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On the Birla Bandwagon T1 Why Ajay Srinivasan quit the global stage and headed home.(Business Today (India) Via Thomson Dialog NewsEdge) On the Birla Bandwagon Why Ajay Srinivasan quit the global stage and headed home. By Anand Adhikari Few can boast a career graph thats been as meteoric and at the same time as unpredictable as that of Ajay Srinivasan. Close to a decade ago he took charge of Prudential Plcs Indian asset management company (a joint venture with ICICI Bank called Prudential ICICI). When the UK financial services power house decided to cast its net across Asia (India was its first port of call in the region), it roped in Srinivasan, 43, to lead the charge. Result? The 13th floor of One International Finance Centre near Harbour View Street, Hong Kong, was Srinivasans work place address for almost the last five years. As Chief Executive (Asia) of Prudential Plc, Srinivasan was in charge of assets under management of $60 billion (Rs 2.4 lakh crore). Then, just when speculation began to gain ground that the St Stephens and IIM-A alumnus would be called up to Prudentials UK headquarters, Srinivasan took a rather surprising about turn and returned home. Theres opportunity in India. These are exciting times, he gushes, in his first media interaction since landing in India. Once I made up my mind, it was about finding the right platform, says Srinivasan. Srinivasan has taken charge of the $24-billion (Rs 96,000 crore) Aditya Birla Groups ample financial services portfolio as Chief Executive (Financial Services) and Director (Corporate Strategy and Business Development). Srinivasan, who joined in mid-July, will sit on the boards of Aditya Birla Management Corporation (the groups core strategy team) and of the financial services companies (insurance, mutual funds and distribution). The group has some aggressive plans in financial services. Group Chairman Kumar Mangalam Birla, when announcing Srinivasans appointment, had said: He will continuously identify emerging opportunities in the financial services sector and lead the Groups entry into these new segments. Srinivasan is in sync with that statement. There are a lot of opportunities in other non-deposit kind of activities, he says, albeit a bit guardedly. The group has already announced a private equity foray. When asked about the other new businesses, Srinivasan smiles: They wont surprise you. A few of the activities being considered are general insurance and stock broking. And perhaps banking. Our intention is to set up a bank if regulations permit industrial houses in the banking area, says Srinivasan, but quickly adds: Today its a hypothetical question. Whats pretty certain, however, is that Srinivasan will have his hands full consolidating and scaling up the existing businesses. The six-year-old life insurance firm and the 13-year-old mutual fund are currently languishing at the 6th position in their respective industries. Srinivasan prefers to look at the strong base thats been created. These businesses are well established and we have seen momentum building up there. There is huge headroom for growth in just these four lines of businesses, he points out. Srinivasan will also be busy putting in place a new team. Some of the veterans have already headed out. S.V. Prasad, who headed Birla Sun Life Mutual Fund, left in early 2006; he was followed by Nani Jhaveri, CEO, Birla Sun Life Insurance in August 2006; and more recently the 59-year-old S.K. Mitra, Director, Financial Services, Aditya Birla Group, called it a day. Enter Pankaj Razdan, who was earlier managing ICICI Prudential AMCs Rs 40,000-crore assets, as Deputy CEO, Financial Services, Aditya Birla Group. More high-fliers are expected to join. We have a team that is looking to win, says Srinivasan. Hell need all hands on deck, for sure. Power Shifts RIL departs from the tried and tested in its quest for global size. In mid-October, at the annual general meeting (AGM) of Reliance Industries Ltd (RIL), Chairman Mukesh Ambani talked about five fundamental strategic shifts that were under way at this petrochemicals & refining Goliath. RIL will now pursue (global) acquisitions for global size and scale. Thats the first major shift. The second big departure from the past is Ambanis willingness to accept partnershipsprimarily joint venturesas a way of life. The other changes involve relying on agriculture and rural sectors for growth, focussing on research and innovation, and getting a global footprint in a bid to be recognised as a true Indian multinational. A couple of those shifts became more evident last fortnight. The head of RILs global oil business let on at an investment summit that acquisitions of oil & gas assets, worth up to $15 billion, were on the anvil. Around the same time, RIL signed an initial agreement with the state-run gas transporter GAIL (India) Ltd to jointly set up petrochemicals units in foreign markets. The shift towards JVS became more apparent when reports surfaced that RIL and Kuwait Petroleum were in talks to set up refining and petrochemicals units in Kuwait. The shifts have begun. Time will tell how they change the paradigms at RIL. By Brian Carvalho Billion-Dollar Dream Can Tejas Networks be Indian ITs next big thing? Ranganath Rangu Salgame hit the headlines two years ago when, as the India head for Cisco, he persuaded his bosses to commit a massive $1.1 billion (Rs 4,400 crore) investment