

"This gap has to be filled to achieve the target of $7 billion worth foreign exchange earnings from leather product export. The only way out is to increase the production capacity which is possible only through huge investment," Dr Elangovan said.

News: Hiranandani targets $ 750 m in London listing

(PTI 22/11/2006) London - Mumbai-based Hiranandani Constructions plans to raise $750 m by selling shares next month in the biggest offering by an Indian developer on the London Stock Exchange (LSE), banking sources said.

Hiranandani plans to sell shares in a property investment firm on the LSE's Alternative Investment Market, the two bankers said.

HSBC Holdings Plc and Bear Stearns Cos will arrange the offering, the bankers said.

Hiranandani joins Indian developers including K Raheja Corp and West Pioneer Properties in turning to London's AIM, where rules for selling shares are less stringent than other exchanges.

News: ICICI plans to mop up $1 bn

(TT 21/11/2006) Mumbai - The appetite for foreign funds has spilled over from industry to banking, with ICICI Bank reportedly firming up plans to raise close to $1 billion either through syndicated loan or yen denominated bonds.

Sources said 14 banks have received the mandate to arrange the funds, to be utilised for lending in India. However, when contacted, ICICI refused to comment on the plan.

The mega borrowing plan comes at a time of huge demand for loans from the corporate sector and in retail. While advances by banks have grown in excess of 30 per cent, their deposits are up by only 18 per cent.

Advances have outstripped deposits for ICICI Bank as well. There was a robust demand for credit in the first half of the fiscal, particularly from retail customers.

Despite higher interest rates, retail assets of the bank in the first half jumped 57 per cent to Rs 1,07,679 crore on September 30, 2006 from Rs 68,537 crore a year ago.

A section of the market believes the bank will opt for syndicated loans, while bond market circles say the $1 billion will be raised through yen-denominated bonds of different maturities.

The buzz is that it may raise $350 million through one-year bonds, $400 million through two-year bonds, with the rest in loans of higher maturity.

There are unconfirmed reports of the bank planning to cash in on the lower interest rates in Japan and convert the funds into rupee.

This is the third time in four months that the private sector bank is approaching the international debt markets. Earlier it raised around $400 million through five-year bonds and $350 million as perpetual, Tier-I securities.

Not only ICICI Bank but also some big guns of India Inc are shopping for funds overseas.

Reliance Industries Ltd (RIL) recently announced its plans to raise $2 billion to fund its investment in oil exploration and production (E&P) business. Many options are under study, including syndicated loan, bonds, foreign currency convertible bonds or a combination of all these.

Sterlite Industries (India) Ltd, too, is planning to raise up to Rs 12,500 crore ($3 billion) to fund its expansion plans. The company has recently filed with the US Securities and Exchange Commission its plan to raise $2 billion through the issue of American Depositary Shares (ADS).

News: Apollo Tyres eyes global acquisition

(BL 21/11/2006) Mumbai - Apollo Tyres plans to invest Rs 600 crore in the next four years for capacity expansion through organic and inorganic route. The company is eyeing certain international companies for acquisition; the company recently acquired the Dunlop plant in South Africa. These investments will be met by internal accruals, Neeraj R.S. Kanwar, Joint Managing Director and COO, Apollo, said. Apollo's recently acquired land in Tamil Nadu is set for a greenfield facility of trucks and bus radials manufacturing plant. Initially the company will invest Rs 300 crore in the new facility that will be spruced up with an additional investment of Rs 200 crore in a span of two-three years said, Kanwar. The new facility is likely to be in full production within a span of 15-18 months. Export focus Besides focus on the domestic market, the company intends having a market share of 45 per cent (15 per cent) in exports by 2010. For export growth, the company is looking at Asia Pacific region and Europe. It is planning to appoint distributors across the region who would promote the recently launched Acelere Sportz a premium V-speed rated (tyre that can go to a speed limit of 240 km/hr) tubeless radial. The new tyre is an all terrain tyre that is ready for Euro norms up to 2009. Apollo has plans to introduce the `Z' rated (tyre that can go to a speed limit of 290 km/hr) Acelere Sportz soon. The Acelere Sportz is the first asymmetric tyre range (the tread design allows it to maximise performance) that will cater to the A3 plus segment (Ford Fiesta, Chevrolet Aveo, Skoda Superb, Mercedes C-class and E-class, etc). It was developed with testing bodies like IDIADA, Spain that helped reduce noise generation in the tyre; ATP, Germany was the testing arm for ride and handling. The company imported moulds from Korea. Apollo has identified 20 cities and 150 multi-brand dealerships that would promote the brand. The company has a total chain of 1,200 dealerships across the country.

