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Saturday, October 31, 2009

High FII holdings are key to stock price rise

OVERSEAS investors with access to billions of dollars at cheap interest rates remain more powerful in the Indian stock markets than local funds as their portfolio of companies have returned more than the companies where they cut stakes, an analysis of BSE 500 companies by SundayET and CNI Research shows. 

    Stock prices of companies where foreign institutional investors (FIIs) increased their holding in the September quarter rose 32% on an aggregate during the period, the study with CNI, a listed research firm, shows. Shares of companies where FIIs' holding either declined or remained the same, appreciated 16%. 
    "Institutional investors like FIIs understand the fundamentals of the company better due to availability of tools and techniques and manpower,'' said Amitabh Chakraborty, president — equity, Religare Capital Markets,. "FIIs's holding and share price movement have a strong positive correlation.'' 
    Overseas investors have invested a net Rs 67,694 crore in Indian stocks as they appeared attractive after tumbling to their lowest in many years in March, compared with local mutual funds which sold a net Rs 4,077 cr in the same period. Furthermore, a raft of share sales to institutional investors under the so-called QIP, attracted mostly overseas investors as the domestic institutions did not have the kind of access to funds like the FIIs who were borrowing cheap elsewhere and investing here. 
    Companies where there was no change in FIIs' holding posted a return of 18% and those companies where their holding was reduced rose by 16%. In fact, companies that outperformed the Sensex, which appreciated by 
around 18% during the same period, belong to the category which saw higher FIIs' holding. 
    Top five companies, which attracted FIIs the most, are Housing Development & Infrastructure (HDIL), Sobha Developers, Hindustan Construction Company, Indiabulls Financial Services and Orbit Corporation. Most of these companies are engaged in construction and infrastructure related works which suffered the worst during the credit crisis. In HDIL, foreign holding rose to 26.01% from 7.05% in June. Similarly, Sobha Developers saw its FIIs' holding going up to 18.68% from 2.54% during the same period. 
    Some of the companies where FIIs cut holdings returned lesser. Among companies where FIIs' holding declined substantially, are Wire & Wireless (India), PTC India, Max India and Balrampur Chini. Their holdings in these companies reduced by as much as 10 percentage points. They reduced their stake from 8.73% to 0.88% in Wire & Wireless during the period. 
    Out of BSE 500 companies, only 456 had declared their shareholding pattern. Of 456 companies, FIIs' holding went up in 254 companies, remained same in 21 and declined in 181. 
    anand.rawani@timesgroup.com 



Thursday, October 29, 2009

M&M net triples to Rs 703 cr on higher sales, easy funding

FALL IN INPUT PRICES ALSO HELPED CO POST HIGHEST-EVER QUARTERLY PROFIT

MAHINDRA & Mahindra (M&M), the country's biggest tractor maker, posted its highest-ever quarterly net profit selling more utility vehicles, Scorpio, and tractors on easy funding from banks even as the company and investors fear a possible slowdown in rural demand due to poor monsoons and a dent in profitability on rising commodity prices. 

    The Mumbai-based company, which also benefited from stake sale in a unit, said net profit for the September quarter nearly tripled to Rs 703 crore from Rs 247 crore a year earlier. Total revenues rose 36% to Rs 4,557 crore, against Rs 3,354 crore. 
    "The country experienced its severest drought in the recent history. The adverse impact, which is likely on agricultural output and incomes and demand for non-agri goods and services, is a source of some concern," the company said in a statement. Shares of M&M surged 3.9% to Rs 927.75 on BSE on a day when the Sensex tumbled 1.4% to 16,052.72. 

