Indian Economy - News & Updates - Archive

[Contrarian]

Sorry guys, India is closed today! No economic news!

 

[Neo]

Sorry guys, India is closed today! No economic news!

Grrrrrrrrrrr...:wall:

 

[Contrarian]

Back in Business LOL!

India invites foreign investment in mining

DAVOS: Minister of State for Commerce and Industry Ashwini Kumar has invited global mining companies to invest in his country, while pointing out that a liberal policy had been formulated to facilitate the flow of overseas capital in the sector.

Addressing the chief executives of some of the largest mining companies of the world at the annual meeting of the World Economic Forum (WEF) here, Kumar said a long-term iron ore exploration and export policy was also being framed to draw investments.

The participants at the meeting included top officials of Alcoa of the US, Alcan of Canada, Arcelor-Mittal Steel Company and Anglo-American of Britain, Severstal of Russia, Africa Rainbow Minerals of South Africa and the De Beers Group.

Kumar also underlined the importance of formulating a comprehensive strategy for the mining industry that will factor in environmental concerns and imperatives of resettlement of displaced persons.

"Democratic governments need to be responsive to the sensitivities of the people attached to land, which was also a symbol of their identity," he said.

Kumar also had a meeting David Cameron, leader of Britain's Conservative Party, and discussed with him ways to further reinforce the ties between the two countries.

Cameron was keen to further extend educational opportunities for Indian students in Britain, apart from strengthening the role of business associations in promoting trade and investment between the two countries.

Cameron was also invited to visit New Delhi in July, which was accepted in principle, officials said.
http://timesofindia.indiatimes.com/..._investment_in_mining/articleshow/1480203.cms

 

[Contrarian]

"Bharti 'quite open' about Hutch deal"

DAVOS: Vodafone's chief executive Arun Sarin has said that Bharti Airtel is "quite open" to the fact that the British telecom major is fighting it out in Airtel's rival firm Hutch-Essar.

Vodafone has 9.9 percent stake in Bharti group's telecommunication venture and will need a nod from the company before acquiring a stake in rival Hutch-Essar.

The two companies have a non-compete clause in the agreement and Vodafone has to seek Bharti's permission before buying a stake in a rival company.

Vodafone's Indian-born chief executive, who has already had been authorized by the company board to take steps as he deems fit on the Hutch-Essar takeover bid, said he has not spoken yet on offloading stake in Bharti group's telecom venture.

"We will talk about that when the issue arises. For the moment, Sunil's told us he is quite open," Sarin told IANS on the margins of the World Economic Forum (WEF) meetings here.

"Our due diligence process is currently underway. Once we get the report, which could be any time next week, we'll be submitting a formal proposal. It will be sometime early next month," he added.

"Yes, the entry of so many players has pushed up valuations. But we're serious," said the alumnus of the Indian Institute of Technology (IIT), Kharagpur.

Sarin also said Hutch-Essar was an exciting prospect for Vodafone even if it means an aggressive bid to get a foothold in one of the fastest growing economies in the world, especially in the telecom market space.

Vodaphone has aspirations of running a telecom business in India and having some management say. But that is not available in the Bharti group. So we have no problems if they look elsewhere," Mittal had earlier told IANS who was Friday named for the Padma Bhushan award and is among the four co-chairs at the WEF's ongoing annual meeting.

He, however, said there were no official talks as yet. The board of Bharti, in fact, also appreciated the fact that Vodafone officials chose to abstain from participating at their board meeting in view of their plans for in a rival firm.

Anil Ambani's Reliance Communications (RCOM), the Hinduja group and Russia's Altimo are among those interested in acquiring the 67 percent stake that the Hong Kong-based Hutchison Whampoa has in Hutch-Essar.

Prakash P. Hinduja, who met with this IANS correspondent on the sidelines of the WEF meeting, said his group was keen on Hutch-Essar. "We are serious. That's why we entered the fray," Hinduja said, adding the due diligence process had started.

