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Kolkata has highest mobile, PC penetration among students
Kolkata has emerged as the metropolitan city with the highest number of students using the internet for information access, as well as the highest mobile and personal computer penetration among students, according to a survey conducted by India’s largest IT solutions provider, Tata Consultancy Services. Around 90 per cent of students have mobile phones and 76 per cent have a home PC, beating the national average. This is among the largest youth surveys in India, and was conducted across 14,000 high school children between 12-18 years of age in 12 cities during 2008-09. The survey says Kolkata leads the pack in the usage of Wikipedia (31 per cent) for information sourcing. Again, among all metros, Kolkata tops the preference for banking and financial services (20 per cent). The survey shows ‘The Web 2.0 Generation’ are digital natives, who are highly technology savvy, global in terms of aspirations and outlook, as well as increasingly optimistic about India’s economic future. “Nearly one out of 10 people on the planet are under 25 years old and living in India. That is the significance of India’s next generation and what they do, think and aspire to hold insights for all those who aim to engage with this Web 2.0 Generation,” said S Ramadorai, CEO and MD, TCS. The TCS Generation Web 2.0 survey confirms that today’s students are shifting their academic and social life online and embracing the world as true digital natives. This societal trend has important implications for parents, educators, policy makers and future employers, as well as companies and brands that want to sell to tomorrow’s generation, the survey pointed out. The TCS Generation Web 2.0 survey, conducted for the first time in 2008-09, highlights that over 80 per cent of urban school children have access to mobile phones, find time for the internet alongside school, classes and extracurricular activities, and are starting to embrace Web 2.0 tools like blogs and social networking sites.
Ranbaxy to set up drug making unit
Indicating that the ownership change has not altered the growth plans of Ranbaxy, the country’s largest drug maker has secured an approval from the Himachal Pradesh government to build a new drug manufacturing facility in Baddi. The new facility, meant to augment Ranbaxy’s production capacity to serve domestic business, is to come up before March 2010. This is the first new manufacturing project since Japan’s Daiichi Sankyo became its major shareholder last year. Company sources declined to provide details of
the project but said it is “well on track to qualify for tax benefits”. The estimated cost of the project is known to be around Rs 40 crore. While the Baddi project is to augment domestic supplies, Ranbaxy’s Mohali pharma SEZ project, also in the process of execution, is meant for exports. “Our SEZ Greenfield project at Mohali is progressing as per schedule and will augment our already significant manufacturing capability when complete. The product and volume plan would be to try and maximize financial benefit”, a company official said. Ranbaxy’s domestic drug manufacturing facilities are located at Dewas (Madhya Pradesh), Paonta Sahib (Himachal Pradesh), New Delhi, Jejuri (Maharashtra), Goa, and Mohali and Toansa (Punjab). The Paonta Sahib and Dewas facilities are under the regulatory scrutiny of the United States Food and Drugs Administration and products from these facilities are not allowed to be marketed in the United States. The company is in the process of complying with US regulations and hopes to resolve the problem soon.
3. ONGC gets nod to partner L N Mittal for Kazakh venture
The government has given ONGC its approval to partner Lakshmi N Mittal for buying 25 per cent stake in Kazakhstan’s prospective Satpayev oilfield in the Caspian Sea. ONGC Mittal Energy Ltd (OMEL), the joint venture of ONGC’s overseas arm ONGC Videsh Ltd (OVL) and Mittal Investment Sarl, plans to invest $400 million in the Satpayev oil field, official source said. The Cabinet Committee on Economic Affairs last evening gave OVL its approval to invest its share of $204 million in the oilfield. OMEL will pay $26 million as signing amount to the Kazakhstan government for 25 per cent stake in Satpayev field. Besides, the partners will also pay $80 million as one-time assignment fee, they said. Over and above these, the two have committed a minimum exploration investment of $165 million and an additional optional exploration expenditure of $235 million. Satpayev is situated in a highly prospective region of North Caspian Sea and in proximity with at least four fields. A peak output of 287,000 barrels per day is envisaged from the 256 million tonnes of reserves in the field. Kazakh national oil firm, KazMunaiGas, will be the operator of the field, holding remaining 75 per cent stake. OVL, the overseas arm of state-run ONGC, and Mittal Investment Sarl are equal partners in OMEL.
Ruias-owned Essar Oil today announced acquisition of 50 per cent stake in a 4 million-tonne oil refinery in Kenya. The company acquired 50 per cent stake of western energy majors Shell BP and Chevron in Kenya Petroleum Refineries Ltd, Essar said.
Infosys gets CISF cover
The home ministry has selected 10 corporate houses, including Wipro, IBM and TCS, to provide them Central Industrial Security Force (CISF) cover, in view of the threat perception and vulnerability of these corporate entities. While Infosys on Friday became the first private sector establishment in India to be provided security cover by the elite security force, cover to the rest of the corporate houses will be provided in a phased manner, asenior CISF official said. At least 79 corporate houses, including Reliance, Tata and Oberois, had earlier approached the Centre seeking CISF security cover for their installations. Other business houses and vital organisations that will get CISF security cover include Reliance, Essar, Jindal, Electronic City (Bangalore) and the Bombay Stock Exchange, CISF InspectorGeneral R K Mishra told Business Standard . CISF is planning to deploy 79 jawans for guarding Electronic City, which houses most of the elite IT companies in Bangalore, and about 71 personnel for Wipro’s Sarajapur Road campus. In total, CISF expects the number of personnel deployed in manning these establishments won’t be more than 1,000. The cost incurred for the deployed of personnel in these companies and establishments will be borne by the business houses concerned. Infosys will spend Rs 1 lakh per day towards the expenses of the 101 CISF personnel, including salary, medical expenses and boarding. In total, the company will spend Rs 3.6 crore per annum towards CISF cover in its Electronic City campus. Infosys Chairman NR Narayana Murthy said that the security cover, coupled with the company’s private security guards, has made the company the “most secured corporate houses in the country”.
5. US economy: contraction slows as recovery beckons
The worst US economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery. Gross domestic product shrank at a better-than-forecast 1 per cent annual pace after a 6.4 per cent drop the prior three months, Commerce Department figures showed on Friday in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month. Stabilisation in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said. At the same time, rising unemployment and weakening Stocks
Government spending rose at a 5.6 per cent pace last quarter, the most since 2003, as President Barack Obama’s $787 billion stimulus program began to take effect. The funds are aimed at helping states retain workers, financing infrastructure projects and reducing tax payments. GDP has fallen four straight quarters, the longest ever. Consumer spending, which accounts for about 70 per cent of the economy, fell at a 1.2 per cent pace following a 0.6 per cent increase in the prior quarter. It was forecast to drop 0.5 per cent, according to the survey median. Purchases slid 2 per cent since the peak at the end of 2007 — the most since a2.4 per cent decline in the 1980 recession. “It’s important to put it in perspective,” Christina Romer, who chairs the White House Council of Economic Advisers, said in a Bloomberg Television interview. “We are seeing some sign the consumer is stabilising and, of course, the tax cut that was included in the recovery act I think is going to help consumers feel more confident.” The IMF, in an annual review of the US economic outlook, today said it anticipates a “gradual” recovery. The Labour Department reported separately on Friday that employment costs — a measure that includes wages, salaries and benefits — rose 1.8 per cent in the second quarter from a year before, the smallest gain in figures dating to 1982. The dollar and the yen declined versus the euro after a government report showed the US economy shrank less than economists forecast, reducing the demand for the currencies as a refuge. The Swedish krona advanced against the euro to the strongest level since December after a government report showed the economic contraction in the Scandinavian country slowed in the second quarter. The US currency headed for a fifth month of declines against the pound, its longest run in five years, after a UK survey showed consumer confidence held at the highest level since April 2008.
6. US Bill to restrict OTC derivatives holdings
US financial regulators would gain the power to restrict holdings of over-thecounter derivatives under legislation to be crafted in the coming months, the chairmen of two House of Representatives committees said on Thursday. Barney Frank of the Financial Services Committee and Collin Peterson, of the Agriculture Committee, said anti-speculation provisions would be part of legislation to bring the $450 trillion OTC derivatives market under federal regulation. The bill would also clamps down on a type of derivative called credit default swaps (CDS), which have been blamed for magnifying global economic distress by spreading losses from bets on risky
mortgages and other debt. The swaps are used to insure against debt defaults and speculate on borrower’s credit quality. A key question for the derivatives bill is whether to ban outright “naked” CDS, where the trader or investor does not hold the underlying asset being insured. An alternative is requiring regulators to monitor CDS trading and restrict the size of holdings — position limits — by dealers and large investors. “We will have in the bill, I believe, full authority to SEC and CFTC to impose limits, both overall position limits and (trading) time outs,” said Frank, referring to the Securities and Exchange Commission and the Commodity Futures Trading Commission. The SEC polices stock markets and the CFTC oversees futures markets. The agencies would split the workload of handling OTC derivatives under the legislative outline by Frank and Peterson. Frank said his committee would begin work on the bill after the August recess and he hoped for a floor vote this year.
Buffett posts $1 bn profit
Warren Buffett’s Berkshire Hathaway Inc earned a $1 billion paper profit from an investment it agreed to make in Chinese carmaker BYD Co less than a year ago. The automaker has jumped fivefold in Hong Kong trading since the deal was announced on September 27, helped by Buffett’s investment and rising demand for fuel-efficient vehicles. Three days earlier Berkshire agreed to an investment in Goldman Sachs Group Inc that has since generated a paper profit of about $2 billion. “When Warren Buffett says the sun shines out of somebody’s backside, it’s worth paying attention,” said Guy Spier, principal at New York-based hedge fund Aquamarine Funds LLC, who owns Berkshire shares and has researched BYD. Buffett is “betting on the jockey in this case,” Spier said, referring to BYD’s Chief Executive Officer Wang Chuanfu. Berkshire’s MidAmerican Energy Holdings Co unit agreed to buy 225 million new shares of BYD for HK$8 apiece. That stock now has a market value of HK$9.66 billion ($1.25 billion), based on today’s closing price. Buffett will pay HK$1.8 billion. BYD plans to sell shares on the mainland to help fund the development of its auto business. The company intends to offer as many as 100 million yuandenominated shares in Shenzhen, it said in a July 16 statement. In May, the automaker agreed to explore cooperation with Volkswagen AG in areas including hybrid cars and lithium-battery powered electric vehicles. The company will also work with Buffett’s MidAmerican on the development of rapid-charge batteries for storing power from wind and solar generation, MidAmerican Chairman David Sokol said in September. Goldman Sachs turned to Buffett after the global credit crunch forced Lehman Brothers Holdings Inc into bankruptcy. Berkshire agreed to buy $5 billion in preferred shares paying 10 per cent
interest and took options to buy $5 billion of shares at $115 apiece. Goldman closed at $162.42 in New York Stock Exchange composite trading on Thursday.
Can RBI’s forecasts be trusted?
The RBI governor, Dr Subbarao, recently announced that he was seeking discussion and perhaps even criticism from within his organisation. This is definitely newsworthy and Dr Subbarao should be applauded for taking this initiative. The RBI is perhaps the last of the feudal organisations in India (along with all the political parties) and this attempt at an entry into the 20th century is laudable. I wish Dr Subbarao luck; having worked on two RBI committees a decade apart (in 1997 and 2006, under the chairmanship of former Deputy Governor and atrueblue RBI man Mr Tarapore) I can say with some experience that the RBI does not take lightly to anti-feudal forces. No sooner had Dr Subbarao made his plea for dissension than the empire struck back. In its quarterly review on Tuesday, July 21, the RBI viewed the economy in a dour manner (why so serious?). It kept tight monetary policy tight (highest real interest rates in the world if one uses the GDP deflator) and warned of impending inflationary dangers. Believing full throttle in this gloomy stagflation outlook, the RBI lowered the forecast for GDP growth for 2009/10 from 7.5-8 per cent (made in January 2009) to 6 per cent. Correspondingly, it raised its forecast for WPI inflation in March next year from 3per cent to 5 per cent ( see table ). These pronouncements are put into focus by noting three facts. First, internationally, India is the only economy that is lowering its GDP forecast, while most are debating not that GDP will be higher in 2009, but how much higher. Second, while all expect inflation to be higher than zero inflation, there is no central banker of a nonbanana republic (that I know) who is forecasting this high inflation. The third fact is perhaps the most damning. The table shows the past forecasts and the errors on both. Note that it is nobody’s contention that the forecast errors should be zero. That would be like forecasting the past. What is desirable is that the forecasts have a randomness to them such that over time the errors add up to zero. Unfortunately, nothing of the sort occurs with RBI forecasts. Very consistently, the RBI underestimates GDP growth by about 1 to 1.5 per cent — it gloriously missed the entire growth acceleration between 2004 and 2007. In May 2004, the growth forecast for 2004/5 was 8.1 per cent, but in October it got lowered by 2 percentage points. Which means that the RBI was expecting GDP growth (in October 2004) to average only 4 per cent for the next two quarters! It turned out to be twice that rate. In 2008, perhaps the RBI noted its erroneous ways and started forecasting higher GDP growth for the great crisis year of 2008/9. At the peak of the crisis (July 2008), it forecast GDP growth of 8 per cent. A month later, year-on-year industrial production was reported to be negative — the very first negative number in the developing world, suggesting that the great Indian slowdown of 2008 was almost entirely a home-grown affair (note that the world collapsed a full three months after the Indian collapse and after Lehman in September). The inflation forecasts are no better, and in many respects shockingly worse. (That this might have something to do with the deeply flawed quantity theory of money model that the RBI uses
has been commented upon ad nauseum in these columns.) The data are from quarterly reports of the RBI. In end January 2009, which is two months before the target of the forecast (March 2009), the RBI’s considered assessment was that year-on-year WPI inflation would be 3 per cent. At that time, the WPI index was 229.6 and the March 2008 WPI figure was 225.5. A 3 per cent year-on-year increase would mean an index level of 232.3 in March 2009. Which means that in just two months the RBI was expecting the index to rise by 1.2 per cent or close to 7 per cent at an annual rate. (If seasonal factors are incorporated into the exercise, which they should, but which the RBI adamantly refuses to incorporate into its thinking, the “performance” would be worse.) This when the world was rightfully talking of the genuine possibility of a second great depression worldwide. Maybe the RBI will be right this time; and maybe only the RBI will be right and the rest of the world wrong. Maybe. It is equally possible that we need to assess the RBI forecasts by a different yardstick, namely not research but ideology. Consider for amoment that the RBI belongs to a strict monetarist school and only looks at the quantity of money supply. Consider also that as a central banker it believes in always erring with tightness. Consider also that its ideology prevents it from being open-minded about different explanations for economic phenomena. If so, then the RBI will act exactly as it has acted.
9. DIPLOMATIC SMILE Nirupama Rao takes over as Foreign Secretary
NEW INNINGS: Nirupama Rao, a 1973-batch IFS officer, has taken over as the new foreign secretary of India, succeeding Shivshankar Menon. Rao, 58, is the second woman after Chokila Iyer to hold the post and will have a tenure of 17 months, said a top foreign ministry official. Prior to her assignment, Rao was the ambassador to China REUTERS
Testing time for GMAT in India
Acrucial test to gain admission in business schools in the US has seen a fall in aspirants for the first time in five years. Applications for the graduate management admission test (GMAT), administered by the Graduate Management Admission Council (GMAC), have dipped 9 per cent from around 6,260 in 2008 to 5,700 in 2009. In each of the preceding four years, the number of applicants had grown 30 per cent. A top GMAC functionary said this was because of the worldwide economic slowdown. “When an economy slows down, initially people go back to school. But as recession stabilises, people are less likely to give up their jobs. Rather than taking up full-time studies, they enroll for weekend and part-time programmes,” said Dave Wilson, president and CEO, GMAC. Wilson said that another reason for the decline in the number of tests taken so far was the depreciating rupee. When the currency depreciates against the US dollar, it makes a dollardenominated purchase more expensive in local currency. Thus, tuition and fees for MBA
programmes have gone up as the rupee has depreciated vis-à-vis the dollar. “When the rupee declines against the dollar, it becomes much more expensive to attend an MBA programme overseas. Many candidates will either decide against attending such programs or will defer their decision to attend until there is either a recovery in the rupee or they accumulate more savings,” said he. Of late, there has been areversal of this trend. The rupee has appreciated 1.70 per cent between January (Rs 48.76) and July 2009 (Rs 47.93). Prominent Indian B-schools, including the Indian Institute of Management, Ahmedabad, and Indian School of Business (ISB), evaluate GMAT scores for their one-year management programmes. ISB was the topmost Indian B-school where Indian students sent scores to in 2008. All told, around 852 management education programmes in India use GMAT scores.
