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APRIL 2012, Rs 35

COVER STORY

EDITOR AMIT BRAHMABHATT

RIDING HIGH Yohan Poonawalla is steering the multi-diversified Poonawalla Group’s new ventures into the big league.

ASSISTANT EDITORS S SIVASUBRAMANIAN SHRIVATSA JOSHI CONSULTING EDITOR SHARMILA CHAND CORRESPONDENT (AUTOMOBILE) JAY KORADIA ADVERTISING MANAGER WILLIAM RUMAO ADVISORY PANEL SHASHIKANT PATEL JITENDRA SANGHVI REGISTERED OFFICE 102, RAJASTHAN TECHNICAL CENTRE, PATANWALA ESTATE, GHATKOPAR (W), MUMBAI 400 086. INDIA PHONE: 6703 0250/6703 0251 FAX: +91 22 6703 0251 EMAIL: mail@ibj.in BUREAU CHIEFS ALLAHABAD: S K BISWAS BHOPAL: VINAY DATAR DELHI: RANJANA ARORA HYDERABAD: B SATYAM UK: ABHIJEET ROY

Printed and published by Amit Brahmabhatt for Issues Analysis and Research Pvt Ltd and published from 102, Rajasthan Technical Centre, Patanwala Estate, Ghatkopar (W), Mumbai 400 086 and Printed at Graphtone (India) Pvt. Ltd., A1/319, Shah & Nahar Indl. Estate, Lower Parel, Mumbai 400 013 Processed at Graphtone (India) Editor: Amit Brahmabhatt Volume VII, No 10 Issue date April 1-30, 2012 Released on April 1, 2012

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Viewpoint Railway Budget 2012-13

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News Round-Up A brief on news, tie-ups, appointments and awards

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Realty ..........22 Reality bites: Housing projects in top metros crawl at a snail's pace. Corporate Reports . Mega revamp: Vedanta Group's ambitious restructuring plan is aimed at creating a global giant. ..........24 Well-oiled plans: Smart strategies and global acquisitions transform Marico into a powerful MNC. .....26 International Business..28 Upping the ante: India and Indonesia set a new $25-billion bilateral trade target. Disinvestment ..........36 Crucial lesson: The government should get its pricing right to succeed in divestment programme. Pharmaceutical ..........38 US gets tough: Regulatory raps and rising litigations spoil Indian drug-makers' American party.

Face To Face ..........42 Sankey Prasad, Chairman and Managing Director, Synergy Property Development Services: Mechanisation will expedite projects Management Mantra .......44 Srinivas Chari, Co-Founder and CMO, Xerago Banking ..........46 Mutual gains: White-label ATMs facilitate banks to reduce costs and enhance customer satisfaction. Global Wrap-Up ..........48 A quick, monthly round-up of news and current affairs across the world Readers' Lounge ..........50 Catch up with new book launches. - Emerging India - Tax Shastra - Inside Coca-Cola

Events Calendar ..........52 An update on national and international exhibitions Star Talk ..........54 Forecast by Bejan Daruwalla Knowledge Zone ..........56 - Anant Goenka - Indian Patent Office - Spiritual Corner: Money Matters

Hot Seat ..........58 Rajiv Vastupal, CMD, Rajiv Group

EDITORIAL ASSOCIATE Press Trust of India

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POLITICALLY CORRECT Despite its small, yet bold, measures, Union Budget 2012-13 clearly signals that reforms have got a decent burial, at least for the near future. 14

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Publisher’s Statement Statement about ownership and other particulars about India Business Journal required to be published under Rule 8 of the Registration of Newspapers (Central) Rule, 1956. FORM IV (See Rule 8) 1. Place of publication : Mumbai 2. Periodicity of publication : Monthly 3. Printer’s name : Amit M Brahmabhatt Whether citizen of India? : Yes 4. Publisher’s Name : Amit M Brahmabhatt Whether citizen of India : Yes Address : 102, Rajasthan Technical Centre, Patanwala Estate, Ghatkopar, Mumbai 400086 5. Editor’s name : Amit M Brahmabhatt Whether citizen of India : Yes Address : 102, Rajasthan Technical Centre, Patanwala Estate, Ghatkopar, Mumbai 400086 6. Names and addresses of : Amit M Brahmabhatt individuals who own the 102, Rajasthan Technical Centre, newspaper and partners or Patanwala Estate,Ghatkopar, shareholders holding more Mumbai 400086 than one per cent of total capital I, Amit M Brahmabhatt, hereby declare that the particulars given above are true to the best of my knowledge and belief. Sd/Dated: 1st March, 2012 Amit M Brahmabhatt Publisher


VIEWPOINT

Back into ICU

A

Railway Minister Mukul Roy has rubbed off Mr Trivedi's reformist fingerprints from the Railway Budget.

Dinesh Trivedi's Railway Budget was unparallelled in many ways. For the first time in ages, a railway minister spoke of India instead of the parochial approach displayed by most of his predecessors. He bit the bullet and hiked passenger fares across classes. He laid paramount significance on safety and it was not mere lip service. Ironically, his Budget was unparallelled in yet another way: He got sacked for doing a very good job. 6

APRIL 2012

s expected, Mukul Roy, the new railway minister, undid what his predecessor, Dinesh Trivedi, intended to do. Erasing off the very essence of Mr Trivedi's Railway Budget 2012-13, Mr Roy rolled back most of the passenger fare hikes, except those of AC first-class and AC two-tier. The new railway minister also scrapped several of Mr Trivedi's far-reaching reform proposals. A committee to examine the possibility of getting an independent tariff-setting authority was nixed. A move to restructure the Railway Board with a member for marketing - aimed at breathing life into public-private partnership projects - and a member for safety was trashed. A proposal to set up an Indian Railway Station Authority for modernisation of railway stations with restaurants and malls was given the go-by. In short, it was back to miserable square one for the Indian Railways. Mr Trivedi's Railway Budget was unparallelled in many ways. For the first time in ages, a railway minister spoke of India instead of the parochial approach displayed by most of his predecessors. Not giving in to mindless populism, Mr Trivedi actually bit the bullet and hiked passenger fares across classes after ten long years. With this move, he sought to address the issue of cross-subsidisation of the railways' passenger business by freight and cross-subsidisation of the highly loss-making ordinary and sleeper class travel by the AC segments. The former railway minister's larger efforts were concentrated on trying to fix the railways' trajectory. He laid paramount significance on safety and it was not mere lip service. He proposed the highest-ever Plan outlay of Rs 60,100 crore for safety of passengers and for sprucing up tracks, bridges, signalling, rolling stock, stations and freight terminals. The railways got a Gross Budgetary Support of Rs 24,000 crore, while Mr Trivedi planned to meet the rest of the capital expenditure through market borrowings of Rs 15,000 crore and Rs 18,050 crore from internal resources. However, all of Mr Trivedi's initiatives have come to nought. Ironically, his Budget was unparallelled in yet another way: He got sacked for doing a very good job. The mercurial Trinamool chief, Mamata Banerji immediately demanded her colleague's head and the UPA government meekly accepted it. No wonder that Mr Roy, Ms Banerji's staunchest loyalist, has rubbed off Mr Trivedi's reformist fingerprints from the Railway Budget. The Indian transport behemoth was staring at an annual loss of Rs 15,000 crore on passenger services. Mr Trivedi, according to his own admission, "tried to bring the Indian Railways out of ICU" by proposing the fare hike and projecting a total incremental revenue of Rs 7,000 crore from passenger services. But the new railway minister's rollback means that the railways will get just Rs 200 crore more from retaining the AC classes fare hike. The Indian Railways missed its surplus target of Rs 5,258 crore for 201112 by a whopping 71.6 per cent, amounting to a mere Rs 1,492 crore. Over the years, inefficient management and crass populist measures - Ms Banerji as railway minister planned to have bottling plants, catering service and a host of such non-core businesses - have led to erosion of the railways' surplus. Besides, the operating ratio of the railways has slipped to a dismal 95 per cent for 2011-12 from the targeted ratio of 91.1 per cent. Mr Roy has called for innovative measures to get the Indian Railways back to its glory. One only hopes that he will not follow in the footsteps of his leader in thinking up many more non-core businesses for the railways. Meanwhile, the Indian Railways is swiftly turning into another Air India! INDIA BUSINESS JOURNAL


MISCELLANEOUS MISCELLANEOUS

NEWS ROUND-UP NEWS NEWS ROUND-UP ROUND-UP Haryana to accord MSME demands TN planssector spending on industry status to major more funds The Micro, infrastructure Tamil New card forThe different Maharashtra mulls Small and Medium EnterNadu government isTo planning modes of transport health projects The manufacturing zoneThe

prises ministry has asked the to spend Rs 6,654.03 crore to Union urban development promote medical tourism in Maharashtra government finance take steps upgrade basic infrastructure minister, Kamal has Haryana, State governplansminister tothe set upto aNath, manufacturrecently launched the to increase funds the5,000 small in major cities andfor towns. The ment decided to accord inghas zone spread over pre-paid national scale industry. "More funds project to be implemented in hectares the National therechargeable status ofunder industry to health common mobility card should be made available to the cityprojects corporations andcalled Manufacturing Policy, which sector with investMore which can be used SMEs, financing should be on municipalities to upgrade wasof announced recently. ments Rs 100 crore, various modes of transportaNational Investment and more transparent. Hurdles drinking water supply, according to the Haryana tion such as metro, bus,(NIMZ) train, Manufacturing Zones which are being experienced drainage, sewerage, solid health minister Rao Narender taxi and ferry including to pay will be developed as by themanagement, sector at present get waste parking Singh. The government istoalso toll across the country. "The Greenfield industrial townfinances from the banks facilities and public transport exploring possibilities of card will benefit public ships, the should bebenchmarked smooth,'' the infrastructure in line with developing Haryana aswith a the transport organizationshubs. global manufacturing MSME Virbhadra increasing urbanization inbyand centre ofminister medical tourism significantly increasing overall They address the Singh. the State.will necessary provisions have efficiency, providing control infrastructural bottleneck and been made inmanagement the new and of theybetter would be different from Guidelines for forming Aviation sector industrial and investment tariff structure, cash SEZ in terms ofreducing size, level of defence JVs governregisters record growth policy 2011, MrThe Singh said. handling and hence lesser infrastructure planning and ment has made a significant According to Centre for Asia pilferage andstructures fraud," said governance India over the step fortakes bolstering domestic Pacific Aviation, India is related the Sanjeev Kumar Lohia, officer to regulatory procedures. defence industrial base by has fastest growing aviation chair of ASOduty SAI India on special in the urban clearing guidelines for its of market inof the world with the recently took over the chair Bengal woos investors development ministry. defence public sector units 2011-12 fiscal likely to record theThe governing board of West Bengal government (DPSUs) toinitiate establish joint aAssociation growth 17-18 perinvestment cent Maharashtra to set upof Supreme Audit plans toof an ventures with private firms. among the highest in the first manufacturing Institutions (ASOSAI), wich promotion campaign called The ministry willfor issue the world. InThe November 2011, is the largest regional Rising Bengal bringing zone government of in guidelines toof harness the when 54 lakh people took investments across various organization government Maharashtra plans to setthe up emerging dynamism of theand Indian skies, aircraft sectors and for all-round the first large integrated auditors. The Comptroller private sector inof India and occupancy ranged from 76zone development State. The industrial manufacturing Auditor General ofthe India, campaign will focus onto increasing per cent to 88.7 per called theopportunities National Investment Vinod Rai, is now thecent. developing the45 smaller towns, and Manufacturing Zone obtain advanced technologies "Domestic is growing chairman oftravel this nation adopting approach (NIMZ) incluster Vidarbha region of from foreign sources though very fast now. December strong Asian organization of for

Takeshi Maeda, Japan's infrastructure minister, and Union Transport Minister C P Joshi

Uttar hopes Pradesh new SSI policy Uttar India to to getannounce $100 bn in nuclear energyThe India is Pradesh government plans to develop aIndia new industrial policy on expected to get foreign investment of over $100 billion in nuclear India Nepal strengthen ties Nepal have India and funds Sri Lankan railway linesand India is funding a the lines of Uttrakhand to promote the small industries in the State energy in the next 20 years, of which a quarter would come from decided to takerailway forward thetoproposal a 41-km $150-million line connectto forbuild the first time petroleum in decades and a special scheme Bundelkhand, according to theat State France, according to thefor Commerce Industry minister Anand pipeline between Raxaul BiharLanka to and Amlekhgunj in Nepal a the former war-torn northinofSri with the country's south. minister for small industies, Bhagwat Sharan Gangwar. HeIndia also Sharma. Addressing thecrore. India-France CEO Forum, he Nepalese said, cost of around Rs 100 After a meeting with his An agreement for the restoration of the Pallai-Kankesanthurai Japan eyes Indian roads & maritime sector investadded that closed industires will be reopened and a new industrial values the French partnership in the energy sector, especially counterpart the commerce secretary, RahulSriin railway linePurushottam in the Northern Province wasmetro signed ments After investing in Ohja, the railways and railbetween transportaarea would be developed in Bareilly.A policy would be formunuclear power. French nuclear energy majors Areva and Alstom Khullar said, ` ` it is a project we have to look at and find money Lanka and India. This projecttowould be funded asand a part of an tion intoIndia, Japan is business looking investand inIndia. the roads maritime lated promote cane, wood, bamboo industries. are actively pursuing interest in for.'' Both countries also discussed ways tomentha increase trade and at $800-million credit line extended by the Indian government sectors in India. Recently, a Japanese delegation led by Takeshi investment as rates well as thea security concerns expressed by Indian concessional repayment period oftourism 20 years. Sunderbans developthe Institution of thewith AccounAfrica's Kruger national park. adoption of appropriate Maeda, Japanese investors investingminister in Nepal.for land, has met its Indian counterment package covering tants General. Mr and Rai takes A pilot project, on the lineskeen of partnership approaches by parts in highways shipping. The team was particularly set up a special fund - Rs the micro and small enterPatharpratima, Jharkhali, over thisconnectivity, prestigiousto post the Kruger park, offering DPSUs. According thefrom on port draft, new berths, terminals and other facilithe State. have identified announced 2,500 crorein- October. meant for prises and"We encouraging Pakhiralaya, Gosaba, Pakistan's General, homestay and jungle lodge guidelines, DPSUs will retain ports. ties ataround the Auditor Ennore and Chennai Japanese land Nagpur and Meanwhile, thefirm StateNissan has technology and modernization investments into the education Hingalganj areas, with the also Muhammad Akhtar Buland facilities for tourists and the affirmative rights for an interest in exporting cars from Ennore port. The team has Amravati wheresectors, the potential government has alsoindustry. notified of auto component and healthcare said help of World Bank assisRana. wildlife enthusiasts has been taking key decisions in the JV met the unionfor shipping K new Vasan for bilateral issues The initiative for is still minister G 50,000 hectares of called land for thedevelopment minister commerce tance, according to the state started by the department company. concerning the port and shipping sectors. As Japan wants toininTechnology and unexploited," Yuvraj Poman, building citiesUpgradation near Dighi port, and industry Partha Maharashtra to prochief minister. Aof team ofin the the buffer zones Tadoba vest in road transport managementDhule, systems, the ministry is Development Scheme would deputy CEO, MIDC said. Aurangabad and Chatterjee. Bengal mulls African motes wildlife tourism officials from infrastructure national park and Nagzira process finalizing a memorandum aimoftocooperation. give thethe $40-billion This is of the first phase of Nashik under Delhi safari model The government ofset up Govt plansoftofor leasing and financial sectors wildlife sanctuary. The domestic component industry development such Mumbai Industrial Corridor Maharashtra has decided Sunderbans The from entrusted by the project is tosaid. provide Rshuge 2,500-crore saw growth ofWest 15-20 slowdown here'', said Benson accessDelhi, to finance at reduced townships under the provi-toper project, Mrseeking Poman "We create aofgovernment sustainable tourism Bengal will state government, hadmany visited an alternative livelihood to the Samuel of Riya Travels. cent over same month inThe 2010 will rates ofsetting interest. With development fund sions the National be up a Special model ona the lines ofofSouth prepare comprehensive the Sunderbans to explore its villagers based on tourism global automakers setting Other travel industry and and there is no Manufacturing Policy Purpose Vehicle (SPV) toupand government ofsign India plans to

horticulture rather the tourism potential. airline officials alsothan confirm traditional cattle and farming this fact. manage these cities," he base at home and the market Assam, Meghalaya top model.In steady added. anothergrowth, developshowing such North-East ex im trade Tallest ATC tower to be ment, proposed to Draft a fundthe is expected make According to Donlad D Ingty, built in Delhi Delhi will CCEA approves 16 oil, Industrial Development Policy the domestic industry much chief commissioner of air have one of the gas blocks Thetallest Cabinet of the competitive Maharashtra more ingovernterms of customs, central excise and traffic (ATC) ment hascontrol suggested an towers Committee on Economic high technology component service tax, northeast region, in the world. The Civil amnesty scheme forgave small Affairs (CCEA) itsand nod development. Assam has registered its medium industries which have Aviation Minister Ajit for 16 of the 33 oil andSingh gas Social-security scheme exports worth Rsbid 476.59 been closed. 49,000 has laidthat theAround foundation blocks were forstone the for unorganised small and medium industrial crore and Meghalaya for theround 102-metre tall tower ninth of auctions. The workers The Finance units, outalso of acrore total 1.61 lakh Rs 383.95 worth goods that will be built adjacent to CCEA cancelled two Ministry is88.16 working oncent a of in thepresent State, have shut down and over pertower. the ATC blocks offered under the Once due to their inability repay comprehensive social-security exports came from items, ready, will be thetotwo tallest in eighth it round of New loans taken from the insurance scheme for lakhs of tea from Assam and coal the country and seventh Exploration Licensing Policy. government agencies. Theother workers the unorganized from Meghalaya, while tallest ininthe world. The bids for 16pay blocks under closed units can the sector, wherein majority share exports included primary NELP-IX were recomprinciple amount and simple ofNew the premium would be Delhi to host products like boulder-stone, mended the Empowered interest. shared by by the government. India-EU annual limestone and fruits. Assam Committee of Secretaries. The scheme seeks to provide Govt to reduce lock-in and Meghalaya have summit India and the The prime minister also life, health retirement period forand FIIs in infra registered its imported goods European Union are toone hold its dedicated to nation, pension schemes under bonds With a the view to the at Rs 34.55 cr and Rs 9.45 annual summit ministerial 2,200-km Dahej-Vijaipurcover. LIC, and the four attracting more foreign funds respectively. TheDelhi two States meetings in general New in this Dadri-Bawana-Nangalpublic into thesector economy, the have emerged as leaders in month. Addressing a joint Bhatinda cross-country insurance companies would government is weighing the export-import trade in the meet to day, the external pipeline of corpus. GAIL India that manage pros and the cons of reducing the North-East during 2010-11. affairs minister SNorth-West M Krishna runs through the lock-in period of long-term Pakistan grants India and the foreign minister of infrastructure bonds for FIIs corridor of the country. The MFN status To facilitate toEuropean one year. Union, RBI hasBaroness recently ambitious Rs 13,000 crore trade, Pakistan has lifted Catherine Ashton, said India liberalized the norms allowing pipelinetoproject barriers importscovers from India, FIIs tothe invest up toa$25 billion, and European Union are eight States. Invest India, joint by agreeing to grant India the uptofrom earlier limited holdthe annual meeting as well venture between FederaMost Favoured Nation (MFN) Rs billion, in bonds and as5tion numerous official level of of Indian Chambers status. Now imports from debentures of Indian interactions, which provide Commerce andthe Industry, India would enjoy same infrastructure companies. opportunities to discuss Department of Industrial terms as its other trade India It and Iran have bilateral issues and provide Policy and Promotion and a partners. will allow import agreed to enhance robust framework for State goods governments, TIE-UPS of most from theand the cooperation in field reviewing challenges. Board ofglobal Investment of country instead ofthe just a of The Aluminium Assorenewable energy. In aofan handful of items. Granting Mauritius, have signed ciation of India and its meeting the Iran MFN status will raise MoU forwith cooperation on US counterpart, Thebilateral President Mehmoud trade from $2.6 billion to $6-8 bilateral investment Aluminium Association, Ahmadinejad infacilitation. Tehran billion a few years. promotion concluded anand MoU to nation TheinWest African recently, Union Minister of Commerce minister Anand promote the use of metal of Mali has signed a $100 Sharma said the move will New and Renewable APPOINTMENTS inmillion emerging sectors. line of creditThe with herald awill `paradigm shift' in Energy Farooq Abdullah MoU beBank promoting the the Ex im ofIndian India Lax man Das, an bilateral calledrelations. for stepping up benefits of metal in three and it willService be usedofficer for of Revenue bilateral and economic key sectors,ties transportation, transmission of power 1974 batch, has been packaging and with Iran. cooperation APPOINTMENTS from Cote D'Ivoire, Mali's appointed as chairman of construction. neighbour, the of capital Direct SCentral K GoelBoard hastotaken over city ofAWARDS Bamako. charge as the Central Taxes in place of M C Board of Excise & won Joshi, who retired recently. Kerala Tourism the The Gujarat government's APPOINTMENTS Customs chairman. Heatthe He will hold for now Golden Gate award ITB Tourism Department joined thethe Indian Revenue post of member Berlin, world's leading has been decorated with R V Kamath, chairman Service in 1975 and has (revenue) on the board. travel show. The campaign the annual awarddirector of Travel and managing of handled various assigntitled "Your Moment is Agents Association Kanoria Chemicals and Arun Sharma hasoftaken ments in the Department Waiting'' won the silver India for the Industries Ltd, hasand taken asbeing chairman ofover Revenue and the prize in the print category country's best tourism over as president of managing director of Ministry of Finance across department 2011.Stadttor at the Das Golden FICCI. Hefor succeeds Indian Register of the country. Awards. Harsh Mariwala. Shipping.

