News: FIIs pump $881 m into the Indian debt mkt in ‘06

(BL 31/12/2006) Mumbai - The year 2006 witnessed a jump in FII investments in the debt market. According to the SEBI figures, Foreign Institutional Investors (FIIs) pumped $881.30 million into the debt market in 2006 compared with an outflow of $1.242 billion in 2005.

The widening of the US-India interest rate differential in 2006 sparked FII interest in the debt market. While the US interest rates remained stable during the calendar year, returns on Indian bonds grew.

Treasury Bills

"Bond yields were attractive this year and most FIIs were investing in one-year treasury bills where the returns were good. Besides, the rupee was stable and FIIs were making investments on an unhedged basis as well," said G. Narayanan, Managing Director, Securities Trading Corporation of India.

When FIIs invest in the debt market, they hedge themselves in the forwards market. With premia in the forwards markets staying low for most of the year, a number of FIIs were not hedging themselves. "The interest rate on one-year treasury bills and one-year corporate bonds edged up and prompted FII buying. Since the rupee was bullish against the dollar, the arbitrage was higher," said a senior treasury official at a foreign bank.

Corporate Bonds

The interest rate on one-year treasury bills increased from 6.25 per cent early in the year to 7.25 per cent (as per the last auction cut-off). The interest rate on one-year corporate bonds went up from 8 per cent to 9.50 per cent.

FII inflows picked up from April this year, while November and December saw the maximum inflows at $176 million and $198.20 million, respectively.

This followed RBI's October credit policy, which said the existing FII limit of $2 billion on investment in Government securities would be enhanced to $2.6 billion by December 31, 2006, and to $3.2 billion by March 31, 2007.

News: Real estate to gain momentum in '07

(PTI 31/12/2006) New Delhi - The booming real estate market will gain momentum and is likely to attract foreign investment worth Rs 8,000 crore in 2007, an Assocham study has said.

"The real estate boom of 2006 is set to multiply itself in 2007 to get India a foreign capital of over Rs 8,000 crore with leading international investors establishing their presence in the rewarding real estate development," the industry body said in a statement.

The sector would provide employment opportunities to over two lakh skilled and unskilled workforce, it said. The chamber attributed factors such as strong economic growth, rising income levels, growing middle class, increasing urbanization and improving transparency for the resurgence in the real estate sector in 2006.

Assocham feels the sector would continue to grow further in 2007 with easy availability of financing. It forecasts that realty sector would grow from 12 billion dollar in 2005 to 90 billion dollar by 2015.

"Greater integration with the global economy and the increase of domestic as well as foreign investments are encouraging demand for real estate. Despite ill found doubts of a bubble, foreign investors are lining up," it said.

In a bid to encash the booming Indian property market, global players such as Royal Indian Raj International, Blackstone, Goldman Sachs, Emmar Properties, Pegasus Realty, Citigroup Property, Lee Kim Tah Holdings, Salim group, Morgan Stanley and GE Commercial Finance are expected to bring substantial foreign capital into India.

"With stock markets being highly volatile, investment in real estate has begun to look attractive and competitive with typical yields being 20-25 per cent per annum," Assocham President Anil Agarwal said, adding the sector would offer a good investment alternative to stocks in coming years.

Giving details about the foreign capital that is expected to come in realty sector, Assocham said US-based investment bank Morgan Stanley has invested Rs 300 crore in the Bangalore-based Mantri Developers and plans to invest more than one billion dollar over the next 5 years.

Tishman Speyer's tied up with ICICI Bank to invest one billion dollar, while Kotak India Real Estate Fund closed its domestic tranche raising 100 million dollar, the release said.

The biggest US pension fund CalPERS, hedge fund Farallon Capital Management, US-based developer Tishman Speyer and NRI fund Trikona Capital too have drawn plans to invest in the country, the release said. High net worth individuals, financial institutions and domestic funds are also very active, it said.

Around 25 million Non Resident Indians (NRIs) were investing in immovable property in India, but unlike HNIs and financial institutions they were keen to invest in housing segment rather than commercial projects.

HDFC introduced sector specific mutual funds, Parasvnath Developers came up with Initial Public Offer and real estate giant DLF too announced that it would float an IPO. Global biggies such as Morgan Stanley, Lehman Brothers, HSBC and ABN Amro queued up to pick up stake in local realty firms, it added.

News: SEBI planning exchange for SMEs

(PTI 31/12/2006) Kolkata - Securities and Exchange Board of India (SEBI) is planning an exclusive trading platform for the small and medium companies and has already formed an internal committee to implement it.

"We are planning to form a separate trading platform for the SMEs. We have already formed a small in-house committee to study and prepare roadmap for the same," SEBI chairman M Damodaran told media during his recent visit to the city.

The new trading platform for the small and medium companies was under strong consideration by the market regulator as the advantages offered by it will help formulation of a more efficient regulation, SEBI sources said.

Moreover, it will also help SMEs to shop in the overseas markets like Luxembourg and London's AIM market to raise their resources. Merchant banking circle believe that SEBI will offer some relaxations in terms and disclosures to SMEs planning to hit the market in comparison to stringent regulations for stocks listed on the NSE and BSE.

"Unless, SEBI offers some advantages for smaller companies for listing on the new platform, it does not make sense," a merchant banker said. "Already, OTC exchange has failed and the BSE Indonext platform also failed to achieve desired result," he added.

In response to failure of OTC, Damodaran said the time was not correct for such market and now India is matured for such a concept. The BSE Indonext was introduced in association with Federation of Indian Stock Exchanges (FISE) and was launched by the Union Finance Minister P Chidambarm early last year.

FISE is a body of 20 regional bourses. But, Indonext could not be launched in all the bourses. BSE officials did not comment on the performance of Indonext after a year of launch when contacted. After two failed ventures for SMEs, it is to be seen how far SEBI succeeds in creating a new one.

Meanwhile, SEBI had said they were planning to bring other massive changes in the capital market like introduction of IDR, debt market and dedicated fund for investor protection. IDRs will allow a foreign company operating in India to tap the Indian capital market.

News: FDI in Indian education sector likely

(PTI 31/12/2006) New Delhi - Industry chamber CII has asked the government to liberalise the education sector and allow Foreign Direct Investment to create a skilled manpower pool for meeting the requirements of the rapidly growing economy.

"Excessive regulation in the education system has led to rigid and non-flexible course curriculum, which in turn hampers development of skill sets. In the light of this, there is need for opening up of FDI in the education system to encourage more institutes," the industry chamber said.

CII's demand comes even as the Commerce and HRD ministries are at loggerheads over the issue of allowing foreign universities to set up campuses in the country. While the Commerce Ministry favours such a proposal, the HRD ministry has been opposing the move.

"The demand for skill sets is rising at a faster pace and the current education system is unable to support it, leading to a huge gap in skill sets necessary to sustain the current levels of growth in services sector," CII said in a statement.

It is estimated that by 2020, India would have 325 million people in the age group of 20-35 years, constituting 25 per cent of its population. Although India would have surplus manpower of 47 million by 2020, the challenge was to create a large pool of skilled workforce, the chamber said.

The global manpower shortage of 39 million translates into a huge opportunity for India. In fact, the country has the capacity to create up to 36 million new direct jobs and many more indirect jobs, the chamber said.

CII said though such numbers spelled global opportunity, an important issue that needed immediate attention was employability of the potential workforce. Given the pace of economic growth, especially in the services sector, the IT and the BPO sectors are experiencing shortages.

"The shortages tend to fuel attrition rates, salary hikes and companies are forced to resort to unethical practices of poaching manpower. Such a trend can erode the country's competitiveness in the global market," CII said.

India has one of the largest numbers of universities (311) and colleges (16,000). However, just about three million are graduating each year out of 120 million young people in the age group of 17-22 years.

Higher education is again accessible to just 1 per cent of the graduates. On the other hand about 14 per cent of the total students in the US are from India. "This indicates the huge supply constraint for quality education in the country," the chamber said.

News: It's destination Beijing for Indian granites

(BL 30/12/2006) Chennai - Indian athletes may or may not bring a medal from the Beijing 2008 Olympics games. However, India's granite industry has already made its mark by contributing significantly to the huge constructions for the games.

Indian granite varieties such as pure black, tan brown, white galaxy, blue from Visakhapatnam and grey from Karnataka and Andhra Pradesh were used extensively in construction, according to industry sources.

China also imports granite from Brazil and countries in Africa. The export momentum from India would continue till next year, sources said.

For instance in 2005, China imported 23.89 lakh tonne of marble block valued at around $380 million (Rs 1,700 crore) and 20.46 lakh tonnes of granite block worth around $400 million (Rs 1,800 crore) and India's share was over 10 per cent in terms of volume and worth more than Rs 600 crore. The numbers for this year and next year would be much more, source said.

China usually imports dimensional block granite stones from India, does value addition and sends finished products to various other countries. However, since 2003 China's requirement of granite was mainly for construction at Beijing, according to industry sources.

The city of Beijing is investing around $23 billion in preparation for the Olympic games. Much of this amount is spent on construction projects. The Chinese Government is investing in renovation and construction of 36 gymnasiums and stadiums and 59 training centres. Over 3,00,000 houses have been demolished and residents relocated thus far in Beijing due to construction in preparation for the 2008 Olympics. The "Olympic Green" containing 13 venues will be the centre for the 2008 Olympics. In addition to the National Stadium, National Indoor Stadium and National Swimming Centre, the venues include the Main Press Centre, the International Broadcasting Centre and Olympic Village. Total investment in the Olympic Village itself is expected to be $480 million, according to information available on the Web.

According to sources, China itself has a number of quarries. However, it still depends on India for colours such as pure black, grey and white varieties.

News: Will it be a Landmark-Tesco tango in India?

(BL 30/12/2006) Bangalore - Now that the Landmark-Carrefour knot has been severed, the Indian retail jigsaw puzzle is being fitted all over again.

The $600-million Dubai-based retail chain, which operates 400 stores across West Asia and India, is believed to be considering a joint venture with the £40-billion, UK-based retail chain, Tesco plc for its hypermarket foray.

Sources close to the group said that the Landmark Group is considering 2-3 global partners and Tesco figures prominently among them.

Responding to this, Micky Jagtiani, CEO, Landmark Group, said, "We did have one introductory meeting with Tesco long time back but at this stage there is nothing to announce in this regard." He also said that "these are very early days and a formal announcement on the partner will be made once something crystallises. I would like to reiterate that these are only initial stages of exploring possible tie-ups."

Commenting on the `failed' Carrefour talks, Jagitiani in an e-mail interview told Business Line, "In mid-December, there had been some reports in the Indian press that the group's talks with Carrefour had fallen through which we had not been informed."

Meanwhile, Landmark Group has chalked out aggressive plans for a foray into the hypermarket segment in the country. Max Hyper is scheduled to launch its first store in India soon and we have been looking at potential partners for this retailing project, Jagitiani said.

Landmark currently has 12 Lifestyle, six Max and two Home Centre stores in India. With a considerable brand presence in India, would Landmark still want to look at a partner for retail expansion in the country?

"As of now, Landmark Group does not have the best of technology in food retailing. It would therefore be good to partner someone in this field," Jagtiani said.

News: Tatas to miss global growth goal

(DNA 30/12/2006) Mumbai - With Corus still hanging fire, Tata Group's internationalization in 2006 falls well short of its acquisition binge of 2005. Under the circumstances, it will be a tough act for the Tatas to maintain the targeted 35% growth in revenues from international business. Unless of course, revenues from global acquisitions of 2005 can be ramped up substantially.

But in terms of size of a single acquisition, the $677 million it spent to pick up 30% stake in Glaceau, this calendar, is the biggest-ever by the group, an indication of the Tatas' increasing aggression in the global M&A playfield.

In the acquisition party of 2005, the Tata Group picked up 11 companies across the globe, spending some $7.75 billion. This spend, however, does not include Taco's buyout of Wundsch Weidinger, Germany and Tata Tea's Good Earth which were for undisclosed amounts.

Compared with this, 2006 has been sedate for the group during which it bought out seven companies, spending $1.08 billion. This is excluding Tata Interactive's acquisition of Tertia EduSoft of Switzerland and Tata Tea's buys of Jemca of Czechoslovakia and Joekels of South Africa for undisclosed sums.

Needless to point out, had Corus happened for the Tatas, for anything between $9-10 billion, the Tatas' global party of 2006 would have been bigger than it had been the year earlier.

In 2005-06, the Tatas were well on course with revenues from international businesses growing 36% to $6.3 billion from $4.6 billion on total group revenues which was up to $ 22 billion from $18 billion in 2004-05.

According to Alan Rosling, executive director, Tata Sons, while no targets for revenues from international business has been set for the group since such can be "overpowering", contributions to international revenues from global businesses like auto, steel and information technology will fall in percentage terms as recent global acquisitions in hotels, chemicals and tea start to chip in more and more to the kitty.

Aggregate spends on global acquisition spree may have sobered but in terms of ticket size of single buyout, 2006 has been seminal for the Tatas, indicative of the group's growing appetite for things bigger. In the $7.75 billion put up for globalisation in 2005, the biggest ticket was $239 million buyout of Teleglobe International Holdings by VSNL.

Compared with this, of total $1.08 billion acquisition in 2006, the biggest has been Glaceau by Tata Tea and Tata Sons for $677 million.

Hence, the $9.2 billion bid for Corus is well in tune with the "bigger is better" corporate growth mantra of Tata Sons. Insiders in the group said that Corus or no Corus, the Tatas are not about to move away from its newfound aggression in the global arena.

News: The year of bull - Sensex gains 47% in 2006

(RTR 29/12/2006) Mumbai - Shares slipped 0.4 per cent on the day on Friday but still ended the year up nearly 47 per cent, clocking their fifth straight year of gains on strong institutional inflows and robust economic growth.

Notable blue-chip winners in 2006 included cement maker ACC Ltd. and diversified Grasim Industries which rose more than 100 per cent, while top private firm Reliance Industries Ltd. gained nearly 89 per cent over the year.

Fund managers and analysts expect the benchmark index to rise further in 2007, with expected returns of 5-15 per cent as corporate earnings growth continues.

"The call would remain bullish, but the expectations of returns should be toned down a bit," said Sandeepa Vig Arora, vice-president at brokerage firm Indiainfoline Ltd.

Foreign funds, which have played a crucial role in powering the market to record highs, bought nearly $7.9 billion worth of Indian equities in the year, following inflows of $10.7 billion in 2005.

"Money would chase earnings growth and will largely be in capital goods, IT and consumer goods," Ved Prakash Chaturvedi, managing director at Tata Mutual Fund said.

Concerns of rich valuations and tightening monetary policy to curb inflation pressures have led to short-term corrections and analysts said the benchmark BSE index lost steam as it neared its latest record of 14,035.30 points set on Dec. 6.

The 30-share index closed 59.43 points lower on the day at 13,786.91 points on Friday, while the 50-issue S&P CNX Nifty lost 0.1 per cent to end at 3,966.40.

The market is closed on Monday for a national holiday.

Only nine blue-chips ended the day in positive territory amid low volumes but in the broader market gainers edged ahead of losers on volume of 201.6 million shares.

"There was lack of buying interest in the large-caps ahead of a long weekend. But some mid-caps have done well," said Gajendra Nagpal, director at Delhi-based Unicorn Investments.

News: Aurobindo to buy Dutch formulations firm

(RTR 29/12/2006) Mumbai - Drug maker Aurobindo Pharma Ltd. is likely to announce on Friday the acquisition of a Dutch formulations firm for more than $20 million, the Daily News & Analysis newspaper said citing industry sources.

The target company had several market authorisations and would enable Aurobindo to expand faster in Europe, the paper said.

Aurobindo officials could not be immediately reached for comment.

"The board of directors has already approved the proposal and the deal will be announced on Friday subject to finalisation of the price," the paper quoted the sources as saying.

This would be Aurobindo's second acquisition in Europe after its February acquisition of UK-based generic drug maker Milpharm Ltd.

News: India set to attract $2b FDI in telecom

(PTI 29/12/2006) New Delhi - India could attract about $ 2 billion worth investment in telecom equipment manufacturing in the next two years. As of now, the total FDI in telecom manufacturing is about Rs 1,000 crore, which is expected to touch two billion dollars or Rs 9,000 crore over the next three years," Telecom Minister Dayanidhi Maran told PTI. Telecom equipment manufacturing revenue is also expected to double in the next one year from the current about Rs 17,000 crore to Rs 35,000 crore, Maran said. Global majors are exploring India for production of switches, gearbox, handsets and other wireless equipment. Rising demand for a wide range of telecom equipment, particularly in the area of mobile telecommunication, has provided excellent opportunities to domestic and foreign investors in the manufacturing sector, he said. India, adding up to six million wireless subscribers a month and having recently surpassed China, promises to be a market with huge demand potential, a fact global telecom majors could barely miss. Maran said a proposal for setting up Telecom Equipment and Services Export Promotion Council and Telecom Testing and Security Certification Centre (TETC) is also in the pipeline. A large number of companies like Alcatel and Cisco have also shown interest in setting up their R&D centers in India. With above initiatives, India is expected to be a manufacturing hub for the telecom equipment. Cisco recently announced that it would undertake a pilot of its IP phone manufacturing in India.

News: Videocon's acquisition of Daewoo hangs in balance

(BL 29/12/2006) New Delhi/London - The much touted $730 million acquisition of Daewoo Electronics by Videocon-led consortium could fizzle out if creditors to the ailing Korean company reject a price cut demand by the proposed buyers.

While Dhoot promoted Videocon, along with US-based equity firm Ripplewood, insisted on a price cut of up to 13 per cent after conducting due diligence of Daewoo, sources in the know said that the creditors' would take a call next week.

They, however, said that in case creditors did not agree to the price cut, the process for sale of the ailing company would have to start afresh.

Videocon officials were tight-lipped on the issue of price cut as also the resistance by the creditors led by Woori Bank, who are collectively running the company since the Daewoo conglomerate collapsed under $80 billion debt in 1999.

Meanwhile, Financial Times of London quoted Park Jun Tae of Woori Bank as saying that ''the deal could be nullified... we expect it will take one or two days to get the result as each of the creditors has to choose whether they agree or disagree with Vid eocon's proposal."

The British daily quoting Woori Bank said the planned $750 million sale of Daewoo electronics could be nullified next week if creditors reject a proposal by the Videocon led consortium to cut the price tag by 13 per cent.

Unless more than 75 per cent of the creditors agree to the proposal, the deal would be cancelled, FT said.

The buyers had earlier proposed to boost capital investment in Daewoo, while adding that they would conduct due diligence and might adjust the offered price.

News: Indian exports cross $100 b in Jan-Dec 2006

(PTI 28/12/2006) New Delhi - The government today said the country's merchandise exports grew 24 per cent in 2006 since January to $103 billion. At 24 per cent growth in 2005-06 and 27 per cent in 2004-05, exports are growing three times faster than GDP growth, an official release said. "We are going to hit 125 billion dollars in exports in the current financial year," Commerce Minister Kamal Nath was quoted as saying. Exports during April-November 2006 have already reached 80 billion dollars showing a record growth 39 per cent. According to Nath, employment generation in the export sector was being accorded the highest priority. In its annual supplement, the Foreign Trade Policy announced in April sought to achieve increased employment generation by identifying the labour intensive focus areas. These included fish and leather products, stationery items, fireworks, sports goods and toys, handloom and handicraft. These were covered under the Focus Product and Focus Market Scheme and enjoyed duty credit facility at 2.5 per cent of the FOB value of exports of specific products and notified countries, it said. Gems and jewellery sector was also given encouragement by facilitating easier product movement across the borders and allowing import of precious metal scrap for refining.

News: Doha Bank to sell ING's mutual funds to NRIs

(UNI 28/12/2006) Dubai - Qatar's leading bank, the Doha Bank, has signed an agreement with the asset management company of ING Mutual Fund for distribution of its mutual fund products to Indian expatriates in the country.

The agreement was signed yesterday in Doha by the bank's Deputy CEO R Seetharaman and ING Investment Management (India) Pvt Ltd CEO Kavita Hurry.

Under the agreement, Indians working in Qatar would have access to investment facilities in the various mutual fund schemes floated by ING Mutual, Seetharaman said.

It would also help meet the expatriates' varying investment objectives, both short term and long term, he added.

Hurry said ING Mutual Fund is one of the fastest growing funds this fiscal with an investor-base of over 1,50,000 across the country with presence in 34 locations in India. She said it is currently managing 21 schemes with the assets worth Rs 5,000 crore under management.

Doha Bank was adjudged as 'Best Bank in the Middle East' by Banker Middle East and 'Banker of the Year 2006 - Qatar' by Banker London.

News: Ranbaxy ties up with Dutch co for life insurance

(UNI 28/12/2006) New Delhi - Ranbaxy Promoter Group and Netherlands-based insurance and pension company Aegon today signed agreements to jointly enter the life insurance and asset management business in India.

The ventures will be implemented by Religare, the financial services division of Ranbaxy Promoter Group, and Aegon.

Ranbaxy Promoter Group will hold a 44 per cent stake in the life insurance venture, Aegon a 26 per cent stake and Bennett Coleman, an investor, will hold the balance.

The asset management venture has been structured on an equal ownership basis between Religare and Aegon.

''We are very happy to join hands with Aegon to establish business in the high growth areas of life insurance and asset management,'' said Malvinder Mohan Singh of the Ranbaxy Promoter Group.

The entry into the life insurance and asset management businesses is part of Religare's expansion plans in India and overseas.

''These ventures are part of the strategic initiatives of the group to consolidate its position and become a meaningful player in the financial sector covering a wide spectrum of activities,'' Singh said.

Alexander Wynaendts, member of the Executive Board of Aegon NV, said, ''India is an important market for Aegon given the significant growth potential for the products and services we provide.'' ''We are confident that with Religare as our partner, we can build on our respective capabilities to maximise the opportunities emerging across the country,'' he added.

Religare provides services in equity, commodity, portfolio management, investment banking, corporate finance, mutual fund distribution, insurance broking and personal credit.

Religare group provides services through its network of more than 272 branches and 580 partner locations, covering more than 300 towns and cities across the country.

Aegon, with headquarters in The Hague, employs about 27,000 people. The company's three major markets are the United States, Netherlands and United Kingdom. In addition, the group is present in a number of other countries including Canada, China, Czech Republic, Hungary, Poland, Slovakia, Spain and Taiwan.

News: Real estate cos raise more money overseas

(TNN 27/12/2006) Mumbai - The Indian real estate sector was able to raise more equity money overseas than in the domestic market in 2006 - over $2 billion. As per a release from the Alternative Investment Market (AIM) of the London Stock Exchange, 11 companies with operations in India have been listed so far on the AIM. The total amount raised by them was $1.25 billion.

However, not everything is gung-ho - most of the India-based companies listed on the AIM are trading below their issue prices. The last traded price of Hirco Plc was 428 pence, while the issue price was 500 pence. Similarly, Unitech is also down to 93 pence against an issue price of 100 pence. Shares of Ishaan Real Estate closed at 100.50 pence, periliously close to its issue price of 100 pence. Many other India-based entities are also trading at discounts to their issue prices. An exception to the trend has been West Pioneer, which was last traded at 101 pence, compared with its issue price of 81.5 pence.

AIM doesn’t have the same momentum as Indian stock exchanges, says a source in the investment banking community. As a result, the kind of listing gains seen in India are unheard of in more mature markets. Secondly, some of the funds like Eredene and Saffron, which had tapped the AIM earlier this year, are similar to mutual funds. After taking into account the entry load and the listing costs, the net asset value is marginally below the issue price. Eredene and Saffron had raised capital for investing in real estate projects in India. The recent listings like Ishaan, Unitech and Hirco have specifically identified projects for which the capital is being raised. If the company chooses not to invest in these projects for some reason, the capital will be available for investment elsewhere.

As of now, most of the Indian companies are trading at a discount to their issue prices. However, it seems unlikely that the popularity of AIM is going to go down in the near future. Firstly, there is a tremendous demand for exposure to Indian real estate - as seen from the response to recent public issues of Parsvnath and Sobha Developers.

Hirco had raised $753 million on the AIM - making it the largest real estate issue in India in 2006. Unitech Corporate Parks was the second largest at $725 million. Compared to these, the two recent real estate IPOs on the Indian market - Parsvnath and Sobha - added up to a little less than Rs 1,600 crore, about $350 million. Within this amount too, significant portions were reserved for retail investors and HNIs. As a result, little was left for the institutions. In comparison, a vast majority, if not all, of the investors on the AIM are institutional.

Another factor in favour of AIM is the depth it offers. Two issues were able to raise a total of $1.5 billion very close to each other. In contrast, a recent large issue - Cairn India - faced problems in getting fully subscribed.

Real estate is one of the big sectors for AIM - it accounts for a little over 7% of the total market-cap of AIM.

News: India Inc hails introduction of LLP Bill

(BS 27/12/2006) New Delhi - The government’s move to introduce the Limited Liability Partnership (LLP) Bill in the recently concluded Parliament session has been welcomed by various corporates of the country who feel that the Bill, if converted into an Act, would organise the entrepreneurial initiative and allow for the evolution of new multi-disciplinary practice to offer a consolidated product or service.

Also, it would prepare the Indian professionals to compete with the highly growing sophisticated professional industry of the West which is already eyeing the sub-continent.

The Company Affairs Ministry has said that the need to have the new law has long been recognised for businesses which may require a framework to provide flexibility, suited to the requirements of the services.

Pallavi Shroff, senior partner of Amarchand and Mangaldas firm, upholds this viewpoint. “The new law shall, without imposing a detailed legal and procedural requirements intended for large widely held companies, will be an alternative corporate business vehicle offering benefits of limited liability besides giving its members a free hand to organise their internal structure as partnership based on agreement.’’

Shroff added that it was a very welcome legislation for professional services. In the present scenario, people enter into partnerships under the Indian Partnership At, 1932. However, there are restrictions as more than 20 partnerships would mean incorporating the firm into a company.

To avoid this, people adapt different means and ways to evade the limitation in the present law. Amit Kapoor, head of the infrastructure practice of J Sagar and Associates also feels that people seldom enter into a partnership as there is always a risk of being held responsible for the acts of the other partner.

“LLP would mean protection from any litigation. If a person has certain financial interest in a particular partnership, the same remains intact in case the other partner gets sued,’’ said Kapoor.

According to him the law will change the paradigm. Professionals will be encouraged to come together and LLP will start the practice of convergence.

“Today one does want to rely on somebody’s competence but is deterred with regard to the liability. This stalls different professionals to enter into partnership,’’ he added.

LLP is also aimed at building the small scale industry. As per the survey of Ministry of Small Scale industry more than 90 per cent of small scale industry are individual proprietorships while only 2 per cent constitute partnership.

Advocate Suman Batra of Kesar Dass states LLP shall promote the service sector to become more organised and have a legal form. This, he claims, would entitle the small scale industry to have access to financial loans from financial institutions.

“In absence of a structured form of business, banks and financial institutions hesitate in sanctioning loans to a small scale industry as it is difficult to recover loan from an individual. Since LLP will promote more legalised firms in the country, there will be no hesitation in giving loans to an LLP.

In case of a default, the LLP can be would up just like a company under the Companies Act. Even in that case, the interests of partners remains protected,’’ adds Batra.

He further states that for professionals it will be a huge leap forward if LLP is made an Act. ``Even a law firm or an chartered accountant firm will be, under the LLP, able to raise capital by taking loans,’’ says Batra.

He cites an example from the West of how law firms internationally are more organised. ``Before taking up a case, law firms abroad sign an engagement document with the client informing the latter about the liability of each partners in the company. This enables a more professional approach towards work,’’ he adds.

News: 'FDI inflows to grow by 100% this fiscal'

(BS 27/12/2006) New Delhi - The foreign direct investment (FDI) inflows into the country this fiscal are set to grow by around 100 per cent, crossing the $11 billion mark, as compared to $5.5 billion in 2005-06.

Giving an overview of the performance of the department of industrial policy & promotion (DIPP) during the current fiscal, Commerce and Industry minister Kamal Nath said, “Once the reinvested earnings of foreign companies, already present in India, are also taken into account in the inflows, which is a world-wide practice, the total FDI inflows in the fiscal 2006-07 could be as high as $14 billion, compared to $7.7 billion last year”.

He added that the country is well on its way of reaching the export target of $120 billion set for this fiscal. “Growth in exports is needed to achieve a target of 10 per cent GDP growth,” the minister said.

According to Nath, the software industry, the financial services segment and the manufacturing sector have seen huge investments.

“Investments in the manufacturing sector are first-mile investments and are likely to be followed up by further funding for completion of the projects and also for their further expansions,” he added.

He also pointed out that compared to last year, the manufacturing sector had grown by 11.2 per cent in the April to October period and this rate was likely to be sustained.

“The targeted rate of growth of 12 per cent in the sector during the 11th Plan was likely to be achieved in the terminal year of the 10th Plan itself,” the minister said.

According to Nath, the manufacturing sector played a major role in achieving the 10 per cent growth rate of industrial production during the April to October period this fiscal.

“The contribution of manufactured products to exports is growing with a share of about 84 per cent in total merchandise exports during the year 2005-06. These have recorded a growth rate of 22.6 per cent in 2003-04, 29.7 per cent in 2004-05 and 23.4 per cent in 2005-06,” he said.

To boost industrial and export growth, the government is in the process of setting up a 1450 km-long industrial sector along the Delhi-Mumbai freight corridor. It would cross five states (Uttar Pradesh, Haryana, Rajasthan, Gujarat and Maharashtra) and attract investments from Japan.

The infrastructure in this sector would include roads, connectivity to ports, development and expansion of ports, power projects, industrial estates and special economic zones.

“A task force comprising certain central government ministries and state departments is being constituted to work out the details of this industrial corridor,” he said.

Nath also informed that in the last 12 months, over 25,000 patent applications were filed and 1,80,000 trademarks registered. According to him, India has initiated a proposal to make disclosure of the origin of genetic resources mandatory at the World Intellectual Property Organisation meetings.

The country had moved an amendment to the TRIPs agreement so as to make such disclosures mandatory in order to prevent bio-piracy and preserve traditional knowledge, he said.

The government was looking at revising the policy for agriculture export zones to boost agriculture exports, Nath said at the Federation of Indian Export Organisations (FIEO) award ceremony on Tuesday.

“Discussions are on to make AEZ policy changes to promote agriculture exports. The motive is to make the Indian farmer a part and parcel of the global agriculture trade,” Nath said.

News: India, Russia to hold unprecedented business summit in Feb

(PTI 27/12/2006) Moscow - India and Russia are planning to hold an unprecedented business summit in February next year to explore ways to boost bilateral trade to USD 10 billion in coming three years, Indian ambassador Kanwal Sibal said.

During the course of the summit, over 300 top business persons are expected to visit New Delhi in February 2007, shortly after President Vladimir Putin's state visit, to give a new fillip to bilateral economic interaction.

According to Sibal, India and Russia have set the target of increasing trade to USD 10 billion by 2010 from the current level of USD 3 billion.

Sibal expressed confidence that the Indo-Russian economic forum in New Delhi would help in achieving this goal.

Sibal told reporters that India was interested in developing energy partnership with Russia and the Indian entities are ready for joint ventures with Russian oil and gas majors like Rosneft and Gazprom for joint processing of hydrocarbons in Russia, especially in Siberia and Eastern part geographically closer to India.

ONGC Videsh Limited (OVL), the foreign operations arm of Oil and Natural Gas Corporation (ONGC), already has 20 per cent stake in the Sakhalin-1 offshore block in Russia's Far East under the production sharing arrangement.

News: Exports cross 100 billion dollars in Jan-Dec 2006

(PTI 27/12/2006) New Delhi - The government on Wednesday said the country's merchandise exports grew 24 per cent in 2006 since January to $103 billion.

At 24 per cent growth in 2005-06 and 27 per cent in 2004-05, exports are growing three times faster than GDP growth, an official release said.

"We are going to hit $125 billion in exports in the current financial year," Commerce Minister Kamal Nath was quoted as saying.

Exports during April-November 2006 have already reached 80 billion dollars showing a record growth 39 per cent.

According to Nath, employment generation in the export sector was being accorded the highest priority. In its annual supplement, the Foreign Trade Policy announced in April sought to achieve increased employment generation by identifying the labour intensive focus areas.

These included fish and leather products, stationery items, fireworks, sports goods and toys, handloom and handicraft. These were covered under the Focus Product and Focus Market Scheme and enjoyed duty credit facility at 2.5 per cent of the FOB value of exports of specific products and notified countries, it said.

Gems and jewellery sector was also given encouragement by facilitating easier product movement across the borders and allowing import of precious metal scrap for refining.

News: Daewoo creditors snub Videocon

(TT 27/12/2006) Mumbai - Videocon Industries’ plan to acquire Daewoo Electronics appears to have run into trouble.

Creditors of the South Korean company have apparently rejected a proposal submitted by the consortium led by the Dhoots to pare the original price for the buyout.

In September, Videocon Industries was picked as the preferred bidder to take over Daewoo Electronics for a price of around $730 million.

Woori Bank, one of Daewoo's leading creditors, had named Videocon and RHJ International, the holding company of US buyout fund Ripplewood, as the primary bidder. Daewoo Electronics was a unit of the Daewoo Group, which collapsed in 1999 under debts that came to $80 billion.

Soon after, differences are believed to have cropped up between the consortium led by Videocon and Daewoo's creditors over price and other terms of the deal. The Videocon group wanted to bring down the purchase price by 13 to 20 per cent from its original bid, while some creditors were willing to limit the reduction only to 5 per cent.

Reports now coming from South Korea say that while creditors have stuck to their stand, they are not inclined to accept certain “conditions” stipulated by the Videocon consortium. The creditors are expected to meet this week to take a decision on the issue.

In the event that more than 75 per cent of Daewoo Electronics’ creditors do not agree to the Videocon price proposal, the selling process may be halted.

Videocon chairman Venugopal Dhoot was, however, not available for comment. When Videocon and its consortium was picked by Daewoo Electronics’ creditors, it was billed as the highest ever bid made by an Indian company to acquire an overseas company. It had then pipped Tata Tea’s buyout of American energy drink giant Glaceau for $677 million. It was expected that the acquisition would enable Videocon to consolidate its position further in overseas markets, apart from creating synergies among the two home-appliances makers.

The bid marked Videocon's third major global attempt in less than two years after it took over French firm Thomson SA and the Indian operations of Electrolux. The Thomson SA acquisition included its global colour picture-tube manufacturing business, including units in China, Poland, and Mexico and it followed Videocon's earlier agreement to buy its Italian tube factory. The combined capacity of the units was around 1.9 crore units of colour picture-tubes and 40 lakh pieces of colour picture-tube glass a year.

Under the terms of the deal with Electrolux entered in July last year, the Videocon group acquired the entire shareholding of AB Electrolux (ABE) in Electrolux Kelvinator Ltd (EKL). The acquisition gave Videocon a control of EKL’s three facilities in India.

Videocon was in the news again, earlier this month, when reports said it has also bid for Hong Kong-based LG Philips Displays (LGPD), a leading manufacturer of cathode ray tubes (CRT), which are used as picture tube in TV sets. The company is a joint venture between Dutch major Philips and South Korean LG Electronics and has operations in China, Indonesia, Korea and Brazil. Some of its facilities in other developed nations were earlier shut down. The bid came as Videocon wants to garner 50 per cent of the global CRT market and it also came as part of its strategy to acquire troubled assets at reasonable prices and later turn them around.

The $2.5-billion Videocon group operates through four sectors that include consumer durables, oil & gas, colour picture tube glass and CRT.

While the Thomson acquisition made it one of the largest colour picture tube manufacturers in the world, it is also one of the largest colour picture tube glass manufacturers globally.

In oil and gas, the group has its Ravva oil field which produces 50,000 barrels of oil per day. The group has plans to venture into overseas as well.

News: RIL malls to house boutique hotels

(DNA 27/12/2006) Ahmedabad - Reliance Retail will launch its first hypermarket in March in Ahmedabad. Though delayed, its hypermarkets, called Reliance Mart, will house boutique hotels. Of the company’s 1,500 hypermarkets, 30 will come up in Gujarat.

The first hypermarket, earlier scheduled for December at Iscon Mega Mall near SG Highway in the city, will now roll out in the first quarter of next year. Parimal Nathwani, group president, corporate affairs, Reliance Retail, said: “Our first hypermarket is scheduled to be launched in March on SG Highway.”

Sources added that Reliance Retail has purchased 2 lakh sq ft at Iskon Mall in Ahmedabad for Rs 9 crore. The company has paid Rs 7 crore as stamp duty, the highest paid by any construction firm in the state, sources added.

Iscon will also house Reliance Fresh. In Ahmedabad, Reliance will have three hypermarkets, the other two being at CG Road and at Shahibaug where it has bought the closed Tata Advance Mill.

The boutique hotels may come up in places like Moti Khawadi where Reliance has its grassroot refinery and one in Bhuj, sources said. Reliance officials declined to comment on this issue. “The refinery in Moti Khawadi is spread over 5 lakh sq ft and will house a hotel and multiplex. The company has roped in foreign architects for this project,” a realtor from Jamnagar said.

Besides, Reliance will open retail outlets in Jamnagar, Rajkot, Surat and Bhavnagar as well, sources said. Reliance has also leased 1.25 lakh sq ft at a shopping location in Greater Noida.

Reliance Retail is in the process of buying out Adani Retail for about Rs 110 crore, sources said.

Adani Retail has 54 stores across Gujarat; these include hypermarkets and supermarkets. “Our talks with Adani are progressing,” Nathwani said.

Reliance may change its retail plans by taking a more aggressive stand and by increasing its store format size, an official said on conditions of anonymity.

According to the findings of Trammel Crow Meghraj, there are currently 100 full-fledged malls and 300 malls, multiplexes and shopping centers are under construction. At the pace set this year, we stand to have close to 50 million sq ft of high-grade retail space by the end of 2007.

“The segment of India’s more affluent shoppers is 6 million strong and international retailer community has taken notice of this. This segment spends approximately $28.36 billion annually. India rates as the fifth most attractive emerging retail market in the world and represents a virtual goldmine. That is certainly strong incentive to adapt to India’s highly individualistic consumer mentality,” the study said.

News: 'Indian growth sustainable'

(PTI 27/12/2006) New Delhi - The Indian economy is not overheated and has the capacity to absorb eight to nine per cent growth for a long period, provided the supply side is managed well and domestic savings are encouraged, an Assocham survey has said.

According to the Assocham Business Barometer (ABB), 74 per cent of the 280 CEOs and CMDs surveyed from different segments of industry believed it would be far-fetched to conclude that the economy was stretched.

However, 69 per cent respondents said a continuous caution was required to maintain macro-economic stability so as to maintain pick-up in investment and growth on a sustained basis.

While inflation remained an area of concern for the government and the policy-makers, the root of the inflationary problem lies in the hardening of primary commodity prices.

The contribution of the primary articles with a weight of 22.03 per cent in the WPI basket was 28.8 per cent in the 34 weeks until November 18. Major contribution to inflation was made by cereals; pulses; potatoes, milk, condiments and spices and minerals, the chamber said.

Over 88 per cent of the respondents said in the short-term, the supply of the primary products could be augmented by measures like reduction in customs duty and improving production of these essential commodities by giving a boost to agriculture.

However, 21 per cent of the respondents did express fear of the economy getting overheated. They argued that besides the mounting problem of inflation, the mismatch between investments and savings could lead to the problem of overheating.

The Reserve Bank's measures to curb excess liquidity was a welcome move and it should not do anything that can stunt growth, 24 per cent of the respondents said.

Over 89 per cent of them said they saw interest rates further going up and this would have an adverse impact on the industrial growth. The RBI should strike a balance between the growth and inflationary expectations, they said.

News: India attracts record FDI in '06

(UNI 27/12/2006) New Delhi - India has attracted record foreign direct investment (FDI) inflows in 2006 with FDI equity inflows during 2006-07 expected to cross $11 billion , more than double the equity inflows of $5.5 billion last year, according to Commerce and Industry Union Minister Kamal Nath.

Giving an overview of performance of the Department of Industrial Policy and Promotion (DIPP) during the year, the minister said, "Once the reinvested earnings of foreign companies already present in India is also taken into account in FDI inflows, which is the world-wide practice, the total FDI inflows in 2006-07 could be as high as $14 billion, compared to $7.7 billion last year." In addition, the contribution of manufactured products to exports grew with a share of about 84 per cent in total merchandise exports during 2005-06. Manufacturing sector recorded a growth rate of 22.6 per cent in 2003-04, 29.7 per cent in 2004-05 and 23.4 per cent in 2005-06, the minister pointed out.

Industrial production grew by over 10 per cent during April-October 2006, a major highlight of this being the high level of growth recorded by the manufacturing sector.

"Between April and October 2006, the growth rate of manufacturing was 11.2 per cent over the corresponding period of the previous year and there are indications that this rate will be maintained and probably bettered and the targeted growth rate of 12 per cent in manufacturing in the Eleventh Plan is likely to be achieved in the Tenth Plan terminal year itself," he said.

Continuous liberalisation in FDI policy and simplification of procedures were contributing immensely to attracting increased FDI into India.

The fact that the government was now annually conducting a review of the FDI policy and procedures had given an added confidence to the foreign investors that their concerns were addressed on a continuous basis.

Also, India was now "the flavour of the year" for most foreign investors given the various policy and promotional measures being undertaken by the Prime Minister himself, both at home and in his tours abroad.

"There have been huge investments coming in the software industry, financial services and manufacturing. The manufacturing investments are the 'first mile investments' in as far as these are likely to be followed up by further investments to complete the projects and also for their further expansions," Nath said.

News: Hutch benchmarks the offer price at $14 b

(PTI 27/12/2006) Hong Kong - As top bosses of Vodafone and Essar arrived here to negotiate a deal for acquiring Hutchison Telecom's Indian business, its parent company has indicated it will not consider any offer below $14 billion.

While Ravi Ruia, Vice-Chairman of Essar, the Indian partner in the JV Hutch-Essar, is here along with his advisor JM Morgan Stanley and investment bankers, British telecom major Vodafone's CEO Arun Sarin too is in town for talks with Hutchison Telecom International Ltd, informed sources said.

Meanwhile, British newspaper 'Financial Times' reported that Hutchison Whampoa, the parent company of HTIL, will only entertain offers "well in excess of $14 billion ".

According to the report, Frank Sixt, Hutchison Whampoa's finance director, dismissed an indicative offer of $13.5 billion made this month by Texas Pacific Group, a private equity firm, and Maxis, a Malaysian mobile operator.

"That is not a valuation that would excite us... really there has not been anything that would rise to the level of being an offer capable of acceptance," Sixt told FT.

The daily had spoken to Sixt before HTIL announced last week it had been approached by various interested parties.

When contacted, an Hutchison Whampoa spokesperson declined to comment on the deal size but added that the quotes of Frank Sixt in Financial Times were correct.

An Essar spokesperson declined to comment, while Vodafone spokesperson could not be contacted.

Vodafone was the first player to make public its intention to buyout HTIL's 67 per cent stake in Hutch-Essar, in which Essar being the partner has the first right to refusal.

News: India may ease some retail investment rules

(RTR 27/12/2006) Mumbai - India may permit foreign investment in some non-food sectors in the tightly-controlled retail industry, newspapers said on Wednesday.

The department of industrial policy and promotion is preparing a note calling for further relaxation of foreign direct investment (FDI) norms, which is likely to be announced before the federal budget in February, the Economic Times said.

The department has listed sports goods, electronics and building equipment as sectors that may be opened up for FDI with a cap of 51 percent, the paper said.

