April-May 2013

AUTOMOBILES AND AUTO ANCILLIARIES

TANMAY AGARWAL
Special Focus

India Car Lease business to pick up Societe Generale's ALD Automotive
26 May, Mumbai According to ALD Automotive, the car lease business is expected to register huge growth in the upcoming years. Besides decreasing fixed costs, car leasing is also expected to particularly useful be for SMEs. Demand is expected to pick up in the pharmaceutical sector where increasingly companies are giving cars to their medical representatives to increase sale conversions and increase employee retention. Also agricultural companies are expected to increase lease cars usage as they can no longer rely on public buses.

India-EU FTA Agreement: Likely to cause more problems for the reeling sector
The India EU FTA Agreement has run into major hurdles as far as the automobiles are concerned. It is understood that the EU has been pushing the Indian side for import duty cuts. This has resulted in Indian Automakers being up in arms as they feel that cheap imports may further impact their already lackluster sales. Leading players like Maruti have been actively lobbying the government to keep this sector out of the purview of the agreement as it believes that it will result in flooding of the market by European cars. Industry Talk

Daimler to develop India ops as export hub
24 May, Chennai Daimler India Commercial Vehicles- will be exporting locally assembled trucks from the conglomerate's Mitsubishi Fuso range in 15 markets in Asia and Africa. The first export market will be Sri Lanka in June 2013. DICV also launched the local production of its new product range under the Fuso brand on Thursday at its Oragadam plant, near Chennai.

Automakers under tremendous pressure; Fall in inflation and monsoons expected to bring relief

May was the seventh consecutive month of declining sales in the Indian Auto Industry. Although automakers have tried to bring back customers by extended Escorts to launch heavy duty tractors from warranties, freebies and discounts, they have been unable to get positive results. This has resulted in 2015 automakers cutting production across vehicle ranges 8 May, New Delhi and giving rise to fear of job losses. Escorts Ltd announced plans to focus on developing The recent fall of Rupee against Dollar and the increase premium tractors by 2015. It plans to develop end to in price for crude oil will result in bigger hurdles to the end solutions for the entire agriculture process - from Indian automobile industry in the coming months. The the time of sowing the seeds to harvest - to bring good news is that inflation is coming down and the more value to the farmers. The tractor in development timely arrival of monsoons is expected to set off tractor will combine software technology with high-end sales. machinery. Strategist Voice

VW sets up unit to export parts of Vento, Polo
18 April, Pune Volkswagen has set up a unit to manufacture and package parts of the Vento and Polo for export at its Pune plant. Announcing the inauguration of the parts and components Business Unit, the company said it has invested around Rs 56 crore to develop it.

Glimmer of hope remains in sector

the

Honda announces plans to export diesel components from India
23 April, New Delhi Honda Cars India Ltd announced plans to export diesel engine components to Asian and European markets from India. It also announced a new plant in Rajasthan worth Rs 2500 crores It is expected to double the capacity of the company in India to 240,000 units. Buoyed by the success of Amaze, despite the de-regulation of diesel the company expects the demand for diesel cars to continue.

The Indian Automobile sector is going through some tough times. Sales of four wheelers seem to be holding up but that is primarily driven by Sports Utility Vehicle sales. Two wheelers are also not doing well, which indicates the low demand conditions in the overall economy. Low industrial growth in India is indicated by the massive drop in commercial vehicle sales, although LCV is doing better. In midst of slowing domestic economy, auto companies have been reliant on exports, however the components industry is dependent on imports and the precipitous drop in value of rupee may have an impact here.

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April-May 2013

AVIATION

VASUDEV HEMACHANDRAN
Special Focus

Indigo increases market share over that of its rivals
20 May, New Delhi Indigo extended its market share from 27.4% in March to 29.8% in April. The airline has improved its load factor from 79% in March to 83.8% in April. Load factor of Spice Jet, Jet Air and Air India have declined over the same period. Indigo achieved an on time performance of 95.6% while Air India and Spice Jet managed 90.9% and 86.2%. This clearly suggests the ability of Indigo to gain mileage over its competitors by maintaining superior operating standards.

