Bundeep Singh Rangar, Chairman, IndusView

Republic Day – India, January 26 2012

2012-01-26T10:52:00.002Z

Today, January 26, marks Republic Day in India, an annual event commemorating when the Constitution of India came into place on January 26, 1950.

Various celebrations are held throughout the country, with the largest taking place at the capitol (New Delhi). The highlight of the celebration is a parade that is held in New Delhi at the Rajpath with military members dressed in their finest attire, a favorite of everyone in attendance and watching on television from afar.

There is also always a state guest invited each year; this year it is Prime Minister Yingluck Shinawatra of Thailand. The President starts the ceremonies with a symbolic gesture by laying a headdress at the Indian Gate in memory of all Indian military members who have given up their lives for their country.

Following the grand parade are tributes to each state which portray the vast diversity of cultures through various displays such as poems, songs, and dance. The ceremonies are ended with the Beating Retreat, played by the Indian Army, Navy, and Air Force; a moving way to end such an important day.

Being one of the three national holidays in India, it is a favorite among all; Republic Day ignites strong patriotic feelings among everyone towards their country allowing each person to feel they are a part of something bigger than just themselves.

Enjoy your Republic Day celebrations…Happy India Republic Day 2012!

Vodafone Indian Supreme Court Win A Positive Sign for Foreign Investments in India

2012-01-20T16:12:00.000Z

IndusView, 20 January 2012 (London) – The decision by India’s Supreme Court in favor of Vodafone Group Plc, the world’s biggest mobile phone company, is a positive signal to foreign investors worried about tax and investment policies in the world’s second fastest growing major economy.

“This was a litmus test won by foreign investors against an attempt by the Indian taxman to extend its jurisdictional reach,” said Bundeep Singh Rangar, Chairman of IndusView, an India-focused advisory firm. “It provides tax certainty to foreign investors as the verdict is a clear statement that deals done outside India that involve Indian assets, are not taxable in India.”

With a recent decline in Indian stock valuations, drop in the Indian rupee currency and the opening up of sectors such as India’s retail market, Indian companies are likely to become attractive targets for foreign acquirers this year. They were cautious and even nervous, however, given the unknown tax implication of Vodafone’s 2007 $11 billion acquisition of Hutchison Essar Ltd, India's second largest GSM mobile service. The court decision today ends uncertainty in a manner that’ll be welcome news by foreign companies seeking to invest in India.

In 2011, seven of the 10 multi-billion dollar deals were inbound ones, i.e. foreign companies buying Indian ones. Multi-billion dollar deals included Vedanta Plc’s acquisition of Cairn India assets that was also mired in a 15-month long regulatory quagmire and BP Plc’s acquisition of Reliance’s energy assets. That’s likely to increase now that uncertainty is removed and could see a reversal of the 20% decline in deals in 2011. The value of merger and acquisitions and private equity investments in India totaled $54 billion in 2011 compared with $62 billion in 2010.

The Indian tax department sought 112.2 billion rupees ($2.2 billion) in capital gains tax on Vodafone International Holdings BV’s purchase of Hutchison’s mobile operations in India. While Hutchison profited from the sale, the tax department pursued Vodafone, saying the company should have withheld the tax from its payment to Hutchison.

Vodafone took its fight all the way to India’s Supreme Court to protest the potential $2.2 billion tax bill on the grounds that the deal was between two overseas companies, tax was applied retrospectively and capital gains tax is paid by the acquired company, not the buyer. If Vodafone’s appeal were unsuccessful, it could have seen its charge double to $5bn due to a penalty for non-payment of tax. It is now also entitled to a refund of $550 million deposit with the Indian tax authorities.

With a subscriber base of more than 851 million, the Indian mobile phone market in India has grown to become the second largest in the world after China after it was opened to private companies in the 1990s. Vodafone has the third largest subscriber base in India following market leader Bharti Airtel and Reliance Communications.

Sarkozy and Merkel Meeting for the Eurozone Growth Plans

2012-01-10T17:30:00.002Z

IndusView Chairman Bundeep Singh Rangar comments on Sarkozy and Merkel meeting for the Eurozone growth plans, Royal Bank of Scotland's Investment Bank head's £4m bonus, Free Trade talks among China, Japan and Korea, Michelle Obama as a canny political player and physicist Stephen Hawking's birthday.

Dollar vs. Euro and Impact on the Eurozone Markets

2012-01-03T14:21:00.003Z

IndusView Chairman Bundeep Singh Rangar comments on the Dollar vs. the Euro and its impact on the Eurozone markets on ET Now -- Closing Trade.

Views and Predictions On The European Markets

2012-01-03T14:20:00.004Z

IndusView Chairman Bundeep Singh Rangar's views and predictions on the European Markets on ET Now -- Closing Trade.

Differences Between the US and Germany About Government Involvement in a Market Economy

2011-12-19T10:48:00.003Z

IndusView Chairman Bundeep Singh Rangar comments on tactical differences between the US and Germany to reboot the world economy, the implications of Cameron vetoing the proposed EU Treaty in world starker than a year ago, Moscow protests against alleged electoral fraud, new global climate pact to stimulate carbon markets, UK Government's over-reliance on wind farms and Santas running for the Irish Heart Foundation.

IndusView Chairman Bundeep S Rangar comments on Spain's Change of Government

2011-12-14T20:50:00.001Z

IndusView Chairman Bundeep Singh Rangar comments on conservatives coming to power in Spain, a Eurobond solution to stabilise the sovereign debt market, Irish government's cancellation of child benefit payments, Egypt's violent protests, Arab League's talks on Syria and Shenzhen's Intellectual Property Index plan.

IndusView Chairman Bundeep S Rangar comments on Greek PM Resignation

2011-11-18T14:53:00.001Z

IndusView Chairman Bundeep Singh Rangar comments on the Greek PM resignation, non-publication of an IMF report forewarning the EU crisis, IMF's Lagarde tapping Russia for EU debt help, cost to the UK if the EU collapsed, BP's deal breakdown in Argentina and Lady Gaga's sweeping of MTV awards.

IndusView Chairman Bundeep S Rangar comments On Impact of the European Debt Crisis On US Banks

2011-11-04T17:33:00.002Z

IndusView Chairman Bundeep Singh Rangar comments on Turkey's rejection of earthquake relief aid offers, French-UK leaders clash over Eurozone issues, impact of the European debt crisis on US banks, Libya's rebirth as a freer nation and Russia's demand for an investigation into Gaddafi's death.

IndusView Chairman Bundeep S Rangar comments on India's Ambition to become Globally Competitive

2011-10-11T20:31:00.000Z

IndusView Chairman Bundeep Singh Rangar comments on German Parliament decision to expand the Euro bailout fund, poll suggesting global recession, Bernanke's warning on US unemployment, India's ambition to become globally competitive, Bahraini doctors jailed for treating protesters and the health benefits of fatherhood.

IndusView Chairman Bundeep S Rangar comments on the bailout of Dexia Bank

2011-10-10T12:00:00.003Z

IndusView Chairman Bundeep Singh Rangar comments on the release of Amanda Knox, French and Belgian guarantees of Dexia Bank's debts, Cameron's message to UK households to pay off credit card debts and an EU court ruling allowing viewing of football in UK pubs via foreign satellite TV.

IndusView Chairman Bundeep S Rangar comments on IMF's Warning on Global Recession

2011-10-06T10:50:00.000Z

IndusView Chairman Bundeep Singh Rangar comments on IMF's warning on global recession and Middle-East stagnation, Berlusconi's criticism of Standard & Poor's, slowdown in demand by Rio Tinto's CEO, US plans for Syria post- Assad and an AK-47 prize in a Somali radio competition. (BBC World News)

IndusView Chairman Bundeep S Rangar comments the Impact of a Weak Europe on Emerging Markets

2011-09-26T12:55:00.001Z

IndusView Chairman Bundeep Singh Rangar comments on what's driving European Markets and the impact of a weaker Europe on Emerging Markets like India. (ET Now)

IndusView Chairman Bundeep S Rangar comments on US Support for a Taleban Embassy in Qatar

2011-09-21T09:38:00.001Z

IndusView Chairman Bundeep Singh Rangar comments on US support for a Taleban embassy in Qatar, UK PM David Cameron's visit to Russia, Germany's position on another Greece bailout, impact on UK banks of the Vickers report and the Welsh Rugby Team defeat.

IndusView Chairman Bundeep S Rangar comments on India Q2 2011 GDP

2011-09-12T17:31:00.000Z

IndusView Chairman Bundeep Singh Rangar comments on India's GDP growth slowing to 7.7% in April-June Quarter on BBC World News.

IndusView Chairman Bundeep S Rangar comments on Bernanke's Jackson Hole Speech

2011-09-08T11:31:00.001Z

IndusView Chairman Bundeep Singh Rangar comments on market expectations of the Federal Reserve Chairman Ben Bernanke's Speech at the Kansas City Federal Reserve Bank's annual Jackson Hole event on ET Now.

IndusView Chairman Bundeep S Rangar comments on Mer-Kozy proposal dampening the Eurozone Banking Sector

2011-08-24T19:29:00.000Z

IndusView Chairman Bundeep Singh Rangar comments on Merkel/Sarkozy’s financial proposals, Unilever's strategy to focus on emerging markets, protests in Madrid over the cost of Pope's visit, Indian street protests against corruption, Gorbachev's criticism of Putin and lexicographers use of new words. (BBC World News)

IndusView Chairman Bundeep S Rangar comments on Global Capital Markets Sell-Off

2011-08-24T19:27:00.002Z

IndusView Chairman Bundeep Singh Rangar comments on panic selling in world financial markets, IMF's support to Ms Lagarde while under investigation, UN's condemnation of Syrian violence, Japan's concerns about China's militarisation, discovery of water on Mars and a popular Egyptian ringtone on Mubarak’s denial of charges. (BBC World News)

IndusView Chairman Bundeep S Rangar comments on US Politicians Wrangling over US Debt Ceiling

2011-08-12T17:57:00.003Z

IndusView Chairman Bundeep Singh Rangar comments on US politicians wrangling over the US debt ceiling, Hong Kong's dilemma due to this US crisis, a worsening European business outlook, clampdown on BT to fight against media piracy, implications of China's high-speed train crash and anonymity and identity-theft online. (BBC World News)

Dealmakers await verdict in Vedanta-Cairn Review

2011-06-27T16:15:00.005Z

The Deal LLC
By Laura Board, Jun-10-2011

Any day now the Indian government will rule on Vedanta Resources plc's $9.6 billion acquisition of a controlling stake in Cairn India Ltd.

A verdict could end months of uncertainty about a 10-month-old energy deal that has been closely followed by aspiring investors who are increasingly skittish about india's "regulatory growing pains," as one observer politely puts it. The London-based, India-focused mining group's purchase of up to 60% of Cairn India, mainly from 62.25% owner Cairn Energy plc, was always going to face scrutiny as it ranked as the country's largest-ever oil and gas transaction. A dispute between the target and state-owned Oil and Natural Gas Corp. Ltd. over royalty payments from the jointly owned Barmer oilfields in Rajasthan, northern India, however, has complicated matters.

Although the bidder has secured 18.5% of Cairn India through two separate transactions, its August agreement to buy the Cairn Energy stake remains in limbo. That's largely because a 1995 arrangement - drawn up to entice a foreign partner with drilling expertise - makes ONGC liable for 100% of the royalty payments from the Barmer fields while its owns only 30% of the assets. That made sense at the time but after production began in August 2009 the oilfields quickly became India's most productive onshore site, with 240,000 barrels per day of expected peak output.

Just before the Vedanta-Cairn deal, ONGC demanded that royalty payments be recast as an operational cost allowing it to recover them from revenuer, rather than paying them out of its share of the profit. "No one expected Cairn to strike black gold or the volume of it," said Bundeep Singh Rangar, Chairman of India-focused Consultancy IndusView. "The math has worked against ONGC and the resumption of the liability for 100% of royalty payments would be a huge burden on the exchequer."

In early April the government appointed a ministerial panel led by Finance Minister Pranab Mukherjee to review the Vedanta-Cairn Energy transaction and the royalties dispute, after India's highest-ranking lawyer and its petroleum minister had called for a change to the royalties arrangement. The panel reportedly concluded at the end of May that Cairn India should share the royalty burden with ONGC. It hasn't confirmed its findings and the final decision lies with the Cabinet Committee on economic Affairs, which is expected to rule in coming days.

High-level government involvement from multiple departments, as well as the economic rather than antitrust emphasis of the review, has surprised M&A practitioners, said Kirkland & Ellis LLP's San Francisco-based partner Abrar Hussain. "For all the progress that India has made and all the transactions that are being done, this is a vestige of the pre-early 1990s, when every regulator wanted to get on the bandwagon and there were mountains of red tape," he said. "It seems like India has regulatory growing pains." The rapid growth of the Indian economy means the regulatory regime is a work in progress. "India is very comfortable with putting the regulation on the book and then correcting it as the process moves forward rather than having fully baked regulation on the book that's fully thought through," Hussain said.

Mr. Rangar draws comfort from the fact that the Indian government seems intent on avoiding the type of long, drawn-out litigation Vodafone Group plc experienced over the tax treatment in its 2007 purchase of a controlling stake in Hutchison Essar Ltd. "There's a huge requirement for foreign direct investment into India," he said. "By delaying the decision [on Vedanta-Cairn] they are fine-tuning a proposition that they can support within the proper legal framework. It's a bit of a wait-and-watch, but hopefully we're at the end of that phase."

Vedanta and Cairn Energy have become accustomed to waiting and watching, recently extending a revised May 20 deadline indefinitely. The probable changes to Barmer royalties arrangements could cost Vedanta-Cairn India millions of dollars, and the companies may yet face litigation from minority investors in Cairn India angry about a change to a lucrative arrangement.

Yet the sharp rise in the price of oil since the August deal, from under $80 per barrel to almost $120, bolsters the case for change. Indeed, many investors who were initially mystified by Vedanta's sudden diversification from mining into oil and gas now support the transaction. Credit Suisse Group analysts noted recently that strong oil prices mean the deal could boost Vedanta Resources' earnings by about 30%.

"A successful deal will also be positive for sentiment towards the Indian business environment," they added. Hussain fears the government may put the bonus back onto the companies to decide if they want to proceed rather than issuing a clear decision. That would be a mistake, he said. "I think the government has to act and has to act decisively as everyone's looking at this deal," he said.

The Global Economy in 2011: A Rocky Ride or Smoother Sailing Ahead?

