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Current News(Business Today (India) Via Thomson Dialog NewsEdge) Beyond 15K Youll be rich in the long term, but watch out for gremlins now. Mahesh Nayak The seventh day in the seventh month of 2007 was labelled Lucky Saturday globally, with millions opting to tie the knot on that day. But as far as punters were concerned, Lucky Saturday was actually a Friday. For, it was in the afternoon of the sixth day of July that the Bombay Stock Exchanges (BSEs) benchmark barometer, the Sensex, hit 15,000 for the first time ever in its 133-year history. It was time to celebrate all right, but traders are realising that as the Sensex keeps headed northward, its taking its time to scale new heights. Consider: For the Sensex to surge from 13,000 to 14,000 took just 36 days. The move from 14k to 15k, however, took all of 215 days. There were a few other dampeners, too. For instance, of the 30 shares that make up the Sensex, only 12 outperformed the benchmark, with the other 18 underperforming on the ride from 14k to 15k. Amongst those to disappoint were Bajaj Auto (down 23 per cent), Tata Motors (down 19 per cent), ITC (down 18 per cent), Hindustan Unilever (down 16 per cent) and Cipla (down 16 per cent). On the other hand, Larsen & Toubro was the biggest gainer among index stocks, sky-rocketing by 64 per cent. Other stocks that contributed to the Sensex hitting 15k include Bharti Airtel (up 36 per cent), Reliance Industries (up 34 per cent), Tata Steel (up 33 per cent) and ICICI Bank (up 27 per cent). Says Rajat Rajgarhia, Head of Institutional (Research), Motilal Oswal: Unlike when the index hit 14k, this time the mood in the dealing room was not jubilant because of the fewer number of stocks that participated in the rise. Its no more a buyers market, adds Rajesh Boghani, a dealer at Parag Parikh Financial Advisors. The market has become completely stock-specific. Companies who beat street expectations will see their stocks zooming. But if the mood is still buoyant on the Street, its simply because of the money waiting to enter Indian equity, even at these levels. Its simply liquidity. The flow of currency into the market from all corners has led to the rally, says Ketan Karani, Vice President (Research), Kotak Securities. There is no euphoria and the rise is on pure fundamentals. With order book of corporate India full till 2010-11, FIIs are buying Indian paper, which compared to most of the other emerging markets is still lucrative. The infusion of capital from FIIs is also because of the strong rupee. And theres anticipation that further weakness in dollar will give them an extra edge to make some currency gains. Says Boghani: The recent rally was on two counts. One is on anticipation of the IT results. Despite the rupee appreciation, the Street expects the IT results to beat expectations. Second, FII flows are still strong. Since 14k (on December 5, 2006) to 15k (on July 6, 2007), the FIIs have infused over $6 billion (Rs 25,917.40 crore). This is nearly three-fourths (72 per cent, or $8.4 billion) of the money pumped in by FIIs between January 1 and December 4, 2006. Some cooling off on the inflation and interest rate front, too, has provided investors a shot in the arm. Price/earnings multiples (P-Es) too still look attractive, at 21.6 times (trailing) earnings with the Sensex at 15k. In contrast, the Sensex P-E stood at 23 times at 14k levels. Yet, the worry is that a dip in earnings, courtesy a base effect and a rapid rupee appreciation may soon make Indian stocks look expensive. According to Motilal Oswal Securities, the Sensex for 2007-08 should record an 18 per cent growth in net profit and a 17 per cent growth in 2008-09. (Thats down from a 31 per cent growth in earnings in 2006-07). Thats why the likes of Rajgarhia are a bit cautious about the nearer term future. In the next nine months, we expect the Sensex to hover in the range of 14k to 17k, he says. Over the longer term though, almost everybody is bullish. I dont see a problem in the Indian markets. Its liquidity-driven and some correction will not hamper the market, says Karani. Adds Rajgarhia: If earnings growth is sustained, we may see the index touching 23k before 2010. Nobodys scoffing, not anymore. Working up a Lather Wipro Consumer is now Indias third-largest FMCG company. Azim H. Premji, chairman, Wipro, has always bristled at suggestions that his non-it portfolio, which ranges from bulbs and electrical switches to soaps, furniture and honey, is ever likely to be either spun off or even sold. Given that till recently it was the it chunk of the pie that brought in nearly 80 per cent of Wipros $3.5 billion revenues and 90 per cent of Wipros profits, several outsiders have felt that the non-it business has been a drag on the company. Premji on each occasion has pointed out that by all financial metrics, including profitability and return on capital employed, Wipro Consumer Care & Lighting has done remarkably well compared to peers in the Indian industry. So, those familiar with Premjis thinking were not surprised that Wipro coughed up $246 million (Rs 1,010.2 crore) to acquire Unza Holdings, a Singapore-based personal care company with operations in 40 countries. In fact, after the acquisition of Spectramind in 2002 (now Wipro bpo) for $95.5 million (worth Rs 448.5 crore then), this is the second-largest acquisition made by the company. What is more, add Unzas revenues of Rs 683 crore to Wipro Consumers Rs 818 crore, and Premji suddenly finds himself at the helm of Indias third-largest Indian fast-moving consumer goods (FMCG) company, after Nirma and Dabur (without Unza, Wipro Consumer would be at #6). Vineet Agrawal, President, Wipro Consumer Care and Lighting, says: This acquisition will double our addressable market size. Unza has a large portfolio of strong brands catering to Asian consumers. We will examine which brands are relevant to India. Agrawal adds that Unza will be managed by the existing team, and changes will be minimal. -Venkatesha Babu No Pie in the Sky Kochi to Singapore at Rs 1,600? Thats without the taxes. Flying into southeast Asia is getting cheaper than domestic air travel. Recently the Bangkok-based Nok Airways announced a Bangalore-Bangkok round-flight for Rs 10,000 (inclusive of taxes). Now its the turn of another low-cost carrier, this time from Singapore, to announce mouth-watering fares. Singapore-headquartered Tiger Airways is flagging off three flights a week from Kochi to Singapore, and four flights a week from Chennai to Singapore. A Kochi-Singapore round trip will set you back by a little over Rs 10,000, inclusive of taxes. Strip off the taxes, and a one-way trip works out to just Rs 1,600. This makes the fares cheaper than Air India Express by at least Rs 5,000 and cheaper than Singapore Airlines by Rs 42,000. Though the latter could come down on its pricing, travel agents have not received any intimation of