11. Dabur forays into premium skincare mkt
Leading Ayurvedic and natural health care firm, Dabur India, has forayed into the premium skincare market by launching a new product range and has targeted 8 per cent market share in the next eight months. The product range — Dabur Uveda skincare expert from Ayurveda, has critical herbal extracts derived from a blend of authentic ayurvedic ingredients, Dabur India’s Vice President, Personal care,Vikas Mittal said. Dabur expects to generate 8 per cent market share in the next six to eight months, Mittal said. “We are expecting a good revenue from these products in the next fiscal as well. We have plans to introduce some new products for both men and women in the near future,” he said. The range consist of complete fairness cream, 2 in 1 moisturiser, moisturising face wash and clarifying face wash.
GM likely to back RHJ offer for Opel
General Motors’ Opel unit may be forced into bankruptcy should the US auto maker and the German government fail to agree on a buyer, according to three people close to the trust that controls the division. The trust’s five-member board doesn’t back an offer by Magna International Inc, the Canadian parts maker preferred by Germany, said the people, who asked not to be identified because the talks are private. They said the officials favor a bid from investor RHJ International SA or pushing Opel into insolvency. “We wouldn’t be doing all these negotiations if we wanted to liquidate Opel,” said Chris Preuss, a GM spokesman. “We simply cannot move forward on the bid presented by Magna, a bid that is substantially out of line with the memorandum of understanding the government endorsed, and
we’re working with Magna to get the bid to alevel that can be executed.” Magna, whose offer is backed by financing from Russia’s OAO Sberbank, has made promises to its partner on assets that were never in the original agreement with GM, said one of the people close to the trust.
13. Beijing Auto to buy 40% of Daimler joint venture
Beijing Automotive Industry Holding Corp will pay 700 million to 800 million yuan ($103-$117 million) for a 40 per cent stake in Fujian Motor Industry Group’s 50-50 commercial vehicle venture with Daimler AG in southeast China, an official newspaper said on Saturday. Daimler’s 34 per cent stake and China Motor Co’s 16 per cent stake will remain unchanged. The venture, Fujian Daimler Automotive, was established in June 2007 with annual production capacity of 40,000 units. Earlier this year, Daimler also reached agreement with Beijing Auto’s subsidiary Beiqi Foton to make heavy-duty trucks.
Towards the end of our conversation director Ram Gopal Varma remarks drearily, “Nothing disturbs me after RGV Ki Aag. ”I’m stumped. “I said, nothing disturbs me after Another horror film? “No, this is not a horror film,” groans Varma, adding, “Horror films, by definition, surprisingly, will ensure that the audience uses its imagination. “That’s why,” he adds, “it is called Agyaat , meaning ‘the unknown’.” The story of his new film, says Varma, came to him while he was shooting Jungle ,a hostage drama starring Fardeen Khan and Urmila Matondkar. The film was well received by audiences and critics alike, especially since it came at a time when (now slain) sandalwood smuggler Veerapan was on the run. “Just walking into the jungles, you see, was scary. Why? Because you realise that you’re shifting away from the structured atmosphere that exists in the cities and metros to something wild, into the unknown,” he explains thoughtfully. That’s how Agyaat was born. Every time Varma went on long walks in the jungle of Bandipur Forest Reserve in Karnataka — where Jungle was shot — he imagined it as the setting of Agyaat .“I realised then that if I wanted to create a scary film, all the elements for the film were in this setting. Every branch, every leaf had a life of its own, and it could be scary to just imagine that something unknown was watching you all the time,” he people bashed up and ripped apart and it happens all the time.” How did he deal with the failure of RGV Ki Aag ,his most ambitious project that was reduced to a pathetic joke and declared the biggest dud in Bollywood? “Within a week of the film’s release I had started shooting for Phoonk ,so it wasn’t a big deal.
15. Los Angeles screenplay bank eyes Bollywood
Script P.I.M.P (Pipeline Into Motion Pictures), one of Los Angeles’s largest story bank for screenplays, is eyeing Bollywood. Chadwick Clough, CEO and founder of Script P.I.M.P, said that he had been running a successful script writing competition in the US for the last nine years, which had grown into one of the largest story banks for screenplays in Los Angeles. “Over 80 of the writers I have discovered have signed agents and managers, five scripts have been produced into Hollywood feature films and the winner of last year’s competition was recently signed by Warner Bros to write the movie He-Man,” he said. “So I knew there is a demand for a competition/company like ours and that screen writing in India is maturing to the quality and discipline of international films,” he said. Script P.I.M.P has joined hands with ‘ScriptWalla’, a script writing workshop started by wellknown script writer Kamlesh Pandey and Ben Rekhi from Hollywood. “We are still sorting out the workflow between Script P.I.M.P and ScriptWalla. I am excited about the possibilities of bringing what I have learnt and done into a new market,” he said. He said like ‘ScriptWalla’, Script P.I.M.P had similar beginnings as awriter’s workshop before it grew into a competition. Script P.I.M.P has joined hands with ‘ScriptWalla’, a script writing workshop started by Kamlesh Pandey and Ben Rekhi
Tata close to signing aid deal with UK
After year-long negotiations, Tata Motors edged closer to signing a financial aid package with the British government for its struggling UK subsidiary Jaguar Land Rover, a media report today said. Tata wants the government to underwrite a £170 million commercial loan to secure the short-term survival of Jaguar Land Rover but baulked at the conditions the government originally set. Executives from Tata and Jaguar Land Rover met officials from Lord Peter Mandelsons business department on Friday to discuss the agreement. Tatas advisors are still going through each clause but no substantive areas of disagreement remain, the report said. In May, it successfully completed the refinancing of the $3 billion (£1.8 billion) bridging loan it had taken out to buy Jaguar Land Rover from Ford in 2008. Moreover, the drastic decline in
vehicle sales in India has eased. Simultaneously, separate talks were on between the government and JLR about providing guarantees to the £340 million loan offered by the European Investment Bank. This proposed loan is designed to help JLR adopt more fuel-efficient technologies and is not tied to its shortterm survival.
17. Essar buys 50% stake in Kenyan refinery
MARKING its foray into the overseas refining market, Essar Energy Overseas, a group company of the diversified Essar Group, has completed the acquisition of a 50% stake in Kenya Petroleum Refineries (KPRL) for an undisclosed amount. KPRL runs a 4 million metric tonne per annum (MMTPA) refinery in Mombasa, Kenya. The stake was bought from global majors like Shell, BP and Chevron, who have been associated with the refinery for the past 50 years. The Essar group company will now invest another $450 million to upgrade the refinery. The agreement to acquire the stake in the refinery was announced in January last year. The Kenyan government will continue to hold the remaining 50% stake. This acquisition is a step towards the Essar group’s vision of reaching a global refining capacity of 1 million barrels per day. The Ruias-owned Essar Group currently operates 2.8 lakh barrels per day (bpd) refinery in India. The company is in the process of expanding this to 3.2 lakh bpd by 2010 and to 7 lakh bpd by 2011. Commenting on the acquisition, Essar Group chairman Shashi Ruia said: “This is an excellent addition to our oil assets and fits well with the group’s strategy of building and becoming a global oil and gas player. This will further enhance our presence in the growing African market.” When queried on the reasons for the transaction taking 18 months to complete, Prashant Ruia, chief executive, Essar Group, through a conference call from Kenya, told ET, “Kenya went through its elections which delayed the process. We look forward to working with the Kenyan government and making KPRL a global market leader.” The Kenyan government executed its pre-exemption rights in favour of the Essar Group for consideration of $2 million. The Mombassa refinery is the only refinery in eastern Africa and produces gasoline, diesel, kerosene fuel oil and liquefied petroleum gas (LPG). In that context, Essar Oil CEO Naresh Nayyar said, “With this acquisition, Essar expects to play a major and vital role in the African oil and gas markets. Demand for petroleum products in KPRL’s markets is estimated at 5 mmtpa. Going forward we would foray into oil retailing in this sub-continent.” The Essar Oil stock gained 4%, or Rs 5.65, on BSE on Friday, to close at Rs 151 over the previous day’s close. The stock has gained 8% in the past week.
US, Switzerland reach deal on UBS tax dispute
THE US and Switzerland reached an agreement in principle to settle a Justice Department lawsuit against UBS seeking the names of 52,000 account holders, a lawyer told a federal judge in Miami. A settlement may be submitted in writing on August 7, Justice Department attorney Stuart Gibson said on a telephone conference call. No details of the accord were provided. The Internal Revenue Service seeks the data because it suspects American account holders may have evaded taxes. Switzerland called the case a threat to its sovereignty and said an adverse ruling by Gold could force UBS to violate criminal laws protecting bank secrecy. The Justice Department said a settlement must force UBS to provide data to the IRS on a ‘significant number’ of account holders. The settlement will avert a twoday evidentiary hearing that Gold planned to begin on August 3. The US sued UBS on February 19, a day after the largest Swiss bank by assets agreed to pay $780 million to defer prosecution for helping wealthy Americans evade taxes. UBS agreed to an unprecedented breach of Swiss secrecy laws by giving the Internal Revenue Service data on more than 250 accounts. UBS, based in Zurich, avoided prosecution by admitting it helped taxpayers hide money in Swiss accounts to dodge paying US taxes. UBS admitted that from 2000 to 2007, its Swiss private bankers helped wealthy Americans evade US taxes by setting up sham offshore companies in tax havens. UBS said it created misleading forms saying those offshore companies, not taxpayers, were the beneficial owners. — Bloomberg
COMMERCIAL office space is showing slow but steady signs of recovery. In fact, many companies have been shifting to alternative, cheaper locations due to the cost advantage they offer. Moreover with adequate supply expected to come up in 2009 and 2010 in various cities, the commercial office market stands poised for growth. So which are the ideal locations to invest in commercial office spaces and which should be given a skip? Manish Aggarwal, executive director, Investment Services, Cushman & Wakefield (C&W) India says investment in commercial space requires multiple considerations as the risks are greater and so are the returns. “Purchase should be done in consultation with experienced parties where due diligence such as legal, demand-supply and other studies can be undertaken to minimise losses. Broadly speaking, the best spaces to invest are either occupied or pre-leased space. Most cities have close to double digit vacancy levels and so the risks of buying unoccupied or non pre-leased space can be very high.” Developers feel commercial real estate transactions, considered a key indicator of economic activity, are showing first signs of stability after a drastic fall during the early part of this year. “Companies that could not afford rentals earlier in Central Business Districts (CBD) or Suburban Business Districts (SBD) of metros have now started looking for space. Deals for fresh expansions have also started which is a very positive sign,” feels Rohit Malhotra, CEO, Realtech. The trend right now is that companies in expansion mode are looking at relocating to cheaper commercial office locations, says Rajeev Rai, V-P, corporate, Assotech. “In the CBD areas of major cities, where there is no or negligible supply of fresh commercial spaces, rentals will
continue to rise steadily. On the other hand, in the extended/peripheral business districts of these cities, rentals are expected to remain stable with significant upcoming supply. So investors looking for large format offices or reduction in costs, should opt for peripheral business districts.” Some, however, are of the view that commercial supply and demand balancing is expected to take more time with the first quarter of 2010 seeing improvements. “The demand for commercial real estate, particularly office space and retail space, will start improving in 6-8 months. It is expected that all industries will be on track in six months and this will benefit the commercial office market as well,” says Ajay Midha, V-P, commercial, Raheja Developers. Mr Midha feels that Tier I cities and satellite towns such as Noida, Gurgaon, Pune, and Mohali will always be the best choice for investors and companies. But there have been significant advantages for companies not just in price negotiations but in other aspects as well. Along with the benefit of lower rentals, companies now have more innovative construction models and schemes to choose from. Options such as Build-to-Suit, mixed-use developments and assured returns to tenants have all been doled out to woo buyers and tenants. But do exercise some caution before opting for space only on the basis of cost effective rentals. Aspects such as the right developer, building specifications, design formats, connectivity and physical infrastructure, need to be considered. Moreover, even though significant supply is coming up in most cities, one needs to consider not just the upcoming supply but also the existing supply, current vacancy rates in the particular micro market, along with tenant profile and location advantage, sums up Mr Aggarwal of C&W.
Should ratings be sole criterion to make investment decisions? IT WAS the retirement party of Rakesh Chopra when his ex-boss, who had been specially invited, took him aside for a piece of advice. “Chopra, don’t repeat the mistake I committed. Consequent to my retirement three years back, I invested my entire savings in mutual funds and stocks. When the need arose last year for funding my wife’s prolonged illness and my son’s tuition fees abroad, I was in for some harsh reality check. The market value of my investments had halved and I had to book losses to generate cash. I strongly advise you to put your funds in AAA rated bonds, post office schemes and fixed deposits of PSU banks only post retirement,” said his ex-boss. These words kept on ringing in Chopra’s mind when he sat down the next morning to plan his portfolio with an investment adviser. He planned to explore putting money in those star-rated companies. But first lets introduce you to one concept: credit rating. CREDIT RATING It is an independent opinion on the relative ability and willingness of a borrower to meet the maturing debt obligations in a timely manner. The rating scale starts with AAA (lowest credit risk) and ends at D (default grade, highest credit risk). Going by the normal yardstick, one should always go for the best. So, should all the investors invest only in AAA rated issues? To fathom this paradigm, we have to understand the riskreturn relationship.
RISK-RETURN & RISK AVERSION Generally, AAA rated issuers/issues offer lower coupon rates i.e. the return for the investor is less as compared to issues rated lower. As one moves down the rating scale, the benchmark interest rates increase. Why so? It is because of the relationship between risk and return — higher the risk, greater has to be the expected return on that investment and vice versa. An investor hoping for higher returns has to embrace the risks that are attached to it. That brings us to another factor — risk aversion. Risk aversion means that, in general, investors tend to choose a less risky alternative when choice exists that will allow for the same degree of benefit. Higher the risk aversion, lower is the risk tolerance. From the perspective of financial markets, investors scout for either similar return for lower risk or similar risk for a larger return. Most investors are risk averse. But how does an investor decide how much risk to be taken? In reality, there is nothing like optimal risk-return trade off. It is often a derivative of various factors like time horizon, liquidity, and some investor specific circumstances. WHAT TO LOOK FOR Having viewed the investment decisions from this perspective, can we now say that credit rating should be the sole criteria for investment decisions? The answer is clearly no. Credit rating has to be necessarily seen as one of the inputs for informed decision making by investors. For someone in the high tax bracket, AA rated tax free municipal bonds might be an attractive investment option as compared to AAA rated corporate bonds. To investors like life insurance companies, matching their assets and liabilities is paramount. Based on their own actuarial inputs, they could be more inclined towards longer tenure debt as compared to say, commercial banks. However, in the process, they could be required to look at lower rating categories. It would be incorrect to say that they have gambled by not investing in only the AAA rated issues. Depending upon their own underlying objective of investment decision, they try to strike a proper balance between risk and return. In case of banks, if the entire lending is to AAA rated clients only, one can assume the kind of impact it could have on their yield since such borrowers typically get the funds at rates much lower than the bank PLR. The risk-return trade off is extendable to equities as an asset class also. The relative safety of investing in blue chips may not result in highest returns. In case of IPOs also, the IPO grading is an opinion on the relative fundamentals of the company. The investor decision is guided to a large extent by the valuation and risk tolerance. Even a highly graded IPO can fail to enthuse investors if the valuation is too high. Credit rating is a culmination of analysis covering various factors like industry, management, business, financial and project risks. The analysis not only looks at the past performance, but the projected operations also. As such, it does involve certain set of assumptions to arrive at the future estimates. In the dynamic world of business, assumptions can go wrong at times and the projected performance could be lower than projected. Depending upon the changed credit profile and outlook, ratings can potentially change. Hence, an investor needs to juxtapose the resultant changes against investment criterion.
So, returning to our example, Chopra needs to look at the risk-return trade off as also a proper asset allocation. As they say, there are no free lunches in this world!
