News: Rs 500 crore earmarked for Commonwealth Games

(BL 28/02/2007) New Delhi - An allocation of Rs 500 crore for the Commonwealth Games, to be held in 2010, was announced in the Union Budget, besides a higher allocation of Rs 111 crore for the Sports and Youth Affairs Ministry.

In a bid to make the multi-disciplinary sporting extravaganza a success, the Centre would sanction Rs 350 crore to the Delhi government and another Rs 150 crore to the Youth Affairs and Sports Ministry for organising the Games.

Chidambaram also earmarked Rs 50 crore for the Commonwealth Youth Games to be held in Pune next year. The Sports and Youth Affairs Ministry has been provided a budget allocation of Rs 780 crore for the year 2007-08, an increase of Rs 111 crore from th e previous year.

Although Rs 669 crore was the budget allocation in 2006-07, it was later revised to 573.77 crore. Rs 700 crore has been earmarked for plan expenditure, while Rs 80 crore has been kept for non-plan expenditure.

In view of a shortage of 20,000 rooms for the Commonwealth Games, Chidambaram said a five-year income tax holiday will be granted to two, three and four star hotels as well as convention centres with a seating capacity of not less than 3,000.

These hotels should be completed and begin operations in Delhi or in adjacent districts during the period April 1, 2007 to March 31, 2010.

News: India Inc expresses disappointment

(PTI 28/02/2007) New Delhi - Indian industry expressed disappointment on Wednesday over Finance Minister P Chidambaram's Budget for 2007-08, raising concerns on lack of measures to increase productivity and for losing an opportunity to provide relief to the corporate sector.

"This Budget is disappointing as there has been no steps announced to increase productivity in agriculture, electricity and other sectors which are not producing up to their potential," CII President R Sesashayee said.

Since revenues from peak customs and excise were increasing, this could have been a time to reduce excise duty to 20 per cent, if not 15 per cent overall, which would have been in line with Kelkar Committee Report, he pointed out.

Ficci President Habil Khorakiwala said a wrong signal has gone to the corporate world as the government has increased cess and dividend distribution tax.

"One does not understand how the multiple taxes should be charged. I think the feeling of the chamber is that the finance minister has lost an opportunity of providing relief to the corporate world," Khorakiwala said.

News: Economy in high-growth trajectory, says Survey

(BL 28/02/2007) New Delhi - The economy seems to have decidedly `taken off' and moved from a phase of moderate growth to a new phase of high growth. That is the prominent theme of the Economic Survey 2006-07, presented to Parliament on Tuesday by the Finance Minister, P. Chidambaram. Pressing its claim, the survey points to signs of industrial resurgence, with the industrial sector growing from a low of 2.7 per cent in 2001-02, moving up to 7.1 and 7.4 per cent in 2002-03 and 2003-04, accelerating to 9.5 per cent in the next two years to touch 10 per cent in the current fiscal. Also, the growth impulses within industry seem to have spread to manufacturing. A notable feature in the current growth phase is the high rate of investment, measured in terms of gross domestic capital formation that has steadily climbed from 31.5 per cent in 2004-05 to 33.8 per cent in 2005-06. There are other positives. The generally laggard infrastructure index grew 8.3 per cent in April-December 2006, up from 5.5 per cent in the same period of the previous year; the public sector turned its dissavings into positive savings and the corporate sector reported a sharp increase in savings at 8.1 per cent in 2005-06, which helped it to finance a large part of its investment in the ongoing capital-expenditure cycle. Capital inflows into the country have also remained strong and even domestic flows to the capital market have been high. Initial public offerings grew 30.5 per cent in calendar year 2006 to Rs 1,61,769 crore and on an average, there have been six IPO issues per month. Sustaining factors According to the survey, this growth in the economy is sustainable for a variety of reasons. First, the high growth from a growing number of the population in the working age group would lead to a rise in savings. Second, efficiency improvements in the economy since 1999-2000 reinforce the confidence in the high-growth phase. Third, opening up of new avenues in services, beyond IT and IT-enabled services, bolster confidence in the high growth rate. The fourth positive factor is the low possibility of an `overheated' economy, typified by a strained labour force and capital stock. This can be obviated through rapid growth in capacity addition through investments. Moreover, the moderate merchandise import growth rules out indications of overheating. The incidence of poverty is down to about 22 per cent in 2004-05 from 26.1 per cent in 1999-2000, as per the NSSO's 61st round large-scale sample survey on household consumer expenditure. On the burning issue of inclusive growth, the survey emphasises that putting more people in productive and sustainable growth seems to be a solution but adds that inclusive growth cannot come without growth itself. As for the downsides, the survey notes that risks for a sustained high growth could be from rapid unravelling of global macro-economic imbalances, volatile oil prices and delays in the completion of the Doha Round. "But, for the present, they appear to be limited," assures the survey.

News: Reliance eyeing big U.S. acquisitions

(RTR 27/02/2007) Mumbai - India's top private firm, Reliance Industries Ltd., is aiming to acquire a global petrochemical giant or a 300,000 barrels per day U.S. refinery, the Times of India reported on Tuesday, quoting unnamed sources.

It said Reliance Chairman Mukesh Ambani was in a position to raise up to $ 6 billion and team up with private equity funds to buy foreign companies and named Dow Chemicals Co. as a possible target.

"Wall Street is abuzz that a clutch of private equity funds such as Carlyle, Blackstone, KKR and Texas Pacific may be teaming up to create a giant $ 60 billion petrochemical fund with Dow as the main target in the crosshairs," the newspaper said.

A spokesman for Reliance Industries declined comment.

The company, which operates India's biggest refinery and dominates the local petrochemical market, has announced plans to build a new $3-billion petrochemical plant.

News: Govt to study big investment, FDI in retail

(PTI 27/02/2007) New Delhi - Under pressure from the Prime Minister's Office (PMO), the Commerce Ministry today said it has commissioned a study on the impact of foreign direct investment (FDI) and big corporates in the retail sector. "I have asked Indian Council of Research in International Economic Relations (ICRIER) to do a holistic study to determine the impact of big investment from the organised sector, including FDI, in retail on not only small shops, but also the other segments of the society," Commerce and Industry Minister Kamal Nath said. ICRIER would submit its report in the next three to four months. Earlier this month, Congress President Sonia Gandhi, buckling under pressure from the Left parties and others, had written to Prime Minister Manmohan Singh on the need for a 'careful study' of the impact of transnational supermarkets and big corporates on livelihood of small scale retailers and vendors. The PMO had in turn asked the Commerce Ministry to look into it. Nath said the study would not limit itself to the impact on small players but would cover consumers, suppliers and dislocation. "It would deal with the issue of big versus small and not just FDI," Nath said. Interestingly, in an earlier study the think-tank had favoured FDI in retail. Nath said, while the review of FDI in specific sectors was an ongoing process, the ministry's proposal to open foreign investment in electronics and sports goods among others could slightly be delayed till the report is received.

News: Booming real estate prices an irritant in retail expansion

(BL 27/02/2007) New Delhi - Meet Samir Modi, 'a man full of ideas', as he describes himself. He heads 'Twenty Four Seven Convenience Stores'. A 'chain' in Delhi that caters to 'the changing needs of the young urban Indian population, that needs a concept such as a convenience store that is open 24 hours a day and 365 days a year,' Modi tells Business Line.

What does he look forward to in the forthcoming Budget? "I hope it will bring down some of the import duties and further align some of the taxes," he says. We ask him, "Does the Reliance model of retail appeal to you?" He quips, "I would not like to comm ent on that, as I have not given it much thought - because not only do we operate in a different market space, but also our business model (24x7) is very unlike theirs."

Modi is also Managing Director - ColorBar Cosmetics, Executive Director - Godfrey Philips India Ltd., Vice Chairman - Modicare Ltd. and a Director of both the Modi Apollo International Group Pvt. Ltd. and Modi Entertainment Ltd. Plus, he is the Vice-Chai rman of Modicare Foundation, an independent, non-profit, non-governmental organisation committed to prevent the spread of HIV/AIDS. He belongs to the $ 800 million K. K. Modi Group, which is part of Modi Enterprises, one of India's largest conglomerates.

Here is more, from his recent interaction with Business Line:

'Twenty Four Seven' - How has it been doing? What are the numbers? What are your plans for the year ahead? Any specific irritants you have encountered?

These stores have become an easy access point for consumers not only for their basic necessities of bread, butter and eggs, but also for utilities such as a pharmacy, ready-to-eat foods and beverages and services such as photo development, credit card fa cility, mobile and utility bill payment, courier services, movie tickets and the like.

The success of these stores can be judged from the fact that 60 per cent of the shoppers of our stores visit us during the night and only 40 per cent shop in the daytime. We currently have four stores running in Delhi. They are located at Lajpat Nagar, S aket, G. K. II Market, and Defence Colony. A fifth store is due to open in April at Nehru Place. We plan to open about 178 stores by the end of the financial year 2007-08 in Delhi and Mumbai and some 1,000 stores in the next five years in all the major I ndian metros. I think the only irritants that we have faced in setting up these stores are the lack of proper licensing policies and the booming real estate prices.

Your comment on the Government's retail Foreign Direct Investment (FDI) policy - More specifically, about the Wal-Mart angle in Indian retail.

I think opening FDI in retail will help the Indian economy as a whole. It will build infrastructure and increase margins for all. However, some checks and balances should be taken.

ColorBar - what are its USPs?

'ColorBar' calls itself the 'keeper of colors.' Its has the largest number of shades in the Indian cosmetics market. Being the only player in the 'masstige' segment of the Indian cosmetics industry, it has carved out a niche for itself. With its internat ional formulations, it is at par with leading prestige brands such as Mac, Bobby Brown and Chanel, but at a very competitive price.

With some 350 SKUs (stock keeping units), the brand has already garnered 12 per cent of the market share in northern India and about 5 per cent at an all-India level. We have over 500 beauty advisors on board and more are joining us.

We put in extra efforts into research and development and make it a point to understand the changing needs of the Indian consumer and assimila te these findings into our products.

Chemicals, tea, restaurants, education and direct marketing...what are the new areas you plan to enter in the next five years?

We are planning to enter the luxury goods market and build on our distribution capabilities.

Can you elaborate on the innovation process that happens in your companies?

We do a lot of consumer research and benchmarking with products and concepts from all over the world. We have various product and innovation teams within all our companies working on design, formulations, ideas and process innovation.

We use various proc esses such as 5S, Kaizen, and Six Sigma within the group. We use a range of research facilities and have people in Japan, Italy, France, Greece and Germany, besides our own research and development (R&D) facilities.

We spend a lot of our resources in emp loyee skill building and training, along with process changes and product development. We believe that R&D is the backbone of all our businesses and it is the only way through which we can get to a leadership position.

Can you describe your style of management?

I like to implement new philosophies of management that involve innovation and lateral thinking and help me in conceptualising new, groundbreaking ideas.

I like getting involved in the lives of my employees and being there for them, personally and profes sionally. I believe in management change and like to try new things to build motivation and fun in the workplace. I think that no job is menial as long as you do it with passion.

I have introduced various new initiatives within my company - such as everyone addressing each other on first name-basis, casual dressing, singing on the stairs, 'chaat' parties, fancy dress parties. My concept of business is to be involved with my team and to create a jovial, friendly atmosphere at work.

For example, it is very important for any business to understand the needs and expectations of its consumers, and so as a policy every management employee of the Twenty Four Seven Convenience Stores chain has to spend one day per month on the shop floor, behind the counter. This way, the person not only understands the needs of the consumer but also the challenges faced by those who are catering to these consumers.

Modicare Foundation is fighting against HIV/AIDS. What are the challenges?

I think the biggest challenge anyone or any non-governmental organisation that deals with HIV/AIDS can face in India, is the lack of sex education and the taboo on the whole idea of an open discussion or debate on sex.

The absence of any such education/discussion, when coupled with the lack of awareness on the importance of contraceptives and the proper use of condoms is what has led to the growth of HIV/AIDS.

A dilemma that the Modicare Foundation faces is in dispelling the myths and misconceptions about the disease. These are spread over all echelons of society, irrespective of class. This catapults the discrimination towards those infected with HIV/AIDS to greater extremes, leading them to lose their jobs and being ostracised from their surroundings.

Our challenges are not only to spread awareness about the disease but to make other corporate houses aware of the need for the infected to have jobs, for the corporate houses to have an HIV/AIDS workplace policy, to spread awareness in children and adole scents about the disease and its prevention and making the vulnerable population aware of their rights, while providing as much medical and psychological support as we can to the infected and their next of kin.

You are active on the corporate social responsibility (CSR) front. At the same time, you sell cigarettes in villages. Isn't there a contradiction?

No, it is not a contradiction. My involvement in CSR-lead activities is because I believe in giving something back to the community and the country. It has nothing to do with the type of businesses I am in.

Any acquisition plans on your radar?

No, but we are always looking for opportunities that come our way.

News: FDI inflows increase six-fold at $ 2.04 billion in Dec 06

(PTI 27/02/2007) New Delhi - India witnessed a nearly six-fold increase in Foreign Direct Investment (FDI) inflows in December 2006 at $ 2.04 billion as against $ 350 million in the same month in 2005.

"This is the highest ever FDI inflow into the country in a single month," Commerce and Industry Ministry Kamal Nath said in a statement today.

Total FDI inflows for April-December 2006 stood at $ 9.3 billion , as compared to $ 3.5 billion in the corresponding period last fiscal.

India is likely to receive $ 12 billion of FDI during the current financial year as compared to $ 5.5 billion in the previous fiscal, he said.

News: Investment climate in India is looking very positive

(BL 27/02/2007) New Delhi - Subbu Subramaniam, Investment Partner, Baring Private Equity Partners (India) on 'what investors should expect from the Budget' or 'steps to boost investment-expectations from the Budget'

"Over the years, more and more Institutional investors have started believing that the budget as a trigger for the markets is becoming less and less important. This is in sharp contrast to what the situation was when I was a Management student; when the courses in Long Term Corporate Planning seemed so irrelevant and out of context, since Indian Corporates lived by the Annual Budget and the customs duty protections that were levied every year. There was an attempt at "Long term Fiscal Policy" by V.P. Si ngh in 1985, wherein the Government, led by the ruling party stated that they intended to stick with their intent for a period of five years until the Indian democracy yielded to a coalition format of politics and policy determination.

The fact remains that liberalization as a process is irreversible in terms of direction and we have all seen and reaped the benefits of the same, like the car manufacturing license policy and telecom licensing policy to name a few. But the pace of change leaves a lot to be desired, as it has been "frustratingly slow". The budget announcements are today looked at for the signal of the "pace" of change and addressing macro issues like allocation to education, health care sectors as opposed to agriculture (food and fertilizer subsidies) and defence.

Given the current structure of the Indian economy where services constitute more than 50% of our GDP, which is also growing at a rate faster than the total economy, it is imperative and important that the right fillip is given to sustain the growth while the global opportunities exist! The one action that is necessary for this is to encourage investment and government allocation for education.

The masterstroke of levying service taxes conceived and executed by the Finance Minister and team over the last 3 years with an increasing list of services being brought into the net has ensured that the revenue collections are growing at an unabated

pace and are contributing substantially to the growth in revenues. There is now scope and need to judiciously consider breaks / exemptions in service tax applicable to educational / vocational training enterprises, be it Information technology (IT), BPO, re tail or manufacturing, to meet the exponentially growing manpower needs of the segments in these sectors through job creation / skill generation.

Another very important aspect of Income Tax that could be considered is the possibility of treating Capital Gains earned from sale of securities to Qualified Institutional Buyers (QIBs), Foreign Venture Capital and Indian Venture Capital (duly registered with SEBI) on par with the long term Capital Gains from sale of securities on the Stock Exchanges. This will effectively mean that the long-term capital gain is not exempt from tax. This will go a long way to accomplish the following:

A) Create liquidity for the entrepreneurs of young companies even as they continue to grow their businesses,

B) Attract Capital from Foreign and Indian VCs, QIBs and assets in Capital formation at the SME level,

C) Avoid / defer the listing of younger companies who are not yet ready to comply with the stringent regulations of disclosure, independent Directors, bear compliance costs. This will increase the quality of listed companies and reassure the international investors.

There is no doubt that the investment climate in India is looking very positive at the moment and we are currently the flavour of the world. However, few steps like the above need to be taken to sustain this momentum and put India as a 'destination of ch oice' on the global map."

News: India-Dubai trade surges to over $ 10bn

(BL 27/02/2007) Dubai - The non-oil trade volume between India and Dubai has soared by over 336 per cent in the past five years, with the total trade volume touching $ 10.9 billion from $ 2.5 billion during 2002-06. Over 80 per cent of the trade between India and the UAE is routed through Dubai.

Trade is poised to get further boost in the coming years, Venu Rajamony, the new Indian consul-general, said here.

"Trade between UAE and India has diversified and rapid economic growth of the Indian economy has made it an attractive destination for investments from UAE. Indian companies have become more robust and confident with the rapid economic growth and are ent ering Dubai and northern Emirates in larger numbers," he said.

India has emerged as Dubai's largest export destination ahead of Pakistan, Iran and Kuwait. However, China leads the tally followed by India.

Exports from India to Dubai touched $ 6.4 billion while Dubai exported goods worth $ 4.5 billion to India last year.

India exported diamonds worth $ 1.3 billion to Dubai last year. The top five commodities exported to Dubai comprised of diamonds, jewellery, platinum, gold and scrap of precious metals.

Dubai on the other hand exported ferrous waste and scrap, aluminium waste and scrap, copper waste and scrap and paper waste and scrap to India last year.

The Dubai Department of Economic Development issued 8,318 licences during the first half of 2006 for businesses. The maximum number of foreign investors in that period came from India, with 1,152 investors.

News: Realty firms bet big on warehouses

(TNN 27/02/2007) Gurgaon - It’s not just malls and retail spaces. Real estate firms seem to be equally bullish on warehouses. They see immense business potential, arising from the fact that almost all international retail chains planning to enter Indian retail, including Wal-Mart, Carrefour and Tesco, have simultaneous plans of doing business in the cash & carry format as well.

Various Companies operating in the commercial real estate sector, such as DLF, Unitech, Ansal API, Omaxe and TDI, have started talking to retail chains. According to industry estimates, backend activities in the retail sector, comprising warehouses and cold-storage, will require close to 5 million sq ft of real estate space by 2010.

Says TDI MD Kamal Taneja: “Warehousing and logistics are clearly the backbone for the growth of organised retail in the country and will throw up huge business opportunities, particularly in tier II and III cities. Owing to very limited space in larger cities, retailers will be able to keep the lowest possible stock on shelf.

This can only be sustained by a strong backend network.” In fact, worldwide, most big scale retailers, including Wal-Mart, thrive on the mantra of smallest possible stock on shelf and a bigger inventory in the warehouse.

Omaxe CEO Arvind Parakh says: “This is inevitable for any retailer. Setting a warehouse and addressing supply chain issues are critical areas, and need to be firmly in place, before a company goes ahead with its frontend retail plans.”

In the warehouse development business, some also see a logical extension of the relationship that a mall developer has with a retailer. “For the first time, retailing is expected to happen in India at this scale where having warehouses will be mandatory. It’s sure an exciting business opportunity for real estate developers,” says Ansal API marketing head Kunal Bannerji.

According to industry sources, even before the deal is formally signed, representatives of Bharti-Wal-Mart have started scouting for locations for their warehouses. These warehouses will be part of the company’s wholesale cash & carry business, which, apart from Bharti, will sell to other interested retailers as well.

Reportedly, other international retail chains, Tesco and Carrefour, which are yet to firm their plans for frontend retail in India, have also evinced interest in the cash & carry business, as this is the only way they can bring equity as they enter the market.

According to Euromonitor, a London-based market intelligence firm, it makes sense as, “when the restrictions on retail in India are lifted, international retailers will be in a prime position to easily convert their cash & carry stores into highly profitable supermarkets and hypermarkets.”

News: More global power cos turning to India

(BL 26/02/2007) New Delhi - Nearly a decade since the fast track power projects announced in the mid-nineties, the country's power sector is again rousing interest among global power companies. Over a dozen new international players are scouting for opportunities in the generation, transmission and equipment manufacturing space here. New entrants eyeing power generation include two Malaysian firms Ranhill Berhad and Tronoh Alco, Israel Electric Corporation, Korea Electric Power Company and US firm Khanjee Holding Inc. Transmission Projects A host of Spanish and Italian firms have thrown their hat in the ring for new transmission projects on offer in the country through the competitive bidding route. These include Spanish firms Control Y Montajes Industriales, Isolux Corsan, Elecnor and Instalaciones Inabensa. Italian firm Terna SpA, which is in charge of electricity transmission and dispatching over the high-voltage and extra-high voltage grid throughout Italy, is also in the hunt for bagging transmission projects in India. According to industry players, Ranhill Berhad, a Malaysian power and engineering group, is evaluating building a 600 MW generation plant in India. The company is on the lookout for partners to build the Rs 2,500-crore power plant and Ranhill executives had visited India recently, they said. The renewed interest among international companies in generation projects, sparked off mainly by the Centre's ultra mega projects scheme, saw a number of new foreign players entering the Indian market. Global players who had shown interest in the first couple of ultra mega projects include Israel Electric Corporation, Korea Electric Power Company, Malaysia's Tronoh Alco Combine, UK's Duncan Macneil and Virginia-based Khanjee Holding Inc. Power Ministry officials said they were confident that a majority of these foreign players would bid for the next set of ultra mega projects coming up. Of these, Israel Electric Corporation is the main supplier of power in Israel, which builds, maintains and operates power generation stations, as well as the transmission and distribution networks in that country. The company, almost entirely owned by the Israeli Government, has tied up with DS Constructions and the consortium plans to bid for at least six ultra mega power projects. Equipment Manufacturing International firms led by the Spanish brigade that have entered the Indian transmission sector are mainly eyeing the new competitive bidding-based projects on offer here, starting with the Western Region Strengthening Scheme (WRSS) project and the 14 new projects, announced by the Centre. Spanish engineering and construction firm Isolux Corsan is on course for bagging a grid link that was part of the WRSS grid-strengthening project. "Our commitment to India is strategic in nature in the medium and long term," an Isolux Corsan representative said. A host of Chinese, South Korean and Russian equipment manufacturing firms, led by Dongfang Electric Corporation of China, Doosan of South Korea and Russia's Power Machines are also significantly ramping up their presence in the country in view of the opportunities arising from new greenfield power projects.

News: Café Coffee Day, Barista to expand overseas operations

(BL 26/02/2007) Bangalore - At a time when global coffee retail giants such as Starbucks, Illycafe's `Espressamente' among others have lined up at the doorsteps of the Indian market, the home grown retailers Café Coffee Day (CCD) and Barista are looking at expanding their overseas operations even while increasing their footprints here. Looking at Europe After its successful foray into Vienna, Austria and in Karachi, Pakistan, Café Coffee Day is looking at Germanic speaking countries in Europe such as Switzerland, Germany, Czechoslovakia and other countries to expand its operations, said the CEO, Mr Naresh Malhotra. CCD has opened two outlets in Vienna in the past 18 months and is in the process of opening the third. It operates one outlet at Karachi and plans to launch shortly in Islamabad and Lahore. "We plan to increase our overseas outlets to 20 in the current year," Mr Malhotra said adding sales have exceeded expectations. CCD outlets Back in the Indian market, the company plans to increase its total outlets to 550 in 100 cities from the present 400 being operated in 80 cities, Mr Malhotra said. The company is also setting up some 120 kiosks at railway platforms in different cities over next three months. CCD, which supplies in-flight snacks and beverages to two low-cost airlines, Air Deccan and Go Air, is also in talks with to more low-cost carriers. Besides, the company is also in talks with big retailers to set up cafes in hypermarkets across the country. The company closed last year with a turnover of Rs 450 crore, up from Rs 350 crore in the earlier year. Barista plans The CEO of Barista Coffee Company, Mr Partha Dattagupta, said his company would increase Barista Crème, a premium café, from the present seven to 25 over the next four to six months. "We also plan to increase the regular Barista Espresso bars to 200 during this financial year and add 120 more in the next fiscal," he said. Barista, which already operates in Gulf countries, was exploring options to expand in the Maldives, the Mauritius, Egypt and South-East Asian markets, he said. The company plans to open some three outlets in Dhaka this year.

News: Starbucks to source more coffee

(BL 25/02/2007) Mumbai - Global coffee retail giant Starbucks expects to source more from India as it ups its operations here. Starbucks, which has tied up with Planet Retail Holdings, would be launching its first retail outlet in India by the year-end, said the company's Director of Trading and Operations, Colman Cuff.

Starbucks has been sourcing coffee from growers such as Tata Coffee and exporting firms such as Ramesh Exports among others for the past three years. "We expect our sourcing to grow along with us here," he said. However, Cuff declined to comment on the quantity of beans sourced from India.

Further, Cuff said they did not boast of being a large buyer, but personally visited the farms in 28 countries to hand-pick high quality seeds that suited Starbucks' roasting style. "We buy quality coffee first that differentiates us from others. We are the largest purchaser, roaster and distributor of Fair Trade Certified Coffee in North America and we are the only licensed company to sell Fair Trade Certified coffee in 24 countries. On an average, we sample around 400 to 500 seeds every day at our Research Centre to give something more to our customers."

News: $30 bn investment in retail sector within 4-5 years

(BL 25/02/2007) New Delhi - A good talent pool, unlimited opportunities, huge markets and availability of quality raw materials at cheaper costs is expected to make India overtake the world's best retail economies by 2042, according to industry players.

While the concept of retail is not new to India, modern retail concepts are fairly new, which would need the industry to share knowledge and get greater exposure to international retail brands, opined industry players at Technopak's 8th Marketing and Retail Conclave.

Retail gurus felt that the growth in the Gross Domestic Product (GDP), coupled with rising income levels is leading to increased purchasing power of the middle class. This would change the outlook of retail business in the country.

The retail industry in India, according to experts, will be a major employment generator in the future. Currently, the market share of organised modern retail is just over 4 per cent of the total retail industry, thereby leaving a huge untapped opportunity.

The sector is expected to see an investment of over $30 billion within the next 4-5 years, catapulting modern retail in the country to $175-200 billion by 2016, according to Technopak estimates.

The Retail Conclave also saw the release of the CIES Top-of-Mind Issues Survey and the Images-Technopak Apparel Report 2007.

According to the CIES (the Food Business Forum) survey, the top five issues identified this year were consumer health and nutrition, retailer supplier relations, retailer brand/offer, technology and supply chain and social compliance.

"With global concerns over obesity rising rapidly, the expected responsibility of the food retailer is to make healthy eating easier.

According to the global social compliance programme, the improvement of global working conditions of the supply chain were very important since approximately 59 per cent of consumers bought food products on ethical or ecological grounds," said Alan Clay, Chief Executive Officer, CIES.

Amitabh Taneja, Chief Convenor of the India Retail Forum, quoting figures from the released Apparel Report, said, "Of the total organised retail market of Rs 55,000 crore, the business of fashion accounts for Rs 30,080 crore, which translates into nearly 55 per cent of the organised retail segment in the country."

While R.S. Roy, Editorial Director of the Images Year Book, revealed that the total fashion sector was estimated at Rs 1,91,400 crore and forms about 15 per cent of the country's retail market of Rs 12,00,000 crore.

"Commanding such a large chunk of the organised retail business in India, fashion retailing has indeed been responsible for single-handedly driving the business of retail in India," added Roy, citing that the Indian apparel market grew at 14.7 per cent in 2006.

News: PM orders a study on the impact of retail chains

(DNA 25/02/2007) New Delhi - Prime Minister Manmohan Singh has ordered a comprehensive impact assessment of the advent of large-scale retail chains, both domestic and foreign, on small businesses and shopkeepers.

Since the study will form the basis of a new retail policy, it could put a spoke in the ambitious plans of Indian business houses. This adds to the uncertainty already shrouding the entry of Wal-Mart.

In a letter to the department of industrial policy and promotion (DIPP), a copy of which is available with DNA, the PM's office has asked for a comprehensive study covering not just transnational supermarkets but major Indian business houses as well.

While Congress president Sonia Gandhi's letter to the PM last month asked merely for an assessment of the impact of the entry of multinational retailers on smaller businesses, the PM appears to have expanded the scope of this assessment.

News: Budget may spell relief to commoner and India Inc

(PTI 25/02/2007) New Delhi - The common man, pushed to the point of exasperation by rising prices, and the corporate can expect some relief from Budget 2007-08 to be presented by Finance Minister P Chidambaram in the Lok Sabha on Wednesday.

The fourth budget of the UPA Government is likely to lay stress on agriculture and announce cut in customs duties on food products to contain inflation, which is hovering around 6.5 per cent.

Besides, the Budget is expected to focus on infrastructure development and may announce establishment of a special purpose vehicle to utilise part of the foreign exchange reserve to import capital goods.

On the personal taxation front, Chidambaram is likely to increase the limit of exemption for savings under section 80C of the Income Tax Act, 1961 from Rs1,00,000 to about Rs1,30,000-1,50,000.

The limit under section 80C was fixed by Chidambaram in 2005-06 after he removed the standard deduction which was available to salary earners.

The Finance Minister is also likely to extend tax exemption to three-year fixed deposits in banks within the overall limit of Rs1,30,000-1,50,000. The exemption is currently available to five-year fixed deposits.

The Budget is also likely to either abolish 10 per cent surcharge or cut corporate tax rates by three per cent to 27 per cent. Either way, corporates are expected to get a relief of three per cent from the Budget, sources said.

The effective rate of tax on corporate works out to be 33.66 per cent, comprising 30 per cent corporate tax, 10 per cent surcharge and two per cent education cess.

News: West Indies rolls out red carpet for India

(BL 24/02/2007) New Delhi - Cricket has long been associated with business. During the forthcoming World Cup, the West Indies would be taking this alliance further to actively promote trade and investment through this route, with India as the prime target.

With an expected arrival of 10,000 Indian cricket lovers, the Caribbean islands are leaving no stone unturned to showcase investment opportunities to Indians.

Around 2,000 visa applications have already been processed for the event.

"We are looking at promoting trade and investment with India through tourist arrivals for the cricket matches. They will be able to get a first-hand look at the investment opportunities here," said Pundit Maniedeo Persad, High Commissioner of Trinidad and Tobago to India, on the sidelines of a CII conference.

The country is taking a host of measures to ensure a smooth visit for Indian tourists.

It is gearing up to assist them in easy visa delivery by hiring VFS, a visa facilitation company.

Special direct charter flights between India and the islands where the Indian team is scheduled to play are also on the cards.

Indian tour operators are being roped in to make the visit a pleasurable experience.

Travel operators are visiting the host country to survey the best possible stay options to provide accurate tips and recommendations to cricket lovers planning their sojourn. On investment sectors, Persad: "We are looking at Indian investment in the downstream energy sector; a few Indian companies have evinced interest."

Trinidad and Tobago is also interested in engaging with the films sector for transfer of skills and manpower movement.

"We have a number of incentives which we want Bollywood to take advantage of," he said, adding that tourism was another area they were looking to develop.

"There is no real tourist travel by Indians into our country. We aim to develop it."

News: Bharti vows to go ahead with Wal-Mart tie-up

(DNA 24/02/2007) New Delhi - On a day when it became clear that the Centre has asked for a comprehensive study of the impact of multinational retailers on mom & pop stores, Bharti Enterprises chairman Sunil Mittal appeared unperturbed. Maintaining that the proposed JV with US giant Wal-Mart would be signed in a matter of weeks, Mittal said: "We will proceed with our plans unless the government specifically asks us to stop." He said the development (letter by PMO) would not affect the tie-up with Wal-Mart as the foreign partner was entering only in the cash & carry wholesale operations, not in the consumer-facing front end. But retail industry experts say that with renewed uncertainty over retail policy, including foreign direct investment (FDI) norms, Wal-Mart may well decide to wait for a while till some clarity emerges on the overall policy front. And even the other big names in retail - Carrefour, Tesco, etc - may want to put their India debut plans on hold till the policy environment is more stable. Meanwhile, Wal-Mart vice-chairman Michael Duke was doing the rounds of the capital's corridors of power on the second day of his India sojourn - among others, he met Montek Singh Ahluwalia, deputy chairman of the Planning Commission, Sharad Pawar, agriculture minister and Kamal Nath, commerce and industry minister. To a question on the relationship between Bharti and Wal-Mart, Mittal said: "The cash-and-carry business by Wal-Mart will have an arms-length relationship with Bharti Retail." It remains to be seen what kind of investments Wal-Mart plans to make in the Indian wholesale cash & carry business and whether it agrees to supply critical technology to the Indian partner for a successful retail venture. From available indications, the upcoming board meeting of Wal-Mart next month is expected to consider the terms of the proposed JV with Bharti.

News: RIL move on mega-preferential to Mukesh

(DNA 24/02/2007) Mumbai - The board of Reliance Industries is slated to meet on Saturday to decide on a preferential issue of warrants/shares to its promoters - Mukesh Ambani and associates.

It is billed as the largest preferential offer ever made to Indian promoters, sources say. The company might issue preferential warrants in the region of Rs 13,500 crore, which is close to $3 billion, sources add.

This would take the promoters stake to 55 %; they will have to cough up 10% immediately with the balance amount payable in 18 months.

In the past one year, the promoters led by Mukesh Ambani have increased their stake from 46.67% to 50.62%, by mopping up shares from the stock markets.

Mukesh Ambani, chairman and managing director of the country’s largest private sector company in turnover and shareholder wealth, has over the past one year been steadily acquiring shares of Reliance Industries from the open market. The RIL share price thus climbed from a 52 week low of Rs 695.15 per share to Rs 1444.80 per share.

Bucking the general downswing in the markets on Friday, RIL share lost just a rupee to close at Rs 1412.80, indicating that the markets were sensing something afoot in the counter. That is, the promoter is giving its vote of confidence by buying RIL shares at valuations close to its historic highs.

Sebi norms allow promoters to increase their stake up to 55% of the equity cap at valuations close to the last two-week’s average market price. Sources say that Mukesh Ambani’s move is in line with the recent trend of Indian promoters hiking stake to fortify their control and ward off hostile takeovers. In the past, Tata Steel, Reliance Capital, Reliance Energy and United Phosphorus have seen promoters hiking stake via preferentials in the past.

Reliance officials declined to comment on this.

The board on November 9, 2006, had approved a plan to raise $2 billion to fund its on-going capital expenditure across new projects that include external commercial borrowings, convertible debentures, preference shares and foreign currency convertible bonds and syndicate loans.

News: Promoters to up RIL stake 5%

(BS 23/02/2007) Mumbai - RIL to issue preferential shares to Mukesh, promoters to up existing 50.62% stake.

The promoters of Reliance Industries (RIL) are preparing to scale up their holding by up to 5 per cent from 50.62 per cent through a preferential share issue.

The move, which follows Tata Sons scaling up its stake in Tata Steel by 2 per cent in the recent past, is aimed at taking the promoters’ holding in RIL beyond the reach of hostile takeover attempts.

The RIL board is expected to discuss the issue of preferential shares to the promoters at its meeting tomorrow.

The meeting may also discuss the company’s investment plans for oil and gas and retail businesses.

A review of the company’s earlier decision to raise $2 billion (Rs 9,000 crore) to finance capital expenditure in oil and gas exploration is also expected.

When contacted, an RIL spokesperson declined to comment.

Sources in the know of the development said the Mukesh Ambani-led promoter companies may scale up their holdings by the maximum permissible limit of 5 per cent in tranches. In other words, the promoter group might subscribe to a mix of fresh equity and convertible warrants.

The Securities and Exchange Board of India has allowed a maximum increase of 5 per cent in promoter holdings in one year, through preferential allotment of shares or creeping acquisitions.

To raise their stake by 5 per cent, the promoters will have to subscribe to around 150 million preferential shares.

Sebi norms require a preferential issue to be priced at or over the last six months’ average stock price. A back-of-the-envelope calculation suggests that at the last six months’ average price of Rs 1,250 a share, Mukesh Ambani will have to chip in with Rs 19,000 crore to scale up his stake by 5 per cent.

The promoters have been raising their stake in RIL since the group’s businesses were split between Mukesh and his brother Anil in June, 2005. Their stake has gone up by 4 per cent since that time.

News: Sahara India to offer services to NRIs

(BL 23/02/2007) New Delhi - Eyeing revenue of $ 160 million in three years, Sahara India Pariwar announced its foray into the global services market with various offerings for non-resident Indians.

``There would be four major verticals — health, utility services, personalised and relationship through which we would offer these services,'' said Romi Datta, Chief Executive Officer, Sahara Care House and International Business of Sahara India Pariwar.

With this foray, the company has formed a new entity, Sahara Care House (SCH), that will provide about 60 services support and care services to NRIs to enable them to purchase these services for themselves and their relatives in India.

With India topping remittance in the world at about $ 23 billion from about $ 25 million people residing overseas, there is a huge potential for this business, he added.

In the first phase, the services have been launched in the UK, Singapore and Malaysia and will be gradually rolled out in other parts of the world.

News: Tatas, Tesco close to tie-up

(RTR 23/02/2007) Mumbai - Britain's Tesco Plc is close to tying up with India's Tata group for a retail venture, the Business Standard said on Friday.

"Tesco and Tatas have reached a crucial stage in the negotiations, which have advanced considerably over the recent past," the paper said, citing unnamed sources.

A deal would be structured in a manner that does not cause a conflict of interest with Australia's Woolworths Ltd. with whom the Tata group has a retail venture for consumer electronics and appliances in India.

"We have no comments to make on the report," a Tata group spokesman said.

A senior Tata group official said last week the company wasn't looking to enter food and grocery immediately and that its preferred partner for supermarkets, when it did make a foray, would be Woolworths.

The Tata group also operates department stores and hypermarkets in India.

India allows multi-brand retailers to operate only through cash-and-carry or licence and franchise operations, the route chosen by Germany's Metro AG Shoprite Holdings and Marks & Spencer

Wal-Mart Stores Inc. has a wholesaling joint venture with Bharti Enterprises Ltd.

News: Anheuser-Busch to enter Indian beer market

(BL 23/02/2007) Houston - Anheuser-Busch International Inc. has entered into a joint venture with Crown Beers India Ltd in a move that will give the US' largest brewer entry into the Indian beer market. The 50:50 joint venture will operate under the name Crown Beers India Ltd and includes a new state-of-the-art 5,00,000-hectolitre brewery in Hyderabad, which will be completed in March this year. "International expansion is a key part of Anheuser-Busch's growth strategy, and while India is a small beer market today, it is growing rapidly and has tremendous long-term potential," August A. Busch IV, President and Chief Executive Officer of Anheuser-Busch Cos. Inc, said. "This joint venture with Crown brings the experience and skills of both companies together with a world-class brewery to introduce Budweiser to beer drinkers in India." Both Anheuser-Busch-maker of Budweiser beer and Crown Beers will each have 50 per cent ownership of the joint venture and will collaborate on all local management, marketing and sales decisions. Crown Beers India Ltd. is expected to employ more than 150 people. Terms of the agreement were not disclosed. Budweiser is one of the most popular beer brands in the world and the joint venture combines Crown's local business experience with Anheuser-Busch's global marketing a and brewing expertise, said K.V.D. Prasad Rao, Joint Managing Director, Crown Beers . While India ranks low among the world beer markets at 8.2 million hectolitres, it has experienced a compounded annual growth rate of 8 per cent for the past five years.

News: Asia's largest airline to fly soon

(IBN 23/02/2007) New Delhi - The runway is set for the largest airline to take off in Asia. A Group of Ministers (GoM) has approved the merger of state-owned carriers, Air India and Indian (Indian Airlines Ltd). The Cabinet will now have to give its nod.

The GoM headed by Pranab Mukherjee has endorsed the roadmap prepared by Accenture, for the Indian and Air India merger after its third meeting.

The GoM has finally decided to send the proposal to cabinet shortly.

Civil Aviation Minister Praful Patel said the merged entity both Indian and Air India will be merged to a new company there will be a clear mechanism to protect the interest of all employees including casual workers but the decision on the name of the company and branding will follow.

“(Regarding) wage parity, there is no question of anybody being worse off or being downgraded from where they are today. In fact, it can only get better, including casual workers, who are working with both Air India and Indian Airlines. Their conditions of employment shall continue to remain as they are today,” said Patel.

After the Cabinet nod, it will take about 16 weeks to complete formalities and the integration will be done in phases. The entire process of integration will take at least two years.

The Government says the proposed that merger will add Rs 1,200 crore to the new entity through synergies between two airlines. The merged entity will be the largest airline in Asia.

Wage parity for employees and career opportunities are the two critical areas the Government will need to work on.

Patel says an employee grievance redressal mechanism will be setup at the company and ministry level.

Consultant Accenture will continue to work with the new entity for one year after the formal merger to ensure integration of manpower, marketing and sales wings of two airlines.

News: 'Agreement with Wal-Mart in coming weeks'

(PTI 23/02/2007) New Delhi - Bharti Enterprises, which is on the threshold of India's booming retail sector, today said the company was weeks away from signing a joint venture agreement with Wal-Mart for cash-and-carry and back-end linkages.

"The JV on retail has been finalised and legal agreements are being worked out," Bharti Enterprises Chairman Sunil Bharti Mittal told reporters here after meeting Planning Commission Deputy Chairman Montek Singh Ahluwalia, along with visiting Wal-Mart Vice Chairman Mike Duke.

Bharti, which had earlier this week announced an investment of $ 2.5 billion in the front-end of retail operations, said the JV would also look at supporting the 'kirana' (neighbourhood grocery) chain.

"Bharti Retail will not get a preferential treatment from the JV, as it will supply to the kirana stores also," he said when asked if the agreement with Wal-Mart was exclusive.

On whether Wal-Mart saw any hurdles in the backdrop of Congress President Sonia Gandhi's letter to the Prime Minister advising caution in allowing entry to the US retailer into India, Mittal said: "Wal-Mart is going to apply for a JV, only in the area where policy exists".

The entry of Wal-Mart, whose revenue of about $ 320 billion is bigger than the size of India's retail market ($300 billion), is viewed by some as a threat to the about 13 million mom and pop stores in the country.

But the US retailer would be investing only in cash-and- carry business, where 100 per cent foreign direct investment is already allowed.

News: Tata Coffee plans retail foray into Russia, CIS, Ukraine

(BL 23/02/2007) Mumbai - Tata Coffee Ltd on Friday said that it plans to retail coffee in Russia, Ukraine and countries in the Commonwealth of Independent States (CIS), via its Eight O'Clock coffee brand.

"We have plans to perhaps leverage the Eight O'Clock brand and launch a brand in Russia, CIS and Ukraine," M H Ashraff, Managing Director, Tata Coffee said at a press conference in Bangalore.

He added that Tata Coffee is currently the second largest wholesale exporter of instant coffee into Russia, Ukraine and CIS countries.

"Tata Coffee has already started its research in Russia, Ukraine and CIS countries and that is where we are going to concentrate on by going in with a brand," Ashraff said.

The instant coffee market in the three areas is growing at about 10 to 12 per cent each year, he said. "The market is big enough for us to enter."

Tata Coffee bought the U.S.-based Eight O'Clock Co. from Gryphon Investors for $220 million in June last year.

News: Pantaloon Retail to invest about Rs 1,000 cr in Kerala

(BL 23/02/2007) Kochi - Retail player, Pantaloon Retail India Limited will invest up to Rs 1,000 crore in the next 12 months in Kerala, a top company official said on Friday.

The company recently opened a store in Palakkad and plans to open 12 stores in nine more cities in 12 months, including Thiruvananthapuram, Kochi, Kottayam, Thrissur, Kozhikode, Kasargod, Thalassery, Gudalur and Guruvayur, Atul Takle, Head-Corporate C ommunications, Pantaloon Retail (India), Limited, said here.

He said their company Kshitij, is developing a mall of more than 4,00,000 square feet in Kochi at an estimated cost of Rs 170 crore, expected to be completed in the next 18 months.

Founded in 1987 as a manufacturer and distributor of men's garments, the company went public in September 1991. The first Pantaloon store was launched in Kolkata in 1997, he said, adding that the first 'Big Bazaar' was launched in 2001.

Total revenue for the 2005-06 fiscal was Rs 2018 crore, of which Rs 750 crore came from South India. The company has projected Rs 4,000 crore for this fiscal, of which Rs 1,500-1,600 crore is from South India.

The company has presence in food, fashion and footwear, home solutions, consumer electronics, books and music.

News: Kingfisher to fly new routes, add more flights

(PTI 23/02/2007) Mumbai - Vijay Mallya-promoted Kingfisher Airlines plans to launch more flights on new routes in its summer schedule, beginning March besides introducing services connecting Tier-II cities in the western and southern regions.

"We will increase the number of flights on our trunk routes like Mumbai-Delhi, Mumbai-Bangalore, and Mumbai-Kolkata from March this year in our new summer schedules," Kingfisher Airlines general manager (sales) Manoj Chacko told PTI.

The airline, which has a fleet of 25 aircraft, will also fly two daily flights connecting Delhi-Chennai, he added.

Currently, Kingfisher has seven Mumbai-Delhi flights daily, to which a couple of more would be added, while the Mumbai-Bangalore sector, which currently has five services daily, will be increased to six, he said.

The airline was also looking to start services from Mumbai to Baroda, Jamnagar, Bhuj, Indore and Nagpur.

It will also start services on the Bangalore-Lakshwadeep, Chennai-Madurai, Chennai-Trichy and Chennai-Coimbatore routes, thereby connecting all important cities around Chennai, said Chacko.

The summer schedule begins on March 26 and will continue till October.

The airline had already filed this new schedule with the Slot Committee for approval and expects to get it very soon, Chacko said.

News: 'Bharti retail plans good for farmers'

(PTI 23/02/2007) New Delhi - Bharti Enterprises' retail plans, which could involve a tie up with Wal-Mart, will be useful for India's farmers, Farm Minister Sharad Pawar said on Friday.

US retail giant Wal-Mart Stores and Bharti Enterprises are very close to finalising a deal for a retail joint venture, Bharti's chief said on Friday.

"Effort of Bharti will be useful for Indian farmers as they will be able to get remunerative prices," Pawar said after a meeting with Wal-Mart Vice Chairman Mike Duke.

News: 'India poised for bandwidth boom'

(PTI 23/02/2007) Chennai - The Centre's decision to allow upto 74 percent foreign direct investment in telecommunications has given the world an opening to contribute and participate in India's growing economy as the country is poised for a bandwidth boom, President A P J Abdul Kalam said on Friday.

Inaugurating the ‘International Conference on Signal Processing, Communication and Network’ at MIT in Chennai, Kalam said the country had achieved the distinction of becoming a fast growing broadband market in 2006. “Many experts believe India is ready to become the most bandwidth- competitive country in the world,” he said.

“Bandwidth price is continuously falling down and the trend is that it could drop significantly in the near future. The growth of the mobile phone market has been phenomenal. Mobile phones in India are increasing at the rate of six million phones per month," he said.

"Increased use of radio frequencies because of ever increasing number of mobile phones and expansion of mobile communication networks have brought in new problems and concerns," he noted.

"In recent times, the overwhelming increase in the number of mobile phones and number of service providers competing with each have created such a situation that we see cellphone towers everywhere," he said

However, he warned that these "towers are radiating high power radio waves, continuously exposing children, senior citizens and people needing healthcare to harmful electromagnetic radiations."

Communication systems had to share electromagnetic spectrum with other users like walkie talkies, terrestrial TV, FM stations, radars and microwave ovens, Kalam said.

News: India-Mauritius PTA to start on a high note

(HT 22/02/2007) New Delhi - With the India-Mauritius PTA on the verge of being signed, the two countries are readying to toast with premium Mauritian rum and Indian wine. India has offered Mauritius a 50% duty waiver on a one-off export of 150,000 litres of rum, Mauritius is doing the same for 500,000 litres of Indian wine, according to officials in the commerce and industry ministry.

With this, the bilateral Comprehensive Economic Cooperation and Partnership Agreement (CECPA) — of which the PTA is a part — seems set for heady times.

While the amount of Mauritian rum coming in will be a mere drop in the ocean in the 360 m litre Indian rum market, Mauritian brewers are confident that their premium rums, especially the high-end flavoured and spiced ones, will be able to carve a niche for themselves.

"Quality-wise, we are as good as the biggest international brands," says Frederic Bestel from Scott and Co Ltd, which produces high-end brands like Sir Richard and Reserve 1850, 'and we will be targeting the high-end market'.

Mauritian rums like the Blue Bay B of the Chatel stable, have won awards internationally and have made inroads into the European and American markets. In India, however, only the Green Island brand is available, and that too only in Goa.

