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Thursday, April 29, 2010

‘Health cover will soon be part of social security system’

FIT FOR ACTION

HEALTH insurance will play an important role in India's changing social environment, which is increasingly moving towards the nuclear family system. After testing success in the life insurance space, Max Group has launched health insurance business under Max Bupa, a standalone joint venture with UK-based Bupa, in six cities to capture the growing demand for health protection in a grossly under-penetrated market. In an exclusive interview with ET's Paramita Chatterjee, Analjit Singh, founder & chairman of Max India, said both the partners would infuse up to Rs 600 crore over the next five years to ramp up operations. Excerpts: 


After a successful life insurance business, which also offers customised health insurance products, why do you plan to venture into health insurance? 
Foraying into health insurance was a natural progression for us considering we were 
already present in the healthcare and life 
insurance space. The idea of launching a standalone health insurance venture was to increase penetration in the country. India is grossly under-penetrated, with only about 3% of the billion-plus population possessing health insurance cover. Going forward, health insurance will become an important part of the social security system. Our aim is to provide social security to common people at a competitive price. 
With the launch of Max Bupa, there are now three standalone health insurers in the country. What exclusive prod
ucts or services are you looking to launch, considering private insurers account for a mere 3% of the market? 
The journey of standalone health insurers has just begun. Our main intention is 
to increase penetration, and, for that, we 
have done some bit of innovation to the 
regular health insurance schemes like 
providing cover to a new born baby from day one under our family floater health insurance policy. It is the first time in India that a new born baby will be covered by health insurance from birth, along with vaccination expenses till the child turns one. Besides, we have also decided to extend health insurance to all age groups and not bar anybody. Health insurance is different from the typical life insurance policies and hence, there is much more interaction required between insurers and customers. And, to make products more cost effective, we have decided not to have any third-party administrators. 
Given the growth opportunities, how much capital infusion will be needed over the next five years? 
Insurance is a capital-intensive business. The current capital base is Rs 151 crore. In our assessment, we need to invest addi
tional up to Rs 600 crore in the next five years. Now that we have launched our business in six cities, we will be hiring significantly this year. By the end of this calendar year, we plan to have 600 employees and another 3,000 agents on board. Besides, we would foray into three more cities — Surat, Jaipur and Ludhiana. We are expecting certain regulatory changes. Once regulatory changes are made, opportunities will only increase further. 
What do you exactly mean by the regulatory changes? 
We are awaiting the relaxation of the foreign direct investment limit of 26% in insurance. Once it goes up to the proposed 49%, many more global players will be tempted to enter the Indian market. In case of our JV too, Bupa may increase the stake to 49-50%. Besides, there are lots of operational charges that require legislation changes. 
    paramita.chatterjee@timesgroup.com 

GEARED UP: Analjit Singh

UltraTech to buy majority in Dubai’s ETA Star, deal seen at Rs 900 crore

CONCRETE PLANS

ULTRATECH Cement, the country's second-largest cement maker and a part of Aditya Birla group, said on Thursday it would acquire Dubai-based ETA Star Cement for an enterprise value of Rs 1,700 crore. UltraTech CFO KC Birla said the deal will be funded through a mix of debt and internal accruals. ETA Star has a market share of 10% and 20% in Abu Dhabi and Bahrain, respectively. He, however, did not disclose the cost of acquiring the stake nor the size of equity. A person familiar with the deal said UltraTech would pay around Rs 900 crore to acquire a majority stake in ETA Star. 