News: DBS to emulate Asian strategies for India

(BL 21/11/2006) Kolkata - DBS, the Singapore-based fund manager, will explore the possibility of applying some of its Asian strategies in India, a market in which it has recently started doing business through its joint venture with the Murugappa group.

The DBS proposal draws strength from the potential that the Indian market for mutual funds is seen to have, especially from the growth projections that are being increasingly worked out. The market is also known to be attracting a number of international fund houses, including a few players from the Asia Pacific region.

"We are currently reviewing the investment strategies that DBS follows for the Asian markets", said Rajnish Narula, Chief Executive, DBS Chola Mutual Fund, adding that the broad idea is to use some of the capabilities built by DBS in the emerging Indian context.

Asian equities and fixed income are part of the core competency of DBS Asset Management. The latter, set up in the 1990s, is a subsidiary of DBS Bank and is known to be managing unit trust funds in Singapore.

Of the DBS products, two specific ones stand out - Shenton Asia Pacific Fund and Asian Knowledge Fund.

The first has a larger asset base and is managed relative to its benchmark; the second has a smaller corpus and is run in a more concentrated manner.

It may be mentioned that the bigger fund (Benchmark: MSCI AC FE Free, Ex-Japan) was set up as Shenton Emerging Capital Fund in 1990 and was rechristened a couple of years later. Its investment objective was altered to allow the fund manager to focus on the Asia-Pacific region.

In recent times, its largest holdings included Samsung Electronics, Hutchison Whampoa and China Life Insurance Co.

At another level, the MF, which has a relatively small asset base compared to many of its peers, is set to launch a new fund in the local market. Regulatory clearance for the proposed DBS Chola Hedged Equity Fund has been obtained.

Proposes India fund

DBS has decided to set up an India-specific fund, Narula said, adding that preliminary work on the proposal has already started.

The proposal will add to DBS's presence on the ground, which started with DBS Bank's initial foray in the mid-1990s.

Its JV with Cholamandalam Investments and Finance Co, announced last year, is aimed at stepping up consumer finance, asset management and securities businesses.

The proposed India fund, a first of sorts insofar as DBS's India initiative is concerned, will chiefly root for domestic equities, which, given the advancing indices, have in recent years helped India emerge as a promising destination for international investors, it is mentioned.

News: Kingfisher signs $500 m deal with Pratt and Whitney

(PTI 21/11/2006) Washington - Kingfisher Airlines has signed a $500 million deal with American aircraft engine manufacturer Pratt and Whitney to power its new fleet of Airbus aircraft. The agreement was signed at a ceremony yesterday at the US Department of Commerce witnessed by the Commerce Secretary Carlos Gutierrez and the Deputy Chief of the Indian Embassy Raminder Singh Jassal. "After a very detailed analysis for all engine offers for the A330, we decided that Pratt and Whitney gave us the best total solution and met all out technical requirements" Vijay Mallya, Chairman and CEO of Kingfisher Airlines, said. Pratt and Whitney was selected to power Kingfisher's fleet of A 320s/ A 319s, ATR 72s and A 300s "because of their ability to support our airline's vision to consistently deliver a safe, value based and enjoyable travel experience to all our guests" he said. The deal will include ten PW 4000-100 installed engines, one spare and an optional for an additional ten engines. Pratt and Whitney will also have a long term fleet management programme to overhaul Kingfisher's PW 4000 engines. The total transaction is valued at $300 million plus an additional $200 million if all options are exercised. Pointing to the fact that the Indian economy is one of the fastest growing economies in the world, Gutierrez spoke of the accord being "as another building block that will strengthen U.S.-India relations, foster greater economic ties and enhance the ability of both countries to compete in the global economy".