This may change soon as brewers from Mauritius have been taking advantage of the waiver to test the Indian waters. A delegation representing seven of the biggest names in the business are currently touring India to meet representatives from the Indian IMFL (Indian-made foreign liquor) industry to explore tie-ups for marketing, bottling and even brewing. Indian wine makers are also readying up to explore the Mauritian market.

“We will be happy to tie up with some good Mauritian importers to introduce our wines in some select locations,” says Rajiv Samant from Sula Vineyards.

This is especially so because Mauritius can help India get duty-free access to European and US markets under the ACP (African, Caribbean and Pacific) Initiative and the AGOA (African Growth and Opportunity Act), respectively.

“It is a win-win situation for both countries,” says Arun Ramduny from Enterprise Mauritius, a consultancy firm, adding, “the rum and wine concessions augurs well for the CECPA.”

News: Lakshmi Niwas Mittal to sell US plant, brother may bid

(DNA 22/02/2007) Mumbai - The latest churn in global steel may see Lakshmi Niwas Mittal in the garb of a seller.

And the buyer? Could very well be one of his younger siblings, Pramod.

A fiat by the US Justice Department is forcing Arcelor Mittal, the world’s largest steelmaker owned by Mittal, to sell its Sparrows Point steel plant in Baltimore, Maryland.

Mittal will thus have to invite bids for the Baltimore plant, which makes under one million tonne of tin plate for American auto giants, apart from two million tones of steel.

Mittal had earlier planned to sell the Weirton mill, which is a loss-making entity, and had signed an MoU with Esmark Inc, a Chicago-based steel producer and distributor.

Now he will perhaps retain Weirton, which is bigger than Sparrows Point facility.

A Wall Street Journal report said Sajjan Jindal’s JSW Steel and Pramod Mittal’s Ispat Industries along with a slew of Chinese and Russian steel companies may be contenders.

Sajjan Jindal recently declared that he’s scouting for 1-2 million tonne annual capacity steel companies in Europe or other advanced markets.

“Our bite is small,” Jindal said, after announcing the company’s third-quarter results in January this year.

The Baltimore plant is a fit — it’s profitable and has a little less than one million tonne per annum tinplate making capacity.

However, Seshagiri Rao M V S, director-finance, JSW Steel, told DNA Money JSW is not in the race. “We have not seen the proposal nor have we considered it yet,” he said.

Vinod Mittal, younger brother of Pramod Mittal’s, declined to comment.

An Ispat Industries spokesperson, however, termed the talk as highly speculative.

However, steel analysts said Pramod Mittal’s Global Steel Holdings could be in the fray as it has shown an appetite for acquiring assets in East Europe and Africa.

Pramod Mittal is said to be returning on Wednesday night from Nigeria and could not be reached for a response from Global Steel Holdings.

The Baltimore plant was earlier known as Bethlehem Steel and was acquired by Wilbur L Ross. In investor circles, Ross is known by his sobriquet ‘Vulture Investor’ because he buys troubled firms, turns them around and sells for big profits.

A couple of years back, Ross merged his US steel business called International Steel Group with Mittal Steel.

Industry analysts said it would need tremendous courage for Indian companies to gobble up a US steel outfit, as these are high-cost operations.

However, the fact that the Sparrow’s plant is a profitable enterprise may attract domestic firms to throw their hat in the ring. The selloff is being forced as the Justice Department felt it would remedy “concerns about competition” arising from the mega merger that spawned Arcelor Mittal.

Among the contenders also include Russia’s Evraz Group or OAO Severstal Group, both of which already own US operations.

China’s Wuhan Steel Corp oration and Anshan Iron & Steel Group also have a good deal of cash and are considering expanding, the paper said.

Brazil’s Companhia Siderurgica Nacional, which failed in two bids - for Wheeling-Pittsburgh Corp in the US and Corus Group Plc in the UK — may be a prospective bidder, say reports.

News: Wal-Mart top brass arrives in India

(PTI 22/02/2007) New Delhi - Even as global retail leader Wal-Mart has said it would increase focus on emerging markets like India, a high profile team led by the of Arkansas-based company's vice president (international) Michael Duke arrived in New Delhi today.

According to sources, Duke, is expected to meet top government officials to discuss the firm's business plans in India and finalise the proposed retail foray with Bharti Enterprises.

Duke is scheduled to meet Rajan Mittal, joint managing director, Bharti Enterprises and his team of executives in Mumbai tomorrow.

The visit is aimed at finalising the fine print of retail venture related agreements with Bharti. Once this is done, the agreements will be put up to the respective boards of the companies for their approval. Sources indicated that the approvals at the Bharti end will happen in a few days time.

Bharti and Wal-Mart had signed a memorandum of understanding for the retail foray in November, 2006. Duke's visit is aimed at taking the process forward and start operational work. However, it is unlikely that a formal announcement will be made at this stage.

Duke's visit comes on the heels of its Indian partner Bharti announcing a $ 2.5 billion retail expansion. Wal-Mart, however, will be partnering Bharti only at the back-end of the retail operations for which a joint venture has been envisaged.

India does not allow foreign direct investment in multi-brand retail, but permits 100% FDI in cash-and-carry and 51% in single brand retail.

Meanwhile, Lee Scott, president and CEO, Wal-Mart Stores has said the retail chain major would be giving special emphasis on emerging markets like India and China.

"This year, expect to hear more from Wal-Mart (about where we are going) in emerging markets like India and China," he said while announcing the company's fourth quarter results.

News: J.M. Financial, Morgan Stanley to part ways

(BL 22/02/2007) Mumbai - J.M. Financial Ltd said Thursday that it has decided in principle to separate from Morgan Stanley in their joint ventures for investment banking and brokerage operations.

Under the terms, J.M. will sell to Morgan Stanley its 49 per cent stake in the brokerage joint venture, JM Morgan Stanley Securities Pvt. Ltd., for $445 million. J.M. will also buy Morgan Stanley's 49 per cent stake in their investment banking joint vent ure, JM Morgan Stanley Pvt. Ltd., for about $20 million, said the financial services company in a statement.

News: McDonald's to adopt franchise models in North India

(BL 22/02/2007) New Delhi - With a view to penetrate deeper into India's growing food and beverages segment, fast food chain McDonald's is considering adopting franchise model in its North India operations by 2008.

"We are studying the franchising sector in India to identify the right kind of people and opportunities suitable for a business model like McDonald's and hope to launch franchise programme by 2008,'' Managing Director Connaught Plaza Restaurants Vikram B akshi said.

Currently, in its North India operations the McDonald's has 61 outlets, run by a 50:50 joint venture between McDonald's International and Connaught Plaza Restaurants.

The company plans to open another 25 joints in this year and invest Rs 400 crore over the next three years.

"We would invest Rs 400 crore in next three years to increase presence in the smaller towns and cities and are looking at doubling our sales every three years," Bakshi said.

Besides the existing range of fast food, which it offers, the company would by the end of this year bring in the concept of McCafes to India.

News: BSNL eyes $20 bn revenue

(BL 22/02/2007) New Delhi - State-run telecom giant BSNL is eyeing a turnover of $20 billion over the next three years at an annual growth rate of 27 per cent.

The Communications Minister, Dayanidhi Maran said here after a meeting of the circle heads of BSNL that the public sector company is targeting to add three million cellular subscribers on an average each month from January 2008 to December 2010.

It would also target to add an average of five lakh broadband connections per month from January next year, he said.

News: SGS plans to open retail outlets in two years

(BL 22/02/2007) Kolkata - Mumbai-based SGS Silk Mills Private Limited plans to open retail outlets across the country in the next two years, its Managing Director G D Rathi said on Thursday.

He said here that the company would have a single brand, which would be marketed through all the retail outlets in India.

With an Rs 70-crore turnover, the company has targeted mostly the middle-class customers of the country.

Rathi said that SGS also supplies fabric to all the leading retail chains such as Pantaloons and Shoppers' Stop. He said that recently SGS International had been launched for manufacturing products in Thailand and Korea.

He said that West Bengal was the focus market for the company.

News: Very European, very private

(TNN 21/02/2007) Mumbai - A dash of English with a splash of French accent, Baron David de Rothschild says what he needn’t have: “We are a European style investment bank and we think people value our advice.” Well, of course. The problem?

The old way of investment banking is walking in Dodo’s footsteps. Over the past 10 years, banks such as Kleinwort Benson, Morgan Grenfell have been acquired by bigger, well-built banks such as Dresdner and Deutsche. Barings collapsed. Lazard, which is closest to the business approach of Rothschild, had to go public to be able to raise more resources.

And even Goldman Sachs, that blue-blooded American bank, moved away from the partnership model and went public. Baron David de Rothschild is visiting the Indian operations after four years to take cognizance of the increasing Indian appetite for M&A activity and to also meet corporate czars before the news of their part in Tata-Corus deal becomes a distant memory.

Talking about the last 10 years and calling that history doesn’t impress Baron David. He talks about the two-hundred years of history that his firm has seen. The Rothschild family was a key player in Napoleanic and the Anglo-Prussian Wars as also the financing of the Suez Canal.

Legend has it that it financed Duke of Wellington as well as Napolean Bonaparte — talk about the perfect long-short strategy. They financed the creation of the diamond behemoth De Beers and the London Underground. But all that was in Europe.

In the US or in India where M&A markets are far more dynamic and less dependant on relationships in the Rothschild way, the bank has found the going tough. In India, for instance, it is way behind banks like Merrill, JM Morgan Stanley or Citi.

Though, to be fair, it did get called to the Tata-Corus deal. “A senior member of our team, who had worked with the UK Takeover panel, worked right through the deal,” says Baron David. It is expertise and people like this that Rothschild hopes will give it an edge.

“Most of our people have worked for a number of years. And in every important deal, we put our very best on the transaction. In other banks, the deal might be originated by an experienced hand but later gets passed on to youngsters, who are no doubt very good, but not as experienced.

It is not surprising then that our repeat business is very high,” says Baron David. One gets a distinct feeling that Rothschild is going against the grain on prevalent trends in its industry, but it is hard to argue against an institution that taken on history in the past and bested it several times.

News: 'Tatas eye for overseas acquisitions unsatiated'

(PTI 21/02/2007) Mumbai - The Tata Group's appetite for foreign acquisitions is not satiated, a top Tata group official said here on Tuesday.

"Our appetite for foreign acquisitions is not satiated. Besides, we also have the appetite to grow in India," said Tata Sons' Director, J J Irani, here on Tuesday, while speaking to reporters on the sidelines of a CII-organised conference.

The Tatas have been acquiring on an average one foreign company per year in the period between 1991 to 2003, which increased to five in 2004.

"In 2005, our acquisitions touched double-digits and in 2006, the number was 20," he said.

While not dwelling too much on the Tata-Corus deal, Irani, however, said that it would be the endeavour of Tata Steel to see that "the efficiencies of Tata Steel flow into Corus. Tata Steel will want to move its efficiencies to Corus."

Pointing out that Tata Steel was now one of the lowest cost producers of steel, Irani said that "we achieved this objective in just six years (by 1999-00). Today, we are amongst the five lowest cost producers of steel in the world."

Incidentally, CSN, which was locked in battle with the Indian group for acquiring the Anglo-Dutch steelmaker Corus, also finds a place in this list.

The Tata group's philosophy is to be a local company in the global arena, he said, adding that the group never tinkered with the culture of the companies it acquired.

Stating that the Tata touch to Corus would be brought in through its management, Irani said that "we realise that the job and working conditions there are different and we will not disturb their culture."

On Tata Steel's plans for growth in India, Irani said that the company's greenfield and brownfield projects would not, in any way, be impacted by the Corus acquisition. "Our Indian plans will not be impacted in any way," he said.

Irani said that Tata Steel's plans for its Orissa plant were "under way" while "we are in discussions with the Jharkhand Government" for setting up a plant there.

The company had enough resources for its Jamshedpur plant but not for Orissa "where the State Government has promised us ore," he said.

Welcoming foreign steel companies into India with the rider that "they should make steel here", Irani said that raw materials should not be allowed to be taken out for making steel abroad and then selling the steel here.

"About 100-million tonnes of iron ore are being shipped out now. One day, India will definiitely need more steel and we need the ore for making steel. Hence, while foreign steel companies are welcome to India, they must make their steel in the country," he said.

Many steel companies are interested in coming to India but they want facilities such as land, iron ore, etc, he said. "Unfortunately, the system here is such that we can't decide quickly on such allocations" Irani said, resulting in such companies investing elsewhere.

News: India Inc to continue acquisition spree in 2007

(PTI 21/02/2007) New Delhi - Having rung in the New Year with two major acquisitions in the metals space, India Inc is set to execute more such deals, albeit in automotive, pharma and IT sectors, with companies in Europe being the targets.

"European pharmaceutical, automotive and IT services companies will be prime targets for takeovers in the next year. Indian companies in these sectors have reached critical mass and are set for lift off," cross-border mergers and acquisitions analyst IndusView said.

It said that India Inc's global expansion, particularly in Europe this year, is expected in the backdrop of growth projections for pharma and IT industries, which are set to cross over USD 27.5 billion. The growth in automotive sector could be doubled to USD 18.7 billion by 2009, analysts say.

"We'll no doubt see a global spotlight on these industries as Indian firms make headline-grabbing overseas acquisitions...," it added.

The pharmaceutical industry is expected to grow by more than 13 per cent to USD 6.5 billion in 2007 and reach a market size of USD 9.5 billion by 2010, surpassing the growth trends of 9.5 per cent recorded over the last five years.

"The progressive trend in this sector is expected to continue, due to increased integration with global trade. India started to recognise global patents and the growing significance in terms of contract research and clinical trials," India-focused cross-border advisory firm IndusView chairman Bundeep Singh Rangar said.

The ability to produce high quality, low cost drugs will see India's exports spike over the coming months, he added.

News: BPO firms worry over service tax, commuting

The BPO companies in India feel that the government has been treating it like a country cousin as compared to the software services sector.

(HT 21/02/2007) Mumbai - BPO heads all over India feel that the extension of sops for companies located at Software Technology Parks of India (STPI) should extend beyond 2009.

Software Technology Parks and SEZs are zones that provide upto 100 per cent export oriented scheme wherein software development can be exported.

Currently, IT companies located at STPIs are granted a tax holiday till 2009 and will have to pay tax like a regular business establishment. Nasscom has been lobbying for the tax holiday on STPIs to be extended till 2019.

Further, the industry is asking the government to lower service tax inputs, telecom connectivity costs and asking for STPIs and SEZs to be treated at par.
The problem that BPO companies are facing is that most SEZs are outside city limits and hence BPO staffers would have to commute long distances.

“We are providing an alternative to public transport by employing private sector transport in a large scale and the government should look at providing some subsidy for these vehicle owners,” says PG Raghuraman, Lead executive, Accenture BPO, India.

There are concerns within the industry when it comes to the taxation issue.
Mukul Agrawal, MD, Unisys Global Services India says, "In the past there has been a lot of discussion and a few circulars have been issued and were withdrawn later. The entire industry would benefit if there was more clarity in the coming budget."

"The service tax paid by BPOs range from 28 – 60 per cent depending on the contract size," says an analyst from a Mumbai-based brokerage house. Smaller BPOs are concerned that if they were to move out of STPIs after 2009, their business would be affected.

The BPO industry also wants a more level playing field when it comes to service tax paid on exports. “A company located in a SEZ does not have to pay service tax on exports, while a company in STPI has to pay service tax,” says Raghuraman. The industry suggests that this service tax should be refunded at a future date.

Raghuraman says that cost is still a huge advantage and the government should look at nurturing this nascent industry and reducing costs will help them to be more competitive.

In the recent Nasscom summit chairman Ramalinga Raju said that if the tax holiday is not extended it result in lesser job creation as companies will be forced to look at other destinations.

News: Videocon, Samsung to expand retail outlets

(BS 21/02/2007) Mumbai - The consumer durable companies such as Videocon, Samsung and Godrej may be aggressively expanding their own brand outlets, all though consultants are not sure if the retail expansion will have a significant impact on sales or bottom lines.

“Durables retailing does not deliver healthy margins and the purchases are not confined to a particular brand. Mostly value-riven retail chains and multi-brand outlets deliver healthy sales volumes to the companies as customers tend to compare various product features to different brands,” a senior consultant said.

Videocon Industries promoter chain of consumer durable retail stores, Next, has set up more than 230 stores across the country and is expected to scale it up to 1000 outlets soon.

Other companies such as Godrej Appliances and Samsung are also taking the same approach. In three years, Godrej aims to launch over 200 Godrej Lifespace stores and also retail other complimentary products such as accessories, toys and wall papers.

Korean major Samsung Electronics plans to scale up its retail presence by 40 per cent. Vishesh Singh, senior consultant, Technopak Advisors, adds that the exclusive company outlets help in enhancing brand display. “A large format durables retailer might not stock all the models of a particular brand. The company’s showrooms help in showcasing the entire range,” he said.

However, consumers might not take their final decision without taking a look at the competition. Vipul Rawal, director, Siemens, said, “Unlike apparels and accessories, the brand loyalty in durables is not very strong as the customers prefer to compare multiple brands before making purchases.

Though the sales are driven from traditional retailers and large format stores, the brand shops enable the companies to display a wide range of products.”

The companies are also taking care of consumer needs to compare their brand with others. “We have installed kiosks to guide customers in buying suitable appliances according to their requirements. Shortly, we will introduce audio-visual screening facilities that will help customers to compare features of Godrej vis a vis other brands,” said Shyam Motwani, vice- president and business head of Godrej and Boyce’s retail division.

He adds that brand showrooms are beneficial in extending the brand visibility, entering newer markets and maintaining the market share.

Going forward, analysts predict that the companies which are expanding their retail presence might look at co-branding opportunities with financial services partners.

“The retail expansion is to promote branding. The companies have made enough profits to sustain these expansions as investments in the inventories and stocking are comparatively negligible.

In the future they have an option of co-branding the retail space, which will fetch them additional revenues,” said an analyst.

News: Brand bug may bite kirana shops soon

(BS 21/02/2007) Kolkata - Despite the onslaught from big retail chains, small kirana shops could get a lifeline from the Indian Institute of Packaging.

The premier packaging institute of the country is chalking out a cluster branding strategy, which could help the thousands of kirana shop owners of the country to counter the organised mega-retailers such as Big Baazar, Bharti Wal-Mart or Reliance Retail.

Chairman of Indian Institute of Packaging B S Kampani said that the institute is evaluating an alternative model for kirana shops which would be a win-win for both customers and the shop owners.

“We want to club the kirana shops of a locality under a single brand. These kirana shops can sell packaged rice, pulses or other groceries under that brand rather than selling it in just conventional paper wraps,” he said.

Kampani pointed out that the packaging could be done by small and medium units at a minimum cost. On the other hand, the customer will get some kind of quality assurance, which may come at a higher price. “But then taking into consideration the locational advantage of the kirana shops you will not mind paying extra,” he said.

According to IIP chairman, the institute has already spoken to 800 kirana shops in Mumbai and over 250 kirana shops in Ahmedabad.

“We have discussed the issue of common branding and packaging and the response is positive. They understand that this is a survival issue for them. If the model is successful in Mumbai and Ahmedabad then it can be replicated in other metro cities including Kolkata,” he added.

Kampani has already had a series of discussions with Union Minister of State for Food Processing Subodh Kant Sahay on this issue. “We have sought the help of the Union ministry for this initiative.

Considering the unemployment that could result if the kirana shop infrastructure gets destroyed; some small subsidy could be a better option,” he added.

Kampani even indicated that FMCG majors were also willing to help the project. The bargaining power of the FMCG majors in case of an organised retail is much less than that of the small kirana shops.

News: Coffee industry in retail push

(BS 21/02/2007) Bangalore - The domestic coffee industry will showcase the country’s potential in expanding coffee consumption and modernising retail trade in coffee at the India International Coffee Festival (IICF 2007).

IICF 2007, a platform created by growers, traders and equipment makers, is supported by the Coffee Board of India and will be held in Bangalore from February 23 to 25.

Indian coffee growers are, at present, heavily dependent on exports which are prone to price fluctuations. Hence the board is devising ways to increase domestic consumption to insulate growers from global price fluctuations.

“Despite the rising domestic consumption, the coffee industry is still dependent on exports as 70 per cent of the production is exported. The country accounts for only 4 per cent of the world coffee output and is ranked seventh globally,” said G V Krishna Rau, chairman, Coffee Board of India.

The recent spread of the coffee-cafe culture across major cities is said to be boosting consumption, but volume offtake of these chains is relatively small.

“Companies such as Starbucks and illycafe can increase market presence and consumption levels. And on our part we can showcase our strength that we do not just grow Arabica and Robusta but also cultivate coffee of 13 different regional varieties and three speciality coffees,” said Rau.

As a build-up to the festival, Roberto Morelli, director of the university and illycaffe coffee culture manager will share his vision on the Coffee University at Trieste, Itally.

Starbucks’ operations and trading director Colman Cuff will be asked to conduct classes or workshops on coffee differentiation.

Researchers from UK’s Bradford University will reveal tools they are developing to establish traceability of differences in Indian coffees from region to region and estate to estate. Mario Cerutti, director of the leading Italian chain Lavazza, is expected to hold talks on quality and sustainability.

“We are inviting global majors to be part of the exercise to boost domestic consumption,” said Rau. Domestic consumption has grown annually by 5-6 per cent in the past few years to around 80,000 tonne, at present. Rising disposable incomes generated by the rapidly growing new economy is seen as a key growth driver.

The board has plans to increase domestic consumption to around 1.2 lakh tonne by the end of 11th Five Year Plan in 2012, up from the present level of 80,000 tonne.

At the same time, the board is also trying to increase coffee output to 3.2 lakh tonne from the present production levels of 2.75 lakh tonne.

News: Law on foreign funds may hit banks

(BS 21/02/2007) Mumbai - The Reserve Bank of India has opposed the government’s move to bring in a law to introduce a new reporting system for inward flow of foreign contributions.

The RBI has contended that the inclusion of all foreign inward remittances in the proposed new reporting system will substantially expand the scope of transactions monitored and may place a heavy reporting burden on the banks.

The Union Cabinet had cleared the Foreign Contribution Regulation Bill last year. The Bill proposes to mandate banks to report all foreign inward personal remittances to the Financial Intelligence Unit-India.

Inclusion of personal remittances in the category of foreign contribution transactions for reporting may discourage non-resident Indians and the expatriate work force to send money home through banking channels.

Further, it may make them send money through other channels like hawala and hundi, the RBI has added.

In view of the present scenario of liberalised current account convertibility, this kind of change would mean that a large number of transactions, which have no relevance, will be reported, the RBI said.

Suspicious transaction reports, which cover foreign remittances also, is a more focussed tool in the matter, the RBI feels. Banks give such reports to the Financial Intelligence Unit-India, as mandated by the provisions of the Prevention of Money Laundering Act.

The central bank has also suggested that banks may be advised to prepare suspicious transaction reports involving foreign inward personal remittances based on frequency, country of origin, source and beneficiary of remittance, instead of the proposed stipulation of summary reporting of transactions representing all inward remittances.

The RBI added that it was neither aware of such practices being followed anywhere in the world or of any international convention that mandates reporting of all inward remittances.

News: Reliance in milestone march

(TT 21/02/2007) Mumbai - Reliance Industries Ltd’s market capitalisation today breached the Rs 2-lakh-crore-mark on the Bombay Stock Exchange (BSE). RIL is the third company after the Oil and Natural Gas Corporation (ONGC) and Wipro to cross this milestone.

RIL continues to be the leader in terms of market capitalisation on the BSE, reflecting the confidence of investors since its demerger last year. Its market capitalisation today stood at Rs 197,118.68 crore.

RIL is followed by ONGC with a market capitalisation of Rs 187,279.61 crore. Bharti Airtel is next with Rs 150,032.07 crore.

Other companies with large market capitalisation include Infosys (Rs 1.31 lakh crore), Tata Consultancy Services (Rs 1.27 lakh crore), National Thermal Power Corporation, Wipro and Reliance Communications (R-Com).

The market capitalisation of Wipro and R-Com are, however, less than Rs 1 lakh crore at present. Wipro breached the Rs 2-lakh-crore-mark during the IT boom of 2000.

The RIL scrip today closed at Rs 1,414.55 on the BSE. The scrip, however, hit an intra-day high of Rs 1,444.80, which is also its 52-week high. It was at this point that RIL’s market capitalisation crossed the Rs 2-lakh-crore-mark.

Market circles said the RIL share continued to see sustained investor interest after it declared better-than-expected numbers for the third quarter ended December 31, 2006.

RIL had posted a 58 per cent jump in net profit to Rs 2,799 crore compared with Rs 1,776 crore in the year-ago period because of a sharp jump in its gross refining margins.

The markets are also optimistic about its plans in organised retail and the output from its KG basins, they added.

Interest in the counter also strengthened with Chevron chief executive officer David ’Reilly arriving in the country on a four-day visit.

Speculation is rife that during his visit, the global oil giant may strengthen its ties with RIL. Unconfirmed reports say that both Chevron and RIL could collaborate in oil exploration.

News: Hind Lever no more Unique

(TT 21/02/2007) Mumbai - Hindustan Lever — the Rs 12,103-crore desi multinational — broke with the 55-year-old hoary tradition last year when it brought in an expatriate — Douglas Baillie – as the chief executive.

It broke it again today when it decided to rename itself as Hindustan Unilever Ltd as it chose to derive more benefits by sporting its parent’s name. But for form’s sake, it decided to keep the word ‘Hindustan,’ remaining the only one in the Unilever family that still strives to assert its individuality. All other companies call themselves Unilever followed by the country’s name.

The current name was adopted in 1956 after the amalgamation of Hindustan Vanaspati Manufacturing Company Ltd and Lever Brothers India Ltd. At a board meeting held today, the directors proposed to change the name of the company to Hindustan Unilever Ltd subject to shareholders’ approval. HLL will hold an annual general meeting on May 18 where the proposal will be placed before the shareholders.

Explaining the reasons for the move, M.K. Sharma, vice chairman of HLL, said the company looked to gain numerous benefits from the change. “Unilever has a global size and scale. As tariffs go down and global sourcing rises, and as we carry the Unilever name, it will be easier for us to go to suppliers and seek same rates as Unilever. Moreover, when it comes to exports, the Unilever name will make sourcing from India more acceptable,” Sharma said.

The HLL vice chairman added that another front in which the Unilever name will prove handy, will be with regard to attracting talent. “The Unilever name is a better known name in developed markets and it will be easier for us to seek talent internationally,” he said.

Last year, Manwani had said HLL was looking to attract more expatriates. Replying to a specific query on whether the name change would have any impact on India’s rural markets, Manwani said that in these areas, the FMCG giant was known by the brands it sold.

“HLL commands a goodwill in these markets and it is our intention not to lose it,” he added. Manwani also revealed that the company would not have to pay any royalty due to the change.

“The company believes that the proposed name change provides optimum balance between maintaining the heritage of the company and the future benefits and synergies of global alignment with the corporate name of Unilever,” a statement said. Market circles believe the change may be a prelude to Unilever raising its stake in HLL.

News: Oracle eyes India's growing retail sector for its solutions

(PTI 21/02/2007) New Delhi - Enterprise software company Oracle today said it is targeting the expanding retail sector in the country.

"Keeping the developing retail in India in view the company is in talks with all the big players in the sector in India," Oracle Senior Vice President Mark Gibbs said here.

When asked if it was looking to tie-up with WalMart in India, Oracle which has Vodafone and Bharti as its customers, said: "The expanding retail sector in India is very important for us. We are targeting it as an industry.

We are comfortable about the retail sector in the country.

We have all the expertise and technology." "Financial and communications sectors are also booming in India.

We have almost all the players in the sector as our customers," he said while launching new versions of its five major product lines to address customer needs.

"We are releasing five significantly enhanced product families. We are giving our customers the choice as to when they upgrade without having to re-license their applications," Gibbs said.

Oracle has in all released 39 new products under its five product lines -- Oracle E-business suite, Siebel CRM 8, PeopleSoft Enterprise, JD Eswards World and JD Edwards EnterpriseOne -- which provide next-generation, role-based analytics, comprehensive application management, integration, search and master data management, he said.

The company recorded year-on-year growth of 53 per cent in new licence revenues for Asia Pacific region in its second quarter ended November, 2006.

Oracle will also launch ERP software 'Accelerator' for the SMB sector on March 20, he said.

News: Apollo Hospitals sets sights on UK for takeovers

(PTI 21/02/2007) London - Apollo Hospitals Group, the country's largest hotel chain, is targetting a number of British healthcare firms, including Priory's Healthcare and Capio UK, for takeovers. Quoting people with knowledge of Apollo's plans, the media here reported that the Indian company has already expressed an interest in the operating arm of Capio UK, one of Britain's biggest hospital operators, which includes the Nightingale Hospital here. Pete Doherty, the Babyshambles singer was treated at the Nightingale Hospital for drug addiction. Britain is understood to have become particularly attractive to Apollo's founder and chairman Dr Prathap Reddy, following a surge of transactions that have seen Britain's private healthcare industry rapidly consolidate into private-equity-backed portfolios. Capio's business in Britain, which consists of 21 hospitals across the country, is part of a much larger European group of the same name. Last November Capio's shares were de-listed from the Stockholm Stock Exchange after the group agreed a 1.2 billion pounds takeover by Opica, a company formed by Apax Partners and Nordic Capital. The Apollo Group, which has 39 hospitals, is also looking at other British targets, potentially including Priority Healthcare, the country's best-known home for celebrity addicts, the Sunday Telegraph reported. ABN Amro, the Priory's major shareholder, has appointed Morgan Stanley to conduct a strategic review, and Apollo would have enough firepower to mount a bid if it teamed up with private equity backers. Apollo, which recorded Rs 27.3 crore (3.2 million pounds) profit in the final quarter of 2006, was founded by Dr Reddy in Chennai in 1983 after he returned from running a medical practice in America. In addition to his hospitals in major Indian cities, Dr Reddy has also taken Apollo to Dubai, Sri Lanka, Bangladesh and Oman.

News: Will merger unlock value for SBI?

(DNA 21/02/2007) Mumbai - The merger of seven associate banks with SBI is a matter of intense speculation in banking sector. Since the Union Cabinet gave its nod to amend the SBI (Subsidiary Banks) Act, 1959, analysts feel it is just a matter of time before the merger takes place. Currently, three of the associate banks —State Bank of Patiala, State Bank of Indore and State Bank of Hyderabad— in which SBI holds a 100% stake, are not listed. If the seven associate banks of SBI are merged with SBI, it will significantly enhance the operations of the country's largest bank. The seven associate banks have a combined branch network of 4,755, which means SBI's branch strength would rise by 51% to 14,061, based on September 2006 figures. All the group's branches are fully computerised and of that, 8,952 branches (including 4,169 of SBI) are now on the Core Banking Platform. In other words, as much as 70% of the total business and 100.86 million accounts of the SBI group are on Core Banking. Interestingly, the associate banks are the only public sector banks to be fully networked. The combined operations would have the largest ATM network of 5,624 (a base of 19.55 million cards), which is being expanded further by another 3,000 ATMs in 2007 alone. The credit card base would stand at over 3 million. In short, there is little effort and investment that SBI will have to do in order to integrate the operations completely. On the financial front also, it is a boost for SBI. For instance, on a consolidated basis, SBI's net profit for 2005-06 would be 35% higher at Rs 6,000 crore, as compared to its standalone profits. For the first half year ended September 30, 2006, too, net profit would be higher by 36% at Rs 2,697.5 crore. Likewise, its net worth will enhance by 35% to Rs 41,402 crore. And since the associate banks have delivered better return on equity (16.01%), as against SBI's 13.39% for the period, the merger should result in increased return on equity on a consolidated basis. Based on pure arithmetic calculations, if the seven associate banks were to be merged with SBI and assuming that SBI's holding in these subsidiaries is cancelled, the net equity dilution will be just 2.53% for SBI, taking its equity capital higher to Rs 539.30 crore, while substantially increasing its book value per share. But, does that serve the government's intention to maintain its stake in SBI? Not really! The other possibility could be that these seven banks are valued and SBI's stake is sold to the government for cash. Thereafter, these seven banks are merged with SBI, wherein the government's stake automatically rises. And for SBI, it also gets cash, which it can use to fund expansion. What valuation one should expect for SBI post-merger? Here is the arithmetic. SBI's current book value is Rs 525. Add to this the book value of the banks merged (only three of them). At Rs 114 for a 100% merger, what should be added to Rs 525 is Rs 57 for a 51% stake. Add SBI's earnings per share for FY07, which is an estimated Rs 81.70. Then deduct the dividend payout of Rs 14 for the year. That would give you a book value figure of Rs 650. At 1.8 times this book value, SBI's share post-merger should quote around Rs 1,170. But, this is considering the merger of only the three currently unlisted banks. However, if you consider the merger of all the seven associates, SBI's share should quote between Rs 1,250 and Rs 1,300. If the conventional price-earning multiple is considered, you can expect a PE of 13, based on FY08 earnings post-merger of three banks into SBI. Says Jyoti Khatri, banking analyst with K R Choksey Securities: "Whichever way you look at it, the merger should make SBI a star sector performer in the bourses." There are analysts who beg to differ. Says Ashutosh Narker, banking analyst with India Infoline: "SBI is already valued on a consolidated basis. So, post-merger SBI's valuation may not change much." Narker's logic is simple. The merger would involve just a book entry and SBI's current valuation already discounts the values of its associates. Concurs Vishal Goel, Edelweiss Securities' banking analyst: "Currently, as much as 80% of the value of the associate banks is already built into SBI's value." Going by that, post-merger, expect SBI's valuation to move up just by 5 or 10%. Adds Narkar: "Most PSU banks are trading in the range of 1.2 to 1.4 times their respective price-to-book-values, a few at 1.7 times. Thus, I do not see any significant deviation for SBI from the current levels." Going by this, SBI's current price to book value at 2.05 times seems to have already factored in the gains from consolidation, at least when compared to PSU banks. However, considering valuations of 3.5 to 6 times price-to-book-value that some key private sector banks enjoy, then there is ample scope. However, again, it is not as easy at it seems though the gap between SBI and private sector banks can narrow in future. Thus, the merger is expected to be largely on paper or for accounting purposes. Says Narkar: "Everybody values SBI on a consolidated basis and not just as a standalone entity. Although SBI has forayed into businesses like mutual funds and insurance, these are relatively smaller. Thus, greater focus should be on valuation of the banking business." All said and done, there are areas where the associate banks lag behind. For instance, except for State Bank of Bikaner & Jaipur, all other associates have a lower spread ranging between 2.96% and 3.77%, compared to SBI's 4.04%. Likewise, the cost to income ratio for State Bank of Indore and State Bank of Mysore are visibly higher at 58.2% and 55.2% respectively as against 51.6% for SBI. So, there are areas where SBI will have to work harder in order to improve profitability. So far so good! In fact, SBI and its associate banks have already achieved synergies in many operational areas. For instance, customers of every bank have access to the ATM network of the group. Says Kanan Shah, senior analyst, Networth Stock Broking: "Right now, only the technology aspect of the group is fully integrated." Upon merger, the need of the hour would be 'real freedom' for SBI, which means more leeway to manage operational costs, especially labour. Says Narkar: "SBI has not been able to cut costs even now. So, if it is able to manage the workforce, then that could act as the trigger. Currently, most PSU banks enjoy a margin of 3 to 3.5% and the biggest cost centre is the employee cost. Hence, that has to be reduced and only then profits would increase." For SBI, staff expenses accounted for 35% of the total operating income or 69% of the operating expenses for nine months ended December 31, 2006. Explains Quantum Mutual Fund's Director I V Subramaniam: "With regards financials, it will look good. However, unless you give power to close down branches and rationalise employee base in areas of duplication, it won't help. It should not be a book merger." The final question: will the valuation gap reduce? Says Shah: "The valuation gap between SBI and private banks would narrow only after 2009, when the banking space is truly opened up for competition. Right now, SBI cannot even dilute its equity beyond the 51% limit." It is true that SBI now faces too much of regulation and policy issues. The merger would mean a stronger and hopefully a more efficient SBI. That is besides better valuation and handsome gains for SBI shareholders. However, for the merger to become a big success, what you need is political will. And of course, co-operation from labour unions.

News: Jet Airways to raise $800 mn locally

(DNA 21/02/2007) Mumbai - Jet Airways, which needs to raise $800 million by way of equity or quasi equity to part finance its $2.5 billion aircraft acquisition plan, would most likely raise the amount locally, a senior company official said on Thursday.

"It's easier to raise money in the domestic market. The debt portion has already been tied up and we will now have to begin work on the equity portion. We have time till July for this," said the company official.

He didn't disclose the amount of debt that has been tied up or the capital that would be raised through equity offering. The company is still undecided on the mode of offering, be it rights and/or public, or invite strategic or financial investors, he said.

Jet Airways has 20 firm and 20 optional aircraft orders to fuel its domestic and international network expansion plans.

Meanwhile, the Jet Airways on Tuesday launched mobile ticketing initiative, under which a traveler can book his tickets using his GPRS-enabled mobile phone. Currently the facility is open only for Hutch users for domestic air travel.

News: New airlines scoop out bigger pie

(DNA 21/02/2007) Mumbai - While the new entrants have usurped market share from incumbents, low-cost airlines, which were not around three years back, look set to dominate the sky for some time to come.

Understandably, the share of incumbent carriers (Indian Airlines, Jet Airways and Air Sahara) has been dwindling, even as full service carriers (FSCs), which had for long dominated the sky, are trying hard to preserve their market.

Except for Kingfisher Airlines (a new player), which has increased its market share to 10.5% in January this year from 7.6% last January, all other FSCs have lost marketshare, even as the overall share of FSCs has shrivelled to 62% from 79% last January.

The share of low-cost carriers (LCCs), on the other hand, has swelled to 38% from 21%.

Likewise, challenger carriers (Air Deccan, Kingfisher Airlines, SpiceJet, GoAir, Paramount and IndiGo) have hammered down the share of incumbents to 50% from 72% to take their own share up from 28% to 50%.

The biggest loser has been Jet Airways, which has lost 9.2% market share from 34.7% last year.

Another incumbent facing the brunt of the new entrants is the state-owned Indian Airlines, whose share has been eroded by 8.7 percentage points to 16.30%.

The state-owned carrier, which has been overtaken by budget carrier Air Deccan in the race for the second position, is only slipping further. From being ahead of it by just 0.2 percentage points in November, Air Deccan has extended the lead to 4.4 percentage points in January with a market share of 20.70%.

Another FSC struggling to keep its market from eroding is Air Sahara, whose marketshare is down to 8.2% from 11.6%. All the new players have added market share over the last one year — Air Deccan 7.4%, Kingfisher Airlines 2.8%, SpiceJet 2%, GoAir 5%, Paramount 1.5% and IndiGo 4.3%.

News: Manikchand plans Rs 500 cr bottled water spend

(PTI 21/02/2007) New Delhi - Charting out an aggressive strategy in bottled water business, Manikchand Group today said it plans to invest about Rs 400-500 crore for both organic and inorganic expansion in the next few years.

"As we look to strengthen our presence in the bottled water business we are weighing options of growing our business through natural expansion and also by acquisitions, for which we could invest up to Rs 400-500 crore," Rasiklal Dhariwal, Chairman, Manikchand Group, said.

He said the company was more keen on acquisitions to give the scale of operations faster and have identified two big national brands for possible acquisitions. He, however, did not name the potential targets.

Asked if the brands were 'Bisleri' and 'Himalaya', which are reported to be on the blocks, Dhariwal declined a direct reply but said: "We are considering options at the moment and if any interesting option comes up we are open".

The company is expanding capacities at its various facilities, including Pune where it is adding 1 lakh litres per day to the existing 2 lakh litres per day.

"Also, we are setting up a plant in Lucknow with a 50,000 litres per day capacity and another at Uttarakhand for 30,000 litres per day," he added.

The company today unveiled a new 'Oxyrich' bottled water, which it claims has 300% higher oxygen content.

Dhariwal said the company was in talks with UAE's leading bottled water brand 'Masafi' for out-licensing its patented technology with ISO 22000:2005 certification.

He said it has applied for registrations in US, a few European countries and China for the technology. It has received registrations in South Africa and Tanzania, he added.

News: DuPont to build $50 million R&D centre in Hyderabad

(BL 21/02/2007) Bangalore - US-based products and services company, DuPont on Wednesday said it will open a knowledge centre in Hyderabad with an investment of $50 million and accommodate 500 R&D professionals in the first phase.

Shankar Krishnan, Executive Director of DuPont India, a subsidiary of $29 billion E.I. du Pont de Nemours, said the centre is expected to be operational next year.

Basic R&D would be conducted at the centre. "Bulk of the R&D is now being conducted in the US; some work will be shifted to India", he said. This is in addition to the centre carrying out R&D efforts to meet specific requirements of the Indian market.

DuPont offers a range of products and services for markets, including agriculture and food; building and construction; communications; and transportation. It has six manufacturing facilities in India in three sites - Baroda, Madurai and Hyderabad.

DuPont has close to 700 employees in India and is growing at more than 25 per cent every year, officials said.

Krishnan said the parent company is betting on India, China and Brazil for growth, adding, it has also started sourcing essential materials from India for global products.

DuPont India today announced the opening of DuPont Refinish Training Centre here, where it would focus on three major DuPont brands 'Centari', 'LE' and 'Standox' -, its second such facility in the country after the one in Baroda.

The RTC here would cater to customers - mainly workshop and body shop outlets of leading carmakers based in Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Goa.

News: Bharti Retail will open its first store in the first quarter of next year

(HT 20/02/2007) New Delhi - Rajan Bharti Mittal, joint managing director of Bharti Enterprises, clarified on Monday that the company it had set up to enter the retail business was a wholly owned subsidiary of Bharti Enterprises. The company has a separate wholesale cash-and-carry agreement with United States retail major Walmart.

Bharti’s agreement with Walmart had raised a political storm with the Left parties voicing concern over Walmart's entry which they feared would badly affect neighbourhood stores.

Bharti Retail also spelt out its future plans countrywide involving an investment of $2.5 billion ( Rs 11,000 crore) over the next eight years. This does not include the cost of acquiring the land on which to build these outlets. Bharti Retail is looking to acquire around 10 million square feet of retail space across all cities in India with a population of over one million.

"This ( $2.5 billion) is about the front end operations involved in setting up the stores. The land acquisition would be done by a separate group company Bharti Realty”, said Mittal.

The company is expecting a revenue of $4.5 billion by 2015 from its retail operations, which will employ 60,000 people. The outlets will be of different kinds, including hypermarkets and supermarkets, offering a wide range of products: groceries, fruit and vegetables, meat and poultry, personal care products and electronic appliances and more.

Mittal said that Bharti’s retail venture was "no different" from such businesses floated by other Indian companies such as Reliance and fully complied with government norms.

"We are no different from other Indian companies which have ventured into retail. Birlas, Tatas, Reliance and the Future Group have done it," Mittal added.

He admitted however, that the company was asked by the government to explain on its tie up with Wal Mart. Mittal said: "Yes, we were asked and we have given them all details."

Mittal said that the company has not decided on the exact branding of the retail venture. “We are evaluating the brand proposition and are in the process of conducting consumer research”, he said.

He said that the existing guidelines do not prohibit the company from using the Wal-Mart brand name.

"The guidelines do not speak otherwise. You have Dominos and Pizza Huts operating under their brands in India," he said.

Mittal said the company was working out modalities for its back-end linkage, including its joint venture with world's largest retailer Wal-Mart.

"The details of the back-end chain and our tie-up with Wal-Mart will be announced in due course," he said, adding a high-level team from Wal-Mart was expected this week in India.

While Bharti would manage front-end of the retail venture, Wal-Mart would be involved in the back-end, including logistics, supply chain and cash-and-carry.

News: Reliance foray into Kenya telecom

(HT 20/02/2007) Mumbai - Reliance Communications, promoted by the Anil Dhirubhai Ambani Group (ADAG), is set to get the contract to become the second national operator (SNO) for the telecom services in Kenya. RCL, which had submitted the bid with Kenya's Triton Group and Swedtel of Sweden as technical partner, has applied for the SNO licence.

“The company has received the invitation from the Kenyan telecom authority to become the SNO and has applied for the licence on last Wednesday. The proposal is expected to be cleared by this month-end,” a source close to the company said. Reliance will compete for the land-line market with the state-run Telkom Kenya, the sole operator in the region. Indian telecommunication companies are eyeing Africa since it is an untapped market, analysts said.

The ADAG group will make an initial investment of around $150 million for the licence. It will make further investments on national long-distance voice and data as well as national cellular mobile services at a later stage. A Reliance Communications spokesperson declined to comment on the issue.

In January 2006, the Communication Commission, Kenya’s Telecom Regulator, had rejected the tender awarded to a consortium led by Dubai-based Vtel for the SNO and asked Reliance to submit a revised tender for the project. Vtel consortium had failed to apply for the licence as required under the tender rules by the expiry of the last deadline on January 24.

The group had been given three deadline extensions but failed to make an application each time. State-owned MTNL was the third bidder for the project. The SNO is expected to be operational in the second half of this year, a source close to the company said.

The SNO licensing is aimed at liberalising the telecommunication market in Kenya, and will cover local and national long-distance voice and data, national cellular mobile, international voice gateway, commercial VSAT, and Internet backbone services.

The shares of Reliance Communication on Monday traded at Rs 463, down Rs 3.5 at close on BSE.

News: Bankers told to bank on stronger currency for stability

(HT 20/02/2007) Mumbai - Theories of Professor John Forbes Nash, the Nobel Prize winner currently touring India, might explain why despite all the Tata-Corus and Hutch-Vodafone deals in India, none of the biggest investment bankers actually have headquarters in the country.

If his ideas are anything to go by, domestic investment bankers and insurance companies might do well to at least hold their financial assets in a strong currency like the dollar or Euro, till the rupee reaches similar stability.

According to him, the quality of a country's money may be getting better if the number of investment bankers and insurance companies setting up subsidiary offices in the country increase.

However, the ultimate quality of the rupee can only be known once Indian merchant bankers begin to dominate the scene and hold their assets in the rupee, much like the way most merchant banking companies in Mergers and Acquisitions (M&A) have their headquarters in USA and Switzerland.

"It is observable that internationally operating commercial banks can do better if they are based in countries where the conventional money is of relatively higher quality. The same principle also applies to…investment banking," he said in Mumbai Monday.

That means that in turn, countries where M&A and investment banking activity is higher, it could mean that the currency is of a better quality. The professor was speaking at length on the topic of ‘ideal money’, a kind of medium of exchange, or currency, that would have a natural stability of value. This type of 'money' needs to be less prone to inflation.

The Economics Nobel laureate of 1994 said that the stability of a currency has to be measured in the long run, and on whether commercial banking activity is continuing in a country without having to cope with interest rate fluctuations in that period.

Nash is an expert in game theory, which creates models of competing companies and states in economics or politics using the example of 'cooperative games' that include mergers and acquisitions.

According to Nash, M&A is facilitated or 'lubricated', by money, which ensures smooth 'transfer of utility', that is the ownership of all assets. Thus Tata's acquisition of Corus actually includes debts built up by Corus in its pension fund. However, the currency in which the deal is preferred indicates the strength of that currency. Tata Corus deal was done in Euros.

India's current rate of inflation is a sure sign of 'bad money', or money that is not good for a stable rupee in the long run which would enable the emergence of a strong indigenous merchant banking and investment banking community in India.

Column: Is India Inc paying through its nose?

(HT 20/02/2007) Mumbai - Business television channels have balloons and festoons to play up at every 1,000-point rise of the Sensex and all has been hunky-dory for quite some time now.

Sadly, whether the Sensex is at 9,000 odd points as it was mid-last year post the May scare at the bourses or 14,000 odd points as it currently stands, there seems to be no serious reduction in the number of Indian citizens who sleep on a hungry stomach every night.

The ‘India Growth’ story—that perpetual explanation for over four years now for all the wonderful things that have happened at the Indian bourses, is now reverberating, across the globe. How wonderful!

Lakshmi Mittal seems to have set the cat among the pigeons with his high profile acquisition of steel major, Arcelor last year. That he was made to extend himself cost-wise was swept under the patriotic din of an Indian company acquiring a white man’s company.

To my mind, the same logic appears to have been at work, and the extension of prices even more strenuous in the case of Tata Steel’s acquisition of British steelmaker and Hindalco’s successful bid for Canada-based Novelis. With Suzlon Energy too in the fray to buy a 75 per cent stake in Germany-based RE Power, the ‘India Growth’ story is well and truly going global.