Mind the GAPS
BY the time you read this, the new Reserve Bank of India (RBI) norms that enforce a third-factor identification for all online credit/debit card transactions will be already applicable. As a cardholder, you will no longer be able to make online purchases or payments if you haven’t registered yourself for an additional security layer with your partner bank. This is what bankers has to say on the subject: “Verified by VISA or MasterCard SecureCode only provides an extra layer of security. In case, wrong password is entered as part of this extra authentication, bank informs e-commerce merchant and if merchant still goes ahead with the transaction, it becomes merchant’s liability. On the other hand, if the password is correct and even if customer disputes the transaction, it is still a customer’s liability.” Stumped! To help you with all such concerns and questions, here’s a ready reckoner on what does the new security layer implies for you as a cardholder. FIRST THINGS FIRST On the face of it, the move is a welcome one. It will ensure you as customer have a third factor authentication which until now was not readily available on the plastic and thus reduce the chance of an online fraud. “From the cardholders’ perspective, another layer of protection gives a lot more comfort in terms of security for the online transactions using credit/debit cards . Though it will also mean you may have to go through another step to complete your transaction online but doing that is always better than to deal with a fraud and face the risk of losing your hard earned money,” says Basant Shroff, associate director, financial services — advisory services, Ernst & Young. As per RBI figures, Indian banks lost out on almost Rs 37 crore in 12,959 credit card fraud cases reported last year. Some banks, in fact, have gone a step ahead creating the security wall. For instance, while generating 6-digit PIN as an additional security layer at ICICI Bank, you are also asked to type a message, known as personal assurance message (PAM). This PAM is known only to you. “When you type your credit card number on the merchant’s website, it will take you to the bank’s website to complete the transaction, where you need to type in the PIN,” explains a ICICI Bank spokesperson. The new guidelines also make it compulsory for banks to intimate the customers via an online alert system for any transactions exceeding Rs 5,000 on their card. Though most of the banks send text message on transactions above Rs 5,000, banking experts feel the day is not far when you will be given the leeway to zero-in on the amount you feel above which you should receive an alert. READ THE FINEPRINT • If you are an American Express cardholder, make sure you don’t share your address at retail shops, food joints
• If correct password is entered as part of extra authentication, even if you dispute the transaction, it is still your liability • Register only those cards which you use frequently for online purchases • Banks can charge you for the new security layer service in future. Right now, it is free of cost
22. BRITNEY SPEARS to open restaurant IN LOS ANGELES
POP princess Britney Spears is set to splash out on a new soul food restaurant in Los Angeles which she wants her father to run. The ‘Toxic’ singer is keen for her father Jamie Spears, who was made co-conservator of her personal and professional affairs following her public breakdown last year, to run the new eatery. “Britney just wanted to give him something useful as a sign of her appreciation. After all their ups and downs she knows he’s always got her best interests at heart,” a source said. Spears who opened her ill-fated New York restaurant Nyla in 2002 plans to serve soul food at the Los Angeles eatery. Soul food is popular in the southern states of US and includes dishes such as fried chicken, barbecued ribs, black eyed peas and sweet potato. Earlier this month, it was revealed Jamie wants a judge to review the conditions of the conservatorship agreement when the singer’s ‘Circus’ world tour concludes in November. “Jamie can’t ask the judge to end it-just to review it. The judge then decides if Britney should regain control of her life,” the source said. Jamie thinks that the singer, who currently has shared custody of her two children with exhusband Kevin Federline, Sean Preston, three, and twoyear-old Jayden James, is now strong enough to look after herself.
23. Magsaysay award for social activist Deep Joshi
SOCIAL activist Deep Joshi, who has done pioneering work for ‘development of rural communities’, was named along with five others for the prestigious Ramon Magsaysay Award for 2009, considered as Asia’s equivalent of the Nobel Prize. Joshi is being recognised for “his vision and leadership in bringing professionalism to the NGO movement in India, by effectively combining ‘head’ and ‘heart’ in the transformative development of rural communities,” the Board of Trustees of the Ramon Magsaysay Award Foundation said in a press statement from its headquarters in Manila. A masters in engineering from the Massachusetts Institute of Technology (MIT) and a Masters in Management from the Sloan School, MIT, Joshi worked with the Systems Research Institute, the Ford Foundation and has nearly 30 years of experience in the field of rural development and livelihood promotion. He also advises the Government on poverty alleviation
strategies. Joshi was the co-founder of Professional Assistance for Development Action (PRADAN) and now works as an independent consultant for the NGO which works for rural poor, promoting self-help groups, developing locally suitable economic activities, mobilising finances and introducing systems to improve livelihoods of rural people.
24. Essar eyes merger with Dhabi in Uganda
THE Ruias-owned Essar Group is looking at merging its telecom licence for Uganda with the Dhabi Group’s operations in that country. The Essar Group will hold a majority stake in the merged entity, valued at $310 million, a person familiar with the development told ET. The UAE-based Dhabi Group is an investment firm led by the Abu Dhabi royal family. In Congo too, the Ruias are negotiating for a majority stake in the Dhabi Group’s telecom arm, Warid Telecom Congo, valued at around $70 million, said another person tracking the discussions. With investment in these two businesses of the Dhabi Group, Essar’s telecom footprint in South Africa will expand to three countries — Kenya, Uganda and Congo. Essar already offers telecom services in Kenya under the ‘Yu’ brand. The Essar Group, last month, said it was in exclusive talks to invest in the Dhabi Group’s telecom operations in Africa. While the Essar Group bagged the licence for Uganda earlier this year, Dhabi Group company Warid Telecom Uganda has been operational in that country since February 2008 with a subscriber base of 1.6 million. “Warid Uganda’s enterprise valuation is $310 million and a 51% stake will come for nearly $190 million, including a control premium,” said the source. Essar Group had outlined a $200-million investment when it bagged the licence for Uganda. “A large part of that will now be used for buying into Warid Uganda. It will give Essar immediate access to over 1.5 million users and a share in one of the fastest growing operators in the region,” said the source. An Essar Group spokesperson declined to comment. Teledensity in Uganda is around 30%, indicating a market with potential. It has five telecom operators — MTN Uganda, Zain Uganda, Uganda Telecom, Orange Uganda and Warid Telecom. Reliance Communications (RCOM) also has licences in Uganda through Anupam Global Soft, a firm it acquired in February last year. Anupam Global Soft has the licence to offer mobile, fixedline, internet, Wi-Max and Wi-Fi services in Uganda.
25. Danny Denzongpa’s co acquires Assam’s Rhino Breweries
BOLLYWOOD’S illustrious gangster Danny Denzongpa is bolstering his beer story in eastern India. Denzongpa-owned Yuksom Breweries has acquired Rhino Breweries in Assam in a move thwarting industry leader United Breweries’ (UB) plans for a bigger play in North East (NE) markets, said sources. This summer, Denzongpa quietly acquired Rhino Agencies, as his nearly three-decade-old
Sikkimese brewing company scripted its first takeover to defend the core markets where it sells beers, such as Dansberg, Hit and He-Man. Yuksom is learnt to have paid over Rs 40 crore for the brewery that started operations only two months back. In 2007, UB had signed a technical consultancy and licence agreement with Guwahati-based Rhino Agencies to etch its manufacturing footprint in the rapidly growing NE market. Denzongpa, who has starred in over 150 films including several memorable roles opposite Amitabh Bachchan, is showing the first signs of aggression, possibly to defend his home turf, after dabbling in the brewing industry from 1982 onwards. Denzongpa, who made a big screen comeback in a re-invented avatar this year, has characteristically kept his cards close to his chest while systematically building the NE market and even training his focus overseas with brews, such as Himalayan Blue and Yeti. Yuksom, which has three breweries in Sikkim, Orissa and Assam, sells over three million cases making it one of the few independent survivors in an industry carved up between UB and SABMiller. It must be mentioned that UB is already well entrenched in West Bengal and had significantly raised its presence in Orissa last year.
Google’s Schmidt logs out of Apple
GOOGLE chief executive officer Eric Schmidt is resigning from Apple board, aiming to quell anti-trust concerns about intensifying competition between the two companies. Schmidt’s effectiveness as a director is “significantly diminished” as he needs to recuse himself from meetings because of potential conflicts of interest, Apple CEO Steve Jobs said in a company statement on Monday. The resignation was a mutual decision, Jobs said. Google has expanded into computer and mobile-phone software, increasingly staking out Apple’s turf. Schmidt’s move signals a reversal from his stance three months ago, when he said he had no plans to resign amid speculation that his overlap on Apple’s board violated US antitrust rules. “Google and Apple are responding to government pressure,” said Shaw Wu, an analyst at Kaufman Bros in San Francisco. He recommends investors buy Apple shares. “The new administration has raised potential anti-trust concerns and that’s the key difference between now and May.” Google is developing a computer operating system based on its Chrome Web browser, competing with software from companies, including Apple. Google’s Android mobilephone operating system also competes with Apple’s iPhone software. Apple, based in Cupertino, California, rose $2.69 to $166.08 in Nasdaq Stock Market trading at 9:57 a.m. New York time. Google, in Mountain View, California, advanced $7.16 to $450.21. INTERLOCKING BOARDS Apple spokesman Steve Dowling and Google spokesman Adam Kovacevich didn’t immediately return calls and e-mails seeking comment. The US Federal Trade Commission began examining whether the companies are breaking antitrust law by sharing board members, a person familiar with the investigation said in May. The
FTC was looking at whether the interlocking boards could hurt competition in markets such as mobile-phone software and services, the person said.
27. Wipro’s consumer care biz logs hefty growth
The first quarter of the financial year 2009-10 was exceptional for Wipro’s consumer care business. Santoor, its flagship soap brand, which contributed close to Rs 850 crore in 2008-09 to the company’s coffers, became the number one brand in South India in its category. Wipro’s Consumer Care &Lighting business offers a range of toiletries, wellness products, baby care products, lighting solutions and office furniture. It accounts for close to 9 per cent of the group top line of around Rs 25,000 crore, majorly derived from software exports and IT products. The share has been gradually increasing. Four years earlier, it was just 5.7 per cent. The share is expected to go up in the coming years, as Wipro is aggressively looking to bring in a premium range of products from Singapore-based Unza, a personal care firm which it acquired during 2007 for around Rs 900 crore. Nearly half the Rs 2,500 crore top line comes from its two main soap brands, Santoor and Chandrika. Another Rs 800 crore comes from Unza, from Malaysia, Singapore, Vietnam, Indonesia, China and the West Asian markets. The rest is accounted for by a few of Wipro’s wellness and baby care products, the lighting and furniture business. The lighting business is starting to make an impact, driven by a ‘Green Buildings’ strategy. After Santoor became the number one soap brand in South India, the next step would be to aim at the rest of India (the brand’s national market share is just 8 per cent). The Rs 8,000-crore Indian toilet soap market is dominated by Hindustan Unilever; two of its brands, Lifebuoy and Lux, hold the top two positions. Wipro is working through pricing-led strategy to come closer to them. “We have a long way to go,” says Vineet Agrawal, president of Wipro Consumer Care and Lighting (WCCL).
28. L&T bags Rs 5,300-crore Bombay High revival order
Larsen and Toubro (L&T), the engineering and construction behemoth, plans to raise about $600 million (approximately Rs 2,800 crore) through the qualified nstitutional placement (QIP) route. The QIP issue would be completed within 12 months, the company said in a notice to its shareholders. The board will consider a special resolution in its annual general meeting (AGM) on August 28 for raising funds not exceeding $600 million, or Rs 2,800 crore, by private placement of shares
with qualified institutional buyers. The project will replace the former BHN Platform, and will create additional facilities for gas processing from future platforms
29. Dettol tops ‘green brands’ list
Dettol, followed by Tata Indicom, Infosys, Taj Hotels and Resorts, Wipro, Microsoft, Reva, Maruti, Colgate and Lifebuoy are the top 10 ‘green brands’ in India, according to a recent research, titled ‘The ImagePower Green Brands’. “Our study shows Indian consumers are concerned about the environment and would love to spend more on green products but don’t know how to, because of limited choice, limited distribution and limited labelling. This implies a huge latent opportunity for brands to tap into the power of green and create greater relevance for consumers,” says Lulu Raghavan, Country Director (India), Landor. The study was conducted by WPP agencies Cohn & Wolfe, Landor Associates and Penn, Schoen & Berland Associates (PSB), as well as the independent strategy consulting firm, Esty Environmental Partners, across seven countries — the US, UK, China, Brazil, India, Germany and France. The study was conducted online, with consumers above the age of 18 years between May 4and June 10. It has a margin of error of 3.6 per cent, both ways. For Brazil, India and China, the research was limited to tier-I cities. Consumers from all seven countries believe that green products cost more than comparable nongreen ones, and also indicate they plan to spend more money on green products in the coming year. China, India and Brazil showed significant support for additional spending. As many as 73 per cent of Chinese consumers say they will spend more, 78 per cent of Indians say so, too, and so do 73 per cent of Brazilians. The percentage of respondents who indicate willingness to spend 30 per cent or more on green ranges from 8 percent (UK) to 38 percent (Brazil).
30. Jackson song writing royalties sound sweet to music investors
Michael Jackson, the Grateful Dead and “The Sound of Music” are finding new fans in pension funds, private equity and banks convinced that old hits will play on as technology expands the way people use music. Competition is increasing for music publishing catalogs and the income they generate from stores, radio and Web play, ads and movies. Last month KKR & Co, the private-equity firm run by Henry Kravis and George Roberts, bought a majority stake in Bertelsmann AG’s music-rights
unit. Publishing isn’t risk free, said Donald Passman, an entertainment attorney with Gang, Tyre, Ramer & Brown Inc in Beverly Hills, California. The health of the music industry, falling retail sales and smaller ad budgets contributed to a 40 per cent to 50 per cent drop in the value of publishers in the past five years, he said. KKR agreed to pay ¤250 million ($347 million) for the stake in Bertelsmann’s musicrights unit, said two people with knowledge of the situation. The group clinched its first deal last month, buying Los Angeles-based Crosstown, owner of an 8,000-song catalog that includes Ricky Martin’s “Livin’ La Vida Loca” and Sheryl Crow’s “All I Wanna Do.” The seller was the investment arm of Minneapolis-based grain processor Cargill Inc.
31. Emami Biotech to set up biofuel project in Ethiopia
Emami Biotech, a part of the Rs 2,000-crore Emami Group, will invest Rs 400 crore in a plantation project over five years in Oromia in Ethiopia. The company will engage in plantation of biofuel crops (jatropha) and other edible and non-edible oil seeds on 100,000 acres allotted to Emami Biotech by the Oromia Investment Commission. Once completed, the project will be able to churn out 100,000 tonnes of crude biofuel or edible oil per annum. While the biofuel will be exported to India for producing biodiesel, the edible oil produced in Ethiopia will be used for local consumption. The commercial plantation work has already begun on the land, which has been offered to Emami Biotech on a 45-year renewable lease. It had engaged Mott McDonald for conducting a feasibility study for the project. Another Emami Group Director Manish Goenka said: “We chose Ethiopia for investment because of availability of labour, contiguous land, congenial business environment and stable law & order situation. Besides catering to our domestic needs, the Ethiopian project has a huge potential for the global export market.” Emami Biotech is also planning to develop two edible oil plants in Gujarat and Tamil Nadu.
32. Daiichi wins court battle against Mylan, Matrix
Japanese drug major Daiichi Sankyo said today a US Court has ruled in its favour in a patent litigation related to the anti-hypertensive drug, Benicar, against Mylan Inc and its Indian subsidiary, Matrix Laboratories. “...US District Court in New Jersey has issued a decision in our US patent litigation against Mylan, upholding the validity of our patent covering the Benicar, Benicar HCT and Azor
products,” Daiichi Sankyo said in astatement. The company had initiated the process of litigation against Mylan and Matrix in response to the Abbreviated New Drug Application (ANDA) filed by Mylan with the US health regulator, Food and Drug Administration (FDA), last year, seeking its nod to market generic versions of those products.