Incidentally, the Hindujas had exited Hutch-Essar last June by selling their 5.11 percent-stake for $450 million.

However, all eyes are now on the board meet of Hutchison Telecom International Ltd (HTIL) that is scheduled to take place on Jan 29 in Hong-Kong.

 

[Contrarian]

EPFO may stick to 8.5% interest rate

NEW DELHI: At a time when interest rates are rising in the money market, Employees Provident Fund Organisation (EPFO) is in a dilemma to cut the interest rate by half a percentage point to 8% for 2006-07 as against 8.5% it offered in 2005-06 to its subscribers.

The central board of trustee of EPFO is meeting on Saturday to decide on the interest rates for the current fiscal.

A highly placed source in the government said the finance ministry might suggest some way out so that the organisation could maintain the return at 8.5% for 2006-07.

Trade union members affiliated with the Left parties will oppose any move to cut the interest rate as it would affect the interest of the workers.

In fact, on a December 7 2006 meeting the board could not arrive at any decision because of the opposition from the Left parties.

In 2006-07, the fund is likely to earn around Rs 7000 crore on its investments. But, if it announces a return of 8.5% of the corpus, there would be a shortfall of around Rs 450 crore. But, at 8% the fund would be left with a small surplus of around Rs 10 crore.

Most of the EPF is invested in government securities and special deposits schemes (SDS) where the interest rate is low at 8%.

The source said that the facility of SDS for fresh investment is already discontinued but it still has large sums which were deposited earlier.

If the government revises the rates on SDS as the market interest rates have gone up, the board can pay the same interest rate as it paid last year.

However, at the same time, a section in the government argues against giving any support to the fund as most of such support would be cornered by the richer employees.

EPFO has around 4 crore subscribers. Though majority — around 80% of them — are small employees having total deposits of less than Rs 20,000 the major portion — up to over 80% — of the total corpus of around Rs 88,000 crore comes from the large employees, who are contributing voluntarily to the fund and having deposits of over Rs 1 lakh.

They argue that any support from the government would be distributed evenly on the corpus and would mainly benefit the large contributors.

But an official said a cut in the rate would be an unpopular move which the government would desist to take in a year when many states are going for elections.

The board of trustee on Saturday would also firm up plan to invest a part of its corpus in the equity as the government has already allowed it.

However, trade union representatives are opposing the move as it is risky and might affect the retirement benefit to the employees.

Government argues that in long run stock market is giving better returns than investments in debt.

 

[Contrarian]

RIL to start retail rollout in NCR from Monday

NEW DELHI: Reliance industries of Mukesh Ambani group will start rolling out its retail outlets in the national capital region from Monday.

The group, which is planning to invest Rs 25,000 crore in the sector will start with nine locations in Ghaziabad, Noida, Faridabad and Gurgaon and within six months will ramp it up to 600 outlets in the region including Delhi.

The group has already started its retail food business in Chennai, Jaipur and Hyderabad. It is planning to set up retail chain in all the tier I and II cities in the country.

Retail sector in India is abuzz with the activities as foreign giants like Walmart and Carrefour are entering the market.

Walmart has already joined hands with Bharati group to enter the retail business in the country.

The Reliance Industries has recently bought land at 18 locations in Delhi for Rs 1,500 crore. It is learnt that the company is waiting for the New Delhi master plan to be notified as it would allow it to open similar stores at 30 locations in Delhi.

A senior realty consultant who is working with the company in buying land in the region, said the company has already bought space but at present it can't open the outlets as it is not allowed under the existing market plan.

In a recent DDA auctions, the company was bullish and bid aggressively to buy plots in areas like Dwarka, Vikas Puri and Vasant Kunj, where it cornered a number of plots to run its retail outlets.

In Dwarka, it offered a price of Rs 8.50 lakh per square meter to buy a plot of the size of 850 sq feet for Rs 75 crore.

The company has already bought over one million sq feet commercial space in the region. It is learnt that the company is planning to buy around 6 million sq feet space in the next six months.