    Indian auto makers have 
been reporting strong sales for the September quarter as banks turned more liberal in lending at nearly record low interest rates for car and motorcycle purchases after remaining cautious for a few quarters in the wake of credit crisis last year. But the demand may slow as the rural population, where a vast majority depend on agriculture for income, suffers the worst rainfall in more than 25 years and that interest may begin to climb. 
    M&M that sells the popular Scorpio and the recently-launched Xylo utility vehicles said sale of those vehicles advanced 44% in the 
quarter to 55,280 units and that of tractors gained 27% to 93,105 units. 
    The fall in commodity prices such as steel also contributed to the higher profits and improved its returns ratio. The operating margin improved to 18.24% from 5.91% in the same quarter a year earlier. Raw material costs as a percentage of revenue fell to 64% from 70.6% a year earlier, said Bharat Doshi, ED-finance and group CFO at M&M. 
    "Going forward, the volume growth may see some impact due to poor monsoons. Margins will also be under pressure as commodity prices are rising," said, Vaishali Jajoo, an analyst at Angel Broking. Total expenditure as a percentage of net sales during the September 
quarter fell to 85.5% from 97.5% a year ago. The net profit in the quarter was also helped by a post-tax gain of Rs 70 crore from the sale of stake in Mahindra Holidays and Resorts, in an offer for sale along with an IPO, the company said in a statement. But the good times may not last long since commodity prices are surging again, thanks to extraordinary printing of money by central banks to bring the world out of the worst-ever recession since the Great Depression in the 1930s. 
    The company expects raw materials costs to rise 4-5% in the next few months, which could put pressure on its profit margins. The company plans to invest as much as Rs 7,000 crore in the next three years, including a Rs 2,500-crore investment in its Chakan unit in Maharashtra, Rs 2,500 crore in new product development and a Rs 1,000 crore to boost its utility vehicles division. 
    On launching utility vehicles in the US, M&M said the plant, products and the distribution channel are in place in the US as it readies to launch in by December this year. 

Mahindra & Mahindra 
Rs 4,557 cr 
Total revenues in the September quarter 
Rs 927.75 
M&M stock closing on BSE on Thursday



Govt-determined gas price needs to be examined: SC

THE Supreme Court, while hearing the gas dispute between Ambani brothers on the sixth day, said the basis for fixing the government-determined natural gas price of $4.20 per unit required examination. The three-judge bench observed the sale of gas at $2.34 per unit may not only end the dispute between Ambani brothers, but may also be in the public interest. 

    The two brothers are fighting a legal battle over supply of gas from Mukesh Ambani-promoted Reliance Industries' (RIL) D-6 block in the Krishna-Godavari (KG) basin to Anil Ambani's Reliance Natural Resources (RNRL). 
    "If the price (of the gas produced from RIL's KG-D6) will be at $2.34 (per unit), then it will not only end the dispute between two companies (RIL and RNRL), but also be in (the) public interest. The fertiliser and power companies will be getting gas at cheaper rate. Ultimately, the people will be benefited," said a bench comprising Chief Justice KG Bal
akrishan, Justice RV Raveendran and Justice P Sathasivam. 
    Justice Raveendran, speaking for the bench, said raising (gas price) from $2.34 to $4.20 per unit would make "only you (RIL) the beneficiary and not the public. RIL is gaining and not the public. Is it in public interest?" 

    RIL counsel Harish Salve said the $4.20 per unit price benefited the government, as this would make cost recovery quicker, and the government would receive a higher share for longer period. 
    The court, however, said the basis for fixation of price for sale of KG gas at $4.20 per unit also required consideration. "Whether fixation of price at $4.20 (per unit) was done arbitrarily. Whether it has some statutory basis or contractual obligation. These are the issues, which has to be decided," said Justice Raveendran. 
    "Isn't it the case that the price of $4.20 per unit will benefit RIL?" asked the court. Mr Salve replied that the pricing was approved by an EGoM and the contractor (RIL) has to supply KG-D6 gas at $4.2 per unit. 
    Chief Justice Balakrishnan intervened at that point and said the $4.20 per unit price may make RIL recover its cost quickly and make profit in a shorter period. RNRL's counsel Ram Jethmalani, however, said he would prove that RIL would make profit by selling gas at $2.34 per unit. 
    sanjay.singh6@timesgroup.com 



Gas holds out hope for RIL

Refining Margins Seen Improving

RELIANCE Industries (RIL), the nation's most valuable company, posted a 6.4% fall in quarterly earnings matching expectations, as it got lower prices for its petroleum products in the global markets due to a supply glut. But the gas business holds the promise of rising profits even as a legal tussle over it continues. 

