Current events-Business & Economy
Nano - finally!
The people's car is finally within reach. Fifteen months after it was unveiled at the Auto
Expo in New Delhi, bookings for the Nano, which is set
to revolutionise the lower end of the global automotive
market, will start from April 9 and end on April 25.
Delivery of the cars will begin from July this year.
While the base model for the car is priced at Rs 1 lakh
(ex-Delhi), the air-conditioned version will cost Rs 1.39
lakh-Rs 1.42 lakh and the deluxe model Rs 1.70 lakh.
Tata group Chairman Ratan Tata said he would dedicate
the car to the common people of India. He also thanked
the 500-odd people involved in the project who overcame their initial sense of disbelief to
"give everybody in Tata Motors a great sense of achievement".
Apart from representing the spirit of breaking conventional barriers, Tata said the project
made perfect business sense for the company and he "is not in it for any ego trip or
philanthropy". The company has so far invested Rs 2,000 crore in the project.
Within 60 days of the closure of bookings, Tata Motors will process and announce the
allotment of 100,000 cars in the first phase of deliveries, through a computerised random
selection procedure. These 100,000 cars will be "price-protected" till delivery of the cars,
though the booking amounts will not bear any interest for the customers. This indicates that
the Rs 1 lakh price tag for the basic petrol-driven car will be revised later.
The delivery of these 100,000 cars could take a year, as the first batch will roll out from the
Pantnagar plant in Uttarakhand, which has a capacity to produce only 5,000 cars a month.
The situation will ease only after the company's Sanand plant near Ahmedabad, which will
have an initial capacity of producing 350,000 cars per annum, becomes operational early next
Tata said apart from Europe, the company was also planning an upgraded version of the Nano
for the US, the world's largest automobile market.
Bidding process for Satyam Computer begins
Satyam Computer Services has commenced the
competitive bidding process which would be overseen
by a former Chief Justice of India or a retired
Supreme Court Judge. The bidders will have to submit
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a detailed expression of interest (EoI) together with the proof of availability of at least Rs.
1,500 crore. The company gave the details of the procedures to be followed for the selection
of an investor to acquire a 51 per cent equity interest in it, subject to regulatory approvals.
Upon deposit of the entire subscription amount by the selected investor with the company and
requisite funds for the public offer in an escrow account, as required under the SEBI
Takeover Regulations, the investor will have to make a mandatory public offer to purchase a
minimum of 20 per cent of the company's enhanced share capital. If required, the investor
would have the option of buying additional shares to make up for the 51 per cent and the
ability to subscribe to them, subject to the terms and conditions specified in the request-forproposal
Based on the EoIs, eligible bidders will be short-listed and given access to certain business,
financial and legal diligence materials relating to the company, provided they are willing to
execute a non-disclosure and non-solicitation agreement, a stand-still agreement and a 'noclaims'
undertaking before submitting financial bids.
The successful bidder will have four days to deposit with the company the entire subscription
amount and the requisite funds for the public offer in an escrow account. Owing to SEBI
relaxation, the rule of 'minimum floor price' would not apply in this case. The bidder will be
allowed subscription of shares after the Company Law Board and SEBI approve the
The 'usual suspects', Larsen & Toubro, Spice group and Tech Mahindra, figure among the
bidders that completed the first step of registration to acquire the troubled Satyam Computer
The eligible bidders will be shortlisted and given access to certain business, financial and
legal diligence material relating to Satyam, provided they have executed a non-disclosure and
non-solicitation agreement, a stand-still agreement and a "no-claims" undertaking. The
successful bidder will have four days to deposit with the company the entire subscription
amount, and the requisite funds for the public offer in an escrow account.
Govt should lower bank stakes below 51%–RBI
Report also suggests gradual foreign investment in the sector.
The committee on financial sector assessment has recommended
that the banking sector should be gradually opened to foreign
players. It also wants the government to lower its shareholding in
public sector banks below 51% and allow state-owned players to
merge if the Centre's stake cannot go below the prescribed lower
The committee, which made its report public recently, also
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reiterated the Reserve Bank of India and government's position that the move towards fuller
capital account convertibility should be also be gradual, concomitant with the objective of the
achieving a balance in the external and fiscal sectors along with low inflation.
The financial sector assessment programme measures compliance with global standards. The
committee, which is headed by RBI Deputy Governor Rakesh Mohan, had members from
RBI, finance ministry and other regulatory bodies with four advisory groups with
representative from the industry.
Overall, the assessment was positive with the committee concluding that the Indian economy
would recover from the current slowdown to grow by 8% over the medium-term.
On the flip side, the committee expressed concerns over the government's need to deviate
from the fiscal responsibility roadmap and spend more by way of economic stimulus
packages and emphasised that it was necessary to return to fiscal prudence at the earliest.
The committee has also called for improvements in the effective enforcement of creditor
rights and insolvency systems for quicker resolution of stressed assets of financial
intermediaries. The committee backed the public sector banking system and said that these
banks, which accounted for the bulk of the banking system, did not need much
recapitalisation. With government assistance these banks would be able to manage up to 25
per cent growth in risk-weighted assets.
Beyond that, the committee said the government would have to consider reducing its stake
below 51 per cent, which required legal amendments. In the interim, the committee suggested
that the Centre could consider merging banks in which it held close to 51 per cent with those
in which its shareholding was higher.
In the case of public sector banks, whose capital requirement till 2012-13 was estimated to be
between Rs 2,100 crore and Rs 49,500 crore, depending on the pace at which they grow, the
committee said that there was a need to lower the floor on government holding below 51 per
The committee also said off-balance sheet items of banks were rising in recent years and
there was a need for a uniform accounts regime across banks and companies.
Although banks did not face any credit risk, the committee pointed to the adverse impact of
some of practices they followed in recent years when credit growth was high. It also said
higher dependence on bulk deposits to fund credit growth could have liquidity and
TDSAT upholds government's dual-spectrum policy
The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has
upheld the dual spectrum allocation policy of the government. Under the
policy, CDMA operators were given GSM spectrum within the same
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licence. The verdict has come as a major relief to CDMA operators like Reliance
Communications and Tata Teleservices.
The GSM operators had challenged the government's decision to allow dual technology to
these players and had demanded a stay on the policy.