News: Bharti near deal with foreign retail partner

(RTR 20/11/2006) Mumbai - Bharti Enterprises Ltd is nearing a deal to partner with one of the world's biggest retailers, with speculation rife that Wal-Mart Stores Inc may pip UK's Tesco Plc to the post. Some local media reports indicated a deal had been finalised with Wal-Mart, but a spokesman for the Bharti group, which controls India's biggest mobile services provider, Bharti Airtel Ltd, told the media the company had not signed off yet.

"We continue to be in talks with all the global majors," the spokesman said, declining to specify when a deal may be finalised. Bharti Chairman Sunil Mittal told the media in October a deal was likely by the end of November.

"Bharti can't lose with either: both have the size and the branding and a proven track-record in non-home markets," said a retail consultant who declined to be named.

"Ultimately, it would come down to who can deliver the better value and a cultural fit between the two companies," he said.

India's financial newspaper said at the weekend Bharti and Wal-Mart had finalised a master franchise agreement that would include hypermarkets, supermarkets and grocery stores.

The two would initially invest $100 million, going up to $1.46 billion, the paper said, quoting industry sources.

The Indian retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.

Organised, or branded, retail makes up only 3 percent of the Indian market, compared to China's 20 percent and Thailand's 40 percent.

TILLS RINGING

But that share is set to rise to 15-18 percent by 2011/12, with the entry of large Indian firms including Bharti, Reliance Industries , the Tatas and the Aditya Birla Group.

Reliance Industries, the top petrochemical company, recently opened its first grocery stores and is investing $5.6 billion in formats ranging from convenience stores to hypermarkets. It expects revenue of $22 billion from retail operations by 2010/11.

Cigarette maker ITC Ltd has also opened its first grocery stores and plans to add outlets quickly.

Foreign retailers are keen to enter the rapidly growing market, but multiple-brand retailers are only allowed to operate through franchises and licencees, or a cash-and-carry wholesale model, like Metro AG and Shoprite have chosen.

Single-brand retailers are allowed to own a majority stake in a joint venture with a local partner, and the expectation is that India would ease rules on foreign investment in the back-end.

Bharti has a joint venture with the El Rothschild group for FieldFresh, which supplies fresh produce to overseas retailers. Wal-Mart has a liaison office in India and expects to step up sourcing of items such as apparel, textiles and shoes from India, which totalled more than $1.6 billion this year. Tesco also sources food and non-food items from India.

News: Biyani sets foot in outdoor media biz

(BS 20/11/2006) Mumbai - Venturing into the outdoor media business, Kishore Biyani’s Future group, with retail brands such as Pantaloon, Big Bazaar, Food Bazaar and Fashion Station, has set up an out-of-home media division called Future Media India Ltd to tap the Rs 900-crore market.

The idea is to use the company’s retail spaces as a media platform. “We are present in 32 cities, where we have over 140 stores. The number of stores will double in 2007 and will attract over 200 million customers. Future Media’s unique selling proposition is that it will provide a communication platform to reach out to these 200 million customers just before they decide to purchase goods at our stores,” said Kishore Biyani, CEO, Future Group.

Future Media plans to offer a range of media solutions to advertisers at the points of purchase at its malls and other multiple format stores. It will use digital signages, large format television sets, and the audio media to advertise brands.

“It’s far more focussed than any other media platform and is completely measurable with respect to actual sales,” he said.