    The company's net profit for the September quarter fell to Rs 3,852 crore, or Rs 23.40 a share, from Rs 4,116 crore and Rs 27 a share a year earlier, said a statement from the company. Its gross revenues rose 6.1% to Rs 48,843 crore from Rs 46,014 crore a year earlier. An ETIG poll of seven analysts' forecast showed net profit may fall 5.6% to Rs 3,889 crore. The earnings does not include profit of Rs 2,941 crore from the sale of its own shares. 
    "The timely completion of the new SEZ refinery and the 
deep water, oil and gas K-G D6 block and their safe and stable ramp-up are noteworthy accomplishments for the company. These projects have contributed meaningfully in RIL achieving a record level of profits despite the challenging business and economic environment," chairman Mukesh Ambani said in a statement on Thursday. Petrochem, oil & gas exploration businesses prop up earnings 
OIL companies across the globe including BP are hurt by lower refining margins as the demand weakened in the wake of recession in developed economies such as the US, Europe and Japan and more refineries commenced production. But Reliance benefited from the beginning of gas production from its block off the East Coast over which it is in a legal dispute with chairman's estranged younger brother Anil Ambani's Reliance Natural Resources. 
    "Increasing production of gas over next few quarters will continue to grow RIL's profits," said Deepak Pareek, analyst at Angel Broking. "We can see its refining margins improve next year with global economic recovery, while stability in petrochemical margins is good." 
    Revenues from its refining and marketing business rose 9% to Rs 39,564 crore, while its refining margins, profit on 
processing every barrel of crude, halved to $6 a barrel pulling the pre-tax profits from the division to Rs 1,347 crore, from Rs 2,774 crore a year earlier. Global refining margins declined to $3.42 a barrel in the three months ended September compared with $6.20 a barrel a year earlier, according to BP data. 
    The petrochemicals and the oil & gas exploration businesses prevented a sharper fall in the earnings as it realised higher prices for products such as polyester and polymer and from the sale of gas. 
    While pre-tax profit from petrochemicals business rose 16% to Rs 2,195 crore, gas division's pre-tax earnings rose 90% to Rs 1,226 crore, according to the statement. 
    "Falling EBIT margins in oil and gas segment is area of concern especially when crude prices went up and gas prices remained unchanged," said investment advisor SP Tulsian. "Also the new refinery contributing less than 5%
in RIL's PBT shows that RIL is selling its products at huge discount in the international market." 
    But the company says the return ratios are set to improve. 
    "It is RIL's highest ever EBITDA and PBT. PAT has been impacted by higher depreciation and higher tax provisioning Lower prices (45.2%) has been offset by volume growth (36.5%). Once KG D6 productions starts fully hope that return on capital and return on equity will cross 20%," said RIL in a statement. 
    RIL is fighting a case in Supreme Court seeking to overturn a lower-court order to supply gas to RNRL at 44% less than a price set by the government in 2007. RIL could lose as much as $600 million a year in earnings before interest, tax, depreciation and amortisation if it loses the case, according to Moody's Investors Services. 
    Its shares fell 1.56% to close at Rs 2003.85 on BSE on Thursday.

US economy grows in Q3, signals end of recession

Best Showing For Uncle Sam In 2 Yrs, Chindia On Fire


Washington: The US economy grew at a 3.5% pace in the third quarter, the best showing in two years, fuelled by government-supported spending on cars and homes. 
    The commerce department's report on Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended. 
    Many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans. 
    "We're beginning to crawl out a very deep hole,'' said economist Ken Mayland, president of ClearView Economics. "It will take time to get back to normal again and there are questions about how consumers will hold up in the months ahead. But I think the recovery will be sustained.'' 
    The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947. It also marked the first increase since the spring of 
2008, when the economy experienced a short-lived uptick in growth. 
    The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3% growth rate economists expected. Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes. 
    Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3% in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's cash for clunkers programme that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers. 
    The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4%, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive. 