to the countrys operations and announced large expansions for the networking equipment maker here. Since putting in place that expansion, Salgame has moved on from Cisco; but rather than opt for the relative comforts of a multinational, he has opted to join a Bangalore-based optical networking start-up, Tejas Networks, as President and point-man for all the firms market and customer-facing roles. Salgame, whos worked across the globein established markets like the US and Western Europe as well as in developing geographies such as Latin Americanow wants to use his wide and varied experience to take Tejas to the next level of growth. We expect to cross $100 million (Rs 400 crore) in revenues this year and the challenge is to grow this to a sizeable scale of at least $1 billion (close to Rs 4,000 crore) in three or four years, says Salgame. While Tejas was born from the ruins of the tech slowdown in 2001, it encounters markedly different conditions today. The company has bucked the current trend and focussed on the local market for most of its revenues. India is the third-largest spender on telecom equipment in the world after the US and China, points out Salgame. Mobile and wired broadband internet growth also has massive potential. According to industry estimates, Indian telecom companies will spend over $50 billion (Rs 2 lakh crore) on their backbone and around five million new wireless connections are being added every month. We built our products targeting the price-conscious Indian consumer who is also acutely technology-conscious and this has helped us expand globally too, argues Salgame. Running this strategy for the last six years may have helped Tejas grow rapidly, but Salgame and Co are aware that to sustain this growth, global markets will be a key part of the firms evolution. The competition is intense globally; our rivals are larger, with well-recognised brands and larger budgets, but we believe that our India-led business model is compelling, says Salgame. From being a company in start-up phase, he believes Tejas is now ready to be counted as Indias largest surviving software product company. You can try several things at an early stage in evolution to see if they work, but at this stage, Tejas needs to firm up its strategy and focus on execution, he adds. The firm is a favourite of venture capitalists, attracting nearly $50 million (Rs 200 crore) in backing from the likes of Mayfield, Battery Ventures and most recently Goldman Sachs, as it seeks to continue its evolution into a global software products player. We have long-term investors and theyre in no hurry to exit, says Salgame. Besides worrying about his own companys strategy, Salgame will also keep a wary eye out on the fast-consolidating software products market, where marquee names such as IBM, Oracle, Microsoft and sap are aggressively buying their way into new and fast-growing markets. Tejas is not here to be acquired; were here for the long haul as an independent, stand-alone company, says Salgame. By Rahul Sachitanand ABB: Awed By India The Swiss giant brings its global board to India for a dekko. Its Hubertus von Grunbergs fifth or sixth visit to India, but his first as the Chairman of ABB and he clearly likes what he sees. And that is plenty of growth opportunities. Next five years, I clearly see India keeping its growth momentum, says Grunberg, who was in India with the entire ABB global board for its first meeting in the country. For starters, ABB hopes to double its revenues in the country by 2010, and is ploughing in $100 million (Rs 400 crore) to set up a new greenfield facility near Bangalore to manufacture low-voltage products and power electronics. It is also setting up new units in Vadodara to make power and automation products. ABBs got another $100 million on tap for India. For good reason. Its India operations have been growing at a rapid clip. For the first nine months of 2007, ABB Indias revenues surged 42 per cent and net profit 51 per cent. At Rs 21,186 crore, its average market cap in the first half this financial year (2007-08) was up 85 per cent over the same period last year. The reason we got Ravi (Uppal, former Managing Director of ABB India and now Chairman ABB India) to Zurich is to show the others (in ABB) whats possible, says Grunberg. Uppal is the head of global markets and operates out of ABBs headquarters in Zurich. Apart from the opportunities in the domestic market, ABB hopes to tap India for its engineering skills. It already has a global Operations and Engineering Centre in Bangalore, but has set up another one in Chennai to support its power systems and process automation projects across the world. The local talent in India, Grunberg says, will help keep ABB competitive. The top slot will be won by the best strategist and talent will be the key issue here, says Grunberg, also Chairman of German tyre giant, Continental. But Grunberg, 65, says ABB isnt just chasing growth. As its Chairman of 10 months, Grunberg, who has a doctorate in physics, says his job will be multiple. One, ensure that ABB continues to have great product portfolio in terms of innovative equipment; two, have its fair share of the market place; and three, play the role of a global citizen. I believe that ABB has to set the direction in terms of clean technology and energy conserving equipment, he says. As for India, Grunberg says this has been my biggest trip for personal motivation. Uppal & Co. must be beaming. By R. Sridharan Will Funny Get the Money? ICL tries humour to sell cricket to TV viewers. Challenger brand Indian Cricket League (ICL) from Subhash Chandra-owned Zee Sports may be struggling to convince advertisers and sponsors, but it seems to be scoring with its first rush of campaign spots unleashed on TV and radio that are now doing the rounds on YouTube. The series has been mandated to O&M, Mumbai, which has worked to bring out the local character for each of the six cities that have formed a team from local talent. Ergo, teams with attendant personifications: Chandigarh Lions that has a tagline Khello Te Tashhan Naal (play with attitude); Delhi JetsDum Hai Toh Aao (Come if you have the guts); Kolkata TigersHumse Bachke Rehna (Beware of me), Mumbai ChampsBole Toh No. 1 (We are No. 1); Hyderabad HeroesCricket Ke Ustaad (Masters of cricket); and, finally, Chennai SuperstarsAnything is possible. All these 60-second spots have found their way on to YouTube and are currently being forwarded among friends. This correspondent, who missed the spots on TV and radio, was actually forwarded a link. The result is only too visible as the hits are mounting in their favour. The response has been really good, as we feel the right buzz is getting generated, says Anup Chitnis, Executive Creative Director, South Asia, O&M. Chitnis says that the agency worked hard to draw local flavours, nuances and the history of the game in each of these cities. Also, we have sought to bring forth the local spirit, as ICL is all about building regional stars and talent, he says. Satish Menon, President, Zee Sports, admits that advertisers are beginning to show interest where ground sponsorship is concerned and the series has attracted brands such as TVs, Spice Telecom, Oswal Group, Rashmi Builders and Rishi Cements, among others. Also, according to reports, ICL has managed to sell the global rights for $10 million (Rs 40 crore) to three distributors. According to information available, there is also a negotiation thats on to bring ICL on the competing TataSky Dth platform. To be sure, even the tam ratings will begin to trickle in soon and industry watchers aver that these, though not too high, may just pave the ground for bigger things in future. Even some prominent advertisers such as LG Electronics India admit that they would watch the progress of the ratings and keep Zees ICL on their radarmuch like other programmes. With a slow build-up, this is proving to be the real dark horse of the media. By Shamni Pande Bullish on India Accenture COO finds the country a great place for business. If a list were to be compiled of global business leaders who were most bullish on India, then Steve Rohleder, COO of consultancy and outsourcing firm Accenture, would certainly be counted among the top. Such is the optimism of the man that despite acknowledging the talent crunch and infrastructure issues facing the country, he still thinks India is a fantastic place to do business and base outsourcing operations. Accentures Global Delivery Network that allows us to meet our customer needs from anywhere in the world has grown on the back of our involvement with India, he acknowledges, adding that of the 75,000 employees in the network, 36,000 are based in Accentures five centres in India. We hope to continue to grow apace in India, Rohleder says, adding: And we hope to become an employer of choice. With Indian industry spreading its wings into new countries, Rohleder believes that Accenture can help in that process as well as others. We are doing some great work in the transportation sector (regarding the Air India-Indian merger and the Kingfisher-Air Deccan merger) and we are looking at other sectors as well, Rohleder points out. A word of caution: Indias biggest challenge, according to him, is not the rising rupee or the collapsing dollar but in closing the infrastructure gap. The lack of infrastructure, roads, power, ports and mass-transport is a fundamental risk to the countrys future growth. But there is some progress happening on that front as well, he says. By Kushan Mitra IFCI: Hard Road Ahead IFCI stake sale enters the last lap fraught with uncertainties. For IFCI, the beleaguered financial institution that over the years has made innumerable attempts to climb back into the reckoning, help seems in sight. As this story went to press, the stage was set for potential investors to place their financial bids by December 14 for a 26 per cent stake in the institution. IFCI is also negotiating with the World Bank investment arm, International Finance Corporation, for a minority stake. That, however, is likely to work out in a few months time. Much will, of course, depend on the stake sale to the strategic partner. The sale process has broadly been on schedule despite several hiccups. Momentum has been maintained in the process so far, says CEO, Atul Kumar Rai. When expressions of interest were invited in September, there were 10 parties in the fray. Rising stock market valuations, coupled with several uncertainties led to a reduction in the list of suiters. Those that withdrew included the likes of private equity player, Blackstone Group and French bank Natixis. Others such as GE Capital and IDFC did not turn up for the due diligence. The remaining four players conducted the due diligence in November. These were the consortia of Sterlite Industries and Morgan Stanley; WL Ross, US Capital Partners VI