slashed fares in India. Tiger Airways is a joint venture between Singapore Airlines, Indigo Partners, Ryanair (another low-cost airline) and Temasek. Says Tony Davis CEO Tiger Airways: We will be low-cost through aggressive cost control and by outsourcing non-core activities such as maintenance. Tiger Airways has received permission to fly six cities in India from Singaporethese include Goa, Kozhikode and Kolkata. The no-frills player also believes in using a single aircraft type, the A320, and is buying 50 more of these. Meantime, Malaysia-based low-cost player, Air Asia, is trying to enter India with aggressive fares. A Chennai-Kuala Lumpur round trip is expected to cost Rs 4,500 (excluding taxes), which would make Air Asia the lowest-cost airline on this route, by far. -Nitya Varadarajan Exit Danone, Enter Kraft? Danone may find a taker for its stake in Britannia. If Nusli Wadia was looking for a new partner for Britannia Industries, he didnt have to wait too longand didnt have to do too much. His current joint venture ally, Groupe Danone of France, is in dialogue with Kraft Foods of the us to sell its biscuits and cereal products portfolio that includes brands like LU, Cracotte and Petit Dejeuner. This will be for the sale of Danones biscuits and cereal products business across the world except India and in Latin America. So, what happens to Danones stake in Britannia? The French foods giant and the Wadia group each own a 25.1 per cent stake in Britannia. It was just a couple of weeks ago when Danone indicated that it was willing to exit this venture. Both the partners have had an uneasy relationship for a while now and Groupe Danones Secretary General, Philippe-Loic Jacob, told the media recently that he expected the negotiations with the Wadias to end in July. A Wadia group spokesperson says discussions are currently ongoing and should come to fruition by early September. Globally, Danones biscuits and cereal products business registered sales of m2 billion against the companys total revenues of over m14 billion. At an offer price of m5.3 billion, Kraft will be paying a large premium for Danones biscuits and cereal products business. In a press statement, Danone has said that this business has a leadership position in more than 20 countries. In 2006, sales volume reached 6,60,000 tonnes, it added. If Kraft doesnt buy out Danones stake in Britannia, the French corporation may decide to sell it to the Wadias. So, what will be the value of that holding? At Britannias current market capitalisation of around Rs 4,100 crore, Danones 25.1 per cent holding is worth over Rs 1,000 crore. Even if Danone decides to exit at a discount, the Wadias will still end up shelling out a significant amount. There has also been talk of Danone acquiring the Wadias stake, although the Wadia group spoksesperson says the group has no intention of putting its stake in Britannia up for sale. -Krishna Gopalan On the Right Track Players running container trains are crunching delivery times. Last month, when a prominent publisher up north imported its stock of newsprint it did not rush to take delivery of the consignment at Jawaharlal Nehru Port Trust at Nhava Sheva in Mumbaithe entry point for a majority of imports to India. It simply asked its shipping line to move the consignment to Loni in Uttar Pradesh, just on the outskirts of Delhi. The delivery time from Nhava Sheva to Loni? An unbelievable less than 24 hours. The normal time for this delivery can range from anywhere between three and 10 days, depending on the level of congestion at the port. The reason for the swift delivery: The train carrying the consignment was running exclusively for this publisher. It was a full train-load that needed to be transported. So it was easy to provide a customised solution, says Amitabha Chaudhari, Managing Director, India Infrastructure & Logistics (IIL), which delivered the consignment. Functioning under the APL IndiaLinx brand name, IIL is a joint venture between Hindustan Infrastructure Projects & Engineering and Singapore-based Neptune Orient Lines, which runs APL, the liner service that brought the newspaper consignment to India. The company began operations earlier this June. We aim to coordinate the train and our shipping schedules in such a way that the rail transport services become an extension of our liner services, says Chaudhari. Currently, the company is running a train a week and expects to scale it up to three trains a week starting August. APL IndiaLinx is one of the 14 licencees who received approvals to run container trains last year. Others included the likes of Boxtranspart of the JM Baxi Groupand Hind Terminals. Some of them have started limited operations, and others are expected to do so shortly. However, Container Corporation of India (concor) still dominates with over 130 rakes (trains) as compared to the less than 15 owned by private operators. Till the time private operators are able to set up their own terminals, there is not going to be any serious competition in the sector, says A.K. Kohli, former Concor head and now CEO of Adani Logistics, which is expected to launch its services soon. Unsurprisingly, there is a flurry of investment in inland container depots (ICD) by the private operators. Adani is investing in two terminals in Delhi and another one in Ludhiana. APL IndiaLinx is planning a terminal at Panipat with an initial investment of $65 million. Meanwhile, private players are competing on what they know bestprice. The results are apparent. According to industry officials, the discounts at Loni swing up to 20 per cent. Three cheers for privatisation. -Shalini S. Dagar Shifting Gear Ashok Leyland is taking the JV route into sunrise areas. Call it the Nokia spin-off. Some 27 months after the Scandinavian handsets major made its entry into Chennai, another Finnish firm has descended on the southern capital. Alteams, a $1.4 billion maker of cast light metal components for telecom players and, in a smaller way, for the automotive and electronic industries, has struck a joint venture with the Chennai-headquartered Ashok Leyland. But why has a manufacturer of commercial vehicles got into such a JV? Mainly to get an entry into the telecom segment through castings, says R. Seshasayee, Managing Director, Ashok Leyland. We see that automotive and telecom are fast-growing areas and we would like to be involved in both through casting component supplies, he says. High pressure die castings (HDPC) are becoming increasingly popular with auto manufacturers in the country and Seshasayee foresees that in 3-4 years, at least 50 per cent of castings usage would be in HDPC. The 50:50 JV will have a total investment of Rs 335 crore, Rs 175 crore of which will be pumped in by 2008, in the first phase. The Ashok Leyland-Alteams venture is expected to have a turnover of Rs 650 crore in 5-6 years and employ 1,000 people directly and indirectly. Strangely, Ashok Leylands own