Unbundling of airline services gives industry a new revenue stream
The government’s decision to unbundle airline services allows airlines to charge extra for window seats, seats in rows with more leg space, excess baggage, carrying special equipment etc. This would help the airlines to improve their revenues without addition to costs thus improving their margins. The industry would be able to achieve higher revenue per seat compared to the previous case. In the current scenario, there is no possibility for reduction in base fare which was the response the government expected as consumers were expected to be charged less due to them not availing of certain airline services. Industry Talk

Etihad Airways to pick up 24% stake in Jet Airways
25 April, Mumbai Etihad would pick up a 24% stake in Jet Airways in a deal worth $379 million. It would also buy majority stake in Jet Privilege, the frequent flier program for $150 million. $70 million would be paid for landing rights that Jet has at Heathrow airport. Jet would also get access to the Etihad’s global network and also improve profitability of the airline. The significant equity infusion would help the airline to increase its fleet to meet future requirements.

Indigo will face tough competition from other low-cost carriers: CAPA
The Centre for Asia Pacific Aviation (CAPA) predicted increasing competition to Indigo by other low cost carriers due to increased focus on strengthening the domestic networks. This would result in more competition in the routes where Indigo had a headstart. The increase in FDI has resulted in some airlines getting more funds to improve its operations and also resulted in the entry of low cost carriers such as Air Asia. In the medium term scenario, the low cost carrier space is set to witness intense competition. Strategist Voice

Air India’s Dreamliners start flying again
15May, New Delhi The dreamliner (Boeing 787) of Air India has started flying again on domestic and International routes. It is using the soon to be delivered dreamliners to operate on newer international routes. It would replace the older fleet of Boeing B-777’s. The use of the dreamliner would reduce costs for the airline and improve profit margins as the dreamliner offers fuel efficiency of upto 20%.

Government plans to split AAI for more efficient operation
05 May, New Delhi The civil aviation ministry plans to split the authority into two agencies for the better functioning of the organization. One agency would look after the infrastructure aspects of the airport such as terminal development and improvement of runways. The other agency would look after the technological aspects of the airport such as air traffic navigation systems. This is a structure followed in many countries and would result in better focus on the infrastructure and technological aspects of the airport.

Challenging times for the Aviation sector
The unbundling of the airline services gives the industry another revenue generating avenue. The increased competition would hamper the industry’s ability to raise fares. They would have to focus on ensuring high load factors. The exit of Kingfisher has resulted in improved load factors for the other players but entry of players such as Air Asia, fleet expansion of other airlines would result in addition to existing supply thus affecting the load factor and also the pricing power of the existing airlines. The industry hopes for policy action from government to reduce the fuel costs, which would improve profitability.

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April-May 2013

BFSI

SYED FAHD IQBAL
Special Focus

Vikram Pandit set to lead JM Financial’s Banking Bid
16 May, Mumbai
Citigroup’s ex-CEO Vikram Pandit looks set for another innings in the Banking Industry should JM Financial be selected by RBI for a Banking License when it selects the final list of winners in India’s third round of issuance of private Banking Licenses. Vikram Pandit, who along with his business partner Hari Aiyar has acquired a stake in JM Financial is proposed to be nominated as non- executive chairman of both the proposed bank as well as the NBFC ‘JM Financial’. The NBFC is banking on Vikram’s experience and reputation to secure a Banking License, hoping for a repeat of what happened in 2003-04 when Yes Bank managed to secure Banking License based on the strong background of its promoters.

Debate on Unified regulator for HFCs
The Recent comments by SBI Chairman Mr. Pratip Chaudhary about having a single regulator for all Home Loans has brought into focus the issue of multiple regulations in India which govern the Financial sector. Currently all Housing Finance Companies (HFCs) in India are regulated by the National Housing Bank (NHB) while RBI is the regulator for Banks. Arguments could be made about benefits, if any a uniform regulator would bring to the financial sector, and this issue is likely remain highly debated in the future. Industry Talk

Chit Fund Scam Hits Investors
21April, Kolkata
Chit Fund Investors in West Bengal were duped of crores when the Saradha group chit fund scheme collapsed. The Saradha group has interests in different business segments and the collapse of the scheme could have caused a loss of thousands of crores to investors. Experts are pointing at deficiencies in the Chit Fund Act, 1982 one of the reasons this scam could not be prevented, and are calling for an overhauling of the existing financial regulations in India.