TIE-UPS

TIE-UPS

TIE-UPS

AWARDS

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country's largest container port, Jawaharlal Nehru Port Trust (JNPT) will allow portbased companies to set up coal terminals for the first time at its facility to capitalize on the growing power needs in the country. "As soon as the government allows the capitive use of waterfront areas, we will invite interest from operators to set up coal berths as we see huge potential in the sector. We have taken anticipatory steps and we believe that in recent times, the demand for power will rise and we can benefit from it,'' JNPT chairman L Radhakrishnan said. A coal terminal is a facility dedicated to handle coal at the port from where it is distributed to various power plant operators. Besides, the port is also looking at setting up a logistics park at JNPT in association with the Dedicated Freight Corridor Corporation.

Inkel to invest Rs 5,00 0 cr Infrastructures Kerala Ltd (Inkel), a Kerala government initiative, has lined up various infrastructure projects in the State at an investment of Rs 5,000 crore in the next four years. These include 11 projects comprising

AWARDS

NPCIL's generation up Nuclear Power Corporation of India Ltd (NPCIL) has increased its power generation to about 32,000 million units during 2011-12, up from 26,000 mu last year. NPCIL revenues are likely to go up from Rs 5,000 crore last year to over Rs 8,000 crore this fiscal, according to the corporation's chairman Dr S K Jain. "The stage is now set for major expansion of nuclear power generation in the country. After the Fukoshima nuclear disaster, we had to revisit all our plants before taking up expansion and new projects," he added. NPCIL has drawn up a comprehensive road map for the XII and XIII Plan periods, which envisages total outlay of about Rs 2,50,000 crore. Dr Jain said that India has the potential to become a supplier of nuclear subassemblies to the world as it makes it possible to produce similar equipment for about 25 per cent less compared to any European manufacturer. a tourism complext at Veli in Thiruvananthapuram and an ayurveda manufacturing unit at Punalur, according to T Balakrishnan, Inkel managing director. Inkel is developing a logistics park and commpercial space at Angamally. An investment of

Rs 235 crore on PURA projects at Thalikulam and Tirurangadi and these are awarded to several other infrastructure companies.

performance in power sector. Union Minister for Power Sushil Kumar Shinde has presented the award to R P Singh, CMD, SJVN Ltd, in New Delhi recently.

ment and marketing of fresh water fish in India.

TIE-UPS The 1,500-mw Nathpa Jhakri Hydro Power Station of Sutlej Jal Vidyut Nigam Ltd has bagged Gold Shield award for 2010-11, instituted by the Ministry of Power recognising meritorious

INDIA BUSINESS JOURNAL

The Marine Products Ex port Development Authority (MPEDA) has entered into an agreement with the Malaysia-based international body INFO FISH for the develop-

UJVN to set up two gas-based power plants Uttarakhand Jal Vidyut

APPOINTMENTS Rear Admiral (Retd) R K Shrawat took over as the chairman and managing director of Mazagon Dock Ltd. Earlier, he was director-general, Weapons and Electronic Systems Engineering Establishment. He has 36 years of experience in the Indian Navy to his credit.

Nigam (UJVN) plans to invest Rs 2,500 crore to set up two gas-based power plants in a joint venture with GAIL. According to G P Patel, UJVN managing director, the company has got land in Kashipur and has identified another land in Haridwar for the two gas plants. This project is expected to be completed by 2015-16. Initially, these two projects will be of 350 mw but later the capacity would be increased to 450 mw, he added.

BHEL commissions power gear units Bharat Heavy Electricals (BHEL) has commissioned thermal and hydro power equipment with a cumulative capacity of 7,900 mw during 2011-12. Four of the projects - 525 mw unit-2 of Maithon Power, 500 mw unit-2 KPCL Bellary, 500 mw unit-2 of DVC Durgapur and 100 mw unit-4 THDC Koteshwar were synchronised and achieved full load.

PUBLIC SECTOR

JNPT to allow cos to set up coal terminals The

NMDC to buy Brazilian iron ore co India's largest iron-ore producer NMDC has agreed in principle to acquire a majority stake in Brazilian iron-ore firm Amplus, with one of the world's largest ore reserves. It involves an investment of $150 million for development. The Brazilian firm's mine is located around 150 km close to the coast with huge reserves of over 1.5 billion tonne. N K Nanda, CMD of NMDC, said the acquisition will help NMDC secure large scale ore reserves to meet its long-term requirements. NMDC is now actively looking to acquire three overseas coal mines, one each in Russia, Mozambique and Australia, a rock-phosphate mine in Australia and an iron ore mine in Brazil. APRIL 2012

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CORPORATE

NEWS ROUND-UP

UK's Triumph Motors to set up unit in Karnataka Followed by an

24 months from the date of receiving the requisite approvals.

agreement with the government of Karnataka, UKbased premium bike-maker Triumph Motorcycles has identified about 40 acres of land at Narasapur on the Bangalore-Chennai highway. The company is looking to assemble the Bonneville, Street Triple, Speed Triple and Daytona 675 models locally. Its third such facility globally after the UK and Thailand, the Indian plant will help Triumph price its models more competitively in the Indian market.

Ranbax y opens factory in Morocco Ranbaxy has

Japan's Kobe to pick up stake in Man Industries Japanese steel maker Kobe Steel will invest Rs 30 crore in Man Industries to pick up a minor stake in the Indian pipe maker. "This is the first of its kind alliance in the world where a Japanese plate / coil manufacturer and one of the leading Indian pipe manufacturers have joined hands to explore the market potential,'' said R C Mansukhani, chairman of Man Industries. Kobe, the fourth largest Japanese steel maker is also in the process of setting up a joint venture with SAIL.

Ambuja Cements mulls investment plans of Rs 1,8 00 cr Ambuja Cements plans to invest Rs 1,800 crore by December 2013 to expand its production capacity. The company will set up a 2.2-mt clinkerisation unit at Nagaur in Rajasthan. It also proposes to set up a new bulk cement terminal at Mangalore. A new brownfield expansion project to enhance capacity at its Sankrail grinding unit in West Bengal has also been initiated. The company, along with IST Steel and Lagarge India, was allotted a coal block in

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APRIL 2012

recently opened its new manufacturing facility at Casablanca, Morocco and also plans to extend the supply from this manufacturing unit to other African countries in the coming years. With this, the company now has three manufacturing facilities in Africa.

Tata Motors to set up a Rs 1,000-cr plant in Karnataka Tata Motors will invest around Rs 800-1,000 crore setting up a plant in Dharwar, Karnataka with a capacity of around 90,000 units annually. It will exclusively manufacture the Tata Ace Zip and Magic Iris and is expected to reach full capacity by end of the next fical. The Tata Ace Zip saw total sales of 3,000 last month, while the Magic Iris saw sales of around 1,000 units. Maharashtra and Ambuja holds a 27.27 per cent stake in the joint venture and plans to invest Rs 95 crore in the project.

JSW to set up electrical steel manufacturing unit JSW Steel plans to set up a 0.6 mt a year electrical

TIE-UPS Hyderabad-based pharmaceutical manufacturer Cheminnova has entered into a joint venture with Brisbane-based neutraceuticals firm Rapid Nutrition Ltd. The joint venture will result in the addition of significant business, brands of Rapid Nutrition and intellectual property rights to Cheminnova. The Rs 5,000-crore KK Modi Group company Indofil Industries Ltd has formed a joint venture with Shanghai Baijin Chemical Group of China. The 51:49 venture will set up a carbon

steel manufacturing facility at its existing Vijayanagar plant in Karnataka. The company has joined hands with JFE Steel of Japan for the technology know how. The first phase of the facility to produce 0.2 mtpa cold rolled non-grain oriented electrical steel will be commissioned in di-sulphide plant called Indo Baijin Chemicals at Dahej in Gujarat with an investment of Rs 200 crore. The Gujarat-based Steelcast, a castings manufacturer, has entered into an agreement with global major Caterpillar Inc for setting up a dedicated manufacturing facility to make castings conforming to Caterpillar's specifications. DLF Brands and American fashion accessories brand Claire have entered into a franchise agreement to open 30 stores across the country in the next three years. The retail arm of DLF Group has a slew of international brands under its umbrella including Boggi Milano, Alcott,

Thermax acq uires German Co's division Thermax has acquired Virgo Valves & Controls India's steam division which includes the steam unit's German subsidiary Rifox-Hans Richter. Rifox, headquartered in Bremen, Germany, is a leading steam traps and stream accessories manufacturer. Virgo's steam division is at Chakan, near Pune. "The high brand value of Rifox in Europe, South East Asia and the Middle East will help us in our selective internationalization programme and enhance Sunglass Hut, Mothercare. Suzlon Group subsidiary RE-power Systems SE has signed contracts to supply wind turbines for two wind farms in England Armistead wind farm in South Cumbria, owned by Banks Renewables and Carsington Pasture wind farm owned by International Power - for a total of 20 mw of power. Tata Power and South Africa-based diversified resources company Ex x aro Resources have formed a joint venture Cennergi to focus on building power generating projects in South Africa, Botswana and Namibia.

INDIA BUSINESS JOURNAL


UIC to set up unit in Gujarat Kolkata-based UIC

L&T bags Rs 2 ,446-cr orders L&T's power transmission and distribution division secured orders totaling Rs 514 crore, including contracts from Power Grid Corporation of India and the building and factories division got orders worth Rs 451 crore for the construction of residential towers. L&T secured an order worth Rs 220 crore for the construction of a 23-mw solar plant in Rajasthan and Kolkata Metro Rail has placed an order worth Rs 121 crore with L&T for the constrction of a 2.7-km viaduct. The company's building and factories division has also secured an order worth Rs 970 crore for design and construction of a large IT campus facility in Kolkata. L&T Oman has won a contract of Rs 170 crore from the Oman Electricity Transmission Co. IT major Infosys has entered into an MoU with the Maharashtra government for developing a 142-acre facility at Nagpur with a total investment of about Rs 450 crore. The facility will be located in an SEZ, which is a part of the mammoth 4,354hectare Multimodal International Hub Airport at Nagpur project. Essar O il Ltd has inked an agreement with Indraprastha Gas Ltd to set up the compressed natural gas pumping facilities at Essar's outlets in the National Capital Region. The Chennai-based Tractors and Farm Eq uipment Ltd has entered into a strategic

INDIA BUSINESS JOURNAL

CORPORATE

European market.

the efficiency of our customer processes,'' said M S Unnikrishnan, MD and CEO, Thermax.

Aditya Birla Retail to open hyper markets Aditya Birla Retail, an unlisted company owned by Kumar Mangalam Birla, will set up 15-18 hyper markets. The Group chairman Mr Birla will invest Rs 400 crore over the next two years mainly to set up these hypermarkets that sell everything from pasta to detergents under one roof. The retail venture3, which started operations in 2006, used most of its money in setting up small supermarket stores under the brand name "More''. The company invested close to Rs 2,000 crore and the group now runs 550 supermarkets and 12 hypermarkets under its belt. The company has tied up with some global consultants to find ways to strengthen the supply chain system.

Apollo Tyres plans to build two units abroad Apollo Tyres plans to invest over Rs 2,500 crore to set up two new facilities in East Europe and Brazil in the next 3-4 years. The company's current European subsidiary Apollo Vredestein - is also alliance with Rajkot's Captain Tractors Pvt Ltd for manufacturing tractors with up to 20 HP engines.

APPOINTMENTS L&T's wholetime director and president, Hydrocarbons, K Venkataramanan, has been appointed as chief executive officer and managing director of L&T from April 1. However, Mr Naik, who is now the chairman and managing director, will continue as executive chairman of the group for five years. K K Maheshwari has been appointed as the managing director of Grasim Industries, an Aditya Birla Group

keeping its options open to acquire a tyre firm in the Latin American market to commence its operations there, according to company chairman Onkar S Kanwar. Recently, Apollo Tyres has introduced a new brand Aspire 4G - for the company. Mr Maheshwari was transferred to Grasim in April 2010 as business head, Pulp and Fibre Business, and inducted on the company board as whole-time director. Nitin Prasad has been appointed as the new country head of Shell Lubricants India, a 100 per cent subsidiary of Shell. Mr Prasad has held several roles within Shell across strategy and portfolio, project management, sales, marketing and operations. Shell Lubricants' customers in India include Wartsila, Maruti Suzuki, Hyundai, Ford and Thermax.

Udyog Ltd has proposed to set up a facility for the manufacture of steel wires and wire products with an installed capacity of 1,80,000 tonnes per annum. This would include galvanizing capacity of 1,00,000 tpa at Bharuch in Gujarat at a total investment of Rs 508 crore. The company proposes to part fund the project cost with a public issue of Rs 108 crore and it has filed draft red herring prospectus with SEBI.

Suzuki Motorcycles to set up unit in Japan Suzuki Motorcycles plans to set up a Rs 2,000-cr unit at Rohtak in Haryana. The first phase of the project will entail an investment of Rs 500 crore and will be completed in 2014 with an annual capacity of 5-lakh units. Total cost of the 3phase project is estimated to be Rs 2,000 crore, with a capacity of 2 million units by 2019.

SEC Industries wins French contract The Hyderabad-based SEC Industries, a manufacturer of key defence components and the company has a partnership with IAI of Israel for manufacturing a number of products including shipping containers, ground data terminal trailers, refueling carts, and hook arresting systems, has won a contract worth Rs 310 crore from the French defence major DCNS for the manufacture of Scorpene submarine components. The company has signed agreements to make equipment for heavy-duty launchers from Belarus and other defence products from Ukraine.

APRIL 2012

11


FI NANCE

NEWS ROUND-UP

Ax ix Bank offers multicurrency travel card Axis Bank is planning to offer travel card in multiple currencies and with valued added services. The bank is also working on other specialized products in the travel cards segment - a bundled product that can be used for public transport in Singapore and a special card for students going abroad, they can avail themselves of discounts at merchant outlets. The bank, which is the biggest issuer of travel cards in India, has roughly four lakh active cards with a usage volume of over $2 billion. A travel card is a prepaid card which can be loaded with foreign currency. It can be used like a debit or credit card while travelling overseas. Currently one travel card allows transactions only in one currency. Axix Bank is working on a multi-currency card which will allow transactions in more than one currency.

LIC pays Rs 1,137 .9 9 cr dividend Life Insurance

APPOINTMENTS DK Mehrotra, acting chairman, has been selected by the government to head Life Insurance Corporation of India. Madhukant Girdharlal Sanghvi has been appointed as chairman and managing director of Syndicate Bank. He has over 31 years of experience in various fields of banking. Mr Sanghvi was the executive director of Bank of Maharashtra.

TIE-UPS ICICI Group, Life Insurance Corporation,

12

APRIL 2012

L&T Finance Holdings on acq uiring spree L&T Finance Holdings (LTFH) is entering the housing finance business by acquiring Indo Pacific Housing Finance. Indo Pacific Housing Finance had a loan book size of Rs 193.5 crore. It has 34 branches, primarily in the southern and western regions. According to N Sivaraman, president of LTFH, the company chose the route of acquiring a small, operating business as its route to entry in this market, because it brings with it a fully functional operating platform, is registered with National Housing Bank and has a well experience team of mortgage experts.Besides, the company has agreed to buy Fidelity's Indian funds, becoming the tenth-biggest equity fund house. The deal will immediately boost L&T's assets to Rs 13,500 crore, making it the 13th biggest fund and the 10thlargest on the basis of equity portfolio. "A large part of the L&T Finance business is lending. This is part of the move to increase fee-based income which is a steady business over mid-to-long term,"said Y M Deosthalee, L&T Finance Holdings CMD.

Citicorp Finance India and Bank of Baroda have joined hands to launch India's first infrastructure debt fund to be structured as a non-banking finance company. This company will have an initial equity share capital of Rs 300 crore. NABARD, UIDAI and NPCI have come together to set up a Centre of Excellence of Rural Financial Institutions to support the RRBs for launching Aadhar-enabled payment service as a part of the larger financial inclusion programme of doorstep delivery of financial services and products to the so far excluded population as well as payment of various subsidies from the Central and State governments.

Corporation of India has paid Rs 1,137.99 crore to the government as dividend for 2010-11. LIC currentincharge chairman D K Mehrotra has recently handed over the dividend cheque to the finance minister Pranab Mukherjee. For 2010-11, LIC received a total premium income of Rs 2,03,358 crore, against Rs 1,85,986 crore the previous year, up 9.34 per cent. The total life fund of LIC stood at Rs 11,51,200.58 crore against Rs 9,99,517.59 crore the previous year.

ICICI Bank launches new credit card ICICI Bank has launched a new card "Sapphirois", the third in the bank's gemstone collection of credit cards, targeting the super affluent and wealth management clients. Card

members will receive two cards - the ICICI Bank Sapphiro Platinum American Express Credit Card and the ICICI Bank Sapphiro Platinum Chip MasterCard Credit Card, linked to a single card account with a single statement and fee. It will provide access to privileges from American Express and MasterCard, as well as from brands such as Leading Hotels of the World Ltd, Atlantis the Palm, Dubai and Air France - KLM. It costs Rs 25,000 to join, with an annual fee of Rs 3,500 from the second year onwards.

UBI to open office in Myanmar United Bank of India (UBI) plans to soon open a representative office in Yangon, Myanmar, to facilitate Indo-Myanmar bilateral trade, according to Bhaskar Sen, CMD, United Bank of India. Th office will be operational during first quarter of the next financial year.

IDBI Federal Life launches new plan IDBI Federal Life Insurance Company has launched a "Bondsurance Plan" with guaranteed returns and life cover. Customers in the eight to 32 years age bracket would get a guaranteed maturity amount of Rs 1,38,293 for a single premium of Rs 1 lakh for a 5-year term. The effective tax-free return would work out to 14.89 per cent. The guaranteed maturity amount is in addition to getting a life cover of Rs 5 lakh to ensure financial security for the family in the unfortunate event of death of the subscriber. Investment in the plan is eligible for deduction under Section 80C and the guaranteed maturity amount is tax-free under Section 10 (10D) of IT Act. INDIA BUSINESS JOURNAL


SPECIAL REPORT

Politically Correct Despite its small, yet bold, measures, Union Budget 2012-13 clearly signals that reforms have got a decent burial, at least for the near future.

