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

year.

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

(RFP).

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

selection.

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

Services.

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

limit.

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

cent.

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

profitability implications.

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,

ADB

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

cent.

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

March 2009.

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

bank secrecy.

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

Switzerland

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

UBS.

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,"

Tendulkar said.

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

participation.

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

growth.

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

demand.

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

brand.

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

online store.

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

music.

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 world.

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

October.

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,"

he added.

 

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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

violations.

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

Standard.

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

promotions.

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

the change.

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

beverages".

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

the US.

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

year.

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

cinemas.

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

$16.7bn more.

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

GMC.

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

made.

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

IMEI number.

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

numbers.

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

Liverpool, England.

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.