33. Sun Pharma settles patent dispute with Astra Zeneca
Sun Pharmaceutical Industries has settled a patent dispute with MedImmune, a unit of drug major Astra Zeneca, to dismiss an ongoing litigation in a US District Court. This was on patent rights of Ethyol (amifostine), adrug used to reduce toxicities associated with chemotherapy and radiation in head and neck cancers. Under the agreement, MedImmune has granted Sun Pharma a licence to certain patents, permitting Sun Pharma to continue marketing its generic version of Ethyol in the US. Sun Pharma had got US Food and Drug Administration (USFDA) approval for the drug in March 2008 and had launched the product ‘at risk’ in the US market. This followed a marketing application to market a generic version of amifostine for injection, challenging the patent. Ethyol has annual sales of approximately $80 million in the US. Medimmune had filed a suit in the District Court of Maryland against Sun Pharma, following challenge to its patents. Sun Pharma, being the first-to-file an Abbreviated New Drug Application (ANDA) for generic Ethyol with a para IV certified patent challenge, has a 180-day marketing exclusivity in the US market. Sun Pharma’s product is being sold in the US by its marketing partner, Caraco Pharmaceutical Laboratories.
34. India may move WTO to protest drug seizures
The government is planning to approach the dispute settlement body of the World Trade Organization (WTO) against frequent seizure of Indian medicines at various European ports. While the seizures were carried out on charges of alleged violation of intellectual property rights (IPR), India’s attempt will be to prove that the consignments were not meant for European markets, but were on transit towards its final destinations in Africa and South America and hence involve no IPR violation. The ministry’s move comes in the backdrop of increased non-tariff barriers being faced by the domestic pharmaceuticals industry in its pursuit to go global. For instance, the commerce ministry is engaged in talks with its Libyan counterpart to amend a notification issued by that
country, barring medicine imports from all countries except the European Union members and North America. Officials said an Indian delegation would reach Libya to ensure that domestic drug manufacturers were able to continue their presence in the Libyan market. Similarly, the Department of Pharmaceuticals has started negotiations with Nigerian drug regulators to ensure smooth flow of Indian low-cost medicines to that country. Indian drug exports to Nigeria, the ninth biggest destination for Indian medicines, had recently come under cloud after Nigerian authorities seized fake medicines that were marketed under “made in India” labels in that country. The department’s attempt is to collaborate with the Nigerian government to set up a drug testing (bio-equivalance centre that proves the safety and efficacy of a generic medicine) centre in that country.
TCS, Wipro in race for $522 Mn rail deal -report
MUMBAI, Aug 3 (Reuters) - Indian technology firms including Tata Consultancy Services (TCS.BO) and Wipro (WIPR.BO) are in pursuit of up to 25 billion rupees ($522 million) outsourcing contract from Indian Railways, the Economic Times said. State-owned Indian Railways plans to procure a human resources management system and other modules for integrating and automating its payroll, accounting and pension functions, the newspaper said on Monday. Indian Railways also plans to outsource its train scheduling and management system, in a deal valued at around 4.5 billion rupees, the paper said. TCS, Wipro and Mahindra Satyam (SATY.BO) are also bidding for this project, it said. ($1=47.9 rupees) (Reporting by Janaki Krishnan; Editing by Ranjit Gangadharan)
36. Mars, Nestle interested in chocolate maker Gu - FT
LONDON, Aug 3 (Reuters) - Food groups Nestle (NESN.VX) and Mars are among the companies interested in London-based chocolate dessert maker Gu, which has been put up for sale by its founders, the Financial Times reported. The paper, which did not cite sources, said private equity firms including Langholm Capital were interested in the company, whose asking price is 30-40 million pounds ($50-$65 million).
Cavendish Corporate Finance, which is advising Gu, sent details to interested parties last month and aims to complete a sale by autumn, the paper added. Gu has increased sales by an average of 66 percent a year since it was founded six years ago, the paper said. A Nestle spokesman declined to comment, while Mars, Gu and Langholm could not be reached for comment. ($1=.6045 British pound)
5 reasons why airline strike went bust
It began with a bang and ended in a whimper. On Friday, July 31 India's private airlines dropped a bombshell. They demanded a bailout package from the government, failing which they would suspend operations 'indefinitely'. But less than 48 hours after their militant call, the proposed August 18 strike fizzled out and turned into a public relations nightmare for the airline body. All the bluster seemed to have vanished into thin air, even though some of the demands of the industry like excessive tax on aviation turbine fuel, high airport costs, etc -- are legitimate. First, the government knew it was on firm ground given the fact that even the bailout package for a state-owned airline -- Air India -- was being met with extreme opposition by the public. Patel, however, disapproved of their earlier decision to suspend flight operations, saying causing inconvenience to passengers was 'not acceptable'. Maintaining that Air India was also not getting a bailout package, Patel said, "The government is the owner and we have to do whatever is necessary. After all, it is our own airline. But to say that even Air India is getting money from the government exchequer, will not be correct." Second, the Federation of India Airlines did not handle the entire episode correctly. A, there was the unilateral decision to go on a one-day strike on August 18. B, there was the threat of suspending operation indefinitely. C, all this was done without really estimating if all members of the FIA were united in this cause or not. D, there was no back-up plan to counter what would the private airlines do if the government adopted a no-nonsense, uncompromising stance -which it did. Never before had a private industry body in India threatened the government with a nationwide strike if it was not bailed out of its financial problems. What should have come as a blow to the solar plexus of the government with the important airline sector being crippled because of the strike, in effect turned out to be a case of a self-goal. The airlines realised that their threat had backfired majorly. To salvage some pride after retreating in face the government hardline, they said they did not want to threaten or blackmail the government and the public, but just wanted to appraise the government of the debilitating problems they faced and wanted rationalisation of high ATF costs and airport charges. The basic price of the jet fuel in Mumbai, the nation's busiest airport, was Rs 24.02 per litre. Freight and other cost add Rs 3.68 to the price while excise duty contributed Rs 2.28 a litre. Third, there is a distinct lack of unity in the airline federation. The smaller, leaner airlines seem to be doing a much better job at their business, than the bigger full-service airlines are managing
to do. So, while Kingfisher and Jet Airways played the belligerent role and led the 'strike,' the low-cost airlines thought they were falling into a trap. As a result, first Indigo and then SpiceJet decided to drop out of the proposed August 18 strike. Fourth, even as the airlines made a case for a bailout, arm-twisting the government for a bailout, many aviation experts, including Capt. G R Gopinath (father of the budget airline in India), said that there was no need for a bailout package, as the 'private airlines are themselves to blame for their losses.' Fifth, most experts feel that the strike threat was all a matter of timing and opportunism. With the government readying to bail Air India out, the private airlines thought that they too could wrangle a similar package for themselves. Or, they might manage to stop the bailout for Air India.
38. IIM-A to set up seamless campus in Hyd
The Nizam of B-schools will make its presence felt in Hyderabad. Indian Institute of Management, Ahmedabad (IIM-A) and the Andhra Pradesh government have informally agreed to set up a ‘seamless campus’ on the outskirts of Hyderabad. A team of senior officials from the AP government visited IIM-A campus recently. “The Andhra government approached us and proposed that IIM-A should set up a satellite centre there. We are seriously considering the proposal. The first few years of the centre will be for executive training programme. Later, we may offer regular MBA programmes. But, the final decision will be taken by the IIM board, which will meet in September to discuss the proposal,” said IIM-A director Samir Barua. “A seamless IIM-A campus would be an extension of the Ahmedabad campus and not a new one. This way, the human resources development ministry will also have no objection as it need not give any financial aid,” said sources.
39. Project Youngistan: Who is the next superstar?
Mumbai: Bollywood’s failure to throw up a single superstar in the last nine years—since Hrithik Roshan made a splash with his debut Kaho Na Pyar Hai in 2000—has trade pundits worried. Besides him, it’s only the four old warhorses—the Khan trio and Akshay Kumar who debuted between 1988 and 1992—who are still in demand consistently. Together, they and Hrithik still make up the top five in Bollywood. So what really happened in the last decade? Yes, Bollywood has thrown up Abhishek Bachchan and John Abraham. The two have unquestionable talent—and several hits—but have been far too inconsistent to belong to the superstar bracket. It’s not that Bollywood has not come up with any talent between the top five and the next two. The names of Shahid Kapoor, Emraan Hashmi, Ranbir Kapoor, Neil Nitin Mukesh, Imran Khan, Farhan Akhtar (as actor) and Adhyanan Suman are bandied about when people talk of the future.
But a staggering Rs 300 crore has been lost on the recent flops, including Luck By Chance, Saawariya, Jashnn, Victory, Love Story 2050, Kidnap and Luck, which some of these actors have delivered. Trade consultant Amod Mehra is of the firm opinion that Ranbir will turn the tide six months down the line though the reality, as far as Bollywood’s young ’uns goes, reads differently. Ranbir does have Rs 200 crore riding on him. Dad Rishi Kapoor says he has no dates to spare till 2011. He is also the most in-demand actor of the younger generation with a reported fee of Rs 5 crore a film and has projects lined up with Aditya Chopra, Karan Johar, Imtiaz Ali, Prakash Jha, Raj Kumar Santoshi, Sajid Nadiadwala and Farooque Rattonsey. But, in all fairness, Ranbir has given one superdud, Saawariya, and one average, Bachna Ae Haseeno. He needs to deliver a couple of back-to-back blockbusters to scale the heights achieved by someone like Hrithik. Imran, the second blueblooded kid on the block, has had one superhit—Jaane Tu Ya Jaane Na— that was made for a modest Rs 18 crore and earned Rs 80 crore from ticket and satellite sales. Overnight, he was hailed as the future. But Imran’s next two films—Kidnap and Luck—lost an estimated Rs 60 crore. Neil has had one flop, Johnny Gaddar, and one hit, New York. He apparently comes with a Rs 2.5 crore fee and will be seen next in Madhur Bhandarkar’s Jail. “He has promise,’’ Bhandarkar says to all those who care to listen. But no one yet is talking of his journey to superstardom. Ditto for the others. Adhyanan has had two releases, Raaz-2 (a hit) and Jashnn (a failure). Harman Baweja, who has around Rs 30 crore riding on him and is the leading man of Ashutosh Gowarikar’s What’s Your Rashee, is severely handicapped by the fact that he has had two flops (Love Story 2050 and Victory). “Rs 80 crore was lost between these two films,’’ a trade insider said.
40. HUL losing share in paste, shampoo mkt
New Delhi: Smaller players like Dabur and CavinKare have started chipping away share from fast moving consumer goods (FMCG) biggie Hindustan Unilever (HUL) in the oral care and hair care market. In the soaps market, too, HUL has been losing its grip. During the first quarter (April-June) this year, HUL lost share in both volume and value terms in the fast growing shampoo market. While Dabur increased its share and now occupies 7.3% of the market, HUL’s share with brands like Sunsilk dipped to 50% (51.5%) and in value terms to 45.4% (46.5%) during the quarter. Procter & Gamble (Head & Shoulders and Pantene) also increased share marginally, while CavinKare (Nyle and Chik brands) maintained its share, according to AC Nielsen data. The shampoo market is driven by Re 1 packs, with over 90% of the rural market dominated by sachets. In cities, sachets account for about 40% of total sales. Small packs have helped in increasing penetration in rural areas where pricing plays a major role. Cavin-Kare is more of a regional player, and is active in the south, while Dabur leverages Vatika on the ‘natural’ plank. A similar trend is visible in the toothpaste market, with both Dabur and Colgate Palmolive upping their market share to 13.1% and 51.9% respectively, while HUL’s share dipped from 25% to 23.1%. Its value market share dipped to 28% during the quarter from 29.6% in Q1 2008, while Dabur’s share increased to 10% (9.3%) and Colgate-Palmolive’s share to 49.5% (47.7%). The penetration in the toothpaste market is quite low, around 50%. Industry experts say that
thanks to awareness and affluence in rural areas, there is a surge in demand with consumers graduating from ‘datum’ to toothpaste.
L&T, Travelers to part ways
ENGINEERING major Larsen & Toubro has confirmed that it is not pursuing its partnership with US insurer Travelers and will now go it alone in the non-life business. Confirming the break-up, L&T chief financial officer Y M Deosthalee said: “If at all we get into this business we will be doing it on our own.” He said the company was evaluating opportunities and would arrive at a decision in a few months. Travelers’ caution appears to stem from the uncertainties in the global economy coupled with the cut throat competition in the nonlife market. The competition is reflected in the continuing losses among private life insurers even after 10 years of business. Yet India continues to be a major draw for multinational non-life companies. Last year, Insurance Australia Group agreed to invest Rs 540cr (including premium) to acquire a 26% stake in a yet-to-be-formed subsidiary between SBI and IAG for non-life insurance. However, SBI’s entry into non-life is expected to be a game changer, given its distribution reach and retail relationships that are amenable for sale of the two largest segment of non-life — motor and health. For Travellers, meanwhile, the search is on for another partner. The company’s India representative Shrirang Samant refused to comment on the issue. In response to an email query, Travelers said it would not like to comment. Jaydeep Roy, a senior executive with Tata AIG General Insurance who was recruited for the JV, will now be working with L&T on the nonlife business. L&T has often indicated its ambitions in financial services. Although it has deep pockets to fund a life insurance venture, the company has chosen to focus on non-life. It could be due to L&T’s relationship with corporates and its large engineering contracts favour lead generation for non-life business. Secondly, state-owned LIC is the single largest investor in L&T with a 17% stake.
42. Now, watch box-office hits on your high-end mobile phone
THE next time you want to watch a movie, just reach out for your mobile phone. Leading mobile phone vendors such as Nokia, Samsung and Spice Mobile, are increasingly planning to bundle some of the top box-office grossers in their hi-end multimedia handsets. What’s more, the handset vendors are even exploring options to roll out a mobile movie store in India where a consumer will be able to buy or rent some of the latest flicks. Mobile movies is also turning out to be an emerging distribution platform for frontline production studios like Yash Raj Films and Sony Pictures. Nokia — which was one of the first vendors in India to bundle a fulllength movie, Sholay, in two N Series handsets way back in end-2007 — recently launched a promo scheme called ‘Ntheatre’. Compatible with the N Series handsets, Ntheatre is a movie library with an assortment of blockbusters like Spiderman, Da Vinci Code, Charlie’s Angels, Jab We Met and Om Shanti Om. Samsung Mobile country head Sunil Dutt said the trend of bundling movies will further gain steam with new handsets sporting larger screens and nearly 32 GB memory capacity.
Incidentally, Samsung Mobile has just launched ‘Samsung Movies’ in Europe where consumers can own or rent a movie for the mobile phone. Similar model could also be replicated in India. Yash Raj Films (YRF) is in various stages of discussion to distribute films through mobile handsets. Asked whether the company could look at a revenue model to watch a movie or its premiere, YRF’s VP (marketing & communications) Rafiq Gangjee said: “All options would be a possibility. Obviously, the most economically viable would be adopted as and when we do get into this space.” On the Hollywood front, Sony Pictures India MD Kercy Daruwala added: “When we contacted Sony’s top executives, it was learnt that Sony is also planning to exploit this right of showing films on the mobile platform in India.”
Indian auto hits Korean hurdle
INDIA’S largest exporter of cars is worried about competition from its Korean parent. Incredible as it may sound, the prospect of a free trade agreement (FTA) between the European Union (EU) and South Korea is sending shudders through the Chennai headquarters of Hyundai Motor India (HMI). The proposed trade pact will allow Korean carmakers such as Hyundai, Kia and GMDAT to ship their cars to Europe without paying the 10% duty levied on imports, threatening to erode the competitive advantage enjoyed by Indian carmakers in their largest export market. Hyundai’s i10 and i20 and Maruti Suzuki’s A-Star are in huge demand in EU, after the UK, Germany, Spain, Austria, France and Italy started offering cash incentives of € 1000-3000 to buy fuel-efficient cars. Indeed, the 10% duty does cover Indian automakers too, but a government incentive helps them offset the costs by 3.5%. HMI, which exports half the cars it makes in India, and most of them (over 55%) to Europe, has already asked the Indian government to take steps to protect its interests. “The government needs to act fast to take some decisions on car exports. A 6.5% import duty that Indian carmakers face in Europe will make it virtually impossible to compete with Korea,” said HMI managing director and chief executive HS Lheem. Mr Lheem’s sharp reaction is not without reason. Tax benefit for the Korean parent and its subsidiary Kia Motors in Europe could render HMI’s business model unviable. While the parent firm doesn’t offer competing models in the European market, Kia sells two hatchbacks—Picanto and Cee’d—pitted against HMI’s i10 and i20. No cost advantage for Hyundai HMI thinks any price difference between its products and Korean imports could adversely affect its sales in Europe. HMI said it did not enjoy any huge cost advantage in India. The cost advantage on account of low labour costs translate into a price difference of only 2-3%, said a company executive. Indian manufacturers are also troubled by the inefficient tax structure, which increases the cost by 10-12%. “There are various local taxes on inputs that have a cascading effect. Infrastructure bottlenecks also add additional cost, which offsets the cost advantage on account of cheaper labour,” said Price Waterhouse auto analyst Abdul Majeed. HMI’s exports jumped 27% to 66,500 cars in Q1 on the back of large orders from Europe.