2011-06-27T15:40:00.000Z

Published: January 05, 2011 in Knowledge@Wharton

In the United States, most experts are betting that the economy will grow stronger this year, but they warn that high unemployment, a depressed housing industry and other problems could dampen growth. Meanwhile, the fate of the euro is still in question, and the specter of inflation looms large in China, Latin America and India despite their resilience to the recent global downturn. In the Middle East, observers expect renewed growth, but they note that resource constraints will become an increasing problem for the region. Knowledge@Wharton spoke with Wharton faculty and other experts to get their views on what's ahead for the world economy in 2011.
The United States: Housing and Unemployment Risks
In the U.S., "the threat of a double dip [recession] has passed," says Wharton finance professor Richard Marston. The congressional compromise to extend the Bush-era tax cuts for two years should help the country's recovery, he predicts. "With the added stimulus of the tax bill, we will have continued growth in 2011."
Still, "there are some very severe downside risks," says Wharton finance professor Franklin Allen. One main concern is housing: Allen, Marston and other experts agree that the uncertain housing market will continue to be a drag on the economy.
"In the housing market, the data is going in different directions," Wharton real estate professor Susan M. Wachter notes. Some reports show sales picking up, while others show prices continuing to stagnate. "The bottom line is that we're bouncing along the bottom.... We're likely to be in a holding pattern." Fortunately, Wachter says, the weak housing market probably will not do too much additional damage to the economy, as most of the harm has already been done. New-home construction is not likely to go lower, for example.
According to Wachter, the housing market has enjoyed some stability because many lenders have been reluctant to foreclose and sell homes at fire-sale prices. A lender is typically willing to sell when a foreclosed property can fetch as much as the appraisers say it is worth, she says, but appraisers rely on backward-looking data that is quickly out of date in a volatile market, making it hard for the lender to know what a property is really worth.
Another problem, Wachter notes, is the recent rise in mortgage rates, which increases payments, makes homes less affordable and undermines sales. In addition, high unemployment reduces the number of potential buyers, she adds.
"The unemployment situation is still not good, and that's going to take a long time to change," Allen agrees. "There's been some upturn in consumer spending, but until things start looking better on the housing and unemployment fronts, I think [consumer spending] won't drive things forward."
While many U.S. retailers reported a good holiday season, it is not certain that consumers, who are the most important force in the economy, will continue to reverse the tight-fisted habits developed in the past few years, Allen says. Whether they have really loosened their purse strings or did so only for the holidays is unclear.
U.S. economic growth also could be hampered by ripple effects from the continuing debt problems in a number of European countries, Allen notes. In addition, economies are starting to overheat in some developing countries, especially China, he says. China has started to raise interest rates to curb inflation, but that could draw more foreign money into China, possibly depriving other countries of capital they need to speed growth while worsening China's inflation problems.
According to Marston, state and local governments in the U.S. face a debt crisis similar to those in Europe. "For a long time, government workers have piled up benefits that were not properly accounted for," he says. "This is as true in New Jersey as in Greece. With an economy not growing as rapidly as in the past, tax receipts are falling short. How this will play out in the case of state and local governments will be interesting. I think it's the main risk facing markets -- that they will be spooked by a default, or near default, here or there."
Allen is also concerned that the U.S. still does not have a long-term plan for dealing with its enormous federal budget deficit. "Until we have [a plan], that's potentially a huge problem," he says. The U.S. covers its deficit by selling government bonds, especially to China. Eventually, investors' recognition that this cannot continue indefinitely will cause bond prices to fall, driving up interest rates in the U.S. and other countries, and undermining economic growth, Allen predicts. "I think long-term interest rates will start going up, and then the dollar will start going down, and then inflation will start going up. The timing of all those moves will be very hard to predict."
Though the economy could continue to struggle, the stock market, which did well in 2009 and 2010, may continue to benefit from rising corporate profits, Allen notes. But he warns that earnings gains are largely due to cuts in labor that feed the high unemployment rate. "This is bad news for the economy as a whole."
Marston points out that by the end of 2010, the broad stock market had gained 86% from its bottom on March 9, 2009. "I expect further increases in stock prices this year," Marston says. "But let's face it: The best is behind us. The first 12 months of a rally following a recession are always the best."
Europe: Are Two Heads Better Than One?
In Europe this year, whoever takes over from Jean-Claude Trichet as head of the European Central Bank (ECB) in October will inherit a different set of issues than the French banker did when he began his term back in 2003, according to Allen. Back then, the euro zone's single currency was still in its infancy, and most Europeans were happy to give fiscal and monetary union the benefit of the doubt. But the European Union's big macroeconomic imbalances and debt crises that began with Greece's near-default last year and spilled over to Ireland, Spain, Portugal -- and potentially could affect Italy and Belgium -- have left plenty of skepticism over the lack of policy flexibility granted to members of the 17-nation euro zone (with Estonia the latest to join as of January 1).
The Frankfurt-based institution is expected to announce Trichet's successor this spring, and the appointment "will really matter a lot," says Allen. A frontrunner is Axel Weber, head of Germany's central bank who is seen as a close ally of German Chancellor and major euro proponent Angela Merkel. Another strong candidate is Mario Draghi, governor of the Bank of Italia, "who is extremely talented," notes Allen, "but I can't see the Germans allowing a southern European to head the bank."
All that will unfold as euro zone countries tumble through recovery at different speeds, depending on the range of austerity measures undertaken. But collectively, according to a recent report from Guillaume Menuet and Silvia Ardagna, analysts at Bank of America Merrill Lynch, "while the pace of recovery [in Europe] post the 2008 recession looks to be quite reasonable, overall levels of GDP have a long way to go before recouping output lost in the downturn." They add that the euro zone's "pre-crisis level of GDP is unlikely to be matched before the third quarter of 2012," and they forecast that GDP growth in the bloc will reach 1.7% this year, compared with 1.8% in 2010 and -4% in 2009. (Globally, they forecast GDP growth in 2011 to be 4%.) While by the spring the worst of the sovereign debt crisis is expected to be over, the analysts note that "since the existence alone of the [EU and IMF's financial] safety net has not proved a sufficient deterrent to arrest the contagion that threatens to engulf one country after the other, Europe must be ready to consider new solutions, including preventive action."
But thus far, for experts such as Allen, there are few signs that this is happening. "The level of the debate is going back to very basic stuff -- for example, they're talking about collective action clauses" to be included in sovereign debt contracts in order to protect investors. "It's good to have them, but that's not the main issue. It's financial stability." At the country level, "the politicians -- and the civil servants -- seem to have no idea about the dimension of the problem. What they have to do is basically revamp banking regulation to deal with ... sovereign debt," Allen states.
Beyond the traditional inflation-fighting concerns, the ECB's new head will need to guide the euro zone through a resolution of the region's sovereign debt woes. The 750 billion euro ($1 trillion) crisis-rescue fund the ECB and the International Monetary Fund put in place last May expires in 2013. According to Bloomberg, Weber expects the ECB to start withdrawing early this year some of its emergency measures, such as buying up the government bonds of the troubled countries to restore liquidity. What then? Will it agree to monetize the debt or allow countries like Portugal to default?
While the chances of the euro zone dissolving "in one go" are around 10%, predicts Allen, another option would be to have two euro zones overseen by separate central banks -- with France, Spain, Italy and the smaller countries staying with the current system, while the likes of Germany, the Netherlands and a few others join a new bloc. "In my view, that's probably the best solution to the problem," he says. "Rather than trying to force these very different countries with very different histories in terms of fiscal responsibility into one area, it would be much better to have two."
China Grapples With the 'I' Word
China watchers are beginning 2011 much as they did 2010 -- concerned about inflation. Though still low by international standards, consumer price inflation early last year was hovering at less than 2%. But since the massive monetary expansion of late 2008, liquidity continued to flood in, putting upward pressure on prices. Housing and food prices surged during the year, and a growing wave of discontent among workers seeking long overdue pay raises swept across the country. By November, consumer prices were up 5.1% year on year.
In a December report, London-based Economist Intelligence Unit (EIU) predicted that average year-on-year consumer price inflation will be 3.9% in 2011, helped largely by intense price competition among goods manufacturers. But this could change if, for example, wages increase and push up the cost of manufacturing, causing price hikes. Agriculture, which accounts for a sizable portion of the country's consumer price index, is arguably a greater concern. Local newspapers are reporting that blue-collar workers in cities like Shanghai are unable to stretch their meager paychecks to cover the rising costs of staples, such as milk and vegetables.
"Having stimulated the economy tremendously, the government now has to deal with the consequences of it," says Wharton management professor Marshall W. Meyer. He and others note that the country's enviable growth -- the EIU estimates that real GDP growth in 2010 will average 10.2% -- has been fueled by a massive expansion of money supply. The inflationary consequences have been largely hidden in the form of rising asset prices, he says.
Reuters reported in mid-December that China has set a 4% target for consumer inflation next year, up from this year's 3% objective, "an indication that the government will desist from aggressive tightening even as price pressures mount."
According to Meyer, the government has some levers to pull, as it did when the country went through a similar cycle three years ago. "First, raise interest rates," he says. In October, the central bank raised benchmark interest rates by 25 basis points. "But they are still much lower than before the crisis and they will have to go up more," wrote Louis Kuijs, senior economist in Beijing at the World Bank, in a recent blog. A December Reuters survey of 26 economists found that most forecast that the central bank would raise rates before the end of 2010 (which the government did on Christmas Day) and twice in 2011 as part of a campaign to control inflation.
Another step is raising the amount of capital reserves banks must set aside, largely to help slow rampant lending to local governments and state-owned enterprises. The reserve requirement is about 19% today, says Meyer, "which is a big number." In December, the central bank raised requirements for the sixth time in 2010.
Third, says Meyer, the government is putting caps on the new loans banks can make. State media recently reported that the government set the ceiling for 2011 at RMB 7.5 trillion. But that's the same amount as 2010, which many observers believe was already surpassed by the fall of last year.
Even among more bullish observers, inflation is seen as problematic when set in a broader social context, notes Horst Loechel, economics professor of China Europe International Business School in Shanghai. "I'm quite optimistic about the Chinese economy. We'll see an average inflation rate of around 4%. This should be fine for an economy that is growing at around 10%," he says. "The main point for China in 2011 is how can they transfer the success of the country to the income of the people and really improve consumption levels."
Loechel notes that consumption levels as a percentage of GDP in China are dramatically low. "We're talking about 35% to 37%," he says. "In a normal economy, it's 60% to 70%, and even in India, you have more than 50%." Rising prices won't ameliorate that. "If we look at this overall picture, inflation has a role. It means decreasing purchasing power." The EIU says from 2011 through 2015, real GDP growth will slow to an average of 8.3% a year.
The need to mop up excess liquidity in the economy comes at a time when trading partners, particularly the U.S., insist that the currency is being kept artificially low in order to protect China's exporting manufacturers, says Allen. "The argument they're using -- that they can't let the exchange rate rise because of exports -- is becoming quite short sighted," particularly amid inflationary pressures.
With China allowing the renminbi to rise only slightly against the dollar in recent months, there's another side to the coin. "The purchasing power of the RMB is declining, and at the same time, [the U.S.] is encouraging China to revalue the RMB upwards," notes Meyer. "This strikes me as awkward. I would [ask] our policy makers to think about this. Normally, your currency would go down if you have hyperinflation, and we're telling them that it has to go up" due to the imbalance of trade. Both countries stand to lose from this, he adds, "obviously because of the [stagnant job growth] in the U.S., but the Chinese people may be paying an even bigger penalty by seeing their savings wiped out by inflation," he says. "I don't see anybody getting the big picture here."
Latin America's Commodity Boom
Provided that the ongoing Asian-led global demand for raw materials continues, experts predict that the majority of Latin American economies should have a relatively happy new year. Commodity prices are expected to be strong across the board, whether they are Brazil's and Argentina's agricultural commodities, Venezuela's oil, Chilean metals or obscure minerals like lithium that are abundant in Bolivia.
"Right now, it's about riding the wave of growth in emerging markets," says Wharton management professor Mauro Guillen. "The economies of the region are all very different from one another. But they are all benefiting from the commodities boom, the rise of China, and in the cases of Chile and Brazil, their own good policies."
Demand for commodities has helped to cause questions about some rather unruly governments, observers note. Take Venezuela's, for instance: The country's leaders have enjoyed political support for much of the last five years. But last year, amid more than 20% inflation and zero economic growth, Hugo Chavez's popularity hit a seven-year low as people wondered why the country had not benefitted from the commodities boom.
Michael Roche, an emerging markets strategist at MF Global, a commodities trader and hedging firm, suggests that countries like Bolivia and Ecuador take a cue from oil powerhouse Venezuela. "If you're a country like Bolivia [or] Ecuador that has been pursuing a model for the benefit of the bottom fifth of the country, you start looking at a place like Venezuela and seeing that that model has done very little for the country. Because it has kicked out foreign oil companies, the country is now producing less oil and below quota," he says, noting that Chavez allies will likely prove to be less hostile to foreign investors and will look for more constructive engagements with resource multinationals next year.
Meanwhile, Wharton professor Felipe Monteiro predicts that some major non-commodity companies in Brazil will make additional headway into global markets. "A strong local currency, plus a downturn in the U.S. and European economies, makes acquiring international assets all the more attractive to big Brazilian companies," he says. Over the years, new names like beef major JBS SA have acquired assets in the U.S. and Europe. Monteiro wouldn't be surprised to see some banking names grow abroad through acquisition, citing government controlled Banco do Brasil. "Next year, we will see more of the big Brazilian names move closer to becoming true global companies with non-Brazilians serving on their boards."
It's not all positive south of the Rio Grande, however. Brazil's consumers are getting tapped out with delinquency rates on overdue consumer debts rising 3.5% to five year highs in November, according to information services firm Serasa Experian.
In Argentina, inflation is like Venezuela's -- more than 22%, making it hard for people to save and for companies to invest. The country remains on stand-by mode until the October 2011 elections, but political leaders have already made overtures to negotiate with foreign bond holders and the International Monetary Fund. "At this point, whoever wins will be better than the Kirchners, and then I think you see a return of investment in the country," says Monteiro, referring to current President Cristina Fernández de Kirchner and her husband, former President Néstor Kirchner, who died of a heart attack in October 2010.
The region might be generally faced with too much of a good thing, some experts point out. Higher growth and higher commodity prices are combined with worries that rising interest rates will lead to currency appreciation. These are risks to the region's inflation outlook, warns Nomura Securities in a note to clients on December 7, 2010. "A common inflation problem will be the major policy challenge for 2011," predicts Tony Volpon, Nomura's Latin America strategist in New York.
India: Muscling Ahead
In India, December 2010 saw corruption charges rise to a crescendo and a whole session of Parliament was lost as opposition parties, demanding deeper investigation into the scams, refused to let it function. None of the political parties wants a fresh election, so this government will continue. But its trajectory has obviously been affected. "The political climate is uppermost in the investor's mind," says Vallabh Bhansali, chairman of Enam Securities, a capital market services firm. "If there are policy logjams, they could create confusion."
But the economy is expected to muscle ahead regardless. Estimates of GDP growth vary from 9.7% (the IMF prediction for 2011) to 7.7% (the Credit Suisse prediction for fiscal 2011-12). Credit Suisse is a rare pessimist; almost everybody else has upped their forecasts. The government projection is 8.75%, with a possible 0.35% addition. "India is on a mission to get its annual GDP growth to 10%," according to Bundeep Singh Rangar, chairman of IndusView, an advisor to MNCs seeking opportunities in India. "A good monsoon [season] and a strong global recovery could make 2011 the year that India achieves that goal."
The Bombay Stock Exchange sensitive index (Sensex) should keep pace with GDP. "By the end of 2011, the Sensex is likely to be between 24,000 and 25,000," says Rajinder Sabherwal, who manages a macro fund called Magister Ludi Global. The New York-based Sabherwal, however, doesn't think India will be a top performer in the markets. "India is a defensive holding for us. It sells at a premium. To some extent [that is] justified, but [it] is vulnerable to inflation and rising oil prices. In emerging markets, we prefer Turkey, Russia, Thailand, Korea and Poland." Sunil Bhandare, advisor (economic and government policy) at the Tata Strategic Management Group, sees a 12% to 16% growth in the Sensex over current levels (around 20,000 at the end of December).
One big worry is inflation. Dharmakirti Joshi, chief economist at credit rating agency Crisil, says inflation will be the biggest challenge in 2011. His other concern is the impact of rising capital inflows on the rupee. Naresh Takkar, managing director and CEO of credit rating agency ICRA, also lists inflation as a top concern, especially in commodity prices. He sees improving international economic sentiment as a "double-edged sword" for India. "Sectors that are dependent on international demand will benefit, but commodity prices will see a further upturn," he says.
If inflation climbs, the Reserve Bank will have to hike interest rates. This could result in "some moderation" in the growth rates of investment and private consumption, according to Joshi. Bhansali also sees "a bit of a cyclical downturn in growth, but it may be only a few quarters or a few months."
It's on the reforms front -- inextricably linked to politics -- where there is the greatest amount of uncertainty. Much could happen. Joshi pins big hopes on the proposed new goods and services tax, which he describes as a "game changer." A slow approach would be just right for new banking licenses, suggests Rajesh Chakrabarti, finance professor at the Indian School of Business. "The dominant view is that caution and safety are key, and no rush towards greater liberalization is warranted." He also expects the recent corruption scandals to create a bigger role for the government, "as the false assurance of the cleanliness of the private sector is now gone."
"There are far too many policy reforms that are pending, but unfortunately, the parliamentary system has been bogged down by controversies, scams and corruption. No substantive reforms could move forward during 2010," says Bhandare. "Our political parties must realize the adverse consequences of their actions."
Middle East: Qatar and Saudi Arabia Lead
As Dubai slowly emerges from its debt woes, sentiment among Arab business leaders and government officials is one of cautious optimism. After largely managing to avoid the effects of the global economic downturn, the Middle East anticipates renewed growth this year.
Leading the region's economic pace will be Qatar and Saudi Arabia. Steady energy demand -- oil and natural gas prices are expected to rise in 2011 -- and economic opportunities within their borders have been an appealing mix for investors. The two countries received $44 billion in foreign direct investment in 2009, half the region's entire investment flow, according to the World Investment Report 2010.
Though garnering world attention with its successful bid to host the 2020 World Cup, Qatar already has a record of high profile investment plays, such as the $2.3 billion acquisition of luxury retailer Harrods. Qatar now has roughly $75 billion in external investments, according to research site RGE Monitor. Coupled with its efforts to diversify its economy beyond liquefied natural gas and crude oil exports, Qatar's GDP is expected to grow more than 20% in 2011, according to the IMF.
Saudi Arabia, meanwhile, has concentrated on internal investment, spending an estimated $70 billion on infrastructure in 2010 alone. Seeking to diversify its economy, the Kingdom has embarked on an ambitious plan to build four economic cities at an initial cost of $60 billion. It has also made progress liberalizing its economy -- real estate investors eagerly await passage of a planned mortgage law early in 2011, which analysts expect will set off a residential building boom in the country.
Such activity is a needed shot in the arm for the Islamic loan industry, which reached a five-year low in 2010. Qatar's World Cup preparations -- expected to cost $65 billion -- will bring new Islamic finance deals. Additionally, the successful restructuring of Dubai World's debt restored some confidence in the market, observers note. Providing a further boost will be the advent of more Western-based Islamic finance issuances, as markets from France to Australia revamp regulations to accommodate the industry.
There will also likely be "many more joint ventures in petrochemicals and refining to be announced between the Gulf states and the Pacific Asian economies," says Christopher Davidson, author and lecturer at the Institute for Middle Eastern Politics and Islamic Studies at Durham University. "This will strengthen the interdependence of the world's greatest hydrocarbon producers and consumers. [Also] expect a growing thirst for gas to supply domestic power stations. Gas will increasingly be imported to the region from further afield, such as Thailand and Indonesia."
The year will likely see resource strain as the growing challenge to the region. The United Arab Emirates, Egypt and Saudi Arabia have decided nuclear energy is the route to meet rising domestic energy demands, but few solutions are at hand to buttress water supply in the region, which is around 1,200 cubic meters per person per year compared with the average of about 7,000 worldwide, according to The World Bank.
Concerns about water use prompted Abu Dhabi's utilities authority in November to inform customers how much their water and electricity was subsidized. That trend will widen in the Gulf, with gradually increased social costs being passed on to residents in the form of higher municipal fees and shrinking subsidies. Inflation is a perennial issue, but aside from Saudi Arabia, which will likely increase oil production this year, the region is expected to see modest inflation gains.

