Auto biz challenging; eye long-term profit: Mercedes-Benz

In this edition of CNBC-TV18's The Forbes India Show, Eberhard Kern, MD, Mercedes-Benz India says that the six months since he assumed charge were full of challenges such as the slump in overall auto sales and the depreciation in the rupee .

Also read: The luxury car battle: Audi's plans to stay on top

Eberhard Kern adds that fall in the value of the rupee against dollar has started to impact margins and highlights that a decision will be taken to change revise pricing by July or August.

The growth of rivals Audi and BMW do not disturb Kern who says that he remains focused on establishing a sustainable and profitable business at Mercedes-Benz India.

Below is the edited transcript of the show on CNBC-TV18

Q: Your first six months in India has been a pretty eventful — auto sales slumped to record lows, the rupee has sunk almost 9 percent in the last two months and the finance Minister paid particular attention to the luxury auto segment during the Budget. How are you faring?

A: Yes, it was quite a challenging time since I arrived in December. The past six months have not only been challenging, but fascinating as well. The tax impact was not planned and the Budget this year took us by surprise. Indian customers have to now pay more than 50 percent in taxes.

Q: How badly has the fall of rupee hurt you?

A: The euro is much more important to us than the dollar as we import most of our products, kits or parts from the euro zone. In December 2012, the euro was around 70 and we established a defensive strategy for the year after taking into consideration a probable rise of the euro to rise to 74 against the rupee. But now it is at 78-79.

This of course directly impacts our costing which involves purchasing in the euro and selling in the rupee. Our  profit margins will start to face some pressure. So far, we have been able  sustain the price level, but if the rupee continues to wobble over the next few weeks or months, we may have to re-examine our pricing as well.

Q: How long will you wait before you take a decision?

A: We will have to come to a decision latest by July-August.

Q: Your stint began when Mercedes-Benz in India lost its position at the top to rivals Audi and BMW. Was restoring the company's position one of your goals when you took over the helm in India?

A: No, there was no such goal this. Our goal is to establish a business that is sustainable and profitable and we have formulated our plans accordingly. We face competition everywhere in the world and that includes India as well. Yes, we are ambitious but we follow plans of our own.

Q: Let us talk about those plans. Will you be able to beat the competition with the launch of the A-Class?

A: We have been in this business for years. The E-Class, as you mentioned correctly, is one of our most important models today. Of the over 2,000 cars we sold in the first quarter which was 5 percent better than last year's Q1 sales, the sales of the E-Class contributed 40 percent. So it is one of our most important models.

Overall, we are the leaders in all the segments that we are present in. There are also segments in the market that we were able to develop quite successfully in the last one-to-two years such as the mid-sized luxury SUV and the small-sized luxury SUV. As we do not have any products in those segments right now, we are not able to participate in them.

Q: Why did that happen? Was it a lack of foresight or planned?

A: There are different reasons for this. In the mid-sized luxury SUV segment, we have the Mercedes-Benz GLK, but unfortunately the only model on offer is the model with the left hand drive.

We hope this will change with the successor model we plan to introduce in two year's time. Though we do not have a product in the small-sized SUV segment right now, you may recall that a few months ago at the Shanghai Motor Show we exhibited the Concept GLA.

This model had a very, very positive response in the Indian market as well. So I am quite confident that we will be able to launch this model into India in one-and-a-half year's time.

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AirAsia to start India operations later this year

Malaysian low-cost carrier AirAsia on Saturday said its Indian operations should begin later in 2013 with flights for South India and the company would also look at setting up some ancillary businesses in the country.

"Though September may be too ambitious, we are hopeful of starting Indian operations later this year with three aircraft serving South India, " AirAsia Group CEO Tony Fernandes said. The airline would expand its services to other parts of the country in the second stage, he said.

Speaking to CNBC-TV18, Tony Fernandes says that he expects fierce competition in India and adds that the low-cost carrier is not looking at Mumbai and Delhi for now. The airline is to start operations with three aircraft and will add 1 aircraft every month.

AirAsia would also look at setting up ancillary services like air travel insurance and duty-free shops in the country, said Fernandes. AirAsia has already put in place a strong leadership team for its India operations, which is a joint venture with Tatas and Telestra Tradeplace.

Former TCS chief S Ramadorai has been appointed chairman while top industry leader Ratan Tata has been named as chief adviser to the board of AirAsia India.

Besides, R Venkataraman (former executive assistant to Ratan Tata) and Bharat Vasani (chief legal counsel of the Tata Group), are among the directors on the board.

AirAsia India is a joint venture of Air Asia, Tata Sons and Arun Bhatia of Telestra Tradeplace with 49:30:21 holding. AirAsia will be represented by Tony Fernandes and Kamarudin Bin Meranu. In May, Fernandes had named Mittu Chandilya as the CEO of AirAsia India.

AirAsia is expected to bring in competitive pricing in the Indian aviation market with its "nano" airfares. These announcements had come within days after aviation minister Ajit Singh said all the issues regarding AirAsia's India applications had been resolved.

(With inputs from PTI)

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Jeep to hit Indian roads end 2013: FIAT

Italy-based Fiat group, which has tied up with US-based car maker Jeep, will launch the first model under the brand in the country during the last quarter of 2013 as a "completely built unit", a top official said on Friday.

"We will be ready in launching Jeep brand during the last quarter of this calender year.. We are aggressively working on it...,"  Fiat Group Automobiles India, president and managing director, Nagesh Basavanhalli, told reporters .

The proposed launch of Jeep was part of its - three-pronged strategy  -- focusing on products, network and brand. "We have been focusing on our three-pronged strategy. We are very proud of our products today.. The Linea has the best in class petrol engine.As part of our strategy, we will bring the Jeep at appropriate time..", he said inaugurating the company's second exclusive outlet -- Ramkay FIAT.

Noting that the group had been expanding its presence globally, he said, they have planned to have 100 dealerships by the end of this financial year.
"Today we are having about 63 active dealerships. We will get there (100 dealerships) before this year end," he said.

About the products lined up for Indian market during the next three years, he said the company had planned to launch four refreshed models under FIAT brand while four products under the Jeep and the Abarth model.