subsidiary Ennore Foundries, which is making gray iron castings, is not involved in the venture. Ennore Foundries is undergoing a doubling of capacity and has got its hands full, says Seshasayee, who has his sights trained on newer, sunrise technologies. Before the year closes, there would be more such (JV) announcements, he promises. -Nitya Varadarajan The Value Hunters Indias mega-corps are becoming PE players. It isnt just the global private equity (PE) majors like Warburg and Blackstone whove taken a fancy to Indian companies. Some of Indias biggest corporations themselves are setting up PE funds of their own to invest in small and medium enterprises. The likes of Dabur, the Hero group, Ranbaxy, Future Group and the Dalmia group, among others, are spotting investment opportunities in sectors like retail, finance and media. PE broadly refers to investments in unlisted companies. Of late, PE firms have invested even in listed companies with the buyout taking place through a negotiated process. Such investors subsequently cash out through a direct sale to an acquirer or through sale of equity through the stock market via a listing. So, what is driving big corporate houses to PE funding? Explains Gaurav Dalmia, Joint President, Orissa Cement, a part of the diversified Dalmia group: Many of the small companies are growing fast and run by able entrepreneurs. For us its an opportunity to make money in the medium to long term. Dalmia has co-sponsored two private equity funds, India Value Fund (with a corpus of $800 million) and Evolvence India Fund (corpus: $250 million). He has also made substantial investments in his personal capacity or through investment companies. These include significant minority stakes in GVK Power, Feedback Ventures (infrastructure consulting), Indiabulls (financial services) and Parag Parikh Financial Advisory (stock broking). Dalmia isnt the only promoter whos turned investor. The Burmans of Dabur are sponsoring an India-focussed private equity fund, Promethean India. Kishore Biyanis Future Group has launched a $425 million Mauritius-based fund Indivision India Partners, which will focus on consumption and consumption-related sectors like FMCG, media, entertainment and healthcare. It already holds investments in companies such as Capital Foods, VLCC Healthcare, Lilliput Kidswear and Global Hospitals. The Munjals of the Hero Group are also investing along with group companies in various sectors that range from auto components to retail and financial services. Most of these investors are active. Besides infusing capital, they provide support, guidance and strategic inputs to the managements of companies. Says Kishore Biyani, CEO, Future Group: We have a full mentoring team. We advise and guide the management based on our understanding of the market. Adds Dalmia: We are an active investor. We ask the management questions and come up with ideas to run the business professionally. -Rishi Joshi Open Sesame SBI forms a holding company for non-banking activities. Its time to unlock valuein a tried and tested way. The largest bank in the country, the State Bank of India (SBI), is forming a holding company for two of its non-banking subsidiaries, SBI Life Insurance and SBI Asset Management Company. The idea of a separate holding entity is to free up the banks capital for core lending and to also provide a focussed approach to the fast growing financial services businesses. SBI has taken a cue from the holding structure of the countrys second-largest bankSBI itself is the largestICICI Bank, which recently created icici Financial Services, which comprises the life & non-life insurance activities as well as the asset management business. ICICI Financial Services is valued at Rs 44,600 crore. Analysts have pegged the value of SBIs new entity at between Rs 25,000 crore and Rs 30,000 crore. The life insurance business is all set to trigger a hiving off spree in the insurance industry because of its capital-intensive nature and also the mind-boggling valuations prevailing in this six-year-young sector. Like ICICI Banks non-banking subsidiaries, SBIs two ventures have also been performers in the market. In a short span of five years, SBI Life emerged as the only private sector company to come out of the red in 2005-06. The fifth-largest SBI Life, in a partnership with French giant Cardiff, garnered a gross premium of Rs 1,075 crore in 2005-06. SBI Asset Management Company, too, is raking in the moolah with assets under management of over Rs 20,000 crore. The AMC is already the sixth-largest player in the Rs 4 lakh crore mutual fund industry comprising close to three dozen players. The holding company can now raise resources independently either through stake sale to a strategic partner or through an IPO, which was not permitted for standalone insurance ventures due to FDI restrictions. The holding structure to approach the primary market will come as a big relief to insurance subsidiaries like SBI Life and ICICI Prudential Life, both of which are growing at over 100 per cent in terms of gross premium income. We would initially divest around 10 per cent to few strategic investors mainly to do the price discovery, O.P. Bhatt, Chairman, SBI, said at a recent press conference. In the past, ICICI Prudential Life has made over a dozen capital infusions, taking its capital base to around Rs 2,000 crore. Similarly, SBI Life has infused Rs 75 crore as capital this year to take its total capital to Rs 500 crore. Current FDI restrictions limit the foreign partners equity contribution in an insurance venture to 26 per cent. ICICI Banks model of hiving off the non-banking subsidiaries to free up capital and make them financially independent is fast catching on. And who knows, the other biggies like Bajaj, HDFC and Birla may also follow suit shortly. -Anand Adhikari Taking Off: Second Airports Several Indian cities will have a second airport by 2010. Come 2010, the Indian aviation industry will receive the infrastructure boost that it has been asking for. According to the Centre for Asia Pacific Aviation (CAPA), India, by 2010, is expected to have world class infrastructure not only in the six major metro cities but also in most of the 35 non-metropolitan cities. Several cities are in the process of constructing a second airport in addition to the one they already have. These include second airports in Mumbai, Delhi, Chennai, Ahmedabad, Kolkota, Goa, Bangalore and Hyderabad. But will all these mushrooming new airports be commercially viable? Today, the focus is around 11-15 airports. These airports are fully saturated. It is just a question of new markets developing. Besides, new airports will see new revenue streams from shopping malls etc, says Jeh Wadia, MD, GoAir. In addition, the new airports are expected to decongest the jam-packed international terminals at metro cities. CAPA figures reveal that Indian airports handled 25.8 million international passengers