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BW Businessworld

Tokyo, Here We Come

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Any tears are being shed across the country over the unbridled decline of the rupee. Plans for higher studies are being reconsidered; foreign trips, particularly those to the western hemisphere, are being rerouted to places closer home — South-east Asia. But then, since misery does love company, maybe one can take heart in the thought that the rupee has appreciated against several currencies in the past year. Take Australia, for instance, which is emerging as a destination of choice for Indians vis-a-vis higher education. The Australian dollar is still cheaper than it was a year ago. In fact, it’s 4.5 per cent cheaper. And, instead of that trip to Europe, which is now 16 per cent more expensive than last year, you could visit alternative exotic locations such as South Africa (which is as much as 10.6 per cent cheaper for Indians than last year) and Brazil (2 per cent cheaper). But if you’d like to stick to East Asia, try the Land of the Rising Sun, Japan, which is 13 per cent cheaper. 
— Abraham C. Mathews

When The Name Isn’t Enough
This year 769 students did the unthinkable. They chose lesser known institutes over the much sought after Indian Institutes of Technology (IIT). That is reason for worry. Getting into the IITs has been a dream for hundreds of thousands of engineering students ever since the first IIT was established in 1952 at Kharagpur. So, has Brand IIT suffered an erosion? It’s all a question of supply and demand. Till 2007, there were seven IITs, now there are 16. Many in smaller towns like Mandi and Rupnagar do not have their own campus yet. Big firms are not even willing to attend placement sessions in these institutes. So while the number of seats has increased, graduates from these colleges don’t make it to the crème de la crème. Till the time these institutes generate their version of an
769 students spurned offers from the IITs
N.R. Narayana Murthy, the IIT name will need the location suffix to carry weight.
— Anup Jayaram

The Business Of Being Neighbourly
A gas-starved India is mulling selling around 5 million metric standard cubic metres of gas per day to Pakistan. One would think this was reason enough for objection, but experts disagree, saying the deal is just business. Pakistan is seriously short on energy, with only 21,000 MW of installed generation capacity (not even a tenth of India’s). More than half its power projects are gas-based, but it doesn’t have the kind of supply needed to fuel them. The only option is using LNG — but then, it doesn’t have any LNG terminals needed to import gas. And this is where India comes in. India can import the gas and then take the land route to forward it to Pakistan, billing it for transport and logistics. Considering Indian producers are unwilling to use the more expensive LNG as fuel, why not be neighbourly instead? It may even smoothen the way for the Turkmenistan-Afghanistan-Pakistan-India pipeline. 
— Chhavi Tyagi
 
Beware Of The Hollow Rally
16% is the gain by the Sensex over the past year
the equities market can be the best example to indicate how numbers can be misleading if not used in the right perspective. If plain index values are considered, India is now in the thick of a roaring bull market rally. The 30-share Sensex has gained 16 per cent in one year. If one takes a shorter time frame — say, between 14 June and 12 July — the bellwether index has returned over 6 per cent. Such returns can make even astute investors sit up and take note. But a deeper analysis of data will tell you how hollow the market rally has been over the past few months. As on 15 July, 31 of the 50 Nifty stocks were trading below their respective 200-day moving average (DMA — a widely used technical ratio to plot directional trends in market) prices. If one takes a larger stock universe, 356 of BSE 500 firms were trending lower than their 200 DMA price lines. A market breadth analysis (participation analysis) will tell you that despite the market rally, 120 of the BSE 500 companies are languishing at their all-time-low price levels. Technical indicators such as these reflect the poor health of the equities market. Investors should be careful investing in markets, for they are fraught with risk.
— Shailesh Menon
 
Looking Beyond The 100% Hype
The big news about FDI in a dozen sectors needs careful screening. In four areas — petroleum refining, commodity and stock exchanges, depositories and power exchanges — the FDI cap remains at 49 per cent. Approval is now automatic and Foreign Investment Promotion Board (FIPB)clearance isn’t needed. Asset reconstruction firms get auto FDI approval till 49 per cent, but can raise it to 100 per cent on FIPB approval. Credit information firms get auto approval till 74 per cent FDI and courier firms don’t need an Indian partner.
 