44. Indian diamond traders find a friend in China
IT’S not yet clear if China can lead the world out of recession, but the Asian giant is certainly helping Indian diamond traders out of the woods. A number of Indian firms are busy setting up diamond processing units and retail outlets across China as they bet on Asian markets to more than make up for the sharp drop in demand from what were traditionally the largest consumers—the US, Europe and Japan. “Indian and non-resident Indian diamond businessmen are setting up retail shops in Shanghai, Beijing and urban areas of southern China,” says Pravin Sankar Pandya, chairman of Diamond India Ltd, an amalgamation of 58 Indian diamond merchants. According to him, the demand for polished diamonds from China and other oriental markets such as Taiwan, Korea, Singapore and Hong Kong will be on a par with the US in another five years. The United States is the world’s largest diamond market. However, it saw a decline in imports of polished diamonds by almost 25.72% to $966.7 million in December 2008. On an annual basis, there was a 4.8% increase in import of polished diamonds as compared to 2007 but there was a clear weakening after September, when the recession started. Israel is the leading exporter of polished diamonds to the US, followed by India. India exported polished diamonds worth $4.66 billion during April-June 2009, almost 5% lower than the yearago figure, according to data published by Gem & Jewellery Export Promotion Council, the apex body of the country’s diamond industry. To sell diamonds in China, a company must set up processing units in that country, points out Sumit Shah, managing director of Renaissance Jewellery. Nobody is complaining though. Like India, the country offers cheap labour. And unlike India, it has modern processing equipment. India to still retain edge Those who have set up shop there include Shrenuj & Co, Gitanjali Group and Sheetal Group. While Shrenuj & Co and Gitanjali Group have exclusive retail stores, Sheetal Group follows a distribution model to sell its diamonds. Thousands of diamond polishers in India lost their jobs last year as the sudden fall in demand due to the global slowdown forced manufacturers across the world to slash production. De Beers, the world’s largest diamond company, cut production by almost 90% in the first phase of recession. But now there is a severe manpower shortage. The sacked workers who were forced to shift to other sectors like farming, textiles and embroidery are refusing to come back on account of job uncertainty and volatile markets, says Mr Mehta. Surat alone is facing shortage of around one lakh skilled workers. Merchants say India should follow China in offering incentives that help the industry come out of the slump. “China is directly sourcing raw material (rough diamonds) from Angola and other countries. India, too, should set up such a mechanism for the domestic diamond processors,” says Navin Mehta, former president of Mumbai Diamond Merchants Association. “Also, the Chinese government has designed loan packages at softer rates for the diamond industry, which boosted the sector during the slowdown,” he adds. Despite all this, it is unlikely that China can challenge India’s dominance in the trade, says Mehul Choksi, chairman of India’s largest jewellery maker, Gitanjali Group, which has set up processing units as well as retail stores in China. “Indian workers can handle more complicated
products than their Chinese peers. Chinese workers need a high quality rough, whereas Indians can do wonders even out of a substandard rough,” he says. The global demand slump has forced one-fourth of the 160 diamond jewellery manufacturers in the zone to shut shop. The zone has now requested the government to allow the exporters to sell their goods domestically with minimal duty for at least a year, so that manufacturers can retain their workers.
45. Barclays to boost India headcount to 4,000
BRITISH bank Barclays will increase the number of jobs it outsources to India to 4,000 by the end of the current year from 2,700 now. The group is also looking to invest more in its domestic banking business in the country. Barclays’ domestic business includes retail and commercial banking, investment banking, wealth and technology. In India, the group already has around a million customers. Early this year, the GRCB business was making a loss of half-amillion pounds a day. In its global results, the group has said that the impairment charges in GRCB business have increased to £213 million from £66 million in emerging markets. “It mainly reflects weakening delinquency trends, primarily across India and the UAE due to the deteriorating credit environments and portfolio maturation, especially across the retail sector,” the group said on Monday. Globally, the group has posted profits before tax of £2.9 billion for the first half of 2009, up by 8% from previous year. When asked about the rationalisation of branches on the NBFC, where it currently has over 100 branches, Mr Seegers said: “Yes. I think the way we think about is there was a slowdown in the Indian economy. Our strategy hasn’t changed. We will continue to develop that business. But we will be doing that in a wiser and prudent way.”
46. China owns up Nigerian fake drugs cargo
CHINA has promised action against its pharmaceutical companies involved in shipping fake drugs to Nigeria with ‘Made in India’ labels. The Chinese authorities have admitted the shipments confiscated by the Nigerian government had originated from China and the manufacturers involved need to be punished, a commerce department official has said. “The Chinese government has communicated to us that the pharmaceutical companies involved in the fake drugs case were indeed from their country. It has also promised that suitable action will be taken against these companies for selling fake drugs and tarnishing the name of another country,” a commerce ministry official told ET on the condition of anonymity. Nigeria’s drug regulatory authority, the National Agency for Food and Drug Administration and Control (Nafdac), had confiscated a large consignment of fake anti-malarial generic drugs with ‘Made in India’ tags shipped from China in May. The cartons had labels bearing the names and addresses of Chinese manufacturers. According to Nafdac, had the drugs not been seized, as many as 6,42,000 adults could have been affected. Following the incident, India had put pressure on the Chinese government to act against the rogue companies. Since Africa is an important market for the Indian pharmaceutical industry— accounting for about 15% of India’s total drugs exports worth Rs 30,000 crore every year—it
cannot afford to get a bad name in the continent. “It is important that the Chinese government takes strong action against the errant companies so that others think twice before doing something similar,” the official added. India sent a delegation to Africa last month to meet regulatory authorities there and discuss quality norms related to packaging and stamping to clamp down on supply of fake drugs.
Yakult Danone ropes in Kajol
Bollywood actor Kajol Devgan and Yakult Danone India MD Kiyoshi Oike at a press conference in Mumbai on Tuesday. Yakult Danone India has named Devgan as its brand ambassador for promoting its probiotic health drink Yakult in the Indian market. Yakult Danone India is a 50:50 joint venture between Yakult Honsha of Japan and Groupe Danone of France
48. Harbinger backs Sterlite in Asarco acquisition
Sterlite Industries, the flagship firm of London-listed Vedanta, may get the support of rival bidder Harbinger Capital Partners in its takeover plan for the bankrupt US copper mining firm, Asarco. Harbinger has decided to withdraw from the race, informing the bankruptcy court that its plan to restructure Asarco should not be considered. Harbinger had given a $500 million takeover offer to the US bankruptcy court at Corpus Christi in May, countering the bids of Sterlite and Grupo Mexico, the estranged parent of Asarco. Harbinger, which has support from Citigroup Global Markets Inc, earlier extended its support to Asarco in the fight against Grupo Mexico and the environmental suits. Asarco, which owns three copper mines in Arizona, was sued for $1.6 billion due in an environmental clean-up suit. According to court documents, Citigroup and Harbinger together comprise Asarco’s largest bondholders and their support is crucial for Sterlite, said industry experts. The Indian copper producer had offered $1.1 billion in cash and about $600 million of senior secured notes, payable over nine years, to Asarco. In a counter bid, Grupo had offered $1.3 billion in cash and a $250 million fully committed loan to regain control of Asarco. A couple of days earlier, Vedanta chief executive M S Mehta said in London that the company has “no immediate plans” to raise the bid it made to acquire Asarco. “Our bid reflects the current market conditions,” he added.
R-Infra bags Rs 11k-crore Mumbai Metro-II
Reliance Infrastructure (R-Infra) has been awarded the Rs 11,000-crore Mumbai MetroII project on a Build Operate Transfer (BOT) basis. The project is for a concession period of 35 years, with an extension clause of another 10 years, the company said in a statement today. The project will achieve financial closure in nine months. The company had earlier been awarded the Mumbai Metro-I (Versova-Andheri-Ghatkopar corridor) and Delhi Airport Express Line projects. Scheduled to be operational by 2015, Mumbai Metro-II would provide a link between Navi Mumbai and the western suburbs, connecting Charkop in the north to Bandra and then to Mankhurd in the east. The total length of the project is 32 km, with 27 stations en-route. The project has been awarded by the Mumbai Metropolitan Region Development Authority through an international competitive bidding process. R-Infra won the project as part of a consortium, which included SNC Lavolin Inc, Canada and Reliance Communications. The Mumbai Metro-II will provide a link between Navi Mumbai and the western suburbs and will ease the burden on the local trains
50. Hexaware CEO banks on ‘ownership model’
PR Chandrasekar says he didn’t know Hexaware “that well” before he joined, but decided to take up the challenge to see how he could work in a different set-up. The initial doubt was understandable, as he was coming from Wipro, heading the IT giant’s $3 billion businesses in the US and Europe. There were other reasons: Hexaware, a mid-cap IT firm, was still recovering from the $20-25 million provisioning it had to make for losses on exotic forex transactions. A year after joining, the ViceChairman and CEO of Hexaware can look back with some satisfaction. The firm’s second quarter results for calendar year 2009 beat market estimates, with its net profit jumping four times to Rs 39.5 crore from Rs 9.5 crore on a year-on-year basis and doubling on a sequential basis. The company managed to go above its revenue expectation for the quarter. “I think we have improved on all the parameters. The growth margins are up and so are the operating margins,” he said. Chandrasekar is the second outsider-CEO after Rusi Brij, of acompany which was founded by Atul Nishar in 1989. Nishar is now the Executive Chairman and Chandrasekar said he was happy that “Atul has given me afree hand to run the show.” The CEO hasn’t given the founder reason to complain. The challenges were many. For example, the manpower utilisation rate, at 63.7 per
cent, wasn’t sustainable. Chandrasekar has now brought that up to 75 per cent by, among other things, putting some employees on a virtual bench (no work and so, no pay) and consolidating many of the centres. Chandrasekar said Hexaware was pursuing 10-12 deals along with Caliber Point, its BPO unit. “Caliber Point operated as an island. Today it is integrated with Hexaware. Now we have abusiness technology outsourcing story, rather than just aBPO. This is not an easy transition. But that is happening now,” Chandrasekar said. “One of the reasons for verticalisation and my most important intent was to create ownership. Ownership that makes the person think, how do I grow this account,” said Chandrasekar. With this set-up, each vertical head is accountable for the profit & loss of his unit. The idea was to make them run a business of their own, which also makes them take tough decisions on investment.
SBI, Tata Motors among tax defaulters
India’s largest state-owned bank, SBI, automobile giant Tata Motors and oil major Indian Oil Corporation, besides Sahara India and its promoter Subroto Roy, figure in the list of top 100 tax defaulters in the country. Disclosing the list of defaulters in the Rajya Sabha today, the Minister of State for Finance S S Palanimanickam said in a written reply that top 100 tax defaulters owed to the exchequer a whopping Rs 1.41 lakh crore — more than three times the amount the government spends on the National Rural Employment Guarantee Scheme annually. According to the list, disgraced stud farm owner Hassan Ali Khan tops the list of tax defaulters, with an outstanding arrear of more than Rs 50,000 crore. While SBI owes Rs 333.6 crore in taxes, Tata Motors and Indian Oil Corporation have to pay Rs 206.5 crore and Rs 210.3 crore, respectively, to the treasury.
52. FDCI announces Van Heusen Men’s week
Men’s fashion will no longer be the neglected child of the Indian fashion world. While women’s fashion has almost two events every year, men’s fashion shows are showcased on the periphery. All this will soon change with the announcement of the Van Heusen Men’s Week by Fashion Design Council of India (FDCI) in September this year. Men’s shirt brand Van Heusen will be the title sponsor of the event which will showcase 15 collections and 40 designers with their stalls in the exhibition area. Shital Mehta COO, Van
Heusen says, “Being associated with this event differentiates us from other brands. The kind of PR and newsworthiness of the event helps.” Mehta is not only looking at the immediate future but also at the long-term survival of a brand like Van Heusen. He says, “The future competitors for Van Heusen will be lifestyle brands and not just other apparel brands.” According to industry estimates the men’s apparel market is growing at 15 per cent every year and is likely to clock this rate of growth for the next five years at least. Despite this impressive growth, the lack of marquee designer names for amen’s week may hamper the kind of publicity the event can generate.
53. Yum! Restaurants to launch Mexican chain Taco Bell
US-based fast food restaurants brands operator Yum! Restaurants is planning to introduce its Mexican speciality chain Taco Bell in India with the first restaurant planned to start in Bangalore in October. Yum! Restaurants, which operates brands like Pizza Hut and KFC, is looking to tap the young consumer segment with Taco Bell’s Mexican offerings as part of its effort to increase its footprint in the estimated $1billion Indian fast food market. He said the company would be introducing Taco Bell as a new concept for the young India foodies and test the market before undertaking an expansion of the brand. The Louisville (Kentucky)based company operates over 5,600 Taco Bell restaurants in the US, which specialises in Mexican items like burritos and quesdillos. Yum! Restaurants currently runs 50 KFC and 110 Pizza Hut restaurants in India.