Under the Jeep brand there would be products across all the segments (compact SUV, premium SUV) he said and added that the products would be launched by 2016. The company, would initially import the Jeep models as 'completely built units' from North America and later look at increasing the localisation.

Fiat Group India has a manufacturing facility near Pune with a capacity of producing 1.60 lakh units and three lakh engines.

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Govt not to bear higher subsidy on gas-price hike: Montek

Planning Commission deputy chairman Montek Singh Alhuwalia doesn't believe that the government should bear the burden arising from the difference between input and output prices of gas.

Also read: Petrol price up by Rs 1.82/L; to cost Rs 76.90/L in Mumbai

Speaking to CNBC-TV18 at the sidelines of Network-18's Think India Dialogue, he says, "I am personally not in favour of any increase in the subsidy burden as subsidy is not a part of planned expenditure. So, it is for the finance ministry to decide that. However, I don't think there has been any specific proposal. If there is a proposal, the government will definitely take a look at it."

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CCEA clears 7.64% NFL stake sale; to rake in over Rs 125 cr

The Cabinet on Thursday cleared the proposal for 7.64-percent stake sale in National Fertilisers Ltd (NFL), which is expected to fetch around Rs 125 crore to the exchequer. "The CCEA has approved disinvestment of NFL though the offer for sale (OFS) route," sources said.

The government plans to disinvest 7.64-percent stake, or over 3.74 crore shares of NFL in the domestic market. At the current market price of Rs 33.90 apiece, the 7.64 per cent stake sale could fetch over Rs 125 crore to the exchequer. At present, the government holds 97.64 per cent stake in
NFL.

The department of disinvestment (DoD) has approached the CCEA for stake sale in the company through four merchant bankers — IDBI Capital Market Services, Avendus Capital, SBI Cap and Kotak Investment Banking — were in fray for managing the stake sale of NFL.

An inter-ministerial panel, headed by disinvestment secretary, had cleared the NFL stake-sale in May. The paid-up equity capital of the company, as on March 31, 2012, was Rs 490.58 crore. The stake-sale in NFL is part of DoD's effort to meet the minimum 10-percent public shareholding norm as stipulated by market regulator Sebi for PSUs.

The government uses the OFS route, popularly known as auction method, to divest its stake in PSUs that come in top 100 companies in terms of market capitalisation. It has already used the route to sell stake in Oil India , NTPC , NMDC and Hindustan Copper during last fiscal. The government proposes to raise Rs 40,000 crore by way of disinvestment in the current fiscal.

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HDFC Bank says got an I-T enquiry post Cobrapost expose

Following the Cobrapost expose, private sector lender HDFC Bank received an Income Tax enquiry but it was not an assessee in the case. "Yes, there was a tax enquiry and they had detailed discussions with our people concerned and the tax authorities are satisfied with our responses," bank chairman C M Vasudev told shareholders at the bank's annual general meeting here.

HDFC Bank Managing Director and Chief Executive Aditya Puri, however, clarified that the bank had appeared before the Income Tax department as a witness, and not as a tax assessee. "We have met the tax authorities. Please remember, we have not met them as a tax assessee, we have met them as a witness," he told reporters.

The Cobrapost expose purportedly showed officials of the country's top three private sector lenders -- ICICI Bank , HDFC Bank and Axis Bank -- offering services which violated the existing money laundering and `know your customer' norms. Following this, the I-T department had sent notices to all the three lenders, seeking explanation on their positions for possible tax evasion.

Answering a query regarding the impact on the business of the bank, Vasudev said, "I don't imagine that genuine sort of business should get affected," adding that only the numbers posted next year will show the results. He said the bank has a whistleblower policy in place and all the cases which come under that are seriously looked into.

Puri said the bank plans to open 300 branches on top of its over 3,000 already operating branches this year and added it takes up to three years for a branch to break-even. Around 53 per cent of its branches at present are in semi-urban and rural areas, Puri said, adding the proportion will go up this year.

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CERC seeks fresh testing of Sasan UMPP unit

Electricity regulator CERC has asked Reliance Power to carry out fresh testing of the first 660 MW unit of its 3,960 MW Sasan ultra mega power project.

The Central Electricity Regulatory Commission's order came on a petition filed by the Western Regional Load Despatch Centre (WRLDC), part of state-owned Power Grid Corp. "... we are of the view that the certificate given by the Independent Engineer for declaration of COD (Commissioning Date) for 101.38 MW cannot be sustained," the Central Electricity Regulatory Commission (CERC) said in its order dated June 20.

"Consequently, we direct that Sasan Power Ltd shall undertake fresh testing of the unit to achieve the tested capacity...," it added. When contacted, a Reliance Power spokesperson said: "The first unit of 660 MW of 4,000 MW Sasan UMPP achieved commercial operations, as certified by the Independent Engineer (IE), appointed jointly by the procurers and Sasan Power, on 30.03.2013 which was duly accepted in writing by all the 14 (fourteen) procurers".

According to him, WRLDC has no locus standi to question the commissioning date. WRLDC in its plea had sought to look into the veracity of the certificate issued by the Independent Engineer "in view of deliberate suppression and misrepresentation of the facts". WRLDC is part of Power System Operation Corp, a wholly-owned subsidiary of Power Grid.

Sasan project, located in Madhya Pradesh, is being implemented by Sasan Power Ltd. As per the CERC order, the power injected by the generating station till declaration of commissioning date by Sasan Power "shall be treated as infirm power in accordance with the regulations of the Commission".

Meanwhile, Reliance Power spokesperson said WRLDC petition was listed before CERC on 23.05.2013 for hearing on maintainability only and the hearing was accordingly confined to maintainability.

"It is surprising that CERC vide order dated 20.06.2013 chose to deal with the merits of Independent Engineer Certificate without even hearing Sasan Power or Independent Engineer," the spokesperson said.

Further, he noted that the order effectively is an ex parte order.
"WRLDC order is violative of principles of natural justice and is not tenable in law. "Sasan Power is approaching Appellate Tribunal to quash the untenable order of CERC," the spokesperson added.

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EcoSport to drive Ford's profitability in India: Singh

Joginder Singh, president, Ford India said the company is betting big on the new EcoSport to drive it to profitability in India and deliver returns on the USD 2 billion dollars, the global car company has committed to this market.