India's 3G Telecom Licenses Auction

2010-05-15T22:35:00.001Z

How Do Experts See Day 1, Road Ahead for the 3G Auction?

CNBC TV (India, April 2010)

The much anticipated 3G auctions kicked off today. In a CNBC-TV18 exclusive interview, telecom minister A Raja said that the bidders were showing high motivation in the auction and that govt may allocate additional spectrum to winners based on TRAI's recommendations.
The official press release from the Department of Telecom while summarizing the activity of the auction for Day 1 says that five clock rounds were completed today. The total bids received in value terms, is Rs 16,000 crore. All 22 circles on offer for 3G have received bids.
Delhi, in the fifth round saw a bid of Rs 373.29 crore while Mumbai comes next in terms of the level of demand at Rs 362.66 crore.
In an interview with CNBC-TV18, Bundeep Singh Rangar, Indusview and Kunal Bajaj, MD, BDA Connect gave their perspective on the opening day of bids for the 3G auction.
Here is a verbatim transcript of the interview. Also watch the accompanying video.
Q: What have you made of the Rs 16,000 figure on Day 1 particularly with Delhi raking in about Rs 373 crore?
Bajaj: Basically because of that 80% activity figure that we are seeing right now, bidders are esssentially strategically holding back what their strategy for the coming weeks is going to be. It's only when the auctioneer raises the requirement to say 90% activity and 100% activity will we actually see all the eligibility points getting used up at the same time. So even though Delhi today for example they are saying that demand matches supply it is clearly not going to stay that way for a very long time.
Q: It is a one of a kind auction that the industry and the government is trying to learn from. What have you made of the kind of perhaps global best practice when it comes to such auctions that perhaps is being replicated here?
Rangar: I guess one of the key things of course is prevent collusion amongst bidders because you don’t want people colluding and keeping the price artificially low. The government's biggest interest is in generating the maximum amount of revenue from this and of course cutting down its current deficit.
So the best practice of course is clearly to allow the best price with the lowest possible chance of collusion. And you see that happening here. Remember this is day 1. This is a 2 week process and with most auctions the ultimate rush to the finishing gear is in the last few days, is in in fact the last few hours. So we have a long way to go and I think this is a good process that is in place for getting the maximum value.
Q: Are you therefore saying as you heard Bundeep saying it is going to be, probably the real rush is going to happen in the last few days. So are you saying that the first day number Rs 16 thousand crore seems on track to get us closer to the Rs 40,000–Rs 45,000 crore number that the minister talked of this morning?
Bajaj: Yes absolutely. For example if you look at the way the eligibility point system is structured since operators only have to use up to 80% of their eligibility points, which means 80% of activation or activity today, they are going to hold their cards back and essentially wait to see what other people are doing, people who maybe have fewer eligibility points or they are going to distribute their bids around the various circles.
Once we get a little bit further down and eligibility increases to 90% then people will start driving those prices up. The provisional winners that are going to be declared today internally on the system even though we don’t have access to that information, I think all them will know that they clearly aren’t in a safe position to expect to win in the future.
So as we move forward, when the auctioneer changes some of the rules around activity, when the auctioneer continues to raise the prices, a lot of the big players will probably re-enter the auction at that point, at those higher level of prices. Day 1 to have gone up this much and to have completed 5 rounds of activity, I think that’s pretty good.
Q: In terms of the fact that five rounds have been completed what does this really indicate – are we sort of moving much faster than earlier expectations and does it mean that the two week timeline that really seems to be the consensus for completing the auction is perhaps going to finish earlier than thought. What about the C category circles which are seeing a minus figure attached to all of them?
Bajaj: Basically given that we have already completed five rounds today that means definitely in some of the circles you had advances of 10-15% of prices because of the way the price advances are structured. If demand is largely in excess of supply then you are going to have more than a 5% jump in that circle price.
The way to think about it is that yes we've moved quickly, but because everyone is not participating in every place that they intend on being, when they do participate we make a pattern situation where demand starts far outstripping supply.
It is too early to say exactly what everyone’s strategy is going to be. But maybe two weeks is not what they can take. If they continue doing 6-7-8 rounds per day moving forward, we may be wrapped up within a week’s time because the eligibilty requirements is what is going to determine how quickly we get to the finish line.
Q: While the auction process is going on right now you got all the India’s top telecom companies taking part in the auction process, will the kind of money that has been invested right now justify the returns in the long term?
Rangar: That has been a key debate. Every country would have had particularly 3G license auctions and the huge investment just in the spectrum because typically to get the license and the spectrum bundled together in the 2G licences.
But in almost every case there is definitely a return on investment scenario. As in India's case in particular, given the fact that you have got a market dynamic where you have got 500 million users, 92% of which is voice driven revenue, of that only 127 million, about 25% of the users today have Internet enabled phones and 10% have used the Internet in the last year and 1% of the population have used the Internet on average of once a month.
So the frequency of usage beyond the novelty factor is very low. If you want to make India a truly broadband country you need a critical mass of about 25% of the population. So the 25% reach into India’s overall population particularly to remote areas, areas outside the key metros is going to be through wireless spectrum. It is not necessary just a phone.
In England for example we use phones for 3G, there is iPhone for 3G and a lot of us carry 3G dongles, which allow our PC and our laptops to connect to 2MBPS wireless access. I believe the return on investment scenario is partly driven by mobile phone usage.
A huge amount is just providing broadband wireless access and therefore the various access revenue, the bundled on services revenue and an ecosystem that generates from an Apple Appstore like further e-commerce revenues is really where the return of investment lies for both the carriers and people sitting on top. This is a 20-year license. So the return on investment will be spread over that period of time. I do believe the investment is justified in that case.

2009-12-13T11:34:00.001Z

INDIA INC RIDES RECOVERY WAVE, RAISES $16.7 BLN IN APR-DEC

Despite poor participation from retail investors, India Inc raised $16.7 billion (Rs 78,000 crore) through equity issues in the first eight months of the current fiscal, five times that in the entire financial year ended March 2009, as foreign investors returned and companies resumed expansion activities.

The pick-up in fund-raising coincided with the economy showing clear signs of revival and the sharp rebound in stock market valuations after they hit a low in early March.

However, the amount raised so far in the current fiscal is still far lower than in the corresponding period of 2007-08, a boom year for the stock markets. India Inc raised Rs 125,526 crore between April and November 2007.

The Economic Times

2009-12-13T11:29:00.001Z

TELECOM TOWER COS AIM HIGHER, MERGE TO REACH OUT

India’s telecom tower industry is set for a wave of consolidation with small and medium sized firms opting for mergers or alliances to take on larger rivals and hasten rollouts in the face of rising demand. India’s position as the fastest growing wireless market in the world has attracted several global players such as UK’s Vodafone Plc, Japan’s NTT DoCoMo and UAE’s Emirates Telecommunications Corp (Etisalat).

“Under the current circumstances, when competition is so severe at operators’ end, the tower companies have to become much more efficient,” said Ravi Sharma, executive chairman of industry body CMAI Association of India. “They will only survive, provided they have more than three tenants per tower,” he said. “Now to get to that, there will be consolidation amongst companies.”

Earlier this month, two sources had told Reuters that GTL Infrastructure Ltd was leading the race to buy the tower holdings of Aircel, the Indian unit of Malaysia’s Maxis, in a deal valued at $1.6 billion to $1.7 billion. Private equity firm New Silk Route, which owns a stake in tower leasing firm Aster Infrastructure, is reportedly in talks with Essar Telecom Infrastructure to buy a stake in the latter. The consolidation spree was kicked off in 2007 when India’s top mobile operator Bharti Airtel, Vodafone Essar and Idea Cellular decided to pool their resources and hived off their towers into an independent firm, Indus Towers.

MINT

2009-12-13T11:26:00.000Z

INTEL BANKS ON 3G AND WIMAX IN INDIA

As India is all set to take a final call on the spectrum allocations in January 2010 for the much-awaited 3G and WiMax licenses, Intel hopes for more demand of its products and solutions in the computing and Internet space.

Recently, Intel has come out with new devices and solutions that provide mobile and wireless broadband Internet access. For instance its Nettops with Atom processor is a low-cost computing device with a good computing performance, available at the market price of around Rs.10,000 in India.

The company considers Nettops as a key affordable computing device along with boosting Internet penetration in the rural parts of the country. Since its launch, Intel already has sold over half a million units.

Besides, Bharat Sanchar Nigam Limited (BSNL) in association with HCL, Intel and Microsoft has launched BharatPC to boost Internet penetration under the National Broadband Penetration Project (NBPP).

2009-12-13T11:22:00.000Z

DOT CHALKS OUT PRIORITY LIST FOR 2G SPECTRUM

Ahead of the upcoming 3G spectrum auctions, the department of telecommunications (DoT) is working on a policy on drawing up a priority list to allocate 2G spectrum. The matter has assumed significance because the DoT needs to clarify who would first get 2G spectrum —the successful 3G bidders or the companies whose applications for licences to operate 2G services are still pending before it. Around 343 applications by 16 companies are still pending before the DoT.

The Financial Express

2009-12-13T11:21:00.000Z

3G AUCTION AS SCHEDULED

Union Minister for Communications and Information Technology A. Raja on Friday said the auction of spectrum for 3G mobile service would be held as scheduled. “There is no change in the schedule,” he told journalists here.

The Department of Telecommunications (DoT) has set January 14, 2010 as the date of auction.

Referring to the number of slots to be auctioned per circle, Mr. Raja said: “It would be decided by the empowered-Group of Ministers (eGoM).” Initially, it was planned to auction four slots a circle, apart from a State-run telecom firm, but the DoT now wanted only three players due to shortage of spectrum.
Reserve Price

The DoT had fixed the reserve price of spectrum at Rs.3,500 crore for the pan-Indian 3G spectrum and Rs.1,750 crore for wireless broadband (WiMAX). However, with a cut in the number of slots, revenue generation from the auction process could fall short by around Rs.5,000 crore from the earlier estimated Rs.25,000-Rs.30,000 crore.

The Hindu

2009-12-13T11:16:00.001Z

AVERAGE URBAN TELEDENSITY CROSSES 100% MARK

Close on the heels of celebrating 500 million mobile customer mark, the country’s cellular phone market has now crossed another major landmark: The average urban teledensity in India has now crossed the 100 per cent mark as per latest figures released by the department of telecom (DoT). This implies the country’s towns, cities and metros, all of which are classified as ‘urban’ by the government, now have as many mobile connections as that of their population. In March 2008, the country’s urban teledensity was about 60 per cent, which jumped to over 85 per cent in March 2009 and it has now crossed the 100 per cent mark.

The Economic Times

2009-12-04T13:31:00.000Z

FDI FLOW SPURTS BY 56% IN OCT

The flow of foreign direct investments into the country saw a major increase in October, registering a 56 per cent jump to touch $2.3 billion in October against the same period last year, an official said.

In October 2008, the FDI stood at $1.5 billion. However, the consolidated inflow during the April-October period of this fiscal saw a decline of $1.1 billion to $17.6 billion from $18.7 billion in the year-ago period.

The Financial Express

2009-12-01T13:24:00.002Z

SECOND QUARTER GDP AT 7.9%

India’s economy grew at its fastest rate in 18 months in the quarter through September, smashing expectations and adding pressure to bring forward an interest rate rise and cut stimulus spending as inflation mounts.

Asia’s third-largest economy grew 7.9% in the past quarter from a year earlier, far above forecasts of 6.3%, but growth was expected to slow this quarter when the impact of a weak monsoon would be seen on crops.

The expansion was driven by government spending, manufacturing, services, and a better-than-forecast farming output, sending bond yields and swap rates higher as investors bet on a rise in rates and the finance minister said growth could hit 7% in the fiscal year ending in March 2010.

“This data could be a green light for the Reserve Bank of India to hike rates, and there are greater chances of this by end of the calendar year,” said Robert Prior-Wandesforde, senior Asia economist at HSBC in Singapore.

“The exit from the fiscal stimulus by the government may also be earlier post the GDP data.”
Prior to the data, most economists had predicted a rate rise sometime between January and April 2010.

In the June quarter, India’s economy grew 6.1% from a year earlier, and Prior-Wandesforde said that by his calculation the last quarter’s growth was the sharpest on a quarter-by-quarter basis since quarterly data began in 1996.

Manufacturing output grew 9.2% in the quarter as consumers bought more cars and other goods.

Larger neighbour China, which along with India is helping to pull the global economy out of its worst recession in decades, clocked growth of 8.9% during the same quarter.

MINT

2009-11-26T17:38:00.001Z

RELIANCE INDUSTRIES POTENTIALLY ACQUIRES LYONDELLBASELL AMIDST RECESSION LED PURCHASE PRICE

The potential purchase of a controlling stake in LyondellBasell Industries AF, the world’s third largest petrochemical company, by Reliance Industries Ltd, India’s largest company by market capitalization, marks a return to multi-billion dollar overseas acquisitions by cash-rich Indian companies tempted by depreciated asset prices of companies affected by the biggest worldwide recession since the Great Depression. If successful, it could make Reliance Industries India’s first company to have a market value greater than $100 billion.

Indian companies with a war chest of cash reserves include the Oil and Natural Gas Corporation Limited (ONGC), India’s state owned petroleum company, with reserves of about $5 billion; Reliance Industries with reserves of $4.2 billion and Tata Sons, the holding company for all Tata Group’s investments, with about $640 million .

Indian companies are on the hunt for bargain basement prices overseas. This is a good time for them to buy market share and customers in the West at fraction of what they would have paid a couple of years ago.

After a lull of about 18 months, Indian companies have aggressively started looking at foreign assets again. During that time, western economies dipped to low single-digit GDP growth and unemployment surged into double digits amidst the worst banking industry led financial crisis in decades. By contrast, the Indian economy continues to grow at nearly 7% annually amidst growing consumer demand and a robust banking system.

The fear that India’s economy might follow the West into a recession is over. That’s giving Indian companies the confidence to go hunting again in overseas markets where the recession gives them one-in-a-lifetime opportunities to acquire depressed assets.

LyondellBasell, based in Rotterdam in the Netherlands, sought bankruptcy protection early this year after demand for its plastic products plunged last year.