Well, I, for one, am very sceptical of the prices paid out for these acquisitions. Notably, these deals are all-cash, funded primarily by debt. Given the sheer size of these purchases versus the size of their balance sheets, gearing ratios look headed northwards.

History too is weighed against these companies as many such mega-cross-border mergers like those of AOL Time-Warner and DaimlerChrysler have left the acquiring company’s shareholders short-changed.

The Tata Steel management has waxed eloquent about the possible $300-350 million synergies, but while the benefits of that remain hypothetical for now and highly dependent on the commodity cycle, the cost hit will have to be borne with immediate effect.

Hindalco’s case is not too different and its hopes to further leverage its position as one of the lowest-cost producers of aluminium worldwide. Again the bogey of the commodity cycle hangs fire over the heads of its shareholders today.

From the share-price movement patterns, it is evident that many shareholders did not seem too excited about getting their scalps singed for a few years in anticipation of utopia ahead.

For shareholders the promise of a better tomorrow is acceptable, but not when it brings immediate price pain. Unlike the promoters of a company, they will seek the shares of another company (of which there is no dearth), which promises a better tomorrow (all companies do), with the accompanying immediate pain.

Finally, some food for thought -- are we as a nation, overdoing the ‘India Growth’ story? Are the whites selling us their wares at exorbitant prices even while cheering our great growth story from the aisles? You decide.

By Ashok Kumar, CEO Lotus Knowlwealth

News: Bharti's joint venture with Wal-Mart may get delayed

(DNA 20/02/2007) Mumbai - On the very day Bharti Enterprises unveiled its retail plans for the front-end, it transpires that its proposed joint venture with Wal-Mart Inc may not happen immediately. According to industry sources, while Wal-Mart chief Michael Duke is still scheduled to fly into India this Friday (February 23), he is unlikely to ink the much-awaited pact with Bharti for a cash and carry wholesale, logistics and supply chain businesses just yet.

Duke is expected to be here for just about 24 hours and has already lined up meetings with commerce and industry minister Kamal Nath, besides officials in the Planning Commission. So, a packed schedule could be one reason for him and his high-profile team to shy away from committing themselves to the joint venture right now.

When contacted, a Wal-Mart India spokesperson merely said, “Our business arrangements with Bharti for wholesale cash and carry, logistics and supply chain are still being discussed. We look forward to partnering with them to build backward linkages with farmers and suppliers through a robust and efficient supply chain

But retail industry experts point out that several aspects of the partnership between Wal-Mart and Bharti may need further discussions. A major issue could be the timelag, after which each partner may want to go alone in India, with sources pointing out that Wal-Mart may like to break away as soon as the government allows FDI in retail.

Then, other aspects of a partnership such as branding of the front-end stores as well as the wholesale business, the pricing strategy etc may also need in-depth discussions before things are written down in black and white. The government’s recent flip-flop on retail FDI may also have compelled Wal-Mart to push back the actual JV just a wee bit.

News: Biyani to hive off Big Bazaar early next fiscal

(DNA 20/02/2007) Mumbai - The roar of retail is getting louder. As Reliance Retail pumps in Rs 25,000 crore into the country's retail artery and Bharti-Wal-Mart lines up $2.5 billion, Kishore Biyani's Future Group is also switching to battle gear. The Rs 2,500-crore retail major is hiving off one of its popular formats - Big Bazaar - by early next fiscal, as part of its plan to split businesses and raise money separately for each format.

Sources said a team has been on the job for the last few months and work to hive off Big Bazaar as a separate company is in the last stage. Biyani is focusing on the metros and wants to dominate the top eight metros in the country. It needs truckloads of money to expand in these cities. Biyani wants to have 11 Big Bazaars in Bangalore, eight in Mumbai and seven in Kolkata by the end of current calendar year. In all these new upcoming stores, Big Bazaar will place its own private label products. The Big Bazaar network contributed Rs 2,000 crore to the Future Group's turnover in 2005-06.

Kishore Biyani, CEO, Future Group, told DNA Money, "We have plans to hive off Big Bazaar as a separate company."

Analysts say Biyani knows huge markets remain untapped in small cities, but the evolving competitive scenario and aggressive entry of Reliance Retail and Bharti-Wal-Mart will change the dynamics in retailing. So it would make sense to dominate the big cities first.

In last six months, the group had opened nine Big Bazaars, three Food Bazaars, two Brand Factory outlets, two Pantaloons stores and five other stores across formats, taking its total retail space to 3.8 million sq ft across 32 cities.

The company plans to increase the size of Big Bazaar network from 41 at present to 100 by the end of current calendar year, with an investment of Rs 1,000 crore. It is planning to cover 15 more cities, including tier-II cities such as Vijayawada and Visakhapatnam.

It will invest an average of Rs 15 crore on each outlet, depending on the space and real estate prices in various cities. The size of outlets will range from 40,000 square feet to 1.7 lakh square feet.

News: Mittal to invest Rs 3,200 cr for stake in HPCL refinery

(PTI 20/02/2007) New Delhi - India-born billionaire Lakshmi N Mittal will invest Rs 3,200 crore in taking 49 per cent stake in Hindustan Petroleum Corporation Ltd's (HPCL) $3-billion Bhatinda refinery.

"The equity partnership in Bhatinda refinery has been decided. HPCL and Mittal will hold 49 per cent stake each, while 2 per cent will be given to financial institutions," Petroleum Minister Murli Deora told PTI.

Mittal succeeded after a series of potential joint venture partners HPCL has had for the Bhatinda refinery. BP Plc of UK walked out of the project in March 2006. Earlier, Saudi Aramco of Saudi Arabia had exited the project in 1998.

HPCL-Mittal combine would lay a 1,100-km crude oil pipeline from Mundra port in Gujarat to Bhatinda and build a crude oil terminal and associated facilities at an estimated cost of $ 600 million.

The approval of the Foreign Investment Promotion Board (FIPB) and Cabinet Committee on Economic Affairs (CCEA) are pre-requisites to the formation of the joint venture as both the companies would invest over Rs 1,000 cr. HPCL has already invested about Rs 500 cr in the Bhatinda project.

In the event of a possible divestment or relinquishment of stake by HPCL, Mittal Investment will have the option to buy the shares held by HPCL at a price determined by experts.

Mittal Investments is wholly owned by the Mittal family and is registered in Luxembourg. It holds 38 per cent in Mittal Steel Company, the Netherlands-based flagship company of the L N Mittal Group.

Should Mittal Investment decline, then the shares can be sold to a third party. Further, if Mittal Investments decides to divest their shareholding, then HPCL has the Right of First Refusal on the shares through a similar mechanism.

News: Arrest warrant issued against Ambanis

(IBN 20/02/2007) New Delhi - A consumer court in Kolkata has issued arrest warrants against Ambani brothers for alleged failure of Reliance Infocomm to comply with its order to supply a new mobile handset to an aggrieved customer.

The warrant was issued on February 13 and the Calcutta District Forum President M Roy directed the respective police stations to produce them before him on March 1.

The warrants were issued after Reliance Infocomm, which was under the control of Mukesh earlier but later went under Anil following the split between them, "failed" to comply with the order of CDF on August 26, 2005, that the company should supply a fresh mobile handset worth Rs 10,500 within 30 days and a sum of Rs 2000 as compensation to the customer, Subhash Priyadarshi.

However, both the companies declined to comment when contacted.

Priyadarshi, who is a businessman, had filed the complaint against Reliance Infocomm in 2004, when the Ambani brothers were together, claiming that the company did not honour the subscription agreement that it would provide a new set if the old one is lost.

Reliance Infocomm contended before the CDF that it had no jurisdiction to entertain the case and that the complainant had no good and sufficient ground for bringing the case against them.

News: Budget 2007-08 - Focus on agriculture and infrastructure

(Sify 20/02/2007) Mumbai - Since last year’s budget, the stock markets have gained 35 per cent in face of strong corporate earnings, foreign investment buoyancy and a generally a fast growing economy. In addition, we may be looking at a second straight year when the Gross Domestic Product is growing at over 9 per cent. The Budget for 2007-08 therefore had to be a balance one, so as to not disturb the long-term growth perspective. Key areas like infrastructure and agriculture need urgent attention, along with spiraling inflation and fiscal discipline. While tax collections have been buoyant during 2006-07 and may continue to be so in the forthcoming fiscal, a check on non-plan expenditure is in order in the forthcoming Union Budget for 2007-08 to be presented by the Finance Minister P Chidambaram on February 28. Inflation to head list Cutting import duties on some commodities, reducing fuel prices and increasing the cash reserve ratio (CRR) in two tranches for banks are some of the recent measures taken by the Government to control the inflation rate which has touched 6.5 per cent in January 2007. Monetary tightening measures have been implemented by the Reserve Bank of India (RBI) almost throughout the financial year 2006-07. These include raising repo rates for banks, which have already led to a general rise in interest rates in the economy. However, inflation in the food articles category was a thumping 9.97 per cent, pointing to supply-side constraints in this area. The government is likely to spell out ways to ease infrastructural bottlenecks and facilitate higher supply of commodities to ease inflation. Focus on agriculture Agriculture has grown at only 2.7 per cent last year, according to advance estimates of Central Statistical Organisation. The approach paper for the Eleventh Plan has hinted at the need for another Green Revolution for sprucing up agricultural growth and restructuring of existing agricultural policies. In Budget 2006-07, the government announced it would give interest subvention of 2 per cent a year to public sector banks and regional rural banks for short-term production credit up to Rs 3 lakh extended to farmers for Kharif and Rabi 2006-07. The banks were to lend at 7 per cent. The Indian Banks’ Association has recently asked the Finance Minister for an increase in subvention from 2 per cent to 3-4 per cent on farm loans. This development assumes significance as Agriculture Minister Sharad Pawar has urged Chidambaram to further reduce interest rates for farmers to 4 per cent a year given the situation of agriculture in some States, particularly Maharashtra and Andhra Pradesh. Rationalising the tax structure Budget 2007-08 is expected to introduce major changes in non-resident taxation, partly aimed at making it easier for foreign companies to do business in India and encouraging greater investment inflows. These proposals are expected in the new Direct Taxes Code. An amendment is also likely to made in Section 115A, which provides for taxing income from dividends, royalty and technical service fees for non-residents (not being a company) at lower rates of 30, 20 and 10 per cent, depending on the date of the agreement. An amendment to Income Tax Act, 1961, which will define India (for taxation purposes) is also on the cards. The present Act defines a permanent establishment as a fixed place of business and this has resulted in a lot of tax litigation. However, experts feel that three crucial sections - 115AB, 115AC, 115 AD - which deal with tax treatment of individual non-residents and foreign institutional investors are unlikely to be changed in a major way, despite the call for equality from the task force on non-resident taxation. According to JP Morgan Research, while the Budget is likely to continue the process of tax rationalisation, there is no expectation of any meaningful reduction in tax rates. However, any marginal tax rate cut is likely to be accompanied with removal of some tax exemptions. The Government is committed to bringing import duties down to ASEAN levels. Moderation of import duties with continued protection to some sectors is likely to be on the cards. More services are likely to come under the tax net considering that the sector now contributes to more than 50 per cent of the GDP. While agriculture, infrastructure, fiscal prudence, rationalizing taxes and above all controlling inflation, will take precedence over other matters, it is widely felt that sectors like automobiles, capital goods, logistics, food-processing, power, retailing and telecommunication will also get special attention in the forthcoming budget.

News: IT sector has multiplier effect on Indian economy

(RTR 20/02/2007) Mumbai - The software and related services sector has a multiplier effect on the Indian economy with every Rs 1 input resulting in a 100 per cent return, a study by rating agency Crisil Ltd. said on Tuesday.

Every rupee spent by the IT-ITES sector translates into a total output of Rs 2 in the economy," the study done for software industry body Nasscom said.

The study has analysed the expenditure on operating expenses, capital expenditure and consumption spending by professionals in the sector.

For every job created in the sector, four are created in the rest of the economy, it said.

The software services sector had a lot of headroom for growth, it said, adding "cost-competitiveness remains a key factor determining investment attractiveness."

While wage inflation was likely to remain, operational efficiencies offered, "significant scope for offsetting margin pressures," the study found.

At current levels a 1 percentage point rise in billing rate would translate into a 0.6 per centage point rise in net margins, while a 1 per centage point rise in employee utilisation would result in a 0.5 per centage point rise in net margins, it said.

News: Nike unveils new India kit ahead of World Cup

(UNI 20/02/2007) Mumbai - Nike, the official apparel sponsor of the Indian cricket team, today unveiled the new national team uniform for the 2007 World Cup at a function held here.

The company had discussions with scientists, players and coaches to design the new kit, which has been created to ensure optimised performance on the field by the players.

The kit was unveiled in presence of top Board of Control for Cricket in India (BCCI) officials and seven Indian players including captain Rahul Dravid, vice captain Sachin Tendulkar, Sourav Ganguly, Dinesh Karthick, Mahendra Singh Dhoni, Zaheer Khan and S Sreesanth.

Speaking on the occasion, BCCI vice president Lalit Modi said ''Today, we equip our players with world class kitting for them to perform at the highest level,'' he added.

Explaining the salient points of the game day jersey, a Nike official said the jersey was made from Dri-fit fabric, which reduces cling and enables the skin to breathe easier. The fabric is also designed to wick sweat, which leads to better moisture management and is extremely light, so that the player is not carrying additional weight that may hamper performance and rather lead to enhanced performance, he added.

News: Industry status for retail will have to wait

(TNN 19/02/2007) New Delhi - The retail sector’s demand for an industry status looks unlikely to be fulfilled in the near future, with the government still considering the implications of such a move.

Speaking to ET¸ minister of state for commerce & industry, Ashwani Kumar, said, “Several representations on this matter have been made and we are studying the implications of granting industry status to retail as there are a host of issues involved including labour laws and other legal implications. We will not announce a policy unless we have studied the implications of the move fully.”

The absence of a retail policy delineating the country’s stand on retail is another issue which needs to be addressed before industry status is granted to retail. “There is no retail policy at the moment and we are moving gradually towards it with steps like allowing 51% FDI in single-brand retail. Until the full dimension of the retail policy is made clear, the question of industry status to retail trade may not be appropriately addressed,” he said.

The retail sector has been demanding recognition as an industry for over two years now. An industry status would not only make it eligible for fiscal benefits and concessions but also get it easier organised financing.

Mr Kumar said that the government is currently focused on opening up the sector and ensuring greater ease of functioning for retailers. “We are looking at how we can facilitate enlargement of economic activities in retail trade by ensuring greater ease of functioning,” he said.

The commerce & industry ministry is considering various public-private partnership (PPP) models for encouraging investments in cold chains and warehouses to build backward linkages with farms.

On the Cabinet note floated by the department of industrial policy and promotion (DIPP) on allowing 51% FDI in consumer electronics and sports goods & accessories retail, Mr Kumar said that based on the success of liberalisation in multi-brand specialty retail in these categories, an extension into other similar categories would be considered.

The opening up, however, must not be at the cost of jobs of those employed in mom-and-pop stores. “The loss of jobs is the main concern. We agree to a progressive liberalisation which yields more employment and greater investments. In consumer electronics and sports goods, there is no competition with smaller stores,” said Mr Kumar.

News: Faithful to the India story

(HT 19/02/2007) Mumbai - While almost all equity funds have rewarded their investors handsomely in the past three to four years, there is a clutch of funds that clearly stand out. Reliance Growth Fund is one among those whose stellar performance in no small way built the reputation of Reliance Mutual Fund, which now has become the largest fund house in terms of assets managed.

The scheme was launched way back in October 1995 as an open-ended equity growth scheme with the stated investment objective of achieving long term growth of capital by investment in equity and equity related securities through a research based investment approach. It is positioned as a diversified equity scheme that can invest in small, mid as well as the large cap stocks without any group bias and takes a long term view without being excessively bothered about the short term volatility of the markets. This allows the small investors to bet on the long term growth story of India without being affected by the market swings.

Having said that, the fund has put money predominantly in mid cap stocks with excellent growth credentials. It has grown to become one of the largest equity funds in the country with assets under management of Rs 3214 crore as at January 2007, a significant jump from the Rs 1963 crore of assets managed in July, 2006. Fund Manager, Sunil Singhania who has been at the helm from 2004 is a Chartered Accountant and a Chartered Financial Analyst (USA).

On the return front, Reliance Growth has been a top performer posting an annualised return of 33.94 per cent returns since inception compared with 13.92 per cent of its benchmark, the BSE 100. Over the past three year and five-year periods, returns have been exceptional at 52.37 per cent and 63.54 per cent in comparison with the 32.23 per cent and 32.66 per cent return of the benchmark index over the same time frame. In the recent six month to one year horizon too, a period in the stock market which saw superior gains from large caps, Reliance Growth has returned 30.52 per cent and 33.95 per cent gains as against the category median of 22.82 per cent and 25.80 per cent. The manager has been able to contain volatility as well with the indicator beta at 0.91, in line with the median of the peer group of diversified equity funds.

Compared to its many of its peers, Reliance Growth’s portfolio is more diversified with the top three sectors and the top ten stocks contributing at a significantly lower level (about 30 per cent) to the total portfolio value. A relatively high percent of the portfolio (about 12 per cent as at January 2006) is in debt/ cash as well. When asked about this, Madhusudan Kela, Head Equities at Reliance Mutual Fund said that cash levels are maintained as part of an overall investment strategy and the fund manager is not factoring in a drastic fall in market levels.

True to its philosophy, the fund has invested across a range of sectors and has been fairly consistent in keeping many of the top stocks in the portfolio unchanged over the past one year. The top three sectors the fund has invested in are metals, industrial goods and software. In January, the fund increased its exposure to metals, petroleum and auto sector while paring exposure to capital goods, pharma and software sectors.

The fund has also invested in new issues and has added the newly listed Cambridge Solutions to its portfolio the previous month. The price earnings multiple of the portfolio at about 13 is rather low as well compared to many of its peers, which points to a value based investing philosophy. When queried by myiris.com on the approach to portfolio building, Kela said that the fund is essentially a mid-cap oriented and a strict comparison with large cap funds (of which there are many in the equity diversified group) might not be very relevant.

On the whole, while large market corrections could affect this fund’s NAV perhaps more than others, it is a bet on the India growth story especially that of emerging companies. When myiris.com pointed out that mid-cap stocks have run up appreciably in the beginning of 2007, Kela said that the fund management team believes in the mid-cap story of India over the next three to five years and will continue to find compelling mid-cap ideas.

News: Shell eyes ONGC's stagnating crude reserves

(HT 19/02/2007) Mumbai - Shell Global Solutions, the services arm of Shell, through its Indian arm Shell India Private Ltd is eyeing to tie up with ONGC Ltd on a technology for oil contract.

The company wants to provide its technology for extracting oil from old oil wells of ONGC in return for around 50 per cent share of the oil. The matter has been pending with the ONGC for sometime and no decision is likely till the company has a new chairman firmly in saddle.

Shell's Bart Van de Ven told Hindustan Times on Monday "We would rather enter into an agreement for sharing production than just providing technology. There are a lot of consultants who can provide technology. We would rather take a share of the oil."

ONGC right now has around 40 oil wells that are under the twin programmes of Improved Oil Recovery (IOR) and Enhanced Oil Recover (EOR). Of these, the company itself has started working on 16 wells to improve production.

ONGC sources said that the management under former chairman Subir Raha was not too keen to part with oil in return for technology and was prepared to pay a fee for the technology. However, the situation may change if a new chairman is brought in.

Shell on Monday announced that it has signed a contract with the Centre for High Technology to improve the efficiency of four major Indian refineries. These are Indian Oil's Mathura Refinery, Chennai Petroleum's Manali refinery, Hindustan Petroleum's Vizag refinery and Bharat Petroleum's Kochi Refinery.

These refineries currently account for 25 per cent of Indian consumption of petroleum products like petrol, aviation fuel and diesel.

Wind power talks on

Shell is also in talks with a number of Indian companies for setting up wind power plants in the country. The company is on the verge of starting off its first offshore wind power generating plant off the coast of The Netherlands.

Bart Van De Ven said: "We are talking to a lot of Indian companies. These are early days but we are looking for people with experience to partner in India."

News: RIL's Mumbai SEZs to bring Rs 31K cr investment

(PTI 19/02/2007) Mumbai - Reliance Industries' (RIL) two mega special economic zones (SEZ) in Navi Mumbai are likely to bring in an investment of Rs 3 lakh crore in sectors like banking, finance, pharma, auto, gem and jewellery and other non-polluting industries.

The Mumbai Special Economic Zone (MSEZ) and Navi-Mumbai Special Economic Zone (NMSEZ), being set up next to each other, will involve investments of about Rs 31,000 crore for required infrastructure for setting up industrial units in an area of 140 square kilometres.

NMSEZ is to come up as a joint venture with City and Industrial Development Corporation of Maharashtra (CIDCO) (26%) and RIL holding the rest in 4,000 hectares. The entire land for the project has already been acquired by CIDCO of which 1,600 hectares has so far been bought by RIL.

MSEZ will be set up in 10,000 hectares of land adjacent to NMSEZ, totally owned by RIL. RIL has so far bought 1,000 hectares of land for the SEZ.

Anand Jain, a close associate of Mukesh Ambani, will be the chairman for both the SEZs.

News: Destination India for private equity funds

(TT 19/02/2007) Calcutta - India overtook China and Singapore to become the largest recipient of private equity and venture capital in 2006 among the Asia-Pacific countries, excluding Japan.

India attracted $2.21 billion of private equity investment in 2006, a record for an Asian country, according to a private equity market report by Thomson Financial for Asia-Pacific region (except Japan).

“The year 2006 was certainly a milestone for India as it climbed from the fourth place last year to the top of the table,” the report stated.

Private equity investments in the Asia-Pacific region (excluding Japan but including Australia) reached record volumes of $7.62 billion in 2006. “This figure represented the highest investment made in the region since 2000, when $10.3 billion of private equity investment was made,” the report added.

India was followed by China with $1.72 billion. Singapore came third with $1.53 billion. About 88 private equity investors put in $2.21 billion in 126 Indian companies in 2006, while 110 private equity and venture capitalist firms invested $1.72 billion in 129 Chinese companies.

However, the top two recipient companies, namely Asia Capital Holdings ($620 million), a reinsurer, and Fraser & Neave ($583 million), a food and beverage manufacturer, were from Singapore.

The report also found that US firms led the investment in Asia-Pacific countries. “Companies in the expansion stage attracted maximum private equity investment in 2006 reaching $2.2 billion, accounting for 28.5 per cent of total private equity investment,” said the report.

“Compared with the traditional seed and early stage funding that private equity investors and venture capitalists provide in other markets such as the US and Europe, Indian investments have been mostly late stage funding and private investments in public enterprises,” said a private equity investment study in India by PriceWaterhouseCoopers.

The pre-IPO funding space has also seen significant deals over the last year, though they have slowed down during the third quarter of 2006. Funds raised by Indian companies through private placement in 2006 were higher than in 2005. About 418 companies raised Rs 86,917 crore through private placement between April and December last year.

News: Time to free the rupee

(DNA 19/02/2007) Mumbai - An artificially held-down rupee is giving a free run to dollar bears across the world, who are pouring speculative money into India. A better approach, therefore, would be to let the rupee find its true value and make investors work for their returns.

The week ended February 9, 2007, saw a $5 billion accretion to foreign exchange reserves, taking the total foreign exchange reserves of the country to $185 billion. The impact of the foreign inflows on domestic liquidity is over Rs 20,000 crore, given that part of rise in reserves is due to revaluation gains.

And the impact on the rupee? Zero. Zed. Zilch. It was rock steady against the dollar at around Rs 44.10 levels. Because the Reserve Bank of India (RBI) keeps buying greenbacks to keep the rupee thus. But the liquidity impact of the central bank’s currency intervention is being felt in the form of large surpluses in the banking system.

Initially, in the early part of the current decade, excess liquidity went into government securities and credit spreads. Interest rates and credit spreads fell sharply as banks bought heavily into fixed-income securities.

The economy was yet to pick up strength and demand for credit was low. However, with increasing foreign exchange flows coupled with government spending, the economy started gathering pace and banks were seen lending heavily to the retail segment which borrowed to buy property, cars and other consumer durables.

This fuelled the start of the economic recovery, and an 8% plus GDP growth over the last few years. It also led to the rise in the stock markets and the property boom. Foreign investors flocked in droves, leading to more capital inflows, adding to the liquidity. A self-fulfilling cycle was thus on, leading to both positive and negative consequences.

The positive ones were increased wealth, higher investments and more jobs, while the negatives were a pick-up in inflation and widening rich-poor divide. Through all this, the rupee was held back by the RBI - by soaking up the dollar flows. In the current context, with inflation as measured by the wholesale price index at 6.73% as on February 4, 2007, and becoming increasingly a political issue with state elections in the offing, the central bank and the government are in firefighting mode.

The RBI has raised the cash reserve ratio of banks by 100bps over the last two months to reduce lendable resources and has also increased the overnight lending rate — or the repo rate — by 50bps over the last two monetary policy reviews.

It has also refrained from hiking the benchmark signalling rate, the reverse repo, worrying about the liquidity impact of interest rate arbitrage.

The government, on its part, has cut fuel prices and curbed price rises in essential commodities. Through all this, the rupee was held back by the RBI - by soaking up the dollar flows. The point here is, if the RBI stops protecting the rupee, many of the negatives mentioned above would lessen in effect.

On the liquidity front, the strong flow of foreign money into Indian assets would ease as the true value of the rupee would deter currency speculators.

As there is no free float of the rupee, currency speculators are using the stock markets, property markets, foreign exchange deposit accounts and other means to go long on the rupee.

Many of these flows would stop, leading to a soft landing of the economy. A stronger rupee would make goods cheaper, bringing down inflation. The RBI and the government can breathe more easily with a strong currency.

Yes, the ramification of this would be felt in exports. Exporters may face falling margins and lose some of their competitiveness to countries such as China. But China, too, has restrained the yuan from gaining its true value.

However, India is not highly dependent on exports as is China - our exports contribute to under 10% of GDP. There will be protests from the exporter lobby, especially technology firms whose margins will be hurt. Tech firms enjoy margins of over 20% compared with domestic-oriented companies’ margins of around 10 to 15%, so it should not be a big worry.

In the longer run, the technology firms will become more competitive without the support of an artificially low currency.

Following the Chinese model of artificially holding the currency and giving large sops to exporters is not a good idea, as again in the longer run, it will only lead to inefficiencies and unproductive use of resources.

News: Hyderabad may have Bangalored Bengaluru!

(DNA 19/02/2007) Hyderabad - Has Hyderabad finally snatched the biotech tag from neighbour and early starter Bangalore?

While much of the debate on the sidelines of the ongoing biotechnology event BioAsia 2007 here centred on the question, investment activity and assertions from officials suggest that the city of minars has made a mark in biotech scene.

If state government officials are to be believed biotech and life sciences-related investment of the order of Rs 3,000-4,000 crore is slated for the state in the coming years.

While multinational giants Dupont, Novartis and others have announced their investment plans for the city earlier, the latest to join the bandwagon are Biocon and ITC, who will be setting up research centres here.

Dupont had said earlier this month it will kick off research in the city with 100 scientists initially and Rs 100 crore investment, which can be ramped to Rs 500 crore over five years.

Novartis, too, will invest Rs 500 crore to set up a research and back office facility at Sultanpur to employ about 1,000 professionals within one year, the state government had said.

More significantly, Biocon Ltd, long seen as a Bangalore icon and a biotech pioneer in the country, said on Friday it would invest Rs 1,000 crore to set up a biopharma project at the Jawahar Pharma City, a special economic zone coming up near Visakhapatnam. Apart from this, the company will also set up a 10-acre campus in Hyderabad at the Biotech Park of the Andhra Pradesh Industrial Investment Corporation (APIIC).

In the city to attend BioAsia last week, Biocon chairperson and managing director Kiran Mazumdar-Shaw reportedly stressed the fact that Bangalore had little to offer to biotech companies now.

The interest in the city is evident from the fact that other multinationals like Merck and Eli Lilly have struck negotiations with local companies at BioAsia for possible research and outsourcing deals. “Companies like Eli Lilly and StemLife of Malaysia have signed letters of intent with local companies for research collaborations,” said Raveen Reddy, additional secretary and director of biotechnology, Andhra Pradesh.

While Eli Lilly has tied up with Suven Life Sciences for research in CNS (central nervous system) disorders, it has tied up with city-based life sciences R&D firm Ocimumbio Bio for developing a biochip. StemLife is looking to set up an adult stem cell bank in the city in association with the Indo-American Cancer Research Centre, he stated.

Another obvious indication of the city’s emergence as a biotech and R&D destination is the fact that the government and private biotech parks are fast running out of space and clamouring for more space.

“We have already run out of space at the park and are scouting around for at least 100 acres more to cater to demand from prospective tenants”, said S Dhawan, chief executive, of the Shapoorji Pallonji Biotech Park, which has been developed to cover an area of 300 acres in Hyderabad’s Genome Valley district, which itself is spread over 600 square kilometers.

The ICICI Knowledge Park spread over nearly 200 acres with a built up laboratory space of 84,000 square feet for incubating upcoming biotech units too is looking to add more built up space to accommodate more tenants.

Similarly, the two phases of the biotech park promoted by the state government totalling 250 acres too have run out of space and the administration is going in for a third phase. “We will make a 600-acre park with the third phase which is attracting big players,” said B P Acharya, vice-chairman and managing director of the AP Infrastructure Corporation (APIIC).

Already bestowed with institutions like the CCMB, CDFD, IICT, ICRISAT, Dr. Reddy’s Research Foundation (DRF), Hyderabad Eye Research Foundation, the Institute of Genetics and Hospital for Genetic Diseases, Hyderabad is fast emerging as a major attraction to companies not just from across Bangalore, but also overseas.

“Hyderabad has clearly emerged as the biotech capital of India today,” asserted Syed E Hasnain, vice chancellor of the Hyderabad Central University, which is home to the Life Sciences Institute, set up Dr Reddy’s Labs and others.

Andhra Pradesh is the first state to formulate a biotech policy, and this has definitely helped in this direction, he said. The city ranks clearly above Bangalore as the number one as far as Biotech research is concerned, he said.

News: Hutch gone, Anil dusts up GSM plan

(DNA 19/02/2007) New Delhi - Reliance Communications (RCom) has put the process for expanding its GSM (global systems for mobile communications) services back on the frontburner. The company had halted the process some time back, waiting for the outcome of the Hutchison Essar stake bidding war.

Telecom equipment vendors, including Ericsson, Nokia, Motorola, Huawei and ZTE, are believed to have already responded to the Reliance GSM tender for a total of 75 million 2G lines and 25 million 3G lines. The value of the tender is estimated in the range of $6 billion to $7 billion.

Chinese vendor ZTE is already in an agreement with Vodafone to supply ‘budget’ handsets across Vodafone markets, including in India. “RCom is about to start evaluation of the offers for its GSM tender,” an industry source said. Technical aspects of the bids will be evaluated first.

But an industry analyst said RCom may not be able to proceed with the GSM expansion process unless there’s adequate spectrum allocation.

Indications that a group of ministers (GoM) set up to look into vacation of defence spectrum for use in telecom may have a meeting soon to deliberate on the matter.

The GoM is headed by external affairs minister Pranab Mukherjee, who was earlier the defence minister.

Currently, Reliance Communications has over 27 million CDMA users across all the 23 circles in India, while group firm Reliance Telecom has 3.8 million GSM subscribers. Market leader Bharti has 33.7 million mobile subscribers and Hutchison Essar 24.35 million.

Vodafone, which has bought control in Hutchison Essar, said it is targeting a 20-25% market share, or 125 million users, in the next four to five years.

The total GSM base in the country is currently 110.5 million, and CDMA 45.8 million (including fixed wireless).

While the total telecom base (fixed and mobile) in the country was over 196 million as of January 31, 2007, it’s expected to cross 200 million by the end of this month.

News: Financial sector plays major role in mobilisation of savings

(BL 19/02/2007) Mangalore - Financial sector played a major role in the mobilisation and allocation of savings in any economy, Dr C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, said.

Delivering the Mangalore-based Karnataka Bank's 'Founders' Day lecture on "challenges before the Indian banking system" here, he said structural reforms in areas such as industrial and trade policy could succeed only if resources were re-deployed towards more efficient producers which were encouraged to expand under new policies.

He said the ongoing financial sector reforms programme were aimed at promoting a diversified, efficient and competitive financial condition with the ultimate objective of improving the allocative-efficiency of available resources, increasing return on in vestments and promoting an accelerated growth of the economy.

The first stage of the banking sector reform had come to an end and the country was now in the next stage of the reform and development, he said.

In the years to come, the Indian financial system would grow not only in size but also in complexity as the forces of competition would gain further momentum and the financial markets gaining greater width and depth, he said.

The thrust of the second phase of reforms would have to be on improvement in the organisational effectiveness of banks and other financial entities, he said.

The financial sector in India, as a whole, exhibited vibrancy and resilience, Dr Rangarajan said, and added that banking sector reforms were unique.

News: Indian realty promises mega bucks for global investors

(RTR 19/02/2007) New Delhi - Real estate in Asia offers great investment opportunities and has robust potential in the long term but lack of infrastructure and transparency, especially in India, pose big challenges to global investors, a study says.

"With an asset base directly exposed to the macro growth story that draws so many institutional investors to the region, Asian real estate offers a gamut of possibilities at every stage, from nascent market to mature developed economy," says a report on Asia real estate sector in the Asian Venture Capital Journal.

The report carries a global consulting group PE Asia's survey of real estate investment trends for the year ahead, focusing on how to tap the growth and avoid the pitfalls.

Meanwhile, the sector exhibits Asia's characteristic vices of volatility, immaturity and market opacity, which could deter the potential investors from entering the markets, the report cautioned.

"At the moment, we've got about USD 800 billion market cap of real estate stocks in this region," world's leading real estate services and money management firm, Jones Lang LaSalle CEO for Asia Pacific Peter Barge said.

Barge said rising GDP in the region is driving trade, which in turn is a key driver for infrastructure, logistics, warehousing, R&D.

"Equivalent trends appear in office assets, and above all residential and retail, playing to the urbanisation and consumer growth stories," he said.

News: Bharti to unveil retail plans today; Wal-Mart may stay away

(DNA 19/02/2007) Mumbai - Rajan Bharti Mittal, joint managing director of Bharti Enterprises, is scheduled to announce Bharti Retail's "strategic roadmap". But, from all available indications, no Wal-Mart official is likely to be present on the occasion.

Does this have anything to do with Congress president Sonia Gandhi's letter to the PM earlier this month cautioning against the US retail giant's Indian debut and the likely repercussions on small shopkeepers?

Perhaps. Or it could be that Bharti wants to keep the joint venture it is expected to sign later in the week with Wal-Mart under wraps till the last minute.

Sources told DNA that Michael Duke, Wal-Mart's CEO, is keeping his date with India next week despite the hype surrounding the tie-up with Bharti. But Monday's announcement will be solely from Bharti's side.

According to retail industry experts, the 'Wal-Mart' brand name may be missing from the front-end grocery stores since the stores have to be fully owned and operated by Bharti.

While this tactic could help quell, to some extent, the disquiet and opposition Wal-Mart's entry has faced, Wal-Mart itself is believed to be open to the idea of not getting to use its high-profile brand at the front end at all.

The US retailer will focus on back-end operations like logistics and supply chain management.

News: Bharti Retail to invest $2.5 billion

(PTI 19/02/2007) New Delhi - Bharti Group, which has joined hands with industry leader Wal-Mart for a foray into retail, today said it would invest $2.5 billion by 2015 and open stores across all major cities in the country.

"After revolutionising the Indian telecom sector, retail will be the next big focus area for Bharti... the investment would be $2-2.5 billion," Bharti Enterprises joint managing director, Rajan Bharti Mittal, told reporters here.

"Organised retail, which currently accounts for only three per cent of the total market, has tremendous potential in the fast growing Indian economy," he said.

The size of the Indian retail market is estimated to be $300 billion, but is dominated by unorganized neighbourhood stores numbering over 13 million.

Mittal said the company would open multi-format retail outlets in all cities with a population of about one million.

"We are looking at 10 million sq.ft. of retail space," he said. While Bharti would manage the front-end of the retail business, US giant Wal-Mart would be involved in the back-end, including logistics, supply chain and cash-and-carry.

The joint venture would employ 60,000 people over the next few years, he said.

News: Tata planning $1 billion realty fund

(RTR 19/02/2007) Mumbai - Tata group is planning to launch a realty fund to invest up to Rs 4,500 crore ($1.02 billion) in the country's booming property sector, the Times of India newspaper reported on Monday.

A spokesman for the group said it was drawing plans for real estate but could not immediately confirm any details.

The newspaper said the real estate business would be headed by Dinesh Chandok, former chief executive of Ansal Properties Foreign investors will also be involved in the fund, it said.

India's real estate sector has seen rapid growth in recent years on the back of robust economic expansion. Global players such as Warburg Pincus, AIG , 3i and Deutsche Bank have been attracted to India after rules on foreign investment in real estate were eased in early 2005.

Last week, Merrill Lynch Capital Markets Espana SA said it had bought a further 4.73 per cent stake in Indian real estate developer Prajay Engineers Syndicate Ltd. , raising its stake in the company to almost 8 percent.

In January, Morgan Stanley Real Estate said it had paid $152 million for an undisclosed stake in Indian property developer Oberoi Constructions Ltd.

Recent initial public offerings by Parsvnath Developers Ltd. and Sobha Developers Ltd. drew demand for more than 50 times the offer size.

News: Urban India buying second and third homes

(TNN 18/02/2007) Mumbai - Ever thought of getting out of the clutter of urban life and spending your weekend in a cool climate, and that too in your own house? Sounds too good to be real, doesn’t it?

Much like the rest of the world, urban India is already into buying second and third homes.But all this is taking place in the quiet locales of Uttaranchal and Himachal Pradesh, thanks to a rising demand for farm houses and apartment blocks from the upwardly mobile in big metros and its adjoining areas.

With disposable incomes rising, investing in second homes is becoming a norm. The investors are mostly in the 35-45 age group and the most sought out in the North are Mussorie, Nainital, Bhimtal, Shimla, Bharatpur, Landour & Kasauni. Due to their close proximity to the NCR, they are already bursting at the seams with rates ranging from Rs 3,000 to Rs 4,500 per sq. ft.

A two-bedroom apartment costs between Rs 20 and Rs 35 lakh. Landour, near Mussorie, is a known favourite amongst Delhi’s rich n’ famous. Ditto for places in south India like Ooty, Kodai Kanal, Kovalam, Mahabaleshwar and other places.

Says Rajeev Behl, director, Realtech Group: “Over the past few years, there has been an increasing trend of growth in resort type developments in hill stations and holiday towns in northern India, targeting buyers from larger cities like Delhi.

Such developments are conspicuous in towns like Haridwar, Rishikesh, Dehradun, Almora, Shimla, etc, which have witnessed a fair amount of interest from buyers from Delhi, looking at a holiday home or a resort home which may be for religious or weekend getaways.

The added attraction is the pricing of such new built residential property, which is being offered at quite attractive prices compared to new residential property available in suburbs such as Gurgaon and Noida.”

In fact the dream of owning property in Himachal has became more realistic as recently the state government has now allowed the purchase of land by outsiders (non-himachali)for the purpose of housing development in the state. Section 118 of Himachal Pradesh Tenancy and Land Reforms Act, 1972, restricted the purchase of property in the state by outsiders (people who don’t have a Himachal domicile).

Now you can construct your own house in an area of 300 metres. The government is now liberal in giving the sanction. However, for plot sizes above 300 metres, the applicants have to convince the government that they have some compelling reasons for settling in Himachal.

Adds Sanjay Verma, executive MD, Cushman &Wakefield: “ The concept of an alternate home or a weekend home that’s away from the city, is increasingly becoming predominant in India. Having widespread appeal in the West, the idea is quickly catching up here, with various individuals opting for alternate houses on the outskirts of their cities, in order to get away from the hustle and bustle as often as possible. These homes are built either in the form of cottages or built-up apartments, with the view being an important criterion.”

With disposable incomes rising, investing in summer homes or second homes is becoming a norm. It was in the early nineties that a number of builders recognised the potential of these areas and started developing housing complexes. Consequently, organised development of accommodation in the hills actually picked momentum. Now people who are in the age group of 35-45 years with an minimum average income of more than Rs 20 lakh are showing keen interest in such projects.

But, which are the hill stations that one can invest in? As far as Himachal Pradesh is concerned, during the pre-independence days, retail activities in Shimla were confined to the famous Mall Road. But, with rapid commercialisation, the real estate market spread to areas like Sanjauli, Baluganj, Kasumpti, Tutu, Shogi and New Shimla.

However, it’s mainly the Shimla Development Authority (SDA) and the State Housing Board that is responsible for real estate development in the erstwhile British summer capital. The same holds true for places like Kasauli, Barog, Solan, Kullu and Manali.

Though many developers are looking at hill states as new market and chalking out plans many have already started residential projects. Like Omaxe Group is constructing Park Wood township which will have more than 2,000 flats in Baddi. Says Rohtas Goel CMD, Omaxe Group:”

The real estate sector in Punjab and specially in Himachal is booming and Shimla and industrial areas such as Baddi are close to Chandigarh and that is the reason for this phenomenal growth in HP. We are making one of the biggest township in the state and Park Wood will set the trend of townships in the state.”

News: BSE open to idea of alternative listing of SMEs

(PTI 18/02/2007) Mumbai - Bombay Stock Exchange on Sunday said it was open to idea of separate platform for Small and Medium enterprises to tap the capital markets.

"We can always explore the possibilities (for separate platform) for the SMEs because the SMEs have a different need and one has to take that into consideration," BSE CEO and MD Rajnikant Patel told media.

"Can you charge the same listing fees that are charged by the national level exchanges because SME are a small capital base company and they need differential pricing," he said. There is a strong case for a separate trading platform for SMEs to enable them raise risk capital.

As stricter corporate governance norms for trading on the national level bourses BSE and NSE were required, it was increasingly becoming difficult to tap them. Small and medium enterprises are coming in hordes to raise money from the capital market but stock exchanges can not afford to dilute compliance norms for them.

London Stock Exchange has received very good response by setting up Alternative Investment Market (AIM) for medium and small companies where regulatory norms are diluted.

"This is one issue and challenge that one has to find a solution. SMEs need exposure to capital market in order to survive is a very noble idea and allow them the access to the risk capital but we also need a compliance level which may or may not be easy to comply," Patel said.

"At the same time exchanges can not dilute compliance standards for the sake of these companies which are difficult for them to adopt as it is expensive," BSE CEO said. SMEs have small business revenue generation and it is difficult to match with the demands of a highly regulated market.

News: Hong Kong co plans India foray

(PTI 18/02/2007) Chennai - Hong Kong-based multinational company QI on Sunday said it would invest upto $200 million in India in the next five years.

Among other projects, QI was interested in setting up a chain of five star and three star hotels at various heritage sites in South India, its managing director, Vijay Eswaran, told media.

As part of the plans, it has acquired 47 acres of land at Mamallapuram, famous for its shore temples, for setting up a star hotel. The work for the hotel project, which would have 275 rooms, would commence soon, he added.

His company was also in the process of acquiring an ayurvedic clinic in Kerala to convert it into an international ayurveda resort. QI has already started health resorts in a number of countries, he added.

It was also looking into the possibility of setting up hotels in tier II and tier III cities in South India like Madurai, Combatore, Kochi, Thiruvananthapuram and Mangalore. Besides these, some towns in Andhra Pradesh were being considered for setting up business class hotels, he said.

He said QI had recently acquired Bernhard H Mayir, a German company producing top-end watches. It was planning to set up an assembling unit of the watch company at Rishi Valley in Andhra Pradesh, which had "suitable climate" for setting up such a unit.

Talks with Andhra Pradesh government were on regarding the project, Eswaran said. QI's another watch manufacturing company 'Cinier', was also looking up to India for setting up an assembly unit.

Swiss-made Cinier watches were known for hand-crafting and setting up of the unit in India required training for Indian artisans in the specialised field as each and every part of the watch was hand-made.

Some experts from Switzerland would be sent to India to find out whether Indian artisans could adopt the company's standards. Probably, the reassembling unit of the Cinier would be act up at Hosur, rear the Titan watch company, he said.

His company already had a collaboration agreement with Titan, he said. With the increase in the number of IT companies in and around Chennai, his company would set up a township, exclusively for IT company executives, he said.

Over 2,400 dwelling units would be there in the township, for which was looking for land in and around Old Mahablipuram Road, where a cluster of IT companies are located. The township was aimed at satisfying the needs of upper income groups, he said.

News: Is Indian pharma vulnerable in US?

(BS 18/02/2007) Mumbai - The search conducted by the US federal officials the New Jersey office of Ranbaxy Laboratories Ltd, India's largest pharmaceutical company by sales, has highlighted the perils faced by Indian drug makers in pursuit of their global dreams.

The accusations they have faced in the last few years range from infringement of patents to outright theft and overcharging on prices. In the process, Indian companies have incurred huge legal expenses. Ranbaxy alone has paid $55 million to its attorneys in the last two years.

The Indian companies are chasing the $60 billion global market for generic (off patent) medicines, which is expected to grow to $300 billion in five years. Almost half of this market is in the US and the United Kingdom.

With the new drug pipeline of pharmaceutical companies in these countries drying up, they are fighting hard to block the entry of cheaper products from India.

Companies like Ranbaxy and Dr Reddy's Laboratories are involved in expensive litigation to get 180-day exclusive marketing rights in the US for over two dozen drugs that are going off patent in the next few years.

And the battle is being fought at various fronts. In 2002, GlaxoSimithKline had initiated legal action against Ranbaxy and Israel's Teva Pharmaceuticals on their generic versions of the anti-depressant augmentin, alleging that they used stolen bacteria to manufacture the product.

Ranbaxy had also faced an inquiry in the UK in 2005, after which it was fined $8.8 million by National Health Service in UK as it felt the company had overpriced generic medicines.

If there is too much scrutiny in developed countries like the US or UK, it is lack of clarity in business rules and alleged favouritism towards domestic firms is the problem faced by several companies that set up manufacturing facilities in places like China. Drug major Aurobindo is a recent example of Indian companies winding up their Chinese operations.

In the developing world, especially African countries, it is either the lack of regulation or inadequate rules that hurt the most.

As reported recently, over a dozen small and medium scale pharmaceutical companies from India, who have apparently been wrongly black-listed by Nigerian drug authorities for alleged supply of unregistered drugs for over a year now, are finding their export business seriously affected.

News: Winning 'trust' of the rich and wealthy

(BS 18/02/2007) Mumbai - Wealth is equally difficult: Both to earn, and to administer. Who better would know this than those who have gone through the grind themselves, and created a fortune. It is, therefore, obvious that wealth creators would like to save their future generations from the rat race and inherit the moolah raked in by them.

In an era, when disputes over petty sums are far too common, your hard earned money does not really need to be spent on feuds over inheritance, court cases and the like.

In an attempt to ensure succession to wealth by deserving heirs and beneficiaries, a will was conventionally an integral part of estate planning. However, a will is vulnerable to legal contests.

In addition, assets are frozen until any dispute over the will is resolved, apart from making the estate known to public. This calls for careful estate planning which would avoid disputes arising out of the distribution of wealth among successors.

Still, there is more to estate planning than just posthumous distribution of an individual’s wealth. Ideally, an estate plan involves organising wealth and specifying how one’s wealth should be used during and after one’s lifetime.

DSP Merrill Lynch now provides a new aspect to wealth management and estate planning by introducing its trust services via its subsidiary DSP Merrill Lynch Trust Services.

The service is aimed at high networth individuals (HNIs) enabling them to make estate planning and wealth preservation an integral part of their financial planning process, thus, helping them achieve their financial objectives during their life span and provide for the heirs in their absence.

A trust is a fiduciary structure that provides such a mechanism, minus the hassles involved with a will in order to ensure that the wealth of the owner passes to the family members in absence of the owner.

“A will is a public document, contestable in a court of law, vulnerable to a lengthy and costly legal struggle to claim the ownership of assets which may lead to fragmentation of family wealth. Trusts on the other hand are private arrangements implemented during the lifetime of the settlor- the HNI client, and trust assets do not form part of the settlor’s assets,” says Amitava Neogi, director, DSP Merrill Lynch Trust Services.

DSPMLTS plays a role of a trustee, who assumes ownership to the settlor’s assets and manages the assets and the timing of their distribution to beneficiaries, thus, acting in their best interest, as decreed by the settlor.

Creating a trust for managing wealth has a number of benefits. The foremost being the assurance that the assets are guarded only for the beneficiaries named in the trust deed, and the deed is not contestable legally by anyone.