A real estate consultant said the company is open to buy any property in Delhi with a permitted area of construction of over 2,500 sq feet.

It is also buying space at shopping malls for the purpose. Sources said it will also open outlets at Shipra Mall in Indirapuram in Ghaziabad.

To start with, the company will sell vegetables and other eatables from these stores. But soon it will diversify into consumer durables, IT hardware and apparel.

The company is planning to sell goods for both middle class and upper middle class people.

Since the company will source materials from primary sources, it would save commissions paid at various levels.

Therefore, it would be able to sell its product at highly competitive prices. For vegetables and eatables, it has started two distribution centers at Kaundali and Arti Nagar, which would act as group's private mandi where they would buy agricultural items directly from farmers.

For apparel and consumer durables, the company is contracting the manufacturing companies directly so that it could save on the dealers' commission.
-----------------------------

So finally it starts!

 

[Contrarian]

Consultancies sue Ranbaxy for charges

MUMBAI: Ranbaxy Laboratories, India's largest pharmaceutical company, has been sued for not paying up consultancy charges for a deal that led to a successful business in the Japanese market.

Mumbai-based firm India Advisory Partners (IAP), a boutique consultancy firm and Hideaki Furuse, a Japanaese consultant, have filed a complaint in the Mumbai high court accusing the pharma major of dishonouring its obligations.

The complaint claims that both IAP and Furuse were instrumental in introducing Ranbaxy to their current partners in the Japanese market Nippon Chemiphar Co and Nihon Pharmaceutical Industry Co.

As per the engagement letter signed in May 2002, Ranbaxy was to pay IAP a certain percentage of any equity investment and sales of any Ranbaxy products through a Japanese partner.

Though Ranbaxy paid a fee after it picked up a 10% initially in Nihon Pharmaceutical, it discontinued further payments despite several requests.

A Ranbaxy spokesperson said that they had still not heard of the complaint and could not comment on the issue.

IAPs Kai Taraporevala says without their consultancy help given between January and April 2002, Ranbaxy could have never known about these small companies in Japan.

In September 2002, Ranbaxy signed business alliance agreement and stock purchase and shareholders agreement with Nippon Chemiphar and Nihon Pharmaceutical. The deal was for an initial 10% stake in Nihon Pharmaceutical with an option to increase upwards over time.

In due course, Ranbaxy increased the stake to 50% and introduced several drugs of its drugs through the joint venture.

Taraporevala claims that Ranbaxy owes IAP and Furuse nearly Rs 2 crore in consultancy charges and they have been refusing to pay it despite several requests. An ex-employee who quit the company a year ago admitted to differences with IAP.

He said that the problem was left unattended as several executives responsible for the agreement with IAP to start the Japanese business notably senior Asia Pacific and legal head shave since left the company.

 

[Contrarian]

Tatas plan 1000 MW power plant in Chhattisgarh

MUMBAI: Tata Power company will set up a 1000 MW coal fired mega power plant in Chhattisgarh with an estimated investment of Rs 5,000 crore.

Tata Power has signed an MoU with the government of Chhattisgarh to this effect, the company informed the Bombay Stock Exchange.

"This agreement signifies Tata Power's commitment towards the state of Chhattisgarh for bridging the power requirements of the state and the country,"Tata Power managing director Prasad Menon said. "With this MoU, Tata Power has taken another step towards its growth plans and increasing its national footprint," he added.

The Rs 5,000 crore power project will require around 1200-1300 acres of land. On the basis of preliminary feasibility study, a suitable site in the Raigarh district of Chhattisgarh has been identified.

Tata Power is now in the process of carrying out a detailed feasibility study for the project.

 

[Contrarian]

Jindal Stainless to invest Rs 5,000 cr in Orissa plant

NEW DELHI: Stainless steel manufacturer Jindal Stainless Ltd (JSL) will invest an additional Rs 5,000 crore in its Orissa plant to double its production capacity to 1.5 million tonnes annually.

The company is also looking at the possibility of tapping the market through an initial public issue to part fund the expansion plans.