The Cellular Operators' Association of India (COAI) had appealed to the TDSAT after the
DoT decision on October 18, 2007 to amend the telecom licence, allowing CDMA players to
enter the GSM mobile space. COAI had also raised objections over the way in which
Communications Minister A Raja had implemented the decision.
The tribunal also cracked the whip on the DoT, as well as state-owned telecom operators
Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) for
under-utilisation of the spectrum allotted to them. "Allocation of additional spectrum to
BSNL and MTNL on the basis of the criteria laid down is a discrimination against the private
GSM operators. We accordingly direct the DoT to immediately review the subscriber base of
these PSUs in all the circles and withdraw the spectrum that is beyond the criteria laid down
by the DoT," said TDSAT. The government had given the state-owned corporations
additional spectrum up to 10 MHZ, which was not linked to any subscriber base.
In another setback to the GSM operators, the tribunal rejected their contention that under the
licence condition and National Telecom Policy of 1999, they had the right to hold spectrum
up to 15 MHz. TDSAT said that their right to receive GSM spectrum was limited to 6.2 Mhz.
TDSAT also slammed the telecom regulator for not exhibiting transparency and fairness
while giving its recommendations on the subject of dual-technology and allocation of extra
spectrum. However, the DoT was given a clean-chit on the issue as the tribunal pointed out
that the department was not at fault in implementing TRAI's recommendation.
(5) Indian economy to grow at 4-5% in 2009-10: World Bank,
India's economy will expand at the slowest pace in seven years, with the World Bank, Asian
Development Bank (ADB) and a grouping of developed nations expecting the country's
growth rate to be 4-5 per cent in 2009-10.
There is also little chance of the global economy staging a recovery during this year,
although it might be able to stand up on its feet in 2010.
In its global economic forecast update for 2009, the World Bank
projected a growth rate of 4 per cent for India during 2009-10,
while the ADB, in its outlook, expects the economy to expand by
5 per cent.
A separate outlook by the Organisation for Economic
Cooperation and Development (OECD), a club of developed
countries, has forecast a 4.3 per cent growth rate for India.
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India had last grown below this level in 2002-03, when the economy expanded by 3.8 per
A likely recovery in the global economy next year may push India's growth rate in fiscal
2010-11 to 7 per cent (World Bank forecast) and 6.5 per cent (ADB projection).
Before the financial crisis hit the global economy, India had been recording a growth rate of 9
per cent or more.
The Central Statistical Organisation has projected 7.1 per cent growth in the year ending
The ADB report warns of high fiscal deficits derailing future growth. "One downside risk
that may jeopardise growth prospects is excessively large fiscal deficits, with domestic
borrowing requirements of the government putting pressure on interest rates and restricting
the availability of private credit and investment," the report said.
The Centre's fiscal deficit has widened to 6 per cent of GDP in the current fiscal, which led
the government to borrow in excess of Rs 3,00,000 crore from the market.
Govt to allow stake sale by new telecom licensees
The Telecom Regulatory Authority of India (TRAI) has proposed that new telecom licencees
can sell equity even during the proposed three-year lock-in period,
provided some stringent conditions are met. The move is a significant
relaxation of its earlier stand.
Apart from the rollout obligations, which were tightened following the
recent sale of stake by a couple of new licencees, the regulator now
wants companies to invest 50% of the "profit" earned from stake sale
into network expansion plans.
TRAI terms "profit" as the difference between the valuation of a company at the time of
applying for a telecom licence and at the time of the transfer of stake. Moreover, the
remaining 50 per cent of the profits should be transferred to the Department of
Telecommunications which sold spectrum to the new licencees. The regulator has sought
permission from DoT and the Department of Economic Affairs under the ministry of finance
to bring these proposals into force. The regulator expects a final approval from the ministries
by the first week of April.
Additionally, TRAI is also learnt to be in consultation with the law and finance ministries to
extend this ruling to all stake-sale by new telecom licencees that took place in the country. If
this is granted, companies like Unitech Wireless and Swan Telecom, which had recently sold
stakes to foreign companies, are likely to be impacted.
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Unitech Wireless had sold 60 per cent stake to Norwegian telecom major Telenor for around
Rs 6,120 crore, while Swan Telecom sold 45 per cent stake for Rs 4,113 to UAE-based
Etisalat. These sales had stirred up controversies, as the two companies had paid Rs 1,651
crore each as licence fees. The valuation at the time of the stake-sale was substantially higher.
Following this, Telecom Minister A Raja had sought stringent norms for companies which
were planning to offload equity at a huge premium after getting spectrum from the
government. TRAI had sought a three-year lock-in period for companies which were awarded
spectrum recently (yet to become a regulation), following the controversies.
The lock-in period, however, will not be applicable if companies were to issue fresh share
capital to investors and foreign telecom majors.
Switzerland eases banking secrecy
Switzerland, the world's largest offshore financial centre, has agreed to accept concessions on
What is a tax haven?
Low or no taxation
Lack of transparency
Refusal to provide information to foreign tax authorities
Andorra, Liechtenstein, and Monaco classed as
"uncooperative tax havens"
Tax evasion v tax fraud
Switzerland is unusual is distinguishing between tax evasion
and tax fraud
Tax evasion is the deliberate concealing of assets
Tax fraud, in addition, involves lying on official documents
Both are criminal offences in most countries, but tax evasion is only a civil matter in
However, while it will now abide by international rules on bank data sharing, Swiss
government said it would only respond to "concrete and justified" requests. The government
added that it would still protect banking customers from "unjustified watching from abroad".
Switzerland's announcement comes after it had risked being added to a global blacklist of
uncooperative tax havens. It is estimated that Switzerland's banks hold $2 trillion of global
wealth held abroad. It reached its agreement overnight with the Organisation for Economic
Co-operation and Development (OECD), which sets rules on the sharing of bank data to try
and crack down on offshore tax evasion.
This is the first time it has agreed to sign up to the OECD rules, having previously stated that
it would not compromise its long-standing banking secrecy principles.
Andorra, Liechtenstein, Austria and Luxembourg have also just agreed to sign up to the
OECD rules. All had come under increasing pressure to reform their banking sectors.
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Andorra and Liechtenstein, along with Monaco, are currently on the OECD blacklist of
"uncooperative tax havens".