Fund, Standard Chartered Bank and HDCF; Cargill Financial Services Corporation and Texas Pacific Group, and finally Shinsei Bank, PNB and JC Flowers and Co. It has been a tough and eventful ride. And not just because IFCIs precarious recovery could easily falter, but also because contentious issues did not receive early clarity. Take the case of optionally convertible debentures worth Rs 1,479 crore held by banks and financial institutions as part of a bailout package in 2002. These instruments carried with them clauses related to convertibility and recompense, which became relevant for the strategic sale plan. This issue was resolved in early December via a partial conversion for insurance companies, which retained their stake at existing levels. The banks chose to convert their entire holding into equity. The conversion date for around Rs 1,300 crore debentures was fixed as December 17. A related issue still persists less than a week away from the financial bidswhether the government will convert its loan of Rs 923 crore into equity. Though the bidders have been asked to work on the assumption that the government will not seek conversion, it is an issue that causes significant concern. The public financial institutions will hold a sizeable chunk of votes on the revamped board after the debenture conversion. Bidders may not want to contend with the might of the sovereign on top of the already strong shareholding of public institutions. Then the investment will not be commensurate with the risk, says a person close to the deal. Unless clarity emerges, the financial bids may well be a non-starter. A smaller irritant is the status of the Rs 1,300 crore promised to IFCI in Budget 2007. Since this money, which was to be a grant, could easily add value of almost Rs 20 per share, clarity on whether it will be coming forth or not will certainly refine the price bids. That when the stock has been on a spectacular run on the bourses in the last year. From a low of Rs 10.29 on December 12, 2006, the share price rose to Rs 110.90 on December 6 this year. The financial institution, meanwhile, is proceeding with the stake sale under the assumption that government support will not be needed following the entry of a strategic investor. There are no surprises or shocks for the bidders, says Rai, who is betting his career on a successful stake sale. A government officer for almost two decades, Rai recently quit and took charge at IFCI in July. He believes that there is no future for IFCI unless there is a breakthrough of the kind that can happen with a strategic sale. And there is reason to be hopeful of the future. After all, IFCIs sale will provide the successful bidder an entry point into an economy that is growing at over 9 per cent and IFCI freedom from repeated bailouts to the government. By Shalini S. Dagar Escaping ITs Tier II MindTree revamps for a better future. A year ago, the top management of IT services vendor MindTree Consulting, led by Ashok Soota, met at the firms headquarters in the primarily residential borough of Banashankari in south Bangalore to discuss the future path for the mid-tier player. Over the next 12 months, different parts of this strategy will come together as the company puts together an action plan to separate itself from the other players (not just smaller, but larger, too) in this fast-growing industry. A key part of this strategy was unveiled in late November, when MindTree announced sweeping organisational changes that saw the wizened Soota move on from his day-to-day responsibilities to a more strategic role as Executive Director; he will be assisted by Salil Godika, the newly appointed Chief Strategy Officer. Curiously, Subroto Bagchi, the firms COO, has been re-designated as Gardener while Krishnakumar Natarajan has been elevated as Chief Executive, replacing Soota. While S. Janakiraman remains CEO of MindTrees R&D business, he will now have a CO-CEO in Vinod Deshmukh. This is our first major reorganisation since we started in 1999 and reflects the changing requirements of our business, Natarajan says, adding: We wanted to give our younger leaders much more autonomy with this new structure. While MindTree was the fastest among IT companies to cross the $100-million mark, it has now set itself much loftier targets: it plans to become a $1-billion firm in the next few years. As the IT market matures, we want to focus on building our expertise in specific industries such as manufacturing, financial services and travel, says Natarajan. Simultaneously, MindTree is looking to expand into newer markets such as remote IT infrastructure management, which could be a $150-billion opportunity. Inorganic growth will be a key component of MindTrees evolution as it seeks to morph from just another Tier II player into something not necessarily much larger but specialised. We dont do everything for everyone. We have our specialisations and in each of those segments, were among the top few players globally, claims Natarajan. While MindTree wont buy or merge (at least for now) with a company purely for scale, it may opt to acquire smaller, technology specialists in future, he adds. While the company most recently bought Purple Vision, the chip design arm of French electronic design solutions firm TES Electronic Solutions, it has previously acquired Linc Software and ERP solutions vendor ASAP Solutions. Besides this restructuring, Natarajan wants to ensure that MindTree