    UltraTech said the transaction would be completed by the June quarter, and would be accretive to its earnings per share. "The acquisition is in line with our long-term strategy of expanding our global presence across businesses," group chairman Kumar Mangalam Birla said in a statement. 
    The acquisition would give UltraTech the advantage of size, say analysts. "Apart from adding value to its capacity, it will benefit UltraTech as Abu Dhabi and Bahrain's real estate markets are not as depressed as Dubai," said Rupesh Sankhe, a cement analyst with Angel Securities. 
    The economies of both Abu Dhabi and 
Bahrain are largely driven by oil, which, given the recent rise in crude prices, could soon revive construction activity, said another analyst, who did not wish to be named. 
    ETA Star's manufacturing facilities include a 2.3 million tonne clinker plant and a 2.1 million tonne grinding plant, both in the United Arab Emirates, a 0.4 million-tonne grinding plant in Bahrain and a 0.5 million tonne grinding plant in Bangladesh. 
    UltraTech has recently proposed to get regulatory approval to absorb the cement business of group firm, Samruddhi Cement, on July 1. Post approval, it would become country's largest player with 49 million tonnes capacity, surpassing Holcim's ACC and Ambuja combined, Mr Sankhe added. "The acquisition, together with the amalgamation of Samruddhi Cement with UltraTech, will enhance UltraTech's capacity to around 52 million tonnes," said OP Puranmalka, whole-time director of UltraTech. 

Co's net falls 26% 
on high input costs 
ULTRATECH has posted a 26% fall in quarterly profit, lagging market forecasts, due to higher input costs and lower realisations. It has reported a net profit of Rs 229 crore in the March quarter, compared to Rs 309 crore in the yearago period. However, its revenue grew 3% to Rs 1,909.4 crore. The worse-than-expected financial performance pulled down the UltraTech stock in a flat Mumbai market. The stock fell 5.2% to Rs 1,018.6 on BSE on Thursday. — Our Bureau


RIL looks to ride Atlas to retail brand in US

RELIANCE Industries plans to sell gas to retail consumers in the US and will use its newly-minted partnership with Atlas Energy to try and build a brand name in the intensely competitive market. 

    RIL, which bought 40% in Atlas Energy some weeks ago, plans to use the pipeline infrastructure that Atlas already has to supply through its own network of gas stations in the world's biggest energy market. 
    An RIL spokesperson declined comment on the development. 

    A person close to the development said RIL's US venture, a subsidiary of RIL Netherlands, will transport gas using the network. The company initially plans to supply to consumers in New York, Virginia among others. 
    Having acquired the stake in the shale gas fields, RIL along with its joint venture partner Atlas Energy will soon begin work on the development of the field to start producing gas. As opposed to many crude oil and gas acreages, the shale gas fields are all proven assets (where time and money are not wasted on exploration) and RIL can get into 
the development stage right away. 
    But India's biggest company and largest refiner will find the US market a tough nut to crack. The retail market is dominated by giants such as Exxon-Mobil and BP that have spent many decades building network and pipeline infrastructure. They also have a strong brand presence. 
    Gas, whether it is from unconventional sources such as shale, or produced through normal means, is largely used in transportation and electricity generation. Big US automakers have so far been reluctant to switch over to natural gas from gasoline, pointing at the higher 
costs involved in producing new cars and in setting up new gas stations. 
    RIL already exports a bulk of its refined petroleum products, primarily gasoline, to the US markets but is not in the retail market. 
    But RIL officials are gung ho about the overseas operations. The firm is looking at increased revenues from its offshore assets in the coming years and is planning to invest a bulk of its capex in these markets in the years to come, an RIL official, who did not wish to be named, said. 
Demand for gas may rise 
"WE are looking at an EBIDTA of at least 35% of our revenues from global operations," he said. Although gas markets are currently soft with demand for natural gas seeing a huge fall after the recession, it is expected to pick up in the medium term. 
    Gas prices, which were at a high of almost $12 per million British thermal unit (mBtu) around 2008, are now ruling at just about $3 per mBtu. Energy analysts see prices stabilising at about $6 per mBtu in the next three to five years. 
    According to David Morrison of global energy consultancy and research firm Wood Mackenzie, the increased play of shale gas in the energy market has turned many a projection upside down. For one, the liquefied natural gas (LNG) market is almost suddenly in a glut with domestic shale gas in the US, replacing imported LNG. 
    Arbitrators in the Asian, and European markets are taking advantage of the sudden glut in the LNG market even as US reduces its import of LNG and ships get diverted. 
    RIL may also soon have some more acreages of shale gas that Atlas is expected to close on shortly. As per the understanding, RIL will get 40% of the share in every new shale gas asset. Interestingly, apart from an assured share, the company also has an understanding that it would acquire the future stake at a price not higher than $8,000 per acre. It acquired its stake in Atlas for $1.7 billion, or $14,000 per acre. 
    Shale gas is like natural gas that is trapped within marine sedimentary rock layers and is considered to be a promising new source of hydrocarbons. The net potential of the Marcellus fields in Pennsylvania is approximately 13.3 trillion cubic feet equivalent (tcfe) of natural gas, with RIL having a claim of over 5.3 tcfe. RIL's KGD6 gas field on India's eastern coast has an estimated potential of 11 tcfe.