The settlor can decree the proportion in which wealth should be distributed among beneficiaries and form the trust deed accordingly, which would then be enforced by the trustee.

In addition, the trustee also manages the assets until the heirs attain a certain age, and conditions could be imposed on the beneficiaries by the settlor to achieve certain professional competence to be able to claim their inheritance. “This saves the wealthy from worrying about spoilt kids spending their fortune just to have fun,” says Neogi.

Trusts could be of different types, ranging from revocable, partially revocable, to entirely irrevocable, depending upon the needs of the clients. Add to this, the client can also appoint an independent financial planner to advice on how to make the wealth preserved by the trust, grow.

“We consider the settlor himself as a financial planner, however it is at the client’s discretion, that we may take advice from an independent financial advisor,” says Neogi.

“It is our duty to preserve and grow the assets in the best interest of the beneficiaries,” he adds.

On commenting the nature of trusts one should opt for, Neogi claims that “as a prudent trustee, we always advise the client to create a revocable, or partly revocable trust, in which the client is also one of the beneficiaries, so that it provides for the client in unfortunate events such as permanent disability and inability to look after the business.” This ensures the flexibility with which the wealth can be allocated among the beneficiaries as and when need arises in addition to providing continuity.

All this comes at a small cost to the settlor of the trust, that is, the fee charged by DSP Merrill Lynch Trust Services to perform the role of a trustee, and assume the risk of ownership of assets.

“The fee is however, insignificant as compared to the fiduciary services that the trustee provides to its client for the trust,” claims Neogi, adding that “as part of the fiduciary services, we manage the assets, comply with applicable laws and the trust deed and keep books and accounts of trusteeship.”

Considering the proposition, there is little reason why HNIs would not give estate planning a thought.

“The only initial stumble is when people often tend to be reluctant to consolidate assets and think of a future beyond their selves and accept the implications of their absence on their family,” suggests Neogi.

Further, he adds, that “there are however a rising number of people who have made it from middle class and bad financial conditions to the pinnacles of wealth, who do not want their heirs to struggle in the same manner as they did.”

News: 'India Inc investment pipeline at $ 500 bn'

(BL 18/02/2007) Chennai - The investment pipeline of corporate India is of the order of $400 to 500 billion (or about Rs 20, 00,000 crore), according to K.V.Kamath, Managing Director, ICICI Bank.

Based on internal estimates, he said, corporate India was now sitting on a free cash flow (profits plus depreciation) of about $ 75 billion (equivalent to about Rs 3,37,500 crore).

Delivering the valedictory address at the annual convention of the Madras Management Association (MMA), Kamath said this investment pipeline was spread over a three year horizon and included all industries, both public and private sector.

Sounding a very optimistic note, he said that 10 per cent GDP growth was on a sound footing as Indian industry had become quite competitive. It was possible to grow at these rates on a sustained basis, he said. He drew a parallel in the way Japan, China and the tiger economies of South East Asia had registered double-digit growth rates for two decades and more at a stretch.

Alluding to concerns about growth being slowed down by inflation, he said that course corrections may happen and would be part of the growth cycle. But they wouldn't slow down the growth rate. He said China had faced inflation levels of over 20 per cent but had made adjustments and good progress in spite of it.

While acknowledging the role of the knowledge sector in kick starting the growth process in India, Kamath said that the dramatic speed with which Indian manufacturing sector became competitive and reinvented itself between 1999 (when things looked very bleak) and 2002 (when the first signs of hope emerged) was very commendable. No nation has achieved this in a span of three years, he said.

News: New airports - Ministry for priority to players with land

(BL 18/02/2007) New Delhi - With the Government facing all round flak over land acquisition issues, the Ministry of Civil Aviation is keen to ensure that a private person who has access to land gets priority while setting up an airport. At present, State governments decide on the site of the airport and acquire land for the project to come up.

The Ministry is keen that if an individual wants to build a private airport, this should be allowed as long as it does not interfere with air traffic control movements in the area. At such private airports, however, security and air traffic control activities would remain with the State.

In this context, the Minister for Civil Aviation, Praful Patel, has called on the Finance Minister, P. Chidambaram, and the Deputy Chairman Planning Commission, Montek Singh Ahluwalia, to review the airport policy.

"There is a need to see how we can have airports without the Government stepping in. At the same time, we must ensure that land related problems faced while developing Special Economic Zones do not come up at such airport projects. There is no reason why the Indian landscape cannot be dotted with airports as we see in the US," Patel said.

He was speaking at the foundation stone laying ceremony of the new integrated terminal and runway at the Indira Gandhi International Airport here on Saturday.

Patel said that he had also tried to "sensitise" Chidambaram and Ahluwalia on the need to provide some concessions to the sector. "We have written to the Finance Ministry requesting them to allow small jets to avail of the concession in sales tax on the sale of aviation turbine fuel (ATF) that is currently available to turbo-prop aircraft," the Minister said.

On the issue of modernisation of Chennai and Kolkata airports, the Minister said that the Government was serious about starting work at the earliest in the two metro cities. "In Chennai, we are waiting for the State Government to give us land. If that is not forthcoming, then we can look at a greenfield airport there. The modernisation of Kolkata airport, however, would be done by the Airports Authority of India (AAI)," he added.

Addressing the gathering, the Chairperson of the United Progressive Alliance, Ms Sonia Gandhi, stressed on the need to improve air connectivity particularly in areas such as the North-East.

Meanwhile, the new terminal in Delhi is to be called terminal III and would form the first phase of the modernisation plan.

The modernisation plan proposes having not only three runways, including Asia's longest, but also 74 aero bridges and 30 remote stands having the capability of parking 200 aircraft. The design, procurement and construction contract for the new passenger terminal building, runway and associated works has already been awarded to Larsen & Toubro Ltd.

"We are committed to completing the process in time and without any cost over run. Globally, creating a world class facility like this would take close to six years, but we feel confident about completing the process within three years well before the start of the Commonwealth Games in 2010," said the Chairman of GMR Group, G.M. Rao.

The GMR Group is heading a consortium selected by the Government to modernise Delhi airport.

News: FIIs, economy and the common man

(BL 18/02/2007) Mumbai - We have been reading about the large investments being pumped into the stock market by foreign institutional investors (FIIs). The current levels are unprecedented. But what is the larger picture? Is the impact of the FIIs limited only to the stock market or do the institutions have a larger role in the economy? To be more specific, how do FII flows affect the common man? Taking a closer look at the funds flow, FIIs bring dollars to India which get converted into rupees in the inter-bank foreign exchange market. As the supply of dollars increase, the law of demand-supply starts operating and the rupee appreciates vis-à-vis the dollar. Appreciation of the rupee So, other things remaining constant, higher FII flows would help the rupee to appreciate. This allows Indian consumers to import goods (which are priced in dollars) at a cheaper price. However, an appreciating currency also makes our exports uncompetitive in the global markets. As India is a developing economy, it would be beneficial to have a weaker currency, improve exports and, thereby, generate higher domestic activity. Higher forex reserves Under normal circumstances, the Reserve Bank of India (RBI), would try to stem the the volatility of the rupee by buying dollars and selling rupees. The excess dollars bought by the RBI would accrue to the foreign exchange reserves. For an emerging economy such as India a higher level of forex reserves affords financial and economic stability and reduces the vagaries of global capital flows. So, higher foreign (dollar) inflows into India usually translate into more rupee liquidity in the system. This increases the money supply and facilitates easy availability of credit (loans) from banks (thus the frequent calls from telemarketers, offering all kinds of loans). Invest and capture gains Thus, we can conclude that higher FII flows also aid in lowering the cost of borrowings. On the flip side, as liquidity is high and banks become keen to lend money than accept it, the rates paid on deposits and bonds would decline. An investment strategy in such a situation is to invest in bond mutual funds and capture the capital gains on the bond portfolio arising from lower interest rates. The easy availability of credit and the lower borrowing costs increase consumption demand for housing, durables, cars and real-estate. This higher demand often leads to greater public and corporate investments, resulting in higher economic growth. This, in turn, raises the prosperity level and the general standard of living. More jobs are created and wages also rise. Taxes are also lower. However, as the amount of money in the system grows rapidly, the goods and services available may not grow at the same rate, leading to inflationary pressures (higher prices for goods and services) and reducing the purchasing power of consumers. Such inflationary pressures can push the central banks to hike interest rates. Creating wealth From a different perspective, if the FII flows are high (relative to the country's stock market capitalisation), the demand-supply equation comes into play once again and the market tends to rise rapidly, creating more wealth for the investor. This positive wealth effect also often leads to higher consumption and greater demand for other asset classes such as gold, real-estate etc., which, in turn, fuels economic growth and inflation. Higher FII flows can, thus, be seen to help create wealth through higher asset prices. In case there is a sharp reversal of flows — the funds start flowing out — the conditions mentioned earlier would be overturned. Strong outflows would result in higher interest rates, lower demand and consumption, lower forex reserves, a weaker rupee and falling asset prices. India's success story Thus, FII flows do have a great impact even on the common man. The large inflows are often cited by politicians and media as proof that India is a success story and that global investors are flocking in their hordes. It should be kept in mind that the so-called `global investor' can be very fickle. He goes where he perceives profits. If the tide turns, he would be the first to flee with the profits. A sharp reversal of fund flows could result in economic and financial instability. India was relatively immune to the Asian crisis in the mid-1990s as its integration into the global financial market was not so strong. It may not be so lucky the next time around. India also needs to focus on long-term flows in the form of foreign direct investment to sustain the economic reform process.

News: Banks line up $ 11.5 bn to fund Indian mega deals

(PTI 18/02/2007) New Delhi - Be it UK giant Vodafone taking over Hutch-Essar or domestic conglomerate Tatas acquiring London-based Corus, capital is no issue for either, over a dozen banks have lined up with a kitty of about $ 11.5 billion to fund the two mega deals. After clinching a deal to acquire control of mobile venture Hutch-Essar in India's biggest inbound takeover transaction, Vodafone is seeking to part fund its $ 11.1 billion cash bid with a debt facility of $ 3.5 billion. Besides, Tatas are also seeking to inject about $8 billion capital raised through debt for its over $ 12 billion acquisition of Anglo-Dutch steel giant Corus, which is the biggest ever overseas takeover by an Indian entity. According to the investment banking sources, mandate has been given to BNP Paribas, Lloyds TSB, Royal Bank of Scotland (RBS), Banco Santander and UBS to arrange $ 3.5 billion credit facility for Vodafone towards the Hutch-Essar deal. At the same time, a number of domestic banks, including ICICI Bank, Bank of Baroda, Bank of India and Export-Import Bank of India, are in talks with Credit Suisse, ABN AMRO and Deutsche Bank, the investment bankers and financial advisors of Tata Steel, to finance the debt portion of Corus deal, sources said. Besides, Standard Chartered Bank and State Bank of India are also believed to have evinced interest in part-funding the debt portion of Tata Steel's bid for Corus. Tata Steel, which had outbid Brazil's CSN in a nine-round auction held on January 30 to bag the Corus deal, is likely to announce its detailed funding arrangement later this month. Tata group plans to contribute $4.1 billion to the deal, while debt raised to finance the deal would be paid out of Corus's earnings. Meanwhile, Vodafone has agreed to pay $11.1 billion in cash for acquiring Hutchison Telecom's 67 per cent stake in India's fourth largest mobile player, while it would also assume about $2 billion in debt as part of the deal. Vodafone has earlier said the acquisition would be financed through debt and existing cash reserves. The UK giant expects its pro-forma net debt at around 22.8-23.3 billion pounds ($ 44.4-45.4 billion) at the end of fiscal year ending March 31, as a result of this transaction. The company's net debt stood at about $39.4 billion at September 30, 2006, the end of its fiscal first half.

News: Moneygram to expand network in India

(PTI 18/02/2007) New Delhi - Payment services company Moneygram International plans to increase its network in the country through alliances and partners in order to cash in on the growing remittance market in India, which is hailed as the largest remittance receiving nation in the world.

"India is on top of our focus list and we are talking to like-minded partners. We are increasing our network through alliances, partners and sub-agents," Moneygram's Country Manager for India Harsh Lambah told media. "We are also looking to hire more people," he said.

While Moneygram has been offering its services in India since the past eight years, it opened its first office in Mumbai only last year. Last month, the firm opened an office in Delhi as well.

Asked how the company was positioning itself in the country vis-a-vis leading players like Western Union, Lambah said Moneygram priced itself competitively and transferring money through it was cheaper than Western Union.

"Our money transfer services are not only convenient and reliable but also affordable," he said, adding that the company did not charge any receiver fee and the sender always knew what amount the receiver would be getting in Indian rupees.

Lambah said the Reserve Bank had set a limit of $ 2,500 for a single money transfer and a limit of 12 transfers per annum to a single person.

As per a RBI report 2006, the maximum remittances came into India from North America and the Gulf, in which the former accounted for 44 per of the remittances and the latter 24 per cent. Within India, maximum remittances flowed into states like Punjab, Uttar Pradesh, Kerala, Andhra Pradesh, Tamil Nadu and Karnataka, Lambah said.

Currently the company, which is present in 170 countries globally, has eight principle agents in India, including Thomas Cook, Trade wings, UAE Exchange, Indusind Bank among others and operates through many other sub-agents like South Indian Bank, IDBI, etc.

On the novel way of remitting money through mobile phones Lambah said technology was important to expand services and grow in this market.

Global remittances stood at $240 billion last year, in which India accounted for $23-24 billion. The Indian remittance market, which is growing rapidly with migration of Indians to newer geographies, is estimated to receive $ 30 billion worth of remittances by the end of this year.

News: Poverty and India's changing image

(BL 17/02/2007) Mumbai - There are dismal statistics about poverty in this fourth largest economy in the world, which ranks 126th out of 177 in the World Human Development Index. The need to improve the situation is urgent. In his Republic Day message, the President, A.P.J. Abdul Kalam, summed up the outlook for the nation in these words: "If we perform in an integrated way with development politics as the focus, in mission mode with transparency, I visualise even before 2020 that a prosperous nation is possible." His emphasis on the focal nature of development politics aptly captured the vision that should inspire the national effort. A vision that no doubt draws confidence from our achievements so far but is aware of the unfinished tasks that lie ahead. Reforms In this season for heady predictions about India's economic prospects in various time-frames, the mention of unfinished tasks would make many people think of the remaining agenda of reforms. But identifying the real unfinished tasks against those which cast an enchantment over us in our quest for double-digit growth, is to get the India story right. All the more so as the country is now moving into the Eleventh Plan. The 56th year of this unique Indian enterprise is an appropriate moment to reflect on what characterises Indian economy beyond the glamour of our achievements in several fields. Centrestage in Davos The glamour was most in evidence at this year's Davos meet. Media reports of the event spoke of India, along with China, assuming centrestage in the global review of economic developments and future growth prospects. With growth rates trending towards 9 per cent and FDI flows surging to $12 billion during 2006-07, India received wide attention at the Davos jamboree, whether from governments, multinational corporations or the international investment community. And close on its heels, striking a high point in the emergence of Indian multinationals, has come the acquisition of Corus by Tata Steel. More such foreign acquisitions have been foreshadowed, the creditworthiness of Indian companies and India's own upwardly revised country ratings making them favoured clients in the global financial markets for loans and leveraged transactions. Apart from large-scale acquisitions, there is a long train of strategic buy-outs by Indian manufacturing and services companies that are in the offing, with sizeable potential to augment the capabilities and geographical reach of Indian business and industry. And in the economy, indicators have never been more reassuring than at the present moment. Nowhere is the buoyancy manifest more than in export trade that is now benefiting increasingly from the new capacities created since the commencement of reforms in 1991. Over the last three years, India's exports have almost doubled. And in the area of information technology and BPO, where its outstanding performance has given the country its high global visibility, the latest Nasscom forecast is $31 billion for the next year. Manufacturing industry may not reveal such spectacular pace of growth but segments such as automobiles and two-wheelers measure up to the Chinese benchmarks. What is perhaps as important as all these impressive developments in the Indian economy is the vastly changed perception of India's prospects as a market and production base on the part of global business and industry as well as of governments and opinion-makers in industrial nations. Leading figures of MNCs, such as those of IBM, Microsoft, GE and Wal-Mart, are among those who have hailed the possibilities for India. The increasing coverage that Indian companies are now receiving in the world economic press is an indication of the perceived change of regard that it has for India's capability to perform and compete effectively in a globalised economy. While the Indian story can thus be expected to engage world attention even as the Chinese story bids fair well to dominate, there is one significant difference between the two - a difference both in substance and resonance. That difference turns on the one dominant Indian reality that is almost a defining element for the country in the eyes of the world. In simple terms, while both China and India are poor developing countries by accepted criteria, China has made far greater strides in elimination of poverty, compared to India. Statistics of per capita income and other details apart, poverty is no longer a visible feature in China the way it continues to be in India. And in the imagination of the wide world, China has virtually ceased to be a poor country; it is rather a fast-growing premier emerging nation with increasing dominance in international trade and production and a formidable competitor in metrics of economic prowess with the leading industrial nations. Dismal poverty statistics The pathos of the Indian story is that 220-230 million of our people, that is 22 per cent of the total population, are poor, according to the latest findings of the National Sample Survey. That makes India home to the world's largest proportion of the poor, even if the percentage of people living below the poverty line reduced from 36 per cent in 1993-94 to 22 per cent in 2004-05. There are other dismal statistics about poverty in this fourth largest economy in the world (by GDP at purchasing power parity): 126th rank out of 177 in the World Human Development Index and the rate of child malnutrition double that of sub-Saharan Africa. With such factual and visible evidence reinforcing existing bias, the defining element of our economy would remain identified with our poor millions, much as we would like it to be otherwise. The painful paradox of such poverty in the midst of consistently high rates of economic growth over the last few years and the sustained development effort pursued through economic planning since 1950 is the measure of the pathos in the Indian story. What is all the more disquieting is that there has been no dearth of recognition in political rhetoric or official thinking of the need for elimination of poverty as the primary objective for the country but what has been done and accomplished has fallen so tragically short of proclaimed intentions. `Direct attack' Garibi Hatao of 1971 apart, the Planning Commission itself had said in its approach paper to the Fifth Plan, "The elimination of abject poverty will not be attained as a corollary to a certain acceleration in the rate of growth of the economy alone. It will be necessary to launch a direct attack on the problems of unemployment, underemployment and massive low-end poverty." Thirty-four years since that urgent call for action was made, it would be interesting to see what the Planning Commission will have by way of a composite strategy in the Eleventh Plan to deal with poverty in the world's fourth largest economy and how the political class will set about "performing in an integrated way with development politics as the focus". The government's eight flagship programmes, notably the Rural Employment Guarantee Scheme, are at the heart of the present development effort and each of them requires a rigorous and continuous outcome-based review.

News: Taj on prowl, eyes LA’s Four Seasons

(TNN 17/02/2007) Mumbai - Hospitality major Taj Group is once again on the prowl in the US. The Tata-controlled Indian Hotel Company (IHCL), which operates properties under the Taj brand, could be looking at the Four Seasons property at Beverly Hills, Los Angeles, among others, sources said.

Sources said IHCL has evaluated 2-3 options in LA and seems to be veering towards Four Seasons. The deal size is pegged at around $200 million, sources said. LA-based Four Seasons, the world’s leading operator of luxury hotels, is located in a quiet palm-lined residential neighbourhood just minutes away from the world-renowned Rodeo Drive and Robertson Boulevard shopping. IHCL officials declined to comment.

Incidentally, last week, Microsoft chairman Bill Gates and Saudi Prince Alwaleed bin Talal acquired Four Seasons Inc, which operates 75 properties across 31 countries as well as a number of time-share properties, in a deal valued at $3.8 billion. Sources said Four Seasons could be headed for a restructuring as both Mr Gates and Prince Alwaleed walk in as financial investors partnering CEO Isadore Sharp in a management buyout.

Taj has been looking at significant acquisitions in the US, more specifically at a West Coast property, with the aim of building the brand in the US, which accounts for a sizeable chunk of its revenues. In 2005, Taj acquired Pierre Hotel in New York from Four Seasons. Last year, it unveiled its $170-million buyout of the Ritz Carlton hotel in Boston. Its other signature assets overseas include St James Court in London while it is also reportedly keen on acquisitions in Cape Town and Durban in preparation for the FIFA World Cup 2010.

The Rs 1,127-crore hospitality chain is also eyeing takeovers in other markets, especially prominent gateways in South-East Asia, sources added.

News: US-based budget hotels plan India foray

(TNN 17/02/2007) New Delhi - It’s not only the promoters of US-based Patel Motels who are looking to re-create their success in India. Several US-based budget and economy hotel brands such as Super8 Motels, CountryHearth, America’s Best Inns and Best Value Inn are set to enter the Indian market through the franchisee route.

America’s Best Franchising Inc, which franchises Country Hearth Inns & Suites, has recently signed a master franchisee agreement to develop at least 20 greenfield properties in the metros and several secondary cities such as Chandigarh, Hyderabad, Jaipur, Goa and Pune over the next five to seven years.

The mid-priced hotels will combine the atmosphere of a bed-and-breakfast outfit with the convenience of a hotel, America’s Best Franchising Inc chairman Douglas Collins told ET.

The group is also looking at introducing the group’s America’s Best Inns & Suites brand in suburban markets and across various highways. Each Country Hearth Inns property is expected to house anywhere between 75 and 100 rooms.

To be developed in association with local partners, the total project cost is expected to touch $100 million. “At some time, we may even have a local chain. It could be named India’s Best Inn brand,” Mr Collins added.

Another hotel chain, Wyndham Hotel Group, which already has presence in the country with its Ramada and Days Inn brands, is now in talks with prospective partners to introduce Super8 Motels across state and national highways.

“Super8 is a roadway product. The highways and the national corridor that are currently being developed across the country offer a great opportunity to introduce this brand in India,” said Wyndam Hotel Group executive vice president (International Development) Reas Kondraschow.

There are plans to position both Days Inn and Super8 brands on the Indian highways, with the average room rates ranging between Rs 1,200 and 2,000 per night. “We would like to have up to 50 Super8 Motels over the next three years,” Mr Kondraschow added.

Several of such hotel brands are in talks with oil marketing companies whose outlets dot the Indian highways. Another US hotel group, Vantage Hospitality, owner of the Best Value Inn brand, is looking at franchisee operators.

News: Govt drawing strategy on looming threat from bad FDIs

(HT 17/02/2007) New Delhi - The government has begun drawing up a strategy to meet the potential threat to national security from foreign direct investments. The National Security Council Secretariat (NSCS) has been asked to prepare guidelines specifying areas, countries and companies whose investments need to be monitored with greater care.

These guidelines will be followed by Foreign Investment Promotion Board and Reserve Bank of India (RBI). To ensure that the move does not caste a shadow on India’s image as an investor-friendly destination, it has been decided that “a mechanism clarifying the procedures will be followed in cases/areas of doubt shall be put in place.”

National security advisor (NSA) MK Narayanan has also talked about the possibility of “terrorist outfits” manipulating stock markets in India.

"Isolated instances of terrorist outfits manipulating the stock exchanges have been reported. Stock exchanges in Mumbai and Chennai have, on occasion, reported that fictitious or notional companies were engaging in operations,” said Narayanan at a conference on international security in Munich last week.

There is also a move to amend the Foreign Exchange Management Act (FEMA) to give it more teeth to deal with global trends and subsequent threat to national security. At present, the FEMA notification prohibits FDI from only Pakistan and Bangladesh.

The government, however, is divided on whether to put in place a National Security Exception Act. However, there is a broad consensus that National Security Exception Clauses could be incorporated in the agreement concerning FDI.

It has also been suggested that the entity bringing FDI or receiving FDI should make a declaration to RBI or FIPB or the sectoral regulators that it would not indulge in any activity that adversely impacts national security.

“The NSCS will prepare a draft legislation in consultation with the departments of legal affairs, industrial policy and planning, and economic affairs to meet the long-term security requirements vis-à-vis FDI,” states the note of a high-level meeting convened by Cabinet Secretary BK Chaturvedi.

The finance ministry will be the nodal point for implementation and monitoring of security guidelines. In drawing up the “guiding principles” to determine the threats to national security, it has been suggested that the sectoral regulators should seek opinion of intelligence and security agencies.

“In all cases RBI should follow a threshold criterion and intimate the nodal body for security scrutiny when the proposed FDI moves above a particular amount. The existing entities should be required to take approval before starting any new activity in sensitive sectors/locations or receipt of foreign participation from countries of concern,” the note added.

News: And now, FDI in electronics and sports goods

(HT 17/02/2007) New Delhi - The government is considering allowing foreign direct investment up to 51 per cent for retail in consumer electricals, electronics and sports goods as well as accessories.

The move is a step forward from allowing 51 per cent FDI in single brand products, and comes even as Congress president Sonia Gandhi expressed reservation about the impact of FDI in retail on small retail stores, with the entry of global majors such as Wal-mart.

“You may consider having the relevant issues properly examined before further decisions are taken”, she said in a letter to the Prime Minister Manmohan Singh last month.

Wal-Mart chief executive officer (CEO) Michael T Duke is expected to visit India next week. The US retail major has entered into an agreement with Sunil Mittal-promoted Bharti group for a retail venture in India.

Friday’s proposal to permit retail of consumer electricals and electronics will cover a wide range of products of every day use, especially durable items used in entertainment, communications and home automation. As per government estimates, consumer electronic retail grew to Rs 41,500 crore in 2006 from Rs 32,000 crore in the previous year.

Consumer electronics retail requires significant investment in terms of large floor-space apart from building up supply chain logistics. India is emerging as a manufacturing base for many electronic goods, their sub-assemblies and components. It is expected that well-established retail outlets would begin to source a large quantum of their requirements from the domestic producers. This would give a fillip to the electronic goods and appliances industry --- which is significantly skill-based and labour intensive, says the Cabinet note prepared on the issue.

Sports goods and accessories similarly cover a broad spectrum ranging from sports bags, clothing to goggles, footwear and headgear, among others. The demand for sports goods is expected to grow substantially from $ 28 million in 2005-06, in view of the Commonwealth Games in 2010. Moreover, India is making a pitch for the Asian Games in 2014.

International manufacturers have already started using India as a competitive sourcing hub for sports goods for the global market.

The policy is expected to encourage sourcing from India and provide market access to domestic suppliers , resulting is expansion of exports.

News: 'Indian economy faces the risk of overheating'

(HT 17/02/2007) Washington - The International Monetary Fund (IMF) has cautioned that the Indian economy faces the risk of overheating in the short-run. It has identified price management and financial stability as the major challenges confronting Indian policy makers.

"With GDP continuing to grow above trend, increases in international oil prices not yet fully passed through, credit and asset prices buoyant, and monetary conditions accommodative, the risk of overheating cannot be ruled out. On the international front, a sharper United States slowdown with potential spillovers to world growth could erode confidence in international financial markets, triggering capital outflows and volatility in emerging markets”, the IMF has said in its latest report on India.

Achieving financial sustainability while continuing to fund the development related sectors was another challenge, it said. This could only be done by reducing high debt and creating fiscal room to fund priority needs.

It stressed the need to promote more "job-intensive, inclusive growth, through further structural reforms, to create an environment in which growth more fully benefits the least advantaged."

The IMF also said that the challenge of fostering a broader and deeper financial sector to expand the channels of saving, investment and risk management needed to be addressed by the policy makers. It maintained however that the near term macroeconomic outlook was "bright" with real GDP growth expected to be around 8.2 per cent in 2006-07.

The wholesale price index (WPI) based inflation, it said, would remain in the 5–5.5 per cent range.

“Robust domestic demand is expected to contribute to a slight widening in the current account deficit (notwithstanding strong exports and services), readily financed by capital inflows," the IMF added.

On the external side, the IMF said that India's foreign exchange reserves were equivalent to over seven months of imports, while short-term external debt amounted to only 12 per cent of reserves and the overall external debt was 70 per cent of exports.

It noted that the current account deficit, at 1.5 per cent of GDP, was "manageable".

On the domestic side, it found financial soundness indicators favorable, and with asset holdings still modest, wealth effects from asset-price fluctuations, small. "The fiscal debt and deficit are on a downward trajectory helped by a favourable interest-growth differential", it said.

News: India deals worth $20b in bag, ABN is hungry for more

(HT 17/02/2007) Mumbai - If India is hot, it is probably hottest for ABN Amro. They are the dealmakers who advised the Tatas for Corus and Hindalco for Novelis and are now advising Suzlon for Repower. Sources say that ABN Amro was also the advisor of one of the unsuccessful bidders for Hutch Essar.

With Hutch, the total India-centric deals cracked by the investment banker in a month would have been worth $40 billion. Even without Hutch, it is at $20 billion (Rs 88,000 crore).

The big ticket dealmaker Jitesh Gadhia, managing director of ABN Amro, who is based in London, along with Frank Hancock, the MD based in New Delhi and Neil Galloway, managing director based in Hong Kong, was in Mumbai this week, when Hindustan Times caught up with them for a chat.

Gadhia feels that this is just the beginning and there are huge areas still waiting for India to explore.

Hancock said: “The deals have happened now. However, we had started planning almost two years back. We had decided to focus on the cross-border mergers and acquisition in India.”

Halloway added: “We are a bank that can offer the Indian companies a total package. Not only will we come up with ideas, we are able to advise them on foreign markets and also arrange for funds and lend money too.”

Gadhia points out: “Indian companies need to acquire in order to get an access to new markets. Indian IT is still some way from getting a strong foothold in markets like France. Then there is eastern Europe, Russia and China to explore too.”

Both Gadhia and Hancock point out that there is a lot more to do in business process outsourcing too. “The entire middle-office of Europe is out there to be outsourced. India has only done the lower levels like call centres and the higher levels.”

Surely the fruits of the labour are there to see. Hancock says that ABN Amro is also advising on Indian companies that may get taken over, but stressed that there are much more foreign companies that Indians can take over than vice versa.

Past successes include the Matrix Mylan deal where ABN Amro advised the company being taken over, Matrix Laboratories. The other was of course the Holcim-Gujarat Ambuja deal.

Hancock said that India’s businesses that are still largely owner-managed are able to take on takeovers of such magnitude. The group is focussing on four areas, which are information technology, auto-components, pharmaceuticals and others. Tata Corus, of course, came out of the others.

News: Pantaloon to expand Big Bazaar presence

(BS 17/02/2007) Mumbai - Pantaloon Retail India Limited (Pantaloon) is planning a big push to its spread in the western India region as it will take the number of its family store Big Bazaar to 70 by the end of the current year.

A major thrust is being laid on the Maharashtra market as the company is now readying to enter the state’s hinterland with a store each in Ahmednagar, Aurangabad, Kolhapur and Solapur.

Pantaloon’s head of Western Region Sadashiv Nayak told mediapersons after the inauguration of second Big Bazaar in Pune that the company had 44 stores at present and wanted to take this number to 70 by end 2007.

Most of the retail action will be in the four metros and cities like Bangalore, Hyderabad, Pune and Ahmedabad, he said. About 66 per cent of the estimated retail segment of Rs 900,000 crore comes from these eight markets, he added.

Nayak said Big Bazaar’s success in Sangli town in Maharashtra had encouraged expansion other districts in the state. It is planning to add five Big Bazaar stores in Pune itself beside a standalone Food Bazar unit and three malls.

“The plan is to create over 600,000 square feet of retail space during the current year,” he said.

News: Govt grapples with rupee riddle

(TT 17/02/2007) New Delhi - The government is a divided house on the course of the rupee. A section within the government feels that the steady appreciation in rupee should immediately be checked as it is hurting exports and has failed to curb inflation. Another lobby, however, believes that the currency should be allowed to rule strong as it lowers inflation and keeps the oil bill within a manageable limit.

The finance and petroleum ministries want a stronger rupee on the back of increased net foreign inflows, but the RBI favours a check on appreciation to step up exports.

The trade lobby, backed by the commerce ministry, would also like to see the rupee depreciate by 2-3 per cent, which would pep up exports.

The rupee yesterday closed at 44.10 to the dollar, near the previous day’s close of 44.13. Over the last few months, strong forex inflows have buoyed the rupee, as foreign investors pump in funds into the country encouraged by improved sovereign ratings, the boom on the bourses and higher interest rates.

Top officials said the North Block supports a stronger rupee since it clamps down on prices. Finance ministry mandarins feel that any move to depreciate the rupee by buying dollars will only have the effect of ramping up money supply in an economy that is flush with liquidity.

However, the RBI has almost convinced the finance ministry to follow a policy of soft intervention in the money market along with sterilising inflows. “The whole aim now is not to depreciate the currency but to contain excess appreciation,” officials said.

“We want the market to find its own levels but too sharp an appreciation is not something we are comfortable with ... the rupee has appreciated by nearly 6 per cent in the last six months,” they said. The government or the RBI intervenes in the foreign exchange market through state run banks.

Yesterday, forex dealers perceived a significant government intervention that steadied the rupee and checked its appreciation.

North Block officials said it has been brought to their notice that exports have suffered from the overvaluation of the rupee by 8-10 per cent vis-à-vis other currencies.

News: GE betting big on wind power, seeks tailwind in India as well

(DNA 17/02/2007) New York - GE Energy Financial Services, a unit of General Electric, closed two deals on Thursday to invest $270 million in six wind farms across the US and take a stake of up to 22% in independent French wind farm developer Theolia.

After making the twin investments, Kevin Walsh, managing director for renewable energy at GE Energy Financial Services, told DNA Money that the firm now wanted to tap India’s abundant wind energy potential.

“India would likely be the next investment country. We would like to partner with experienced Indian wind farm developers,” said Walsh.

Walsh indicated that GE Energy Financial Services has a goal to have a $3 billion renewable energy portfolio by 2008. The deals in the US and Europe have helped the firm step over the halfway mark with over $1.75 billion in renewable-energy assets.

With the global wind power industry spinning into high gear, GE is now keen to expand the geographic footprint and technology mix of its wind holdings into Asia through India.
Currently, GE Energy Financial Services’ heavily US-centric renewable energy portfolio has investments in wind, solar and projects to generate electricity through water and geothermal energy. It is keen to grow its portfolio by investing in Asia where governments are planning to tap wind and solar energy in a big way to get clean energy and cut pollution resulting from burning coal.

“We are expecting to have an office in New Delhi in the near future,” Ken Koprowski, spokesman for GE Energy Financial Services, told DNA Money over the phone from Stamford, Connecticut.

He declined to reveal how much the US firm planned to invest in India, which overtook Denmark as the fourth-largest wind power market in the world two years ago.

GE is also eyeing India’s booming solar energy market. “Our approach would be to look at wind and solar projects that make economic sense,” said company spokesman Koprowski.

The market for solar power is set to grow at an annual rate of up to 35% until 2010, as other countries follow the footsteps of US with policies designed to spur the development of renewable energy resources. Even hard-nosed Wall Street financiers are now catching a ride on the $14 billion global solar market that is on a tear.

According to figures released by the Global Wind Energy Council the country with the highest total installed wind power capacity is Germany (20,621 megawatts), followed by Spain (11,615 megawatts), the US (11,603 megawatts), India (6,270 megawatts) and Denmark (3,126 megawatts). The top five countries accounted for over 80% of total wind energy installation worldwide in 2006. New players such as France, China and Portugal are gaining ground.

In the US, investors last year put about $4 billion into new electricity-generating wind farm projects, boosting capacity by about 27%, according to the American Wind Energy Association. Wind farms can generate about 11,603 megawatts of electricity in the US— enough to power about 3 million average homes.

GE, which also makes electricity-generating wind turbines, aims to generate about $20 billion in revenue by 2010 through energy-efficient “Ecomagination” products.

News: Tatas say Woolworths is fine, no Tesco talks

(DNA 17/02/2007) Mumbai - The Tata group said there have been no talks with UK’s biggest retailer Tesco, which was jilted at the door by the Sunil Mittal-owned Bharti Enterprises, who preferred an alliance with Wal-Mart.

Says R K Krishna Kumar, director, Tata Sons: “There have been no discussions with Tesco. Let me tell you that we are very happy with Woolworths (the Australian chain) and they will remain our first preference.”

He said it’s too early to talk about entering into other formats of retailing, pointing out that Trent has done very well managing different formats such as the Star India Bazaar hypermarket, apparel store Westside and books and music chain Landmark.

“We can’t have two companies from the same business house existing in one format and competing for the same market,” Krishna Kumar said.

He was speaking after the inauguration of the second Croma store in the Malad west suburb of Mumbai on Thursday evening. Excerpts from an interaction:

Are you acquiring the southern chain Viveks?

We are looking for scale and size in this segment to derive synergies. No options are ruled out. If an opportunity comes as we expand, we would definitely go for acquisitions that make commercial sense.

What about the acquisition of Himalayan water brand?

The mineral water segment has lot of strategic business value for us. We are looking forward to entering it, but as I said earlier, acquisitions will be based on opportunities that have a commercial value.

Has the Singur controversy deterred or delayed your plans of the Rs 1 lakh car?

Let me put it very categorically. We are committed to rolling the small car out by 2008. I must say the West Bengal government has stood strongly behind us in this. The House of Tatas hasn’t done anything that is against the wishes of the common people. There are some vested interests who have made it a political issue.

What about the group’s plan to enter real estate?

Well, as you see, expansions need huge real estate investment, especially in the retail sector. We are exploring the idea. On the controversy over FDI limit in the retail sector
I think we are taking a very short-term view of things.

Let us accept the fact that unlike China, ours is a democratic process and decisions have to made through consensus. Global forces are opening up the economy and in future we will see lot of changes in the Indian retail sector.

There will be a surge in demand from Tier-II and Tier-III cities. The rapidity of changes will force the industry to see merit in FDI and I am hopeful that limit will increase as our size of economy grows further.

News: How mills stand to gain from cogeneration, alcohol

(BL 17/02/2007) New Delhi - Every 100 tonnes of sugarcane crushed by mills yields roughly 10 tonnes of sugar, 4.5 tonnes of molasses and 30 tonnes of bagasse.

Out of the 30 tonnes of bagasse, mills typically use up 21-22 tonnes to produce steam for captive consumption. This assumes steam consumption of 45 tonnes per 100 tonnes of cane and a bagasse-to-steam ratio of 1:2.1. That leaves a surplus bagasse of 8-9 tonnes.

If factories were to sell 10 tonnes of sugar, 4.5 tonnes of molasses and eight tonnes of bagasse at say, Rs 15,000, Rs 2,000-2,500 and Rs 1,000-1,500 a tonne respectively, the maximum they can gross from crushing 100 tonnes of cane would be in the region of Rs 1,70,000. It would be even lower in the present scenario — where bagasse realisations have crashed to Rs 250 a tonne in Uttar Pradesh and molasses are fetching Rs 500 a tonne in Tamil Nadu. What would be the economics if mills were to erect cogeneration and distillation facilities?

According to Ram Tyagarajan, CMD of Thiru Arooran Sugars, from one tonne of cane, anywhere from 120 to 150 units of electricity can be generated, depending on the pressure at which steam is raised in the boiler and taken to the turbine. After netting out 25 units of in-process consumption by the mill and 12-15 units of auxiliary consumption in the boilers and turbo-generators, 85 to 110 units can be exported to the grid.

Likewise, one tonne of molasses yields roughly 220 litres of alcohol. Thus, for every 100 tonnes of cane crushed, a mill can sell 10,000 units of electricity (at Rs 3 a unit) and 990 litres of alcohol (at Rs 20 a litre), besides 10 tonnes of sugar. The gross realisation, then, works out to almost Rs 2,00,000 — an additional 17.6 per cent.

Not everyone though is in a position to harvest this extra income. As of now, the two significant players in cogen, with annual revenues of Rs 125 crore plus, are Balrampur Chini and Thiru Arooran. Triveni Engineering's cogen income amounted to Rs 60 crore in 2005-06, while Sakthi Sugars and EID Parry are said to be doing business of Rs 50-60 crore.

News: Tata group set to enter airport modernisation biz

(BL 17/02/2007) New Delhi - In keeping up with its business expansion mode, the Tata group is set to enter the business of airport modernisation. Partnering the Tatas could be the Singapore-based Changi Airport International, which has already made bids in the past to get involved in the development of airport infrastructure in the country.

Sources told Business Line that the Tata group is expected to take a majority stake in the venture and an official announcement is expected as early as next week.

The Tata group's proposed foray into the aviation sector would come after a considerable time since it made an abortive bid more than a decade ago to enter the aviation business in India in partnership with Singapore Airlines. Since then, the group has steered clear of this sector, except for picking up a small equity stake in SpiceJet recently. The Tatas were not involved with the modernisation of Delhi and Mumbai airports that saw bids from leading Indian corporate groups such as GMR, GVK, Zee, Reliance Anil Ambani Group and DS Constructions.

Govt move

While Delhi and Mumbai airports modernisation would involve over Rs 10,000 crore, the Government is now keen to push forward the modernisation of not only the metro airports of Chennai and Kolkata but also plans to rope in the private sector for the city-side development of 35 non-metro airports. Besides, plans are also being discussed about having another new airport in Mumbai for which the International Civil Aviation Organisation has cleared the feasibility report.

Changi Airport International (CAI) is a wholly owned subsidiary of the Civil Aviation Authority of Singapore, which owns and operates Changi airport.

CAI has actively been searching for a suitable Indian partner for some time now.

Joint ventures

Late last year, senior CAI officials had indicated that a number of leading Indian business houses from diverse fields, including those in construction and real estate development, were interested in a possible joint venture to pursue the proposed modernisation and development of Kolkata and Chennai airports.

In addition, CAI is also in talks for development of greenfield airports, including some within the proposed Special Economic Zones.

CAI provides consultancy and management services to many airport projects in countries all over the world, including China, Fiji, India (Bangalore), the Maldives, Pakistan, the Philippines, Seychelles and Russia. The scope of services covers major areas such as airport master planning, review of terminal operations, air traffic forecasts, feasibility studies as well as providing customised aviation training programme.

The company has also been involved with manpower training of staff at the Mumbai airport after the running of the airport was transferred to a consortium led by the GVK group.

In 2005, Changi had partnered with Bharti to bid for the modernisation of Delhi and Mumbai airports.

News: Indian forex reserves jump $5 billion on strong FII inflows

(BL 17/02/2007) Mumbai - The country's forex kitty rose by $5.031 billion in the week ended February 9, to touch $185.078 billion on strong FII inflows into the domestic equity and debt markets.

The forex reserves have risen for the fifth consecutive week. This is the highest accretion to the forex kitty in a single week in the recent past.

Foreign currency assets increased by $5.119 billion to $178.084 billion for the week ended February 9. During the week ended February 2, they had increased by $995 million to touch $180.047 billion.

RBI intervention

"There has been aggressive intervention by the RBI in the forex market as it would not like the rupee to appreciate sharply against the dollar," said Mr P. Mukherjee, Senior Vice-President, Treasury, UTI Bank.

According to forex dealers, the RBI had picked up around $3 billion in the last 10 days. "The RBI would not like to see the rupee breach the 44 levels. The home currency has been trading in the range of 44.10-44.20 levels for the past few days," said a treasury official at a private bank.

The stock markets saw around $555.9 million in FII inflows during the week ended February 9. "FII inflows have been consistently positive, even on days when the stock markets were relatively weak. The IPOs of Firstsource Solutions and Power Finance Corporation did attract attention in the domestic equities market," said Mr K. Harihar, Head-Treasury, Development Credit Bank.

"After the international ratings agency Standard and Poor's upgraded India's rating to investment grade, the country has been attracting more FII and FDI inflows," said Dr Rupa Rege Nitsure, Chief Economist, Bank of Baroda. "The rupee has been strengthening against the dollar. According to the real effective exchange rate, the rupee is overvalued by around 10 per cent eroding the competitiveness of exports. This was the reason behind RBI's intervention in the market, which resulted in a rupee inflow, which in turn raised liquidity, forcing a hike in CRR last week," she said.

Foreign currency assets as expressed in dollars include the effect of appreciation or depreciation in non-US currencies (euro, sterling and yen) held in reserves.

"The euro and sterling had strengthened against the dollar during that week, which added to the forex kitty," said Mr Ajay Mahajan, President-Financial Markets and Institutions, YES Bank. According to a forex dealer at a private bank, the euro had gained against the dollar from around $1.29 to around $1.350 during the week.

Gold reserves remained unchanged at $6.529 billion, while Special Drawing Rights decreased by $8 million to $2 million.

News: Aluminium giant Alcoa inducts Tata on board

(DNA 17/02/2007) Mumbai - Global megacorps seem to be queuing up to induct Indian corporate captains to their boards. The $30 billion Alcoa, the world's largest aluminium maker based in New York, inducted Ratan Naval Tata, 69, chairman of Tata Sons, to its 12-member board as a director on Friday. Just a week ago, NR Narayana Murthy, co-founder of Infosys Technologies, was inducted to the board of Unilever plc, one of the largest global FMCG giants. They follow Naina Lal Kidwai, HSBC's India chief, who was last year inducted to the board of Swiss chocolate and beverages giant Nestle SA. Murthy's protégé, Infosys managing director & COO Nandan Nilekani, is on the Reuters Group Plc board, while Jagdish Sheth, marketing guru, is on board of pharmaceuticals giant Eli Lilly and NASDAQ-listed genetics firm Cryocell Inc. Enlisting Tata comes at a time when predators are circling Alcoa. Reports suggest that Australian mining giants Rio Tinto and BHP Billiton have readied bid approaches for Alcoa in an attempt to de-risk their gigantic copper and iron ore businesses. The price? About $40 billion, or Rs1,60,000 crore, says the buzz. This makes Tata's induction timely. Only a fortnight ago he won a four-month, $11 billion fight for UK's Corus Group, defeating Brazilian steelmaker Cia Sidegurgica Nacional. The experience will come in handy. Alcoa chairman and CEO Alain Belda said, "Ratan's global business acumen and his depth of knowledge about quality and customer satisfaction will make him a valuable addition to our board." For Tata, this is nothing out of the ordinary. He is a director of Italian automaker Fiat SpA. He is on the international advisory boards of Japanese giant Mitsubishi Corporation and bulge-bracket global finance companies such as American International Group (AIG) and JPMorgan Chase. He is also a member of the Asia-Pacific Advisory Committee to the New York Stock Exchange and chairs the advisory board of US think tank Rand Corporation's Centre for Asia Pacific Policy. Tata has also been trying to pick talent from foreign companies to manage his business ventures. The Tata Group was among the earliest Indian companies to rope in expatriate heads for some of its ventures. Darryl Green, an Australian, is CEO of Tata Teleservices, while Raymond Bickson, who is at the helm at Indian Hotels, parent company of the Taj Group of Hotels, is Hawaiian by birth. Ratan Tata, who holds a bachelor's degree in architecture from Cornell University, joined the Tata Group in 1962, and became chairman of the holding company, Tata Sons, in 1991. Under his leadership, the group has grown globally, primarily through acquisitions. Today it runs 96 companies in seven business sectors. In India, Tata is chairman of the Government of India's Investment Commission, and a member of several business, industry and trade organisations.

News: Reliance Capital secures Western Union linkage

(DNA 17/02/2007) Mumbai - Reliance Capital Ltd, the Anil Dhirubhai Ambani Group financial services firm, has added another dimension to its business basket. The company would now allow people to send/ receive/ money to/from abroad through Reliance Communications and Reliance Mutual Fund outlets.

Reliance Capital has become a principal agent of global remittance company Western Union through its acquisition of Travelmate Services (India) Pvt Ltd in November 2006. Travelmate has been a principal agent for Western Union for more than 10 years.

"Western Union aims to cover 2000-3000 Reliance outlets in the medium-term and this number will go up as the business expands," said the spokesperson with Western Union Financial Services.

Western Union has already tied-up with the Indian post office for remittance services. It also has links with banks such as State Bank of India, Canara Bank, Bank of Baroda, Bank of Baroda, Punjab National Bank, Vijaya Bank and Andhra Bank.

Reliance Capital spokesman Sharad Goel refused to comment when asked how big a role the company will play in the new venture. He did not give details on the agreement with Western Union Co.

Western Union is a leading remittance company in the world, cornering about 15% of the $23.4 billion worldwide remittance market through its network of about 2,85,000 locations in 200 countries, and about 600 agents.

Both Western Union and Reliance Capital see huge potential especially in tier II and tier III cities, the spokesperson said. In Indian, Western Union has got a 36,000 agent network.

"We are looking forward to a mutually beneficial and long-term relationship with Reliance Capital," said Anil Kapur, managing director-South Asia, Western Union Financial Services.

News: VC firm NEA lines up $200m for India

(DNA 17/02/2007) Mumbai - New Enterprise Associates (NEA), the US-based venture capital firm, which manages over $8.5 billion spread across 13 different funds is expected to announce a new investment in an IT firm in the services vertical next week.