The acquisition of LyondellBasell by Reliance is expected to be India’s biggest cross-border deal this year, on par with the acquisition of the U.K.’s top steel maker Corus Group Plc for $12 billion by India’s Tata Steel Ltd in January 2007. Indian M&A activities peaked in 2007 with more than $51 billion worth of transactions.

India has been host to 234 M&A deals amounting to only about $8 billion during the first 10 months of this year, less than a third of that in the corresponding period in 2008.

The $100 Billion Club
The Reliance – LyondellBasell combine will accelerate Reliance into the elite league of companies worldwide that have a market capitalisation of more than $100 billion (Rs 460,000 crore). The combined entity will have potential consolidated revenue of more than $85 billion, transcontinental presence across more than 60 facilities and 60,000 people. Reliance Industries currently has a market value of about $75 billion.

The Indian companies are buying international scale and growth not only in developing economies, but to compete in developed economies as well. Reliance’s acquisition of LyondellBasell will mark India’s entry in the international petrochemical industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.

Indian oil companies are stepping up overseas purchases as shrinking profit margins have prompted international refiners to idle and sell plants. Crude oil currently trades at about half its record $147.27 a barrel in July 2008.

Essar Oil, India’s second-largest private refinery is currently in talks to buy three refineries in the U.K. and Germany from Royal Dutch Shell Plc. Oil & Natural Gas Corp., India’s biggest energy explorer, completed a 1.4 billion-pound ($2.3 billion) acquisition of Imperial Energy Plc in March.

2009-11-22T18:45:00.001Z

RELIANCE COMM SEES INDIA TELECOM CONSOLIDATION

Intensifying competition in the Indian telecom sector, the world’s fastest growing in mobile sign ups, should kick off an industry consolidation in two years, a senior official at Reliance Communications said.

With four firms, including ventures of Norway’s Telenor and United Arab Emirates’ Etisalat, set to start operations in India this year, existing players led by Reliance and Bharti Airtel have slashed call charges to lure users.

India, which has 11 mobile operators, has this year added an average 14 million mobile users a month. Analysts say still there is huge potential as only 40 people of every 100 own mobile phones from a population of more than a billion.

Reuters/Livemint

2009-11-22T18:40:00.001Z

RED CARPET WELCOME BY OBAMA AWAITS MANMOHAN SINGH

A red carpet welcome awaits Prime Minister Manmohan Singh as he lands at the Andrews Air Force Base on Sunday as the first state guest of President Barack Obama for a visit that is expected to take the Indo-US strategic relationship to the next level.

The Prime Minister, his wife Gursharan Kaur, and his delegation would be welcomed by a group of children and the Indian American community, before he drives to the Willard Intercontinental Hotel, three blocks away from White House.

PTI/Livemint

2009-11-22T18:37:00.001Z

BHARTI SLASHES MOBILE ROAMING CHARGES, SHARES FALL

Bharti Airtel launched yet another new billing plan on Friday, slashing mobile roaming rates by nearly 60% and signalling a tariff war in the world’s fastest-growing wireless market was far from over.

The announcement accelerated losses in the shares of Bharti, the country’s top mobile operator. The stock fell as much as 3.3% but trimmed losses to 2.7% at Rs284.90 by 0825 GMT in a Mumbai market that was up 0.3%.

The price war, aimed at grabbing new users ahead of fresh entrants waiting in the wings, has raised concerns about telecom firms’ profitability. Four new firms, including ventures funded by Telenor and Etisalat, are set to start services this year adding to the existing 11 operators.

Reuters/Livemint

2009-11-22T18:34:00.000Z

RELIANCE OFFERS TO BUY LYONDELL FOR OVER $12 BLN

India’s Reliance Industries is offering about $12 billion to buy a controlling interest in bankrupt chemical company LyondellBasell Industries to create one of the largest petrochemical firm in the world, two sources with direct knowledge of the deal said.

“The offer is in the vicinity of about $10 to $12 billion,” one source said, while another said it was around the upper end of the band. The two sources declined to be named as they are not authorised to speak to the media.

The deal, if closed, will make it one of the largest overseas acquisitions by an Indian company. In 2007, Tata Steel bought Anglo-Dutch Corus steel maker for $13 billion.

On Saturday LyondellBasell said Indian energy giant Reliance Industries has made a non-binding cash offer to buy a controlling interest and the offer represented a potential alternative to its previously filed reorganisation plan to emerge from Chapter 11 bankruptcy.

Reliance said it had made a preliminary non-binding offer to acquire, for cash, a controlling interest in LyondellBasell upon its emergence from Chapter 11.

Reuters/Livemint

2009-10-22T07:59:00.000Z

INDIA INC’S PAT TO GROW AT 23% THIS FISCAL

India Inc is likely to witness a 22.8% growth in its profit after tax (PAT) in the current fiscal, an economic think-tank has said in its report. “Corporate sales growth will average at a meagre 4.1% in 2009-10. At the same time, the PAT will rise by a robust 22.8%,” the Centre for Monitoring Indian Economy (CMIE) said in its latest report.

The manufacturing sector (excluding petroleum sector) would report a 24.3% growth in PAT mainly because of low prices of raw material and soft interest rates, CMIE said, adding that the PAT of the financial and non-financial services would rise by 32.2% and 20.4%, respectively.

The Financial Express

2009-10-22T07:55:00.000Z

INDIA INC ON A FUND RAISING SPREE, RAISES $9 BN

India Inc is on a fund raising spree, garnering $9 billion (Rs 32,400 crore at the current exchange rates) through sale of shares and convertible bonds to institutional buyers since April as companies, locked out from capital markets for almost a year due to the liquidity crisis, rush to finance growth plans.

The Economic Times

2009-10-22T07:52:00.001Z

PM ECONOMIC PANEL SEES 2009-10 GDP GROWTH AT 6.5%

India’s accommodative monetary policy may continue until the end of March, with the need for tightening once inflation picks up, a government panel that advises the prime minister said on Wednesday. Former central bank governor C. Rangarajan, who heads the panel, said growth in the fiscal year that ends in March 2011 would accelerate to 7 to 8% after growing by about 6.5% in 2009/10, with inflation at around 6 percent by the end of March 2010.

MINT/Reuters

2009-10-22T07:49:00.000Z

CROSS BORDER DEALS: NOW IS AS GOOD A TIME AS EVER

One of the most intriguing ironies of the business world is the fact that when economies are booming and asset prices skyrocket, we see companies making audacious bids to buy other companies. On the other hand, when the economy takes a tumble and asset prices are at historic lows, we see CEOs become inward-looking and go into defensive mode, even though they might be in a relatively good position.

Bleak economic scenarios like the present time should be used by strong companies to bolster their standing in their respective industries and to orchestrate "game-changing" initiatives, prime among which is mergers & acquisitions. It's a buyers' market and companies acting now are likely to emerge as winners when the upswing comes. Now is as good a time as ever for dealmaking.

Bangkok Post

2009-10-22T07:46:00.001Z

INDIA'S HNI CLUB TO SWELL 3 TIMES IN 10 YEARS

India and China are together projected to treble the number of high net worth individuals (HNIs) from 4.48 lakh in 2008 in the next one decade, as per a report collated by Merrill Lynch Wealth Management and Capgemini, which pegged the number of Indian HNIs at 84,000 for the past year. After seeing a 22.7% growth in the population of HNI in 2007 to 1.23 lakh - the highest percentage jump in the world - India saw a 31.6% drop in the number of HNIs past year. India happened to witness the second-biggest drop in the population of the rich, as defined by the survey, behind Hong Kong, which recorded a 60% drop in HNIs in 2008.

The survey defined HNIs as those with investable assets of at least $1 million (Rs 5 crore), excluding their primary residence and consumables. With the Indian economy showing clear signs of revival and the stock market bouncing back, the number of HNIs in the country is expected to bounce back soon.

The Economic Times

2009-10-05T18:16:00.000Z

WHY BHARTI-MTN BROKE UP?

A mega transnational deal and over USD 20 billion transaction, a new south-south alliance, the creation of the world’s third largest telecom firm, two public attempts, unprecedented government lobbying, a combined 12 months of negotiations, thousands of hours in legal fees and yet this deal came unstuck.

Bundeep Singh Rangar, Chairman of IndusView; Lauri-Lynn Pursall, Partner of Mayer Brown; and Vivek Gupta, Partner at BMR Advisors discuss what went wrong in the Bharti-MTN deal

CNBC-TV18

2009-09-25T07:29:00.002Z

INDIA TO INVEST $18 BN IN PORTS OVER NEXT 5-7 YEARS

India is likely to invest $18 billion in ports and over $4 billion in its ship building industry in the next five-to-seven years, shipping industry players said at a meet here. Shipping Corporation of India's Chairman and Managing Director, S Hajara, who spoke at the meet, said that shipping should be brought under the infrastructure ambit. He called for a relaxation in the present cabotage law to allow shipping into the infrastructure sector.

The Economic Times

2009-09-25T07:17:00.002Z

13 INDIAN FIRMS IN FORBES ASIA'S FABULOUS 50 LIST

As many as 13 Indian companies, including Reliance Industries, Infosys Technologies and Tata Steel, have made it to the list of Forbes' 50 best listed companies in the Asia-Pacific region.

In the Forbes list, there are four Indian entities – Reliance Industries, Bharti Airtel, Infosys Technologies and Tata Consultancy Services – among the top ten firms in terms of market value, while Reliance Industries and Tata Steel feature in the top ten league in terms of sales. Other than RIL, Infosys and Tata Steel, the other Indian firms that have made it to the prestigious list include - Adani Enterprise, Axis Bank, Bharat Heavy Electricals, Bharti Airtel, HDFC bank, Jindal Steel & Power, Larsen and Toubro, Mahindra & Mahindra, Tata Consultancy Services and Wipro.

The Economic Times

2009-09-25T07:06:00.003Z

GOVT BACKS BHARTI-MTN DEAL

Finance minister Pranab Mukherjee said on Wednesday that the Indian government backs the proposed merger of Bharti Airtel Ltd and South Africa’s MTN Group Ltd and it was looking into legal aspects related to a dual listing.

“Our position on this is very clear. In the first week of September, I had met the South African finance minister on the sidelines of the G-20 finance ministers’ summit in London, and told him that we are in favour of the deal,” Mukherjee said in Kolkata. “As far as dual listing is concerned, that is linked with full (capital account) convertibility. This has legal aspects, which we are looking into.”

On whether India would alter legislation to allow the record $24 billion (Rs1.15 trillion) deal, the finance minister said: “We welcome the deal but in the context of the law of land. There are some legal implications, which are being looked into.”

Livemint

2009-08-31T10:28:00.001Z

MTN WANTS SPEEDY CONCLUSION TO BHARTI DEAL

South African mobile operator MTN wants to conclude a proposed tie-up with Indian partner Bharti Airtel quickly to end any doubt about the deal, chief executive Phuthuma Nhleko said.

“We want to do the deal sooner rather than later because we are really uncomfortable with the uncertainty,” Nhleko told Reuters on Thursday.

Last week, Bharti and MTN extended talks aimed at creating the world’s third-biggest mobile company for a second time, frustrating investors who wanted the deal finalized, and raising concerns its structure was too complex to succeed. Both firms agreed to extend talks to 30 September, after previously extending discussions by a month to 31 August, as they negotiate a $23 billion cash and share-swap deal aimed at an eventual full merger.

Livemint

2009-08-31T10:25:00.001Z

EXXONMOBIL IN TALKS WITH LOCAL VENDORS FOR $1BILLION IT CONTRACTS

World’s biggest oil company ExxonMobil is in talks with India’s top technology firms and multinational vendors for outsourcing of several IT contracts worth up to $1 billion.

A day after British Petroleum (BP) formally awarded over $1.5-billion outsourcing contracts to TCS, Infosys and Wipro along with IBM and Accenture, top Indian offshore vendors including L&T Infotech and HCL Technologies - along with other MNC vendors - have locked horns with each other for almost $1-billion outsourcing deal being fleshed out by ExxonMobil.

The Economic Times

2009-08-31T10:22:00.000Z

INDIAN AUTOMAKERS ROPE IN INTERNATIONAL DESIGNERS

Spurred by a worldwide consolidation wave, Indian carmakers are rushing to global automotive designers in a bid to give a cutting edge to their products line-up. Auto majors such as Bajaj Auto, Maruti Suzuki, Mahindra & Mahindra and Tata Motors are understood to be meeting several top auto designers in a bid to scale up their in-house design functions.

Senior officials of these companies have conducted several rounds of interviews at a recent Society of Automotive Engineers event with designers from Chrysler, BMW and others based out of Europe and the US.

The Economic Times

2009-08-31T09:10:00.001Z

INDIAN PREMIER’S 100-DAY STOCK RALLY BEST SINCE 1991

Indian stocks rose more in the first 100 days of Prime Minister Manmohan Singh’s leadership than under any new government since 1991. Investors predict more gains as he opens up the world’s second-fastest growing economy.

The Bombay Stock Exchange’s Sensitive Index climbed 16 percent since Singh started a second term on May 22 as international investors bought $4.9 billion more shares than they sold, data compiled by the bourse show. The advance is the biggest since the 40 percent rally after Prime Minister P.V. Narasimha Rao came to power, and compares with the 8.4 percent increase for the Standard & Poor’s 500 in the first 100 days of U.S. President Barack Obama’s administration.

Bloomberg

2009-08-13T07:55:00.002Z

MPHASIS TO BUY AIG'S INDIAN IT ARM

The acquisition is expected to strengthen its domain-based solutions in key BFSI vertical

IT and BPO services company MphasiS today said it will acquire AIG Systems Solutions (AIGSS), the IT arm of the US-based insurance giant AIG (American International Group), for an undisclosed sum.

The acquisition, which comes with guaranteed business from AIG, is expected to strengthen MphasiS’ domain-based solutions in its key banking, financial services and insurance (BFSI) industry vertical, MphasiS CEO Ganesh Ayyar said. The BFSI segment brings in 40 per cent of the company’s revenues.

MphasiS, a majority of which is owned by Hewlett-Packard subsidiary EDS, did not disclose the financial details of the deal. With cash and bank balances of $74 million in its second quarter ended April 30 this year, the company is likely to fund the acquisition through internal accruals, according to analysts.

The MphasiS buy of AIGSS signals renewed activity in the tech merger and acquisitions space, which has been sluggish since January this year. TCS had bought the back-office unit of Citigroup Inc for $505 million in October last year, while Wipro acquired in December another captive unit of Citigroup for $127 million.

“Indian IT companies are positive on cash flows and are looking at rebounding from the recession through inorganic growth. We expect action to pick up on the M&A scene,” said Neeraj Atri of IndusView Advisors, a strategic consulting firm.

AIG, once the world’s largest insurance company, was part of an $800-billion fiscal stimulus package from the US government and has been looking at hiving off assets which fall outside its core insurance business.

AIGSS has around 800-850 people on its rolls, with offices in Chennai and Kolkata, and provides IT services to AIG companies worldwide, according to an MphasiS filing with the Bombay Stock Exchange. MphasiS currently employs 33,810 people, of which the applications services business has a total of around 15,000 employees. The acquisition is expected to help MphasiS gain market share in the insurance domain and enhance its portfolio of domain-specific solutions.

“This acquisition gives MphasiS the depth and breadth for us to be the preferred partner of choice in their (AIG’s) IT transformation,” MphasiS President (Applications Services Business Unit) Gopinathan Padmanabhan said in a statement.

Post-acquisition, AIGSS is expected to become part of the key application services business unit of MphasiS. This unit showed a quarter-on-quarter growth of 5.2 per cent for the period ended April 30 this year, and brought in 63.8 per cent of MphasiS’ total revenues. While the company has seen pressures in terms of pricing and solutioning, it has been winning new deals in the marketplace, CEO Ganesh Ayyar had said in a internal mail to employees in May this year.

For the second quarter ended April 30, MphasiS showed 219.1 per cent growth in PAT to Rs 224.5 crore from Rs 70.3 crore earlier. Total revenues for the quarter crossed Rs 1,000 crore, with consolidated topline at Rs 1,048.5 crore increasing 52.3 per cent from Rs 688.4 crore in the same period of 2008. The company hired 3,822 people to support growth during the quarter, of which 117 were freshers.

