Sectoral Snippets

India Industry Information

Issue 23 - September 2008

KPMG IN INDIA

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Sectoral Snippets

Table of Contents
Russell Parera Chief Executive Officer KPMG in India

1. Indian Economy 2. Auto and Auto Components 3. Banking and Insurance

3 4 5 6 7 8 9 10 11 12 13 14 15

Sectoral Snippets, Issue 23

4. Consumer Markets and Retail
The recent change in the Indian governments coalition parties has precipitated expectations that the pace of reforms may be accelerated in the remaining period of this government. Moreover, Indias trade minister Kamal Nath expects the nations economic growth to go no lower than 7-8 percent .

5. Hospitality 6. IT / ITeS 7. Media 8. Oil and Gas 9. Pharma 10. Power

While all are hopeful that these reforms would be passed through Parliament with support from its new coalition parties, media reports indicates that new reform legislations include approximately 32 reform laws, of which 21 pertain to economy and finance.

We hope you find this edition useful and informative.

11.Real Estate and SEZs 12.Telecom 13.Transport and Logistics

Regards, Russell

About Sectoral Snippets

Sectoral Snippets is an India-focused, monthly, freely-distributable newsletter brought out by KPMG in India. This newsletter provides an overview of the Indian economy in the form of news-briefs from across key sectors. Contact mknowledge@in.kpmg.com if you are interested in receiving this newsletter on a regular basis, or wish to unsubscribe.

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Indian Economy
Even as we maintain Indias status as one of the fastest growing economies, the Economic Advisory Council to the Prime Minister said Indias economic growth will slow to 7 percent this fiscal year from 9 percent in 2007 and inflation to 8 .7 to 9 percent from its current record levels. Indias inflation rate rose to its peak in over 16 years this month, escalating the probability of the fourth rise in interest rates since June this year. The Reserve Bank of India (RBI), Indias central bank, maintains its stance that in spite of a series of monetary tightening measures, the demand in the economy remains strong, laying added pressure on prices. Inflation is currently much higher than RBIs revised target of 7 percent for the end of the current fiscal. Last month, the RBI increased its repo rate by 50 basis points to a seven-year high of 9 percent. It also increased the cash reserve ratio by 25 basis points to 9 percent. Although there has been a slight softening in oil prices; the move to increase the salaries of 5 million central government civil servants by 21 percent at a cost of USD 3.6 billion this financial year is likely to give an added fillip to the inflation figures. Though the pace of Indias economic growth is slowing down owing to global shocks, the economy is well-positioned to achieve 7-8 percent growth in the current fiscal.

Source: Ministry of Commerce and Industry

Analyst: Asmita Deshmukh

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Auto and Auto Components

General Motors to invest USD 200 mn in a new engine plant
General Motors (GM) has planned an investment of USD 200 million in a new facility near Talegaon in Maharashtra. The plans for new facility have come as a strategic decision to increase GMs market share in India. The proposed facility is expected to produce power train and transmission assembly line and will have an annual capacity of 140,000 units and is expandable to 300,000 units. The plant is expected to be completed in the first quarter of 2010.

Apollo Tyres to invest USD 320 million in India and South Africa
Apollo Tyres Limited has proposed an investment of USD 320 million at its multiple plants in South Africa and India. The company is scheduled to invest USD 13 million in its 2 plants in South Africa to expand its capacity from 180 tonnes to 270 tonnes a day. The balance USD 310 millions will be invested at its plants in Chennai and Baroda. This investment is to increase the capacity of Chennai plant to 20,000 passenger car radial tyres a day and the Baroda unit is supposed to see an expansion from 10,000 tyres to 15,000 tyres a day. The radial tyres for buses and trucks in Baroda plant is also expected to increase from 300 units a day to 1,100. The project is expected to be financed by a combination of debts and internal accruals. Apollo Tyres is also investing USD 302 million to establish a new manufacturing facility in Hungary.

GM's total investment in the country will go up to USD 1 billion. This shows our confidence in emerging markets like India".
Karl Slym, Head of GM India (Source: Business Standard, August 29, 2008)

Mahindra and Mahindra acquires majority stake in Chinese tractor company

Mahindra and Mahindra (M&M) has formed a JV with Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd. of China. M&M through its subsidiary Mahindra Overseas Investment Company (Mauritius) Ltd. will hold 51 percent stake in the JV company at a cost of USD 50 million. The value of net assets of Yancheng Tractors is approximately USD 50 million which would therefore provide M&M an outlay of about USD 26 million.

