Reddy says 3% inflation rate is ideal

Inflation should be ideally and optimally closer to 3 per cent over a period so that global integration becomes smoother, Reserve Bank of India Governor Y V Reddy, said today. He was speaking on the sidelines of a conference in Pune. “The target for this year is to contain inflation within the 5 per cent range. In the medium term, it should be between 4 and 4.5 per cent,” he said.

The annual rate of inflation for the week ended June 16 dipped to 4.03 per cent from 4.28 per cent in the previous week. Both the RBI and the finance ministry are keen on containing the rising inflation without hurting growth.

The central bank has raised the key lending rates five times during the last year in an attempt to contain the inflationary expectations. It last increased the overnight lending rate to a five-year high of 7.75% on March 30.

While bankers continue to debate whether the interest rates in India have peaked or stabilised, ICICI Securities has stated in its recent report that policy rates in India are yet to peak. In the near term though, the RBI is unlikely to tinker with the rates, thanks to softening of domestic inflationary pressures.

Although headline inflation has dipped below 4.5 per cent, this could be temporary. Inflation is likely to remain below the RBI’s targeted five per cent for the next three months.

Apart from the base effect, the manufacturing price rise has slowed down in line with the sharp rupee appreciation and decline in import parity prices. However, the farm prices could still pose a risk.




Tata Steel to sell Corus aluminium business; Expected to fetch over $ 1 billion

Six months after acquiring Anglo-Dutch steel giant Corus, Tata Steel has put the foreign company’s aluminium business on the block, reports the Business Standard. The aluminium business, which comprises two smelters in the Netherlands and Germany, is expected to fetch over $ 1 billion (Rs 4,000 crore).

Tata Steel was catapulted to the world’s fifth largest steel company through the acquisition of Corus for an enterprise value of $ 12.9 billion in January, the highest ever overseas buyout by any Indian company.

Sources close to the development said German aluminium producer Trimet had shown interest in the business but added that it might not be sold to a single buyer. The smelters are in Delfiz in the Netherlands and Voerde in Germany. A Corus spokesperson said the company was evaluating the best strategic option for the aluminium business but declined to comment on the identity of the buyers.

“The aluminium business was identified as a non-core area of operations four years ago. Last year, we sold the downstream aluminium business. Now, the main concern for the aluminium business in the Netherlands is the high energy cost,” she added.

Corus sold its downstream aluminium business, including its rolling and extrusions business in Europe, for billion (Rs 4,000 crore) to Aleris last year. After the sale, Corus agreed to long-term contracts to supply Aleris with raw material. “So, the primary aluminium business is secure. Even then, the high energy cost is a major concern” she said.

Trimet has been managing its business well despite high energy costs. Last year, it bought the electrolysis and anode units of the Hamburger Aluminium-Werk smelter in Germany.

Corus had tried to sell its aluminium business in 2003 to French major Pechiney. But the move fell through due to opposition from the company’s Dutch supervisory board.




RCoM to make handsets, ties up with Taiwanese co; Also ties up with Bangladesh telecom firm for intl roaming

Reliance Communications is finally set to make handsets in India. After years of speculation, India’s second-largest mobile telecom operator and the largest player in the CDMA space is getting into a joint venture with Taiwan’s Cal-Comp Electronics to manufacture CDMA handsets in the country, reports the ET. The manufacturing plant is slated to be operational during the first half of 2008. RCOM is also learnt to have placed an order of nine million additional handsets with Cal-Comp.

“Due to the fast-growing handset market in India, Cal-Comp plans to set up a joint venture with the client to manufacture handsets in India, with the planned investment project likely to be carried out in the first half of 2008,” Cal-Comp chairman Rock Hsu said in Taiwan, without naming the client. He, however, said that his client was a CDMA operator in India which has increased the order size for 2007 to 12 million units from three million units.

With the proposed JV, Cal-Comp, which has manufacturing plants in China and Thailand, will join Nokia, Sony Ericsson, Motorola, LG and Samsung to add to the 51 million handsets likely to be made in India this year. India produced nearly 31 million mobile phones in 2006 worth about billion. Asked about plans to make handsets in India with Cal-Comp as the JV partner, the RCOM spokesperson declined to comment.