The US-firm would invest around $200 million in different IT and healthcare companies in India over the next two years, sources said.

The firm had recently invested in the proposed Indian operations of US-based mobile payments company Obopay and personalised search engine firm Minekey, incubated at

IIT-Kharagpur.In keeping with its India-push, the company plans to shift handling of its Indian operations from the US to Bangalore. Additionally, the Indian office will also monitor the company's Chinese operations.

India and China, the two fast-growing Asian economies, have been identified as an integral part of the firm's geographical expansion strategy. The focus will be on mid-size enterprises in the technology sector.

NEA, which started operations in 1978, has funded over 500 companies in the IT and medical sectors. The NEA model is built on the philosophy of team achievement and it measures success by the successes of the entrepreneurs.

The average tenure of NEA's ten general partners exceeds 15 years-longer than many venture capital firms in the business. With offices in California, Virginia and Maryland, NEA operates as close to the people and places where much of the leading IT and medical thinking happens.

The last two years have witnessed a slew of venture funds entering India. Blackstone, 3i, Helion Ventures, New Enterprise Associates and Matrix Partners have all invested in the country.

Domestic players like IDFC Private Equity and IL&FS have also obtained a strong foothold in the market.

News: Blackstone, Citi, IDFC to build $5-bn fund for infrastructure

(HT 16/02/2007) Mumbai - Global financial giants have joined hands with leading Indian counterparts to provide long-term finance for the infrastructure development in India. Leading private equity firm Blackstone, financial powerhouse Citigroup, India’s Infrastructure Development Finance Company (IDFC) and Indian Infrastructure Finance Company (IIFC) said on Thursday they had launched an initiative to set up a $5 billion fund in a combination of equity and debt, with maturities exceeding over 10 years.

The fund is being launched under a programme titled ‘The India Infrastructure Financing Initiative’.

Of the $5-billion fund, $2 billion will be in the form of an equity, which will take exposure as risk capital in the infrastructure companies across sectors including roads, ports, power and other related areas. The asset management company of IDFC will monitor the equity fund.

According to an agreement inked in the Finance Ministry on Thursday by the four entities, the equity financing programme will be managed by IDFC and the fund will be invested in greenfield, brownfield and operating projects. Speaking on the occasion, Finance Minister P Chidambaram said, “This initiative is an important milestone in our search for innovative solutions to meet the vast challenge of financing the development of India's burgeoning infrastructure sector."

Blackstone, Citigroup and IDFC have committed to invest $75 million each and IIFC will invest $25 million in the equity fund, resulting in a sponsor contribution of $250 million. The remaining $1.75 billion will be raised from overseas and domestic long-term investors.

In addition, these institutions will also set up a debt fund of $3 billion, which will be used to provide long-term debt financing to infrastructure projects. Debt financing will be channelled through IIFCL in several tranches over the next three years for projects appraised by IDFC, certain banks and financial intermediaries. These funds will be invested across sectors in public sector or private companies or a combination of both, said SS Kohli, chairman, IIFC. “India needs $320 billion in the next five years to fund infrastructure development,” he added. The debt fund will be raised at competitive rates. “We expect to raise equity over 18 months, mostly abroad,” said Rajiv Lall, managing director of IDFC.

News: Tata Motors, Fiat may work together for small car

(BL 16/02/2007) New Delhi - Tata Motors today said it was willing to collaborate with Fiat SpA of Italy for its Rs 1 lakh, the trials for which have already commenced.

"The small car, which will cost around $2,200, is ready and is presently undergoing tooling. The product is fully developed and is undergoing trials and productionising. Fiat has expressed considerable interest in this product and we are taking suggestions from them as well. This product is marketable in different global markets such as Latin America and we can tie up for the same," Ratan Tata, Chairman, Tata Group, said here today adding that the car will roll out in the latter half of 2008.

Tata was speaking at the India-Italy CEO Forum event today, which was addressed jointly by him and the Fiat Group Chairman, Luca Cordero di Montezemolo.

Tata Motors has been rapidly increasing the areas of collaboration with Fiat.

The company entered into a joint venture with Fiat earlier last year, with an investment of Rs 4,000 crore at Ranjangaon in Maharashtra to manufacture one lakh cars and two lakh engines annually.

The two companies earlier this week also entered into a memorandum of understanding to build pick-up vehicles bearing the Italian major's nameplate.

The vehicles will be manufactured in the Fiat Group's plant in Argentina, at an investment of $80 million.

Industry analysts point out that the collaboration could be expanded to the tractors segment as well, with the Tata-Fiat alliance reported to have made a bid for Punjab Tractors

News: Apollo Hospitals to pursue mergers, buy-outs overseas

(BL 16/02/2007) Hyderabad - The Apollo Group of Hospitals is set to expand its global footprint through strategic partners with some of the local hospital chains overseas while pursuing mergers and acquisitions in the US and Europe. The group is now in pursuit of a UK-based hospital chain in partnership with private equity players. Apollo will provide its management expertise in such deals. The Chairman of Apollo Group, Dr C. Prathap Reddy, said they were actually contemplating pursuit of one of the largest closed deal of a hospital chain, which was eventually acquired for $36 billion. Though we do not have this kind of money, several funds were keen to partner with us in pursuit of similar deals globally, he said. One such deal Apollo plans to pursue is a UK-based hospital chain estimated to be valued upwards of £1.2 billion. Speaking after announcing a tie-up with Hayel Sayeed Group to manage a hospital in Yemen, Dr Reddy said they have had similar offers to manage hospitals in some other countries, particularly Nigeria. And the group is close to finalising a telemedicine project that would provide access to Apollo healthcare to African countries. HEART OF THE MATTER Apollo Hospital and Johns Hopkins Institute plan to work on genetic research in pursuit of `mischief maker' in the genetic composition that leads to heart ailments in Indians. Quoting data, Dr Reddy said that increasingly young Indians are prone to heart ailments and about 50 per cent of the heart problems could potentially occur in India due to smaller vessels in Indians by 2010. The group also plans to step up research and set up an Institute of Nanotechnology and expects to work closely with Institutions like Indian Immunologicals. UK DOCTORS ISSUE Referring to the current crisis faced by about 16,000 doctors in the UK due to changes in EU regulations, Dr Reddy said this was unfortunate and felt that at least some changes need to be brought about so that those who have passed the qualifying examination in the UK could continue to work there.

News: HDFC Bank partners Italian bank

(BL 16/02/2007) Mumbai - HDFC Bank has signed a memorandum of understanding with an Italian bank, Banca Monte dei Paschi di Siena, to offer banking services to each other's corporate customers engaged in business activity in their respective countries.

The two banks will assist their customers on commercial (imports and exports, including shipment services, payment orders, among others) and financial transactions (investment activities, foreign direct investments, pre-export financing and trade financing) between Italy and India.

The services will include remittances and bank guarantees.

The Italian bank operates in India through its representative office set up in 2006 in Mumbai.

News: Make India Inc the main instrument of growth

(BL 16/02/2007) Mumbai - The one sector that must get the impartial horizontal and vertical attention of the government is industry. Pre-Independence, the British rulers did not look at industry as an agency to be promoted at state expense.

When the socialistic model was adopted in 1952, the need was felt to promote public sector establishments across all segments to provide the wherewithal to the millions of Indians aspiring for a better life. This signalled an era of state support to industry.

Today, India has nearly 5,000 companies listed on the stock exchanges - many from the public sector from which the government has partially disengaged. There are a large number of closely-held companies that are not listed. So, the market capitalisation of listed companies, amounting to Rs 32,16,600 crore , is not a true reflection of the size of the corporate sector. For this also does not take into account the extensive investments that Corporate India has made across the globe.

Traditionally, industry is the main source of revenue for Central and State governments. But equity in terms of securing revenues from Indian industry is at a slight disadvantage to the other sectors. India is essentially a rural economy and its strength and potential are seen in agriculture. But the 60 years since Independence has shown that agriculture can grow only in a limited way.

Radical shift needed

But now there is definite stagnation with no new plans or investments. The Green Revolution has faltered. Farm production is not uniform. nor are the yields. The monsoon continues to be a major influence on farm operations. Land reforms are slow and `controlled' inputs do not fully meet the needs of the farmers. A radical shift is needed for the rural economy to prosper and for income levels to match those in urban India.

Joint corporate operations with farmers and panchayats could be one way to once again accelerate farm output.

India's large land area, with its huge bio-diversity, offers unique opportunity for agricultural development. The climatic conditions range from the dry cold of Ladakh to heavy rainfall areas, to the semi-arid tropics, and it is for the planners to understand all this and then develop a farm sector that can also produce for the global market.

Corporates can help

To expect the simple farmer to rise to the occasion is unfair to him. Farming can be one of the most mechanised methods of production. But occupational farming holds the key to satisfying the growing demand of the market.

Corporates have indicated their readiness to help agriculture that benefits not only the current practitioners but also to gain a certain global dominance.

Thailand, with limited surface area, is one of the world's largest exporters of rice while India with the largest area under cultivation is a net importer of foodgrains.

It is time India reflected and planned the best way forward to fortify agriculture and make it robust and resilient. Not just to feed the country but to display an ability to command deserved heights in terms of output, cost and quality.

The manufacturing sector, with the capability to match world standards, needs focussed attention. For instance, engineering goods, transport equipment, textiles, leather, chemicals, and gems and jewellery, where the country has won global reputation and trust.

Showcase potential, proficiency

The Budget has an impact on almost all industries. The Government should create a long-term stable plan which enables India Inc to prepare a strategy to get better, improve trade, and secure a higher share of, and a prominent voice, in the global economy.

The country still remains a marginal player and that must be corrected. The time has come when India must showcase its full potential and proficiency.

Manufacturing is essentially value adding and in the dynamic flux of today staying ahead is a tough game.

Value-addition varies and execution and location remain fluid and unpredictable. There is little room and time to manoeuvre among these elements.

The primary requirement which the Budget should assess is how India can improve operational effectiveness in production for higher throughput to benefit (local and foreign) customers, lead to higher employment, raise GDP growth, and result in increased government revenues.

The advantages of controlling markets and product segments are obvious. The country prospers, incomes grow at the individual level, living conditions improve and with it the nation gets stability and strength. The poverty so rampant today can disappear tomorrow.

Global horizon

Most corporations now have a global horizon. The concept of a market related economy will force India to become efficient and productive. It can no longer be one among many or even the second best. It has to be at the top and demonstrate what it can do. Services which till recently were in the government domain have emerged as successful private sector endeavour.

No outlays needed

India Inc has shown interest in various fields. Now, it must be the Government's endeavour to help corporates achieve their aspirations.

The Government, despite its imperatives, must accept that liberalising trade and industry does not imply any outlays. In fact, it brings in the much-needed funds to spend on important projects, especially infrastructure.

What is involved is the exit of the Government from certain spheres to concentrate on efforts that would ensure a good life to the citizens.

Ensure fair competition

One aspect that the Government should ensure is fair competition. Currently, some regions receive preferential tax treatment on the plea that they are `backward'. These are necessary up to a point. But they can have a distorting impact too.

Most important is for the country to become one single market, unencumbered by the tariffs and barriers. It should not be easier to ship goods from Chennai to Singapore than to Mumbai.

There are too many restrictions and the cost of compliance for movement between and through States is needlessly high. It is essential that the Union Government removes as many hurdles as possible, with the States following up with simpler procedures. One pronouncement can be the rapid withdrawal of Central Sales Tax rather than reduce it in fractions every year.

The Value-Added Tax is to be followed by a General Service Tax that is the more modern and preferred method of generating revenues. The commodity tax levied by each State may continue but the Central Sales Tax is an anachronism with VAT in place.

Every year, the Budget provides the Centre (and to some extent the States) a chance to impact a billion lives. What will it do this time around?

News: Reliance topples ONGC as most valued firm

(PTI 16/02/2007) Mumbai - Reliance Industries has toppled PSU major ONGC to grab the numero uno position with a market capitalisation of over Rs 1,96,000 lakh crore as against ONGC's Rs 1,93,653.29 crore.

Reliance gained over 2% (Rs 29.75) to close at Rs 1,407 while ONGC gained marginally (Rs 5) to end at Rs 905.40 on the BSE on Thursday.

Telecom major Bharti Airtel is the third most valued firm with a market cap of Rs 1,50,000 crore followed by IT majors Infosys with Rs 1.32 lakh crore and TCS at over Rs 1.26 lakh crore.

News: 'Suzlon may sell equity to help REpower bid'

(RTR 15/02/2007) Mumbai - Wind turbine maker Suzlon Energy Ltd may sell shares to help fund its $1.3 bn bid for Germany's REpower and other expansion plans, a company source said on Thursday.

The company had said it planned to fund the bid through internal accruals and debt, but analysts said this would raise its debt-equity ratio from 0.7 currently to about 2.2 and that instead it may issue shares to generate funds.

"This could be a possibility as only 30 percent equity is in public hands right now," the source, who did not wish to identified, told Reuters. India's Tanti family holds 70 percent.

"The debt component is much higher than Suzlon's own funds, and it may have to go for an equity dilution," said an official from the company's banking consortium, who did not want to be identified.

A Suzlon spokesman declined comment.

Suzlon and Portugal's largest builder, Mota Engil, offered 126 euros per share for the German wind turbine maker earlier this month, topping an offer of 105 euros a share from France's Areva.

Suzlon, the world's fifth-largest wind turbine maker, has formed a joint venture for the bid with an arm of Mota Engil, Martifer, which owns more than 25 percent of REpower. Analysts say Areva owns 30 percent of REpower.

"Assuming Suzlon puts up 75 percent of the acquisition cost, and if it were to keep its gearing to the existing level of less than 1, this could potentially mean a dilution of 5 to 8 percent over a one-two year period," brokerage Edelweiss said in a client note this week on the possibility of selling shares to raise funds.

Suzlon shares fell 2.8 percent to 1,039.75 rupees in Mumbai on Thursday, while shares in REpower were down 1 percent at 144.60 euros at 1226 GMT in the German market.

"At this point, we see 126 euros a share as fair valuation with regards to synergies with REpower," the company source said.

Market analysts said the offer was high, however, and they were concerned that a takeover battle could push it higher. REpower shares currently fetch a premium over the bid, indicating the market expects a higher eventual price.

"Suzlon's bid at 126 euros a share translates into price earnings (ratio) estimated of 57.3 times in the current financial year ... this is clearly expensive considering the low profitability of the company and is a significant premium to peer group such as Vestas and Gamesa," JP Morgan said in a report.

Denmark's Vestas Wind Systems AS is the world's biggest wind turbine maker, and Spain's Gamesa is the second largest.

Suzlon has said a successful deal would probably boost its market share to nearly 15 percent from 11 percent and would give it access to European markets and advanced technology for offshore and larger turbines.

News: 'US awaiting Indian Govt's decision on Wal-Mart entry'

(BL 15/02/2007) New Delhi - The US said it was awaiting the Indian Government's response to the entry of Wal-Mart into the country.

"We will have to see what Government officials decide," said Carlos Gutierrez, US Commerce Secretary, while commenting on the Bharti-Wal-Mart joint venture's foray into the Indian retail sector.

"Since India is a vibrant and energetic democracy, intense debate over Wal-Mart's entry in to the country is happening, in the same way debates occur in any other democracy. We will see what Government officials ultimately decide," Gutierrez said.

Pointing out that Wal-Mart's entry into India would not only benefit millions of farmers but also smaller retailers due to greater efficiency in the supply chain, he said,

"Foreign investment will be prohibited in the front end but there could be some partnership structure in wholesale. It could represent effective outlet for farm products and bring benefit to farmers as well as the agricultural sector."

Gutierrez said, "While the Indo-US trade grew over 20 per cent on year-on-year in 2006 to $32 billion, India's exports to the US grew 16 per cent to $22 billion. Imports by India from the US increased at 26 per cent to $10 billion in the same period." Both countries have set a target to double bilateral trade by 2010, he said.

News: Air India may go with Star Alliance

(DNA 15/02/2007) Kolkata - There are strong indications that the national flagship carrier Air India will be joining the Star Alliance. The final round of talks between Star Alliance and Air India’s (AI) are slated to be held in Frankfurt in end-February, sources said. The merged entity of Air India and Indian Airlines (IA) will certainly be a part of the alliance. When contacted by DNA Money, Air India officials (AI) said: “Talks are still on. But Air India is seriously considering a membership with Star Alliance.” The long-standing free-flow code share agreement with German flagship carrier Lufthansa and US’ United Airlines tipped the scales in favour of Star, sources said. While it is difficult to quantify the growth in passenger numbers in the aftermath of the alliance but AI, it seems, expects at least a 10% increase in the first year itself. Reasoning why the carrier is opting for a global alliance at this juncture, an aviation analyst said: “First, there was the issue of the merger of AI and IA. Secondly, Air India is entering a new phase of growth with the addition of 68 aircraft to its fleet, which will occur over the next four years, up to December 2011. To be globally competitive, it is necessary to be part of an alliance team wherein you could plug into the benefits of the alliance partners in both directions.” There are many benefits that accrue from joining a global alliance, which include sharing of each other’s lounges at international airports and earn and burn frequent flyer points on each other’s network. Improved connectivity, seamless transfer of passengers at various points, sharing of resources at home base, a hub and spoke network at gateway points and a common IT platform are some of the other advantages. Star Alliance, set up in 1997, has 17 member airlines on its roster, carrying an annual passenger load of 413 million, serving 155 countries. But, according to the Centre for Asia Pacific Aviation (CAPA), the “Key for all alliances going forward is filling in the ‘white spots’”. Oneworld has just 4% capacity share within Asia and no coverage in the Middle East - gaps that will soon be plugged with the entry of Japan Airlines and Royal Jordanian within its fold. India seems to be becoming a battleground for global alliances. Jet Airways and Kingfisher Airlines both are rumoured to be weighing options. But Jet Airways officials strongly denied this. “We have no immediate plans,” a Jet Air official told DNA Money.

News: Insurance FDI limit to be raised to 49%

(IM 15/02/2007) New Delhi - With the Budget just round the corner, private insurance companies are crossing their fingers for the much-awaited Foreign Direct Investment (FDI) hike to 49% from the present 26%.

The Group of Ministers (GoM) are still debating on the FDI hike since this would mean amending the Insurance Act. Conversely, the GoM has ruled out a separate cap on Foreign Institutional Investors (FIIs) in insurance companies. It is more in the favour of continuing with the composite cap for both FDIs and FIIS.

In addition, the government guaranteed on LIC policies was being considered to withdraw. Implementing it would mean amending the LIC Act. If the government decides to do away with its guarantee on LIC policies, the state insurer would soon have to increase its paid-up capital to Rs. 100 crore from the present Rs. 5 crore. However, the Insurance Regulatory and Development Authority (IRDA) wants a level playing ground for both public and private insurance companies, for which the government must withdraw its guarantee on LIC policies.

It is expected that the FDI cap on insurance would be soon raised to 49% in the forthcoming Budget. However, the final decision is still pending.

News: Import gold in large quantities

(FPJ 15/02/2007) Mumbai - A major part of the annual budget relates to the country's foreign trade. We receive foreign exchange from tree major sources-exports, foreign investment and remittances by NRIs. This inflow has to be balanced against an outflow which also takes place through three routes-imports, outward FDI by Indian companies such as the acquisition of Corus by Tatas, and purchase of dollars by the Reserve Bank of India for increasing our forex reserves.

These total inflows and outflows have to be equal to each other just as the water entering a canal from a barrage has to be equal to the water going out in the minors. The Finance Minister is the gateman who can open one gate and close another but he has to make sure that the inflow is equal to the outflow. He can make policies to increase outward foreign investment by allowing individuals to make investments abroad such as buying shares in the New York Stock Exchange; but in the same breath he has to reduce the outflow of dollars by some other route such as by asking the RBI to desist from purchase of US Treasury Bills to augment our forex reserves.

The Finance Minister has recently reduced import duties on cement and refined oils. This will lead to higher outflow of dollars for the import of these items. But this will not lead to more total imports because there will be fewer imports of other items such as fertilizers. The Finance Minister is, so to say, holding a weigh balance in his hands that has three cups on each side. He can adjust the weights in the cups as long as the balance is stable.

There is a large inflow of dollars presently from foreign investment in our share markets as reflected in the buoyant Sensex; and from remittances by NRIs which has crossed the level of $20 billion and is almost equal to inward foreign investment. The basic problem facing the economy is how to send these $40 billion out of the system. The purchase of dollars for increase in forex reserves is likely to be less. We already have reserves adequate for about 15 months of imports.

Accumulation of larger amounts is not beneficial since we earn low rates of interests on these holdings. Acquisition of foreign companies by Indian businessmen is largely outside the hands of the Finance Minister. An enabling framework has already been put in place. The option before the FM is to allow outward investment by individuals, say, for the purchase of shares in the New York Stock Exchange or for the purchase of property in London. The FM can take a bold action in this direction and allow the same in small amounts. This will be a step towards full convertibility which may come later.

The balance dollars have to be necessarily sent out through higher imports. The option before the FM is to encourage imports of some items and discourage imports of other items. The FM can determine whether the country will import more cement or fertilizers as long as the total imports are sufficient to suck out the excess dollars. This will necessarily impact domestic industries adversely.

Higher imports of a commodity will necessarily mean less domestic production of the same just as the cooking done in the kitchen is less when TV dinners are brought in larger numbers. Thus Assocham and CII have demanded a reduction in excise duties from 16% to 14% in tandem with the reduction of the import duties to enable domestic industries face the competition from cheap imports. They are demanding a level playing field. This demand is entirely justified.

The difficulty is that this does not solve the basic problem of removal of excess dollars from the system. A reduction in excise duties will lower the cost of production of domestic industries, lead to fewer imports and add to the indigestion of excess dollars coming into the system. It will lead to less outflow of water from the canal system and lead to overflow and catastrophe everywhere. The need is to find something to import that does not hurt our industries. That will lead to less pressure on imports of other items and domestic industry will stand protected.

My suggestion is that the FM should create a large fund to import gold in large quantities. Alternatively, he could encourage RBI to do this. The US government holds huge stocks of gold at Fort Knox. We should do the same at Fort Amer of Jaipur. The purchase of gold will have two beneficial effects.

One, it will suck out the excess dollars and reduce the pressure on imports across-the-board. Two, it will help us preserve the national wealth within our borders. Our reserves will not stand the danger of devaluation because of decline in the value of the dollar, for example. The FM may increase customs duties for generating revenues for this. That will provide double protection to domestic industries without hurting the domestic manufacturers of cement or edible oils as happening presently. The Free Trade Areas being established with various countries may be a hurdle here. They can be amended suitably. Or the import duty on import of gold by individuals can be reduced to encourage private imports. The main point is that imports of gold do not hurt our economy in any way yet suck out the excess dollars.

The direction of imports can be bettered. The reduction of customs duty on cement and edible oils is not good for the country even though it may help in reducing the rate of inflation in the short run. The domestic supply of these commodities will not increase unless price is allowed to rise. By allowing cheap imports, we are discouraging an increase in domestic production and fostering import dependence. That will be harmful in the long run. Instead the FM should encourage imports of items that do not conflict with the domestic industrial activity.

We could import more phosphate fertilizers. We could provide an import subsidy on straw and other animal feeds. That will lead to more generation of milk and organic manures and help preserve our food production and food security. We could provide import subsidy on uranium and other nuclear fuels. The government must put in place a system of providing `technology-subsidy' on imports of frontline technologies along the lines of capital subsidy scheme of the yesteryears. More imports of oil would also be good.

Plentiful supply of LPG will provide easy fuel for our rural people and help conserve our forests. The demand of the Chambers of Commerce for reduction of customs duties on components and raw materials is also justified. The basic point is to increase imports of items that do not conflict with our domestic industrial activity.

News: Biggies in race for Delhi airport rail link project

(BL 14/02/2007) New Delhi - Domestic and multinational biggies including Alstom, Bombardier, Siemens, DLF, GMR, GVK, IL&FS, Reliance Energy and French firm Veolia Transportation are engaged in hectic negotiations to form consortia and bid for managing the high-speed rail link that would connect the international airport in New Delhi with the city centre.

Alstom, Bombardier and Siemens are also trying to get a pie of business in metro projects of Delhi, Mumbai, Bangalore, Kochi, Hyderabad and Chandigarh, which are in various stages of implementation.

Delhi Metro Rail Corporation (DMRC) has invited expressions of interest from firms to design, supply, install, commission and operate the 19-km rail link for 30 years. The civil works for the project would be handled by DMRC. The consortium which gets the concession will have to install all systems including rolling stock, overhead electrification, track, signalling and telecommunication, ventilation and air-conditioning, automatic fare collection, baggage check-in and handling, depot and other facilities.

Partnership options

None of the companies, however, are willing to divulge their partnerships. Most of them maintain that they are weighing various options. DMRC has mandated that one of the consortium members should have been a major partner of at least one such project.

Confirming Bombardier's participation in the airport rail link project, the company's Managing Director Mr Rajeev Jyoti said, "Bombardier is a member of consortium involved in financing, design, construction, and operation and maintenance of the 80-km Gautrain Rail Link in South Africa."

"Alstom has provided metro turnkey solutions that include project coordination, designing, building, commissioning and maintaining metros in Sao Paulo and Cairo.

News: IndianOil in talks with Turkey's TAPCO

(BL 14/02/2007) Kolkata - IndianOil (IOC) is negotiating with Trans-Anatolian Pipeline Company (TAPCO) of Turkey for award of engineering as well as operation and maintenance contracts. TAPCO is laying a 550-km pipeline to transport 1.5 million barrels of crude oil a day from northern Black Sea city Samsun to the Mediterranean port city Ceyhan in Turkey. The pipeline will replace the tanker movements through the Bosphorus Straits. In MoU for stake IOC has already entered into an agreement with the existing promoters of TAPCO - ENI of Italy and Calik Enerji of Turkey - for picking up 12.5 per cent stake at an undisclosed price in the $1.5-billion pipeline project. "We are expecting to get some engineering contracts and the operation and maintenance rights for the project," an IOC official said. He, however, added that decision in this regard would be formalised once the IOC board approved the company's proposal to pick up stake in the project. IOC is expected to seek requisite board approval for participation in the project in its next meet. According to sources, representatives of TAPCO recently visited the country to take stock of IOC's abilities to handle such a large-scale cross-country pipeline. "They have expressed satisfaction at our abilities," the official said. IOC has created a network of over 10,000 km product and crude pipeline across the country. This apart the company recently forayed into LPG and natural gas pipelines in the country. The company is also looking forward to tap emerging opportunities in the natural gas pipeline sector in India. Meanwhile, steps have been taken to tap the growing overseas opportunities in the crude pipeline sector. The company has already entered into MoU with Russian oil and gas construction major Stroytransgaz in this regard and had bid for a proposed crude pipeline project in Syria.

News: 'India can attract 25% of global engg process outsourcing'

(BL 14/02/2007) New Delhi - As the International Engineering and Technology Fair kicked off on Tuesday, the Union Minister of Commerce and Industry, Kamal Nath, said that country had the potential to attract 25 per cent of the $ 70 billion global engineering process outsourcing industry.

Infrastructure needs

He said that the need for infrastructure in the domestic market was pegged at $ 330 billion and hence had a great potential in achieving the growth target of 15 per cent in manufacturing.

"We are targeting a growth rate of 25 per cent from the current share of 17 per cent of the share of manufacturing sector to the country's GDP. At present the exports in this sector stand at $ 24 million and may cross $ 30 million," said Nath.

Japanese FDI

He also highlighted that FDI from Japan to India had been growing at 60 per cent for the last two years. "Japanese business is excited about the Delhi-Mumbai industrial corridor, a mega industrial zone that will attract investments and promote trade," said Toshiaki Kitamura, Vice-Minister for International Affairs, Ministry of Economy, Trade and Industry, Government of Japan.

New wave

"Re-engagement of Japan and India had commenced with the visit of the Prime Minister to Japan in December," said R. Seshasayee, President, CII - that has organised the fair jointly with Japan as the partner country.

News: Vodafone to invest $2 b in India

(PTI 14/02/2007) New Delhi - Vodafone CEO Arun Sarin on Wednesday said the company would invest $2 billion in India in the next couple of years, while on a personal note termed the Hutch-Essar win as a "homecoming." “This (Hutch-Essar) is the biggest company in the Vodafone group in terms of subscriber base," he told reporters on his first visit to the Capital after announcing acquisition of India's fourth largest mobile player with 24.4 million customers. Sarin, who was born in India and graduated from IIT-Khargapur, described the deal as a homecoming. "This is what we used to talk during the IIT days." Having clinched the deal, Sarin is now intent on making Hutch-Essar the country's number one player with a target of 100 million customers. At present, mobile leader Bharti Airtel has a subscriber base of over 33 million. Vodafone, the world's largest mobile player in terms of revenue, has said it would bring in all incremental investment while ruling out an Initial Public Offer for raising funds from the market. "We have enough funds," Sarin said. The transaction is expected to be completed in about two months, including obtaining all regulatory approvals. While Vodafone had bid $11.1 billion for Hong Kong-based Hutchison Telecom's (HTIL) 67 per cent stake in the mobile venture, it actual stake acquisition would be only 52 per cent as the remaining 15 per cent is held by minority Indian shareholders who have opted to continue as partners. Vodafone, which offered to buyout the 33 per cent stakeholder Essar from the venture at the same price as given to HTIL, said it would like it if the Indian conglomerate stayed put as a partner.

News: Videocon nears Italian deal

(BS 13/02/2007) Mumbai - Even as the fate of its bid for Daewoo's electronics business hangs in the balance, the Videocon group is close to acquiring Magaldi Power, an Italian company.

Italy’s minister of international trade, Emma Bonino, who is on a visit to India, said Videocon Industries was in the final stages of negotiations with the Napoli-based company and a deal was expected to be announced soon.

Magaldi Power SPA is part of a 70-year-old Italian business house. The company deals in dry bottom ash handling systems for solid fuel-fired boilers catering to the power generating industry.

Venugopal Dhoot, chairman of Videocon Industries, refused to comment.

The deal could be announced tomorrow, as a host of Italian companies are expected to sign agreements with Indian companies in Mumbai in the presence of the Italian prime minister.

Fiat is expected to sign another agreement with the Tata Group and Italian aviation major Finmeccanica is expected to announce tie-ups with several Indian aviation companies. However, the trade minister refused to disclose details of the agreements.

Bonino told Business Standard that the Italian delegation, which included almost 400 top Italian CEOs, was extremely bullish on enhancing business ties with India.

She said the Italian government has set up a Euro 300 million “Go India” fund sponsored by a group of Italian financial institutions to help Italian small and medium businesses explore business ties with Indian companies.

News: Anil Ambani bets big on healthcare

(BS 13/02/2007) Mumbai - The Reliance Anil Dhirubhai Ambani Group (ADAG) is planning a big splash in healthcare services, and has decided to invest over Rs 5,000 crore.

The plan includes setting up a chain of medicine retail stores at a cost of Rs 1,200 crore, setting up four hospitals for Rs 400 crore each and two medi cities involving initial investments to the tune of Rs 2,000 crore each.

The four hospitals will be set up in West Bengal, Bangalore, Delhi and Mumbai within the next seven years. The company will also bid for the healthcare cities coming up in Udaipur and Jaipur, with focus on medical tourism.

Sources close to the developments told Business Standard that Reliance Health Venture’s drug retail foray will roll out in a big way nationally within three months. It will acquire or take strategic equities in the existing retail drug chains operating in India and has already bought two small retail chains.

Advanced negotiations are on to acquire some of the big pharma retail chains. Further, it has tied up with 20-odd drug distributors and associations in various parts of the country.

Plans are to source drugs directly from the companies and supply to hospital pharmacies and retail medical shops by acting as a ‘national distributor’ to pharmaceutical and healthcare manufacturers in India and abroad. Reliance Health Venture has ensured ‘sole drug distribution rights’ with 10 leading pharma companies and is targeting at least 30 more companies. It will also set up 25 fully air-conditioned drug warehouses with advanced infrastructure in different parts of the country.

The venture will also take up distribution of medical devices, lifestyle products and over the counter (OTC) drugs. Around Rs 200 crore is likely to be earmarked for giving a facelift and creating brand equity for the Reliance Health pharmacies.

Sources said three to four teams of Reliance Health Venture, headed by Rajendra Pratap Gupta, former CEO of Medicine Shoppe and also executive director and CEO of Medybiz, are working overnight to roll out the national plan. When contacted, Gupta declined to comment.

In Mumbai, Reliance Health Venture has already acquired the Mandke hospital, which will be converted into a 650 bed super speciality hospital with six divisions.

About 200 beds will be ready by September and the hospital will be fully functional in 2008. Reliance Health Venture has acquired land in West Bengal and Delhi to set up greenfield super speciality hospital projects.

Reliance Health also has placed bids with the respective state governments for the health city projects proposed at Jaipur and Nagpur. About 100 to 250 acres each will be acquired for the project, which will attract investments in medical tourism.

News: Indian realty firms eye PE as bank funds dry up

(BS 13/02/2007) Mumbai - Small- and medium-sized realty firms are scouting for private equity funds to finance forthcoming projects as bank funds have dried up following concerns over high credit growth to the sector.

“It is a typical case of demand beating supply, which has lead to high prices. With order-books full for 3 to 5 years, these smaller firms are finding it hard to raise money from the open market. Private equity funds are ready to take this risk,” said Alok Agarwal, a senior analyst with brokerage Motilal Oswal.

This year, around 7-8 IPOs, including the much-talked DLF are likely to hit the market.

As per market expectations, most of these issues could see inflows from private equity funds. Conventionally, Indian companies prefer project financing instead of private equity, but the scene has changed over the last few years.

Private equity participation in all sectors grew 252 per cent last year as such funds invested around $7 billion in the country, a report by Asian Venture Capital journal had said recently.

Besides, PE-backed companies have grown faster than their similar-sized competitors, which don’t opt for PE funding, a Venture Intelligence report had mentioned.

Despite concerns over growth sustainability of the sector, private equity funds are ready to bear the risk, as they feel that the regulators will not slow down growth in infrastructure to meet the targeted 9 per cent growth.

“It is true that overvaluation exists in the sector. But at the same time, most sectors face similar criticism. I think there could be softening of prices in days to come. But, we don’t see chances of a price crash,” Amit Dand, manager with Tano Capital said.

Jai Mavani, executive director, KPMG India, observes that overvaluation exists in “select pockets”. “A lot of funds and developers are shifting their focus to tier-II and III cities. It is logical for them to do so as population shift is happening in these cities owing to changing job patterns.”

Besides private equity funding, construction firms are also exploring raising money at avenues such as London Stock Exchange’s Alternate Investment Markets, where they could earn project-specific finance and avoid listing the whole entity.

Using this mode, around 15 Indian firms, including Noida Toll, Ansal, Hiranandani Developers, Unitech and Raheja Group, have raised funds from the AIM this year.

Analysts also predict that the listed real estate as well as construction firms could also sell some equity to private lenders to fund their ongoing projects.

“Real estate firms, with huge land bank, have already scaled high valuations. Housing demand has gone up, but the high lending costs could hurt retail demand. As banks are cautious on over-lending to the sector, I hear some sound of caution for this sector,” a real estate analyst said.

News: Pricing worth the entry into India

(BL 13/02/2007) Mumbai - While Vodafone may be successful in winning a controlling interest of 67 per cent in Hutch Essar, will it end up paying a heavy price at an enterprise value (EV) of $ 18.8 billion? There are two elements that need to be considered. One, for Vodafone, which has lacked a cohesive emerging market strategy, Hutchison Essar will help fill a strategic gap by opening a gateway into the Indian market. Since Vodafone was unable to achieve this objective through its 10 per cent effective equity stake acquired in Bharti in late 2005, this is probably the next best alternative. Two, though the deal value is lower than the scary EV of $ 21 billion that was speculated earlier, it still works out to a stiff price. Based on the two key performance metrics - enterprise value/EBITDA (earnings before interest, tax, depreciation and amortisation) and EV/revenues, the consideration payable by Vodafone to Hutchison Essar is at a 20-30 per cent premium to the valuation of Bharti Airtel and Reliance Communications. While this valuation builds in an element of control premium payable on such deals, Vodafone is banking heavily on effectively leveraging infrastructure-sharing arrangements (of the kind struck with Bharti for ILD and NLD today), value-added and innovative schemes, which are its forte worldwide and capitalise on 3G services over the next few years. What is encouraging about this deal from Vodafone's point of view is that it meets the stated financial investment criteria committed to the shareholders.

News: Markets take dim view of India Inc's dream

(DNA 13/02/2007) Mumbai - At a time when the world is gung-ho about the India story, the Indian stock markets seem to be developing cold feet. The Birlas are set to ascend the global aluminium league, the Tatas are No 5 in steel after the Corus takeover, and Suzlon wants to harness favourable winds to take over Germany's wind energy major REpower, but punters have taken a dim view of these bold initiatives. On Monday, when the Bombay Stock Exchange Sensex tanked 348 points, worried investors were dunking Hindalco Industries by 13.74%, while Suzlon Energy declined 13.26%. On Sunday, the former had announced its $6 billion acquisition of Atlanta-based Novelis, the world's leading producer of aluminium-rolled products. Suzlon has made a $1.33 billion offer for its faltering German competitor, REpower Systems AG. "The market is not prepared to accept the fact that Indian corporations can absorb the huge debts they are creating to acquire companies larger than their own size," says Sharekhan, in a post-market note. The Birlas are financing $2.4 billion in a cash payout of $3.55 billion for Novelis through debt. Two weeks ago, when Tata Steel announced its successful bid for Corus, again financed substantially by debt, the share dropped 10.6%. The market is also jumpy about deals that fail. On Sunday, when Vodafone bagged Hutch, the market dumped losing horse Reliance Communications, beating its share down by 4.32%. Having won Hutch, Vodafone offloaded around 5.6% of its stake in Bharti Airtel to comply with the foreign holding cap in the telecom sector. This saw Bharti Airtel also coming under selling pressure, ending down 3.19%, even though Vodafone has offered a sweet deal to Bharti on sharing telecom infrastructure. India Inc clearly has to start worrying about its image back home with investors.

News: Is the realty bubble about to burst?

(DNA 13/02/2007) Mumbai - Real-estate stocks, which were a hot favourite with investors only some time ago, are suddenly being shunned.

Why have these scrips lost lustre? Does it have anything to do with a property price correction? Leading developer and Mantri Group chairman and managing director Sunil Mantri thinks so.

"The current real-estate market is overheated and there could be a small correction," he said. "In some places, it is already happening. Over the past few months, property transactions in Mumbai have gone down by 20%. High prices and rising home loan interest rates have affected the buying power of people and so they have adopted the policy of wait and watch."

Property prices across Mumbai range from Rs 4,000 to Rs 50,000 per sq ft. This, Mantri believes, could be the peak from where prices go downhill.

Consultant Ashok Narang of L Lachmandas & Co sees the meltdown in real-estate shares as a conspiracy of builders to keep DLF Developers, which will soon be launching its Rs 10,000 crore IPO, out of the market.

"DLF has paid deposit on plots across India and would be acquiring them after it raises money from the IPO," he said. "Many other real-estate firms are also eyeing those plots. These firms are pulling down real-estate stocks so that DLF is not able to get a good issue price."

Narang does not agree that soaring prices have taken properties beyond the common man's reach. "If property prices have risen, then salaries have also gone up," he said.

For Anuj Puri, managing director, Trammell Crow Meghraj, the slump in real-estate stocks is a reflection of a speculator's mood and not a consumer's. "At these prices, property is no longer attractive to a speculator, but demand from a real buyer is still there," he said. "However, he will now shift from central Mumbai to the suburbs.

As long as the supply doesn't meet demand, prices will continue to move up. Though, in some pockets like Nariman Point and Andheri, which have overstretched themselves, one could see a correction."

But people associated with the property market say demand has slowed in the last two or three months, and volumes are lower, especially in markets like Mumbai, Chandigarh, Delhi, Bangalore, and Pune.

But they also add that "though supply has increased, there is no major worry visible among builders as their resistance to hold on to their stocks has increased."

While there are no indications of a drastic slowdown in demand, it may weaken in a few months.

"By June-July, there should be some correction as more supply is coming to the market, interest rates are going up, and demand is not strong," said a consultant.

"Weaker builders who don't have holding power may trigger a correction." Lastly, the budget is also being keenly awaited by the industry.

News: Tatas let call option on VSNL lapse

(DNA 13/02/2007) Mumbai - The Tata group has decided not to exercise the call option to acquire the government's 26% stake in Videsh Sanchar Nigam Ltd (VSNL), the company they acquired five years ago.

The call option expired on Monday. Sources close to the development said that the Tata group has a combined effective shareholding of over 50% in VSNL.

"It will continue to acquire additional stakes through market acquisitions. Under the circumstances, it was not considered to be a significant advantage in exercising the call option," the source added.

News: TCS gets multi-million dollar contract in China

(RTR 13/02/2007) Bangalore - Tata Consultancy Services Ltd, India's top software services exporter, said on Tuesday it had won a multi-million dollar contract from a unit of the People's Bank of China.

TCS, part of India's salt-to-software conglomerate Tata Group, will implement a comprehensive international trading system for China Foreign Exchange Trade System, the company said in a statement. It did not give a specific value for the deal.

TCS set up operations in China in 2002.

At 0747 GMT, shares in TCS were up 1.6 per cent to Rs 1,247 in a Mumbai market that was up nearly one per cent.

News: 'Tie-up with Wal-Mart to benefit common man'

(PTI 13/02/2007) Barcelona - Seeking to put to rest concerns about impact of multinationals on livelihood security of local retail operators, Bharti Group Chairman Sunil Mittal said his group’s tie-up with Wal-Mart would "reverse" this perception.

"The joint venture will work in the interest of common man. For example, a pullover will be available for about Rs 40 against the average price of Rs 400 per piece," he told PTI here.

"We are following the policy and all the norms on joint venture with Wal-Mart," Mittal said in the context of the political debate over Foreign Direct Investment in retail and

Congress President Sonia Gandhi's letter to the government, advising caution on opening up the sector for FDI.

According to reports, the Congress President had written to the Prime Minister asking the government to first study the impact of transnational super markets on livelihood security of those engaged in small scale operations, before taking further decisions on FDI in retail.

Mittal said the joint venture, forged last year, would unveil its retail plans in ten days.

Asked about reports whether Wal-Mart's CEO would visit India, he said a top-level team of the US retail giant’s management would be in India from February 22-24, but did not elaborate.

News: Birla hits the Fortune 500 3 years ahead of schedule

(DNA 12/02/2007) Mumbai - If the Tatas pulled off a multi-billion-dollar acquisition, can the Birlas be far behind?

Hindalco Industries, a flagship company of the Aditya Birla group, on Sunday announced an agreement to acquire Novelis Inc, the largest flat-rolled aluminium maker in the world, for $6 billion (Rs 26,400 crore), which includes $2.4 billion of debt on the books.

The all-cash deal will involve payment of $3.55 billion in cash to Novelis shareholders, at $44.93 a share. The Novelis share closed on Friday at $38.54 on the New York Stock Exchange.

Announcing the deal, Kumar Mangalam Birla, chairman of the Aditya Birla group, the fourth-largest Indian business group by sales turnover ($12 billion at last count), said: "The deal will catapult the group to the Fortune 500 list three years ahead of what we had targeted." Birla had spoken of his Fortune 500 ambitions in DNA Money's inaugural issue on July 30, 2005.

The deal, when consummated in the second quarter this year, will also catapult Hindalco to No 5 rank globally as an integrated aluminium player. On the Birla radar for some time now, Novelis Inc is the world's largest flat rolled aluminum maker, and will thus make Hindalco No 1 by far in this category. Novelis has been a loss-making company waiting to be acquired. Its woes stem from the fact that it has no captive source of bauxite, which forces it to buy alumina, the main raw material, from the spot markets.

In the nine months to September, 2006, Novelis had reported a loss of $170 million largely because it is locked into fixed-price contracts with many customers that run upto 2011. Birla will have to carry the can till then.

The story line for the Birla deal almost runs parallel to what Tata Steel's logic was in acquiring Corus Group for $12 billion.

It will give Hindalco a quick entry into value-added aluminum products that include sheet metal for cars and cans for beverages. "We need technology. We need to move into the high end of the aluminum market", says Debu Bhattacharya, managing director of Hindalco.

Hindalco, like Tata Steel, is also in the midst of a gargantuan greenfield capacity expansion plan that'll cost it a whopping sum of Rs 25,000 crore.

The young scion of the Birla family, 39, who's known for his tenacity when pursuing an acquisition, brought along his mother, Rajashree, also the vice-chairman of his group, and his wife Neerja to the press conference.

"We have been conservative with our business and we'll remain very competitive", says Birla, who admitted that Hindalco will face the pangs of acquiring Novelis for a couple of more years. While $2.8 billion of the funds required will come from recourse financing, the balance of $750 million will come from Hindalco and group company Essel Iron Ore Mining.

The Birlas were confident that a repeat of Corus, where the initial Tata bid faced a challenge from CSN of Brazil, is unlikely. "We have secured the Novelis board's support on Hindalco's offer of $44.93 a share." The price represents a premium of about 17% over the stock's closing price on Friday last week."

The Birlas are certain that they have locked in the deal, thanks to the shrewd manner in which they have structured it. Any interloper walking in late to place a bid will have to pay US $100 million (Rs 441 crore) as breakoff fee to the Birlas. The Birlas have also put in a clause in the agreement that any new bid has be at least $3-4 higher than what they have promised to pay. "I can bet that we'll get it," says Debu Bhattacharya.

News: Club Rich is 1.8 m and growing

(DNA 12/02/2007) Mumbai - For K Sanjay Prabhu, Sunday usually means spending quality time with his high-end customised home theatre system and two kids. “I’ve got the best in the market. It cost me more than Rs 200,000!” says 44-year-old movie and music buff Prabhu, director and CEO of the Bangalore-based Radio Indigo.

If one were to believe Arvind Singhal, chairman of the management consultancy KSA Technopak, by the end of 2007, India will have more than 1.8 million Sanjay Prabhus, i.e., households with annual incomes above Rs 45 lakh. That tots up to 6 million Indians.

Singhal and his team have met over 4,000 affluent consumers spread over 12 cities across the country to map the emerging super-rich category. The KSA Technopak study finds that the chief earners in such households are 35 years old or more and one-third of them have men and women with professional qualifications. “Almost 70 per cent of such households are engaged in business. Significantly, 20 per cent comprise executives,” says Singhal. “The traditional rich comprise less than 1 per cent.”

Each household in this new class will spend about Rs 400,000 lakh a year on luxury and premium goods and services. That works out to a market potential of Rs 72,000 crore. It’s a story of first-time wealth creators. “The 45-lakh plus households are growing at an incredible rate of 12 per cent. That works out to at least 216,000 new households every year. Indians are getting rich,” says Singhal.

And the world’s taking notice

The India growth story is not just confined to the 'super-rich’. The 'ultra-rich’ too is a creation of the booming economy. The World Wealth Report published by the investment bank Merrill Lynch and the consultancy firm Capgemini last year says the number of High Net Worth Individuals (HNWI) - liquid assets of more than US$1million, excluding primary residence and consumables - increased by 19 per cent in India.

While, at one level, the rich are being hair split into 'rich’, 'super-rich’ and 'ultra-rich’, the average Indian consumer is also feeling the rub-on effect. AC Nielsen’s Global Consumer Confidence Report, 2006, finds the Indian consumer upbeat, with over 85 per cent saying their personal finances will improve in 2007 and over 60 per cent saying they will make big ticket purchases this year.

“Lifestyles are becoming global. I have clients who want to set up niche luxury goods and premium services stores in India. We are on the brink of a pretty big revolution,” says Sarang Panchal, executive director (Customised Research Services), Asia Pacific, AC Nielsen. “The aspiration levels of the Indian consumer are becoming international.”

And if the world’s taking notice, then the advertisers are paying close attention to this phenomenon. Quite a few are rubbing their hands in glee. “Of course, it is a huge opportunity for us,” adman Prahlad Kakkar told DNA. “The primary occupation of all Indians has always been shopping. Earlier, every distant cousin who went abroad returned loaded with goodies. Now, the opportunity is available in India.”

The new Indian, loaded with cash, is not price conscious. “He is value conscious and wants luxury and premium products,” says Singhal. Kakkar agrees. “Today, the value lies in a brand. A T-shirt is no longer a T-shirt. It reflects the brand with which you want to be associated. A product has acquired aspirational overtones, making it what you want to be,” he says.