Monday, April 26, 2010

Large-cap funds go past ’08 highs

Y O U R MONEY

29 MFs At Levels Last Seen When Sensex Was At 21,000

Coimbatore: The sensex may be well short of the 21,000-mark it achieved in January 2008. But many large-cap oriented mutual funds (MFs) have raced past the highs they achieved two years ago when the stock markets hit their peak during the previous bull rally. 

    In all, 29 of the 200-odd open-end diversified equity MFs, a majority of which focus on large-cap stocks, have recorded growth compared to January 9, 2008, when sensex was trading above the 21,000-mark. 
    While mid-cap and smallcap MFs, which have beaten benchmark indices by a huge margin in the past year, have been the flavour of the season, funds that have a high exposure to large-cap stocks have been the first to breach their previous highs. 
    "Small and mid-caps (stocks) are always a bit volatile. But value stocks have done a lot better in the last two years,'' says Sankaran Naren, CIO, equity, ICICI Prudential MF. "Large cap comprises low beta (less volatile) stocks. They offer stable returns in the long run,'' says Gopal Agrawal, head, equity, Mirae Asset 
Global Investments. "Since they are less risky than small and mid-caps, money first comes to the large-cap space during the early stages of recovery,'' he says. 
    The net asset values (NAVs) of most diversified mid-cap and small-cap ori
ented funds — that have given a staggering 150% to 186% returns since March 9, 2009, the beginning of the current market rally — are still quoting below their previous highs. NAVs of many top performing funds of the past year are 8.7% to 32.6% lower than the peaks hit in January 2008 when sensex breached the 21k-mark for the first time, analysis shows. 
    However, large-cap funds have come up with a better show. Though they are yet to recover fully from the market meltdown of late 2008, more than 15 of these funds have posted 3% to 9% returns. Incidentally, NAVs of many large-cap oriented funds are now at a 52-week high, data with Value Research, a firm
that tracks MFs, shows. 
    Despite their recent stellar performance mid-cap and small-cap stocks, which have surged 130% and 101%, respectively, in the past year (till April 23), are still a long way off from recouping their losses. While the BSE-100 index is 17.5% short of its January 2008 high, the small-cap and mid-cap indices are a good 30.8% and 26.5% lower than their previous peaks. Large-cap stocks have also fallen at a smaller pace than their peers in the small and mid-cap space during the market meltdown.


Maruti’s Q4 profit up 170% to Rs 657 crore

Higher Sales, Cost Cuts Boost Auto Major's Margins, FY10 Net Rises 105% To Rs 2,498 Cr

New Delhi: Maruti Suzuki posted a 105% growth in net profit in the last financial year to Rs 2,498 crore, against Rs 1,219 crore in 2008-09, on higher sales and cost reduction steps. 