Argentum Motors acquires 60 percent stake in Heuliez SA

Delhi-based Argentum Motors has acquired 60 percent stake in French auto manufacturer Heuliez SA for USD 37 million of which USD 15 million is to be .4 paid immediately. Heuliez is one of the largest customized car manufacturers. It manufactures convertibles and station wagons for Peugeot, Renault, Citroen, General Motors and Daimler Benz. As per the restructuring plan, post acquisition, Heuliez is to be spun off into three companies. Argentum plans to leverage on the patented retractable hardtop car technology of Heuliez and its electric vehicle manufacturing capability.

JBM Auto invests USD 57 million in Pune plant

JBM Auto Limited, an auto part manufacturer has reportedly planned to invest USD 57 million in its Pune plant. The plant will manufacture body parts and is expected to cater the Ranjangaon facility of TATA and Fiat JV. As reported, the plant will have an initial capacity of 90,000 units annually. JBM along with its Italian JV partner, Magnetto Automotive SPA, is to invest USD 14 million of equity. The firm has taken an overseas loan of USD 20 million to purchase equipment and has raised USD 23.2 million from the local market.

Analyst: Rajiv Somani

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Banking and Insurance

Flagstone plans foray into Indian general insurance business
Flagstone Reinsurance Holdings Ltd. (FSR), a Bermuda-based reinsurance company is planning to invest around USD 30 million to enter the general insurance business in India. The company expects to hold 49 percent stake in the business and is looking for local partners with a strong distribution network to invest in the business. FSR has been operating its reinsurance business in India and has already invested approximately USD 30 million in its Indian operations. The current FDI norms in India allows a foreign partner to hold a 26 percent stake in insurance ventures; however, the Government is looking at hiking the FDI cap in insurance to 49 percent, as companies need additional capital for their expansion plans.

Tata Capital enters into alliance with Mitsubishi UFJ

Tata Capital Limited has signed a memorandum of understanding (MoU) with Mitsubishi UFJ Securities Co. Ltd. (MUS) as a part of its strategy to strengthen its presence in the Japanese markets and augment the Indo-Japanese Financial corridor. The Company is looking to establish cooperation in diverse business areas which include cross-border investment banking, global offering of Indian equities and development of the local bond market. Mitsubishi UFJ Securities Co Ltd. provides services, like securities trading and underwriting various types of derivative transactions, advisory services related to mergers and acquisitions and asset securitization to its domestic and foreign clients from its strong network of 119 sales outlets across Japan.

Credit and Debit Cards Value of transactions (USD million)

Period 2005-06 2006-07 2007-08 Credit cards 7 ,880.5 9,618.9 13,478.6 Debit cards 1,371.4 1,900.5 2,911.9 Total 9,251.9 11,519.3 16,390.5

DBFS to start NBFC operations in India

Doha Brokerage and Financial Services Limited (DBFS) plans to start its Non Banking Financial Company (NBFC) operations in India, after it received the approval to operate, from RBI. Doha Bank, the parent company of DBFS, is planning to pump in USD 50 million as capital funding for the new venture which is initially looking to enter the more favorable consumer and housing loan segment. Doha Bank forayed into the Indian brokerage industry by acquiring 49 percent stake in Investnet, an Indian brokerage company held by Select Group of companies, which has approximately 140 branches across India and renamed it as DBFS. DBFS also plans to foray into Asset Management business in association with Tata Asset Management Company by launching the India Growth Fund by 2009.

Source: RBI Annual Report 2007-08

Strong growth in credit and debit card transactions

According to the latest report from the RBI, the total value of plastic money transactions increased by over 42 percent to reach USD 16,390.5 million in the year 2007-08 as compared to a 24.51 percent rise in the previous year. Credit card transactions have been the major contributor in the overall plastic money segment growth. The merchant terminals have also grown by approximately 30-40 percent and the number of establishments offering the facility to swipe cards has been estimated to be around 400,000. The substantial growth in credit and debit card transactions has been attributed to the increasing number of schemes, like cash back on purchases, provided to the account holders by the banks.

Analyst: Kunal Jain

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Consumer Markets and Retail

Tesco ventures into Indias cash and carry business
Tesco, UKs largest retailer, plans to venture into the Indian wholesale cash-andcarry business with an initial investment of USD 107 million. The company has .9 entered into an alliance with Trent Limited, the retail arm of Tata Group, to develop Trents hypermarket format. Trent aims to leverage on Tesco's marketing, stock management, retail information systems, cold-chain infrastructure and front-end services expertise and also seeks to source merchandise from Tesco's wholesale outlets in India. Tesco plans to utilize the initial investment over the next two years to set up three operations at Mumbai, Delhi and Bangalore. International players like Wal-Mart and Carrefour have already announced their plans to foray into Indias wholesale cash-andcarry market, while Metro AG has been operating in this space since 2003.