The Swiss government's acceptance of OECD rules comes as UBS, the country's largest
bank, is in dispute with US authorities. US officials are continuing to demand that UBS hands
over the details of 52,000 American account holders it suspects of tax fraud. While UBS has
given the US details of 300 American account holders, it has so far rejected a request to hand
over details of all 52,000. The Swiss government said that it was in the process of drafting a
legal statement to clarify its position regarding a civil case brought by US authorities against
Switzerland said it would be drafting an "amicus curiae" or third-party statement to put
forward its position in the matter. It said it wished to give "added emphasis to Switzerland's
sovereign interests". It is estimated that the US government loses $100bn in revenues every
year because of tax havens.
PM's advisory council lowers growth forecast to 6.5-7%
The Prime Minister's economic advisory council (PMEAC) has lowered India's growth rate
forecast to 6.5-7 per cent from an earlier projection of 7.1 per cent
for 2008-09. Drop in exports due to slackening global demand has
hit Indian trade more than anticipated.
"It (growth rate for 2008-09) may go somewhere around 6.5-7 (per
cent), that is the current estimate... 7.1 per cent was earlier estimate,
obviously it has to be lower. Because contraction of trade turned out
to be much greater than it was anticipated," said PM's Economic
Advisory Council Chairman (PMEAC) Suresh Tendulkar.
Exports declined for the fifth consecutive month in February after it
had a good run in the first half of 2008-09, growing by over 30 per
cent. But orders got cancelled and exporters found it difficult to get new bookings, thereafter,
with demand slackening overseas due to global financial crisis.
As a result, from October onward, exports have been on decline, with overseas bound
shipments falling by 21.7 per cent, the lowest in 13 years, in February 2009
In January, the PMEAC revised down its growth projection to 7.1 per cent for 2008-09 from
7.7 per cent projected earlier due to "painful adjustments to the abrupt changes in the
international economy". Even the Central Statistical Organisation's advance estimates have
pegged the growth rate at 7.1% for 2008-09.
Tendulkar said the global crisis affected the Indian economy through export and exportrelated
industries and capital outflows, which took place not because of lower profitability
but foreign institutional investors (FIIs) had their obligation to meet back home. "There was
deeper than expected recession in advanced countries. The psychology of gloom and doom
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that was essentially pervaded in the industrialised countries was imported to this country,"
The Indian financial markets are also integrated with the rest of the world and so they were
also hit, he said.
To boost the economy, the government came out with three stimulus packages — in
December last year, in January and in the interim Budget in February — providing incentives
to various sectors. The Reserve Bank of India also took monetary easing measures by
infusing more than Rs 4,00,000 crore since October.
However, Indian economy could manage only 5.3% growth in the third quarter of 2008-09 as
industrial growth turned negative in October and December. Despite stimulus packages,
industrial output again fell in January.
Tata Motors plans truck unit in Myanmar
After launching the Nano, the country's leading truck and bus maker, Tata Motors, is now
looking to set up a truck manufacturing plant in Myanmar with
support from the Indian government in the form of financial
This will be the first foray by an Indian automobile company in
the military-controlled country. Tata Motors has a plant in
Thailand which produces pick-up trucks.
The truck project is a part of India's more-than-a-decade old "Look East" policy wherein it is
striving to improve economic cooperation with ASEAN countries, which includes setting up
several developmental projects.
For the project, the Indian government will sanction a line of credit of $20 million (Rs 100
crore) which would be used in putting up a heavy turbo truck assembly plant in addition to a
component parts production factory by Tata Motors.
This new plant will be the latest to be operated by Tata Motors in the Asian region after it
signed a joint venture with Thonburi Automobiles to set up a pick-up manufacturing plant in
Thailand in December 2007. The company also manufactures and sells the Daewoo brand of
trucks in South Korea. It also exports trucks from South Korea.
Analysts believe that the project will provide a fillip to the ailing commercial vehicle
business of Tata Motors, which accounts for almost half of the company's revenues.
Commercial vehicle demand from the domestic market is expected to remain flat or even
shrink in the coming quarters primarily due to an expected contraction in India's economic
Tata Motors posted its biggest loss in seven years at Rs 263 crore for the quarter third ended
December 31 as against a profit of Rs 499 crore posted in the corresponding quarter of the
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previous year. The company was even forced to shut a few of its manufacturing plants a
couple of months ago so as to get rid of its excess inventory and align production with
Nestle unveils 'Me & Meri Maggi' to mark 25 years in India
Nestle India is celebrating the 25th anniversary of its instant
noodles brand, Maggi and plans to unveil a new campaign 'Me &
Meri Maggi'. Born in 1983, the brand has created a market for
itself. This brand made noodles a household product.
Nestle has also launched an interactive website for consumers,
'www.meandmeri.in.' which invites viewer participation. The
website invites entries in various categories and if a consumer has an interesting story to tell
about Maggi (which the company finds good enough), his picture will be used on the
packaging, TV or print.
Nestle has been keeping the price point at Rs 5 since the year 2000 to address the low-income
group. The prepared dishes and cooking aids wing of Nestle, in which Maggi falls, accounted
for 21.4% (Rs 781 crore) of total revenue in 2007 of Nestle India.
Nestle renovated the two-minute noodles to ensure more calcium and protein content in the
product to incorporate its health and wellness slogan – 'Taste bhi, health bhi' – in the noodles
In 2008, two brand extensions – Maggi Bhuna Masala and Maggi Cuppa Mania Instant
Noodles – were added to the portfolio.
(4) Jobs introduces new pricing system for iTunes downloads
Apple has introduced a new three-tier pricing system for downloading tracks from its iTunes
Downloads now cost either 59p, 79p or 99p per track – most songs
used to sell at a standard price of 79p. They will now be Digital Rights
Management (DRM) free so can be used on all players and not just
Apple's iPod. According to the changes announced by Apple's senior
vice president of worldwide product marketing, Phil Schiller on behalf
of chief executive Steve Jobs, prices would be based on what record
labels charged Apple. New releases will now often be priced 99p.