"WE ARE NOW AT A JUNCTURE, WHEN IT IS NECESSARY TO TAKE HARD DECISIONS. WE HAVE TO IMPROVE OUR MACROECONOMIC ENVIRONMENT AND ACCELERATE THE PACE OF REFORMS." PRANAB MUKHERJEE, UNION FINANCE MINISTER

14 APRIL 2012

IBJ RESEARCH BUREAU

C

oming two days after the revolutionary Railway Budget - which has since been rolled back to inconsequence - the Union Budget 2012-13 was damp and dreary. There were neither big-ticket reforms nor any big-bang proposals. As expected, the markets gave a thumbs-down and slumped. Most of the analysts were their usual self, criticising the Budget for not taking the big plunge. India Inc, diplomatic as ever, played safe and called it a mixed bag, pragmatic, realistic and so on. The Opposition, more aam aadmi-friendly than the UPA government, went on an endless tirade over the Budget proposals. So, was Finance Minister Pranab Mukherjee's Budget as bad as it is made out to be? The answer would and should be an emphatic no if one were to look closely at the annual financial statement and attempt to understand the constraints and compulsions that the finance minister had to negotiate. The Congress Party's miserable performance in the recent State elections was the latest in a string of reversals for the UPA government. Yet to complete its third year in office, the UPA-II already resembles a lameduck government. No government, perhaps, has had such a frosty relation with the Opposition as this one and the latter should also take a fair share of blame for the mess. Amid charges of corruption and policy paralysis, every bit of reforms introduced by the government has been bulldozed by an uncooperative Opposition. Worse, some of the government's allies have been shriller than the Opposition in forcing the government to retreat. Consequently, amid global uncertainties, the domestic economic growth is floundering. INDIA BUSINESS JOURNAL


INDIA BUSINESS JOURNAL

tax net by including most of the services, except a small negative list of 17 services. The decision was welcomed by most of the economists and analysts, given that the service sector today accounts for about 59 per cent of the nation's Gross Domestic Product (GDP). The direct tax proposals will result in a revenue loss of Rs 4,500 crore for the government, while the indirect tax proposals are expected to bring about a revenue gain of Rs 45,940 crore. The tax proposals lead to a net gain of Rs 41,440 crore,

with Service Tax alone expected to yield an additional revenue of Rs 18,660 crore. Though Dalal Street ended in the red on the Budget day, it was initially enthused by Mr Mukherjee's proposals. The finance minister introduced Rajiv Gandhi Equity Savings Scheme, a purely, equity-linked scheme for new investors. All firsttime investors in the stock market, with an annual income below Rs 10

MACROECONOMY BEYOND ROSY NUMBERS The Big Picture

Rs crore

PARAMETERS

FY12BE

FY12RE

FY13BE

GROSS TAX REVENUE RECEIPTS

9,32,439

9,01,663

10,77,611

NON-TAX REVENUE RECEIPTS

1,25,435

1,24,737

1,64,613

NON-DEBT CAPITAL RECEIPTS

55,020

29,750

41,650

11,12,894

10,56,150

12,83,874

PLAN EXPENDITURE

4,41,546

4,26,604

5,21,025

NON-PLAN EXPENDITURE

8,16,182

8,92,115

9,69,900

12,57,728

13,18,719

14,90,925

REVENUE DEFICIT

3,07,270

3,94,951

3,50,424

FISCAL DEFICIT

4,12,817

5,21,980

5,13,590

8.5-9

6.9

7.6

4.6

5.9

5.1

TOTAL RECEIPTS

TOTAL EXPENDITURE

GDP GROWTH (%) FISCAL DEFICIT TO GDP(%)

FY12BE

FY13BE

FY12RE

3,19,759

2,67,986

Fund-Guzzlers

2,75,618

BE - Budget estimate RE - Revised estimate

Food Subsidy

Fuel Subsidy

60,974

67,198

49,997

43,580

68,481

23,640

75,000

72,823

Rs crore 60,572

It was in these challenging times that Mr Mukherjee presented his recent Budget, placing him second among Indian finance ministers to have presented the highest number of Budgets. With eight Budgets, he is next only to Morarji Desai, who has presented 10 Budgets. Pranabda did a tough balancing act and unveiled a politically-correct Budget. "I must be cruel only to be kind," said the finance minister, quoting William Shakespeare's Hamlet. Yet, he turned out to be kinder than the Danish prince. Positive moves The Budget did cheer taxpayers a bit. With an increase in exemption and changes in Income Tax (I-T) brackets, the salaried class got some relief from inflation. Mr Mukherjee increased the exemption limit from Rs 1.8 lakh to Rs 2 lakh. He stuck to the exemption limit prescribed by the Direct Taxes Code (DTC) and refused to heed the Standing Committee on Finance's recommendations to raise it to Rs 3 lakh. Taxpayers were also allowed a deduction of up to Rs 10,000 for interest on savings bank accounts. The finance minister exempted employees earning up to Rs 5 lakh salary and up to Rs 10,000 interest from savings bank accounts from filing IT returns. As expected, Mr Mukherjee rolled back the tax stimulus that he had administered to heal the economy, plagued by the slowdown in 2009. Consequently, both the Excise Duty and the Service Tax were raised from 10 to 12 per cent. During the pre-crisis period, the Excise Duty was as high as 14 per cent. But Mr Mukherjee desisted from revisiting that peak rate. Instead he opted to raise both the taxes to 12 per cent and align them to the rates prescribed in the forthcoming Goods and Services Tax (GST). Apart from hiking the Service Tax, the finance minister also widened the

Fertiliser Subsidy

Interest Outgo

Reality Check Although the finance minister's fiscal deficit target seems achievable, it hinges on a very crucial factor of whether the government will take tough decisions to curb fuel and fertiliser subsidies. Given the vitiated political atmosphere, the government may find it difficult to bite the bullet.

APRIL 2012

15


SPECIAL REPORT

lakh, are eligible to invest up to Rs 50,000 directly in equities. These investors can deduct 50 per cent of their investment from their income when computing their Income Tax over and above the Rs 1 lakh investment exempted from the tax. The investment scheme, which will lock in equity investment for three years, has been hailed as a masterstroke by many equity analysts. The scheme, the detailed guidelines for which are still awaited, is expected to bring about 1.5 crore new investors into the stock market and deepen the market. However, some analysts have expressed concern that the scheme could mislead new investors. They hope that the scheme could be mean-

ingful if new investors route their money through mutual funds. "I hope that when the details of the new equity scheme are, mutual funds are a part of the definition. Otherwise, to encourage inexperienced investors to buy stocks directly with a three-year lock-in period could end up being disastrous investment experience and give Rajiv Gandhi a bad name," opines Value Research CEO Dhirendra Kumar. The Budget also lowered the Securities Transaction Tax (STT) by 20 per cent from 0.125 to 0.1 per cent. However, the market, which was looking for the abolition of the tax, "WE HAVE TO BITE THE BULLET. THERE IS NO OTHER WAY IN WHICH YOU CAN REDUCE SUBSIDIES. I SINCERELY HOPE THAT WHEN THE TIME COMES TO TAKE TOUGH DECISIONS, WE WILL TAKE ALLIES ON BOARD."

INFRASTRUCTURE BIG TAKEAWAYS

MANMOHAN SINGH, Prime Minister MEASURE: Tax-free bond issues doubled to Rs 60,000 IMPACT: More funds to flow into infrastructure projects

crore

MEASURE: 14 per cent hike in allocation for roads to Rs 25,360 crore IMPACT: Facilitating meeting of target of awarding 8,800 km road contracts

under NHDP MEASURE: ECB market thrown open to highway developers with Withholding Tax cut to 5 from 20 per cent IMPACT: Easy access to cheaper funds to build roads faster

Customs Duty exemption on equipment used for road construction IMPACT: Facilitating highway developers access to superior technology at lower cost MEASURE:

MEASURE: Set-off benefits on Dividend Distribution Tax paid by multi-tiered holding companies IMPACT: Removing cascading impact of tax on holding companies, especially infrastructure entities designed as many special purpose vehicles under a holding company MEASURE: Bringing many segments under viability gap funding IMPACT: Making PPPs a viable business proposition and bringing

in muchneeded finance and expertise of the private sector into these vital sectors MEASURE: Weighted deduction of 150 per cent of capital expenditure from Income Tax in various vital segments and skill development IMPACT: Greater private sector participation, boost to enhancing skill

Reality Check Overall, the infrastructure sector has got a big boost from the Budget. With half of the Rs 50,00,000-crore infrastructure funding estimated for the 12th Plan period expected from the private sector, the finance minister's incentives set the stage for big private participation.

16 APRIL 2012

was disappointed that the STT cut is applicable only for delivery-based transactions. Most of the trades are not based on delivery, but are squared off, limiting the benefit of the tax cut. Besides, proposals related to twoway fungibility of Indian Depositary Receipts (IDRs) and permitting qualified foreign investors (QFIs) in corporate bonds gladdened investors. The finance minister left the Corporate Tax rate untouched and chose not to tweak the peak Customs Duty. He also provided a slew of tax concessions to key infrastructure segments such as power, airlines, roads, bridges, hospitals, cold-chain facilities and affordable housing. Focusing on domestic demand-driven growth recovery, Mr Mukherjee took many, small, but bold, steps to address bottlenecks in many sectors and create conditions for a rapid revival of high growth in private investments. "We are now at a juncture, when it is necessary to take hard decisions. We have to improve our INDIA BUSINESS JOURNAL


macroeconomic environment and accelerate the pace of reforms," noted Mr Mukherjee in his two-hourlong Budget speech. The Budget threw a much-needed lifeline to the beleaguered power sector. It allowed external commercial borrowings (ECBs) to part-finance the rupee debt of existing power projects. It also slashed the Withholding Tax from 20 to 5 per cent to boost overseas investments in the sector. It scrapped Customs Duty on coal imports and slashed the Countervailing Duty on coal to 1 per cent to facilitate power producers, who have had to depend on costly coal imports on the back of depleting production of Coal India. The Budget also provided a balm to gasbased power producers by withdrawing Customs Duty on natural gas. Besides, the tax holiday, under Section 80-IA of the Income-Tax Act, has been extended by another year to March 2013, giving power companies huge relief. There were some positive proposals for the ailing airline industry too. The Budget permitted the airline industry to tap ECBs cumulatively for one year, subject to a total ceiling of $1 billion, to meet the working capital requirements of the industry. Providing a leg-up to the nascent maintenance, repair and overhaul (MRO) sector, it also proposed to allow full exemption from Customs Duty and Countervailing Duty on aircraft spares, tyres and testing equipment. The Budget further reinforced the government's commitment to the infrastructure sector. The finance minister reiterated that infrastructure investment during the 12th Plan period (2012-17) would go up to Rs 50,00,000 crore, with half of the investment expected from the private sector. He doubled the amount of tax-free bonds to be issued in 201213 from Rs 30,000 crore to Rs 60,000 crore for funding infrastructure projects. INDIA BUSINESS JOURNAL

RUCHIR SHARMA, MORGAN STANLEY

MUKESH AMBANI, RELIANCE INDUSTRIES

"India either needs to implement another burst of reforms to lift its underlying economic growth back to an 8 to 9 per cent pace to help fund its ambitious welfare dreams or aggressively cut back spending to prevent a fiscal train wreck down the road. This Budget unfortunately did not chart either of those paths."

"The finance minister has showed resolve to address infirmities in governance and plug leakages in tax collection. A range of anti-evasion proposals, widening of Service Tax through a negative list and harmonisation of Service Tax and Excise Duty are clear signals in this direction."

The road sector got a good fillip, with the Budgetary allocation rising by 14 per cent to Rs 25,360 crore. Fixing a target of awarding contracts for 8,800 km of roads under the National Highway Development Programme in 2012-13, he offered a slew of sops for highway developers, including the option to tap the ECB market, reduction of Withholding Tax from 20 to 5 per cent and Customs Duty exemption on some

equipment used for road construction, among others. The finance minister also tweaked norms related to Dividend Distribution Tax for multitiered holding companies, removing the cascading impact of the tax and providing relief to many infrastructure companies. Mr Mukherjee tinkered with a few

POWER A SILVER LINING Power companies permitted to tap ECB, Withholding Tax cut to 5 from 20 per cent IMPACT: Access to cheaper funds for cash-strapped power producers MEASURE:

Customs Duty on coal, natural gas scrapped, Countervailing Duty on coal cut to 1 per cent IMPACT: Relief to coal- and gas-based power producers depending on costly imports MEASURE:

MEASURE: Tax holiday under Section 80-IA of I-T Act extended by another year IMPACT: Tax exemption for power producers up to 10 years from the date of project commissioning

Reality Check Tax incentives apart, the sector is facing a severe shortage of fuel in India, leading to increased dependence on costly imports. Structural reforms in coal and gas sectors could prove more beneficial for power producers.

APRIL 2012

17


SPECIAL REPORT

SHANKAR SHARMA, FIRST GLOBAL

"India's public finances are in great shape. The debt-to-GDP ratio stands at 63 per cent as against 85 per cent eight years ago. The interest burdento-GDP ratio too has lowered to 31 per cent from 46 per cent earlier. These measures, and not fiscal deficit, are the correct ways to assess financial risk in an economy."

norms to recharge public-private partnership (PPP) and research and development (R&D), thereby giving a boost to a number of sectors. He widened the ambit of viability gap funding (VGF) to a host of sectors, including irrigation, terminal markets, common infrastructure in agriculture markets, soil-testing laboratories, capital investment in fertiliser projects, oil, gas and LNG storage facilities, oil and gas pipelines and fixed network for telecommunication and telecommunication towers. The VGF, which makes PPPs a viable

business proposition, brings in muchneeded finance and expertise of the private sector into these vital sectors. Moreover, a five-year extension for 200 per cent weighted deduction for in-house R&D, increased deduction of 150 per cent of capital expenditure incurred for skill development, hospitals, hotels, warehouses and cold-chain facilities, among others, provides a big impetus to a host of sectors in removing bottlenecks and improving efficiency. The Budget provided a lot of succour to the agriculture sector, which has been lagging with paltry 2.5 per cent growth expected in 2011-12. Extension of 3 per cent interest subvention scheme and additional interest subsidy of 3 per cent for timely loan repayment, raising farm credit target by Rs 1,00,000 crore to Rs 5,75,000 crore, an 18 per cent hike in outlay for the sector at Rs 20,208 crore, along with PPPs in irrigation projects and tax incentives for constructing warehouses and cold-chain facilities augur well for the sector. There were some welcome proposals for the small and medium enterprises (SMEs), the real engines of

AVIATION NEW FLIGHT PLAN Industry cumulatively given access to $1 billion ECB for a year to meet working capital requirements IMPACT: Access to global funding for ailing Indian airlines, some of which have turned NPAs and struggling to get funding in India MEASURE:

MEASURE: Customs

Duty and Countervailing Duty exempted on aircraft spares, tyres and testing equipment IMPACT: A leg-up to nascent MRO industry Reality Check The aviation industry is reeling under several policy glitches and mismanagement. With 49 per cent FDI in airlines, a political hot potato, still under consideration, air carriers continue to bleed. The government's move to allow airlines to import aviation turbine fuel directly is of little help unless broad-based policy reforms are effected.

18 APRIL 2012

DHIRENDRA KUMAR, VALUE RESEARCH

"I hope that when the details of the new equity scheme are out, mutual funds are a part of the definition. Otherwise, to encourage inexperienced investors to buy stocks directly with a three-year lock-in period could end up being disastrous investment experience."

economic growth. The finance minister proposed to float a Rs 5,000crore venture fund with Small Industries Development Bank of India (SIDBI) to enhance availability of equity to the sector. He also proposed to exempt Capital Gains Tax on sale of residential property, if the sale consideration is used to buy equity of a manufacturing SME for purchase of new plant and machinery. In one stroke the measure not only provides investors with another taxfree investment option, but also addresses the funding needs of small enterprises. There were some good measures for the banking sector as well. The finance minister announced plans to infuse Rs 15,888 crore in public sector banks and financial institutions during 2012-13 to strengthen their capital base. He also put forward proposals to set up a holding company to recapitalise State-owned banks, a Central Know Your Customer (KYC) depository to avoid multiplicity of registration and data upkeep and unfurled many measures to promote financial inclusion. Besides, Mr Mukherjee unveiled a number of proposals to set right anomalies in the economy. He INDIA BUSINESS JOURNAL


doubled the Customs Duty on standard gold bars and coins and platinum from 2 to 4 per cent and on non-standard gold bars and coins from 5 to 10 per cent. The move is aimed at curbing Indians' craze for the yellow metal, whose imports shot by a whopping 54 per cent to $45.5 billion, next only to oil imports, causing a huge current account deficit. The finance minister also introduced a number of small, yet farreaching, measures to curb black money. The change in stance with relation to Tax Residency Certificate (TRC) and providing for General Anti-Avoidance Rule (GAAR) in the Income-Tax Act will go a long way in curbing round-tripping of black money as foreign institutional investment (FII), from tax havens, especially Mauritius. Besides, 1 per cent tax deduction at source by the buyer in any transfer of immovable property, except agricultural land, worth over Rs 50 lakh in urban areas and over Rs 20 lakh in rural areas and 1 per cent tax collection at source by the seller on cash transaction of bullion and jewellery worth over Rs 2 lakh are aimed at curbing black money in realty and gold sectors. "The finance minister has showed resolve to address infirmities in governance and plug leakages in tax collection. A range of anti-evasion proposals, widening of service Tax through a negative list and harmonisation of Service tax and excise Duty are clear signals in this direction," notes Reliance Industries Chairman Mukesh Ambani. Mr Mukherjee was very candid about the fiscal deficit for 2011-12, which overshot the Budget estimate by 1.3 percentage points from 4.6 to 5.9 per cent of the GDP. The net effect of lower-than-targeted tax receipts, low disinvestment proceeds and higher spending, mainly on subsidies for food, fuel and fertiliser, led to slippage of the fiscal deficit. Compared to the previous year's INDIA BUSINESS JOURNAL

SUNIL MITTAL, BHARTI ENTERPRISES

UDAY KOTAK, KOTAK MAHINDRA BANK

"It is perhaps a little worrying that key reforms in the current tax regime introduction of DTC and GST - have once again been postponed. The finance minister could have provided a future roadmap for these important reform initiatives."

"This Budget is anchored in India's political and macroeconomic reality and moves away from the last year's more aspirational Budget. The focus on domestic demand, private investment and infrastructure will provide a boost to Bharat."

over-optimistic Budget estimate of the fiscal deficit, Mr Mukherjee has been quite realistic in pegging it at Rs 5,13,590 crore for 2012-13, which works out to 5.1 per cent of the GDP. He has also scaled down the disinvestment target to Rs 30,000 crore from Rs 40,000 crore last year. He has slashed fuel and fertiliser sub-

sidies, but assured full provision for food subsidy. "India's public finances are in great shape. The debt-to-GDP ratio stands at 63 per cent as against 85 per cent eight years ago. The interest burden-to-GDP ratio too has

MARKETS LINGERING CONCERNS MEASURE: Rajiv

Gandhi Equity Savings Scheme: Up to 50 per cent income exempted from tax for first-time stock investors with less than Rs 10,00,000 annual income investing up to Rs 50,000 with three-year lock-in period IMPACT: About 1.5 lakh new investors likely to enter stock market STT on delivery-based transactions slashed from 0.25 to 0.1 per cent IMPACT: Negligible impact as most trades not delivery-based, but squared off MEASURE:

MEASURE: Two-way fungibility of IDRs, subject to ceiling IMPACT: Allows swapping of IDRs with underlying stock;

likely to attract

more foreign companies to list in India MEASURE: QFIs permitted to invest in corporate bonds IMPACT: Infusing life and deepening corporate bond market MEASURE: Change in stance related to TRC and GAAR provisions IMPACT: Effective tool to curb round-tripping of black money as FII

investments Reality Check Markets remain unenthused, owing to lack of big-ticket reforms, regressive provisions such as I-T Act amendment to retrospectively tax Vodafone-like cases and concern over further fiscal deficit slippage.

APRIL 2012

19


SPECIAL REPORT

lowered to 31 per cent from 46 per cent earlier. These measures, and not fiscal deficit, are the correct ways to assess financial risk in an economy," points out First Global Vice-Chairman and Joint Managing Director Shankar Sharma. The finance minister has committed to restrict expenditure on Central subsidies under 2 per cent of the GDP in 2012-13 from the current 2.4 per cent. He has also set a target to bring it down further to 1.75 per cent of the GDP in the next three years. Fully endorsing the Unique Identification Authority of India (UIDAI), Mr Mukherjee has announced setting up of a mobile-based Fertiliser Management System designed to provide end-to-end information on movement of fertilisers and subsidies by 2012. The finance minister also added that UIDAI Chairman Nandan Nilekani's recommendations related to Aadhaar-enabled cash payments for various government

Besides SMEs, Budget has been generous to the textile sector.

schemes would be rolled out in at least 50 districts within six months. Nagging concerns The Union Budget 2012-13 is wellintentioned, to say the least. Mr Mukherjee has attempted to present a Budget as best as it can be, given the vitiated political atmosphere. With small, yet bold, mea-

TAXPAYERS SOME GAIN, SOME PAIN New Tax Structure Rate of Tax

Figures in rupees

Below 60 Years

Above 60 Years

Above 80 Years

0-2,00,000

0-2,50,000

0-5,00,000

10%

2,00,001-5,00,000

2,50,001-5,00,000

---

20%

5,00,001-10,00,000

5,00,001-10,00,000

5,00,001-10,00,000

30%

Above 10,00,000

Above 10,00,000

Above 10,00,000

Nil

MEASURE: I-T exemption limit hiked, changes in tax brackets IMPACT: Rs 2,000 savings at lower tax bracket and Rs 22,000

savings at

highest tax slab No tax on interest from savings bank, post office accounts up to Rs 10,000 IMPACT: More benefit for savers, especially senior citizens MEASURE:

MEASURE: Those earning annual income of not exceeding Rs 5,00,000 and

interest less than Rs 10,000 exempted from filing I-T return IMPACT: Free from annual I-T return hassles, less paperwork for tax officials Reality Check Goods and services get costlier on hike in Excise Duty across many goods and Service Tax on most services by 2 per cent each.