Jarden to explore Indias kitchen appliances market

US consumer durables player, Jarden Corporation, has launched five products from its Oster brand in India. The company aims to occupy the leadership position in the USD 240 million Indian kitchen appliances market which is witnessing an annual growth of 15-18 percent as per industry sources. The company would be retailing its products through various retailers, including EZone, Hyper City, Aditya Birla Retail, Reliance Retail and Croma. Jarden is planning to expand its reach beyond Mumbai and Delhi to the other 2 metros and 6 tier I cities by the start of 2009. The company would be sourcing its products from existing production hubs in China, Mexico and Venezuela.

"This is another exciting development for Tesco. It complements our entries into China and the United States, giving us access to another of the most important economies in the world. Our wholesale cash-andcarry format will bring improved value, range and service to thousands of Indian businesses".
Terry Leahy, CEO, TESCO. (Source: Financial Express, August 12, 2008)

Pizza chains on an expansion spree in India

Domino's Pizza, the international pizza chain, plans to invest USD 44.9 million in India to add another 300 outlets by the end of 2010-11. The fast food major has 207 outlets at present which are spread across 45 cities. It aims to take the number to 500 outlets covering 75-80 cities by 2010-11. The company has planned an investment of USD 18 million in the current fiscal to set up 47 new outlets. Domino's is also undertaking a brand positioning strategy with a USD 1.3 million advertising and marketing campaign over next the 3 months. Another fast food major, Pizza Hut is also planning to invest USD 22.5 million in India over the next 3 years for brand transformation and store expansion. The company plans to invest around USD 10.1 million to set up 30 more stores in metros and Tier I cities in the next 3 years taking the number of Pizza huts to 175. It plans to spend another USD 11.2 million to apply its 'enhanced dine-in concept to all Pizza Hut places.

Reliance Retail strikes an alliance with Hamleys

Reliance Retail continues its strategy to tie up with large global brands in specialty categories. It has now entered into a pan-India franchise with UKs toy retailer, Hamleys. Reliance Retail would make all the financial investments and Hamleys would add value through design assistance, training as well as marketing and promotion activities. Reliance plans to pump in USD 28.1 million to set up 20 Hamleys outlets in India by 2015 and aims to set up 2 flagship stores in Mumbai and Delhi in 2009. The stores would stock a wide range of domestic and international brands including private labels from Hamleys. The value of the Indian toys and games market is estimated at USD 561.8 million of which organised retail is about 20 percent.

Analyst: Sonia Topiwala

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Hospitality
ITC to expand hotel business
Indian Tobacco Corporation (ITC) plans to open two more hotels in Chennai and Kolkata. The Kolkata project is likely to have an investment of INR 8.6 billion. ITC has already started working on its INR 12 billion hotel project in Chennai. This 600-room property is expected to be completed by 2010. ITC's second hotel in Bangalore would be open in 2009. Moreover, ITC has bought land for building hotels in Ahmedabad and Hyderabad and plans to develop another outside Delhi. ITC also has a tie-up with Starwood Hotels & Resorts which would run the operations in several of the new hotels.

IHCL plans to invest INR 18 billion for expansion

Indian Hotels Company (IHCL), which runs the Taj chain of hotels, plans to invest INR 18 billion in the next three years. IHCL would set up four airport hotels in the country, including one in Navi Mumbai, over the next few years. Besides, IHCL is looking at establishing its presence in the other domestic leisure destinations like Andaman. The company has entered into marketing alliances with hotels in Japan and Korea. As a part of its expansion strategy, the company would continue to acquire iconic standalone properties across the world.

Oberoi Group to add 10 hotels by 2011

Increase in average room rate across cities Oberoi Group (Oberoi), one of the leading global hospitality companies in India plans to open 6 more hotels in India and 4 hotels abroad under its various luxury brands by 2011. The new additions would take the Oberois room capacity to 6700-rooms from current 4400-rooms. Out of four hotels abroad under the Oberoi brand, one is likely to be located at Dubai, two (one City and a Leisure) in Abu Dhabi and one in Muscat in Oman. In India, the 6 properties out of the 8 which are in the planning and development stages are expected to open by 2011.

Source: CRISIL Report 2008

Lemon Tree on expansion drive in India and abroad

Lemon Tree Hotel Company is setting up hotels in Gurgaon, Shimla, Chandigarh and Ranchi with an investment of INR 3840 million. In addition, the Company has acquired a 27-room alleppey-based Grand Nirvana in Kerala for INR 220 million and INR 500 million hotel property in Bangalore. Lemon Tree plans the global foray though its tie-up with Forrest Hotels, where Lemon Tree would hold 51percent.

First Ibis hotel opens in Gurgaon

The first hotel property of the InterGlobe Hotels, a joint venture between InterGlobe Enterprises and French hotel group Accor has opened in Gurgaon. The hotel property is reportedly branded as ibis. The JV plans to open a chain of hotels under the ibis brand name and is expected to add 6 more ibis hotel properties by end of 2008 in India.