Ford has priced its new sport utility vehicle (SUV) Ecosport at a very aggressive Rs 5.59 lakhs. At this price, not only has Ford created a new entry level SUV category but it will also compete with the likes of the Maruti Dzire and the Hyundai i20.

Also Read: Ford bets on EcoSport to ride mini-SUV boom in India

The EcoSport will not be impacted by the additional excise duty on SUV, and in fact is a beneficiary of the small car duty as it is under-4 metre in length.

Singh said, we expect our customers to come from a whole variety of segments. "Existing sedan owners, people who own hatchbacks, people who own small SUVs, people who own big SUVs, they might think that this is the right size SUV for their lifestyle," he added.

Below are the excerpts of his interview with CNBC-TV18's Shereen Bhan

Q: What are your plans for India?

A: The interesting thing about India is that there are new segments emerging all the time. We are in the sub 4 metre category it is the right SUV.

What we have announced today was the icing on the cake that we were able to offer such a compelling price proposition. This is what I call a 'Dhamaka' that we have been able to combine these things so well.

Q: You have been very aggressively been able to price this product. How much of the design specifications for instance and I pick up on the point that you just made about this being sub four metres because that will ensure that you get the small car benefits, that will also ensure that you don't fall now under the governments SUV category which means you don't have to pay the higher excise duty. How much of the design specification was driven by the eventual price that you wanted to offer?

A: There is more than just a design specification. Ofcourse we have to design what the needs of the market are when we think there is a strong demand in the sub four metre category.

However, it's more than that, the reason why we have been able to offer such a great proposition to the customer. First of all we have the advantage of scale. The EcoSport product is being produced in our factory in Chennai but it will satisfy customers not only in the Indian market but also be satisfying customers in the export market as well.

The second factor in addition to the design efficiency that we have is the very satisfactory level of localization we have in this product.

We have been engaged in this localization strategy over a period of time, to make sure that we take advantage of our global suppliers that are helping Ford worldwide. They are also helping us in India in Chennai as well as in the upcoming factory in Sanand.

Q: So, who are you going to be competing against because the assumption was this is going to take on the Renault Duster which is an entirely different category and it's an entirely different price category as well. So, who do you believe is going to be your competitor?

A: It is a new space. We expect our customers to come from a whole variety of segments. So, existing sedan owners, people who own hatchbacks, people who own small SUVs, people who own big SUVs, they might think that this is the right size SUV for their lifestyle. Therefore, our draw for customers is going to be from a whole range.

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RBI eases ECB norms, paves way for low cost home projects

Moneycontrol Bureau

The Reserve Bank of India (RBI) on Monday eased fund raising norms through external commercial borrowing (ECB) route for the low cost affordable housing projects. Both housing finance companies (HFCs) and developers are the direct beneficiaries while home buyers too will enjoy their share in terms of concessional interest rates and better availablity of low cost homes.

HFCs can now mop up cheap funds to lend at concessional rates. Developers/builders too can avail such funds via ECB route and will be encouraged to promote low cost housings. Millions of low-income Indian families still struggle to buy their own homes due to lack of affordability.

Builder experience eased

"Developers/builders should have a minimum of three years experience in undertaking residential projects as against five years prescribed earlier and should have good track record in terms of quality and delivery," RBI said in a notification.

No bar for paid-up capital of HFCs

The central bank also revoked the benchmark of minimum paid-up capital of HFCs to get ECB funding. Earlier, it was "not less than Rs 50 crore" as per the latest audited balance sheet for those companies. However, the condition of the minimum net owned funds (NoF) of Rs. 300 crore for the past three financial years remains unchanged.

ECB limit extended

"The aggregate limit for ECB under the low cost affordable housing scheme is extended for the financial years 2013-14 and 2014-15 with a ceiling of USD 1 billion in each of the two years, subject to review thereafter," RBI said.

Must read: RBI creates sub-sector for housing, paves credit flow

Impact

Those steps, no doubt, will expand the reach of affordable housings. More HFCs will be able to fund such projects wherein home buyers can also get cheap credit from lenders. The relaxation on developers' experience criteria is expected to encourage more builders to get into affordable housings. Currently, the number of low cost housings is not adequate. In coming days, you can expect some activities in this residential segment.

Support to falling rupee

According to the RBI, the ECB availed of by developers and builders shall be swapped into rupees for the entire maturity on fully hedged basis. This move would bring some support to the tumbling Indian rupee against the US dollar. The conversion from (majorly) dollar to rupee will bring in some inflows giving strength to the local currency against the greenback. It had slumped to record low of 59.98/USD on June 20.

Also read: ANALYSIS: Here's how NDF factor works for rupee/dollar rate

Yardstick for affordable housing

While applying for ECBs, HFCs will have to adhere to certain prescribed norms which qualify under the scheme of affordable housings. Some of those are:

• To submit a certificate from NHB, the nodal agency, that the availment of ECB is for financing prospective owners of individual units for the low cost affordable housing;
• To ensure that cost of such individual units does not exceed Rs. 30 lakh and loan amount does not exceed Rs. 25 lakh;
• To ensure that the units financed are having maximum carpet area of 60 square metres.

saikat.das@network18online.com

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LIC gears upto achieve growth target after FM report card

Indian insurance giant Life Insurance Corporation (LIC) is gearing up for some serious business. After finance minister P Chidambaram visited LIC and expressed dissatisfaction with the PSU's performance in May, a series of internal and board meetings were held to address the problem.

Also Read: Mining minerals needed for development: Chidambaram

During the latest meeting on Saturday, the board decided to not just refurbish the existing process but also set up small 300 offices across India by end of June, reports CNBC-TV18's Manasvi Ghelani, quoting sources.

According to sources finance minister P Chidambaram visited LIC's  Mumbai office in May month and handed over a list of about 20 strategic changes to be made in the organisation to achieve a desired year-end target of about Rs 33,000 crore.

The changes include refurbishing of marketing processes, a change in the investment strategy and also changes in the products on offer. With the finance minister monitoring LIC's performance, officials at the PSU are tightening loose ends. Around 19,000 underperforming agents have been terminated in the last two months alone. At the same, one lakh fresh recruits are being trained to achieve at least 50 percent of the premium collection target by September 2013.