20 APRIL 2012

sures to attract the private sector into various vital sectors, remove bottlenecks and improve efficiency, Mr Mukherjee's Budget does stand out singularly. "This Budget is anchored in India's political and macroeconomic reality and moves away from the last year's more aspirational Budget. The focus on domestic demand, private investment, infrastructure and governance will provide a boost to Bharat," emphasises Kotak Mahindra Bank Vice-Chairman and MD Uday Kotak. However, the Budget leaves a lingering taste of disappointment, which, at times, turns to despair. A strikingly-negative feature of the Budget is to bring in an amendment to the Income-Tax Act, 1962, and tax old, Vodafone-like cases retrospectively. The move is aimed at getting past the adverse Supreme Court's verdict in the Vodafone tax case on sale of capital assets in India outside the country. The amendment aims at retrospectively taxing offshore share transfers of foreign companies that derive their value substantially from assets located in India. "Changes in law with retrospective effect could be a complete disaster. Even if the Parliament has the ability to amend laws retrospectively, it should not be done as it will impact the credibility of the government," opines Ernst and Young's Sudhir Kapadia. This proposal threatens to reopen at least half a dozen such cases like Aditya Birla-Nuvo deal, the purchase of AT&T's stake by Idea Cellular India, SAB Miller's acquisition of Foster and Vedanta's deal to buy a majority stake in Sesa Goa from Mitsui, among others. The amendment will send out negative signals to foreign investors, who are already watching India with extreme caution. No doubt, most of these cross-border deals are structured with the very intent of avoiding taxes. The move to plug loopholes in the I-T Act and net revenue to the exchequer is certainly INDIA BUSINESS JOURNAL


welcome, but applying it retrospectively is a retrograde measure. The Budget has once again missed the deadline of introducing the DTC and GST, the progressive direct and indirect tax regimes that will have a profound bearing on the economy. "It is perhaps a little worrying that key reforms in the current tax regime introduction of DTC and GST - have once again been postponed. The finance minister could have provided a future roadmap for these important reform initiatives," rues Bharti Enterprises Chairman Sunil Mittal. The DTC seems all set to debut from 2013-14, with a few provisions already put into implementation in the current financial year. However, the GST appears to be a long-drawn battle, yet another victim of partisan politics. One cannot squarely blame the government for the delay in rolling out the GST. Mr Mukherjee has promised to operationalise the nationwide GST network by this August. This does indicate the government's firm resolve in ushering in this piece of tax reform. It is time the other political parties turned reasonable, at least for the sake of national interest. The Budget also mentions contentious issues like foreign direct investment (FDI) in retail and airlines and adds that efforts are on to take all the stakeholders concerned on board. There is little that the government can do in these issues in the light of vicious politicking. The much-needed amendments to a number of crucial financial Bills related to banking, insurance and pension too suffer from the same fate. "India ei-

SUDHIR KAPADIA, ERNST AND YOUNG

NIRMAL JAIN, INDIA INFOLINE

"Changes in law with retrospective effect could be a complete disaster. Even if the Parliament has the ability to amend laws retrospectively, it should not be done as it will impact the credibility of the government."

"If the growth target does not materialise, the fiscal situation will aggravate. Liquidity will remain tight on continued overhang of government borrowings and pressure on long-term bond yields."

ther needs to implement another burst of reforms to lift its underlying economic growth back to an 8 to 9 per cent pace to help fund its ambitious welfare dreams or aggressively cut back spending to prevent a fiscal train wreck down the road. This Budget unfortunately did not chart either of those paths," adds Ruchir Sharma, the MD (Emerging Markets) of Morgan Stanley. Another major concern is on the fiscal consolidation front. The Budget does throw in a realistic fiscal deficit figure. But that target too appears tough, considering the sharp revision of the Budget estimates for fuel and fertiliser subsidies that Mr Mukherjee did for 2011-12. Moreover, he has sharply slashed subsidy outgo for fuel and fertiliser for 201213. This would be a near-impossible task on the back of rising crude oil and fertiliser prices. The only way to curb the subsidies stringently is to bite the bullet, which the government

has been reiterating. "We have to bite the bullet. There is no other way in which you can reduce subsidies. I sincerely hope that when the time comes to take tough decisions, we will take them on board," stresses Prime Minister Manmohan Singh. But the reality suggests that the government lacks teeth to bite the bullet as was quite evident in the Railway Budget fiasco. This was an excellent opportunity for the finance minister to unveil a reforms Budget. The next one will be quite tough as the nation will be heading for general elections in 2014. Of course, a lot of reforms can still be unveiled outside the Budget, in dayto-day administration. However, the miserable rollback of the Railway Budget and a politically-correct general Budget clearly indicate that reforms have got a decent burial, at least for the near future. And that is a major setback for the India story.

SALES SERVICE INSURANCE FINANCE LEASING EVERYTHING IN AUTOMOBILES INDIA BUSINESS JOURNAL

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APRIL 2012

21


REALTY

Reality bites Housing projects in major metros crawl at a snail's pace, souring dreams of scores of home buyers. MANVENDRA JHA

A

large number of home buyers in the National Capital Region (NCR), Mumbai and Bangalore will not get possession of their apartments on time. A survey by PropEquity, a property research firm, reveals that about 45 per cent of the housing projects in these regions are facing significant delays, affecting the prospects of scores of home buyers. The study, which surveyed 1,920 projects launched between January 2007 and June 2009 in these three regions, with expected delivery by January 2012, points out that the NCR was the worst performer out of the three regions, with just 23 per cent of the projects completed by this January. In Bangalore and Mumbai, the situation is better, with 66 and 61 per cent of the total projects completed respectively. The research firm mainly attributes the delay in construction to cash crunch faced by developers and a slowdown in housing demand. "Several developers launched a slew of projects in the pre-2008 crisis and are now facing severe funding woes, increased borrowing costs, falling, global, macro-economic trends and dwindling housing demand," observes PropEquity Chief Executive Officer (CEO) Samir Jasuja in the survey. Lagging NCR The NCR has contributed a lot to the delay and the major reason is that the number of projects that were

22 APRIL 2012

launched in the NCR are very large compared with those in Mumbai and Bangalore metropolitan regions, the survey further adds. The execution timelines have been further extended due to delays in obtaining regulatory sanctions in the region. Besides, the developers do not have the execution bandwidth to complete so many

HOME TRUTHS 45 per cent of projects in NCR, Mumbai and Bangalore facing significant delays NCR worst performer with just 23 per cent of the projects completed Bangalore with 66 per cent and Mumbai with 61 per cent projects completed faring better Affordable housing projects hit hardest in three regions

large-sized projects and that has led to delays, points out Mr Jasuja. Last year, farmers' protest against land acquisitions prompted the Supreme Court to cancel the construction of residential flats in Noida Extension, which tanked absorption,

prices and supply, notes PropEquity. Within the NCR, affordable housing has faced the major brunt as 92 per cent of all projects have been delayed, followed by 76 per cent in the mid-end housing projects and 72 per cent in the luxury housing segment. In the Bangalore region, 33 per cent of affordable housing projects have been delayed, followed by a 31 per cent delay in the mid-end housing projects, while about 45 per cent of luxury housing projects have been crawling. Similarly, in Mumbai, 37 per cent of affordable housing projects have been delayed even as a 36 per cent delay is seen in the mid-end housing projects and a 48 per cent delay in the luxury housing segment. Boosting demand Of the total delayed projects in the three regions, the research firm expects that 40 per cent may get delivered by the end of 2012. About 12 per cent of the delayed projects are expected to be delivered by the 2014-end as they are most likely at the excavation stage and will need around three years for completion. The survey also reveals that small-sized projects (under 300 units) have seen 62 per cent completion rate compared with just 23 per cent completion rate for large-sized projects (above 300 units). The rising interest rates, coupled with bullish property prices, triggered by speculation, have kept genuine home buyers away from the property market. As interest rates appear to drop, realtors should make conscious efforts to bring down property prices to boost genuine housing demand. This can revive the dormant realty market. INDIA BUSINESS JOURNAL


CORPORATE REPORT

Mega revamp Vedanta Group unveils an ambitious restructuring plan aimed at creating a global metal and mining giant. SURYA SARATHI RAY

B

illionaire Anil Agarwal-led Vedanta Resources has decided to merge all its businesses in India and abroad - excluding the African copper mine - into a single entity, Sesa Sterlite. The merger, which is aimed at simplifying the group structure, will turn the consolidated entity into the world's seventh-largest natural resources company. BHP Billiton, Vale, Rio Tinto, Glencore Xstrata, Anglo American and Teck are the top-six global natural resources companies according to their EBITDA (earnings before interest, tax, depreciation and amortisation) in 2011. This is the second time that the mining and metal major has proposed to restructure its businesses. The earlier attempt in 2008 had failed in the face of mounting protests from

shareholders on the issue of inclusion of Africa's Konkola Copper Mine into other businesses. The latest attempt is in line with the company's strategy to consolidate and simplify the group structure and eliminate cross-holdings. It will also improve capital structure and cash fungibility besides allocation of and access to capital. "The vision behind merging the assets is to create a giant resource company in India in line with BHP Billiton of Australia and Rio Tinto of Brazil," emphasises Vedanta Group Chairman Anil Agarwal. Learning from the earlier mistakes, Vedanta Resources has kept the African operations outside the purview of the merger proposals and plans to keep it as a direct subsidiary, in which it has a 79.4 per cent stake. Vedanta discloses that the merger will be completed by the end

of 2012, subject to approvals from regulators and shareholders. It adds that the amalgamation will ensure an annual Rs 1,000-crore synergy benefit for the consolidated entity. Merger plan The consolidation plan, which the management hopes to be earningsaccretive for Sesa Goa, Sterlite and Vedanta, includes merger of Sterlite with Sesa Goa at a share-swap ratio of 5:3 to form Sesa Sterlite. Accordingly, shareholders of Sterlite will get three shares of Sesa Goa for every five Sterlite shares held by them. Besides, Vedanta Aluminium (VAL) and Madras Aluminium Company (MALCO) will be consolidated into Sesa Sterlite. Vedanta's direct holding of 38.8 per cent in Cairn India will also be transferred to Sesa Sterlite, together with the associated debt of about Rs 30,000 crore ($5.9 billion), a company statement reveals. Post-merger, Sesa Sterlite will include Cairn India, Hindustan Zinc (HZL), Skorpion and Lisheen, Bharat

The New Structure Vedanta Resources ZINC-LEADSILVER

Konkola Copper Mines

IRON ORE

OIL & GAS

HZL

Sesa Goa

Cairn India

Zinc Int’l

WCL

Sesa Sterlite COPPER

ALUMINIUM

POWER

Tuticorin

BALCO

Talwandi Sabo

CMT

VAL

BALCO Jharsuguda MALCO

Source: Vedanta Resources

24 APRIL 2012

INDIA BUSINESS JOURNAL


Aluminium (BALCO), Talwandi Sabo Power, VAL Power, MALCO Power, Western Cluster and Australian Copper Mines as its subsidiaries. After the share transfer, Sesa Sterlite will be listed in India and the company will also list American Depositary Shares in New York. Vedanta, which will own 58.3 per cent in Sesa Sterlite after the restructuring, now controls about 55 per cent each in Sterlite Industries and Sesa Goa. Balancing act The question is whether Mr Agarwal will be able to sail through the merger this time? Rating agency Standard and Poor's (S&P) opines that the merger may not materialise soon as the company may face obstacles in getting approvals from shareholders as well as regulators. However, it adds that the organisational restructuring may improve the debt service coverage ratio of the holding company. "The proposed restructuring is subject to approvals from a number of minority shareholders and regulators in the UK and India. In our opinion, the restructuring will take time to implement because it could face difficulties in getting these approvals," notes Vishal Kulkarni, a credit analyst of S&P. On a consolidated basis, the proposed corporate restructuring will not by itself reduce debt. The Rs 45,000-crore debt of Vedanta Resources, the Vedanta Group holding company, remains subordinated to that of its operating subsidiaries. Until the restructuring is complete, the company will have to pay Rs 2,500-crore interest per year for the debt from cash dividends paid by its subsidiaries, point out analysts. Global rating agency Moody's also adds that Vedanta's restructuring is a "mild positive" for the metal and mining conglomerate as its debt burden will get reduced by Rs 30,000 crore. However, the agency retains its "negative outlook" and adds that apart INDIA BUSINESS JOURNAL

Anil Agarwal is eyeing to create a giant resource company in India in line with BHP Billiton of Australia and Rio Tinto of Brazil.

ADVANTAGE MERGER Eliminating cross-holdings and simplifying group structure Building a global resources behemoth Broader portfolio of ferrous and non-ferrous metals Improve capital structure and cash fungibility Effective allocation of and access to capital Annual Rs 1,000-crore synergy benefit Superior debt service coverage ratio

from about Rs 900 crore of savings, primarily from group tax efficiencies, there is no reduction in group's debt level, currently at about Rs 82,500 crore. However, reduction of indebtedness by some Rs 30,000 crore at the thinly-capitalised parent company is an improvement achieved by pushing down borrowings and assets to the new Indian holding company, Sesa Sterlite, the agency notes. Observations of rating agencies and analysts were reflected on the domestic bourses as shares of both Sesa Goa and Sterlite plummeted, while share price of Vedanta Re-

sources saw an increase on the London Stock Exchange. The merger will equip Vedanta with a broader portfolio of ferrous and non-ferrous metals under the same umbrella. This will give it a shape more similar to other global mining companies like BHP Billiton and Rio Tinto. The merged entity has iron ore, zinc, aluminium, copper, oil and gas and other natural resources in its portfolio, barring coal, the most desired fuel in any developing nation. Mr Agarwal reveals that Sesa Sterlite will be looking to buy out coal assets in Latin America to plug the missing link in its portfolio and also bid for coal assets in India when the government starts auctioning of blocks. The proposed merger will make Vedanta the world's seventh-largest natural resource company. Besides, it will facilitate in slashing debts, improving capital structure and cash flows as well as creating synergies. But the restructuring is fraught with problems and shareholders are hardly expressing unalloyed joy. Mr Agarwal's rich experience in negotiating hurdles can play a constructive role here by balancing the group's ambitions with its shareholders' aspirations. APRIL 2012

25


CORPORATE REPORT

Well-oiled plans Smart strategies and aggressive global acquisitions transform Marico into a powerful Indian multinational company. MUNISH SHEKHAVAT

M

arico, the domestic fastmoving consumer goods (FMCG) giant, is back in the acquisition mode. The company plans to strengthen its product portfolio further, with its latest purchase recently. The over Rs 3,100-crore company is known for brands like Parachute coconut oil, Kaya skincare service and the Saffola brand of oats and wheat flour, among others. In February, the Mumbai-based company acquired the Paras brand of personal-care products from Reckitt Benckiser. Last April, the United Kingdom-based consumer goods major had acquired home-grown Paras Pharmaceuticals for Rs 3,260 crore. Reckitt Benckiser had bought both pharmaceutical and personal-care products of Paras, but decided to sell Paras' personal-care business to Marico. As a part of Ahmedabad-based Paras Pharmaceuticals' acquisition, Reckitt had acquired brands like Moov pain relief ointment, Krack heel-care lotion and D'Cold and personal-care brands such as Set Wet and Zatak and hair-lotion brand Livon. Reckitt's own brands include Dettol soap and liquid, Strepsil throat lozenges, Mortein pest control aerosol spray, Lizol floor cleaner, Vanish stain remover and Harpic toilet cleaner. In recent times, Paras Pharmaceuticals, a private company owned by founder Girish Patel and his family, had become a significant player to reckon with. With strong portfolios

26 APRIL 2012

of over-the-counter health and personal-care products and state-of-theart manufacturing plant in Baddi, Hiamchal Pradesh, it had attracted attention of major investors. In fact, private equity investors such as Actis and Sequoia Capital had also bought stake in the company.

Harsh Mariwala: On a shopping spree

Latest deal Marico's deal with Reckitt, whose details were not disclosed, is expected to conclude by the end of the second quarter of 2012. Dabur India and Emami were among the players in the race to acquire the Paras brands, which are expected to generate a turnover of Rs 150 crore during this financial year. By clinching the deal with Reckitt amid stiff competition, Marcio it is set to reap rich dividends from Paras' strong brand equity and modern manufacturing facility. "We are not in a position to com-

ment on the deal size at this point," points out Saugata Gupta, Marico's consumer products business CEO. According to the scheme of arrangement, Reckitt will transfer the personal-care division to a separate company called Halite Personal Care India, in which Marico will acquire a 100 per cent equity stake. According to Mr Gupta, the deal is likely to be sealed in a couple of months and will be funded through internal accruals, debt and equity. "It fast-forwards our journey towards creating a portfolio for the future with a significant presence in the male-grooming and post-wash, hair-care segments," adds Mr Gupta, referring to the latest among a string of acquisitions undertaken by Marico. Ex citing journey With over 3,000 employees, 15 manufacturing facilities - eight in India and seven overseas - a clutch of powerful brands and presence in more than 25 countries across Asia and Africa, Marico is an FMCG behemoth today. But the company traces its humble roots to 1948, when it started off as Bombay Oil Industries (BOIL), a regional oil trader, in Mumbai. BOIL had three main operational lines - fatty acids, spice extracts and consumer products. In 1971, Harsh Mariwala, the current chairman of the Marico Group, joined the family business, infusing a whiff of fresh air into BOIL. Mr Mariwala, taking charge of the company's consumer products division, was quick to spot the untapped potential of its oil business. He travelled extensively and studied BOIL's distribution and retail operations. He realised that BOIL's customers were other companies and intermediaries, who resold to retail outlets, who, in INDIA BUSINESS JOURNAL


With a clutch of powerful brands and presence in more than 25 countries, Marico is an FMCG behemoth today.

turn, sold the oil in loose, unbranded form to consumers. Mr Mariwala spotted the opportunity for branding and introduced consumer-friendly packs for both coconut oil - Parachute - and refined edible oil - Saffola. In 1990, BOIL's consumer products division was hived off into a separate company, leading to the birth of Marico. Over the next two decades, Mr Mariwala turned Marico into a powerful, trendsetting FMCG juggernaut. He replaced tin cans with shapely, plastic containers for oil, which the industry soon adopted. He pitched Saffola on the heart-care platform, making it the country's first edible oil brand, promoting health and wellness about two decades ago. Towards the end of 2002, Marico forayed into beauty and wellness segment with Kaya Skin Clinic, which has over 100 clinics across the world. Going global For Marico, going global was not just a means of opening up new avenues of growth, but also an opportunity for cross-border learning. That, in part, explains the shopping spree and the amazing growth of its international business group. With a footprint in West Asia, North Africa, South Africa, Bangladesh, Malaysia and Vietnam, the international division has grown manifold, accounting for about a quarter of the Marico Group's total turnover. Last year, it acquired an 85 per cent stake in International Consumer INDIA BUSINESS JOURNAL

Marico: A Fact File Origin: 1990

............................................. Headquarters: Mumbai

............................................. Business: FMCG, health and wellness

............................................. Major brands: Parachute, Saffola, Kaya Skin Clinic

.............................................

Facilities: 15 (including seven overseas)

............................................. Employees: 3,000+

............................................. Global presence: 25 countries

.............................................

Turnover (FY11): Rs 3,100+

Products, a Vietnamese company, for an undisclosed sum. In 2010, the consumer products major had bought hair-styling brand, Code 10, from Colgate-Palmolive apart from buying out the aesthetics business of Singapore-based Derma Rx Asia Pacific in the same year. Marico has been looking at acquisitions for about Rs 1,000 crore both in the domestic and overseas markets. We have grown almost 26 to 27 per cent. We will try and maintain our high growth rates through both organic and inorganic routes. We will tap new opportunities available through acquisitions," stresses Mr Mariwala. Cut-throat competition in the Rs 1,30,000-crore domestic FMCG market and rising input costs have

SAUGATA GUPTA CEO, Consumer Products Business "THE PARAS DEAL FAST-FORWARDS OUR JOURNEY TOWARDS CREATING A PORTFOLIO FOR THE FUTURE WITH A SIGNIFICANT PRESENCE IN THE MALE-GROOMING AND POSTWASH, HAIR-CARE SEGMENTS."

been prompting consumer product companies to expand their presence globally. No wonder, Marico's rivals - Godrej Consumer Products, Dabur and Emami - have been equally aggressive in global acquisitions and expansion. Meanwhile, opportunities are opening up for FMCG companies in India on the back of reasonably-high economic growth, rising disposable incomes, rapid growth of the rural market and exciting developments in the organised retail segment, driven by the growing mall culture. The growing emerging markets of Asia and Africa too are also beckoning FMCG players with open arms. The trend-setting FMCG, Marico, seems to have taken a brief break before plotting its next move. APRIL 2012

27


INTERNATIONAL BUSINESS

Upping the ante India and Indonesia set a new $25-billion bilateral trade target, triggering a virtuous cycle of mutual growth. TRIPTI AGARWAL

I

ndia and Indonesia are set to reach their target of bilateral trade worth $25 billion by 2015 ahead of schedule. The bilateral trade between the two Association of SouthEast Asian Nations (ASEAN) members has already crossed $20 billion by 2011. Bilateral trade between the countries has grown at an annual rate of 30 per cent and was $20.13 billion in 2011.

tion of India-ASEAN FTA last year, the trade and investment flows between our countries would accelerate and help achieve and exceed the target easily," Mr Sharma told reporters in Jakarta. Both the sides also agreed to speed up negotiations on the bilateral Comprehensive Economic Cooperation Agreement (CECA). "Opening up the two economies for service trade would be a winwin situation for both the countries," Mr Sharma added during his three-

Anand Sharma and Gita Wirjawan explore ways to strengthen bonds between India and Indonesia.

