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STRAWS IN THE WIND

> Eros fixes price band at
`158-175/share
Lanco saves Rs 17,000 cr (you read
Media and entertainment firm Eros
International Media Ltd (EIML) has
fixed a price band of `158-175 per
equity share for its proposed initial
public offer (IPO) to raise `350 crore.
it right) via order to China’s Harbin
The issue will be open September
17-21. “The issue size is `350 crore
wherein 60% will be for institutions
(QIB), the retail component will be
30% and the balance for high net
worth individuals (HNIs),” a
company official said. “We intend to
use up to `280 crore from the net
proceeds, to fund our Hindi, Tamil
and other regional language film
projects that we intend to release in
fiscal 2011 and 2012,” said Kishore
Lulla, executive director, EIML. The
company has successfully concluded
a pre-IPO placement of `20 crore.
> Subbarao skips
customary visit to FM
Tradition is likely to dictate Reserve
Bank of India governor D
Subbarao’s monetary steps in the
first ever mid-quarter policy review
on Thursday. For, Subbarao has
already veered from one tradition
that RBI governors have been
following religiously over the years
— meeting the finance minister
before the policy day. —TickerNews
> RIL seeks 25% hike in
price of gas from D6
Reliance Industries (RIL) is seeking
a 25% increase in the price of
natural gas it produces from the
eastern offshore Krishna-Godavari
Basin. The company has written to
the oil ministry saying it has
customers willing to pay more than
the government-approved price.
GMR Energy and Welspun Maxsteel
have proposed to buy additional KG-
D6 gas at $4.75-5.25 per million
British thermal units, RIL senior
vice-president (commercial) B
Ganguly stated in a letter to oil
Power equipment deal stuns analysts, who look askance at the math: 16 sets of 660 mw
@ `68.3 lakh/mw. That’s 75% lower than the prevailing `2.5 crore/mw. What gives?
K V Ramana HYDERABAD
Lanco Infratech has given an order for supply of
16 sets of 660 mw power equipment to Harbin Pow-
er, the largest supplier in Mainland China, at what
analysts say are “stunningly low prices”.
Lanco would procure the sets at around `68.3
lakh per mw, or one-fourth the prevailing price of
of `2.5 crore per mw. The value of the order is es-
timated at `6,830 crore or `17,000 crore less than
current market prices.
This is said to be the largest-ever export order
bagged by Harbin for single-host device. Lanco is
also believed to have paid 5% of the total cost as
advance to Harbin.
“I am shocked at the price at which Harbin
has agreed to supply the equipment. I am still not
able to figure out the logic behind the pricing,”
an analyst with a leading research firm told DNA
Money on condition of anonymity.
Lanco would use the equipment for eight of its
projects including Anpara, Amarkantak and Ba-
bandh. A source said the pricing is low since the
order is just for turbine and generator (TG), while
another source said the order is for boiler, turbine
and generator (BTG).
“If it is a TG order, then there could be some
clarity on the order and its plan to utilise the
equipment, sources said the order does not include
erection, testing, commissioning of BTG and sup-
ply/installation of associated auxiliaries. It also
excludes control and instrumentation systems in-
cluding transformers, and import duties.
Not willing to take it easy, the other power
equipment majors are alleging that the contract
to Harbin was awarded privately behind closed
doors. Interestingly, industry majors like Alstom
and DongFang too kept off the bidding process for
a variety of reasons including the apprehensions
about the funding ability of Lanco. It is believed
that Harbin was the only bidder.
logic. But, if it is a BTG order, then there is some- The pricing issue is something the analysts are
thing for all of us to probe,” the analyst said. still trying to crack. “We believe such low pricing
Lanco officials did not provide any clarity amid increasing competition will be negative for
on the issue despite repeated attempts since Mon- the whole sector including Bhel,” Amar Kedia and
day. Emails sent to the company remained unan- Gaurav Gupta, analysts with Nomura, said in a
swered. note. “Although realisations implied by the Harbin
Though the timeframe for the supply equip- order are not comparable to Bhel’s supercritical
ment is not known, sources said that Lanco would BTG realisations of about `28-30MM/mw (which
seek an immediate delivery of six sets while the has larger scope of work), they are low even by
balance would be sourced over a period of time. Chinese standards (norm of at least Rmb1.1-
However, the funding for procuring the equipment 1.3MM/mw),” Shilpa Krishnan, Sumit Kishore
is being seen as a major issue by the analysts. and Deepika Belani, analysts with JP Morgan,
Though Lanco has so far not provided any said in their note.
Indian firms supplied 80% of AIDS drugs
But, this could taper if India
gives in to patenting norms
through bilateral pacts with
EU/Japan, says a study
Priyanka Golikeri MUMBAI
Japan intervenes for
the first time since
2004 to support ¥
But it won’t be able to keep the currency
from rising, say analysts
Toru Fujioka & Aki Ito TOKYO
Japan intervened in the foreign-ex-
change market for the first time
since 2004 after a surge in the yen
to the strongest against the dollar
in 15 years threatened to stunt the
nation’s economic recovery.
Finance minister Yoshihiko
Noda told reporters in Tokyo the
yen sales were unilateral. Chief
cabinet secretary Yoshito Sengoku said the ministry “seems
to think” 82 yen per dollar to be the line of defence, after it
reached 82.88 earlier on Wednesday. Government officials
speaking on condition of anonymity have previously said
volatility was a bigger concern than the level.
Prime minister Naoto Kan was under pressure from
business leaders to stop the yen’s gains from undermin-
ing the exports propelling Japan’s growth. It may do little
for the economy because Japan alone won’t be able to keep
the yen from rising, said analyst Tohru Sasaki.
“In the medium-term it can’t change the overall direction”
of the currency, said Sasaki, head of Japan rates and for-
eign-exchange research in Tokyo at JPMorgan Chase, who
on Tuesday said he perceived a bigger chance for interven-
tion after Kan’s reelection as head of Japan’s ruling party.
haney, project manager, India, campaign for
access to essential medicines at interna-
tional humanitarian aid organisation
Medecins Sans Frontieres.
The study comes at a time when the
World Health Organisation has introduced
new recommendations for people living
with HIV/AIDS to begin treatment earlier
and to switch to newer medicines that are
more robust and less toxic, but also much