A series of internal meetings and board meetings were conducted in June. In the latest meeting, the members included economic affairs secretary Arvind Mayaram and financial services secretary, Rajiv Takru and a decision to open 300 mini offices across India during this week was finalised.

Current LIC chairman Thomas Mathew has confirmed that these offices are a part of LIC's growth plan to set up 1,700 branches by December.

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Mining minerals needed for development: Chidambaram

Union Finance Minister P Chidambaram today made out a strong case for mining mineral deposits such as coal and iron ore, saying these would help in the country's development.

"Some people do not want to mine mineral deposits...their attitude is that let it be there as deposits... this will not in any way help in the development of the country," he said after inaugurating a branch of Andhra Bank at Malampatti near here in his native district.

Proposed FDI cap review by Cabinet in July 3rd week: FM

He said China had achieved rapid development because its approach and attitude were conducive to development.

"But in India, there are many criticisms about development...They want coal deposits to remain as deposits.

Coal is necessary for power generation and power is essential for industrial development," the Minister said.

He said Jamshedpur would not have achieved so much development without mining iron ore deposits found there 100 years ago.

Chidambaram said since he got elected to Lok Sabha from Sivaganga in 2009, he had come to his constituency 74 times.

"This is my 74th visit... I want to score century..and visit my constituency 100 times."

He said Andhra Bank was founded in 1923 by Dr Bogharaju Pattibi Sitaramiah, who was a close friend of Mahathama Gandhi. The bank had Rs 10,000 crore deposits in Tamil Nadu and had given advances to the tune of Rs 11,800 crore.

Executive Director of the Bank S K Kalra was also present on the occasion.

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Mukesh Ambani bets on 4G broadband, but risks abound

Indian tycoon Mukesh Ambani hopes his multi-billion dollar bet on cheap high-speed wireless broadband could change the way nearly a billion of his countrymen use mobile devices from the way they do banking to watching cricket.

Also read: RComm, Reliance Jio to ink intra-city fiber pact soon

In a country where most people own a mobile phone yet lack basic Internet access, it is a risky gamble even for India's richest man. He is counting on an unproven strategy and still-developing technology in a market with very little pricing power.

Three years ago energy conglomerate Reliance Industries Ltd (RIL) won an exclusive nationwide licence to roll out 4G across India, giving it a foothold to tap a potentially lucrative market in phones, tablets, computers and television.

The data-focused service could start to roll-out in New Delhi and Mumbai by the end of the year, sources familiar with the matter, who asked not be named, told Reuters. Eventually, the plan is to run it across hundreds of cities. Ambani has refused to divulge any specifics on the launch.

In what is one of the world's poorest countries, Ambani's 4G mantra is affordability. This has fuelled industry worries of a price war in a still-crowded telecoms sector that has recently started seeing stability after years of cut-throat competition and regulatory uncertainty.

Ambani's strategy is cut-price handsets and data, even if it means he has to subsidise the devices from his own cash pile. Fortunately, he has very deep pockets. Reliance's cash hoard of $15 billion stands in contrast to rival telecoms carriers who are estimated to have a combined debt load of $32 billion.

"Broadband and digital services will no longer be a luxury item - a scarce commodity - to be rationed amongst the privileged few," Ambani, the world's 22nd richest person according to Forbes magazine, told shareholders this month.

Ambani hopes to offer 4G devices costing less than Rs 5,000 and in talks with Samsung Electronics Co and others for sourcing handsets and other devices, one of the sources said.

A spokeswoman at Samsung's local unit declined to comment.

While it appears to be a risky bet, the payoff for a successful venture is first-mover advantage in mobile data communications, which has transformed media, marketing and business strategies from Europe and the United States to China.

In a sign that its rollout is gaining pace, Ambani's Reliance Jio Infocomm unit this month signed a USD 2 billion telecom tower sharing deal with mobile carrier Reliance Communications, which is owned by his younger brother Anil. That followed an agreement with rival Bharti Airtel for leasing international bandwidth, and two other pacts.

India's cellular market is the world's second largest by users after China, with users surging from just over 5 million in 2002 to nearly 870 million now. However, less than 5 percent of mobile phone owners use their device for high speed 3G data.

The uptake for 3G has been slower than expected since its launch in 2011 after costly airwave auctions, mainly due to the premium pricing of data services in a country where voice rates are less than 1 US cent a minute, among the lowest anywhere.

Cheap data rates could help grow usage of 4G, which offers several times faster download speeds, but would force Ambani to play an expensive mass volume game - a bruising strategy that has battered margins for India's incumbent mobile carriers.

Over the next five years as infrastructure is built, analysts predict India's rapidly growing middle class will buy between 30-80 million 4G connections.

Some investors, however, are worried Reliance may be taking too much of a gamble in its bid to diversify away from its oil and gas-related business which produces the bulk of its USD 70 billion in revenues.

They are also growing impatient over an outlay that has cost nearly USD 5 billion and counting, with no returns expected anytime soon.

Challenges ahead

Serious technology challenges await Reliance.

The company is using a version of 4G that is still evolving, and there are few compatible network devices and handsets now available. Bharti, which has 4G permits for some service areas, launched its first network more than a year ago, but is yet to start selling a handset that works on the technology.

The 2300 megahertz spectrum band India has allotted for 4G is less efficient than the 700 megahertz band widely used in the West. Apple Inc's iPhone and iPad and Samsung's popular Galaxy S4 are not tuned for RIL's spectrum.

The 700 band is currently allocated for state TV broadcasting services and security agencies, but the sector watchdog has recommended that the band be auctioned in 2014. Both bands need the same core infrastructure, making the switch from one to the other possible.

Ambani's telecoms ambitions have a familiar ring - a decade ago a phone company run by him sharply cut call prices and sold handsets for an initial payment of just USD 10. It transformed an industry that came to symbolise India's rampant economic growth.

His re-entry raises the possibility of another price war in a sector where carriers including Bharti and Vodafone have only recently started seeing price stability.