Apple also agreed to start selling digital songs from its iTunes store without copy protection
software. Earlier most music downloaded from Apple's iTunes store can only be played
through an iTunes interface or iPod. The agreement with Sony BMG, Universal, and Warner
Music ended digital rights management (DRM) software attached to iTunes music.
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The new model will have a varied pricing structure, with what the company calls "better
quality iTunes Plus" costing more. The move could potentially spell the end for DRM
limited music, which was never popular with users or the record industry.
In 2007 Steve Jobs, published an open letter called 'Thoughts on Music' in which he called
on the three big record companies to ditch DRM.
The move comes after major labels said the price of a song should reflect how much buyers
were willing to pay for it. They hope it will make music sales more profitable. Removing
copy protection software from the downloads could spell the end of unpopular DRM-limited
The changes come after rival Amazon dropped the price of more than 100 bestselling songs
on its MP3 site, including number one Poker Face by Lady GaGa, to 29p.
Amazon's site (Amazon MP3), launched in December, has more than five million tracks for
sale compared with Apple's catalogue of more than 10 million.
(5) General Motors, Segway unveil PUMA
A solution to the world's urban transportation problems could
lie in two wheels not four, according to executives for General
Motors Corp. and Segway Inc.
The companies have introduced a two-wheeled, two-seat
electric vehicle designed to be a fast, safe, inexpensive and
clean alternative to traditional cars and trucks for cities across
The Personal Urban Mobility and Accessibility, or PUMA, project also would involve a vast
communications network that would allow vehicles to interact with each other, regulate the
flow of traffic and prevent crashes from happening.
Not intended for highway use, the Pumas would hit about 35 miles per hour (56 kmph) and
go up to 35 miles on a full charge, which in turn would cost around 35 cents. The Puma will
be about half the size of the smallest car sold in America, Daimler AG's Smart.
The companies did not release a projected cost for the vehicle, but said ideally its total
operating cost — including purchase price, insurance, maintenance and fuel — would total
between one-fourth and one-third of that of the average traditional vehicle.
Larry Burns, GM's vice president of research and development, and strategic planning, said
the project is part of Detroit-based GM's effort to remake itself as a purveyor of fuel-efficient
vehicles. If Hummer took GM to the large-vehicle extreme, Burns said, the PUMA takes GM
to the other.
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Ideally, the vehicles would also be part of a communications network that through the use of
transponder and GPS technology would allow them to drive themselves. Though the
technology and its goals may seem like something out of science fiction, Burns said nothing
new needs to be invented for it to become a reality.
The ambitious announcement also comes at a time when GM's future is hanging by a thread
after receiving billions of dollars in federal aid and is in the midst of a vast restructuring that
could still lead to a filing for bankruptcy protection.
Telenor carries out first part of $1.2 bn Unitech Wireless deal
Norwegian telecom group Telenor invested an initial $250 million in Indian
operator Unitech Wireless for a 33.5 percent stake and will inject the
remaining $970 million in three tranches this year, Telenor said on Friday.
Once the $1.2 billion deal is completed, Telenor will own 67.25 percent of
Unitech Wireless, as announced earlier. Telenor unveiled the deal to buy a
majority of Unitech Wireless from Indian property company Unitech in
It said earlier this week it would take 67.25 percent of the company instead of an earlier
planned 60 percent because of economic developments in India. Analysts and shareholders
have criticised Telenor's plans to enter India which they say is an already crowded mobile
telecom market, the world's second biggest.
Scepticism over the deal forced Telenor to abandon plans for a share issue and instead to look
to its own funds, new debt and retained dividends. Telenor shares were off 0.7 percent at
34.55 crowns at 0906 GMT, against the trend of a rising Oslo bourse.
BCCI may lose Rs 200 crore from IPL's overseas relocation
The Board of Control of Cricket in India (BCCI) stands to lose
around Rs 200 crore as a result of the decision to shift the second
edition of its prestigious and profitable Indian Premier League
(IPL) Twenty20 tournament to either South Africa or England.
The decision follows the inability expressed by various state
governments to provide security for the event, which overlaps
with the general elections.
The IPL tournament is scheduled for April 10 to May 24 and the general elections from April
16 to May 13.
IPL Commissioner Lalit Modi, however, told the press that the organisation would take care
of all the losses and extra expenses. "Because of this one-time exercise, we will not make any
money on IPL this year," he said. "The costs of shifting to another country are prohibitive,
but without that there will be no tournament. We are not looking at the losses at the moment,"
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The eight team franchisees, for instance, stand to lose around Rs 100 crore to Rs 110 crore
from in-stadia ticket sales, the revenue of which entirely went to the teams. IPL will also have
to incur an additional Rs 80 crore to Rs 100 crore on travel (for over 150 players), hotels,
logistics and the cost of venues in another country.
There is also uncertainty over whether companies that have booked space for in-stadia
advertising will agree to put in money in a different country with few spectators on the
ground. Last year, in-stadia advertising provided about Rs 150 crore of revenue. Some
money, however, will be recovered from in-stadia tickets at the new venues also, though they
would be a fraction of ticket sales in India.
The decision to shift the IPL tournament out of India ends a dispute of several weeks between
the government and IPL's organisers over hosting the tournament at the same time as
elections, following the March 3 terrorist attack on Sri Lankan cricketers in Lahore.
Indian cricket fans, however, will continue to see the matches during the peak hours of 4 pm
and 8 pm in India, ensuring that advertisers who are expected to put in over Rs 450 crore to
Rs 500 crore to buy time on TV do not exit altogether, which could lead to huge losses for the
broadcaster SET MAX, BCCI and the franchisees. TV advertising forms the bulk of revenue
from the tournament.
Meanwhile, sources said the legal row over the domestic broadcast rights between BCCI and
the SET MAX channel may also be resolved. SET MAX bought the TV rights to the
tournament and its contract was terminated a week ago, over allegations of past contractual
BCCI, however, squarely blamed the government for its decision to go abroad. Speaking to
reporters after the board's emergency working committee meeting, Shashank Manohar, BCCI
President, said: "Because of the attitude of the government that it is not ready to spare
security forces for the cricket tournament we have been forced to take the decision to move
the event out of India."
IPL relocation prompts advertisers to mull budget cuts, pullout
The decision to relocate the second edition of the Indian Premier League
(IPL) Twenty20 tournament to South Africa has prompted several key
advertisers such as Hyundai, Havell's and Reebok, among others, to consider
cutting back budgets or pulling out.