    The company said net profit in the fourth quarter of last fiscal was up 170% at Rs 656.5 crore from Rs 243 crore in the same quarter of 2008-09. Maruti's sales volume in the period stood at 287,422 units against 236,638 a year earlier, growing by 21%. Net sales revenue in the quarter grew 30% to Rs 8,235 crore from Rs 6,308 crore in the corresponding quarter. 
    The company, majority owned by Japan's Suzuki Motors, said net sales revenue in the fiscal grew 42% at Rs 28,958 crore against Rs 20,358 crore in the previous fiscal. Maruti's sales volume last year topped the million-mark for the first time as its grew 28.5% over the 7.92 lakh units sold in 2008-09. 
    The company's operating profit margin, or earnings before interest, tax, depreciation and amortisation expressed as a percentage of sales, stood at 13.7% against 9% in 2008-09. "Though our net sales increased, our profit was impacted to some extent by increase in raw material cost, cost of new model launches, 
cost of upgrade to Bharat Stage-4 emission norms and a decline in euro,'' Maruti MD Shinzo Nakanishi said. 
    Maruti CFO Ajay Seth said higher sales volumes and favourable foreign exchange rates helped the company realise higher profits. "The profit margins grew as our total overhead costs shrunk, material costs came down and we had price adjustment on the cars,'' Seth said. 
    The company plans to spend Rs 1,700 crore to double 
the capacity at its Manesar plant to 550,000 units during the next two years. Maruti's Gurgaon factory can produce 700,000 units annually. 
    Nakanishi said Maruti expects lower double-digit sales growth in 2010/11. "The market still continues to look good and we are positive. Last year, middle to lower cities, rural segment and government employee segments helped our sales. This year, we think the top cities will respond well," he said.


Monday, April 19, 2010

Indian cos on top with bottom-of-pyramid plan

M O N DAY S P EC I A L

Mumbai: When R K Krishna Kumar, vice-chairman of Indian Hotels Company which runs the Taj chain of hotels, brought on board management guru C K Prahalad in the early 2000s, he had little idea that a whole new category of budget hotels was in the works. 

    What Krishna Kumar, who was on first-name terms with Prahalad, was sure about was that the renowned corporate strategy thinker would come up with something novel for the group. Code-named 'Wildfire', the concept of the project was to provide a comfortable stay for guests at an affordable cost. The culmination of the idea was budget hotel Ginger, priced below Rs 1,000 for a double room, launched in Bangalore in 2004. 
    "With a large number of Indian managers travelling extensively, their choice of stay was restricted to either expensive hotels or lodges. We conducted a research to find out the basic expectation of most travellers. With the help of CK, we designed Ginger, which was born out of his bottom of the pyramid vision,'' said Krishna Kumar. 
    The Ginger chain has now expanded to 21 hotels. The Paul and Ruth McCracken Distinguished University Professor of Strategy at the Stephen M Ross School 
of Business, University of Michigan, CK Prahalad (CK) passed away on Saturday, after a brief illness. 
    Apart from his association with Ginger, CK also conducted management programmes for the Tata group's senior management. In fact, following the success of Ginger, and these programmes the Tatas brought on several products at the lower end of the market, such as the Nano, Tata Swach (water filter), Tata Housing (low-cost residential apartments), among others. 
    Ravi Kant, vice chairman of Tata Motors, who met CK for the first time nine years ago, said that CK knew which business 
model would work best for India. The Nano is a great example. "It (Nano) exemplifies and confirms his concept (business at the lower end of the market). CK's take has always been that corporates should design products around a certain price rather than the other way around,'' he said. 
    "His path-breaking work on value of goods and services at the lowest income level transformed corporate thinking and has resulted in some iconic products,'' said Jamshyd Godrej, chairman, Godrej & Boyce Man
ufacturing Co. 
    This was especially true for FMCG major H i n d u s t a n 
Unilever (HUL), where CK was an active independent director. He was also a member of the audit committee and remuneration committee of HUL. 
    For HUL, the lessons were immensely helpful. The company developed a soap bar with a coating on five sides to make it waterproof and ensure a longer life of the product and minimum wastage. This was meant to help the bottom of the pyramid (BOP) consumers in India in terms of savings on cost and water, which is an area of concern. 
    CK's BOP propagation in
duced HUL to go in for huge product sampling to generate volumes. "Given the nature of the Indian market, he always encouraged us to go for sampling targeted at the bottom-end of the market as one encounters fewer barriers as compared to the West. The sampling was done across personal care and food categories,'' MK Sharma, former vice chairman of HUL told TOI. 
    CK's BOP theory came as a revalidation for CavinKare too - the pioneers of low-unit price sachets in shampoos. "Although he (CK) was on the board of a rival company (Hindustan Unilever), we at CavinKare held him in the highest regard. In fact, I would often quote him in our internal strategy meetings,'' said C K Ranganathan, CMD of CavinKare. 
    "It was in the mid-80s that corporate strategy as a management subject emerged and new and great ideas about strategy started filtering in. One such was CK's BOP idea which is very effective for the Indian market,'' said Ramanuj Majumdar, professor, marketing, IIM Calcutta. "The cellphone revolution and the sachet revolution in India validates his theories,'' Majumdar added.


