India to grow 7% in ‘10: OECD

The Organisation for Economic Co-operation and Development (OECD) has in its latest report applauded the Indian economy’s resilience and has projected a growth rate of 7 per cent in 2010 and 7.5 per cent for 2011. However, it says that India’s central bank must tighten its monetary policy fairly soon to contain the rising inflation.

“Given the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based OECD said about India in its Economic Outlook report released today. OECD expects headline inflation to be at 5.4 per cent in 2010, while it expects the fiscal deficit to be at 10 per cent in 2009 and 9 per cent in 2010.

The OECD outlook is in line with finance minister Pranab Mukherjee’s recent statement that the country could expect to go back to a growth rate of 9-10 per cent in 2012-13 and a 7 per cent growth rate in 2010-11.

Source : Business Standard. 20/11/09

Indian tourists ride the slowdown

A record 10.8 million Indian tourists went on a globe trotting spree in 2008-09, the worst year of the economic slowdown, as dipping airfares and lower hotel rates made holidays cheaper. This was one million more outbound tourists than the year before.

And the numbers are still rising. “This year (2009-10), we are expecting around 10 per cent growth in the number of outbound Indian tourists,” said Ajay Kerkar, executive director, Cox & Kings (India) Ltd, a leading tour operator. He was here to talk about the company’s initial public offer (IPO) of shares.

“The cost of travel services in foreign countries came down due to recession, and overseas tour operators passed on the benefits of low cost to Indian tourists, resulting in more travellers visiting foreign tourist destinations,” Kerkar added.

Agrees Manish Sharma, managing director, Akshar Travels, a subsidiary of Ahmedabad-based Shree Akshar International. “The prices of accommodation, local transportation and hospitality services, as well as airfare, have declined in major tourist destinations such as Singapore, Europe and Malaysia, which Indian tourists, especially Gujarati people, took advantage of.”

Travel was also boosted by the fact that India was still a growing economy — though the growth rate had slowed — while many large developed countries were actually facing negative growth. “The impact of financial turmoil was relatively lower on India as compared to other destinations,” said Sharma.

For Indian tourists, after Singapore, the UAE is the second most popular travel destination, followed by the UK and the US.

Research by the World Travel & Tourism Council says the travel and tourism economy’s size will contract by 3.6 per cent in 2009, but emerging economies such as India, China and Brazil are expected to be the main engines of the travel and tourism sector’s growth.

“Generally, hoteliers in tourist destinations hike the prices during peak season. This time, they were forced to keep the rates unchanged due to recession, leading to higher inflow of tourists,” added Mahesh Budakiya, managing partner, Shakti Travels, which has been in the travel industry since 1977.

Source : Business Standard.  20/11/09

Indus Biotech to begin HIV drug trials in US

New Delhi: Pune-based Indus Biotech would be starting clinical trials for its HIV botanical drug molecule in the US soon. The company claims this antiviral has also shown promising results for the pandemic H1N1 during initial clinical trials. Indus, founded by Sunil Bhaskaran and Rajan Srinivasan in 1997, is two to three weeks away from completion of the phase-I trials for a botanical drug that the company claims could kill both H1N1 and HIV viruses.

Indus is also the first Indian company to have received an Investigational New Drug Number from the US Food and Drug Administration for a botanical anti-viral in HIV research. This permits Indus to conduct further clinical trials related to the drug in the US, the only country in the world that has clear guidelines on botanical drugs.

Once the company compiles data from its phase-I study, it would finalise with USFDA the modalities associated with the clinical trials. “Since the area is uncharted territory, we would have to debate the protocol for advanced clinical trials. If the USFDA limits the subject strength to 20-25, we would manage from our company funds. If they ask us to test on 200 to 500 subjects, we would have to raise funds through PE players, fresh or existing or other means,” Srinivasan told FE. Trials on each subject could cost between $20,000 to $30,000.

Two of company’s applications are also being reviewed by DCGI. “Post approval, the clinical trials studies for H1N1 would take five to seven months, while for HIV they would take 18 to 24 months,” said Srinivasan.

The drug, which the company estimates would cost a fraction of anti-retroviral therapy (ART), the current first-line therapy for AIDS, is expected to hit the market in two years from now. ART costs Rs 20,000 to Rs 25,000 per unit per person annually in India. “However it is difficult to comment on the cost now, which would be decided by the marketing partner to who we outlicense the drug. Once the drug is ready to be commercialised, we would start discussions with companies strong in antivirals and anti-infectives,” said Srinivasan. Saying investment in the drug is “significant”, he refused to divulge any figures.