Media planner Sandeep Nagpal points out an interesting conundrum that the advertising industry faces today. “Target audience categorisation in terms of SEC A/B/C is no longer relevant. What do I call the new class of super-rich, who are not conventionally SEC A? SEC A+?” asks Nagpal, director, Strategem. “The super-rich are also redefining the marketing paradigm. Unlike earlier, intangible values are becoming more important than tangible values.”

Where is the new money going?

Luxury and premium are the buzzwords when it comes to spending that wad of cash. “Premium housing, premium education and premium vacation are the top three picks,” says Singhal. “For instance, a premium vacation will mean a private cruise along the Amazon river, and not a trip to Bangkok and Pattaya.”

As for personal accessories, jewellery (27%), clothing (16%), digital accessories (13%), timewear (8%) and cosmetics and skincare (8%) occupied the top slots. But, significantly, there was a difference between 'super-rich’ men and women. “The top two picks of men were premium watches and premium eyewear, while the top two for women were premium jewellery and cars,” says Singhal. “In fact, the eye-opening fact was women preferring cars. And these were not high-end ones, which could only mean that women perceived mobility as freedom.”

News: India Inc on a buying binge

(BL 12/02/2007) Mumbai - One of the first overseas acquisitions by India Inc. in 2007 which received little or no notice was Mahindra & Mahindra Ltd's takeover of 90 per cent stake in Schoneweiss & Co. GmbH, a family-owned German forgings company with over 140 years of experience in the sector.

Among the top five axle beam manufacturers in the world, the company specialises in suspension, power train and engine parts, and its top customers include the DaimlerChrysler Group, MAN, Scania and Volkswagen. Schoneweiss has three manufacturing plants in Hagen and Gevelsberg, Germany, with a total manpower of 550 people.

M&M is convinced that the acquisition will create a strong European base and will consolidate its position towards becoming a globally significant player in the forgings business.

The Tata-Corus (the Anglo-Dutch steelmaker) $12.1-billion mega-acquisition, which hit the headlines on the last day of January, illustrates that Indian companies used to small deals are now prepared to use their cash mountains for larger acquisitions.

Tata Steel's Corus deal apparently offers the promise of access to high-end European markets combined with low-cost Indian manufacturing.

The Corus acquisition will be India's largest-ever global acquisition that will make Tata Steel the world's fifth largest steel producer with a capacity of about 26 million tonnes and combined sales of $24.4 billion. It is incredible and makes Indians hold their heads high in pride.

Acquisition drive

Indian companies are not just floating in cash; they're almost sinking! And keeping the cash in the bank is not an option, as it generates embarrassingly low returns.

Also, "vulture funds", or the so-called private equity firms that are driving up acquisition prices, could view that cash as a reason to target the company. So, Indian companies are now on an acquisitions overdrive!

With its strong balance sheets, India Inc is able to borrow heavily ahead of transactions, then use the proceeds from subsequent divestitures to pay back debt quickly.

Pharma, information technology, automotive component and textile companies, which are on an acquisition binge in the Continental market, are paying high premiums for companies, sparking speculation that Indian companies are getting aggressive in carving out a presence in Europe.

Riding high on a booming domestic economy and availability of easy international financing, Indian companies have already made overseas acquisitions worth a total of over $16 billion since the beginning of 2006, compared to just $4.5 billion in 2005.

Indian corporate deal-makers face a challenge: Though 70 per cent of major acquisitions fail, it is nearly impossible to build a world-class company without doing deals. So the acquisitions binge will go on.

Current Trends

Mergers and acquisitions worth $10.8 billion involved Indian companies during the first six months of 2006. These included $4 billion spent by Indian companies on 85 overseas acquisitions. Two-thirds of the money was spent on buying European firms. On the flip side, foreign companies bought 34 Indian firms worth $3.4 billion.

The average deal size of Indian M&As has also grown in the past two years. In 2005 it was $32 million. By the first half of 2006, the average deal value was $47 million. In some cases, the deal size was bigger than the acquiring Indian company's revenues

Four years of sustained growth - corporate earnings have increased by 20-25 per cent, on average - have boosted profitability and strengthened the balance-sheets of Indian companies.

Total cash flows for the Indian corporate sector were about Rs 250,000 crore ($50 billion) in 2006.

Flight of Investment

Indian companies are going into Europe, investing and saving European jobs, though there is no dearth of investment opportunities within the country.

The problems in India relate to infrastructural constraints, restrictive labour laws and job security regulations.

Despite the voracious appetite for investments in India, governments, both at the Central and State levels, have failed to put in place non-discretionary, transparent mechanisms for channelling these investments.

The Centre's obscure procedures were apparent from the dearth of transparency concerning norms for acquiring agricultural land for setting up industrial units, especially those located in the Special Economic Zones.

Europe Shifting Eastward

While India Inc. is on an acquisition spree in the Continent, European companies, weighed down with soaring costs of labour and manufacturing, high taxes, apathetic labour laws, stumpy working hours, far above the ground health-care and pension costs, are on a horizontal cross-border consolidation course to create a class of pan-European champions able to compete with their counterparts around the globe. Decision-makers of European "national champions," as well as smaller players, are moving eastward, to grow by way of acquisition and relocation, based on the realisation that they need to increase the scale and geographic footprint of the companies they manage if they are to position them to seize growth opportunities in the principal developing economies, particularly the areas collectively known as BRICET (Brazil, Russia, India, China, Eastern Europe, Turkey).

Getting locked in

Multi-billion dollar deals such as the Corus acquisition by Tata Steel is putting India Inc on the fast lane to be counted among the world's largest corporates.

Tata Steel is already being projected as a sure-shot entry to the next Fortune Global 500 list, following its acquisition of the Anglo-Dutch steelmaker that comes in at the 352nd position.

While we can look forward to more Indian companies on the Fortune 500 list in the years to come, it will be exciting to see how many remain there.

Acquisitions in Europe are like the highly sophisticated chakravyuh (a maze) that involves a legion of the world's best. It is like circles within circles. You can travel inter-dimensionally if you understand it. Only, knowledge, preparation and lucid strategy can liberate you as a palpable winner.

News: CII suggests new model to create jobs, skills

(RTR 12/02/2007) New Delhi - The Indian economy, in order to maintain its growth curve, needs to create jobs as well as overcome the shortage of skilled human resources. An industry lobby has suggested that setting up a "skill development bank" can achieve the two aims in one go.

Recognising the lack of financial support coming in the way for job-seekers to acquire skills, the Confederation of Indian industry (CII) felt that special attention needs to be paid to the availability of finance for potential trainees as also for the skill development infrastructure.

Putting forward a unique model to address this issue, it said the government needed to set up a Skill Development Bank (SDB) as a financial intermediary between commercial banks and the final customer - the potential trainees.

A dedicated SDB would be required since commercial banks currently perceive risk in lending to these trainees, CII said in a release Monday.

The SDB would also extend loans to private players looking at setting up new institutes or upgrading existing ones. Lending by commercial banks to the SDB would be taken as part of banks' priority sector-lending targets, recommended CII.

In order to reduce the risk of default, the SDB would lend money for training directly to the training institute in question, where the trainee would be inducted.

On the completion of the training course, the original diploma certificate would be directly handed over by the institute to the SDB, which would hold this as a collateral for the trainee, suggested the CII model.

The certificate would be transferred from the bank to the person's first employer directly, with an arrangement that the company would settle the loan on behalf of the trainee in easy instalments, which would be deducted from his salary.

To ensure a rapid take-off of the model and make it affordable as well as lucrative for the trainees, CII has suggested a concessional rate of interest at 7 per cent for such loans.

CII said that this initiative would have to be largely government-funded for the time being and, therefore, such an institution would have to be created under the act of parliament.

It added that market forces would eventually take over and loans for vocational training would be available from commercial banks.

Moreover, CII called for a huge thrust in this year's union budget on education and skill development. A beginning should be made in the coming budget, to be present Feb 28, towards hiking the support for this sector from the current level of 2.9 per cent of GDP to around 6 per cent before the terminal year of 11th Five-Year Plan (2007-12).

News: Toyota to build new plant in India by 2010

(RTR 12/02/2007) Tokyo/Mumbai - Toyota Motor Corp. plans to build a new plant by 2010 in southern India, concentrating on inexpensive, smaller model cars, the Nikkei business daily reported on Monday.

The new plant, which would be built close to the company's first plant near Bangalore, would aim at producing 100,000 cars a year, roughly doubling the firm's output capacity in India.

It would cost roughly 40 to 50 billion yen ($328-$410 million) to build, the report said.

Asked about the article, a Toyota spokesman said the company did not have any such concrete plans at present but stopped short of saying the report was incorrect.

A spokesman in India said he was "not aware of such a plan".

Toyota, Japan's top auto maker, has said it wants 10 percent of the fast-growing Indian market by 2010, when annual sales are expected to nearly double to 2 million units or even more.

Toyota sold 48,000 vehicles in India in 2006, including the seven-seater Innova and the Corolla and the imported Camry sedan and Prado sport utility vehicle.

Toyota has said it is considering developing a cheap small car for India and other emerging markets.

Its rivals Suzuki Motor Corp and Honda Motor Co. have a sizeable presence and are expanding capacity.

Suzuki -- whose Indian unit Maruti Udyog Ltd. has nearly half the market for mostly small cars -- is investing a further 200 billion yen by 2010 to expand capacity at car and engine plants.

Honda is building a second plant in India and aims to sell more than 150,000 vehicles a year by the end of 2010.

News: France's Auchan eyes Indian retail

(TNN 12/02/2007) New Delhi/Mumbai - The government may be a fence-sitter on FDI in retail but that has not dampened the enthusiasm of global retailers to be part of India’s growth story. Auchan, the $50-billion grocery and consumer goods retailer from France and the ninth-largest food retailer in the world, is shaping up its India plans.

The retailer is believed to have held talks with Bombay Dyeing, a Wadia group company which is currently finalising its retail venture. It is learnt that Ness Wadia has met the Asia-Pacific head of Auchan. Informed sources said the much-publicised Wadia-Carrefour alliance is still far from being finalised and the deal could swing either way.

Carrefour, it’s learnt, is talking to other Indian business houses as well. In the absence of FDI in front-end retail of food and grocery, which is also not set to be liberalised in a hurry, most foreign retailers are exploring a model similar to that of Wal-Mart-Bharti (JV at the backend and a licensing arrangement in the front-end) which is permissible under Indian laws.

At the same time, foreign retailers want to partner business houses of repute who also have sufficient political clout. This explains why Wal-Mart chose the Bharti Group (it is learnt that it had also approached Reliance Retail) and why Carrefour’s talks with the Dubai-based Landmark group failed.

Given the government’s blow-hot, blow-cold attitude towards foreign retailers, especially those selling food and grocery, consultants often advise such retailers to go with partners capable of providing sufficient cushion during rough weather.

A Bombay Dyeing spokesperson declined to comment on its retail plans. However, it’s known that the group is currently finalising its plans in the space of malls, hyper markets and super markets. The group’s textile retail business is being handled independently of its other retail plans.

Auchan, the latest foreign retailer to join the India bandwagon, is known for its strength in hypermarkets and has also strengthened its position in supermarkets through the acquisition of Docks de France. It is currently faced with the challenge of pushing growth rates beyond France and other developed but saturated markets.

From the time its first outlet in Roubaix, France opened in 1961, Auchan has grown over the past 45 years to become a leading international grocery and consumer goods retailer, operating across 12 countries globally.

With a workforce of 160,000, the Auchan Group operates over 600 supermarkets and 300 hypermarkets. Groupe Auchan, an unlisted family company, is implementing a policy of progressive and controlled international growth, and is concentrating its investments on priority development areas: Western Europe, Central and Eastern Europe, and Asia.

News: India Inc in Q3 — Few dark spots in bright picture

(BL 11/02/2007) Mumbai - India Inc has yet again pleasantly surprised investors with commendable results for the quarter ended December 2006, leading to renewed buying interest. Buoyed by the healthy earnings scorecard, the bellwether indices Sensex and Nifty have scaled new highs. Corporate India's sales for Q3 grew about 27 per cent while net profits increased about 67 per cent on a year-on-year basis (including the "other income" component, which was up 28 per cent). On a sustainable basis, however, the operating profit for the quarter increased by about 48 per cent. Rising interest costs (31 per cent higher) are a source of concern. A total of 2,140 companies have announced their earnings so far. Impressive numbers from cement companies, private banks, infrastructure, steel and non-ferrous metals, apart from the usual high-performers, such as information technology and telecom service providers, underpinned strong profit growth. Sugar and automobiles, on the contrary, posted lacklustre numbers. Here is a brief overview of the results of various companies, on a sectoral basis: Cement companies firm up: Cement companies once again came up with impressive numbers, registering a 270 per cent increase in net profits over the quarter. Robust sales volumes and better realisations have driven an overall increase in the operating profit margins for the majors. Helped by a consolidation of ACEL (Ambuja Cement Eastern) as well as healthy realisations and despatches, Gujarat Ambuja Cements reported earnings of Rs 337 crore, 284 per cent higher, while India Cements outperformed expectations by posting a sharp turnaround in profitability. Higher prices and better operating margins, in general, pushed up earnings' growth for Ultra Tech Cement, Prism Cements and Shree Cements. Banks, a mixed bag: Continuing the previous quarter's trend, private banks outperformed their public sector counterparts in profit growth. While the average net profits of public sector banks increased 16 per cent over the previous year, private banks notched up about 37 per cent growth. A bigger deposits base and higher fee-based income helped sustain the growth rates of private sector banks. ICICI Bank reported a 42 per cent rise in net profit for the third quarter on the back of higher interest income, coupled with a rise in fee-based income. A robust rise in net interest income (the interest earned on loans minus that paid for funds) bodes well for HDFC Bank, which recorded 32 per cent higher net profits for the third quarter. Bank of Rajasthan, ING Vysya Bank and Dhanalakshmi Bank doubled their earnings. State Bank of India, however, saw its net profits fall about 4.5 per cent as a result of higher provisioning and rising costs. Infrastructure/realty grows: Infrastructure/realty companies sustained their stellar earnings growth with 56 per cent higher revenues and a 257 per cent increase in net profit. Leading the pack, Unitech registered a staggering 3,190 per cent increase in earnings as several of its ongoing residential projects were completed and booked over the quarter. Its operating margins stood at 69 per cent, against 13 per cent the previous year. Other companies that scored high were Valecha Engineering, Prajay Engineers and Noida Toll Bridge. Higher volumes and, hence, better operating margins, could have contributed to the sector's strong showing. Metals strike: While the growth in volumes for players in non-ferrous metals was healthy, better realisations contributed to their earnings' growth. Hindalco reported a 91 per cent increase in earnings on the back of a 62 per cent volume growth. Its operating margins grew about 216 percentage points during the period. Madras Aluminium recorded a 300 per cent increase in net profits on the back of robust revenue growth and 1,612 percentage points increase in operating margins. Buoyed by higher metal prices, steel companies too put up a decent performance last quarter. SAIL reported a 54 per cent increase in earnings on a yearly basis. Higher volume growth and an 800-percentage point increase in operating margins boosted performance. Tata Steel, helped by a 21 per cent sales growth, reported a 35 per cent increase in earnings. Usha Martin, Jindal Stainless and Man Industries recorded over 130 per cent increase in net profits. Software — surprises from smaller firms: Results of software companies were mixed, as the quarter is seasonally a quiet one for the sector, with a lower number of billing days. An appreciation in the rupee also had an impact on overall earnings. Software majors Infosys Technologies, Wipro, TCS and Satyam Computers turned in numbers that ranged from `in-line with expectations' to `better-than-expected'. It was the mid-sized firms that turned up most of the surprises this quarter. Polaris Software, reporting a sharp turnaround in profitability, caught the market by surprise. Some of the small- to medium-sized companies, such as KLG Systel, Silverline Technologies, Four Soft and Tele Data Informatics, more than doubled earnings during the quarter. IOL Broadband and Ramco Systems, bucking the trend, registered losses during the period. Telecom buzzes with action: Continuous growth in the subscriber base provided the necessary impetus for telecom service providers, which turned in a solid performance during the third quarter. Bharti Airtel reported an increase of 61 per cent in net revenues YoY on the back of a 41 per cent operating profit margin (a 550 percentage point increase). VSNL recorded a 5 per cent decrease in net profit for the quarter on a YoY basis because of lacklustre sales and operating margins. Tata Tele-Services (Maharashtra) reported losses for the quarter. Autos in neutral gear: Despite strong growth in the top-line, the third-quarter results of auto companies are a mixed bag, as players became vulnerable to margin pressures from rising input costs. Two-wheeler companies Hero Honda and TVS Motors reported a decline in profits on the back of a rise in raw material costs. Ashok Leyland, thanks to a significant growth in volumes, reported a 93 per cent increase in earnings. Tata Motors and Maruti Udyog registered a near 11 per cent increase in net profit during the quarter. However, Maruti's operating margins dipped by 119 percentage points during the period. Sugar turns bitter: The December quarter usually captures the start of the crushing season for sugar companies. However, lower sugar prices, on expectations of a bumper output this year, resulted in sharp profit declines for most companies, marking a reversal of the past two years' trend. While the revenues of Thiru Arooran Sugars, Dwarikesh Sugar and Rajshree Sugar rose more than 50 per cent, the earnings were lacklustre. Though volume growth for sugar companies remained healthy given higher cane availability, lower realisations weighed heavily on the profitability. Divergence in numbers Though the big picture showing the earnings performance of India Inc in the third quarter is impressive, a sectoral breakdown of the numbers reveals a significant divergence. Better-than-expected earnings growth in sectors such as infrastructure/realty, telecom and cement made up for the lacklustre performance in the auto, sugar and certain other heavyweight sectors. Strong topline growth across sectors suggests that demand and consumption drivers are still in place, amid margin pressures in select businesses. The stock market rally of the past six months has been quite narrow, focussing on a few sectors and stocks seen to have impressive growth prospects; if the earnings scorecard is anything to go by, these trends will only continue.

News: Aerotropolis - new 'cities' springing up around airports

(BL 11/02/2007) Hyderabad - When the new international airport here gets ready for commercial operations in early 2008, it would not be just another airport. It is going to be the nucleus of the country's first aerotropolis, a new urban form that would house business parks, hotels, residential units and entertainment areas.

The aerotropolis would come up around the new generation airport.

The GMR group, which also bagged the international airport project at Delhi with Fraport of Germany, would also develop the aerotropolis.

These airport cities would be taken up on the lines of Incheon (South Korea), Dubai and Munich airports. An aerotropolis offers operational convenience for companies and organisations to maximise the benefits, while cutting down on expenditure significantly.

"We are in the process of finalising a master plan with the help of CPG consultants based out of Singapore," G.M. Rao, Chairman of the GMR group, told Business Line. The company expects the plan to be ready in two months.

Greenfield airport

GMR leads a consortium comprising GMR Infrastructure (63 per cent) and Malaysian Airports Holding Berhad (11 per cent) to construct Rs 2,283.18-crore greenfield airport at Shamshadbad near here.

"The aerotropolis would prove to be a trigger to the State's economy, with a number of multinational companies preferring to have office, residential convention and exposition facilities in the vicinity of the airport," he said.

According to Prof John D. Kasarda, Director of the US-based Frank Kawkins Kenan Institute of Private Enterprise, airports would do what seaports, railways and highways did in the past, resulting in the phenomenal growth of business locations.

Economic impact

Prof Kasarda, who coined the word aerotropolis and studied extensively how airports affected growth in major cities, said spines and clusters of airport-linked businesses are forming along airport transportation corridors in a radius of 25 km. "There will be significant economic impact up to 90 km," he observed.

Prof Kasarda was recently in Delhi to speak on `Airport-driven business development — India's aerotropolis opportunity'.

Stating that India had a huge potential to tap, Prof Kasarda said the country should rather go for an organised, economically efficient, aesthetically pleasing and environmentally sustainable aerotropolis.

News: Wal-Mart, Bharti may adopt neighbourhood store format

(PTI 11/02/2007) New Delhi - Away from the political backlash against its entry into India, the world's largest retailer has been keeping domestic rivals guessing about the format it would adopt in this country, where grocery shopping is an industry by itself.

Wal-Mart, better known for its large stores like hypermarkets and supermarkets spread over thousands of square feet, may go in for the neighbourhood store format keeping in mind the Indian consumer's preference for this model.

"We expect Wal-Mart and Bharti to explore the neighbourhood market concept because groceries are one of the largest retail categories with the least organised retail competition in India," a former Wal-Mart adviser and US-based global retail investment firm Growth Ventures Group's Chairman and CEO Love Goel told media.

Though foreign multi-brand retailers are barred from setting shop in India, Wal-Mart has tied up with Bharti Enterprises to gain a toe-hold in the country. While the Left parties fear that entry of multinational retail players would slowly kill the estimated 13 million mom and pop stores, Congress President Sonia Gandhi too has joined the chorus of opposition against FDI in retail.

Even though fully opening up retail sector to foreign players still remains an issue, domestic petrol and petrochemical major Reliance Industries has entered the field and already boasts of over 40 neighbourhood vegetable and grocery stores across five cities.

Wal-Mart, which has a revenue of $320 billion, is the largest retailer of groceries in the US. So, it could be anybody's guess what format it would choose for India. Wal-Mart has often adapted itself to the local needs, like in Brazil where there is a greater emphasis on neighbourhood stores inside cities, Goel said.

The company has already become the third largest retailer in Brazil by following the right format concept, Goel added.

However, the going might not be as easy for the company in India, where a number of retailers like Big Baazar and Vishal Megamart are expanding their presence with large-format neighbourhood stores and domestic conglomerate Reliance Group, which has also purchased land in the vicinity of residential areas in various cities for its retail stores.

Wal-Mart and Bharti are likely to use one of Wal-Mart's proven store models that range in size from 40,000 square feet for neighbourhood stores to 20,000 square feet for its super-center stores, Goel said.

The US giant might also try out membership schemes to gain the customers' loyalty in wake of intensifying competition in the retail market sector, the experts believe.

"With more than nine groups from Birla and Tata and Ambani investing over $ 1 billion in next few years in retail, it will be important for retailers to create loyalty with customers rather than drive profit margins down by competing on price," Goel said.

Membership clubs like Sam's Club (being operated by Wal-Mart in US) are a great way for retailers to offer lower prices while creating loyalty among its customers as well, he added.

According to experts, the relationship with Bharti could prove to be an asset if Wal-Mart decided to combine their retail concept with a direct-to-consumer approach by selling through catalogs, internet, mobile phones and television.

"In that case, not only most orders are placed on phone, but the after-sales customer service is also handled through phone," Goel said, adding it could pave the way for the most optimal, capital-efficient and fastest method for organised retail to grow in India.

According to the experts, while neighbourhood stores appear to be the best format for Wal-Mart in India, it could also try out away-from-city locations. Wal-Mart's approach of buying cheap land in rural or urban locations could be successful in India as proven by a number of big malls, which have sprouted up on the outskirts of big cities like Delhi and Mumbai.

"With the explosion in the number of automobiles and vehicles, transportation is not necessarily a limiting factor," Goel said.

News: Vodafone to acquire majority stake in Hutch

(PTI 11/02/2007) London - UK Telecom giant Vodafone will acquire 67 percent stake in India's fourth largest mobile venture - Hutch-Essar - for $11.1 billion. Announcing the decision for the deal, that puts the enterprise value of Hutch-Essar at $18.8 billion, Vodafone CEO Arun Sarin said, "We are delighted to be deepening our involvement in the Indian mobile market... We have concluded this transaction within our stated financial investment criteria." Vodafone pipped Anil Ambani Group company Reliance Communication, a consortium led by NRI group Hindujas and Indian conglomerate Essar, which has 33 per cent stake in the venture. The winner emerged at the Hutchison Telecom Ltd's board meeting at Hong Kong, convened for considering the four bids for its 67 percent stake put on the block late in 2006. Vodafone has offered to partner Essar, on which the Indian conglomerate said: "We are at the moment evaluating all our options in the best interest of the group."

News: Global players eye pvt jet market in India

(BL 10/02/2007) New Delhi - With more than 7,00,000 Indians accounting for a cumulative wealth of $ 3 billion, it is no surprise that private jets seem to be the in thing for corporate India. The leading players in the global private jet market such as Bombardier, Cessna and Raytheon all say that they are not only getting queries but are seeing an increasing number of corporates converting them into orders. "We sold five aircraft in the last eight years. But during 2005 and 2006, we have already sold 11 Citation jets," said the Regional Sales, Director, Cessna, India, Pakistan, West Asia, Michael McGreevy. Not a mean achievement when the list price for these aircraft ranges from $ 2.5 million to $ 21 million. Similarly, Raytheon, whose aircraft prices range from $ 3 million to $ 21 million, estimates having sold nine aircraft last year alone and the future looks very "encouraging" said Sean McGeough, Vice-President, International Aircraft Company. Bombardier registered five aircraft here last year and is confident of doing a lot more business in the coming years. • Newsmakers of the week: View Slideshow But what is bringing about a change that is seeing corporates not bat an eyelid about spending a few crores of rupees to acquire an aircraft to meet their travel needs when air connectivity within the country and to international destinations has improved dramatically in the recent past? Aircraft manufacturers point out that with the general economy growing at a very fast pace and Indian corporates spreading their businesses not only within India but also globally they have recognised the importance of a private aircraft. Clients Secrecy "These are not toys for the rich but an important business tool. They allow corporates to pack in more in a working day. A private aircraft allows a corporate to fly when they wish, land at strips where there might not be a commercial service and conduct business even as they jet from one part of country to another or from one part of the globe to another," said the Senior Vice-President, Bombardier Business Aircraft, David Dickson. While industry is willing to talk about the benefits of private jets, they prefer to be tight-lipped on their client list or who they are in talks with. "We are like the private bankers of aviation. Just as there is secrecy about which clients hold accounts, we also have confidentiality clause which do not allow us to reveal names," Dickson pointed out.

News: Demerger yes, split no - Bajaj

(DNA 10/02/2007) Mumbai - Bajaj vs Bajaj? An empire to be carved-up between two sons? Rahul Bajaj, chairman and patriarch of Bajaj Auto Ltd (BAL), on Friday rubbished reports of rivalry between his eldest son Rajiv and second son Sanjiv, even while admitting differences in approach and a four-year-old plan to bifurcate the company into two. "The Bajaj family are not a family of chamchas. We have our own individualities, and our own integrity. We love each other," he asserts, evidently bristling with indignation. He recently conceded the managing director's post to Rajiv Bajaj, who has won his spurs by taking Bajaj Auto's market share threateningly close to No 1 Hero Honda. But the markets celebrated reports about the impending split between the two-wheeler company and its treasury and financial operations. The shares of Bajaj Auto and Bajaj Auto Finance - the two companies which will be affected the most if the insurance and treasury businesses are spun off - surged. The shares rose on expectations that the board of the automobile major will "within months" consider a proposal to spin off its insurance and treasury businesses from Bajaj Auto. In a telephonic interview to DNA Money, Rahul Bajaj confirmed what he's been saying for the past four years about Bajaj Auto. "The board will take up for consideration in the next six months the matter (of spinning off the cash assets of the company)," he said. Apparently, the broad framework of the split is already blueprinted. Bajaj Auto holds cash and cash equivalents of about Rs 9,000 crore.It also has two aggressive joint venture insurance businesses with Allianz, which a research report has valued at Rs 900 per share. "It's a good move and we've been hearing this for some time now", says Avinash Gorashakar, head of research at Emkay Share. The restructuring exercise will help the balance-sheet to get leaner and improve the return on capital employed by BAL, said Avinash. Marketmen expect the financial assets to be spun into Bajaj Auto Finance, and later be used to acquire a small bank. With the stock markets on a roll, Bajaj's insurance business is growing faster than the industry and its bread-and-butter automobile business is prospering. But ask Rahul Bajaj whether the relationship between his sons is "frosty", he immediately goes on the offensive. "Rajiv and Sanjiv are my sons, they are not my clones. And we are not jokers or idiots," the patriarch ripostes. Rajiv has impressively turned around operations of Bajaj Autoby introducing new motorcycle models that have turned into best-sellers. If the sales uptrend continues, Bajaj may overtake Hero Honda over the next few months. "We have our differences," admits Rahul Bajaj. "Rajiv wanted to set up a plant in Chakan, and I put my foot down on the proposal. I wanted Rajiv to use the 400 acres of land that were already available with us in Aurangabad for the project, but he argued about the need for a new mindset in a state-of-the-art facility at Chakan. He persisted and eventually he won," the father said. The patriarch said Rajiv's move to Chakan paid rich dividends for Bajaj Auto. Bajaj Auto Finance shares rose by an impressive 17.40% to Rs 432.20 from its overnight close of Rs 368.15 on Friday, while Bajaj Auto, the flagship company, gained 1.29% to Rs 3,047.10 from Rs 3,008.25, a gain of Rs 38.85. Last month, DNA Money had reported on the much-speculated split in Bajaj Auto. Rahul Bajaj says everyone will benefit. "The financial institutions and foreign investors always wanted the company to spin off its financial business into another entity to unlock shareholder value," he said. A business TV channel said Nanoo Pamnani, the former CEO of Citibank India, will be overseeing the exercise of spinning out the financial businesses.

News: Suzlon tops Areva, bids $1.33 b for Repower

(DNA 10/02/2007) Mumbai - Less than ten days after Ratan Tata won the race for UK's Corus Group Plc with a $12 billion plus bid, India's eighth-richest person of 2006, Tulsi Tanti - Forbes magazine estimated his wealth at $5.9 billion - has entered what could potentially be another international bidding war involving an Indian entity. On Friday, his company Suzlon Energy, India's largest maker of wind turbines, made a €1.02 billion ($1.33 billion) or €126 per share bid for its stuttering German competitor, REpower Systems AG. In doing so, the Pune-based firm has outbid the world's No. 1 nuclear reactor manufacturer, France-based Areva, which had offered €105 a REpower share on February 5. Suzlon has made the bid in partnership with Martifer, a company belonging to Portugal-based builder Mota-Engil SGPS SA, which already owns a quarter of REpower. This is where things get intriguing. In a conference call on Friday evening, Tanti said Suzlon has an option to buy out its partner later. A couple of hours later, Eduardo Rocha, chief financial officer of Mota-Engil, told Bloomberg that his company, too, has the option to buy out Suzlon. The Oporto, Portugal-based construction group has "significant industrial plans" for Repower, Rocha said. Tanti said any deal to buy REpower would take "a couple of months". Shares of REpower surged as much 25% to €142 at 9 p.m. (IST), a 52-week high, suggesting investors suspect that French state-owned Areva may sweeten its bid. That's already €17 more than what Suzlon's offering. "This entire market is in hype dimension," said Matthias Schrade, an analyst at GSC Research in Dusseldorf who recommends selling Repower stock. "One can't rule out a higher bid, though the price is already above where it should be fundamentally," he told Bloomberg. Tanti, however, did not comment on increasing the bid price at the conference call. But U P Bhat of Canbank Mutual Fund told Bloomberg that Suzlon would have factored in the possibility of a counter bid. "They will be able to sustain further counter-bidding, if any, with the backing of banks." ABN Amro Holding NV and Yes Bank Ltd are helping Tanti raise funds for the bid, which would be financed through long-term and short-term debt and from Suzlon's own resources. Suzlon's offer doesn't require any minimum percentage of the German company's shares, whereas the Areva approach depends on it gaining a stake of more than 50%. This bidding structure favours Suzlon more than Areva, analysts said. Why does Tanti want REpower? Because, he says, he wants a share of the European market where REpower is strong. It also affords Suzlon very high-end R&D capabilities and an integrated supply chain. Canara Mutual's Bhat said the approach from Suzlon "makes sense" because a combination of the two wind-turbine makers would cut costs. Suzlon's approach coincides with a global surge in wind-power projects as governments seek to cut carbon emissions and reduce dependence on oil. In India, REpower has an alliance with the Essar Group. Tanti said if he succeeds, all existing tie-ups including in China and US, will continue. "For REpower, Suzlon's financial strength can be of great help," said analysts. REpower's annual sales was around €450 million, with an Ebidta margin of 8% as of December 31, 2006. "It can be an €850 million company by 2008," Tanti said. Suzlon itself has been growing at 100% for more than 3-4 years. "That's the kind of financial tailwind REpower can do with," analysts said.

News: S & P upgrade a blessing for domestic banks

(DNA 10/02/2007) Mumbai - India's upgrade to investment grade by rating agency Standard and Poor's couldn't have come at a more opportune time, especially for banks.

Grappling with high cost of deposits owing to rising interest rates (by over 1% in the last year) and a record growth in credit (at about 30%), banks were finding it difficult to meet their demand for funds.

S&P's upgrade on January 30, 2007 has allowed banks to access a new breed of investors abroad, and that too at cheaper rates.

"The rating upgrade has led to a tightening by 10-15 basis points of spreads for Indian papers. S&P's upgrade was crucial since a large number of foreign investors can now invest in Indian paper," said Neeraj Gambhir, general manager, ICICI Bank.

The first beneficiary of the upgrade was State Bank of India, which raised $700 million through the sale of dollar bonds on Thursday.

$400 million was raised through hybrid tier-one bonds at 120 basis points above three-month Libor, while the remaining $300 million was mopped up through five-year floating rate bond at 38 basis points above three-month Libor.

SBI's hybrid paper was priced 74 basis points cheaper than the listing price of ICICI Bank's perpetual paper issued last year. Its floating rate bond was priced 7 basis points better than SBI's own issue last month, which was priced at a record 45 basis points over three-month Libor.

Foreign investors usually take the lowest rating as a guidance for investment in a country and though other two major agencies like Fitch and Moody's have upgraded Indian long back, investors were shying away looking at the S&P rating.

Now, with all rating agencies on a par, more funds are available, resulting in lower price, bankers said.

Another reason why SBI has got a good price for its paper is that overseas investors believe the bank has the full support of the government and the Reserve Bank, analysts point out.

But, will cheaper funds abroad and the SBI experience mean more banks will look overseas?

Not necessarily, say both bankers and analysts. "Borrowing abroad can be a cost-effective means of raising resources. However, this requires banks to have advanced risk-taking capabilities. In Crisil's opinion, RBI also pays particular attention to the ability of banks to manage such risks. Not to forget that SBI is the largest bank in India," said Krishnan Sitaraman, head of financial sector ratings, Crisil, a S&P company.

"Borrowing overseas is also not very easy - it involves expertise to manage risks and things like hedging costs. Apart from us, only ICICI has gone in for a perpetual bond issue," said an official from SBI.

But, by the looks of it, Indian banks are not shying away from raising funds abroad. Canara Bank, Bank of Baroda and Bank of India are expected to raise money from abroad soon.

Banks may also like to cash in on individual ratings upgrade. Together with the sovereign upgrade, S&P also raised its ratings on six Indian banks. Ratings of State Bank of India, ICICI Bank, Industrial Development Bank of India, Bank of India, Indian Overseas Bank and UTI Bank Ltd were raised to BBB-/Stable/A-3 from BB+/Positive/B.

News: FDI and retail - Time to raise shutters

(BL 09/02/2007) New Delhi - A short note of caution by the Congress president, Sonia Gandhi, to the Prime Minister, Dr Manmohan Singh, that she has "received suggestions from many quarters about the desirability first to study the possible impact of transnational supermarkets on livelihood security of those engaged in small-scale operations" so that the relevant issues are weighed before decisions are taken, has caught the Government off guard. So much so that the party spokesperson and rattled officials had to go on a damage-control exercise.

Yet, in the ensuing melee, even policy consultations for allowing foreign direct investment (FDI) into sectors such as stationery, construction equipment and electronic hardware have come to a halt, as reported by the media.

SEZ policy

No doubt the fears of small retailers over the impact of entry into India of MNC retailing giants in collaboration with local corporates, and the current spurt in retail prices of grocery and vegetables have slightly unnerved the ruling coalition, especially with elections to five State Assemblies looming.

As it is, the Special Economic Zone (SEZ) policy is caught up in issues of land acquisition, rehabilitation of the displaced and questionable tax-breaks provided to developers and units. The policy, unveiled last year to act as a magnet for FDI and to boost exports, has been put on hold.

FDI in retail

In retail, FDI remains barred, save in single-product retailing with the rider that products should be of `single brand only', that is, sold under the same brand internationally and would cover only products that are branded during manufacturing.

Since the policy of permitting 51 per cent FDI in single-brand product retailing was announced on February 10, 2006, only a few global brands such as Nike (footwear), Louis Vuitton (shoes, travel accessories, watches, ties, textiles ready-to wear), Lladro (porcelain goods), Fendi (luxury products), Damro (knock-down furniture), Argenterie Greggio (silverware, cutlery, traditional home accessories and gift items) and Toyota (retail trading of cars), have obtained approvals for trading.

It is not as if global firms will wait patiently through policy flip-flops and arbitrary suspension of rules and regulations that would upset their investment plans.

Yet, whether it is the SEZs or FDI in retail, the Government buckles under pressure from various lobbies that do not seem to have any fixed purpose in their opposition.

Benefits assured

According to a study by the Indian Council for Research on International Economic Relations on the size of the organised retail market, the CAGR (compound average growth rate) from 2001-02 to 2007 of the sector would be 18 per cent and account for 10 per cent of GDP. No wonder the FDI interest in retail.

Indeed, the policy claims that FDI is to supplement and complement the Indian industry to make it globally competitive, open up export markets, provide backward and forward linkages and access to international quality goods and services.

In retail, which is growing at a robust pace, benefits to growers and farmers through backward linkages are assured because large companies have the logistics capability to reach fresh produce to the consumer through cold chains.

The growers and farmers will benefit too from bulk sales to large retail outlets.

If India's high growth ambition is to be realised and it is to raise resources to invest in social and physical infrastructure to make a dent on the living standards of millions of people bypassed by economic liberalisation, FDI could provide an opportunity through technological upgradation, optimal utilisation of human and natural resources, and backward and forward linkages.

Undoubtedly, FDI in retail could do all this. Middle-class consumers and above-average income family groups deserve the benefit of modern retailing as it gives them a wider choice.

Policy analysts rightly caution the political dispensation to refrain from playing politics to wreck the wishes of consumers and producers alike by short-sighted ad hocism and whipping up fears of the corner-stores being decimated by the entry of retail giants, both domestic and foreign.

News: Rupee at new 1-year high on capital inflows

(RTR 09/02/2007) Mumbai - The rupee hit its highest level in more than a year on Friday, on renewed capital flows and media report that the finance ministry was concerned the central bank's suspected intervention was fanning inflation.

At 9:05 a.m. (0335 GMT), the partially convertible rupee was at 44.03 per dollar, its strongest level since Jan. 31, 2006. It ended at 44.11/12 on Thursday.

News: Bajaj empire to be carved into two for gen-next

(PTI 09/02/2007) New Delhi - Two wheeler giant Bajaj Auto is all set to be carved into separate auto and finance entities, to be headed by group chief Rahul Bajaj's sons Rajiv and Sanjiv respectively.

A plan for demerger to utilise the company's cash surplus will be put before Bajaj Auto Board in the coming months, sources in the know of the development said, amid reports of differences between Rajiv and Sanjiv, neither of whom could be contacted for comments.

When approached, Rahul Bajaj told PTI, "I am proud of my sons. They have done a wonderful job for the company. They are individuals in their own rights and if you call it differences, then so be it."

He, however, declined to comment on the demerger plans.

According to the sources, Bajaj Auto Board is likely to consider, either in its March or May meeting, a proposal to demerge the automobile and financial and investments businesses to utilise cash surplus and cash equivalent (in the form of investments such as bonds and in other companies).

This could be carved out either as a separate entity or merge into Bajaj Auto Finance, they said.

While the March Board meeting is one of the six mandatory meets held every year, the May meeting takes into consideration the annual accounts.

The sources, however, said that the cash surplus of the company has now grown to about Rs 8,000 crore from about Rs 3,000 crore about three years back when plans were first mooted to hive off the financial services and investments to utilise the surplus.

News: Avendus floats $200 m India specific fund

(PTI 09/02/2007) Mumbai - Leading Indian investment bank Avendus Advisors today said that it is in the process of floating a $ 200 million India specific fund for investing in diversified sectors.

"We are in the process of an India specific fund of $ 200 million and it would be a growth and equity fund," Ranu Vohra, Managing Director, Avendus, said on the sidelines of Nasscom India Leadership Forum.

The fund to be floated in association with US-based Mayfield, is likely to be deployed within next three years.

"It is our first fund and we hope to invest it completely within three years. We are in the process of making our first investment tranche of $ 20-30 million," he added.

The investment bank is looking at across all sectors including auto components, IT, BPO, media and also retail.

He added that the focus is on mid-size unlisted entities and Avendus plans to stay invested for seven to 10 years.

On the proposals under consideration, Vohra said that about 80-90 companies are actively considering acquisitions abroad and he expects the momentum to continue for another two years.

News: Indian firms add 5 million new GSM users in January

(RTR 09/02/2007) Mumbai - Indian GSM carriers signed up over five million new users in January, taking their total user base to 110.5 million, a telecoms industry body said on Friday.

The Cellular Operators' Association of India, which represents 9 carriers offering wireless services based on the widely prevalent GSM platform, said 5.03 million users signed up in January, compared with 4.63 million in December.

Call rates of as low as 2-3 U.S. cents a minute are luring customers in the world's fastest-growing wireless services market, where less than 14 per cent of the country's billion-plus population own a mobile phone despite rapid growth.

The mobile user base of Bharti Airtel Ltd. India's top provider of such services, rose to 33.7 million after it added 1.76 million customers.

Second-ranked GSM firm Bharat Sanchar Nigam Ltd. lured 823,813 new customers, boosting its user base to 24.44 million.

Hutchison Essar Ltd. added 1.11 million customers, lifting its user base to 24.41 million.

News: Further liberalisation of FDI in retail on track

(PTI 09/02/2007) New Delhi - Measures to further liberalise Foreign Direct Investment (FDI) in specific sectors in retail, like electronics, stationery and sports goods, are likely to stay on course despite the recent storm over Congress President Sonia Gandhi's letter to Prime Minister Manmohan Singh on Wal-Mart.

This was indicated on Friday by Commerce and Industry Minister Kamal Nath here.

When asked whether the recent controversy on Gandhi's letter over Wal-Mart would be a set back for opening new retail sectors to FDI, he replied in the negative.

The Department of Industrial Policy and Promotion had already floated a proposal for liberalisation of FDI regime in specific sectors of retail because the move would not any impact neighbourhood kirana stores.

All through the controversy the DIPP has maintained that no regulations have been breached with regard to Bharti-Walmart joint venture.

Government regulations allow 100 per cent FDI in cash and carry through automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators.

News: Indian FDI inflow may double in 2007

(TNN 08/02/2007) New Delhi - Inflows of foreign direct investment (FDI) into India have increased significantly during the current financial year, according to the minister of commerce and industry Kamal Nath.

The inflows are likely to be more than double the amount recorded in 2006, said Mr Nath while presiding over the meeting of the parliamentary consultative committee on Tuesday.

FDI equity inflows during April 2006 to November 2006 were $7.2 billion, which is the highest ever for equity capital since economic liberalisation. Mr Nath said that monthly inflows this fiscal crossed $1 billion during July, October and November 2006.

The higher inflows as well as the new credit rating reflected growing investor confidence in India, the minister added. According to him, FDI inflows by the end of this fiscal would reach $12 billion. This means an unparalleled growth of 120% over the previous year.

A presentation made on the occasion highlighted the fact that in the A T Kearney’s FDI confidence index India’s rank as a FDI investment destination has improved from number 15 in 2003 to number 2 in 2006. According to the leading financial firm J P Morgan, the return on equity on investments made in India is the highest in Asia at 18%. Services sector has become the top sector in attracting FDI during April-November 2006.

In response to a suggestion made by the members of the committee, Mr Nath agreed to set up an expert committee to look into the sectors into which FDI was flowing and its impact on the rural economy. The committee will study sectors where FDI has been allowed by the government and has a direct or indirect impact on the rural economy. Its findings would help ensure fair dispersal of FDI and thereby a reduction in the rural-urban divide, the minister said.

The committee members agreed with the minister on the importance of FDI in the country’s economy in terms of not only generating economic activities and jobs, but equally in facilitating transfer of technology and managerial capabilities, which helps enhance India’s global competitiveness.

News: 'Government to allow higher FDI in aviation'

(PTI 08/02/2007) Bangalore - The government will bring in a policy change to allow higher foreign direct investment in civil aviation-related areas, Civil Aviation Minister Praful Patel said on Thursday.

Inaugurating an international conference on aviation here, he said, "We are bringing in policy changes in the coming months whereby we will allow higher FDI. We want to bring in higher FDI...even in some cases up to 100 per cent."

The FDI cap in the civil aviation sector currently is 49 per cent, he said.

Noting that there was an exponential demand for corporate jets, Patel said the government will progressively open up this sector.

"We want to expand helicopter operations. The software side of civil aviation will be given a fillip," Patel said, adding MRO (maintenance, repair and overhaul) activities will also be given a push.

News: Assocham seeks FDI in retail through automatic route

(PTI 08/02/2007) New Delhi - Industry body Assocham on Thursday said the Government should allow only 49 per cent FDI in the retail sector through an automatic route instead of opening 100 per cent equity option through various routes.

In a note sent to Prime Minister Manmohan Singh and the UPA Chairperson Sonia Gandhi, the chamber has said that FDI in retail should be encouraged to push up agriculture, rural economy and to generate huge employment opportunities.

Assocham President Venugopal Dhoot said the government's decision to resort to various routes permitting retail FDIs of 100 per cent through cash and carry and franchising route and 51 per cent in single brand has created confusion in the recent past.

The ceiling should be raised in a phased manner to give a minimum three years time to domestic retail business to organise itself before it was prepared to take on 100 per cent competition from overseas businesses, it said.

"The organised retail in India was still at a very nascent stage and forms only less than 5 per cent of the entire retail trade and throwing it open to FDIs will disorganise the domestic retailers without letting them prepare for foreign competition," Dhoot said.

In a few years hence, the share of organised retail is expected to go up substantially and India would be far more attractive and ripe to attract higher levels of FDIs. Even China opened up its retail only after it ensured its domestic retail industry's maturity.

India should not liberally open up its retail sector now as it was capable of attracting larger sums of foreign investments a few years later, it said.

News: Videocon in talks with UK firm

(BS 08/02/2007) Mumbai - Consumer durables major Videocon Industries is in talks with a major UK-based durables retailer for back-end support services for Next, its retail chain.

Venugopal Dhoot, chairman, Videocon Industries, confirmed that talks were on but refused to name the company.

He added that the tie-up would be on lines similar to the tie-up between Inifinti Retail, the Tata group’s retail arm, and Woolworths of Australia for sourcing expertise and supply chain and back-end management.

Industry sources say the tie-up could take place with UK-based retailer Next, with whom Videocon’s chain shares its name.

With close to 300 retail outlets, Videocon Industries has been recently scaling up its retail initiatives by buying out shops from the textile retailer Raymond group’s, Plug In chain and so on. Company executives told Business Standard they were targetting 1,000 durable retail outlets under the Next brand by the end of the year, from 300-odd at present.

Apart from the brands for which the Videocon group has contract manufacturing arrangements (Akai, Sansui and Toshiba, Korean consumer durables brand Hyundai and European brand Kenstar), the Next chain retails competing brands such as LG, Samsung and Philips.

Consumer durable retailing has recently seen the entry of major players like the Tata group, Reliance Retail and the Future group.

News: Retail FDI - Govt for more reforms

(BS 08/02/2007) New Delhi - Defending its policy of liberalising foreign direct investment (FDI) in retail, the government today confirmed that it would go ahead with its plan to expand its ambit, despite objections raised by Congress President Sonia Gandhi in a letter written to the Prime Minister’s Office (PMO)on 11 January.

“The FDI policy is not frozen and we are going ahead with our plans,” said a commerce ministry official.

Meanwhile, the commerce ministry has circulated a draft cabinet note to increase FDI up to 51 per cent in specific product categories like consumer electrical and electronic goods, sports goods and accessories.

Last December, Commerce Minister Kamal Nath had discussed with Prime Minister Manmohan Singh the plan to permit FDI in specific product categories. At that time, it was proposed to allow FDI in other categories also — building equipment, stationery and possibly even furniture.

Agency reports said the department of industrial policy and promotion had sent a clarification on Gandhi’s letter.

Gandhi had said that the government should study the impact of transnational super markets on the livelihood security of small scale operators before taking further decisions on FDI in retail.

The reports also said the commerce ministry had informed the PMO that the Bharti Group had said its joint venture with Wal-Mart was in compliance with FDI policy.