    The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on November 30. 
    The collapse of the housing market led the country into the recession. Rotten mortgage securities spiralled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery. A top concern is whether the recovery can continue after government supports are gone. 
    Several economists predict economic activity won't grow as much 

in the months ahead as the bracing impact of President Barack Obama's $787 billion package of increased government spending and tax cuts fades. 
    The National Association for Business Economics thinks growth will slow to a 2.4% pace in the current October-December quarter. It expects a 2.5% growth rate in the first three months of next year, although other economists believe the pace will be closer to 1%. 
    Christina Romer, Obama's top economist, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year. 
    Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9% in the third quarter, on top of a 11.4% growth rate in the second quarter. AP



ONGC net profit up 6% at Rs 5,089 crore in Q2

New Delhi: Lower sales due to decline in production notwithstanding, flagship explorer Oil and Natural Gas Corporation on Thursday posted 6% increase in its second quarter net profit at Rs 5,089 crore on the back of lower subsidy payout and an appreciating rupee. 

    The rise in net comes for the first time in the last five quarters. Net profit had stood at Rs 4,808 crore in the same period a year ago. "Our net realisation after paying for subsidy was $56.42 per barrel as compared to $46.72 last year,'' chairman R S Sharma said. For the half-year ended September 30, net profit fell to Rs 9,937 crore from Rs 11,444 crore a year ago. 
    ONGC gave $14 per 
barrel discount to refiners as subsidy to compensate them for their losses on fuel sales. The subsidy payout at Rs 2,630 crore was 79% lower than Rs 12,663 crore outgo in the previous corresponding period. ONGC reckons its profit would have been higher by Rs 1,491 crore if it did not have to pay the subsidy. 
    The appreciating rupee helped the company in improving realisation in rupee terms from crude sales, which was Rs 2,731 per bar
rel in the quarter under review against Rs 2,041 a barrel a year ago. But sales declined to Rs 15,080 crore from Rs 17,407 crore on a dip in production, down 3.4% at 6.63 million tonnes, as natural decline set in at ageing fields. Gas production was almost unchanged at 6.45 billion cubic metres. 
    Sharma said ONGC was targeting to raise 
gas production to over 100 million cubic metres per day by 2015-16 from 62 at present. The incremental production would come from new fields, particularly in the KG basin. ONGC reported five oil and gas discoveries during the quarter, including one in the Krishna-Godavari basin. In October, ONGC had discovered four more oil and gas reserves, all of which are in western offshore. He declined to give reserve estimates, saying it was too early. 
    The ONGC board also approved an investment of over Rs 50,000 crore in exploration and production during the current and the next financial year. 
    Plan investment during current fiscal has been revised upwards to Rs 24,720 crore from Rs 21,820 crore estimated earlier, while Rs 26,523 crore would be capital expenditure in 2010-11, Sharma said.



RIL profit falls for 4th straight quarter

Shrinking Refining Margins Erode Petrochem Giant's Net

Mumbai: Petrochem giant Reliance Industries (RIL) reported a lower quarterly profit for the fourth time in a row due to shrinking refining margins. Its fiscal second quarter net profit declined 6.4% to Rs 3,852 crore, while turnover increased 6.1% to Rs 46,848 crore. Gross refining margins fell to $6 a barrel for the quarter ended September 30 from $13.4 a barrel a year earlier. 

    Decrease in prices was partially offset by higher volumes. Its refining business, the largest contributor to revenues increased 8.9% to Rs 39,564 crore in the second quarter of FY10. Revenues from petrochemicals increased 14.2% to Rs 13,340 crore during the period under review. On the other hand, revenues from oil & gas more than tripled to Rs 2,937 crore as against Rs 1,864 crore in the corresponding period last year. RIL scrip on Thursday closed at Rs 2,004 on the BSE, down 1.56% before the earnings were announced. 
    "The timely completion of the new SEZ refinery and the deep water, oil and gas K-G D6 block and their safe and stable ramp-up are noteworthy accomplishment for the company. These projects have contributed meaningfully in RIL achieving a record level of profits despite the challenging business and eco
nomic environment,'' RIL chairman Mukesh Ambani said in statement. 
    Other income was higher at Rs 628 crore during the period under review. Total expenditure increased from Rs 39,477 crore to Rs 42,063 crore during the second quarter of FY10. Early this fiscal Reliance commenced gas production from the KG D6, India's biggest field and the current gas production stands at 40 million cubic metres a day. The output is expected to increase to 60 million cubic metres, which would help the company to offset lower refining margins in a global economic downturn. 