version 2.0 also derisks its business and looks beyond its staple North American market for growth. For example, Asia-Pacific today contributes around 16 per cent of the companys revenues and the company is also preparing to tap the burgeoning domestic market. The rupee appreciation is a constant worry in the IT industry and we need to find innovative fiscal (currency hedging, for instance) and operational measures to tackle this problem, says Natarajan. He also points out that MindTree has been multi-cultural in its DNA, given the mix in its senior management, but the firm is also looking to diversify its presence with centres overseas. Industry watchers and competitors point out that while the initial growth for MindTree was scorching, the next couple of years will tell if the firm is really a long-term player. Indian companies need to build scale quickly to start competing for large global contracts, but MindTree is just starting off on this, says the Head of Marketing at a large Indian IT services company. Others point to hurdles MindTree could facea constantly appreciating rupee and the escalating war for talent. A company like Infosys lost nearly Rs 300 crore in a quarter from rupee appreciation; MindTree will have to be wary of this trap, says a Mumbai-based IT analyst. In addition, with the IT industry facing a shortfall of around 500,000 trained people over the next two years and Tier I players hiring 20,000-30,000 recruits annually, mid-tier players like MindTree could face serious challenges on this front too. By Rahul Sachitanand Most IT Projects Dont Pay Absence of baseline data makes comparisons difficult. The implementation of IT projects leaves a lot to be desired, feels John Roberts, Research Vice President, of Information Technology (IT) and Research firm, Gartner (Asia-Pacific). But why does Roberts reach this damning conclusion? Its because, according to published data, over 50 per cent of IT projects implemented by corporations are failures or delayed. And, there is often no empirical evidence to prove the benefits that companies implementing these projects receive from technology. Roberts does not argue that all IT is bad, but he thinks it can be done a lot better than it is. Many companies like quoting strings of three-letter IT acronyms to impress people, but when you ask them how these IT projects actually help them, they will mumble streamlined processes or productivity enhancements, Roberts says. According to him, herein lies a problem. When companies say that an IT project has saved time or money, they very rarely have a baseline measurement before the project was implemented. More than 90 per cent of companies do not take a base-line measurement of their business processes before implementing a project, he says. Roberts argues that companies can benefit more if they measure processes before implementing them. This can lead to better utilisation of IT funds, targeting areas where companies can actually see improvements. This will also help IT vendors and consultants because they can actually enter revenue share agreements if certain criteria are met. By Kushan Mitra On Verizons Horizon US communications giant applies for ILD entry licence. The already-crowded inter-national long-distance (ILD) telephony market in India is set to swell further with another global giant, Verizon Business, a unit of US communications service provider Verizon Communications, declaring its intentions by applying for an entry licence. We had recognised a tremendous growth potential of Asian markets, and especially India, for some time now, and I think the time is right for us to step in, says D. Blair Crump, Group President, International and Premier Accounts, Verizon Business. Already, the players in the segment include domestic and international biggies such as Tata Telecom, Bharti Airtel, BT, and Alcatel-Lucent, but that has not deterred Crump, who feels there is scope for more players. Crump, who was in India recently and met prospective clients and government authorities, says: We have a tremendously huge network worldwide and with our technological edge, we intend to provide the full range of advanced telecommunications services to multinational companies with operations in India, as well as to India-based multinationals. The firm, which delivers IP, data, voice and wireless services to large businesses and the government, has already set up a joint venture, Verizon Communications India, in partnership with Leo Communica-tions, an arm of the Mumbai-based Videocon Group. Verizon and Leo between them hold 74 and 26 per cent, respectively, in the JV. The company currently provides services to its multinational customers Indian operations through partnerships with several licensed carriers in the country. The New Jersey-based Verizon Business, which generated revenues of more than $20 billion worldwide during 2006, already holds an Internet service provider licence in India and has various local IP hubs. Once the licences are in place, we hope that companies operating in India will benefit from direct access to Verizon Business advanced IP communications portfolio through Verizon Business India, which will complement Verizon Business continuing relationships with its existing Indian partners, says Crump. Verizon Business India plans to offer the full range of services to multinational customers, including international private-leased circuits with multi-protocol label