Commerce and Industry Minister Kamal Nath had also said that a clarification on the Gandhi letter had been sent. “The PMO had asked for details on the FDI policy on retail and we have sent our comments, so what is the fuss about?” he said.

News: Fastest Indian growth in 18 years

(TT 08/02/2007) New Delhi - India will have its best growth rate in 18 years with the economy projected to grow 9.2 per cent in fiscal 2007 which ends in March. But unlike Reserve Bank of India governor Yaga Venugopal Reddy, the finance ministry mandarins aren’t spooked by fears of an overheating economy — at least not just yet.

“Is 9 per cent too high? I don’t think so,” Ashok Lahiri, the government’s chief economic adviser, said. “Does high growth entail overheating, my answer is an emphatic no.”

The Central Statistical Organisation today made the forecast of 9.2 per cent that topped the 9.1 per cent estimate made for the first half of this fiscal. The high rates are expected to be powered by the boom in the manufacturing and the services sector.

The great numbers are still a tad behind the figures for China, which is expected to grow by over 10 per cent this year after clocking 10.7 per cent in 2006.

The black spot is the farm sector which has been forecast to grow at just 2.7 per cent, whereas it increased by 6 per cent in the previous year. Yields of staples, which have reached a plateau, and indebtedness among farmers have blighted agriculture for several years now.

The other issue of concern is that jobs have missed the growth bus. Employment growth has just been 1 per cent. “It’s a jobless growth saga, that’s the sad part of it. There is a whole section of the populace who are missing out,” S.P. Gupta, former member of the Planning Commission, said.

Notwithstanding the job blues, the manufacturing sector is expected to grow by a spanking 11.3 per cent compared with 9.1 per cent a year ago and services, which make up more than half of the GDP, by 11.2 per cent against 9.8 per cent.

The government is not tense about overheating but jittery over the inflationary pressures generated by a growing economy.

It is widely expected that the RBI would again raise the cash reserve ratio (CRR) of banks to put a squeeze on liquidity, so that inflation is under check.

The prices of both essential commodities as well as that of manufactured items have been shooting up on the back of a splurge in consumer spending brought about by a 30 per cent growth in credit — the highest in three decades — lofty increases in salaries and a higher spending among the rural population.

Economists expect the consumer demand to rise further as the salary spike in India is seen at 7 per cent by human resources consultant ECA International, which is the highest in the world.

Despite a rise in the interest rate, money supply and credit will also continue to swell on account of the huge inflow of foreign exchange in the form of higher FDI, earnings by software firms and remittances by expatriates.

“Some $9 billion in foreign direct investment and $23 billion in NRI remittance inflows have simply added to the money supply pressure within the domestic economy,” officials said.

They said new policies are in order to spur “the export of capital out of India so as to maintain an equilibrium in Indian markets.”

News: Bankers target cash-rich NRIs

(DNA 08/02/2007) Mumbai - India’s population of high networth individuals may be growing at the second-fastest rate in the Asia-Pacific region (after South Korea), but the absolute numbers are still small. No wonder then that private bankers and wealth managers are increasingly looking towards non-resident Indians (NRIs) who are flush with cash to shore up their businesses.

Though there is no accurate figure available on NRI wealth, Pradeep Dokania, managing director and head of the global private client group at DSP Merrill Lynch, says the broad projections are between $400 billion and $800 billion. He adds that there are an estimated 22 million NRIs, of which around 22,000 are dollar millionaires. These 22,000 add substantially to the 83,000 dollar millionaires that the Capgemini-Merrill Lynch Asia-Pacific Wealth Report 2006 estimates India to have had in 2005.

It’s little wonder then that Merrill Lynch recently hired two veteran Citigroup employees to beef up its global private client non-resident Indian (NRI) business: Inderjeet Hora as market director of the European and African NRI markets, and Aseem Arora as market managing director for the Asia-Pacific NRI market. While the former will be based in London, the latter will be based out of Singapore.

SG Private Banking, the private wealth management arm of French financial services group Société Générale, has a global centre in Singapore to cater to NRIs.

Balakrishnan Kunnambath, managing director and global head of the Indian subcontinent, SG Private Banking (Asia Pacific), says: “We provide comprehensive and dedicated service to high networth Indian clients globally. This includes inbound investments into Indian capital markets along with a large suite of global investment opportunities.”

Relatively smaller domestic wealth managers have also not fallen behind in chasing money from rich overseas Indians.

“The Middleast and US are the key markets, but there’s a lot of money in the UK, Canada and markets such as Singapore, Hong Kong, Indonesia and Malaysia,” said Akhilesh K Singh, business head of wealth management at Emkay Share and Stock Brokers. Emkay manages over Rs 450 crore under its portfolio management services.

News: Mukesh readies big-bang pharma move

(DNA 08/02/2007) Mumbai - The Mukesh Dhirubhai Ambani group is finalising a “multi-billion dollar, aggressive” entry into the pharmaceuticals retailing business in India.

The idea is to capture at least half of the Rs 30,000 crore market in the next five years, sources said.

This could mean the paths of the Ambani brothers may just be crossing once again, because Anil is said to be working on partnerships with regional distributors of drugs that will, in effect, lead to the excision of C&F agents from the pharma supply chain.

Mukesh’s plans are breath-taking: It will involve the acquisition of “scores” of contract manufacturers across the country, apart from outsourcing deals with a clutch of them.
The group will also have pill production facilities of its own, for which the machinery estimates alone tot up to Rs 1,000 crore, sources said.

The idea is to have the capability to produce most of the popular, fast-moving generic medicines which have wafer-thin margins at the retail level.

Producing them will afford the company far better realisations.

At the distribution level, the group’s pharmacy chain will dovetail into Reliance Retail stores.

There will also be link-ups with standalone chemists outside this network, whose facilities could be upgraded to .

“All the supermarkets and hypermarkets that Reliance Retail will set up - and there is no fixed number to this - will have pharma stores owned and run by Reliance,” said sources.

Down the road, products developed at Reliance Life Sciences will also be sold at these stores.

“There will also be a lot of emphasis on rural distribution because most of the drugs available in the hinterland are spurious,” said a group source.

“For example, patients in the Bimaru states (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh are the most affected by the incredible amount of fake drugs - You won’t believe the versions of a simple paracetamol that exists. We will give them a safe alternative,” said the source.

Analysts said about a quarter of all pharmaceutical products sold in India are counterfeit or of substandard quality.

A World Health Organisation study said 35% of the counterfeit drugs marketed in the world are manufactured in India. To top it, statistics put out by the European Commission in November last year said three out of four fake drugs seized in Europe in 2005 were exported from India.

News: Go to Tier II cities for expansion, Maran tells IT cos

(BL 08/02/2007) Mumbai - The Union Communications and IT Minister, Dayanidhi Maran, has asked IT and BPO companies to consider Tier II cities seriously while expanding operations, notwithstanding the pessimism that they may harbour about the pace of improvement in infrastructure in major cities.

Speaking at the inaugural session of the Nasscom Leadership Summit 2007 here, Maran said the Centre was seriously considering the idea of developing integrated modern townships for sunrise industries such as IT and BPO.

The creation of such integrated townships will not only take the pressure off the large cities that are unable to cope with growing infrastructure demands for supporting developmental needs, it will also help in decentralising economic activities and spur the evolution of these cities, Maran said.

Infrastructure in terms of better and more airports, particularly in the Tier II and III locations and special modern integrated townships need to become part of the country's future roadmap, he said.

Already such hubs are being envisioned by the country's policy makers and a recent set of recommendations from the Prime Minister's Office suggests that such modern townships are an imperative.

Tech-driven law

The Government is also taking a fresh look at the Information Technology Act 2000. The Information Technology Amendment Bill was introduced in Parliament on December 15, 2006 and has been referred to the Parliamentary Standing Committee, the Minister said.

Further, Maran felt that the time was ripe for the IT-BPO industry to up the ante. "There may be a need for us to revisit our export and domestic market goals and create a case for higher global market share,'' he added.

Tax sops

Maran reiterated that he was in favour of continuation of tax incentives under the Software Technology Parks of India (STPI) scheme, which is set to expire in 2009. Supporting the industry's demand, he urged the industry to stand united on the issue.

While assuring the Minister that the industry was united on this issue, the Nasscom President, Kiran Karnik, also stressed on the need for the extension of STPI scheme, which benefits the small and medium sized firms.

Highlighting the software success story, he added that the IToutsourcing industry has grown by 10 times in the past 10 years.

About 1,500 delegates from some 20 different countries are participating in the three-day event, which intends to deliberate on the issues and challenges facing the industry.

The Nasscom Chairman, Ramalinga Raju, emphasised that there was need for greater innovation in the products space. He also added that the industry was committed to make the global delivery model more efficient.

News: FDI in retail - Panel to study impact on rural economy

(BL 08/02/2007) New Delhi - With the Government cautioned on the possible impact of foreign direct investment (FDI) in retail on vulnerable sections of society, the Commerce and Industry Ministry has decided to set up an expert committee to examine the sectors into which FDI is flowing and the impact on the rural economy. The exercise is meant to ensure equitable distribution of FDI and to bridge the rural-urban divide, the Minister for Commerce and Industry, Kamal Nath, said at the meeting of the parliamentary consultative committee on commerce and industry held here late on Tuesday.

The Minister also informed members that FDI equity inflows during the current year (April-November 2006) was $7.2 billion - the highest ever since the commencement of economic liberalisation in 1991.

Emphasising that the high inflows as well as the new credit rating reflected growing investor confidence in India, the Minister said FDI inflows by the end of this fiscal would touch $12 billion. This translates into an unprecedented 120 per cent growth over the previous year, he pointed out.

Nath also informed the members that monthly inflows during 2006 crossed the $1-billion mark on three occasions - July, October and November.

India has also emerged as the most attractive FDI destination in Asia with an 18 per cent rate of return on equity investments, according to a study by JP Morgan. Simultaneously, in the AT Kearney's FDI Confidence Index, India's rank as an FDI destination has improved from 15th in 2003 to second in 2006, with the services sector at the top in attracting FDI in April-November 2006, the Minister said.

He also referred to the higher credit rating assigned to India by Standard and Poor's recently and said that the raising of India's rating to investment grade - both at institutional and FDI levels - should lead to even greater inflows into India.

News: Is the Indian economy overheating? There's little evidence now

(DNA 08/02/2007) Mumbai - Ron Subbaraman, economist at Lehman Brothers, on Thursday said it is unlikely that India's policymakers would want to end this demand-driven boom. "Our base case is that India's economic boom will continue, with growth around 10% in 2007-08, probably outpacing China." In a note, he said demand will continue to exceed supply, causing rising inflation, financial imbalances and, possibly, asset price bubbles. "But the concern is that demand is running ahead of supply, creating bottlenecks. This is because essential reforms have been neglected, including the lack of physical infrastructure, shortages of skilled labour, an inflexible labour market and weak government finances." As a result, Subbaraman said, symptoms of overheating are emerging: inflation has risen to over 6%, credit is growing at about 30%, and India is the only Asian country whose current account has slipped into deficit (about 2.5% of GDP in 2006). Valid arguments? Ashok Lahiri, India's chief economic advisor, begs to differ. "Is 9% too high? I don't think so," Lahiri said in New Delhi on Thursday. "If the question is whether high growth entails overheating, my answer is an emphatic no." Sucheta Mehta, chief economist with Standard Chartered Bank, said strong growth has no doubt led to inflationary pressures, but it is still very early to say if the economy is overheated. "There are areas that have not grown the way they should have. Agriculture, from which 60% of the country earns its livelihood, is supposed to grow at 4%, but is doing around 2%. There are many bottlenecks in rural infrastructure. These need to be addressed. Then there are also areas that have grown faster than others. But we would refrain from saying the Indian economy is overheated," says Mehta. D K Joshi, senior economist with rating agency Crisil, said the current growth looks more sustainable than in previous cycles because it is backed by a high investment rate, good consumption and export demand. But he and other analysts expected growth to moderate in coming quarters and some said Wednesday's figure could be revised down to just below 9% later on. Joshi also saw the central bank continuing to raise interest rates to cool inflation. "The numbers mean further monetary tightening is in store," he said. Subbaraman of Lehman concurs. "We expect interest rates to rise by a further 75 basis points this year, but only in line with inflation, keeping real rates very low." Growth in the $854 billion economy is also being spurred by a higher savings rate, spending on roads, ports and other infrastructure and more foreign direct investments, Morgan Stanley chief global economist Stephen Roach said in a note to investors this week (See graphic). “The takeoff phase of economic development has long been associated with saving and investment rates in excess of 30% of GDP,’’ Roach said. “India is now on the move and could well be one of the world’s most exceptional economic development stories over the next three to five years.” Potentially, such growth can spin inflation out of control. The solution, said said N R Bhanu Murthy, an economist at the Institute of Economic Growth in New Delhi, is simple. “Supply of goods and services must expand at a faster pace than demand.” Indranil Pan, chief economist of Kotak Mahindra Bank said flying prices of primary articles are the main culprits. He agrees it is too early to say if the economy is overheated “though there could be some signs hinting at it”.

News: India is on threshold of trillion-dollar club

(DNA 08/02/2007) Mumbai - India is set to become a trillion-dollar economy as early as next year, if the latest figures released by the Central Statistical Organisation are any indication.

The economy, which has been on a high growth path of 8-9% for the last three years, is expanding faster this year at 9.2%, it said.

Only a few days ago, the CSO had revised the GDP growth figure for the last financial year to a scorching 9% from 8.4%. On Wednesday, it put economic growth this year at 9.2%.

"Reforms are driving growth," Finance Minister P Chidambaram said. "Reforms have brought in investment, fostered competition, and enhanced productivity and efficiency."

Most optimistic projections so far had been of a growth rate of close to 9% in 2006-07. The economy had expanded 9.2% in the second quarter of the current year and 9.1% in the first half.

The latest CSO figures suggest that India will be an $850 billion economy this year, well set to join the big league of trillion-dollar economies as early as next year. There are nine countries in that club now (see table).

At 9.2%, India's GDP growth in 2006-07 is a full percentage point less than that of China, which registered 10.4% growth in 2006.

But India's growth is clearly the world's second fastest this year. In fact, this is the highest growth for the Indian economy since 1987-88, when GDP grew 10.6 per cent on the back of the previous year's low caused by drought.

"This is good news," said Rajiv Kumar, director and chief executive, Indian Council for Research on International Economic Relations, "though it draws attention to urgent supply-side reforms if this growth rate is to be sustained. There are signs of overheating and that needs to be managed."

The 9.2% growth estimated by the CSO, Kumar said, is beyond the RBI's latest projections. "The central bank is likely to see this from the demand side and we could, therefore, be in for another round of interest rates hikes," he said.

Significantly, the 9.2% GDP growth this year comes about despite the slowdown in farm-sector growth to just 2.7% from last year's robust 6%.

Though 65 crore Indians still depend on agriculture for their livelihood, it is evident that the broader economy is now firmly driven by the dynamism of its industrial and services sector.

News: BMW set to start India production after record 2006

(RTR 08/02/2007) Singapore - Germany's BMW, the world's biggest luxury carmaker, will start assembling cars in India next month and expects to produce 1,000 vehicles in the plant's first year of operation, it said on Thursday.

The Munich-based company also said it would stick to its goal of selling 150,000 cars in Asia by next year, after sales in the region climbed 13.8 per cent last year to a record 126,949 vehicles.

BMW's plant in Chennai is the group's fifth factory in Asia and will make 3 and 5 series BMWs exclusively for the Indian market.

"It will be around a thousand units this year and we'll bring it up to the plant's capacity of 1,700 next year," BMW management board member Michael Ganal told journalists after a news conference.

BMW, the world's biggest premium carmaker ahead of DaimlerChrysler's Mercedes-Benz, hopes to sell around 1,000 cars this year in India, up from just 257 last year.

Ganal said India was a difficult market but added that the firm expects to profit from rising demand for its luxury cars as a result of rising wealth.

Sales in the premium segment -- which includes such brands as BMW, Mercedes-Benz, Lexus, and Audi -- in Asia's third-largest economy reached 5,400 cars last year and Ganal expects that figure to rise to around 10,000 by 2012.

The company also said sales of BMW brand cars in Asia rose 15.5 per cent in 2006 from the previous year to 109,848 units.

Sales of its popular Mini in Asia rose 3.7 percent to 16,959 vehicles, while its ultra-luxury Rolls-Royce Phantoms sold 142 times -- 40 more than in 2005.

Sales of BMW motorbikes were almost unchanged at 3,620.

Japan, which accounts for the lion's share of sales in the region, recorded a 5.6 percent rise to 62,068 units, while China showed the strongest growth rate in Asia last year, up 35 percent to 44,700 vehicles.

Last month, BMW announced a 5 per cent rise in 2006 group sales to a record 49 billion euros ($64 billion) and reaffirmed that its 2006 pretax earnings would hit 4 billion euros on the back of a 3.5 percent rise in unit sales to just over 1.37 million BMW, Mini and Rolls-Royce cars.

News: Disinvestment re-initiated; Govt targets Rs 1500 cr

(PTI 08/02/2007) New Delhi - Overcoming resistance from the Left Parties, government on Thursday virtually re-initiated the disinvestment process by targeting Rs 1500 crore funds for the National Investment Fund through IPOs of three public sector power companies. "The government will be piggybacking on the IPOS of Rural Electrification Corporation (REC), Power Grid Corporation of India (PGCIL) and National Hydro-electric Power Corporation to raise Rs 1500 crore for the NIF, which has no funds currently", Finance Minister P Chidambaram told reporters after a Cabinet meeting. The three PSUs together are targeting to raise Rs 2400 crore, he said adding this was based on the estimated current book value of these unlisted companies. By piggybacking on these IPOs the government hoped to garner funds for NIF, he said. Chidambaram said the External Affairs Minister Pranab Mukherjee had met the CPI-M leaders in January and told them that "no money was flowing into the NIF", the earnings of which are intended for restructuring PSUs and for meeting social sector requirements. "Without getting into disinvestment, if and when IPOs (of these PSUs) are issued we will piggyback a small portion to put it in NIF", Chidambaram said. After the issue of IPOs and the piggybacking on them, the government share in REC will come down to 81.22 per cent, while that in PGCIL and NHPC will be reduced to 86.36 per cent each, the minister said.

News: 'There's room for many in booming retail sector'

(TNN 07/02/2007) New Delhi - Wal-Mart’s Michael T Duke is coming on February 22 to sign the JV agreement with Bharti. Reliance Retail echoed chairman Mukesh Ambani’s stand that there’s room for many in India’s booming retail sector and the entry of foreign retailers would generate healthy competition.

The Wal-Mart spokesperson declined to comment. The fractured view on FDI in retail is perhaps the reason for the world’s largest retailer maintaining a studied silence about its India plans so far, even though Bharti chairman Sunil Mittal has been quite vocal about his retail partner and plans.

Wal-Mart is aware of the negative sentiment its name carries in some sections of the government as it has managed to defeat the very purpose of the FDI ban in retail. Also, it has busted the general belief (much of it created by Wal-Mart itself) that it wouldn’t consider a retail option in India without FDI.

In fact, the announcement of the Bharti-Wal-Mart MoU was followed by the Left raising concerns, leading to the agreement being examined by the commerce & industry ministry, which later pronounced it well in conformity with exisiting FDI regulations. The Left, too, had become muted in its opposition, after the initial protest.

Ms Gandhi’s letter, therefore, comes as a surprise, particularly as the government has recently been hinting towards a gradual opening up of the sector. The prime minister had said in a recent economic summit that FDI in retail was one of the ways to move India’s economy to a higher growth path, while commerce & industry minister Kamal Nath last month had said that a policy to allow FDI in multi-brand specialty retail in select segments like sports goods, stationary, consumer electronics and building equipment would be announced shortly.

Early last year, the government had allowed 51% FDI in single-brand retail. With Ms Gandhi writing to the PM, the policy to open up multi-brand specialty retail could be in jeopardy.

“Following the letter, the momentum of gradual opening of the retail sector could be lost. It is likely that the policy to open up FDI in select multi-brand specialty retail segments would be jeopardised. If the government doesn’t allow FDI in retail, convoluted arrangements like Bharti-Wal-Mart would continue to happen,” said a player.

News: UTV, Future in talks for retail JV

(TNN 07/02/2007) Mumbai - Entertainment and media company UTV Software Communications and Kishore Biyani’s Future Group (Pantaloon Retail) are in talks to float a retail venture together. The blueprint for the project is to open Cafe Lounges as a brand extension to UTV’s upcoming youth centric channel in June.

The Cafe Lounges targeted at the youth will be a fusion of entertainment, gaming and a lounge where youngsters can relax. While UTV will use its strength in the entertainment and broadcasting space, the Future group will use its expertise in the retail domain to jump start this venture.

The Cafe Lounges will be a brand extension of UTV’s youth centric initiatives and will use these to attract the youth both in terms of footfalls to these outlets as well as to ensure eyeballs on the channel. Top sources at UTV said that work on this front has already begun, and placement agency sources also confirmed that UTV has started recruiting people from the retail and cafe space. An official UTV spokesperson refused to comment.

Kishore Biyani, who joined UTV’s board about 10 days ago, said, “The relationship with UTV is only 10 days old, and there are currently no such plans on the table.” However, informed sources revealed that the retail outlets planned would not be me-too Cafe Coffee Days or Baristas, but would be about 2500 sq feet each, which would act as entertainment zones encompassing all the youth initiatives including the channel.

Twenty two cities have been identified, and currently locations for the outlets are being tied up. The partnership between UTV and the Future Group would either be a lease and profit sharing model or a joint venture company, which is still being discussed by both parties.

UTV has partnered with Malaysian Broadcaster Astro to tap the youth entertainment space. Astro is believed to be pumping in Rs 90 crore and UTV will put in RS 60 crore for the joint venture. The idea is to offer entertainment across multiple platforms, thereby ensuring to engage the youth at all points. The initiative will go beyond television and will extend itself in terms of live events, gaming and the web to as to provide an integrated entertainment product in the target group ranging between 17 - 25 years.

The roll-out of the retail Cafe Lounges will take place after the launch of the channel, and about five such outlets will be operational by the end of 2007. Executives involved in setting up the venture said that phase one will comprise 50 such outlets with an investment of Rs one crore per outlet. While all the different offerings across different platforms will be part of the same company, they will function as different business units.

UTV is now conducting extensive research on this target group as an input to its programming and marketing plans. The first television channel in Hindi is slated for launch in the second quarter of 2007. The company will follow it up with the launch of multiple channels across languages in India and Southeast Asia.

News: JP Morgan to set up Indian asset reconstruction company

(BS 07/02/2007) Mumbai - JP Morgan Securities is setting up an asset reconstruction company (ARC) in the country.

Sanjai Vohra, managing director, Asia-Pacific special situations, JP Morgan Securities, said on the sidelines of a seminar in Mumbai that the group was in the process of seeking regulatory approval for setting up the ARC.

Vohra added that the company had already identified and tied up partnerships for the proposed venture, but declined to name them.

“We are in the early stages of discussion and details are being put in place. It is too early to announce the names,” he said. Vohra also refused to comment by when the ARC would be in place, but said he expected it to “happen soon”. JP Morgan had already picked up around six distressed assets in the country and was looking out for more, he said.

The company has invested around $700-800 million in distressed assets and principal investments in the Asian markets, but declined to say how much of that was invested in the country’s market. Vohra added that the existing Indian assets might not be transferred to the new company immediately. “We will see as we go along,” he said.

Asked about the timing of the ARC, Vohra said given that the country’s economy was booming, the chances of turning around a non-performing asset was better now than at a time when the economy was not doing so well.

JP Morgan is the second player in the recent months to announce the setting up of an ARC. Anil Ambani’s Reliance Capital has already approached the Reserve Bank of India for approval to promote an ARC, Reliance Asset Reconstruction Company. It has tied up with Corporation Bank, Indian Bank, General Insurance and some foreign players as equity partners.

A number of foreign banks and funds have shown interest in the country’s bad loan market. US-based George Soros and US fund Blue Ridge have acquired 26 per cent stake in Reliance Asset Reconstruction, while Barclays is close to picking up a stake of nearly 10 per cent in ICICI Bank-promoted ARCIL.

News: 'India's development story could be most exceptional'

(HT 07/02/2007) New Delhi - Morgan Stanley chief economist Stephen Roach believes that India, for all its persisting deficiencies, could be the world's most exceptional economic development story over the next few years.

In his latest report on India, Roach has said that human capital, rising savings, increasing foreign direct investment (FDI), and its growing entrepreneurial spirit will drive the country's economic development in the medium term.

Roach waves away comparisons with China, maintaining in his report that India is over fixated with China. "In the end, the story is not about China or India, but most likely China and India," he writes. "Are the rich countries of the developed world prepared for the ultimate endgame of globalisation?"

India's entrepreneurs are making great progress in three most important areas - rural reform, retail and infrastructure, says the report. Citing the case of the Reliance Retail model, he writes that its concept and execution was "fascinating and would benefit India in term of lifting rural income and boosting consumer purchasing power."

He has also noted that India's entrepreneurs were playing a role in developing much-needed infrastructure, and cited the example of the GMR group that is developing Delhi and Hyderabad airports. He said the Delhi Metro Rail Corporation was comparable to New York City Straphanger.

Infrastructure, however, remained a glaring laggard. "The infrastructure contrasts are painfully obvious, to any one travels in both India and China," the report says.

Roach adds that India's corporate leaders compare very favourably with their counterparts in any other country in the world. "Not only is this a huge advantage when compared to China, but it is likely to be a major plus for India as it fights for market share in the global competitive sweepstakes," he notes

Morgan Stanley's India equity strategist Ridham Desai adds that any correction in the equity market in the 15 to 20 per cent range should be viewed as important buying opportunities.

News: Moser Baer to buy Philips arm

(TT 07/02/2007) Calcutta - Moser Baer India will acquire optical research and development company OM&T BV, a wholly owned subsidiary of Philips, for an undisclosed sum.

The company has entered into an agreement with Philips for the acquisition, Moser Baer has informed the Bombay Stock Exchange.

“This acquisition is a milestone for Moser Baer as we implement our strategy to be at the forefront of technology in both the optical and solar photovoltaic segments,” company executive director Ratul Puri said.

According to the agreement, all intellectual property of the Dutch firm will be transferred to Moser Baer. The joint venture will also focus on developing photovoltaic technologies to support Moser Baer’s business.

Nic Kramer, senior vice-president, corporate investments, Philips International, said, “This is a synergistic move. I am sure that Moser Baer’s high technology manufacturing competencies along with OM&T’s R&D capabilities will ensure that we see innovative products in the immediate future.”

Moser Baer said the acquisition would complement the technology research being conducted in the company’s R&D centre in India and would help the global number two player in the optical media market to further consolidate its leadership position.

OM&T has been instrumental in developing new optical media solutions and technologies creating new markets via global standardisation.

It is the only firm outside Japan, which is shipping Blu-ray discs. Moreover, its work in Blu-ray would jumpstart Moser Baer’s objective of being among the first few global manufacturers of the Blu-ray disc.

The agreement would also help Moser Baer leverage OM&T’s mastering and stamper making capabilities.

News: Mittal helps China set up Asia's 1st carbon-credit exchange

(PTI 07/02/2007) Beijing - China, set to overtake the United States as the world's largest carbon dioxide emitter, will soon set up Asia's first carbon-credit exchange in Beijing, allowing the country a head-start in the multi-billion-dollar global carbon market. The exchange and 12 brokerages in western China, estimated to cost 1.7 million US dollars over three years, will be established with financial backing from Arcelor Mittal, the world's largest steelmaker, which is scouting for major forays into China. The project aims to establish the Clean Development Mechanism (CDM) technical service centres in 12 provinces, such as Xinjiang, Qinghai, and Inner Mongolia. These centres will act as brokers between international investors and local partners to kick-start "green" investment in China's less developed regions. The initiative aims to pilot carbon trading in China, build capacity and provide policy input for the expansion of carbon market and reduction of greenhouse gas (GHG) emissions in China, United Nations Resident Coordinator and United Nations Development Programme (UNDP) Resident Representative in China, Khalid Malik said. "Assisting China in its efforts to cope with the impact of global climate change and to create more sustainable, less GHG intensive development paths is an important focus for UNDP. A range of market-based instruments has now emerged to support this effort, with carbon trading emerging as a major opportunity," he said.

News: Indian GDP growth seen up at 9.2%

(PTI 07/02/2007) New Delhi - Driven by robust performance in manufacturing and financial services, the country's gross domestic product (GDP) growth is projected at 9.2% during FY07, against 9% in the previous year.

"The 9.2% GDP growth FY07 is projected on top of 9% for FY06, taking the growth to over 9% for the second year running," according to advanced estimates released by the CSO here.

However, the advance estimates showed that growth in agriculture dipped again to 2.7% in FY07 after rising to 6% in the previous year.

The manufacturing sector grew at 11.3% against 9.1% while construction took a breather to 9.4% against 14.2% last year.

The financing, insurance, real estate and business services continued to perform well logging in 11.1% growth against 10.9%.

There was a marginal improvement in mining and quarry to 4.5% from 3.6% last year.

News: 'India must aim for higher economic performance'

(PTI 07/02/2007) New Delhi - Buoyed by the over nine per cent GDP growth in 2006-07, the Planning Commission today said country must aim for higher economic performance, while acknowledging that agriculture continues to remain an area of concern.

"We have been saying that economy is on an upswing. We had nine per cent growth in two years and the average growth in the 10th Plan is 7.3 per cent and we could think of aiming for better growth in the coming plan," Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

He said the country witnessed a better agriculture growth of 2.7 per cent as revealed in the estimates, but suggested that more efforts were required in the sector.

He said inflation has been factored in the estimates revealed by the CSO, but more data in health, education and employment sectors were needed before it could be termed as an inclusive growth.

He said the growth in the unorganised labour sector was a matter of concern as there was no clear data to gauge its dimensions. "We need to have data on factors propelling the growth in unorganised labour sector," he said

News: 'Single window clearance for FDI'

(PTI 07/02/2007) New Delhi - President A P J Abdul Kalam on Wednesday mooted setting up of a single window clearance mechanism for foreign investment in the country saying such a system would further accelerate India's economic growth. Addressing a gathering of diplomats here, the scientist- president also asked policy makers to take into account the national prosperity index while gauging the country's economic growth as the GDP rate alone cannot provide a clear picture of progress. Noting that India has demonstrated its upswing in economic development as also in fields like space and nuclear science, he said the contributions of the Indian diaspora, business leaders and talents in arts and sports are becoming increasingly visible in various parts of the world. "Multinational companies are evincing great interest in starting new joint ventures with Indian companies. However, the pace of progress will further increase if the country adopts a single window clearance system for foreign investment," he said. Kalam said the absence of such a system was perhaps one of the reasons why the country was not able to get lots of investments. He was delivering the annual lecture of the Association of Indian Diplomats. "The interaction among the reputed academic institutions from all over the world with Indian institutions is on the increase. Indian companies based on their technological and managerial excellence are able to take over large industries abroad," he added. The president in his inimitable style spoke passionately about the Brahmos missile system, a Indo-Russia joint venture, and the Pan African e-Network that he mooted during a visit to Africa in 2004 while underlining the key role played by diplomats in forging foreign collaborations. He said these are success stories to illustrate how the close working of diplomatic community with the technological and administrative segments of the government can facilitate time-bound accomplishment of mutually beneficial, multilateral and complex international collaborative initiative. Kalam also did not forget to suggest a seven-point mission for Indian diplomats while asking them to bring out booklets on their rich experiences abroad and the significant contribution made by India in maintaining world peace. He said the booklets should be "case studies of effective diplomatic intervention in promoting business, science and social activities for mutual benefits to India and the partner countries." Besides the diplomatic community can devise a strategy to showcase India's progress abroad to generate joint programmes for mutual development and can study the core competence of panchayats in the country and try to convert rural enterprises into a marketable export product in a sustainable manner, he said. Kalam called upon diplomats to suggest ways to channelise the urge of the expatriate population to contribute to the country's development and take up the task of redefining the role of diplomacy as India cruises on the path of progress. Other suggestions include making recommendations for further facilitating the welfare of NRIs and studying the special problems of Indians in the Gulf region to make their life more comfortable.

News: Wipro 'actively' pursuing a dozen buyouts

(PTI 07/02/2007) Mumbai - IT major Wipro Technologies today said it is 'actively' looking at about a dozen companies for acquisition and is hopeful to complete at least one in the current quarter.

"We are actively looking at 9-12 companies...We hope to complete at least one acquisition in the current quarter," Sudip Nandy, chief strategy officer, Wipro Technologies said at the NASSCOM India Leadership Forum.

He, however, did not give a time-frame for the acquisitions.

"We are looking at companies of above $50 million but in some cases we could pick up a stake also," Nandy said adding the company is looking at all modes of expansion, including buyout, stake or joint venture, as part of its inorganic growth strategy.

The verticals in focus are healthcare, travel, telecom, manufacturing and pharmaceuticals, he added.

Nandy said while Wipro is scouting for companies in India and abroad, it has not fixed any geographical focus.

"The aim is to deepen our domain expertise, fill up competency gaps and expand our service lines," he added.

News: Volvo eyes bigger share of Indian bus market

(RTR 07/02/2007) New Delhi - Swedish truck and bus maker Volvo is looking to increase its share of the Indian market when its local joint venture begins rolling out bus bodies, a senior company official said on Wednesday. Volvo, the world's number two truck maker, owns 70 per cent in a venture with Bangalore-based Jaico Automobile Engineering to make 1,000 bus bodies a year for India.

Volvo, which is investing a little over $ 6 million in the venture, has also said it would consider exporting to other Volvo markets in Africa, the Middle East and south east Asia.

Its main focus, though, would be the $ 5-billion Indian bus and truck market, the world's fifth-largest, dominated by local firms Tata Motors Ltd. and Ashok Leyland.

"If you look at China, there are some 30 players, whereas in India there are only two big players, and a few others," Peter Danielsson, a senior specialist of Volvo's bus rapid transit unit, told Reuters on the sidelines of an automotive conference.

Volvo leads the small but rapidly growing market for luxury coaches in India and has also entered the city bus segment.

The market for city buses is estimated at about 10,000 units a year and expected to rise as domestic travel expands.

"We see great potential for bus rapid transit in India because of rapid urbanisation and because it is the only choice for the poor," Danielsson said.

"At the same time, with improving highways, we find that people are willing to pay a premium for better quality," he said, referring to its luxury express coaches that have become a generic in inter-city transport.

Volvo last year raised its stake in Nissan Diesel Motor Co. to 46.5 per cent from 33.5 per cent, a move that also gave it a link to China through Nissan Diesel's local joint venture, Dongfeng Motor Corp.

Volvo has also been reported by local Indian newspapers to be in talks to acquire a stake in Ashok Leyland.

Danielsson declined comment on Volvo's interest in Indian truck makers, but said the company was keen to "localise" components in order to be more competitive locally.

"We have examples in China where we have done that, and India is a large enough market for us to do that," he said.

Volvo, which has been in India since 1998, exported truck components worth more than 70 million euros ($ 90.9 million) in 2006.

Faced with maturing markets at home, truckmakers in Europe and the United States have been seeking growth in Asia.

Germany's MAN AG has a joint venture with Force Motors Ltd. to make trucks and buses in India, and Navistar International Corp. will make commercial vehicles with India's Mahindra & Mahindra Ltd. from 2007.

News: Marriott to open three hotels in Pune

(PTI 06/02/2007) New Delhi - US-based hospitality major Marriott International on Tuesday said it plans to open three hotels in Pune comprising 833 rooms, which are being developed by a local partner.

Marriott International will manage three hotels representing 833 new luxury, deluxe and upper-moderate quality guest rooms in Pune, which are scheduled to open over the next three years, a company release said. A local property development group is developing all the three hotels, it said without naming it.

"It is gratifying to see our hotel portfolio in India continue to grow significantly, enabling Marriott to serve a variety of travel needs in this exciting country," said E D Fuller, President and Managing Director of International Lodging for Marriott International.

As per the plans, a 153-room 'Courtyard' by Marriott West will open in 2008 at Pune in the upper-moderate Tier, while a 250-room 'J W Marriott' Hotel is being planned in the luxury segment scheduled to open in 2009. Besides, a 430-room Pune Marriott Hotel and Convention Centre in the upscale, deluxe Tier is scheduled to open in 2010, it said.

J W Marriott Hotel Pune would be a part of 13 acres, mixed use project, which would include four office towers covering 1.5 lakh sq metres and 20,000 sq mt of high end retail space. Pune Marriott Hotel and Convention Centre and Courtyard would have office and retail space, it said.

Marriott's hotel portfolio in India is represented by 358-room J W Marriott Hotel Mumbai, the 297-room Hyderabad Marriott Hotel, the 178-room Goa Marriott Resort Panjim, the 286-room Renaissance Mumbai Hotel and Convention Centre, the 177-room Lakeside Chalet Marriott Executive Apartments and the 238-room Courtyard by Marriott Chennai.

News: India may need 1,100 new aircraft in 20 years

(BL 06/02/2007) Mumbai - Aircraft manufacturer Airbus estimates that India will require 1,100 new aircraft, estimated to cost $ 105 billion, over the next 20 years, going by the growth in demand for air travel. According to Sanjay Sharma, Senior Marketing Analyst of Airbus, effectively India will need 712 single-aisle, 121 medium twin-aisle, 58 long range and 44 large aircraft during this period. "India will continue to be the fastest growing country for air travel for the next 20 years, as per an Indian market forecast by Airbus," Sharma told presspersons on Monday. Demand for air travel in India is growing at a CAGR of 7.7 per cent against the world average of 4.8 per cent with the Indian domestic market growing at 16.4 per cent per annum, he said. Sharma was, however, non-committal when asked whether Airbus plans to set up a manufacturing facility in India to tap the growing aircraft market. For the freighter segment, over the next 20 years, Airbus estimates that there would be a demand for 165 new aircraft - 70 small jets, 55 regional jets, 30 Long Range aircraft and 10 large aircraft. "This demand is being fuelled by the low cost carriers. However, for these demand projections to be met, Indian carriers will have to regain their market share to 50 per cent of international traffic into and out of the country from the current 35 per cent," he pointed out. • Online auction frauds!: View Slideshow In 2005 and 2006, Indian airliners have placed orders for a total of 406 aircraft with Airbus getting 71 per cent of these (288 aircraft) through seven large customers and Boeing bagging 29 per cent (118 aircraft). On the preparedness of Indian airport infrastructure for the arrival of the new mega-sized 550-seater A-380 aircraft, Sharma said, "to date, Kochi airport is the only one ready for it. But most Indian airports will be ready for it by end-2008 in time for the delivery of the aircraft to India." Corporate jets Regarding the demand for corporate jets, usually purchased by companies for executive travel, Sharma said, "we have already delivered one A-319 corporate jet and have an order for one more. The market is growing and there is always the possibility for fractional ownership of the aircraft as in other parts of the world." In the very large wide-body segment, Kingfisher will become the first Indian carrier to operate the advanced passenger aircraft, the A 380. Sharma said Airbus's engineering centre in Bangalore would focus on high-end engineering analysis and design. Other initiatives include establishment of a joint CAE and Airbus training centre for pilots and maintenance crews.

News: Indians to pocket highest salary hike in 2007

(BL 06/02/2007) New Delhi - The year 2007 promises to be a harbinger of higher salary for Indians, as wage increments are predicted to be the highest in the world, says a new survey.

"Indian workers are set to receive the highest raise, with companies forecasting annual salary hike of 12 per cent resulting in real wage increase of seven per cent once inflation has been taken into consideration," a latest survey by ECA International s aid.

In terms of real wage increase in 2007, India tops the chart of the 45 countries under the survey including Indonesia and China, ECA International added.

Real wage increase is defined as a worker's actual annual salary hike, after inflation is taken into account.

Out of the 45 countries included in the survey, the five highest real salary hike for 2007 are all expected in Asia.

Indian workers are set to receive the highest raise, with predicted annual salary hike of 12 per cent and with inflation being taken into consideration it would amount to a real wage hike of seven per cent, the survey added.

Indonesians along with mainland Chinese are expected to benefit from real wage increase of about 6 per cent, while Philippines and Thailand, with hike of four per cent each, come at fourth and fifth ranks respectively.

ECA is world's largest membership organisation for international human resources professionals. It establishes actual and predicted salary hike in local markets around the world.

Multinational firms to help them determine future wage hike at home and in other markets use the survey.

News: Suzuki to invest $1.6 b more in India

(RTR 06/02/2007) Manesar - Suzuki Motor Corp will invest 200 billion yen ($1.66 billion) in its Indian joint venture as it expands capacity at car and engine plants, company chairman Osamu Suzuki said on Tuesday.

Already 100 billion yen has been invested in the units run by Maruti Udyog Ltd. and another 200 billion yen will be spent by 2010 to take total capacity to 1 million units.

At the moment the tie up has an annual capacity of 630,00 units.

News: Fortis HealthWorld plans 1,000 stores by '12

(PTI 06/02/2007) New Delhi - Offering accesibility to quality medicines, healthcare major Fortis today announced its retail health store chain with 1,000 shops in 400 towns of the country by 2012. Fortis HealthWorld, a joint venture of Ranbaxy Laboratories and Fortis Healthcare, would open health stores which will be like a one stop shop offering health products for the entire family, Malvinder Mohan Singh, CEO & MD, Ranbaxy Laboratories, here said. "We are entering the retail business and investing Rs 800 crore in the retail stores, covering over 400 towns. The launch of the chain of retail shops shows our clear intent and desire to bring healthcare closer to the people across the country on affordable prices," he said after unveiling the Fortis HealthWorld logo. The stores will offer prescription drugs, health supplements, health foods, alternate medicines, home and personal care products and a pathology lab collection centre. "We are extending one more arm in the healthcare sector. There was a gap in this field as patients were looking for medicines, which are not spurious. We are providing them that place which is easily accessible. People need not go to a hospital for a blood test or to buy quality medicines," Shivinder Singh, CEO & MD, Fortis, said. We hope to open 1,000 shops by 2012, he said. "The stores will run round the clock and would give customers value-added services like prescription reminder service, loyalty programs, OPD appointments in our hospitals and free home delivery," he said.

News: Tesco to call on Tatas, Landmark to talk ties

(TNN 03/02/2007) New Delhi - The global chief of UK retail giant Tesco, Sir Terry Leahy, is flying down to India this month to meet potential partners for its retail foray in India. The buzz is that meetings are scheduled with Ratan Tata and the Bangalore-based Landmark Group.

Sir Terry’s proposed India visit will take place within a month of Carrefour chairman Jose Luis Duran’s stopover in India.

Industry experts say there’s a certain logic to such high-profile visits. It seems a section of the government is keen that Indian companies quickly enter into partnerships with global retailers—on the lines of the Bharti-Wal-Mart alliance—in quick succession so that it’s not seen siding with either.

And for Tesco, the government’s eagerness makes perfect sense. With Wal-Mart already in India and Carrefour set to seal a tie-up, the UK retailer wouldn’t want to wait any longer.

Credited with Tesco’s $72-billion global expansion, Sir Terry is expected to meet Mr Tata’s top team, represented by Tata Coffee chairman R Krishna Kumar as well as that of Croma, the durables venture with Australia’s Woolsworth.

While Tatas are considered to be a natural fit for Tesco at this juncture, Sir Terry is also likely to sit for a meeting with the Landmark Group honchos, making it a dark horse. Sources said the $500-million Landmark has already had preliminary talks with Tesco after breaking negotiations with Carrefour.

News: Indian diamonds lose glitter

(HT 03/02/2007) Mumbai - Blood stained or not, diamonds from India had fewer takers during the 2006 Christmas-New Year season. The cut and polished diamond exports from India fell eight per cent in rupee terms and 11 per cent in dollar terms during April-December 2006, as per the provisional figures put out by the Gem and Jewellery Export Promotion Council.

The publicity preceding the release of the Leonardo Dicaprio starrer, Blood Diamond created ripples in the diamond trade. If not the world, the US market which accounts for 40 per cent of India's exports had seen sales slide, as a result of serious activism to publicise the effect of buying 'conflict diamonds'. "We only execute orders in pipeline and the fall in exports has got nothing to with the hype about the movie", says Mehul C Choksi, co-convenor, diamond panel committee, Gem and Jewellery Promotion Council.

Orders for the Christmas season were dull and even the Valentine season orders are not so good, says a diamond trader in Mumbai. "I have been a trader for two decades and I can tell that the business has been nowhere near the order we did in the last two years", he adds. Choksi maintains that it is only the cyclical nature of order flow that dampened diamond sales and not the movie.

The total gem and jewellery exports from the country witnessed a 3 per cent fall during April-August 2006, against a 25 per cent increase in exports the previous year. The diamond trade had taken efforts to publicise the fact that diamonds are put through the Kimberly Process certification process to make sure it is from conflict free region. "India has been following the process for last three and half years and there is nothing new about it, may the consumer awareness has increased now", says Choksi.

'The effect of the movie will fade away in the next few months and then we expect the trade to pick up and diamond prices to climb, so if you want to buy your much desired solitaire, this is the best time", says the diamond trader. No one from the trade wants a bad publicity especially at a time the film is running across theatres in India.

News: The Bombay House biz wiz

(HT 03/02/2007) Mumbai - The late patriarch JRD Tata, ambitious as he was, could not have foreseen that the industrial group he had built so painstakingly would be taken to such heights by his chosen successor.

The conquest of Anglo-Dutch steel maker Corus Group plc by Tata Steel under Ratan Tata’s leadership this week is a giant achievement, even by the Tata group’s standards.

About 15 years ago, when JRD decided to pass the baton on to the then 53-year-old Ratan Tata, his close lieutenants had opposed the move: Ratan Tata was too young and inexperienced, they said.

The old guard at Bombay House — Rusi Mody, Darbari Seth and Ajit Kerkar, in charge of steel, chemicals and hospitality respectively — had their own vision for the company .

But the suave and soft-spoken Ratan Tata was determined to take the group to new heights.

In one of the biggest gambles of his life, Ratan Tata put everything at stake at Tata Motors to give the country its first indigenously manufactured ‘people’s car’.

At a time when foreign carmakers were confidently raising their grip on the Indian market, Tata went ahead with his grandiose vision and the result, the ubiquitous Indica, is on Indian roads and select export markets. It was, for Tata, the first indication that he could take on foreign competitors.

Ratan Tata articulated his vision for the salt-to-software group with 86 companies in three phases over 15 years. In the first phase, he was primarily engaged in cleaning the empire’s Augean stables that comprised slothful chieftains who drained resources and ran personal fiefdoms. Next, he started scouting around for management professionals.

In the second phase, Tata put together a management team that combined Indian traits with global vision. The Tatas had a strong management cadre and were known to groom management graduates from the Tata Administrative Services.

But there was need for fresh blood and thinking, which came from the likes of R Gopalakrishnan, Kishore Chaukar and Allen Rosling along with inhouse bosses: JJ Irani, Ishaat Hussain, NA Soonawala and RK Krishna Kumar.

"The biggest change that is happening on a continuous basis is that of distribution of leadership. It’s like someone creating a 100 piece orchestra," says Gopalakrishnan, executive director at Tata Sons, the group’s holding company into which he moved from Hindustan Lever.

"Ratan Tata has the unique ability to smell the winds of globalisation much be fore many of us,” says Krishna Kumar, vice-chairman, India Hotels.

"The changes that the Tata Group has undergone is entirely in sync with globalisation. The chairman’s initiatives are in response to the winds of change that have been blowing ever since the Berlin Wall fell," he adds.

Designs on the world Following the management shakeup, Ratan Tata unleashed the tiger. This was the beginning of the third phase. After 2000, the Tata empire has gone on a shopping spree across the world.

The mandate was clear. Each business segment should be strong enough to survive and thrive in the global market.

Gopalakrishnan says, "Ratan Tata gives his team the licence to be bold. But no major de cisions will happen without consultation."

Nobody, for instance, now raises eye brows about the feasibility of the ‘people’s car’ in the price bracket of Rs one lakh.

Ratan Tata is man of determination, says investment banker Uday Kotak. "Nothing he says is casual or off-hand. When he speaks, he means business."

The Corus deal, adds Kotak, is the biggest example of Tata’s “courage and vision, which made India proud and a force to reckon with in the glob al canvas”.

So, what makes Ratan Tata so confident?

Industry observers say Tata not only preaches ethics and corporate governance, but implements them in letter and spirit. He has the ability to call a spade a spade. Much before ‘corporate governance' became a catch phrase with India Inc, Tata did not hesitate to file a criminal case against one of his perceived close lieutenants and a top executive of the group for allegedly defrauding one of his companies.