in the year ended March 2007. Mumbai handled most passengers (7.3 passengers) registering a growth of 9.2 per cent. Delhi was a close second with 6.7 million passengers, growing at 15.4 per cent. Chennai handled another 2.9 million passengers. Whats more interesting is the growth rate of international passengers in smaller metros and non-metro towns. Bangalore breached the million passenger mark for the first time ever, clocking a growth rate of 46.2 per cent in traffic in 2006-07. Smaller cities like Trivandrum (18.2 per cent), Calicut (17.1 per cent) and Amritsar (19.3 per cent) registered strong rates of growth in global traffic. With international carriers like Tiger Airways set to launch flights from Singapore to Chennai and Kochi, it is likely that traffic in these centres will spike up. -T.V. Mahalingam The Buffett Disciple Mohnish Pabrai invests and gives away like Warren Buffett. Over the last eight years, us-based value investor Mohnish Pabrai has hit the bulls eye several times. But his best bingo moment came on June 29 when the 43-year-old Managing Partner of Pabrai Investment Funds won the bid to dine with legendary investor, Warren Buffett. It was the fifth time that Pabrai, a resident of Irvine, California, had bid to break bread with Buffett. What did the trick this time around was his whopping bid: $650,100, or Rs 2.66 crore, all of which will go to charity. So, sometime later this year or early next, Pabrai (besides his wife, Hiran, two daughters, and fund manager friend Guy Spier, who chipped in for the winning bid, and his wife) will meet up with the Oracle of Omaha at a New York steakhouse called Smith & Wollensky for what could be a three-hour lunch. Whats the first question that Pabrai, who studied computer science at Clemson University, South Carolina, and not an IIT because I am not that smart, will ask his guru? I will express my gratitude for all the learning I have received thanks to him, and how he has been my inspiration for not just how I invest, but live, he says. With $600 million under management, Pabrai, who launched the fund as a hobby but turned pro in 1999 with less than $1 million, isnt as rich or austere as Buffett (our man drives a BMW 6 series, and Buffett, a Cadillac DTS), but he does intend to give back like his idol. Pabrai and his wife Hiran have set up the Dakshana Foundation with the aim of making social investment along the lines of Muhammad Yunus Grameen Bank, except that it wont have a tight contract. Heres the plan: Through Dakshana, Pabrai and his wife intend to give away 2 per cent of their net worth (he is the single-largest investor in Pabrai Funds, which has returned 29 per cent a year since inception) every year. But instead of just giving the money away, they are looking for the most bang for their buck. Ergo, they offer scholarships to poor but bright students who want to get into IIT. Heres where the value investor in Pabrai comes in. He will not fund just any student, but the most needy and deserving. Like Patna-based Anand Kumars Super 30 Group that provides free coaching and accommodation to IIT aspirants from poor families, Pabrais Dakshana will get students from Bihar villages, screen them through an entrance test and move them to Kota for one- or two-year IIT joint entrance exam (JEE) training at private coaching institutes. Pabrai is open to spending up to $2 million a year on this, with each student training costing Rs 30,000 per child per year. Currently, Dakshana, which has just moved into a 1,600 sq. ft office in Kota and is managed by Ramesh Bathija, a 61-year-old former prep tutor and an IIT Madras alumnus, has six scholars, including a girl, Sarita Kumar, who is the first girl from her village in Bihar to try for IIT. To qualify for scholarship, a student must come from a family with less than Rs 7,000 in monthly income, have scored above 75 per cent in maths and science, and pass the foundations written test. Dakshana is trying to tie up with the state-run Navodaya Vidyalaya, which has a school in almost every district, to find potential scholars. Next year, we hope to screen 25,000 students, says Bathija. Pabrai, who has authored a book, Dhandho Investor, on the business philosophy of Americas motel czars, the Patel clan, is making a simple calculation. His iit scholars will earn millions of dollars over their lifetime, and perhaps some of them will want to give back to Dakshanaalthough they are free not to donate to Dakshana at all, says Pabrai. Tragically, Pabrais philanthropy faces only one problem: Finding enough kids who are both brilliant and poor. -R. Sridharan Statistical Comfort? Magically, the HIV infected population in India halves. Last fortnight, when new data relating to the prevalence of AIDS/HIV disease in India was released, the infected population went down from earlier estimates of 5.2-5.6 million to 2-3.1 million people. Those associated with the epidemic had long suspected that the Indian numbers could be below those projected. The new estimates made official this view. But heres the thing: the decline is not in the absolute numbers of those infected. It is just that the estimates of the people who might be infected are down. So what is it: clever semantics or more? Well, it is just that the mode of estimation changed this time around. Earlier, NACO, the nodal organisation for formulation of policy and implementation of programmes for prevention and control of HIV/AIDS in India, arrived at estimates through a random sampling of cases from around 703 sentinel surveillance sites that have been set up in areas that show high prevalence. Each site contributed 400 samples. The drug samples were collected, tested and verified. This database was then extrapolated to the denominator of a billion people to get the figure of 5.2 million people and 0.91 per cent prevalence. Prevalence, defined as the number of current cases per population at risk, has dropped to 0.36 with the new estimates. This time around, apart from the scale-up in the sentinel surveillance sites to 1,122, NACO has used additional inputs from the National Family Health Survey, which is a countrywide community-based household survey. How reliable are these numbers? Very reliable, says K. Sujatha Rao, additional secretary and director general of NACO. Besides Indian experts, the numbers have been vetted by eight leading experts round the world, including UNAIDS, who, CDC, Imperial College of London, among others. However, as Rao points out, Estimates are estimates and will keep changing as we get better data and insights into the epidemic. Do the new numbers change Indias response to the epidemic? Rao is clear it does not. There will be no change because the mainstay of our strategy is prevention and prevention efforts do not change with scale. As says Ashok Alexander, who heads Avahan, the India anti-aids initiative of the Bill and Melinda Gates Foundation, the real point is not to get caught up in