Monday, April 12, 2010

Input costs to eat into Nifty cos’ profits

But Earnings Growth May Be Best In 7 Quarters

METALS producer Sterlite Industries and the nation's largest carmaker, Maruti Suzuki, will lead a 23% jump in quarterly earnings for Nifty companies, the highest in seven quarters, as the two companies benefited from soaring commodity prices and cheap loan-driven sales. 

    But profitability of the companies may plunge to the lowest in 16 quarters due to a steep jump in raw material prices. 
    The ET Intelligence Group's March quarter forecast covers 36 companies in the S&P CNX Nifty index and excludes banks and oil companies because of their peculiarities. 
    Export-dependent software producers and drugmakers may bear the brunt of rupee appreciation against the dollar. And the tariff war would hurt telecom companies. 

    The end of the quarter rally in bonds and a surge in loans could save the day for banks, which were feared to make paper losses in treasuries when government bond yields rose to as high as 8%. Bond prices and yields move in opposite direction. 
    "Lower base effect and volume uptick are likely to be the key drivers," Sandeep Gupta of Edelweiss Securities wrote in his forecast report. "Oil marketing companies are likely to register an erratic dip in core profits, primarily due to a lower allocation of subsidies." 
    The growth in earnings is partly amplified by a poor show in the same quarter the previous year, when consumption and production fell due to the global credit crisis. The economy and the market have revived since. 
    Aggregate revenue of the Nifty sample is expected to rise 14% from a year earlier. 

MIXED SHOW 
Aggregate revenues: Likely to grow by 14% from a year earlier. In the December quarter, it stood at 17% 
Net Profit: Expected to rise by 23%, similar to the previous quarter's performance 
Operating Profitability: May shrink by 290 basis points to 22.7% from a year earlier. 
THE WINNERS: Automobiles, metals, cement, capital goods 
THE LOSERS: Rupee rise may hit exportdependent software and pharma cos
    The cut-throat tariff war may hurt telcos 
Future Tense: The possibility of higher rates in the backdrop of rising inflation could translate into lower future growth and earnings upgrades 
Inflation looms over cos' future show 
THIS is above the 17% growth in the December 2009 quarter. Growth in net profit is likely to be stronger at 23% on top of the similar growth rate in the previous quarter. 
    The earnings growth outlook and cheap money across the globe led to a rally in stocks taking them to a near twoyear high. But the optimism may slowly turn, given the rate at which prices are rising, with just a few gainers from it, as most manufacturers are unable to pass on the rise to consumers. 
    India Inc's operating profitability may drop due to higher prices of steel, copper and aluminium. Operating margin of the Nifty sample is expected to shrink by 290 basis points to 22.7% from a year earlier, the lowest in 16 quarters. A basis point is 0.01 percentage point. 
    Prices of most commodities were at their lows a year ago. Aluminium, zinc and copper on the London Metal Exchange had crashed by more than half on a year-on-year basis in the March 2009 quarter. The subsequent quarters witnessed a gradual increase in the prices, helping these commodities regain most of the lost ground by the end of March 2010. 

    The top performers during the March quarter are likely to be automobiles, metals, cement and capital goods. For a detailed commentary, see the quarterly coverage in this week's Investor's Guide. 
    Cement and capital goods would derive their growth, mainly from buoyant underlying demand from user-industries. 
    Profits of Grasim and Jaiprakash Associates may be higher due to improved realisations on a cement per tonne basis and higher sales. This is despite a 25% rise in international prices of coal, a major raw material, coupled with higher freight costs due to the recent increase in diesel prices. 
    Steel companies may witness a moderate growth in absence of steep rise in prices of final products. Aluminium maker Hindalco and Sterlite, which manufactures copper, zinc, and aluminium, would be the major beneficiaries of higher commodity prices. 
    Explorers Oil & Natural Gas Corp and Cairn may reap profits from the two-thirds jump in crude prices. Reliance Industries, an integrated refining company, would be able to report higher refining margins due to increasing product prices. 