2009-08-13T07:39:00.001Z

GLOBAL INVESTORS FANCY INDIA GROWTH STORY

* A Spurt In Overseas Fund-Raising By Indian Companies

* Indian Companies Preferring GDR More In Comparison To ADS Route

* Institutional Fund Raising Through Qualified Institutional Placement Also On Rise

* Foreign Institutional Investors Turned Net Buyers In The Indian Markets

The appetite of global investors for Indian equity is increasing again, as reflected by a spurt in overseas fund raising by Indian companies in recent times. The fact that India still continues to grow at 6% - 7% while the global economy is facing one of its most severe economic crises, has made the global investors less risk-averse to India. They are realising and appreciating that as soon as the global economic conditions improve, India’s growth rate would move closer to double digit.

As a result, overseas public offerings of Indian blue-chip companies, which provide the global investors an attractive option to participate in the India growth story, are on the rise. Also, the Qualified Institutional Placements (QIPs) in which mostly the Foreign Institutional Investors (FIIs) participate, have become a preferred route for fund raising by Indian companies. Apart from that, the recent outperformance of the Indian stock markets when compared with other prominent markets is largely due to the renewed buying interest among the FIIs, who want to ride the next wave of India’s growth.

In the first four months of fiscal year 2009-10, Indian firms raised about $3 billion (Rs.14,686 crore) through QIP route and about $2.5 billion (Rs.11,990 crore) through GDR (Global Depository Receipt) and ADR (American Depository Receipts) issues, according to an estimate of Delhi-based research firm PRIME Database. The trend of tapping GDR/ADR route actually revived in July 2009 only, during which the Indian firms moped up more than $2 billion through these instruments. After touching the peak levels of $5.32 billion QIP offerings and $6.39 billion GDRs/ADRs during 2007-08, the global meltdown of equity markets had turned the year 2008-09 in to a drought year.

QIPs
Year	No. of Issues	Amount (Rs.Crore)	Amount ($ mln)
2006-2007	25	4963.03	1024.36
2007-2008	38	25770.38	5318.96
2008-2009	2	188.82	38.97
2009-2010 (Till Jul,09)	16	14686.32	3031.23

GDRs / ADRs
Year	No. of Issues	Amount (Rs.Crore)	Amount ($ mln)
2004-2005	14	4435.45	915.47
2005-2006	56	15895.91	3280.89
2006-2007	21	4922.50	1016.00
2007-2008	33	30949.26	6387.88
2008-2009	12	893.42	184.40
2009-2010 (Till Jul,09)	7	11990.47	2474.81

Source: PRIME Database

Indian Companies Become One Of The Biggest Fund Raisers In Overseas Markets

The $1.5 billion (Rs.7,305 crore) ADS issue of Sterlite Industries, a subsidiary of London-listed Vedanta Resources Plc. and India’s largest copper producer, closed in just six hours on 16^th July 2009. It was the largest U.S. share sale by an Indian company in the last two years. Earlier, India’s largest private sector bank ICICI Bank had raised $2.46 billion through ADS offering in June 2007.

The other big fund raisers through ADR/GDR route in the recent weeks are, by the world’s sixth largest steel maker Tata Steel Ltd($500 million), India's largest private power producing company Tata Power ($335 million) and the world's fifth-largest wind-turbine maker Suzlon Energy Ltd($110 million).

Tata Steel’s $500 million GDR issue is not only the largest ever Indian Global Depository Receipt (GDR) offering in London, but also one of the biggest new equity issues to be conducted by a company outside its home market on any global exchange in the last 12 months.

"As a globally ambitious Indian company, with significant operations in Europe, Tata Steel is a high profile addition to our markets. Tata Steel's listing demonstrates that London remains the market of choice for companies from across the globe seeking to access a truly global pool of international investment capital and benefit from trading on the International Order Book, the world's most liquid trading platform for GDRs." London Stock Exchange Group’s Xavier Rolet, Chief Executive appreciating Tata Steel’s offering said.

Prithvi Haldea, CMD of PRIME Database, however warns that it should not be viewed as hype. “Investors are still very selective in what they are buying. They are willing to look at investment opportunities from credible companies with a substantial track record and where the pricing is attractive,” he says.

Indian Markets Outperform The U.S. And Asia On The Back Of FII Buying

The outperformance of the Indian equity markets in the recent months can directly be attributed to the renewed buying interest of the foreign institutional investors (FIIs). July 2009 is set to become the fifth consecutive month in which the FIIs have made net purchases on the Indian bourses. March 2009 proved to be the turning point when FIIs turned buyers again after almost a year. From May 2008 to February 2009, they had been on a selling spree (barring December 2008) in India due to global worries. The selling in India during this period was also due to the fact that India was one of the few markets where they could have sold their old stock investments in profit even after a significant decline from the peak.

Since March 2009, the net FII purchases in this year have now reached almost $8 billion including $4.15 billion in May 2009 – the month in which the United Progressive Alliance (UPA), India’s ruling coalition gained a clear majority in the elections for the lower house of the Indian parliament setting aside the political uncertainties. In line with the FII buying, India’s benchmark index Sensex has moved up from 8,110 on March 09, 2009 (the lowest of the year 2009 so far) to 15,379 on July 24, 2009 scoring a 90% gain in just about four and half months. Earlier, in contrast, FIIs had made net selling on the Indian bourses to the tune of $11.97 billion during the year 2008. Accordingly, Sensex had fallen from 20,287 on December 31, 2007 to 9,647 on December 31, 2008 registering a decline of 52.4%.

It’s important to note that although the rally in Indian market during March to July has been a part of global rally, but it has outperformed the indices of other emerging markets and the U.S. Dow Jones Industrial Averages Index, which also touched its low of 6,440 on March 09, 2009 has since moved up 41.2% to 9,093 on July 24, 2009. In Asia, Nikkei of Japan has moved up 41.5%, while Hang Seng index of Hong Kong and Straits Times of Singapore have scored 76.1% and 73.8% gains respectively in the same period.

2009-08-13T07:37:00.001Z

VENTURE CAPITAL MAGNET

India continues to attract venture capital firms seeking extra-ordinary returns. The country’s attractiveness is highlighted by the fact that about 60 foreign investment firms have expressed eagerness to invest in India, as per data as on May 31, according to the country’s stock market regulator Securities and Exchange Board of India (SEBI).

Currently, there are 129 foreign venture funds and 132 domestic funds operating in India. These funds collectively invested about $8 billion in FY 2008-09, with almost equal amount of investments.

Real Estate sector emerged favourite, attracting $1.4 billion of investments followed by telecommunication and services sectors sharing the second slot at about $630 million each and information technology $550 million, respectively.

2009-08-13T07:27:00.001Z

OVERSEAS INVESTMENT MATCHES DOMESTIC CAPEX

India Inc.’s appetite for overseas investments at about $37 billion in the financial year 2008-09 is underscored by its corresponding increase in capital expenditure and inorganic expansion strategy to accelerate growth.

The surge in capital expenditure of $47.5 billion at more than 21% in the financial year 2008-09 has a very visible contribution of the infrastructure sector that accounted for a large chunk of the increase at $18 billion, with a share of more than a third.

As a clear signal of revival, the increased capital expenditure in the sector coupled with the Indian government’s well timed stimulus packages, amounting to 3.5% of the country’s GDP, resulted in a healthy growth of 6.5% in the six core infrastructure sectors in June 2009. The sector had grown by 5.1% in corresponding month the previous year, while the figure for May 2009 stood at 2.8%. Cement topped the chart with a growth of 12.8%, while steel rose 5.3%, both crucial inputs for construction activity.

Of significance is the fact that a part of the expense finds its way in to mergers and acquisitions (M&As), as in the case of the largest acquisition of the sector by state-run Oil and Natural Gas Corporation Ltd’s (ONGC) of then London Stock Exchange listed-Imperial Energy Corporation for $2.8 billion in August 2008. The other large overseas acquisition by an Indian company was that of the U.K.-based automobile marquee brands Jaguar and Land Rover by Tata Motors Ltd for $2.3 billion.

The potential merger of India’s largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Ltd for about $23 billion will substantially add to the share of the telecom sector in the capital expenditure this year. The deal will result in about $4 billion of net cash outflow from Bharti. (See Vol4 | Issue 7; Bharti-MTN: A Billion Subscribers in Sight).

2009-08-13T07:18:00.000Z

BOLLYWOOD’S HOLLYWOOD RESCUE

Steven Spielberg, Hollywood’s iconic film director’s cash strapped DreamWorks Studios will receive a lifeline of $825 million in financing for film production as part of a 50:50 joint-venture with India’s Anil Ambani founded Reliance Big Entertainment (RBE).

Of the $825 million, RBE’s parent company Reliance-Anil Dhirubhai Ambani Group (R-ADAG) will provide $325 million as equity infusion while The Walt Disney Company will table $175 million in distribution advance. Rest of the funding will come from the global financial services firm JP Morgan Chase & Co as debt.

The Indian Film industry popularly called ‘Bollywood’ that churns out the largest number of movies in the world, has welcomed global film production companies in to its fold including the U.S.-based Twentieth Century Fox Film Corporation, Warner Brother Entertainment, Inc., Viacom Inc., Sony Pictures Entertainment, Inc., among others in partnership deals with Indian counterparts for film production and distribution.

Renowned Indian actor Shahrukh Khan's Red Chilies Entertainment and director Karan Johar's Dharma Production's have recently entered in to a marketing and distribution deal worth more than $20 million with Oscar winning film Slumdog Millionaire’s fame Fox Star Studios, a joint venture between Twentieth Century Fox and the U.S.-based News Corporation’s Indian subsidiary Star India.

DreamWorks has required funds since it parted ways with the U.S.-based media conglomerate Viacom Inc’s Paramount Motion Pictures Group in September 2008. The financing deal will enable Spielberg to resume movie production, with the target to make five to six films per year. The first production is scheduled to start this year for release in 2010.

The Ambani-Spielberg joint-venture potentially elevates the fledgling $2 billion Indian movie entertainment sector growing at 9% compound annual growth rate (CAGR) to global scale with projects in the pipeline involving Hollywood stars George Clooney, Julia Roberts and Brad Pitt, among others.

RBE’s Holywood ambitions are not limited to DreamWorks only. BIG Pictures, owned by RBE, has plans to produce films with Nicolas Cage’s Saturn Productions, Jim Carrey’s JC 23 Entertainment, George Clooney’s Smokehouse Productions, Chris Columbus’ 1492 Pictures, Tom Hank’s Playtone Productions, Brad Pitt’s Plan B Entertainment, Jay Roach’s Everyman Pictures, Brett Ratner’s Rat Entertainment and Julia Roberts’ Red Om Films.

2009-07-20T09:39:00.001Z

ANIL AMBANI, SPIELBERG SCRIPT A $825-MN DREAM DEAL

Its the biggest and the most high-profile deal in Indian entertainment. Anil Ambani-promoted Reliance Big Entertainment (RBE) has finally sealed the funding for its much-hyped 50:50 joint venture with Hollywood’s iconic director Steven Spielberg’s DreamWorks.

DreamWorks Studios will get an initial funding of $825 million, which includes equity from Reliance ADAG to make films for a global audience. The company would make five to six films per year, and the first production would start this year for release in 2010. Of the $825 million, $325 million will be equity infused by Anil Ambani as his personal investment, $150 million will come from The Walt Disney Company as a distribution advance, and the rest will be funded by JP Morgan via debt.

2009-07-20T09:34:00.001Z

TOP-10 COS ADD OVER RS 1.42 LAKH CR

India's top-10 firms added Rs 1,42,000 crore to their market capitalisation last week with country's most valued firm, Reliance Industries crossing Rs 3 trillion mark after two weeks.

The country's most-valued firm, Reliance Industries Ltd, added Rs 24,395 crore to its market valuation taking its total market cap to Rs 3,04,292 crore. Shares of RIL surged nearly 9 per cent on the Bombay Stock Exchange (BSE) to end the trade at Rs 1,933.40 on Friday...

The Financial Express

2009-07-20T09:31:00.001Z

RETAIL SECTOR WITNESSING WINDS OF CHANGE

A palpable improvement in economic conditions and low inflation have helped the retail sector stage a recovery in the recent past. After two bad quarters, same store sales (SSS) have again turned positive. While discretionary spending remained low, value retail has been the show stealer during this recovery.

This trend is expected to continue into the coming quarter, as monsoon sales would start soon. This will boost revenue growth for lifestyle retailers. However, despite growing sales, profit margins will continue to be under stress on account of increasing share of value retailing.

The Economic Times

2009-07-08T09:30:00.003Z

INDIAN AUTOMOBILE SECTOR: GOING AT STEADY PACE

The website of Tata Nano, the world’s cheapest car, recorded more than 20 million hits in merely 15 days since its launch on March 23, 2009. Between April 9, 2009 and April 25, 2009 Tata Motors Ltd, the manufacturer of Nano and India’s largest commercial vehicle company, received 203,000 orders for its much-awaited car.

The strength of India’s automobile sector is not just limited to the success of a single wonder-car. Contrary to the global automobile sector, Indian automobile companies have continued their growth even in the current situation of economic slowdown. Indian automakers sold 929,596 vehicles in May 2009, up 8.86% compared to the corresponding month of year 2008, according to the Society of Indian Automobile Manufacturers Association (SIAM), the apex Industry association representing 44 leading vehicle and vehicular engine manufacturers in India. This is in sharp contrast to the U.S. automobile market, which recorded 33.7% decline in May 2009, when compared to the corresponding month a year ago with sales sliding to 925,824 vehicles. There are certain sections in this sector, which are feeling the pinch of economic slowdown. But the Indian auto companies are seeking only some tax cuts from the government to run their business smoothly, not bailout packages.

India: An Attractive Market For Global Companies

Toyota Motor Corporation, the largest automaker of the world that has relatively smaller presence in the Indian market so far, has recently brought its Sports Utility Vehicle (SUV) model Toyota Land Cruiser in the car market of India with a price tag of about $170,000 (Rs.80 lakh). The success of SUVs such as BMW X5, Audi Q7, Porsche Cayenne etc. offered by other global competitors signaled Toyota that it can no longer afford to avoid this segment of the Indian market. So it decided to face the challenge with no other model but its flagship SUV brand Land Cruiser.

Toyota has a joint venture in India named Toyota Kirloskar Motors Private Limited, in which 89% stake is owned by Toyota and Kirloskar Group, one of India's largest Engineering and Construction Conglomerate, holds the rest. With the demand getting better, Toyota Kirloskar has decided to raise its production. During 2008, it sold 51,800 units that include the models such as Innova, Corolla Altis, Camry and SUV Prado.

Global automotive companies are also using India as a manufacturing hub for their exports market. Toyota Kirloskar is identifying export markets for the small cars produced by it in India. The company is setting up its second plant at Bidadi near Bangalore, the capital of the south Indian state of Karnataka, with an investment of about $680 million (Rs.3,200-crore), which is expected to produce about 100,000 units per year. Toyota might export these small cars to Russia, Brazil and China in the initial stage.

Another Japanese company Suzuki Motor Corp, which specialises in small cars, holds more than 54% stake in India’s largest carmaker Maruti Suzuki India Ltd. Suzuki had identified the opportunity in India as early as in 1981 when it partnered with the Government of India and formed the joint venture company in the following year as Maruti Udyog Ltd. In 1983, it brought Maruti 800, a 796 cc model that was dubbed as India’s first affordable car. The model became so successful that even after 26 years; it is one of the best-selling cars in India, although the company plans to gradually phase it out now. Suzuki got the majority control of this company in 2002 with 54.2% stake, when the Government of India sold its stake to Suzuki as part of its disinvestment strategy.

Relying on the Indian market is now paying off to Suzuki a handsome reward. Today, Suzuki not only controls 62% market share in India’s domestic car market (and about 50% share in the total car production of India), but also getting a much needed cushion for its global operations contributing almost half of the Suzuki’s global consolidated profits. Maruti Suzuki’s share in Suzuki’s profit moved up to 46% in 2008-09 from 30% in 2007-08. At a time when Suzuki is facing a downturn in all of its key markets such as Japan, the U.S. and Europe and a 14% fall in its net sales in 2008-09, Maruti Suzuki posted 14% increase in its net sales. Now, in order to save costs and ease its burden, the Japanese parent is considering shifting a major portion of its small car manufacturing activities to India.

The dominance of Suzuki in the small car segment in India has forced Japan’s second-largest carmaker Honda Motor Co. to introduce its first small car named ‘Jazz’ in India on June 11, 2009. It aims to sell 20,000 units of its first small car in India, in the first year. Honda has invested about $345 million (Rs.1,620 crore rupees) in the country and has plans to invest another $210 million (Rs.10 billion) for its second plant, which will increase its production capacity in India to 160,000 vehicles annually by 2010.