Currently, India has two private oil refineries, two power exchanges and three national-level commodity exchanges. With excess refining capacity in India and petroleum products being subsidised, FDI can happen only in a public-private joint venture refinery. That too looks bleak as of now.
 
With 100 per cent FDI , telecom and single-brand retail should see increased FDI inflows. Defence FDI can exceed 26 per cent based on approval from the Cabinet Committee on Security, which could take years. Telecom operators like Norway’s Telenor, Russia’s Sistema and the UK’s Vodafone can quickly buy out minority partners. But, until the telecom department clears the fog on M&A, not much action is expected. 
 
In insurance, 49 per cent FDI can happen only after parliamentary approval. But, it all goes back to the insurance amendment Bill (introduced in 2008) in Parliament. 
 
Even before the ink could dry on the revised FDI caps, two steel projects were shelved by Korea’s Posco and ArcelorMittal. The limit on FDI is important, but creating an investment climate is critical. — Anup Jayaram

No Space For Low-Price Housing?
The low-priced housing segment, priced around Rs 10 lakh, may be going downhill. Particularly, with Tata Housing — which had entered the segment in Mumbai in 2010 amid much fanfare— cancelling its affordable housing project at Vasind, Thane. The firm cited its inability to get the required government approvals as the reason for suspension. It has also returned money (with 12 per cent interest) to customers who had booked houses. But with other small players (like Omaxe) who had announced similar projects either cancelling or stalling them due to the economic slowdown, it begs the question whether low-cost housing is a viable idea in the current scenario.


In the meantime, Tata Housing has ventured into the luxury segment which, ironically, seems to be the only lucrative segment left in real estate.
— Sachin Dave
 
Once Bitten, But Far From Shy
Bloomberg
The recent crash of the carbon credit market ought to act as a cautionary tale, but it’s a tale India has decided to ignore. Similar to carbon credit trading, India is promoting the exchange of Renewable Energy Certificates (REC). Carbon credit trading has all but stopped and most developed nations who had promised to purchase the Certified Emission Reductions from nations like India and China are unwilling to buy them, citing regulatory and monetary reasons. India believes the REC exchange is viable, mostly because it is limited to deals within the country and doesn’t involve global economies. But since carbon credits, which started out at $20 per tonne in 2008, went below $5 in 2010 and are today close to $1 today, suffered on account of supply outstripping demand, experts feel there is a strong possibility that this may be mirrored in REC trading as well because each sector, company, entrepreneur and consumer is looking to cut energy costs through green energy.
— Moyna

Blow Hot, Blow Cold
It seems the Competition Commission of India (CCI) is going soft. After facing a lot of criticism for its big-bang order imposing huge fines for objectionable behaviour, the regulator seems to be bending backwards to give some leeway. For example, it absolved the Indian Broadcasting Federation (IBF) of cartel-like behaviour after IBF collectively boycotted advertisers (coaxing them to agree to a different billing method) for two days in May. Given that group boycotts are frowned upon globally, CCI’s decision that not all collective actions can be termed anti-competitive seems strange. 
— Abraham C. Mathews
 
Of Trials And Tribulations
According to the health ministry’s clinical trial registry, clinical trial approvals by the Drugs Controller General of India have been on the decline. If 500 approvals were given in 2010, it was 321 in 2011, and 262 last year. This year, only six trials have been listed so far. More will be added as a central committee recently cleared many applications pending since January. Fewer clinical trials isn’t good for the growth of India’s clinical research industry. It is also not good for patients, as many of these trials are part of global clinical studies, meant to secure marketing approval for innovative medicines and technologies in medical care. Delay in generating India-specific clinical trial data will mean a delay in getting these new therapies approved and launched in India. Many issues plague the clinical trial sector, such as unethical practices , complaints related to adverse reactions, insufficient or zero monetary compensation, etc. But a stay on trial approvals isn’t the solution. The Centre should streamline its regulatory mechanisms, encouraging genuine clinical trials through timely approvals. 
— Joe C. Mathew
 