New frontiers have also been nurtured. FC Kohli and JRD Tata created a hen that laid the golden eggs - Tata Consultancy Services (TCS), the country’s biggest soft ware company, which was listed on Indian bourses in 2004. Before its listing, it was a cash cow for Tata Sons.

Now, Tata Sons' holding of 80 per cent in TCS, which has a market capitalisation of Rs 1,26,500 crore is worth over Rs 1,00,000 crore. A marginal dilution can generate enough cash for Tata Sons to gobble up many companies through a leveraged buyout route using the acquired com pany’s assets to pay for the acquisition.

Throughout his career, which began with his role as a management trainee in Tata Steel, Ratan Tata has displayed enormous courage in taking assignments that others had written off — even before they had taken off.

“Ratan Tata has a great risk-taking abil ity. He has a strong sense of what is right and what is wrong,” says Alan Rosling, executive director, Tata Sons.

"He always en courages his managers to come forward and express their views rather than impose his decision." India first Tata is fiercely patriotic. During 1998, he personally stepped in to douse a nation wide rumour that there was a shortage of salt. The rumour led to panic buying and a price rise.

Tata issued full-page advertisements stating that there was no supply crisis and that he would personally ensure that the company met the demand.

His perseverance and determination is best epitomised in what he recently said in an interview. "I am, unfortunately, a person who has often said you put a gun to my head and pull the trigger or take the gun away, I won’t move my head."

Ratan Tata is said to protect his privacy, integrity and patriotism in equal measure. After gobbling up Corus, he has his work cut out. As non-executive chairman, the 70-yr-old has already handed over the day-to-day running of the empire to chosen managers, but there is little doubt that his vision will be sought after — and provided.

Given that the Tatas now have a finger in many global pies, the big man of Bombay House will continue to move his fingers to conduct his corporate orchestra.

News: Indian legislation on microfinance likely in budget session

(BS 03/02/2007) New Delhi - The Centre will bring in a legislation during the budget session to regulate microfinance in the country. “We will be coming out with a comprehensive legislation on microfinance in the Budget session,” Minister of State for Finance Pawan Kumar Bansal said today.

The government’s approach to microfin-ance was flexible and the proposed legislation would support the microfinance institutions, he said addressing a gathering at the Banking Conclave’07, organised by the Symbiosis Centre for Management and HRD here.

News: Indian inflation tops 6% again, FM vows action

(TT 03/02/2007) New Delhi - Alarmed over the inflation rate touching 6.11 per cent for the week ended January 20, the government today promised to take steps to contain it. Inflation has crossed the 6 per cent mark twice within a fortnight.

Since the prices that consumers pay normally rise faster than wholesale prices, the burden on the urban poor and middle-class is higher than that reflected by the 6.11 per cent rate. Besides, these provisional estimates are generally revised upwards in subsequent calculations.

Finance minister P. Chidambaram said the government is concerned about skyrocketing inflation and steps are being taken to contain it.

While chairing the meeting of the parliamentary consultative committee attached to his ministry, Chidambaram said the present runaway inflation is the result of high growth and expressed confidence that the government will “gain mastery in dealing with it”.

The sharp increase in prices of food articles, including pulses like arhar and moong, fruits, vegetables, eggs, textile, wool, sugarcane, coupled with that of metal and paper products, has led to the increase in overall inflation.

The cut in customs duty on edible oil, cement and other manufacturing products, along with the RBI’s liquidity tightening measure announced on January 31 will take some time to dampen the rising prices due to a time lag factor, said government officials.

The finance ministry feels that the current round of inflation is a monetary phenomenon and is also being driven by supply-side constraints especially in food products.

This is especially worrying for the Manmohan Singh government as Assembly polls are round the corner in four crucial states.

The wholesale price index for all commodities for the week ended January 20, 2007, rose by 0.1 per cent to 208.5 from 208.3 for the previous week.

Inflation was just 3.86 per cent during the week ended January 7, 2006 and 4.24 per cent as on January 21 last year.

News: Sensex 50,000 may be just 10 years away

(DNA 03/02/2007) Mumbai - The Sensex breaching all-time highs has become passé. Friday was another day it did so, ending at 14,403.77.

Analysts have already started talking about 15,000 levels for the index in the next few weeks, but here’s one report that takes a long enough view where the Sensex hits 50K - yes, 50,000.

According to a JM Morgan Stanley report dated January 31, 2007, “the Sensex could take almost 13 years to breach 50,000 from its current level”.

Before jumping over the moon, investors should know that the 50K projected over the next 13 years would merely mean the index would be rising at a bit more than 10% annually. Some banks already offer interest rates of 9-9.5% for fixed deposits.

The Morgan Stanley report says that this kind of return may not be a source of comfort since it “may not be able to compensate investors for the risks involved in investing in India.

However, this return appears consistent with the current low levels of risk appetite still making Indian equities attractive in the context of current high levels of risk love”.

Ridham Desai and Kuleen Tanna, who authored report, feel that for investors to be compensated with the risk-return premium they deserve, the Sensex should grow at a compounded annual growth rate of 14%, rather than just a tad over 10%.

If this has to happen, critical success factors like GDP growth, interest rates, inflation rate and the success of India’s infrastructure rollout should have to exceed the research house’s most bullish assumptions over the coming years. A growth rate of 13.5% would assume that the Sensex would touch 50,000 in 10 years.

Put in context, these numbers pale in comparison to the 42.33% growth delivered by the index in 2005 and 46.70% in 2006.

And “if things turn bad, returns could shrink to an annual rate of 8.6%, implying that it would require more than 15 years for the BSE Sensex to reach 50,000,” says the report. This would be just a bit better than the yield offered by long-term government bonds.

The report also says less obvious factors like global risk appetite, the pace at which Indian companies globalise, the rate of wage increases, the investment rate, the estimated asset life in the books of accounts and capital structure alterations will also play a role in determining how the benchmark index would grow.

News: Corus will take Tata brand to Top 100

(DNA 03/02/2007) Mumbai - Say Tata post-Corus, and you have a truly global brand which will weigh about $9.1-9.2 billion in valuation.

Say Tata, and you’d have a brand that’s in the Top 100 - in the same global power pack as a Hitachi ($9.1 billion in brand value) or a FedEx ($9.2 billion).

Say goodbye to a home-grown, complacent brand. Say good morning to a steely new player, which could in brand value outpace iconic nameplates such as Ikea ($8.9billion), Merrill Lynch ($8.8 billion), Morgan Stanley ($8.7 billion), Goldman Sachs ($8.7 billion), Walgreen ($8.7 billion), and Chrysler ($8.6 bn).

Yes, the Tata-Corus brand-value combine should also zoom past legendary brands like Oracle ($8.3 bn in brand value), Heineken ($8.3 bn), Canon ($8.1 bn), Philips ($8.1bn), Chevron ($8.1 bn).

This Tata cheer is based on figures and extrapolations drawn from the just-released Brand Finance Top 250 Global Brand Value report.

The Tata brand figures - pre-Corus - as the only Indian brand in the globe’s top 250, clocking in at No 103 with a value of US$7.4 billion.

This is based on high-level brand valuation across its three engines of Tata Consultancy, Tata Motor, and Tata Steel, which account for about 80% of group revenues, says Unni Krishnan, managing director, Brand Finance India.

This brand value is about 20% of its total enterprise value, says the report. It also reveals that the total value of the 250 most valuable global brands is over $2 trillion, accenting that brands now create significant economic value in all sectors, from utilities to finance.

With Corus in the family, the overall Tata brand value is poised to jump a minimum of 25-30%, which decodes to a wholesome $9.1-9.2 billion in brand value. Next year, it could be rank under 90, and this may just be the start.

The BF 250 brand value is worked out on the `Relief from Royalty’ approach. In essence, what would it have cost the company if it didn’t own the brand and had to rent it (royalty).

``The rise in value for the Tata brand will be very fast in the years ahead, driven by organic growth and M&A, which has been leveraged well not just globally, but also locally,’’ explains Unni Krishnan.

What’s more, the penetration of Indian brands will increase very fast in this global Top 250 table in the coming four to five years, he predicts. ``I bet on a Wipro entering this league, with its acquisition-led, string of pearls strategy.’’ How come a Reliance didn’t make this grade?

Well, it’s not as strong in terms of geographical footprint, intellectual property, or new product development, says Unni Krishnan. He also bullish on a Godrej brand finding its place in the sun, based on its strategy blueprint.
So why does the Corus acquisition by Tata pack in such additional brand value?

Answer: It brings everything from products, to capacity to geographical footprint and the heritage value of British Steel to the overall Tata brand furnace, say analysts.

The Corus brand itself is highly priced, with a high degree of equity value in European markets.

It unleashes a huge pool of R&D and new technology for Tata Steel specifically. Here’s the twin advantage this combined brand offers: At the back end you have a low- cost base in India (Tata Steel), and at the front end a high-value delivery system which is the Corus brand. This combo will gives great margins to the business, backed by a stronger brand, says Unni Krishnan.

In terms of business efficiencies, just having to rebuild Corus’ infrastructure would have cost Tata 60% more than what it dished out, says Ramesh Thomas, CEO, Equitor Consulting. Add customers, and the order pipeline, and it’s a good deal for the Tatas, he adds.

The Tata brand values can kick in much more with the wider, global playing field of Corus. There is now scope to create and deliver much more value for the customer, reckons Thomas.

The Tata brand itself was valued at about $5.5 bn in Brand Finance’s India brand survey last year, says Unni Krishnan. It was valued at a little over $6 billion in 2005 in an exercise undertaken by Equitor-Interbrand on behalf of the Tata group, says Thomas.

They used the economic value process, which is based on the economic forecast of a company; the economic value of a firm and what per cent of that value comes from the brand.

Question is, what propelled the Tata brand value (pre-Corus) from $5-6 billion to $7.4 billion in the short timeframe between 2005 and now?

Unni Krishnan says that brand value reflects everything from R&D efforts to new technologies, new product activity, and M&A strategy, which was leveraged well - not just globally, but locally too.

TCS, for one, has been getting into new areas of consulting, and into IP-related products. And Tata Motors has been driving its Indica and Ace brands forward, and so on.

Underlying all this is the bedrock of heritage and values though. The Tata brand has stood for trust, transparency, and honesty. ``Value is not separated from values. Values drive financial value,’’ underlines Unni Krishnan.

News: Indian companies tilting scales in global M&As

(PTI 02/02/2007) London - In the backdrop of Tata Steel outbidding Brazilian rival CSN in a takeover battle for Corus, Commerce and Industry Minister Kamal Nath today said Indian companies now have the potential to tilt scales in global mergers and acquisitions. "From a tentative mindset that questioned our entrepreneurial capability to survive against global competition, Indian businesses and people are embracing globalisation," he said at a seminar on 'Doing Business with India-Achieving Success in a Fast Growing Economy' organised by The Economist here. Attributing India's emerging power to the change in domestic mindest, Nath said Indian companies are now establishing a global presence, displaying the muscle to tilt scales in global mergers and acquisitions. "Indian companies seeking to be listed on the New York Stock Exchange do not make headlines any longer. The hunger to be globally benchmarked has spread across sectors and regions," he was quoted as saying by an official statement. While India has begun to invest in the global canvas, the world continues to invest in India, he said, adding that the intrinsic worth of India's strong macro-economic fundamentals are being recognised by international investors. "Foreign Direct Investment inflows this fiscal are expected to touch $12 billion, which is more than double the equity inflow of $5.5 billion last year," he said. Since 1991 up to September 2006, of the $53 billion in FDI (equity and other components), around $18 billion has come in the last two and a half years alone, he added.

News: Indian retail majors to enter private label beauty biz

(BL 03/02/2007) New Delhi - Retail giants Pantaloon, Reliance and Bharti-Wal-Mart are all set to venture into the private label beauty products business.

"The three retail majors - Reliance, Pantaloon and Bharti-Wal-Mart - are in talks with us to outsource the manufacturing of their private label beauty products to us at our upcoming unit in Haridwar, slated to be operational by July," confirmed Mr Sandeep Ahuja, CEO and Director, Personal and Healthcare, VLCC, the fitness, health and beauty firm, headquartered in Delhi.

He, however, declined to set a definite time line to begin manufacturing beauty products for the retail giants.

Meanwhile, official sources at the Future Group's retail arm, Pantaloon Retail (India) Ltd, said, "We are already into private labelling of various products in the foods and grocery category. Getting into private labelling of beauty and health products is only a natural transition. In fact, Pantaloon has always been known to explore different formats and has already forayed into the health, beauty and fitness segments."

"As far as the beauty format is concerned, we already have a service format Star and Sitara Salons and have recently forayed into retailing beauty products of other companies through our exclusive outlets - Turmeric. So, starting our own private label business is just a matter of time. We are in talks with VLCC to outsource manufacturing of these products to them, since production is not our core competence." Pantaloon currently has six to seven Turmeric outlets that are a part of its Health Village (holistic wellness and beauty centres), as well as in a cut-in format at its Food Bazaar stores offering products such as colour cosmetics, fragrances, herbal and speciality skin items, hair products and bath accessories.

Long-term aim

"Since getting into the private label business is a part of Reliance Retail's long-term aims, across formats, foraying into private labelling of beauty products is certainly on the cards," said industry sources close to the development. While declining to elaborate further, the source said that it was certainly in talks with VLCC to outsource manufacturing of the products to the latter.

Bharti-Wal-Mart, however, was unavailable for comments. The domestic beauty industry is touted at Rs 6,000 crore, excluding colour cosmetics. According to an Indian market survey done by the US-based magazine Stat USA the current per capita expenditure on beauty products is approximately 68 cents as opposed to $ 36.65 in other countries. The domestic beauty market is growing at around 20 per cent on a year-on-year basis.

News: 'Social banking critical to take credit to the poor'

(BL 03/02/2007) Mumbai - For Muhammad Yunus, the poor are like "bonsai", which could have grown into taller trees if given proper soil. The society has not given the poor a chance. "The champagne glass society" hones economic policies and the rest just watch.

The international banker of the poor, . Muhammad Yunus, on Friday talked of his first experiment to place money in the hands of the poor.

"It was thought poor people cannot handle credit. I wanted to test it. My first branch manager said it was not worth a try but I said I wanted to try it," said Muhammad Yunus, Nobel Prize winner, 2006 and founder of Grameen Bank.

From one borrower to many villages, Grameen Bank gave credit and money came back.

"It worked. Now if anyone tells me the poor are not credit worthy, I can scream and shout and say they are liars," he said.

Human right

Echoing views similar to Yunus, the RBI Governor, Dr Y.V. Reddy, said that it would make a charter to include credit as a human right.

In a hall packed with bankers and RBI officials, Yunus expanded on social banking making a critical difference in the lives of the poor.

Financial systems, especially banks, are entrusted with enormous powers to choose which institution or individual can be rich but they have no social controls. There are opportunities, which financial services provide through micro-credit, to unleash the hidden energy of the poor so that they can take care of themselves, he said.

Bangladesh model

Today within Bangladesh, 80 per cent of the poor households have access to credit. "We want to reach 100 per cent by 2010.We are in the business of financial inclusion,, and not exclusion," he pointed out.

As of December, 2006, the bank has 2,319 branches and provides services in 74,462 villages, covering more than 89 per cent of the total villages in Bangladesh.

Grameen Bank has 22 million individual borrowers. "While visiting one of the villages in Bangladesh, I met a young boy who had come to visit me from town. He said he bunked his college to meet me because his mother was one of the borrowers from Grameen Bank," he said.

Since then, Grameen Bank has introduced students' loan and scholarships to promote higher education.

Fifteen thousand students have taken students' loan and five of them have also been awarded Ph.D degrees.

"There is a possibility of stopping history in the first generation and that is where illiteracy should stop," he said. Grameen Bank has a separate department looking after the second generation and how to place them.

Grameen Bank is owned by the rural poor whom it serves. Borrowers of the bank own 90 per cent of its shares, while the remaining 10 per cent is owned by the Government, says the official Web site of the bank.

Danonoe tie-up

There is a form of business, which believes in doing good to people. "It is a non-loss and non-dividend kind of business," he said. Driven by passion and knowledge, Yunus succeeded in convincing the France-based foods company, Danone, about social business. Danone has entered into a joint venture with Grameen Bank to produce nutritious yoghurt for the malnourished children in Bangladesh. Grameen Bank is aware that ill-health and poverty are related.

He defended the social business model and said there is a need to create social business to solve problems. It is not philanthropy but business which recycles money.

"There needs to be social business funds and business plans. We can create a social stock market where only social businesses are listed," he said.

News: China no threat to India in IT/BPO

(BL 03/02/2007) Banglaore - China will remain only a distant competitor to India in the outsourcing landscape, according to a white paper prepared by Tholons Inc, a services globalisation advisory and investment firm. Lack of maturity in service delivery, cultural incompatibility, poor English and communication skills and lack of confidence from buyers in the US and Europe will confine it to basic IT and BPO functions for some time. India will lead in the IT/BPO space, but it faces challenges such as overheating of the offshore outsourcing market due to attrition, escalating wages, talent scarcity and rising real estate prices, which are leading entrepreneurs to explore other options including China, the Philippines, Russia and other tier II cities of India. "Many people seem to think that China is the next IT/BPO outsourcing destination. But we are yet to see a significant movement outside of the manufacturing industry," said Avinash Vashistha, CEO & Chairman of Tholons. • Newsmakers of the week: View Slideshow "To overtake India, China has to establish itself as a viable and large-scale offshore destination." Shortage of skilled resources, primarily at the middle management level, is another factor that could inhibit China gaining traction in the European and US markets. However, China could gain from being the most preferred location for outsourcing for the Japanese market, with the Japanese living in Dalian and Wuhan giving an edge. Service providers like IBM, EDS, Accenture, TCS, Infosys, Wipro and Cognizant have either set up centres or partnered with local players in China to leverage those skills and expand their market base. "Over the past two years, we have seen selective offshore outsourcing of small IT projects and product development going to China. In the BPO space, we are seeing China emerge only in the area of non voice-based services," said Vashistha.

News: Indian forex reserves rise $924 m

(BL 03/02/3007) Mumbai - Forex reserves have risen $ 924 million to $ 179.052 billion, for the week ended January 26, on a growth in foreign currency assets. Last week, forex reserves increased by $ 702 million to $ 178.128 billion. Foreign currency assets expressed in dollars include the effect of appreciation or depreciation in non-US currencies (euro, sterling and yen) held in reserves. Foreign currency assets have increased by $916 million to touch $ 171.984 billion, according to RBI Weekly Statistical Supplement. "India has a large base of forex kitty with different currencies and the increase in the kitty was basically due to revaluation of currencies," said Mr Paresh Nayar, Chief Dealer, Development Credit Bank. "Euro and sterling had gained against the dollar that week," he said. Gold was unchanged at $ 6.517 billion and SDRs increased $ 9 million to $ 10 million. India's reserve position in the IMF decreased by $ 1 million to $ 541 million. Dealers said the rupee is likely to touch 44 next week.

News: Global footprint of Indian companies to grow

(PTI 03/02/2007) Silicon Valley - Indian companies intend to step-up offshoring, reflecting the growing global footprint of many Indian companies, according to a latest McKinsey survey. According to the just released Global Survey of Business Executives : Confidence Index, January 2007, the number of Indian firms intending to hire staff in a different country to the company's headquarters has increased by 12 per cent from 30 per cent in September 2006 to 42 per cent in December 2006. By comparison, 61 per cent of all executives globally say the majority of their hiring will take place in the same country as their headquarters, a figure that has remained almost unchanged over the past three months. "In India, executives seem to be looking to offshore some of their own operations, after years of benefiting from Western companies doing the same," the survey says. However, executives are notably likelier than three months ago to say that new hires working in a different country from headquarters will perform functions identical to those performed at homeyperhaps indicating year-end assessments of efficiencies and costs, it said. Overall, the survey shows that executivesF relatively high confidence in economic conditions remained unshaken during the final quarter of 2006, despite the upheaval the quarter delivered, and executives are hiring.

News: Govt to revamp FDI policy, may allow multi-brand retail

(HT 02/02/2007) New Delhi - The government is exploring the option of opening up the retail sector with an emphasis on allowing multi-brand product retail. The move attains importance in view of the domestic industry entering the retail business in a big way over the past few months in alliance with global majors in the sector.

The exercise to open up retail is a part of the exercise to take a fresh look at the foreign direct investment (FDI) regime in the country. With FDI expected to cross $12 billion this financial year, the imperative to re-define parameters is being felt in the government, Commerce and Industry Ministry officials told the Hindustan Times.

The issues that are likely to attract the attention of policymakers include liberalisation of regulations relating to cargo handling at airports, permitting FDI in commodities exchange and simplification of procedures as well as relaxation of guidelines on foreign investment in the retailing of petroleum products.

Apart from Reliance Industries Ltd entering the retail business in a big way, Bharti group has also tied-up with Wal-Mart to play a significant role in this growing sector. Many other Indian business group have been in close consultation with overseas players such as Carrefour and Tesco to grab the opportunity that organised retail business offers in India.

Industry secretary Ajay Dua told reporters on Friday, "The information we have got is that they (Carrefour) are talking to various companies to look for a partner but they are yet to finalise its name."

There are indications that the government will also liberalise FDI in asset reconstruction companies, where the current equity limit for FDI stands at 49 per cent through Foreign Investment Promotion Board (FIPB) approval. In the petroleum sector, the dilution of a condition that 26 per cent of the equity must be divested in favour of Indian entities in five years could be a part of the simplification process.

Speaking at a retail summit organised by The Associated Chambers of Commerce and Industry (Assocham), Dua also said that the government was examining a complaint filed by Nusli Wadia-controlled Britannia against French foods firm Danone for its alleged violation of Foreign Investment Regulation Rules to enhance Danone's stake in Britannia.

"We have received a letter from Nusli Wadia, alleging that Danone violated stipulation of Press Note 1 of 2005 on foreign investment and foreign exchange regulations which are being examined with all seriousness", said Dua.

Brittannia has alleged that the investment made by Danone in Bangalore-based biotech firm Avesthagen violates the norms as laid down in Press note 1, which says that a foreign investor must have special government approval to start a JV where the foreign investor has an existing joint venture in the same field.

The government after carefully going through the allegations laid against French company by Wadia would investigate the matter and take necessary action, Dua said.

D Raja, Secretary, Communist Party of India, who was also present on the occasion, said, "Left parties have already warned the government that retailer MNCs like Wal-Mart should not be permitted to enter India even through the joint venture route."

News: Indian banks' profitability seen falling

(RTR 02/02/2007) Mumbai - Profitability of Indian banks could fall in the near term as rising cost of funds and greater risks of customer defaults squeeze margins, Fitch Ratings said on Friday.

Indian banks have been raising lending rates since May last year, but the increase has been smaller than the rise in deposit rates because of tough competition, Ananda Bhoumik at the rating agency said.

Fitch estimates median net interest margin (NIM) has fallen to 3.2 percent from 3.5 percent in fiscal 2005.

"Pressure on deposit rates are enormous. The pressure on NIM is therefore likely to continue for most banks in short term," Bhoumik said.

Indian banks have raised deposit rates by 200-300 basis points since the start of 2006, competing with mutual funds and a booming stock market for investor savings.

Demand for loans has been growing at 30 percent for the third straight year as companies expand and consumers splurge on cars and homes, but risks are also rising.

Private sector banks such as ICICI Bank India's second-largest lender, and HDFC Bank last month reported more than 30 percent quarterly earnings growth, riding on consumer loans.

State-run banks such as Andhra Bank UCO Bank and Canara Bank that have lesser exposure to consumer loans reported less than 10 percent rise in quarterly earnings.

Banks that chased consumer loans which provided bigger returns than advances to companies could face rising bad loans as interest rates go up, Bhoumik said.

"These sectors are vulnerable to pressures," he said. Indian banks began lending to consumers in the last few years but credit history is inadequate.

Still, such loans as a proportion to the total were lower than other Asian markets, he said.

"The exposure to capital market and real estate is low compared to other markets in Asia," he said. "And, unsecured consumer loans are less than 5 percent of the total."

Profitability could be hurt by higher provisions by banks.

"Loan loss provisions are low... (and) need to be strengthened," Bhoumik said. "At 0.5 percent it is not sustainable... it has to go up."

Indian banks' net bad loans have fallen to about 1.22 percent of loans from a high of 8 percent in 1997.

News: Carrefour in advanced signing JV for India foray

(PTI 02/02/2007) New Delhi - French retail giant Carrefour is in an advanced stage of sewing up a joint venture for its India foray, sources said on Friday. Carrefour, which is said to be close to announcing a tie-up with Wadias, is still talking to some other companies, they said. "The information we have got is that they are talking to various companies to look for a partner but they are yet to finalise its name," Secretary in the Department of Industrial Policy and Promotion Ajay Dua said on the sidelines of Retail Summit organised by Assocham. Yesterday, Commerce and Industry Minister had said in London that Carrefour would be announcing its tie-up with Wadias in the next two weeks. Apart from Carrefour, other global retail chains like Tesco are looking at entering India. The world's largest retailer Wal-Mart has already stolen a lead over them by entering into a joint venture with Bharti Group. The magnet for these companies is the huge market that India offers. According to estimates, the Indian retail market is $ 300 billion and will grow to $637 billion by 2015. This would be led to a large extent by organised retail, which is growing at more than 30 per cent per annum.

News: FDI regime all set for major changes next month

(PTI 02/02/2007) New Delhi - The government will go in for major changes in Foreign Direct Investment (FDI) regime next month and is likely to allow foreign investors to pick stake in commodity exchanges and change regulations and caps for aviation, petroleum and retailing. "A comprehensive proposal on fine-tuning the existing FDI regime across diverse sectors will be taken to the cabinet for approval in March," sources said. The note for consideration of Cabinet will follow a review of the FDI regime in the light of the experiences of the last one year, they said. The Cabinet note is likely to have a proposal on FDI in commodity exchanges as Agriculture Ministry is likely to make up its mind on it by then. It would also liberalise FDI in Asset Reconstruction Companies, where the present limit stands at 49 per cent through Foreign Investment Promotion Board approval. In banking sector, the cap on voting rights is also being reviewed. In petroleum, the dilution of condition that 26 per cent of the equity must be divested in favour of Indian entities in five years could be a part of the Cabinet note. In aviation, the proposal is to set a separate head of air traffic services. The government will define what constitutes these services and should they have different FDI rules and limits.

News: India Inc flexing muscles globally

(PTI 02/02/2007) London - In the backdrop of Tata Steel outbidding Brazilian rival CSN in a takeover battle for Corus, Commerce and Industry Minister Kamal Nath said Indian companies now have the potential to tilt scales in global mergers and acquisitions. "From a tentative mindset that questioned our entrepreneurial capability to survive against global competition, Indian businesses and people are embracing globalisation," he said at a seminar on 'Doing Business with India-Achieving Success in a Fast Growing Economy' organized by The Economist. Attributing India's emerging power to the change in domestic mindest, Nath said Indian companies are now establishing a global presence, displaying the muscle to tilt scales in global mergers and acquisitions. "Indian companies seeking to be listed on the New York Stock Exchange do not make headlines any longer. The hunger to be globally benchmarked has spread across sectors and regions," he was quoted as saying by an official statement. While India has begun to invest in the global canvas, the world continues to invest in India, he said, adding that the intrinsic worth of India's strong macro-economic fundamentals are being recognised by international investors. "Foreign Direct Investment inflows this fiscal are expected to touch $12 billion , which is more than double the equity inflow of $5.5 billion last year," he said. Since 1991 up to September 2006, of the $53 billion in FDI (equity and other components), around $18 billion has come in the last two and a half years alone, he added.

News: Tatas enter fresh food business, target supermarkets

(PTI 02/02/2007) Mumbai - Fertilisers maker Tata Chemicals entered the multi-billion dollar fresh foods business in partnership with Europe's Total Produce to source and supply edibles to growing number of supermarkets, besides wholesalers.

The 50:50 joint venture company would create state-of- the-art distribution facilities across India targeting the growing organised retail industry, including western-style food retail joints, in the country.

However, the JV company has no plans to enter retail as of now.

"Retailing is not part of our plans. The front-end is more glamorous, but the most valuable part is the rear-end (supply chain)... We are just scratching the surface," Tata Chemicals Ltd Managing Director Homi Khusrokhan told PTI.

He said the fresh produce business in India was estimated to be worth Rs 1,00,000 crore, excluding the 40 per cent wastage due to lack of infrastructure like cold storage.

"We will supply to any customer who comes to us," he said, when asked if the JV would engage in business with Reliance Retail's fresh foods stores - Reliance Fresh.

Reliance Retail has set up its own supply chain in the country as part of its farm-to-fork project, but also imports some products from abroad.

TCL's partner Total Produce is Europe's largest fresh produce firm and operates through its subsidiaries, joint ventures and associates from 66 retail and wholesale distribution facilities.

It has five ancillary offices throughout Europe with facilities in Ireland, the United Kingdom, Sweden, Denmark, Spain, Italy, Holland, Belgium, France, the Czech Republic and Slovakia.

News: Ambiguities in UAE, India tax pact to go

(BL 02/02/2007) New Delhi - Investment flows from the UAE into India may see a spurt, just like from Mauritius, with the Union Cabinet giving its nod for removing certain ambiguities in the applicability of the double taxation avoidance agreement (DTAA) between India and the UAE. While the Government did not elaborate on the ambiguities, tax experts said the ambiguity was on whether benefits of the DTAA could be claimed in situations where there was no incidence of payment of tax in any of the contracting countries. The Authority for Advance Rulings (AAR) had, in a recent ruling, said that a person who is not liable to tax in the UAE would not get benefit of DTAA. The Income Tax Appellate Tribunal (ITAT) in Mumbai, on the other hand, had ruled in another case that if the Government of the other country has powers to tax an individual, then such an individual would be entitled to treaty benefits, irrespective of whether he actually pays the tax or not. Aseem Chawla, Director (Taxation) Amarchand & Mangaldas, told Business Line that ITAT, Mumbai had recommended to the Government to sort out the uncertainty in interpretation of the DTAA. "If this ambiguity goes, it would give a fillip to investments into India from the UAE.''

News: Stanchart will remove caps on India exposure

(BS 01/02/2007) Mumbai - The bank is removing the ceiling to leverage the country's economic growth.

Standard Chartered Bank, the country's second-largest foreign bank, is removing the ceiling on its India exposure to tap into the 9 per cent economic growth and expand operations, especially in infrastructure funding.

“The country limit has become meaningless for India. Nothing seems to be enough in this kind of a growth scenario,” Peter Sands, the visiting group CEO of the UK-based but Asia-Africa focussed bank, said here today.

Sands is on a three-day visit to India, three months after assuming charge as group CEO. He was speaking at a breakfast meeting with select journalists.

Jaspal Bindra, regional CEO-South East & South Asia, said the country risk ceiling for India was in “double-digit billion dollars” but did not disclose the exact limit.

Standard Chartered earns 75 per cent of its profits from Asia and close to 10 per cent from India. Profits from its India operations grew 50 per cent to Rs 904.8 crore in 2005-06. However, India’s share of profits has been constant owing to an expanded global base arising from acquisitions like the one in South Korea last year.

Asked if the bank was losing out on opportunities because of the exposure ceiling, Sands said, “We were not losing out on opportunities. We have done a good job here (in India).”

He, however, expressed the need for easier regulations for foreign banks to open branches in India. Citibank, the other large foreign bank, has 39 branches, while Stanchart has 89 branches.

News: TCS named top IT services provider

(PTI 01/02/2007) New York - Tata Consultancy Services topped the list of top 10 best performing IT services providers worldwide rated by Global Services, a specialized publication for IT businesses.

Indian companies dominated the list with Cognizant Technologies occupying second position followed by Infosys Technologies, HCL Technologies, Neoris and Patni Computer System.

The 7th spot was occupied by MindTree Consulting followed by Politec, Satyam Computers Servicee and Wipro Technolgies.

The top ranking for both Leaders in Human Capital Development and Best Performing BPO providers went to Genpact, and Hinduja TMT was selected as the Best Performing Global Call Center Provider.

The honour for the best performing Managed Services Providers went to Affiliated Computer Services of the US.

While Polaris Software Labs with delivery centers in India led the list of the Top 10 Specialty Application Development Providers, the Top Engineering Services Provider slot went to Patni Computer Systems.

India accounts for the largest number of companies among the top 100 with 36 finding the coveted slots and is followed closely United States with 32 outfits. Together India and the United States corner 68 of the 100 slots.

An expert from Global Services, a CMP-CyberMedia publication and outsourcing experts at neoIT, a consulting firm that specializes in servicing globalization, identified top service providers on the basis of survey conducted by the publication.

CMP-CyberMedia LLC is a 50-50 joint venture between CMP Media in the US and CyberMedia in India.

The evaluation is based upon 250 data points collected from service providers from 18 countries and third parties regarding effective operations, service offerings, client relationships, and human capital.

The winners are organized in three categories: Customer and Business Process Ads, Regional and Emerging Provider Awards, and Tech-Delivery Awards.

Commenting on what made these firms more special than others, Pradeep Gupta, Chairman and Managing Director, CyberMedia, said, "These firms demonstrated a pattern of market leadership, innovation and outstanding customer service."

Quoting an analyst from Aberdeen Group, Global Services predicts that the market for outsourced IT services will become more global in nature leading to a buyer's market. A broader competitive field will create downward pressure on prices as providers in other parts of the world, particularly Eastern Europe, are finding better seats in the arena.

The listing, the Global Services said, throws up an interesting challenge to India's software supremacy in the form of 8 firms from China, 4 firms each from Malaysia and Eastern Europe, 3 each from Brazil and Mexico, and 2 from Russia.

An offshoring software firm each from Ukraine, Philippines, Latin America, Czech Republic and Romania signals the arrival of an entirely new set of nations providing software and IT services.

It estimates that the US purchases of IT goods and services will grow five percent in 2007 to touch $1.55 trillion. Over a dozen of the 32 American firms listed in the Global Services 100 survey are servicing their global customers through their India facilities.

America is known to source nearly two-thirds of total IT and BPO exports from India. Indian firms are hoping to export IT and BPO services exceeding $31 billion in the 12 months ending March next.

The Top emerging Global Service Providers slot went to Globant of Argentina; the Top South of the Border slot went to Softtek of Mexico with delivery centers in Mexico, Brazil and Spain.

Neusoft Group of China with over 10,000 employees bagged the Top Emerging Asian Markets rank and the IBA Group of the Czech Republic, the largest IT service provider in Eastern Europe, topped the list of Top Emerging European Markets.

Nearly two-fifths of the respondents to the Global Services 100 survey expressed concern about extended sales cycle, employee attrition and the ability to scale operations.

The survey reveals that 50 per cent of the outsourcers look for firms that bundle IT and BPOs services.

The Indian firms in the top 100 included 24/7 Customer, Caliber Point Business Solutions, Exl Service Holdings, Genpact, ICT Group, i-flex solutions, Infinite Computer Solutions, Intelenet Global Services, ITC Infotech, Knoah Solutions, marketRx, Mastek, Microland, MindTree Consulting, Mistral Software, Motif, NIIT SmartServe, OfficeTiger, Promantra Synergy Solutions, QuEST, Satyam Computer Services, Sonata Software, Symphony Services, TransWorks Information Services, Customer, Vee Technologies, WNS and Zensar Technologies.

News: India emerging as new business destination for US

(IANS 01/02/2007) Washington - India is emerging as the new destination for American business after China with several states planning to send trade missions to take advantage of its 'fast-growing market'.

Governors from Virginia and Iowa have been there, and Minnesota, California and Utah are lining up gubernatorial visits for this year, according to Michael Taylor of the US-India Business Alliance that helped organise the earlier missions.

"There is sort of a stampede thing. India is very much on everyone's radar scope now," said Taylor, the alliance's executive vice president, who has been in contact with at least a dozen states about possible trips.

"It's just a question of when they decide to go and how they decide to go. I think they feel a necessity to do it. The China mission was something you had to tick off. India has now become that."

Minnesota's Republican governor Tim Pawlenty is planning to lead a 30-member trade mission to India from October 20-27 with stops in New Delhi, Bangalore and Mumbai.

"We view this as a tremendous opportunity to better acquaint Minnesota with India and better acquaint India with Minnesota," said Pawlenty announcing the trip to a country that now makes up a tiny fraction of Minnesota's roughly $14 billion in annual manufactured exports.

The agenda will include market and industry presentations, networking events, business roundtable discussions, customised one-on-one business matchmaking meetings, and other similar events.

In a message to Minnesota business leaders about the trade mission to the fast-growing market of India, Pawlenty said, "I invite you to take a closer look at business opportunities in India, and I encourage you to consider applying to join the delegation."

There are many compelling reasons for all types of Minnesota companies to expand trade in India, he said and outlined "just a few":

Fast-growing market: With a population of more than one billion, India is the world's fastest growing, free-market democracy. India's GDP is growing at about nine percent annually. US manufactured exports to India reached $6.8 billion in 2005 - an increase of 111 per cent since 2000. Minnesota manufactured exports over the same period rose 208 per cent to $85 million.

Major infrastructure improvements: Over the next several years, India's transportation, energy, environmental, health care, high-tech, and defence sectors are expected to undergo major overhaul, which will create greater demand for products and services.

Tremendous consumer demand: India's middle class (200 million people and growing) has increasing purchasing power and increasing consumer demand.

Pro-American environment: With an overwhelmingly favourable impression of the United States, India is one of the most pro-American countries in the world and is eager to work with American businesses.

Youth power: More than 58 per cent of the Indian population is under age 20. That's more than 564 million people - nearly twice the total population of the United States. This younger population has an increasing desire for high-tech products and services.

News: Tata group picks up 6% stake in Spicejet

(PTI 01/02/2007) Mumbai - Low-cost carrier Spicejet has allotted a total of 2.70 crore equity shares to Tata group company Ewart Investment and BNP Paribas Arbitrage Fund out of the proposed preferential issue of 7.20 crore equity shares.

Ewart Investments was allotted 1.4 crore shares, while BNP Paribas Arbitrage Fund received about 1.30 crore shares from the airline company, Spicejet informed the BSE.

A company official said the allotment to Ewart Investments represents 6 per cent stake in the carrier while that of BNP was 4.5 per cent.

The shares so allotted were issued at a price of Rs 52.69 per equity share, raising an amount close to Rs 143 crore.

Other investors apart from Tata Group and BNP Paribas, who also picked up significant stakes in Spicejet, are Ishtitmar, Telemnix, Goldman Sachs and UK's KBC Fund.

Spicejet had informed the Bombay Stock Exchange recently that it would offer equity shares on preferential basis to various foreign and domestic investors.

In December, it was planning to sell USD 80 million worth of shares on a preferential basis. The company had, however, received offers amounting to USD 118 million. Texas Pacific group, a leading global private investment which also wanted to invest in the carrier later withdrew the offer.

Spicejet's offering of shares on preferential basis was aimed at raising funds for non-aircraft capacity expansion purposes like, investment in engineering and strengthening call centres.

Shares of the company closed at Rs 58.65, down 0.42 per cent at the Bombay Stock Exchange.

News: Indian private banks see big bucks in trust business

(DNA 01/02/2007) Mumbai - An extremely popular estate planning technique in India is to do nothing and leave it to fate. This attitude more often than not has resulted in family feuds and lengthy court battles.

If private bankers and wealth managers have their way this could change, at least, among the uber-rich.

In a first-of-its-kind offering from a private bank in India, DSP Merrill Lynch, has announced that it will offer trust services under the umbrella, DSP Merrill Lynch Trust Services (DSPMLTS). While it will initially target the financial assets of its private banking clients, it plans to extend this service to cover other asset classes as well.

A trust essentially allows a person to structure his wealth effectively for the benefit of current and future generations. A trustee, in this case DSPMLTS, takes care of the client’s wealth, both during and after his lifetime, and sees to it that assets are efficiently managed and properly distributed among the settlor’s (the original owner of the assets and the creator of the trust) beneficiaries.

“This will be done according to the trust deed that sets out the agreement between the settlor and the trustee,” said Kevin Horrocks, chief trust officer (international trust and wealth structuring), Merrill Lynch.

While DSPML is the first private bank to act as a trustee, IL&FS Trust Company has been in the business on a larger scale for about six years now. Its list includes both corporates as well as individuals, the latter numbering about 20 till today “The administrative costs are such that the threshold assets of an individual, for someone to act as his trustee should be at least Rs 5 crore,” said Adrish Ghosh, vice-president, IL&FS Trust Company.

Meanwhile, others are waiting in the wings to join this extremely lucrative business. Deutsche Private Wealth Management is one of them. It already offers trustee services at the formation stage— it helps set up the trust, but is not the executor of the trust or the trustee.

SG Private Banking, which offers trust services to its global and NRI clients from Singapore, is also set to launch the trust services for Indians. “We plan to launch it between June and December, as there is tremendous appetite for this service from investors,” said Sandeep Sharma, head - private banking, India, SG Private Banking India.

While the service may help in client retention, a private bank becoming the trustee may also aid in employee retention. A relationship manager (RM), who is known to move clients’ accounts to the new firm he joins, may find it difficult to do so because his previous employer has become the trustee of his clients’ assets. “This may be a deterrent for the client to move. But he can agree for a change of trusteeship if he’s more comfortable dealing with a particular RM, or if it’s an equally reputed private bank that the RM is moving to,” said Ghosh of IL&FS Trust Company.

News: i-flex to snap up BPO firms in Europe

(DNA 01/02/2007) Mumbai - Mumbai-based i-flex solutions is in talks to acquire two companies — one in France and the other in Greece — early next fiscal; both these acquisitions will be made in the financial BPO and knowledge process outsourcing (KPO) segments.

i-flex is increasing its focus on the BPO and KPO space.

Deepak Ghaisas, CEO (India Operations) & CFO, i-flex solutions, declined to comment.

The software exporter has chalked out major plans in the BPO space and has incorporated new firm — i-flex Processing Services (IPSL) — which will serve as the umbrella for all its BPO service offerings.

At present, BPO business accounts for less than 5% of the company’s revenues.

Recently, i-flex acquired Mantas Inc, a provider of anti-money laundering (AML) and compliance software and services headquartered in US, in an all-cash transaction of $122 million.

Also, the company expects more clients from Japan, Western Europe and the US. The new client addition has averaged 2-3 tier-I clients per quarter over the last few quarters, and the company expects to win more tier-I deals in these regions. i-flex products are used by close to 300 financial institutions spread across 200 countries.

News: DuPont to invest $ 23 m in India R&D centre

(RTR 01/02/2007) Mumbai - DuPont Co. said on Thursday it would invest more than Rs 100 crore ($23 million) in its first research and development centre in India.

The facility in the southern city of Hyderabad will be operational in early 2008 and have more than 300 employees, it said in a statement. "The establishment of the DuPont Knowledge Centre in India is consistent with our strategy of going where the growth is," said Balvinder Singh Kalsi, president of DuPont India, a subsidiary.

R&D at the facility, DuPont's sixth major centre outside the United States, will be directed toward local and global clients and initially focus on molecular biology, bio-informatics and polymer synthesis, DuPont said.

News: India continues to be IBM's fastest country

(PTI 01/02/2007) Bangalore - IT major IBM clocked a growth of 37 per cent year-on-year in 2006, in India led by servers, storage, software and services, a company official said on Thursday. "IBM has seen more than 30 per cent year-on-year growth in India in the last four years. Market has grown 14-15 per cent. We have grown more than twice the market," Regional General Manager, IBM India/South Asia Shanker Annaswamy told reporters here. The headcount of the company in India, has grown 38 per cent, from 38,500 in 2005 to 53,000 as on January one this year. "IBM is the biggest MNC software exporter in India," he said. Annaswamy said IBM Daksh has grown 200 per cent in the last three years, and it now has 20,000 employees. Discussing plans for 2007, he said investments in education will remain a key focus. "We will extend the Kidsmart program and University Relations initiatives across India, and create unique opportunities for our employees to contribute to social causes through volunteer and grants programs," Annaswamy said. IBM India said the company imparted training on open standards based technologies to more than 80,000 students in over 745 colleges in India during 2006. Besides, its "Great Mind Challenge" saw participation from over 700 colleges involving 21,000 students and 3,900 faculties from 24 States. The company said in March this year, it will host its Global Innovation Outlook (GIO) 3.0 summit in Mumbai, which would focus on identifying emerging business, technology and social trends that will lead to thought leadership and collaborative commercial opportunities for IBM, its clients and its partners.

News: 'A landmark win for India'

(BL 01/02/2007) Mumbai - After a much-deliberated wait, Tata Steel has finally won Corus. At the end of nine rounds of bidding at 608 pence per share, Tata was one-up on Brazilian player CSN. The Director of Tata Sons, Arun Gandhi, was a key player in clinching the deal.

He is one of the country's leading chartered accountants and has managed to maintain a low profile for almost four decades. An expert in auditing, taxation and due diligence, Gandhi is better known for his valuation and negotiation skills, making him the best bet that the Tata Group could have against CSN.

Industry experts reveal that he is India's master negotiator because of his ability to structure complicated deals in the most cost-effective manner.

On this special occasion for the company, Arun Gandhi says this is a landmark win for an Indian company. He says that the Corus management is delighted with the deal. He says this is a further step in the global endeavours of the Tata Group.

Excerpts from CNBC-TV18's exclusive interview with Arun Gandhi:

What is the mood among the Directors of Tata Sons?

We are all excited and happy — it has been a long affair over nine months.

Has the feeling sunk in or are you too dazed?

Tired yes, the last three days have been hard work, but I am still in meetings here to do things which I need to.

By the ninth round, was the tension absolutely palpable in the room?

There were tensions, but I had taken my views and I got all the support from my seniors in Mumbai and all along I was able to steer the way and I had all the support.

How is the Corus management feeling about the deal?

I got a call from the Corus Management and they are delighted and happy that we have won.

Did you meet the CSN management after the deal and shake hands cordially or was the spirit different?

There was no opportunity to meet anyone as we were in different offices and the bidding was done through sending emails.

News: Tata-Corus deal - Aggressive price by any yardstick

(BL 01/02/2007) Tata Steel appears to have pulled out all stops in its effort to seal the deal with Anglo-Dutch steel giant Corus. Tata Steel has scaled up its last offer made in December at 500 pence all the way to 608 pence in an hotly contested nine-round auction with Brazil's CSN. It had made the first bid at 455 pence on October 20, 2006.

Caught in a bidding war with CSN for the only major European steel producer available for acquisition, this deal may prove to be expensive one for the Tata group with a much longer payback period vis-à-vis its first bid. This is also evident from some of the conventional metrics used to evaluate such deals.

Final value

The final deal for Corus at an enterprise value of over $13 billion works out to multiple of approximately 7 times EBITDA (earnings before interest, tax, depreciation and amortisation) for the year ended December 31, 2005 and 9 times for the 12 months to September 30, 2006. This is much higher than 5.5-6 times paid by Mittal for Arcelor.

On an EV/tonne basis also, the deal works out to $ 710 per tonne, higher than the Arcelor Mittal deal, though in line with some of the standalone deals in this space.

The final offer price of 608 pence works out to a 50-per cent premium to Corus' price on October 4, the day prior to the preliminary announcement by Tata Steel deal for Corus. Call it a kneejerk reaction, but the markets had pulled down the Tata Steel stock by 10 per cent during the day's trading.

In our view, such aggressive bidding by the Tatas is based on three key factors:

Access to low-cost slabs: The steel makers in India enjoy a 20 per cent cost advantage in slab making over its European peers. The ability to export surplus slabs either from Tata Steel's facilities or through acquisitions in low-cost regions over the next few years will be the key driver of this deal.

Restructuring of Corus' existing units: It is likely that over the next few years, Tata Steel will put through an extensive restructuring of its underperforming units at Port Talbot and Scunthorpe in the UK, though it has ruled out any job cuts. It may also prune down high-cost slab facility at Teesside.

Potential synergies: For the first time since this deal surfaced, Tata Steel has quantified that it will benefit to the tune of $ 300-350 million every year. However, the benefits from the deal may be lower than this amount spelt out in the first two years and attain this level from the third year onwards.

News: 'IT exports to touch $75 bn'

(BS 01/02/2007) Mumbai - Figure to beat 2010 target, says Nasscom's Kiran Karnik.

India’s software services and business process outsourcing exports may touch $75 billion by 2010 if the current growth rate is maintained, Kiran Karnik, president, National Association of Software and Services Companies (Nasscom), has said. This is significantly above the target of $60 billion set last year.

Speaking at the release of a Nasscom-McKinsey study titled “Operational excellence: The next frontier in offshoring,” Karnik said information technology and business process outsourcing exports were expected to grow 33.47 per cent to $31.9 billion in 2006-07 from $23.9 billion in 2005-06.