The move to place a large handset order and enter into a JV with an established player will help RCOM preempt Vodafone-Essar, which plans to launch a series of ultra low-cost bundled handsets (mobile connection and a handset) in collaboration with China’s ZTE to get a bigger pie of rural India and increase its market share. Vodafone’s low-cost handsets are expected to be priced between Rs 1,000 and Rs 1,600.

This apart, market leader Bharti has similar ambitions in the bundled handset space and is in talks with many mobile phone manufacturers for customised handsets for its new subscribers.

So it is only logical that RCOM is planning to make handsets in collaboration with a known player. The Anil Ambani-owned company has been pursuing an aggressive handset-driven expansion plan and in the last two months kicked off a series of price war in the handset category which began with the launch of the Rs 777 Classic range.

RCOM sold over a million units of the Classic range within a week of its launch. RCOM followed it up with the launch of colour handsets beginning at Rs 1,234 and sold over a half a million in the first 10 days. Subsequently, RCOM introduced FM radio mobiles at Rs 1,888 and Rs 1,919.

The price wars resulted in RCOM’s rival in CDMA Tata Teleservices launching handsets below Rs 1,000 bundled with its mobile connection and market leader Nokia choosing India for the global launch of its latest low-cost phones.
In addition to CDMA handsets, Cal-Comp also manufactures PDA handsets, chordless phones, printers, VoIP phones, GSM phones and Bluetooth headsets. Cal-Comp also operates R&D centres in Thailand, Taiwan, South Korea, China, and Singapore.

Last year, after a major tiff with RCOM over royalties on handsets, CDMA patent holder Qualcomm had said that it would share technology and provide licences to companies to manufacture CDMA handsets in India to bring down prices of mobile phone. Though Qualcomm had given the licence to HFCL to manufacture CDMA handsets in India about nine months ago, the company is yet to begin production.

Meanwhile the Business Standard adds that RCOM also has tied up with Pacific Bangladesh Telecom (PBTL), which is offering CDMA service in Bangladesh under the name CityCell, for international roaming.

With this, Reliance postpaid customers can stay connected using the same Reliance mobile number and handset, both in India and Bangladesh.

Reliance customers can now avail of the roaming facility in 200 countries with 350 CDMA & GSM operators. For availing of the roaming facility in Bangladesh, a subscriber will have to pay Rs 18 a minute for any local or national call and Rs 29 to call India.




Ratan Tata wants merger of TCS arms

India’s leading information technology (IT) services provider, Tata Consultancy Services (TCS), will explore the option of merging some of its group companies. Speaking at the company’s second Annual General Meeting (AGM), Tata Group chairman, Ratan N Tata, said: “It makes sense merging some of the group companies. However, Tata Elxsi is into animation and will be a standalone business.” He, however, did not specify any name. IT solutions provider CMC Ltd, Elxsi and Tata Technologies are the other IT companies of the group.

The company management also announced it has earmarked a capex of Rs 1,400 crore for FY’08. This is an increase of Rs 235 crore from the Rs 1,165 crore spent during the previous financial year. TCS Managing Director and Chief Executive Officer S Ramadorai said that Rs 300-350 crore would be spent on technology and the remaining for IT infrastructure.

On the rising rupee, Ratan Tata said, “It is a matter of concern for us like anyone who is into exports. But as offshoring is becoming a critical business strategy among the US, European and Latin American companies there will be some balancing act.” Ramadorai added: “We are looking at expanding our Latin America centre. But this will be through organic growth.”

Answering a shareholder’s concern on why Indian IT companies cannot be the next Microsoft or Cisco of the world, Tata remarked: “This is something that I have been discussing with Rama (Ramadorai). But I feel that products come from markets that are close to such market places and the US provides that market. We might look at creating a product group in the US and treat it as a venture capitalist activity by TCS.” The Tata group company, he added, is aiming to become one of the top 10 global IT companies by 2010.




Dr Reddy's in SEC list for terrorist state links

Dr Reddy’s Laboratories is the lone Indian company in a list of some of the world’s biggest companies named by the Securities and Exchange Commission (SEC) as those “indirectly subsidising” terrorist states like Sudan, according to a Business Standard report. Sudan is one of the five countries designated by the US state department as “sponsors of terrorism”. The others are Cuba, Iran, North Korea and Syria.

The list, posted on a website link launched by the US regulator, includes ABB, HSBC, Nokia, Unilever, Cadbury, Total and Siemens among others. The SEC prepared the list of those companies that have published business interest with these countries in their 2006 annual reports. By clicking on each country, investors can see a list of companies mentioning that country in their latest annual reports.