    An appreciation of over 4% in the rupee against the dollar could dent profitability of Infosys Technologies and Ranbaxy Laboratories. 
    Reliance Communications and Bharti Airtel are expected to post sluggish numbers for a third straight quarter due to the ongoing tariff war. Idea Cellular, the third-largest listed telco, may be an exception, with a 21% sequential growth in net profit backed by double-digit sales growth. State-owned Bharat Heavy Electricals, and ABB, the power equipment maker, may report a jump in sales and profits, as their order books swelled and due to lower operating expenses. 
    The good show by companies in the March quarter may be overshadowed by concerns over the rising inflation, which may lead to higher interest rates, hence lower future growth, and less earnings upgrades. 
    The Society of Indian Automobile Manufacturers is forecasting sales growth to fall by half this fiscal from 26% last year, as prices and interest costs are rising. 
    "We do not expect meaningful upgrades over the next quarter," Citigroup said in a note. 
    ranjit.shinde@timesgroup.com 

Sunday, April 11, 2010

Stocks to take a hit if ban stays

STOCKS of Indian companies may take a knock in the near term unless the government steps in swiftly to resolve the stand-off between the two regulators—Sebi and Irda—on the issue of unit-linked insurance plans (Ulips), as a large chunk of funds raised through such plans is invested in equities. 

    Brokers and fund managers expect share prices to fall on Monday considering the growing flow of insurance money into the stock markets. Local insurance firms invested close to Rs 62,000 crore in equities in 2009-10, of which Ulips accounted for roughly Rs 50,000 crore, according to insurance industry estimates. These are gross estimates and do not take into account shares sold by insurance companies. Data has to be collated from industry estimates as Sebi does not provide a break-up of insurance firms' investments in equities. 
    A sizeable chunk of the premium collected by insurance firms through Ulips is invested in stocks, unlike traditional insurance plans, which predominantly invest in government securities and debt. State-owned Life Insurance Corporation (LIC) is the largest domestic institutional investor in equities. 
LIC pumped in Rs 50k cr last fiscal 
LIC had pumped in close to Rs 50,000 crore during the last fiscal. LIC has also been one of the biggest investors in initial public offerings (IPOs) and follow-on offerings (FPOs) of staterun firms, but the money invested in such issues has been primarily from its term plans. So to that extent, the bar on Ulips should not impact its plans of investing in upcoming IPOs. 
    Ulips are one of the major sources of money in stock markets, says Asit Kumar Nayak, senior manager, insurance product and branch sales, ICRA Online, an information services and database provider. "A ban on Ulips could cause a liquidity crisis. Such a move could suck out a lot of money from the markets," he added. 
    Over the last couple of years, Indian insurance firms have quietly emerged as a force comparable to foreign portfolio investors, or FIIs, which have a significant influence on the course of the markets here, given the funds at their disposal. During January-March 2009, for instance, Indian insurance firms pumped $2.5 billion into the market, even as foreign funds were dumping stocks across the board, and cushioned the fall to an extent. In all of calendar year 2009, FIIs invested close to $17 billion. "Sebi's ban will impact insurance companies and the market alike," said the chief investment officer of a private insurance company. "We will have no money to invest in equities if we don't sell Ulips. The problem will be worse if we are met with unforeseen redemption. In the absence of fresh investments, we'll be forced to sell stocks to repay investors," he added. 
    A booming stock market and fat commissions for distributors helped boost Ulip sales in the past few years. Insurance firm officials said Ulip investments accounted for 85-90% of the asset base of private insurers. The insurance industry collected Rs 2,20,000 crore last fiscal (2009-10) by way of premium alone. Stateowned LIC accounted for a significant chunk, mopping up Rs 1,35,000 crore. Industry officials said Ulips formed 65% of overall investment products sold by LIC. 
    Ulips are long-term insurancecum-investment products that allow investors to have stock market view-based exposure on debt and equity assets.