The two countries have decided to revise the trade target and widen the proposed free-trade agreement (FTA) by including more service sectors like health and banking. The new trade target was set last month, when Commerce, Industry and Textile Minister Anand Sharma reviewed the business ties between the two countries with his counterparts in Jakarta, the Indonesian capital. Enhancing ties "We now see ourselves achieving the next target of $25 billion by 2015 comfortably. With the implementa28 APRIL 2012

day visit to the Asian nation. Currently, Indonesia does not allow movement of professionals in health and banking sectors. The services sector is of key interest to India as it contributes over 59 per cent to its Gross Domestic Product (GDP). Indonesian Trade Minister Gita Wirjawan has agreed to take up these issues with the health department and the Central Bank of Indonesia. Mutual gains Last October, both the sides started negotiations for CECA, which would

cover trade in goods, services and investment. Mr Sharma also raised the issue relating to non-tariff barriers in pharmaceutical sector and bovine meat exports. The Indonesian minister said that it was important for the island-nation to have a more open regime for trade. Besides, Mr Sharma expressed concern over the new mining laws of Indonesia that have affected Indian mining and independent power projects (IPPs). Currently, Indian mining companies are obliged to export coal at benchmarked prices announced monthly by. This has upset the calculations of a large number of IPPs. Mr Sharma also asked Indonesia to improve its offer on services in the ongoing negotiations for an FTA in services and investments between India and the 10-member ASEAN. He said that movement of professionals would help in boosting investment opportunities. In order to further the economic cooperation, both the sides decided to institute five new working groups in the fields of healthcare, pharmaceutical and biotechnology, mining, agro and food processing, R&D and skill training. There is a huge demand for professional services in Indonesia's healthcare, education and accountancy sectors, which, at present, is met by countries like Australia, New Zealand and, to some extent, China. India certainly stands to gain in a big way if the CECA between the two countries materialises. Besides, Indonesia is an important source of coal to energy-starved India and the bilateral ties can power up the country's energy sector, which is facing severe shortage of coal. As the two Asian nations inch closer to each other, they could set off a virtuous cycle of mutual growth. INDIA BUSINESS JOURNAL


COVER STORY

RIDIN HIG

A decade after takin Yohan Poonawalla is new ventures into th

Yohan Poonawalla: Doing business hands on

IBJ RESEARCH BUREAU

T

hink Poonawallas and the thoughts inevitably lead up to exquisite horses and racing. Prod the mind a little harder and luxury cars and flashy, private jets come to the fore. Taxing the brain any further only draws a blank. Minute details of the

30 APRIL 2012

Poonawallas, one of the nation's oldest business families, have been in public domain for years now. Reams of newsprint have been devoted to the jet-setting, high-flying lifestyles of Pune's best-known corporate house. Yet, few would be familiar with the diverse businesses of the Poonawalla Group. "Two of our group companies are market leaders in their respective

fields of industrial valves and pneumatic actuators. Our products are employed across a range of core sectors, both in India and abroad," stresses Yohan Poonawalla, the young and dynamic scion, who heads the group's engineering and hospitality ventures. Like his illustrious business house, Mr Poonawalla is a very familiar public figure. The 40-yearold Poonawalla's passion for horses, INDIA BUSINESS JOURNAL


NG GH

ng charge, s steering his group's he big league.

luxury cars and private jets are all well chronicled. Yet, the Poonawallas are much more than their luxurious lifestyle. Over the last six decades, they have built a sprawling business empire, ranging from horse racing and breeding to biosciences, engineering and hospitality. Poona, circa 19 46‌ The Poonawallas trace their legacy INDIA BUSINESS JOURNAL

back to a little over a century. Their ancestors, belonging to the Parsi gentry, owned large tracts of land in and around Pune or Poona, as it used to be called during the British Raj days. Over a period of time, the family, which was mainly into trading, acquired the name Poonawalla (literally meaning inhabitants of Pune). In 1946, the late Soli Poonawalla - the father of Zavaray and grandfather of Yohan - ventured out of the family's trading business and started a stud farm across 15 acres, with a dozen mares and a stallion in Hadapsar on the outskirts of Pune. Breeding was still in its infancy in India, with hardly any Indian thoroughbreds. With a strong passion for horses and racing, Soli Poonawalla single-handedly built the stud farm and sowed the seeds of horse breeding in the country. For about two decades, Soli Poonawalla's sons - Zavaray and his brother - built on their father's legacy and expanded the Poonawalla Stud Farms. Today, the stud farm has actually redrawn the country's landscape of horse breeding and racing. The stud farm is divided into two separate units - the young stock division situated in Hadapsar and the breeding division located in Theur, about 10 km away from Hadapsar. It boasts of winning 11 Champion Breeders' Awards - nine in a row since the award was instituted 16 years ago. The stud farm is also famous for its most-coveted event, Poonawalla Breeders' Multi-Million, which is the country's richest juvenile race. Besides, the stud farm's thoroughbreds are in big demand across the globe, with many of them exported to Dubai, Hong Kong, Malaysia, Singapore, the USA and many other countries. The horses from Poonawallas' stables have been winners all the way, bagging 332 Classic races, including nine Indian Derbies and 66 Indian Classics. Reckoned

Poonawalla Empire

Poonawalla Stud Farms Origin: 1946 Business: Horse breeding and racing Location: Hadapsar, Pune ......................................

Intervalve India Origin: 1987 Business: High-quality valves Existing plant: Manjri, Pune Upcoming plant: Hadapsar, Pune User industry: Refinery, petroleum, fertiliser, chemical and other core industries Clients: RIL, BHEL, BOC India, Essar Construction, Finolex Industries, L&T, NPCIL, South Pacific Viscose, Monetic Valve Corp, etc ......................................

EL-O-Matic India Origin: 1989 Business: Pneumatic and electric actuators and valve automation systems Plant: St Patrick's Town, Pune User industry: Pharmaceutical, textile, sugar, paper & pulp, food & beverages and other core industries Clients: ABB, Alstom India, BARC, Asian Paints, Orchid Chemicals, Sterlite Industries, Visakhapatnam Steel Plant, Emerson, etc ......................................

Hospitality Grayshott Business: Health spa and resort Location: Surrey, UK Area: 47 acres Fawsley Hall Business: Heritage hotel Location: Silverstone, UK Rooms: 58 Suites: 13 APRIL 2012

31


COVER STORY

"Passion should not override business" Y

ohan Poonawalla respects his family legacy. But the young and dynamic businessman is not the one to rest on past laurels. A handson planner and manager, he has placed the Poonawalla Group's engineering ventures on a highgrowth trajectory since taking charge a decade ago. Taking risks should not be difficult for the young Poonawalla scion, given his family business of horse racing. No wonder, he surprised many in business circles by acquiring stakes in two UK hotels. These acquisitions did not just mark the Poonawallas' entry into hospitality, but was the group's maiden foreign venture. Tight business schedule apart, Mr Poonawalla, who sits on the boards of some of the reputed companies and charitable trusts, is indeed the real king of good times. With a fleet of luxury cars and private jets, he is one of the most popular faces of young India Inc. But save for these indulgences, Mr Poonawalla is a very private person, committed family man and doting father to his son and daughter. In a free-wheeling interview with India Business Journal, Mr Poonawalla talks about his engineering ventures, foray into hospitality and the group's future plans. Excerpts: How was the going for your engineering businesses last year, given the uncertainties and negative sentiments plaguing the economy? During the last quarter of 2011, we did notice some signs of a slowdown. There were fewer orders during the period in question, chiefly because many big projects were put on hold. But the situation 32 APRIL 2012

seems to be improving in the new year with many infrastructure projects getting revived. With considerable ex ports, has the current global economic crisis not impacted your business? We have always been looking for newer markets across different geographies and clients. Besides, apart from our traditional forte of butter-

businesses from economic crisis. What made you to diversify into the hospitality sector? I visit the UK quite often and I was fascinated by these two properties there. Greyshott is a spa and health resort. Today, detoxification and other health and beauty treatments are becoming hugely popular across Europe. The second acquisition,

“We target to maintain our leadership position and grow at a long-term annual growth of about 20 to 25 per cent. I will still keep my eyes open for new opportunities.� fly valves, we have diversified into check, gate, globe and ball valves to cater to a diversified client base. We want to be in the widest possible range of valves and actuators as a one-stop solutions provider for our customers under a single roof. Our new valve plant coming up at the Hadapsar Industrial Estate will move a step closer in this direction. With this strategy of spreading risks widely, we are able to insulate our

Fawsley Hall, is a 700-year-old heritage hotel nestled around pristine natural beauty. I have always been passionate about hospitality and the two UK properties gave me a good opportunity to live the passion. It was also exciting as this happens to be the Poonawalla Group's first overseas venture. So, are there any plans lined up for the hospitality sector in India? There are too many hotels in Pune. INDIA BUSINESS JOURNAL


In fact, there is a surplus supply of hotels in the city and business would not be viable. It is very important to ensure that passion should not override business considerations. What sectors will drive the group's future? I would be sticking to the core business of engineering and hospitality in the near future. We target to maintain our leadership position and grow at a long-term annual growth of about 20 to 25 per cent. I will still keep my eyes open for new opportunities, as and when they arrive. I am passionate about horse breeding and racing. Besides, it is a family legacy, which should continue for the years to come. What are the secrets behind your group's immense success? There are several factors behind the success. A good team of employees, without whom it would be difficult to reach this point. My parents have always advised me to give 100 per cent of whatever you do. You will have to put your heart and soul into any work that you take up. It is always very important to follow ethics and maintain integrity and reputation at all costs. These qualities pay off in the long run. O n a personal note, apart from horses and cars, what are the other interests that keep you occupied? Work, of course, takes up most of time these days. So far, it has been a hands-on approach as far as work is concerned and hence you need to devote a lot of time. But I am seriously contemplating delegating a part of my work to our dedicated staff. I am trying my best to balance between work and family. I want to spend as much time as possible with my young children before they grow up.

INDIA BUSINESS JOURNAL

Mystical, the wonder horse Poonawalla Stud Farms has redrawn the racing landscape by introducing generations of Indian thoroughbreds to the world.

as the highest stakes-earning establishment in the country, over 378 horses from the Poonawalla Stud Farms have earned stakes of over Rs 10 lakh. The Poonawalla brothers shared their father's passion for horses. But they went a step ahead and ventured into biosciences, establishing a synergy between the stud farm and the new vaccine business. "Retired horses from our stud farm were donated to government-owned Haffkine Institute in Mumbai, which made vaccines from horse serum. A veterinary expert at our farm suggested that we too could enter the vaccine-manufacturing business and thus was born Serum Institute of India," recounts Mr Poonawalla. It was quite by chance that the Poonawallas diversified into industrial engineering. "A family friend of ours, who was running an industry in Vapi, manufacturing mechanical seals, actually led us into this sector," recalls Mr Poonawalla. The family friend in question owned Sealol Hindustan in Vapi. As he was on the lookout for a buyer for his business

and when the intention was disclosed to the Poonawallas, they did not think twice but seized the opportunity. The group thus forayed into engineering. Today, the Poonawalla Group is one of the country's leading diversified conglomerate, growing at a rapid pace and making forays into new ventures. New focus During the late 1970s, the Poonawalla Group turned its focus to engineering soon after taking over Sealol Hindustan. In less than a decade, the group's engineering business got a big push following its technical and financial alliance with two Dutch giants, leading to setting up of Intervalve India in 1987 and EL-OMatic in 1989. Over the years, the two companies have built a formidable clientele, comprising some of India's and the world's biggest companies. With a wide range of valves, including butterfly, check, gate, globe and ball valves, Intervalve India, an ISO 9001-certified company, has become synonymous with high quality. The company's modern manufacAPRIL 2012

33


COVER STORY

Group with a big heart

L

ong before corporate social responsibility (CSR) became the norm, the Poonawalla family has been engaged in giving back to society. The Poonawallas have contributed towards various social causes such as health, education and social infrastructure. The group widened and resurfaced the Hadapsar Road, beside which most of its operations are located, and the road has been christened as the Soli Poonawalla Road. The family has also built and is maintaining the Gool Poonawalla Garden in Salisbury Park. Besides, the group has given generous donations to several hospitals. The Zavaray Poonawalla

Ultra modern cancer facility at Ruby Hall Clinic, Pune

Cancer Building, with ultra-modern facilities devoted to treatment of cancer patients, in the premises of Ruby Hall Clinic in Pune stands testimony to the contributions of the Poonawalla Group. The family has also contributed immensely to schools, the needy and weaker sections of society.

Yohan Poonawalla in conversation with Dr A P J Abdul Kalam, former President, at the inauguration of the Zavaray Poonawalla Cancer Building

turing facility in Manjri, near the stud farm, caters to most of the core industries, including refinery, petroleum, fertiliser and chemical, pharmaceutical, textile, sugar, paper and pulp, food and beverages, among others. Intervalve's superior Dutch technology and high standards of design and accuracy have enabled it to corner a major market share of the do34 APRIL 2012

mestic process industries. Besides, its valves, which boast of the CE marking, conforming to the stringent quality standards of the European Union, are in great demand across the UK, the USA, Germany, South-East Asia, Middle East and other major countries. The establishment of EL-O-Matic India, in collaboration with another Dutch industrial leader, gave a shot

in the arm for the Poonawalla Group. With its pneumatic and electric actuators and valve automation systems, the group has been able to cater to a host of niche companies that are going in for automation of their processes. "Pneumatic actuators and valve automation systems are the future of process industries. EL-OMatic's products are a natural extension of the valves. Pneumatic actuators enable industries to control their processes automatically from a remote destination," adds Mr Poonawalla. Automation may be the buzz word today. But the Poonawallas entered this high-technology industry two decades ago, much before the technology could capture the world's imagination. EL-O-Matic International, which was set up in 1973 in the Netherlands, pioneered the world's first electric actuator in 1987. By the 1990s, the Dutch company had expanded to about six countries, tying up with the Poonawallas for the India venture in 1989. EL-OMatic International, which became a part of Emerson Electric, a large American multinational conglomerate, in 1995, is today one of the world's largest specialised manufacturers of valve actuators. With a stateof-the-art manufacturing plant in Pune's St Patrick's Town and a network of 18 dealers and 15 branches across India and six international dealers, EL-O-Matic India has become a leading player in process automation. Big leap The group's engineering division has seen robust growth since 2002 with Yohan Poonawalla taking charge as chairman and managing director of the two companies from his father, Zavaray Poonawalla. Armed with an MBA degree from the UK and fresh with new ideas, the young Poonawalla began infusing new life into the group companies. "Mr Poonawalla is a kindhearted man with innovative ideas. INDIA BUSINESS JOURNAL


Fawsley Hall, Silverstone

Grayshott spa, Surrey

Yohan Poonawalla’s acquisition of stake in two UK hotels marks the group's first overseas foray.

He is running a legacy of tradition and has a challenge to strike a balance between the old and the new schools of thought, the art of which he has mastered," points out Aijaz Hussain, a senior core committee member of the Poonawalla Group. Mr Poonawalla drew up winning business strategies to take the engineering companies to the new level. Betting big on diversification, he guided Intervalve and EL-O-Matic India in widening their product baskets, moving into newer markets and broadening their clientele. He also trimmed the companies' inventory, outsourced many non-core operations and cut costs drastically. In a short span of time, there was a sea change in the two engineering companies. In 2004, Mr Poonawalla moved into uncharted territory by getting the group to enter hospitality. The group bought stakes in two UK hotels, marking its first overseas expansion. The first acquisition was Grayshott, a luxury spa in Surrey, an hour's drive from London. Spread across 47 acres of gardens, woods and sweeping lawns, the spa boasts of some of the best natural therapies, beauty treatments and fitness programmes. The other acquisition, Fawsley Hall, a 700-year-old heritage mansion-turned-countryside hotel, is close to the Formula-1 racing track INDIA BUSINESS JOURNAL

in Silverstone. The 58-room hotel, accompanied by 2,000 acres of rolling hills and parklands, recently underwent renovation by adding 13 new suites. The Great Hall of the hotel was originally commissioned in 1537 and its South Wing was used by Queen Elizabeth-I during her visit in 1575. The hotel, which has been patronised by the rich and famous of

The engineering companies' valves and actuators cater to the who's who of domestic and global companies.

the world, is a prized possession for the Poonawallas. Meanwhile, it is an exciting time for the Poonawalla Group's engineering division. The Rs 7,000-crore Indian valve and actuator industry has been growing at about 15 per cent annually and is quite bullish of the near future. A small, but critical, support devise in almost every industry,

valves and actuators are turning niche by the day as projects get bigger and more complex. Having supplied over 5,00,000 valves to the Indian industry so far, Intervalve has reached a critical mass. Mr Poonawalla has set in motion an expansion plan to focus more on high-margin valves such as gate, globe, check and ball valves. A plant is coming up at the Hadapsar Industrial Estate to manufacture these high-value valves and the unit is expected to go on stream in the next three months. "There are more than 300 types of valves, based on the parameters of pressure, size and material. I want my companies to become a one-stop solution, making available all types of valves under a single roof," emphasises Mr Poonawalla. As the economy surges and industries embark on ambitious projects of huge size and scale, there is a big rush for high-quality, niche valves and actuators. The Poonawalla Group's engineering companies, in the meantime, have an edge over their peers, considering that they have the first-mover advantage of embracing technology a long time ago. With Mr Poonawalla at the helm, it would be a matter of time before Intervalve and EL-O-Matic gallop to glory like Mystical, Ace, Adler and many of his prized thoroughbreds. APRIL 2012

35


DISINVESTMENT

Crucial lesson Irrespective of the process, the government should get its pricing act together to succeed in its divestment programme. ONGC oil platform

The ONGC auction took a mysterious turn 10 minutes before the scheduled close. SUMEDHA SHANKAR

I

t is a fair price, and not the method, that can ensure success in the government's disinvestment drive, note market experts. Their observation comes in the wake of share sale of Oil and Natural Gas Corporation (ONGC) by an innovative auction barely scraping through last month. After many initial hiccups and then an intervention by the government and market regulator Securities and Exchange Board of India (SEBI), sale of about 5 per cent promoter equity in ONGC, the public-sector behemoth, sailed through on March 1, fetching about Rs 12,700 crore to the exchequer in its disinvestment kitty. This was the first time that a one-day auction method was tried by the government in its disinvestment drive 36 APRIL 2012

"The instrument for ONGC stake sale was good, but the only problem was the pricing of the offer." JAGANNADHAM THUNUGUNTLA

Head (Research), SMC Global Securities

and it was widely expected that a success for the ONGC issue could lead to shares being sold in other public sector undertakings (PSUs) through this method. However, a tepid response to the ONGC shares from investors other than State-run entities has led to questions being raised about this unique auction route. Market analysts, although, do not find fault with the method as such and say that the poor response should be mainly attributed to a high floor price fixed for the auction. O NGC fiasco As the ONGC auction was taking place at the floor price of Rs 290 a share, the company's share price slipped below the floor price in the normal trading on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Faced with a tepid response, the offer for sale of 42.77 crore ONGC shares at a floor price of Rs 290 a share had to be rescued by Life Insurance Corporation of India, the State-owned insurance behemoth, which is said to have put in a vast majority of the bids. According to experts, until half an hour before the close of markets, neither the NSE nor the BSE saw big money coming in. It was only when it became clear that the issue would fail to get its Rs 12,000 crore target that the government panicked and probably arm-twisted some of its cash-rich entities to somehow put in the money to rescue the auction from ignominy. The auction took a mysterious turn when stock exchange websites stopped updating the bids 10 minutes before the scheduled close. The government said the system was jammed because of a rush of last-minute bids. Market watchers said the technical glitch was a blessing for the INDIA BUSINESS JOURNAL


government because it would would come after some time be almost impossible to find as the government will take out if some bids came after the time to put another issue on Government fails to meet disinvestment target. scheduled closing time. Howthe block." TARGET MOP-UP ever, the next day, both the The traditional fund-rais2009-10 25,000 23,553 stock exchanges denied that ing processes like IPOs and there was any technical glitch, 2010-11 40,000 22,145 FPOs for share sale are relashrouding the whole share sale tively more time-consuming * 2011-12 40,000 14,000 affair in mystery. and require at least four to five 2012-13 30,000 -"The government is trying months to complete. Experts (Rs crore) *Estimates every way possible to meet the point out that the auction disinvestment target. The inroute is good as long as pricstrument for ONGC stake sale was ing is done appropriately. good, but the only problem was the outside investors rather than buyback CNI Research Chairman and Manpricing of the offer," points out by the PSUs themselves, he adds. aging Director Kishore Ostwal The cash lying with the PSUs points out that all the four options Jagannadham Thunuguntla, strategist should be meant for their future ex- auction route, share buyback, IPO and head of research of SMC Global pansion and not for buying back the and FPO - have their own faults and Securities. "If the issue is properly priced, there would be a lot of dethe government should go straight for mand. We had expected a discount on privatisation and that should be the the floor price, but Rs 290 per share best way. He, however, notes that the came as a surprise," he adds. government may again fall back upon IPOs and FPOs for its future Right pricing disinvestments. Undeterred by the Against its disinvestment target of criticism over the ONGC auction isRs 40,000 crore for 2011-12, the sue, the Disinvestment Department government could manage to garner has said it is comfortable with the only around Rs 14,000 crore, with process and will consider selling the follow-on public offer (FPO) of government equity in more PSUs Power Finance Corporation, the through the same method. ONGC auction and the initial public offer (IPO) of National Buildings Meanwhile, the Union Finance Construction Corporation. ConsidMinistry has begun inter-ministerial ering the poor disinvestment show, discussions on listing subsidiaries of Finance Minister Pranab Mukherjee profit-making, State-owned enterset a more realistic target for 2012prises, raising hopes that the govern13 of Rs 30,000 crore in his recent ment may look at all options to meet Budget. its divestment target of Rs 30,000 crore in 2012-13. The government On the same day of the ONGC "All the four options - auction plans to focus on companies, in flop show, the Union Cabinet ap- route, share buyback, IPO which it has more than 90 per cent proved a share buyback route for its and FPO - have their own stake such as Minerals and Metals disinvestment programme, under faults. The government may Trading Corporation of India, State which cash-rich PSUs can purchase again fall back upon IPOs Trading Corporation, Neyveli Lignite the government's stake and help and FPOs for its future and Rashtriya Chemicals and Fertilmeeting its disinvestment target. disinvestments." KISHORE OSTWAL izers. It has already secured the "The government is desperate to get CMD, CNI Research Cabinet's approval for stake sale in the fiscal deficit under control, but four State-run companies - Steel Authe sentiment is not permitting it to go whole-heartedly with the disin- shares and therefore buyback should thority of India, Hindustan Copper, vestment programme," opines not be a preferred route, notes Mr Bharat heavy Electricals and Unicon Financial Services CEO Nagpal, adding: "I do not think that if Hindustan Aeronautics. As the govGajendra Nagpal. If market senti- the ONGC stake sale emerged as a ernment gears up for another round ments remain positive, the preferred flop show, others will also bear the of share sale, it should take care to route will be to get the money from same brunt. I think the next issue price the issues fairly.