54. New inflation data series to downgrade food inflation
The new Wholesale Price Index (WPI) series with a revised base of 2004-05, an updated product portfolio and increased data points will understate food inflation, as the weight accorded to primary articles will see a significant decrease from the current 22.02 per cent to around 10 per cent. The new series, expected to be out by October, will see asignificant increase in the weightage for the manufactured products category to around 80 per cent from the current 63.75 per cent. Therefore, the point to point inflation rate derived from this index on a year-on year basis will be driven by wholesale prices of manufactured products rather than commodities like rice, cereals, pulses and wheat, which form apart of the essential consumption basket. Many economists feel the current WPI series, with a base of 1993-94, already understates food
inflation. This has come to the fore since the headline inflation rate as measured by WPI has displayed a consistent downward trend since November 2008, moving into the negative domain in May 2009, though food inflation continued to be in the range of 7-10 per cent. Moreover, the divergence between WPI and CPI-based inflation also reached historic levels, with CPI inflation at near double-digit levels and WPI inflation at sub-zero. This was also due to the lesser weightage given to food items in the WPI, though the CPI has around 50 per cent representation of food items in its index. Economists argue that an understatement of food inflation in the major inflation indicators will mislead the direction in which prices are moving; however, it will not have any major effect on the formulation of monetary policies. “If the weight of primary articles do go down, then the divergence between CPI and WPI will continue and might increase further. The WPIbased inflation rate, which is followed more widely than CPI, would of course be a little misleading for the common people. However, as increase in food prices is related to supply side problems and monetary policy generally pertains to the demand side, there should not be any major effect on the policy making front,” said Subhada Rao, chief economist with YES Bank. The weights in the respective data series are calculated by the share of specific sectors in the growth rate or gross domestic product (GDP) figures. The contribution of agriculture in the GDP has been on the decline and, therefore, the weight of food products in inflation indices are also going down. “The changes are made in accordance with the contribution of different sectors to the GDP figures. The share of agriculture has been going down. The idea is that the effect of an item on the inflation rate is in accordance to its contribution to GDP. The weight of food items in CPI will also see a drop as the base is revised,” said Pronab Sen, chief statistician of India. Agriculture contributed around 32 per cent to the GDP in 1990-91; its share went down to 20 per cent in 2005-06 and now stands at around 16 per cent. The trend continues and as the GDP base is also set to be revised, the share of agriculture is expected to contract further. The weight of the primary article category was reduced by around 10 percentage points to 22 per cent when the base of the series was revised from 1981-82 to 199394, as the manufacturing sector started making a major contribution to growth. The weight accorded to primary articles will see a significant decrease from 22.02% to 10% To be out by October, it reflects weight of components in GDP
55. A portal in the works for developing nations to share food problems
“When the world economy was hit by the food crisis last year, most countries took decisions that were against the principles of economics. Exports were banned by countries like India and China
at a time when they should have allowed farmers to take advantage of higher international prices. Instead, countries did panic buying and fuelled international prices. The requisite information to help policy making was either not available or was not utilised,” said Suresh Babu, senior research fellow at IFPRI. India, for instance, banned the export of non-basmati rice last year. In 2007, it banned the export of wheat. Similar restrictions were imposed in other countries. Babu agrees that the measures adopted were successful to a large extent but claims that it was not rational. “We did not give a stable policy to farmers,” he said. “The policymakers across these countries can exchange their ideas and help each other come up with a more informed decision for tackling food problems,” said Babu. “Though a lot of information is available in the public domain, we would do research on the missing information and streamline the information to facilitate decision making,” he added. AJAY MODI New Delhi, 5 August The International Food Policy Research Institute (IFPRI) has brought together 20 countries, including China, Brazil and India, through a portal where food and agricultural policy makers will exchange their food-related problems and the measures adopted to tackle them. The purpose is to strengthen the ability of policymakers in the developing world to respond quickly and adequately to dynamic developments in the world food system. The portal will contain information regarding food crisis response on its 20 partner countries (mostly in SubSaharan Africa, but also in Asia and Latin America and the Caribbean). The policy information portal has been established to provide comprehensive and detailed information country-by-country on food policy developments. It is looking to bring more countries together on this platform. The initiative is a part of an IFPRI’s project called “World Food Crisis”, which aims at improving food security for the poor in developing countries and increasing resilience of their food systems against future crises. The project will build a global research-based monitoring and capacitystrengthening device for successful identification and implementation of the appropriate policy actions in response to the food crisis. All of these actions come together at the country level, where the ownership and final accountability for implementation rests. The purpose of the portal is to strengthen the ability of policymakers to respond quickly and adequately to developments in the world food system
Flying on empty
Private airlines, who called off their strike threat after the government contemplated action, continue to argue they backed down because they didn’t want to inconvenience passengers, but maintain that their reasons for striking remain as valid today — avery high aviation turbine fuel price and high airport charges in the country. Much of this is untrue, and what the larger airlines
are not saying is that there was a split in the Federation of Indian Airlines — under whose aegis the strike threat was announced —with the budget carriers unwilling to go along with the larger full-service carriers who, incidentally, also offer low-fare services.Indeed, just how justified the airline grievances are is best brought out by the sharp contrast in the performance levels of the two sets of airlines. First, not everyone in the aviation business is making losses (see graphic) — it is the full-service carriers who are losing the most. Kingfisher lost Rs 243 crore in the latest quarter ending June 2009, Jet Airways lost Rs 225 crore while budget carrier SpiceJet made Rs 26 crore of profits. Indeed, as compared to the same period a year ago, Jet’s revenue’s are down 18 per cent while SpiceJet’s are up 15 per cent. Interestingly, this has taken place while aviation turbine fuel prices in India, though much higher than those internationally, have fallen by almost half — from Rs 71,028 per kilolitre in Delhi in August 2008 to Rs 36,992 in August 2009. While this happened, Kingfisher’s revenues fell slightly, from Rs 1,398 crore in the quarter ended June 2008 to Rs 1,314 crore in the quarter ended June 2009; its losses rose from Rs 158 crore to Rs 243 crore in the same period. In the case of Jet Airways, while revenues fell 18 per cent, its profits of Rs 143 crore turned into losses of Rs 225 crore. SpiceJet’s revenues rose and its losses of Rs 129 crore in the June 2008 quarter got transformed into profits of Rs 26 crore. None of this jells with the argument often made by private airline companies — that since aviation fuel comprises around 40 per cent of costs, India’s higher aviation fuel costs are the reason for their losses. Also, airlines like Jet earn around 53 per cent of their revenues from international operations — all international flights get aviation fuel at international prices! In other words, it is difficult to argue that fuel prices are as critical as the airlines make them out to be — it is even more difficult to argue that the airlines were not aware of the differential between Indian and global prices, either when they first entered or when they began their expansion spree. Of course fuel costs matter, but what matters more is how efficiently the airlines are managing other costs; if the plane is flying anyway, are they getting the maximum number of passengers they can, and so on. Once again, this is where the budget carriers score over their full-service counterparts. Air India has a passenger load factor (PLF) of 67.9 per cent, Jet Airways’ is around the same and Kingfisher’s is 72 per cent — SpiceJet, however, is 77.3, GoAir 85,1 and IndiGo 81.6 per cent (all figures for June 2009). That is, the budget airlines are getting in more passengers per flight. Since they have lower costs of flying, this means their costs per passenger seat are much lower than those of the full-service airline. Even more than the passenger load factor, what matters is the number of passengers being flown. At a time when the market has not expanded as fast as the airlines originally expected, what matters is the market share of each airline. Once again, it is the budget carriers that are doing better. The number of passengers flying on Jet Airways rose from 5.96 lakh in January 2009 to 6.12 lakh in June, but its market share has fallen from 17.9 per cent to 16.6 per cent; Kingfisher’s fell from 27.6 per cent to 24.4 per cent; SpiceJet’s market share has risen from 11.8 per cent to 12.8 per cent and GoAir’s from 2.4 to 5.4 per cent — IndiGo’s share has remained constant at around 13.6 per cent. As a result, SpiceJet’s PLF rose from 68.3 per cent to 77.3 per cent, GoAir’s from 64 to 85.1 per cent and IndiGo’s from 72.2 to 81.6 per cent. PLFs for Air India
rose, but by less, from 60.2 per cent to 67.9 per cent, from 64.8 per cent to 67.8 per cent for Jet Airways and from 64 per cent to 72 per cent for Kingfisher. As a result, SpiceJet has added 20 more flights in existing routes and leveraged the fuel price reduction by cutting fares by around 30 per cent to 40 per cent. SpiceJet has bought three new aircraft this year and there is no change in its original delivery schedule. Jet Airways, on the other hand, has cut capacity by 20 per cent and deferred eight aircraft deliveries. Kingfisher has deferred the delivery of 32 aircraft and reduced capacity by 26 per cent. The other bogey, of high airport charges, is not fully true either. Airport charges went up in India after privatisation of major airports, but they’re still lower than those in comparable countries. Typical charges for a Boeing 747 on an international flight are around Rs 277,000 in Delhi and Mumbai — this is higher than Dubai’s Rs 188,000 but lower than Changi’s Rs 337,000 and Incheon’s Rs 406,000. A study by TRL which indexes airport charges to 2005 levels shows that the hike in airport charges in India is among the lowest in the world The good news here is that full service carriers are planning to expand their low-cost services. The problem here, though, is that offering lower fares is not the same thing as having low-cost operations. Will Jet Konnect, for instance, pay its employees the same salaries that low-cost carriers do and will it remove service trollies which add to the fuel-burn in an aircraft? Airline losses have more to do with their business models than the price of aviation fuel, says SSuurraaj jeeeet tD Daas sG Guuppt taa
57. Tax websites give CAs a run for return money
This year, Praveen Jain, a software professional in Bangalore, did not have to make his annual tax trip to Kolkata. Even after e-filing came into vogue, Jain, like many of his family members, used to go to his native place near Kolkata to submit the signed copy of his ITR-V, the acknowledgement of e-filing, at the local income-tax (I-T) office. Not this year, though. Thanks to a number of tax preparation portals that have come up, and the decision of the government to allow tax payers opting for e-filing to send asigned acknowledgement to the income-tax processing centre in Bangalore, Jain filed his returns on the evening of July 31, the due date for submission of IT returns. On top of that, he prepared his returns on his own with the help of a tax preparation portal instead of a chartered accountant. As tax filing in India gets digitised, and rules get simplified, most of the floating population now prefers e-filing. This has given rise to a number of tax preparation websites, such as, TaxSpanner, eLagaan, Taxsmile, Taxshax, Taxonline and myITreturn. Riding on the burgeoning tax payer base, these websites are offering innovative services. The government simplified e-filing this year. As soon as atax payer (one who does not have a
digital signature) uploads his returns on the incometax website, he can download the acknowledgement and take aprint. The I-T website also sends the acknowledgement to the email address of the tax payer. The tax payer needs to sign the acknowledgement and send it to a designated post box number meant for the central processing centre (CPC), by normal post. Once the CPC gets the acknowledgement, it will send an email confirming the receipt. The acknowledgement should reach the I-T office within 30 days of the e-filing. Tax preparation using automated tools is a relatively new concept in India as the government allowed e-filing only in 2007-08. Till then, one had to go to a chartered accountant and pay Rs 200-1,500. After e-filing was introduced, the initial response was not very encouraging, as one was still required to go to the I-T office to deposit the money. After the decision of the government to set up a CPC in Bangalore in partnership with Infosys Technologies for processing all e-filings from across India, it has caught on, although the I-T department is yet to come out with an official figure on this. In turn, this has thrown up a business opportunity of about Rs 2,000 crore, the amount that some 35 million tax payers spend every year for getting their tax returns prepared by chartered accountants. Most portals that offer tax preparation services use standard tools which automate the process of tax preparation. This minimises errors (chartered accountants generally engage trainee associates who do it manually).
Secretive about cybercrime
We proclaim we are the outsourcing capital of the world. Most of the world’s data passes in some form through our virtual borders. But we as a nation rarely file cybercrime complaints with the police, who we perceive are not equipped to handle technology crime. We enacted an IT Act in the year 2000 but yet only have a handful of judgments from our legal ecosystem which have applied sections of the IT Act. Conventional crime is localised and deterministic. But technology has changed all of this. Last year just one man, Jerome Kerviel, who worked for Société Générale Bank, caused it a loss of 5 billion Euros. Without technology, you would need dozens of people to commit a fraud of such magnitude. This fraud went on for years as it is very easy to backdate entries on a computer. Even today nobody really knows what techniques Kerviel used to hack the bank’s computer system. The worst part is that we will never know. How many Kerviels are out there even today, nobody really knows. For instance, it’s been months and we still have no idea of the extent of loss at Satyam and we may never know. Earlier, whenever a conventional fraud happened in an organisation, nobody ran to inform the audit committee or the board. After Satyam, technology crimes have become a corporate governance issue, and rightly so. At the first whiff of conventional fraud it is easy to get a grip on
its magnitude. With the advent of technology, it has become very difficult to even understand the nature of the fraud. What does the management of a company do if it finds that a fraud has taken place? For months, it is unlikely to have an idea about the extent of the fraud. Should they report this to the audit committee or the board? They must, because if they do not, the board could be held guilty of collusion with the criminal. We have to bear in mind that the CEO/CFO has to sign a document every quarter which talks of material loss to the company. The company must also file a complaint with the police that a crime has been committed. The police in India are not adequately trained to investigate technology fraud (there may be exceptions in a couple of cities such as Mumbai) and the company must bring in outside forensics experts not only to investigate but also to make sure that all the evidence is sanitised so it can be used in court. If the court throws out the evidence on the ground that it is contaminated, charges could be filed against the company for doing acover-up job. I have yet to see our police force understand the science of evidence gathering in a technology crime. Finally, does the organisation report the cybercrime to the stock exchanges or the regulators? How will it quantify the extent of the damage? The fraud could turn out to be ared herring. The biggest problem is that the suspect is likely to turn around and say that whatever he did had the sanction of the management. Thus every company must have firewalls in place to make sure that the blame remains at a certain level. Everyone should not be singed. Technology crimes raise more issues than we have answers for. Nobody really knows how companies should respond to such a complex situation. After Satyam, companies are reacting to corporate governance but more out fright. Regulators must get together to set up a procedure that everyone must follow when it comes to reporting of fraud in the greater interests of transparency and corporate governance. Governance involves public money and public interest. It is important that safeguards, processes, firewalls and a counter-strategy are put in place in anticipation.
59. Buffett picks Sokol to run NetJets, fuels speculation
Berkshire Hathaway Inc named David Sokol to run its money-losing NetJets Inc airplane-sharing unit, adding to speculation he may one day lead the investment and holding company built by billionaire Warren Buffett. Sokol was tapped by Buffett to replace Richard Santulli on an interim basis as chief executive officer of the Woodbridge, New Jersey-based airplane-rental unit, according to astatement yesterday. Sokol, 52, is chairman of Berkshire’s energy business. Buffett, Berkshire’s leader since the 1960s, is monitoring candidates to succeed him in overseeing businesses from candy and furniture to energy and insurance. The potential successors all work for Omaha, Nebraska-based Berkshire, and picking one is the board’s most important job,
Buffett, 78, has said. Tony Nicely, the head of Berkshire’s Geico Corp car insurance business, and Ajit Jain, who runs a unit that sells reinsurance, are also on media lists of potential successors. Santulli had also been included on some lists. “It’s big news,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha,” of yesterday’s announcement that Sokol would take over for now. “That kind of tells you everything you need to know about where the company is headed.” Berkshire made its first foray into the energy business with the agreement in 1999 to buy MidAmerican for about $9 billion in cash and assumed debt. The firm’s largest individual shareholder before the deal had been Buffett’s Omaha neighbour, Walter Scott. Sokol, the CEO of the business at the time, in 2008 yielded the post to his second-incommand, Gregory Abel, saying that working as the MidAmerican’s chairman would allow him to focus more on finding acquisitions. Scott, Sokol and Abel retain minority interests in MidAmerican. BYD started selling the F3 DM, the world’s first mass- produced plug-in hybrid, in December and is working with MidAmerican on the development of rapid-charge batteries for storing power from wind and solar generation, Sokol said in September.
Citi plans to sell 20 finance businesses
Citigroup plans to sell 20 businesses in consumer finance area, many of them located in Europe, its CEO Vikram Pandit said in an interview with Singapore’s He said the move was due to the shift in the consumer finance market where “there is less funding availability and they are probably less robust as businesses.” Pandit also said that the group’s capital position following the completion of the exchange of preferred shares for common equity in July, reflected an “incredible financial strength.” “On the completion of our exchange offer, we had 12.7 per cent tier 1 capital and more than 9 per cent tier 1 common capital,” Pandit said during his recent trip to Singapore. The New York-based bank has said in July investors have agreed to swap $32.8 billion of preferred securities for common stock, and the US government, which will officially take a 34 per cent equity at the bank and become its largest shareholder, will swap $25 billion. The US third-largest lender conducted the offers after heavy credit losses and writedowns prompted a series of bailouts, including a $45 billion injection of taxpayer funds from the Troubled Asset Relief Program. Citigroup reported a quarterly profit of $4.28 billion, compared to a year-earlier loss of $2.5 billion. However the second quarter was boosted by $6.7 billion gain from the sale of its Smith
Barney brokerage. Without that one-off gain the lender would have reported a $3.7 billion loss. “We’ve done a pretty good job in the first two quarters of this year,” Pandit said. “But we got there after a lot of hard work last year. We reduced our assets by almost 25 per cent. We reduced our risk by alot more than that number. And we cut about $16 billion ayear in expenses.” The new, restructured Citi will have three main lines of business of roughly equal size, which are a consumer bank, a securities bank, which will include investment banking operation, and a financial service for business. The third largest lender in the US conducted the offers after heavy credit losses and writedowns prompted a series of bailouts, including a $45 billion injection of taxpayer funds from the Troubled Asset Relief Program
Clinton to address IIT alumni meet
Former US President Bill Clinton will address over 3,000 alumni of the Indian Institute of Technology at a global conference here in October. Clinton, 42nd President of the United States and founder of the William J Clinton Foundation, would speak about innovative ways to address challenges and opportunities in areas of education, energy, climate change and public health at the Seventh Annual ‘PanIIT Global Conference 2009’ on technology and innovation. The theme of the conference, being held from October 9-11, is ‘Entrepreneurship and Innovation in a Global Economy’. The conference would bring together a diverse group of thought leaders from industry, academia and government, including IIT alumni, to address challenges and opportunities in key industries such as alternative energy, healthcare, digital infrastructure and climate change, it said. “The conference theme is aligned with the goals of the William J Clinton Foundation and the Clinton Global Initiative in bringing together a community of global leaders and private citizens in identifying and implementing innovative solutions for the world’s most pressing challenges,” a PanIIT statement said. Other key speakers at the conference include US President Barack Obama’s Chief Technology Officer Aneesh Chopra, Indian Ambassador to the US Meera Shankar, Caterpillar Inc Chairman and CEO James Owens, India’s National Knowledge Commission Chairman Sam Pitroda and Suzlon Energy Chairman Tulsi Tanti.