Future Media CEO Partho Dasgupta said using retail media spaces effectively was critical as India’s growing consumer class spent a large chunk of its leisure at malls and retail stores.

The media solutions would be aimed at branded products and services ranging from telecom and insurance to automobiles and the FMCG sector.

Other than using its malls and retail chains, the company will bid for outdoor media space at amusement parks, Delhi Metro etc. The company’s business model is fashioned after Focus Media, China’s largest out-of-home media company.

But does Future Media plan to tie up with an international outdoor brand or rope in an investor? “It is a high return opportunity. A lot of people have shown interest in investing in this venture. We are exploring various options,” said Biyani.

News: Indian FDI rises 100% to $4.4 billion in first Half

(PTI 20/11/2006) New Delhi - India is poised to achieve the target of attracting $10 billion of Foreign Direct Investment (FDI) this year as inflows have nearly doubled to $4.4 billion in April-September 2006.

"The buoyancy in FDI in the first six months is likely to continue in the second half of the year as well exceeding the target of $9-10 billion," Commerce and Industry Minister Kamal Nath said on Monday.

In September 2006, FDI inflows grew 225 per cent to $916 million as compared to $282 million in the same month last year.

The Chennai region, including Pondicherry, recorded the maximum growth of 211 per cent, attracting $437.3 million in FDI, largely due to greater activity in computer hardware and leather.

In absolute terms, Delhi region continues to remain on top of the table with $936.5 million showing a growth of over 25 per cent. The Mumbai region was second on the chart with total inflows of $867.5 million .

Helped by the Comprehensive Economic Cooperation Agreement, Singapore moved ahead of the US and UK as the second biggest source of FDI inflows. Mauritius, because of the Double Taxation Avoidance Agreement, is still the largest source of investment with $2.45 billion.

Services attracted maximum investment of $1.5 billion showing growth of 350 per cent. Telecom sector with inflows of $405 million showed the maximum growth of 950 per cent.

News: IA keen to fly to more foreign cities

(TT 20/11/2006) New Delhi - Indian Airlines (IA) plans to start flights to Australia, the UK, China and South Africa.

IA executives told The Telegraph that the airline planned to launch flights to Sydney and Melbourne via Singapore, direct flights to Shanghai and Hong Kong and a hopping flight to Beijing.

“We are also looking at flying to Johannesburg or Cape Town via Mauritius, besides reviving our plans to fly to Birmingham,” officials said. A plan to fly to Gatwick is obviously not being taken up by the airline.

IA currently flies to other South Asian, Gulf and Southeast Asian countries as its original charter debarred it from flying beyond a specified distance.

After a protracted internal battle, last year, the Union cabinet allowed the airline to compete with private carriers like Jet and Sahara who have been allowed to fly on international routes.

IA plans to start flying on these routes from the middle of next year. The IA board has already cleared plans to buy 43 new Airbus aircraft as well as lease two wide-bodied Airbus 330s and six 70-seater jets for five years and five Airbus-320s for about three years.

IA executives said the leased A330s would be deployed on international routes.

The airline’s purchase order of a mix of Airbus-319s, Airbus-320s and Airbus-321s to be delivered over four years is not considered by many to be suitable for long-distance international routes.

If IA is successful in its international operations, it may go in for more wide-bodied orders.

But with moves to merge it with Air-India, this may not be needed and the aircraft deployed on its new routes may eventually be that of Boeing which Air-India has ordered for its expansion.

News: 'Indian economy on a roll'

(UNI 20/11/2006) New Delhi - The Indian economy is on a roll, notching up a record $4.4 billion in foreign direct investment during April-September 2006, up 100 per cent from the same period last year, Commerce Minister Kamal Nath said on Monday.

The impressive growth in FDI equity inflows is the highest recorded in any six-month duration and is higher than the total yearly inflow in any period prior to 2005-06 (which, however, received a higher FDI inflow of $5.5 billion).