Falling short

INDIA BUSINESS JOURNAL

APRIL 2012

37


PHARMACEUTICAL

US gets tough Regulatory raps and rising litigations spoil Indian drug-makers' American party. MUNISH SHEKHAVAT

I

ndian generic drug-makers, which generate most of their revenues from the lucrative US market, have been at the receiving end recently. The domestic pharmaceutical companies are grappling with a host of issues, with a multinational com-

in the US generics market, led by Glenmark, Aurobindo and Sun Pharma. Despite the recent troubles, the US continues to remain the largest global market for generics as a slew of patented medicines go offpatent in the coming years. Sun Pharma's woe In a recent development, Sun Phar-

The regulatory rap on Ranbaxy sounds a sinister note of caution for the domestic pharmaceutical industry.

pany demanding millions of dollars in damages. Meanwhile, a domestic company has initiated a voluntary recall of products from the world's biggest pharmaceutical market. India is a huge source for generic drugs or less expensive medicines that are not covered by patent protection, unlike original, innovative medicines. Generic drugs have always had to battle with voices in developed markets, which question their quality for reasons not always based on sound reasoning. The over Rs 1,00,000-crore domestic pharmaceutical sector has maintained its number-one position 38 APRIL 2012

maceutical Industries has been asked by US-based Wyeth Pharmaceuticals for damages worth $960 million related to their ongoing patent dispute over a generic version of Protonix, which is used to treat heartburn. Protonix is a registered trademark of Wyeth, which was acquired by Pfizer in 2009. Sun Pharma reveals that Wyeth has submitted to the District Court of New Jersey confidential expert reports claiming damages against Sun Pharma and Teva, arising out of their earlier at-risk launches. Wyeth's experts have estimated the purported damages from Sun Pharma to be

$960 million. The experts have also claimed that Teva may be liable for some of Sun Pharma's damages and vice versa. However, Sun Pharma believes that it has sound reasons to disagree with these overstated claims of Wyeth and also continues to believe that the patent is invalid and unenforceable and will pursue all available legal remedies, including appeals. Sun Pharma adds that in due course, it will also come out with its expert reports, providing assessment on the purported damages. In 2010, the District Court of New Jersey had turned down Sun Pharma's request to "reverse the jury verdict that the patent is not invalid". Wyeth and Nycomed, the company from which Protonix was licensed, had initiated the legal action against Sun Pharma and Teva over alleged patent violations in 2004. Glenmark's recall Glenmark Pharmaceuticals, another Indian company that also sells its products in the US market, has issued a voluntary nationwide recall in the US for seven lots of its oral contraceptive, Norgestimate and Ethinyl Estradiol tablets, owing to a packaging error. The recall is issued by the company's US arm, Glenmark Generics, for tablets in strength of 0.18 mg/0.035 mg, 0.215 mg/0.035 mg and 0.25 mg/0.035 mg. According to Glenmark, the recall is being implemented because of a packaging error, where select blisters were rotated 180 degrees within the card, reversing the weekly tablet orientation and making the lot number and expiry date visible only on the outer pouch. The company adds that as a result of the error, the daily regimen for the oral contraceptive can leave women consumers in the US at risk of unintended pregnancy. INDIA BUSINESS JOURNAL


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It, however, does not mention the financial implications of the recall exercise. The tablets are manufactured and packaged by Glenmark Generics India and distributed by Glenamrk Generics USA only in the US. The company points out that it discovered the error when it received a complaint from a consumer, stating that she received one blister pack, in which the tablets were packaged in reverse order, and it immediately decided to recall the drug. The company remains confident of supplying the product and adds that there is sufficient supply of unaffected lots of the medicine in the market to support

the demand. Relief for Lupin Meanwhile, Lupin, the Mumbaibased drug-maker, has reached a patent litigation settlement agreement with US-based companies Santarus and Depomed involving diabetes drug Glumetza. The development, which can help the Indian company launch its generic version of the drug by 2016, will, however, be subject to a review by the US Department of Justice, the Federal Trade Commission and other regulatory authorities. The company and its subsidiary, Lupin Pharmaceuticals, have entered into the settlement agreement with

Despite recent troubles, the US continues to remain the largest global market for Indian generics.

Santarus and Depomed to resolve the pending patent litigation involving Glumetza in the strength of 1,000 mg and 500 mg. According to the company, the settlement agreement grants Lupin the right to begin selling a generic version of Glumetza on February 1, 2016, or earlier under certain circumstances. The company adds that the settlement agreement is subject to review by the US Department of Justice, the Federal Trade Commission and the US District Court of California. Lupin had received the tentative approval for generic Glumetza from the United States Food and Drug Ad40 APRIL 2012

ministration (USFDA) this January. The company points out that it is the first applicant to file an abbreviated new drug application for Glumetza 1,000 mg and 500 mg and as such is entitled to 180 days of marketing exclusivity in the US market. Depomed had sued Lupin in 2009, alleging that Lupin's application to market a generic version of Depomed's diabetes drug Glumetza infringed its patents. According to IMS Health data, Glumetza tablets of 1,000 mg and 500 mg had annual US sales of around $71 million for the twelve months ending December 2011.

Ranbax y's troubles Ranbaxy Laboratories, India's largest pharmaceutical company, recently filed a consent decree with a US court as a part of its settlement with the American authorities regarding a ban on certain manufacturing plants operated by the company in India. The Gurgaon-based company signed the consent decree with the USFDA on December 20, 2011, which has been filed with the United States District Court of Maryland. In 2008, the USFDA had banned 30 generic drugs produced by Ranbaxy at its Dewas (Madhya Pradesh), Paonta Sahib and Batamandi (Himachal Pradesh) units, citing gross violation of approved manufacturing norms. In the same year, the US Department of Justice had moved a motion against the company in a local court, alleging forgery of documents and fraudulent practice. Under the terms of the consent decree, which is subject to approval by the court, Ranbaxy has committed to further strengthen procedures and policies to ensure data integrity and comply with current good manufacturing practices. Ranbaxy faces the possibility of a permanent injunction, which requires it to make fundamental changes to its plants both in the US and India. This will also prevent it from manufacturing drugs at certain facilities in the US. The injunction follows the US Justice Department's unprecedented action in filing a ground-breaking consent decree in the Maryland court at the request of the USFDA. "This action against Ranbaxy is groundbreaking in its international reach. It requires the company to make fundamental changes to its plants in both the US and India," notes Tony West, the assistant attorney general for the Justice Department's Civil Division. "Our commitment to ensuring that the drugs the American people rely on are safe, effective and manufacINDIA BUSINESS JOURNAL


tured according to the USFDA's standards extends beyond our borders," adds Mr West. Ranbaxy reveals that under the terms of the consent decree, it is committed to further strengthen procedures and policies to ensure data integrity and to comply with the current good manufacturing practices. "The announcement is the next step in the process of finalising our agreement with the USFDA to resolve this legacy issue," admits Ranbaxy CEO and Managing Director Arun Sawhney. The consent decree requires Ranbaxy to hire an outside expert to conduct a thorough internal review at the affected facilities, to audit applications containing data from those facilities and withdraw any applications found to contain false data. It also requires the pharmaceutical company to set up a separate office of data reliability within Ranbaxy and hire an outside auditor to audit the affected facilities in the future. These are a part of a wide range of actions to correct its violations and ensure that they do not happen again. The consent decree prevents Ranbaxy from manufacturing drugs for introduction to the US market and for the President's Emergency Plan for AIDS Relief Programme at the Paonta Sahib, Batamandi, Dewas and Gloversville facilities until drugs can be manufactured at such facilities in compliance with US manufacturing quality standards. "Because this company continued to violate current good manufacturing practice regulations and falsify information on drug applications, the USFDA took these actions in an effort to protect consumers," adds Dara Corrigan, the USFDA's associate commissioner for regulatory affairs. According to the USFDA, Ranbaxy has agreed to relinquish any 180-day marketing exclusivity that it may have for three pending generic drug applications. The company has INDIA BUSINESS JOURNAL

INDIAN PHARMA Vs USA Sun Pharma faces $960-million damages from Wyeth over Protonix patent violation. Glenmark recalls seven lots of oral contraceptive, owing to packaging error. Lupin patches up with Santarus and Depomed over Glumetza patent infringement dispute. Ranbaxy signs consent decree with USFDA over violation of manufacturing norms at Indian plants; likely to face court injunction.

by the court, it becomes a court order, with which Ranbaxy must comply or face contempt. Wake-up call The regulatory rap on Ranbaxy comes with severe ramifications to the company, besides sounding a sinister note of caution for the domestic pharmaceutical industry. The unfortunate take-away for the industry is that the latest incidents strengthen the voice of those who already view generic drugs with suspicion. The concern is if Ranbaxy, considered the poster boy for Indian generic drug-makers, can be in the dock for violations, a question mark may well be raised over other manufac-

Indian drug-makers need to adopt stringent quality measures, given the huge global demand for generic medicines.

further agreed to relinquish any 180day marketing exclusivity that it may have for several additional generic drug applications if it fails to meet certain decree requirements by specified dates. The consent decree also contains damages provisions to cover many potential violations of the law and the decree. If the company submits an untrue statement in connection with any application filed with the USFDA, Ranbaxy will have to pay up to $3 million in liquidated damages for each such statement, not to exceed $30 million in any one calendar year. Once the consent decree is approved

turing plants of the company. Worse, the same brush could be used to tar products from other Indian companies as well. India boasts of the largest number of USFDA-approved plants in the world - more than 100 - outside the US. This means that products made in these plants by Indian companies or foreign ones that contract out work to local manufacturers are safe to be sold in the US. Regulators in other global markets take the USFDA's certification seriously. So a black mark from the USFDA can deeply impact the Indian pharma's global plans. APRIL 2012

41


FACE TO FACE

SHARMILA CHAND

S

ankey Prasad, the chairman and managing director of Synergy Property Development Services, seems to be quite pleased with his company's progress. The Bangalore-based property management consultancy has grown by leaps and bounds since its inception in 2003. The company recently achieved a landmark of facilitating frontline developers and builders and delivering 100 million sq ft of property development across India and overseas. Starting off in 2003 with around 40 employees, the property management services provider boasts of a strong team of over 700 people. With pan-India presence, the Rs 300-crore company has spread wings overseas with offices in Malaysia and the UAE. In 2008, Blackstone Real Estate Partners, an affiliate of the Blackstone Group, picked up 35 per cent stake in the company. Despite the trail-blazing growth, Mr Prasad is not resting on his past laurels. He is looking at more than tripling the company's revenue to Rs 1,000 crore by 2015. With over 25 years of experience in real estate development in India and aboard, Mr Prasad has played a crucial role in delivery a number of landmark projects. He is planning to make Synergy a single point project management services company. In an exclusive interview with India Business Journal, Mr Prasad shares his views on infrastructure and realty projects, challenges before developers and contractors and benefits of modern technology. Excerpts: What, according to you, is the status of infrastructure projects? In December 2009, the Union Statistics and Programme Implementation Ministry released disturbing figures that of the 601 projects undertaken between 2004 and 2009, only 54 projects were either completed on time or ahead of schedule. The factors for the delay include delay in supply of equipment, fund constraints, land acquisition issues and so on. I believe that project promoters, both in the government and private sectors, have to factor in mechanisation from the planning stage itself. Introduction of new technology in the construction sector is entirely owner-driven. It is only when they demand quality and are prepared to pay the price that the contractors would have the incentive to adopt better technology. It may, therefore, be necessary to introduce higher specifications and technical conditions in the bidding process to encourage adoption of superior technology. With increased usage, it is hoped that the executing agencies will be able to maintain project deadlines. The challenges before the infrastructure sector are as many as the opportunities. Could you throw some light on how to deal with the growth pangs? 42 APRIL 2012

"Mechanisation will expedite projects" SANKEY PRASAD

There is no doubt whatsoever that the infrastructure sector is getting attention, although delayed. Massive infrastructure projects are coming up across the country, bringing along with them several challenges. They are not insurmountable. One of challenges the industry is facing is that of adhering to rigid time stipulations. This needs discipline and it is happening. Also, another aspect that is noticeable is that promoters now demand better quality and enhanced safety standards. One of the biggest challenges is that of dealing with inventory, keeping in mind volatility, both in availability and price of construction material. These issues can be dealt with only by a professional management approach to projects. Professionalism at all levels would be a major differentiator. INDIA BUSINESS JOURNAL


of mass applicability so that there is less dependency on skilled labour. Do you think that the perception of labour being cheap and mechanisation costly is leading to the slow off-take of mechanised construction? Yes, that is true to an extent. However, that perception is changing, forced by a shrinking labour force. According to a World Bank study, labour crisis in the construction sector is going to be massive with a shortfall of skilled and semi-skilled workers in the medium term expected to be in the range of 18 to 28 per cent. The study paints an alarming picture of the shortfall going up to 65 per cent in the next decade. In such a scenario, certainly the way out is mechanisation. With the Central government insisting that the labour component in an infrastructure project has to be 33 per cent, it opens up opportunities for those in the equipment business. With demand for labour going up, wages will also go north and rightly so. While it is a fact that there will be a marginal increase in manufacturing cost with mechanisation, one has to look at the benefits that accrue in the medium and long terms. Could you highlight the benefits of mechanisation from an Indian perspective? Considering the surge of the Indian economy, the need for rapid implementation of infrastructure projects cannot be understated. Mechanisation would accelerate the pace of overall infrastructure growth and development. One of the key advantages of mechanisation would be "IT IS ESTIMATED THAT THE PERCENTAGE OF MECHANISATION IN INDIA IS AROUND 20 PER CENT, WHILE IN DEVELOPED COUNTRIES, IT IS BETWEEN 60 AND 70 PER CENT. WE SEE MECHANISATION HAPPENING HERE AND THERE, BUT FOR INDIA TO BE ON THE INFRASTRUCTURE MAP, THERE HAS TO BE RAPID MECHANISATION."

As projects are becoming bigger and greater in number, how can India keep pace with such developments? Do you think mechanisation is the answer? The shift in India towards mechanisation is not going to be a paradigm one as there are several factors - social, cost, mindset, etc - that come into play. But sure enough, mechanisation is happening due to a fast-shrinking labour force. It is estimated that the percentage of mechanisation in India is around 20 per cent, while in developed countries, it is between 60 and 70 per cent. We see mechanisation happening here and there, but for India to be on the infrastructure map, there has to be rapid mechanisation. Mechanisation is addressed in the areas INDIA BUSINESS JOURNAL

that project management companies can have more control over delivery time schedules over projects. As we are all aware, maintaining delivery time schedules is a problematic area in the construction sector. Mechanisation would result in increased production and efficiency and, above all, enhance quality of construction. Importantly, with the scale of infrastructure and housing projects taking enormous proportions, there is no choice but to use equipment on a large scale. Worldclass batching plants, tower cranes, hot plant mixers, earth-moving equipment and stone crushers are readily available and already in use. The advantages are speed, quality, strength and standardisation of construction, which are of paramount importance. APRIL 2012

43


MANAGEMENT MANTRA

Lead by Example SHARMILA CHAND

A

finance professional by experience, Srinivas Chari is one of the co-founders of Xerago, a direct and interactive marketing services company. With strong skills in finance, operations, technology and processes, Mr Chari has played an instrumental role in drawing up Xerago's business strategies and building its operations and technological capabilities. Mr Chari, currently Xerago's Chief Marketing Officer (CMO), began his career as a business analyst at ANZ Grindlays Bank and subsequently moved over to HDFC Bank. A chance encounter with Xerago CEO

Srinivas Chari Co-Founder and CMO Xerago

44 APRIL 2012

Ganesh Mandalam during a dinner discussion led him to be a part of the marketing services company's founding team. In the past nine years, Mr Chari has managed multiple process and product cycles apart from boom-bust business cycles for Xerago. Currently, he drives consulting, client engagement, marketing and branding at Xerago. In a lively chat with India Business Journal Mr Chari shares his management style, strategies and winning solutions. Excerpts: Five management mantras I believe in… Based on experience, I have adopted five critical management functions of planning, organising, staffing, directing and controlling, which are as follows: Plan and expect to be surprised: Despite the surprise element, you still need to plan because your brain needs this dart board. Else, what would you be committing your darts to? I refuse to start without a plan, no matter what. Break your plan into small task goals. Expect course correction. Even when the sunny side is up, carry your umbrella as it helps you either way, sun or rain. Be passionate about every task that you are working on: There is no excuse for not loving what you do and vice versa. Reward self and others for small task victories with a pep talk and ensure that you and your team look forward to every working moment. Keep an eye for talent: Each of us is gifted uniquely to do awesome things and some quirk of fate brings us on a plane, where we need to team up for a unified goal. People demonstrate native ability to do certain things effortlessly and one needs to be sensitive and cognizant of such talent. Base decisions on meritocracy rather than hierarchy and refuse to suffer mediocrity. Slot job instruction or interpretation: Each

job comes with its inherent demands. Unfortunately, a lot of jobs or tasks are stiff with objective outcomes that require routine rigour and not creative thinking. First things first, prepare yourself vis-avis whether you are working on a task that is an instruction or an interpretation. Lead by example: What you can't lead, you can't manage and what you can't manage, you can't control and finally what you can't control you can't grow. If your team is sweating it out, lead from front and don't leave them in the cold. Don't preach austerity and fly business class, when your team is flying cabin class.

Lot to learn from cricket… Cricket and, funnily every aspect of the game, is connected with work. Team work that leverages individual strength, giving your best shot, fielding for your colleagues and finally letting go of failures to rev up again because you got to continue being in the game if you want to win are common to both cricket and work. Turning point in my life… The chance dinner meeting with Ganesh convinced me that life is too amazing to be wasted on a day job! Secret of my success… Decisions that make your time fulfilling…. For example, don't play golf when you love playing cricket, don't pretend reading Philip Kotler at the airport lounge if you love Calvin & Hobbes. My philosophy of work… Love it or leave it! If you're not fully turned on, don't commit yourself to doing that work because someone else depends on you and definitely there is someone out there who can do it far better and still love it. Send feedback to sharmila.chand@ibj.in

INDIA BUSINESS JOURNAL


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BANKING

Mutual gains White-label ATMs facilitate banks to reduce costs and enhance customer satisfaction even as they expand banking services to unbanked areas. KUMAR DIPANKAR

T

he Reserve Bank of India (RBI) has issued draft guidelines for permitting nonbanking entities to set up, own and operate money-dispensing machines to accelerate growth and wider spread of automated teller machines (ATMs) in the country. The central bank reveals that it has reviewed the extant policy on ATMs. "It has been decided to permit nonbanks to set up, own and operate ATMs to accelerate growth and penetration of ATMs in the country. Such ATMs will be in the nature of whitelabel ATMs (WLAs) and will provide ATM services to customers of all banks," the draft guidelines add. WLAs are not owned by banks, but by private ATM service providers. Customers from any bank can deposit or withdraw money from such ATMs. New norms Non-bank entities proposing to set up such service will have to have a minimum net worth of Rs 100 crore, the RBI notes. The apex bank has sought views and comments on the draft circular from banks, authorised ATM network operators, non-bank entities and members of public.