>
secretary S Sundareshan on
September 6.

Religare to buy 50% in

SBI takes branch India is the pharmacy of the world all right,
at least for AIDS drugs.
Indian generic manufacturers such as
Cipla, Hetero Drugs, Matrix Labs and Au-
of the total value ($463 million) of AIDS
medicine purchases.
This was possible only due to the legal
more expensive.
The study warns that the upcoming trade
agreements India is negotiating with the Eu-
ropean Union and Japan, which contain pro-

banking to a new
robindo Pharma supply over 80% of AIDS framework in India, which facilitated pro- visions for several patenting measures, can
Lankan broker medicines to developing countries, a recent duction and export of low-cost generic hamper production of low-cost generic med-
Financial services firm Religare study shows. drugs, it says. icines, thereby threatening access and af-
Enterprises on Wednesday said it According to the study by the Journal of Generic medicines from India are much fordability for patients across the globe.
will acquire 50% stake in Sri International AIDS Society, between 2002 cheaper than those sold by the innovator Millions with HIV are able to lead a

>
Lankan brokerage firm Bartleet
Mallory Stock Brokers (BMS).

Gold demand fades on

record high price
Record high price dried up demand
for gold, on Wednesday as buyers
preferred to postpone purchases,
bank dealers and jewellers said.
Gold futures on Multi Commodity
Exchange of India (MCX) hit a
record high of ` 19,257 per 10 gram
on Wednesday afternoon.
NOBODY’S BUSINESS
There are many modes of payment, sir.
A few years ago I too had dinner here
without paying the bill in cash.
level - kirana shops
Opening a regular savings a/c costs Rs 400 at an
SBI bank branch. This one’ll cost Rs 20
Khyati Dharamsi MUMBAI
Count your cash, the bank is coming
to you — to the neighbourhood
kirana store.
State Bank of India (SBI), India’s
biggest lender, has started offering
banking services through kiosks set
up at kirana stores where you can
Manjul open an account, deposit cash, with-
draw or transfer money, and get a
‘pakka’ receipt for it.
SBI is doing this through an al-
liance with Oxigen, a bill-payment,
mobile recharge and ticketing sys-
tems provider.
The bank opened the first 50
kiosks in Mumbai, including one in
Dharavi and will be rolling out 1,000
more in the city and another 870
across the state.
In Delhi too, 30 such kiosks have
been opened. Kiosks in Bihar and UP
are planned to be operational by Oc-
tober 2010, said sources.
Other banks are yet to respond to
this but experts said they will soon-
er than later.
The SBI kiosk will facilitate bank-
ing services through six languages.
A person who walks into select ki-
rana stores with a photo ID and ad-
dress proof can open a no-frills ac-
count, where minimum balance is
not mandatory. The shopkeeper will
capture a photo the person using a
webcam and also fingerprints with
a biometric device.
“The know-your-customer verifi-
cation process is diluted here; the
regular KYC is so stringent that dai-
ly wage earners and migrants get
excluded from banking facilities,”
said Pramod Saxena, managing di-
rector and chairman at Oxigen.
So, if you do not have an address
proof such as a letter from the
mukhiya of your native place or
your employer, just stating your
place of stay can serve as address
proof. There is no personal verifica-
tion done as in the case of a regular
bank account and your fingerprints