Singapore has emerged as the second largest investor in India, piping the United States and the United Kingdom with a total investment of $ 481.7 million -- a growth of 305 per cent compared to FDI inflows in the corresponding period of last year, the minister said here.

The period also saw two other firsts -- industrial growth logged double-digit growth of 10 per cent during the past 11 years and a 12 per cent jump in manufacturing rate of growth, he announced.

FDI inflows have registered a consistent growth in the past three years, he said, noting that in September alone this rose to $916 million compared to $282 million garnered during September 2005, showing a spectacular rise of 225 per cent.

News: Anil Ambani plans global M&A fund

(RTR 20/11/2006) Mumbai - Anil Ambani is in talks with George Soros, private equity firm Blackstone and Singapore state investment firm Temasek about launching a $5 billion global buyout fund, a paper reported on Monday.

Ambani, one of richest men who controls top CDMA-mobile services provider, Reliance Communications Ltd, has put up $500 million of his personal wealth and has received commitments of up to $2.5 billion from other investors, the Economic Times said.

The fund, which was likely to be based in Singapore, would focus on firms in telecoms, media, communications technology, software, IT-related and broadband services, the paper said, quoting people familiar with the development.

The fund could look for "big-ticket acquisitions" in Asia and the Middle-East, the paper said.

A spokesman for the Anil Dhirubhai Ambani Group was not immediately available for comment.

News: Independent regulator likely for Indian BPO sector

(BL 19/11/2006) New Delhi - With the pressure building up on the BPO sector to allow formation of unions, the Call Centre Association of India (CCAI) on Saturday said that it was considering a proposal to set up an independent self-regulatory organisation in partnership with the Confederation of Indian Industry (CII). Proposed to be on lines of the independent regulator for the telecom sector, CCAI said that the organisation would comprise a nine-member body of a retired Chief Justice of India, representatives of industry bodies such as Nasscom, CCAI, and members from CITU as well as representatives from BPO (business process outsourcing) employees amongst others to monitor the working conditions in the sector. Many companies from the ITES (IT-enabled services) sector are of the view that unionisation of BPO staff was driven more by political aspirations than by the BPO employees. They feared that such a move would hit the industry, which is now plagued by high attrition rates and shortage of skilled labour. "We can form a non-political, quasi Governmental Human Asset Maintenance Forum in the Business Process industry to understand the working conditions of the staff. We do not want to control our employees completely. However, we do not even want the trade unions to take control. So why can't there be an independent regulator for the IT sector, just as it exists in the telecom sector," said Samir Chopra, President, CCAI. Further, CCAI may work with Nasscom to ensure adaptation of better regulatory practices in the ITES sector so as to rule out the need for unions.

News: Volkswagen to set up facility in Maharashtra

(BL 19/11/2006) Mumbai - It is now official. German carmaker Volkswagen has finally chosen Maharashtra for setting up a $300-million (Rs 1,350-crore) green field automobile manufacturing facility.

The plant, which will come up on a sprawling 500-acre site at Chakan, near Pune, is expected to create employment opportunities for about 2,500 people.

On Friday, the company's board gave its approval for setting up the plant in Maharashtra. As per the plan, production of small passenger cars will commence by the second half of 2009.

The carmaker has been planning to set up a manufacturing facility in India since long, having considered other States, prominently Andhra Pradesh, Tamil Nadu and Punjab, to locate the plant. This is seen as a significant development for Maharashtra, as the proposed unit would spawn spin-off benefits for the State, said a State Government official.

MoU by month-end

A statement on the Volkswagen Web site said: "India is one of the fastest growing automotive markets worldwide, but high import duties on vehicles mean that any meaningful market presence can only be achieved by establishing domestic production facilities. Volkswagen examined a number of locations in India in detail and chose the Pune region because of its economic environment, good logistics links and sufficiently strongly established supplier structure. The region also offers qualified employees who will ensure that production meets appropriate quality standards."

V.K. Jairath, Maharashtra Industries Secretary, told Business Line that an MoU with the company would be signed by the end of this month.