Source : The Financial Express.  20/11/09

Sony Ericsson to close Chennai uni

CHENNAI: Even as global economic crisis is showing signs of a recovery, mobile handset maker Sony Ericsson said it plans to close four of its centres globally, including the company’s R&D centre in Chennai, which employs around 60 engineers.

When contacted by ET on Thursday , a Sony Ericsson spokesperson confirmed that his company plans to shut the Chennai centre.

“We opened a site in Chennai in 2007 to focus on entry-level phones. But, since then, we have been severely impacted by the financial situation and we’ve been unprofitable for a number of quarters . We are looking at how we can return to profitability so we have decided to focus on the mid-end to higher end phones,” Sony Ericsson’s corporate vice-president and head of global communications Aldo Liguori told ET from London.

There were no details available on whether these employees will be moved to other locations or if there were outplacement services available . Mr Liguori added that the handset maker also has a sales & marketing office in New Delhi, which will continue to be operational . Earlier, Sony Ericsson’s India office issued a statement on the back of a number of news reports which spoke about the Chennai operations shutting down.

“Sony Ericsson confirms that it is continuing its business transformation programme, as announced previously , and is making changes to its global organisation to reduce costs and increase efficiencies. The principal aim of the company is to return to profitability as soon as possible. As part of its programme that started a year ago, Sony Ericsson will phase out activities in some of its locations worldwide and plans to reduce headcount globally by 2,000 people. Sony Ericsson intends to complete its programme by mid-2010 ,” the statement read. The company has already cut nearly 500 jobs since last year as part of this restructuring.

Meanwhile, Som Mittal president of Nasscom said that Sony Ericsson’s decision is not very significant as the overall economy continues to show signs of recovery.

“Some part of this consolidation will happen all around. Some like Nokia are expanding their plant. By and large, people are increasing investment and jobs are coming back, also for laterals. So, these are not significant events,” Mr Mittal said.

Source : Economic  Times.  20/11/09

JSW, JFE team up for India play

MUMBAI: JSW Steel on Thursday announced a strategic alliance with Japan’s second-largest steelmaker JFE Steel, but markets were disappointed that the pact does not immediately involve the acquisition of an equity stake in the Indian company.

JSW, India’s third-largest steelmaker, said on Thursday that the partnership will allow it access to JFE’s technology for producing steel used in automobiles and both companies may acquire stakes in each other. Other possible tie-ups include the production of other specialty steels, procurement of raw materials in and outside India and the construction of an integrated steel plant in JSW’s West Bengal project.

JSW vice-chairman and managing director Sajjan Jindal said the financial implications of the proposed collaboration could be “immense” but not quantifiable immediately, because the exact nature of the collaborations has not been finalised. “We have constituted two task forces to arrive at final agreements. It is difficult to provide a timeframe as to when it might take place.”

Investors in India and Japan sold stocks of both firms, after it became clear that a share sale is not imminent.

On Thursday, the JSW stock slipped 0.65% to close at Rs 959.35 after reaching a 17-month high of Rs 1,039 in the morning session on BSE. Shares in JFE Holdings, promoters of JFE Steel, fell 2.9% to 2,885 yen in Tokyo. JSW has a market value of $3.9 billion and JFE $20.4 billion.

“If the money were to come into the company, then there would be an immediate benefit (in the form) of a fall in interest cost,” said Deepak Jasani, head of retail research at HDFC Securities. “Operationally, the technology transfer will take some time to show up in margin improvement,” he added. JFE Steel CEO Hajime Bada described the co-operation in the automotive segment as “the first step” of the partnership. “Through our co-operative activities, we would like to secure a local production base in India,” he said.

JSW has been going slow on its West Bengal project mainly because of funding problems. JSW plans to build a 10-million-tonne-per-year steel mill in West Bengal at an investment of Rs 11,000 crore. The alliance will supply automotive steel to the Indian units of Suzuki, Toyota, Honda and Hyundai, which are global customers of JFE, the world’s sixth-largest steelmaker.

Attempts by global steel companies to set up plants on their own in India have run into trouble. ArcelorMittal, the world’s largest steel producer, and South Korea’s Posco, announced plans more than two years ago to set up plants with capacity totaling 24 million tonne, but they are yet to get the land for the projects.

JSW joint managing director Seshagiri Rao told ET that the market for auto grade steel is growing at 7% with nearly 1.9 million tonne of steel being consumed by the sector. If other collaborations with JFE do not fructify, the Indian company will pay royalty for the procurement of automotive technology from its Japanese partner, he added.

Among the world’s low-cost steelmakers, JSW plans to raise annual capacity to 11 million tonne from 7 million tonne in two years. The $3.5-billion firm sells products in 100 countries.