Rural Bank norms may make the going difficult for new Banks
The Rural Bank norms which are part of the requirements of new banking license may make the going tough for winners of India’s third round of issue of Private Banking Licenses. RBI norms require the License winners to open 25% of their Branches in unbanked areas with population of less than 10,000. This would pose problems for new incumbents going by the experience of current private players as well as by the fact that the candidates for Banking License do not have much of a presence in the rural areas. This would cast serious doubts on the business viability of such a provision, but would anyways be helpful towards RBI’s goal of Financial Inclusion. Strategist Voice

Cobra Post Sting Hits PSU Banks
6 May, New Delhi
After hitting the Private Banks the Cobra Post Sting has hit the PSU Banks as well. According to the second leg of the sting operation as many as 23 public and private banks are involved in money laundering by willingly helping customers evade rules and launder money. The Sting mentions banks such as SBI, Punjab National Bank, Canara Bank, Allahabad Bank and Yes Bank. As per the sting this was achieved through overlooking and ignoring KYC norms, as well as through different financial products and services such as virtual products. The Cobra Post Sting has served only to re-iterate the need of strong regulations, since the current laws and regulations do not appear to be a deterrent to those willing to bend and ignore rules and regulations.

New Provisioning Norms to Benefit India’s Banking Sector
The new provisioning norms unveiled by the RBI for the Indian Banks promise to greatly benefit India’s banking sector in the long run. Recently the RBI has also changed the way banks treat stressed assets as well as how provisioning is done for them. While opponents of this plan may say that implementing these norms at a time when the Indian economy is slowing down is counter- productive to economic growth, in the long run it would lead to greater stability in India’s Financial System and would lead to a more sustainable growth by preventing any crisis in India’s Banking and Financial Industry.

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April-May 2013

CONSUMER GOODS AND RETAIL
Special Focus

VINEET GUPTA

FMCG biggies such as Cadbury, HUL, ITC, P&G offer big discounts to push premium products on slowing demand
10 April, New Delhi FMCG giants have launched discounts from 10-70% on high-value items in the past two weeks as they try to push premium products amid slowing demand. It's after several quarters (apart from festive seasons) that big discounts are coming to packaged consumer products such as chocolates, soaps, detergents and food with such intensity. While most FMCG players increased prices in 2011, there were hardly any price changes last year. Industry experts believe that promotions and discounts have accelerated because of a combination of slowdown and aggressive competitors coming in.

IKEA’s Rs 105 billion Indian Entry
IKEA has been given the go-ahead by the government to set up home furnishing stores. The Rs 10,500 crore, 20year long investment will see 10 home-ware stores coming up under the Swedish furniture major’s brand name. This is the biggest ever FDI proposal in single brand retail since reforms by the central government last year and could prove to be a shot in the arm for the economy which has seen FDI decline by 38% in the past fiscal year despite reforms to ease the entry of foreign players into the market. Industry Talk

Philips looks to up personal care products assembly in India

Volatility and Uncertainty: The New Normal

13 May, New Delhi Consumer durables maker Philips India on Monday said it is In Unilever’s sustainable living plan progress report, its looking to increase local production of personal care CEO Paul Polman has stated that the volatility of the products in the country starting with assembly of its hair commodity markets and significant rise in costs coupled dryers from Himachal Pradesh. The company started with the threat of a ‘fiscal cliff’ have dented consumer producing a few models of the item at Baddi under a contract confidence. He has further stated that sluggish growth manufacturing agreement. This is a gradual shift towards has been anticipated for the developed market. more localization by Philips. But this would also depend on For long term sustainability in such an uncertain atmosphere, the direct concern of the citizens has to be domestic sales of the product. taken into account. The message from the chief of the world’s largest FMCG company seems to be clear. Adaptation and concern for ITC pips Hindustan Unilever to become the environment has to be the route for long term India's leading branded food and success. beverages company Strategist Voice 22 May, Mumbai ITC, with brand portfolio consisting Sunfeast biscuits and FMCG major takes an e-commerce sip Bingo chips, has posted branded food sales of over 4,600 crore in 2012-13, a 24% growth over the previous year. With the e-tailing expected to grow more than On the other hand, HUL, which owns Knorr soup and hundredfold in the next nine years to reach a value of $76 Lipton tea, reported sales of 4,480 crore from its food billion by 2021, many brick-and mortar businesses have and beverages business for 2012-13 while declaring its joined the e-commerce bandwagon. Though many eannual results thus giving a shot in the arm to YC grocery stores have come up over the last year, none of Deveshwar's ambition of making the cigarette maker the FMCG majors have initiated a standalone portal to sell India's largest FMCG firm. their wares in India. Major FMCG firm Coca Cola India has piloted an online store for home delivery of all its products in an attempt to tap the burgeoning e-commerce market. The objective of this initiative is to take advantage of the rapid growth of e-commerce and provide consumers an added avenue of choosing and ordering our beverages. This is a step which is in keeping with Coca-Cola India's efforts of being within easy reach of the consumers.