The land for the project has been identified and the process of clearance from the MIDC and State Pollution Control Board will start after signing of the MoU.

He said proximity to ports and the availability of skilled workforce worked in favour of Chakan as the suitable location for the new plant.

In the last one year, the State Government has singed MoUs for eight major automobile projects, he said.

The Government has given `mega project' status for the Volkswagen project, which will be the German company's first manufacturing facility in the country.

The Volkswagen Group, based in Wolfsburg, Germany, has a major footprint in Western Europe's automobile market. The Group's passenger car business is split into two brand groups. Under the umbrella of the Group, Audi and Volkswagen manage their separate brand groups and are responsible for generating global earnings from them.

The Volkswagen Group operates 45 manufacturing facilities in 11 countries in Europe and seven countries in America, Asia and Africa. A workforce of over 336,000 people all around the globe produces over 21,500 vehicles per working day, as well as providing vehicle-related services. The Group's models are sold in more than 150 countries.

Other projects

In August 2006, Bajaj Auto Ltd signed an MoU with the Government of Maharashtra for setting up a Rs 2,000-crore two-wheeler and three-wheeler manufacturing facility at Chakan.

Earlier, General Motors also announced that it would be setting up a Rs 1,300-crore second plant Talegaon industrial estate in Maharashtra.

The State Government had also signed an MoU with Mahindra & Mahindra Ltd in June 2005, for setting up a Rs 550-crore facility jointly with French company Renault for making cars.

News: Biyani plans discount store for Future labels

(TNN 18/11/2006) New Delhi - How niche can it get? After announcing Brand Factory, a discount store for branded goods, Kishore Biyani's Future Group is now planning to have the largest factory outlet for its own private labels.

The Future Group has about 80 private labels cutting across various product categories and the company is working around a business model which will help liquidate stocks that are out-of-season.

The company has roped in Anshuman Singh from Welspun Retail to head the business. Though the Future Group is internally calling this factory outlet business Value Fashion, sources said it is yet to get a consumer-facing brand name. “It’s yet to finalise a brand-name, but what’s certain is that it aims to make it the largest discount business in the country.

The store size is likely to be in the region of 70,000-80,000 square feet which will hawk most of Future Group’s private labels,’’ a source told ET. Mr Singh, however, declined comment.

Interestingly, private label products will be retailed through the proposed stores at prices significantly lower compared to any of the company’s existing formats, including Brand Factory, where the group sells other brands for a discount of as much as 20-25% to market price. Private Label products are anyway sold at a lesser price than the brands.

Indigo Nation, Scullers, John Miller, Bare, DJ and C, Annabelle are some of the brands in the apparel segment owned by Future Group. The group also has Gini & Jony, a kid’s fashion lifestyle brand, catering to the 2-16 years.

The company will soon be launching Navarasa, a private label to be extended to female accessories. In the consumer durable segment, the company has two private labels — Koryo and Sensei.

The company is now looking at developing private labels in the home furnishings segment as well. At present, the company retails home furnishings through Home Solutions Retail, a subsidiary company of Pantaloon Retail.

Home Solutions again has various store chains under it, such as Collection I, a lifestyle furniture store and Furniture Bazaar which is an utilitarian and affordable furniture store and Home Town, a one-stop destination for all house requirements. The company also has four private label brands in the food business.

News: Tata likely to revise its offer to Corus

(RTR 18/11/2006) Mumbai - Tata Steel Ltd may revise its offer for Anglo-Dutch steelmaker Corus Group Plc after Brazil's Companhia Siderurgica Nacional topped its bid, newspapers said on Saturday.

CSN, which made a bid for Corus in 2002, said late on Friday it had approached Corus' board with a proposal to pay 475 pence per share in cash, more than Tata's 455p agreed offer.

The offer was subject to due diligence and CSN had not yet made a firm bid, CSN said.