Analyst: Pallavi Phatak

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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IT / ITeS
Indian Software Product Revenues expected to rise tenfold
According to a study conducted by Nasscom-Zinnov, Indian software product (ISP) industry is expected to grow tenfold in revenues and reach USD 9.5 -12 billion by 2015. The study states that the Enterprise application software would provide the largest opportunities in this sector with key priorities being Enterprise Resource Management, Business Intelligence, storage and security. Factors such as proximity of ISP businesses to the local market requirements, excellent understanding of localization requirements, and ease of adopting a customized and targeted sales approach is expected to drive this growth.

Infosys acquires UK-based Axon Group

Indias second largest IT service provider, Infosys Technologies, has agreed to buy British SAP consultancy firm Axon Group Plc for USD 753.1 million. Axon has about 2000 employees and provides consultancy services to multinationals that have SAP as their enterprise platform. Axon has its offices in United Kingdom, North America, Malaysia, and Australia. With this strategic acquisition, Infosys expects to increase its share in the high-growth SAP segment and consolidate its position in Europe.

Wipro Technologies acquires US-based Gallagher Financial Systems

Wipro Technologies, Indias third largest IT Company, has completed the acquisition of US-based Gallagher Financial Systems (GFS), Inc. GFS provides loan origination and processing systems through its flagship product NetOxygen. Netoxygen has been successfully implemented at several large and mid-tier banks in the US and has capability to be personalized for different loan products like mortgages, auto loans, student loans, installment loans, etc. As per the terms of the acquisition, GFS is to be integrated with the financial services vertical of Wipro Technologies and will be called Wipro Gallagher Solutions.

We are delighted to enter into this highly complimentary relationship with TechM that will deliver the huge benefits of Indian offshoring to the European market place. There is substantial potential for growth, which is reflected in current demand, as European companies are at relatively early stages in their use of IT offshoring for competitive advantage, compared to their American counterparts.
Ben Andradi, Chief Executive Officer, Servista Ltd. (Source: Tech Mahindra company website, August 28, 2008)

Rolta acquires WhittmanHart Consulting

India-based IT company, Rolta, has acquired WhittmanHart Consulting (WHC), the consulting Division of Chicago-based WhittmanHart Inc. WHC is a management and technology consulting services firm and provides consulting services in the Business Intelligence arena. WHC's partners include Oracle, Business Objects, Cognos, CA, and HP It is also an active member of Oracle's . Partner Advisory Council.

Tech Mahindra announces Strategic Partnership with Servista

Tech Mahindra (TechM), India-based IT services provider in the telecom space has acquired minority stake in UK-based Servista. As per the terms of the deal, TechM is to be Servistas exclusive delivery arm for three years and also assist it in securing more large scale European IT offshoring business. London-based Servista offers IT services on an offshore basis in operating and business systems such as Billing, CRM, Operational Workflow, IT Systems Transformation and Testing. Tech Mahindra believes that the deal will accelerate its expansion into the European market and enhance its business development capabilities.

Analyst: Parnika Patil

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Media
UTV Interactive acquires stake in True Games
UTV interactive the gaming arm of UTV Software Communication has acquired 80 percent stake in True Games, a US-based online game publishing company for an undisclosed amount. This acquisition is part of the companys strategy of realizing growth through the inorganic route. The acquisition also gives UTV a presence across online gaming platform and gives them a presence across all gaming platforms: Online, Mobile and Console gaming. The company plans to invest around USD 810 million for development of games over next 18 months. UTV is also planning to make another acquisition of a US-based mobile content aggregator through Indiagames.

Reliance ADA Group forays in Direct to Home (DTH) services

Reliance ADA Group launched its DTH services Reliance BigTV in the country. The company is expected to offer a bouquet of over 200 channels with digital picture and sound quality on an MPEG 4 DTH platform. Reliance BigTV plans to capture 40 percent of the DTH market in India and has an extensive distribution network of over 2000 stores and 500 channel partners. To compliment its DTH services, the company plans to enter the broadcasting sector with the launch of 20 television channels. Out of these 20 channels, 2-3 channels are to be released in the fourth quarter of this year and another 4-5 channels, early next year. The home video rental arm of the Reliance ADA group, BigFlix, plans to expand its footprints across India by doubling its existing network to 200 with presence across 10 cities in India by March 2009.