the single number estimation game but to look at the underlying trends in the epidemic. About one in 6 districts in India is high prevalence. These levels are still high and not coming down fast enough yet, he adds. And thats the point. -Shalini S. Dagar A Castle in the Air Thats literally what Lanco is planning in Hyderabad. Lagadapati Madhusudan Rao doesnt like to think small. Seven months ago, the Chairman of Hyderabad-based Lanco Group stunned larger power sector rivals by bagging the ultra-mega (4,000-mw) power project in Sasan, Madhya Pradesh, thanks to an ultra-low price bid (Rs 1.196 compared to Reliance Energys Rs 1.29 per unit). But subsequently, when the parent of Lancos Singapore partner, Globeleq, which was part of the bid, decided to exit power generation business, the government decided to review Lancos bid. When BT went to press, a group of ministers was to meet on July 24 to take a decision. We are confident (of continuing with the project), Rao told BT. Of confidence, Rao has in plenty. Consider his next project: He wants to build the worlds tallest residential complex, all of 112 floors, in Hyderabad. Like Sasan, the project awaits governmental clearances, including one from the Ministry of Civil Aviation. Hopefully, we should get the clearances in a month from now and the work could begin to get the building ready in four years, says Rao. This residential venture, which hasnt been named yet but will have a historical name, is to be part of the Rs 5,500-crore, 108-acre integrated techno-township that Lanco plans to set up near Hyderabad. Atkins of the UK, the same engineering consulting firm that built Dubais landmark Burj Al Arab hotel, will design the complex. As for the project funding, this is going to be mostly self-funded and we may only need Rs 1,200 crore by way of equity. This is Lancos first foray into realty. So far, Hyderabad has no building taller than 20-storeys, though a few projects in the region of 30 floors each are being proposed. Whats got the super-sized residential projects to come crawling out of drawing boards is the citys decision last March to do away with the concept of floor space index. Getting people to live in a 112-storey complex may be a stiff challenge, but Rao is unfazed. Besides, he is in good company. Anil Ambanis Reliance Energy, Lancos rival for the Sasan project, has just bagged a project to build a 100-storey trade tower in a business district it plans to set up near Hyderabad. Talk about competitive spirit. -E. Kumar Sharma A House for Mr Ambani Ambanis 27-storey partly-built condo is under threat. It has been the most talked about residential property in India for sometime now. Housed in Mumbais upmarket Altamount Road, Mukesh Ambanis 27-floor residence, currently under construction, is in a bit of a bother. Antilia, as it will be called, is a 4,532 square metre piece of land, which was bought by a company called Antilia Commercial, owned by Ambani, in 2002 for around Rs 20 crore. It now transpires that the land belongs to the Wakf Board and questions are being raised over the deal. The Maharashtra government has termed the transaction as illegal and has issued a show cause notice to the Chairperson of the Maharashtra State Board for the Wakfs. The alleged irregularities in the sale of the land, as alleged by the government, is something that the Wakf Board will have to clarify on. The original owner of the property is said to be the Currimbhoy Ebrahim Khoja Orphanage. As things stand, the Wakf Board has now issued a notice to Antilia Commercial asking why the property should not be restored to the Wakf Board as it was acquired in contravention of the Wakf rules. The Ambani house, as envisaged, will be among the most extravagant residential projects in the country. Apart from a mammoth outlay of Rs 400 crore, the house is expected to have a six-floor parking, a health club, a swimming pool, an entertainment centre and helipads. When contacted by BT, the Reliance Industries spokesperson declined to comment. For now, it appears to be a bit of a battle for Ambani and it will be interesting to see what becomes of his dream project. -Krishna Gopalan His Own Broadcaster Cornered, Neo Sports decides to go solo. After the termination of the Rs 1,000-crore distribution deal with star India, Nimbus Communications Neo Sports Broadcast, which holds telecast rights of cricket matches featuring India till 2010, has finally decided to set up an independent distribution initiative with a new bouquet for cable and other TV platforms. To begin with, it will start with distributing its own channels Neo Sports and Neo Sports Plus. Prior to this move, Neo Broadcast, which paid a whopping $612 million (approximately Rs 2,700 crore) to buy the cricket rights, was in talks with Sony Entertainment Television (set), Indias distribution network One Alliance. The independent distribution route allows us a rapid ramp up, better long-term control and superior monetising, says Shashi Kalathil, CEO, Neo Sports. The bouquet of Neo Sports and Neo Sports Plus is currently priced at Rs 37.2. Neo Sports Broadcasts efforts to reach a distribution deal failed after the government issued an ordinance making it mandatory for the private broadcaster to share feed with public broadcaster Doordarshan. However, Kalathil says that their decision to terminate the star distribution deal had nothing to do with the feed share but more to do with the performance of the broadcaster. The deal was terminated due to a lack of delivery and performance that further led to non-distribution, claims Kalathil. On Sony, he adds that while they were in discussion with Sony, they (Neo) realised that there were many small and niche channels that were open to being on an independent distribution platform. This set us thinking and we took a call of going independent on distribution, he added. Setting up an independent distribution platform is not an easy task. It is labour (manpower)-intensive and needs infrastructure (office network) across the country for collection. Moreover, the distribution business runs on the amount of clout a broadcaster has. Neo Broadcast is yet a new entrant in the business. Kalathil, however, is confident: It is not a difficult task at all. We need manpower and we are already working towards it. We have just hired former Zee Turner CEO Arun Poddar as President (Sales) for Neo Sports. According to Dinyar Contractor, Editor, Satellite and Cable TV magazine and a media analyst, While it is a difficult task to set up a distribution network, there is certainly room for another player in this space. Currently, there are three large distribution playersnamely, star India, Sonys One Alliance and Zee Turnerand in all, about 300 channels and many more are yet to be launched. Many of these existing channels are not pay but some are looking to go pay. Distribution business would clearly be a profitable business, says Contractor. While there is