Fin Fast Track-Finals 2011spidi2.iimb.ac.in/~networth/resources/fastrack/ff2011.pdf · Fin Fast...

FIN FAST TRACK’ 2010

FIN FAST

TRACK

FINALS 2011

Fin Fast Track-Finals 2011

Contents

Global Market Overview & Outlook ............... 3

November 2010 .......................................... 3

Overview ................................................. 3

Outlook ................................................... 4

December 2010 ........................................... 4

Overview ................................................. 4

Outlook ................................................... 5

January 2011 ............................................... 6

Overview ................................................. 6

Outlook ................................................... 7

Indian Markets ................................................ 8

Daily Report February 25’ 2011 .................. 8

Daily Report February 24’ 2011 .................. 8

Week Ending February 12’ 2011 ................... 10

January 2011 ................................................. 11

Key Highlights ............................................ 11

Events ........................................................ 11

December 2010 ............................................. 12

Key Highlights ............................................ 12

Sector Performance .................................. 13

November 2010 ............................................ 14

Key Highlights ............................................ 14

Major Corporate Announcements Events 14

Key Macro Economic Developments ........ 15

Indian Economy............................................. 15

Indian Sectors............................................ 23

World Economy ............................................. 58

Oil Crisis: Impact of Middle-East revolutions

.................................................................. 58

Europe’s Inflation ...................................... 59

Britain: Inflation Dilemma ......................... 61

US .............................................................. 63

Banking: The debt net ............................... 64

ASIA M&A DEALS .......................................... 67

1.Mahindra & Mahindra to acquire South

Korea‘s SsangYong .................................. 67

2. Reliance Industries buys 95% stake in

Infotel Broadband for Rs 4,800 cr ............ 68

3. Steel Consolidation- JSW- Ispat deal ... 69

4. ADAG pack consolidates...................... 70

5. Axis Bank and Enam combine their

investment banking and equities businesses

.................................................................. 71

6. iGATE to Acquire Majority Stake in

Patni Computer Systems ........................... 73

7. BP, Reliance enter $20bn investment deal

.................................................................. 74

USA & Europe M&A ...................................... 76

Sanofi-Aventis - Genzyme ......................... 76

Danaher - Beckman Coulter ...................... 76

DuPont - Danisco ...................................... 77

Amgen - BioVex ......................................... 77

Scorecard: Top M&A deals 2010 .............. 77

Novartis/Nestle - Alcon ............................. 78

Sanofi - Genzyme ...................................... 78

Merck KgaA - Millipore ............................. 79

Teva - Ratiopharm..................................... 79

OSI - Astellas ............................................. 79

Reckitt Benckiser - SSL .............................. 79

NBTY - The Carlyle Group .......................... 80

Abbott Laboratories - Piramal Healthcare 80

Pfizer - King ............................................... 80

Grifols - Talecris ........................................ 81


Global Market Overview &

Outlook

Source: www.trigoncapital.com

November 2010

Overview

In November equity markets reminded

investors about its risky nature. Last time

the markets showed a negative result was

in August. This time investors once again

paid attention to the deepened debt woes in

the eurozone. In contrast to May, when the

focus has been on Greece struggling with

its budget deficit, now the fate of Ireland

was in question.

Shares of both industrialized and

developing countries have by a couple

percent deviated from this year‘s peaks

reached in early November. The overall

nervous atmosphere has resulted in

increased oil and gold prices, as investors

tend to see these types of assets as safe-

haven in times of uncertainty. The price

increase was particularly steep, if one is to

measure the performance of assets in

euros. At the same time, prices on

industrial metals fell as investing in them

is often associated with risks. The plan to

increase further the money supply

launched in the US has driven yields of

government bonds higher, but a sharp

decline in prices was limited due to the

renewed debt worries in the euro zone. The

situation has again increased the

attractiveness and reliability of such bonds

to investors. Negative performance was

also demonstrated by risky fixed income

investments. On the one hand, there were

fears that difficulties in the troubled

countries will affect businesses, making

corporate financing increasingly difficult.

On the other hand, the bonds of

developing countries fell along with other

risky assets. The 6% decline of the euro

significantly limited negative results of the

assets traded in the US dollar.