The fund would invest in film projects in which we can get at least 50 percent of the equity. We wont go for an ownership less than that, and we would fund projects around the world wherever we find the opportunity to make money for our investors.
Sheetal Talwar, Chairman & MD of Vistaar Religare Capital Advisors. (Source: Economic Times, August 11, 2008)

SeventyMM received USD 11 million from US-based private equity firm

SeventyMM, a movie rental company received approximately USD 11 million from a US-based private equity firm, NEA-Indo US Ventures. Since its inception, SeventyMM has received USD 21 million as total capital investment. Earlier, the company had received investment from Matrix Partners India, Draper Fisher Jurvetson and ePlanet Ventures. By the end of 2009 the company plans to have its presence in 40 Tier 1 and Tier 2 cities and also increase the number of titles from the present 1800 to 2500 by the end of this year. The companys five year goals include: achieving a customer base of 4 million from the current 70000, beginning online streaming and downloading of films and touching USD 350 million in revenues.

Balaji Telefilms Ltd. (BTL) buys back 25.99 percent stake from Star
Balaji Telefilms Ltd. has bought back their stake from Rupert Murdochs Star Group. Star group held 25.99 percent stake in BTL via Asian Broadcasting FZ LLC. Under the termination agreement, BTL plans to buy back the entire 25.99 percent stake held by Asian Broadcasting at USD 4 each within 240 days. Star and BTL have agreed to be released from all prior rights, obligations and agreements including the joint venture to launch regional channels. BTL is also reportedly in talks with Reliance ADA group promoted Reliance Big Entertainment and Eros International to pick up the stake owned by Asian Broadcasting.

Analyst: Mehul Desai

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Oil and Gas

OVL to acquire Imperial Energy
ONGC Videsh (OVL) has acquired UK-based oil firm Imperial Energy Corporation. For this, the company has paid an amount of USD 2.6 billion. Imperial Energy is a Russian energy company with focus on oil exploration and production. This acquisition is expected to be an important addition for the OVL operation. Besides, OVL financial strength and technical expertise is s s expected to help enhance the attractive growth potential of the business in the Tomsk region.

BPCL buys stake in Mozambique oil asset

Bharat Petroleum Corporation Limited (BPCL) has acquired a 10 percent stake in an offshore hydrocarbons exploration and production asset in Mozambique. The oil asset was acquired for an amount of USD 75 million. The acquisition is expected to help the firm in strengthening its oil and gas portfolio and securing supplies.

USD 1.49 billion committed in NELP-VII

The NELP has received bids for 45 of the 57 blocks offered in NELP-VII, with a minimum investment of over USD 1.5 billion. The Phase I investment commitment includes USD 321.2 million for exploration in deep sea. Besides this, there is an investment of USD 598.3 million for exploration in shallow waters and USD 572.8 million for onland blocks. The investment committed for Overview of Indian Petroleum Industry for the year 2008-09
Items Reserves Estimates for the Year 2008-09 (Million Tonne) Crude Oil Natural Gas (Billion Cubic Meter) Consumption Crude Oil Petroleum Products Production Crude Oil Petroleum Products LPG from natural gas Gross Imports Crude Oil Petroleum Products Exports Petroleum Products 725.0 1055.0 156.1 118.4 34.2 144.9 2.1 121.7 22.7 39.3

Phase II and III is optional and only upon a discovery.

ONGC raises its stake in Cambay Block

Oil and Natural Gas Corporation (ONGC) has exercised its right to increase its stake by 30 percent in the CB-ON-7 in the South Pramoda Development Area in the Cambay basin. Besides ONGC, Hindustan Oil Exploration Company (HOEC) and Gujarat State Petroleum Corporation Ltd. (GSPC) are the other two consortium partners. Since ONGC is the licensee for the block, it had the right to increase its stake, thus resulting in HOEC and GSPC conceding their stake by 15 percent each. .

Source: http://petroleum.nic.in/petstat.pdf

Analyst: Rajiv Parekh

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Pharma
Strides Arcolab acquires controlling stake in an Australian company
Strides Arcolab Limited, an Indian pharmaceutical company, has acquired 50.1 percent stake in Ascent Pharmahealth Limited (formerly known as Genepharm Australasia Limited), an Australia-based pharmaceutical company. Strides considers Australia an important market along with the emerging Asian markets. With this acquisition Strides is expected to become the 4th largest generics company in Australia.

Lupin acquires minority stake in an Australian company

Lupin Limited, an Indian manufacturer of generics and branded formulations and Active Pharmaceuticals Ingredients (APIs), has acquired a minority stake in Generic Health Pty. Ltd., a privately held Australian generics and OTC products company. This acquisition is expected to strengthen Lupins presence in the Australian generics market. Lupin has already filed 16 dossiers for generic products and has received approval for 14.

