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.