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April-May 2013

HR
Special Focus

GARIMA CHIB

Critical thinking, problem solving more significant than college major, says study
18 April, New York According to a press release 74 percent of business and nonprofit leaders recommend young individuals to equip themselves with intercultural skills, ethical judgment, and a sophisticated understanding of the diversity of our society and of any successful business or organization irrespective of their careers. More than 80 percent of those surveyed say they want more emphasis on five key areas including: critical thinking, complex problem solving, written and oral communication, and applied knowledge in real-world settings.

Engaging the workforce is the top priority for HR in 2013
In the 2013 Global Assessment Trends Report, it was found that performance management, workforce planning/talent analytics and training and development rounded out the top five priorities for HR professionals this year. These priorities reflect the continuing importance, in an increasingly competitive global economy, of maximising the contribution of existing employees and leveraging their experience of the business. Other key priorities for 2013 that were indicated included succession planning, career development and external hiring. Industry Talk

20% salary hike for top management of ICICI Bank
25 May, New Delhi ICICI Bank, India's largest private sector bank, has proposed a pay hike of over 20% to its top management team just months before issue of new bank licenses to corporate houses by the Reserve Bank of India. The Board of Directors have rewarded Chanda Kochhar, the managing director and chief executive offer of the bank with a 20.75% salary hike to Rs 5.12 crore in 2013. Other directors have also got pay hikes of over 20%.

Labour Shortage to go up by 65 % by next decade: Survey
With the workforce moving from the traditional construction and real estate sectors to service industry like banking, telecom, IT and ITeS, the shortage of labour is expected to go up by 65 per cent in the next 10years. According to a report titled 'Indian Construction Sector The Great Leap Forward' by Synergy Property Development Services, this shortage in the construction sector will drive the industry to adopt mechanisation and also project management.

Is HR aware of the Google Glass?
29 April, New York Google Glass may very well be the next smart phone or Facebook—in other words, the next creation to redefine our concepts of privacy rights, workplace productivity, and communications etiquette. Glass consists of a small, Wi-Fi-enabled module that is attached to an otherwise ordinary pair of eyeglasses. The module contains a 5-megapixel camera and is capable of capturing and either storing or transmitting audio and video recordings of the wearer’s activities and experiences. Employers must be concerned about dissemination of trade secrets, confidential documents, and other protected workplace correspondence, and such exposure may not even be malicious or intentional. It will only be a matter of time until we read the first viral social media story of an embarrassed Google Glass user who, through user error or absentmindedness, accidentally records and broadcasts his or her own private activities.

Strategist Voice

HR analytics: Choice or Option?
Human behavior is the mediator between business strategy and outcomes. Both HR and corporate strategy have the same goal in mind: achieving competitive advantage. But even the right talent doing the right things is not enough to produce competitive advantage. Treating HR as resource also raises objections. Resource simply denotes something that is measurable. Of course not all human performance activity is measurable. Also information asymmetry is decreasing day by day which changes the definition of competitive advantage. In this case people become most valuable investments. And they require the best analytics which we have got to align the their strength with the organization’s goal.

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April-May 2013

IT, TELECOM AND MEDIA
Special Focus

L R KRISHNAN

GroupM, Optimystix “Mash (it) Up”
13 May, Mumbai
GroupM, the media agency announced its alliance with Optimystix Entertainment's O4 Digital Media in launching a brand solutions company called MashUp. This new company would offer online-only ads, infomercials and branded content. Optimystix, which has been doing content-based shows on various television channels for 13 years, would be creating content. Group M is expected to extend its online offering and also back it with metrics and measurement.

Which business model to work with?
Waterfall or agile, managed services or billing per hour, complete service or a tinge of product ownership, IT industry today is negotiating a lot on all fronts to develop a sustainable model for engagement and weather the economic down turn. Experts are predicting that a model with lesser employee engagement and more ownership on offerings is what IT companies are moving towards. A diversified profile is getting lot of importance across varied geography and business vertical for lesser dependency. With Indian companies acquiring companies overseas (Wipro acquiring Opera and Promax), time is not far when the Indian IT does the IBM way. Industry Talk

TRAI to recommend on national roaming
23 May, New Delhi
Indian Telecom regulator TRAI completed the consultation phase on nation-wide free roaming plan and is expected to give its recommendations by midJune, confirmed by TRAI Chairman Rahul Khullar. Industry sources indicate that free national roaming will be through special tariff vouchers to customers. But it will bring roaming prices down uniformly as a first step. National Telecom Policy of 2012 aimed to abolish roaming charges which will allow mobile phone subscribers continue using the same number across regions in the country without paying extra charges for services outside their telecom circle .