switching (MPLS), and internet protocol services. With a network of over 485,000 route miles and footprints in more than 2,700 cities across 150 countries, Version Businesss IP and data network services are planned for launch in Mumbai, Bangalore, Delhi, Chennai and Hyderabad in 2008. By Amit Mukherjee School for Retailers Pantaloon has tied up with 11 B-schools to train staff. Riding the boom in the retail sector, Pantaloon Retail is adding a new outlet every week and 500 employees to its rolls every month. But finding the right people was proving difficult. The reason was that many people did not want to work for a store. The problem was with the mindset of people. Till recently, retail was not viewed as a respectable and dignified profession by many people, says Sanjay Jog, Head hr, Pantaloon Retail. Though retail is now viewed as a cool sector to work in, finding trained people who are passionate about providing customers a shopping experience remains a problem. To get over this, Pantaloon has tied-up with 11 B-schools around the country to offer its employees a two-year management programme in retail. Unlike many other companies, Pantaloon gives its employees a two-year sabbatical, bears the tuition fees and also pays them salaries during the two-year period. A brainchild of Kishore Biyani, Managing Director, Pantaloon Retail, the education initiative has been successful in attracting and retaining talent. The scheme kicked off in 2003 with a tie-up with the Welingkar Institute of Management, Mumbai. Later, institutes such as K.J. Somaiya Institute of Management Studies and Research, Mumbai, Indian Institute of Social Welfare and Business Management (IISWBM), Kolkata, Chennai Business School and a few others were also added to the list. Each year about 60-70 Pantaloon employees are placed in the collaborating institutes. Pantaloon supports the initiative in other ways as well. It provides the inputs to structure the curriculum and sends its senior staff as visiting faculty to teach students practical aspects of organised retail. When we started out, there was a lack of domain knowledge about retail and our assistance was welcomed by the partnering institutes, says Kurien C.K., General Manager, hr and Design, Pantaloon Retail. Says 25-year-old Pankaj Sharma, a commerce graduate, who worked in a Big Bazaar outlet in Agra for one year before joining BLS Institute of Management, Ghaziabad, as a nominee of the company: For financial reasons, pursuing an MBA was not feasible for me. As a result of this and other initiatives, Pantaloons attrition rate is about 4 per cent (at mid-management level), much lower than the industry average of 20-25 per cent. The attrition rate for front-line staff is 8 per cent, down from 12 per cent in the last four years. Every year, employees take part in the selection process conducted by a third party and based on their performance in a written test and interview, are sent to B-schools. Every employee who has completed one year of service in the company is eligible to apply. About 700 candidates pass out of the collaborating institutes each year. Pantaloon hires about 100 of these graduates and also takes back its 60 employees. The courses will lose their credibility if we take the entire batch of students. We want other retailers to pick up candidates from our partnering institutes as well, says Jog. But does Big Bazaar still carry the tag of a store? Ask Chiranjeet Saha, 24, a B. Tech from West Bengal University of Technology. After completing engineering, I joined Big Bazaar because I found its offer very convincing and my parents encouraged me. I am happy because I got an opportunity to do an MBA too, he says. As a result of this initiative, Pantaloon gets a loyal and trained workforce, employees adds value to their knowledge base and the economy gains a pool of trained manpowera win-win situation for everyone concerned. By Dibyajyoti Chatterjee Staples Diet Global giants in stationery are opening office. Business cards, letter heads and the like may appear like innocuous little odds and ends, but put them all together and you have a humungous marketone thats pegged at $10 billion (nearly Rs 40,000 crore). Its a pie the global majors in this business are finding difficult to ignore. The US-based Staples entered India through a licensing agreement with Pantaloon Retail and other biggies like Office Depot and Office Max may not be far behind. And domestic players like Offix from the Todays Writing Products stable are also set to flag off their ventures in this space. But first off the blocks is Staples Future, a 50:50 JV between Staples and the Future Group (of which Pantaloon Retail is a part), which has opened its first store in Bangalore. 