 Source : Economic   Times. 20/11/09

 

Reliance ups fuel sales to Africa, cuts Europe

NEW DELHI: Giant Indian refiner Reliance exported a third more fuel during July to September versus the second quarter, with Africa racing past Europe as its No. 2 market while sales to the United States are set to rise further. Reliance’s 1.24 million barrels per day (bpd) refining complex — the world’s largest — exported 6.08 million tonnes of gasoline and diesel in the third quarter from 4.5 million tonnes in the previous quarter and 3.76 million tonnes a year ago, shipping data obtained by Reuters show.

For a table on Reliance’s fuel exports in July-September, click In the third quarter, when all units at its new 580,000-bpd refinery were commissioned, Reliance Industries nearly doubled sales to South America, followed by an 88 percent jump in exports to the US, where it aims to directly sell diesel and gasoline. Reliance’s gasoline shipments in its own account to the US and Bahamas rose 60 percent to 197,600 tonnes in the third quarter versus the second. US refiner Hess Corp, with whom the privately run Indian refiner has a term deal, received 145 percent more gasoline at 148,100 tonnes. Traders expect fuel supplies to the US to rise further as the onset of new carbon emission limits may offer Reliance an opportunity to fill the demand-supply gap. The International Energy Agency (IEA) in its latest monthly report has forecast US oil product demand to grow by 0.4 percent in 2010 from its previous estimate, compared to an expected 3.7 percent decline this year.

Reliance’s supply data largely confirms forecasts by analysts and traders on the likely flow of its fuel output, the world’s biggest one-off incremental refinery expansion since the company fired up its first plant a decade ago. “I believe Reliance has been increasing supplies in its own account to various location as some of its term lifters prefer to lift volumes from destinations other than Jamnagar port,” said a trade source. FOCUS ON HIGH GROWTH MARKETS Most of the shipments were concluded by independent trading firms who buy directly from Reliance at its Jamnagar terminal with the flexibility to sell anywhere in the world, the data show. The exports also reflect Reliance’s aim to shift from traditional markets into nearby high-growth markets, or seek a premium for its ultra-clean production in the West.

The cut in direct supplies to Europe and the Mediterranean knocked the region off Reliance’s No. 2 spot in the second quarter to No. 3. A year earlier, Europe was Reliance’s fourth-biggest market. Asia remained the fourth-largest market, as a three-quarter increase in diesel shipments outweighed a near 18 percent decline in gasoline supplies. “Asia is flushed with gas oil especially in East Asia like Korea and Japan. The shipments from Asia must have gone to Middle East or Europe… Some premium fuel matching European standards was shipped to Asia,” a trade source said. Reliance’s fuel supplies to Africa rose 57 percent in third quarter versus the second, and on an annual basis the supplies surged by 136 percent. Diesel supplies to Brazil’s Petrobras almost doubled in the quarter to 387,000 tonnes but declined 32 percent from a year ago.

Middle East, a region increasingly reliant on imports due to petro dollar-fuelled economic growth, continued to be the top buyer of Reliance’s oil products overall. Reliance’s gas oil (diesel) exports to the Middle East in the September quarter declined 17 percent from a year ago, with the region slipping to No. 2 position for the product. But shipments to Saudi Aramco, with whom the Indian refiner has a term diesel supply contract, more than doubled in the period to 464,970 tonnes. Reliance’s gasoline shipments to the Middle East rose nearly 34 percent to 823,900 tonnes in the third quarter from a year ago. This came despite the refiner not exporting directly to Iran, possibly due to Washington’s move to limit gasoline exports to put pressure on the OPEC producer for its disputed nuclear programme. Iran depends on gasoline imports because of a shortfall in refining capacity. In the third quarter of 2008, Reliance directly sold 108,800 tonnes of gasoline to Iran.

Source : Economic   Times. 20/11/09

 

Pepsico to set up 4 new plants in India for estimated Rs 700cr

NEW DELHI: Focusing on India as a rapidly growing market, US soft drinks giant Pepsico would pump in an estimated Rs 700 crore to set up four new food and beverages projects by 2012.

Just Days after its high-profile global board meeting that was hosted for the first time in the country earlier this month, Pepsico India Chairman Sanjeev Chadha said “going forward, over the next three years, certainly we will be putting up new plants.”

Chadha, who took charge as Pepsico India head three years ago, said there would be three greenfield plants on the beverages side. “On the food side, at least there would be one more plant,” he said, but did not specify the quantum of investment involved.

He said on an average it costs around USD 30 million to set up a beverages plant and around USD 50-60 million a food plant.