Snapshot: Indian Telecom Sector
The overall look of the telecom sector results reflects its failure in all fronts. The total telecom subscribers in India declined from 937m to 895m in the last quarter, implying a Q-on-Q decline by 4.50%. This reflects a Y-onY decline of 3.35%. The overall density in India has declined from 77.04 to 73.34 in the last quarter. The total subscriptions in Urban Areas decreased from 595m to 556m, and Urban density declined from 161 to 150. Rural subscription decreased from 342m to 338m, and Rural density also saw a slight decline from 40 to 39. Share of subscription in Rural areas out of total subscription increased from 36.5% to 38%. Strategist Voice

Media liberalization: A reality
29 May, New York
Intel’s dream to enter the mobile segment comes true via a major reorganization that includes creation of new device units and the acquisition of the mobile GPS-chips division of ST-Ericsson. ST-Ericsson is originally a JV between ST Microelectronics and Ericsson, which as a consequence of this acquisition, is in the verge of shutting down. Financial terms of the acquisition were not disclosed although ST-Ericsson noted the deal will reduce their cash needs by about $90 million through funds from the sale and not having to spend money on restructuring.

Mahindra Satyam and Tech Mahindra to merge: Andhra High Court
The Andhra Pradesh High court has given its green signal towards merger of Mahindra Satyam and Tech Mahindra, which would create the fifth largest IT company in India (2.4 billion US dollars). With it, stocks of both companies appreciated. However, the legal issues with Satyam would still follow the merged company. Overall, it is a welcome move for both the companies, while Satyam would look to regain its status it had before the accounts scam, Tech Mahindra would look forward to rub shoulders with the bigger players. However the complete deal would take some more time as currently a nod is required from the High court and settle an appeal from the Raju family, founder of Satyam. Mahindra Satyam’s CEO C.P Gurnani would lead the merged entity.

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April-May 2013

OIL AND GAS
Special Focus

HIMANSHU ARORA

Fire break out at BPCL refinery
31 May, Mumbai A fire broke out at Numaligarh refinery of BPCL on early Friday. Crude unit caught fire and all the downstream units were shut down. Fire was soon bought under control. Only gasoline unit, which is separated from the other units, was functioning. Company is assessing the damage due to sudden fire, but thanks to the large inventory, it is able to meet the demand.

Improving refinery margins and reducing subsidies boosting investors sentiments
State run oil & gas companies outperformed their private counterparts in the fourth quarter of last financial year. Various positive steps, including increase in diesel prices, reducing gas subsidies, taken by government boosted investors sentiments. Such steps would benefit state run companies, including ONGC and OIL. Companies like IOCL and BPCL are likely to perform well on the account of improving refinery margins.

Iran is offering insurance to Indian refiners to spur oil sales
25 May, New Delhi Iran has started offering insurance to Indian refiners to boost its crude sales, to counter a fall in revenues hit by western sanctions. American and European sanctions are aimed at choking the flow of money into Iran and forcing Tehran to negotiate curbing its controversial nuclear program. These sanctions have forced refiners in India, Iran’s second largest oil buyer, to reduce imports because Indian insurers have said they can no longer cover refineries that process Iranian crude. Iran has also offered to ship gas to India in liquefied form via Oman, as they do not have the technology to liquefy the same.

Industry Talk

Govt. considering freeing oil and gas prices
The government is considering freeing prices of oil and natural gas drilled locally from any kind of state control. This step is to be taken to attract foreign investments. While state-owned refiners are free to sell petrol at market rates, diesel and natural gas prices are still controlled by the state. A panel headed by Rangarajan has recommended benchmarking the gas prices to global prices, to boost production by private players including Reliance Industries.

India eyeing Tajikistan for oil and gas
17 April, New Delhi With severe economic sanctions against Iran by western countries, hitting its oil procurement, India is in talks with Tajikistan to import oil to meet its energy deficiency. India has decided to buy the oil from the best available source and refused to lay down a quota for the same. It has maintained that it would continue to buy oil from vital supplier Iran even though there has been a recent decline in oil import from the Islamic country.

Strategist Voice

Is revival on the cards for the Indian power sector
For 16 months since January 2012, there hadn’t been a single private equity investment in Indian power utilities that use conventional fuel such as coal and gas to generate electricity, so hope flickered in April on the likelihood that JP Morgan Asset Management may buy a stakes in Diligent Power Pvt. Ltd. Diligent Power may get $150 million for selling the stake to the US-based money manager. The company is developing coal-based generation capacity of 6,400 megawatts (MW), which includes a 1,200MW project in Chhattisgarh and a 1,320MW plant in Madhya Pradesh. The size of the stake it may sell couldn’t be ascertained.