46 APRIL 2012

The draft guidelines add that nonbank entities proposing to set up WLAs will have to apply to the RBI for seeking authorisation under the Payment and Settlement Systems Act, 2007. It suggests that only cards issued by banks will be permitted to be used at WLAs initially and acceptance of deposits will not be permitted. "The WLA operator will be the acquirer for all transactions at the WLA and earn his fee accordingly," it states. The WLA operator will be permitted to earn extra revenue through advertisement and by offering value-added services. The advertisements placed on such ATMs will be THE BANKING SECTOR HAS SEEN CONSIDERABLE GROWTH IN ATMs DURING RECENT YEARS, WITH AROUND 87,000 MACHINES OPERATIONAL ACROSS THE COUNTRY. HOWEVER, THEY ARE LARGELY RESTRICTED TO URBAN AND METRO AREAS.

subject to the Advertising Standards Council of India codes and other regulations. "Being non-bank-owned ATMs, the guidelines on five free transactions in a month for using other bank ATMs would not be applicable for transactions effected on the WLAs. The charges for the transactions should be displayed on the screen before the customer initiates the transaction," the guidelines note. According to the draft guidelines, the WLA operator will not be entitled to any fee from the issuer bank other than the inter-change fee payable to the acquirer bank similar to the present bank-owned ATM situation. "The WLA operator shall also not be permitted to charge any fee from customers for use of the ATM resources," the guidelines clarify, further adding that regulatory guidelines relating to compensation for failed ATM transactions will apply to transactions at WLAs. "General guidelines governing the operations of the bank-operated ATMs would apply mutatis mutandis to WLAs," the draft guidelines notes. The operator will have one sponsor bank, which will serve as the settlement bank for all the transacINDIA BUSINESS JOURNAL


tions at the WLAs. Settlement of all the transactions at the ATMs will be done only in the books of the sponsor bank through the ATM network, with which the operator has established connectivity. The maintenance and servicing of WLAs will be the sole responsibility of the operator. The sponsor bank will be responsible for cash management at WLAs. "For the purpose of cash management, the sponsor bank may enter into tie-ups with other banks for loading and reconciliation of cash at various WLAs at locations where it has no presence," the guidelines propose. While the primary responsibility to redress grievance of customers relating to failed ATM transactions will vest with the issuing bank, the sponsor bank will have to provide necessary support in this regard, including making available relevant records and information, the guidelines stipulate. Right move The banking sector has seen considerable growth in ATMs during recent years, with around 87,000 machines operational across the country. However, they are largely restricted to urban and metro areas. "Although there has been about 30 per cent year-on-year growth in the number of ATMs deployed in the country since 2008, ATM penetration on a per capita basis continues to be less compared with other countries. There is, therefore, an abundant scope and a felt need to deploy more ATMs, particularly in tier-III to tier-IV areas of the country," points out the apex bank. Banks love WLAs for a particular reason. The machines are said to reduce per-transaction cost and even help in reducing overall costs. Managing a payment channel like ATMs is a big problem for banks. If a third party is ready to manage the operations entirely, it reduces the capital expenditure for banks considerably. INDIA BUSINESS JOURNAL

CONDITIONS FOR WLA OPERATORS

Rs 100 crore minimum net worth for starting operations Only cards issued by banks to be permitted initially Operators allowed to earn extra revenue through advertisement and value-added services Five free transactions a month norm not applicable for transactions on WLAs Charges for transactions to be displayed on screen Operator only entitled to inter-change fee Maintenance and servicing of WLAs sole responsibility of operators Sponsor banks to be responsible for cash management at WLAs

Besides increasing banking services, WLAs will help sponsor banks to set up ATMs without incurring capital expenses for owning money-dispensing machine. Except in the US, in all markets that allow WLAs, the share of such ATMs is no more than 25 per cent of the entire ATM network. They are always complementary to bank ATMs. WLAs will bring more efficiency and help keep ATM set-up costs down. In the last two years, India has seen a lot of brown-label ATMs or outsourcing of ATM services by banks. At present, brown-label ATMs are allowed in the country. In such cases, the hardware as well as the lease is under the ownership of the service provider, while connectivity and cash handling and management are the responsibility of the

sponsor bank. Today, there are managed-services outsourcing companies that perform such functions as switching, cash management and technical management for banks. About 50 to 60 per cent of the ATMs in the country are already outsourced in some way or the other. The development of ATM services in any market goes through certain phases. Banks use ATMs first for product differentiation and branding and, in the next phase, for customer acquisition and retention. With outsourcing of ATMs gaining currency, it was only a matter of time for the RBI to permit WLAs. With several banks outsourcing ATM management, WLAs are a natural extension. It is a win-win situation for both banks and customers. APRIL 2012

47


GLOBAL WRAP-UP

Encyclopaedia Britannica ends print edition Australia imposes 30% mining tax Encyclopaedia Britannica has said that it will stop publishing print editions of its flagship encyclopaedia for the first time since the sets were originally published more than 200 years ago. The book form of Encyclopaedia Britannica has been in print since it was first published in Edinburgh, Scotland, in 1768. It will stop being available when the current stock runs out, the company said. The Chicagobased company will continue to offer digital versions of the encyclopaedia.

GM to buy 7% stake in Peugeot General Motors (GM) plans to extend a $335-million lifeline to struggling French automaker PSA Peugeot Citroen as a part of a tie-up, which each hopes will aid turnarounds at their struggling European car operations. GM will take a roughly 7 per cent stake in Peugeot as a part of an effort by the Paris-based auto-maker to raise cash through a share sale. Under the deal, the two companies would jointly buy supplies, build engines and, potentially, entire vehicles in Europe and elsewhere.

become a behemoth that almost collapsed in the financial crisis and then led its recovery, will be replaced by fellow director Michael O 'Neill. Mr O'Neill will take over after the bank's shareholder meeting in April, New York-based Citigroup said recently. Mr Parsons, 63, spent 16 years on the board, becoming chairman in 2009 after the bank's $45-billion bailout by US taxpayers. Mr Parsons's successor inherits a board, grappling with a slump in revenue, higher costs and new regulations as CEO Vikram Pandit pushes the firm into emerging markets.

O'Neill to succeed Parsons as Citi chairman Citigroup Chairman Richard Parsons, who helped the bank

China slashes 2012 growth target to 7.5% China recently pared the nation's economic growth target to 7.5 per cent from an 8 per cent goal in place since 2005. The cut in growth target is a signal that leaders are determined to cut reliance on exports and capital spending in favour of consumption. The Chinese government is also aiming for inflation of about 4 per cent this year, unchanged from the 2011 goal, according to a state-of-the-nation speech of Chinese Prime Minister Wen Jiabao. "The

48 APRIL 2012

Australia's parliament passed laws for a new 30 per cent tax on iron ore and coal mine profits recently, after a bruising two-year battle with mining companies. The mine tax is considered a major victory for Prime Minister Julia Gillard and her struggling minority government. The tax will affect about 30 companies, including global miners BHP Billiton , Rio Tinto and Xstrata, and aims to raise about $11.2 billion in its first three years. The tax, which is being closely watched by other resource-rich countries, is designed to spread the benefits of Australia's resources boom to other sections of the economy.

government will maintain a proactive fiscal policy and a prudent monetary policy," the prime minister added. Greece clinches debt deal with investors Greece averted the immediate threat of an uncontrolled default after winning strong acceptance from its private creditors for a bond-swap deal. The deal will eat into its mountainous public debt and clear the way for a new bailout. With eurozone ministers set to approve the $172-billion bailout, French President Nicolas Sarkozy declared that the Greek problem had been settled. However, Germany said that any impression that the crisis was over would be a big mistake.

Apple announces dividend, share buyback Apple Chief Executive Officer (CEO) Tim Cook recently fulfilled a longstanding desire of investors by initiating a quarterly dividend and a share buyback that will pay out $45 billion over three years. The world's most valuable company will start paying its first dividends since 1995 - a regular quarterly payout of $2.65 a share - in July and buy back up to $10 billion of its stock beginning in the next financial year. However, some fund managers expressed disappointment, given a 1.8 per cent dividend and its modest size versus a $98billion war chest that Apple has accumulated selling Macintosh computers and iPhones.

INDIA BUSINESS JOURNAL


UPS to buy TNT Express for $6.8 billion

Bentley drives into SUV segment

United Parcel Service (UPS) has agreed to buy TNT Express with a sweetened bid of $6.8 billion. The deal, the biggest purchase in the US company's 105-year history, is aimed at challenging Deutsche Post in Europe. UPS reached an agreement to buy Netherlandsbased TNT Express after raising its bid for Europe's second-largest express delivery service. UPS, already the world's largest package-delivery company, will double in size in Europe and vault to equal footing there with Deutsche Post's DHL, the market leader.

Bentley has unveiled plans to build its first ever sports utility vehicle (SUV) in a break with tradition for the luxury carmaker. Bentley Motors Chairman W o l f g a n g Duerheimer recently unveiled the EXP 9F design concept at the Geneva Motor Show, branding it "a historic moment for Bentley Motors". The EXP 9F is set to be the next big step in the history of the Crewe-based company, which has expanded its model lines to three, alongside the bespoke Mulsanne and the high-performance Continental GT and Flying Spur.

Joachim Gauck is Germany's new president Joachim Gauck, a rights activist and former Lutheran pastor, was overwhelmingly elected as Germany's 11th

post-war president recently. Mr Gauck, a former East German like Chancellor Angela Merkel, emerged as the consensus candidate to restore a sense of respectability and authority to the office of the president. His predecessor, Christian Wulff, stepped down in February after being accused of accepting favours from business executives when he was governor of Lower Saxony. "With all of my heart and my strength, I will affirm the responsibility that you bestowed upon me," said Mr Gauck after being elected to office. INDIA BUSINESS JOURNAL

Asia beats America, Europe in rich list The number of Asian centamillionaires (people who own more than $100 million in disposable assets) surpassed that in North America for the first time, according to a report released by Citigroup in partnership with Knight Frank. By the end of 2011, 18,000 centa-millionaires were from South-East Asia, China and Japan compared with about 17,000 in North America and about 14,000 in West Europe, the bank said in its Wealth Report 2012. Asia is set to play a vital role in the global economy as the economic centre continues its eastern shift. The report also predicted that the number of Asian centa-millionaires will rise to 26,000 in 2016, 21,000 for North America and 15,000 for West Europe. Deutsche largest European bank again Deutsche Bank, adding assets as other lenders trim their balance sheets, leapfrogged France's BNP Paribas to reclaim the title of Europe's largest bank. Assets of the Frankfurt-based bank rose 14 per cent to $2.9 trillion in 2011, making it the largest

publicly-traded bank in Europe for the first time in five years. Chief Executive Officer Josef Ackermann, who has called proposals to limit bank size "misguided", will leave behind a balance sheet about 40 per cent larger than in 2006 and more than 80 per cent as big as Germany's economy, when he steps down in May. BMW to recall 1.3 million cars globally BMW is set to recall about 1.3 million cars for checks because of a potential fault that could cause electrical problems or a fire. The German car-maker said that it was taking the steps because

of "remote" cases of an incorrectly-fitted battery cable cover in the boots of a previous generation of 5 and 6 Series models. BMW said that it was not aware of any accidents or injuries stemming from the fault. The company added that the recall would apply to vehicles built between 2003 and 2010 at a plant in Germany. Swatch to build fuel-cell car Swatch, the world's biggest watch company, is looking at building a car that runs on hydrogen and oxygen. "We already have a test-car with a fuel cell," revealed Swatch Chief Executive and Chairman Nick Hayek in a recent interview. The fuel-cell vehicle is not Swatch's first attempt at building a green car. In 1997, it teamed up with Daimler-Benz to build the two-seater Smart, but the watch company later sold its shares to Daimler-Benz. "Liquid hydrogen and oxygen are used as fuel, producing very efficient combustion. What we don't know is whether it would be costefficient to build one," added Mr Hayek.

APRIL 2012

49


READERS' LOUNGE

A reformer's take Bimal Jalan offers interesting facets of the delicate relationship between political and economic reforms in India. s India completes 20 years of economic liberalisation, some concerns about the country's future prospects as an emerging power are beginning to be voiced. Often, these stem from the past history of sharp swings in EMERGING INDIA India's fortunes. Bimal Jalan has closely followed the path of India's economic policies across its changing trajectories, from before the time the economy was liberalised to the very present Mr Jalan's new book is a compilation of articles that were all written during the Author BIMAL JALAN last 20 years, with the exception of three prescient notes Publisher VIKING from the mid-1970s, highPages: 298 lighting the need for ecoPrice: Rs 599 nomic reforms to foster growth. The principal thought behind these essays is that in the past 20 years, India's capacity to grow faster than ever before has increased substantially because of its comparative advantage in relation to other countries. However, the author points out that for the country to seize the opportunities that lie ahead, it is essential to bring about further reforms in the running of India's politics and administration in order to ensure inclusive and

A

incremental economic growth. The book offers facets of the delicate relationship between political and economic reforms in India. The author attempts to find an explanation to scams and corruption cases that have hogged the limelight over the past decades in the political system of India. He examines lacunae in our political system, which are pulling down economic reforms, and how we may have lost the basic premise of the reforms on the way. Although Mr Jalan has been an astute and conservative central banker never given to belligerence either in action or in words, he is more forthright when commenting on the polity - even though he is politically correct in never taking names. He praises India for having a democracy and freedom and traces the growth of the system through four phases, with the present one being framed with coalition parties, which is the crux of the country's political problems. He rightly points out that there has been a tendency for the role of the Parliament to diminish over time and the bureaucracy to get politicised, factors that have hindered governance. The growth of regional parties and coalitions has blunted the accountability of governments, which have a limited time horizon in mind. Reforms evidently are required here. The book quite extensively covers the banking sector, which starts with a recollection of the Asian crisis and how India managed it through some conservative policies followed by the Reserve Bank of India (RBI). Though

Smart tome

TAX SHASTRA cific and measurable with key performance indicators. The author points out that in advanced jurisdictions such as the UK, the administrative focus is on minimising tax gaps through gap analysis instead of maximising revAuthor enue. He examines the segPARTHASARATHI SHOME regation of roles of the UK's Publisher treasury and revenue and cus- BUSINESS STANDARD BOOKS toms departments and how it Pages: 230 facilitates the UK's focus on Price: Rs 450 tax gaps and administration. He shares the UK experience, where every change in

T

ax Shastra is a comparative account of the tax administrations of three countries - India, the UK and Brazil. The author has worked extensively in these countries and uses his invaluable experience to advocate for India a system that adopts the strengths and discards the lacunae of the three countries. He advocates a model structure that maximises administrative efficiency and minimises the tax gap. Mr Shome believes that an efficient tax administration rests on three pillars: management and structure of tax administration, information and communication technology and customer focus. He brings out the need for defining objectives of tax administration that are spe50 APRIL 2012

INDIA BUSINESS JOURNAL


he sounds self-laudatory on occasion, he highlights some of the concerns at that time that are, quite ironically, also the issues that germinated the recent financial crisis. In a way, the RBI did display foresight in attempting to strengthen these inherent processes. Mr Jalan finally does a round-up of economic reforms, which actually were seen in the 1970s through automatic licensing for imports and elimination of price controls, which moved across diversification, delicensing, broadbanding and so on. Although he is appreciative of the reforms that have happened so far, he is critical of the tardy pace of change in the public sector. There is novelty when he talks of the politics of reforms. Quite interestingly, he talks of a corruption multiplier, which is around four in India's context in terms of value of destruction due to incorrect choices that are motivated by greed.

About the author Bimal Jalan is one of India's well-known economists. He was governor of the Reserve Bank of India from 1997 to 2003. He has held several top positions in the Ministries of Finance and Industry and in the Planning Commission. Educated at Presidency College, Kolkata, and Cambridge and Oxford universities, Mr Jalan has penned several thought-provoking research papers and critically-acclaimed books.

policy is supported by a 30-page report on all relevant aspects of the policy. In short, the book is a must read for tax authorities in India. About the author Parthasarathi Shome is director and chief executive of ICRIER, New Delhi. He was chief economic adviser to India's Finance Minister between 2004 and 2008 and later served as chief economist of the UK's revenue and customs department between 2008 and 2011. He has authored several books and research papers in various publications. INDIA BUSINESS JOURNAL

Full of fizz

N

eville Isdell was a key player at Coca-Cola for more than 30 years, retiring in 2009 as its CEO after rebuilding the tarnished brand image of the world's leading soft-drink company. This first book by a former CocaCola chief tells an extraordinary personal and professional world-wide story, ranging from Northern Ireland to South Africa to Australia, the Philippines, Russia, Germany, India, South Africa and Turkey. Mr Isdell helped put out huge public relations fires in India and Turkey, opened INSIDE COCA-COLA markets in Russia, Eastern Europe, Philippines and Africa, championed Muhtar Kent, the current TurkishAmerican CEO, all while living the ideal of corporate responsibility. When Mr Isdell agreed in May 2004 to come out of Author retirement to become the NEVILLE ISDELL global beverage giant's chief Publisher executive, little did he PAN MACMILLAN realise that many people Pages: 272 were keenly watching to see Price: 499 where his first overseas trip would be to. To the surprise of many, however, he chose India, which Isdell felt offered great growth potential for the company that was troubled by dipping sales volumes. The book is unique in other respects, being the first effort by a CEO, whose more than 40-year career at the cola giant saw him deal with key decision-making, including the purchase of Thums Up and allied brands like Limca and Maaza as well as a well-thought out corporate strategy to re-enter India in the mid-1990s. Mr Isdell's and Coke's story is newsy without being gossipy; principled without being preachy. It is filled with stories and lessons appealing to anybody who has ever taken "the pause that refreshes." It's also a readable and important look at how companies can market and govern themselves more ethically and to great success. About the author Neville Isdell is the former chairman and CEO of CocaCola, where he worked for 43 years. Mr Isdell took the world's largest beverage company to new heights during his tenure. A management graduate from Harvard Business School, Mr Isdell serves on the boards of a number of non-profit organisations, including the World Wildlife Fund, and is a member of General Motors' board of directors.. APRIL 2012

51


EVENTS CALENDAR

EXHIBITION

PARTICULARS

PERIOD

MosBuild

Design and decor

02/04/2012 to 05/04/2012

Moscow Russia

ITE Group www.mosbuild.com

Syroil

Forum for oil, gas and petrochemical industries

02/04/2012 to 05/04/2012

Damascus Syria

Allied Expo http://www.syroil.com

Pulp, Paper & Tissue

New technologies & solutions in paper industry

02/04/2012 to 05/04/2012

Moscow Russia

Restec速 Exhibition Company www.restec.ru

Buildex

New developments in construction industry

03/04/2012 to 06/04/2012

Moscow Russia

Internationaler Messewww.imag.de

Modern Machine Shop

Trade show on engineering industry

05/04/2012 to 08/04/2012

G Noida India

IMTMA www.mmsinfo.in

MosBuild

Building and architecture

10/04/2012 to 13/04/2012

Moscow Russia

ITE Group www.mosbuild.com

SinoCorrugated South

Developments in corrugated manufacturing industry

11/04/2012 to 13/04/2012

Dongguan China

Reed Exhibitions www.sino-corrugated.com

China Electronics Fair

Platform for electronics and ICT industry

11/04/2012 to 13/04/2012

Shenzhen China

The Organizing Committee of China www.iCEF.com.cn

SinoFoldingCarton

Electronics and ICT industry

11/04/2012 to 13/04/2012

Dongguan China

Reed Exhibitions www.sino-foldingcarton.com

Mechanical Electrical and Plumbing Expo

Mechanical, electrical and plumbing services

12/04/2012 to 14/04/2012

Mumbai India

INIS Enterprises www.mep-india.com

Metal Buildings & Steel Structures Expo

Technologies in building & construction industry

12/04/2012 to 14/04/2012

Mumbai India

INIS Enterprises www.mep-india.com

International Exhibition of Latest products & technologies 14/04/2012 to Surfactants & Detergents in detergent industry 16/04/2012