On-ground advertising and promo spends for the IPL were expected to go up 40 per cent over
last year's Rs 150 crore, advertising industry sources said. For on-air advertising, companies
were expected to spend over Rs 500 crore.
Sports and fitness brand Reebok, one of the key spenders in last year's IPL, said it may cut
spends 15 to 20 per cent. Reebok is the team sponsor for Kings XI Punjab, Kolkata Knight
Riders, Bangalore's Royal Challengers and the Chennai Super Kings.
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"The magic of IPL will not be the same outside the country. Last year, we generated a good
percentage of sales from on-ground promotions; that will not happen now. We may have to
activate our marketing efforts overseas and then will have to work out the revenue-sharing
with them," Sajid Shamim, executive director for marketing, Reebok India, told Business
Havell's India, one of the associate sponsors on air, confirmed that it has cancelled the Rs 7
crore to Rs 8 crore allocated for on-ground promos at each of the domestic venues. "We may
cut our spends for on-air advertising too," Vijay Narayanan, director, marketing and
communications for Havell's India said. Havell's had set aside about Rs 30 crore for on-air
Like Havell's, Hyundai is considering cutbacks. "Had IPL been played in India, there were
plans to back our on-air advertising with on-ground marketing activities. Now, no such
possibility exists and we are also looking at re-working our on-air spends," a senior executive
in Hyundai Motors said.
A senior executive of a leading beverages company said: "Nearly 20 per cent of the value of
our team sponsorship contracts is on-ground marketing activities like pouring rights in the
stadiums, meeting players, and free tickets that we can leverage. Now all this is gone and we
have to reduce our budgets."
Media buying agencies confirmed the trend. Said Pavan Chandra, managing director, (South
& East) of ZenithOptimedia: "Unless the parameters of IPL — timings, venues, dates or its
broadcaster — are clear advertisers will re-evaluate their advertising spends for sure."
Despite the slowdown, FMCG cos see sales volumes surge
Slowdown? If there is one, producers of colas,
tea, biscuits and toiletries — or fast moving
consumer (FMCG) goods — haven't noticed. All
of them are reporting substantial growth in sales
volumes in the first three months of 2009.
A major reason for this surge in sales is
changing income demographics — newer buyers
in small towns are opting for branded products.
Also, price cuts have reduced differentials
between premium and economy products,
inducing consumers to spend.
Carbonated beverages are a case in point. The industry is expected to end the first quarter of
this calendar with a 25 per cent surge in sales volumes against 10 per cent for calendar year
2008. A Coca-Cola India spokesperson attributed this surge to excise breaks, from 14 to 9 per
cent, and the fact that the company was extending its cold storage coverage to make the
product available to more consumers.
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Kishore Biyani, chairman of Future Group, the country's largest retail chain, confirmed that
sales of food, grocery and FMCG products in his stores have grown around 15 per cent, but
non-food and non-FMCG products are growing at only 5 per cent. "It has to do with
demographics. A whole host of new customers, who earlier aspired to buy branded products,
are joining the fold for the first time. And that is ensuring there is no slowdown," he said.
Indeed, observers point out that income levels in the newer markets in India's smaller towns
have not really fallen so drastically. In B- and C-class cities, where most people have small
businesses and services, income levels have not fallen as much as they have in the big cities.
This has sustained growth.
Lower commodity prices have also helped push sales for many branded FMCG products. K S
Oil, one of the largest players in the branded edible oils business, especially in mustard, has
seen a 25 per cent growth in volumes in January-March this year over last year.
And of course, the old reason that people have to eat, wash and groom even in a slowdown
holds. Packaged hair oil producer Marico Industries, which has seen sales volumes grow 12
per cent, confirmed that consumers are not reducing purchases. "These are daily consumption
products and the price points are not high — between Rs 30 and Rs 70 — and we have not
seen any trend of consumers not buying such products," a spokesman said.
New ATM regime spells more revenue for big players
Inter-change fee remains key to increased ATM deployment.
With the use of third-party automated teller machines (ATMs) going to
be free from April 1, banks – both large and small – are bracing up for
For larger players such as State Bank of India, ICICI Bank, HDFC Bank
and Axis Bank, the shift would mean higher revenues as customers would tend to use the
nearest ATM. Smaller bank, which already allow their account holders to access any ATM
without having to pay a transaction charge, fear that the bigger players, sensing an
opportunity, may increase the inter-change fee over the next six months or so.
The State Bank Group is ahead of the pack with 11250 ATMs followed by ICICI Bank
(4600), Axis Bank (3570), HDFC Bank (3,177) and Canara Bank (2007). Besides, plans are
afoot to launch white-label ATMs where banks are free to levy a fee.
According to estimates, the average cost of setting up an ATM in urban centres is Rs 7-8 lakh
and the monthly cost of operating it comes to around Rs 50,000-60,000. If the inter-change
fee falls below a certain level, it will not be feasible for banks to increase deployment of
ATMs, says an executive with a bank with a larger ATM footprint.
Banks that own ATMs charge an inter-change fee for providing the facility to the customers
of other banks. The fee depends on the terms of bilateral and multilateral arrangements banks
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enter into with each other. Banks with larger ATM networks treat inter-change fee as an
important stream of revenue.
While the smaller private sector banks are increasingly looking at riding piggyback on the
networks of the larger players, public sector banks, which do not have a large presence at
present, are going ahead with plans to expand their footprint across the country.
'Budweiser not your brand', EU court tells Anheuser
US beverages giant Anheuser-Busch InBev has lost its long battle to sell its beer under the
'Budweiser' brand across Europe. A European Court rejected its
claim, saying the commercial right to use the term 'Budweiser' as a
Europe-wide trademark already belongs to the small, state-owned
Czech brewery Budejovicky Budvar.
For over a hundred years the two beer makers have been locked in a
fight to control the ownership of the Budweiser brand, based on
claims of "historical rights".
The Czech brewer has been producing a budweiser beer since 1876, and the Czech city of
Ceske Budejovice, where Budvar is located, has also been known through history by its
German name, Budweis. Budejovicky Budvar said it had registered the name in France,
Austria and the former Czechoslovakia back in 1958.