Strong rupee brings cheer to FMCG sector

HIGH ON CURRENCY

Mumbai: The strengthening of Indian rupee against the dollar could bring some cheer to fast-moving consumer goods (FMCG) companies which are challenged by fading benefits of lower raw material costs. 

    Prices of raw materials like palm oil, copra, LAB (linear alkyl benzene) and HDPE (high-density polyethylene), which are key ingredients of daily use items like soap, detergent and hair oil, are already showing signs of firming. 
    Palm oil prices, for instance, went up by 34% in the fourth quarter of fiscal year 2010 compared to the corresponding quarter of the previous fiscal. 
The prices of HDPE, which goes into packaging and thus is much in demand in the FMCG sector, rose by around 40% during the period. 
    A rising rupee would negate the impact of cost increases on imported raw materials like palm oil, which is used in making toilet soaps. 
    "Rupee has appreciated by about 5% in recent past. The benefits would accrue to us on our vegetable oil imports and would mitigate, to some extent, the impact of increased inflation on packaging materials and freight. Since rupee has seen movement in both directions in the last six months, the benefit of appreciating rupee can't be counted as sustainable 
savings,'' said Dalip Sehgal, managing director, Godrej Consumer Products. 
    Milind Sarwate, chief, finance, HR & strategy, Marico, 
said the company does not depend significantly on imports and, hence, the rising rupee does not necessarily lead to lower costs. "Most Indian FMCG companies are now MNCs. Therefore, fluctuations in rupee can affect them in several ways, which were not earlier salient. For example, if rupee strengthens, the financial results of overseas subsidiaries of Indian MNCs lose their lustre when consolidated with the Indian parent company's results,'' said Sarwate. 
    The rupee rose to its 19-month high on Friday (April 9) at 44.29/dollar as against 44.46 on April 8. The rise is mainly on account of FII inflows and a weak dollar overseas. 

    According to industry analysts, price increases, irrespective of rising input costs, in the highly competitive space of soaps and detergents are a difficult proposition for companies focusing on increasing their volumes instead. "We believe maintaining profitability and decent profit growth will be the key challenge for most FMCG companies,'' a Sharekhan Research report said. 
    According to the report, fading raw material cost benefits, lower sales realisation (due to the price cuts implemented to improve sales volumes) and heavy spends towards advertisement would limit the margin expansion for companies like HUL, GCPL, Marico.


HC tells Sebi to probe DLF’s IPO disclosure

New Delhi: The Delhi High Court has directed Sebi to probe real estate giant DLF for alleged mis-statement in its red herring prospectus while launching its IPO in 2007. 

    The court passed the order after it was alleged by a person that DLF had intentionally made a false statement that it had no association with Sudipti Estates, one of its subsidiary companies, against which a criminal case was filed for duping him Rs 31 crore. 
    "A direction is issued to the Sebi to undertake an investigation into the complaints made by the petitioner," Justice S Muralidhar said, adding that the probe would be completed in three months. AGENCIES

3G to boost telecom consulting biz

UK Co Buys BDA Connect's India Ops Auctions To Hurt Cos Hit By Tariff War

Shalini Singh | TNN 


New Delhi: The 3G/BWA auctions and the resultant commercial activity that will be generated in India — the world's fastest growing telecom market — has stirred up expansion and M&A activity in the telecom consulting space with London-based Analysys Mason acquiring BDA Connect's India business. 
    This is a strong signal that the next two years will see hectic rearrangement of India's competitive landscape in the telecom space. Analysys Mason is learnt to have some of the largest telcos at its clients, including those invested in India and others that are planning to enter India. 

