The IndusView Publication - Volume 3, Issue 6

Genpact IPO on NYSE

Genpact Ltd, India’s largest Business Process Outsourcing firm is expected to reach a market capitalization of about $3 billion, when it lists on the New York Stock Exchange later this year. That valuation is based on that of its peers, WNS (Holdings) Ltd and ExlService Holdings, which have already listed on U.S. exchanges.

The public offering will provide a healthy return to its principal investors, Oak Hill and General Atlantic, which invested $800 million for a 60% stake in the company two years ago. The remaining 40% is held by General Electric, which started Genpact as an in-house offshore facility 10 years ago.

IT: A $100 Billion Industry

India’s information technology (IT) and IT-enabled Services (ITeS) industry will be worth $100 billion by 2011 from about $48 billion in 2006, according to a report by IDC India, the Indian affiliate of Massachusetts-based market research firm IDC. The report suggests that the Indian IT industry will register a compound annual growth rate (CAGR) of 18% during these five years.

The estimate, however, seems conservative considering the 31% growth rate marked by the Indian IT industry in 2006. The industry, which has grown more than 30% annually for the past four years, according to the National Association of Software and Service Companies (NASSCOM), the industry body representing more than 1,100 Indian IT companies.

The IDC report suggested rising domestic sales, previously a weak segment. IDC forecasts IT & ITeS sales in India will grow at a CAGR of 20% to $41 billion in 2011 from $17 billion in 2006.

Indian Contenders

Indian companies are apparently better positioned to challenge the global blue-chip companies. Rating agency Standard & Poor’s (S&P) annual ‘Global Challengers List’ included eight Indian companies out of the 300 firms listed from 37 countries, compared with four companies from China. The list that identifies mid-size public listed companies exhibiting the strongest growth characteristics includes ACC Ltd., one of the oldest manufacturer of cement and ready mix concrete; Hotel Leela Venture Ltd, an Indian hotel company that owns four deluxe hotel in the cities of Mumbai, Bangalore, Kovalam and Goa; Jain Irrigation Systems Ltd, the country’s largest manufacturer of irrigation systems, pipes and fittings; Lakshmi Machine Works Ltd, one of the world’s leading manufacturers of textile spinning machinery; Marico Industries, one of the leading FMCG companies; Titan Industries, the world's sixth largest wrist watch manufacturer and part of the Tata Group, India's largest private sector business group; The Indian Hotels Company Ltd, a part of the Tata Group that operates Taj Hotels chain of luxury hotels.

Oil Tips a Perfect Balance

If India could discard its oil import bill, it will reach a perfect trade balance. During the fiscal year 2006-07, India's exports grew by 24% to reach at $125 billion, while non-oil imports increased to $124 billion from $99.5 billion during the same period. Its trade deficit, however, widened to $57 billion from $40 billion only due to the crude oil imports bill that rose by the same amount, i.e. $57 billion in 2006-07 from $44 billion in the previous year.

With the Indian economy estimated to grow at the rate of 8%-10% per annum in the coming years, the oil import bill will only increase as demand for energy rises to 200 Giga Watts by 2012 from the current installed capacity of 125 Giga Watts. It makes a clear case for large investments in alternative energy sources such as wind energy, nuclear energy and solar energy. Wind energy has added about 6,000 megawatts of power supply in the past five years, and it is estimated to create additional capacity of about 8,500 megawatts by 2012.

Large oil and gas discoveries announced by Reliance Industries Ltd., country's most valuable firm with a market value of $37.2 billion and Cairn India Ltd, subsidiary of Edinburgh, Scotland based Cairn Energy Plc strengthen India’s efforts to reduce dependence on oil imports.

Bundeep Singh Rangar
Chairman, IndusView
Bundeep.Rangar@IndusView.com
www.indusview.com
www.indusreal.com

Links for 2/5

US and India discuss nuclear deal
BBC Online
Senior US State Department official Nicholas Burns is to go to India later this month to try to finalise a landmark nuclear fuel treaty.

India taps into wind power
BBC Online
The industrial area of Bhiwandi, about an hour's drive from Mumbai (Bombay) is a prime example of just how voracious India's demand for energy is.

More life in a liberalised market
Financial Times
Late last year, drivers on Mumbai’s congested roads were greeted with an unusual sight: billboards exhorting them to take out health insurance for diabetes.

Recording may have held clue to Air India bombing
Reuters
A secret recording of Sikh militants just days before the 1985 Air India bombing may have warned of a pending terror attack, a Canadian inquiry was told on Tuesday, but police could not agree about the usefulness of the evidence.

India's exports grows 23 percent to top $124 bn
Monsters and Critics
India's exports grew 23.88 percent during the fiscal year ended March 31 to touch $124.63 billion, against $100.61 billion in the previous year, trade data released Tuesday said.