Going by these estimates, Pepsico, whose global operations are headed by India-born Indra Nooyi, may have to shell out around USD 150 million (Rs 700 crore)to set up these plants. The sites for the plants are yet to be finalised.

“We are in the process of searching and identifying, through a network analysis, as to where the location of these plants would be,” he added.

Since its entry in India 19 years ago, the company has invested over USD 1 billion in the country. This includes USD 600 million that is being invested.

Source : Economic   Times.  20/11/09

 

India Inc keeps its brand value intact

NEW DELHI: Shareholders of Reliance Industries have more to cheer than the 1:1 bonus issue that they approved on Tuesday. Turns out that the country’s most valued company continues to be the most valued brand as well.

The petrochemicals-to-retail conglomerate retained its No. 1 position in the India’s Most Valuable Brand 2009 (IMVB) study carried out by Brand Finance, global brand valuation firm based in London, exclusively for The Economic Times.

It was a tough year alright. Perhaps the toughest for many global corporations as the world slipped into the worst economic crisis since the 1930s, triggered by the US sub-prime crisis and the collapse of global investment bank, Lehman Brothers, late last year.

While the Indian economy, riding on strong domestic demand led by the rural areas and proactive government initiatives, mostly managed to steer clear of the global recession with a 6.5 per cent growth, most our corporates got caught in the storm, thanks to the slump in global and urban demand.

Some companies cut salaries. Others put off salary hikes. Everybody travelled economy class. And cut marketing spends.

Yes, it was a year when building brand image took the back seat. For most of the year.

Yet, there are 19 homegrown companies with a brand value of more than $1 billion each. There were 20 such firms last year, according to the Brand Finance India’s Top 50 Most Valuable (Company) Brands that using the relief-from-royalty method of brand valuation.

This method assumes that a company does not own its brand and needs to license it from a third party. The selection was made from only consumer-facing corporate brands listed on the Bombay Stock Exchange (BSE) and not holding companies such as Hindustan Unilever that own a portfolio of branded business.

In fact, the combined brand value of the top 50 companies this year was slightly higher at $67.1 billion compared to last year’s $66.8 billion.

Interestingly, the cut-off for the Top 50, which was Rs 645 crore (No 50, Gail’s brand value) has almost doubled to Rs 1,204 crore (Bharat Forge at No 50 this year).

The biggest gainers were from the manufacturing sector that largely depends on domestic demand. Thanks to automobile and steel, manufacturing ruled the list with 20 brands making it to the top 50. Notable gainers included L&T, Tata Motors, Bajaj, JSW Steel. In fact, two of the three new entrants into the top 50 list, Ashok Leyland and Bharat Forge were from the manufacturing sector.

Other companies focused on local market, and therefore less impacted by the global shocks, such as telecom operators and auto firms too improved their rankings in 2009.

The sectors that took a hit included information technology and ITeS companies that are almost completely dependent on global demand. Top IT companies Tata Consultancy Services, Wipro, Infosys Technologies and HCL Technologies all saw their brand values drop this year with global clients slashing their IT budgets and driving hard bargains with vendors.

Banking and financial services companies, particularly ICICI Bank, the largest private bank, too lost some sheen. After all, all the protagonists of the global economic crisis came from this sector.

There are nine banking and finance companies in the Top 50. While five companies represented oil & gas sector, IT, telecom and real estate/infrastructure contributed four each.

Reliance Industries saw its brand value rise 15 per cent to $7.8 billion in 2009, while the State bank of India saw its own brand value improve 30% as the global financial crisis prompted the population to migrate to state-run banks.

As many as 19 companies saw their brand values decline, with the highest fall of 56 per cent being seen in Jet Airways, followed by Ranbaxy Laboratories (51%) and Dr Reddy’s Lab (a drop of 42%).

All the real estate and infrastructure companies figured in the bottom 10 in the league table, with DLF being the topper in the pack at No 42. The country’s largest realtor lost $5 million in brand value at $330 million.

All these companies, however, can look forward to better times given the improved market conditions in the second half of 2009, both at home and abroad. In the domestic market, while rural demand is keeping its pace of growth despite poor monsoon rains, urban demands too have picked up with festival season sales besting expectations.

There are clear signs of demand revival from the global markets as well.

But it won’t be a cakewalk. The global downturn is not over and given the rising food prices, the Reserve Bank will tighten the interest rates regime sooner than later. That will separate the men from the boys—companies with ability to sail the downturn will emerge winners.

Source : Economic    Times.  20/11/09

IT companies to seek government push for defence offset contracts

MUMBAI: NASSCOM, the trade association for India’s $60-billion IT industry, plans to seek government help to ensure technology transfer from global defence majors for execution of offset contracts by Indian companies. IT companies are one of the beneficiaries of the multi-billion-dollar defence and aerospace contracts that are to be finalised over the next 12 months.