    During the quarter ended September 30, five companies have already started drawing gas aggregating to five million cubic metres a day, RIL said in a statement. Profit before depreciation, interest and tax increased 18.3% to Rs 7,845 crore in the second quarter of FY10.

Mukesh Ambani


Wednesday, October 28, 2009

RBI does a balancing act, with credit policy

THE CREDIT POLICY SUGGESTS THAT THE RBI IS TRYING TO CURB FORMATION OF AN ASSET BUBBLE - IN SIMPLE WORDS, ATTEMPTING TO CONTROL ASSET PRICES FOR END USERS. KAMLESH PANDYA TAKES A LOOK AT THE REALTY FRATERNITY'S VIEW


The fact that the RBI left interest rates unchanged came as a huge relief for real estate players. With the inflation index moving away from negative territory, the real estate industry was worried about a possible hike in interest rates and its impact on sales, says Rajen Bandelkar of the Raunak Group. "From a home buyer's perspective, the credit policy does not seem to be negative and that is good news for the real estate industry," he says. In terms of funds for the industry, "It seems to be an indication of a tighter regime to follow, in the days to come," adds Bandelkar. 
    The credit policy reflects two changes that could affect the real estate sector, explains Shobhit Agarwal, joint managing director (capital markets), Jones Lang LaSalle Meghraj. "SLR has been increased by one per cent and the provisioning for real estate loans has been increased to one per cent, from the earlier 0.4 per cent," he says, but adds that the impact on the sector will not be significant. "Banks will now be a little more cautious while lending to real estate players but given that interest rates are at their lowest in recent times, even a marginal hike due to this tightening in provisioning, will not affect the overall sector seriously," he explains. "Rather, it might help, as the central bank is trying to curb the formation of an asset bubble. In other words, it is trying to control the asset prices for end users. If implemented properly, this policy will benefit property buyers in the long run," he maintains. 
    According to Agarwal, the projected increase in inflation is in line with India's long-term inflation history and is automatically factored into the markets and overall market sentiments. "Therefore, this would not hamper the recovery that is currently being witnessed," he points out. 
    Manju Yagnik, vice-chairperson of the Nahar Group feels that the RBI's policies have been consistent with the nation's best interests and she 
expects the latest change to augur well for the nation's economy. "The RBI has refrained from hiking key rates, like repo or reverse repo and has hiked the statutory liquidity ratio (SLR) by just one per cent. The cash reserve ratio (CRR), the minimum amount banks need to park with the RBI, has also been left unchanged," she points out. Controlling inflation was the challenge that the RBI faced, even as it worked at ensuring that growth levels in the economy did not dip, said Yagnik. 
    The Ambit Capital Report, termed it as the 'end of loose credit and monetary policy'. The report said the policy indicated a strong probability of increase in interest 
rates, in 2010 and reduction in exposure to real estate. "We have been concerned, over the fragile balance sheet of real estate companies and we expect that the recent announcements in credit policy will increase the pressure on balance sheets," the report said. 
    The RBI could have tougher measures in store, in days to come, concludes Bandelkar.



ACC net up 54% at Rs 435 cr

India's cement industry is set to add 40 mt of capacity this fiscal, a 21% rise over 2008-09. Cos expect demand from infrastructure sector will drive growth

The country's largest cement maker ACC on Wednesday posted a 54% jump in quarterly net profit on the back of buoyant demand and lower operational costs. 

    Holcim-controlled company has posted a net profit of Rs 435 crore in the September quarter, compared with Rs 283 crore in a year-ago period, while net sales went up by 10% to Rs 1,969 crore. 
    Sumit Banerjee, MD, ACC, told ET: "Our team efforts in cost management are yielding results." ACC's energy costs fell 13% during the quarter to Rs 382 crore largely due to lower coal prices. ACC expects a significant increase in demand from the infrastructure sector and other development schemes of the government. However, additional capacity to come on stream 
within the next year is a concern. 
    Swiss cement maker Holcim holds 46.21% equity in ACC and has a combined capacity of 41 million tonne in India. On BSE, ACC shares were down 1.63% to Rs 745.95 on Wednesday. 
    The Indian cement industry, second largest in the world after China, will add 40 million tonne of capacity this fiscal, a 21% increase over the installed capacity at 212 mt in 2008-09.