Myanmar invites bids for 30 offshore oil, gas blocks
11 April, New Delhi Myanmar said it would open bidding in June for the exploration and development of 11 shallow and 19 deep-sea oil and gas blocks, in only the second bidding round since the easing of US sanctions against the gasrich country. Stiff competition is expected for the 30 offshore blocks. The bidding round would be the third opportunity for companies to enter the country’s oil and gas sector since 2011.

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April-May 2013

PHARMACEUTICALS AND HEALTHCARE faces $500 million U.S.
Special Focus

HARSH VARDHAN

Ranbaxy Penalty

14 May, New Delhi Ranbaxy USA Inc, a subsidiary of Ranbaxy Labs, pleaded guilty to charges relating to the manufacturing and distribution of adulterated drugs made at its two facilities in India. Company has agreed to pay $500 million in fines and penalties for selling adulterated drugs. This represents the largest financial penalty against a generic drug company for violations of the Federal Food, Drug and Cosmetic Act, The problems came to light when a whistleblower filed a federal lawsuit in Maryland in 2007. Whistleblower Dinesh Thakur, a former Ranbaxy executive is entitled to receive $49 million for bringing this incidence to light. The company may have settled the charges in US but back home the problems have just begun. Hospitals like Jaslok and Apollo have issued advisory against Ranbaxy drugs and temporarily suspended their sale. A PIL has been filed in the Supreme court against the company and the Central Drug Standard Control Organization. The health ministry has now woken up and asked the DCGI to examine all the dossiers and drug applications on the basis of which approvals had been granted to Ranbaxy in the past. But detection of unacceptable manufacturing practices followed by Ranbaxy has made the US authorities somewhat suspicious of entire Indian drug manufacturing.

Chinese firms call for easing of norms to promote bilateral trade
India has been the top buyer of API from China in the recent years, accounting for about 15 per cent of total export share. Shi Shengyi, Secretary of the Board of Directors and official spokesperson of Sinopharm in a recent interview said, Chinese firms faced no big regulatory hurdles for exports to India, however several Chinese players wanted India to be more `open-minded’ and promote the bilateral trade between the two neighbours. Bo Hui, vice-president of Dawnrays Pharmaceutical (Holdings) Limited says, the Government should ease the norms, if not allowing incentives. India is the most important market for Chinese manufacturers and the government should not go for any anti-import or harsh laws to discourage the foreign players. Chinese exporters are concerned about weakening of rupee against dollar and that it is affecting their profitability. Industry Talk

Commerce Ministry Eyes Foreign Markets To Increase Exports
Commerce ministry has identified countries across Latin America and Africa to ink collaborative efforts with them. Ministry believes that these markets have huge potential which till now have been untapped by the Indian companies and assured that all the steps are being taken by the government to sensitize the industry about the same. The ministry is also planning to set up common warehouse facilities in these and other foreign countries so that small and medium scale drug makers can cut down on their expenses, as one of the difficulties faced by the SMEs was huge expenditure on using warehouse facilities abroad. The first overseas warehouse, expected to be ready in a couple of months, will give 75 per cent, 50 per cent and 33 per cent subsidies for three years respectively. Through these steps ministry also wants to expedite the process of supporting African countries in delivering better healthcare services by providing high quality affordable medicines. At present, India plays a major role in exporting anti-malarial, anti-TB, anti-cancer drugs and other lifesaving drugs at a far more affordable rate to the cash crunched African countries. Strategist Voice

Venus Remedies Ltd receives gold medal for best innovation of 2013
6 May, New Delhi Venus Remedies Limited has received Gold Medal from DST-Lockheed Martin India Innovation Growth Programme – 2013 for its drug, Elores. For the award around 1500 technologies were adjudged under various parameters like novelty, innovativeness, technical strength and commercialization potential by a team of experts from Stanford Business School, US, IC2 University of Texas, Austin, US, Lockheed Martin foundation in collaboration with DST under Indo-US joint science and technology innovation programme, 2013. Elores is a novel antibiotic adjuvant entity (AAE) that targets bacterial resistance mechanisms. It not only kills resistant pathogens but also prevents the spread of resistance. Venus is aiming a revenue of around Rs 500 Cr from Elores.