62. Aircel shortlists four firms for tower sale
Cellular firm Aircel, 74 per cent of which is owned by Malaysia’s Maxis, has shortlisted four firms — including American Tower and Bharti Infratel — to conduct due diligence as it looks to sell part or all of its tower holdings, sources with knowledge of the deal said. Aircel, which is India’s No 7 mobile operator and owns about 12,000 towers, values the asset at between $1 billion and $1.6 billion. The company is looking to offload 51 per cent to 100 per cent of its tower business, the sources added. Tower operators Crown Castle and Tata-Quippo are the other two suitors who would inspect Aircel’s books, starting next week. A spokeswoman for the company, when contacted said: “These are all speculations.” Bharti Enterprises, the parent of Bharti Infratel, also declined to comment. As new telecom companies start operations in the country, the world’s fastestgrowing mobile phone market, they are looking to save on costs by sourcing infrastructure, including mobile masts, from existing telecom firms and independent tower companies. Existing operators are selling stakes in tower units in order to raise funds for the expansion of the tower business and growth of core operations. Standard Chartered, Nomura and Rothschild are advising Aircel in the deal, they said, adding that GTL Infrastructure, Reliance Infratel and at least one private-equity firm had shown interest in the towers. India’s number 2 mobile operator Reliance Communications’ Reliance Infratel tower unit recently said it hopes to secure $2 billion over 10 years by leasing its infrastructure to Etisalat’s India telecom venture. New York-listed American Tower is looking to expand in the country and earlier this year bought an independent tower operator, Xcel Telecom. Top mobile operator Bharti Airtel, number 3 Vodafone Essar and number 5 Idea Cellular have together formed the biggest independent tower company, which owns more than 100,000 towers. Separately, Bharti Airtel’s tower unit Bharti Infratel has raised $1.35 billion by selling stakes to private-equity firms. India’s No 7 mobile operator Aircel owns about 12,000 towers, values the asset at between $1 American Tower, Bharti Infratel, Tower operators Crown Castle and Tata-Quippo are selected for intended tower sale
Tata DOCOMO starts GSM service
Union Minister of State for Communications and Information Technology Gurudas Kamat with Femina Miss India World 2009 and brand ambassador Pooja Chopra during the launch of Tata DOCOMO services for the Maharashtra circle, in Mumbai on Thursday
Hiranandani eyes tie-up with Maha
Real estate developer Hiranandani Constructions is looking to enter the affordable housing segment and may enter into a public-private partnership (PPP) with the Maharashtra government for the same, a top company official said. PTI The C K Birla-controlled Hindustan Motors (HM) is preparing to launch the Lancer Evolution X (also known as Evo 10) in the Indian market by the end of the current financial year. The car will be initially sold in the local market through the completely built unit (CBU) route (direct import), with plans of having a completely or semi-knocked down operation some time after the launch.
65. IFC to spend 135 million in VW Pune plant
The World Bank’s private sector lending arm International Finance Corp (IFC) said it would invest ¤135 million in Volkswagen India’s plant in Pune to help generate jobs. “IFC ... has agreed to invest ¤135 million in Volkswagen India Pvt Ltd to help the company set up an integrated car manufacturing plant in Pune, India, that will help create jobs locally,” it said in a statement. The construction of the Indian manufacturing unit of Europe’s largest car maker, Volkswagen AG started in 2007 and the parent German auto maker has already invested about ¤245 million in the project. The plant will have an initial capacity of 110,000 units a year, and Volkswagen India will target the local small- to compactcar segments, IFC said. IFC said ¤60 million will be paid from its own account and a syndicated loan of ¤75 million will be arranged from Societe Generale, Bank of Mitsubishi, DBS Bank and Fortis Bank.
66. Coca Cola’s latest campaign will be launched online before mass media
Coca Cola India is launching its latest campaign for Sprite, the second-largest selling carbonated drink in India, on the Internet. This is the first time the cola major is breaking a campaign for one of its brands online, giving the electronic medium a miss. The digital campaign will be launched in partnership with In.com on August 8 and will be preceded by an online contest that will run for a day on August 7. “In a psychological sense, launching the campaign online is a big, big, big move,” says Srinivas Murthy, general manager (Flavors), Coca-Cola India. The company is known to have advertising and marketing budgets of close to 30-35 per cent of its overall revenues. In the two days that the campaign is being aired online, Coca Cola expects close to 4 million views. In.com has a daily traffic of 9-10 million users online and the company has ensured that it gets a minimum of 2 million flashes (views) and is also running other activities to drive traffic to its site. FMCG companies in India spend approximately 1-3 per cent of the overall budgets on the digital medium as compared to 10 per cent in countries like the US and the UK. However, with growing broadband usage and rising internetenabled mobile phones in India, marketers are now looking at increasing their digital spends. FMCG companies like Hindustan Unilever, Proctor & Gamble, Cadbury’s and Tata Tea have already increased their digital ad budgets up to 8-10 per cent for individual brands. Fridge Mein Jayega Bade Kaam Ayega for the 1.25-litre fridge pack. For instance, the online contest will bring in interactivity as internet users view eight seconds of the Sprite commercial and will have to complete the rest. The first six participants who guess the ending would win Nokia multimedia phones. Besides digital and electronic, the campaign — which is conceptualised by Ajay Gahlaut, group creative director, Ogilvy & Mather, Delhi and directed by Shoojit Sircar from Rising Sun Films — will also use the outdoor, out-of-home, on-ground activations and radio and print as it builds on the message Fridge Mein Jayega Bade Kaam Ayega .The total duration of the campaign will be eight weeks.
67. SKorean firms to win greater access to India
Hyundai Motor Co, LG Electronics Inc and other South Korean companies will get greater access to India’s 1.2 billion people in a trade deal to be signed tomorrow. Import duties on 85 per cent of Korean goods, including auto parts and electronics, will be cut or phased out over the next decade, Korea’s trade ministry said today. Commerce Minister Anand Sharma and his South Korean counterpart Kim Jong Hoon will sign the agreement in Seoul, said Choi Kyong Lim, the official overseeing trade agreements, said today in Seoul.
India’s $1.2-trillion economy grew 5.8 per cent in the January-March quarter, brushing off the slowdown that has dragged Korea into recession. Singapore’s exports to India excluding oil products more than doubled in the two years after they signed a similar accord in 2005, according to Indian commerce ministry data. Bilateral trade between India and South Korea rose 39 per cent last year to $15.6 billion. South Korea exported $3.6 billion worth of goods to India, and imported $1.6 billion in the first six months of this year. India’s growth puts more money into the hands of consumers in a country where almost 30 per cent of the population is under 15 years of age. Younger people tend to spend more on vehicles, phones and other consumer goods. India will eliminate or reduce tariffs on 85 percent of South Korean exports over 10 years, Korea’s trade ministry said. These will include auto parts, tankers, electronic goods, machinery parts and synthetic rubber. South Korea’s cuts will cover about 90 per cent of Indian exports, including polycarbonates, leather, industrial diamonds, gasoline and corn for livestock. Hyundai, which operates an auto plant near Chennai, sold 244,030 vehicles in the country in the year ended March 31. The largest South Korean automaker gets 55 per cent of sales from emerging markets including India and China, where car demand has withstood the global slowdown. LG Electronics, the world’s third-largest maker of LCD televisions, also has plants in India to make consumer appliances and personal computer monitors.
Building brands Indian-style
Love Aaj Kal was the latest Hindi film release this weekend. It is another love story from the Bollywood stable. However, its promotion is interesting. Instead of using one standard visual across billboards, the film has used eight stills. This is surely a reflection of progress in vinyl printing technology — you no longer need quantities to get a cost benefit. It’s also a reflection of innovation —a creative cut-through device to make the film stand out. However, digging deeper, it also reflects the emergence of Indian branding into film promotion. The concept of having a standardised visual design in a very western concept of bringing unity; the eastern concept is actually keeping the spirit the same, while being flexible in form. Not surprisingly, brand building and advertising principles in the two parts of the world are different. It’s hard to think of a western brand running two distinctly different-looking campaigns for a brand almost concurrently like Vodafone does in India. For value-added services, there is the famous ‘zoozoo’ campaign on air; for service — ‘happy to help’ — the ‘girl and dog’ commercials. The commonality is the spirit of being ‘warm, endearing, charming’ and the logo at
the end. For a culture comfortable with symbols and forms, this would be sending two different ‘images’ for the same brand. Cadbury Dairy Milk’s ‘Real taste of life’ campaign of the early 1990s is today part of branding folklore. It’s often seen as both a ‘re-positioning’ and abrand ‘re-invention’ exercise. While the re-positioning is perhaps true — the marketer was attempting to make it relevant to a newer audience — the ‘re-invention’ is true only from the western point of view. For the easterner, it was just a case of making the soul of the brand ‘child-like happiness’ relevant to anew audience. While the audience expanded, the spirit was the same and is perhaps still the same, even today. The key to global campaigns transferred from one market to another has always been transfer of formats. In the print medium, it’s often about where the logo has to be placed, what colours have to be used and what typefaces and fonts. In the audio-visual medium, it’s often the case of sticking to similar stories and definitely having the same base line. This has been the means of building brand unity. Many global brands —McDonalds, Coke, Dove, Colgate — have been built by using such standardisation techniques and models. The same principles have often been adhered to by Indian (and eastern) marketers as much as marketing and brand thinking have emerged from the experienced and evolved West. However, this has resulted in brands with global presence ie being present in many markets but with variable equities in each of those markets. Perhaps, restriction by form — symbols — limits the strengthening of equity at the local level. Philip Kotler defines brand as a ‘name, term, sign, symbol, design, or a combination of them, intended to identify the goods or services of one combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors’. Clearly in the subtext of this definition, the form takes precedence over the soul! As the centre of gravity of marketing moves eastwards and marketing becomes more and more localised, it may be worthwhile to revisit definitions and see the ‘name, term, sign, symbol…’ to be a summation of a soul, spirit and values of a brand rather than the starting point. The differentiation and the consumer connect comes from the soul and spirit rather than just the symbols. This may sound semantic but the difference is important to note. The soul should take precedence over the form! This will enable brands to get liberated from forms and structures and become more holistic entities, the way many iconic brands unconsciously have managed to take shape in the East. It allows brands to take cultural nuances into account and connect more strongly across individual localised markets. This could mean baselines can change, colours can change and so too can execution elements. Brands unfettered this way could actually become ‘truly’ global.
69. Young investors wary of jumping into market lows
Young investors may accept the argument that those who begin investing when stocks are cheap end up with more retirement money, but after the turmoil of the past year, some find it hard to put
their money in the market. Asset managers and analysts say that those who invest in rock-bottom stocks of a bear market will see share values rise for decades. But many in their 20s and early 30s are not buying rosy projections, due to immediate financial pressures and exposure to the longest recession since the 1930s Great Depression. The trend has some worrisome long-term implications. Stock brokers may find themselves largely shut out of a big customer base, and demand for equities will likely be crimped as investors favour safer havens, hurting the stock market’s prospects. It’s also unclear whether these young investors will have accumulated enough to fund their retirements when the time comes. Corbacho is no stranger to markets. At age 13 he invested his birthday money and a matching donation from his father, $1,000 in total, in tech stocks only to feel the sting when the internet bubble burst. He carried the lesson with him in early 2008, after seeing signs of economic trouble as an intern at a Boston investment bank. He put the majority of his stock investments, which had reached about $5,000, into a certificate of deposit instead. Corbacho doesn’t plan returning to stocks for a few years after graduation and is instead focusing on saving. The recent market collapse has made holding cash for immediate expenses far more attractive to young people than investing, said Rodger Smith, managing director of Connecticut consulting firm Greenwich Associates. The early exposure to such dramatic declines could restrain many from investing aggressively when they are older and have accumulated more money to put into the market, some say. Asset managers, financial advisers and investors agree that young people will emerge from the financial crisis more educated, and more cautious, about managing their money. Corbacho said his generation should not expect to accumulate sudden wealth like some in the past. Assets in US retirement plans fell 22 per cent in 2008 or nearly $4 trillion, with almost 75 per cent of the drop in the second half of 2008, the Investment Company Institute found.
70. News Corp may charge for web news; blasts Amazon
News Corp, which is trying to stem newspaper revenue declines, could charge for access to its
news websites by the middle of next year, and might break off its relationship with Amazon.com Inc’s Kindle e-reader if it cannot get better terms. Rupert Murdoch, chief executive of the global media empire, said on Thursday that he is unhappy with the Kindle’s control of relationships with newspaper subscribers, and might seek a better deal with rival e-reader maker Sony Corp. Amazon officials did not return calls seeking comment. Murdoch’s comments come after News Corp, whose properties include The Wall Street Journal, cable programmers, local TV stations and movie studios, reported a 10.7 per cent drop in quarterly revenue to $7.67 billion, which was in line with expectations, according to Reuters Estimates. It forecast operating revenue for fiscal 2010, which ends next June, would rise in the high single digits on 4 per cent revenue growth. Murdoch said the worst might be over. But another fight looms: persuading millions of people to pay for news on the internet when most get it for free. He did not provide details on a conference call with reporters and analysts, but said that he wants to make people pay for access to his news websites by the middle of the 2010 fiscal year, which ends next June.
Music firms see revival in a flash
THE Indian music industry, caught in the blues of digital piracy, is turning to the millions of earphone-wielding teenagers found in the country’s metro trains and city buses, to go rocking again. Top recording companies TSeries, Saregama and Times Music will soon be selling music on memory cards and pen drives used in mobile handsets and computers, with the hope that at least a part of this young brigade glued to iPods and smart phones embrace legal music. This may turn out to be a stopgap mode of selling digital music in the country till a time Internet connections are fast enough for consumers to adopt online downloads, prevalent in the West. The target market is huge. According to a mobile phone maker, nine out of every 10 cellphones sold in the country have a slot for memory card that support music uploads. Pricing holds key to success THE music industry is desperately looking to revive its fortunes after seeing its earnings from sale of compact discs and cassettes slip 14% to an estimated Rs 630 crore in 2008, mostly due to the lack of effective anti-piracy laws and poor enforcement of existing ones. Saregama will launch music on microchips by this month-end and pre-loaded pen drives by Diwali. TSeries will join in next month when it releases the music of the Akshay Kumar and Sanjay Dutt-starrer Blue on pen drives and microchips, along with CDs and cassettes. “Here on, music for all big movies will be launched in this form in addition to CDs and cassettes,” said
Bhushan Kumar, managing director of the Delhibased recording firm. While T-Series will initially source memory cards and load them itself, Saregama plans to team up with hardware importers and manufacturers to bundle music into mobile memory cards and pen drives. The music will be in MP3 format. The key to its success will be pricing. Companies said they are still working on it. According to industry insiders, they may be looking at selling mobile cards with bundled music in the range of Rs 450-550. Pen drives, which can be plugged onto the computer or even car stereo systems, will cost Rs 700-750. This may discourage many people from tuning in though. The problem is, Indians can now load the music of their choice on their phone cards and iPods from any mobile store by paying just Rs 50, said Savio D’Souza, general secretary of the Indian Music Industry (IMI), an association representing Indian and foreign music labels. Many people get their music free from the Internet. Also, pirated MP3 format music CDs containing up to 200 songs are available for Rs 50-100 in the grey market. Companies will not be able to make their offering much cheaper though, given that branded mobile cards and pen drives with 1 GB (gigabyte) capacity—that can hold 200 songs—cost at least Rs 700. They are available for Rs 200-400 in the grey market. Experts feel that the initiative will succeed only if anti-piracy drive too picks up. The government on Tuesday moved a bill in the Lok Sabha to amend the fivedecade-old Copyright Act that promises to make piracy a punishable offence with up to two years imprisonment. This is why some recording firms such as Tips have decided to wait and watch before taking a decision. Tips may launch similar products to sell music once other companies test the market, its managing director Kumar Taurani said. But given the ever-growing number of mobile phone users in the country, the early birds are optimistic. “Just as there is a consumer for music CDs, there is a consumer for pre-loaded micro chips and pen drives,” said Times Music CEO Adarsh Gupta. The Indian music industry, which was pegged at Rs 670 crore through sale of CDs and cassettes in 2004, grew to Rs 730 crore by 2007 before declining to Rs 630 crore last year, according to a PwC report that also said digital music will drive the growth of the industry, growing its share from 16% to 60% by 2013.