"It's a very competitive market, and Reliance looks to be very serious and aggressive," said Walter Rossini, a Milan-based fund manager at Aletti Gestielle SGR, which counts Reliance and Bharti among its Indian holdings.

But many question Reliance's dependence on a data-focused network in a market where voice generates nearly 85 percent of carrier revenues.

"Though we think RIL's entry into the telecom space cannot be ignored, we believe that for RIL to pose any credible threat to incumbents, a strong comprehensive voice business is an imperative," Macquarie analysts wrote in a note on June 7.

Reliance received a boost when India recently allowed 4G carriers to offer voice services by paying an extra fee. It is yet to decide whether to offer voice on its 4G airwaves using new technology or by tying up with an established voice carrier, a company source said.

Reliance did not reply to emailed questions seeking comments on its 4G plans.

While acknowledging scepticism towards his 4G venture, Ambani said at the shareholders meeting this month he was in the "optimistic minority" who held a bullish view of the sector.

Executives at rival carriers play down the Reliance threat.

"For them it is everything starting from scratch and we have a very serious headstart in this business," said an official at a large rival telecoms carrier, declining to be named.

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Bajaj Hindusthan to sell investment in two group firms

Country's largest sugar firm Bajaj Hindusthan today said it will seek shareholders' nod for sale of investment in two group firms related to power venture, Bajaj Energy and a subsidiary in Singapore. Bajaj Hindusthan has 26 per cent stake in Bajaj Energy, while Bajaj Hindusthan (Singapore) Pte Ltd is a wholly-owned subsidiary set up to acquire coal mine in Indonesia.

In a filing to the BSE, the company said the board of directors has approved seeking consent of shareholders by way of postal ballot for sale of investment in Bajaj Energy Pvt Ltd and Bajaj Hindusthan (Singapore) Pte Ltd. According to sources, Bajaj Hindusthan is likely to sell investment in these two firms to group firms only to enable the company to fund investment in its 1980-MW thermal power project at Lalitpur in Uttar Pradesh.

Bajaj Energy has set up coal based power plants of 90 MW each in the vicinity of 5 of its existing sugar units. These projects have been commissioned in March 2012 at a cost of around Rs 2,300 crore. Bajaj Hindusthan had set up a subsidiary Bajaj Hindusthan (Singapore) Pvt Ltd, which is engaged in trading in commodities and also exploring opportunities for coal mine acquisition in Indonesia. The Singapore subsidiary has already acquired coal mine in Indonesia.

That apart, Bajaj Hindusthan is also developing two mega thermal power projects in Lalitpur district of UP of 1,980 MW each through consortium. Shareholders' approval would be taken for re-appointment and payment of remuneration to company's Chairman and Managing Director Shishir Bajaj for a further period of 5 years with effect from July 1 2013.

The shareholders nod would also be taken for payment of minimum remuneration in case of loss or inadequacy of profit for a period of three years. Share price fell by 3.2 per cent to Rs 14.45 on BSE.

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AFTI applauds lawmakers for taking their case against India

The recently established Alliance for Fair Trade with India has commended both the House and Senate for calling on Obama Administration to end the alleged Indian discriminatory trade practices hurting American jobs.

Co-Chaired by National Association of Manufacturers (NAM) and the US Chamber of Commerce's Global Intellectual Property Center (GIPC), AFTI represents top American business and advocacy groups. It was formed early this week.

"The overwhelming bipartisan support from Congress pressing for action to stop India's unfair and damaging practices shows the scope and impact on American businesses and jobs," said NAM Vice President of International Economic
Affairs Linda Dempsey. "Our hope is that Secretary Kerry can engage India's leaders at the highest levels and urge them to put an end to these discriminatory practices," Dempsey said.

Also Read: New US trade chief focused on India, striking deals

"India's deteriorating intellectual property system is a detriment to economic growth, future innovation and competitiveness-for both India and the global economy," said GIPC executive vice president Mark Elliot. "The bipartisan support of more than 200 members of the House and Senate rings loud that Indian intellectual property practices cannot stand," he said.

In nearly half a dozen separate letters, more than 200 members of the House of Representatives and 42 influential Senators expressing concerns with India's discriminatory trade and intellectual property practices urged US President Barack Obama and Secretary of State John Kerry to take immediate action
to address them. The Alliance for Fair Trade with India was launched earlier this week by 15 multi-industry business groups to work with the Administration and members of Congress in pursuing public policy options that help create a level playing field for US exporters and innovative companies operating in India.

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The Week That Was: Fedspeak, Weak Rupee, Truant Weather Rock Nation

Its been a week of high drama. A natural catastrophe led to the death of thousands in Uttarkhand , while a bloodbath was seen in the Indian and US markets on the back of Fed chairman Ben Bernanke tapering quantitative easing. Adding to investor woes, the rupee was hammered as FIIs withdrew from the debt market. And in politics, the Cabinet was again reshuffled.

Here's a lowdown of the micro, macro and everything else that made headlines this week.

Welcome To The Week that was

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Unlikely to be at SBI's next annual general meet: Chaudhuri

Jun 21, 2013, 10.33 PM IST

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

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Unlikely to be at SBI's next annual general meet: Chaudhuri

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

Like this story, share it with millions of investors on M3

Unlikely to be at SBI's next annual general meet: Chaudhuri

State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

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State Bank of India has written to aviation regulator DGCA expressing concern over the grounded Paramount Airways plans to re-launch the carrier, saying it has been in default for long.

Also read: SBI objects to Paramount's revival plan over dues

Meanwhile responding to a question at the SBI AGM today, State Bank of India Chairman, Pratip Chaudhuri said that he was unlikely to be a part of the bank's next annual general meeting.

However, in May end there were rumors that Pratip Chaudhuri may get an extension as SBI Chairman.

From DJ EU Officials Spain Aid Cap Of 100 Bn Euros 'should Be Enough'

The latest earning numbers FIRST on CNBC-TV18

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Data market war: Idea slashes tariff by 90% in 8 circles

Triggering a tariff war, Idea Cellular on Thursday slashed data charges by 90 percent in eight circles, following Bharti Airtel and Vodafone, who recently cut their rates by similar margins in select circles.

" Idea Cellular ...has revised data tariff in eight circles across the country...users can now access data for 2 paise/10 KB, which is a 90 per cent reduction in the existing tariff of 2 paise/KB," Idea Cellular said in a statement.