API industry in India to achieve high growth
1 May, Bangalore Active pharmaceutical ingredient (API) industry in India which constitutes around 50% of Rs. 112,000 crore Indian pharma market is likely to benefit as market dynamics undergoes a major change. USFDA and Europe union have introduced a number of new regulations in API industry in 2013. Also s a number of patent expire, a significant opportunity exists for the suppliers of APIs to manufacturers of generic drugs. As per ICRA report, companies in API industry are shifting focus on improving core competencies and access to novel technologies.

Progress of CRAMS industry in India
Contract research and manufacturing services (CRAMS) pertains to outsourcing research services/ manufacturing products to low-cost providers with world-class standards. CRAMS industry over the last five years has been contributing close to eight per cent to the total Indian pharmaceutical business. Factors like a vast expanse of specialty hospitals with state-of-the-art facilities diverse population and gene pool; a combination of diseases characteristic of developing and the developed countries is expected to propel the CRAMS industry to grow at a CAGR of over of 42.2 %.

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April-May 2013

POWER AND UTILITIES
Special Focus

PRANJAL SINGH

Andhra Pradesh hikes power tariff by 15%
1 April, Hyderabad Andhra Pradesh has increased its electricity tariff by an average of 15% for next financial year. Tariff has been increased for customers of all categories: Domestic, Commercial and Industrial. Tariff hike has been approved by the Andhra Pradesh Electricity Regulatory Commission. Andhra Pradesh is one of the eight states which have given nod for financial restructuring plan. Under FRP scheme 50% of total short term outstanding loans of distribution companies will be taken by State government and rest 50 % will be restructured by lenders which are mainly banks. As a result of FRP tariff is expected to rise in upcoming years also, as it is an essential part of the scheme.

Advance Super Critical Power Plant: BHEL-NTPC-IGCAR for efficient power production
Driven by the government’s National Mission for Technology, the Advanced Ultra Super Critical (AUSC) project, which could cost well over Rs 6,000 crore, will be put up by a joint venture of BHEL, NTPC and the Indira Gandhi Centre for Atomic Research (IGCAR).The BHEL-NTPC-IGCAR combination will set up R&D project at Dadri complex of NTPC and will work at pressure levels of 310 Bar and temperature of 710 degrees Celsius. This is very high on both counts — comparatively; conventional super-critical projects in India operate at about 250 Bar and 590 degrees Celsius. Industry Talk

PFC bails out UPPCL for outstanding power purchase liability
7 April, Lucknow PFC has bailed out UPPCL with Rs1558 loan package in order to clear its power purchase liability till March 2012. Bailout decision has been taken in the scenario of possible default by Uttar Pradesh Power Corporation Limited on its electricity Dues. The loan will be a part of Financial Restructuring package worked out by centre for ailing power distribution companies. Out of total payments 90% was used to clear the dues of private companies and 10% was used for outstanding payment of Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited. Uttar Pradesh is one of the few states which have approved the FRP scheme for state distribution companies.

Subsidies vital for promoting green energy: Dr. Manmohan Singh
Financing of green energy is one of the crucial issues for promoting expansion of clean energy, said Prime Minister Manmohan Singh. He said investments in green energy were subject to technological, commercial and regulatory risks. For the moment, green energy was not viable without subsidy or regulatory incentives, he said, adding that investors obviously needed assurance that these incentives would continue. He also said market forces alone would not provide sufficient financing unless the risks of policy change were appropriately addressed. He also added that India proposes to double its renewable capacity to 55,000 MW by 2017. But, the pace at which this can be expanded is constrained by the fact that green energy is more expensive than the conventional energy Strategist Voice

CERC gives approval to TATA power to raise tariff of Mundra UMPP
16 April, Delhi Central Regulator of electricity CERC has allowed Tata Power to raise tariff of its Mundra UMPP to compensate it for the increase in imported fuel cost. Tata power Ltd has received the Mundra UMPP through competitive bidding with a levied tariff of Rs 2.26. Tata power was to import coal from Indonesia for Mundra UMPP, but due to change in regulation in Indonesia price of imported coal has increased which has increased the power production cost at Mundra UMPP. All units of Power plant have been commissioned and it has entered a PPA with Gujarat, Rajasthan, Punjab, Maharashtra and Haryana.

Reforms in Distribution Sector holds the key of a healthy power sector
Electricity is one of the most essential things for a rapidly growing economy like India. It acts as a fuel for all the infrastructural growth like industries, Metros, Malls and commercial houses. For India the condition of distribution companies is not very encouraging as in most of the states these are burdened with high debts, which is mostly attributed to high losses and huge gap between ACS are ARR. With the reform initiation in various states condition of these companies is expected to be improved in upcoming future. Regular tariff hikes to reduce the ARR- ACS gap and Infrastructural improvement to reduce losses, is very essential for the revival of health of distribution sector.