Renault-Nissan Automotive India, a 50:50 JV between Nissan Motor Company, Ltd of Japan and Renault S.A. the French automaker, has targeted to gain 5.7% of the total market share in the passenger cars segment of India by 2012. Nissan has allocated 350 billion yen for its global investment plans in 2009 and India will likely receive the largest share of the amount. It has set up a car manufacturing plant in Chennai, the capital city of the Indian state of Tamil Nadu, that will cater to the exports market also. It plans to export 110,000 units by 2011. Nissan Motor India will begin its exports to Europe from the second half of 2010. Nissan’s light commercial vehicle project with the Hinduja Group’s, the London headquartered diversified conglomerate, flagship company Ashok Leyland is also expected to take off in 2011.

General Motors Corporation, the world's second-largest automaker, which filed for Chapter 11 bankruptcy protection in the U.S., has its Indian operations that continue to grow at healthy pace, hence are not being included in the U.S. filing for Chapter 11. Expansion plans of GM India are intact. The company is going ahead with its plans to introduce three new cars this year. GM India has invested more than $1 billion in India over the past 14 years. Its manufacturing facility in Gujarat, the western state of India has an annual capacity of 85,000 vehicles, while its facility in the state of Maharashtra produces 140,000 vehicles per year. To compete with Tata’s Nano, GM India plans to introduce a new mini car by the end of 2009. One can expect that if General Motors emerges from bankruptcy in the next 2-3 months, its India operations would have a more effective role in the reshaped GM.

Indian Automobile Market: Going Strong Even In Tough Environment

Indian automobile sector’s growth is primarily driven by the two-wheeler segment, which continued its fast pace in May 2009 with sales reaching at 727,937 units, 12.5% higher than the sales in May 2008. In the two-wheeler market, the motorcycle segment grew by 12.34% at 576,000 units compared with 513,000 units in May 2008. Passenger car sales grew a bit slow, but remained positive, with 2.47% growth at 113,490 units. The one segment, which is not having good performance, is the commercial vehicle segment comprising of trucks and buses. This segment reported a drop of 13% in sales to 60,642 units last month.

Maruti Suzuki, the largest car manufacturer of India, registered a 10% growth with its sales reaching at 62,878 units during May 2009 when compared to the corresponding month in the previous year. Earlier, in April 2009, the company had sold 64,857 cars with a growth of 9% over April 2008. Hero Honda Motors Ltd, the largest two-wheeler manufacturer of the world, sold 359,000 motorcycles with year-on-year growth of 21%. It is noteworthy that Hero Honda, a joint venture of India’s Hero Group and Japan’s Honda Motor Co. Ltd., is the world’s largest two-wheeler company for the past seven years primarily on the strength of domestic consumption, because it exports only to those countries where Honda is not present due to non-compete arrangement with Honda Motor.

Trends In The Recent Years:

If we look at the production figures of Indian automobile sector in the recent years, it’s quite visible that the growth continued to be very strong till 2006-07 with annual growth in the range of about 14%-17%. For the last two fiscal years, production has stagnated, particularly due to pressure on commercial vehicle segments. This segment has suffered due to two reasons, a) very high interest rates, and b) slowdown in the economy. Now, with the banks easing the interest rates again and an improvement in the economic outlook, it is expected that sales of the commercial vehicle segment would start picking up in the next few months.

India Emerging As A Prominent Force In Global Auto Market

Indian auto companies have started increasing their presence in the global auto market. For this purpose, these companies are not only focusing on increasing their exports, but also acquiring companies, brands and assets overseas. The most prominent example of a foreign acquisition by an Indian company was the acquisition of the U.K. based Jaguar and Land Rover, two iconic British brands by India’s largest commercial vehicle manufacturer Tata Motors Ltd in March 2008. Tata Motors had acquired these two brands from Ford Motor Company for a net consideration of $2.3 billion.

The company has just introduced the Jaguar and Land Rover (JLR) brands in the Indian market giving the discerning Indian customer direct access to these prestigious brands. The launch of JLR by Tata Motors in India mirrors the growing aspirational value among consumers in the Indian market - not only to own a car, but also associate with a brand and upgrade to a luxury car, a segment that is growing at more than 25% annually. Such aspirations have seen more than 7,500 luxury cars added to the Indian roads in 2008, up from 5,000 in 2006, according to estimates.

In fact, Tata Motors had started looking beyond Indian markets quite early, when it set up its first assembly operation in Malaysia in 1974. Currently it has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and Senegal. In 2004, Tata Motors acquired Daewoo Commercial Vehicle Company, South Korea’s second largest truck maker, which has got rechristened as Tata Daewoo Commercial Vehicles Company now. Thanks to this acquisition, two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors had acquired a 21% stake in Spanish bus and coach manufacturer Hispano Carrocera with an option to acquire the remaining stake as well. Tata is using Hispano’s presence to expand its reach in other markets. In 2006, the company formed a joint venture with Marcopolo, a Brazil-based company specialising in body-building for buses and coaches. In the same year, Tata Motors entered into another joint venture with Thailand-based Thonburi Automotive Assembly Plant Company to manufacture and market the company’s pickup vehicles in Thailand.

Bajaj Auto, the second largest two-wheeler manufacturer of India, registered 25% increase in its exports during 2008-09. It has set up a manufacturing facility in China to cater to the exports market.

Overall, India exported 1.53 million vehicles in 2008-09, up 23.6% from the previous fiscal year. A segment-wise break-up of India’s exports suggests that passenger vehicles segment registered the highest 53.7% growth in 2008-09, followed by 22.5% growth in two-wheeler segment.

Better Times Ahead For The Indian Auto Sector

The coming months are set to be exciting for the Indian auto sector with a series of new models being introduced, both by domestic and foreign companies. With the inflation touching almost zero, the Indian banks are expected to cut their lending rates sooner or later. India’s finance minister Mr. Pranab Mukherjee, in an attempt to spur the growth rate again, has already urged the banks to reduce interest rates. Indian auto industry is set to benefit from the lower rates, as it will increase the demand for vehicles.

Rural initiatives of the new government will have a positive impact on the rural demand. The benefit of rural demand getting stronger will spread across segments including tractors, commercial vehicles, two-wheelers, multiple-purpose vehicles and small cars. With the low penetration level of two-wheelers in the country, the companies still have a sizable potential upside left. Once the industrial production starts improving, which is expected by July or August 2009 according to economists, the commercial vehicle demand will also pick up.

2009-07-08T09:24:00.001Z

INDIAN AUTO SECTOR: MOVING INTO HIGH GEAR

The Indian automotive sector aptly showcases the country’s prowess in manufacturing, indicative of a marked shift from the earlier perception of outsourcing and services based economy, such that some of the leading global automotive companies plan to make India their manufacturing and exports hub.

The country’s automotive sector that has grown at about 15% over the past five years is projected to grow to $145 billion by 2016 from $35 billion, according to the Automotive Mission Plan (AMP) 2006–2016. India will emerge as the destination of choice for design and manufacture of automobiles and auto components during the period involving investments worth more than $40 billion.

While the Indian auto sector has witnessed steady growth as domestic and global companies launch new models and increasing capacities, global automobile manufacturers in their home countries are seeking bailout packages and reporting bankruptcies. For instance, the Indian unit of the U.S.-based General Motors Corporation, which filed for Chapter 11 bankruptcy protection in the U.S., continues to grow at a healthy pace and is not being included in the U.S. filing for Chapter 11.

And Tata Motors, part of India’s largest diversified Tata Group, launched models of its U.K.-based marquee brands Jaguar and Land Rover that it bought from U.S.-based Ford Motor Co., into the Indian market on June 28. See our Special Report that outlines the current state of India’s automobile sector and how it is emerging as a manufacturing hub for the global companies.

2009-07-08T09:20:00.000Z

THE JEWEL OF THE BRIC CROWN

India is the preferred destination for Doing Business among the emerging BRIC countries, comprising of Brazil, Russia, India and China based on key factors that include, protecting investors’ interest; getting credit; employing workers; starting a business; and trading across borders, according to the rankings in the global report on ‘Doing Business 2009’ by the World Bank and its affiliate the International Financial Corporation.

India occupied the top slot in three of the parameters – protecting investors, getting credit and employing workers; while emerging second in trading across borders and starting a business. India’s improving business environment is a reflection of the regulatory reforms by the Government to bring uniformity in urbanisation across its regions to bridge the urban-rural divide, representing what it calls an “inclusive approach” to development.

This approach is reinforced in the Financial Budget 2009-10 announced by the Indian Finance Minister on July 6, committing increased investments in the infrastructure sector to more than 9% of the Gross Domestic Product (GDP) by 2014 from 5% currently, apart from other rural development and welfare programs. This opens scope for investment opportunities, in the form of Public Private Partnership (PPP) developments that the government has championed.

Regional variations remain, however, due to internal pressure groups and anti-reforms voices within certain state governments. Cities such as Ludhiana in the north Indian state of Punjab; Bhubaneshwar, capital of the eastern coastal state of Orissa; Ahmedabad in the western state of Gujarat and Hyderabad, capital of the south Indian state of Andhra Pradesh rank high in ease of doing business. In contrast, Kolkata, the capital of the East Indian state of West Bengal ranks lowest.

2009-07-08T09:16:00.001Z

INDIA INC. REMAINS U.K. BOUND

India Inc.’s distinct preference for the U.K. was highlighted as Indian companies emerged as the second largest investor in the U.K. in the financial year 2008-09, replacing Japan as the largest Asian supplier of Foreign Direct Investment (FDI) projects and ahead of China by about twice the number.

Indian companies set up 108 new Foreign Direct Investment (FDI) projects during the period, moving up five places when compared to the previous year, creating and safeguarding about 8,000 jobs according to the U.K.’s Department of Trade and Industry.

India’s affinity for the U.K. is marked by its historic ties, similar legal, accounting, finance and judicial systems. The English language and Parliamentary democracy are as Indian as they are English.

The U.K., however, needs to keep its competitive edge vis-à-vis other European countries that are moving aggressively to capitalize on Indian companies’ growth ambitions. Indian FDI in the European Union (E.U.) soared to $3.4 billion (€2.4 billion) in 2008 from zero in 2004, according to Luxembourg-based Eurostat, the EU statistical office.

2009-07-08T09:09:00.001Z

INFRASTRUCTURE WINNER IN BUDGET 2009-10

In the Indian Financial Budget announcement for the fiscal year 2009-10, the first budget since the Indian National Congress led United Progressive Alliance (UPA) government won its second consecutive term to power in May this year, the infrastructure sector emerged winner as it was accorded top priority by the Indian Finance Minister.

This reinforces the government’s commitment to augment the antiquated infrastructure of the country, vital to achieve a Gross Domestic Product (GDP) growth of 9% per annum from the current 6.7%. The lack of adequate infrastructure is responsible for pushing back India’s GDP growth by about 2% annually, according to estimates.

The minster responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity under Public Private Partnership (PPP) model.

“However, the Finance Minister missed this opportunity to address sectoral reforms and liberalization in Foreign Direct Investment (FDI) norms, falling short of the investors’ expectations who sent the Sensex, the benchmark index of the Bombay Stock Exchange down 870 points to 14,043.40 (5.83%) on Monday, the level that it was at in the month of May. The minister further disappointed by not being explicit on the aspect of disinvestment of the Public Sector Undertakings (PSUs).” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.

“India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year”

“The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes.” added Rangar

Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development had been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.

“These initiatives pale when compared to China that spends about 11% of its GDP for infrastructure development, indicative of the scope and extent of scaling up needed in infrastructure development in India to match global standards.” added Rangar

“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year, had set the ground for how the alliance was approaching the General Elections that took place in May.” said Rangar

The minister was way short of taking the initiative further as various sectors including, pharmaceutical, retail, telecommunication, aviation, insurance, among others keenly awaited reforms to facilitate higher foreign investments. These sectors collectively have the potential to attract more $200 billion worth of investments over a period of five to ten years.

Indian Telecom: Scope of Growth & Investment

“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add more than 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 400 million.” explains Rangar

To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.

The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of more than one billion by 2014, exposes the growth potential in investments that the sector can attract from aspiring global mobile telecom service providers.

Pharmaceutical Sector: Prescription for M&As

The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlined its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.

“This spells out the scope of growth for global pharmaceutical companies and can fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015.” says Rangar

India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.

Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years.

Retail Sector

“The retail sector in India is witnessing a huge revamp as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Easing regulations in the sector would help bring the benefits of organised retail to customers.” said Rangar

The overall retail market is expected to grow to more than $1 trillion from $262 billion by 2016, with organised retail at $165 billion, according to the Investment commission of India.

Aviation Sector

India’s aviation sector presents investment opportunities of $110 billion envisaged up to 2020 $80 billion in new aircraft and $30 billion in development of airport infrastructure. The investments will be needed to cater for approximately 300 million passengers that are expected to be airborne by 2020, according to estimates.

“With such sectoral growth indicators, the need of the hour was to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation. To that extent, the finance minister would have helped by being more generous and explicit in his policy initiatives.” said Rangar

2009-07-03T10:34:00.001Z

GOVT MAY INCLUDE EUROPE, US IN FOCUS MARKET SCHEME

With India's exports declining for the eighth month in a row in May and the need to arrest the decline assuming urgency, the Government may convert the US and Europe into focused markets.

"We have been trying to help exporters diversify their markets in the last few months. There is a need to arrest decline in exports...we may have to convert the US and Europe into our Focus Market Scheme," Director General of Foreign Trade, R S Gujral, told exporters in an open-house meet organised by the Federation of Indian Export Organisations (FIEO), here today..

The Economic Times

2009-07-03T10:31:00.001Z

INDIA REMAINS PREFERRED DESTINATION FOR FDI

India has been able to retain its position as a preferred investment destination despite the global economic downturn, says the pre-budget economic survey.

"FDI flows in 2008-09 were also reflection of the confidence of foreign investors in the growth prospects of the Indian economy...India continues to retain its position as a preferred destination for investments," said the pre-budget economic survey tabled in Parliament today.

The Economic Times

2009-07-03T10:27:00.001Z

INDIAN STOCKS EMERGE BEST PERFORMERS GLOBALLY IN 5-YRS PERIOD

A sharp meltdown during the last year notwithstanding, Indian stock market has emerged as the best performer among its global peers for a time-frame of five years with a return of over 65 per cent for investors, according to Economic Survey.

In the five-year period ending December 2008, the Indian stock market benchmark Sensex posted a positive return of 65.2 per cent, the Survey showed, even as a number of global markets such as Japan, Malaysia and Taiwan, posted negative returns...

The Economic Times

2009-06-12T11:20:00.001Z

INDIA’S MARKET OUTPERFORMS CHINA

While investors hope that consumer spending growth in China will eventually balance its export dependence, in the short term it is India that presents more opportunity.

Economists crow over the long-term domestic growth prospects in both emerging Asian giants, which is likely to be led by a young generation of spenders eager to buy clothes, computers, cars and other goods.

Until recently, China’s massive government stimulus spending worth 6% of gross domestic product was the biggest draw in Asia for investors chasing growth. However, last month’s stunning election victory by India’s Congress-led coalition, which allowed the grouping to secure a parliamentary majority, has turned the heads of some fund managers to the consumer-oriented sectors in India.

In addition, India’s valuations are cheaper, suggesting more upside potential for any investments...

Livemint

2009-06-12T11:09:00.003Z

INDIA'S BILLION DOLLAR CLUB ADDS 51 FIRMS; $500 BILLION

The rally in the stock market and the recent appreciation in rupee value has brought 51 new members to the elite billion-dollar market-value club, while doubling its overall valuation since October when the benchmark index had dropped below the 8,000-level.

The country boasts of as many as 144 companies with a market capitalisation of at least a billion dollar at present. The number represents a increase of 51 companies from just 93 in October 2008. Interestingly, the cumulative market value of the club currently stands at about 900 billion dollars (Rs 42,34,171.25 crore) as on June 5, more than double of its value in October last year of 410 billion dollars (about Rs 20,41,029.8 crore).

The Economic Times

2009-05-31T16:34:00.000Z

WAL-MART OPENS INDIA WHOLESALE OUTLET WITH BHARTI

Wal-Mart Stores Inc., the world’s largest retailer, and local partner Bharti Group opened their first wholesale outlet in India as rising disposable incomes boost demand in the world’s second-fastest-growing major economy.