When contacted, Satish Reddy, MD and CEO, Dr Reddy’s Laboratories, said in an e-mail: “Our formulations segment markets a limited number of products in Sudan through independent distributors. Our sales in Sudan (pertaining to 2006) are not viewed as material to our business or to our overall revenue.”

“The SEC sent a letter to Dr Reddy’s one-a-half years ago asking the company’s business details in Sudan. We replied to the SEC in January 2006, which has been acknowledged by them,” Reddy added. Dr Reddy’s global branded formulations business is operational in six regions including Africa, where it is present in South Africa, Ghana, Sudan, Kenya, Uganda, Tanzania, Rwanda and Congo.

Industry experts said some companies might have appeared in the SEC list but that did not mean that they were direct or indirect supporters of terrorism. They added that although the SEC’s attempt was to protect investors’ interest and exhibit the highest level of transparency, it had no tool for judging whether a company mentioned in the list did a material level of business in these countries.

The exercise is a part of the SEC’s investor protection mission so that investors will know whether his or her investments are indirectly subsidising a terrorist state.




Wipro closes in on Unza buy; Deal size estimated at over Rs 1,000 crore

Wipro Consumer Care, the Rs 818-crore consumer care and lighting division of infotech major Wipro, is close to buying out Unza, the Singapore-headquartered consumer care company, reports the Business Standard. Sources said the deal size was estimated at over Rs 1,000 crore. Wipro executives declined to comment on the deal. Other Indian bidders like Dabur, Emami and Godrej were out of the race over valuation issues, sources said.

Unza is a manufacturer and marketer of personal care products with a predominant presence in South-East Asian markets. The company has 48 brands spanning products like soaps, shampoos, deodorants and talcum powder and a presence in over 58,000 retail outlets in South-East Asia.
Wipro’s product basket is more diversified and includes natural sweeteners, honey, soaps, talcum powder, laxatives and light bulbs. Consumer care products account for only 5% of Wipro’s consolidated revenue of Rs 15,000 crore.

Industry analysts felt acquiring Unza would be a good opportunity for Indian consumer goods companies, due to the company’s extensive distribution channel and large manufacturing base. However, the pitfalls of acquiring a company with such a huge product offering could prove daunting for Indian players who are relatively inexperienced in international markets. Teething problems like product integration might take over two years, analysts felt.

Some analysts were also sceptical about Indian companies using Unza’s distribution channel to market their products. “Consumer products require customisation according to regional needs. Indian brands might not suit conditions elsewhere and Indian companies might not have the expertise to doctor their products to make them suitable for conditions elsewhere,” said one analyst.

Analysts seemed unsure about how Wipro might leverage this acquisition, although an industry expert felt the buy-out would only be to Wipro’s advantage in the long run.




Honda to roll out small car by 2009-end

Giving in to the irresistible small car boom in the country, Japanese automaker Honda Motors is foraying into the segment with the launch of its first small car by the last quarter of the calendar year 2009.

"We plan to start our small car venture in India with this plant," said Satoshi Aoki, chairman, Honda Motor Company, as he referred to its subsidiary Honda Siel Cars India’s (HSCI) second facility at Tapukara, Rajasthan, which had its foundation stone laying ceremony today.

The car will contend with premium end hatchbacks like Maruti Suzuki Swift and Hyundai Getz, as Aoki subtly said, "We can not make a car without Honda-like characteristics." When asked about the viability of making a $3,000 car that Renault-Nissan plans to market in India, Aoki said personally, he would be surprised. Currently, the cheapest car that Honda makes is priced at $9,000 with a 660cc engine, sold in Japan.

Aoki said the new car will have a localisation content of 90%, while the City and the Civic have already reached 80 and 78% respectively.

"Definitely our aim with the small car is to qualify for the excise duty benefits," Masahiro Takedagawa, president and CEO, HSCI, said while clarifying that the car will be primarily for domestic sale.

The new 600 acre facility, which envisages an initial investment of Rs 1,000 crore, will have an initial annual capacity of 60,000 units, which will be later peaked to 2,00,000 units. The plant, besides manufacturing the small car, might also produce existing models to lessen load on the 150 acre Greater Noida plant.