Reading The Ambani Mind
Mukesh Ambani
Many were surprised to not find RIL in the final list of banking licence aspirants
BW Pic by Subhabrata Das
Mukesh Ambani seems to be playing corporate chess these days, while others try to guess his next move. Currently, speculation is rife on why neither Reliance Industries (RIL) nor its joint venture (JV) firm D.E. Shaw India Securities figures on the list of banking licence aspirants. Especially since the JV with the New York-based D.E. Shaw group was put together “to participate in the growing Indian financial services sector”, as Ambani had said. Younger brother Anil, though, seems to have jumped on to the banking bandwagon. But given Mukesh’s decision to not bid for telecom spectrum but acquire Infotel Broadband Services once the latter had a pan-India licence, one wonders if he will play a similar move by tying up with JM Financial, one of the banking licence aspirants.
— Nevin John

Get To Live In Your New Home Before Buying It
What if you could test-live your new home? Taking cues from the auto sector, real estate firms are now increasingly offering potential home buyers an actual taste of the life they could have. Real estate developer Tata Housing has spent more than Rs 1 crore on its marketing campaign for La Montana, a Mediterranean-themed housing project in Pune. Interested home buyers are invited on site to experience the Mediterranean lifestyle through several ongoing activities — including the La Tomatina festival with artificial tomatoes! 
 
50% visitors to the Ashiana Utsav bought a flat
While the trend is only just picking up, Ashiana Housing was one of the first to do this earlier this year with much success. It offered ‘trial homes’ in its senior-living projects, where the clients could get a feel of their potential home by spending a couple of days there before deciding to buy a house. 
 
The Ashiana Utsav in Jaipur saw over 50 per cent visitors convert to buyers.  With marketing innovations touching new heights, ‘simulated living’ may be the next big thing in realty.
— Ankita Ramgopal
 
Keeping The Faith In E-tail
$200 mn is what Flipkart raised from its investors
While funding seems to have dried up for new e-tailers, there is some optimism for existing ones in the domain. Existing investors in the e-tail space continue to support the companies they have invested in by pumping in money to keep them afloat till a viable exit option is available. If rumours are to be believed, Flipkart was supposed to run out of money in the next three months. But, instead, it recently raised $200 million from existing investors, US hedge fund Tiger Global, venture capitalist Accel Partners and South Africa’s Naspers. Sources say Flipkart wanted to raise another $100 million from new investors but a deal is yet to be struck.  In April, baby products e-tailer Babyoye raised $12 million from existing investors. First Cry too is reportedly in talks with its existing investors for infusing fresh capital to keep it running. As the game becomes more competitive with the world’s largest e-tailer, Amazon, coming to India, investors have no option but to show faith in their investments, instead of writing them off.
­— Shrutika Verma
 
It’s Sunny Side Up For Green Energy
Even though the question — how long will renewable energy (RE) take to override fossil fuel-based power to meet the ever-increasing demand? — remains unanswered, the signs are mildly positive. The consistent decline in RE rates is heartening. For example, 1 unit of solar power cost close to Rs 18 in 2010, but today it’s closer to Rs 6-8, which is the same as 1 unit of diesel-based power. But there are a few bumps. The solar manufacturing market witnessed an all-time low last year and is believed to be still recovering from over-dumping and other regulation-induced slumps.

Despite the constraints, big RE developers and solar panel makers say the potential and market for the RE sector is huge, especially since resources like sunlight, wind and biomass are unlimited.

Similarly, even with government incentives being withdrawn in the wind sector, power generation through wind is
only increasing.
— Moyna

Now You Can Purify Your Water On The Go
The battle for a bigger share of the high-growth water purifiers business is heating up. With players such as Hindustan Unilever and the Tatas entering the space, market leader Eureka Forbes is upping the ante, and foraying into the personal purifiers space. Its CEO, direct sales, Marzin Shroff, says the firm will soon launch ‘Aquaguard on the Go’. “It’s a  cartridge-based bottle in which you can fill the dirtiest water in the world and drink safe water,” he says. Currently, it’s being piloted in Dubai. The price in India would be around Rs 600. Incidentally, the first in this space was Swiss firm Vestergaard, whose award winning on-the-go filtration product ‘Lifestraw Personal’ is used by backpackers globally. Till now mostly in the public health space,  Vestergaard is planning a retail venture. A Vestergaard spokesperson said the company is planning to launch two new products later this year in the Indian retail market — the LifeStraw Countertop and the LifeStraw Bottle (which has LifeStraw fitted inside).  Every drop counts. 
—Chitra Narayanan

(This story was published in BW | Businessworld Issue Dated 12-08-2013)