"Since there are hardly any small manufacturers and retailers which will be affected in these areas, the government is likely to allow FDI at both the front-end and back-end," the paper said.

"The government is also considering (permitting) multi-brand retail in such areas."

The Business Standard said the government may also relax norms in stationery and furniture, quoting highly-placed sources.

Commerce Minister Kamal Nath, who told the paper such a move was being considered, said that he was opposed to easing FDI rules in a manner that would affect neighbourhood grocery stores.

"Even if the Left were to agree, my line would be that we cannot allow it," he said, referring to the government's communist allies, who have opposed the move to allow more foreign investment on grounds that it would lead to loss of jobs.

India now allows 51 percent FDI in single-brand retail and 100 percent FDI in wholesale and cash-and-carry operations.

Several luxury retail brands have set up shop in India, while multiple-brand retailers including Metro AG , Shoprite Holdings and Marks & Spencer Plc have opted for cash-and-carry and franchise routes.

India's Bharti Enterprises said last month it would form a joint venture with the world's top retailer, Wal-Mart Stores Inc.

News: Annik Tech to promote Netherland department's research business

(UNI 27/12/2006) New Delhi - Annik Technology Services Pvt Ltd, a software solutions provider to market research industry, today said it has been chosen by the Dutch Centre for Promotion of Imports from Developing Countries (CBI) to promote its research business process outsourcing arena. CBI is an agency of the Netherlands' Department of Foreign Affairs. Last year it commenced a programme to partner with companies in the BPO/ KPO sector. As a part of this programme, CBI will assist these companies in entering the European market. Annik has a three-year agreement with CBI on promoting and developing the outsourcing of market research functions from organisations in the EU. CBI has already sponsored Annik at EXPRO 59, the outsourcing seminar held in November 2006, in Rotterdam. Future plans include, sponsorship at trade fairs in Europe, CMMI certification and CBI support in building relationships with new clients within the EU. ''While already fairly established in the US, we are looking to develop the European market for our services. This association with CBI gives us an opportunity to grow our footprint in the EU market," Annik Technology Services President and Cheif Executive Officer, Rahul Sahgal, said. With more than 390 people, Annik works with market research companies and end clients in the US, Europe, Australia and Japan. The company today also received ISO 27001 certification by BSI-Global, the highest standard on information security available from the International Standards Organisation (ISO). ''While the ISO 270001 certification enhances the robustness of our information security practices, it also serves a dual purpose of retaining customer confidence as they get assurances that the confidentiality of their information is secure in accordance with an internationally recognised standard,'' Sahgal said. The ISO 27001 outlines the rules for defining, establishing, implementing, operating, reviewing, monitoring and improving a documented ISMS within the context of an organisation's overall business risks.

News: Bharti to invest $7 b in retail

(RTR 27/12/2006) Mumbai - Bharti Enterprises plans to invest about $7 billion by 2010 to set up 200 hypermarkets and hundreds of small stores across the country, the Business Standard paper said on Wednesday.

The diversified group, which last month announced a joint venture with the world's top retailer, Wal-Mart Stores Inc. expects to earn $1 billion to $2 billion in revenue from its retail business, which would constitute 10-20 per cent of the group's turnover by 2010, the paper said.

"We should have 200 large stores and hundreds of small stores in the first phase," Chairman Sunil Mittal told the paper.

"Depending on what we do in real estate and logistics, we will invest around $7 billion by 2010. Our expectation is a topline of $1-$2 billion from retail by the same period."

The group planned to enlist small retailers as franchisees and also decide whether the venture would undertake logistics or outsource functions such as trucking and cold chains.

At the time of announcing the venture, Mittal told Reuters it would operate several hundred stores across the country within five years and investment could run into billions of dollars.

The equal joint venture will operate in areas where the Indian government allows foreign investment in retail, like cash-and-carry and logistics, he said at the time.

India's 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.

News: Mahindra-Renault`s Logan on streets in Feb

(BS 26/12/2006) Mumbai/Nashik - Mahindra-Renault, a 51:49 joint venture between the automobile group Mahindra & Mahindra (M&M) and French car-maker Renault, would launch the mid-sized sedan car Logan for the domestic market by the second week of February 2007. Its Logan car plant at Nashik will start commercial operations in the first week of January 2007.

Mahindra-Renault has set up its Logan car plant adjacent to M&M’s state-of-the-art manufacturing facility at Nashik. The total investment in the project is around Rs 600 crore. The company has done the final testing of vehicles for making drive vehicles.

It has already started making 3 to 5 vehicles daily and almost 200 vehicles have been made so far, company sources said.

Initially, it will manufacture 90 vehicles daily and then increase the number of vehicles gradually. The company has set the target of manufacturing 50,000 units of right hand drive (RHD) entry-level C segment car- “Logan’ in the first year. The Logan will share stamping division and paint shop of M&M’s Scorpio plant.

About almost half of the partsomponents of the Logan car will come from Europe, while it will source the rest (50 per cent) from 35 vendors across India, including 10 vendors from Nashik. Lear Corporation, JBM Auto, Sharda Motors and Reliable Group are among the major vendors of Mahindra-Renault.

Currently, M&M is manufacturing Scorpio and Bolero utility vehicles at its Nashik facility with manufacturing capacity of 330 units per day. M&M has also said that it would make the Ingenio vehicle in Nashik from 2008 and the work for that has also begun.

The company is building a new body shop (for Ingenio) adjacent to its existing facility at Nashik.

News: How Indian firms finance their overseas M&As

(BS 26/12/2006) Mumbai - Most people would not think of United Phosphorus when discussing mergers and acquisitions.

Yet, this Punjab-based exporter of agrochemicals has emerged as a star player, buying up no fewer than six companies overseas in 2006, and spending Rs 1,100 crore in the process — about 10 times its post-tax profit.

Among the companies United Phosphorus bought during the year was the Dutch seeds firm Advanta Netherlands — and the case is typical of how relatively small Indian companies are buying up much bigger overseas businesses.

Having acquired Advanta in February for ¤100 million, United Phosphorus has gone on to float a public offer of Advanta shares; the money raised will be used to clear the debt taken for the acquisition.

The United Phosphorus case is not unique. For India Inc went on an unprecedented shopping spree this year, sealing 145 mergers and acquisitions worth $7.8 billion till October, compared with 136 deals amounting to $4.3 billion in all of 2005, according to Grant Thornton.

The takeover deals point to the soaring ambition of Indian companies as they covet entities bigger than themselves and pay amounts that dwarf their annual turnover numbers. Consider the following:

The Hyderabad-based pharma company, Dr Reddy’s Laboratories (2005-06 turnover: Rs 2,100 crore), paid Rs 2,600 crore for the German generics company Betapharm. Subex Systems (2005-06 turnover: Rs 184 crore) bought Azure Solutions of the UK for Rs 630 crore. Aban Offshore (2005-06 turnover: Rs 500 crore) bought 34 per cent in Norwegian drilling company Sinvest ASA for over Rs 2,000 crore. Tata Steel is locked in a battle to acquire Anglo-Dutch steelmaker Corus, four times its size, and Reliance Communications is ready to shell out $15 billion for Hutchison Essar.

If those last two deals materialise in January, overseas acquisitions in a little over 12 months will have equalled the combined net profits of the 1,000 largest companies in the country last year.

Says Neeraj Swaroop, CEO in India for Standard Chartered Bank, which was involved in over $3 billion of acquisition financing for Indian companies during the year: “With financing options getting more innovative, we expect the number of cross-border deals and their average deal size to increase significantly in 2007. Bids like the Tatas’ for Corus will only fuel the ambitions of Indian promoters.”

It has helped that most of the target companies have been closely held, and that most of the sellers have been private equity players. Says Jai R Shroff, executive director of United Phosphorus: “Privately-held companies are easier to take over. There are fewer formalities and this saves time.”

The secret to how minnows can swallow whales is of course the leveraged buyout method of financing, which leverages the target company’s balance sheet to fund the acquisition.

“The acquirer’s equity dilution is often a very small component of the deal size,” said Ganeshan Murugaiyan, executive director, investment banking, UBS Securities India. The trend will last as long as the benign interest rate regime does, he added.

Two other elements address the risks inherent in such financing: One is the confidence of Indian companies that they can improve the performance of the acquired company — thus delivering the cash flow required to service the debt. The other is risk-mitigation through financing structures that cap the danger from interest rates climbing.

Facilitating the trend has been the progressive easing of foreign exchange restrictions by the Reserve Bank of India, which has made it possible for companies to take out the equity portion of deal finance, up to a specified proportion of their net worth.

The acquisition spree would gather momentum if Indian companies could trade their stocks while buying abroad. Till now, most acquisitions have been cash-based.

An important component has also been the growing confidence of global financiers in Indian companies, thanks to their sustained growth — 20-25 per cent annually — over the last four years. With rising profitability, the Indian corporate sector had cash flows of Rs 200,000 crore to show in 2005-06.

An emerging trend when it comes to financing is earn-out deals, where shareholders of the target company earn their payments as their company meets a fixed target in a stipulated time. The payment is made in tranches.

This financing method is getting popular with mid-sized software companies, and is usually adopted if the management team owns the company and continues to hold a stake after the change in majority shareholding.

Hexaware, KPTI Cummins and Geometric Software are some examples of this kind of financing.

But the scale of ambitions has been growing too. The average deal size for Indian M&A aspirants in 2005 was $32 million. By the first half of 2006, it was $47 million (Rs 210 crore), according to Grant Thorton.

“The appetite of corporate India is increasing, and so is its risk taking ability. Indian companies now are not just looking for assets overseas but also for brands,” said Swaroop.

Meanwhile, the refrain among deal-makers is: “A company needs to have a strong balance sheet and aspirations. To strike a deal is the banker's responsibility.”

News: Re-crafting the Indian economy

(BL 26/12/2006) New Delhi - India has a rich tradition of handicrafts, dating back to the Harappan period. Indian skills in metallurgy, pottery, bead making, inlay work, seal making, stone sculpture, fine jewellery and delicate carving on semi-precious stones, weaving fine cotton clothes drew a wry comment from Pliny, the Roman Chronicler of the 1st Century AD, that Indian handicraft was depleting the Roman treasury to the extent of 50 million sestertius every year. Economic Historian Angus Maddison in his book The World Economy: A Millennial Perspective, noted that India was the world's largest economy between 1st and 15th Century AD, with a 32.9 per cent share of world GDP in the 1st Century to 24.5 per cent in 1500 AD. It was down to a pitiable 3.8 per cent in 1952. The declining Indian trade is attributed to British government's domestic trade policy to replace Indian cottage industry creations with factory products. The British increased their share in global trade by marketing Indian handicraft, agriculture and handloom products in western and European markets. They deliberately did nothing to protect the Indian domestic industries. The rich Indian handicraft traditions received a body blow. Traditional handicraft Though many handicraft traditions disappeared due to long neglect during the British Raj, some survived due to the patronage of kings, wealthy craft lovers, and various socio-cultural practices. Kerala's Kathakali mask painting, Orissa's classical Patta Chitra and palmleaf carvings, Bengal's famous handloom traditions, Bihar's Madhubani paintings, Chikankari work of Lucknow and miniature moghul paintings have survived due to the dedicated efforts of a handful of senior artisans. But they always face a threat. Even today traders and middlemen compel artisans to sell their products at throwaway prices. These products are then sold in global craft bazars at high cost. In many States, artisans are forced to sell magnificent metal crafts on weight basis later to be sold piece by piece for huge profits. Though the scale of production has increased due to global demand, the benefit does not percolate to the majority of the artisans. Also such production processes curb the creativity of artists; they cannot give of their best if they are treated as factory workers. Classical handicrafts need high levels of concentration, creative skills and mental ability. Little wonder, that today, few artisans have the skill to reproduce the classic artistic lines, curves and shapes. National Award Winner Nasim Bano of Lucknow uses more than 65 kinds of stitches to create the intricate chikankari art on cloth. Such chikankari work survives among two-three artisans in UP. Skill, the USP of artists Similarly, the Oriya patta painter Binod Maharana, another National Award Winner of Bhubaneswar, can create figures that express human emotionswith amazing accuracy. A few artisans in Orissa can equal Binod's work. Such business jargons as product diversification, market dynamics and economy of scale will not help the handicraft tradition to survive. Actually the USP of the handicraft sector is the age-old skill. Handicraft skill is a national treasure, which no other nation can steal or copy. To keep the classical traditions alive it is essential to give a modest pension to genuine master craftsmen. Protecting handicraft Protecting traditional skills is a guarantee to a sustainable growth of handicrafts that have a market world-wide. The global market for handicrafts has been estimated at more than $235 billion. There is a huge market for Indian handicrafts. According to the All India Census of Handicraft, India has more than 48.2 lakh artisans whose creations can sell in global craft bazars. Though India's share in global handicraft export is less than 2 per cent, with available potential it can reach 4 per cent export target. But a sustainable export growth depends on the survival of genuine artistry among the artisan community.

News: YES Bank to raise $70 m thru private placement/QIP

(BL 25/12/2006) Mumbai - Private lender YES Bank plans to raise $70 million within the next three months and is in talks with a few investors for share placement.

"We will adopt either the qualified institutional placement (QIP) or private placement route for raising this capital," Rana Kapoor, Managing Director and CEO, YES Bank said here on Monday. This would be part of $150 million capital raising programme this fiscal.

The bank is already negotiating with a few investors, Kapoor said, adding the plan was to issue around 10-12.5 million shares to these investors. "We are trying to negotiate a higher-than-market price from these investors," he said.

Its aim is to rope-in marquee investors of the calibre of Swiss Re, which recently took a 3.57 per cent stake in the bank for Rs 120-crore ($26.5-million). The bank had issued one crore shares as a part of this transaction.

When asked whether there was a possibility of Swiss Re increasing its holding to five per cent, the maximum allowed under present banking regulations, Kapoor said: "It was up to them to decide. They are, anyway, free to buy our shares from the market. "

Rabobank presently holds 19.29 per cent stake in the bank, the highest foreign holding, followed by three private equity investors - CVC, ChrysCapital and AIF - who together hold around 18 per cent. Fidelity holds a further 4.5 per cent while HSBC and a US-based pension fund hold 2.45 per cent and 1.6 per cent stake respectively in the bank.

News: GM India may bring back Opel Marque in niche segment

(BL 25/12/2006) New Delhi - General Motors India is pondering over bringing back its Opel brand in the niche segment of the domestic market, months after it slammed brakes on local manufacturing of products of the Marque early this year. The company's thinking of re-launching the Opel brand in the Indian market comes in the wake of a possible revival of fortunes of German technology here with the entry of the likes of BMW and Volkswagen. "There is a possibility of re-introducing the Opel badge in the niche segment," a company source said. GM, which had shifted its focus to the Chevrolet brand after the global acquisition of erstwhile Daewoo, has found the latter's technology not only cost-efficient but much more suitable to the Indian market. "If and when the company brings back any Opel badge, it would definitely be not in the lower end of the market," the source added. Earlier this year, General Motors India had announced stopping of local production of the mid-sized sedan Corsa, the last of the Opel badge to be produced in India. GMI had struggled nearly a decade to make a cut in the Indian market with 'Astra', 'Corsa', 'Sail' and 'Vectra' from the Opel stable. However, Rajeev Chaba, President and Managing Director, General Motors India, insisted that the company has no plans to bring the Opel brand back in India right now, despite the company announcing an ambitious target of selling two lakh vehicles annua lly by 2010. "We are looking at the total sales coming from the Chevrolet brand only," Chaba said.

News: Indian economy has the potential for ‘red-hot’ growth

(DNA 24/12/2006) Hong Kong - When Credit Suisse’s chief Asia (ex-Japan) economist Dong Tao wrote his recent Asia Outlook report, he says he didn’t realise that projecting India’s GDP growth to be marginally ahead of China’s in 2007 - for the first time in over 20 years - would be a hot topic of media discussion.

“But in fact,” Tao said in Hong Kong on Thursday, “that bit of information has more press value than financial analysis value.” The fact of the matter, he emphasises, is that India and China are two totally different animals. And, besides, the fact that they are both large emerging economies in Asia, there aren’t many things you can compare.

“Therefore, I don’t want it to sound like India is going to beat China and become the world leader in economic growth,” caveats Tao. “In fact, both of them will do well in 2007, with very little to separate them.” And the reason China will record a marginally slower growth rate than India is that its government is holding back the economy, and is particularly trying to squeeze the bubble in the property market.

But having said that, the Credit Suisse Emerging Markets Quarterly report notes that India has the “potential for red-hot growth”.

“This is the first time in a long time that infrastructure investment in India will have a very big lift,” explains Tao. “Finally, the government has realised the significance of building railways, freeways and power stations.” Sure, India will face problems, but even if authorities can deliver 50-70% of their promises, “it will be a great job,” he reckons.

Additionally, what’s driving the India growth story is private consumption, which in turn is driven by wage growth. “India’s domestic demand story is one of the best news for 2007.” Equally important, says Tao, is that India is much less exposed to the vicissitudes of global economic growth. Even if the global economy slows down a tick, it will affect India much less than China, he adds. But isn’t monetary policy in India going the other way - to cool things down - as evidenced by the recent hike in cash reserve ratio (CRR) by 0.5 percentage points, and an anticipated rise in interest rates in January? “We do anticipate that there will be a tightening in January,” says Tao. “But the overall tightening will be very measured, and it’s not going to cool down the economy significantly.”

Were India’s fiscal consolidation measures on course? “Whether they will be on target is a matter of debate, but we anticipate an improvement.” In any case, he adds, the overall fiscal target is “quite ambitious”, and may be difficult to reach. But there’ll likely be “some improvement - maybe even meaningful improvement.”

News: NRI home loans galloping

(BL 24/12/2006) Mumbai - The concept of `home' still remains a confusion for NRIs. Yet they are building homes in India. NRI home loans are galloping at an annual growth rate of 50 per cent and now account for 15-20 per cent of the banks' retail portfolio. "There is a growing level of interest among the NRIs in the Indian real estate sector. They are interested in acquisition of property either for future occupation, rental income or for pure investment," said Sandeep Kotak, Head-Home finance, Kotak Bank. Growth in this segment is estimated to be close to a 50 per cent increase year-on-year, he added. Relaxation in policy Factors favouring the NRIs are the relaxations made in the recent review of the credit policy. RBI has dispensed with the lock-in period for the remittance of sales proceeds of immovable property of NRIs or PIOs (Persons of Indian Origin) from their non-resident ordinary account. Earlier, the remittance from such sales proceeds had a lock-in period of 10 years. They can also remit up to $ 1 million per calendar year for any bonafide purpose. "The current real estate boom has been largely contributed by rising income levels and buying capacity, lower interest rates and low mortgage to GDP ratio. We expect an increasing number of NRIs to now invest in India as existing regulations regarding property transactions have been relaxed by the RBI," said Rakesh Singh, Business Manager Mortgages, Standard Chartered Bank. Big ticket The average ticket size of NRI home loans is around two to three times higher than domestic home loans. The average size of Kotak Bank's NRI home loans, for instance, is in the range of Rs 50-60 lakh and carries an interest rate of around 9.25 per cent to 9.50 per cent per annum. "NRIs generally look for large properties in India, because of the lifestyle enjoyed overseas. A surging Indian economy has prompted many NRIs settled overseas to relocate to India," said Anup Bagchi, Head-International Retail Banking, ICICI Bank. Most of the loan originations are from the Middle East, the US and UK, said Manasije Mishra, Senior Vice-President and Head NRI Services, HSBC. NRI home loans contribute approximately 20 per cent to the bank's total home loan portfolio. Most NRIs buy houses in their native towns. While Mumbai, Delhi, Bangalore, Chennai and Pune figure prominently among the hotspots for NRIs, there is a growing interest in Goa and Kerala.

News: RPL's IPO world's 13th biggest in 2006

(PTI 24/12/2006) New Delhi - Mukesh Ambani group company Reliance Petroleum Ltd may not have found much favour with investors during its nearly eight-month stay on the bourses, but the company has found mention in a list of the world's 15 biggest IPOs in 2006.

Reliance Petroleum made its debut on the Indian stock market in May this year following a much-hyped initial public offer that was oversubscribed by more than 50 times and generated total proceeds of about Rs 8,200 crore ($1.83 billion) for the company.

RPL's public issue has emerged as the world's 13th biggest IPO in 2006 and is the only Indian entry in the list of top-20 IPOs, according to data compiled by global research major Ernst & Young and financial information providers Dealogic and Thomson Financial.

While the stock debuted at a sharp premium of 70 per cent over the IPO price of Rs 60 a share on May 11, it has pared nearly the entire premium and is trading near its offer price over the past few months.

After listing at Rs 102 per share, RPL shares have remained below Rs 70 a share since the end of May and closed at Rs 63.05 a share on Friday last week. Still, the hugely succesfull IPO has earned the company a place with China's Industrial & Commercial Bank of China (ICBC), which has emerged as the biggest IPO with total proceeds of about $ 22 billion in Hong Kong.

There are as many as seven Asian companies that figure in the top 20 list, while six IPOs were from the emerging markets, the data compiled by E&Y, Dealogic and Thomson Financial shows. There are as many as seven Asian companies that figure in the top 20 list, while six IPOs were from the emerging markets, the data compiled by E&Y, Dealogic and Thomson Financial shows.

The IPO from a Chinese bank, Bank of China, raised $11.19 billion in Hong Kong and earned itself the second slot in the biggest ever IPO list. Along with China's Daqin Railway Co Ltd (ranked 12th with proceeds of $1.88 billion), there are three Chinese companies in the top-20 list, while there are four companies from the UK and two from the US.

However, ICBC's IPO size is nearly 12 times of the total proceeds raised by the only Indian entity in the list. The market analysts believe although there is not much near-term upside potential in the share price, RPL could give good returns in the long term as the company's new refinery in Jamnagar would commence production only in December 2008.

The new 5,80,000 barrels per day refinery, which is being built at an estimated cost of Rs 27,000 crore ($6 billion), is expected to earn better margin than its parent company Reliance Industries' existing refinery in Jamnagar.

RIL owns a 75 per cent stake in RPL while US based energy giant Chevron Corp has acquired a 5 per cent stake as a co-promoter in the company with an option to raise this stake by another 24 per cent.

Earlier in October, the company signed a deal with a consortium of 14 international banks for a loan of $ 2 billion to finance its Jamnagar refinery. This was part of the $ 3.5 billion debt that the company was planning to pick up for the refinery.

The loan of $2 billion was 33 per cent higher than the originally planned $1.5 billion loan, while the rest of the loan is expected to be mobilised in 2007.

News: No "blind disinvestment strategy" in India

(PTI 24/12/2006) Burnpur (WB) - Emphasising the Central government's commitment to modernising and expanding PSUs, Prime Minister Manmohan Singh on Sunday said his government has no "blind disinvestment strategy" for state-run units.

Laying the foundation stone for a Rs 9,000-crore revival plan for the Indian Iron and Steel Company (IISCO) here, Singh said his government has already provided large amounts for the revival of many PSUs in recent times.

"There is no blind disinvestment strategy without examining the viability of the unit," he said. There is an effective system of examining the viability of each loss-making PSU to identify long-term proposals for rehabilitation and growth, he said.

Citing examples, he said, sick PSUs like Bridge and Roof, Heavy Engineering Corporation, Braithwate and Company and Cement Corporation of India have already been provided large amounts for their revival.

He said units in West Bengal have been a major beneficiary of the Centre's revival strategy that has put these units on the revival path. "IISCO's revival plan is an example where we are exploiting its synergies with SAIL and investing its future growth," Singh said.

News: Porsche to launch Cayenne in India

(BL 23/12/2006) Mumbai - Porsche will be introducing the new Cayenne in April 2007. The new model that is likely to make its worldwide debut at the Detroit Motor show in January 2007 will be introduced in the country with major changes in exterior and interior styling and engine upgrades said Mohammed Rahman, Managing Director, Porsche India. The company is also gearing up for the Indian launch of its first four-door coupe model, the Porsche Panamera in 2009.

Besides product launches, Porsche India has introduced the used car business and is most likely to introduce the Porsche Financial Services by 2008.

Since two years, the company has been in the country. It has sold 250 Porsche cars (the cheapest car is priced at around Rs 50 lakh) till date, said Rahman. Ever since they got going with the used car business a year ago, the company has sold 20 cars in second sales, eight per cent of total sales.

The Porsche pre-owned (used car) car business is governed by various global systems and parameters set by the company. Every pre-owned car undergoes 103- point parameter check and is backed by a one-year warranty. Considering the continuous upgrade in the global Porsche product range, various Porsche owners are looking at an upgrade in their existing product profile or opting for a new Porsche model. That has invariably created demand in the used car market.

Porsche is looking at introducing the Porsche Financial Services in India. In 2007, various studies will be conducted before the company introduces it in 2008. On a global platform, the financial services include features like preferred lease (providing flexible, attractive terms and reasonable monthly payments on new and pre-owned up to five-year-old Porsche models), retail financing (finance terms to spread out the cost of the vehicle - up to 84 months in some cases), Porsche options (one pays only for the period during which one has driven the new or pre-owned Porsche (up to five-year-old models with an estimated final balloon payment covering the vehicle's remaining expected value), direct pay programme (the programme helps simplify the payment process by automatically deducting the monthly payments from a designated account, payment estimator (a calculator that gives you an approximate estimate of the actual sum of money that will be paid upfront and credited on a monthly basis to the bank account) and European delivery (this exclusive customised programme allows one to take delivery of your new Porsche while touring Europe; the local dealer takes care of the delivery in one's country of origin).

News: ‘Indians to go on a spending spree in 2007’

(BL 23/12/2006) Bangalore - Driven by high confidence levels on the state of their personal finance, Indians are all set to go on a spending spree in 2007. In an AC Nielsen study of Internet consumers that gauged current confidence levels, spending habits/intentions and current major concerns of consumers across the globe, Indians (61 per cent) were the second most optimistic group of people after Denmark (71 per cent) about spending in the coming year. Globally, 43 per cent of the world's Internet consumers think it is a good/excellent time to buy the things they want and need in the next 12 months. Region-wise, nearly half of North Americans are set to go on a shopping spree, followed by 44 per cent of Latinos and 41 per cent of consumers in Asia Pacific. High Optimism The high spending intention of Indians is fuelled by high optimism in the state of their personal finance. While globally, 58 per cent of world consumers are optimistic about the state of their personal finance in the next 12 months, Indians at 87 per cent were toppers. At 53 per cent positive, Asia Pacific recorded an increase of four percentage points from 49 per cent in the last survey with Indonesia (77 per cent) ranked the second after India, followed by the Pacific (72 per cent). Holidays (30 per cent) overtook all others apart from investing in mutual fund and shares, to become Indian consumers' top choice for disposing their spare cash, followed by 32 per cent for home improvement and 27 per cent each of out of home entertainment and new technology respectively. About 30 per cent also choose to pay off debts/credit card bills/loans with their spare cash. The survey conducted in late October/early November, polled about 25,408 Internet users in 46 markets from Europe, Asia Pacific, North America, Baltics and West Asia.

News: How great is the Indian retail story?

(BL 23/12/2006) Mumbai - After spurning several suitors and after months of negotiations held in secrecy, Wal-Mart has decided to tie the knot with Bharti Enterprises.

The timing of the wedlock is significant. It comes within weeks of the entry of two Indian Houses - Tatas and Reliance - into the retail business. There are reports of others jostling to capture retail space.

Currently, retail demand is estimated at $300 billion and is expected to double in the next five years. Consultancy firms such as KSA Technopak, A.T. Kearney, Pricewaterhouse Coopers and Ernst & Young provide tempting accounts of the boom and advise clients not to delay their entry.

A.T. Kearney's Retail Development Index 2006 predicts, "India's government seems to be on a gradual, but definite, path toward allowing foreign retailers into the country...And when it takes final steps, the peak time to enter will quickly pass - giving retailers that enter now a distinct advantage."

In its Great Indian Retail Story (April 2006), Ernst & Young suggests that global retailers could achieve breakthrough and realise the Indian potential "by creating the right market-entry strategy based on individual retailer's business models." Majors such as Wal-Mart, Tesco and Carrefour have been knocking at India's doors for some years now. Their intense lobbying directly or through their governments led to one of the longest and ideology-charged policy debates. Every visiting foreign dignitary lobbies for opening retail trade to Foreign Direct Investment. It is a recurring theme at bilateral meetings and strategic-partnership parleys of CEOs.

Despite such pressures, the government has not been able to revise the policy due its dependence on Left parties for survival and their opposition to FDI in retail trade. However, there is evidence of ambivalence in government's approaches. Some of the steps taken by it suggest that, while formally upholding the ban on FDI in retail, it is not wholly committed to the ban. It has been taking measures to weaken the policy framework testing the nerves of the Left partners.

The UPA government relaxed the policy in January 2006 without consulting its Left partners to permit up to 51 per cent equity in single-brand products. Touted as a major policy revision, it was announced at Davos in January 2006 to signal that further relaxation was on the anvil. Reacting to the revision, The Economist (April 15, 2006) wrote, "those claiming inside knowledge suggest that the provisions will be applied leniently, and that this amounts to big liberalisation by stealth." A.T. Kearney's Report, cited earlier, reflects this view. A Wharton Report adds, "Wal-Mart officials have indicated that India, where government reforms lifting restrictions on foreign ownership of retail operations are under way, could be a major target for the company." (Knowledge@Wharton, Wal-mart: Is There a Downside to Going Upscale? June 14, 2006.) There have been other relaxations.

FDI in real estate

Warehousing was opened up with 100 per cent foreign equity. Similarly, government permitted 100 per cent FDI in the real-estate sector (read, malls) under the automatic route in townships, housing, built-up infrastructure and construction-development projects, etc subject to certain minimum area and capitalisation conditions. Foreign subscription to IPOs (initial public offers) for real-estate is permissible.

Reportedly, foreign real-estate promoters are cozying up with big retail groups for promotion of malls, raising capital through private equity, etc. Thus, short of allowing direct entry, the government has created all the infrastructure to welcome FDI into retail.

Based on these developments, companies such as Wal-Mart began to expect that the ban on FDI in retail would be lifted soon and they should be at the gates to rush in. FDI was allowed in `cash and carry' trade way back in 1993. It did not attract much attention and remained in a limbo. Only two companies secured approval and only one company - Metro of Germany - made some progress. However, several consultants and legal practitioners have latched on to this option as a way to circumvent the ban on FDI in retail.

Indian market

After his meeting with the Prime Minister, Dr Manmohan Singh, in May 2005, John Menzer, CEO of Wal-Mart, said that India was a market "to which we will just keep coming back because of its unbelievable size. There is talk (that FDI in retail) could be limited to brands or even certain regions. We think that is unproductive... we can't utilise our global leverage if that happens."

Chinese market

The Chinese market is getting saturated. Wal-Mart finds it difficult to compete with the Chinese retailers on `cheap' bargain. The market in Thailand is highly concentrated with top five retailers holding about 45 per cent share of the market, leaving no room for new entrants. Further, the Thai government has been trying to impose limits on the expansion of foreign retailers.

Wal-Mart's model of `everyday low prices' did not succeed in Germany. In July 2006 it decided to close 85 stores in Germany. Earlier, Wal-Mart had had to close operations in South Korea where also its model did not click.

In Japan, its operations through its subsidiary Seiyu incurred a net loss of $465 million in the first half of 2006. Japan has proved to be a difficult market for foreign retailers and Japanese customers look with suspicion offers of `low prices.' Cultural factors militated against the Wal-Mart model in these countries.

Back in its home country, Wal-Mart posted the worst monthly performance in November. "Wal-Mart may be facing a crisis in its business model as its low-price strategy appears to have hit a wall... ." wrote Bruce Nussbaum in BusinessWeek online of November 30.

The company's older strategy of huge volume sale at cheap prices seemed to have run its course in its home turf. Its efforts to sell fashion clothes failed and some other moves did not help the company to transform itself and compete with companies such as Target.

As one commentator wrote in The New York Times, "There's a limit to the market for which they are offering. They're smacking up against it" (December 2, 2006). Some others began to write about the "Decline and Fall of the Wal-Mart Empire."

The company has been under attack for its anti-trade union policies and failure to fulfil Medicare and social security benefits to employees. Some American States have enacted laws to prevent Wal-Mart from opening malls. Wal-Mart has to contend against adverse public wrath over its policies.

Wal-Mart is not known to have shared its technologies or methodologies with third parties in any other country.

Based on the record of its behaviour brought out in the vast literature on the company, it is difficult to expect that it would play the role of an equal or junior partner with Bharti.

News: RIL Retail hires 60 expats

(TNN 22/12/2006) New Delhi - Reliance Retail is in the process of hiring close to 100 senior expat managers. Some 50-60 expats with 15-20 years of retail experience in global giants, such as Wal-Mart, Best Buy, Tesco, ASDA, Sainsbury and Kroger, have already joined the company at an average compensation package of Rs 1-1.5 crore. Sources said the company is heavily drawing talent from South Africa and the Middle East.

It is learnt that Reliance Retail HR head Bijay Sahoo is abroad scouring the overseas markets for retail talent. Sources said about 25 seniors had been brought on board for supply chain management while another 30 executives would take care of operations, concept and strategy.

For instance, senior managers such as Scott Edward brought from Wal-Mart’s home ground the US and Charles Starbuck from a large retail house in Saudi Arabia are helping set up operations in the company. “Most expats are playing coaches to the top team and working on specific projects. They are largely consultants,” said a source.

While Reliance Retail spokesperson declined to comment, sources said the company’s overseas recruitment could touch 200 in the next 12-18 months. “The requirement for top talent is being fuelled by the aggressive plans of the company to cover 100 million sqft of retail space in four years. Bharti’s alliance with Wal-Mart has also pushed the company to work faster on its plans,” sources said.

Such is the desperation for people that RIL is quite open to even hire people right away, even if it means keeping them on the bench for some time. ET had earlier reported that Sr Ambani is keen on tapping the world’s best retail houses because he feels that no one knows the business better than those who have been running it successfully for over decades now.

Retail is an entirely new area for RIL and the company obviously does not want to repeat the teething troubles that Mukesh Ambani’s one-time dream project Reliance Infocomm faced, which was also a completely new business for Reliance.

Besides the West, Reliance Retail is also looking at the Middle East market which has a developed retail sector such as Dubai, Bahrain and Muscat, for merchandising and jewellery retail professionals.

News: Indian food retailers for larger realty platter

(TNN 22/12/2006) New Delhi - Size does matter. Food and beverage retailers are increasingly opting for larger-sized retail outlets to tap the growing appetite of the Indian consumers for eating out. As far as floor area goes, fast food players like McDonald’s, Pizza Hut, Barista, Costa Coffee and even the delivery-focused Domino’s are learning that bigger is definitely better.

“Eating out is a form of entertainment in India. A Technopak study shows that an Indian family’s expenditure on eating out is next only to their food and grocery spends,” says Vikram Bakshi, MD, McDonald’s India. As McDonald’s expands in smaller cities and towns, it is going for larger outlets with at least 100-seats, against the average 80-90 seats so far.

Players say higher rentals due to increased area are compensated by greater volumes and higher ticket size per order. No wonder, Domino’s has re-modelled its delivery-focussed strategy to make way for additional dining space. All new Domino’s outlets will have a dine-in capacity of 20-25 seats along with the standard take-out counters. According to Domino’s India marketing chief Dev Amritesh: “We introduced additional dining space in some outlets two months ago and sales increased by about 30%.’’ Coffee chain Costa is also looking at larger-sized outlets with about 1,500-1,600 sq ft of floor space as against the existing standard of 800-900 sq ft, while Pizza Hut is also gunning for bigger outlets as it expands further. “We need bigger outlets to fully tap our customer base,” says Virag Joshi, CEO, Devyani International, master franchisee for Costa and Pizza Hut in India.

Barista is following suit by adding generous lounging space at its upmarket Creme format. “A larger sitting area attracts more customers and leads to higher ticket size per order,” says Rini Dutta, marketing head, Barista.

With organised F&B retail growing at over 30%, the sector offers one of the most lucrative returns on investment with better returns per square unit of real estate as compared to other retail formats, says an industry expert.

This realisation has come with time and experience. “Initially, even the most formidable F&B chains had opened smaller formats in India as they were unsure about the market response. Now, with experience behind them and a better idea of consumer demand, retailers are getting bolder and going bigger,” says Technopak Advisors COO Harminder Sahni.

News: When local real estate players go national

(BS 22/12/2006) Kolkata - An increasing number of Kolkata-based real estate players are spreading their wings and building interesting projects all over India.

South City Projects, a consortium of some of Kolkata’s largest realtors, recently bagged two projects in Dubai. One, a 1,50,000 sq ft office building inside the Dubai Investment Park, and the other, a residential project of around 150-200 studio apartments.

The total investment for the two projects will amount to Rs 100 crore. Although Pradeep Sureka, one of the South City partners, makes light of the Dubai project, describing it as “entry level”, South City’s Dubai foray is an indication of the growing ambitions of city promoters.

Sureka has also bought a 10-acre plot in Bhubaneswar, where he plans to come up with a high-end residential complex. His Sureka Group has also acquired three plots measuring 64.5 acres in Hyderabad, one of which will be developed into an IT work space, while the other two will be residential projects. Besides, Sureka has also tied-up with a partner for a project in Siliguri.

Then there’s Bengal Shrachi Housing Development which is not only building a 257-acre township in Burdwan and a mall in Durgapur, but is also constructing a premium housing complex, Neo City, on a 15-acre plot, in Bhubaneswar.

Rahul Todi, managing director, says he is on the lookout for land in other major towns of eastern India like Ranchi, Patna and Guwahati for similar projects.

PS Group, which has several large-format housing and commercial projects in the city to its credit, has not confined itself to the east.

Pradip Chopra, director, says the company, along with another city developer, Srijan Group, is building a 3,50,000 sq ft mall in Chennai, another huge 9,50,000 destination mall in Coimbatore, two middle-end housing projects in Chennai besides a 250-acre service sector SEZ in Pune and another 75 acres of space near Chandigarh.

The southern city is also where Piyush Bhagat of Bengal Silver Spring Projects is coming up with a Rs 400-crore IT park spread over 1,35,000 sq ft.

Bengal Ambuja is coming up with two townships in Punjab, a housing estate in Raipur and an IT park in Nagpur. Other outstation projects by Kolkata builders are the Mani Group’s 4,00,000 sq ft mall in Raipur and Merlin Projects’ foray in Raipur.

Clearly, Kolkata builders, whetted by their local successes — especially in several large-format residential and IT office developments in Rajarhat, want to keep up the growth momentum. Says Chopra, “There’s been a close to thousand per cent growth in turnover in the past three years.”

There’s the clutter in the real-estate market, but then, as Sureka points out it’s the same everywhere in the country. What’s changed is perhaps the number of outstation players who have entered the city real-estate space — DLF is coming up with a 5,000 acres integrated township in Dankuni; Unitech, another Delhi developer, is coming up with a 100-acre premium residential project, a logistics centre and an IT park in and about Rajarhat, while Shappoorji Pallonji from Mumbai is going to build a low- and middle-end housing estate spread over 150 acres.

Not just that, there’s also overseas interest in the form of Indonesia’s Salim and Ciputra group, which have bagged some large projects in the state — the 5,000-acre Calcutta West International City, and a slew of SEZs and industrial parks.

Thus, Sureka’s point, that “While Kolkata remains our forte, it makes sense not to put all the eggs in one basket”, makes sense.

Then there is the relatively easy access to credit that is also propelling Kolkata realtors to bid for projects elsewhere.

The PS Group will need a capital flow of around Rs 500 crore for its various projects in the next two years — Rs 225 crore for the Coimbatore mall, Rs 80 crore for the mall in Chennai, around that much each for the two residential estates, Rs 150 crore for the Chandigarh SEZ and another Rs 250 crore for the Pune one.

Chopra says that he’s not only talking to banks but has been approached by a number of venture capitalists, including some foreign ones.

But it seems Bengal’s restrictive land ceiling norms, the strictures on land-use conversion in the state leading to a high prices of whatever land that is on offer are the main reasons why local realtors are looking for greener pastures in other parts of the country. “Tamil Nadu does not have an urban land-ceiling and there are no restrictions on conversion of land use.

Maharashtra too has a special township act wherein land-ceiling is not applicable for land measuring more than 100 acre,” explains Chopra. Concurs Sureka, adding that, “In contrast, getting land in and around Kolkata is still very difficult.”

“It’s natural. Now that they’ve come up with several large projects here, they naturally want to increase their footprint in other cities. It is also a sign of the growing maturity of the city’s real-estate industry,” says Todi.

News: Mukesh Ambani to set up varsity

(BS 22/12/2006) Mumbai - Reliance Industries Chairman Mukesh Ambani plans to set up a private university in Mumbai or Pune, to be named the Dhirubhai Ambani International University.

While investment details of the project are not known, sources close to the development said the subject, faculty and infrastructure aspects are being worked out.

However, when contacted, a Reliance Industries spokesperson declined to comment. The university is expected to come up on a 100-acre plot of land. Courses in science, arts and professional disciplines will be offered.

Education is not a new field for Mukesh Ambani. His wife Nita Ambani is the chairperson of the Dhirubhai Ambani International School, which was set up in 2003.

The school offers a blend of nationally and internationally acclaimed programmes up to middle school, and the Indian Certificate for Secondary Education (ICSE), International General Certificate of Secondary Education (IGCSE) and International Baccalaureate (IB) diploma programmes at the higher level.

The school’s integrated curriculum at the primary level also draws on the ICSE and the Cambridge International Primary Programme.

Mukesh Ambani is expected to make use of this experience. A source close to the development said the university would attract students from across the world, having state-of-the-art facilities.

“The blue-print for the university is almost ready, but Mukesh Ambani is waiting for the private university Bill to be passed in Parliament. Once the Bill is passed, it should be up in 12-18 months,” he added.

The private universities (establishment and regulation) Bill was presented in Parliament in August 1995. It was passed by the Lok Sabha but rejected by the Rajya Sabha. The Supreme Court has already given the green signal, and various parties are now waiting for the Bill to be passed.

Earlier this year, Anil Agarwal, chairman, Vedanta Resources, too announced plans to establish a multi-disciplinary university called Vedanta University in Orissa, with an endowment of up to $1billion.

The university is expected to match the standards of institutions like Harvard, Stanford, and Oxford.

Column: Will Indian GDP growth cross 9 per cent?

(HT 22/12/2006) New Delhi - The mid-term review of the Ministry of Finance convincingly brings out the widely known fact that the economy is in fine fettle. All relevant signals, except one, are blinking a bright green, and it can be reasonably expected that the trend will continue for the rest of the financial year. Even the external constraints, like crude oil prices, seem to have eased.

Growth has been picking up gradually. It crawled up to eight per cent last year and to nine per cent in the first half of the current year. There are indications that the economy will be pushed up even further. For instance, new investment proposals in industry alone in the quarter ending October were over Rs 6,57,343 cores, about three times the new investment proposals in the same quarter last year. Investment is really what is driving the economy, though it can also create pitfalls that may hold up growth.

Almost every sector of the economy is performing better than it did last year, except agriculture. Last year production of wheat was down; this year production of rice will fall. In the first half of the year, income generated in agriculture was up a mere 1.7 per cent and, for the year as a whole, growth may not show any improvement. Agriculture generates a fifth of the national income. A faster growth would have enhanced the GDP and, even more important, held back inflation.

It is the rest of the economy that is really on the bounce. Industrial production in the first half of the year was up 10 per cent. The manufacturing sector which is a major contributor to growth is performing even better. The other activity which is crazily expanding is construction. Contributing nearly seven per cent to the GDP it grew at 10 per cent in the first half of the current year. Services, particularly trade and commerce, have been the backbone of the strong GDP growth.