Under the offset clause, overseas suppliers that win these contracts are under obligation to do business worth 30% the contract value locally. In some contracts, such as the $10-billion contract for the procurement of 126 multi-role combat aircraft, the offset is much higher at 50% because of its large size.

The offset business to local providers from this contract alone will be $5 billion. Six large suppliers, Boeing, Lockheed Martin, Mirage, MiG, Eurocopter and Saab of Sweden, have been shortlisted for this contract and are currently carrying out field trials. IT providers are eyeing the opportunity in this and other such offset contracts, including in commercial offsets.

“In aerospace and defence, several countries have restrictions on transfer of these technologies. If you want to utilise the offset in design and engineering services you also need some of these technologies,” Tata Consultancy Services VP (engineering and industrial services) Regu Ayyaswamy said.

Nasscom plans to make a representation to the government pushing for bilateral agreements to simplify technology transfer processes. The Export Administration Regulations (EAR) of the US controls many dual-use items, that have both commercial and military use, while the International Traffic in Arm Regulations (ITAR) controls the export of defence-related articles and services.

 

Mr Ayyaswamy said the industry was hoping that bilateral agreements could cover at least the transfer of identified technologies. The aerospace and defence sectors are among the largest revenue earners within engineering services business for TCS and Infosys Technologies.

“We see business from this industry as stable with visibility of revenues,” said Infosys Technologies VP and head of product lifecycle and engineering solutions Valmeeka Nathan.

It is also a key focus area for Mahindra Satyam, which has over 3,000 people working for it in engineering services. Aerospace major EADS is one of the top customers for Mahindra Satyam in engineering services.

Source : Economic  Times. 20/11/09

 

Tech companies find it difficult to crack deals in US, Europe

BANGALORE: For India’s top tech firms seeking to take an inorganic growth route for expanding in the US and European markets, successful acquisitions are becoming harder to come by, as potential targets demand high valuations and cultural barriers in several countries act as a bottleneck.

Over the past two years, tech firms including Wipro, Infosys, Patni and several others have had discussions with potential targets such as Globant of Argentina, Ciber in the US and IDS Scheer of Germany. While IDS Scheer was acquired by Software AG earlier this year, both Globant and Ciber decided to discontinue their dialogues with potential acquirers.

“It is not a surprise to me that we are an acquisition target as we do have a very unique model which makes us attractive, but also it is very difficult to acquire,” said Tony Hadzi, executive vice- president & president (custom solutions division) of Ciber. “However, we do not want to be acquired and not aiming to be acquired. We have solicitations, but we just turned them down.”

With around $1.2 billion in revenues, and customers such as American Express, AT&T, General Motors and Abott Laboratories, Ciber makes a very lucrative acquisition target for an Indian company seeking to establish a stronger US footprint.

“We did explore Ciber, but valuations apart from other issues did not help our efforts,” said an executive at an Indian tech firm involved with M&A initiatives. He requested anonymity because he is not authorised to discuss such transactions with media.

Meanwhile, smaller service providers in countries of Brazil, Argentina and Mexico, such as Globant, which counts Adidas, LinkedIn and Citi among its top customer, have also been approached by several Indian tech firms, including Patni. But, the dialogues could not conclude.

Globant, with around $100 million in revenues, can help an Indian tech firm gain near shore advantage and serve top US customers better. “We wanted to explore M&A opportunities with Globant, but the valuation being demanded was almost $400-500 million at $4,100 million revenues. We were not ready for a transaction at such premium,” said a senior executive at one of the tech firms, which had evaluated Globant for a potential acquisition.

In Germany, where Infosys, Wipro and several other Indian tech firms are pursuing acquisition targets, the companies are wary about offshoring of jobs. Experts such as Peter Schumacher of European strategy consulting firm Value Leadership say acquisitions are an emotional issue in Europe, which many Indian tech firm are not realising.

“European companies and employees are concerned that Indian companies will fire employees in Europe and shift work offshore,” he said. Citing an example he said NIIT’s acquisition of German services firm AD Solutions in 2002 provides some learning for Indian tech firms. “While they started with much enthusiasm, they failed to acquire any offshoring business during the following 12 months period. They also ran into significant integration problems, which they had completely underestimated,” Mr Schumacher added.

Within just 15 months the German unit saw its headcount drop 26% at significant cost. “With proper preparation, NIIT should have anticipated most of these problems prior to the acquisition,” he added.

Source : Economic    Times.  20/11/09