A Tata Steel spokesman declined to say whether the company would make a counter offer, saying: “We do not wish to comment at this point in time.” But Indian business dailies speculated it would revise its bid.

Business Standard said it might make an improved offer next week, quoting sources close to the development.

Economic Times said Tata Steel would have to match CSN's offer and cannot be seen walking away from the deal after coming close to it.

“The development means they (Tata) now have to gird themselves for a long and bitter battle,” the paper said, calling it two Davids fighting over one Goliath.

Tata Steel won approval from Corus on October 20 for its offer to create the world's fifth-largest steelmaker.

Corus agreed to Tata's offer after spending a year looking for a strategic partner in Brazil, Russia and India. Analysts said at the time Tata Steel may have to raise the offer by 10 percent or so in the event of counter bids.

A successful bid would have been India's largest-ever foreign takeover.

News: India could see more inflows - Societe Generale

(BL 18/11/2006) Kolkata - Societe Generale Asset Management (SGAM) sees Indian equities as worthy of attracting fresh allocations on a 3-5 years' basis, thanks to fundamental factors that collectively strengthen the case for the country's economy. SGAM, among the handful of international players to have taken stake in an Indian fund house - SBI Mutual Fund in this case - is sure that the local market will gain from the kind of corporate earnings visibility that is expected to become evident in the days ahead. It is also sanguine about the corrective phases that will set in off and on in the next 3-5 years and is convinced that its India-specific fund will persuade new investors to come in, according to Ms Michala Marcussen, Head of Strategy and Economic Research. That India is high on SG's agenda is clear from the fact that it still does not have too many country funds - it does have a China fund - although there are a number of emerging market products in its stable. The India fund, rolled out only a few months back, manages $130 million. SG, which thinks that the fundamental story will play out well in the Indian context, is currently somewhat overweight on Asia. More specifically, it has started taking "a more moderate view" of the two largest and most promising Asian economies. Incidentally, SG manages close to 400 billion globally. The company is also eager to see changes in the Indian pensions market. While the opening up of the pensions sector is being debated in political circles, the segment is expected to grow substantially in the days ahead. SG is keen to observe the progress of capital-protected funds in the country. Several local fund houses have already sent their offer documents to the regulator. SBI MF in pact with US FII Meanwhile, SBI MF has wrapped up an agreement with a large US-headquartered FII for managing a couple of hundred million dollars. Its identity is not being disclosed at the moment. SGAM, which holds 37 per cent in the SBI-promoted fund house, sees the development as one that has followed its India strategy. "We believe that the joint venture with SBI MF has significant growth potential, especially considering the strengths of our Indian partner. It will continue to leverage local fund management expertise," said Marcussen. SBI MF, which has lately been engaged in introducing various fixed-income products, is now set to launch a close-ended equity fund. The latter will turn open-ended after three years.

News: Ocimum Bio buys Dutch co

(BL 18/11/2006) Hyderabad - Ocimum Biosolutions, Hyderabad, has acquired the BioMolecules synthesis business division of Isogen Life Science, Netherlands.

The acquisition, whose deal value was not disclosed, would give Ocimum Biosolutions, a provider of laboratory information management systems (LIMS), bioinformatics solutions, Microarrays and contract research the opportunity to become a global oligo player, according to Ms Anuradha Acharya, its CEO.

"We will continue looking for targets in related areas to scale up our oligo production capability. This acquisition will also help us become a more integrated genomics services provider with three delivery points in Indianapolis, Ijsselstein (Netherlands) and Hyderabad," she said.

Hans Beijersbergen van Henegouwen, MD of Isogen Life Science, said, "The new business configuration will be much more flexible and will be able to play an important role in the vast growing demand for oligo nucleotides all over the world."

In pix: Newsmakers of the week

Avendus Advisors was the sole financial advisor to Ocimum for the deal.

Acquisition route

Ocimum has, in the recent past, used the acquisition route to scale up, the German MWG Biotech's division being one example, according to a company press release here.