Bharti Wal-Mart Pvt. today opened the cash-and-carry store in the northern city of Amritsar, it said in a statement. The venture plans to open 10 or 15 wholesale outlets and employ 5,000 people during the next three years...

Bloomberg

2009-05-27T11:41:00.000Z

BHARTI-MTN DEAL LARGEST INDIAN CROSS-BORDER CORPORATE MERGER

--- India’s biggest cross border deal, twice the value of Tata Steel – Corus and Vodafone – Hutchison Essar transactions

The potential merger of India’s largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Limited highlights the attractiveness of fast-growing telecoms markets in India and Africa and reinforces India Inc.’s global ambitions undeterred by the worldwide economic slowdown.

”The companies are buying international scale and growth in the world’s fastest growing telecoms markets of India and Africa,” said Bundeep Singh Rangar, Chairman IndusView Advisors Ltd, the India-focused cross-border advisory firm. “This one deal worth $23 billion will almost match the value of the 280 cross-border mergers and acquisitions last year at $25 billion. It marks the grand entry of India as an acquirer in the international telecoms industry, just as previous years saw India Inc. buy into international steel, auto and IT industries.”

“It shows what a catalyst a stable government with an unencumbered policy toward economic liberalization can be,” he added. The Indian National Congress led United Progressive Alliance (UPA) won a second term in Parliament with an increased majority, in an affirmation of its economic policies of continued liberalization and desire for political stability and continuity.

The merger of Bharti and MTN will be India’s biggest cross border deal at almost twice the value of the acquisition of U.K.’s top steel maker Corus Group Plc for $12 billion by India’s Tata Steel Ltd in January 2007. It also surpasses the acquisition of Hutchison Essar Ltd, India’s second largest GSM mobile service provider then by the U.K.’s Vodafone Group Plc for $11 billion, by more than a similar margin.

The Bharti Airtel and MTN Group combine will create a leading emerging market telecom operator with more than $60 billion in market value, revenues of about $20 billion and over 200 million subscribers. The combined entity will be amongst the top five service providers globally with operations spanning more than 23 countries in Asia, Middle East and Africa.

The new entity will enjoy better pricing power in the market, lower costs on account of shared infrastructure and resources, better purchasing power with suppliers, doubling up of subscribers to 200 million that will gradually result in more average revenue per user (ARPU) as new mobile applications and services are offered to them.

Global telecom companies are drawn to India’s market estimated to grow to more than 650 million subscribers by 2012 from 360 million currently as 10 million new subscribers are added each month. Africa’s telecommunications growth is driven by its 360 million mobile users who account for 90% of all subscribers, growing at about 40% per year.

The telecommunication sector has been a significant driver of merger and acquisition (M&A) deals in India accounting for the highest share of deals at 18.6% and 22% during the last two years with values of $5.7 billion and $11 billion in 2008 and 2007, respectively.

“The deal will add the much needed traction to the deal flow in the country this year encouraging other companies to pursue their growth ambitions that had been stalled owing to the downturn,” added Rangar.

The total number of M&A deals during the first four months of 2009 at $2 billion against $9.43 billion during the corresponding period last year illustrates the impact of the economic slowdown.

The string of investments in Indian telecom companies since last year, including, Tata Teleservices Ltd, the telecommunication services arm of India’s largest private sector diversified Tata Group by NTT DoCoMo, Inc., the largest Japanese mobile telecom service provider; Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; Gulf-based Bahrain Telecommunications Co’s acquisition of 49% stake in S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd for $225 million; and now, South Africa’s largest telecom company MTN Group’s renewed attempt to enter the Indian market – are an indication of the fact that there is ample room to enter this market, at least inorganically.

Other international telecom service providers seeking an India entry include Kuwait-based Zain Group, Qatar Telecom, Italy-based Telecom Italia SpA, among others. However, some of the global mobile telecom service providers such as Telefonica SA of Spain, French mobile telecommunication services provider, France Telecom and Deutsche Telekom AG of Germany are among those missing out on the opportunity to tap a market that is projected to offer overall mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, according to estimates.

Such growth trends bring with it corresponding increase in investments as government estimates suggest that the overall telecommunication sector will need $73 billion over the next five years to achieve a tele-density of up to 45%. And, a major chunk of the investment is expected to be realized through Foreign Direct Investment (FDI), particularly in the area of mobile communication.

“The Indian National Congress led government’s pledge to revive the economy from the slowdown with continued liberalization will likely see more regulatory reforms toward attracting investments in the telecom sector, among others,” added Rangar

It becomes significant as the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; and Loop Telecom, a BPL Mobile Communications group company, which are likely targets – but within the regulatory purview of the overseas entity’s stake in the domestic company not to exceed 74%.

2009-05-18T16:40:00.003Z

BOMBAY STOCK EXCHANGE'S SENSEX WELCOMES UPA WITH HIGHEST SURGE THIS YEAR

India’s Dalal Street, home to the Bombay Stock Exchange was a busy address on Monday, May 18th creating history with euphoric investors leading the Sensex, the benchmark index to surge more than 17% or 2,099.21 points higher at 14,272.62, the highest ever increase in a day anywhere in the world, so much that the trading had to be halted for the day. The Sensex touched the upper limit twice, earlier opening at 10.73% or 1,305.97 points higher at 13,479.39.

“The overwhelming response on the first trading day following the verdict of the people in the General Elections for the 15th Lok Sabha or the House of the People, in favour of the Indian National Congress led United Progressive Alliance (UPA) is an affirmation of its economic policies of continued liberalization and the stock market’s vote for stability and continuity.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.

“India’s high gross domestic savings rate of 30.7% compared to the 1.8% in the U.S. and 1% in the U.K. is indicative of the lower propensity to invest among Indian households and hence signifies the scope of potential investments that can move in to the Indian Equity Markets if these households are assured stability and increased return on investments.” says Rangar

“Increasing Indian households exposure to the Stock markets along with the Foreign Institutional Investors (FIIs), who made net investments worth $74 million in equities so far this year and other investors could result in the BSE’s Sensex scaling new highs.” added Rangar

The first signs of the investors’ confidence in the expected outcome of the elections came on Friday, May 15, as Foreign Institutional Investors (FIIs) made a net investment of $205 million (Rs 983.86 crore) while domestic institutional investors made a net investment of $90 million (Rs 432.47 crore) in equities, taking the BSE's benchmark index to cross 12,000 level.

Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07, under the current Congress led government, before slowing down on account of the worldwide recession.

The outcome of the General Elections will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.

“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.

The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.

“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar

Investment in Energy

India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.

“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar

Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.

Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.

Infrastructure: Foundation of Growth

India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.

Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.

“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar

The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minister responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity

Telecom: Dial India For Growth

“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar

To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.

The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.

Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.

Indian Pharma: Prescription for Growth

The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.

The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.

Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.

With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.

2009-05-16T17:53:00.002Z

UPA TO CONTINUE IN GOVERNMENT: ADVANTAGE REFORMS AND DEVELOPMENT

--- Potential Investments Worth $700 billion To Go On Track

--- Power & Energy, Infrastructure, Telecommunication and Pharmaceuticals To Drive The Next Wave Of Investments

If the trends emerging from the counting of votes are to be believed in the General Elections for the 15th Lok Sabha or the House of the People, the Indian National Congress led United Progressive Alliance (UPA) will most likely be the victor that would be an affirmation of its economic policies of continued liberalization.

The results so far indicate that the United Progressive Alliance (UPA) with 48% seats out of 543 will likely form the government with support from smaller regional parties. The outcome will usher a new wave of confidence globally in the Indian economy with expected ramp up in economic activity, brought about by the urgent need to develop world class infrastructure, globally competitive pharmaceutical sector, telecom and augmentation of power generation.

“The government will have its task cut out with more than $700 billion worth of investments to be channeled in to India’s infrastructure, power, telecom and pharma sectors over the next five years to provide the country a strong foundation to achieve the aspirational growth of 10%.” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, the India-focused cross-border advisory firm.

The General Elections this time witnessed a three-way contest between the Indian National Congress led United Progressive Alliance (UPA), Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA) and Third Front, comprising of the Communist Parties and smaller regional parties, attempting to offer another alternative.

Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.

“The Government would be best served if it continued and augmented the ‘India Shining’ policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.” says Rangar

Investment in Energy

India’s power deficit entails an estimated investment of up to $150 billion by 2012. To meet the growing demand, the government plans to add 90GW over the same period to its existing generation capacity of 145GW.

“India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. starts to show the benefits of investments coming in to the country.” says Rangar

Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.

Favourable policy initiatives could see global energy companies such as Areva SA, Alstom SA and Électricité de France (EDF) of France; the U.S.-based General Electric Co., Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others vying to enter India’s nuclear energy market.

Infrastructure: Foundation of Growth

India's challenge is not only to augment its antiquated infrastructure, but also to build new infrastructure to keep up with its $1 trillion economy and the aspirations of its 1.2 billion population that grows by 16 million people each year.

Recognising that good infrastructure are a vital pre-requisite to build a strong nation, infrastructure development has been accorded key priority for the 11th Five-Year-Plan for the years 2007-2012 and the 12th plan period 2012-2017 with projected investment requirement of $500 billion and $1.5 trillion respectively by the Prime Minister's Committee on Infrastructure.

“The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages announced last year had set the ground for how the alliance was approaching the General Elections.” said Rangar

The government’s spotlight on Infrastructure Development heralds the importance it attaches to the sector as a means to counter the prevailing economic woes. The minster responded to an urgent demand for new infrastructure, announcing that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. Estimates suggest that a third of this investment will come from private companies, paving the way for unprecedented investment opportunity

Telecom: Dial India For Growth

“India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively add about 10 million new subscribers a month, which is more than the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.” explains Rangar

To ensure quality service to match the growing subscriber base and achieve the target of 45% tele-density, the telecom sector is estimated to need about $73 billion during the next five years.

The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.

Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.

Indian Pharma: Prescription for Growth

The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.

The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.

Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business.

With such sectoral growth indicators, the need of the hour is to take existing initiatives to the next level of implementation and completion, with enough scope of ramping up and innovation.

2009-05-14T10:14:00.001Z

ECONOMIC AGENDA FOR THE NEW GOVERNMENT

* The New Government Expected To Give Further Stimulus To Economy.
* Urgent Need To Boost Investments, Particularly In Infrastructure.
* Challenge Of Keeping The Fiscal Deficit Under Check.
* A Number Of Policy Reforms On The Table

The policy initiatives of the new government are certainly going to determine how quickly the Indian economy will recapture its high pace of growth. There are a number of pending economic issues that need the urgent attention of the new policymakers. The real challenge for the new government lies in stimulating the economy on the one hand, and at the same time controlling the fiscal deficit on the other hand. The fiscal deficit has already reached near 12% of the gross domestic product (GDP), which is clearly not sustainable.

Waiting For The Third Stimulus:

After the announcements of two stimulus packages by the outgoing government in December 2008 and January 2009 respectively, the planning commission Deputy Chairman Montek Singh Ahluwalia had suggested that the country will need a third stimulus, which can be announced by the new government. One needs to wait and watch what kind of fresh stimulus comes from the new government now. For the purpose of countering the economic slowdown, the government can reduce corporate taxes and remove income tax surcharge. As a measure to push the rural demand, the scope of the National Rural Employment Guarantee Scheme can also be extended so that more people would come under its net. A further push to infrastructure can also be a part of the fresh stimulus package.

Continuation Of The Economic Reforms:

There has been a consistency in pursuing the economic reforms during the past 10 years, although there was a change of guard in 2004 when the United Progressive Alliance (UPA) replaced the National Democratic Alliance (NDA) at the centre. The dependency of UPA on the left parties was a stumbling block for UPA in pursing the reforms at full pace, yet the UPA government managed to implement a number of reforms. The continuation of the reform process, not in words but in action, is required to keep the engine of growth turned on.

Focus on Infrastructure:

There is a general consensus that infrastructure development has to be accorded key priority. The Prime Minister's Committee on Infrastructure has already projected earlier that India will require investments worth $500 billion and $1.5 trillion for the 11th Five-Year-Plan (2007-2012) and the 12th plan period 2012-2017 respectively. The government had announced in the Interim Budget presented in the Parliament in February 2009 that 9% of the country’s GDP will be spent on infrastructure by 2014, from the current 5%. If the new government successfully pursues this path, it will be a great push to the growth rate of the country.

Reining in the fiscal deficit:

India’s total fiscal deficit including the central and state deficits is estimated to reach at about 12% of GDP, which has become a major worry for the country. Most economists believe that the new government will have to take immediate steps to control the situation. In fact, the global factors have derailed India’s fiscal reform process that was going very smoothly as per targets during the past four to five years. When the global crude oil prices moved up very sharply in 2008, it resulted in highly inflated subsidy bill – particularly for the oil subsidy and fertilizer subsidy. Then, the global slowdown impacted the growth rate of India too, and resulted in lower than expected tax revenues. Also, the Indian government decided to revise the salaries of its employees by a fat margin at each level. A loan waiver programme for poor farmers also put a heavy burden on the exchequer. And, in order to counter the slowdown, the government came out with two stimulus packages. While all these steps were required and aimed at benefiting large sections of the society as well as the economy, these measures certainly inflated the fiscal deficit to such a high level that was not seen in the recent history of India.

Now, the new government will have only two ways to control and reduce the fiscal menace – reducing its expenditure and increasing the revenues. Both the options are not easy at the moment. At a time when the Indian economy has considerably slowed down, the tax revenues can’t be expected to increase. Increasing the tax rates will certainly not be a wise decision, as history suggests that tax rate hike in troubled period for economy always turns out to be counter-productive. R.K. Gupta, Managing Director of Taurus Mutual Fund that manages the equivalent of more than $100 million of stocks, warns that while a tax rate hike may lead to more tax evasions and ultimately not increase the tax revenue for the government, it might actually reduce the growth rate of the economy further.

On the other hand, reducing the expenditure is easier said than done. A systemic change aimed at expenditure reforms is the need of the hour. Dr. D.K. Joshi, Director and the Principal Economist at Mumbai-headquartered rating agency CRISIL said that as long as the growth rate was high and tax revenue was good, the government managed to run its business even without expenditure reforms, but it couldn’t be ignored any more. He said, “The new government would have to clearly spell it out how it plans to curtail its expenditures. Also, it would have to chalk out a clear roadmap regarding stimulus packages. How much stimulus it wants to provide and for how long? And then, how it plans to revert to fiscal prudence?”

PSE Disinvestment: A Right Prescription

The government has an option of selling its shareholding in a number of public sector enterprises (PSEs) to private sector, which can bring it much needed money. But commencing the disinvestment programme is a politically sensitive issue and reaching a consensus among the political parties is difficult. Also, even if the government manages to pursue this programme, it will have to use the proceeds very prudently. As Dr. Joshi warns, the proceeds of disinvestment should be used strictly for infrastructure creation, not for merely giving subsidies.

Goods & Services Tax

A unified goods and services tax (GST), a major reform of indirect taxes in India, is already proposed to be introduced from April 01, 2010. It’s advisable to have a single tax rate for all goods and services barring few exceptions across the country. Since there is not much time left, the new government should immediately chalk out the detailed implementation plan for the same. It shouldn’t be a difficult task because generally there is a political consensus on this issue. The Indian industry has already welcomed this initiative and is keenly waiting for its implementation.

Reducing Petroleum Subsidy:

The retail prices of petroleum products are determined by the Government of India due to political considerations. The situation caused a major trouble for the economic health of the government last year when the crude oil prices sky-rocketed in global markets. The oil marketing companies, most of them majority-owned by the government, were forced to sell products at their retail outlets at prices much below cost. It caused havoc on their balance sheets and almost every oil marketing company stalled all kinds of investments. Now, post elections, it will be politically easier for the government to opt for market-linked prices. As the global crude oil prices have cooled off considerably from their peak levels, linking the retail prices to market conditions won’t cause any major upward revision in the retail prices. Hence, it could be the best time for switching to market-linked prices from the administered prices

2009-05-14T10:08:00.001Z

REVIVAL TRENDS: INDIA SHINING

If historical patterns are anything to go by, the voting in of the 15th Lok Sabha or the House of the People, the directly elected lower house of the Parliament of India, will mark a starting point for a sharp ramp-up in economic activity for the country. Economic activity, as measured by industrial production index, had increased immediately after five elections out of seven polls since 1984, as political stability provided a platform for economic growth.