no exact data to determine the distribution revenues earned by the broadcast networks, it is estimated that between the three large bouquetsthat is, star, Sonys One Alliance and Zee Turnerthe total industry size would be approximately Rs 1,000 crore. According to Kalathil, several non-sports channels have shown interest in joining the bouquet. On the basis of the considerable interest shown by several channels, existing and new entrants, to be part of a bouquet led by a cricket-focussed sports channel, the best option in the Indian environment to extract revenues from the cable TV distribution chain, the bouquet would be expanded, explains Kalathil. Neo Sports also sees potential in regional feeds. Recently, Neo Sports Broadcast tied up with various language channels to telecast the matches in different regional feeds. Given that the Harish Thawani-promoted Nimbus has Rs 2,700 crore (the price that they have paid for the cricketing rights to BCCI) at stake, Kalathil had better think innovatively, and fast. -Anusha Subramanian Toon Boom Walt Disney will co-produce animation films out of India. For the Walt Disney group, the interest in India continues unabated. In mid-2006, the Walt Disney Company acquired just under a 15 per cent stake in UTV Software, apart from buying out the kids entertainment channel, Hungama TV. It has now followed that up with an agreement with Yash Raj Films (YRF) to produce animation films. Both the companiesWalt Disney and YRFwill be equal partners in this joint venture and the first film, Roadside Romeo, will be released next year. According to Mark Zoradi, President, the Walt Disney Motion Pictures Group, this development is more strategic than anything that his company has ever done before. It is for the first time that we have committed to a local language, country-specific animated project exclusively with a local player, Zoradi told BT. Roadside Romeo, which will be directed by Jugal Hansraj, will be targeted at the market for Indian films in the country as well as overseas. Though there are no plans to open a full-fledged studio in India, Walt Disneys broad gameplan for India is reasonably clear. We are looking to make live action films with a number of potential players. These will be co-productions, the way we do them in England, Spain, Germany and Latin America, says Zoradi. Understandably, the potential in the Indian entertainment industry is not something that the Walt Disney Group wants to miss out on. Animation, which Zoradi describes as the heart and soul of the Walt Disney Company, will be the initial foray. We will start with Hindi and then explore other languages, he adds. If Walt Disney is moving slower in India than in many other parts of the world, thats understandable. As Zoradi points out: India is one of the most complicated markets From a long-term perspective, it remains extremely strategic for us. For now, the story is about animation. Last year, the biggest grosser in the US was Pirates of the Caribbean which was followed by Cars. The market for animation in the US today is large and we see a lot of potential in the Indian market, concludes Zoradi. -Krishna Gopalan Ball by (Eye)ball Online cricket coverage grabs viewers and advertisers. Beating South Africa in Ireland may have earned Team India a few brownie points, but thats about it. That series win is hardly enough to erase the debacle at the ICC World Cup. But even though advertisers are still chary about pouring big bucks into cricket, an encouraging fallout of this is that online cricket sites are slowly but surely finding favour with marketers. Disillusioned fans of cricket in India are actually being driven online, says R. Ramesh Kumar, 37, Commercial Director, Cricinfo India, which was recently acquired by sports channel ESPN from the Wisden Group. That disillusioned bunch is expected to number 100 million in India in the next three years, powered in no small measure by at least 10 million broadband connections. The current global universe of cricket fans online is estimated at 144 million (according to an industry source), and growing at 100 per cent annually. That should explain the interest of advertisers in cricket portals which, for their part, are dressing up for the occasion. Take, for instance, Cricketnext.com, now a part of the tv18 network, which has revamped the site, added new content and, consequently, has got new advertisers interested. We find that FMCG (fast-moving consumer goods) has come on in a big way with the presence of brands such as Colgate and Perfetti. This is bound to happen as marketers are finding this to be a far more accountable medium. It also offers them reach to key non-resident Indian audiences and those brands wanting to talk to consumers here, says Lakshmi Narasimhan, Business Head (News Ventures), Television Eighteen India. That online spends are lower than conventional media also means that advertisers arent likely to pullout in knee-jerk fashion if India does a flop act (as it is prone to do). Ramesh points out that almost all the 40 advertisers that came on board of Cricinfo during the World Cup stayed on through the entire duration of the tournament. Only Pepsi dropped out as their creative about the Blue Billion winning was really not in sync with the ground reality. But we exceeded our targets on all counts, he says. The brand owners, for their part, recognise the efficacy of the medium: Cricket sites are especially good as they are available to us at attractive rates and offer a segmented, premium audience. Gone are the days when people used to take off to watch a match; most people keep track of the game at workonline. So, even if connectivity is not there at home, office is the right place for catching the right profile of users, says Arun Sharma, gm, Head of Media, Airtel. Cricket on TV, observes Sharma, has become grossly overpriced and fragmented while the online medium offers opportunities to play around with creative and provide interesting options. For instance, Airtel, which was the leading sponsor on Cricinfo during the World Cup 2007, chose to offer its cricket-related products and games by launching a micro-site on Cricinfo. Results were encouraging as we got the young, upwardly mobile audience to sample our games and a chance to convert them into buyers, adds Sharma. Industry estimates indicate that 22 per cent of online advertising is accounted for, ironically, by broadcasters. Another 30 per cent is split equally between telecom players and internet portals; and auto and financial services clients each make up 12 per cent of the pie. Says Sundar Raman, MD, Mindshare: Just as cricket is unlikely to fade away and is the most emotive connect for Indiansjust like Bollywoodthe online medium, too, is only likely to gain ground, rapidly. Dravid and company can heave a sigh of relief. -Shamni Pande Magic Pill Now, a contraceptive that can reduce acne and facial hair. It is called Tarana, which