"We are planning to make fresh investments of around Rs 5,000 crore in our Jajpur plant in Orissa, which would double our overall production capacity,"JSL chief executive officer and managing director VS Jain said.

"The project would be funded mainly through internal accruals but in case need arises we would also tap the market,"Jain added further.

The expansion plan, expected to be completed in 36 months, would take Jindal Stainless Ltd's overall production capacity to 1.5 million tonnes per annum from the present 0.7 million tonne.

The company presently operates through its three plants in Hisar, Visakhapatnam and Jajpur. JSL expects Hisar plant's capacity to touch 0.6 million tonne this year while the Jajpur plant is presently operating at around 0.1 million tonne per annum.

JSL has already invested Rs 2,300 crore in setting up a greenfield facility in Jajpur. The first phase of investment, scheduled to be completed this year, was made to install basic input requirements including a ferro-chrome unit and a captive power plant at the facility.

"The investment would be made in addition to the Rs 2,300 crore invested in the first phase. We plan to have an installed capacity of around 0.8 million tonnes in Jajpur by the end of Phase II,"Jain said.

The company was looking at having an overall capacity of 1.6 million tonnes at Jajpur and would start a third phase of expansion at the plant to achieve 1.6 million tonnes target after completion of the second phase, Jain added.

"The third phase of expansion at the Jajpur unit depends entirely on the market demand. We are looking at doubling the plant's capacity to 1.6 million tonnes per annum in the third phase,"he added further.

JSL had, in 2004, acquired Maspion Steel in Indonesia to strengthen its presence in the international market.

 

[Contrarian]

UBS buys StanC Mutual Fund

MUMBAI: It's final. After months of speculation that had thrown up a slew of possible suitors, Swiss banking giant UBS will buy Standard Chartered Mutual Fund. The European bank, best known for its expertise in managing private wealth in true Swiss banking tradition of extreme secrecy, will pay around Rs 600 crore to buy out the fund house, industry sources said.

The deal, which was finalised in London recently, is somewhat different from the recent acquisition deals in the Indian mutual fund industry. Over the last few years, most of the acquisitions were buyouts of only the assets of the fund house and not the whole mutual fund. But in the UBS-StanC MF case, the Swiss bank is buying out the entire equity in the fund house.

UBS will pay about Rs 530 crore to the promoters of the fund house, while it would also assume a liability of Rs 60 crore, at present in the books of StanC MF, sources said. Aviva, another European financial giant, was also in the race for StanC MF but had backed out, refusing to assume the liability of the fund house.

As of January end, StanC MF's assets under management were about Rs 12,628 crore. So at the current valuation of about Rs 600 crore, the price works out to about 5% of AUM. Going by industry standards, the price was a little on the higher side, industry players said.

Usually, equity fund AUMs fetch a higher price, about 2.5-3% of the AUM while debt funds are priced at about 1.5% of the AUM. Liquid and money market funds are priced lower than 1% of the AUM.

Since its inception in 2000, StanC MF was a pure-play debt fund house. It was only in 2005, that the fund house launched its first equity fund, Classic Equity Fund. Since then it has added about four pure equity schemes and an equity arbitrage fund.

For UBS, the entry into the fast growing Indian fund industry is a huge step forward. For a long time the Swiss banking giant has been trying to enter the country's banking industry but is yet to get a license from the RBI.

 

[Contrarian]

Essar delists its oil and steel arms

MUMBAI: The Ruia-controlled Essar group, on Thursday announced its decision to delist two of its companies — Essar Steel and Essar Oil. Another group company Essar Shipping is also in the process of being delisted.

The minimum floor prices for the delistings have not been disclosed.

The move is aimed at consolidating the group's holdings into Prime Holdings, a closely held Mauritius-based investment arm.

According to sources, the group has drawn up mega plans to list Prime Holdings overseas to generate funds for expanding its business globally. TOI had first reported that the Essar group was delisting in its edition dated September 7, 2006.