Also read: Airtel slashes data usage rates by 90% in Punjab, Haryana

Bharti Airtel had yesterday slashed data usage charges by 90 percent for pre-paid subscribers in Punjab and Haryana, a day after Vodafone lowered its data charges by 80 per cent for pre-paid and post-paid customers in three circles.

Airtel has reduced the price to 1 paisa per 10 KB from 10 paisa per 10 KB and Vodafone slashed the tariff from 10 paisa per 10 KB to 2 paisa per 10 KB.

Idea's new tariff is applicable to all 2G data users who use data on pay-as-you-go basis and also on an average on regular data from July 1, 2013 and the offer will be valid for 90 days, the statement added.

 "The new data rate will be automatically implemented for all Idea 2G postpaid subscribers in these markets, effective July 1...prepaid users can avail the new rate with a value recharge priced between Rs 5-10," the statement said.

 Idea said Tamil Nadu & Chennai, Karnataka, Kolkata, West Bengal, Assam, North East, Bihar, and Orissa circles will benefit from the revised data tariff.

"These eight circles comprise one-third of the total mobile users in India, with a large number of users waiting to board the mobile broadband wagon. Availability of data at such affordable rates will usher in a new wave of mobile data growth in the country," Idea Cellular deputy managing director Ambrish Jain said.

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Affordable housing: Mphasis founder Jerry Rao's next foray

From software in the 1990's to affordable housing in 2010, Jerry Rao has always aimed at riding the next big wave.

The former Mphasis founder speaks to CNBC-TV18's Vineetha Athrey exclusively about his new venture; Value and Budget Housing Corporation (VBHC) and how it is attracting big ticket investors like the World Bank.

Also read: RBI policy big letdown for realty sector: MCHI-CREDAI

Betting on affordable housing

Affordable housing is still to pick up in India but that has not stopped Jerry Rao's venture Value & Budget Housing Corporation (VBHC) from attracting investors.

According to Rao, the World Bank-backed International Finance Corporation (IFC) is coming on board and will invest Rs 60 crore as equity which translates to a 12 percent stake.

With HDFC , Caspian and Carlyle having invested Rs 120 crore for a 36 percent stake in the company, the corporation already has big name on its board. At their end, the promoters hold around 36 percent.

"The purpose is to strengthen capital base of the parent company and use it for individual project jd or purchase of land", says Jerry Rao, chairman, VBHC.

With annual revenues of a Rs 100 crore, VBHC offers homes in the Rs 15-25 lakh range and has six ongoing projects across Bangalore, Mumbai, Chennai and Delhi.

VBHC's plans

The company is looking to launch six to eight new projects this fiscal. It is also eyeing new markets such as Gujarat, Greater Mumbai and Rajasthan.

In addition to IFC, it is in talks with other financial institutions to raise Rs 30-40crore at the special purpose vehicle (SPV) levels for these projects.

"We raise anywhere between 20 and 70 percent of the equity component of the project. There are institutions, funds and wealthy individuals who are willing to invest with us", says Rao.

Affordable homes, a good bet?

But the way forward may not be all-smooth. The fact is, affordable housing has not really taken off in India on a very strong note

Surging raw material costs, especially those of cement and steel, might throw more spanners in Rao's wheel. To counter this, Rao admits he has no choice but to raise prices by three to five percent across the board on a quarterly basis; a move that might not go down very well with its price sensitive clientele.

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EU-US FTA will promote growth around world: Joao Cravinho

The two biggest players in the global economy, that is the European Union (EU) and the United States (US) are about to launch negotiations on a free trade agreement (FTA). According to Joao Cravinho, ambassador of the European Union in India, EU-US FTA will promote growth around the world.

He believes that this trade agreement can add as much as USD 100 billion to world gross domestic product (GDP), excluding what it will add to the US and the EU side. He told CNBC-TV18 that the talks could last for two years.

Talking about the long-running negotiations between India and the European Union on a FTA, he said it is nearing completion.

Also read: India-EU FTA in jeopardy? Here's why

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Can you give us a sense of the proposed timeline for this US-EU free trade agreement (FTA)?

A: We are ready to start talks as of now. We are waiting for the United States approval to come from the US Congress. Hopefully that will come in the manner that will allow us to start negotiations before the summer.

So, in the very near future we will be beginning a negotiation process. We think it could last for around two years and that could have a major impact on world trade. A major impact ofcourse for the European Union (EU) and for the United States (US), but more widely on world trade flows as well.

Q: Both the US and the EU have been facing serious economic challenges. Is the US-EU FTA being seen in a sense as a panacea for its economic woes?

A: Certainly boosting trade is good for the economy. Whether the economy is growing well or whether the economy is having a difficult time. As you rightly point out matters have not been easy on either side of the Atlantic and we expect that this is part of the solution. It will promote growth on both sides of the Atlantic.

One important thing though, it will promote growth around the world because world trade or the world economy is now so integrated. So many goods imply an integrated global value chain that the knock-on effect for other countries can also be quite significant. We expect that this trade agreement can add as much as USD 100 billion to world gross domestic product (GDP) excluding what it will add to the US and the EU side. So, it will be good for the world as well.

Q: US and the EU are the biggest players in the global market and the global economy. Won't this FTA impact trade with its partners like India? There are concerns on trade diversion for instance.

A: I don't think so. You are quite right, we are talking about the two biggest players in the world. EU is slightly bigger than the US economy. Together they are almost 50 percent of global GDP. So, this will have a major knock-on effect around the world.

However if EU and US increase the trade between them, they are also going to increase demand for raw materials. They are going to increase the need to source products all around the world or source raw materials around the world. This is why we believe that this kind of agreement will not be trade diversionary on the contrary it will be a stimulus to international trade and the available studies that have been made indicate this quite substantially.

Q: The EU will also have to deploy a majority of its resources in terms of negotiators for the US and Japan FTAs, will that not impact the India-EU FTA talks which have already been going back and forth, seen years of delays?