Economic activity has risen consecutively following the last three elections held on 1998, 1999 and 2004. A comparison of industrial production (IP) data before elections and six months after elections, shows that on five occasions, the IP index rose by 20-80 basis points, according to data from Goldman Sachs Global ECS Research.

The Interim Budget for the financial year 2009-10 announced in February by the Finance Minister of the ruling United Progressive Alliance (UPA), focused on infrastructure development, easing of Foreign Direct Investments (FDIs) norms and economic stimulus packages that set the ground for how the alliance was approaching the General Elections.

The new Government that comes in to power would be best served if it continued and augmented the “India Shining” policies that currently sustain a Gross Domestic Product (GDP) growth of more than 7% as India continues to defy negative GDP growth seen in many Western economies.
Such growth initiatives have led to an economic revival in key sectors like steel, cement, automobile, food and beverages and fast moving consumer goods (FMCG) (See Vol 4 | Issue 3 ‘Clearing The FDI Highway’) that are best not derailed.

2009-05-14T10:04:00.001Z

GENERAL ELECTIONS: THREE-WAY TUSSLE

India’s month long General Elections, which will decide the political framework of the next government, is turning out to be a three-way contest.

The tussle for power used to be bi-polar one between the two largest national political alliances, the Indian National Congress led United Progressive Alliance (UPA) and Bharatiya Janata Party (BJP) led National Democratic Alliance (NDA). Now this has turned to be three-way one with a Third Front, comprising of the Communist Parties and smaller regional parties, presenting another alternative. An emerging power broker is likely to be the Bahujan Samaj Party (BSP), representing low-caste interests, that runs the state government in India’s largest province Uttar Pradesh. It is likely to win significant seats.

The Communist Parties emerged as a prominent force following their intense opposition to the Indo-U.S. Civil Nuclear Agreement that threatened the survival of India’s ruling coalition government of the United Progressive Alliance (UPA) last year.

This three way contest, however, has a bi-polar implication. On the one hand, the UPA and the NDA alliances have the experience of successfully running a National Government that propelled India to grow its Gross Domestic Product (GDP) more than 9% in recent years. On the other hand, the inexperienced Third Front has never been able to provide a stable government having only ever been in power for less than half of any full five-year term. Moreover, they are likely to be less inclined to open up India’s economy that has been turbo-charged over the past decade. Election results are due to be announced on May 16th.
Both the Congress and BJP led governments have successfully accelerated India’s GDP growth rate to about 7% today from 1.4% in 1991-92. This momentum peaked at 9.7% in the fiscal year 2006-07 before slowing down on account of the worldwide recession.

2009-04-27T15:12:00.004Z

INDIAN PHARMACEUTICAL: RIPE FOR CONSOLIDATION

India

’s Pharmaceutical Sector Growing Fast Both In Domestic And Exports Markets

· Up To 50% Lower Costs Make India An Attractive Production Hub

· A Highly Fragmented Domestic Market Calls For Consolidation In The Industry

The Indian pharmaceutical industry is characterised by the twin benefit of strong domestic consumption growth on the one hand and robust export opportunities on the other. At the same time, the intense competition in a highly fragmented market is posing a great challenge too. The stage is set for the next phase of growth accompanied by consolidation. This stage will see traction owing to the global meltdown of equity markets that has brought the valuations at very attractive levels.

With the increasing need of capital for sustaining the growth momentum or even sustaining in the business due to the highly competitive environment and limitations on the ability to introduce new drugs due to the new patent regime, a number of Indian pharmaceutical companies will find it difficult to pursue the growth path on their own. Such companies will be ideal candidates to join hands with strong multinational companies. The acquisition of India’s largest drug-maker Ranbaxy Laboratories by Daiichi Sankyo Company Limited, one of the largest pharmaceuticals companies of Japan last year is an apt example in this context.

The foreign pharma companies already operating in the Indian market are also trying to increase their stakes in the domestic subsidiaries, which indicates the growing importance of this market for them. In the last week of March, Swiss firm Novartis International AG and Pittsburgh-headquartered Mylan Inc announced plans to significantly hike equity stakes in their Indian subsidiaries. The leading multinational pharmaceutical companies are increasing their focus on emerging markets such as India and China in their growth plans, as pointed out by a global survey of top 15 pharmaceutical companies conducted by Ernst & Young, one of the largest professional services firms.

Export Becoming Major Growth Driver

Pharmaceutical industry in India is showing a good resilience in the current phase of slowdown both in the domestic and export markets. But export has become an important growth driver for this industry in the recent years with more than 50% of the revenues coming from overseas markets, particularly the U.S. and Europe. The Global recession has impacted India’s drug exports only marginally, which is estimated to reach at $8.25 billion in the financial year 2008-09 against the earlier estimate of $8.97 billion, according to the Pharmaceutical Export Council of India – an organisation set up by the Government of India. The growth rate of pharma exports in 2008-09 was estimated at 23%. The industry, however, is expected to have slightly lower growth in exports as revealed in a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI), one of the oldest industry chambers in the country with a nationwide membership of more 1,500 corporates and 500 chambers of commerce and business associations. The FICCI survey has predicted a 16% increase in India’s pharmaceutical exports, while most of the other industrial sectors expect a negligible growth or contraction during 2009-10.

Exponential growth for Indian pharma exporters is expected as many high value drugs are going off-patent. It’s estimated that over the next five years, the global pharmaceutical companies are set to lose about $100 billion in sales due to such drugs going off-patent. Indian companies are well poised to take advantage of this situation, owing to the competitive advantage in generic drugs business. Basic production cost of drugs in India is up to 50% lower compared with the established markets such as the U.S. and the costs of U.S. Food and Drug Administration (FDA or USFDA) approved plants in India are 30%-50% lower.

Indian companies are continuously increasing their presence in the U.S., a $440 billion market that constitutes around 47% of the global pharmaceutical market. In February 2009 alone, the Indian companies (along with their subsidiaries) large and mid-sized, together have secured approvals for 15 Abbreviated New Drug Applications (ANDAs).

Global rating agency Fitch Ratings Ltd., recently commented that the exports of low-cost Indian generics are going to benefit due to the weak global economic environment and the weaker rupee. Similar factors will also generate greater demand for low-cost contract research and manufacturing activities (CRAMS) of the Indian firms.

Strong Domestic Growth

Drug sales to retail consumers in India grew by 9.8% to $6.98 billion (Rs.34,000 crore) in the calendar year 2008, according to research firm ORG IMS Research, a joint venture of AC Nielsen ORG-Marg and the U.K.-based IMS Health. The growth rate in 2008 was lower than 13.4% registered in 2007, due to a dip in the second half of 2008. These figures are compiled from the data collected from wholesalers and don’t include the drug sales through hospitals estimated at about $1.4 billion (Rs.7000 crore) per annum. After a decline of 1.2% in October 2008, the monthly retail drug sales has improved significantly in the following months with the growth rate of 6.8% in November 2008, 13.3% in December 2008, 14.4% in January 2009 and 13.3% in February 2009, respectively.

The domestic market of Indian pharmaceutical industry is likely to register 12%-13% growth in 2009, only marginally lower than the earlier projections of 15% as an impact of macroeconomic conditions, according to ORG IMS Research. The impact of macroeconomic factors is much less on the Indian companies compared to the global peers. In the next 4-5 years, this industry is expected to continue to grow at more than 10% to touch the $30 billion mark by 2020. In the long term, the domestic consumption is expected to keep growing at a healthy pace, because currently India’s healthcare spending is only 5.6% of the country’s gross domestic product (GDP), which is among the lowest globally.

The domestic consumption of drugs is bound to increase as the necessity of drugs will increase with time and they will become more affordable for a larger population. The necessity will increase with the rising population and lifestyle disorders making people more vulnerable to ailments such as cardiovascular diseases and diabetes. Secondly, medicines will become more affordable to a larger number of people as the size of India’s 300 million middle class is rapidly increasing and the income levels are also going up.

Highly Fragmented

The domestic pharmaceutical market is quite fragmented with the top five companies commanding only 22% market share. Cipla Ltd, has become the largest and the fastest growing company among the top five companies, outclassing Ranbaxy Laboratories Ltd. Even the top 20 companies have a total market share of about 57% only in contrast to the global drug market dominated by the 10 largest companies that account for about 40% of global sales.

India’s Domestic Pharmaceutical Market (12 Months Ended January 2009)
Company	Size ( $ Billion)	Market Share (%)	Growth Rate (%)
Total Pharma Market	6.9	100.0	9.9
Cipla	.36	5.3	13.4
Ranbaxy	.34	5.0	11.5
Glaxo Smithkline	.29	4.3	-1.2
Piramal Healthcare	.27	3.9	11.7
Zydus Cadila	.24	3.6	6.8
Total of Top 5	1.53	22.1	--
Source: ORG IMS

An Active Sector For M&A And Private Equity Deals

Pharmaceutical, Healthcare & Biotechnology was one of the busiest sectors on the deal street of India in 2008. It was second in terms of total value with $5.57 billion, marginally below the Telecommunication sector which had total transactions worth $5.78 billion, according to a report of consulting firm Grant Thornton. In terms of volume, the Pharma sector had 57 deals, second to 102 deals in Information Technology & IT-enabled Services sector. The $4.60 billion acquisition of Ranbaxy Laboratory, India’s largest drug-maker, by Japanese firm Daiichi Sankyo Co., Ltd was on the top of the table of India’s largest deals in 2008. Out of the total 57 M&A deals in the sector, 17 deals were domestic.

Private Equity (PE) firms have also been active in the pharma sector in 2008 with total 22 PE deals worth $337.41 million. The average PE deal size for the sector in 2008 was estimated at $15.34 million, 20% higher than $12.82 million in 2007. Narayana Hrudayalaya, one of the world's largest pediatric heart hospitals, which received a funding of $100 million, was on the top of PE deals chart of 2008 for the sector.

2009-04-27T15:07:00.002Z

INDIAN PHARMA: PRESCRIPTION FOR GROWTH

The Indian Pharmaceutical sector is positioning itself to be among the top five centres of global innovation as the Department of Pharmaceuticals (DoP), Government of India outlines its roadmap for the sector up to the year 2020 (Vision 2020). It foresees investments of about $2 billion annually, under the public-private partnership model.

The initiative will open avenues of growth for global pharmaceuticals companies and fuel the next wave of mergers and acquisitions (M&As) in a market where consumer spending on healthcare increased to 7% in 2007 from 4% of the Gross Domestic Product (GDP) in 1995 and is expected to rise to 13% of GDP by 2015. India also offers the benefits of low cost research and development (R&D), a domain in which it is estimated to capture about 10%-20% share of the world’s R&D business by 2020 from less than 1% currently.

Expansion by global pharmaceutical companies in to emerging markets like India becomes imperative as about $103 billion worth of patented drugs will go off patent in the next few years. This will further hit the already sagging fortunes of global pharma companies which are trying to augment their revenues by acquiring or aligning with companies in the generics business. The acquisition of India’s largest drug-maker Ranbaxy Laboratories Ltd by Daiichi Sankyo Company Limited, one of the largest pharmaceuticals companies in Japan last year, is an apt example in this context. (See our Special Report for an overview of the sector.)

2009-04-27T15:04:00.000Z

FDI: DESTINATION INDIA

India continues to enjoy a high level of confidence among overseas investors who have invested about $24 billion during the first 10 months of the financial year 2008-09, up 66% compared to the corresponding period last year. In contrast, worldwide, foreign direct investment (FDI) fell 21% last year to $1.4 trillion, estimates the United Nations Conference on Trade and Development (UNCTD).

In the month of January 2009 alone, FDI inflows worth $2.74 billion represented a rise of about 55% year-on-year. China, by contrast, saw a 33% drop in FDI compared to the same month last year as it’s manufacturing-based economy was more negatively affected by tightening global credit, recession and falling corporate profits.

India is expected to close the financial year ended March 31, 2009 with $28 billion of FDI against inflows of $24.5 billion in the previous year. If reinvested earnings of foreign companies are taken in to account, that figure is expected to increase to about $38 billion, up from $34.3 billion in the previous fiscal year.

2009-04-27T14:59:00.001Z

G-20 LONDON SUMMIT: EMERGING ECONOMIES FOCAL POINT

The G-20 London summit on April 2, 2009, part of the annual forum of the 20 largest economies that convenes to review the global trade and economic scenario, marked the recognition of the central role that the emerging economies will play in the revival of the global economy.

The financial crisis that gripped the global economy since last year is expected to result in a drop of 9% in global trade in 2009, according to the World Trade Organisation estimates. The developed countries’ exports are set to fall by as much as 10%, while developing countries will see a marginal contraction of 2%-3% in their shipments.

The G-20 shunned protectionism across the board to promote global trade and investment. The forum extended a $1.1 trillion for international credit and additional $250 billion through the International Monetary Fund (IMF) as part of the few decisive steps to revive the global economy. This capital infusion will benefit the emerging economies like India and China, particularly in the services exports. The two countries figure among the top 10 in services exports, with China contributing 3.7% at $137 billion closely followed by India contributing 2.8% at $106 billion of the world’s total in 2008.

G-20 itself is a manifestation of emerging economies with more weightage in the global economic affairs, as compared to the G-8, a group of eight largest industrialized nations. Some assertions, however, such as the regulations to curb tax havens, could negatively impact capital flows into emerging economies.

2009-04-15T08:38:00.000Z

TECH MAHINDRA BECOMES NO 4 IN IT COS' LIST

Maimed and left gasping for a lifeline, Satyam Computer Services has finally found its new knight in shining armour, Tech Mahindra (TechMa).

The bidding process for the beleaguered software firm culminated on Monday with TechMa emerging as the highest bidder with an offer price of Rs 58 per share. TechMa's price outbid other suitors, engineering giant Larsen & Toubro and private equity player Wilbur Ross, by a comfortable margin. L&T's bid of Rs 45.90 per share and Wilbur Ross' Rs 20, were not even within striking distance of TechMa's deal-winning bid.

The Economic Times

2009-04-09T19:19:00.002Z

47 INDIAN COS AMONG FORBES GLOBAL 2000 LIST

As many as 47 Indian companies, led by corporate behemoth Reliance Industries and the country's biggest lender, State Bank of India, have made it to the list of world's biggest 2,000 companies by US magazine Forbes.

The Economic Times

2009-04-09T19:14:00.002Z

MEDIA & ENTERTAINMENT: AN EMERGING HOTBED

Prospects of the Indian Media and Entertainment (M&E) sector estimated to grow to about twice its current size of $11.6 billion by 2013 prompted global media and entertainment companies such as The Walt Disney Company, The Warner Group, Viacom, Inc., Sony Pictures Entertainment, Inc., The Financial Times and the Dow Jones & Co. to enter the market that has grown at a sustained pace of about 15% annually during the last five years by either acquiring a stake or partnering with an Indian counterpart.

Among the most recent expansion plans in India, News Corporation, the world's largest media conglomerate by market capitalization, had announced that it will strengthen its presence in the country by investing more than $100 million to launch six new regional television channels last year.

The potential for growth in India’s M&E sector is underscored by the low penetration base. For instance, the print media with low penetration rate of 38% and the cable & satellite penetration in the country of just about 50% offers a large market that remains to be tapped. See our Special Report highlighting the trends in the sector.

2009-04-09T19:08:00.001Z

TELECOM: DIAL INDIA FOR GROWTH

India’s mobile telecommunication services sector has defied the economic recession. The incumbent mobile telecommunication service providers collectively added 15 million new subscribers in the month of January, which is more than twice the population of Finland, home country of largest mobile handset manufacturer Nokia Corp., taking the country’s total tally of wireless subscribers to 362 million.

The world's fastest-growing mobile telecom services market estimated to reach a subscriber base of about 650 million by 2012, exposes the growth potential for global mobile telecom service providers who are not yet present in India. Such service providers are missing out on opportunities to grab a share of the projected mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18%, while the profitability of their operations in saturated developed markets continue to be under pressure.

The string of investments in Indian telecom companies last year, including, Tata Teleservices Ltd, the telecom services arm of India’s largest private sector diversified Tata Group by NTT DoCoMo, Inc., the largest Japanese mobile telecom service provider of $2.7 billion; Unitech Telecom, the telecom arm of India’s second largest real estate developer Unitech Ltd by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; as well as South Africa’s largest telecom company MTN Group’s attempts to enter the Indian market – are an indication of the fact that there is ample room to enter this market, at least inorganically.

Of significance is the fact that the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview as an overseas entity’s stake in the domestic company cannot exceed 74%.