Essar Steel Holdings and Essar Energy Holdings, the parent companies and largest shareholders of Essar Steel and Essar Oil, have proposed to buy out the public shareholders in the two companies.

The two companies are listed on the Bombay and the National stock exchanges.

At present the promoter' stake in Essar Steel is 87% and while the corresponding figure in Essar Oil is 88%.

"The delisting of equity shares will offer more flexibility in operations and management of the com pany, greater efficiencies and provide an exit opportunity for shareholders," the group said.

Essar Steel and Essar Oil will seek their board approvals for delisting on January 29 and January 30 respectively.

Shares of both the companies rose more than 10% on the bourses. On the Bombay Stock Exchange, while Essar Oil ended at Rs 63.20, while the 52 -week high for the stock was Rs 80, reached last May.

Essar Steel, on the other hand, closed at Rs 50.15, with the 52-week high at Rs 58.85.

 

[Contrarian]

Radico mulls tie-up with Future for liquor retail

MUMBAI: The dynamics of liquor distribution is changing. With some state governments allowing alcohol products to be sold through organised retail, liquor companies are charting new business strategies.

Seizing the first mover advantage in modern trade, Radico Khaitan, the second largest spirits company, is in talks with the Future Group (owners of Big Bazaar hypermarkets) for a 50:50 joint venture for liquor retailing.

When contacted, Kishore Biyani, managing director of Pantaloon Retail India, said, "We are looking at various opportunities in the retailing space."Abhishek Khaitan, managing director of Radico Khaitan, declined to comment.

While the scope of the agreement could not be ascertained, sources said, Radico's whisky brands like 8 pm and Whytehall, Magic Moments vodka and Old Admiral rum will bag shelf space at Pantaloon's Big Bazaar and Food Bazaar outlets.

But a caveat exists — putting hard spirits on retail shelves requires regulatory approvals which are still pending.

Currently, only Karnataka allows wine and beer on retail shelves. Delhi allows beer and Maharashtra only wine. West Bengal and Andhra Pradesh are expected to follow suit.

Meanwhile, the Tata group's Star India Bazaar may look at making wine and beer available at its soon-to-be opened store in Bangalore.

A Trent executive said that the company is yet to start negotiations with any spirits firm.

Even as the companies try to strike alliances for shelf space in retail malls, some are trying to strike out on their own.

Diageo, for instance, the world's largest spirits company, is planning to open stores that will stocks its brands exclusively.

Asif Adil, managing director of Diageo India said, "Our stores will be branded after flagship Johnnie Walker and will sell the entire range of our products."The first Johnnie Walker store will be opened in suburban Mumbai shortly.

Diageo will explore leveraging its relationship with the world's largest retailer Wal-Mart in India as well.

 

[Contrarian]

Higher tax burden on shipping cos

MUMBAI: Even as the Indian shipping industry fights tooth and nail to shake off the burden of 12 different taxes, another liability just knocked at its door.

The income tax department is asking companies in the business to shell out 22.5% as TDS (tax deducted at source) on income earned by giving ships out on rent. In shipping parlance, it is called 'charter hire'.

If the department has its way, the Rs 11,000 crore industry will end up with a tax burden that runs into a few hundred crores.

Clearly, people who run the business aren't happy. "This twist will destroy the industry,"said an industry source.

From the tax department's perspective, they have simply put ships on par with 'plant and machinery' given out on rent. Hence, they argue, income earned ought to be taxed at source at 20%. Add cess and surcharges to it and the number shoots up to 22.5%.

The tax department has already turned the heat on companies like Varun Shipping, Mercator Lines and UltraTech. Unlike other kinds of tax payments, the onus of collecting TDS is on the user of the service.

So, UltraTech has already started deducting taxes on the charter hire it pays two companies—K C Maritime and Bulktainer Shipping.

Sources told TOI that notices have also been issued to oil majors like ONGC and Cairn Energy which hire ships or different offshore vessels for their exploration works.

"The highly capital intensive (shipping) industry's net profit is not even 20% of their total income,"said an official.