Advinus partners with Genzyme and Medicines for Malaria Venture (MMV)
Advinus Therapeutics Limited, a lifescience research and development company, has entered into a collaborative agreement with Genzyme, a global biotechnology player, and MMV, a not-for-profit R&D organization working for treatment of malaria. The three partners plan to collaborate to develop new and better treatments for malaria.

Australia and the emerging markets of Asia are strategic and important markets for Strides. With Asia growing three times in comparison with Western markets, we strongly believe that Ascent Pharmahealth is positioned to take leadership in these markets.
Arun Kumar, Vice Chairman and Group CEO of Strides, commenting on the acquisition (Source: Company Press Release, August 1, 2008)

Dishman plans to invest heavily in setting up SEZs

Dishman Pharmaceuticals, an Indian pharmaceutical company, is planning to develop two Special Economic Zones (SEZs). It has already acquired 390 acres of land to set up its pharmaceutical and chemical SEZ. It is still in process of acquiring land for its engineering SEZ. The company has planned a total investment of USD 114 million in setting up the SEZs.

Fortis Healthworld is reported to be acquiring a retail pharmacy chain

Fortis Healthworld, a Religare Group company, is reported to be in process of acquiring CRS Health, a retail pharmacy chain. Through this acquisition, Fortis is likely to add 27 retail shops and 4 warehouses of CRS Health. This acquisition is expected to give Fortis a wider presence in India. Fortis is also expected to reposition itself as a health and wellness company providing a broader portfolio of services.

Analyst: Nandita Kudchadkar

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Power
Mahagenco places USD 625 million order with BHEL
State-owned Bharat Heavy Electrical Limited (BHEL) has bagged an order of USD 625 million for supply of power equipment from Maharashtra Governments electricity generating arm Mahagenco. The proposed order comprising of boilers, turbines and generators are for power plant at Chandrapur, where Mahagenco is setting up two units with a capacity of 500 MW each. Of the two units, one unit is expected to generate power from December 2011 onwards while the other one is to start functioning from March 2012 onwards.

First large scale grid connected solar power plant in West Bengal
Titan Energy Systems Ltd., in collaboration with Beck Energy of Germany, plans to build the countrys first large-scale grid-connected solar power plant in West Bengal. The proposed power plant of two MW costing USD 8.4 million would come up at Jamuria, near Asansol. Titan Energy has signed a letter of intent with West Bengal Green Energy Development Corporation (WBGEDC). Power Finance Corporation would invest USD 7 million while the balance would be .2 provided by WBGEDC. The solar power produced from the plant would be fully purchased by DPSC, a power utility company, at INR 5 per kWh and a subsidy of INR 10 per kWh would be provided by Ministry of New and Renewable Energy (MNRE). The plant is expected to be fully functional by March 2009.

East Cost Energy to establish 4,000 MW plant in AP

Details of projects sanctioned in X and XI Plan under RGGVY* East Coast Energy, a special purpose vehicle of Asian Infra, Singapore and Athena Energy Ventures, has firmed up its plan to set up a 4,000 MW capacity power plant in Andhra Pradesh (AP). The plant would also have a dedicated jetty to evacuate coal near Bhavanapadu in Srikakulam district of AP The phase I of . the project would envisage an investment of USD 2,325 million for setting up 2,640 MW capacity.

Bhilwara Energy to set up 1,500 MW power plant

Bhilwara Energy would set up a 1,500 MW coal based power plant with an investment of USD 1,744 million in Madhya Pradesh. The company has also signed a Memorandum of Understanding (MoU) with the Madhya Pradesh government for setting up a power plant. The proposed power plant would be set up in phases.

*RGGVY: Rajiv Gandhi Grameen Vidyuteekaran Yojana Source: powermin.nic.in

Haryana signs 3,044 MW PPAs

In a step to tide over power shortage faced by the state, the power distribution companies of Haryana have entered into different power purchase agreements (PPAs) to procure 3,044 MW of power for a period of 25 years. The Uttar Haryana Bijlee Vitran Nigam (UHBVNL) and Dakshin Haryana Bijlee Vitran Nigam (DHBVNL) signed PPAs of 1724 MW with Power Trading Corporation (PTC) and Adani Power at a tariff of INR 2.86 per kWh to INR 2.94 per kWh. Additionally, the Haryana Power Generation Corp (HPGCL) signed a share purchase agreement with China Light and Power for procuring 1,320 MW for a period of 25 years.

Analyst: Rajiv Parekh

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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Real Estate and SEZs

Sri City to develop a multi-product SEZ
Sri City Pvt. Ltd, a Chennai based company, has launched a multi product SEZ project focused on the manufacturing sector. The project would be spread on 5000 acres and is located on the border of Andhra Pradesh and Tamil Nadu, about 55 kms from Chennai. The promoters expect to receive investments of about USD 4.07 billion by 2012-13. An initial investment of about USD 233 million would be made to develop common infrastructure like connectivity and water. Of the initial investment, USD 116 million would be in the form of equity and the remaining would be through loans and internal accruals. Sri City has signed an MoU with 10 manufacturing units to set up operations in the SEZ. About 1.75 lakh jobs are expected to be created by this project. The SEZ has been planned and designed by Jurong Consultants of Singapore.