A: I think that the pace of talks is dictated by other factors. We are now very close to finalizing the talks. We haven't reached that moment yet but we are very close. We believe that we have a very fortunate time horizon ahead of us because the trade talks with the US, which we believe can be launched now will really intensify the end of the year 2014 will be a very intense year.

We hope that we can finish the talks with India before that happens sometime in the next two or three months. So, in terms of our calendar we believe that we have got things just right and we are looking forward to an enormous amount of hard work.

Q: For months now we have been hearing about how both sides are close to finalizing the agreement. In the light of the fact that negotiations with the US and Japan are going to start, are you really still hopeful about the India-EU FTA going through?

A: There is more than hope, there is optimism. Both sides understand that in this process of evolving world trade patterns it is fundamental that EU and India story be central part of the global story. That means finalizing this deal now. In any negotiation it is in the last moments that we find the most difficult and intractable problems.

However looking at the big picture, I think that both sides realize that they have much more to gain than to lose. Those difficult decisions which have to be taken at the end of negotiations are now very close to being taken.

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ANALYSIS: 2 yrs on, Jyothy struggles to digest Henkel buy

Nachiket Kelkar
moneycontrol.com

Its been over two years since Jyothy Laboratories announced the acquisition of the local unit of German consumer goods major Henkel AG. Now Jyothy, familiar for its Ujala whitener, is riding on Henkel's brand to position itself in the mid and premium segment, especially in detergents.

Jyothy had announced acquisition of majority stake in Henkel India in 2011 and in June last year, it got board approval for the merger of Henkel India.

Henkel's key brands--Henko detergent and Pril dishwash liquid--have strong brand recall in South India, and even two years after acquiring the company, Jyothy hasn't been able to penetrate the Northern markets in a big way.

Its a similar case even with some of Jyothy's key brands like Exo dishwash bar and Ujala detergent.

Exo, for instance, has a 22 percent market share in the south, but elsewhere it has just 3-5 percent market share, according to Kotak Institutional Equities. Pril has 18 percent market share in liquids and 45 percent of its revenues come from southern markets alone. The dishwashing category as such derives 35-40 percent revenue from Southern India.

Jyothy has now begun addressing some of these issues.

For instance, Bhaumik Bhatia, analyst at IDBI Capital says, the company has launched new brand communication for Henko and Ujala, Henko will relaunched with new packaging and price positioning in the next few months and Ujala, which has a 22 percent market share and Rs 75 crore revenue in Kerala alone has been launched in Andhra Pradesh and Karnataka in June.

Similar steps are being taken for other brands like Margo bathing soap Fa deospray for women, where new commercials are being launched and Margo brand will be extended from just being an ayurvedic soap to facewash and glycerin soap among other variants, according to analysts.

As far as its Maxo insecticide is concerned, Jyothy Labs aims to focus on more profitable liquids and vapourisers. Its market share in liquids is just about 5 percent,  Bhatia says.

One common thing the company seems to be doing across brands is positioning itself as a mid-to-premium brand. Premium detergents, where Henko will fight with the likes of P&G's Ariel and HUL's Surf, is for instance a Rs 2,500 crore category.

Jyothy's plan to go premium may work in the long-term, given that products like Henko command high margin. But the increased marketing and promotional spends will put pressure on margins in the near-term.

Kotak Institutional Equities feels FY14 will be a year of increased aggression on sales but the full force of the combined entity will start reflecting on the financials only from FY15.

"We expect FY14 to be another year of modest EPS (in the context of valuation) as increased D&A (on account of the intangible/goodwill amortization) will remain a drag," the brokerage said.

Kotak has maintained an "add" rating on Jyothy Labs, but IDBI Capital has downgraded the stock to "hold" from "buy" citing the run-up in the stock since its fourth quarter results were announced.

Antique Stock Broking downgraded the stock to "sell" from "hold" on valuations.

"In our view, the best-case scenario, comprising of an EPS of Rs 9.3 during FY15, assuming a net sales CAGR of 27 percent in FY13-15 and an EBITDA margin of 14.6 percent in FY15 would be difficult in a scenario of demand slowdown and rising inflation," Antique's Abhijeet Kundu and Nupur Parik said.

With the recent rupee depreciation, input cost inflation is re-surfacing, the two analysts say.

Jyothy Labs shares closed marginally up at Rs 192 on NSE on Wednesday. In the last one year, the stock has declined near 14 percent, significantly underperforming the wider CNX FMCG index, which has gained close to 40 percent.

nachiket.kelkar@network18online.com

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Unilever open offer price for HUL 'fair, reasonable': Panel

FMCG major Hindustan Unilever today said the committee of independent directors that looked into parent firm Unilever's proposed USD 5.4 billion open offer, is of the view that the offer price of Rs 600 per share is "fair and reasonable".
    
"After a review of the public announcement, detailed public statement, the draft letter of offer, and the aforesaid points, the independent directors committee (IDC) is of the opinion that the offer price of Rs 600 per equity share is fair and reasonable," Hindustan Unilever Ltd (HUL) said in a filing with BSE.

Also read: Unilever to begin raising stake in HUL from June 21
    
Last month, the company had constituted a committee of independent directors, including five independent directors of the company--Aditya Narayan, S Ramadorai, R A Mashelkar, O P Bhatt and Sanjiv Misra, to give recommendation on the open offer to the shareholders.
    
The offer price is at a 29 percent premium to the volume weighted average market price of the equity shares for a period of 60 trading days, the committee said in its recommendations.     

"The offer price is at a premium to the highest ever market price of the equity shares of face value of Rs 1 each, up to the date of public announcement of the open offer," it added.
    
The USD 5.4 billion-open offer by Unilever Plc to buy 22.52 percent stake in HUL would begin on June 21 and close on July 4.

Once complete, the open offer would be one of the biggest deals and fifth largest India inbound M&A transaction on record till date.

Anglo-Dutch consumer goods giant Unilever Plc is looking to hike stake in its Indian arm HUL to 75 percent through the open offer. Currently, it has a stake of 52.48 percent.     

Unilever will pay Rs 600 a share, valuing the open offer at USD 5.4 billion.
   
HUL's portfolio includes leading brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Sunsilk, Pepsodent, Closeup Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.
    
The company, which employs over 16,000 employees, posted net sales of Rs 26,317.15 crore for the 2012-13 fiscal.     