Comparing the half-yearly performance of different sectors in this year last, it would appear that the rate of growth of agriculture in 2006-07 will be 15 per cent lower than in 2005-06. On the contrary, growth will be higher by 16 per cent in industry, 27 per cent in construction and seven per cent in services. Taken together the GDP in 2006-07 should be 12 per cent higher or grow at over 9 per cent.

There is, however, a catch. Inflation is one signal that is flashing red. With excessive investment and low savings, the economy is getting overheated. The RBI did raise the reverse repo rate and the CRR to mop up excess liquidity but without much success. If inflation continues and the fiscal deficit is not curbed, both of which are likely, RBI may be forced to go in for harsher measures. The first to be hit will be construction followed by industry. To move too fast too soon has its problems. These need to be taken care of even before they become visible.

By DH Pai Panandiker

News: GM cranks out big India plans

(DNA 22/12/2006) Mumbai - If you thought that the excise reduction for small cars this Budget would help bring down prices of new launches, you could well be wrong. Take the case of General Motors. The company delayed entry into the small-car segment with Aveo UVA by more than four months, fitting it with a 1.2 litre petrol engine instead of the earlier 1.3 litre one, just to qualify in the lower, 16% excise bracket.

But the company appears to have chosen competitive pricing while refraining from making the new offering any lighter on the pocket than the existing premium hatchbacks — Maruti Swift and Hyundai Getz.

In the months to come, the premium hatchback is expected to see additions such as Swift diesel and Hyundai Getz 1.2 litre petrol — both these models would qualify for the lower excise bracket and it remains to be seen whether they pass on the excise benefit to the consumer either.

However, there are several firsts General Motors is offering to the Indian consumer, such as a warranty for three years or one lakh kilometers — something no other hatchback brand offers at present. Also, the company claims that the maintenance of the UVA would come to a mere 23 paise per km for the first one lakh km, which is 18% lower than the maintenance budget needed for Maruti Swift.

But will lower maintenance cost help GM rise above its well-entrenched competitors? GM is looking at 20,000 unit combined sales of the Aveo family next year (the UVA and the sedan) against about 60,000 of Maruti Swift and over 15,000 of Hyundai Swift each year.

Says Rajeev Chaba, president and CEO of GM India: “We have capacity constraints and are not looking at the sales numbers of competition right now. Our second production facility will go onstream only in 2008 so we will have to supply all our models from the enhanced 80,000 unit capacity we will achieve at Hallol in a few months from now.”

Aveo has been one of the successful models from GM across the globe, selling one lakh units (combined Aveo and Aveo UVA) in the US and about 1.2 lakh in China every year.

Road rush

Plans to launch mini car Chevy Spark by April next year; Optra diesel, too, on the anvil. Also mulling the launch of high-end models like Captiva SUV and Cadillac in India. General Motors plans to triple its share in the country to 10% by the end of the decade

News: Rush of Indian small, medium enterprise IPOs

(DNA 22/12/2006) Mumbai - The new year could see a flurry of small and mid-sized companies going public, with investment bankers saying as many as 300 could hit the bourses on 2007.

“There are thousands of unlisted companies in India. About 300 of them need a fresh fund infusion to increase capacities and streamline business models owing to growing global demand,” says Nimish C Shah, managing director of Fortune Financial Services, a Mumbai-based investment banking firm.

This means increased business for investment bankers. They confirm a lot of interest being generated and a steady flow of IPO mandates in the pipeline.

“I think small- and mid-sized companies will mop up around Rs 3,000 crore through IPOs in 2007,” said Mayank Dalal, senior vice-president of Centrum Capital, which has 25 mandates of such companies with an average issue size of Rs 40 crore.

While the list of companies lined up for IPOs includes those falling in the small and medium enterprises category, most of them are in the Rs 200-250 crore bracket in terms of their potential market capitalisation.

“I think you will see a set of companies falling inside a potential market cap of Rs 200-250 crore range and are eager to go into the next step of their businesses and tapping the IPO market in 2007,” says Vinit Suchanti, managing director of Keynote, which has 15 such companies from various sectors waiting to raise funds in the range of Rs 30-200 crore from their IPOs.

More than one-third of these companies, approximately, are in the business of auto ancillary and spread in the industrial belts of Pune, Coimbatore and Gurgaon.

As per the estimates of investment bankers, a majority of these companies are in the auto ancillary segment.

“Almost 20% of them are textile manufacturers and 15% business process outsourcing firms,” says another investment banker.

With the Indian stock market still on with one of the biggest bull-runs of all times, small and mid-sized companies will be in a position to sell their stakes at better valuations.

“These IPOs could come at an issue price which is 13-15 times the companies’ forward earnings. However, this could be cheap considering the bulky order books of these companies,” says Shah.

For these companies, the exchange’s mandate of 25% dilution of the equity capital or a minimum issue size of Rs 100 crore is not a turn-off. Further, the BSE committee set up well ahead of the approaching busy season to look into the IPOs of companies valued at less than Rs 500 crore has made the issue process simpler and faster for smaller companies.

However, the Securities and Exchange Board of India is likely to be extra-cautious on IPOs. The market regulator had recently hinted at its plans of making IPO grading compulsory, a step that could help small investors distinguish the chaff from the grain when the small IPOs hit the market.

Issue pipeline

Of the thousands of unlisted companies in India, about 300 are ready for public funds infusion

Almost 20% of the issuers are textile manufacturers and 15% BPOs

The IPOs could come at issue prices that are 13-15 times the companies’ forward earnings

News: Volvo shifting Europe truck work to India

(BL 22/12/2006) Bangalore - Volvo will shift some of the truck manufacturing work from Europe to India and build its bus manufacturing plant near Bangalore. The Volvo India's Managing Director, Eric Leblanc, told presspersons at the company's plant at Hoskote near here that during the course of the next year, some of the manufacturing work from plants in Sweden and Belgium will be shifted here. In turn, these plants will focus more on supplying trucks to the European countries. Due to capacity constraints in Asian plants, some of the demand is met from the plants in Europe. Leblanc said over a period of time, the Indian plant will double the production capacity to around 2,400 units per year to meet the demand from Asian countries like Indonesia and Vietnam. Exports to China, where Volvo already has a joint venture, will be undertaken at later.. The Indian plant already exports trucks to South Korea and Bangladesh. Leblanc said no additional investment was required for doubling the capacity of the existing plant. Currently, nearly 4,000 Volvo trucks are sold in Asia. He said Volvo will also hire more workers from the existing 150 blue-collar workers while the work shift will be increased to two. The R&D work done out of India will also be raised with the addition of 100 more engineers, while the software development work will be increased to 500 consultants. The bus manufacturing plant will also be set up near the existing plant at Hoskote and will start operations from 2008. It will have a capacity to manufacture 1,000 bus bodies a year. The bus manufacturing business will be a joint venture with Jaico Automobiles, with Volvo holding 70 per cent in the venture. Volvo also announced the launch of its new FM 400 tipper, which costs around Rs 63 lakh. During this calendar year, Volvo is expected to sell over 600 trucks.

News: ICICI Bank to raise $1 b yen loan

(BL 22/12/2006) Mumbai - ICICI Bank will borrow $1 billion yen equivalent in three tranches under its loan syndication agreement in Geneva on December 20. "Twenty-six banks participated in the syndication facility, which is the widest participation for any Indian bank syndication in international markets. ICICI Bank concluded this transaction in one month from the date the mandate was awarded," said a bank release. The facility is split into three tranches: $350-million 364-day tranche, $450-million two-year tranche and a $200-million three-year tranche. "The $1-billion syndication is a benchmark deal as this facility marks the largest syndicated loan for an Indian bank borrower. It is heartening to see a number of new players participating in this deal," said Ms Chanda Kochhar, Deputy Managing Director, ICICI Bank. ICICI Bank has raised around $2 billion (including the current loan syndication) overseas till now.

News: India's richest under 40

(Forbes 22/12/2006) Mumbai - As a more affluent India blossoms, the rich are getting younger. This year, five men under the age of 40 made our list of India's 40 richest citizens, and four of them are billionaires.

As a more affluent India blossoms, the rich are getting younger. This year, five men under the age of 40 made our list of India's 40 richest citizens, and four of them are billionaires.

They made and grew their fortunes in diverse sectors that reflect the multifaceted Indian economy. Their talents are spread among online gaming, pharmaceuticals, commodities, finance, software and telecommunications. In aggregate, they are worth some $10.9 billion.

Most benefited from India's hot stock market, which rose 39% this year, as well as from a robust real estate market. But these men aren't sitting around watching their assets appreciate. While some inherited a portion of their wealth, all are actively involved in managing and growing their empires.

There the similarities end. One of the five youngest is a newcomer to India's 40 Richest and a self-made millionaire. Jignesh Shah, 39, worth some $840 million, founded his Financial Technologies Group software company in 1995. Today, the company has a market capitalization of $2 billion. Shah also set up and heads the Multi Commodity Exchange, India's largest commodity exchange.

Anurag Dikshit, 34, saw his shares in PartyGaming tank this year, but he still managed to maintain a net worth of $1.5 billion. The online gaming company he co-founded ran afoul of the U.S. Congress, which passed a law forbidding companies to facilitate payments to gambling sites. Dikshit, though, was able to sell $275 million worth of shares before the crackdown.

At age 31, Shivinder Singh is the youngest on the list. He and older brother Malvinder are the biggest shareholders in Ranbaxy Laboratories, India's largest pharmaceutical firm in terms of sales. Together, they share a fortune of $1.8 billion.

Malvinder, 34, is now chief executive of Ranbaxy, which recently paid $324 million for Romanian generics-maker Terapia as part of an ongoing acquisition binge. Shivinder heads Fortis Healthcare, a chain of hospitals, which he is readying to take public. The brothers have said they will soon expand their empire into a pharmaceutical retail chain and medical education.

Kumar Birla is not only one of the five youngest, he's also the seventh-richest Indian overall, worth $6.8 billion. The 39-year-old became chairman of commodities conglomerate Aditya Birla Group, the country's largest aluminum and copper producer, at the age of 28 after his father passed away. Amid a peer group that generates no shortage of headlines, Birla may have been the biggest newsmaker this year. After a spat with Tata Steel, in which Aditya Birla holds a major stake, he resigned from Tata's board. He subsequently paid nearly $1 billion to buy Tata's stake in Idea, the mobile phone venture that the two companies had launched together.

Like his cohorts, Birla seems to have an appetite for diversification and shows no signs of slowing down. Barely out of their youth and with fortunes to play with, these dynamic players promise to dominate Indian business for decades to come.

News: Indian FDI inflows rise to $6.1 b in April-Oct

(BL 21/12/2006) New Delhi - Foreign Direct Investment (FDI) inflows into the country registered a 134.62 per cent increase in April-October 2006 to touch $ 6.1 billion as compared to $ 2.6 billion in the same period last year.

In October 2006, FDI inflows stood at $ 1.7 billion as compared to $ 0.412 billion received in the same month last year.

"The FDI inflows of $ 6.1 billion for April-October 2006 do not include reinvested earnings. If reinvested earnings are included, the inflows for the period would exceed the total FDI received last year", Kamal Nath, Union Commerce and Industry Minister, told presspersons here today.

Services, electrical equipment, cement and gypsum, drugs and pharmaceuticals and hotel and tourism are the five major sectors that received FDI inflows in October 2006. Two-thirds of the investment ($ 1.1 billion) during October 2006 came from Mauritius. The Netherlands, the US and Cyprus are the major countries from where inflows have been received.

The top inflows in October 2006 came from SDC Mauritius ($ 517 million, financial services through Indian partner Kappa industries), Oracle Global ($ 349 million, software), EMMAR MGF ($ 150 million, real estate), Cementrum IBV, Netherlands ($ 124 million, cement and gypsum), and Carraro SA ($ 25 million, agricultural machinery).

Kamal Nath pointed out that most of major investments made in October 2006 were first-mile investments and expressed confidence that there would be more investments from these investors in the next one year.

The Delhi regional office of the RBI registered inflows of $ 727 million, accounting for 43 per cent of the total inflows during October 2006. Mumbai, Bangalore, Hyderabad and Chennai are the other major regions that have received FDI inflows.

News: India could lose duty-free access to US

(PTI 21/12/2006) Washington - The United States Trade Representative has identified six countries, including India, which could lose duty-free access to the American market in 2007 under a revamped trade programme signed into law by President George W Bush. Brazil, India and Venezuela along with Thailand, the Philippines and the Ivory Coast could lose trade benefits because of recent changes Congress made to the US Generalized System of Preferences (GSP) program for developing countries, the chief American trade negotiator said. Under the current revamped GSP programme, the administration can revoke waivers when one of two conditions have been met: import of a certain good from one country exceed an annual cap of about $187.5 million, or comprise 75 per cent of total US imports of that good. According to USTR statistics, a preliminary assessment shows that India would lose duty-free access for gold jewellery and brass lamps. The country shipped $1.6 billion in gold jewellery and $20 million in brass lamps to the United States under the GSP program in the first 10 months of 2006. And Brazil stands to lose duty free access for brake and brake parts, which totalled $242 million in January through October, and for ferrozirconium, which totalled $700,000; and Thailand also would lose duty-free access for gold jewellery, of which it shipped $611 million to the United States in first ten months of 2006. Bush signed the legislation that continued the Generalized System of Preferences (GSP) program for two years until December 31, 2008. The GSP program has proven to be very successful in creating US trade with and development in developing countries. Congress provided new guidance to address product competitiveness when it extended the program. "We will ensure that the program adapts so that it continues to assist developing countries in becoming more active participants in the global trading system," USTR Susan Schwab said. The expectation is that the USTR will issue a Federal register notice in February 2007 which will identify those waivers that meet either of the new thresholds and thus subject to potential revocation.

News: Anil Ambani stakes $100 m in Zapak

(IBN 21/12/2006) New Delhi - The Anil Dhirubhani Ambani group is all set to make multi-million dollar investment in gaming internet site zapak.com. Rajesh Sawhany, President of Reliance Entertainment, says the company is targeting a community of over 10 million internet users by end of next year, offering online gaming and much more. Zapak.com currently offers 150 games and plans to double its gaming bouquet in a month's time. “We are going to have a team of 200 people and a studio that will start developing MMOG, localized in India and will start releasing them in 2008. We also have requests with lot of Joint venture partners,” said Rajesh Sawhney, President, Reliance Entertainment. ADAG will invest over $100 million in Zapak over the next 3 years and hopes to touch the billion dollar mark in value terms over the same period. Revenues will be a mix of advertising, subscription and transaction or e-commerce. Zapak is also in talks with various youth oriented brands to develop adver-gaming, that’s advertising bundled in gaming content. Though right now its games are designed around sports and Bollywood, Zapak will soon foucs on mythology and action. It will also offer an option of downloading international games at attractive Indian prices. This is clearly the sunrise for the online gaming industry in India. So log on and get gaming.

News: Reliance, Bharti see retail opportunity in Railway land

(BL 21/12/2006) New Delhi - India's organised retail players, for whom real estate comes at a premium, are looking to commercially exploit 44,000 hectares of surplus land lying with Indian Railways across the country under a win-win formula.

The railway ministry sources said feelers have been received from corporate houses, including Mukesh Ambani-spearheaded Reliance Retail, R P Goenka Enterprises and Bharti Group, after Railway Minister Lalu Prasad announced that the surplus land would be made available for commercial purposes under public-private-partnership.

The Railway has about 44,000 hectares of surplus land across the country, which the railway ministry is ready to offer to corporate houses for building budget hotels, warehouses, farm outlets and hospitals.

Indian Railway Catering and Tourism Corporation (IRCTC) has already announced over 100 budget hotels on the surplus land and issued tenders for execution of 40 such projects.

The railway ministry has also announced setting up over 7,500 farm outlets at railway stations across the country to provide benefit to farmers by selling their products.

Sources said the ministry was planning to hire a consultant to advise it about the use of these surplus lands, mainly lying idle near railway stations.

While Reliance Retail Ltd has ambitious plans to provide fresh food and vegetables in its outlets the railway's surplus land could provide an opportunity to grow a wide variety of food products.

News: India's Ansal to develop $4.5 bn property project

(RTR 21/12/2006) New Delhi - Indian real estate developer Ansal Properties & Infrastructure Ltd. said on Thursday its consortium had got approval to develop a Rs 20,000 crore ($4.5 billion) city.

The project to develop more than 2,500 acres (1,000 hectares) near Greater Noida, about 40 km (25 miles) from New Delhi, will have a convention centre, 5-star hotels, serviced apartments, malls, hospitals and schools, it said in a statement.

Aimed for a population of 30,000, the city in the northern state of Uttar Pradesh will also have a stadium in addition to sporting facilities like a golf course, tennis academy, polo and equestrian clubs, it said.

In October, Ansal's board approved raising up to Rs 2500 crore in equity, including a follow-on offer for Rs 2000 crore by March and the remaining from private placement.

Ansal, whose shares ended provisionally down 1.5 per cent at Rs 872, has also said it plans to foray into the country's booming hospitality sector.

News: Reliance Life Sciences to acquire UK's GeneMedix

(BL 21/12/2006) New Delhi - Mukesh Ambani-promoted Reliance Life Sciences on Thursday entered into a deal to acquire a majority stake in UK-based biopharmaceutical company GeneMedix Plc and also invest £32.1 million over the next five years.

According to an announcement by GeneMedix at the London Stock Exchange, RLS would make the investment over the next five years in order to take the company's bio-similars for launch in the EU and US.

The proposal would see RLS make the investment in two tranches, of approximately £14.6 million and £17.5 million, to reflect the anticipated funding requirements of the business, it said.

Initially, RLS will acquire 74 per cent in GeneMedix through the investment of £14.6 million, which will immediately allow the company to restructure its balance sheet by removing long-term debt instruments, it added.

The initial investment would be through a share subscription while the second through the issue of five year warrant of additional ordinary shares. GeneMedix plans to delist post acquisition by RLS.

Commenting on the transaction, Julian Attfield, Chief Executive of GeneMedix said the investment by RLS, subject to the approval of its shareholders, would bring to an end the uncertainties surrounding the funding of its programmes and the company's financial position.

"Not only will the significant investment allow GeneMedix to continue to develop its existing portfolio of products at an accelerated pace but will also allow us to bring new biopharmaceutical products under development," he added.

News: RBI to contain inflation within 5% to 5.5%

(PTI 21/12/2006) Kolkata - The Reserve Bank of India (RBI) today said that it would take policy measures required to keep inflation between five per cent and 5.5 per cent till the end of the year.

Deputy Governor of RBI Rakesh Mohan told reporters that as mentioned in the Mid-term Policy Review, inflation would be contained within that range and the bank would take certain policy measures required to do so.

"Inflationary expectations would be contained," Mohan said after a meeting of the Central Board of RBI held here and attended by Governor Y V Reddy and others.

Speaking about liquidity, Mohan said that there was temporary excessive tightness in the market at the moment.

Following a hike in the cash reserve ratio (CRR) by 50 basis points recently, a certain amount of liquidity was expected to be sucked out of the system, he said.

Mohan said that total liquidity in the system ranged between Rs 80,000 crore to Rs one lakh crore in the last one year or so.

News: 'Overheating of Indian economy more imaginary'

(BL 20/12/2006) New Delhi - The Finance Ministry does not seem to fully share the Reserve Bank of India's concerns of the economy experiencing signs of overheating. In its Mid-Year Review of the economy for 2006-07, tabled in Parliament here on Tuesday, the Finance Ministry has attributed a "large part" of the current inflationary pressures on "commodity-specific supply problems related to products such as wheat and pulses". According to the review, "a durable solution to the price rise problem has to be found in increasing yields and domestic output of such products". This view is seen as being somewhat in variance with the RBI's more monetarist approach to inflation, which has led to recent measures such as 50 basis point hike in the cash reserve requirement for banks in order to suck in excess liquidity from the system. The Finance Ministry, almost in contrast, has held that as long as investments remained buoyant and efficiency (productivity) levels in the economy were improved, "the problem of overheating may turn out to be less real and more imaginary". The review has drawn attention to "several instances" in recent history where economies have grown at 8-9 per cent or high annual rates for years on end. "Japan grew at an annual average of 10.4 per cent between 1960 and 1970. China has grown at above 8 per cent in 14 out of the 19 years since 1987", it has noted, adding that this has come "despite routine concerns of overheating in China". The Finance Ministry has also highlighted the fact that overheating of some economies in the past were associated with speculative debt flows through the balance payments leading to excess liquidity expansion and a sharp real appreciation of the exchange rate. "While net foreign inflows have driven the growth of money supply in India in recent times, such flows have been of the non-debt creating variety and orderly conditions have prevailed in the exchange rate market of the rupee," the review noted. Besides tackling the supply-side problems, the Finance Ministry is of the view that the simultaneous macroeconomic policy responses have to be prospective rather than retrospective. "A tightening, for example, will have to be in response to an inflationary problem anticipated in the future, not an inflationary bout that has already taken place," the review noted. Another point in the context of the `overheating' debate relates to the buoyancy in India stock markets relative to some-other well-performing markets such as Korea, Malaysia and Thailand. "While passing a judgment about appropriate valuation of stock market is a hazardous venture, the increase in the price-earning ratio of the BSE Sensex from 20.92 at end-March 2006 to 21.34 at end-September 2006 suggests that a part of the increase in stock valuation may be because of higher corporate earnings and the higher growth expectations in the economy," the review said.

News: Tata, CSN get a deadline for Corus bid

(PTI 20/12/2006) London - The UK Takeover Panel has stepped into the high-voltage drama over acquisition of Corus, setting a January 30 deadline for revised offers from its two suitors, after which the Anglo-Dutch steelmaker could come under the hammer.

The British regulatory body asked the two bidders -- India's Tata Steel and Brazil's CSN -- to announce their revised offers by January 30, while saying that an auction could be considered if the 'competitive situation continues to exist shortly before' the deadline.

Currently, both the bidders are entitled to revise their offers and the terms of the auction, if required, would be set by the panel, the regulator said. Each of the parties has accepted the ruling, it said.

Following the panel's decision, Corus said it expects the competitive situation to be resolved, at the latest, on or shortly after the deadline. Corus has separately decided to adjourn its extraordinary general meeting scheduled for Wednesday to a later date.

Meanwhile, banking sources said no decision has been taken so far by Tata Steel, which is mulling over all the possible options.

When asked whether CSN would match in case Tata revises its offer further, a spokesperson for the Brazilian firm said the company cannot 'comment on what it might do in hypothetical situations'.

However, banking sources said the Latin American company is in talks with its financiers and advisors in case it needs more funds to close the deal.

News: Soros warns against full rupee float

(DNA 19/12/2006) New Delhi - Billionaire investor George Soros has expressed confidence in the Indian financial markets but warned against making the rupee fully convertible.

Soros was speaking at an event organised to launch his book, The Age of Fallibility: Consequence of the War on Terror. He said it was the government’s role to prevent the economy from getting overheated.

Soros said overseas interest in India was growing but did not say whether he would invest in the country.

At present, India allows its currency to be convertible only on the trade or current account. This allows companies and individuals to freely convert rupees into foreign currencies for trade in goods and services.

On September 1, a panel formed by the Reserve Bank of India suggested a three-phase, five-year roadmap to create a freely traded Indian rupee. The RBI is looking at suggestions to further ease rules that cap overseas fund investments in local bonds.

Soros argued that capital controls are effective only in times of crisis and cannot be a general. Dwelling on his “theory of reflexivity”, Soros said the generally accepted notion is that financial markets tend towards equilibrium, and on the whole, discount the future correctly.

“I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future, they help to shape it,” Soros said. “In certain circumstances, financial markets can affect the so-called fundamentals, which they are supposed to reflect.”

When that happens, he said, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. He said such boom-and-bust sequences do not arise very often. “But when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy.”

News: Audi to produce A6 in India

(BL 19/12/2006) Pune - Autumn 2007 would see another entrant into the four-wheeler category as Audi6 assembly would begin in Aurangabad. The Audi A6 would be assembled from completely knocked down (CKD) kits, manufactured in Germany.

"This move gives us the opportunity to better fulfil our potential on this market. Through supplying the parts sets, our locations back in Germany will also benefit," commented Dr Jochem Heizmann, Board Member for Production at AUDI AG. Production will take place at the Skoda Auto India Ltd site, he said.

He noted that the future employees would be trained in Ingolstadt and prepared for the specific parameters. "With this move, Audi is building on its sales strategy, which involves greater involvement in new, economically-emerging markets, as well as CKD production - which should produce over 300 vehicles in 2008, the first full year - the creation of a sales company to be based in Mumbai is scheduled for early 2007," he said.

Dr Heizmann said the India strategy also envisages an expansion of the dealer network over the next few years to provide at least eight exclusive Audi dealers in central locations around the country. At present, the network comprises three dealers in Mumbai, Bangalore and Delhi.

News: Coffee Day plans outlets in Pakistan

(BL 19/12/2006) Thiruvananthapuram - Café chain Café Coffee Day, which recently opened a café in Karachi, is planning 25 outlets in Pakistan in the next few years.

Over the next 12 months, the company plans to open four more cafés in Karachi and also plans to expand to Lahore and Islamabad, said Venu Madhav, Head-Operations, Café Coffee Day. The company's first international café was opened in Vienna in November last year and it now has two cafés in the city, he added.

In India, Café Coffee Day, which is a division of Amalgamated Bean Trading Company Ltd, currently operates 364 cafes in 70 cities.

The company plans to have 500 cafés in the country by June next year, Madhav said.

The company is all set to open its fourth café in Kerala, in Thiruvananthapuram, in the next few days.

The first Café Coffee Day outlet in Kerala's capital is likely to open before December 25, he said. The company is looking at adding more cafes in Thiruvananthapuram and also at adding at least two more outlets in Kochi in the near future.

The café in Thiruvananthapuram, located in the upmarket Kowdiar locality, will be company owned and will cover an area of almost 2,000 sq. ft. across two floors. The café will have an outside seating area as well, Madhav said.

Eventually, the company plans to have outlets in other cities in Kerala and also in locations that have a large tourist population, he added.

News: 'For Japan, India is a first mile investment'

(BL 19/12/2006) New Delhi - The Prime Minister, Dr Manmohan Singh's delegation that went to Japan last week immensely enjoyed the attention and the adulation they received from their hosts. When Dr Singh spoke to the Diet, Japan's Parliament, his 25-minute speech was punctuated by applause 22 times. When he finished speaking, the Parliamentarians were, according to the Commerce Minister, Kamal Nath, "jumping over one another to congratulate the Prime Minster".

The Prime Minister himself said, "When I went for a lunch with captains of Japanese industry, I found a new enthusiasm among them which I have never seen before. So I feel for the first time, the synergy involving both the Japan government and Japanese industry is most favourable as far as investing and trading with India are concerned."

As the delegation headed home, Kamal Nath took pains to explain to Indian journalists the synergies between the two countries and the challenges ahead.

Here are excerpts from the interaction:

On the complementarities

The good part is the complementarities of our two economies. They (Japan) are not looking to export to us rubber-bands and pencils. They are looking to export hi-tech goods. That is not going to hurt us. If we bring tariffs to zero with them, it is not going to hurt us; our manufacturers will only benefit from lower raw material costs. In agriculture, Japan is a major importer of food products. Why not we export our fruits?

We do not want to export rice to them, because they do not eat basmati rice; they eat a sticky rice. Japan's agricultural interests are very different from ours.

On Japanese investment prospects

Japan is now focussed on India. For the Japanese, investment in China is a last-mile investment, in India is a first mile investment. The first tranche of it can easily be $2 billion, immediately, in the next 15 months. What they have not done in 15 years they will do in 15 months.

Japanese FDI in China is high, but if you look at their portfolio investments it is not so. Nomura Securities told me that (Japan) will be investing $10 billion in India as institutional investments in the current year.

Toshiba was one company that left India. They are looking at coming back. When they met me, they said they were looking at expansion plans. You know about Nissan.

I met (Osama) Suzuki (Chairman, Suzuki Motors). He said, `I am going to come next month to inaugurate my second factory. I am going to be exporting 300,000 vehicles a year. For that I need a port.' The Japanese industry and their government work closely on this. Their priority will be on this.

Otherwise how would you export three lakh cars a year? Where are the port facilities for this scale? To load so many cars on a ship, what does it take? It takes 30 acres to park them. So they want to concentrate on the logistics. If we want to sustain our 9 per cent growth, our ports cannot measure up. Our trade basket has been changing over the past few years.

We are exporting iron ore now. As and when we put up pelletisation plants, we will stop exporting ore. We will export steel. Export of iron ore requires a different kind of port facilities from steel. All these issues have to be looked at a macro level. Our port capacities and handling will be crucial. You can have a large port, but the way you ship ore is different from shipping cars.

On strenghtening the ITIs

JETRO (Japan External Trade Organisation) will participate in the upgradation of Industrial Training Institutes. The future is going to lie in the State that has the best skills. As we move on in the next five years in the growth momentum we are in, we need people with skills. No one is going to set up factories where there are no skills. Today, Tamil Nadu is getting so much of investment because it has people with skills. So ITIs will play a pivotal role in attracting investments. The upgradation of the ITIs has to be at the core of our inward investment strategy.

On non-tariff barriers coming to the fore

In the next five years, tariffs are not going to be an issue in trade. It is going to be the non-tariff barriers. For instance, China has just 4-5 per cent duties on agriculture products, but their non-tariff barriers are going to be stiff: they will say the food must be packed in a specific way... India used to have non tariff barriers on crude palm oil, which was very wrong. We had put in a specific carotene (a naturally occurring substance in palm oil that is known to deteriorate on long storage and to get destroyed on processing) value that could not be met. By the time the produce reached India, the carotine value would have changed. So you can create any kind of non-tariff barrier.

Some countries want us to pack farm products in wooden crates, but these crates must be tested to be pest free. And it could take two years to do the test. These could be the kind of problems that would crop up. The future of trade wars will not be in tariffs, but in non-tariff barriers such as phyto-sanitary standards, health standards. These are the issues we will be confronting as the United States and the EU turn protectionist.

These countries were the champions of globalisation, and we were at that time not happy with globalisation. As we become more and more competitive, we are becoming champions of globalisation. We want to enter their markets.

News: Anil Ambani approaches Essar before Hutch bid

(RTR 19/12/2006) Mumbai - Anil Ambani group has approached the Ruias, founders of the Essar group, for their one-third stake in Hutchison-Essar joint venture in India, ahead of a bid for Hutch, the Business Standard said on Tuesday.

The Ruias, who have first right of refusal if Hutchison Telecommunications International decides to exit its Indian mobile operations, were "veering to the view of cashing out," the newspaper said, quoting merchant banking sources.

The Mittals of top mobile services firm Bharti Airtel Ltd. had also "informally sounded out" the Ruias, it said.

Hutchison Essar is 67 per cent-owned by Hong Kong tycoon Li Ka-shing's Hutchison International.

Indian laws mandate that a telecom firm's ownership in another telecom firm will be capped at 10 per cent, or it would have to buy the entire 100 per cent.

A spokesman for the Anil Ambani group declined comment.

Local newspapers have reported that the Anil Ambani group, which controls Reliance Communications Ltd. , the country's second-biggest mobile services firm, was preparing a bid for Hutch with a clutch of private equity funds.

A successful bid would give Reliance Communications the lead in the lucrative Mumbai market and catapult it to the top in the fast-growing Indian market.

Macquarie Securities estimated Hutchison Essar's enterprise value at $13.7 billion with an equity value of $12.18 billion and said a deal would make "strategic sense" for Ambani as it would instantly boost Reliance Communications' GSM operations.

Local media reports at the weekend said the list of potential suitors also included Malaysia's Maxis -- which last year bought 74 percent in India's Aircel, besides Egypt's Orascom Telecom and UK's Vodafone

But local media have crowned Ambani, with some newspapers saying a deal would be sealed by Dec. 28, the birth anniversary of his father Dhirubhai.

News: India set to join ranks of top-10 gas producers

(PTI 18/12/2006) Beijing - India will be catapulted into the world's top 10 gas producing nations if the country's biggest natural gas discovery in the Krishna-Godavari basin is validated, a senior official said here today. "Once the gas comes out, we will join the select club of top 10 gas producing countries," M S Srinivasan, secretary of ministry of petroleum & natural gas, said here while commenting on the gas discovery by the public sector Oil and Natural Gas Corp (ONGC). "Our negotiating power vis-a-vis other producers could considerably go up as a result of this major discovery," Srinivasan, who is accompanying Deora said here. He said the initial estimate suggests that the well in the Bay of Bengal has reserves of about 21 trillion cubic feet (tcf).If the gas discovery is validated, it reserves would be equivalent to 20,000 MW of electricity for 20 years or 4,000 MW of electricity for 100 years, he said

News: Reliance finds huge oil reserves in block D6

(BL 18/12/2006) New Delhi - Reliance Industries Ltd has discovered huge oil reserves in its gas-rich D6 block in Krishna Godavari basin off the east coast, its minority partner Niko Resources of Canada has said.

"The MA-2 well has encountered the thickest hydrocarbon column discovered to date in D6," Niko Resources said in a release. Niko Resources has 10 per cent interest in the block KG-DWN-98/3, also known as D6. Reliance is the operator of the block with 90 per cent interest.

"MA-2 reached a target depth of 3581 metres and penetrated a gross hydrocarbon column of 194 metres consisting of 170 metres of gas/condensate and 24 metres of oil in the cretaceous section," the release said.

MA-2 is located approximately 2-km from the previous MA-1 oil discovery well.

"Application has been made for the commerciality of the MA field and approval is expected to be granted in the near future. The full field development plan will be submitted after approval of the commerciality and the oil development is to be fast tracke d with initial production targeted in the second quarter of 2008," it said.

The MA-1 well in June 2006 reached a total depth of 3,783 metres and hit 26 metres of net oil pay and 72 metres of net gas pay.

Reliance has till date made about a dozen gas discoveries in D6 and put combined reserves in the block at around 50 trillion cubic feet (Tcf). MA-2 is the second oil discovery on D6 after MA-1.

News: Mumbai is a top ranker among Asia Pacific realty hotspots

(DNA 18/12/2006) Bangalore - Ho Chi Minh City, and Mumbai are strong development markets while Osaka, Shanghai, and Tokyo are considered top Asia Pacific cities in terms of real estate investment and development prospects. The conclusions, elaborated in a report titled 'Emerging Trends in Real Estate Asia Pacific 2007', were published recently by PricewaterhouseCoopers and the Urban Land Institute.

The 19 Asia Pacific cities that figure in the report are divided into five general categories based on their investment and development prospects. The other basis for categorisation is various respondents' opinion about buying, holding, or selling different property types within each market. See box for details of the categories.

The office sector is ranked highest among the favoured property types in Asia Pacific cities. Singapore is listed as the top city in which to buy office space, followed by Mumbai, Ho Chi Minh City, Tokyo, and Osaka. The second favoured property type is in the hotel and resort sector. New Delhi ranks as the best market for purchasing hotel and resort properties, with Mumbai, Ho Chi Minh City, Beijing, and Taipei trailing. Retail is the third favoured property type and Mumbai, Tokyo, Shanghai, Bangalore, and Osaka are ranked as the top five markets.

While it is observed that US investors are the largest source of Asia Pacific real estate investment capital, the report notes that investment is growing from within the region and from the Middle East as well.

The reports says the current targets for total annual returns range from 12.5 per cent for core investments to nearly 24 per cent for opportunistic investments in the Asia Pacific region.

News: Japan FIIs may pump in over $10 b in India next year

(BL 17/12/2006) New Delhi- Japan may funnel more than $10 billion in foreign institutional investment into the Indian markets in the coming year, the Commerce Minister, Kamal Nath, said today.

Speaking to the media on board the special Air India aircraft bringing home the Prime Minister after his visit to Japan, Kamal Nath said that this was disclosed to him by representatives of Nomura Securities.

Recalling that Japanese FIIs had pumped in $4.5 billion in the past twelve months, he contrasted with less significant investments they had made in China. "The Japanese have faith in our institutions," he said

On foreign direct investments, he sad he expected about $2 billion from Japan this coming year. Toshiba, the electrical and electronics conglomerate, which had exited the country, had plans to return and invest in the country.

"What they have not done in 15 years, they will do in 15 months," said Kamal Nath. Japan.

Kamal Nath also said that the Chairman of Suzuki had informed him that Maruti had plans to export 300,000 cars a year, and needed commensurate port facilities. They need 40 acres to park the cars meant for export, he said.

Feasibility study

Work on the proposed dedicated freight corridor from New Delhi to Mumbai and to Kolkata, which would cost about Rs 22,000 crore, is expected to start in a year's time, the Prime Minister, Dr Manmohan Singh, said.

Speaking to the media on board the special aircraft, Dr Singh said the Japanese had done a feasibility study on the project and a final report would be available soon.

Asked whether Japanese companies would get a preference in the execution of the project, he said, "The normal rule is that we go by the competitive bidding, but the Japanese industry's competitiveness is well known. And there is every possibility that a sizable chunk of orders will go to Japan on merit."

The Prime Minister said that his visit was likely to result in a transformation of relations between India and Japan. He said he was delighted with his interaction with Japanese business and industry. "When I went for a lunch with captains of Japanese industry, I found a new enthusiasm among them which I have never seen before. So I feel for the first time, the synergy involving both the Japan government and Japanese industry is most favourable as far as investing and trading with India are concerned."

On the political opposition to the proposed Tata plant at Singur, Dr Singh said, "We need more investment to create more jobs, our young people need a fast moving economy to provide them with job opportunities which is their right. So it goes without saying that anything which comes in the way of maintaining the industrial peace constitutes a setback. I hope all political parties and trade union leaders and employer's representatives will work together to create a climate for industrial relations which is at the same time is investor-friendly."

The Prime Minister conceded that there was some ambiguity on the issue of security and foreign direct investment. "I cannot say that the security concerns can be totally set aside but it is very important that security concerns are sector specific and should not be targeted at individual countries."

Carrefour to enter India

The French multinational retail store, Carrefour, is likely to announce in the next two weeks its plans to enter India.

Headquartered in France, Carrefour,has revenues of 75 billion in 2005 and operates in 29 countries across Europe, Asia and the Americas.

News: Dubai Properties keen to enter into India

(PTI 17/12/2006) Mumbai - Dubai-based property developer, Dubai Properties, is keen to enter into the Indian realty space both through direct investment and joint venture initiative.

"We are very much interested to come to India. It is in our mind. But, we are yet to take a final call," Md.S Binbrek, Chief Officer (Portfolio Management), Dubai Properties told PTI here on Sunday.

Binbrek was here to showcase the projects, worth $90 billion, the company is currently developing in Dubai. Stating that the Indian market offers huge potential, he said that the market would grow further in tune with the economic growth.

Binbrek feels that India is blessed with all the inputs required for the growth of the real estate sector. "India has talent, human capital, all resources and what not? On the economic front, the country is doing very well. We will be very much interested to take part in the Indian growth story," Binbrek said.

There are a lot of opportunities in the Tier-I and Tier-II Indian cities as well, he added. Dubai Properties is engaged into development of properties in Dubai alone and is eager to increase its business in the country.

News: Indian industry expects exports to touch $125 bn target

(PTI 17/12/2006) New Delhi - Reflecting all-round optimism, an overwhelming 85 per cent of the respondents of a FICCI survey felt that the export target of $125 billion would be met in the current fiscal. "The results of the survey indicate the country is moving towards a phase of stabilisation in export growth," the Chamber said in a statement here. The high export growth rates of the last few months are likely to be maintained during the remaining part of the year with a low probability of surprises on the upside, the survey said. According to the findings, Indian exports are likely to witness growth in the markets of South East Asia, USA, SAARC countries, Middle East and the European Union. The survey covered 270 companies with turnover ranging between Rs 1-20,000 crore and representing sectors like automobiles, consumer durables, food processing, FMCG, textiles, handicraft, metal and metal products, heavy engineering, pharmaceuticals and chemicals. A majority of the firms expected improvement in industry level export conditions. A total of 68 per cent of the firms surveyed saw their export levels improving further. Nearly 48 per cent of the firms reported "moderate to substantially better" current overall export prospects in the second half of the current fiscal as compared to the first half.

News: Reliance Industries eyes Kurd oilfields

(BS 16/12/2006) Mumbai - Reliance Industries (RIL), the country’s largest private oil company, is seeking oil and gas fields in Kurdistan.

The Mukesh Ambani-controlled company is considering various options of entering the oil-rich region.

While it is in talks with the Kurdistan Regional Government for tie-ups with the region’s national oil companies, it is also considering buying oil fields on its own.

“Reliance is also in talks with an Indian company to jointly explore potential oil fields in Kurdistan. A deal could be finalised in six months,” a source close to the development said.

The country’s largest company in terms of market capitalisation is eyeing 3-4 oil fields in Kurdistan, an autonomous, federally recognised political entity located in northern Iraq. The oil sector forms a major part of the region’s economy.

Separately, a Reliance source said the company was also in talks with Oil and Natural Gas Corporation (ONGC) for joint exploration and production in an oil block in southern Iraq.

Sources said Reliance’s move to enter the oil-rich region in partnership with ONGC, is a move to tackle steel magnate Lakshmi Mittal’s increased presence in India’s oil and gas business.

“Reliance does feel threatened to an extent,” he said. ONGC’s joint venture with Mittal Steel, ONGC-Mittal Energy, has acquired oil blocks in Nigeria. Mittal on his own also acquired 50 per cent stake in an arm of Russian oil major Lukoil earlier this week.

A sector analyst says that while Iraq is sitting on huge oil reserves, tackling the geopolitical risks will be the primary concern of oil companies investing in Iraq. “Under the ground risks are low, over the ground risks are very high,” he said.

Iraq’s proven oil reserves of 112 billion barrels are second only to Saudia Arabia, which has the world’s largest oil reserves. In January 2005, Iraq opened its oil reserves to the world with the interim council of ministers inviting foreign oil companies to develop potential fields.

Some analysts, however, feel that risk-taking has paid off in the past, and are optimistic about Reliance’s chances in Kurdistan and Iraq.

When India’s largest upstream company, ONGC, had entered Sudan in 2003, that country was under US sanctions. “The Indian government still took the risk and it has paid off. There is no reason why this can’t be repeated,” the analyst said.

News: Peak Indian import duty at 10%

(BS 16/12/2006) New Delhi - In line with the consistent trend over the last few years of bringing down Customs duty rates, the forthcoming Budget is likely to see the paring of the peak Customs duty rate from 12.5 per cent to around 10 per cent. This is the same level as the peak rate of the Association of South East Asian Nations.

In June Finance Minister P Chidambaram had said the government would in the long term not look at import taxes as an instrument of revenue.

Sources told Business Standard that bringing down the peak Customs duty was being considered. More goods are also likely to be added to the exempt list.

Currently, capital goods attract a duty of 10 per cent, while there are sector-specific exemptions like the one provided to textile machinery, which can be imported at zero duty.

Even if a final decision to reduce the peak rate does not materialise in Budget 2007-08, there is a strong possibility that the government will reduce the duty for additional goods through an exemption notification.

Indications to this are already there and the idea of extending the benefit of concessional rate of duty will be guided by the need to provide a boost to sectors that will benefit from cheaper imports of plant and machinery items.

“The Asean Customs duty rate ranges between 5 per cent and 10 per cent, with most capital goods attracting a 5 per cent duty rate while the others attract a 10 per cent duty rate. There are a few items that attract more duty than this peak rate but that list is extremely small,” said Ashok Dhingra, partner and head of indirect tax at Khaitan & Co.