Aeren to invest USD 1.47 billion in two projects

Aeren R Enterprises, an NCR-based real estate company, is planning to invest about USD 1.47 billion in two projects in Ludhiana. The company has acquired 175 acres land at International City in Ludhiana for both projects. The first project, a township, would be developed at a cost of USD 1.4 billion by 2012 and a second township project would be developed at a cost of USD 81 million and would have 650 high-end residential units. The company is currently awaiting regulatory approvals for International City.

This investment bolsters Credit Suisses long-term commitment to India. We have a great partner in Indu and we view this as a tremendous opportunity to participate in the strong growth of the countrys real estate and infrastructure sectors.
Sameer Nayar, managing director and head of real estate finance, Asia Pacific, at Credit Suisse. (Source: Indianrealtynews.com, August16, 2008.)

Kolte-Patil unveils middle-income housing project

Kolte-Patil Developers Ltd., a Pune-based real estate company, has launched a USD 209 million housing project for the middle income group. The company has formed 37 .5:37 joint venture with ICICI Venture Funds Management (ICICI .5 Ventures) for the development of this project and would raise the remaining funds from landowners. The project is named Lush County, and is being developed on 80 acre land about 15 kilometers from Pune. The first phase would have development of twin bungalows, and 2, 3 and 4 BHK apartments with an investment of about USD 87 million over 36 months.

Zoom to develop township in Philippines

Zoom Infraestates, a Mumbai-based real estate company, has tied up with Philippines government to develop a township near Manila. The project would be developed on a 80,000 hectare plot of land. The Metropolitan Manila Development Authority (MMDA) has provided 50,000 hectares and 30,000 hectares would be given by a local developer. The township is named The Pacific Co City and would have residential, commercial and SEZ development. There are also plans to provided residential units to people from the economically weaker section.

Credit Suisse Invests in Indu Projects

Credit Suisse has invested about USD 113 million (INR 476 crore) in Indu Projects, a Hyderabad-based infrastructure and real estate company, for a stake of 13-14 percent. Of this investment about USD 77 million (INR 325 crore) would be paid in the first phase and the remaining amount would be paid in the next 90 days. Indu projects, is planning to use these funds to expand their operations in India.

Analyst: Nitin Dehadraya

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Page 14 of 16

Telecom
KEC International plans to set up 400 telecom towers in rural areas
KEC International a part of RPG group, engaged in laying power lines globally plans to expand its business by foraying into the installation of telecom towers. The company plans to invest approximately USD 23 million in installing 400 telecom towers in rural areas where mobile phone penetration is low. The company is constructing telecom towers at 3 existing facilities in Jabalpur, Jaipur and Nagpur with a total installed capacity of 180 thousand tons including 70,000 tons of contracted capacity.

Tata Teleservices to invest USD 2 billion for telecom business expansion

Tata Teleservices plans to invest USD 2 billion to expand its telecom business over the next 2 years. Of the total investment, USD 1.5 billion would be used for a nation-wide launch of GSM services in the country. The company currently offers only CDMA services and plans to launch GSM services in the six circles where they have been allocated the spectrum. The company plans to start GSM operations by the end of 2008.

Idea Cellular launches operations in Mumbai

Aditya Birla Groups mobile telephone service provider company Idea Cellular, launched its services in the Mumbai circle. The GSM service provider plans to invest close to USD 185 million including close to USD 140 million paid as license fees for its Mumbai circle. The remaining amount of investment is to be used in developing the network and other infrastructure in the circle. With the entry in the Mumbai circle, Idea Cellular would have network coverage in 70 percent of total mobile subscriber base in the country. The company is anticipating a market share of up to 20 percent of new subscribers in Mumbai.

"We see a significant demand growth in this segment. The Government plans to achieve a tele-density of 32.74 per cent by 2010 from 15.6 per cent now, with improved coverage of rural areas. India will need additional 1.5 lakh towers in the next 3 years from the current base of 1.20 lakh towers to meet the capacity and coverage requirements".
Mr. Ramesh Chandak, KEC's Managing Director and CEO. (Source: Business Line, August 11, 2008)

World phone forays in cable broadband services

World Phone Internet Service Private Limited, one of Indias VoIP solutions providers, has announced its foray into cable and broadband internet services in Delhi and National Capital Region. The company has come out with a low tariff of ~ USD 2 per month for its users. The company expects to achieve a subscriber base of 5000 within the first 3 months of its launch, as a result of its low tariffs. The company also plans to enter the Mumbai, Jaipur, Ahmedabad, Hyderabad and Kolkata markets in the future.