    The size of the telecom management and strategy consulting business in India is estimated at roughly $100 million with an over 25% growth rate. This growth rate is expected to accelerate as a result of fresh financial and commercial activity generated through the 3G auctions. Each telecom firm works closely with more than one consulting company for a variety of their internal requirements and many are being used as advisors in the current 3G spectrum auctions. 
    Analysys Mason delivers strategy advice, operations support, and market intelligence worldwide to leading commercial and public-sector organisations in telecom, IT and media. The company employs over 250 people worldwide, with offices in Cambridge, Dubai, Dublin, Edin
burgh, Madrid, Manchester, Milan, Paris, Singapore and Washington. 
    Analysys Mason is acquiring the BDA India team, which comprises 16 professionals with significant experience in strategy consulting in telecom and technology. The team has been working closely with international carriers, original equipment manufacturers (OEMs) and value-added service (VAS) companies on market entry and growth strategy, and also has serious engagement with FICCI and CII. 
    The acquisition gives Analysys Mason an entry to the India market and also significantly enhances its capability to increase its footprint across Asia. For BDA India, it brings Analysys Mason's expertise on issues like realising the potential of broadband to India at this critical point in the market's development.

    When contacted, Kunal Bajaj, MD, BDA India, confirmed the deal but declined to reveal the acquisition value. Bajaj will take on the role of director, India, at Analysys Mason. 
    Apart from this, Ernst & Young recently brought in a new Partner from IBM to head telecom strategy, while IBM is scouting for a new telecom consulting and operations head.It is learnt that both PWC & KPMG are expanding their teams and strength in the telecom space at senior levels. Arpita Agarwal, who recently moved from PwC to KPMG as a Partner, is a visible testimonial of this activity. 
    The sheer size of the telecom industry together with the 3G auctions and the consolidation that is expected to follow points to the need for telcos to increasingly seek external help on a variety of issues, says Agarwal. 

A New Spectrum Of Opportunities 

tThe size of the telecom management and strategy consulting business in India is estimated at roughly $100 million with an over 25% growth rate 
tTelecom firms work closely with more than one consulting company for internal requirements 
tMany consultancy firms have been hired as advisors in the current 3G spectrum auctions


Thursday, April 8, 2010

SAIL gets govt nod for 10% divestment

Centre Sets Mop-Up Target Of Rs 16,000 Cr

New Delhi: Steelmaker SAIL is likely to be the first public sector undertaking to tap the capital market in 2010-11 after the government on Thursday cleared a proposal for disinvesting 10% of its share in the company which will simultaneously issue an equivalent fresh equity to mobilise an aggregate of Rs 16,000 crore in two tranches. 

    As part of the proposal approved by the Cabinet Committee on Economic Affairs (CCEA), SAIL will raise an additional 10% of the paid-up equity and the government, on its part, will disinvest 10% of its holding. "This will be done in two tranches. In each tranche, there will a 5% FPO (follow-on public offer) and 5% sale of government equity,'' home minister P Chidambaram told reporters after the CCEA meeting. 
    At present price levels, it is expected that SAIL will get an additional capital of Rs 8,000 crore, while the government will also get Rs 8,000 crore. SAIL shares dropped 7% on Thursday to close at Rs 237. The government has set a target of raising Rs 
40,000 crore this fiscal by disinvesting its equity in leading state-run companies. 
    "The net result will be, after both tranches are completed, the government's shareholding will be approximately 69%. Public shareholding will be 31%,'' Chidambaram said. As of now, public holding in the company stands at 14.2%. The proceeds from fresh issues of equity by SAIL will help in filling the resource gap for funding the steel Navratna's capital expenditure emerging from increased pressure on steel prices and diminished margins. 
    SAIL has undertaken a Rs 70,000-crore expansion programme to raise its installed 
capacity from 13.82 million tonne per annum (MTPA) to 23.46 million tonne a year. The SAIL disinvestment is in line with the policy sharing ownership of Central public sector enterprises with the public, while also raising the funds to finance its different social programmes. 
    In the last fiscal, the government had divested stake in REC, NMDC and NTPC, amid tepid response from public investors. The government had set a target of raising about Rs 40,000 crore this fiscal through disinvestment, while last year, it was Rs 25,000 crore. Other PSUs like Coal India, MMTC and EIL are also expected to follow suit. 

Strike When Iron Is Hot 
t SAIL will raise an additional 10% of the paid-up equity and the govt will disinvest 10% of its holding 
t The disinvestment will be done in two tranches. In each tranche, there will a 5% FPO and 5% sale of govt equity

 

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