On the other hand Anheuser-Busch says it has the right to the name as it first started brewing
Budweiser in 1876, 19 years before Budejovicky Budvar was founded in 1895. Beer has been
brewed in the Czech town since 1265.
Anheuser-Busch, which markets Budweiser and Bud Light beers, lost a similar fight six years
ago to stop the Czech company selling beer in the UK under the 'Bud' and 'Budweiser'
trademarks. However, it has successfully stopped Budvar registering or using the
'Budweiser' name in Finland, Spain, Denmark, Argentina, Australia and New Zealand.
But now the European Court of First Instance in Luxembourg delivered another rebuff to the
American company, saying the commercial right for the name to be used for "'beer of any
kind" was already held in Germany and Austria by the Czech brewery. They added that
Anheuser-Busch could not register the very same word as an EU trademark for goods
described in the court application as "beer, ale, porter, malted alcoholic and non alcoholic
The court found the Czech company had proved the validity of its ownership of the trade
mark, submitting "Budweiser" advertisements and invoices addressed to customers in
Germany and Austria dating back at least five years before Anheuser-Busch applied for an
EU trademark for the word.
In January 2007, Anheuser-Busch and Budejovicky Budvar decided to end their century-long
legal battle over the Budweiser brand name and formed a historic trade alliance, with
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Anheuser-Busch distributing its Czech rival's Budweiser, owned by the Czech government, in
Anheuser-Busch was founded by German emigrants in St Louis, Missouri in the 1860s. It has
been renamed Anheuser-Busch-InBev after a $52-billion takeover by Belgian-Brazilian
brewer InBev last year.
IIM-A raises fees by Rs 50,000 from 2010-11
After more than doubling fees last year, the Indian Institute
of Management, Ahmedabad, (IIM-A) has raised fees for
its Post Graduate Programme in Management (PGPM) by
Rs 50,000 from 2010-11, institute director Samir Barua
informed the media.
"Last year, we had decided that the fee for PGPM for 2008-
09 would be Rs 5.5 lakh and for 2009-10 it would be Rs 6
lakh. The board decided that the fee for 2009-10 for the
incoming batch will stay the same. But for the second year,
that is 2010-11, the fee will be Rs 6.5 lakh, an increase of
Rs 50,000," Barua said, after a meeting of IIM-A board of governors that was specially
convened to discuss this issue.
This means the 2009-11 PGPM batch will be paying Rs 12.5 lakh for the course, Rs 1 lakh
more than the 2008-10 batch. The 2008-10 batch was required to pay Rs 5.5 lakh in the first
year and Rs 6 lakh in the second year or Rs 11.5 lakh in total.
Barua, however, added that the fee waiver scheme IIM-A had started last year would
continue for the next year. "Last year, 21 students did not have to pay anything at all for the
course," Barua said.
RIL gas to deflate oil import bill
Reliance Industries Ltd has started pumping gas from India's largest offshore gas field in the
Krishna-Godavari basin, which is expected to knock 10 per cent, or
$9 billion, off the country's annual oil import bill. The Mukesh
Ambani promoted company took just six-and-a-half years from
discovery to start gas production from the deep-sea KG-D6 block
against the global average of nine to 10 years.
The deep-water block in the Bay of Bengal is expected to yield 40
million cubic metres of gas per day by July. It will reach a peak
production capacity of 80 million cubic metres a day next year. At
peak production, KG-D6 is expected to supply 550,000 barrels of oil
equivalent a day.
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The gas will first be supplied to Nagarjuna Fertilizers and Chemicals Ltd — the first of the 11
fertiliser plants that will receive gas supplies in the initial phase.
The other fertiliser plants, which have also signed agreements with RIL, will receive the gas
by April 15 through the East-West pipeline built by Reliance Gas Transportation
Infrastructure Ltd. This pipeline will inter-connect with the pipelines of GAIL (India) Ltd and
Gujarat State Petronet Ltd.
The gas is flowing out of two wells called Dhirubhai 1 and 3 — the first two of the 18 gas
finds in KG-D6 that have been put into production. RIL has 90 per cent participating interest
in the field. Niko Resources of Canada holds the rest. Under the bidding terms for the oil
blocks, the government is entitled to a share of the profits.
Gas sales could generate $42 billion in revenues over the 11-year life of the field. The
government's share is likely to be a minimum of $14 billion.
The project worth Rs 44,175 crore will double domestic natural gas production when it
reaches peak output in 2010 and wipe out the fuel deficit at urea-making fertiliser plants. It
will also meet half of the gas shortfall at power plants, which is estimated at 36 million cubic
metres per day.
RIL expects that the supply of gas to fertiliser and power projects will substantially reduce
the subsidy burden of the government. Sources said the government could save between Rs
2,000-3,000 crore on subsidies.
(4) MTNL, BSNL get lukewarm response to 3G
Telecom firms hoping for a major shift by mobile customers to high-speed third generation
(3G) services may be in for a disappointment. Between them, state-owned telecom companies
Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), which
offers telecom services in Mumbai and Delhi, have managed to rope in just 3,200-odd
customers for their 3G services.
Two months after its commercial launch in February this year, MTNL has
been able to get 200 to 300 subscribers for 3G services in Delhi. It will
launch services in Mumbai only in May.
BSNL has not done much better. It has managed to garner 3,000 customers
in over 24 cities since a month of its commercial launch, said an official.
That means it has, on an average, 125 customers in each city — which
includes Agra, Ambala, Jalandhar, Jaipur, Dehradun, Shimla, Lucknow,
Ranchi and Patna, among others. However, it claims it will be in 500 cities
in the next three months.
The Cellular Operators Association of India (COAI) had projected that as
much as 10 per cent of the 375 million mobile customers would shift to 3G services in the
first year of its launch in the country.
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The two government-owned companies have notched up poor subscriber numbers despite the
first-mover advantage given to them by the government to offer 3G services in December last
Meanwhile, private players' entry into 3G services has been delayed indefinitely over pricing
controversies. "There is so much competition in the Indian telecom industry that when the
private operators get into 3G services, they will deploy very aggressive and competitive
strategies," said a telecom analyst.