Power Companies without a PPA got approval to sign FSA
31 May, Delhi Coal India board has approved signing of FSA with power producers even in the absence of long-term purchase pacts between generation companies and distribution firms, but fuel supply will start only after inking of buying agreements. The supply of coal will be restricted to the quantity required for generating electricity to meet the commitment as per PPA.

Email: strategist@mdi.ac.in

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April-May 2013

REAL ESTATE AND INFRASTRUCTURE

ABHINAV MISHRA
Special Focus

PM wants ADB to increase lending for infrastructure
5 April, Mumbai Prime minister Manmohan Singh has called for increased lending of long-term resources by the Asian Development Bank (ADB) to boost investments in the much needed infrastructure sectors in India and the region, so as to sustain and improve growth momentum. Such institutional funding becomes necessary as governments are short of resources and the private sector is not so forthcoming in sectors that require long-gestation investments.He also suggested a pooling of investments across various countries in order to mitigate risks and a further reduction of risks through credit enhancement by the ADB. Expanding infrastructure financing and investment through the intermediation of the ADB could help lower the cost of financing long-term infrastructure projects. Regional cooperation and integration among countries in Asia and the Pacific can play a critical role in accelerating the process of economic growth, reducing poverty and economic disparities.

$12.1bn investment in infrastructure in 12th Plan

airport

The rapid expansion of air transport network and opening up of the infrastructure to private sector participation have fuelled the growth of air traffic in India and the government envisages an investment of $12.1 billion in the airport sector during the 12th Plan period. Civil aviation is a key infrastructure sector that facilitates the growth of business, seamless flow of investment, trade and tourism, with significant multiplier effects across the economy. The aviation sector is one of the prime movers for economic growth and a strategic element of employment generation, besides providing air transport for passengers and goods. Over a third of world trade by value is delivered by air and about half of international tourism is facilitated by air links. Aviation has created a global community based on the connectivity it provides. In a world of decreasing barriers to trade, the civil aviation industry remains a unique engine for innovation and technological progress, one that provides infrastructure that keeps the nation competitive. Industry Talk

Japanese loans for infrastructure projects only after green nod
15 April, Mumbai Japan which funds infrastructure projects in India through its development assistance arm, the Japanese International Cooperation Agency (JICA), says it will now sign loan agreements only when most of the land acquisition and environment clearance is done. It will also increase funding if projects are implemented on time or in a smooth way. Multiple infrastructure projects in India have stalled because of a maze of approvals, delay in environment clearances and land acquisition taking years to come through. JICA lends money to the government for projects funded through public money.

Real estate firms score corporate governance

poorly

in

Push to infra sector: 2 new ports to be set up
15 May, Mumbai In a major push to infrastructure sector, the Union Cabinet will consider a proposal to set up two big ports with an investment of Rs 16,000 crore, a step being taken after a few decades. Along with the proposal for the ports, the Cabinet will also consider a proposal of the Railway Ministry for restarting two large modern locomotive factories in Madhepura and Marhowra in Bihar at an investment of about Rs 20,000 crore. The two ports, one each in West Bengal and Andhra Pradesh, will add the capacity by 100 million metric tonnes, sources said. The ports, to be operated in public-privatepartnership mode, are intended to cater to the increased import of coal and oil besides boosting local economy and jobs.

A report by BNP Paribas Securities India Pvt. Ltd on corporate governance at eight leading Indian real estate companies found that each of them performed poorly on one or more of the parameters considered for the assessment. Compensation structure, ability to retain key personnel, financial stability, pending litigation and trading in own stock were some of the criteria used to assess the management quality of Oberoi Realty Ltd, DLF Ltd, Unitech Ltd, Sobha Developers Ltd, Mahindra Lifespace Developers Ltd, Godrej Properties Ltd, Prestige Estates Projects Ltd and Phoenix Mills Ltd. India’s real estate sector has often faced criticism for poor corporate governance standards and lack of transparency. Most of the evaluated companies failed in one or the other parameters of evaluation. Strategist Voice

Real Estate Future
The future of the sector is currently dependent upon a lot of decisions due. The bright side for the sector is the active participation of government in reviving the sector by bringing in investments. The real estate regulatory bill will bring about a lot of clarity for the customers and also for the companies. This will make banks to ease the lending to the sector. The sector also needs a bigger push that just reducing the repo rate by RBI. The sector is suffering from liquidity crunch and banks are not passing the benefits of rate cuts to the sector.

Email: strategist@mdi.ac.in

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