72. Essar Steel to buy Shree Precoated assets, long-term debt for Rs 600 cr
THE Ruias-owned Essar Steel on Tuesday agreed to acquire the fixed assets and long-term liabilities of Mumbaibased Shree Precoated Steels for a little more than Rs 600 crore, a move that could signal the return of consolidation in the Indian steel industry and also give Essar Steel a major presence in the high-value steel-making category. Although Essar Steel didn’t elaborate on the financial size of the deal, people close to the development said it is in the range of Rs 600-Rs 650 crore. Under the agreement, Shree Precoated, an unlisted firm controlled by the Ajmera group, will transfer its assets including the colour coating line, the cold rolling mill, the galvanising line and pickling line. Essar Steel will also take over the outstanding long-term debt of Shree Precoated Steel, which is currently at about Rs 175 crore, said people familiar with the development. The acquisition will give Essar Steel a 2 million tonne capacity in cold rolled steel making, a
high-value category in steel making that sells at a premium of more than Rs 6,000 per tonne, over the base grade category — hot rolled coils. CR steel and galvanised steel are used for highend applications in automobiles, consumer goods and in constructions and are typically insulated from extreme fluctuations. While the base grade category saw prices more than halve to Rs 26,000 per tonne in the initial months of recession, prices of CR steel fell by just about 10-15% in the same period. Global consulting giant Ernst & Young were the financial advisors to the deal which, industry executives say, could prompt a return of the consolidation wave seen five years back. “With companies focusing solely on core operations, divestment of non-core units is gaining,” said the senior executive of a large steel company that competes with Essar Steel. “Many companies had entered steel making when steel prices were firm. Now, with costcutting becoming top priority, such companies want to sell off these steel businesses.” The Mumbai-based Ajmera group’s main area of operations is real estate. Shree Precoated Steels had earlier been sought after by the Jindals of the JSW group in 2000, when the Jindals were finalising plans to increase their presence in galvanised steel near Mumbai, to export to premium markets such as Europe and the US. However, the talks with the Jindals fell through due to differences on valuations, and JSW, subsequently, strengthened its cold rolled steel operations in Vasind and Tarapur. OP Gandhi, CFO, Ajmera Group said: “The funds realised would be used for new business purposes like steel trading and service centre for steel products.” For the fiscal year ended March 2008, Shree Precoated Steels had sales of around Rs 1,940 crore. Subsequently, the company has undergone a substantial reorganisation through a rather complicated scheme of demerger. The Shree Precoated plant location at Ranjangaon is strategic as it is home to auto companies and is considered to be one of the largest steel consuming centres in India.
73. Pepsi to fizz up business, nears $8-b bottling deal
PEPSICO, the world’s second-largest soda maker, is close to an agreement to buy Pepsi Bottling Group and PepsiAmericas for about $7.8 billion, said people familiar with the matter. PepsiCo is offering $36.50 a share for Pepsi Bottling and $28.50 a share for Pepsi-Americas, half in cash and half in stock, based on the July 31 closing price of Pepsi-Co, according to the people, who declined to be identified because the talks are private. PepsiCo originally offered about $6 billion in April for its two biggest bottlers, a bid they both rejected. The takeovers would give Purchase, New York-based PepsiCo control of about 80% of its North American beverage market, enabling chief executive officer Indra Nooyi to cut hundreds of millions of dollars in annual costs and simplify negotiations with retailers such as Wal-Mart Stores. The parties have sparred over how much the maker of Pepsi-Cola could expect to save. Pepsi Bottling said in June that the transactions could bring as much as $850 million in annual savings, compared with PepsiCo’s estimate of at least $200 million. PepsiCo and bigger rival Coca-Cola sell beverage concentrate and syrup to licensed bottlers, which add water and other ingredients, put the mixture in bottles and cans, and sell it. In 1999, PepsiCo followed Coca-Cola’s lead by spinning off its capital-intensive bottling operations to create Somers, New York-based Pepsi Bottling. — Bloomberg
74. Tatas look to buy out AIG in life insurance JV
THE Tata Group is preparing to buy out US insurer AIG from the life JV, Tata AIG Life Insurance. The local partner is believed to be doing a valuation of the life company. The possibility of Tatas buying AIG’s stake gathered steam in the aftermath of the global financial slowdown that resulted in AIG suffering huge losses. The bailout that followed resulted in the US government becoming the largest shareholder in AIG. Initially, there were indications that AIG would sell its Asian life insurance business. Earlier this year, US’ Metlife, UK’s Prudential and French insurer Axa had shown interest in buying parts of AIG’s life insurance business. But this could have caused regulatory problems in India, as all three multinationals have a presence here through JVs. More recently, the US government decided that it would get AIG to repay part of the bailout money by selling shares in its Asian business under AIA, an arm of AIG, through an initial public offer. When contacted, a Tata spokesperson said: “We do not wish to comment on such speculation.” According to an AIG official, given AIA’s positioning as an Asian insurer, presence in the Indian market would be crucial. Indeed, AIG insiders pointed out that despite the financial crisis, AIG was quick in infusing money into the Indian life insurance JV. A chief executive with another life JV company said that AIG’s plans for life insurance are yet to emerge. “It’s not clear which part of the life insurance business they are going to retain and fund through an IPO and which are the pieces they are looking to sell,” he said. But what is clear is that AIG plans to continue in the non-life business where it has a strong position in the market. But if AIA were to be carved out, there would be a change in shareholding that would give Tatas the option to re-examine the partnership. There are indications that things may not be the same at Tata AIG Life Insurance. For instance, the company has, for the first time, hired a nonAIG person as CEO when it appointed Suresh Mahalingam. Mr Mahalingam was with HDFC Standard Life as head of marketing before he moved to Tata AIG as chief operating officer. All the three earlier CEOs — George Oommen, Ian Watts and Trevor Bull — were AIG executives. Secondly, AIG has renamed most of its Asian businesses as AIA, but has kept India out of the rebranding exercise.
Crisis won’t upset US dominance
THE American economy has been battered by the present financial crisis. It could take several years for it to get back to normal. Some commentators and political leaders have suggested this could be the beginning of the end of America’s dominance of the global economy. Wrong, says historian Niall Feguson. In an article in the Harvard Business Review (JulyAugust 2009), Ferguson argues that, while America’s financial sector may be end up weaker, American dominance of the global economy is likely to continue.
Ferguson is an unabashed Americophile and something of an icon to the neo-conservatives in the US. He is the author of a book, Colossus, in which he argued that America’s problem is not that it is imperialist but that it does not take its imperial role seriously enough. Those who contend that the present crisis will be a huge setback for the US put forward several reasons: • The US economy could take several years to come back to normal. Meanwhile, rivals like China will power ahead. • America’s national debt is set to explode and this will limit its future growth. • The US dollar will lose its status as the reserve currency in the near future. • The American financial system will soon be a pale shadow of what it has been. The IMF expects the US economy to shrink by 2.6% in 2009. Recovery will be slow in coming — in 2010, the US economy is projected to grow by just 0.8%. Many think this could alter the race between the US and its principal economic rival, China, to China’s advantage. In 2007, Goldman Sachs had forecast that China’s GDP would equal that of the US in nominal terms by 2027. If the US economy suffers low to zero growth over the next four years while China grows by 6%, one would think that China could catch up with the US even earlier. Not really. Ferguson points out that, going by the IMF’s forecast (of April 2009), US growth rate will be lower than the growth rate of 2007 by 4.6 percentage points. But that of China would be lower by 6.3 percentage points. So, the present crisis could mean that China won’t catch up with the US until much later than forecast earlier, say, 2040. The crisis will have stretched out America’s dominance instead of abbreviating it. (The IMF’s July forecast raised the growth forecast for China in 2009 but growth will still be 5.5 percentage points lower than in 2007). Indeed, there is no dearth of conspiracy theorists who believe the US is interested in prolonging the crisis — and may have even engineered it — knowing that its principal rivals, especially China, would be severely impacted. China has used its double-digit economic growth rate to contain discontent. A decline of five percentage points or so in its growth rate risks fuelling serious disaffection within the country. AMERICA’S public debt is set to rise sharply following the resort to a fiscal stimulus as a means of reviving the economy. The federal deficit is expected to exceed 12% of GDP in 2009. Federal debt is expected to rise from 89% of GDP in 2009 to 101% of GDP in 2019, even on the optimistic assumption that the US economic growth rises to over 4% by 2011. India’s combined debt to GDP ratio of the Centre and the states was 73% last March. The consolidated fiscal deficit is expected to be around 12% of GDP in 2009-10. We worry, despite the fact that we can count on a long-term growth rate of 8% and we know that a growth rate of this order renders the fiscal problem self-correcting. Surely, the US should have a problem given its lower growth potential? There are differences in the two situations. The US is still regarded as a safe haven by investors whereas confidence about the Indian economy is nowhere as strong. More importantly, the dollar is the reserve currency and even America’s rivals prefer to invest overwhelmingly in dollars. This gives the US enormous borrowing potential. It can simply print dollars which others will gladly pick up. For all the talk of the dollar losing its primacy, no alternative is in sight. Indeed, the present
crisis has underscored the inherent attractiveness of the dollar. The dollar rallied in the face of bad news about the US economy and has defied predictions of a steep decline since. As Ferguson notes, there are practical obstacles to switching to the Special Drawing Rights issued by the IMF. A senior Chinese mandarin summed up the situation very well earlier this year: “Except for US Treasuries, what can you hold? Gold? You don’t hold Japanese government bonds or UK bonds… We hate you guys….but there is nothing much we can do.” Because the problems of the US economy hurt the rest of the world, the US appears set to retain its primacy in the world economy. The dollar will remain the dominant currency and the world resigned to financing America’s deficits. If there is a question mark, it is over the future of the American banking system. For the US banking system to regain its vitality, the US government will have to assume control of the top banks at least for some time, organise the disposal of banks’ toxic assets, put in place rules that rein in high leverage in the banking system and get a lot tougher with executive pay in banking. But the Obama administration has so far lacked the will take such decisive steps. This undermines the chances of an early recovery in the US economy and hence the world economy. But for the reasons mentioned above, it does not pose a threat to America’s dominance of the world economy. When the US catches a flu, the rest of the world goes down with pneumonia and the US ends up looking stronger.
GSK eyes buys to double revenue
GLAXOSMITHKLINE Consumer Healthcare (GSKCH) is ready to shift into the top gear in India. The Rs 2,000-crore healthcare company is planning aggressive acquisitions and rapid movement into new product categories, helping it double turnover to Rs 4,000 crore. “We are closing in on our target of doubling our business in four years. As part of this plan that we made two years back, we aim to touch a turnover of Rs 4,000 crore in the next two years,” Zubair Ahmed, managing director, GSKCH, told ET. To achieve the target, a strategic acquisition is definitely one of the options that the company is looking at. Though Mr Ahmed declined to comment on the details of the impending acquisitions, he stressed on the importance of growing the business fast. The acquisition of Crocin — an OTC paracetamol brand — had helped GSKCH thwart competition from Calpol in 1996 and at the same time, helped it ease itself into the analgesic market. Today, with significant market share in OTC segment with brands such as Crocin and Eno, it doesn’t come as a surprise that Mr Ahmed is waiting for the right opportunity and the right moment to make a bid. GSKCH is also planning to make a foray into new product categories where it doesn’t have a presence yet. “Every six weeks, we will have a new product,” Mr Ahmed said. Also, GSKCH’s ad spend has been increasingly going up, even during the economic slowdown. Mr Ahmed said after Hindustan Unilever and Procter & Gamble — two of the country’s largest FMCG firms — GSKCH is now the third-largest spender on advertising. According to Mr Ahmed, brand Horlicks accounts for about 65% of GSKCH’s total revenues.
Fox buys Khan rights for Rs 90 cr
FOLLOWING the stupendous success of Slumdog Millionaire, Fox Star Studios — a panAsian joint venture between Twentieth Century Fox and Star — has bagged the worldwide rights
of My Name is Khan, Dharma Productions and Red Chillies’ next venture, for a reported sum of Rs 80-90 crore. Fox Star Studios will finance and distribute the Karan Johar-directed My Name is Khan, starring Shah Rukh Khan and Kajol, which is expected to release in early-2010. According to industry trackers, the deal is said to have been struck for 15 years, and covers all rights except music, which has been bagged by Sony Music. Leveraging on parent News Corp’s global presence, Fox Searchlight Pictures will release the film in the US, while Twentieth Century Fox International will distribute the film outside India and the US. Fox Star CEO Vijay Singh confirmed that the film will have a global, multi-lingual release, though details on number of prints and marketing activity plans are not yet ready. “We have access to markets worldwide. When the homevideo is ready, we will have the strength of 20th Century Fox. Basically, we see a seamless transition of one entity working on it,” he said. For Karan Johar, it was important to find a partner who was like-minded, had a similar vision and the capability to take the Indian cinema to international markets. “I am happy that audiences unfamiliar with these films will get a chance to see what the Indian cinema has to offer to the world,” he said. My Name is Khanexamines how the life of a Muslim from India (SRK) living in San Francisco embarks on a remarkable journey across the US, inspiring people and inviting debate, creating an accidental revolution.
Turner laps up Amar Chitra Katha
REMEMBER Amar Chitra Katha, the comic books? Some of those stories will now debut, in animated form, on Cartoon Network and Pogo — the kids channels of broadcaster Turner International. The broadcaster has acquired rights of some Amar Chitra Katha stories from Mumbai-based ACK Media for a 26-episode series and two 70-minute films. Officials from both ACK Media and Turner International India declined to comment on the deal size, although sources in the broadcasting industry estimated that kids animation content is generally acquired for Rs 12-20 lakh for a 30-minute slot. Film content comes at over Rs 50 lakh, but this varies based to the strength of the content, the broadcaster’s reach and the duration of the deal. Turner has acquired perpetual rights for the films and seven years for the series in the Indian sub-continent. ACK is free to exploit rights for other markets. ACK has similar plans for Tinkle magazines. Amar Chitra Katha is the 35th Indian animation title acquired by Turner over the past decade. Monica Tata, V-P and deputy GM, entertainment networks (South Asia), Turner International India, said: “Amar Chitra Katha has entertained many generations. So we feel it was a great idea to bring alive those amazing stories, which most adults have grown up with. Initially, we have tied up with ACK for three properties, which will go on air next year.” Cartoon Network is Turner’s global animation channel, while Pogo is an wholly-Indian channel. India is the only country where the broadcaster has a separate channel. Pogo recently launched a science-based live action show FAQ. ACK Media is a two-yearold start-up founded by Samir Patil, also the founder of Vertex Software, which was acquired by NTT Data Corporation of Japan two years ago. He started the company with the acquisition of Amar Chitra Katha and Tinkle titles from India Book House and later acquired a controlling stake in Chennai-based Karadi Tales. ACK will produce the three
properties for Turner. It will do the pre-production work in-house, along with Cartoon Network and plans to outsource the production work to other studios.
79. Bank of China to invest $1.5 bln in rail company -report
BEIJING, Aug 7 (Reuters) - Bank of China (3988.HK) may invest almost 10 billion yuan ($1.5 billion) to buy a minority stake in a railway company that is building a high-speed rail link between Beijing and Shanghai, stated media reported on Friday. Bank of China Group Investment Ltd, the bank's investment arm, will acquire a nearly 8 percent stake in Beijing-Shanghai High-Speed Railway Corp from China Railway Investment Corp, a unit of the railway ministry which is the majority owner of the high-speed rail company, the China Daily said. The Chinese government is considering floating key assets of its three major railway operators to help bankroll a massive expansion of its railway system, state media have previously reported. China plans to spend an estimated 350 billion euros ($502.4 billion) on railway construction, expansion and upgrades over the next three years. At least part of the Beijing-Shanghai express railway, a 1,318-km line between the country's capital and its financial hub, is expected to be injected into the listing vehicle. ($1=6.831 Yuan) (Reporting by Simon Rabinovitch and Wang Lan; Editing by Chris Lewis)
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