Telecom companies to invest USD 400 million in undersea cable link

Bharat Sanchar Nigam Ltd. (BSNL), Bharti Airtel, Tata Indicom and Saudi Telecom are planning to invest USD 400 million in an undersea cable link called The Europe India Gateway (EIG) cable. BSNL has reportedly planned to invest USD 50 million. The cable link is expected to be completed by December 2009.

Analyst: Mehul Desai

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Page 15 of 16

Transport and Logistics

Indian Warehousing sector expected to be worth USD 55 billion by 2010-11
Growing at the rate of 35-40 percent per annum, the Indian warehousing sector is expected to be worth USD 55 billion in 2010-11 from USD 20 billion in 200708. This growth would be mainly due to the rising logistics parks and warehousing space. Around 45 million square feet of land is likely to be developed for warehousing space apart from 110 logistics parks expected to be developed and operational by 2013. At present, warehousing accounts for 20 percent of the total logistics market in India.

Sical to invest in multi modal logistics network

Sical Logistics of Chennai, is planning to invest USD 395 million to develop a nation wide multi modal logistics network which would include cargo terminals and rail lines. The company is likely to invest approx. USD 255 million to develop two cargo terminals and USD 140 million towards railway connectivity to these terminals. Of the two cargo terminals, the company is expected to develop one Iron-ore terminal at Ennore with an investment of about USD 117 million in partnership with MMTC India Ltd. and Larsen & Toubro Ltd. which would hold a 26 percent and 11 percent stake respectively. The terminal is expected to handle 35,000 tones of iron-ore daily with a throughput of 1.2 million tons. MMTC is expected to provide 3 million tons of iron-ore for the first phase of the project. The terminal is expected to transport Bellary-Hospet iron ore to Mangalore and Goa.

"The timing of this partnership, representing MAS E&M's (engineering and maintenance) first foray into the Indian aircraft maintenance market, is perfect as the Indian market is experiencing strong aircraft growth with manufacturers bullish on aircraft orders".
Tengku Azmil Zahruddin, MAS Executive Director and Chief Financial Officer. (Source: Business Standard, August 20, 2008)

GHIAL and Malaysian Airline sign MoU

GMR Hyderabad International Airport Ltd. (GHIAL) and Malaysian Airlines have entered in a Memorandum of Understanding (MoU) to establish aircraft maintenance, repair and overhaul (MRO) centre at the Rajiv Gandhi International Airport in Hyderabad. The center is expected to provide maintenance services to all kind of aircrafts like light jets and super jumbos like the A380. The details of the centers area, capacity, equity and financial structures are not yet finalized. Malaysian Airlines engineering and maintenance have started providing training to almost 70 employees who will be engaged in the MRO operations. The company expects around 200 new aircrafts in the next 2 years and close to 2000 new aircrafts in the next 8-10 years, enabling the company to capitalize on the opportunity in the subcontinent.

Kingfisher-Deccan gets government approval to fly abroad

The Vijay Mallya led UB group has got the license from the aviation ministry for flying abroad commencing with seven flights a week between Bangalore and London. Kingfisher is expected to fly on Deccans license wherein UB has a substantial stake. The company becomes eligible to fly overseas after 26 August, 2008 when it completes five years of Indian operations. Thirteen countries were informed about Deccan capturing the international skies so that the airline could make necessary preparations like arranging airport slots, terminal space and booking offices in those countries. The company is expected to launch its services on the 3 September, 2008 and expects to increase its flying time in due course of time.

Analyst: Preeti Sitaram

2008 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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For further information about this newsletter, please contact: Deepankar Sanwalka National Industry Director Consumer Markets e-Mail: dsanwalka@kpmg.com Tel: +91 (124) 3074302 Sanjay Aggarwal National Industry Director Financial Services e-Mail: saggarwal@kpmg.com Tel: +91 (22) 3983 5102 Rajesh Jain National Industry Director Information, Communication & Entertainment e-Mail: rcjain@kpmg.com Tel: +91 (22) 3983 5300 Arvind Mahajan National Industry Director Infrastructure & Government e-Mail: arvindmahajan@kpmg.com Tel: +91 (22) 3983 6206 Yezdi Nagporewalla National Industry Director Industrial Markets e-Mail: ynagporewalla@kpmg.com Tel: +91 (22) 3983 5101 Vikram Utamsingh National Industry Director Private Equity e-Mail: vutamsingh@kpmg.com Tel: +91 (22) 3983 5302 Research Inputs by KPMGs India Research Center

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2008 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.