Isogen Life Science is a leading supplier of products for the life science sector. The company provides a wide range of instruments, reagents and consumables in the areas of cell biology, molecular biology and biochemistry.

Oligo nucleotides are basic material used widely in molecular biology laboratories across the world. They are used in gene sequencing studies, micro-arrays and have an important role in better understanding of genes.

Interview: Anand G Mahindra, vice-chairman and MD of Mahindra & Mahindra

(HT 17/11/2006) Mumbai - Anand G Mahindra, vice-chairman and managing director of Mahindra and Mahindra has been in the forefront of making it an Indian multinational.

M&M currently has an annual turnover of $4 billion (Rs 18000 crores) in diversified industries from tractors and utility vehicles to the IT sector.

In conversation with Deepak Joshi, Anand Mahindra outlines his vision for the group.

Q. M&M has plans to unveil the Logan car in tie-up with Renault next year. You are also looking at a three-way manufacturing alliance between Nissan, Renault and M&M. What is the broad strategy?

A: Our three companies will be forming a manufacturing alliance. The equity structure and details have still not been decided. We are in discussions with state governments about setting up a greenfield project and a final decision will be taken soon. Logan and its variants will be manufactured at the existing Nashik facility.

The joint venture will give the three alliance partners economies of scale that is beyond one partner as well as flexibility in manufacturing lines. Apart from this, we will have the advantage of a wide vendor base for joint procurement and enable us to cut costs

Q. Scorpio has been well received both in India and overseas. What are your preparations for next model Ingenio?

A: The preparations for our next model are going on well. I cannot provide you details for competitive reasons. I can assure you that the model will hit the road in the next couple of years.

Q. How do you wish to be seen in next couple of years, as a car manufacturer or a utility vehicle maker?

A: I would like to be seen as a global brand in the utility vehicles segment in next few years. M&M should be an independent player in the segment with a wide acceptability and presence.

Q. What lessons did M&M learn from its earlier joint venture with Ford ?

Today the joint ventures are like pre-nuptial contracts. It is not essential to know how long they last. They can be dissolved once the objective is met. This is a win-win situation for the partners. Contracts can be extended if there are fruitful results or dissolved after the objectives are completed.

Q. You have been aggressively acquiring component companies. What are your plans on this front?

A: We want to be the largest and most diversified automotive component manufacturer with major portfolio of the products being exported. M&M hopes to have overseas revenues of $ 1 billion by 2010. We will be targeting forgings and castings segments. M&M is planning to achieve this largely through inorganic growth.

Q. Are you looking at setting up tractor manufacturing facilities to cater to US and European market?

A: In the United States, we have franchisee assembly in three locations and a post-fitment unit in Australia. Our strategy is to go high potential areas like China. M&M is also looking aggressively at China.

Q. Are you looking at the option of hiving off the tractor business into a separate company?

A: M&M is an engine that is adding a cylinder by entering various automobile segments. This gives us the advantage in terms of R&D, logistics, finance and component manufacturing.

Q. There have been reports about your entering the motorcycle business?A: We are always looking at options. This is pure speculation. I am not commenting on it.

News: Dell to hike India investments

(DNA 17/11/2006) New Delhi - In line with its goal of reaching out to customers around the world with affordable technology, US-based computer maker Dell on Friday inaugurated its fourth customer contact centre in the country. Starting with 800 people, the 300,000 square-foot customer experience centre in Gurgaon is expected to employ about 1,000 by the end of this year.

“We are investing an incremental $150 million this fiscal year for various initiatives that enhance our customer experience,” said Dick Hunter, Dell vice-president, customer experience and customer support. “In Gurgaon, we are piloting innovative support strategies that we hope to replicate around the world. We are also investing in the capabilities of our support professionals through industry-leading training and certification programs,” he added.

Dayanidhi Maran, minister for communications and information technology, informed that Dell, which currently employs nearly 13,000 people in the country, will raise th