90 per cent of the office products consumption in India happens in the cities of Delhi and NCR, Mumbai, Pune, Ahmedabad, Chennai, Bangalore, Hyderabad and Kolkata, points out Shailesh Karwa, CO-CEO, Staples Future. Karwa, of course, has prior experience in the market through his start-up Officedge, an online b2b office products company that was acquired by Pantaloon Retail earlier this year. Adds Rakesh Biyani, CEO, Pantaloon Retail: The Staples brand will help us establish a presence in the office products market, which is growing at 15-20 per cent annually. According to Biyani, the venture will invest Rs 250 crore by 2010 to set up its chain. Staples stores, like their counterparts elsewhere globally, will offer a complete range of office stationery, office automation products including PCS and office furniture. In addition, these stores will have facility for in-shop printing of business cards, letterheads, invites and documents. Staples Future, which is targeting 50 large format stores and 100 store-in-stores with projected revenues of $150 million by 2010, has the first-mover advantage but that might be for a brief period only. Snapping close on its heels is Offix, which is opening its first such store in Mumbais Malad suburb in January 2008. Globally, offices spend around $200 (Rs 7,900) per employee annually on office stationery and related items whereas the corresponding figure for India is $50 (a little under Rs 2,000). So the scope here is immense, observes Amit Mohta, COO, Todays Writing Products. However, Offix is banking more on catalogue sales to ramp up its growth. Mohtas strategy is to gain strength from region to region through a central warehousing facility in each regionsix are plannedcoupled with wholesale retail, doorstep delivery and, later on, online sales and e-commerce. Offix has lined up Rs 200 crore for a pan-India store count of 500 in the next five years. The other major player in the writing instruments category, Luxor, is also eyeing the segment. We have already expanded outside the writing instruments market with our office stationery products and we will definitely enter the office products market, says Pooja Jain, Executive Director, Luxor Writing Instruments. Foreign players like Office Depot, too, are eyeing an entry into the Indian market, though its spokesman said there was no specific plan at the moment. With India Inc. on a growth curve, that might soon change. By Tejeesh N.S. Behl Big Bosch The German technology giant is flexing its muscle in India. The 43.7-billion Bosch group is further upping the stakes in the country. Following investments of Rs 1,800 crore from 2005 to 2008, the group plans to pump in another Rs 850 crore. This takes the total investments in the country to Rs 2,650 crore by 2010. Dr Bernd Bohr, Chairman of Boschs Automotive Group, announced these investments last fortnight. These investments demonstrate the growing significance of our Indian subsidiaries. Including exports, sales of our Indian subsidiaries this year will come to more than Rs 5,700 crore, which is nearly 1 billion. Our sales to Indian consumers will amount to some Rs 4,700 crore. This is equivalent to a sales increase of nearly 20 per cent. In 2008, we expect our sales growth to approach even 30 per cent, says Bohr. Bosch also made a couple of other key announcements. For one, Bosch plans to bring all its subsidiaries, including automotive major MICO, under the banner of Bosch Ltd (the company has four subsidiaries in the country). Other than expanding its common rail diesel production, the investments would go into manufacturing of gasoline systems components from 2008. The company also plans to start local production of anti-lock braking systems by the end of 2008 and of electronic control units in 2009. We will manufacture a total of 1,00,000 common rail systems in India this year. The figure will rise to 1.3 million by 2010, and we hope to reach the 2-million mark by 2013, says Bohr. Bosch is also making changes in its top management in the country. Dr Albert Hieronimus, who has headed MICOs operations in India for the past four years, has been elevated as Chairman of the company as well as the Chairman of the board of management of Germany-based Bosch Rexroth AG, effective from February 2008. Current Joint Managing director V.K. Viswanathan will take over as full time Managing Director. Recently, the company also upped its stake in MICO from 60 per cent to nearly 70 per cent. Bohr says that the parent company is comfortable with its holding in MICO and does not plan another increase in the nature future. Bosch is betting big on India as a key geography in the Asia Pacific region, considering the fact that Indias share of vehicle production is expected to increase from 6 to 9 per cent by 2015. Bosch is also closely monitoring the progress of the low price vehicles and specifically the small car projects in India. The experience we are gathering in India will benefit us in other countries. In the area of low price vehicle equipment, we aim to generate global sales of m1 billion by 2010, says Bohr. Bosch expects to employ 18,000 people in Indianearly 1,800 people up from the year ago. Mark this as yet another MNC thats shifting into higher gear in the country. By T.V. Mahalingam Shopping in Singapore Indian majors eye mega-power units there. The announcement that Singapores 2,670 MW Tuas Power is up for sale has electrified Indian power majors. Tuas is the youngest and first of the three power companies Temasek Holdings, the investment arm of the Singapore government, has put on the block. Temasek hopes to close the Tuas deal by March next year. The sale is part of a Singapore government initiative to liberalise its energy market and capitalise on the boom that the sector has generated. While GMR Energy has qualified for the bid, power sector sources say Tata Power and Reliance Energy may also join the bid. Analysts expect Temasek to earn anywhere between $2 billion and $3 billion from the Tuas deal, but the Indian players see gains only at the lower band of the valuation. At $2 billion (close to Rs 8,000 crore), the cost of acquisition per MW translates