Dhingra added that over the last dozen-odd years, the government had consistently moved towards paring Customs duty rates from the effective rates of 100 per cent and more.

“In fact, in the early 1990s, the basic Customs duty rate stood at 85 per cent, which, added with a number of surcharges, took the effective rate to 100 per cent,” he said.

Dhingra believes such a move will makes sense, given the buoyancy in revenue collection and the possibility that the government will exceed targets in this regard.

Earlier this year, Finance Minister P Chidambaram had expressed confidence that Customs duty collection for 2006-07 would meet Budget estimates and perhaps exceed them.

For 2006-07, the government had budgeted Customs duty collection of Rs 77,066 crore against the revised estimate of Rs 64,215 crore in 2005-06.

According to Central Board of Excise and Customs data, Customs duty collection surged by 34.05 per cent during April-August to Rs 34,110 crore, compared with Rs 25,446 crore in the same period last year.

Chidambaram had also said the Customs department would have to face declining revenues from Customs duty in the coming years.

“I cannot tell in which year the decline will start. It will peak and then the graph will have to begin moving downwards when the duties are further lowered to, say, 5 per cent levels,” he had said, making it clear the government was not, for the long term, looking at Customs duty as an instrument of revenue.

News: Will India catch up with China in FDI?

(HT 16/12/2006) New Delhi - The gravitational forces are changing. China attracted a lot of foreign direct investment which, along with exports, became the driver of its economic growth. India was late in bringing in reforms but has now reached that critical mass which will draw investment from abroad.

Last year, China received $72.4 billion (Rs 3,25,000 crore) FDI or about eight per cent of the global foreign investment. India was way down with investment of only about $7.7 billion - though this is an underestimate because it does not capture all the investment going through the automatic route.

Even so, the FDI India received would be less than a fifth of what China did. India, however, has been a more attractive destination for equity investment, which has been partly responsible for the boom in our stock markets.

Investors had a reason to go to China. It offered far better terms to foreign companies in comparison to domestic companies. The former, for instance, pay 12 per cent tax while the latter pay 25 per cent. The system of contract labour made employment flexible. These incentives were a great pull and investment poured in from Hong Kong, Taiwan, Japan, South Korea and the United States.

China does not need foreign capital now as it did earlier. It has accumulated foreign exchange reserves exceeding $1 trillion. Foreign investment, on the contrary, is now causing worry. That is because foreign investors control 21 out of 28 key manufacturing industries and are responsible for more than 60 per cent of China's exports. Chinese domestic entrepreneurship has been overshadowed by foreign companies.

It is no wonder China is now wanting to bring back the level playing field which was skewed in favour of foreign companies. The tax rates will no longer be lower for foreign companies. Termination of employment will have to be done in consultation with labour unions. Mergers and acquisitions will be permitted taking into consideration 'national economic security'.

Equally, there is frustration on the part of foreign investors. Not all foreign companies could make the grade. Only a third succeeded. There is now a downturn in FDI and it is quite possible that 2005 may have been the peak year for China for FDI.

What China loses India may gain. It is not necessary, unlike China, to offer incentives. All that is required is to create a level playing field for foreign investors. There is no reason why foreign companies should pay a higher tax. The room for foreign investment has to be enlarged by increasing the percentage of equity they can hold and the number of industries they can invest in. It is in that direction that the policy is moving.

The future direction of global FDI is likely to be different. While investment in China will decline in the absence of incentives it will increase in India because of better opportunities. Possibly, in another three or four years India may overtake China in FDI and consequently in the rate of growth, if our government plays its cards well.

News: India a hot market for corporate jets

(HT 16/12/2006) New Delhi - Business class is passe, business jets are in. A booming economy and a general upswing in the aviation market have thrown open a major opportunity for large aircraft manufacturers Airbus and Boeing to tap an emerging market for corporate jets in which India has turned out to be a hot new destination.

The Airbus Corporate Jetliner (ACJ) Family, which includes the A318 Elite, Airbus ACJ and A320 Prestige models, has established a strong presence at the upper end of the business-jet market with 80 sales to date from global customers since the business took off in 2001.

Of these, 22 deals have been clinched in 2006, giving them their best year ever. All of the sales are for the Airbus ACJ Family aircraft, except for one VIP A330-200 to an undisclosed customer.

Airbus spokesman David Velupillai told Hindustan Times that "several" of these were for Indian customers, compared to a "handful" for Chinese buyers. Exact numbers are not disclosed, but industry officials say that "several" usually means more than 10.

Airbus delivered seven corporate jets in the first half of 2006, including the first for a US-based customer, Pharmair of Florida, and the first for an Indian customer, Vijay Mallya's UB Group. Reliance Industries also owns an ACJ family aircraft, industry sources say.

Similarly, Boeing Business Jets won 14 orders in 2005. "As of December 14, we have won 19 orders this year, nine of those are for our widebody VIP airplanes," a Boeing spokesman told Hindustan Times.

"We have sold four BBJs in India, three within the last year," the spokesman said, but refused to divulge the names of the customers.

The number of corporate jets in the country is expected to double to 300 in the next 18 months, industry officials say.

While the price range of Boeing Business Jets (BBJs) is between $48 million and $64 million, those of the Airbus series range between $45 million and $65 million.

However, both Boeing and Airbus command a small market share in the corporate jet business, unlike in passenger jets. Industry officials say Indian buyers may also have sourced from other jet-makers such as Brazil's Emrbaer.

According to the General Aviation Manufacturers Association (GAMA), which groups 50 leading aerospace manufacturers, global shipments of business jets during the first nine months of this year totalled 629, a 23.3 per cent increase over the 510 units delivered through the first nine months in 2005.

"Our manufacturers have seen growth in all airplane segments, part of which we attribute to strengthening sales in Europe, and into Russia, China, and India," said Pete Bunce, GAMA’s President and CEO.

News: Big fight over Indian cement supremacy

(TT 16/12/2006) Mumbai - A turf war is set to erupt in cement. Holcim and the AV Birla Group, the main players, are pulling out all the stops to quickly ramp up capacities to snatch an edge in the fight for market share.

While Gujarat Ambuja Cements and ACC Ltd, which are controlled by Swiss major Holcim, are jointly investing Rs 3,000 crore to ramp up capacities, the AV Birla Group, through the two companies in its fold, has mapped out plans to raise the capacity to 45 mt in the next couple of years.

Gujarat Ambuja today informed bourses that its board yesterday approved a capital expenditure of Rs 1,519 crore on a new cement plant with a capacity of 3 million tonnes (mt) per annum and two split grinding stations in Himachal Pradesh, to be commissioned by March 2009.

The company said the merger of Ambuja Cement Eastern with itself would take its capacity to 16 mt. Statutory approvals have been obtained and the merger will get retrospective effective from January 1, 2006.

Gujarat Ambuja is also implementing a Rs 1,050-crore project for a 3-mt plant in Chhattisgarh and setting up another grinding station in West Bengal.

These will be commissioned by March 2009, by which time the Himachal Pradesh plant will also commence production, taking the company’s capacity to 22 mt.

The ACC board, too, has approved an investment of Rs 1,480 crore to raise the capacity of its Wadi plant in Karnataka by 3 mt, taking its capacity to 24 mt.

After ACC and Gujarat Ambuja’s expansion are over, the combined capacity of companies where Holcim has a controlling stake will be around 46 mt — 24 mt of ACC and 22 mt of Gujarat Ambuja.

If Holcim is pumping in around Rs 3,000 crore, Kumar Mangalam Birla’s AV Birla Group is not far behind.

Analysts said the AV Birla Group through a mix of greenfield projects and acquisitions plan to take the capacity of its cement entities Grasim and UltraTech, which was formed after the AV Birla Group acquired the cement division of Larsen & Toubro, to 45 mt in early 2009 from 31 mt.

Grasim Industries recently signed an MoU with Orissa for a 3.5-mt integrated plant in the Sundergarh district at an investment of Rs 1,200 crore. To be the largest cement facility in the state, the plant will be commissioned in three years.

UltraTech has drawn up a capital expenditure plan of Rs 2,698 crore for the next three years. This includes captive power plants of 192 mw aggregate capacity in Gujarat, Chhattisgarh and Andhra Pradesh and a brownfield expansion project of 4 mt in Andhra.

Holcim entered into a strategic alliance with the Ambuja group last year when it acquired a majority stake in Ambuja Cements India, which had a 13.8 per cent stake in ACC.

Holcim simultaneously made an open offer to ACC shareholders through Holdcem Cement and Ambuja Cements India to acquire a majority in ACC. After the open offer, Ambuja Cements India’s stake in ACC was 34.69 per cent.

Early this year, Holcim acquired a 14.8 per cent in Gujarat Ambuja from the two promoters — the Sekhsaria and Neotia families — for Rs 2,100 crore.

Holcim strengthened its hold over Gujarat Ambuja last month when it acquired 5 crore more shares, or 3.7 per cent equity, from entities controlled by the Sekhsarias and Neotias, taking its holding in the company to 18.5 per cent.

This will rise to 23 per cent following the merger of Gujarat Ambuja with Ambuja Cement Eastern.

News: Wal-Mart’s arrival jolts more into action

(DNA 16/12/2006) New Delhi - The arrival of Wal-Mart on the Indian retail scene appears to have catapulted the cash-and-carry wholesale trade to the limelight. This is perhaps why two of its major competitors - Reliance Retail and Metro AG - appear to have put their expansion plans in the cash-and-carry business on the fast track.

Reliance Retail, which entered the business by opening its first Ranger Farm outlet in Hyderabad last month, has begun scouting for a suitable candidate to head it. Industry buzz points to Harsh Bahadur, managing director of German retail major Metro’s cash-and-carry operations in India at present, joining Reliance to head the Ranger Farm business. When contacted, Bahadur denied the move.

Then, Metro AG appears to have put its expansion plans on a twin track: not only has it decided to expand the cash-and-carry business, Metro also appears to be looking at the possibility of entering the front-end of the retail business by setting up its own outlets.

This is perhaps why the German major has entered into an agreement with ICICI Bank for identifying retail properties across Tamil Nadu, West Bengal, Andhra Pradesh, Delhi and Mumbai.

And if industry buzz is to be believed, Metro has begun discussions with some Indian companies for a partnership - it will need an Indian partner if it wants to enter the front-end of the retail business. While Metro’s discussions with AV Birla Group do not appear to have yielded any result, it is now looking at smaller retailers such as Samir Modi’s 24x7 for a tie-up.

Harsh Bahadur declined to answer the queries DNA Money posed on Metro’s expansion plans. Meanwhile, industry watchers aver that Reliance will need to rapidly scale up its Ranger Farm outlets, to keep pace with its front-end store expansion and the cash-and-carry wholesale business needs experienced hands on board.

News: 'India to contribute significantly in globalisation'

(PTI 16/12/2006) New Delhi - The World Bank today said India would contribute the most in the process of globalisation, which could spur growth in average incomes in the next 25 years in the world. However, unless globalisation is managed carefully, it could be accompanied by growing income inequality and potentially severe environmental pressures, World Bank Country Director Fayez Omar said at the launch of a report by the multi-lateral agency. "India would be on top of the list in contributing toward globalisation due to size of its population and performance of exports," Omar said. However, India would have to face the challenge of sustaining its economic growth and ensuring equitable distribution of this growth," he added. GDP in South Asia is estimated to have expanded at a very rapid pace of 8.2 per cent in 2006, with India leading the way at a GDP growth of an estimated 8.7 per cent, backed by non-agricultural growth in excess of 10 per cent. "This strong growth in the region is fueled by economic reforms that have promoted private sector-led growth, sound macro management and greater integration with the global economy," the report, Global Economic Prospects 2007: Managing the Next Wave of Globalisation, said. The report was launched today by Minister of State for Planning M V Rajasekharan, World Bank Acting Country Director Fayez Omar and Assocham President Anil Agarwal here. By 2030, 1.2 billion people in developing countries would belong to the "global middle class", up from 400 million today, constituting 15 per cent of the world population.

News: Egypt to take up investment issues with India

(PTI 16/12/2006) New Delhi - Pitching for Orascom, which has raised the hackles of security agencies in India, visiting Egyptian Foreign Minister Ahmed Aboul Gheit on Saturday said that there should be no hurdles for companies of his country as Egypt welcomes Indian companies.

Gheit said he would take up the issue with New Delhi. "In Egypt we have direct investment from India and we are hopeful that no obstacle should be put for companies coming to make direct investment in India," Gheit said after the trade meeting with Ficci.

Asked specifically about Orascom, which is the telecom operator in Pakistan and is seen as a security concern by the intelligence agencies in India, he said, "That is an issue really and truly has to receive the attention of both the governments".

News: How will finance flow for Mukesh Ambani’s giga plans?

(DNA 15/12/2006) Mumbai - Reliance Industries (RIL) is known for its ability to successfully plan and execute huge projects in its core business area of refining and petrochemicals with supreme efficiency.

And it’s hardly a secret that RIL has once again drawn up huge investment plans to backward integrate into oil & gas exploration and production, which, as per the company’s own estimates, would cost $5.2 billion.

That apart, RIL’s foray into retail is also estimated to cost a few billion (rough estimates put the figure at $2-3 billion).

Besides, its plan to set up SEZs, too, is estimated to cost a similar amount. Analysts haven’t put a figure in this case, as details of the venture are awaited.

While executing projects super-efficiently is one part, what about funding all this?

Recently, the RIL board gave a carte blanche to its treasury department to raise $2 billion overseas through a combination of equity and syndicated loans, bonds and FCCBs.

But that’s just $2 billion. What about the rest?

Marketmen say raising that should be a breeze. Says Amitabh Chakraborty, business head, privileged client group, Brics Securities: “It should not be a problem for Reliance. Every time they required funds, we have seen that they have managed to get it with a good mix of equity and debt.”

The multibillion-dollar question for the company-trackers is whether a convertible bond issue will mean a dilution of equity or whether RIL will again soak money through the debt route.

If RIL chooses the equity route, it could be either fresh (least likely option) or part dilution of treasury shares (12.2% stake in RIL) held by the trusts — the current market value of which is Rs 21,446.50 crore.

A Reliance spokesperson told DNA Money the company does not have plans to monetise the treasury stock.

Marketmen rule out both the options, at least in the near term.

Says Amitabh: “Right now we have no expectations on equity dilution, but we have seen that companies have diluted equity at appropriate times.”

One reason here could be the reasonably sufficient scope to leverage the company’s balance sheet. RIL’s debt to equity ratio stood at 0.46:1 as on March 31, 2006.

The company’s consolidated shareholders’ funds stood at Rs 51,028 crore and total debt at Rs 23,342.80 crore as on the same date.

“The company can comfortably go up to a gearing of 1 (or 1:1 debt-equity), besides the net debt: equity ratio would be lower adjusting for the cash and investments on the company’s books,” said an analyst with a foreign brokerage who tracks the company.

Add to this the company’s annual cash flows (see table), which, after meeting dividend and regular capital expenditure requirements, would add to more than Rs 27,000 crore over the next three years.

Plus cash flow from the oil & gas operations would start in 2008 latter half, while Reliance Petroleum’s new refinery will start in 2009-10. Big cash will flow in then.
And given that no major capital expenditure is planned in the core business, most of it can be used for investing in the new segments.

In this light, even if the total investment into new businesses and backward integration works out to $8-10 billion, raising resources, for the time being, is unlikely to be an issue for Reliance - until the petrochemicals cycle moves the other way anytime soon.

News: Rolls-Royce rolls out big plans for India, China

(Agencies 15/12/2006) Hong Kong - China and India are expected to form the thrust of super-luxury car marque Rolls-Royce's expansion plans in the next few years, chairman and chief executive Ian Robertson has revealed.

In an interview, Robertson said China had become the company's third-largest market in the past year and India was likely to close the gap soon.

He said China's four successful dealerships would be complemented with three more in the new year, while India - which recently witnessed a return of the brand after a 50-year absence - would see another outlet open in 2007.

"Growth in Greater China is unique, it's very special," said Robertson, in Hong Kong for the unveiling of a 14-strong fleet of Rolls-Royce Phantoms that will ferry guests of the famous Peninsula Hotel around the city.

"We've seen 60 per cent growth there this year - it has overtaken Japan as our biggest Asian market," he added.

"Usually 5 per cent either way means the difference between a great year and a not so great year in other markets; that gives you some indication of how big China has become."

For Rolls-Royce, Greater China encompasses Hong Kong, which in the 1990s laid claim to owning the highest per-capita number of the luxury cars.

Robertson said that title was likely to be held now by Los Angeles, which accounted for a third of all cars sold in the US, still Rolls-Royce's biggest market, ahead of Britain.

While, Hong Kong remains an important sales point, the company's three other Chinese dealerships in Shanghai, Guangzhou and Beijing are propelling the country's sales.

Guangzhou, the regional capital of China's wealthy southern industrial heartland, has seen terrific growth.

"At one point last year, sales in Guangzhou were neck and neck with those from our Beverley Hills dealership," said Robertson. "Beverley Hills has since taken the lead again."

Such is the pace of growth among Chinese buyers that the company is to extend its dealerships to Hangzhou, Shenzhen and Chengdu.

Leading the charge is Rolls-Royce's 2003-launched Phantom, the first car to roll off its new Goodwood, southern England production line following the company's acquisition by German auto manufacturer BMW in 1998.

Robertson expected Rolls-Royce to have sold 600 of the cars worldwide by the end of the year, a 16-year record for the former British company.

Among the milestones in the new car's history is the brand's return to India, which had snubbed the car for the majority of the past 50 years.

"After Indian independence Rolls-Royce was not made welcome, along with many other foreign brands," Roberston said.

With the country's recent economic growth has come a liberalisation of trade and Rolls-Royce opened its first Indian dealership in Mumbai last year. Another is planned for the capital New Delhi in 2007.

"We are particularly pleased with the return to India because it is the country we've had our longest relationship with," Robertson said.

"Our return was marked by very strong sales and we are expecting at least double-figure growth in the coming years."

News: 'India ranks higher than China in business competitiveness'

(UNI 15/12/2006) New Delhi - India ranks much higher in business competitiveness than China in a list prepared by the World Economic Forum besides other countries in the Asian region with regard to various other variables, the Finance Minister, P. Chidambaram, told the Lok Sabha. However, he said that they should not be "much enthusiastic" about such reports, as ''some of them are quite reverse putting India in bad light''. In this context, Chidambaram, replying to a query during Question Hour told a member not to take note of the International Finance Corporation (IFC) report that had placed India at 134th position among 175 countries as regard to various parameters of business environment. "The Government rejects this report," the Finance Minister said adding that such studies rarely affected the inflow of FDI in the country. Referring to the time taken to start a business in India, the Minister said that according a global study, ''while obtaining all relevant clearances takes 16.6 days for a project in developed OECD countries, this exercise needed around 32.5 days in countries of Asian region and nearly 35 days in India''. However, he said that attempts were being made by the government to improve the time-period for clearance from 35 days to 30 or even lesser in the near future. Chidambaram dismissed the demands for 'single window' clearance for the projects. ''The single-window clearance is a myth we are promoting unconsiously... for a project, clearance has to be taken from local municipal authorities, environment, power and other related bodies,'' he said, stressing that the time span for each clearance had to be reduced and made hassle-free.

News: India to push for stable oil prices

(PTI 15/12/2006) Beijing - Pushing for stability in oil price, Ministers from five major energy consuming nations, including India, are likely to issue a joint appeal to key oil producing countries to step up their investment and expand oil supply capacities at a meeting here tomorrow. The first-ever meeting of the energy ministers of the five major oil consuming nations is expected to issue a call to the international community to work together to send a clear signal to the oil market so as to enhance transparency and curb speculation to maintain stability. Minister for Petroleum and Natural Gas Murli Deora will attend the meeting which will brainstorm on ways to stabilising the volatile crude oil prices, vital for their economic growth and energy security. Apart from India, the other four participants are China, the United States, Japan and South Korea. China, the United States, Japan, South Korea and India consume nearly 45.5 per cent of the world's 3.77 billion tonnes of oil. But hikes in the oil price are constraining their economic development, Chinese media reported. Deora will chair a session on 'Major Challenges and Priorities for International Cooperation' in which India is expected to call for enhanced international cooperation to ensure stable oil prices. The in-camera meeting is expected to come out with a Joint Statement, reflecting the collective opinion of the five major oil-consuming nations, sources said. China is expected to be represented at the meeting by the Chairman of the National Development Reform Commission (NDRC), Ma Kai. US Energy Secretary Sam Bodman is expected to lead his country's delegation.

News: India to overtake China in GDP growth in 2007

(PTI 15/12/2006) New Delhi - India is set to surpass china as the fastest-growing economy in Asia next year on the back of increasing consumer demand and public investment in infrastructure, global research firm Credit Suisse has said. In its December forecast, the firm upgraded India's economic growth rate to 9.5 per cent in 2006 from 8.5 per cent projected in September this year. The economy would grow by 10 per cent in 2007 and 10.5 per cent rate in 2008, it added. Our most significant growth upgrade for 2007 is in India from 8.5 per cent to 10 per cent, surpassing China to become the top growth performer in the region, Credit Suisse research analyst Dong Tao said in the report. Besides, external liquidity in India remained a concern and interest rates could go up. The report also singled out India on external liquidity concerns and said most countries in the region maintained robust current account surpluses. The agency also increased the projected growth rate for China in 2007 to 9.9 per cent from 9.5 per cent forecast in September. Chinese economy is likely to grow at 10.4 per cent in 2006, it said. The overall Asian outlook for growth will weaken a little in 2007 compared to 2006, but strong domestic demand and some form of disconnect to the US demand should mean that Asia's growth stays relatively healthy, the report said. It raised Asia's growth forecast to 7.9 per cent for 2007 from 7.4 per cent projected earlier, compared to a revised 8.2 per cent for 2006. In 2008, regional growth is pegged at 8.3 per cent, the report said.

News: Metro Cash, Reliance rope in ICICI to spot property

(BS 14/12/2006) Mumbai - German retail giant Metro Cash & Carry and India’s emerging retail venture Reliance Retail have roped in the property services group of ICICI Bank for identifying retail properties for its proposed pan India expansion.

The retail companies, which are planning a rapid expansion in the next two years, will use the expertise of the Bank’s recently launched property services group to identify and acquire properties like malls and other retail spaces in various locations in the country.

While Metro Cash & Carry has studied the options of expanding into Tamil Nadu, Andhra Pradesh, West Bengal, Delhi and Mumbai next year, Reliance Retail – the newly launched retail initiative of the Mukesh Ambani-led Reliance group – has plans to open over 10-11 stores in all big cities in the country over one year’s time.

Sources said Metro Cash & Carry was already finalising a property at Bhandup in Mumbai through ICICI Bank to enter Maharashtra state and is scouting for more locations in Mumbai and other cities.

ICICI Bank had ventured into this specialised services for the booming retail sector about an year ago. With this, it provides services such as property tracking, identification, due diligence and negotiation with property owners among others.

Metro Cash & Carry India, which set up its first distribution centre in Bangalore, is likely to have five to six distribution centres in Tamil Nadu with a minimum requirement of about seven acres each covering 125,00 sq ft.

The investment for each centre would be up to Rs 70 crore. The company, a member of the German Metro Group, entered India in 2003 and has two distribution centres in Bangalore at present.

However , it is not yet clear that the company will get into consumer retail with local partners in the country. Since the current law does not allow FDIs in front- end retail in India, it is present only in the cash and carry (wholesale) format currently.

On the other hand, Reliance Retail will open neighborhood supermarkets in almost all the cities.

Reliance Retail, which last month opened its first 11 stores in Hyderabad, plans to open stores in another 783 cities and towns and 6,000 smaller towns by 2011.

News: Zee group to enter film production after 5 years

(BS 14/12/2006) Mumbai - Mumbai-based media house Zee is undergoing a massive restructuring and has decided to bet again on film production, link its cable business directly with subscribers and enter China while beaming a Chinese general entertainment channel into India.

Promoter Subhash Chandra and family used to hold 44 per cent equity in Zee Telefilms, which housed all its media and related businesses.

After the restructuring, which has created four companies, they will hold 44 per cent equity in Zee Entertainment Enterprises Ltd (earlier Zee Telefilms), 44 per cent in Wire & Wireless India (earlier Siticable Network), 54 per cent in news company Zee News Ltd and 67 per cent in Dish TV India (earlier ASC Enterprises).

Pradeep Guha is the chief executive officer of Zee Entertainment Enterprises Ltd, JS Kohli of Wire & Wireless India, Arun Kapoor of Dish TV and Harish Doraiswamy of Zee News. Puneet Goenka, Chandra’s son, is in charge of content at Zee Entertainment Enterprises Ltd.

Zee, which now controls 400 screens across the country through its Fun Republic, Digital Cinema and Bioscope, is coming back into film production after five years.

“We did not make anything after Gadar (starring Sunny Deol) because we received only Rs 38 crore of the Rs 150-160 crore the film earned. Unless you have your own distribution there is no point in making films. We will enter film production again and the first film will be released in May-June next year,” Chandra told Business Standard.

In the cable business, the group is connecting directly with subscribers by taking control of last-mile connections and has lined up Rs 500 crore as infrastructure investment.

The company’s grouse is that it gets paid for only about a third of its over 7 million cable subscribers. “We will make strategic acquisitions of cable operators or multi-system operators,” said Chandra.

The group recently tied up with CCTV, a Doordarshan-like general channel of China, and will soon start beaming it in India on its platform.

CCTV, on its part, is helping Zee enter China. “We are stabilising our operations in Russia, the Persian Gulf region and Indonesia and getting into China,” said Chandra.

News: Ritz-Carlton, Hillwood in India hotel deals

(RTR 14/12/2006) Mumbai - The Ritz-Carlton Hotel Co. has tied up with Nitesh Estates for a chain of premium hotels in India, the Economic Times said on Thursday.

The first Ritz-Carlton hotel will be in Bangalore, the newspaper said, quoting a senior official at the Indian developer as saying the two companies were in "serious discussions".

Indian Hotels Co. Ltd.'s Taj Hotels in November bought The Ritz-Carlton Boston hotel, the longest continuously operated Ritz-Carlton hotel in the United States, for $170 million. The hotel will be renamed Taj Boston.

U.S.-based developer Hillwood Corp. is also entering India in a joint venture with the founders of Asian Hotels Ltd. for a chain of Clarion brand hotels, the Economic Times said, quoting a senior official of the venture.

The venture, in which Hillwood would hold nearly a quarter, would invest about 4.5 billion rupees over five years to develop properties in big Indian cities, the paper said.

Global hotel chains are rushing to India, encouraged by a booming economy and a woefully inadequate supply of hotel rooms.

News: 'India could get upgrade if finances improves'

(RTR 14/12/2006) Mumbai - International rating agency Standard & Poor's (S&P) said on Thursday that India's credit rating could be upgraded to investment grade if it continued to improve its public finances.

"The outlook on the sovereign credit rating on India was revised to positive from stable in 2006, highlighting that if current credit improvements continue, especially on the fiscal front, India could achieve investment grade ratings," S&P said in its Asia Pacific Market Outlook for 2007.

Fitch Ratings and Moody's Investors Service both rate India's foreign debt at investment grade, but S&P assigns a rating just below that at "BB+".

The government cut the fiscal deficit to 4.1 percent of gross domestic product (GDP) in the fiscal year that ended in March 2006 last year from 5.9 percent in 2002/03.

The deficit is expected to fall to 3.8 percent of GDP this fiscal year as strong economic growth lifts net revenues, and the government wants to cut it to 3 percent by 2008/09.

S&P there was a risk to this outlook from a review of pay for government employees. A panel is due to submit its report in 18 months.

"Judging from the impact that the previous fifth pay commission had on both the centre and state finances, this could throw the steady fiscal progress into disarray," S&P said.

A similar pay panel in 1997 raised salaries for federal employees by nearly 40 percent and sparked off demands from states and other state-run company workers for wage increases.

S&P said that while the macroeconomic view was favourable for Indian stocks, the deficit could pose a risk.

"Some potential risk lies in the government deficit which has thus far been offset by a positive capital account, through foreign investment inflows," S&P said.

News: Hiranandani group raises $754 mln in London

(RTR 14/12/2006) Mumbai - Real estate group Niranjan Hiranandani raised 382.6 million pounds ($753.7 million) through a listing of its Hirco Plc unit on the AIM market of the London Stock Exchange, the company said in a Dec. 13 regulatory filing.

Hirco, a closed-ended investment company based in the Isle of Man, will invest in foreign-direct-investment compliant real estate projects in India.

Hirco will invest in five projects including townships and special economic zones, regulatory filings showed.

Regulations do not permit foreign investment in all areas of real estate, so Indian real estate firms spin-off some projects which are foreign investment compliant and raise funds from overseas investors.

Last month, Ishaan Real Estate Plc. of the Raheja group, Hiranandani's Mumbai-based rival, raised 180 million pounds in the AIM market.

HSBC Bank and Bear Stearns were managers to the Hirco issue.

News: Reliance Communications raises $1 b

(PTI 14/12/2006) New Delhi - Reliance Communication today concluded a $1 billion borrowing from the international markets amid reports that it was in talks with global equity players to acquire Hutchison's stake in its Indian venture.

RCL, a company of the Anil D Ambani Group, has raised the five-year unsecured loan, and the deal was facilitated by ABN Amro, Standard Chartered and Citibank, banking sources said.

The proceeds of the transaction, the biggest in the Indian telecom sector, would be used for "general corporate purposes".

News: Tata Motors and Fiat to float joint venture

(PTI 14/12/2006) New Delhi - Finalising their partnership, Tata Motors and Italian auto giant Fiat will sign a joint venture agreement to manufacture passenger vehicles, engines and transmissions for the Indian and overseas markets.

The two companies, which had in July this year signed a Memorandum of Understanding to establish an industrial joint venture in India, will announce the road-map for taking forward the partnership.

The announcement comes days after Fiat got approval from the Foreign Investment Promotion Board to invest Rs 2,000 crore in India that will be used at its plant at Ranjangaon in Maharashtra, where the two companies will undertake joint production

News: Citibank takes a micro view

(DNA 13/12/2006) Mumbai - Citibank has stepped up efforts to reach out to the under banked. After having launched biometric ATMs, the bank is now targetting small businesses.

“Small businesses and professionals are a priority for Citibank and we are committed to make business products for this segment,” said Rajiv Jamkhedkar, head of personal loans and business banking, Citibank.

The bank launched an offering for the small businesses and professional space - Citibusiness Power Access- on Wednesday. It is a privilege network, offering a suite of business and financial solutions and services, targeted at small businesses and professionals.

Citibank’s suite of such products was launched in May is year and the loan book has grown by over 50%. The bank, whose small business loans comprise 35-40% of its total retail lending, expects the new offering to accelerate growth further. Jamkhedkar expects a 25% growth in business next year.

The bank plans to focus on merchants, traders, small exporters, services providers and business professionals with annual turnover of less than Rs 50 crore. There is no minimum turnover, Jamkhedkar said. “We give business loans as low as Rs 3 lakhs and 5 lakhs. (In fact) small loans comprise 35% of the total loans from Citibusiness”

“The idea given the distribution challenges is to expand to a suite of customers,” explained Madhulika Gupta, director, corporate affairs, India, Sri Lanka and Bangladesh, Citibank.

The bank had commissioned a survey on small businesses “to understand their evolving needs, long term business plans and future outlook of this sector.” The study was conducted in five Asian countries, namely, Hong Kong, Singapore, South Korea, Malaysia and India with 677 respondents, 175 of which were in India.

‘The ability of small businesses to get into a close relationship with customers, to be flexible in pricing, and to make quick decisions gives them the advantage over their larger competitors,” the study found.

Shortage of finances and skilled staff were the main hurdles for more than 80% of the respondents. Funding for more than 70% of small businesses was either through personal savings (50%) or financing for banks.

Interestingly, 44% of the Indian businesses would like to grow their business and then pass it on to a professional management, while only 33% said they wanted to pass it on to their children. However, 51% of those who inherited their business said they wanted to pass it on to their children.

News: India may top China’s GDP growth in ’07

(DNA 13/12/2006) Hong Kong - If economic growth is a Formula 1 race, China has been outpacing India for over two decades. But now, at least one punter is betting that India will record a faster lap as early as next year.

On Wednesday, Credit Suisse revised GDP growth projections for Asian economies for 2007. Perhaps the most striking statistic is that India’s GDP growth for 2007 could, for the first time, be higher than China’s and reach double digits.

“Our significant growth upgrade for 2007 is in India,” says Credit Suisse chief Asia economist Dong Tao in his Asia Economics report. India’s GDP growth projection for next year has been bumped up from 8.5% to 10%. And though the forecast for China’s GDP growth too has been revised upwards by 0.1 percentage point, it is projected to fall a notch lower than India’s, at 9.9%.

DNA has learnt that one other international bank is revising India’s GDP projection for 2007 upwards.

Credit Suisse’s projections for 2008 read even better from an Indian perspective: it forecasts that India’s GDP will grow 10.5% that year, ahead of China’s 10.2%.

Finance Minister P Chidambaram had said in Parliament on Tuesday that the economy is “firing on all cylinders”. And, in an interview to the Wall Street Journal, he had said that the economy could accelerate to more than 10% per annum for the next five years.

India’s anticipated emergence as the top growth performer in the region is driven by strong domestic consumption and public investment, says Dong. China, on the other hand, is taking its foot off the accelerator and cooling down the economy, and this will “create room to unwind the tightening” in 2007.

Credit Suisse revised Asia’s GDP growth projections from 7.4% to 7.9% for 2007 and to 8.3% for 2008.

The report says that although inflation remains benign across the region, “we expect incremental interest rate hikes in India and China”. External liquidity remains strong in the region, except in India, it adds.

News: Barnes & Noble will pen India chapter

(DNA 13/12/2006) Bangalore - Barnes & Noble, the world’s largest bookseller and a Fortune 500 company, is planning to write an India chapter in its retail story. And guess who has it chosen to pen this story with?

Sources say it’s none other than retail major Future group, which owns brands like Pantaloon and Big Bazaar, and which operate through 3.5 million sq ft of retail space with over 100 stores across 25 cities.

According to sources, the US-based bookseller has already initiated talks with the Kishore Biyani-owned group for a possible tie-up to launch its book stores in the country.

“The talks are still at a preliminary stage. It is not known what format the US book retailer is looking at,” the source said.

When contacted, Future group CEO Kishore Biyani denied the development: “There is no truth in it,” he said.

The Rs 2,000-crore Future group already has a presence in book retailing through its Pantaloon Retail, but not on the scale of Barnes & Noble. The US book major, which also stocks music, DVDs, newspapers and magazines, currently operates 801 bookstores in 50 states.

It sells close to 445 million books per year through it online and offline operations and is the second-largest coffee house in the US.

News: DaimlerChrysler to increase component sourcing from India

(BL 13/12/2006) New Delhi - Automaker DaimlerChrysler today said it would source more components from India for its operations in other countries such as Japan, Germany and the US.

"Our sourcing from India has witnessed a compound annual growth rate of 20 per cent over the years and it will significantly go up in the coming years," said DaimlerChrysler Indian operation's chief, Wilfried Aulbur.

Aulbur said DaimlerChrysler is serving all the major markets through a group of Indian component makers and is looking at developing its vendor base in the country.

"Component sourcing from India is already the largest in South and South-East Asia and it will grow higher than the current level of 20 per cent,'' he said.

high-end products

The India chief said out of the total sourcing at present from the country, components account for 70 per cent with the remaining being services.

Aulbur said the company expects the market for high-end products in India to grow at a rapid pace.

The company had recently said it plans to set up a new plant in India, which could come up near Pune where it already has a manufacturing facility.

DaimlerChrysler India sold 1915 units in 2005, and expects its sales to grow at 15-20 per cent over the next few years.

News: 'More Indian ventures may reach out to AIM next year'

Kolkata - London Stock Exchange, which is keen to present AIM, its platform for smaller, growth companies as a sensible option before Indian corporates, intends to woo them on the strength of sheer numbers — more equity offers, growth in market capitalisation and a quantum increase in the number of India-related companies. Hugh Sandeman, Head of Business Development for India, LSE, answers a few queries.

How much do you think will be raised next year?

We really cannot hazard a guess. If the current trend continues, we may well see more Indian ventures reach out to AIM in 2007. It has already seen companies with operations in this country raise more than $1 billion. Infrastructure and real estate are both growing rapidly — these will need considerable funds in course of time. More than half-a-dozen companies have come to us this year.

How does India compare with China on this front?

There are over 40 Chinese companies with operations in China. In comparison, there are 10 India-related entities. The last one to arrive was a real estate outfit, which mobilised $ 340 million for investing in the rapidly growing Indian real estate market. Incidentally, a few other Asian countries are represented as well. As for the US, more than 50 companies have come on AIM in the last couple of years or so.

Of the 10, not too many are domiciled in India...

No, some of these are domiciled in the UK, while others are in Isle of Man and Cayman Islands. The point is there can be IPOs of businesses held by an Indian parent outside the country. Or even IPOs of shares in foreign outfits holding assets in India.

Listed Indian companies can also do follow-on GDRs. Last year, UK companies raised about $ 12 billion capital, both new and further. If you consider all overseas companies, $ 4 billion was raised in 2005. You may note that the Indian companies that have come to AIM represent diverse businesses. These actually include an entertainment company, one known for distribution of films.

What sort of liquidity issues that Indian companies are expected to face?

Liquidity on AIM is on the rise. Market capitalisation statistics make it clear that the last few years, beginning from, say, 2004, have been particularly encouraging. Values of shares traded have also moved up.

Some of the bigger AIM segments relate to mining, software/computer and support services. Internationally, mining companies account for about 26 per cent, while oil and gas producing companies, and industrial metals comprise roughly 20 per cent and 6 per cent, respectively.

News: India is Dubai's top export destination

(PTI 13/12/2006) Dubai - India remained Dubai's top export destination with transaction worth Dh 3.43 billion, as the emirate's total non-oil trade during the first nine months of 2006 grew by 10 per cent to Dh 231 billion. China, with exports worth Dh 19.80 billion, tops the list of the leading trading partners followed by India, with an export bill of Dh 17.10 billion. Imports formed the largest part of Dubai's non-oil foreign trade reaching Dh 158.78 billion, with diamonds, precious stones, semi-precious stones and precious metals topping the list with imports worth Dh 34.46 billion. Industrial equipment, machinery, electronics and spare parts accounted for Dh 20.44 billion of imports, followed by the automotive industry, at Dh 16.02 billion. A report compiled by Dubai World's Department of Statistics attributed the increase to general cross-sector growth in the economy, and particularly in the real estate market. The diamonds, precious stones and precious metals trade also led the export list recording transaction valued at AED 3.23 billion, followed by aluminum and related products at Dh 1.93 billion and sugar and confectionery items fetched AED 860 million in export orders. The report placed China with exports worth Dh 19.80 billion at the top of the pile of exporters to Dubai, followed by India (Dh17.10 billion). Other major exporter to Dubai are the US (Dh 11.50 billion), Germany (Dh11.14 billion), and Japan (Dh10.66 billion).

News: Raymond unit forms joint venture with U.S. firm

(BL 13/12/2006) Mumbai - The suit and apparel maker Raymond Ltd said on Wednesday that one of its units had agreed to form an equal joint venture with the US-based AJ Rose Manufacturing Co to set up a facility in India for making sheet metal components.

The facility would have an initial project cost of Rs 16.6 crore, the company said in a statement.

News: Private equity investors fall for India Inc

(TT 13/12/2006) Mumbai - It was an action packed first three quarters for private equity investors in India .

There were close to 246 deals aggregating $5.4 billion in the first nine months, much higher than the 169 deals worth $2.2 billion in 2005. According to a PricewaterhouseCoopers report on private equity investment in India, the focus on the country was due to expansion plans of Indian corporates to meet growing domestic demand and the opportunity to list gains through pre-IPO placements.

“Indian companies have already reached a stage where they have already created certain amount of value and infrastructure for themselves. Now, they need that capital to scale up. That explains the interest in Indian companies. Also, in the past one year, the returns on investments in Indian companies have been very high, thus making it a very attractive destination,” Sanjeev Krishan, ED, PricewaterhouseCoopers, said.

The past two years have seen a gamut of funds entering India such as Blackstone, 3i, Helion Ventures, New Enterprise Associates and Matrix Partners.

Even Indian players like IDFC Private Equity, ICICI Ventures, Reliance Private Equity and IL&FS have got a strong foothold.

However, these funds have been facing stiff competition from hedge funds and pre-IPO funds such as Farallon Capital, New Vernon, Soros Funds Management and Octant Capital.

A further sign of maturity is in the investments being mostly in late stage funding and private investment in public enterprises (PIPE) compared to the traditional seed or early stage funding of venture capitalists in other markets such as the US and Europe,

“It’s not that venture funding at an early stage is not happening, but in the last one year, we have noticed more investments in the late stages,” he added.

Investments are also being made across a wide variety of sectors, including automotive ancillaries, real estate, infrastructure and pharmaceuticals, indicating a gradual shift in focus from information technology.

“In the coming one year, we will see more investments in sectors like retail, real estate, healthcare, infrastructure and auto. But the shift will be gradual,” added Krishan.

However, due to the bull run on the bourses and the spate of successful IPOs, there have been an increase in valuations in the Indian market.

News: Mittal to buy half of Lukoil firm

(DNA 13/12/2006) Mumbai - Steel baron Lakshmi Mittal will pay Russia’s Lukoil $980 million (about Rs 4,400 crore) to buy 50% stake in a Kazakhstan oil firm.

His company Mittal Investment will undertake the deal though it is likely that it may rope in ONGC-Mittal Energy Ltd, a joint venture with ONGC Videsh at a later stage.

The deal with Mittal Investments that is expected to be in place in next few months has a debt component of $160 million.

The news was doing the rounds even as OVL chairman R S Sharma said they were willing to divest stake in Nigerian fields to Shell.

“We are talking to Shell because they have evinced interest in participating in the Nigerian blocks and their team was here,” Sharma said.

OMEL may give Total SA of France 18% stake in Block 279 and 26% in Block 285 in Nigeria. Shell may get 10-15%.

ONGC Mittal Energy, a joint venture of OVL and steel baron Laxmi Niwas Mittal, has three blocks in Nigeria. The company was earlier this year awarded OPL-246 which was auctioned by government after revoking licence of Nigeria’s South Atlantic Petroleum (Sapetro). It won the block by bidding $100 million, beating INC Natural Resources and BG-Sahara. The company has already got two blocks - OPL-209 near ExxonMobil’s Erha project and OPL-285.

Both ONGC and Mittal Investment Sarl dismissed speculation of their joint venture OMEL being in trouble with differences between the two partners. In a joint clarification, the companies said since OMEL’s incorporation, the company has successfully been awarded two prosperous blocks in Nigeria - OPL-279 and OPL-285. “The production sharing contracts for the two are expected to be signed shortly. OMEL is also in the process of being awarded another prosperous exploration block in Nigeria,” said the statement.

OVL’s subsidiary, ONGC Nile Ganga B.V. had acquired interest in a producing property in Syria along with China National Petroleum Corporation, a part of which is held by OMEL.

OMEL is also in an advanced stage of signing a farm-out agreement in respect of an exploration block in Turkmenistan. OMEL has also recently bid for an offshore block in Trinidad & Tobago. In addition, OMEL is looking for various opportunities including in Kazakhstan, Turkmenistan, Azerbaijan, Indonesia, which are at different stages of progression.