means safe in Sanskrit. And it promises to be just that and more. Touted as a true fourth generation oral contraceptive for women, Tarana, claims its manufacturer, Natco Pharma, has no side-effects like weight gain, bloating, increase in blood pressure and increase in LDL (low-density lipoprotein) levels. These are the typical side-effects evidenced in the use of some other contraceptives. But not only does the Rs 280-crore Hyderabad-based company claim Tarana has no side-effects, the product is also said to have the ability to reduce acne, unwanted facial hair and take care of pre-menstrual dysphoric disorders. The drugs uniqueness lies in its combination composition of drospirenone and ethinyl estradiol, as opposed to progestin contained in traditional oral contraceptives, says P. Bhaskara Narayana, Director and Chief Financial Officer, Natco. The oral contraceptive market in India is currently at Rs 300 crore (including those subsidised by the Government of India) and is growing at 19 per cent per annum, he adds. Upbeat about the prospects of this drug, which is the first generic version of Yasmine, an international brand from Bayer, Narayana says: Capacity (to manufacture) is not a constraint. While Natco may be banking on its product composition, it may be worthwhile to add that Tarana is priced at Rs 290 per cycle (of 28 tablets21 active tablets and seven inert tablets). Competing products are available for as low as around Rs 50. But then few claim to reduce acne and get rid of facial hair. -E. Kumar Sharma Pushing the Right Button Legrand makes India the epicentre of its growth plans. That India is on the radar of most global corporations is virtually a given these days, but when a hitherto low-profile multinational with an 11-year-old India operation says it has made India the epicentre of its growth plans, youre tempted to sit up and take notice. Legrand, the m3.7 billion (Rs 20,350 crore) French electrical installation major, entered India in 1996 with the acquisition of Maharashtra-based MDS Switchgear. Since then its been on a buyout binge in international markets. In 2006 alone, it bought a wiring accessory company called TCL and a door-entry system provider Shidean (both in China), home networks provider On-Q and home automation products company Vantage (both in the US), and a wiring accessory provider, HPM, in Australia. We foresee consolidation happening in the Indian market and wed be keeping our options open for any interesting opportunities as and when they come, says Benoit Lecuyer, Managing Director, Legrand India, which has three manufacturing facilities and a global research & development centre in Maharashtra. The switches and accessories market is heating up, particularly after Japanese company Matsushitas Rs 2,000-crore purchase of Anchor Electricals in April. Other large players include MK Electric, Havells (which acquired German company Sylvanias lighting business for about $300 million or Rs 1,230 crore early this year), Larsen & Toubro, ABB and Siemens. Legrand India, with 700 employees in India, only reveals its net of excise turnover, which was Rs 235 crore in 2006. The company makes mccbs (moulded case circuit breakers), MCBs (miniature circuit boards), RCDs (residual current devices), distribution boards, wiring accessories, structured cabling, home automation products and cable management products in a Rs 3,000 crore market that is growing at about 20 per cent. Lecuyer says his business in India has been growing at a handsome 35-40 per cent for the last 4 years on the back of residential, commercial and IT/ITEs projects. There is a paradigm shift amongst clients and end-consumers to invest in newer technologies. There are huge opportunities for growth in India, he adds. The company claims to be the leader in MCBs, RCDs and distribution boards, and the only player in India that provides complete solutions for electrical installations and data networks. The French major has also made India a manufacturing hub for Asia Pacific and Middle East countries. For example, we are manufacturing here mccbs and wiring devices for India as well as Asia-Pacific countries. This manufacturing platform will be strengthened in the future, says Lecuyer. Its global R&D centre at Sinnar (Nashik)one of the two in Asiahas gone a step further, developing wiring accessories and sockets for the developed European market. India has also been made a centre of excellence for it support for all of Legrands subsidiaries across the world. -Kapil Bajaj Talent Hunt Potential for CRAMS is huge, but wheres the manpower? Drug discovery can prove to be a high-return gambit for Indian pharma companies, but alongside a lower-risk (and lower-return) strategy would be contract research and manufacturing services, or crams in quickspeak. crams is expected to be a $1-billion (Rs 4,100-crore) opportunity by 2010, from just $200 million (Rs 820 crore) todayin effect a cumulative average growth rate of close to 50 per cent between 2007 and 2010. These are industry estimates of the opportunity open for players out of India in the crams space. The driver: Constant pressure on global pharma innovators to explore ways to reduce costs (including through outsourcing to locations like India). India already has established players in this space like Divis Laboratories, Nicholas Piramal India, Dishman Pharmaceuticals, Jubilant Organosys and Shasun Chemicals. In 2005, for instance, the global outsourcing opportunity was estimated at $27 billion with contract manufacturing worth $15 billion and the balance accounted for by contract research. In this, India accounts for just $100 million (a 0.67 per cent market share) in contract manufacturing and an insignificant proportion in contract research. So, it is a no-brainer that the opportunity is huge. But then, consider this: crams players out of India are already beginning to find a huge dearth of skilled resources in the critical areas of process development, manufacturing and quality control/quality assurance as compared to chemistry or analytical where the talent is available. Except chemistry graduates and post-graduates, there is severe paucity of trained personnel, says Utkarsh Palnitkar, Partner and Industry Leader (Health Sciences), Ernst & Young. Not surprisingly, he feels: Manpower training is emerging as a high-investment cost issue. Most in the space would agree considering that companies are increasingly turning to in-house training to feed their future growth. Take, for instance, Laurus Labs, a crams player located near Hyderabad. The US-based Aptuit Inc, a global contract drug development firm, will invest $100 million (Rs 410 crore) over the next four years in Laurus Labs, making this arguably the biggest-ever overseas investment in the crams space in India. There is talent available but it is raw and needs to be made employable. We have created the Aptuit Laurus University and here new graduate recruits are