into Rs 3 crore, and at the higher band of $3 billion (Rs 12,000 crore), the cost works out to Rs 4.5 crore per MW. Experts say there are some ongoing power projects in India where cost per MW has outstripped the Rs 4 crore benchmark, owing to the prohibitive cost of land. The average cost per MW, points out L.V. Nagarajan, Managing Director, Karnataka Power Corporation, is around Rs 4 crore for a thermal station in India. Temasek will put Power Senoko and PowerSeraya on the block after the Tuas deal and expects to sell them by 2009. The three together command a capacity of 9,070 MW and meet 90 per cent of the countrys demand. By K.R. Balasubramanyam Northern Comfort J&K tops the list in VAT collections. The northern state of Jammu & Kashmir has taken pole position in the recent review of vat (value-added tax) collections by the states for the six-month period ended October 2007. J&K has clocked a growth of 42.14 per cent over its previous years collections followed by Andhra Pradesh (36.52 per cent) and Karnataka (34.46 per cent). An interesting sidelight: Bihar, with a growth of 30.81 per cent, has outperformed Gujarat (30.07 per cent). But both are above the national average of 23.26 per cent, along with Kerala (24.41 per cent). All the other states including Delhi, Maharashtra and Haryana figure below the national average. Even West Bengal, whose Finance Minister Asim Dasgupa heads the Empowered Committee of State Finance Ministers, finds itself at the bottom with a 16.01 per cent growth. The figures were revealed at the recent meeting of the Empowered Committee in Delhi. According to tax experts, J&Ks performance cannot be compared with that of the other states in view of its narrow tax base, which may be one fifth the size of Andhra Pradesh or Karnataka. They also point out that only Karnataka gives a refund of excess input tax credit to dealers on a monthly basis without any conditions. Other states do not have a monthly refund system and provide refunds only against the bank guarantees or other securities from the dealers. By K.R. Balasubramanyam Bad Trip How significant is Ranbaxys drug recall in the US? In march this year, Swiss drug major Novartis announced a suspension of the marketing and sales of its bowel drug Zelnorm in the US over concerns that it may cause cardiovascular problems in some patients. This decision is expected to cut its annual sales by $600 million. Two months later, the US Food & Drug Administration (USFDA) issued a safety alert on GlaxoSmithKlines blockbuster diabetes pill Avandia (rosiglitazone, which, last year, posted worldwide sales of GBP1.6 billion ($3.2 billion). This came in the wake of reports that the drug may raise the risk of heart attack (the data on this remains inconclusive) and the company has revised its labeling in the US. Now its the turn of Indian major Ranbaxy. Last month, the Delhi-based pharma major pulled out 73 million tablets of its epilepsy drug Gabapentin from the US market. Reason for the voluntary recall, as the company puts it: Presence of related substances permitted in the products to be outside the approved specification limit. Numbers in terms of how this will impact Ranbaxy are difficult to come by from the company and the officials are playing down the recall. Ranbaxy does not seem to see any room for alarm and the development is expected to have a marginal impact financially, if at all. The company stresses that this is a Class III recall, implying that it is a drug that is unlikely to cause any adverse health reaction and consumers are unlikely to fall sick after consumption. A Class I recall is where it would be a dangerous or defective product that can have serious health problems or even death; a Class II is a product that can cause temporary health problems or only pose a slight threat. In September 2005, when the company got USFDA approval to make and market the drug in the US, it had given a sense about the market by indicating that the total sales for Gabapentin were $2.2 billion with tablets of 600 and 800 mg strengths (the ones recalled) totaling $964 million (IMS-MAT: June 2005). But then, these would have to be seen more in terms of a potential market and considering that there would be other players in the space, analysts feel there may be reason to believe that the financial impact may not be significant. What it may have lost would be mainly on the expenses incurred in getting the drug to this stage and that would typically be on investments in R&D to make the formulation, on packaging and on marketing. Analysts feel that the damage to Ranbaxy would be on two fronts: A set back in the race against other generic companies; and a hit on its reputation. In addition, innovator companies will try to use this development to corroborate their argument that the quality of drugs manufactured in the country is suspect. Also, a bigger damage, some analysts feel, could be on the regulatory side. For there could now be risks of possible delays in USFDA approvals going forward if the agency decides to get more tough with the company. But still the industry does not see a major reason for worry. This is a common thing and not very unusual. There is more attention this time here probably because for the first time there is an Indian company involved, says G.V. Prasad, Vice Chairman & CEO, Dr Reddys Laboratories. By E. Kumar Sharma Copyright 2007 Syndications Today, Source: The Financial Times Limited |