News: Subhiksha aims 1000 stores by 2007

(PTI 12/12/2006) Mumbai - Retail chain Subhiksha on Tuesday said it is investing Rs 500 crore to expand its network to 1000 stores by 2007.

"We are targeting a 1,000-strong retail network by end-2007. We are looking at providing customers across the country with a viable smart shopping option," R Subramaniam, Managing Director, Subhiksha Trading Services, said today.

The company is also targeting a turnover of Rs 3,500 crore by that period.

It has already raised Rs 80 crore through rights issue. The proceeds of the rights issue alongwith debt and internal accruals will fund the expansion plans, he said.

Outlining his plans for Maharashtra, Subramaniam said, his company planned to open 180 stores across eight cities in the state. "Of these, 100 would be in Mumbai alone."

Of the 100 stores in Mumbai, 80 are expected to be operational by mid-January.

The rapidly-growing retail chain has already crossed the 450-store mark across five states and presently has over one million square feet of retail space.

Today's announcement marks the final leg of Phase I of Subhiksha's expansion plan across India.

"With the implementation of our expansion in Maharashtra, we will complete our 600-store target. We will shortly activate Phase II of our expansion plans by foraying into the north and east," he said. Phase II involves Rs 200-crore investment in opening 400 stores.

News: 'Tata may up Corus offer, but not by much'

(RTR 12/12/2006) Mumbai - Tata Steel Ltd. may raise its bid for Corus Group Plc one more time, but will not be able to top the new offer of 515 pence per share from Brazil's CSN by much, analysts said on Tuesday.

As part of its strategy to avoid a drawn-out battle for the Anglo-Dutch steelmaker, Tata Steel may also directly sell its case to big shareholders such as Standard Life Investments, which owns 7.8 percent of Corus, they said.

The Tata group, which controls India's biggest private steel firm, Tata Steel, as well as its top software firm Tata Consultancy Services and top bus and truck maker Tata Motors aims to significantly expand it overseas operations, which already account for 30 percent of its revenue.

A source close to the Tata group said the group saw its bid for Corus as a strategic move, but the group was also ready to pursue other options.

"It is very clearly a good strategic move for the Tatas. If it doesn't happen, then they will move on. There are always other opportunities," he said.

The spokesman for Tata Steel declined comment.

Companhia Siderurgica Nacional (CSN) , which failed to strike a deal with Corus in 2002, on Monday offered to buy Corus for 4.9 billion pounds ($9.6 billion), or 515 pence a share, 3 percent higher than Tata Steel's raised offer of 500 pence a share.

Analyst estimates of the final bid by the Tatas varied from 520 to 540 pence a share, or 1 percent to 5 percent more than CSN, although local media reports said bankers were ready to fund the deal for 550 pence a share.

"I think the breakeven point is 540 pence a share," said Rakesh Arora, analyst at Macquarie Research.

Bhavin Chheda, head of research at Pioneer Intermediaries, said the Tatas may not go that far.

"I see it somewhere in the 520-525 pence range."

Analysts said an aggressive bid by the Tatas may hurt the company's shares, which have already fallen more than 13 percent since Oct 20, when Corus approved its initial offer of 455 pence.

Some analysts say Tata Steel may withdraw from the race.

"We feel that Tata Steel might not outbid CSN as it will stretch their balance sheet considerably and it might take a lot of time before synergies between Tata Steel and Corus materialise," Emkay Research said in a note.

Sumeet Rohra, an analyst with Antique Stock Broking Ltd. said: "It may be a good move for Tatas in the long run but the way global commodities cycle is going, the market is not ready to take a long-term view on the stock."

News: 'India, China to spur global jewellery demand'

(RTR 12/12/2006) New Delhi - Global jewellery sales have the potential to grow by almost 7 percent annually to reach $280 billion by 2015, spurred by India and China, an industry study said on Tuesday.

The global gems and jewellery industry is estimated at $146 billion at retail prices in 2005, the joint study by the Gems and Jewellery Export Promotion Council and consulting firm KPMG said.

The industry has grown at an average annual rate of 5.2 per cent since 2000.

"India and China are the emerging centres of jewellery consumption and have steadily increased their share," the report said, putting India's share of the global market at 8.3 percent and China's at 8.9 percent in 2005.

The study said current projections were for global jewellery sales to grow at 4.6 per cent annually to $185 billion in 2010 and $230 billion by 2015.

But with steps like identifying new jewellery products and consumer segments, reducing the cost of financing and maximising potential in emerging markets, the industry had the potential to grow to $280 billion by 2015.

"This would translate to a annual growth of 6.7 percent," Neelesh Hundekari, a KPMG official, told Reuters.

The United States is the world's largest market for jewellery, accounting for an estimated 31 per cent of sales in 2005. Eight key markets account for 75 percent of global sales.

"Palladium is expected to establish itself as an alternative metal for jewellery fabrication, while gold and diamond jewellery will continue to dominate the market together, accounting for about 82 per cent of the market share," said the study.

The study said growth in the industry would be slow in comparison to watches and perfumes or luxury apparel, which are expected to grow at 10-15 per cent over the next seven years.

DIAMOND SHIFT

India is the world's biggest exporter of cut and polished diamonds, with Mumbai being one of the main centres for the international diamond trade.

The report said the structure of the diamond-processing industry would change considerably, with India's share likely to drop to 49 percent in value terms by 2015 from 57 percent currently.

The industry is one of India's top foreign exchange earners -- generating around $17 billion last year -- and employs around 1 million people including traders, cutters and polishers.

By 2015 China will emerge as a strong player with a 21.3 percent share of diamond processing, the study said.

By 2015 around nine per cent of the world's diamonds, in volume terms, were expected to be processed locally by mining countries, with Angola, Namibia and Botswana emerging as profitable centres in Africa.

News: India's job market to remain vibrant, predicts study

(HT 12/12/2006) New Delhi - The job market in India will remain vibrant with companies in the mining and construction sector hiring liberally in the first quarter of the coming year, predicts the Manpower India Employment Outlook Survey for 2007, released on Tuesday.

Of the 4,742 employers surveyed in India, 41 per cent expected an increase in hiring activity in the first quarter of 2007, two per cent thought there would be a decrease, while 50 per cent did not expect any substantial change. The survey indicated a bullish sentiment in recruitment for the services sector but a fall in hiring in the insurance and real estate sectors.

Overall, the Net Employment Outlook was more than 39 per cent. Though this is a drop of three percentage points from the last quarter, on a year-on-year basis it represents an increase of 12 per cent.

Soumen Basu, executive chairman Manpower India said, "Hiring intentions are slightly more cautious compared to the previous quarter, but remain strong. Although the survey shows a significant hiring activity across all industry sectors, the mining and construction sector employers report the strongest hiring intentions, thus emphasising the importance of skilled labour in this domain."

The Global Employment Outlook Survey interviewed about 50,000 employers covering 27 countries to measure employment trends between January and March 2007. It revealed that employment prospects are strongest in Peru, Singapore, India, Argentina and South Africa. The weakest hiring activity is forecasted in Italy, Germany and France.

News: Jet charts global flight path

(TT 12/12/2006) New Delhi - Drawing up ambitious global plans, Jet Airways today said it would fly to three cities in North America and double the pilots on its rolls to 1,400 by 2008-09.

The airline also said it would fly to Bangkok from Calcutta and Delhi. The inaugural flights are from January 23 next year.

“We will be the 12th airline to fly international out of Calcutta and ours will be the 100th weekly flight out of the city,” a Jet Airways executive said.

Jet also has plans for flights from Mumbai and Chennai to Bangkok.

Jet CEO Wolfgang Prock-Schauer said Calcutta would be the gateway for onward travel to Buddhist holy sites. He also said the early morning arrival into Calcutta from Bangkok would also provide convenient connections to other cities served by Jet.

Sources, however, said Calcutta was chosen over other cities to cash in on the heavy traffic out of the city to Thailand. A Calcutta-Bangkok return ticket in the economy class is Rs 6,500 and in Club Premiere between Rs 18,500 and Rs 26,000. For Delhi, in the economy class it is Rs 13,500 and in Club Premiere, between Rs 28,500 and Rs 38,000 (These are introductory offers from Jet, valid for two months and exclusive of taxes).

Jet will fly to New York via Brussels next year followed by flights to South Africa, Kenya and another flight to San Francisco via Shanghai.

Jet expects to be a major player in the Gulf when the sector is opened up by 2008.

Prock-Schauer said Jet has targeted to earn 50 per cent of its revenues from its international operations by 2009. The share is now 20 per cent.

Jet, which commands 40 per cent of the domestic market, already flies to the UK, south Asia and Southeast Asia.

The Jet CEO said the company would take delivery of 22 long-haul, wide-bodied aircraft by October 2008 to be used for the international operations. The company plans to start flights to Toronto and Shanghai from October 2008.

Jet will face competition from entrenched player Air- India which is planning to expand its fleet.

News: Tata to launch Rs 1 lakh car with petrol engine initially

(PTI 12/12/2006) Mumbai - Tata's Rs one-lakh car will initially be available only with a petrol engine and have the capacity to accommodate five persons, Tata Motors managing director Ravi Kant said on Tuesday.

"We may think of introducing a diesel version depending on the market situation," Kant told senior editors at a luncheon meeting.

The car’s looks are "unexpectedly fabulous". The car's space is slightly less than the Tata Indica, he said.

Asserting that Tata Motors is committed to its 2008 deadline to roll out the small car, Kant said it is "certainly not a modification of autorickshaws but "a state-of-the-art car with a swanky look".

According to the company's plans, Tata Motors intends to initially manufacture 2.5 lakh cars and this will be stepped up to a million cars in three to four years, for which a demand would have to be generated.

Asked if he expected more automakers to enter the fray, Kant said his company is not afraid of competition and this is the first time a small car has been indigenously developed in India - a development that was keenly observed the world over.

"It will be an indigenous car," he said, adding the car would be manufactured for the domestic market and exports would be considered at a later stage.

News: 'Five lakh people will be employed in SEZs by 2007'

(BL 12/12/2006) New Delhi - There will be five lakh people employed in SEZs by 2007, said L.B. Singhal, Director General, Export Promotion Council.

He was chairing the session on SEZs at the Conclave 2006 — A National Symposium on `Burning Issues in Corporate Finance', organised by the Institute of Management Technology (IMT), Ghaziabad. He brought to light how India started experimenting with the concept of SEZs in 1965 with the set up of Kandla port. Dr B.S. Sahay, Director, IMT-Ghaziabad and Dr Parthasarathi Shome, Advisor to the Union Finance Minister, were the keynote speaker for the event.

News: Israeli firm to invest $ 1 b in India

(PTI 12/12/2006) Jerusalem - An Israeli firm, Elbit Medical Imaging, is planning to invest $1 billion in India to build a chain of hospitals, hotels, malls, offices and residential complexes.

The owner of the firm, Mordechay Zisser, and Vice Chairman of the firm, Abraham Goren, were in India last week and are close to finalising deals in this regard, which are in the advanced stages of negotiations, daily Ha'aretz reported.

Elbit's largest project in India involves establishing a chain of hospitals in partnership with Ambuja Realty.

The first hospital, which will house a thousand beds, will be built in Kolkata at a cost of $230 million, the report said.

A biotechnology centre will be located next to the hospital, construction of which is slated to commence in four months, it said.

Elbit and Ambuja, the leading Indian cement company, also plan to establish a joint company of equal ownership that will construct at least 18 hospitals in major cities across India as well as a medical college and nursing school, the daily said.

The joint company will also operate the hospitals.

The Indian-Israeli joint venture will facilitate telemedicine, long distance consultation and exchanges of doctors for training and operations.

Indian doctors will also be send to Israel to attend training seminars, the report said.

News: Citi lines up billion-dollar realty blitz

(TNN 11/12/2006) Mumbai - Amid the frenzy of real estate deals, Citi, the world’s largest financial services group, has quietly sewed up half-a-dozen property deals worth over $400 million in the past few weeks. The group is also in the process of signing other major deals, including a joint venture with mortgage leader HDFC and US-based Portman Holdings. Citi, which is the single-largest foreign direct investor in India’s financial services industry, is readying itself to invest over $1 billion in the real estate sector here, sources told ET.

Citigroup is stepping in through Citigroup Property Investors (CPI) India, a Mauritius-based company financed by a fund in Cayman Islands with limited liability. CPI India has raised $500 million through an India-dedicated fund, mainly from the US pension funds and high net worth individuals, and is an aggressive player here. Sources said it may raise more funds to invest in realty.

Sources said Citigroup will invest in FDI-compliant projects in Mumbai, Delhi, Chennai, Bangalore and Pune. “It has concluded 4 deals over the last couple of weeks, and invested over $150 million, with the total commitment running into $400-500 million. It is also ready to sign another 4-5 deals, involving equity sharing with local companies,” they added.

CPI India has teamed up with HDFC and Portman to float a JV, which will set up a large five-star facility in Mumbai, with a cumulative capex of $250 million. HDFC is likely to invest through its real estate fund and pick up 5%, while Portman will pick up another 5%, sources said. The remaining 90% will be held by CPI India.

The group has also joined hands with a Delhi-based real estate company to set up an IT park in Noida. It will invest up to Rs 80 crore in the 50:50 JV, according to sources. CPI India has also set up a 50:50 JV with Pune-based Gera Developments for a residential project in the city.

Citigroup is also looking at developing 5-6 hotel projects, with two being finalised in Bangalore and Chennai through a Chennai-based company. Initial investments could go up to $100 million.

The group has been bullish on residential, commercial, hospitality and special economic zone (SEZ) projects in India. The group is being advised by FoxMandal Little, a Delhi-based law firm. Citigroup was earlier planning to tap India’s real estate through the foreign venture capital (VC) fund route, and had approached the RBI with a proposal. However, RBI has not allowed any foreign VC funds in real estate so far and has over a dozen applications pending.

Apart from Citigroup, many other foreign funds floated by groups like Blackstone, Goldman Sachs and JP Morgan are either taking exposure in domestic VCs or directly in FDI-complaint real estate projects.

News: Mumbai realty prices up 35 per cent

(BS 11/12/2006) Mumbai - Residential property prices in south Mumbai continue to soar. The office of inspector general for stamp duty and registration has completed the revision of the ready reckoner for property prices in Mumbai and elsewhere in the state.

As per the revisions, property prices in the city and other places in the state have increased by 5 per cent to 35 per cent.

However, the details of the exact increase in the prices are not known as the file is currently on the revenue secretary's table for his approval. It will go to revenue minister for the final approval, according to sources close to the development.

According to sources, prices of commercial properties in traditional business district of south Mumbai have remained more or less same or witnessed marginal increase.

But they have substantially increased in now what is called alternative business districts of Worli, Lower Parel, Shivri, Bandra-Kurla Complex, etc.

However, residential property prices in south Mumbai continue to soar.

There is an increase of almost 35 per cent in areas like Colaba, Malbar Hill, Nariman Point, etc.

It also reliably learnt that mill land properties have been segregated for stamp duty purposes from the rest of properties in Dadar, Lower Parel, Shivri and adjoining areas as mill lands or residential or commercial properties which have come up thereon command much higher prices than other old properties in the same locality.

Besides this, the government is also contemplating amending rules and charge stamp duty on carpet area instead of the built up area as has been the practice to make stamp duty policy consistent with the recently announced housing policy.

In the new housing policy announced recently, the government made it mandatory for builders to sell residential properties on the basis of carpet area so that consumers know exactly what and how much they are paying.

News: L&T bags Rs 5400 crore Delhi airport contract

(BS 11/12/2006) Mumbai - GMR Industries-promoted Delhi International Airport (P) Limited (DIAL) has awarded Larsen & Toubro (L&T) the contract for design and construction of terminal, runway and associated works of the Delhi airport.

The deal, valued at about Rs 5,400 crore will give shape to the Master Plan unveiled by GMR-DIAL recently. The Master Plan envisages the design and construction of a new terminal and a runway for the modernisation and upgrade of the Delhi airport.

The passenger terminal building (Terminal 3) will cater to both domestic and international passengers. It will house more than 130 check-in counters, 50 emigration and 48 immigration counters to reduce waiting time for passengers.

Spread over 4.4 million sq ft, T3 will have 74 aerobridges and 30 remote parking stands for aircraft. Besides, 56 passenger travelators will make commuting within the terminal easy. The contract also includes installation of elevators and escalators, baggage-handling systems, IT, security, electrical and mechanical systems.

T3 will be ready well in time for the Commonwealth Games in 2010. With T3, the total capacity of the Delhi airport will go up to 37 million passengers a year by 2010.

L&T will also construct a new runway measuring 4,430 metre that will be ready by 2008. The Code F runway will be able to handle A380 aircraft.

The runway will be among the longest in Asia and will be equipped with CAT IIIB instrument landing system. The contract also involves the construction of connecting taxiways, satellite fire fighting facilities, among others.

In addition, the project involves the development of airside works comprising aprons, remainder taxiways, cargo terminals, aircraft maintenance facilities, utility services and other primary infrastructure support facilities.

Landside works involve a six-lane road connecting the terminal and national highway NH-8, a new multi-storey car park to accommodate 4,300 cars and forecourt for terminal T3, among others.

DIAL is a joint venture company consisting of GMR group, Airports Authority of India, Fraport, Eraman Malaysia and India Development Fund.

News: Indian retail giants, railways in talks for leasing land

(BS 11/12/2006) New Delhi - India’s retail giants, including Kishore Biyani’s Future Group, Mukesh Ambani’s Reliance Retail and Sunil Mittal-promoted Bharti group, have started negotiations with the railways for leasing land for retail development.

The companies are also looking at an alliance by which they will use the railways’ network for their supply chain by carrying their products to different warehouses across the country.

“We have had talks with Indian retail chains, which have shown interest in leasing our land to set up retail outlets. They also want to use our network for transporting their products across the country,” a railway official told Business Standard.

Retail companies are also looking at tying up with the railways for setting up warehousing and a cold chain.

The railways expect to earn about 4 per cent of their projected revenues next year from retail-related activities.

With over 44,000 hectares of vacant land they want to commercially exploit, the railways set up the Rail Land Development Authority this year for this purpose.

They have been looking at various options of using the land, including setting up retail outlets, hotels, a cold storage network and warehouses.

They will soon formulate a clear policy framework for use of the land, especially in retail and warehousing, after discussions with the corporate houses.

News: USA to boost India's electronic sector

(HT 11/12/2006) New Delhi - India will seek support of US Information and Communications Technology (ICT) majors in its efforts to become an electronics and IT hardware manufacturing hub.

The Confederation of Indian Industry (CII) and the Ministry of Communications and IT will take up this key issue at the business meeting with the US and Indian government officials and industry leaders to be held on Tuesday.

During the discussions at this meeting, the Indian industry leaders will highlight on Electronics and IT hardware manufacturing industry being the priority sector for the Indian government and a key off-shoring business for the US technology industry provides an attractive opportunity for enhancing bilateral trade in the ICT sector.

Deepak Puri, chairman Moser Baer, told Hindustan Times, "We will make our friend from US aware that India can be a manufacturing hub because in this sector even 'unemployable can be employed' and still excel in the hardware. We have excelled in design and conceptualisation the missing block was manufacturing. "

As part of this effort, Puri has requested Communication and IT minister Dayanidhi Maran on behalf of the ICT industry to lead a team to showcase the prowess of Indian manufacturing in ICT on May 15-17 at Santa Calra in US.

The meeting would be part of the Indo-US ICT Working Group set up in December last year during the visit of Prime Minister Manmohan Singh to the US.

The working group is co-chaired by the US State Department's Coordinator for International Communications & Information Policy Ambassador David Gross and additional secretary M Madhavan Nambiar of the Department of Information Technology from India.

Three industry subgroups focusing on, information technology, telecommunications and media and broadcasting are likely to be set up on Tuesday.

India Manufacturing Foundation president NK Goyal said, "It was long overdue and any delay in developing India as a manufacturing hub would be detrimental to its future growth in the ICT sector."

The Chairman of the National Manufacturing Competitiveness Council ( NMCC), V Krishnamurthy will highlight the potential of India to become a key hub for manufacturing in Asia.

Vikram Tiwathia, chief information officer CII said, "In addition to setting up of the sub-groups, the meeting will also discuss the approaches the governments can take to create a supportive investment and regulatory environment that can maximize the development in the ICT sector."

In addition to the senior government officials the meeting would be attended by senior executives from telecom majors like Qualcomm's, Sean Murphy, Vice President for International Government Affairs, Kathy Brown, Senior VP for Policy Verizon, and from IT industry Joe Joe Aldenhoff, VP and Chief Privacy Officer Oracle, Harriet Pearson, VP and Chief Privacy Officer IBM.

The media and broadcasting industry would have representations from Rick Rossow, Director of Operations, United States India Business Council TimeWarner, Hugh Stephens, Senior Vice President for Public Policy Discovery Communications and others like Sony, Disney and NewsCorp.

News: Signs of overheating abound in the Indian economy

(TT 11/12/2006) Mumbai - The 9.2 per cent growth in gross domestic product during the second quarter of the year is, of course, a reason for celebration. The macro numbers underline what had already been made clear by the second-quarter corporate results — the fact that earnings growth has not only shown no signs of deceleration but has instead accelerated.

Such a high rate of growth will naturally fuel talk of overheating. The finance minister, of course, has dismissed such talk as premature. Nevertheless, there are some signs of strain.

First, take a look at the consumer price index numbers. The base year for the consumer price index for industrial workers (CPI-IW) has been revised recently, so the government doesn’t give the year-ago numbers. Nevertheless, the index was at 120 in April and at 127 in October, which gives an inflation rate of 5.8 per cent over the six-month period between April and October 2006. Last year, the rise in the index between April and October was 3.6 per cent.

If we take the consumer prices index for urban non-manual employees (CPI-UNME), the rise in the index between March and September (this is the last month for which data are available) has been 5.4 per cent. Compare that with the rise of 3.8 per cent of the index during the same period last year.

And finally, if you take the consumer price index for agricultural workers and rural labourers, the rise has been 5.6 per cent between April and September this year compared with 3.8 per cent over the same period last year. To cut a long story short, whichever way you slice and dice the data, inflation is much higher this year.

Signs of overheating are also clearly visible in the housing market, with the news about a record sum of Rs 73,000 per square foot being paid for a flat in Cuffe Parade, Mumbai. A recent survey by property consultants CB Richard Ellis says occupancy costs for prime commercial space in Mumbai and New Delhi have risen by 75 to 100 per cent in the past year. That’s not all — these cities are also moving up the league tables of the world’s most expensive business locations.

Mumbai, ranked 15th last year, has now moved up to seventh, while Delhi, which was a lowly 36th last year, is now at number 11. One reason for the rise of property prices in Delhi is because of the crackdown on unauthorised shops in residential areas, but that doesn’t explain the phenomenal increase in Mumbai.

Yet another sign of overheating lies in the Hewitt salary survey that showed India had the highest average salary increase in the Asia-Pacific region. The gap between salary increases in India and the Philippines, which came in at number two, was over 5 percentage points. What’s more, a similar order of salary increases is expected in 2007 as well.

The rise in salary and real estate costs may at the moment be offset by even higher revenue growth among companies. However, if demand starts to flag, companies’ earnings will be hit and it would be difficult to sustain the high valuations in the stock market.

The final warning sign comes from the current account. The deficit in the current account in the country’s balance of payments was $6.1 billion in the first quarter of 2006-07. In spite of all these factors, however, liquidity has been so high, thanks to the flood of money pouring into the country, that the yield on the benchmark 10-year government bond is around 7.4 per cent, more than 100 basis points lower than where it was in mid-July. No wonder, the RBI has raised the cash reserve ratio to 5.5 per cent.

News: Tata Steel ready with Plan B to thwart rival

(TT 11/12/2006) Calcutta - The Tatas have a flexible option built into their strategy to beat off the CSN offer for Anglo-Dutch steelmaker Corus which is expected to be tabled this week.

The Tata offer on the Corus table is a management-backed scheme of arrangement that will require the support of 75 per cent of the shareholders present and voting on the proposal at the extraordinary general meeting (EGM) due to be held on December 20.

But in the face of a competing bid, the Tatas have the option to re-categorise it as a takeover offer. This is more than a matter of semantics and indicates just how well the Tatas have crafted their strategy to acquire Corus.

There are two ways to acquire a company in UK: the first is through a takeover offer and the other is through a scheme of arrangement. Tata Steel is pursuing the latter route at the moment. Secondly, Tata Steel and its wholly owned subsidiary have also kept the door open to reduce the acceptance condition of shares from the level of 75 per cent.

Observers feel that both conditions will come in handy if the Tatas decide to wage a bidding war with CSN, which looks increasingly likely.

Tata Steel won the Corus board’ approval for a 455 pence a share bid on October 20, but CSN trumped it with a higher offer of 475 pence on November 17.

After CSN made its indicative offer, the Corus management decided to adjourn the court-appointed EGM till December 20 to give CSN more time to put up a firm bid.

This has fuelled speculation about what the Corus board will do if CSN makes a firm and a higher offer. When contacted by The Telegraph, John Bennett, head of corporate law at London-based law firm Berwin Leighton Paisner (BLP), confirmed that Corus directors were free to recommend and pursue an alternate scheme.

If that happens, the clauses tucked into the Tata offer document will give the Indian company the option of launching an outflanking manoeuvre.

This is because the takeover offer will allow it to pursue Corus without its management support which is mandatory in the case of a scheme of arrangement.

“A scheme is a scheme of the target company and the process is therefore controlled by the target company. This could be a problem if there is a higher competing offer. If the target directors switch allegiance in these circumstances, the bidder would want to take control of the process by making a takeover offer,” Bennett said while seeking to explain why the Tatas may have kept this option open.

The acceptance clause also enables the Tatas to deal with a situation if there is a competing offer for Corus.

The City Code of Takeover and Mergers of UK stipulates a minimum acceptance level at 50 per cent.

Thus, if Tata feels that it would not be able to garner such a high acceptance from shareholders, it may choose to lower the acceptance threshold from 75 to 50 per cent.

News: Hope vs reality - Tatas may be losing the plot on Corus

(DNA 11/12/2006) London/Mumbai/Kolkata - Masterstroke or mess-up? Tata Steel’s decision to raise its bid for Anglo-Dutch steelmaker Corus Group to 500 pence a share just hours before being outbid again by Brazil’s Companhia Siderurgica Nacional (CSN) at 515 pence has raised eyebrows all around.

Why didn’t the Tatas wait for the CSN bid before announcing their own offer worth $ 9.16 billion (Rs 40,972 crore)? What did they gain by bidding first and getting the Corus management to back it when the board would anyway have had to reconsider a higher bid from CSN, valued at $9.6 billion?

As a matter of fact, Jim Leng, Corus chairman, who had backed the Tatas’ Sunday night offer, approved the CSN bid, too, on Monday morning. “This offer is both higher than the initial proposal by CSN as well as the revised Tata offer of 500 pence a share. It is consistent with our strategic objective of securing access to raw material, low cost-production and growth markets,” said Leng. “The combination of the two businesses will create a strong platform from which to compete and grow in an increasingly global market,” he added.

If that is not a wet blanket for Tata hopes, one wonders what is. But some observers did see elements of strategic thinking behind the Tata bid.

Says Harish HV, head, mergers & acquisitions, at Grant Thornton India: “It was a well-thought-out ploy. It wouldn’t have made sense to bring an offer which is lower after CSN had made a higher bid.”

“It was clearly a pre-emptive move by the Tatas to ensure that the CSN bid is rich enough and that the Brazilian steelmaker is financially stretched”, says Sanjeev Krishan, executive director at PricewaterhouseCoopers (PwC).

If that was the objective, it may well have been achieved, but that’s not the same as saying that Tata will win. Some astute observers of the steel scene believe that the Tatas will probably call it quits now since the price target is moving too high.

“The price of 515 pence a share is more on the upside and the next offer has to be 530 pence, which is unlikely to happen. It is quite possible that Tata will take a step backwards and pull out,” says Raju Deswani, steel analyst and global publisher of Metal Bulletin.

CSN clearly is digging in for a fight. CSN chairman and chief executive Benjamin Steinbruch said on Monday: “The strategic impetus for this combination (Corus plus CSN) is growth - in Brazil, in Europe and for our combined workforces”.

Against this backdrop, Tata hopes now centre around one of three points. One, the pension trustees will back its own bid over CSN. Two, the shareholders’ meeting convened on December 20 will give it the thumbs up. And three, it can raise the bid once again to top CSN’s. On Monday, the Tatas declined to comment on the CSN bid beyond saying it was “considering the position after the latest development.”

Observers in London rule out the possibility of Corus shareholders settling for anything less than the CSN bid just out of love for the Tatas. Nish Kotecha, founder of Sphere Partners, a financial advisory firm, said there was no question of the Corus management rooting for Tata. “There is no inside edge. This is about shareholders and price. They will want the best for their employees, shareholders and pension funds and if the management doesn’t want to work with a particular company then they can leave,” said Kotecha.

A tiny sliver of hope revolves around what the Corus pension trustees will do. Tata Steel had earlier said it would fill the £123m deficit in the Corus pension scheme immediately and increase contributions to the British Steel scheme from 10% to 12%, which is in surplus.

But sources in the merchant banking business pointed out that CSN has offered an equally good option, by paying £138m immediately into the Corus pension scheme and increasing the contribution rate to the company’s larger British Steel pension scheme from 10% to 12% until March, 2009.

The only real chance for the Tatas, then, lies in making a higher bid. “The current bid can at best be a semi-final,” Krishan of PwC says.

He believes there is more to come before Corus shareholders head for their December 20 meeting.

But the consensus among analysts is that the Tatas, if at all they had planned to surprise CSN, have not quite succeeded. The Brazilians returned the salvo in hours, promising an engrossing auction battle in the coming days.

Why is Corus so precious?

Whoever buys Corus will become the fifth largest steelmaker in the world. Both Tata and CSN want to buy Corus to add mills in Europe that supply automakers Ford and Volvo. Surging demand has spurred $78 billion of mergers in the industry this year. Tata wants Corus as an entry-point to end-customers. CSN wants Corus as an outlet for its iron-ore production, says Tom Muller, an analyst with Theodoor Gilissen Bankiers in Amsterdam.

Why did Tatas bid before CSN?

Some analysts say it wouldn’t have made sense for the Tatas to bid lower than CSN after the latter had made its offer known. Moreover, the Tatas may have thought
that if the Corus management backs them, even a lower bid might work. Another school of thought is that the Tatas bid first to make sure that CSN will have to bid higher, stretching its resources further.

Are bidders paying too much?

Investors said Tata Steel and CSN may be paying too much for Corus. Lakshmi Mittal’s offer for Arcelor was 4.56 times the Luxembourg-based company’s earnings before interest, taxes, depreciation and amortisation, or Ebitda.

CSN’s bid is 5.73 times Corus’s Ebitda, based on the UK steelmaker’s earnings in the 12 months to June 30. Tata’s offer is 5.03 times Ebitda. Whoever wins will use Corus’ cash flows to repay the loans taken for the bid.

How is the battle shaping up?

As things stand now, only the pension fund trustees stand between Corus and CSN. If they back CSN, it is highly unlikely that Corus shareholders will accept a lower Tata bid at the forthcoming December 20 meeting. The Corus management has already shifted allegiance from Tata to CSN after the latter’s 515 pence a share bid. The only way for the Tatas to get back into the game is to bid higher. The betting is that the Tatas will call it quits now.

News: Tata group picks up less than 10% in SpiceJet

(RTR 11/12/2006) New Delhi - Tata group on Monday said it had picked up "less than a 10 per cent stake" in domestic budget airline, SpiceJet Ltd., in a deal an industry source valued at about $22 million.

The source added existing investor Istithmar, a Dubai-based investment firm, would raise its stake to 15 per cent from 10 per cent this month.

"It is not a strategic investment, purely a financial one," a spokesman for the Tata group, who did not want to be identified, told Reuters.

"There is a board meet scheduled later in the afternoon to discuss fund raising," a SpiceJet official said without giving further details.

An industry source close to the deal said the carrier had "issued fresh equity" for a "qualified institutional buyer deal for about 7-8 per cent of the company's current market cap".

"They have not done a preferential (allotment), and equity of their directors has not been diluted," the source, who declined to be named, said.

In November, New Delhi-based SpiceJet said it was in talks with Indian and foreign strategic investors for a "plain-vanilla equity sale" to raise $60 million and hoped to finalise terms and conditions with investors by end-December.

Spicejet has already raised money twice -- through a $80 million overseas convertible bond issue and a $12.5 million stake sale to Istithmar -- since it began operations in May 2005.

The airline's revenues for the business year ending May crossed Rs 453 crore and it hopes for 100 per cent annual growth in sales.

News: Govt to hike insurance FDI to 49%

(IM 11/12/2006) Mumbai - The hike in Foreign Direct Investment (FDI) is taking longer time to materialize than expected. Since budget 2004-05, a bill to this effect has not been considered as yet in the parliament.

The opposition from the Left is so strong that the current session of the parliament may possibly pass by without any final decision made on the FDI hike. Under the present scenario, in a joint venture of an insurance company, the foreign partner can hold a stake of 26% only. More and more insurance companies are pressing for the much-awaited FDI hike to 49%, so that they can infuse more capital.

However, all said and done, the government is considering to raise the FDI limit soon. Since the time the insurance sector has opened up, insurance penetration has grown with reasonable profits made in the business underwritten, new premiums, etc.

News: 'GDP growth seen at 8.6% in FY07'

(RTR 11/12/2006) New Delhi - An industry lobby group on Monday raised India's economic growth forecast to 8.6 per cent for 2006/07 from 8 per cent earlier, despite hardening of interest rates and higher inflation.

India's gross domestic product (GDP) was up by 9.1 per cent in the first half of the fiscal year to March 2007, and the prime minister said on Saturday he expected the economy to sustain 8 per cent growth during 2006/07.

The Confederation of Indian Industry (CII) said in a report the economy is likely to grow by 8.2 per cent during Oct-March compared with 8.4 per cent in the same period last fiscal.

The lobby group expects industrial growth to be 9.1 per cent in Oct-March period, higher than 8.5 per cent in the same period a year ago but lower than 10 per cent in April-September. "We expect a slight decline in the growth of profits of firms in the second half compared with that in the first half," CII's head of economic policy, M. Sen Gupta, told Reuters.

CII however expects GDP to expand by 8.6 per cent in the full year compared with 8.4 per cent in 2005/06.

"The performance of the economy would have been much better had it not been for the climbing inflation and interest rates."

India's central bank on Friday raised the cash reserve ratio by 50 basis points to 5.5 per cent. During 2006, the Reserve Bank of India also raised its key lending rate -- repo rate -- by 100 basis points and the reverse repo rate by 75 basis points.

"While rising inflation would affect industry, soaring interest rate would affect the services more," it added.

News: ICICI Bank to acquire Sangli Bank for Rs 300 cr

(BL 10/12/2006) Mumbai - ICICI Bank is to snap up Maharashtra-based Sangli Bank through an all-stock amalgamation deal costing Rs 230-300 crore. The share exchange ratio has been fixed at 100 shares of ICICI Bank for every 925 shares of Sangli Bank. "The board of directors of ICICI Bank Ltd and Sangli Bank Ltd at their respective meetings held on Friday, have approved an all-stock amalgamation of Sangli Bank with ICICI Bank. The amalgamation is subject to the approval of the shareholders of both the banks, the RBI and such other approvals as may be required," said a press release from ICICI Bank.

Rural Penetration

For the proposed amalgamation, ICICI Bank will additionally issue approximately 34.5 lakh shares, which work out to about 0.4 per cent of its existing equity capital. Going by ICICI Bank's average share price in the last six months, the cost of the deal works out to Rs 230 crore. At the current share price (Rs 876 on Friday), it will be more expensive at Rs 302 crore. Sangli Bank will discuss the merger at its annual general meeting on December 18. Sangli Bank will offer ICICI Bank the fast lane to achieve its rural strategy, said Vishakha Mulye, Chief Financial Officer, ICICI Bank.

The merger will contribute to the bank's penetration in rural areas. "At one go, ICICI Bank will get nearly 100 branches in rural and semi-urban areas. Significantly, ICICI Bank will have a large number of experienced employees with exposure in rural areas," said Mulye. Sangli Bank has 198 branches (of which 158 are in Maharashtra) and extension counters to give the merged entity a network of 830 branches.

ICICI Bank will absorb the 1,850 employees of Sangli Bank to lift its total staff strength to 33,350, said. Sangli Bank has 3,500 shareholders of which the Bhate family of Sangli is one of the largest shareholders with seats on the board.

Financials

The Maharashtra-based bank has deposits of Rs 2,004 crore and advances of Rs 888 crore. Sangli Bank has a net NPA ratio of 2.3 per cent and capital adequacy of 1.6 per cent as of March 31,2006. The minimum requirement mandated by the RBI for capital adequacy is 9 per cent. The bank has incurred a loss of Rs 29 crore in the same period.

The merger has, however, found a dissident in the All India Bank Employees Association (AIBEA), which has strongly opposed the merger. It has sought the merger of Sangli Bank with a public sector bank. "The RBI should impose a moratorium on Sangli Bank," said Vishwas Utagi, President, AIBEA.

News: Vehicle production in India crosses record 10 million mark

(PTI 10/12/2006) New Delhi - The Indian automobile industry has reached a milestone, crossing the record 10 million production mark in 11 months of this calendar year, boosted by a strong economic growth, increased sales, plethora of products and attractive financing schemes. According to the Society of Indian Automobile Manufacturers (SIAM), for the period January-November 2006, the total production of vehicles in India, stood at 10,031,886 units with the industry growing at 16.82 per cent as compared to last year. During the same period last year the industry produced 8,587,131, vehicles. Given that the 10 million mark was exceeded by just over 31,000 vehicles it is certain that the 10 millionth vehicle was produced on November 30, 2006, SIAM said. The industry body said of the total vehicles produced, over 77 per cent were two wheelers with 7,741,261 units as compared to 6,686,963 during the same period last year, up 15.77 per cent. Motorcycles and step-throughs led the growth in the two wheeler segment with an increase in production of 19.96 per cent. Other segments, including passenger vehicles, commercial vehicles and three wheelers have also demonstrated significant growth in the January-November period compared to the corresponding period last year, it added. Passenger car production also crossed the 1 million mark in the 11 month period with a production of 1,100,799 passenger cars at a growth of 18.59 per cent, while multi-purpose vehicles grew by 9.24 per cent.

News: 'Tatas Rs one lakh car to be most fuel-efficient'

(PTI 10/12/2006) New Delhi - Confident of starting work on the Singur project before the turn of the year, Tatas on Sunday said the Rs one lakh car that would roll out from the new facility would be the most fuel-efficient car on the Indian roads.

"I can bet, whoever sees this car will fall in love with it," Tata Motors Managing Director Ravi Kant told media here.

Asked whether he would bet on the Trinamool Congress leader, who is spearheading an agitation against the project, too falling in love with the people's car, he said possibly even her.

While declining to comment as to what mileage the new car would give on Indian roads, he admitted the vehicle would be "more fuel efficient than any other car" keeping in mind the economic consideration of the targeted customers - youngsters and even college-goers.

Despite delays in getting the land, Kant said, the company was in the process of finalising other things related to the Rs 1,000 crore project (by Tatas and their vendors) that when completed will see a production capacity of 2,50,000 units on a two-shift basis.

"We are in a difficult situation. However, we have ordered machines and finalised 60 per cent of vendors. We have placed orders with them and finalised architects," he said.

Asked whether the company was confident of meeting the announced roll-out timeline of mid-2008, he said, "Everything is being done in parallel. It's a very tight timeline and we are still sticking to mid-2008, may be 1-2 months here or there. Now it’s a question of starting the work on ground."

News: Indian IT firms go up on value ladder

(IANS 09/12/2006) New York - Indian IT firms, once purely providers of call centre services and payroll processing, are moving up the value ladder faster than anyone had expected.

Many Indian IT companies are offering product design, software design, chip engineering and the kind of corporate asset-deploying advice which was once the sole domain of Western firms like McKinsey and Booz Allen Hamilton, according to Forbes magazine.

"A lot of consulting deals won by the Indians in the last few years have really shocked the industry," said Stephanie Moore, Forrester research analyst.

More and more multinationals are relying on Indian IT firms for fundamental missions. US-based financial services major Citigroup Inc faced a major problem of complications in data processing as a result of its global expansion as it had 59 different versions of banking software across 100 countries.

Hence, it hired an Indian consultant to streamline the processes to a single version. It is estimated that the project, which has so far been implemented in 70 countries, will save the company at least $110 million a year.

Similarly, Northeast Utilities, a US-based company, consolidated three customer information systems into one and six call centres into two, a move expected to save the company $10 million in annual operations and management costs. Indians played a role here too.

American IT giants like IBM and many others who bid for such projects have lost out to Indian IT firms such as I-flex Solutions, Mphasis BFL Group, Infosys Technologies and SlashSupport, says Forbes.

Top five Indian players in consulting like Tata Consultancy Services (TCS), Infosys, Wipro, Satyam and HCL Technologies have averaged 30 percent revenue growth in this fiscal while the largest US players have averaged on meager four percent, according to Datamonitor senior analyst Patrick O'Brien.

The Indian firms view consulting work as a means to maintain their competitive edge in the face of wage inflation in India and the rise of Chinese data processing firms. The labour arbitrage is also not what it used to be.

Wages for project managers in India have increased to 23 percent per year from 2000 to 2004 while salaries for programmers have increased at a rate of 13 percent, according to the McKinsey Global Institute.

In a bid to restrict the spread of Indian IT firms, foreign players are increasingly shifting their operations to India or buying up rival companies.

News: India PM says 9 pct average growth in '07/12 feasible

(RTR 09/12/2006) New Delhi - India can attain an average 9 percent growth between 2007 and 2012, the prime minister said on Saturday as he outlined the need to maintain fiscal prudence while raising spending for infrastructure, education and health.

Manmohan Singh also said India was determined to control inflation to within 5 percent in the next five years.

The Planning Commission's 5-year economic plan has forecast gross domestic product (GDP) to increase from 8 percent in 2007/08 to 10 percent by 2011/12, yielding 9 percent average growth during the 11th Plan period.

"This is ambitious no doubt, but feasible," Singh told a meeting of state chief ministers to fix targets for the next five years, or 11th Plan period.

India's GDP grew 9.2 percent in the July-Sept. quarter and Singh said the economy was expected to grow by 8 percent for the full year ending March 2007.

The commission expected gross domestic product in the farm sector to expand 4.1 percent during 2007/12 from 1.8 percent in the previous five years.

"Growth in agriculture has been less than 2 percent since middle of 1990s... Agriculture as whole is in crisis," said Singh, also the chairman of the commission's economic forecasting panel.

India aims to raise average industrial growth to 10.5 percent during 2007/12 from 8.3 percent in the previous five years, and service sector growth to 9.9 percent from 9 percent earlier.

India has grown at an average of 8 percent in the past three years, and analysts say it will struggle to achieve the 10 percent growth needed to eradicate widespread poverty, unless it improves creaking infrastructure.

The planning commission says India would need $350 billion in investments to improve its infrastructure by 2012.

Singh said India needed a sound macro-economic framework, investor-friendly environment and strong financial sector to attract huge investments from private firms.

The federal and state government also had to increase spending mainly for improving health, education and rural infrastructure, he said.

"Even so, we must ensure that this level of budgetary support does not come at the cost of fiscal prudence and stability."

India aims to rein in its fiscal deficit to 3.8 percent of GDP in the year to March 2007 and reduce it to 3 percent by 2008/09.