(5) Global hotel cos make a beeline for India
Global hotel chains are lining up to open properties in India at a
time the sector is grappling with falling occupancy levels and
declining average room rents, forcing local developers and
hoteliers to defer projects.
Companies, including MGM Mirage Hospitality, Wyndham Hotel Group, Langham Hotels
International and Corinthia Hotels and Resorts, are finalising plans to launch their brands in
the country in the next two-three years. Hotel chains such as Dubai-based Jumeirah Group,
Movenpick Hotels and Resorts and Swissotel Hotels and Resorts are also close to finalising
their plans for India.
Industry experts say as many as 37 international hotels brands are knocking at India's doors.
The world's largest gaming company, MGM Grand, which forayed into the hospitality sector
with three premium luxury brands, is finalising its India plans. The company has held
discussions with Indian real estate players for this. Bellagio is MGM's super luxury brand, on
a par with a Four Season property, whereas the MGM Grand is positioned a tad below that,
and can be compared with the Grand Hyat.
The Wyndham group, which operates the Ramada brand, a four-star hotel in India, is also
planning to launch its Days Inn and Super 8 brands. The company plans to add 50 hotels of
three brands in the next three years. It will bring other brands at a later stage.
Similarly, Hong Kong-headquartered Langham Hotels is looking to take full advantage of the
favourable economic scenario in the country, where raw material and construction prices
have been sliding continuously.
Salt, tobacco products seek Twenty20 trademarks
Even as the country's apex cricket body, the Board of Control for
Cricket in India (BCCI), and the Zee group continue to fight over
trademark rights related to the Twenty20 format of the game, a
couple of other entities selling salt and tobacco products have
sought to register similar trademarks.
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According to the information available from the Controller General of Patents Designs and
Trademarks under the Ministry of Commerce and Industry, application has been filed for
registering a trademark under the name 'TWENTY-20' by an entity in Karnataka for "gutkha
and tobacco products."
Separately, another trademark application has been filed with the authorities for 'TWENTY
20' by Gujarat-based Ahir Salt Industries for salt to be sold in the states of Gujarat, Madhya
Pradesh and Chhattisgarh.
Subhash Chandra-led media and entertainment conglomerate Zee group is the force behind
Indian Cricket League (ICL), which runs parallel to BCCI's Indian Premier League (IPL).
Both the leagues conduct cricket tournaments with a Twenty20 format, where each team is
allowed to play for 20 overs.
Essel started filing applications for these trademarks way back in 2007, while most of the
objections from BCCI on these applications have been submitted in the past few months with
the Controller General of Patents Designs and Trademarks.
The two other trademark applications, 'Twenty-20' for gutkha and tobacco products and
'Twenty 20' for salt, were also filed in late 2007.
On both the applications, the government has issued an 'examination report', which is
generally issued when the authorities find any problem, which has the trademark being
deemed generic or a similar mark having been found.
The trademark office generally takes about four months for examining the application, after
which it issues either an 'acceptance letter', or an 'adverse report'. Once accepted, the
application is advertised in the Official Journal of Trademarks, after which an 'opposition
period' follows, which gives three months for any third party to file an official objection.
The Twenty20 related trademarks have been sought by Essel for areas like entertainment
programmes, sports, news and current affairs programmes or services.
Producers differ with multiplexes over revenue sharing
Bollywood film producers are to go on strike after failing to settle
differences with multi-screen cinemas over revenue sharing. The
protest means no new films will be released in popular multiplex
Producers are demanding a 50% share in the revenues generated
by the cinemas. Owners say the share should be lower if a film
performs poorly. The indefinite strike is expected to begin any day.
Actor-producer Vinay Pathak said many high-budget films have been put on hold and all
parties stood to lose from the dispute. "This problem can only be resolved if both parties find
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a solution that will be beneficial for producers, distributors and multiplexes, and hence for the
audience," he said.
Well-known Bollywood producer Mukesh Bhutt said that multiplexes have grouped together
and are holding the producers, who have never before united on the issue, to ransom.
But multi-screen cinema owners say producers should get less than 50% of revenues if a film
does badly at the box office. "If a movie does well, producers should get more money," said
Alok Tandon, the Inox multi-screen cinema chain's chief operating officer. "If a movie
doesn't do well they shouldn't."
Multilplexes have decided to show old films until the dispute is resolved. Many producers
now make films for release only at multiplex cinemas. Bollywood has been badly hit by the
global economic slowdown and the latest dispute will heap more misery on the industry. It is
already fearing a big drop in its audiences when the IPL cricket bonanza starts in South
Africa in mid April.
The Indian film industry is the world's largest, churning out more than 900 films every year.
Auto financiers breathe sigh of relief over court order
Auto financiers, which had tightened lending norms in the face of rising defaults last year,
may loosen their fists in the wake of the recent Calcutta High Court's order, reaffirming the
lender's right to seize vehicles if customers stop repaying loans. This
could turbo charge sales of cars and other vehicles, nearly 80 per cent
of which are through loans.
A division bench of the high court gave the judgement while hearing
21 appeals filed by GE Capital Transportation Financial Services Ltd
against customers who had stopped paying repayment instalments and had obtained
injunctions from a lower court against confiscation of their vehicles.
As customers began defaulting on auto loans from the middle of last year, financiers started
tightening lending norms. Some, like ICICI Bank, curbed their exposure to auto loans. Nonbanking
finance companies like Mahindra Finance and DBS Cholamandalam Finance were
hit by high interest rates and the liquidity crunch.
Last year, the Reserve Bank of India had come up with detailed guidelines on repossession of
vehicles. It prevented lenders from visiting the defaulting borrower's home and required them
to give them more time. This made it difficult to repossess vehicles. Earlier, a Delhi court
barred the use of muscle men or force of any kind to recover loans.
The Calcutta High Court's judgement does not reverse these orders but may lift sentiment.
''We need to have guidelines for repossession of vehicles that balance the interests of
customers and financiers. The current guidelines are skewed in favour of defaulters,'' said a
senior executive of an auto manufacturer.
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Banks allege some customers have been going to courts with frivolous claims, and they are
scared of taking on delinquent customers. There have been a few cases where courts have
found customer claims frivolous. "These are isolated cases. In general, there's no support
system for the lender. The rights (to repossess) have always been there, but when I try to use
them, I will be open to accusations,'' said a senior banker, though he said he believed that
there was increasing realisation of the problem.