Shares of HUL today closed at Rs 595.60 on the BSE, up 0.02 percent from its previous close.

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India hurting US jobs, economy: American biz group

A group of major American business organisations and advocacy groups today launched a new alliance against what they allege as India's "discriminatory" economic policies, including intellectual property issues, which they claim hurt US jobs and economy.

Co-chaired by the National Association of Manufacturers (NAM) and the US Chamber of Commerce's Global Intellectual Property Centre (GIPC), the Alliance for Fair Trade with India (AFTI) was launched in Washington ahead of the India visit of the US Secretary of State John Kerry, for the fourth India-US Strategic Dialogue.

"India's unfair trade practices against US manufactured exports is putting jobs at risk and harming American manufacturing workers," said NAM vice president for International Economic Affairs Linda Dempsey.

"The Obama administration must engage the Indian government in high-level discussions to put an end to these practices to protect manufacturers' competitiveness and jobs," Dempsey said.

"In recent months, India has systematically failed to respect global intellectual property standards, causing an impact to its investment potential," alleged Mark Elliot, executive vice president of the GIPC.

"From unprecedented patent revocations and denials to insufficient copyright enforcement, India has established itself as an outlier in the global economy. If this is truly to be India's 'Decade of Innovation', the government must promote robust IP policies that incubate both homegrown and international innovators," Elliot said.

The alliance alleged that over the last year, India has systematically discriminated against a wide range of innovative US products and exports in order to benefit India's business and industrial community at the expense of American jobs.

These actions constitute a disturbing trend that puts at risk a growing bilateral trade relationship worth over USD 60 billion in 2012 alone, it said. In a cross-sector report comparing IP systems across the globe, 'Measuring Momentum', the GIPC found that India consistently ranked last, behind Brazil, China and Russia in promotion and enforcement of patents, copyrights, and trademarks.

Earlier this month, in a letter sent to President Obama, 17 business groups had urged the US government to end discrimination against innovative products and manufacturing exports and restore American jobs currently being lost to India's "unfair trade policies".

"It is time the Government of India ended discrimination against our nation's exporters and took steps to ensure it is not repeated in the future," the letter noted.

In the coming weeks, AFTI will work with the administration and members of Congress to pursue public policy options that help create a level playing field for US exporters operating in India.

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India set to become a hub for Ford, says its CEO

With India leading the small SUV market and attracting majority of investments from Ford Motor Company, the country is set to become a hub for the US automobile major, a top official said today.
    
"Yes. Absolutely. That is our dream. India is great market and an indicator of about what people really want in vehicles around the world. The (latest SUV from Ford) Ecosport is a really good example", Ford Motor Company President and Chief Executive Officer, Alan Mulally told reporters here.

Also read: Ford India sales down 22.46% in May

Observing that India is one of the important markets for Ford globally, he said, "small SUV segment on the B size platform is the fastest growing segments which is led by India. We are making Ecosport in five locations around the world. And it is going to be most popular vehicle worldwide. So it (The launch) is very important launch for us".
    
He said Ford is making long-term commitments on strategies in rolling out products and currently is on a "positive path" on its growth.
    
"We are number one brand in United States and number two in all Americas. In Europe we are the fastest growing brand. We have made tremendous commitment in terms of man and money investments", he said.
    
Asked about the company's focus on its Asia-Pacific operations, Mulally said the management has not made any specific time frame on reaping profits, but expects a
significant revenue to be contributed from this region.
    
"Clearly, in the next few years,it (Asia Pacific region) is going to be a major contributor to Ford. I think in four-five years, 40 percent of revenue will come from Asia Pacific. This is the largest growing region in the world", he said.
   
Currently, Ford has garnered about three per cent market share in the Asia Pacific region.

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Ford bets on EcoSport to ride mini-SUV boom in India

Ford Motor Co began shipping its locally-made EcoSport compact SUV on Monday, hoping to share in growing demand in India for mini-sport utility vehicles, which are popular due to heavy traffic, scarce parking and bumpy roads.

Also Read: India set to become a hub for Ford, says its CEO

The US auto maker, which has struggled to build share in an Indian market dominated by small cars, will also export the EcoSport from its plant in the south Indian city of Chennai to Europe starting late this year, part of its big bet on small "urban" sport-utility vehicles.

"Who would have ever thought that a small SUV on a (compact vehicle) platform would be one of the fastest growing segments in India ... also around the world," Ford CEO Alan Mulally told reporters on Monday in Chennai, where the company spent USD 142 million to set up its EcoSport production line.

Sales of utility vehicles, including Renault's popular low-cost Duster compact SUV, have been robust in an otherwise dismal year for the Indian auto industry, where passenger car sales fell for the seventh straight month in May.

Mini-SUVs are especially popular in emerging markets.

In China, IHS Automotive forecasts demand for small SUVs to more than double this year to over 207,000. In India, it expects sales in the segment to grow from just 6,140 vehicles in 2012 to more than 126,000 in 2015.

A growing array of models is fuelling demand for small SUVs in emerging markets, said IHS Automotive analyst Anil Sharma. "Even two years ago, we didn't have these kinds of vehicles."

Ford makes the EcoSport in Brazil, China and now India. The Dearborn, Michigan-based auto maker is also expected to start producing the EcoSport soon in Thailand and Russia.

US carmakers have struggled to gain ground in India against small car-focused brands such as Maruti Suzuki and Hyundai Motor Co, which sell India-specific models. Ford's India sales fell 17 percent last year, compared with a 20 percent decline at rival General Motors.

Ford's focus on small SUVs reflects a shift in consumer preferences globally towards SUVs for everyday driving.

A decade ago that shift boosted demand for larger SUVs, with massive utilities like the Hummer proving popular before rising oil prices and the U.S. economic downturn squeezed sales. Demand is now shifting towards smaller, cheaper, more fuel-efficient SUVs and especially in emerging markets.

According to IHS Automotive, global small utility vehicle sales grew 154 percent between 2005 and 2012. During the same period, demand for midsize SUVs grew 56 percent while sales of large SUVs shrank 22 percent.

"The story of the death of the utilities was premature," Ford Executive Vice President Jim Farley told reporters late last month.

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