News: Botswana pitches for Indian investment

(BL 09/12/2006) New Delhi - Botswana is keen to attract Indian investment in minerals, especially diamonds, copper and coal beneficiation. To facilitate this, it opened its High Commission in India in April and plans to set up an office of the Botswana Export Development and Investment Authority in New Delhi soon, said the Botswana President, Mr Festus Mogae.

While speaking at a meeting organised jointly by CII, FICCI and Assocham on Friday, he said, "We are willing to negotiate a free trade agreement between India and the South African Customs Union (SACU) to overcome the protective tariffs that exist within SACU."

Double-taxation treaty

Botswana and India, he said, have agreed on a double-taxation avoidance treaty and are negotiating an investment protection agreement. "We want to attract Indian investment in technology as well as its business acumen, especially in the small and medium enterprises sector," he added.

Attractive climate

The President said his country offered an attractive investment climate. The corporate tax rates are low, at 15 per cent for manufacturing and 25 per cent for non-manufacturing industries. There is a negotiable tax holiday of up to 10 years. Botswana has a high credit rating, a transparent governance process, continuity of policy, rule of law and respects the sanctity of contracts.

News: FDI in Indian realty sector will add value

(BL 09/12/2006) Chennai - Foreign direct investment (FDI) can add value to Indian real estate by bringing in economic and process efficiency.

"Today it is easy to build small and large buildings. But can we build economically viable buildings? A foreign investor can help do this," according to Mr Yash Gupta, Managing Director, HINES, an international real estate firm.

Addressing the `Estate South 2006', a seminar organised by the Confederation of Indian Industry (CII) on `Emerging Trends and Opportunities in South India's Real Estate Sector,' he said besides bringing international design and engineering concepts, a foreign investor also optimises business through economic and process efficiency.

He cited the Haryana Government's plan to build 22 malls on one road in Gurgaon as economically unviable and one that could have been avoided in the planning stage itself.

Through case studies he explained how companies could add value even in modest projects. `Embassy House', an apartment complex built by HINES in Beijing paid attention to detail, such as building a flexible kitchen to suit an expat's dry cooking as well as a native's wet cooking. Office complex `Torre Almirante' in Rio de Janeiro recycled all construction trash to produce about five lakh bricks.

Mr Prakash Gurbaxani, Chief Executive Officer, TSI Ventures (India) Private Ltd, said FDI would create entrepreneurial opportunities. "FDI provides incubation support and venture capital options for young entrepreneurs," he said.

The session also discussed why foreign investors were apprehensive of entering India. "Most Indian companies have dramatic scale-up plans which are seen as unreasonable by the foreign investor," said Mr Niten Malhan, Vice-President, Warburg Pincus India Private Ltd.

Lack of market data on real estate deals, lack of transparency in land pricing and lack of investment options were other issues that lead to delayed FDI, he said.

He said these delays were part of the normal gestation period that foreign investors took before entering any sector in the world. To speed up FDI deals he suggested Indian companies align their interests with that of the foreign investor.

"Reviewing ownership of the project through the development period is a good way to ensure that all partners face the same risks."

News: 'Indian real estate boom to continue'

(IANS 08/12/2006) Chennai - The boom in the real estate sector in India is likely to continue for the next 10 years, experts said here Friday, cautioning the industry to "behave responsibly".

The real estate industry is currently valued at $12 billion, growing at a rate of 30 percent compound annual growth rate (CAGR), they said.

Speaking at a seminar on emerging trends and opportunities in South India's real estate sector, organised by the Confederation of Indian Industry (CII), Kamalesh Chandra Chakrabarty, CEO and MD of Indian Bank said, "the real estate industry should not become a playground for speculators and go bust."

It is advisable that the serious players have sufficient stake in projects but they should not look for higher returns than what an equity market would offer, he added.

Chakrabarty said that housing and real estate account for 6 percent and 7 percent of GDP respectively, and this "was a good indicator of a maturing economy".

However, the boom will sustain "only when the industry becomes a part of an inclusive growth", he said.

In India, banks had never thought of funding a commercial or residential real estate property a decade or two ago. "However, this has become a legitimate financing activity for the banking industry" today, he said pointing out that real estate boom and retail banking boom go hand in hand across the world.

Listing the bottlenecks, Chakrabarty said that despite ambitious project announcements, the level of deployment is low. "There is a need to improve building efficiency and more focus on creating housing infrastructure for the underprivileged".

"Real estate and construction industry is the second largest employment provider in the country", said Parasu Raman R., chairman, Indian Green Building Council.

News: Tesco may check in with 'cash & carry' format

(TNN 08/12/2006) New Delhi - Undaunted by Wal-Mart walking away with its wannabe partner Bharti, UK retail behemoth Tesco is believed to have firmed up plans to take its first step into the Indian market. The company is reportedly entering the cash-and-carry business in India, where, currently, 100% FDI is allowed.

However, according to sources, Tesco has not closed down options for a full-fledged retail presence in India either. “Tesco will enter India through the cash-and-carry route before the middle of next year. The idea is to have a better understanding of the market. The company will then clinch a franchise deal with a domestic retail chain for its front-end venture,” a source told ET.

While winding up its talks with Bharti, Tesco had said it was excited by the opportunities available in India and that it would continue to explore the best options to enter the market. Following the breakdown of talks with Bharti, Tesco is learnt to have approached a leading Mumbai-based business group. However, the group was not interested in an alliance.

India could be Tesco’s first greenfield cash-and-carry venture. A couple of days back, Tesco marked its entry into the cash-and-carry segment with the acquisition of Malaysian chain Makro Cash & Carry. “Tesco might use its learnings from Makro in India,” the source pointed out.

Currently, the two most prominent players in the Indian cash-and-carry business include the German chain Metro and the African food retail chain Shoprite.

With FDI not being allowed in retail, cash-and-carry is seen as an interesting business proposition for international retailers. According to Euromonitor, a London-based market intelligence firm, “When the restrictions on the retail industry in India are lifted, international retailers will be in a prime position to easily convert their cash-and-carry stores into highly profitable supermarkets and hypermarkets.”

News: 'Indian power market comparable with US in size'

(HT 08/12/2006) New Delhi - Global power equipment major Alstom, which has been operating in the country for well over a century through Alstom Projects India Pvt Ltd (APIL), views the Indian market as comparable with the United States in size. APIL vice chairman and managing director Fredric Lalanne spoke with M Rajendran about the company’s plans in India, the potential of hydro and gas-based power projects, and the company’s thrust on expanding its research and development centre.

Excerpts:

What opportunities do you see for Alstom in India?
We have planned a major investment initiative for India for the next two years in engineering and research and development (R&D). We plan to make it a hub in Asia. The ultra mega power project opens up an opportunity but we are not directly involved in it and are supporting Bharat Heavy Electrical Ltd (BHEL) to provide the latest and cleanest coal technologies. But we will explore opportunities in hydro-power.

How do you view the Indian power scenario vis-à-vis other markets?
In the coal segment, the Indian market is smaller than China’s but it is as big as the US in terms of revenue potential. India is a critical market for Alstom, as the opportunities emerge in new areas. Our global engineering centre at Kolkata is very important: it supplies high-value engineering skills to our projects not only in India but also in countries in North America and Europe. We will add about 200 staff at the centre, taking the total strength to 1,000 by the coming March.

What are Alstom’s plans for its India operations?
We have a number of activities in India. There are three factories, manufacturing power equipment, one for hydro- and two for coal-based boilers. Investments would be enhanced in these factories, as they manufacture equipment for the global market apart from catering to the local market. We also plan to give a major push to the transport segment in India. Alstom has made a significant contribution to the ongoing Metro Rail project.

What next?
Hydropower is the future for Alstom in India. We are comfortable doing business in hydro because of our leadership position in manufacturing hydropower equipment worldwide. We would like to replicate this in India.

How has business been in India?
We have an order book of more than Rs 2000 crore in India, and expect this to go up substantially with more power projects coming up in the next few years - particularly gas-based ones. The recent find of gas in the KG basin and the optimism shown by companies like Reliance and Gujarat Sate Petroleum Corporation that gas would be available by 2008-2009, seems to indicate we are on the right track.

News: Mumbai developer making it big in Dubai

(DNA 08/12/2006) Dubai - For leading Mumbai developer Dheeraj Wadhawan, Dubai is the gateway to the world. After his initial investments in the booming real estate in the city struck pay dirt, he is now gearing up for a massive expansion here, to be followed by the United Kingdom.

Wadhawan family name is well-known in the housing and finance industry in India, he being a key shareholder of Dewan Housing Finance Corporation.

As he branched out to the UAE, his real estate projects in Dubai have so far met with instant success.

Dheeraj Group has joined hands with UAE-based East Coast Contracting & Trading to form DEC Dubai, which is now in an expansion mode. DEC has now announced 16 projects to be developed at a cost of $1 billion.

DEC’s first project in Dubai was the $6.5 million DEC Towers, in Emaar’s upmarket Dubai Marina, a twin-tower 21 and 25-storey residential development. Since then, the company has acquired plots and is at various stages of development of projects in Business Bay, Jumeirah South Village and Culture Village. He aims to cash in on the unprecedented realty boom in UAE, driven by the growth in Dubai.

The Indian developer made its first overseas foray in Dubai at the right time.

Jay Bahirwani, marketing manager, DEC says the projects received good response at the just concluded three-day international property investment and development event at the Dubai World Trade Centre.

“We have a lot of Indian customers. In fact, Indians constitute 30% of our customers for our Dubai properties,” Bahirwani said. “Our highest-priced properties in Dubai Marina cost up to Dh 7 million (Rs 8.4 crore) and we have Indians buying up that too,” said Bahirwani.

The company is now all set to launch a new residential project, Marina Wharf II, replicating the success of its earlier Dh 250 million (Rs 3,000 million) Marina Wharf I, which has been sold out. The Dubai JV, set up in July 2005, has a whopping 4.5 million sq ft area currently under development.

As part of its aggressive expansion plans, DEC is also making a debut in the UK realty market. The company has already opened an office in Ealing, London, its second overseas outfit.

“We believe that Dubai continues to offer strong growth prospects in both residential and commercial freehold sectors,” according to Wadhawan.

Gulf play

Indians comprise 30% of DEC’s customers for Dubai properties. Its first project in Dubai was the $6.5m DEC Towers in Emaar’s upmarket Dubai Marina. The Dubai JV, set up in July 2005, has 4.5 m sq ft area currently under development

News: Global hotel chains check in to India

(RTR 08/12/2006) Mumbai - A buoyant economy and a woefully inadequate supply of hotel rooms are drawing global chains to India, where pricey real estate is forcing them to partner with local developers to get off the ground quickly.

There are an estimated 105,000 hotel rooms in India -- compared with 135,000 in Shanghai alone -- and only a quarter of these are in the branded segment. Another 100,000 to 125,000 rooms would be needed over the next five years to meet demand.

Room rates -- at $150-$ 300 in premium hotels, and going up to as much as $550-$ 650 in the peak tourist season from November to March -- are already among the highest in Asia-Pacific.

Rates are expected to climb a further 20-25 per cent over the next two to three years, according to industry estimates.

But the pitfalls are many in Asia's fourth-biggest economy.

"India is a tough country to do business in because real estate is not transparent, so it's better to join hands with someone who knows the market and has a land bank," said Manav Thadani at hospitality consultancy HVS International.

"Plus, when you're looking for economies of scale to maximise returns, you need to start with 15-20 hotels at one go, and that's only possible with a developer that has land."

Hotels can free up precious capital, while a franchise deal or management contract also minimises operational risk, he said.

But hotel chains are not alone in the chase for land.

Land prices in India's top cities have doubled in the last two years as hoteliers, retailers, commercial and residential property developers and multiplex operators fight for space.

"You might like to buy, but there's not a lot of property to buy," said Chender Baljee, managing director of Royal Orchid Hotels Ltd, which has a franchise deal with Wyndham Worldwide Corp to manage its Ramada brand in India.

Growth markets

A recent report from PriceWaterhouseCoopers said slower growth at home and booming markets in emerging economies such as India and China were drawing global hotels to these markets.

French hotel group Accor SA , owner of the upmarket Sofitel and budget Ibis brands, plans to open 200,000 new rooms by 2010, with two-thirds of them in emerging markets.

In addition to an earlier joint venture for 25 Ibis economy hotels in India, Accor recently signed deals with Hindustan Construction Co. , GMR Infrastructure Ltd. developer Nirmal Lifestyles Ltd. and Naman Developers Ltd.

Accor also has a joint venture with Dubai's Emaar Properties for 100 budget hotels in India at an investment of $ 300 million. Emaar MGF owns more than 5,000 acres across India.

Hilton Hotels will invest $143 million in a venture with developer DLF Ltd. for 75 hotels and serviced apartments.

For developers, hotels are more commercially viable than retail, as the floor space index is double that of malls.

"But the gestation period for a hotel is much longer, so you need deep pockets, besides a lot of patience," said Anuj Puri, head of property consultant Trammell Crow Meghraj.

"You can't just build it and expect returns from day one."

Still, the attraction of a showpiece hotel is hard to resist.

"It's big for the developer's ego to partner with the Hiltons and Shangri-Las of the world here in India," Puri said.

News: Indian car sales up 28.5% yr/yr in Nov

(RTR 08/12/2006) New Delhi -: Domestic car sales in November rose 28.5 per cent to 88,473 from 68,841 a year earlier, the Society of Indian Automobile Manufacturers said on Friday.

Cumulative sales for the financial year that began in April were 684,105 for passenger cars, up 22.6 percent from 557,929 in the same period a year ago, the industry body said.

Sales of commercial vehicles -- trucks, buses and goods carriers -- rose to 40,317 in November, up 43.1 percent from sales of 28,174 units in the same month last year.

Commercial vehicle cumulative sales stood at 285,087 for the eight-month period, up 35.5 percent from 210,403 a year ago.

Sales of motorcycles in India, the world's largest market for bikes after China, rose an annual 15.0 percent in November to 556,612 units.

Cumulative sales of motorcycles were 4,467,576, up 17.2 per cent from 3,811,855 in the same period a year earlier.

Indian automobile companies made nearly 1.14 million cars in the financial year that ended in March 2006, and analysts forecast the market to reach 2 million units by 2010 as a boom in Asia's fourth-largest economy spurs consumer spending.

News: 'India emerging as a land of opportunity'

(PTI 08/12/2006) Toronto - India's robust economic growth has opened vast investment opportunities which Candian companies should utilise, Canadian High Commissioner to India David M Malone said here. "Indo-Canada relations are in a process of transformation, and this is the time when the Canadian companies should invest in India," Malone said while addressing a meeting organized by Canada India Business Council yesterday. Over 120 top executives of Canadian companies attended by the meeting. "The nature of our relationship is now is really unprecedented, and India is one of our most important strategic partners," Malone said, adding Canadian exports to India has grown 41 per cent in the past nine months. "Canadian companies must create the brand name in India, if they want to succeed in business with India," Malone said. He said that India's growth would remains robust in years to come which means there are "vast opportunities for Canadian companies". He said that there were opportunities for investment in infrastructure sector including power, higher education, financial sector, mining, retail that was opening up, and civil aviation despite problems of inflation, red-tape, shortage of power and corruption, which he added, were gradually vanishing. George Haynal- Vice President, Public Policy, Bombardier Gary Teelucksingh- Senior vice president of Satyam, Thomas J Bata- Chief of Bata Company, Marvin Hough- Regional Vice President (ASIA) of Export Development Canada and Kam Rathee- President of C-IBC also spoke on the occasion.

News: Doors to open for hedge funds soon

(DNA 07/12/2006) New Delhi/Mumbai - India may allow hedge funds to directly invest in the stock markets by the middle of next year

The market opening could take place under the issuance of new rules to govern foreign portfolio investors, the Financial Times reported on Wednesday, quoting Securities and Exchange Board of India chief M Damodaran.

When contacted by DNA Money, Damodaran said, “We didn’t say we would open it to hedge funds. We said we will see each application in its own merit.” He did not explain further.

Currently, hedge funds cannot directly trade in Indian stocks, though they can invest through participatory notes (PNs) or instruments linked to underlying shares traded by foreign institutional investors.

The new initiatives affecting hedge funds would be part of an overall review of regulations overseeing foreign institutional investors, which may lead to clearer guidelines about who should be allowed to participate in the country’s stock market, the FT report said.

Finance ministry officials said the government is currently examining in detail emerging global regulatory frameworks governing these funds.

Storm brews?

Government is currently examining emerging global regulatory frameworks governing hedge funds

RBI has already voiced its scepticism loudly about the entry of hedge funds

A policy that allows hedge funds in would also face political resistance from the government’s Left allies

News: Big buzz on $8 billion bid for Hutch-Essar

(DNA 07/12/2006) Mumbai/New Delhi - Will arch rivals Ambanis and Ruias break bread in the same boardroom? If Thursday’s buzz is anything to go by, they may.

Shrewd Hong Kong entrepreneur Li Ka-shing’s firm Hutchison Telecommunications International Ltd, is fighting a shadow battle with his Indian partner the Essar group.

Hutchison has been approached by Blackstone group LP and Texas Pacific group for buying its local telecom assets, the Wall Street Journal said on Thursday.

And partnering the bulge-bracket US-based private equity pashas could well be the ambitious Anil Ambani.

His Reliance Communications is toying with a plan to enter GSM mobile telephony as it is more lucrative than the CDMA technology platform the company operates in.

Li Ka-Shing, who is currently battling for ownership with his son Richard Li to acquire PCCW, the basic telephony business in Hong Kong, has too much in his plate already.

While both sides have declined to comment on the speculation, the Wall Street Journal said Blackstone Group LP and Texas Pacific Group may make as much as an $8 billion offer for Hutchison Essar Ltd.

Blackstone might ally with Reliance Communications Ltd, said the report.

It makes eminent sense for Reliance to buy into Hutch as it gives it the numbers in GSM telephony, which otherwise it could enter only through a greenfield venture.

It has already earmarked a capital expenditure of Rs 36,000 crore for its proposed GSM venture. As first reported by DNA Money on November 9, Reliance is floating a tender for 75 million GSM lines.

It is already in a spat with CDMA technology proprietor Qualcomm Inc over royalty fees.

“We haven’t approached anyone nor has anyone approached us,” sources in Reliance Communication told DNA Money. A Hutch-Essar spokesperson said “It’s not the company’s policy to comment on speculation.”

But the confluence of factors surrounding the troubled alliance reveal that the rumours may have some credibility. It could be posturing by the Hong Kong billionaire who’s finding his Indian partner too difficult to manage.

The Ruias have held up the merger of BPL’s Mumbai operations for a higher stake in Hutch-Essar. This could be Li Ka-shing’s turn to return the compliment, analysts said.

Industry sources said talks were held at the promoters’ level, but the seriousness of these could not be ascertained.

Hutch-Essar’s valuation is estimated at around $12 billion.

But a source pointed out that the valuation would be around 20%, if at all the sale happens. An industry insider said, “there are people in play”, referring to sale possibilities.

Recently, Egypt-based Orascom Telecom had triggered speculation that HTIL was up for sale.

Orascom, which had picked up 19.3% stake in Hutchison Telecom for $1.3 billion last December, wanted to increase its holding considerably in the company.

But subsequently, Orascom changed its stand. At that point, a top industry source had said Hutch did not have any plans to sell.

In another development, a senior executive of HTIL had recently said that Hutch-Essar IPO (initial public offering) was not scheduled for any time soon.

As reported earlier, Hutch-Essar was gearing up for an IPO, but the plans were shelved somewhere along the way, perhaps over differences between the JV partners in India. Besides its IPO plans going awry, even the proposed merger of Hutch Essar with BPL Mobile in Mumbai has been thrown off gear.

Will the Hong Kong billionaire sell out, or is it a ploy to get the Ruias to come around, the coming months will tell.

Possibilities & reasons…

A Blackstone-ADAG combined acquisition offers Anil Ambani a ready and profitable GSM operation. It also gives Li Ka-shing, the promoter of Hutchison Telecom, Hong Kong, an opportunity to hit back at Essar.

Essar’s Ruias have held up the merger of BPL’s Mumbai operations, its most profitable, for a higher stake in Hutch-Essar

News: Cisco to locate unit in Chennai

(BL 07/12/2006) New Delhi - With plans to make India its global hub, US-based networking major Cisco Systems on Wednesday announced a slew of initiatives including setting up a manufacturing unit in Chennai and tripling its manpower in the country from 2,000 at present to 6,000 over the next 3-4 years. Cisco is also moving 20 per cent of its top executives across various divisions of research and development, venture capital fund and manufacturing to India. These initiatives are in addition to the $ 1.1-billion India-specific investment announced by the company last year. Announcing the move, John Chambers, Chairman and CEO, Cisco Systems, said, "This is the first time that we are making such a commitment outside of Silicon Valley. India is a very important market for Cisco's global growth strategy." Cisco is committed to its ongoing investment plan in India, as well as its partnership with the Indian government." Cisco expects 5 per cent of its global revenues to come from India over the next 2-3 years. Wim Elfrink has been appointed the Chief Globalisation Officer and will spearhead Cisco's India strategy. While Chambers did not divulge the investment details for the manufacturing plant, which will be launched as a pilot next year, he said that the unit would export hi-tech products to Cisco's global market. Initially the plant will manufacture Internet Protocol-based telephone instruments. In line with the company's outsourced manufacturing model, Cisco has selected one of its global manufacturing partners, Foxconn, to work with the company on the facility. As part of the investments announced last year, Cisco looks to acquire companies in the broadband and digital media content business for which it has earmarked $ 25-30 million. It has also set aside $ 10 million to set up a lab in Chennai with State-owned telecom company BSNL for developing products for rural connectivity. Other investments include $ 50 million for a new R&D campus in Bangalore to be completed by June 2007, $ 750 million towards training and development in India over the next three years, $ 50 million fund to provide financial solutions to Cisco customers, $ 100 million towards venture capital investments in high-growth companies based in India such as Indiagames and Bharti Telesoft, and $100 million in growing its technical services capabilities, spare parts depots and channel development. Commenting on the plans, Dayanidhi Maran, Minister of Communications and IT said, "Cisco's growing investments across all its operation areas in India is a vindication of the increasingly self-sustaining ecosystem that the country provides for businesses to thrive and compete in a globalised economy."

News: 'Target $200 b software exports by 2010'

(BL 07/12/2006) Kolkata - With West Bengal waking up to the potential of ICT and bringing niche capability in the Indian market, the country's software exports should be pegged higher at $ 200 billion by 2010 as against the earlier projection of $ 100 billion, according to the President, A.P.J. Abdul Kalam.

Delivering the inaugural address at the Infocom 2006 Conference and Exhibition here on Wednesday, Kalam said that, even before West Bengal had appeared on the ICT radar screen, the eastern neighbours of India, such as Singapore, Malaysia and Korea, had made phenomenal progress to make themselves synonymous with the term Asian Tigers. Indian ICT export projections were made without taking into account the possibility of "Bengal Tigers entering the field of ICT with a roar. Now that West Bengal has woken up, we are all waiting to make the dream of $ 200 billion by 2010 a reality by innovating to differentiate," he said.

Dwelling on his chosen theme of "Innovate to Integrate," Kalam said it was technology that empowered economic development. He spoke of the need for continuous innovations through creativity in a knowledge society. Stating that competitiveness was the common driving factor for the developed and developing nations, he said quality of the product, cost-competitiveness and just-in-time marketing were key elements of competitiveness. In this regard, he likened technology to a "non-linear tool available to humanity, which can affect fundamental changes in the ground rules of economic competitiveness."

Kalam presented a strong case for making available bandwidth to all Indians with a view to bridging the "perceived divide." He said India has missed the "micro electronic bus" and could ill afford to miss developments in the arena of nano technology. "If we take proper investment decisions, we can definitely aspire to become leaders in nano technology products, especially in the nano electronics area which is having a market potential of $300 billion."

Other suggestions offered by the President included the promotion of the BPO sector in Tier II cities and establishing joint ventures in countries such as the Philippines and Korea, where the infrastructure was already there and the cost of operations was also low. "This will enable servicing of large number of customers," he said.

News: L&T wins multi-million dollar order from China

(PTI 07/12/2006) Beijing - India's top engineering company L&T has won a multi-million dollar contract to supply three reactors to Chinese oil and gas giant Sinopec, industry sources said here today.

L&T's Heavy Engineering Division and the Tianjin branch of China Petroleum & Chemical Corporation (Sinopec), China's second-largest state-run oil and gas firm, have signed an agreement to this effect, the sources told PTI here.

The size of the deal is not known but sources said it may be worth nearly $85-95 million.

The signing of the deal follows the recent visit to India by the President of Sinopec, Tianjin branch, Xu Hong Xing and his talks with top L&T brass in Mumbai.

Sinopec is setting up two one million tonne capacity ethanol plants each in Tianjin and Zhenhai and the L&T-supplied reactors would be critical elements in the company's massive expansion plans.

News: AIG strengthens presence in India with new corporate office

(IM 07/12/2006) Chennai - AIG Systems Solutions (AIGSS), a leading information technology solutions provider to American International Group Inc. (AIG) companies, announced the inauguration of its corporate office and expanded development centre at a new facility in Chennai. The new state-of-the-art office, located at Olympia Technology Park, is spread over 45000 square feet and can accommodate 500 professionals.

"The expansion of the development centre is a significant addition to our existing IT facilities in India. It is an indication of the confidence that AIG companies have in AIG Systems Solutions and our IT operations in India," said Sunil Mehta, Country Head & CEO of AIG India, while inaugurating the new facility. “It has been our endeavor to provide clients with world-class IT services and solutions. The opening of this new development facility further strengthens AIG’s presence in India. This world-class facility will allow us to leverage India’s ability to provide cost effective and high caliber IT engineering resources to support AIG’s world wide operations."

AIGSS combines technology, business domain knowledge, and process strengths to provide cutting edge IT solutions to AIG companies worldwide. The organisation is currently increasing its operations to service clients in the US, Europe and the Asia Pacific region. It will also be expanding to provide infrastructure services to AIG through its parent company AIG Technologies, Inc.

"AIGSS is able to differentiate by both quality of service and the caliber of IT engineering skills with insurance domain knowledge, in addition to offering the cost advantage to the AIG companies by supporting their mission critical business applications," said James Klinck, Senior Vice-President, AIG Technologies, who was also present at the inauguration.

“Our move into this new facility, after the occupation of another 600 seat facility at Guindy inaugurated earlier this year, is indicative of the fact that AIGSS is on the fast track to achieve its vision. AIGSS is a growth oriented organisation that is employee-centric. It offers its customers superior value by both specializing in technologies that are strategic to AIG and by aligning its capabilities with new technologies that AIG is committed to implement worldwide," said Vik Manchanda, Chief Administrative Officer of AIGSS.

News: Airbus to invest $1b in India

(PTI 07/12/2006) New Delhi - European aerospace major Airbus is planning to invest $1 billion in India over the next ten years. Predicting robust growth in the India civil aviation sector, Airbus today said India would require passenger and freight aircraft, valued at $105 billion, to serve the strong demand by 2025. According to the latest Airbus global market forecast, India will become the fastest-growing country for air travel for the next decade. "Strong demand in India is being unleashed by Air transport deregulation, the emergence of a number of new operators, low fares and large untapped demand for air travel," Airbus COO (customers) John Leahy said today. According to the forecast, India will require 1,100 passenger and freight aircrafts by 2025 of which 935 will be passenger aircraft. The number of passenger aircraft will increase five-fold from 190 aircrafts in service at the end of 2005. Earlier, US major Boeing, a competitor of Airbus, had predicted similar growth in Indian aircraft demand.

News: Hilton ties up with DLF to enter India

(IANS 06/12/2006) Mumbai - Britain-based hotel major Hilton Hotels Corp is all set to form a joint venture with Indian realty giant DLF Ltd to take advantage of the boom in the country's hospitality industry, a top Hilton official said.

The global hotel chain plans an investment of $140 million in the new venture, in which DLF will hold a 74 per cent stake and the rest will be with Hilton.

"Tourism in India is expected to get a major boost thanks to the powerful combination of economics and demographics," said Ian Carter, executive vice president of Hilton and chief executive of its international operations.

"The Hilton DLF JV is a compelling next step to capitalise on the development momentum and build Hilton brands in India," Carter said in an interview.

Hilton is among the major players in the upper end hospitality segment globally and the joint venture with DLF will develop 75 hotels and serviced apartments over next seven years, subject to the necessary approvals, he said.

The venture will represent a bouquet of Hilton brands such as Hilton Hotels, the Hilton Garden Inn, Homewood Suites and Hilton Residences. While the venture will modernise and build these properties, Hilton will manage them, said Carter.

During the first phase, the joint venture will develop some 20 hotels in cities like Chennai, Chandigarh, and Kolkata — a larger number under the Hilton Garden Inns brand to offer focused service.

Later, the venture will identify and acquire sites to undertake new projects.

According to Carter, his group will also manage five more hotels that are under development — Hilton Bangalore, Hilton Residences at Embassy Gold Links Bangalore, Hilton Chennai, Hilton Hyderabad Palace and Shilim Retreat.

According to industry estimates, the size of the hospitality industry in India, given its growth prospects, continues to be abysmal with 26,000 rooms. Some 100,000-125,000 rooms are expected to be added over the next few years.

Hilton — which has more than 2,800 hotels and 495,000 rooms in some 80 countries — is keen on tapping this potential, Carter said.

DLF — which is a India's leading real estate developer, engaged in the business of developing office complexes, homes, shopping malls, special economic zones, hotels and infrastructure projects — will make the bulk of the investment.

News: 'No overheating in Indian economy'

(PTI 06/12/2006) New Delhi - Finance Minister P Chidambaram on Tuesday dismissed reports that the Indian economy was overheated.

"No...it is premature (to talk about)," he told reporters when asked whether the economy was showing signs of overheating in view of the rising inflation.

The annual inflation rose to 5.45 per cent for the week that ended on November 18 from 5.29 per cent in the previous week mainly due to costlier minerals and manufactured items.

The wholesale price-based inflation was at 4.27 per cent during the corresponding week in 2005.

Chidambaram had earlier said that inflation remained an area of concern and the government wished to bring it down to below five per cent.

Indian economy grew 9.1 per cent during April-September this fiscal, the fastest growth in the first-half of any year since reforms began in 1991.

On the issue of bank lending to the real estate sector, the finance minister said it had advised banks to re-balance their portfolios by reducing exposure toward real estate and push more credit toward the production sector.

News: India second largest investor in UK

(IANS 06/12/2006) London - As Indian companies continue to stalk British business with takeover bids, latest figures reveal that India has become the second biggest investor in London after the United States.

Indians are among the many overseas investors who are driving London's property prices, while the growing number of flights between India and Britain have been bringing an increasing number of professionals and entrepreneurs.

Indian investors are expected to contribute 33 million pounds to London's economy in 2006-2007, according to the foreign direct investment agency, Think London. Indian capital accounted for 18 per cent of foreign capital during the current year.

Since 2005, 36 Indian companies have set up office in London, voted the top European city to locate a business this year. On Tuesday, London mayor Ken Livingstone launched a 'Year of India' campaign to attract more Indian companies to London.

According to the latest edition of the European Cities Monitor, London is now the top-rated city in Europe for easy access to markets, qualified staff, external transport links, telecommunications, availability of office space, languages spoken and internal transport.

Recent demographic figures show that people of Indian origin constitute the largest single minority group in multicultural London.

Michael Charlton, chief executive of Think London, said: "These results confirm London's status as Europe's leading city for business and mirror Think London's success in attracting foreign investment. London's position means it ranks amongst the elite group of global cities along with New York and Tokyo.

"London attracts over half of all Indian investment into Europe and provides Indian businesses with a gateway to the continent".

Think London recently assisted The Export-Import Bank of India to relocate its European headquarters from Milan to London. Bank representative Samuel Joseph said: "We chose London because it is a more attractive place for Indian businesses.

"It really is the most important business centre in Europe and the financial services industry is very advanced in London. Another reason for choosing London was to take advantage of the excellent access to global capital markets."

Last year, Indian companies spent 228 million pounds buying British businesses, with the value of the average takeover rising to 28.5 million pounds compared with just 6 million pounds the year before.

Some of the biggest recent bids and acquisitions by Indian companies are:

1. The Tata Group trying to pull off the biggest-ever Indian takeover of a foreign company, offering 4.3 billion pounds for Corus, formerly known as British Steel. If it goes ahead, the deal will create the world's fifth-biggest steel company.

2. Tetley Tea, the company that invented the tea bag and remains the world's second-largest producer of tea bags, was bought by the Tata Group for 270 million pounds in 2000.

3. Apeejay International followed Tata into the market for British tea businesses last October when it bought Typhoo for 80 million pounds from Premier Foods.

4. Tyco Global Network, one of the world's most advanced submarine cable systems, was bought by Tata for 69 million pounds in November 2004.

5. Tata also bought Incat International, a British software company, for 53 million pounds last year.

6. Indian liquor tycoon Vijay Mallya's United Breweries is seeking to buy whisky major Whyte & Mackay, which it values at around 400 million pounds.

News: Be competitive, FM tells small banks

(BS 06/12/2006) Kolkata - Union finance minister P Chidambaram today said consolidation and increased competitiveness are key to smaller banks’ survival.

He was speaking at the launch of the internet banking service of United Bank of India (UBI) here.

The minister praised UBI for its turnaround in the last two years but cautioned that it should not be complacent about this. The bank had paid Rs 46 crore dividend to the government after 14 years recently.

Chidambaram assured UBI help from the government for its capital restructuring and initial public offering but also gave an ultimatum that it had to grow faster to reach a respectable size in the next five years.

UBI’s capital restructuring plan envisages reduction of equity capital from Rs 1,532 crore to Rs 332 crore by converting Rs 1,200 crore worth existing equity to preference shares.

“UBI has achieved Rs 50,000 crore business in the current financial year, but it took 56 years to achieve this size. I will be happy if it achieves Rs 100,000 crore in the next five years. I do not think it is impossible and the bank has to go for the era of competition,” he said.

The minister said UBI could achieve the target of Rs 100,000 crore business if it grows at 18 per cent for the next couple of years.

“Small is beautiful but that does not mean that you remain weak. The business philosophy of banks now should be based on 3 Cs - convergence, competitiveness and consolidation,” he said.

Chidambaram criticised UBI for not implementing core banking solution (CBS) and termed the bank’s internet banking initiative as just ‘a baby initiative’ in today’s tech-savvy banking world.

He said UBI was planning to introduce core banking solution from December this year when many banks had completed computerisation.

“I am sorry to say technologically UBI is 3-4 years behind its peers,” he added. Chidambaram advised the bank’s management to catch up with others in the next 1-2 years. He urged UBI to utilise its vast human resources.

“When UBI was nationalised it was sixth in ranking among nationalised banks but now it is 14th - it is time to catch up,” he added.

Speaking on the banking sector, the Union finance minister advised public sector banks to go in for a portfolio rebalancing.

“You have to extend credit to the priority sector too and excessive weightage on real estate is not desirable,” he added.

FM for insurance penetration

The penetration of insurance in the country was low and needed to improve dramatically, Finance Minister P Chidambaram said today.

The country would not feel the pinch of lagging other nations, in the sector, till 2040 – when it was expected to have a predominantly young working population, but thereafter the scenario was likely to change for the worse, he added.

Chidambaram was speaking at the centenary celebration of the National Insurance Company (NIC). President A P J Abdul Kalam and West Bengal Governor Gopal Krishna Gandhi were also present on the occasion.

“All non-life insurance products in India together will account for a mere four crore policies. In a country of billion people this number is a just drop in the ocean. More and more Indian lives need to be insured. Also, all non-life insurance premiums account for a very low percentage of the gross domestic product,” the minister said.

He advised people of the country to concentrate on long-term savings in the form of insurance, pension and other such products, alongside short-term savings in banks and other institutions.

“Political parties have been unable to reach a consensus over insurance policy in the country. I appeal to the general public to bear upon the political parties to complete this task,” Chidambaram stated.

The minister congratulated the NIC on having completed 100 years of operations, with over Rs 4,000 crore in insurance premium and over 10 million customers.

News: Asia's largest runway, high-speed rail link for Delhi airport

(BS 06/12/2006) New Delhi - At 4,430 metres, Asia’s largest runway will make the Delhi airport the first in the country with the capability of handling A-380, the largest aircraft in the world.

Under the revised master plan submitted to the Ministry of Civil Aviation, the Delhi International Airport Limited (DIAL), which is working on the project, will ready the third runway by 2008 and develop a new integrated two-tier terminal building (Terminal 3) to handle both international and domestic passengers.

All this will need an investment of Rs 6,703 crore in the next four years.

With an eye on the 2010 Commonwealth Games, DIAL will augment the airport’s annual passenger handling capacity from 16.24 million to 37 million. A new high-speed rail link from Connaught Place, which will reduce the journey time to 19 minutes, will also be ready before the games.

Terminal 3, to be made operational by 2008, will include a multi-level parking for 4,300 cars, new aircraft hangers, a power station, and improved general aviation facilities.

Shrinivas Bommidala, managing director, DIAL said, “With Commonwealth Games in focus, we want to elevate Delhi airport into the league of Frankfurt, Dubai and Singapore airports. After working out the details for 11 months, we have submitted the master plan to the Ministry of Civil Aviation.”

Terminal 3 building will have around 153 check-in counters, including 23 for self check-in, 40 X-ray scanners, 74 immigration desks for international passengers, 55 contact stands (aerobridges) and 30 remote parking bays.

Around 90 per cent of all passenger traffic at Terminal 3 would be handled via aerobridges by 2010, an official said.

A 380 will have six dedicated aerobridges. Access to the new terminal will be via a 6-lane road connecting to NH8 (Delhi-Jaipur highway).

The existing international terminal will also be upgraded by 2008. Giving emphasis to revenue-generating non-aeronautical services, the new terminal will have a large number of duty free shops, cafes, bars, restaurants and a range of leisure facilities with the capacity to handle 100 million passengers per annum.

By 2010, all international and full service domestic carriers will operate from Terminal 3, while Terminal 1 will be developed as an exclusive terminal for low-cost carriers. In subsequent stages, the low-cost carriers will also move to the new terminal complex, according to the plan.

The master plan has been designed in consultation with Moff McDonald, a leading management, engineering and development consultancy and HOK, world-renowned airport architects based in the UK.

News: Ramada to enter India with Royal Orchid

(BS 06/12/2006) Bangalore - Royal Orchid Hotels (ROHL), a business class hospitality major, has signed an exclusive territorial agreement with Ramada World Wide, to manage and develop hotels under the Ramada brand in India.

Ramada, a part of Wyndham Group Worldwide, runs about 900 hotels across 25 countries.

Chender Baljee, chairman and managing director of Royal Orchid Hotels, said as a part of the agreement, the company was planning to open at least 10 four star hotels in all major metros and some mini-metros under the Ramada brand name.

“We are proposing to invest about Rs 500 crore over the next three-four years to open hotels in all those places where Royal Orchid is present now and in some newer locations,” Baljee said.

Post the acquisition of Ramada almost a year back, Wyndham Worldwide has been aggressively looking to enter Asian markets with local players.

“This tie-up with Ramada worldwide will power an international brand with Indian management and hospitality. This partnership endorses and serves to consolidate our strength in the four star upper mid scale segment to which we cater,” Baljee added.

At present, Ramada operates two hotels — one in Mumbai and the other in Goa — under franchise with local companies.

News: Cisco to ship 20% top execs to India

(BS 06/12/2006) New Delhi - In a move to make India one of its global strategic centres, US-based computer network equipment major Cisco Systems today said it would shift 20 per cent of its top executives to India. It also proposes to make India “Cisco Globalisation Centre East.”

Addressing a press conference with Telecom Minister Dayanidhi Maran, John Chambers, Cisco’s chairman and CEO, said, “India is a very important market for Cisco’s global growth strategy. Half of the future headcount growth will come from India and the country will contribute about 5 per cent to our revenues in the next 3-4 years. The country has a highly skilled workforce, innovative customers, supportive government, and world-class partners.”

Wim Elfrink, the company’s third-most senior official, will be its new chief globalisation officer and relocate to Bangalore next year. Elfrink, however, will retain his position of senior vice-president of customer advocacy and report to John Chambers.

The company also intends to triple its headcount in India over the next three to five years. It has 2,000-6,000 employees in the country at present. About 95 per cent of the headcount addition will be accounted for by Indians.

Cisco will also start a trial factory in Chennai for making Internet protocol-based phones, as part of its $1.1-billion investment plan for the country. The manufacturing will be done by Cisco’s global partner Foxcon, and is expected to happen by April next year.

California-based Cisco had announced in October 2005 an investment of $1.1 billion in India over the next three years.

News: JP Morgan unit invests $60 mln in Mumbai project

(RTR 06/12/2006) - JP Morgan Chase 's Principal Real Estate Investments has invested $60 million in a residential project in Mumbai with Lodha Builders, a joint statement by the companies said on Wednesday.

"JP Morgan is very excited about this partnership with Lodha Builders. We have invested significant time and effort in understanding the market and the key players in the market," Vice-President Tyler Goodwin said in the statement.

"We are very happy to partner with JP Morgan for one of our premium projects, as this gives us the ability to access resources to fuel our growth plans, which will make us amongst the top five real estate developers in the country by 2008," said Abhinandan Lodha, director, finance, Lodha Builders, in the statement.

News: Indian cos get more to buy property abroad

(BL 06/12/2006) Mumbai - Indian companies with overseas offices can now remit more funds for acquiring immovable property outside India for business and residential purposes.

For the initial expenses, banks may allow remittance up to 15 per cent of the average annual sales or income or turnover of the company in the last two financial years or up to 25 per cent of its net worth, whichever is higher.

For recurring expenses, banks may allow remittances up to 10 per cent of the average annual sales or income or turnover during the last two financial years, said a notification from RBI.

"At present, these banks are permitted to allow remittance up to 10 per cent and five per cent of the average annual sales or income or turnover during last two accounting years of the Indian entity for initial and recurring expenses respectively, for the purpose of normal business operations of the branch or office or epresentative abroad," said the notification.

News: Indian banks cut back lending to realty, retail sectors

(BL 06/12/2006) Bangalore - Taking a cue from the Reserve Bank's peak season credit policy and finance ministry fiats, commercial banks have cut back on credit disbursement to real estate and retail sectors.

But bankers said this cutback essentially amounted to rebalancing of credit portfolios. The Finance Ministry at a review meeting last month told bankers to redirect credit to more productive areas, which included infrastructure, manufacturing and farm sectors. The shift was necessitated by the fact that these sectors currently needed credit-support the most. The cutback, bankers said, had brought down their overall exposure to the real estate and commercial sectors to about 20 per cent. During the second quarter of this year, exposure to these sectors had been about 30 per cent of overall credit.

Yet, despite this reduction, bankers said, credit expansion remained at 28 per cent on year-on-year basis, though below the 31 per cent growth recorded at the end of Q3. Outstanding non-food credit at the end of last month ranged around Rs 16.5 lakh crore, bankers said.

Off-take from SMEs

Bankers said the high growth largely owed to off-take from second-rung manufacturing sector, particularly SMEs (small and medium enterprises) and the farm sector. The larger corporates, however, continued to stay away from banks for term funds, as they could tap the financial markets at competitive rates. Syndicate Bank General Manager Credit, R.K. Abrol said, "The returns are better for lending to non-AAA rated corporates. AAA corporates still insist on low lending rates and steep discounts to the current PLR."

Currently PLR ranges between 10.25 per cent and 10.75 per cent.

The lower-rated corporates, however, were comfortable with lending rates above the PLR. These included corporates raising funds for infrastructure on a non-recourse basis, where the banks would depend entirely on project cash flows for debt service and physical assets in the event of payment delinquencies.