Bajaj June bike sales soften, down 12%

Sales of India's second largest two-wheeler maker Bajaj Auto dipped in double digits for the third consecutive time in each of the first three months of the current financial year.

The company sold 162,253 motorcycles in June, down by 12% over 183,549 motorcycles sold during the same month in 2006. Total two-wheelers sold during June, including exports, were 164,758 units as against 188,231 units sold in June 2006.

Exports of two and three wheelers, however, during the mionth grew 42% to 48,675 units, as against 34,369 units exported during the same month last fiscal.

Sales for the first quarter ended June 30, 2007 (Q1FY07) were down further at 14%, with total two-wheeler sales standing at 499,777 units, as compared to 578,621 units in Q1FY06.

Rajiv Bajaj, managing director, Bajaj Auto, said, "The first quarter of the current fiscal has been disappointing."

The company will launch a motorcycle in September, with a monthly target of 50,000 unit sales, Bajaj added.




Navi Mumbai SEZ to come up for nod on July 12

The much-delayed Navi Mumbai special economic zone (SEZ) promoted by Reliance Industries chairman Mukesh Ambani will come up for formal clearance before a central government panel on July 12 after getting the green signal from the Maharashtra government on issues raised by the revenue department.

The Board of Approval (BoA) will also be taking up a multi-product SEZ at Chhindwara, Madhya Pradesh, the Lok Sabha constituency of Commerce and Industry Minister Kamal Nath, for clearance.

The board will consider 38 proposals at its next meeting. If approved, this will take the overall SEZ approvals - formal as well as in-principle - to over 500 after the new SEZ Act came into force in 2006, government officials said.

The Navi Mumbai proposal was referred to the revenue department as the proposed zone was said to be non-contiguous and a highway passes through it. The report of the department, while giving clean chit on the issue, also wanted to know what would promoters do to protect the interests of villagers in the area.

The views of the state government were also sought by the board and its approval came last week that have been circulated among the members of the BoA for consideration.




Maruti on an overdrive to tap rural India

After establishing its foothold in urban and semi-urban markets, Maruti Udyog, the country's top car maker, has embarked on an ambitious drive in villages and entered into an understanding with regional rural banks for car finance to push sales.

The company, which early this year began executing its pan-India plan, has already started seeing the results. "We have already sold 2,700 cars and generated about 20,000 enquiries through the rural scheme that was started in April," Jagdish Khattar, managing director, Maruti, said.

Interestingly, of the cars sold under the scheme 50% were Alto while about 23% were M800, he added.

Khattar said one of the main reasons for the company's confidence in doing well in rural areas was its ability to rope in regional rural banks as partners for financing besides taking help from the company's existing umbrella of car financiers including Mahindra Finance and Magnum. "We wrote to 95 regional rural banks, which together have about 14,000 branches all over the country for financing purchases," he said.

Besides approaching the banks, MUL has also been innovating its rural sales strategy by asking dealers to appoint rural sales executives (RSEs) to build and maintain relationship with potential customers.

"Since January, our dealers have started appointing RSEs in villages who belong to the place and are stationed there itself. The idea is to strengthen interaction with potential customers and convert them to buyers," he said.




DLF plans expansion of multiplex biz

Banking on the growing multiplex culture in metros, real estate major DLF is planning to set up 35-40 new movie screens across the country over the next two years, entailing an investment of about Rs 160 crore.

"We are going to add 35-40 screens at various locations across the country over the next two years. The company invests in a range of Rs 3-5 crore on each screen," Ajay Khanna, executive director, DLF told PTI.

The company operates multiplex's under the DT Cinema brand. DT Cinema presently operates two multiplexes in Gurgaon.

Khanna said in the current fiscal DT Cinemas would add multiplexes at Shalimar Bagh, Saket, Vasant Kunj, in Delhi and Gurgaon.

Speaking about the expansion of the company's shopping malls, Khanna said DLF's four new malls will come up at three major towns in the country.

DLF would open one mall each in Vasant Kunj, Delhi and Jalandhar while two new malls would come up in Mumbai by the end of this financial year.

"We have invested nearly Rs 1,000 crore on the Vasant Kunj mall," he said.

Commenting on the company's insurance business, he said: "DLF is looking to venture into insurance pretty seriously."

The company recently tied up with the US-based Prudential to form a life insurance company in India. Insurance market here raises 24 billion dollars annually in premiums.