"The shipping industry has reached a stage where more than looking at the business opportunities, we look at the tax incidence for each and every little transaction. If all the government departments behave in the similar way, shipping in India will not be viable any longer,"said the head of a shipping company.

 

[Contrarian]

'Treated in India' catching on in West

BANGALORE: A liver transplant in the United States costs around $450,000. In India it costs $40,000. If any explanation was required to describe why the Indian medical tourism industry is flourishing, this fact will nail it.

Today Indian medical tourism market is worth $700 million and the projection is that by the year 2010 it will swell to $1 billion.

The key is it is not just the south or west Asian population that is coming here for treatment — the UK/US crowd have also realised the value of coming to India. According to estimates, out of 1.5 lakh international patients who visited India, three-fourths came from US and UK.

There are two factors contributing to this. First, the international community is confident of the quality of Indian healthcare practitioners. It is said that one out of six doctors in the US is an Indian. Second, there are huge cost benefits.

Low-cost cardiac surgery in India costs $4,000-9,000 and in the US as high as $30,000-50,000. An orthopaedic surgery costs as low as $4,500 here with a corresponding surgery in US costing $18,000.

Besides, the cost of comprehensive health check-up for a US patient in India is around $80, which in the US costs $600.

The reasons for indulging in health tours also vary from country to country. Medical tourists from the US are seeking treatment at 1/4th or even 1/8th of the cost at home. From Canada, it is often people who are frustrated by long waiting periods.

The typical UK patient is one who is not able to wait for treatment by the National Health Service and in some cases cannot afford to see a physician in private practice.

And then there are patients coming from countries like Bangladesh, Kenya and Vietnam where it is difficult to get quality treatment.

Says Wockhardt Hospitals CEO Vishal Bali, "What started as a low-cost, low-value medical care destination is today turning into a superspeciality zone.

There is a "Treated in India"brand going around."International patients are coming to India for cardiac surgery, spine correction, hip replacement and other such high value treatments. "The market is growing by 30% a year,"says Bali.

"Another reason why people fly into India for treatment is our holistic approach,"says Apollo Hospitals CEO V P Kamath. "We weave in things like yoga, aromatherapy and ayurveda into our treatment. It's a unique basket."

The majority of the clinical population here speak English and Indian surgeons have world class skills and surgical exposure too.

Another aspect that is helping Indian medical tourism is the fact that there are 50 million uninsured US citizens.

"High insurance premiums have kept a lot of people away from taking health insurance policies in the US,"says Kamath.

The health insurance sector in India, however, does not even cover 10% of the population. "But it will eventually grow.

Already the Indian health insurance market is worth Rs 5,000 crore," says Bali. The growth in health cover would be crucial for the betterment of the domestic MT market.

 

[Neo]

Only 3 per cent Indians understand economic reforms

NEW DELHI: India may be registering blistering rates of growth but only three per cent of its people understand the economic reforms being implemented and most think they have benefitted only the rich, said a survey published Friday.

“Seventy-two per cent of Indians were unaware of the economic changes that the country has been going through since 1991” when India launched market reforms, said the survey published in the Hindustan Times.

Sixty-two per cent also felt the changes in economic policy benefitted only the rich, said the poll by the New Delhi-based Centre for the Study of Developing Societies for the Hindustan Times and news channel CNN-IBN.

The survey questioned 7,681 people across 19 states of India.

It found that only 28 per cent of Indians had heard of economic reforms while “most did not have even a rough idea of the broad directions of the policy changes.”

Despite this lack of awareness of the reforms, 56 per cent said India’s economy had improved in the past decade while 46 per cent said their family’s economic situation had improved since 1991.

India liberalised its economy in 1991 when Manmohan Singh, who is now India’s prime minister, served as the country’s finance minister.

Sixteen years of reforms have seen revolutionary changes in Indian industry, with government figures showing 9.1 per cent economic growth in the first six months of 2006 led by strong manufacturing growth.

http://www.thenews.com.pk/daily_detail.asp?id=40534