serve as the main identification.
and 2008, more than 4 million people with
HIV/ AIDS in Congo, Namibia, Mozam-
bique, Tanzania, Kenya, Nigeria and other
developing and underdeveloped countries
companies (see table). No wonder, the de-
mand for these is high internationally.
“Local production in several countries is
weak and hence there is strong reliance on
healthy life thanks to the antiretroviral
drugs produced in India, points out Kan-
nikar Kijtiwatchakul, coordinator, health
consumer protection programme, Chula-
in Africa, Asia and South America were
treated with low-cost medicines made by
India made medicines,” says Giten
Khwairakpam, programme coordinator,
longkom University in Thailand. “Hence,
any provision in the bilateral agreements
Indian drugmakers. Coalition of Asia Pacific Regional Network which India is negotiating, which can ham-
Indian firms supplied over 80% of total on HIV/AIDS. per early entry of generics, can affect pa-
AIDS medicines in that period. Yet, as of “We get over 80% of our requirement for tients not only in India, but also millions in
2008, Indian companies accounted for 65% AIDS drugs from India,” says Leena Meng- the developing world.”
Prakash Inds in new mining plan at Chotia
Promit Mukherjee MUMBAI tonnes per annum (mtpa). forests. Agarwal said if Madan- discrepancies of loss of coal
“The left-out middlings of coal pur stays that way, the company due to transportation, there
New Delhi-based sponge iron from the plant are being used for may have to seek a nod to up ex- have been no reports of illegal
player Prakash Industries might captive power generation,” Agar- traction at Chotia. mining from the government
submit a new mining plan for its wal said on Wednesday, while He said it would take another body,” he said.
Chotia coal block in Chhattis- speaking to analysts on a confer- 2-4 months to get clarity on the Prakash Industries plans to
garh, to enhance capacity. ence call. status of the Madanpur block. enhance its sponge iron capacity
The company recently got em- Agarwal said the company “Beyond that, it would take 5-6 from 0.6 mtpa to 1.2 mtpa by 2013.
broiled in a controversy over has been allotted three coal months to get a new mining plan It has a waste heat power gen-
Chotia, where it has been ac- blocks — Chotia, Fatehpur and approved,” he said. eration capacity of 75 mw and
cused of illegally mining and Madanpur. Denying allegations of ille- another 100 mw of coal-based ca-
selling coal to third parties. While Chotia was allotted in gal mining from Chotia, Agar- pacity at Chhattisgarh, which is
Vipul Agarwal, director-fi- 2003 to feed a 0.8 mtpa of sponge wal said the company has been being expanded to 775 mw by
nance, said the company is cur- iron capacity at Champa, the oth- operating the block for the last 2015, with the first unit being
rently mining 1 million tonne of er blocks were for the company’s four years. “The extraction of commissioned by the last quar-
coal from the block, which is be- foray into power generation. coal, its quantity, grade and us- ter of the current fiscal. Hence,
ing used for its sponge iron plant Madanpur has been placed age are being verified every coal becomes very critical feed-
in Champa, Chhattisgarh, hav- under a ‘no-go’ zone by the Union year by the office of the coal stock for the company’s future
ing a capacity of 0.6 million ministry of environment and controller and barring a few growth, Agarwal said.