Shanghai China

Shanghai Yihan Exhibition www.iesdexpo.com

China Import and Export Fair

Industrial machinery and equipment exhibition

15/04/2012 to 19/04/2012

Guangzhou China

China Foreign Trade Centre www.cantonfair.org.cn

IFPEX

Platform for hydraulic & pneumatic sectors

17/04/2012 to 19/04/2012

Birmingham UK

DFA Media www.ifpex-expo.com

Metal & Steel

Innovations in metal and steel sectors

17/04/2012 to 20/04/2012

Cairo Egypt

Arabian German For Exhibitions www.arabiangerman.com

PaintExpo

Opportunities in paint industry

17/04/2012 to 20/04/2012

Karlsruhe Germany

FairFair www.fairfair.de

Secutech

New Developments in security 18/04/2012 to and safety sector 20/04/2012

Taipei Taiwan

Messe Frankfurt New Era Business www.secutech.com

Surface Transport

Developments in transportation sector

18/04/2012 to 20/04/2012

Mumbai India

Confederation of Indian Industry www.cii.in

Chinaplas

Latest technologies in plastic and rubber industries

18/04/2012 to 21/04/2012

Shanghai China

Adsale Exhibition www.chinaplasonline.com

Subcon China

Manufacturing, metal and plastic processing

19/04/2012 to 21/04/2012

Chongqing China

Chongqing Exhibition Center www.subcon.cn

Diemould India

Platform for die and mould industry

19/04/2012 to 22/04/2012

Mumbai India

Tool & Gauge Manufacturers Assn. www.tagmaindia.org

International Risk Management Conference

New trends and ideas in risk management

19/04/2012 to 20/04/2012

Almaty Kazakhstan

Eurasia Insurance Company www.theeurasia.kz

Paper Today

Latest technologies in paper industry

20/04/2012 to 22/04/2012

Chennai India

Buysell Interactions www.nprintech.com

Hannover Messe

Industrial technologies, new products and materials

23/04/2012 to 27/04/2012

Hannover Germany

Deutsche Messe www.hannovermesse.de

52 APRIL 2012

CITY/ COUNTRY

ORGANISER

INDIA BUSINESS JOURNAL


EXHIBITION

PARTICULARS

PERIOD

CITY/ COUNTRY

ORGANISER

Mining World Russia

New trends in metal mining & processing

24/04/2012 to 26/04/2012

Moscow Russia

ITE Group www.miningworld-russia.primexpo.com

Nepcon China

Electronics manufacturing & the SMT industry

25/04/2012 to 27/04/2012

Shanghai China

Reed Exhibitions www.nepconchina.com

Green Lighting Shanghai

Opportunities in LED lighting industry

25/04/2012 to 27/04/2012

Shanghai China

Reed Exhibitions www.reedexpo.com.cn

Food & Bev Tech

Platform for food & beverage processing sector

25/04/2012 to 27/04/2012

Mumbai India

Confederation of Indian Industry www.cii.in

ChemProTech India

Platform for chemical process 26/04/2012 to technology & equipment 27/04/2012

Mumbai India

Koelnmesse YA Tradefair www.chemprotechindia.com

CRTS China

Focus on rail transit market

26/04/2012 to 28/04/2012

Beijing China

HNZ Industry Media Group www.crtschina.com

Chemspec India

Fine and speciality chemical industries

26/04/2012 to 27/04/2012

Mumbai India

Quartz Business Media www.chemspecevents.com

IPR

Focus on parallel imports

27/04/2012 to 27/04/2012

Delhi India

ASSOCHAM www.assocham.org

India Warehousing Show

Opportunities in warehousing and supply chain industries

26/04/2012 to 28/04/2012

G Noida India

Manch Communications www.manchcommunications.com

Southern Asia Ports, Logistics and Shipping

Container-handling technologies & products

26/04/2012 to 27/04/2012

Colombo Sri Lanka

Transport Events Management www.transportevents.com

Coal Prep

Coal preparation and processing industry

01/05/2012 to 02/05/2012

Kentucky USA

Penton Business Media, www.coalprepshow.com

Fabtech Mexico

Opportunties in Metal forming and fabrication

02/05/2012 to 04/05/2012

Mexico City Mexico

American Welding Society www.fabtechmexico.com

Glass World

Products,solutions and 03/05/2012 to technologies in glass industry 05/05/2012

Cairo Egypt

Nile Trade Fairs www.nilefairs.com

Lightexpo

Decorative, outdoor, industrial and lighting accessories

05/05/2012 to 07/05/2012

Nairobi Kenya

EXPOGROUP www.expogr.com

Buildexpo

Building construction and material-handling sectors

05/05/2012 to 07/05/2012

Nairobi Kenya

EXPOGROUP www.expogr.com

Bias

Trends in manufacturing & process automation

08/05/2012 to 11/05/2012

Milan Italy

F & M Fiere & Mostre www.fieremostre.it

PCIM Europe

Power electronics and applications

08/05/2012 to 10/05/2012

Nuremberg Germany

Mesago PCIM www.pcim.de

Chemspec USA

Fine and speciality chemical industry

08/05/2012 to 09/05/2012

Philadelphia USA

Quartz Business Media www.chemspecevents.com

Plast

Developments in plastics and rubber industries

08/05/2012 to 12/05/2012

Milan Italy

PROMAPLAST www.plastonline.org

China EPower

Power generation, transmission and distribution

09/05/2012 to 11/05/2012

Shanghai China

MP Zhongmao International www.epower-china.cn

Smart Gridtec China

Focus on IT, automation and interaction

09/05/2012 to 11/05/2012

Shanghai China

MP Zhongmao International www.smartgridtec-china.com

Green IT Expo

Power-saving and environment- 09/05/2012 to responsive IT products 11/05/2012

Tokyo Japan

Reed Exhibitions Japan www.grix-expo.jp

Inamarine

Shipbuilding, offshore and marine machinery

Jakarta Indonesia

PT. Gem Indonesia www.inamarine-exhibition.net

09/05/2012 to 12/05/2012

You may send us details of your forthcoming events for listing in this column to mail@ibj.in DISCLAIMER: The list of events is indicative and dates mentioned are subject to changes. We request readers to contact respective organisers for details.

INDIA BUSINESS JOURNAL

APRIL 2012

53


STAR TALK

ARIES

Mar 21-Apr 20

Your focus should be on getting back in shape, staying fit and getting rid of all your health woes once and for all. Expect eventful times on the career and financial fronts too. A job switch or a transfer is likely for professionals, while businessmen may be recruiting new people. The Sun enters your money House by mid-April, making it an extremely prosperous phase for you. Love may hover in your proximity and grant you chances to flirt and enjoy. Have fun while it lasts, but don't expect much. Make time for family.

TAURUS

Apr 21-May 21

It's time to adopt a wait-and-watch policy in the love domain. Ganesha advises you to avoid or at least postpone taking any major decisions related to love or relationships at this point in time. Allow your spouse or beloved some space and utilise the leftover time to pamper yourself. On the brighter side, your health will be good and you may be in top shape. Be ready to receive compliments and ardent attention of the opposite sex. At work, you will do well. However, don't let others bully you. Money comes, but through a lot of hard work, so use your finances judiciously.

GEMINI

May 22-Jun 21

Friends and colleagues will form an integral part of your life as you begin to increasingly seek their guidance in myriad matters. They will only be happy to oblige as you'll prove to be a good host. Your social life looks set to be rocking; love too may be on the horizon. As the Sun enters the Taurus, you will see other domains of your life getting a boost, including marital harmony and career. Singles may be ready to seal their love bond. Ganesha advises you to keep an eye on lucrative opportunities.

CANCER

Jun 22-Jul 22

Alter your focus this month and fix your gaze on matters related to your health and fitness. On the career front, you have been making steady progress, though it may not be very noticeable. Some of your planets are still retrograde and that may be the cause of your dissatisfaction. As the Mars embarks on its forward journey from the 17th onwards, things will start clearing up for the better. Your financial position will the same, but be careful as facing a crunch towards the end of the month is possible. Eschew speculative transactions like the plague. Love life will improve. 54 APRIL 2012

LEO

Jul 23-Aug 23

Your yearly career peak begins this month. You will take full control of your life and your family will heed your advice more than they usually do. However, some planets will now begin a retrograde motion, owing to which unwanted family issues may crop up. Careful thought is called for before taking any decisions. Financially, things may be on a stable ground and business partnerships are a possibility. Take care of your health though, especially after the 20th.

VIRGO

Aug 24-Sep 23

Planetary positions may shortly begin a process of reinvention in your sign. You will spend more time in identifying areas needing new direction. It could be repairing your relationships or focusing more on your work. Many of you may also pay more attention to your health and will find it easier to get fitter this month. You realise now that before anything can be renewed, the problem itself will have to be rooted out. Your love life will be happy. Possibility of a sudden career change can't be ruled out. Most of the developments are likely to be positive.

LIBRA

Sep 24-Oct 23

It's time for some real action. The scene shifts from planning boards to the practical field. Get rid of your old self and turn a new leaf. And for all your endeavours, stars will favour you amply. Pay more attention to your outer life and worldly ambitions. You will see your popularity and allround happiness surging. Planets related to your love House are set to move forward, so don't hesitate in taking a few important decisions. Increased sexual activities and visits to gyms, spas and spiritual centres for personal transformation are also likely.

SCORPIO

Oct 24-Nov 22

Your communication planet is the Saturn and it is retrograde this month too. So, continue exercising caution in communicating and related matters. You are set to enter a yearly love and social peak this month. A few propositions for marriage or even business may be in the offing. Your personal charm will be heightened. Employ your powers of persuasion, especially when seeking help from others. You may notice a dip in your confidence. But don't worry. This vulnerability will, in fact, add to your charm. INDIA BUSINESS JOURNAL


Will 2012 buck bearish leap year trend?

A

dhik maas (extra month), is based on a concept similar to a leap year, there are 13 months in the lunar calendar instead of 12 months. The year 2012 is a leap year and it also consists of the adhik maas. In the past two decades, there were five leap years - 1992, 1996, 2000, 2004 and 2008. Let's begin with the momentous year of 1992. In 1992, the market had closed on a positive note after a lot of struggle. It was the same year, in which Harshad Mehta's scam was later brought to light. The stock market had seen a correction of 42 per cent due to the scam. In 1996, the result again was not very different. Investors received a marginally-negative result in the

SAGITTARIUS

The leap year of 2012 has the same Jupiter-Fire combination of the past.

stock market. The year 2000 too had been a negative one for investors, with the dot.com bubble burst and the Ketan Parekh scam. The leap year of 2004 had, more or less, been a positive year for the stock market. However, there had been a lot of panic and chaos in the market on May 17, 2004, as the UPA Nov 23-Dec 21

AQUARIUS

came to power defeating the NDA. The stock market had tremendously fluctuated. The leap year in 2008 due to global financial meltdown. In the earlier leap years, Jupiter had been in a fire sign, that is, Aries, Leo or Sagittarius. The tremors that had been felt on the stock market in the past leap years had a strong connection with the Jupiter-Fire combination. The current leap year of 2012 has the same Jupiter-Fire combination. Going by the past trends, it can be safely said that whenever there is a combination of a leap year and Jupiter in a fire sign, the market does not favour the investors. Even if the market is buoyant, there would be some news that would rattle the market sentiments. Jan 21-Feb 18

Relationships look set to take a turn for the better. It's now best to forgive and forget the turbulent past and you may see your beloved also following suit. Social stars also look promising and the month holds some great opportunities for the ones pursuing someone and for singles. Sudden, unexpected career opportunities may crop up from nowhere. Make the most of them. A romantic opportunity at the workplace is also a possibility now. However, dramas and sudden career changes in the lives of your parents or parent figures may boggle you.

The past month may have been slightly confusing for you, with miscommunication and delays becoming the norm. Expect these areas to improve this month, all thanks to Mercury and Mars assuming their forward movement. This is the right time to engage in activities that have communication at their core. However, you may experience a lull of sorts on the career front. Don't let that stop you from working towards your goals. Health issues may bother you this month. Lie low and spend time with family and friends to give a boost to your personal power.

CAPRICORN

PISCES

Dec 22-Jan 20

You will stumble upon new sources of income, which will boost your financial position. Interesting job opportunities, especially the ones involving foreigners or foreign lands, may appear on the horizon. Your spouse or partner will be more supportive than usual. The moment you see any sign of bad health, you will have to become extra careful about your hygiene and food habits. The last week of the month may be especially stressful health-wise, but with caution and care, you will be able to avert the worst of these health problems. Maintain emotional harmony and don't take any major family decisions before the 11th. INDIA BUSINESS JOURNAL

Feb 19-Mar 20

Past efforts to resolve family disputes will bear fruits now. Positive planetary positions will help you sort out complex matters. The good news is that money as well as job offers may start pouring in during this period. You may hit your annual financial peak around the 14th of April and a dream job or a business partnership too may be in the offing. Your relationship with your spouse or love partner will benefit from benign stars. But you must continue to avoid confrontations and ego clashes if you want to strengthen your relationship. It's a propitious time for singles too. APRIL 2012

55


KNOWLEDGE ZONE

A

nant Goenka is the latest entrant to the young, elite club of India Inc. Taking charge as managing director of Ceat, the over Rs 3,500-crore tyre major, he joins the long list of scions - including Wipro's Rishad Premji, Godrej Properties' Pirojsha Godrej, Piramal Healthcare's Nandini Piramal, among others - taking charge of their family businesses. The 30-year-old son of RPG Group Chairman Harsh Goenka is young, but certainly not a novice. Having joined his family business at 25, Mr Goenka has worked up his way in many RPG Group companies. With an MBA from the Kellog School of Management and a BSc in economics from The Wharton School, young Goenka had brief stints with Hindustan Unilever, Accenture and Morgan Stanley. After his business studies, Mr Goenka has joined group company KEC International as its corpo-

AT THE HELM

ANANT GOENKA rate vice-President in July 2007. He was in charge of KEC's telecom business, business development in North America and integrated planning and monitoring of the transmission and

F A C T S F O R

Y O U

INDIAN PATENT OFFICE

I

n a recent landmark order, the Con- estimated to be using it right now. troller General of Patents, Designs With the CL, Natco plans to make the and Trademarks (CGPDTM) - also medicine accessible and affordable called the Indian Patent Office - at Rs 8,800 a month. Natco has been granted Natco Pharma a Compulsory ordered by the patent office to pay a Licence (CL) to manufacture and royalty of 6 per cent of the drug's net sell generic version of Bayer's Indian Patent Office, Kolkata Nexavar, a drug used in treatment of liver and kidney cancer. The CL has been granted under Section 84 of the Indian Patents Act, 1970. In fact, this is the first time that such an order has been passed since the Act was promulgated. Nexavar is patented by its innovator Bayer, the German drugmaker, which sells it at a little over Rs 2.8 lakh for a month's dosage The number of patent grants has almost in India. Given the exorbitant doubled every year since the new patent price, less than 9,000 patients are regime came into force in 2005. 56 APRIL 2012

distribution business. He was later elevated as KEC's executive director in charge of supply chain and was responsible for manufacturing, procurement, planning, logistics and quality functions. Mr Goenka joined Ceat, the flagship company of the RPG Group, as head of its speciality tyre business. Soft-spoken and friendly, he was successful in changing the product mix, with greater emphasis on passenger car radials. He also took several initiatives to improve the margins of the country's fourth-largest tyre company. In January 2010, Mr Goenka was promoted as deputy managing director of Ceat. Since then, he has been pushing limits to grow the tyre major across the world. In the same year, he successfully oversaw the company buying the global rights of the Ceat brand from Italy's Pirelli for Rs 55 crore. With this, Ceat can market its products in Europe, Latin

sales to Bayer. The Nexavar order is a path-breaking development in the country's patents history since the new regime came into force in 2005. The CGPDTM or the Indian Patent Office reports to the Department of Industrial Policy and Promotion, which comes under the Union Ministry of Commerce and Industry. The patent office has five main administrative sections - Patents, Designs, Trademarks, Geographical Indications and Patent Information System. The office of the CGPDTM is located in Mumbai, while the headquarters of the Indian Patent Office is in Kolkata, with branch offices in Chennai, New Delhi and Mumbai. The Trademarks Registry is located in Mumbai and has branches in Kolkata, Chennai, Ahmedabad and New Delhi. The Design Office is located in Kolkata, while the offices of The INDIA BUSINESS JOURNAL


America and Africa, where it was earlier exporting tyres under Altura brand. "I want to make Ceat among the most profitable tyre companies in India in the next five years by strengthening the Ceat brand and improving operational efficiencies," stresses an upbeat Goenka. An avid squash player, who also enjoys running and travelling, the new Ceat chief has a lot of work cut out for him. The company is betting big on the newly-built, Rs 650-crore Halol radial tyre plant, which can make 3,00,000 passenger car and 40,000 truck tyres a month. With interest rates and raw material costs shooting up, there is also the challenge of maintaining margins and boosting bottom line. Meanwhile, Mr Goenka is drawing up plans and strategies to keep Ceat rolling swifter and swifter.

Patent Information System and the National Institute of Intellectual Property Management are in Nagpur. The Geographical Indications Registry has been established in Chennai. The CGPDTM awards patents and trademarks to products of innovation. It supervises and administers rules related to patents, designs and trademarks, the important types of intellectual property rights that have become the cornerstone of any modern, industrial economy. The Patents and Designs Protection Act, 1856, based on the British Patent Law of 1852, laid the foundation of patents in India. The Indian Patent Act, 1970, amended in 2005, ushered in the new patent regime and unveiled product patent instead of the earlier process patent. The number of patent grants has almost doubled every year since 2005, aggregating to 37,334 patents as of March 2010, the latest official data available.

INDIA BUSINESS JOURNAL

Spiritual Corner How are obstacles to charity created? Dadashri: If a man is giving charity to a poor man and another man interferes with his intellect (buddhi) and asks him why he is giving to the poor man, he creates an obstacle for himself by interfering. This obstacle will prevent him from getting any help from others when he comes across hard times himself. In whatever situation a person creates an obstacle, that obstacle will surface and hinder him under the same situation. What if the obstacle was created through mind and not through speech?

PUJYA DADASHRI

Dadashri: The obstacles created through mind have an even greater effect. These effects will be experienced in the life to come, whereas the effects of obstacles created through speech will give visible results and will be experienced in this life. So, should we make sure that we do not have any negative thoughts? Dadashri: That is not possible. You cannot help having such thoughts. However, your job is to erase them. The decision not to have such thoughts is called nischaya. You cannot stop your thoughts, they will continue to come. You must, however, erase them before they create a new karma for your next life. If you were to have a thought that a person should not be given any help because of this knowledge that you received about creating obstructions, you will have the awareness and you will erase that thought. This is similar to erasing the contents of a letter before you mail it. Then the problem is solved. But without gnan, you cannot erase anything. A worldly person (who has not taken gnan) will never erase his mistakes in this way. On the contrary, he will say; "Such thoughts are necessary, you don't understand." Thus he only complicates his life further. By saying and maintaining this, he doubles his faults and reinforces them. The ego does the wrong thing, it causes harm to the owner. It is like slashing your own legs with an axe. It is selfdestructive. From now on, you can erase everything through repentance. If you hurt someone through your speech, first make a decision that you should not speak that way again and then ask for forgiveness. This will erase your bad deeds. Your initial MONEY MATTERS negative thought on charity is now changed to it is good to give charity. In EDITED BY DR NIRU MAA this way, your initial thought gets erased. To give charity, to help others, to have an obliging nature and to care for others are considered relative dharma. One binds merit karmas by doing this. And by stealing, fighting and hurting people, one binds demerit karma. Wherever there are either merit or demerit karmas, there is no real dharma (the religion of the soul). Real religion goes beyond both these dualities. What should we do in this life to earn merit karmas for the next life? Dadashri: Donate a fifth of your earnings to temples or spend a fifth of your wealth for happiness of others. At least this much of an 'overdraft' will carry forward into your next life. In this life, you are enjoying the 'overdrafts' from your past life. Merit karmas of this life will carry forward to your next life. Whatever you earn as merit karmas in this life, will help you in your next life. The Marwadis are businessmen and they have found the key to profits in their business. They have a custom of donating 25 per cent of their income to the darasars and temples every year. Do they need to be told to do anything? You can only harvest what you sow. How can you expect fruits without planting a seed? The Marwadis customarily give towards religion, gnandaan and other charitable causes. They do not give to schools or individuals.

For more details, log on to www.dadabhagwan.org Also visit kids.dadabhagwan.org

APRIL 2012

57


HOT SEAT

FIGHTING FIT RAJIV VASTUPAL CMD, RAJIV GROUP A first-generation entrepreneur, Rajiv Vastupal has over the last three decades set up the Rajiv Group, a large, diversified entity, encompassing a dozen companies in trading and manufacturing. Starting out at the young age of 22 with a mere Rs 39,400 as his initial investment in 1979, the group has scaled great heights and posted revenue of Rs 550 crore in 2010-11. A successful businessman apart, Mr Vastupal is active in philanthropy and has been contributing to several social and charitable causes. A prominent figure in trade and business circles, Mr Vastupal is equally passionate about health and fitness. Exercises, including aerobics every morning and swimming every evening, are an essential part of his daily regimen. In an exclusive interview with Sharmila Chand, Mr Vastupal shares his views on life, business, interests and passions. Excerpts: How do you define yourself? A helping person What is your philosophy of life? Be happy and keep happy What is your passion in life? Work for growth in a positive manner

Your kind of music… Drum, guitar and Indian old classical music Favourite actors… Dev Anand Favourite holiday destination… Zermatt, Switzerland

Your management mantra? Do things now

Golf or Bridge or… Billiards

The business leader you admire the most… Pankaj Patel, the CMD of Zydus Cadila Healthcare

Formal suit or casual attire… Casual attire

Your strength… Untiring perseverance Your weakness… Expecting results too fast What upsets you easily? Work done untimely

You are a tough, serious boss or… Motivating and delegating What do you enjoy the most in life, generally? Exercise with music How do you de-stress? Music, exercise and swimming

Your kind of a movie… Mainly comedy

Your fitness regime… Regular yoga and aerobics and swimming

Any favourite one… Zindgi Na Milegi Dobara

Your favourite cuisine… Gujarati, Chinese, Thai and Italian

58 APRIL 2012

Any favourite places you like to go for dining… House of Ming, a Chinese restaurant of Taj Mahal Hotel in Delhi Your favourite gadget… BlackBerry One thing you cannot travel without… Cell phone Your stabilising factor… Pranayam Your mantra for success… Work hard with focus Your dream… To become the most leading industrialist and philanthropist You to be remembered as… Philanthropist Ten years from now, where do we see you? As a leader of a global management forum Send feedback to sharmila.chand@ibj.in

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