(5) GM chairman to leave US car maker
The chief executive of struggling US car company General Motors, Rick
Wagoner, has agreed to step down. He will leave his post immediately at
the request of the White House. In an interview with CBS, President
Obama said the firms must do more to justify further aid, saying "they're
not there yet".
President Barack Obama is preparing to outline terms for offering more
help to GM and fellow car giant, Chrysler. The two firms have already
received $17.4bn in bail-outs. Chrysler has requested a further $5bn while GM says it needs
GM plans to axe 47,000 jobs and Chrysler 3,000, as well as shedding a number of car
models. The job cuts would take place by the end of 2009 and are the largest work-force
reduction announced by a US firm in the current downturn. Wagoner, 56, has headed GM for
almost six years, after first joining the company in 1977.
In December, GM had said it would cut the number of plants from 47 in 2008 to 38 by 2012,
but now plans to close a further five factories, which would leave it with 33 facilities. The
carmaker's brands would also be reduced from eight to four – Chevrolet, Buick, Cadillac and
GM and Chrysler received their first bail-outs at the end of last year, warning that without the
support they risked financial ruin. Ford, the third of the "Big Three" US car makers, has yet
to require any bailouts, but says it may need funds in the future.
GM, Ford and Chrysler have all seen sales fall sharply in their home market.
Mobiles sans IMEI number may face disconnection
25 mn handsets without IMEI could be out of service soon. DoT has asked operators to
disconnect services to phones that don't have IMEI from April 15.
About 25 million handsets are expected to be out of service from April 15,
as GSM service providers, including Airtel and Vodafone, gear up to deny
connectivity to cell phones without an International Mobile Equipment
Identity (IMEI) number.
Concerned over national security, the Department of Telecommunications
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(DoT) has asked operators to disconnect services to handsets that do not have an IMEI
number. IMEI is a 15-digit code that appears on the operator's network whenever a call is
If all service providers adhere to the deadline given by DoT, nearly 25 million handsets,
which comprise almost 10 per cent of the total GSM mobile phones used in the country and
are mostly China-made, are likely to go out of service.
Analysts feel that the move is also likely to hit the revenue of telecom firms, as phones which
have no IMEI numbers are usually low-cost and unbranded and used by low-end subscribers.
To get these subscribers back on the network would be a challenge for the telcos as they
would have to provide these subscribers subsidised or free handsets.
In October 2008, DoT had set the December 31, 2008 deadline to stop services to handsets
without IMEI numbers. The deadline has been extended to April 15, 2009.
One of the leading telecom service providers has started sending out messages to its
subscribers for using phones with IMEI number or face disconnection.
A mobile phone without an IMEI number poses a threat as it cannot be traced by the service
providers. An IMEI number prevents the use of stolen handsets for making calls and allows
lawful interception to prove the use of a particular device.
The Indian Cellular Association (ICA), the industry body for handset makers, said the
government should also impose restrictions at the point of import of mobile devices without
Moreover, there is no central mechanism to prohibit the use of stolen phones. The bulk of
grey market phones, predominantly originating from China, do not have genuine IMEI
Handset maker Nokia India said: "Nokia has been working with trade bodies like the ICA to
create awareness around this issue and would request all consumers to get their IMEI
numbers validated before the deadline."
(5) India born is America's top paid CEO
With a $104 million pay packet in 2008, mobile phone maker Motorola's
India-born chief Sanjay Jha has emerged as America's top-paid CEO,
while Citigroup's Vikram Pandit tops the league among bailed-out banks
according to a survey published by Wall Street Journal.
Jha joined Motorola in 2008 and serves as co-chief executive officer of
Motorola, Inc. and chief executive officer of Motorola's Mobile Devices
business. He is also a member of Motorola's Board of Directors.
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Jha holds a Ph.D. in electronic and electrical engineering from the University of Strathclyde,
Scotland. He received his bachelor's of science degree in engineering from the University of
Prior to joining Motorola, Jha served as chief operating officer of Qualcomm Incorporated.
Pandit is ranked fourth overall with a pay of $38.2 million, while PepsiCo's Indian American
CEO Indra Nooyi is at the 36th slot with a pay package of $13.98 million.
With his over-$104-million package, Jha is the only CEO to get a compensation package
exceeding $100 million, with Occidental's Ray Irani a distant second with $49.9 million.
Irani is followed by Walt Disney's Robert Iger ($49.7 million) in the third slot.
The median salaries and bonuses for the chief executives of 200 big U.S. companies fell 8.5
per cent to $2.24 million, according to an analysis. CEO compensation decreased more
sharply at banks and brokerages, long the source of some of the biggest paychecks.
PartyGaming reaches compromise with US govt
Online gambling firm PartyGaming has
reached a legal settlement with
authorities in the US.
The agreement ends an issue that has
dogged PartyGaming since 2006, when
the US passed laws that in effect made
online gambling illegal there.
In October 2006, President George W Bush signed the Unlawful Internet Gambling
Enforcement Act, criminalising the transfer and handling of payments from online gambling.
The move caught the industry off guard, and set in motion sweeping changes which saw
PartyGaming withdraw from the US market, where it collected most of its revenue and profit.
PartyGaming has agreed to pay a penalty of $105 million over the next four years as part of a
"non-prosecution agreement". As part of the deal, Party put its name to a "statement of facts"
in which it admits for the first time that, before October 2006, it had targeted US citizens,
resulting in the processing of transactions that were "contrary to certain US laws".
PartyGaming was founded in 1997 as a network of gambling sites operated by Ruth Parasol
in the Caribbean. The network eventually operated under an umbrella company called
iGlobalMedia, which then changed its name to PartyGaming. PartyGaming's flagship site,
PartyPoker.com, was launched in 2001. Its primary shareholders are Parasol, Anurag Dikshit,
Vikrant Bhargava, and Russ DeLeon (Parasol's husband). Other products include
PartyCasino.com, PartyGammon.com and PartyBingo.com.
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The company listed on the London Stock Exchange in June 2005 and is regulated and
licensed by the Government of Gibraltar. It has customers throughout the world but does not
accept wagers or deposits for real money games from customers located in the US.