Bharti, RCOM profits may take a hit

Lower Per-User Revenue, Increase In Competition To Dent Bottomline

Ranjit Shinde ET INTELLIGENCE GROUP 


THE country's top two telecom operators — Bharti Airtel and Reliance Communications — are expected to report a deceleration in growth for the September 2009 quarter. Both the telcos will declare their quarterly numbers on Friday. Bharti is likely to grow its revenue 14% to Rs 10,288.5 crore from the year-ago level, while net profit may rise 16% to Rs 2,427.5 crore. For RCOM, net sales may grow 12.6% to Rs 6,356.6 crore. Its net profit is likely to skid 27.3% to Rs 1,171.2 crore. The estimates are based on the average of forecasts of four brokerages and estimates of the ET Intelligence Group. 
    The third-largest listed mobile operator Idea, which declared results on Monday, disappoint
ed investors with near-flat revenue and lowerthan-expected growth in profit. It witnessed lower per-user revenue and higher churn of subscribers — a fallout of intense competition. 
    Against this backdrop, the performance of Bharti and RCOM will hold answers to some critical questions regarding sectoral trends. Subscriber growth is expected to remain ro
bust for both the operators given the steep rise in monthly additions from 12 million in June to 14 million in August. However, this is likely to drag average revenue per user per month (ARPU) and minutes of usage similar to that in case of Idea. 
    The domestic telecom sector is currently witnessing steeper fall in valuations after the operators reduced tariffs significantly to gain market share. The stocks of Bharti and RCOM have lost 27% and 36%, respectively, in one month. Analysts have downgraded future revenue expectations of the top players citing the sharp fall in ARPUs due to the recent tariff revision. Given this, it would be important to follow management comments on Friday pertaining to the near-term growth and profitability scenario. That would have a bearing on future valuations of the sector.

Bajaj has the potential to be a world-class company

COMING to think of it, Tomotaka Ishikawa, advisor at Bajaj Auto since April 2008, has not made much of a transition. After all, there is so much to separate from Truly Yamaha and Hamara Bajaj. Both are truly yours for this turnaround man and Yamaha lifer. The former Yamaha India managing director, known for reviving the Japanese firm's fortunes in Thailand and later in India, hopes to weave the same magic into Bajaj Auto's sales. Short, bespectacled, and clothed in a Bajaj Auto Tshirt, Ishikawa has just finalised a three-year plan with Rajiv Bajaj, MD of Bajaj Auto, to get the company back on its wheels after struggling to keep pace with market leader Hero Honda in the last couple of years. Ishikawa is confident that he will make Bajaj Auto a niche, high value player and help its exports double in three years. Lijee Philip andKausik Datta caught up with the turnaround expert in recently, where he talked at length on product plans and global strategy... 