provided intensive 12-week classroom and lab-based training, says Kunal Khattar, Director (Corporate Development), Aptuit. In the last six months, Aptuit has trained 100 and plans to train 50 every quarter going forward. It is now also toying with the idea of tying up with a local university to give graduates professional certificates at the end of the training programme. Says Khattar: We want to bring expertise into India so as to help create an eco-system that can spur development of innovative drugs. Indeed, time is running out. As Palnitkar points out: For early-stage chemicals, India has already started losing out its cost-competitiveness to China. It is only for complex chemicals, final products (intermediates/active pharma ingredients) or formulations that India is seen as a destination for outsourcing with its large number of USFDA approved plants and CGMP (current Good Manufacturing Practices) compliant manufacturing facilities. -E. Kumar Sharma Taking the Rap Hip-hop is passe, Reebok seeks a more universal message. The message is loud and clear: Rapping is no longer an overriding theme at Reeboks Boston headquarters in 2007. The brand that pushed the edgy boundaries of hip-hop culturemost prominently with the controversial 50 Cents I am what I am 2005 campaignwhich was eventually pulled backis now looking to put its marketing muscle behind a unified message with universal appeal. Hip-hop is not such a big trend outside of the US. We will now be working on just one big idea at a time, which will allow our consumers worldwide to know what we stand for and are about, says Ulrich Becker, Head (Global Marketing), Reebok International. He was in India recently to launch the new Scarlett Hearts Rbk collection. So, is it curtains for the celebrity rappers such as Jay-Z, Nelly, 50 Cents and Daddy Yankee? After all, the mood seems to be more encompassing in 2007 with the Run Easy campaign, which has already debuted, and Two People in Everyone promo, which will be launched later this year. Becker is quick to point out: Reebok as a company values a relationship and maintains it. But clearly theres a bigger agenda that is taking centrestageespecially after the public admission by Herbert Hainer, the Adidas Chief Executive, that Reebok was a drag on its performance in 2006. (Reebok was merged into Adidas in mid-2005 in a $3.8-billion deal.) The sobering effect is beginning to bear fruit as the first quarter results of 2007 show that Reebok has indeed managed to pick up its sales. We have a first-quarter order backlog of 3 per cent, a figure closely tracked as it reflects operational strength. In fact, the last 18 months have been particularly good for us. The group has seen stronger synergies and we have been able to act as one company in terms of sourcing, logistics, etc. However, in terms of brands we are two entirely separate entities, in terms of what drives us, says Becker. The integration is beginning to pay off, it appears. But it has put the onus on Reebok to actually strategise spends, especially as Adidas net profits are being bogged down by marketing spends and also that these have not been justified by the inefficient impact they managed to achieve in various parts of the world in the past. The problem it emerges is that Reebok has been waylaid by the very ideas that it spawnedbe it hip-hop, or chasing twin anchors in lifestyle and sports. The changes have been too quick and were not supported by a strategic approach always. Hence, the marketing context has been challenged and we also noticed that the people in the company have not been aligned properly and the resources were not focussed, admits Becker. Also, globally the sports brand that fights the #3 slot closely with Puma has to define its space between fashion/lifestyle and sports. We will never digress from our corewhich is sports. Our resonance into any other area, be it high fashion or lifestyle, comes directly from our proposition, which is sports. Fashion statements come and go, he says. And ironically, for a brand that fights for the top 3 slot worldwide, India has proved to be a more certain playing field as it is clearly the lead player among the MNC sports/apparel brands. In India, we are very young (12 years) and our consistency in strategy has helped us. Consumers here have not been distracted by multiple messages coming from Reebok and we hope to follow the same approach globally from now on. Hence, we need to defocus on hip-hop and get the balance right, says Becker. The companys main agenda in the Asian markets and in Russia clearly is to ramp up retail presence, and thats paid off well. It has 497 exclusive retail outlets with 200 outlets added in the last year alone in India. We are looking to double our presence here soon and we are also very aggressive about spreading our presence in Russia, he says. Sticking to the tried moves and putting some of those more dangerous liaisons on the back-burner may work after all. -Shamni Pande Emotional Connect Societe Generale Consumer Finance opts for Kolkata. Mumbai may be the financial services capital for most, but not for Societe Generale Consumer Finance (SGCF). A part of one of Europes largest financial services groups, SGCF has chosen to flag off its Indian operations out of Kolkata. A few months ago, SGCF had acquired Apeejay Finance, a leading non-banking finance company (NBFC) in the West Bengal capital. This is the first global financial powerhouse to choose Kolkata as the headquarters for its Indian operations. SGCF is keen to make its new brand FamilyCredit, the market leader in the Indian consumer credit market. Says Jean-Francois Gautier, Head of Specialised Financial Services of the Societe Generale Group, who was recently in Kolkata to flag off the India operations: The experience and expertise gained by Societe Generale in its global operations will ensure both flexibility and economy to Indian consumers. FamilyCredit currently offers loans for automobiles, two-wheelers and consumer durables. It also plans to offer personal loans shortly. One of the key differentiators in FamilyCredits offerings will be a range of reliable offers for each member of the family, which will be introduced keeping in mind the needs of the Indian consumer. Extensive expertise transfers are now taking place between SGCF experts and the young, high-caliber members of the erstwhile Apeejay Finance. We are also pursuing an aggressive policy of recruiting young, talented and experienced professionals from the industry, says Gautier. Adds N.V. Swaminathan, CEO, FamilyCredit: Our state-of-the-art technology will ensure that every consumer finance application is processed online and disbursements are made in the shortest possible time. We will certainly benefit from the proprietary it tools of SGCF. Our endeavour is to connect with our target group emotionally. -Ritwik Mukherjee Copyright 2007 Syndications Today, Source: The Financial Times Limited |