Ahead of 3G launch, evolution dilemma for mobile operators

With voice revenue growth on the wane and in-house data capabilities missing, destruction looms, unless…
Amit Tripathi MUMBAI
Innovate or perish — the message for tele-
com operators rings loud and clear.
As the sector gears up for rollout of 3G
services, sector experts feel the operators
will have to come up with newer ways of
doing business to be able to maintain rev-
enue continuity or face a burnout going
forward.
Between themselves, telecom operators
in India added 20 crore new subscribers
in 2009.
But, their combined revenue increased
barely 3%.
Even if one attributed 30% of the sub-
scriber additions to usage of dual and dis-
posable SIM cards, revenue accretion
from the additional users during the year
was minimal.
Understandably, therefore, breaking
even on the huge amounts they have spent
on acquiring 3G spectrum and putting in
place the required infrastructure will be
easier said than done.
Operators cite low-ticket users from ru-
ral India and ever decreasing call tariffs
as the twin reasons for the decrease in rev-
enue growth.
“With hyper competition and 10+ oper-
ators in each circle, there is always at best
a tenuous equilibrium in terms of com-
petitive dynamics. Even if consolidation
were to happen, it will take some time be-
fore prices can rebound, and in my view
that is a very unlikely outcome. In short,
there is little upside on voice revenue in
the market,” Arvind Subramanian, part-
ner and director at Boston Consulting
Group India told DNA Money.
Besides a decline in user revenue, op-
erators face the threat of seemingly un-
charted areas such as cloud computing
and free voice services over the Internet.
“Three shifts have unleashed waves of
both creativity and destruction in the
telecom market. First, customer behav-
iour is becoming more varied, as con-
sumers take advantage of new features at
their fingertips. Fixed-line telephone has
one function; the iPhone, hundreds. Cus-
tomers expect anywhere, anytime access
to content. Second, deregulation — a
perennial force — continues to exert
downward pressure on prices. Finally,
open standards and global platforms such
as the Web have lowered barriers to en-
try and fuelled an explosion in innovation
and new services,” Stepan Breedveld, Ron
Nicol, and Maikel Wilms, partners at
Boston Consulting Group, wrote in a note
in August.
As if this cocktail wasn’t deadly enough,
operators also face congestion due to a
surge in mobile data traffic just as their
western counterparts such as AT&T have
seen due to increasing iPhone usage.
In fact, and somewhat sadly, Indian tel-
cos do not yet have data services capabil-
ities such as user experience manage-
ment.
“The next few years in Indian telecom
market will mark a new era of data. Oth-
er developing markets like China and In-
donesia have shown that data can quick-
ly grow to as much as 20-30% of mobile
revenue. But mobile data services de-
mands new capabilities such as customer
insight, analytics, product management,
network management, pricing, promo-
tion, user experience management, device
management that the operators current-
ly do not have and will need to build
anew,” said Subramanian.
According to him, the ensuing consoli-
dation in the telecom sector needs to take
place with an eye on those capabilities.
“The key question is going to be
whether those capabilities get built by the
content & apps players or by the telcos in
India. This is where consolidation among
the mobile operators will help. It will af-
ford the surviving operators some head-
room to invest in building these capabili-
ties,” said Subramanian.
Other observers see early signs of tel-
cos positioning themselves for better data
play in India.
“The journey for better data services
has begun. On the one hand, telcos are
launching entertainment services such as
DTH, IPTV and content distribution,
while on the other, for the enterprises,
they are offering more data-based servic-
es through MPLS VPN, managed servic-
es, etc. Yes, the maturity of cross-sell and
up-sell opportunities in those services will
take a lot of time,” said Alok Shende,
founder and distinguished researcher at
Ascentius Consulting, a Mumbai-based
telecom and IT sector research firm.
Others, such as Jatin Ahluwalia, a tele-
com sector veteran and founder director
of Delhi based content development firm
vRock Mobile, believe that operators in In-
dia will take time to move from outsourc-
ing mindset to owning various newer ca-
pabilities.
“Let us take the example of one of the
largest telcos in India. It has at the mo-
ment more than 100 partners providing
everything from network equipment, IT
to value added services and others. Be-
sides, it manages more than 1200 applica-
tions and services for its subscribers. So,
it will take time for the firm to acquire
all of those capabilities in-house,” said
Ahluwalia.
A telecom sector analyst at a Mumbai-
based broking firm, though, feels data rev-
enue stagnation for telcos is some time
away.