Low risk

Yet bankers said there was little risk of assets turning into substandard or non-performing assets in the near future as some of the advances were tied to export receipts and component supplies to larger domestic and international companies. Besides, with the current pace of GDP growth at 9 per cent, demand was unlikely to be impacted in the near future, they added. Borrowers included large infrastructure companies, and even greenfield power entities. Moreover, the farm sector yielded 9-plus per cent, inclusive of a 2 per cent subsidy.

With this kind of credit off-take, the bankers said, their respective spreads were also protected. Bankers are focussing on a net interest margin of 3 per cent plus for this quarter as well. The rebalancing of credit portfolios partly offsets the impact of softening yields on government securities.

News: FM sees GDP growth of 9% over 5-10 yrs

(RTR 06/12/2006) Kolkata - Finance Minister, P. Chidambaram, said on Wednesday he expected gross domestic product to grow at a 9 per cent rate over the next five to 10 years.

"There is a long way to go. But our economy is growing and I hope it will grow at 9 percent. We hope to maintain this growth for the next 5-10 years," he told a banking conference.

News: Reliance Retail gears up for takeovers

(PTI 06/12/2006) New Delhi - Reliance Retail, already creating ripples in the organised domestic retail market, is poised to acquire smaller rivals in order to take on serious competition from the likes of Bharti-Wal-Mart combine.

The Mukesh Ambani-spearheaded venture is bidding to buy out smaller competitors such as Adani Retail and also has plans to gobble up other well-known brands including Subhiksha and Landmark, the book and music store chain in which corporate behemoth Tata has a controlling stake through its retail arm Trent.

"Reliance is the highest among three bidders for Adani and is looking at all others... even Subhiksha and Landmark," an industry source familiar with the development said, but did not elaborate on the proposed Adani takeover.

Adani has a network of over 50 retail stores, which includes formats ranging from neighbourhood stores to supermarkets in Gujarat. On the other hand, acquiring Subhiksha, a Chennai-based discount retail chain, would give Reliance a large presence across various states, including more than 100 stores in the national capital.

Sources said the inorganic growth route suits Reliance's plans, which includes rolling out 300 stores by this year and another 4,000 in three years.

When contacted, a Reliance Industries spokesperson declined to comment on the company's acquisition plans.

Since unveiling Reliance Fresh, its first retail format store that sells vegetables, fruits and groceries in Hyderabad last month, the company has added 16 more outlets to the pilot project in that city. Plans are afoot to roll out Reliance Fresh in four other cities including Delhi this month.

Sources said the company's first hypermarket is expected to be unveiled by the end of February next year.

The Reliance Retail blueprint envisages a nation-wide chain of hypermarkets, supermarkets, discount stores, department stores, convenience stores and specialty stores at an investment of over Rs 25,000 crore in the next five years.

The company expects returns from the venture to be around Rs 90,000 crore by 2010.

Industry estimates suggest that India's retail industry is worth $300 billion (Rs 13,50,000 crore) and could grow to $427 billion in the next four years. Of this, organised retail accounts for just over Rs 35,000 crore.

The potential for organised retail in the country, with a population of 1.1 billion including a 300 million-strong middle-class, makes it an attractive market for foreign retailers who have reached saturation point in other markets.

Already, global retail giant Wal-Mart has made an entry into India through a tie-up with Bharti Enterprises. While the Indian partner would manage the front-end of its operations, Wal-Mart would take care of logistics and supply chain.

Reliance, however, is going about establishing its own supply chain for its retail venture.

In fact, Reliance Fresh stores represents the front-end of RIL's farm-to-fork project, which involves procuring farm products through agri hubs, establishing a supply chain and providing logistics and finally retailing the products.

With the stakes high, the retail sector itself is poised for intense competition whose dividends would be enjoyed by consumers in the form of western-style shopping experience in air-conditioned stores at highly discounted prices.

News: London attracts Indian investors

(BBC 06/12/2006) London - India is the second biggest foreign investor in London, and will contribute over £33m to the capital's economy in 2006/7, according to a new estimate.

Inward investment agency Think London said India accounted for 18% of foreign investment this year, behind the US.

It has helped 36 Indian firms set up in the capital since mid 2005, creating 840 jobs.

London was voted the top European city to locate a business this year, for the seventeenth time in a row.

In the annual location survey from European Cities Monitor, London came top in seven categories: easy access to markets, qualified staff, external transport links, telecommunications, availability of office space, languages spoken and internal transport.

"London attracts over half of all Indian investment into Europe and provides Indian businesses with a gateway to the continent," said Think London chief executive Michael Charlton.

Think London calculated its £33m figure by measuring the number of jobs created and their contribution to the London economy.

Other reports measuring foreign investment into the UK are usually much higher because they measure the total capital inflow into the country - and include takeovers of giant British companies like O2, P&O and Abbey National.

News: India trumps South Korea in m-cap

(BS 05/12/2006) Mumbai - The Indian market today displaced its South Korean counterpart to attain the fourth position in the market cap rankings for the Asia Pacific region, with a total market cap of $821 billion. With a market cap of $811 billion, South Korea has moved to the fifth position.

India Inc’s market capitalisation touched a record high of $821 billion today, while the Korean market fell marginally as the Seoul Composite declined by 0.41 per cent. Japan leads the Asia-Pacific market cap rankings with $4,800 billion, Hong Kong ranks second and Australia, third.

The number of stocks with a market cap of over $1 billion in India has increased to 131 from 125 in the last six months. Five of the new entrants, Reliance Petroleum ($6.6 billion), Tech Mahindra ($3 billion), GMR Infrastructure ($2.9 billion), Parsvnath Developers ($2.1 billion), and Lanco Infratech ($1.3 billion) got into the club after their public offers.

NMDC got into the list with its market cap moving up from $0.70 billion six months ago to $2.50 billion now.

On May 10, when the BSE Sensex hit a high of 12,612.38, 125 companies had a market-cap of over $1 billion. Membership of the club is based on the rupee-dollar exchange rate of Rs 44.52 on December 5, 2006.

India Inc’s total market cap today hit a record high of Rs 36,57,499 crore ($821 billion), which is 3.16 per cent higher than India’s GDP of $796 billion.

The companies with over $1 billion of market cap account for only five per cent of the total stocks traded on the BSE.

Of the 131, as many as 17 are from the banking sector, 10 from the information technology sector, eight each from pharmaceuticals and construction, seven from the refinery sector, six from power and automobiles, five from cement, and four each from non-banking finance and telecommunications.

ONGC tops the list with a market cap of $41.2 billion (Rs 1,83,336 crore). The company’s market-cap has fallen by $5.9 billion (Rs 28,336 crore) in the last six months. It stood at $47.1 billion (Rs 2,11,672 crore) on May 10.

Reliance Industries comes second with a market cap of $40.1 billion (Rs 1,78,432 crore), Infosys Technologies was at the third position with $28 billion (Rs 1,24,491 crore), followed by NTPC with a market cap of $27.7 billion (Rs 1,23,353 crore).

News: India holds good potential for global media

(BS 05/12/2006) New Delhi - Equity research firm Credit Suisse has predicted bright future for global media and entertainment companies in India.

In its latest report on global entertainment, Opportunities for Hollywood in Bollywood, it states that India is one of the four countries where there is significant opportunity for global media and entertainment companies to make money in the medium and long term.

The other countries with the same potential are Brazil, Russia and China.

The report also hints at consolidation in the sector in the near future, especially in view of the recent acquisitions by Disney.

The US giant had acquired 15 per cent stake in Indian film and television production company UTV and also bought out its children’s channel Hungama a few months ago.

The report states that among the companies best positioned to leverage their Indian operations are News Corp, Sony and Walt Disney.

It may be noted that News Corp acquired the Tamil entertainment channel Vijay TV a few years ago and owns 26 per cent stake in TV production house Balaji Telefilms. Sony bought out Sab TV from Sri Adhikari Brothers.

The report says that companies like Viacom (MTV Networks, Nickelodeon), Time Warner (CNN, Cartoon Network and Pogo) and Discovery could further expand their operations here.

It expects most global media and entertainment companies, if not all, to establish a “play on India” at some point.

India also boasts of a sizeable population of local companies that are publicly traded. Their market cap sizes, however, are a fraction of the companies in the US. Clearly, consolidation opportunities are enormous.

Revenue and profit opportunity in India is particularly hot since the content distribution systems in the country are well established.

Besides the model for generating advertising and subscription revenue from television is also well developed. In fact, the latter is expected to grow as digital distribution platform penetrate the market.

The report also compares the entertainment and media market of India with China. It clearly states that the industry in India has grown because of a benign regulatory environment.

The regulatory environment is one of the reasons that foreign companies find India more attractive than China.

Though the Chinese advertising market at US $9,677 million is much bigger than India’s at $ 3,428 million, foreign companies get to keep merely 6 per cent of the total ad pie compared with 30 per cent in India.

News: Canara Bank on expansion spree

(BS 05/12/2006) Mumbai - Bangalore-based Canara Bank is expanding its reach in the western and northern regions of the country. It will open most of the proposed 106 new branches in the two regions over a year.

The bank also plans to open 20 overseas branches or representative offices in North Amercia and South East Asia.

The bank has over 2,540 branches, largely concentrated in the south. It has received licences from the Reserve Bank of India (RBI) to open new branches a few days ago, along with permission to set up 683 offsite ATMs. The bank currently has 810 ATMs.

“The thrust will be on expanding our branch network in the financially active western region,” chairman and managing director M B N Rao told reporters after launching multicap equity scheme of Canbank Mutual Fund today.

The bank has a branch in London, a subsidiary in Hong Kong (Indo Hong Kong International Finance), a joint venture with State Bank of India (SBI) in Moscow (Commercial Bank of India) and a representative office in Shanghan.

Gilt Securities Trading Corporation, Canara Bank’s primary dealership subsidiary, is likely to be converted into a stock broking entity. The primary dealer business will be merged with the bank.

Soon after getting regulatory nod, GSTC plans to acquire membership of the BSE and the NSE.

The bank is also finalising a joint venture partner for Canbank Investment Management Services, its asset management subsidiary and the proposed life insurance venture.

It expects to firm-up partners for both the ventures by March 2007.

News: Target to up sourcing from India to $1 billion

(BS 05/12/2006) New Delhi - Even as Wal-Mart, Carrefour and Tesco make a beeline to enter the burgeoning Indian retail space, Target, $52.62 billion retailer of the US, plans to make it big in sourcing.

The retailer hopes to triple its sourcing from India by 2010 and touch the $1 billion mark. The retailer has been running a sourcing operation, Target Sourcing Services/AMC, in India since 1975.

Target, which has sourcing operations in 51 countries, has been growing its sourcing from India.

While it sourced less than $100 million worth of merchandise in 2003, the company will source $300 million this year and is expected to touch the $450 million mark in 2007.

It currently sources textiles, stainless steel, handicrafts, stationery, lighting equipment and home furnishings from India.

However, company executives said they had no plans to enter the retailing segment in India through the cash and carry route, like the other global biggies, Wal-Mart and Tesco.

“We are very excited about the fast growing Indian retail sector but there are no definite plans to make an entry right now. India still has a major role to play for providing merchandise to our operations,” said P Jagannath, managing director, Target Sourcing Services/AMC.

Official sources said despite the domestic retail sector having everything going for it at the moment, the company’s own plans were currently focused on the US market.

“Target has plans to grow to a $100 billion operation by 2010 and they see enough potential in the US market and need not look elsewhere now,” retail analysts said.

They added that this was not the case with Wal-Mart, which had to look outside the US for pushing growth, as it had hit a plateau in America.

News: India-Arab CEOs summit to explore business alliances

(IANS 05/12/2006) New Delhi - About 100 Indian CEOs will be in Dubai on Thursday to explore business alliances and strategies with their counterparts from the Arab world at a day-long summit.

The first India-Arab World CEO Summit, being organised by the United Arab Emirates (UAE) ministry of economy, will provide an opportunity for CEOs "to flirt with various proposals for better collaboration to boost two-way flow of investments", said Khalid Al Malik of Tatweer, a subsidiary of Dubai Holding.

Dubai Holding is a semi-government owned company with seven entities each with several subsidiaries. Among the major projects handled by the company are Dubai's Internet City and Media City.

Representatives from 22 countries from the Arab world would be taking part in the summit, which is slated to become an annual event.

"As India charts the roadmap for higher economic growth, infrastructure investment remains a major goal, while we in the Arab world are looking for investment opportunities particularly in technology."

"In the era of globalisation, the summit will help CEOs explore how we can mutually benefit," Al Malik, who is also CEO of Moutamarat, a conference organising subsidiary of Dubai Holding said.

Promoted by UAE Minister of Economy Sheikha Lubna bint Khalid Al Qassimi, the event is being managed by Moutamarat with the Confederation of Indian Industry (CII) as partner.

"The knowledge-based event will provide a platform for exploring opportunities and networking, and help explore strengths of different countries. We see lot of opportunities in India and this platform will help us build bridges between India and the Arab World," said Al Malik.

"Part of the Arab world makes efforts to strengthen ties with Brazil, Russia, India and China or the BRIC initiative, the initiative aims for closer cooperation with the four economies as part of the globalisation strategy," he said.

India would be hosting the second summit in 2007. Moutamarat is exploring possibilities of holding a similar exercise with Chinese CEOs next year. This would be followed by meetings with Brazilian and Russian CEOs, possibly in 2008.

Based on a knowledge report by global consultants Mckinsey and Ernst & Young, Al Malik said the plan was to have at least two CEO summits every year. The platform is also expected to help CEOs to voice views on investment hurdles and get speedy redressal.

News: Rise of 'Chindia' to alter global economy

(PTI 05/12/2006) The rise of Chindia - a combination of China and India - will alter the world economy and generate investment opportunities in several sectors, international investment experts predicted.

The high economic growth in China and India will change the world economy and generate investment opportunities in the consumer, agricultural, industrial, banking and logistics sectors, the China Securities Journal quoted the managing director and head of markets, China of JP Morgan Chase & Co, Jing Ulrich as saying.

Her remarks were echoed by Timothy J Bond, analyst with Merrill Lynch & Co., who pointed out in a report that the Indian stock market had grown much faster than the Chinese market in recent years but the latter had enormous potential.

Jing Ulrich said overseas fund managers were looking at the two countries as key investment destinations following Chinese President Hu Jintao's recent state visit to India.

Ashburton, an asset management company based in Jersey, the United Kingdom, launched in November a Chindia Equity Fund that invests in Chinese and Indian companies, the report noted.

The company decided to launch the fund as China is expected to grow at a rate of eight per cent to 10 per cent per year for a long period, while a growth rate of eight per cent is projected for India, fund manager Jonathan Schiessel said.

He said consumer demand would grow exponentially in both countries, driven by an expanding generation with higher aspirations, offering investors tremendous opportunities.

News: Mukesh Ambani set to buy Adani Group's Gujarat-based retail chain

(DNA 05/12/2006) New Delhi - Reliance Industries, which has been in talks with several small retail chains in the past (including food and grocery chain Subhiksha) for acquiring them, seems to have finalised one deal.

According to industry sources, RIL has decided to acquire Adani Retail, the Gujarat based retail chain controlled by the Rs 13,500 crore Adani Group.

Talks between the two parties have been finalised and the deal is expected to be closed soon, said the sources.

The Adanis have about 54 stores across all formats such as neighbourhood stores, supermarkets and hypermarkets, spread across 15 cities in Gujarat. The company had planned to have about 65 stores by the end of this year.

Adani Retail will have a topline of about Rs 200 crore this year. The valuation and the premium RIL has agreed to pay could not be ascertained.

Adani Retail CEO Devang Desai could not be reached for comment. An RIL spokesperson declined to comment.

But why are the Adanis selling out? According to sources, the retail business has seen 100% growth over the last two years but the promoters are keen to exit since it is not their core focus area.

Then, with the retail industry suddenly becoming active — after the commencement of Reliance’s fruit and vegetable retail stores in Hyderabad last month and now with the Bharti-Wal-Mart deal — the promoters believed that this was the right time to offload a profitable but non-core business.

Transport, energy and global commodity trading are some of the businesses the Adani Group is into and the six year old retail venture was a misfit among these. The group’s flagship company, Adani Enterprises, posted a turnover of over Rs 9,000 crore last fiscal.

For RIL, this transaction makes a lot of sense — it provides the company with a readymade retail infrastructure and real estate to begin operations in Gujarat.

RIL has been looking at acquisitions as a way to scale up its retail business for some time now.

Not only is the group one of the contenders for the government-owned Super Bazar chain of stores across Delhi, it has also been in talks to acquire state cooperatives - such as the HPMC - for getting better distribution and sourcing muscle.

While Super Bazar will provide RIL prime real estate for its business in the Capital, HPMC would help sourcing of fresh fruits (such as apples) and veggies from Himachal. Some months back, RIL acquired the Sahkari Bhandar chain in Mumbai - which is also expected to provide similar synergistic benefits to the company.

News: Unilever to HLL - Shape up & win respect

(DNA 05/12/2006) Mumbai - The management of Hindustan Lever Ltd (HLL), India’s largest fast-moving consumer goods (FMCG) company, has been given a simple brief by Unilever group chief executive Patrick Cescau: Bring back HLL “to the top table” in terms of the market’s respect and bottomline performance. “We want to be the best FMCG company in India.”

Openly acknowledging — perhaps for the first time in as many words — that the Indian subsidiary has been facing more critics than admirers in recent years, Cescau said he wanted HLL to not only generate outstanding growth and margins, but also become a net provider of talent, ideas and technology to the global Unilever. Cescau also reiterated the basic metric by which all success would be judged: marketshare.

Given the HLL is a market leader in eight of the 10 broad categories it operates in, the India-specific directive is essentially to “maintain marketshare” where it cannot grow further.

He lauded the Indian company’s high double-digit growth, but seemed to indicate that it could do better.

Talking about Unilever in general, he said it had lost a bit of its old aggression, but in the past two years the top management has tried to bring this back on the agenda. Cescau was appointed in April, 2005, as group chief executive of the combined Unilever plc & Unilever NV, the first incumbent to hold the position after the board decided to abolish the Anglo-Dutch multinational’s dual-headed structure - an anachronism in the modern corporation.

The changes at Unilever coincided with changes in HLL’s own board, with chairman Manvinder Singh Banga being elevated as president (foods) and Harish Manwani becoming president (Asia & Africa), apart from becoming non-executive chairman of HLL. Douglas Baillie was named CEO of HLL in India from March 1, 2006.

Cescau’s new brief to the HLL board is important in the overall context of Unilever’s own attempt to push up growth and margins. In the last quarter, Unilever grew by 5% with no improvement in margins. To list Unilever above anaemic growth levels, the big push has to come from developing and emerging markets, which comprise 40% of Unilever’s turnover. And India, as the top emerging market within this portfolio, has to deliver the goods. India contributes about €2 billion (€1 = Rs 59) to Unilever’s developing and emerging markets business of about €15-16 billion.

While declining to reveal any of the formal goals set for HLL, Cescau agreed with a questioner that topline needed to grow faster than the rate at which the economy was growing - which is about 14-15% in nominal terms. In the third quarter ended September 30, 2006, HLL’s sales were up 12.2% to Rs 3,163 crore, while adjusted net profits (after extraordinary items) were 17.5% higher at Rs 383 crore.

Cescau emphasised that HLL’s basic mistake in the past was to be in too many places while ignoring its core franchise. There was also an assumption that distribution strengths would provide competitive edge, when the marketplace was changing. HLL may also have made some bad acquisitions.

Does this mean HLL will not be looking at any new acquisitions? Cescau disabused newspersons of any such intention. “Asia is a priority for acquisitions,” he said. But he expected the HLL management to learn lessons from past mistakes. Most of HLL’s acquisitions have been in the foods business.

Cescau’s other advice to the HLL top brass was to get more innovative. Among other things, he said that while Unilever had a portfolio of strong brands, any decision to introduce them in India must be driven by a better understanding of the local consumer. “We don’t want a one-cap-fits-all approach to products,” he said.

Cescau was, however, very positive about the quality of HLL’s top leadership team and pointed out that two of his seven direct reports - Manwani and Banga - were Indian. Overall, about 30% of Unilever’s higher level managers came from developing and emerging markets.

So when will HLL change its name to Unilever India? Cescau’s reply: that will be decided by the local management.

News: ‘Sight’, ‘blind’ funds take AIM

(DNA 05/12/2006) Mumbai - Call it herd mentality, but Indian real estate developers are going in hoards to the Alternative Investment Market (AIM) of the London Stock Exchange.

Why are they looking West, when funds can be mopped up in the local market?

There are two reasons: valuations, and institutional interest in the Indian realty space.

“The real estate and infrastructure space is relatively new in India. Though real estate companies have been successfully raising funds in the domestic market, they are getting better valuations on AIM, where the sector is better understood and where institutional investors are keenly watching the Indian realty story play out,” said Ambar Maheshwari, director, investment advisory, DTZ India.

All companies looking at international funding need to have foreign direct investment (FDI)-compliant projects.

This means that each property needs to have a built-up area of over 50,000 square metres, and the project should necessarily have a development component.

Some developers have been clubbing together 4-5 projects under the fund being raised (on AIM), but each needs to be FDI-compliant individually.

Some of the benefits that a real estate company enjoys when getting listed on AIM: “The parent company does not get exposed at all because it is an entirely new company that is raising the fund, the parent company can continue with its non-FDI projects, and there is no dilution of stake in the parent company,” said Josef A Pattathu, executive director of Housing Development and Improvement (India) Ltd.

The fund being raised is divided into two parts: ‘sight funds’ and ‘blind funds’.

The former is the value attached to properties that have already been identified for development, while the latter is the value that investors give to properties yet to be identified by the developer.

“Blind funds are normally 30-40% over the sight funds, going up to 60% sometimes, depending on the trust investors repose in a particular developer,” said Pattathu. Among firms that have already raised funds for India through AIM are New-York based Trikona Capital (around $450 million through its fund Trinity Capital) and CL Raheja-promoted Ishaan Real Estate ($341 million).

Waiting in the wings to raise money on this exchange, are Unitech ($700 million) and Niranjan Hiranandani’s daughter, Priya, who is structuring a $700 million fund. Besides, Westfield Pioneer is said to be raising a $50 million real estate fund on AIM.

Another benefit of AIM listing is that none of the new companies (funds) being formed need to be incorporated in the UK. They can route their investments through vehicles incorporated in principalities such as Cayman Islands, Isle of Man or even Mauritius, with which India has a double taxation avoidance agreement.Why is AIM better than other international markets?

“From the regulatory standpoint, AIM is very flexible. It does not stipulate minimum requirements with regard to company size, track record, the number of shares in public hands and market capitalization.

This makes cost of compliance low as compared to other exchanges,” said Vineet Suchanti, managing director of Keynote, a domestic investment banking firm.

“Further, the entire responsibility of due diligence and documentation is on the nominated adviser, who is accountable to the investors,” he added.

Both UK and overseas companies joining AIM are required to pay a flat fee of £4,340, which is not a tall order in the light of the other aspects, said Suchanti. Though no admission fee is payable by AIM companies for further issues, an annual fee of £4,340 is payable by all AIM companies.

Noida Toll Bride and Great Eastern Energy Corporation are a couple of non-real estate Indian companies listed on AIM. According to the AIM website, since its launch in 1995, over 2,500 companies have joined it, raising more than £34bn both through initial public offerings (IPOs) and further capital raisings. It is a market specifically designed for getting smaller growth companies listed. It becoming an exchange-regulated market in October 2004 has further added to its lustre.

News: No hurdles seen in way of Bharti, Wal-Mart retail plan

(BL 05/12/2006) New Delhi - The proposed alliance between Bharti Enterprises and Wal-Mart Stores for a joint retail venture is unlikely to face any regulatory hurdles. The existing FDI guidelines support such an alliance where the arrangements could result in a win-win situation for both companies, according to sources. The current policy guidelines allow 100 per cent FDI in cash-and-carry wholesale trading through the Reserve Bank of India's automatic approval route. To take this route, the foreign company has to give a self-declaration that it will not violate the set rules. Another condition is that the buyer to whom the foreign company is selling must have a sales tax registration. On the other hand, Bharti Enterprises, being an Indian company, has complete access to the entire retail market without any restriction in terms of investment caps, geographical location and supply and distribution chains. Thus, the proposed alliance may be workable under two sets of corporate structures, according to experts. First, Wal-Mart may have a wholly owned subsidiary that would import all the products to be sold by retail stores. But this company cannot undertake retailing. So, another company from the Bharti group without any FDI component could source its supplies from the Wal-Mart subsidiary. In pix: Social Entrepreneurs Alternatively, the company that would undertake the imports could also be a joint venture between Wal-Mart and the Bharti group. This would give Bharti greater control over the supply channel, while Wal-Mart would not have any direct control over the retail store chain without equity participation. Senior retailing experts said that the existing legal framework does allow such an arrangement. Paul Merrifield, CEO of Proftiz Canada, said: "Companies like Wal-Mart are too big and too high-profile to risk their reputation by refuting the law of the land. Wal-Mart's entry will only benefit the small retailers and traders in terms of providing them with low-priced products and increase their stock positions." Reflecting a similar line of thought, Subhinder Singh Prem, Managing Director of Reebok India, said: "Wal-Mart has a huge reputation which it cannot risk. If they had to enter they could have done so five years ago and not waited for the joint venture to happen."

News: S. Korea's Lotte Shopping eyes India entry

(RTR 05/12/2006) Mumbai - Lotte Shopping Co. , South Korea's top retailer, is planning to enter India, the Economic Times daily reported on Tuesday.

Lotte, which runs South Korea's biggest department store and No. 3 discount store chain, has set up an office in New Delhi to study the Indian market, and is looking for an Indian franchise partner, the newspaper said, quoting sources.

Lotte, which in January raised $ 3.54 billion via the world's largest retail IPO, is present in India through its confectionery unit, Lotte India Corp. Ltd.

Interest in India's fast-growing retail industry has heightened after Wal-Mart Stores Inc. last week signed a joint venture agreement with India's Bharti Enterprises for cash-and-carry stores in Asia's fourth-biggest economy.

Bharti had also been in talks with other global heavyweights including Tesco Plc and France's Carrefour

Tesco said last week it still planned to enter India, and some local media reports said it may be in talks with India's Tata group, which has a venture with Woolworths for retailing consumer electronics and appliances in India.

But a Tata spokesman denied the reports to Reuters.

Only single-brand retailers are now allowed to take 51 per cent in a joint venture with a local Indian firm.

Multiple-brand retailers can only operate cash-and-carry stores or through franchises and licensees, such as Metro AG and Shoprite have chosen.

India's retail industry is estimated at about $ 300 billion, and is forecast to grow to $ 427 billion in 2010, according to consultancy KSA Technopak Advisors. But organised, or branded, retail, only makes up about 3 per cent of this market.

With the entry of deep-pocketed companies including Reliance Industries Ltd. cigarette maker ITC Ltd. , the Tatas and the Aditya Birla group, that share is forecast to rise to 15 to 18 per cent by 2011/12.

News: ICICI Bank expands SE Asia presence

(RTR 05/12/2006) Mumbai - ICICI Bank Ltd. said on Tuesday it had opened offices in Bangkok, Jakarta and Kuala Lumpur, to capitalise on a rise in cross-border deals.

"This is to enable the bank to increase its participation in India's transactions in the region, which are likely to see a spurt once the ASEAN-India FTA (free trade agreement) is announced," Deputy Managing Director Chanda Kochhar was quoted as saying in a statement.

With the new offices, ICICI Bank would have a presence in 17 countries. Shares in ICICI Bank fell 0.9 per cent to Rs 862.40 on Tuesday in a Mumbai market that rose 0.5 per cent.

News: VSNL to provide voice peering services for Yahoo

(PTI 05/12/2006) Mumbai - VSNL International, the overseas arm of Tata-controlled Videsh Sanchar Nigam Ltd, on Tuesday said it would provide international retail call facilities for popular internet portal Yahoo's voice services. Yahoo has chosen VSNL International's Teleglobe voice peering and termination services to exchange high quality VoIP (Voice over Internet Protocol) traffic on a global basis, a company release said here. As per the understanding, Yahoo will use the Teleglobe VoIPLink service, to bridge interoperability between VoIP networks, to terminate traffic anywhere in the world, it said. Yahoo is also utilising the Teleglobe VTS Service to ensure high quality, cost effective retail termination for users of Yahoo! Voices Phone Out (PC-to-Phone) service worldwide. Teleglobe's premier voice peering product, VoIPLink, is currently being utilised by over 450 customers across the globe. Earlier this year, VSNL had acquired Teleglobe for $239 million.

News: Indians are rich, Westerners are filthy rich!

(PTI 04/12/2006) New Delhi - The extravagant lifestyle of Indian "oligarchs" like L N Mittal may be making newspaper headlines across the world - as do those from other emerging economies like Russia and China - but developed countries are still the primary breeding grounds for tomorrow's wealthy, a new study says.

A new report from Barclays Bank's wealth management arm, published on Monday, has re-asserted the pre-eminence of G-7 as the natural home of the super rich over the next decade, while terming the influence of BRIC countries on the wealth landscape as "overplayed."

According to the study, US would remain home to the highest number of wealthy hosting nearly nine million 'dollar- millionaires' by 2016, while the UK, Japan and Canada would experience biggest growth in high net worth individuals over the next decade.

Barclays Wealth Insights study, jointly conducted by the Economist Intelligence Unit (EIU) on behalf of Barclays Wealth, says: "The significance of the emerging BRIC markets (Brazil, Russia, India and China) as a source of the rich and super rich is overplayed."

Despite dramatic economic growth within the BRIC markets in recent years, relative weaknesses in infrastructure and the business environment could hold back their development as dominant sources of high net worth households.

"Much is made of the BRIC Effect, but this research with the EIU shows that the developed nations will continue to be home to the majority of the worlds wealthy," Barclays Wealths private banking division Managing Director Mark Kibblewhite said.

"BRIC oligarchs like Roman Abramovich and Lashkmi Mittal will continue to exert their influence in G7 countries precisely because they understand the stability, security and potential these parts of the world offer wealthy people," Kibblewhite added.

The point is supported by the EIU's Business Environment Ranking, which uses a range of measures to assess how conducive a country is to business (and with it wealth) development.

The USA, Canada, UK, Germany and France are all registered in the top 20 (with Japan and Italy just outside) but in contrast, Brazil is 44th, China is 51st, India 58th and Russia 59th, the report said.

"The BRIC markets have seen less significant growth in recent years, but all four countries face challenges in developing their business environments so that they are more welcoming to business and enterprise," said Rob Mitchell of the EIU.

"While larger corporates are right to invest in the BRIC countries, they should not expect quick results and should consider these investments as long term. In the shorter term, the G7 countries will continue to present major opportunities for wealth generation and cannot be ignored," Mitchell added.

As the numbers of wealthy individuals continue to grow at pace across the globe, the vast majority of millionaires and super millionaires will continue to come from developed markets, the report said.

According to the EIU forecasts, all seven countries in the G-7 group would see the number of high net worth individuals those with financial wealth in excess of one million dollars double over the next decade.

In the UK, Japan and Germany, these numbers will more than triple and Canada will enjoy almost a six-fold increase in its millionaire count.

The report said India is set to be the fastest-growing country in the world in the next couple of decades, with real GDP growth forecast to average six per cent a year and GDP per head growing at 4.8 per cent a year the second-fastest rate in the world after China.

Current success, however, is narrowly based on a few sectors, with IT leading the pack. Agriculture, a poorly paid sector, still provides a living for two-thirds of India’s population, it added.

A number of drawbacks continue to hamper India's efforts to attract foreign direct investment, despite the strong performance in some sectors. Red tape, restrictive labour laws, expensive power supplies and poor infrastructure are among the problems that are most commonly cited by foreign investors.

The report has been published by Barclays Wealth, the leading wealth manager in the UK with 84 billion pounds worth assets under management. It is part of the Barclays Group, one of the largest financial services groups in the world by market capitalisation.

News: Volkswagen may roll out on Apollo tyres

(BS 04/12/2006) Mumbai - Gurgaon-based premium tyre manufacturer Apollo Tyres is in talks with German car major Volkswagen for supplying tyres to the proposed small car that it will launch in the next two years.

Onkar Kanwar, chairman and managing director, Apollo Tyres, said, "We are holding talks for supply of car radials for Volkswagen vehicles, which are expected to roll out in the second half of 2009-10".

Apollo's new passenger and truck-bus radial factory, which is scheduled to come up in Tamil Nadu in the next five years, will make the company self-sufficient to cater to the demand from Volkswagen and also from the open market.

Volkswagen had firmed up its plans to set up a car plant in Chakan near Pune and is expected to sign a memorandum of understanding (MoU) with the Maharashtra government by the next week.

Apollo Tyres' share of sales to Original Equipment Manufacturer (OEM), such as car companies, is 30 per cent and remaining through sales to car owners, better known as after market sales.

Kanwar said though better margin comes after market sales, the company is expecting OEM sales to go up to 35 per cent.

Meanwhile, to strengthen its position, the company is also eyeing acquisitions in domestic and international markets, especially Europe where it is going to launch its premium tyres next year.

"Apollo Tyres is all set to cross the $1 billion mark in consolidated revenues in the current financial year," Kanwar said.

Currently, 85 per cent of Apollo's revenue is derived from domestic sales but the company aims to increase its export share in the next five years.

News: Hedge funds wait for India to open

(BS 04/12/2006) Mumbai - India is now clearly in the radar of the global hedge fund industry after recent statements by the Securities and Exchange Board of India (Sebi) favoured the direct entry of long-term hedge funds.

Hedge Funds World, an international hedge fund lobby group and a leading organiser of hedge fund conferences globally, will hold its first Hedge Funds World India series next year.

The series, to be held in Singapore in the second half of 2007, is expected to feature over 50 global and domestic fund managers and investors.

“While hedge funds growth has reached maturity in the developed markets of Asia like Hong Kong, Singapore and Japan, India still has a lot to offer to local and international fund managers,” a note sent to clients by Hedge Funds World said.

Currently, hedge funds are denied direct entry into India and most of them operate through participatory notes. According to sources, hedge funds, which manage over $14 trillion in assets the world over, expect the Indian market to be opened up for their direct entry before the Singapore meeting.

“The Asian market as a whole has become lucrative for many hedge funds in recent years. Though Hong Kong, Japan and Singapore top the list, a lot of recent activity has also been seen in the Indian market. The burgeoning money-making opportunities India offers have become rare in the US and the European Union. As a result, hedge funds have been aggressively pumping money into India,” the note explained.

Sources said hedge funds were being viewed as a necessary condition for financial markets to mature. “India looks increasingly attractive with annualised returns in double figures despite the recent volatility. The number of dedicated Indian funds has also increased by leaps and bounds, while assets under management by these funds have more than doubled,” a source said.

Interestingly, hedge funds see better prospects in India, when compared with all other major markets in the region.

“Indian markets are more fertile for hedge fund operations than those of China. Such advantage has been derived from the growth of the derivatives market in the country, in addition to revision and modernisation of investment laws and regulatory oversight. Derivatives trading in India is becoming better for hedge funds’ trading activities, compared with China. As a result, there has never been a better time to set up or establish an India-focussed hedge fund,” the note said.

India-focussed hedge funds have been beating their counterparts operating in other Asian markets in recent months by growing their assets in double digits on a monthly basis.

News: Tata Steel forms shipping jv

(RTR 04/12/2006) Mumbai - India's largest private steel firm, Tata Steel Ltd., said on Monday it had signed an agreement with Nippon Yusen Kabushiki Kaisha to form a shipping joint venture.

In a statement, Tata Steel said its partner was one of the world's leading transportation firms, operating some 700 ocean vessels as well as fleets of planes, trains and trucks.

News: India seeks dialogue to resolve EU alcohol row

(RTR 04/12/2006) New Delhi - India is hoping to resolve through dialogue a trade dispute with the European Union over high import tariffs, its commerce minister said on Monday after a meeting with his visiting French counterpart.

Last month, the European Commission said it was taking India to the World Trade Organisation (WTO) in a dispute over New Delhi's high duties and taxes on wine and spirit imports.

"The (French) minister has strongly raised the issue," Kamal Nath said at a joint news conference with Christine Lagarde. "I hope we will resolve this by dialogue and it won't have to reach the next stage of dispute settlement."

Consultations at the WTO can last for 60 days but if no agreement is reached, Europe's complaint could eventually lead to retaliatory tariffs being imposed by the EU on Indian exports.

A European Commission report this year, prompted by European producers of whisky and other spirits and wines, found "clear violations of WTO provisions" in some Indian states.

Duties and taxes combined amounted to as much as 550 percent on imported spirits and 264 percent on imported wines, the EU executive's report said.

In the state of Tamil Nadu only Indian-made spirits and wines may be sold through shops and other retail outlets, it said.

Indian trade officials have said the issue is difficult to resolve quickly because state governments are responsible for excise duties on alcohol under the country's federal set-up.

EU spirits exports to India in 2005 amounted to 43 million euros ($55 million), a tiny amount given the country's size, while wine exports stood at 7 million euros, the Centre for European Policy Studies said.

News: Indian shares rise to new record

(RTR 04/12/2006) Mumbai - Indian shares rose 0.21 percent to a second successive record close on Monday, led by construction firm Larsen & Toubro Ltd. and Tata Motors, after it reported strong annual sales growth.

The 30-share BSE index closed 29.55 points higher at

13,874.33 points, having hit a record high of 13,912.54 during trade, although gainers matched losers at 15 each.

"The November auto and cement sales numbers were good. I see the market moving upward in a run-up to third-quarter numbers, which are due next month," said Vinod Bansal, director at Ficuswealth.com.

"However, there could be some sector-wise consolidation. Hotels, engineering and cement stocks look good."

The 50-issue NSE index also set a record close, ending up 0.09 percent at 4,001.00, after hitting a record peak of 4,015.25 during trade. In the broader market, 1,466 gainers outpaced 1,071 losers on a volume of 237.6 million shares.

The benchmark BSE index has surged more than 47 percent this year, making it the best performing major market in Asia-Pacific, boosted by foreign fund investments of more than $8.8 billion so far this year, including $2 billion in November.

Construction and engineering firm Larsen and Toubro led the index higher with a 3.1 percent rise to 1,422 rupees.

Tata Motors gained 4.3 percent to 879.25 rupees, while cement maker ACC Ltd. rose 3.6 percent to 1,172.60 rupees, after their respective November sales and shipments figures showed strong annual growth.

Bellwether Infosys Technologies Ltd. gained 0.5 percent to 2,205.45 rupees, but most other blue chip technology stocks were in the red.

Reliance Industries Ltd., India's top private firm, fell 0.1 percent to 1,260.10 rupees.

Elsewhere in the region, the Karachi 100 index closed 0.28 percent higher at 10,417.39 points, while the Colombo market was shut for a Buddhist holiday.

STOCKS THAT MOVED

* Industrial Development Bank of India Ltd. rose 6.6 percent to 79.05 rupees, after a senior official of its bad loans trust said the state-run bank should receive 15 billion rupees from recovery of bad loans in the year to March 2007.

* Defence components maker IST Ltd. rose 5 percent, its maximum daily limit, to 200 rupees after the firm said it would transfer land in Haryana to Gurgaon Infospace Ltd. for 1.11 billion rupees.

* Jewellery maker Rajesh Exports Ltd. rose 9.9 percent to 258.45 rupees after the firm said it had formed an equal joint venture with U.S.-based watch designer Fossil Inc. with an investment of 250 million rupees to make watches and sell jewellery.

MAIN TOP THREE BY VOLUME

* Parsvnath Developers Ltd. on 6.1 million shares

* Welspun Gujarat Stahl Rohren Ltd. on 6.0 million shares

* Balrampur Chini Mills Ltd. on 3.9 million shares

News: Wal-Mart’s gain is not Tesco’s loss in India

(TNN 03/12/2006) Kolkata - Sunil Mittal’s Bharti Enterprises may have chosen Wal-Mart over Tesco as its retail partner, but that hasn’t crashed the UK retailer’s faith in the Indian summer. On the contrary, Tesco has confirmed it is still on the lookout for an Indian JV partner to enter the country’s emerging retail arena.

While Tesco’s retail plans in India are unlikely to crystallise before financial year 2007-08, the company is bullish on its local sourcing plans.

In response to ET’s email query, the Tesco spokesperson wrote back: “We remain excited by the opportunities available in India and continue to review how best we may enter the market. As this work progresses we will be in a better position to give more details.”

But Tesco refused to elaborate on the scope of its proposed Indian retail operations. On whether it will be focused only on cash-and-carry, logistics and supply chain, areas in which FDI up to 100% is allowed. Or, on the possibility of Tesco’s Indian partner entering the front-end with hypermarket, grocery chains or non-food retailing formats.

Not too long ago, Tesco’s CEO Terry Leahy had said: “The Indian market hasn’t opened up yet to foreign retail investment, but if it did open up, I’m sure it would present opportunities for Tesco.”
Tesco has indicated that it will continue its research and expects to give an update on its India gameplan post-April 2007.

While Tesco starts its Indian odyssey afresh, it is bullish about the merchandise sourcing business in India. Tesco has buying/sourcing offices in Bangalore and Delhi and sourcing products including clothing, homeware and garden furniture for its worldwide stores. “Over the past year, we sourced £75 million of products from India and expect this to grow in the coming year,” the company spokesperson said, adding “India has a large population and modern retail is in its infancy.

Whenever we choose to enter India, there will be plenty of opportunities.” Meanwhile, Infosys non-executive chairman Narayana Murthy lauded Wal-Mart’s entry into India. He was speaking on the sidelines of the inauguration of the Institution of Engineering and Technology’s (IET) first Indian office in Bangalore.

News: India sees rising living standards, as poverty ratio declines to 22%

(TNN 03/12/2006) New Delhi - The poverty ratio in the country has come down to 22% from 36% in 1993-94 as per initial estimates, the government said. This could be a shot in the arm for the UPA government and a justification that reforms and liberalisation do help in improving the living standards of the masses.

The latest poverty estimates are based on the results of the large sample surveys conducted by National Sample Survey Organisation (NSSO) in 2004-05 on household consumer expenditure based on mixed recall period (MRP).

Based on this result, the government claims that poverty has declined by about 0.79 % per year during the period 1999-2005. Measurement of poverty has always been an important yardstick for the government to decide if its economic policies have helped the poor.

The NDA government had used the same MRP methodology to put the percentage of those below poverty line at 26.1% as on 1999-2000. But the UPA government had disputed the method and reverted to the earlier standard, under which the percentage of those below poverty line was set at 27.8%. However, it had said that if the same yardstick’s adopted then the poverty ratio can come down to 22% in 2004-05.

In the MRP method, consumer expenditure data of five non-food items — clothing, footwear, durable goods, education and institutional medical expenses and other items are collected over a fixed period. Usually, the data is collected on a year’s recall period and the consumption data for remaining items is collected from a 30-day recall period.

However, the final word on the subject will come from the NSSO survey on a quinquennial basis. The report on consumption expenditure is yet to be released. The government also said the decline in poverty is a complex process and not dependent on GDP growth.

“Unequal agricultural development, frictions and rigidity in the economy are some of the reasons for the imbalance,” a government paper on the subject said. Thus, while GDP in real terms during 1993-94 to 2004-05 period grew at around 6.3%, the rate of reduction in poverty was far more slow.

News: ‘GDP growth lures foreign investors'

(IANS 03/12/2006) New Delhi - India, with a growth of over 8% per annum, is emerging as the most-preferred destination for foreign investors, a survey by a leading business chamber says. In a survey by the Federation of Indian Chambers of Commerce and Industry (Ficci), 83% of foreign firms are considering expansion, while 71% hope the country will surpass the 8% GDP growth by March 2007.