Given Bajaj Auto's strategy to be distinctly ahead by developing itself as a life-style brand across global markets, what exactly is your mandate in the company? 
I am an advisor to Bajaj Auto, with no specific roles. Certain emphasis is given on product and growth planning. I am trying to set up a procedure for a three-year planning. I tried last year but I failed. It may take three years to make a three-year plan! 
What is the objective of the three-year plan? When was it implemented? Why did it fail initially? 
We intend to start the plan by February 2010. The plan is about the future — which segment of the market or which customer or the product the company should target. This will help Bajaj Auto achieve its target of exporting 
1.2 million vehicles in three years against the current level of six lakh units. We are currently outlining the new markets, deciding on the priority of product launches. Once that is set, we can have a clearer picture of cash flow. I want Bajaj Auto to take the three-year plan seriously. Last year, I set up a process and couldn't attain a certain level in the product planning area. I struggled to get consensus and approval from Rajiv (Bajaj) and it took a little too long. So now we have started again, with a different process. But I cannot unveil the strategy. 
Can you specify the target of this plan? 
My idea may not be Rajiv's idea as yet. Bajaj Auto is trying to do unique things in the Indian market as compared to Hero Honda. We are trying to be number one and Bajaj has the potential to be a world class company. Rajiv's idea hasn't changed since he has introduced the Pulsar and the product has been gaining market share steadily. I think it's 
a miracle, for a company without any support or technology, to attain a market share of 25% within 10 years. 
What do you mean by a world-class company? 
You should have your own technology. The sales volume should be very close to the big four Japanese players. We have already touched the two million level, and will be bigger than Kawasaki. We are major players in African markets, but the Chinese have flooded the markets. We are not necessarily number one in many countries. But with this technology, performance and quality, we can produce products at very low cost with quality. 
What about the Indian market? 
We have been trying many different things to challenge Hero Honda sales but it has only confused the customer. We went 
back to the Discover, the 110cc bike and sales started growing from September last year. Our thrust is, not to grow the same way as Hero Honda, but to educate the customer so that they have a better choice. We don't want to be like the Chinese, discounting products as we care for the brand. Our patience and consistence is helping us and I believe it is the right direction. 
What's your strategy in the overseas market? 
Bajaj Auto can take the road that Japanese took 40 years ago. That was the market of motorcycles and prices were expensive. Japanese gave smaller motorcycles at a cheaper price. Now Japanese are struggling to be in the commuter segment because of high cost. Many manufacturers have started buying from China, resulting in a big 
gap in quality between Chinese and Japanese bikes. Many of the Chinese products are unacceptable by mature markets. So I think we have a lot of potential to attack with Japanese products at Chinese prices. 
What about three-wheeler market? 
We have to know who we are and why we are here. The confusion is that we are using the technology of a two-wheeler to sell a three-wheeler. If we push ourselves like the Tatas, we will be nowhere. Our task is to upgrade and evolve our current products. 
Is working at Bajaj Auto different? 
It is completely different in terms of management. The Japanese companies are very bureaucratic and very established with a lot of work done systematically. Strategic discussions are scarce, once in a year where we talk about mid-term planning. Here in Bajaj Auto they talk strategy everyday. 
    lijee.philip@timesgroup.com 



INDIANS TOP GLOBAL CONFIDENCE CHARTS

INDIA ROCKS THE WORLD

GLOBAL consumer confidence is rebounding, and in the US has risen for the first time since 2007, amid signs the world economy is picking up although spending is still restrained, a survey showed on Wednesday. 

    Confidence was highest in India, followed by Indonesia and Norway, and was weakest in Japan, Latvia, Portugal and South Korea, although in Korea it had improved markedly, according to a quarterly survey by The Nielsen Company, conducted between September 28 and October 16. "Consumer confidence is rising faster in BRIC countries than other markets, driven by increasing job prospects," Oliver Rust, managing director of Nielsen Hong Kong, said. 
    In the United States and Europe, high unemployment continued to discourage spending on big-ticket items although confidence had improved as the worst appeared to be over for those economies, New York-based Nielsen said. 
US confidence rises post-2007 
IN THE United States — the world's biggest consumer market — consumer sentiment rose from three months ago for the first time since early 2007. The data contrasts with a Conference Board index of US consumer confidence, released on Tuesday, which showed a sharp deterioration in confidence this month. The US reading in The Nielsen Global Consumer Confidence survey at 84 was up 4 points from a similar survey in July but just below the global average reading of 86 and well below India's score of 120 and Indonesia on 115. 
    "While consumer confidence in the United States edged up 4 index points, that hasn't translated into spending confidence for the vast majority of Ameri
can consumers," said James Russo, vice-president, global consumer insights at The Nielsen Company. "Clearly, this recovery will be manifested in measured and restrained spending as consumers work to repair their balance sheets." A reading above 100 is considered optimistic. The global average was up four points from a similar survey in July. 
    Japan and Spain were the only markets in the latest survey to register a decline in confidence from July. Japan's score dropped by 2 points while the reading for Spain — which the IMF has predicted will be the only Eurozone economy to contract in 2010 — fell 4 points to 74. Hong Kong, which pulled out of recession in the second quarter, marked the biggest increase in confidence as its score jumped 14 points from the July survey to 93. — Reuters



 

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