A majority of foreign investors have achieved their growth target set for their India business, said the survey, adding that 91% of the companies making profits have been able to meet their profitability targets.

With more and more companies bringing in their assembly lines and setting up manufacturing units here, India is becoming a coveted place for investments.

India, with its young population, is an attractive destination for investment in comparison to other developing countries, including China, where the one-child policy has resulted in an older workforce. The perception of India as a manufacturing base has reasonably improved over the past two years, with 48% of foreign companies rating India as an attractive manufacturing base.

In the first quarter of the current financial year, the manufacturing sector grew by 11.3%, yielding India’s highest first-quarter growth of this decade, pegged at 8.9%.

However, the survey points out that there are a number of serious challenges that are slowing down the economy, including a visible shortage of skilled and qualified manpower and infrastructure problems.

News: Realty triggers FDI to kiss $10 bn in 6 months

(TNN 03/12/2006) New Delhi - Foreign investment inflows in the country are expected to touch $10-12 billion over the next six months, thanks to several big-ticket listings being in the offing at the Alternate Investment Market at the London Stock Exchange.

While realty biggies such as Tricona, K Raheja and the Surinder Hiranandani Group have already raised close to around $3 billion at the AIM, several other players including Unitech, Ansal API, Omaxe and the Nirendra Hiranandani Group are learnt to be in talks for raising another $2-2.5 billion.

In addition, home-grown realty funds like the Kishore Biyani promoted Kshitij and the Ashok Piramal Group promoted Peninsula Realty Fund (PRF), are also bringing FDI into the sector which is expected to further increase the total inflows.

In fact, Peninsula Realty Fund has recently got a CCEA (Cabinet committee on economic affairs) approval for raising a whopping $350 million FDI to invest in the real estate and infrastructure projects in the country.

While Unitech has already announced its plans to raise around $700 million from the London market, according to industry sources,Omaxe, Ansal API and Nirendra Hiranandani Group will soon be announcing their respective plans, it is learnt.

As of now, according to a study by Jones Lang LaSalle, FDI investment in the Indian real estate sector is already in excess of approximately $3 billion. Though the AIM market was meant to facilitate fund raising for those companies which were looking at raising $30-50 million, real estate companies have been using this route to raise large amounts of money.

“The original idea was that those companies with different business models felt that the response at the AIM market would be better than the response at the Indian stock market. But real estate companies have a standard business model and there is no justification for raising such large amounts. This is like a herd instinct,” said an expert.

Industry insiders say that with the kind of investment opportunities that the Indian real estate has thrown open, it has already caught the attention of the entire world.

Says Pranav Ansal, director, Ansal API, “It’s a healthy trend and sooner or later it was bound to happen as the Indian real estate market has come of the age and has been recognised the world over as an excellent investment opportunity.”

“There are a lot of companies which are not just exploring this opportunity but have done due diligence. Of the 30 companies that we are talking to, 15 should list at the AIM this year which also includes few real estate companies,” said Pankaj Karna, partner and head (M&A advisory), Grant Thornton.

Listing at AIM requires the Indian companies to be listed at the domestic markets, who can then list through a GDR. For unlisted companies, however, the route is through investment in foreign funds.

The AIM market, a stock exchange which was started in 1995, requires no minimum requirements for initial equity, minimum public float, market capitalisation, trading history and profitability for the companies to list with them.

News: Pantaloon in office retail push, courts Staples Inc

(HT 03/12/2006) Mumbai - Staples Inc, the world’s largest office supplies’ retailer, is set to enter the Indian organised retail sector close on the heels of retail giant Wal-Mart announcing plans to set up an Indian venture with the Bharti group.

The $16 billion US company that runs 1,600 stores in the US and Canada, is close to striking an alliance with Kishore Biyani's Future Group, currently the country's largest retail player, thanks to established brands such as Pantaloons and Big Bazaar.

Pantaloon Retail India Ltd, the listed entity that leads Biyani's ambitious chain that spans everything from bookseller Depot to extensions of Big Bazaar such as Furniture Bazaar and Food Bazaar, is set to be the vehicle for the collaboration.

“Staples and Pantaloon are expected to sign the agreement shortly. Pantaloon is forming a new company to manage the office supplies’ business," said a source close to the transaction. Pantaloon Retail's board, at its meeting held on November 17, approved the formation of a new subsidiary company to carry out the office supplies’ business. Pantaloon offered no comment on the issue.

Staples, which is expanding in markets outside the US, is betting big on Asia and has underlined that the region's emerging markets will be key business drivers. India being the hottest growth market after China in the continent, would likely be on its radar.

Staples has a joint venture with OA 365 in China. Similarly, it operates in Taiwan through a JV with UB Express.

News: RIL sketches grid for gas to south India

(TT 03/12/2006) Chennai - Reliance Industries is planning an ambitious ‘southern corridor’ of gas pipelines through Andhra Pradesh, Tamil Nadu and Kerala, to commercially exploit its huge gas reserves in the Krishna-Godavari basin.

The company’s chairman Mukesh Ambani, who held discussions with Tamil Nadu chief minister M. Karunanidhi at the latter’s Gopalapuram residence here this evening, said “some of the huge quantities of natural gas” in Andhra Pradesh “is with Reliance”. He, however, did not specify the quantity.

After the 30-minute meeting, at which the Union communications and information technology minister Dayanidhi Maran was also present, Ambani said the benefits of this natural gas find could be directly delivered to thousands of households in Tamil Nadu also.

“So, after Andhra Pradesh, our focus will be Tamil Nadu,” he said, adding that Reliance hoped to deliver piped gas directly to households across major cities and towns in the state in the next two to three years. “This gas supply would be 25 per cent to 30 per cent cheaper than LPG,” he said.

“Therefore, we can bring down (gas) prices in south India,” he added.

Hinting at extending Reliance’s retail network in Tamil Nadu, Ambani said they were also looking at creating distribution logistics to support the farmers of the state in marketing their agriculture products.

Karunanidhi welcomed both the projects and assured the state government’s full support.

The capital outlay for these two projects will be divulged at the appropriate time, Ambani added.

One estimate, however, has put his proposed investments in the state at around Rs 15,000 crore.

Maran said the proposed CNG pipeline project in particular was crucial as the pipeline would criss-cross Tamil Nadu en route to Kerala.

Apart from ensuring direct piped gas supply to households in Tamil Nadu, the CNG, like in Delhi, could also be used in vehicles, Maran added.

News: Israeli Property, Electra to invest in India

(RTR 03/12/2006) Jerusalem - Israel's Property and Building Corp. and Electra Ltd. on Sunday said they had agreed on a joint venture to invest $100 million in real estate projects in India.

The joint venture includes an Indian partner who will hold a 10 percent stake. Property and Building, a subsidiary of holding company IDB Development Corp., and Electra both hold a 45 percent stake.

The name of the Indian partner was not disclosed.

The companies are currently examining investments in southeast India, including a 42.9 acre site for construction of 260,000 square metres, and a 9.9 acre site for construction of 1,200 housing units.

In October, Property and Building acquired along with two partners two Hilton hotels in London and Birmingham for 463 million pounds.

Shares in Property and Building were down 1.6 percent, and shares in Electra were down 2.3 percent, compared with losses of 0.7 percent in the broader market.

News: TCS wins $100m deal in China

(PTI 03/12/2006) Beijing - IT major Tata Consultancy Services has won a landmark deal worth a whopping $100 million from the state-run Bank of China, industry sources said on Sunday.

It is being dubbed as one of the major IT-related deals signed by a Chinese bank ahead of the opening up of the country's banking sector to foreign competition by December 11 under Beijing's commitment to the World Trade Organisation, industry sources said.

"It is a major breakthrough for Indian IT companies, who are aggressively expanding their operations and bidding for government contracts in China," a software expert said.

Under the just-inked deal, the Indian IT giant will provide a range of banking solutions to BoC. The details are not yet known.

All major Indian IT giants, including TCS, Infosys, Satyam, Wipro and NIIT, and i-flex have set up bases in China, servicing their multinationals customers in the country and targeting the huge domestic software market as well as the Japanese and South Korean markets.

TCS and its Chinese partners are expected to get their business licence soon for their Beijing-based joint venture, another milestone in the company's bid to expand its global footprint.

The joint venture company will be located in Beijing's Zhongguancun Software Park (z-Park) and will provide IT services and solutions to China's domestic market as well as major markets particularly Japan as well as the rest of Asia-Pacific region, US, and Europe.

News: Indian bourses break into Asian Top 5

(DNA 03/12/2006) Mumbai - The piping hot India story is being told in a number of ways. One of which is through market capitalisation, and another through portfolio and retail inflows. On Friday, India’s total stockmarket capitalisation soared past $800 billion to $ 808 billion - the fifth country in the Asia-Pacific region and the 14th in the world to have the distinction. It is just a few billion dollars away from South Korea’s $ 815 billion, and crossing that target needs only a few big-ticket new listings.

Of the $262 billion added to India’s market capitalisation in the year to date, around 20% ($50 billion) is accounted for by 87 public issues. The forthcoming Cairn Energy and DLF floats are set to add another $29 billion to India’s market-cap looking at expected pricing indications. These will help the country race past South Korea to the fourth spot in Asia-Pacific, after Japan, Hong Kong and Australia.

Among Asia-Pacific markets this year, India’ market-cap has climbed at the third-fastest rate in absolute terms. Only Hong Kong, which added $ 677 billion, and China, which added $459 billion, are ahead on this count.

With foreign institutional investor (FII) inflows into equity ($8 billion year to date) also being robust, the India performance comes as no surprise, but this is not a saga of foreign flows alone. Domestic flows have also played their part in catapulting company valuations in India.

Data show that mutual fund assets soared by Rs 29,061 crore in November, which is an all-time monthly record, to close at Rs 3.39 lakh crore. According to Sameer Kamdar, national head of mutual funds for Mata Securities, about 25% (Rs 7,250 crore) of the Rs 29,061 crore added in November could be accounted for by equity funds. “But fresh inflows into existing equity schemes are negligible, and additions to assets under management (AUM) are largely driven by new fund offerings (NFOs),” he added.

While a large part of the Rs 7,250 crore can be accounted for by mark-to-market gains, the gratifying part is that retail investors are entering the markets in the prescribed way, considering the high valuations. Following the May-June meltdown of the markets, investors have been sitting on the sidelines as far as direct equity investing is concerned.

In May and June, equity assets of funds had eroded by around Rs 10,442 crore. The mood recovered gradually, with the next four months up to October seeing an addition of Rs 19,288 crore in equity mutual funds.

Among domestic funds, UTI Mutual Fund could lead the charge in December. It became the first asset management company in the country to cross Rs 40,000 crore mark in AUM. Interestingly, the fund that gathered the maximum assets over November was LIC Mutual Fund, which saw its AUM go up by Rs 4,022 crore.

News: Spar ready to spar with biggies in India

(DNA 03/12/2006) Mumbai - Amitabh Bachchan is said to be a frequent visitor to it. The Spar supermarket in Juhu, that is. He will soon see a new nameplate there.

The store, which was a joint venture between the Rs 177,000 crore (€28 billion) Dutch giant Spar and Radhakrishna Foodland Pvt Ltd, is being rebranded following a break-up of the two partners. That should be good news for corporations who have missed the Reliance Retail, Wal-Mart, and Food Bazaar what-have-you bus.

It gives them an opportunity to ally with a retailer owning 17,500 convenience stores in 34 countries. An official announcement on the break-up will be made by the second or third week of December.

Spar currently has two outlets in India - in Juhu and Thane— which tot up a business of around Rs 25 crore.

Spar stores offer an exotic selection of fruits, vegetables, dairy items, impulse items, bakery delicacies, groceries, staples, home meal replacement products, non-vegetarian items, delicatessen items, personal care and home care items.

The precise reasons for the split are not known. You could call it a conflict of interest issue or just a move-on strategy, now that the international principals have understood the nitty-gritty of doing business in India, said a source.

Spar signed a licensing agreement with Radhakrishna in 2003, through which the latter was given the responsibility to expand the Spar network in India.

But since then Radhakrishna has managed to open just two stores in Mumbai - one each in Juhu, Mumbai (spread over 2,700 sq ft and launched in December, 2004) and
Thane (6,000 sq. ft, opened this year). The original agreement envisaged setting up of a dozen-odd stores by May, 2006.

In the meantime, Radhakrishna launched its own food and grocery retail store brand called Foodland Fresh in 2005. Radhakrishna has since focused on expanding the Foodland Fresh network and Spar stores took a backseat. This is the root cause of the split, said a source. Radhakrishna officials were not available for comment on the issue.

Foodland Fresh has grown from two stores in 2005 to over eight stores as of date and is still expanding. Spar now wants to rewrite its Indian expansion story by joining hands with a new partner altogether.

Some of the developments in the recent past have clearly shown growing interest among Indian conglomerates to enter the retail business in association with an international partner. It’s all about hitting the iron when it is hot and Spar must have finally realised that the time was right, said the source.

News: 'India keen on stake in Sakhalin-III project'

(BL 03/12/2006) Mangalore - After the success of Sakhalin-1 fields in Russia, India is making a case for Indian participation in Sakhalin-III oil fields. Russia is planning to invite bids in future for Sakhalin-III project and once the blocks are put on offer, India will look for opportunities there, the Petroleum Minister, Murli Deora, said. Deora, who was in Mangalore to receive the first parcel of Sakhalin-1 crude, said he would make a case for Indian firms getting a stake in future Sakhalin projects and strengthening ties with Russia in the field of hydrocarbons. Speaking to mediapersons, Deora said, "India plans to get more oil and gas from Russia as part of its efforts to diversify sources of energy. Russia is our important friend and we look towards them when we think of our energy needs and security of the country." Endorsing, Deora's sentiments, Vyacheslav I. Trubnikov, Ambassador of the Russian Federation to India, said "we welcome all kinds of Indian participation in exploration and development of our enormous natural resources, and we are ready to do whatever may be required from us to help ensure India's energy security." Second cargo soon ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC), has 20 per cent stake in Sakhalin-I project. It has shipped 7,00,000 barrels of crude from its share in the project. The second cargo of similar quantity is expected by month-end. The country imports more than 70 per cent of its crude oil requirement and most of it comes from West Asia. ONGC's subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), will process the Sakhalin crude. Speaking on the occasion, R.S. Butola, Managing Director, OVL, which is sourcing more than 6 million tonnes of oil and oil equivalent gas per year from 15 countries where it has presence, said that Sakhalin-I project contains an estimated 2.3 billion barrels of oil and 17.1 trillion cubic ft of gas. ExxonMobil holds 30 per cent in Sakhalin-I, with the remaining equity owned by Russia's Rosneft (20 per cent) and Japan's Sakhalin Oil and Gas Development Co (30 per cent). OVL expects its share of Sakhalin crude to touch 50,000 barrels a day once the production from the Sakhalin fields touches its peak. Currently, OVL's share stands at 33,000 barrels with the production at the fields at 166,000 barrels per day. The production is expected to touch 250,000 barrels per day by early next year. Rosneft loan repayment Asked whether OVL's equity stake and sourcing of oil from the fields would remain unaffected or not with Rosneft returning the loan extended to it by the Indian company, Butola said, "it will remain unchanged." Rosneft has repaid the loan extended to it by OVL of about $1.34 billion. OVL's investment in Sakhalin-1 stood at $1.7 billion. The loan was extended to the Russian state-owned firm to fund its 20 per cent equity in Sakhalin-I and was to be paid back in oil. The total development cost of the Sakhalin-1 field is $12.8 billion. OVL on its part proposes to plough back the revenues it earns from sale of Sokol crude oil for development of Sakhalin-1.

News: How Volkswagen is saddling up for India

(BL 03/12/2006) Mumbai - After much speculation and controversy, German automobile giant Volkswagen AG's plans for the Indian market have finally taken a clearly defined roadmap. The company, which recently announced that it would invest around Euro 410 million (approximately Rs 2,400 crore) to build a car manufacturing plant near Pune, has now announced plans to join the already growing list of foreign automakers looking at the high-volume domestic small-car segment. The foreign media has been talking about VW planning a specific car for emerging markets - a first for the company. Volkswagen has a number of small cars in its global portfolio. But these will not match the Indian definition of a small car in terms of price positioning. Most of VW's compacts, such as the Polo, the Golf, the Eos and the Fox, will be very expensive if homologated for the Indian market. The VW Golf Cabriolet is sold in India through exclusive importers-cum-dealers of the company at super luxury sedan prices. Made for India So, it came as no surprise when, earlier this week, Volkswagen's Chief Financial Officer, Hans Dieter Potsch, said that the company will develop a compact car `specifically tailored to the needs of the Indian market.' The car is expected to be on the lines of the Polo, which is sold in Europe. The car will compete in the premium small car segment with the likes of the Maruti Swift and the Hyundai Getz. It will be customised for Indian needs but VW will have similar versions of the car selling in China and Russia. The company's upcoming Pune facility will have a capacity to produce up to 1,10,000 vehicles a year when it starts production in 2009 and the cars manufactured here are expected to have a high local content. The new plant will create 2,500 jobs. Meanwhile, Volkswagen's first model rollout in India will be as early as 2007. VW plans to first start assembling cars at Skoda Auto's (its group company) Aurangabad facility from mid-2007. It will start by producing models such as the Passat sedan. In what could be stiff competition for the Porsche Cayenne, which is already sold here, Volkswagen will also sell its Touareg SUV (built on the same platform as the former) and Phaeton luxury sedan models in India after importing them as completely built units. Volkswagen is also setting up a new marketing and sales subsidiary in India, which will commence operations in January 2007. The new company will handle sales for the Group brands - Volkswagen, Skoda and Audi. Potsch also said that the company may look at setting up an assembly unit for group brand Audi as well in India. Audi's A4, A6, A8, TT coupe and the Q7 SUV are already being imported and sold in the Indian market.

News: Air India to operate more flights for Haj pilgrims

(BL 03/11/2006) Thiruvananthapuram - Air India (AI) will operate four additional flights from Thiruvananthapuram to Jeddah in the first week of this month for persons going on the Haj pilgrimage.

According to a release issued by AI on Friday, these flights will be operated from December 3 to 6 on a daily basis. The flights will depart at 11.15 am (local time) and reach Jeddah at 3 pm (Saudi time).

Each flight will be operated with an Airbus 310 aircraft with a capacity of 201 seats. For the benefit of Haj pilgrims, each passenger will be permitted 30 kg of baggage.

News: India, Europe trade bloc sets up joint study group

(BL 02/12/2006) New Delhi - In a significant bid to step up trade and investment flows, India and the European Free Trade Association (EFTA) bloc, comprising the member-countries of Switzerland, Norway, Liechtenstein and Iceland, on Friday set up a Joint Study Group (JSG) to explore the possibility of entering into broad-based trade and investment pact. The agreement to set up the JSG was signed on Friday at a meeting of the EFTA Council in Geneva in the presence of Union Commerce and Industry Minister, Kamal Nath, and Ms Doris Leuthard, Federal Counselor, Federal Department of Economic Affairs, Switzerland. The Chairperson of the EFTA Council and Ministers from all other member States were also present. The study would examine all aspects of bilateral economic relationship and recommend measures to deepen engagement through an expansion of two-way trade and investment flows. This would also entail trade facilitation, technical standards, sanitary and phytosanitary standards, intellectual property rights and dispute settlements, besides, trade in goods and services. The JSG would be co-chaired by the Additional Secretary, Europe Division in the Department of Commerce, Rahul Khullar, from the Indian side, while his counterpart official is to be designated by the EFTA. The JSG will meet alternatively in New Delhi and Geneva and has been directed to give its report within one year. The first meeting is scheduled for February 2007. Kamal Nath said India is emerging as a major manufacturing base for the global economy. The investment potential of EFTA States could be married with the country's manufacturing capabilities to foster greater economic growth on both sides, he added. Bilateral trade between India and EFTA in 2005-06 stood at $7,475.36 million, comprising exports of $623.11 million and imports of $6,852.25 million. The growth in bilateral trade was 9.3 per cent last year over 2004-05. Even as India's exports to EFTA declined by over 3 per cent, its imports grew by 11 per cent. Among the four members of EFTA countries, India's largest trading partner is Switzerland, followed by Norway, Iceland and Liechtenstein.

News: Pantaloon Retail plans more Brand Factory outlets

(BL 02/12/2006) Hyderabad - Pantaloon Retail, which promotes retail formats such as Pantaloon, Big Bazaar and Central, is planning to open a total of 55 Brand Factory outlets by 2010.

The company recently opened a new segment in the form of Brand Factory to address the space between the premium and value segments. After opening the first such outlet in Bangalore two months ago, the company has announced the launch of its second outlet in Hyderabad.

"We will open Brand Factory stores in all metros and 35 cities with over one million population," Vishnu Prasad, President (South) and Chief Executive Officer of Central and Brand Factory, said. Addressing a press conference here, he said the new format of retailing would cater to people who were brand conscious but who could not afford them.

Consumers in this bracket usually would go to outlets that sell seconds. "They do aspire for branded products. But it doesn't mean that they should compromise for the looks of the outlet. In sharp contrast, we offer them these products - be it apparel, footwear or travel accessories - in a nice ambience," Rajesh Seth, Chief of Marketing (Central and Brand Factory), said.

News: India wants more oil, gas from Russia

(PTI 02/12/2006) Mangalore - The government is planning to get more oil and gas from Russia as part of its efforts to diversify sources of energy, Petroleum Minister Murli Deora said today.

"Russia is our important friend, and we look towards them when we think of our energy needs and security," Deora said at a function organised to mark the arrival of first crude oil from the Sakhalin-I project in Russia.

OVL, the overseas arm of Oil and Natural Gas Corporation (ONGC), has 20 % stake in Sakhalin-I project. It has shipped 90 thousand tonne (7,00,000 barrels) of crude from its share in the project. The company will ship second cargo by the month-end.

"Russia, being the largest producer of gas and having the largest gas reserves, is definitely important to us. We believe that Russia would be playing a major role in balancing energy access in the globe. The multipolar energy supply chain, which Russia is capable of creating, would help us to diversify our sources," Deora said.

India imports more than 70% of its crude oil requirement, and most of it comes from the Middle East countries.

ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) will process the Sakhalin crude.

"Sakhalin to Mangalore, a new silk route, a route of more than 5,700 nautical miles, is the new route of integration," Deora said.

News: India wants more oil, gas from Russia

(PTI 02/12/2006) Mangalore - The government is planning to get more oil and gas from Russia as part of its efforts to diversify sources of energy, Petroleum Minister Murli Deora said today.

"Russia is our important friend, and we look towards them when we think of our energy needs and security," Deora said at a function organised to mark the arrival of first crude oil from the Sakhalin-I project in Russia.

OVL, the overseas arm of Oil and Natural Gas Corporation (ONGC), has 20 % stake in Sakhalin-I project. It has shipped 90 thousand tonne (7,00,000 barrels) of crude from its share in the project. The company will ship second cargo by the month-end.

"Russia, being the largest producer of gas and having the largest gas reserves, is definitely important to us. We believe that Russia would be playing a major role in balancing energy access in the globe. The multipolar energy supply chain, which Russia is capable of creating, would help us to diversify our sources," Deora said.

India imports more than 70% of its crude oil requirement, and most of it comes from the Middle East countries.

ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) will process the Sakhalin crude.

"Sakhalin to Mangalore, a new silk route, a route of more than 5,700 nautical miles, is the new route of integration," Deora said.

News: India to consider policy changes to attract more FDI

(PTI 01/12/2006) New Delhi - The government will consider policy changes while finalising the 11th Five-Year Plan to attract more foreign direct investment and remittances, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Friday.

"In the course of the finalisation of the 11th Plan, if we find some areas to further improve remittances and attract more FDI, we will look into it," he said after releasing the Regional Poverty Profile 2005 prepared by SAARC Secretariat.

In the report, the SAARC Secretariat has estimated the receipts of remittances in 2004 at around 22 billion dollars against a mere 4.4 billion dollar FDI flow into the country.

Ahluwalia said there was no doubt the country was doing well on remittances as also FDI.

"Our position on the external account is good," he said.

Asked about the current FDI policies, Ahluwalia said: "The policies at the moment are good enough. But we would want the policies to help increase the revenues." Remittance has been an important source of foreign exchange supporting growth and has contributed positively to income, consumption and savings.

Nearly 25 million NRIs (Non Resident Indians) sent close to 22 billion dollars back home in 2004. This, together with FDI, provided an impetus to the economy and raised the GDP growth level to well above 8 per cent.

According to estimates, India has the largest share of remittances from a total of about 100 billion dollars. China and Mexico are close behind. In the SAARC region, India, Pakistan and Bangladesh were among the top recipients of remittances in 2004.

News: American dream coming to India

(TNN 01/12/2006) New Delhi - Indian suppliers of Wal-Mart hope to relive their American dream in India. Manufacturers of goods ranging from towels to toothbrushes and basmati to gramophones expect to leverage their existing relationship with the world’s largest retailer to drive their fortunes in India when the Beast of Bentonville descends on Indian shores in partnership with Bharti Enterprises.

Some players are hoping for more business from Wal-Mart’s domestic operations in India. For others, it’s the promise of stocking the retailers Indian shelves with their own brands, something subsumed by Wal-Mart’s current global supply contracts with them.

Wal-Mart has sourced an estimated $600 million in goods from suppliers in India in the current year. In 2005, Wal-Mart’s sourcing arm in India, WM Global Sourcing India, directly sourced more than $400 million worth of merchandise. The hope with these suppliers is that with its India quasi-retail operations now just few months away, the retailer will source much larger quantities.

“We look at Wal-Mart’s entry not just as an opportunity to supply for its private labels but also to retail our products under our own brands. We already have an established relationship with Wal-Mart and that would work in our favour once they start sourcing for their India operations,” says Rajinder Gupta, MD of Ludhiana-based Trident group, which manufactures and exports towels to Wal-Mart in the US. The company was ready to scale up operations, if required, due to increased demand, he added.

“Since we supply to both Wal-Mart and domestic retailers like Subhiksha and Spencer’s, we will have no trouble meeting Wal-Mart’s sourcing demands in India. Moreover, our understanding of the domestic market, of products, pricing and packaging, will come handy while supplying to them. It would translate into a huge business opportunity for us,” says Nikhil Nanda, MD, JHS Svendgaard, which manufactures oral care products for domestic and international retailers, including Wal-Mart.

Liberty Shoes director Adarsh Gupta, which supplies footwear to Wal-Mart, says the retailer’s entry will also lead to consolidation in the largely unorganised footwear sector. “Suppliers will have to build economies of scale to be able to supply to Wal-Mart and this will benefit the industry. We will have the first-mover advantage, of course,” adds Mr Gupta.

Organised retail is a big opportunity, which is getting bigger with large players entering the arena, feels Satnam Overseas CFO Rajiv Mangla. The company supplies basmati rice to Wal-Mart through its distributors in the US. The growth of organised retail will also spur purchase of ready-to-cook category where the company is expanding its presence.

UMA Group of Companies that manufacturers antique-style furniture and has supplied home accessories like gramophone to Wal-Mart opts for cautious optimism. “We are not sure if they would want these products for their Indian stores initially. But when they do, we would like to enter the domestic market through them,” UMA Exim CEO Capt Sharma said.

News: Ranbaxy breaks big into South Africa with $70 m acquisition

(HT 01/12/2006) New Delhi - The country's largest pharmaceutical company, Ranbaxy Laboratories, is well into an acquisition spree overseas, and has added another big buy to its bag with the purchase of South Africa's fifth largest generic drug maker, Be-Tabs Pharmaceuticals (Pty) Ltd, for $70 million. That tops seven companies across the globe that the Delhi-based company has already bought for a total of more than $450 to 470 million since January this year.

Ranbaxy's biggest buyout yet has been that of Romania-based Terapia, which was sealed for $324 million.

"Ranbaxy is continuously looking for inorganic growth in the overseas markets,” Malvinder Singh, Ranbaxy's chief executive officer, told Hindustan Times on Friday. The purchase strengthen's Ranbaxy's hold over South Africa, where Be-Tabs is the nation's largest pencillin maker.

The acquisition of Be-Tabs is subject to requisite approvals from South Africa’s Competition Council Authority and is expected to be completed in the first quarter of 2007.

BE Tabs, with current sales of around $30 million, is among the most established companies in South Africa. “Be-Tabs is a significant acquisition in a market that is large and growing with high entry barriers," Singh said.

Be Tabs has a strong over-the-counter (OTC) drug portfolio with significant brand recognition that can be leveraged by Ranbaxy with wholesalers, pharmacists and consumers.

The transaction will be funded by from foreign currency convertible bonds (FCCBs) and is valued at 2.2 times of sales and 7.7 times of EBITDA (earnings before interest, taxation, depreciation and amortisation) multiples.

“The acquisition of Be-Tabs’ results in considerable synergies and further strengthens Ranbaxy’s foothold in South Africa. It reinforces our position by expanding our portfolio in a key market that is exhibiting strong growth potential. The move will help us to provide effective disease management solutions in support of the government’s objective to make healthcare affordable to a wider cross-section of the population,” said Singh.

South Africa is the largest pharma market in Africa, valued at close to $2 billion, with a high potential for generic product growth.

Dr Rashid Bhikha, Chairman Be-Tabs, said: "Ranbaxy’s stature as a global generic pharma player brings further credibility to Be-Tabs' 30-year-old rich heritage in South Africa and will take it to its next phase of growth."

News: India's growth story just got better

(BS 01/12/2006) New Delhi - India’s economic growth rate accelerated to 9.2 per cent in the July-September quarter from 8.4 per cent in the year-ago quarter on the back of a strong performance by the manufacturing and services sectors, raising the likelihood of interest rates being raised in January 2007.

Taken along with 8.9 per cent growth in the first quarter of the current financial year, this comes to 9.1 per cent growth for the first six months of 2006-07. Finance Minister P Chidambaram said this was the highest first-half GDP growth since 1991-92, when economic reforms were initiated.

He added that the 9.2 per cent growth clocked in the second quarter was among the highest growth rates in recent years. FASTER, FASTER (GDP at constant prices) 2005-06 2006-07 Industry Q1 Q2 Q1 Q2 Agriculture 3.4 4 3.4 1.7 Mining & Quarrying 3.1 -2.6 3.4 3.1 Manufacturing 10.7 8.1 11.3 11.9 Electricity, Gas & water supply 7.4 2.6 5.4 7.7 Construction 12.4 12.3 9.5 9.8 Trade, hotels, transport & communication 11.7 11 13.2 13.9 Financing, real estate & business services 8.8 10.5 8.9 9.5 Community, social & personal services 7.3 8 7.4 6.9 GDP 8.5 8.4 8.9 9.2 Figures indicate percentage growth

“Higher growth rates were only seen in the fourth quarter of 2005-06, which saw 9.3 per cent growth and in the third quarter of 2003-04, which saw 11.3 per cent rise. This, however, was on a low base of 1.5 per cent,” he said.

After today’s numbers, economists said they might look at revising their growth forecast for the whole year. “Overall, we are revising up our full-year forecast marginally to about 8.2-8.3 per cent from 8.0 per cent,” JP Morgan Economist Rajiv Malik told agency.

“With GDP growth for the first half at 9.1 per cent, it is certain that there will be an upward revision for the full year. If the growth momentum is maintained, I see full-year GDP growing at close to 9 per cent,” added CRISIL Chief Economist Subir Gokarn.

Asked to comment on the expected annual rate of growth, Chidambaram said, “There is no limit to my expectation on GDP growth.”

He also played down concerns of increased pressure on interest rates on account of the high economic growth rate.

“There is ample liquidity in the system. Only yesterday, the Reserve Bank of India absorbed Rs 2,400 crore through reverse repo.” He endorsed the RBI’s view that it was premature to think of the economy “overheating.”

The finance minister said all sectors had done better in the second quarter than in the first one, barring agriculture and mining and quarrying. Commenting on the 1.7 per cent growth in agriculture, he said this was not unusual.

“The second quarter is always a lean quarter, as only a part of the kharif crop has come in, and the rabi crops come in in the third and the fourth quarters,” he felt.

“One of the worrying factors is the slightly high inflation, which is largely driven by supply side constraints. But with better supply side management and sugar and wheat stocks building up, I am confident that inflation can be tamed,” the minister said.

“My own view is that we should have inflation below 5 per cent and move towards 4 per cent. Somewhere around 4 per cent is a tolerable limit,” he added.

News: L&T to buy 10% in City Union Bank

(BS 01/12/2006) Chennai - Engineering major Larsen & Toubro will pick up nearly a 10 per cent stake in the Kumbakonam-based City Union Bank for Rs 45 crore.

The company will subscribe to the preferential allotment of 2.66 million equity shares, representing a 9.99 per cent stake in the post-issue equity of the bank, at Rs 169 apiece. The allotment is subject to the approval of the Reserve Bank of India.

The City Union Bank board today approved the issue of preferential shares to L&T. The City Union Bank stock closed at Rs 170.70 on the BSE, 4.88 per cent higher than yesterday’s close of Rs 162.75.

The proposed move of L&T is aimed at leveraging the strength of the bank and L&T’s financial services firm L&T Finance. “Also, it provides an investment opportunity in the banking sector, which has been doing well for quite some time,” said an L&T executive.

It is not clear whether L&T’s financial services arm will be the investment vehicle for the acquisition of the bank’s stake. It is learnt that L&T will seek permission from the apex bank for acquiring the stake.

RBI norms allow a corporate entity to pick up up to 5 per cent stake automatically and up to 10 per cent with the apex bank’s permission.

However, scaling up of stake beyond 10 per cent in a bank by a corporate entity is not allowed.

The 102-year-old bank, formerly known as Kumbakonam Bank, manages over Rs 3,500 crore in deposits and its advances portfolio increased by Rs 537 crore in the 2006 financial year.

In FY 2006, CUB’s total income stood at Rs 184.14 crore with a net profit of Rs 56.37 crore. It’s operating profit increased to Rs 109.15 crore from Rs 81.67 crore in 2005. The bank slashed its NPA liabilities on net advances down to a mere 1.95% in fiscal 2006 from 3.37% in fiscal 2005.

News: Key indices set new peaks

(PTI 01/12/2006) Mumbai - Key indices on Friday charged ahead, with the National Stock Exchange index Nifty reaching an all-time intra-day high of over 4,000 points and the Bombay Stock Exchange Sensex at 13,857.

The BSE Sensex ended higher by 148.47 points at 13,844.78 on frantic buying by funds led by shares of capital goods, auto and banking segments.

In similar fashion, the NSE index Nifty closed higher by 43.10 points at 3,997.60, after touching a record intra-day high of 4,001.30 just before the closing bell.

The major support to the bourses came in from heavyweight stocks such as Reliance Industries, Infosys, Tata Motors, Hero Honda, Maruti Udyog, Motors, Bajaj Auto, State Bank of India and ICICI Bank.

News: Reliance Retail opens six more outlets

(PTI 01/12/2006) Hyderabad - With its retail experiment getting an overwhelming support from consumers, Reliance Retail Ltd has added six more outlets to its pilot project to test acceptance across classes. "Six more Reliance Fresh stores have been opened in the city in addition to the 11 inaugurated on November 3," company sources said on Monday. These air-conditioned stores, which sell a wide variety of vegetables, fruits, eggs, dairy products and Reliance's private label of groceries, have received tremendous response with a turnover of Rs 2,00,000 per day. The new outlets have been opened in areas ranging from upmarket to middle-class localities. The pilot project would roll out this month into four more cities -- Delhi, Chennai, Cochin and Jaipur, with 100 stores in the pipeline, sources said. Reliance Retail, a subsidiary of India's largest private firm Reliance Industries, would graduate to the second level of its retail initiative in February-end. The company would unveil the big format stores -- hypermarkets in 20 locations each spread across over 60,000 square feet compared to the 3,000-5,000 square feet of the Reliance Fresh outlets. The company, which has stolen a march over rivals such as the Bharti-Wal-Mart retail venture, has outlined an investment of more than Rs 25,000 crore in its retail venture over the next five years. Reliance expects to take its retail formats to 784 cities and towns, besides over 6,000 rural towns by 2010, with over 100 million square feet of retail space.

News: Reliance Comm m-cap hits $20 b

(PTI 01/12/2006) Mumbai - The market capitalisation of Anil Ambani group company Reliance Communications today topped $20 billion, and now stands at Rs 90,400 crore ($20.19 billion).

The shares gained more than 3% (Rs 13) to close at an all-time high of Rs 442.05 today. A total of about 63 lakh shares changed hands on the BSE today.

Selective buying was witnessed in the shares of Bharti Airtel, and it gained marginally to take the company's market capitalisation to Rs 1,20,000 crore ($26.80 billion).

News: Wal-Mart's India entry 'as per guidelines' - Bharti

(PTI 01/12/2006) New Delhi - Facing flak from the Left parties for Wal-Mart's entry into the Indian retail market, Rajan Bharti Mittal, joint managing director of Bharti Enterprises, today said its tie-up with the US firm was "as per guidelines".

"Bharati will manage the front-end 100%, while Wal-Mart will provide support at the back-end, logistics and supply chain. The deal is as per the (government) guidelines," Mittal said on the sidelines of a FICCI function in New Delhi today.

Asked if the deal provided Wal-Mart a back door entry into the Indian retail market, he said it was not the case and Wal-Mart will be doing the same as other global retailers like Germany-based Metro were doing in the country.

Rajan Mittal, however, declined to comment on the reaction of the Left parties to the Bharti, Wal-Mart deal.

Left parties had opposed Wal-Mart's entry into India and alleged that the retail giant's joint venture with Bharti would enable FDI entry into the retail sector through the back door.

News: Israel mulls FTA with India

(PTI 01/12/2006) Jerusalem - Israel is considering a free trade agreement (FTA) with India to reach a bilateral trade target of $5 billion, deputy Prime Minister and Minister for Trade and Industry Eliyahu Yishai has said.

"The recommendations of the Joint Study Group (JSG) released in November last year talked about establishing Preferential Trade Agreement (PTA). We want to take it a step further ahead".

"We have commissioned a study to look into the possibilities of signing an FTA with India. The results of the study are not yet available but we certainly understand that there is a huge trade potential between the two countries", Yishai, who will be on a five-day visit to India from Dec 3, said here.

Asked about specific areas being looked into, he said, "It will be the first FTA in Asia. India is a huge country, so we need to check several issues and we believe that we can overcome all obstacles".

Yishai said the issue will be on the agenda of talks during his forthcoming five day visit starting next week on Dec 3.

Yishai is leading a business delegation of more than 50 Israeli entrepreneurs, the first such trade delegation after the formation of this government.

The deputy Prime Minister was also optimistic on reaching the bilateral trade target of five billion dollars between the two countries.

"There are several areas with vast potential of cooperation and the government will facilitate trade by outlining thrust areas and adopting measures that can help them. I am hopeful that we can come close to the target of $5 billion in bilateral trade", Yishai said.

News: NBFCs plan to petition RBI

(BL 01/12/2006) Chennai - The revised draft guidelines for Non-Banking Finance Companies (NBFC) that the Reserve Bank of India has announced on Thursday have been welcomed by the NBFC industry as "an improvement" over the previous draft guidelines. But NBFC companies discern no merit in what they see as micro management by the regulator. The draft norms put up for feedback on Thursday asks banks to cap their exposure to a single NBFC - deposit-taking or otherwise - at 10 per cent of the bank's capital funds. In contrast, the previous draft guidelines (of November 3) spoke of a ceiling of five per cent of bank's net worth. That is a significant difference, because `capital funds' include long- term bonds (tier-I I and upper tier-I I) too. Therefore, `10 per cent of capital funds' would be substantially higher than `five per cent of net worth.' Many NBFCs are not quite happy with the draft guidelines and said they would represent to the RBI against them. Within the NBFCs, those that lend money for purchase of trucks, off-highway vehicles, telecom equipment and other `infrastructure-related' equipment, have been demanding that they be classified as a separate category - asset finance companies. Many of these companies, being deposit-taking NBFCs, are already well-regulated, they feel. For instance, their minimum capital requirement is 12 per cent of their assets, as opposed to 10 per cent for non-deposit taking NBFCs. (Indeed, many in the industry question the logic of this regulation too.) They are subject to SLR guidelines. They are `hire-purchase companies' which means that at least 60 per cent of their loans are for purchase of productive assets. Why separate cap Why should bank lending to these companies be limited to 10 per cent of the bank's capital funds, they ask. In any case, banks have the single-borrower limit of 15 per cent of their loans - why should there be a separate (and more stringent) cap for NBFCs? "The RBI's concern over the end-use of loans given by NBFCs is understandable," said one source in the industry, "but in the case of asset financing companies, the end-use is clearly documented." Advantage foreign banks Sources point out that in contrast, a foreign bank could set up a NBFC subsidiary and fund customers through the subsidiary, circumventing the `single-borrower' regulation. Because these subsidiaries come under `non-deposit taking' categories, the parent bank may continue to hold even 100 per cent stake in the subsidiary.

News: Banks can invest more in NBFCs

(BL 01/12/2006) Mumbai - The Reserve Bank of India has given more room for banks to lend to and invest in non-banking finance companies (NBFCs) in its revised draft guidelines issued today.

In the earlier draft guidelines released on November 3, banks were allowed exposure of up to five per cent of their net owned funds in single NBFCs and up to 40 per cent to a group of NBFCs.

As per the revised guidelines, this ceiling has been increased to 10 per cent for a single borrower; the base has been changed to the banks' capital funds from their net worth. This is a relaxation because capital funds, which include tier I and tier II capital, constitute a larger base. Net owned funds are capital funds not including banks' investment in subsidiaries.

Anand Sinha, Executive Director of the RBI, said that this was one of the suggestions that the apex bank had received from NBFCs and banks in response to the first draft guidelines.

The request for additional 5-10 per cent exposure for infrastructure has also been allowed.

The revised draft guidelines are open for feedback up to December 7. They will come into effect from April 1, 2007. Institutions that require more time for compliance can approach the Central bank by January 31, 2007 to indicate a timeframe, said Sinha.

In the guidelines, the RBI has imposed prudential norms and prescribed a regulatory framework for non-deposit-taking companies (NBFCs-ND) that have a minimum asset base of Rs 100 crore (described as Systemically Important).

Sinha said: "Banks should not use NBFCs as a delivery vehicle for seeking regulatory arbitrage opportunities or for circumventing bank regulations; the activities of NBFCs should not undermine banking regulations."

For Systemically Important NBFCs-ND, the RBI has prescribed capital adequacy ratio of 10 per cent.

It has also introduced a stipulation on the exposure norms of NBFCs-ND.

These NBFCs can lend up to 15 per cent of owned funds to any single borrower and up to 25 per cent to any group of borrowers.

"The composite limit for lending and investing should not exceed 25 per cent of owned funds to a single party and 40 per cent to a single group of parties," Sinha said.

With regard to NBFCs that are subsidiaries or affiliates of foreign banks, the RBI has extended the prudential regulations to the group as a whole.

"NBFCs owned by foreign banks in India or by the group to which the foreign bank belongs will be treated as part of the local conglomerate. They will be subjected to prudential regulation as a group."

But if the overseas parent bank or group does not have management control, then these entities will not be subject to group prudential regulation, provided the RBI is satisfied of the same.

On restricting the stake of banks, including foreign banks, in NBFCs-ND up to 10 per cent of paid-up capital, Sinha said: "This is because in our general framework under the Banking Regulation Act, no bank in India is allowed to have a banking subsidiary within the country."