In November the support for markets

provided by the earnings season has

weakened, since, as the markets see it, the

most important companies have already

submitted their reports. Moreover, the

recent results were in line with analysts‘

expectations or even appeared slightly

weaker. The Irish saga has overshadowed

certain macroeconomic indicators that

exceeded the expectations and pointed to

accelerating economic growth in the fourth

quarter compared with the past three

months. The growth signals were coming

both from manufacture and services

sectors. The most surprising results were

demonstrated by Germany, which once

again confirmed the dual nature of the

European region‘s development. Over the

past weeks initial jobless claims in the US

http://www.trigoncapital.com/


have decreased, although it is still

somewhat early to talk about any marked

improvement in the labour market.

Outlook

The entire story with Ireland has once

again given grounds to doubt the ability of

the PIIGS countries (Portugal, Ireland,

Italy, Greece, Spain) to solve their debt

problems on their own. Ireland is already

the second country turning for help to the

EU authorities. The 750 billion euro

package aimed at ensuring financial

stability on the European credit market

was apparently not enough to restore the

investment confidence. Pressure on other

PIIGS countries was continued with the

result that now they have to finance their

expenses at a higher price. Despite the

assurances of Ireland that the need of

funding is not so high, the reality turned

out to be different. Because of the action

taken to bail out local banks the budget

deficit in Ireland has reached a level of

30% of GDP, and the chances of the

country to copy were minimal. At present

the rescue plan for Ireland has already

been approved. It will cost the EU 85

billion euros. It is now too early to talk

about solving the problems, but at least the

situation was brought under control in the

short-term. The markets continue to

actively discuss the lingering issues in

other PIIGS countries, the contagion effect

and the challenges facing the euro ahead.

Portugal is likely to be the next problem

country. It is still not clear whether Spain

is to follow. However, everything points at

one thing: the PIIGS countries are to face

harsh austerity programs that will affect

the next year's economic growth across

Europe. The US Fed also revised its

forecasts for the next year, lowering the

projected growth rate due to remaining

high unemployment indicators.

At the same time the emerging countries

continue with dynamic growth, and should

support industrialized nations with their

rapid development. The nominal economic

growth of developing countries amount to

10-15%, which creates a favorable

environment for the profit growth of

enterprises. The share of investment

channelled here, does not even remotely

correspond to the role played by these

countries in the world economy nowadays.

December 2010

Overview

For investors this December ended on a

positive note. More than 7% growth on the

world stock markets marked a good ending

of 2010. In terms of performance 2010 was

a successful year. Assets of investors

demonstrated good performance in almost

all classes. The year was especially good

for those who save, consume and measure


investment performance in euros. Due to

the fact that during this year the euro was

under pressure, such investors have

received a steady 7% gain on their dollar

investments.

According to breakdown by the asset class,

the investments in commodities were of

the highest performance. The commodities

index increased during the last year by

nearly 26%. It was mostly caused by

steady growth of Chinese economy, which

boosted demand for various crops and

industrial metals. Natural disasters that

happened this year limited the supply of

commodities, providing additional

dynamics to the price growth in this asset

class. Performance of stocks of emerging

markets followed the dynamics of

commodities. Performance of such stock

has reached 25%. Growth of developing

countries once again significantly

exceeded that of industrialized countries,

which creates a favourable environment

for growth of company profits. Without a

doubt, the rise in prices on commodities

played an important role here. Equity

markets of developed countries also

showed good performance (+17%) while

supported by actions of governments and

central banks, as well as improved

financial performance in corporate sector.

The debt crisis in the Euro zone became a

slowing factor for European stock markets.

In the bond sector the developing countries

increased most notably (+20%). German

bonds have also grown by 6%.

Outlook

The world economy has still not

completely recovered from the crisis, but

despite this there are some positive trends.

The topic of a second wave of economic

crisis was actively discussed this summer,

but now it is all but forgotten. The growth

of the developed countries continues to be

limited by problems in the labour market

and budgetary constraints. Growth in the

developing countries, and especially in

China, will continue, thanks to strong

macroeconomic foundations and little

damage caused by the crisis.

Regardless of sectors, such countries offer

the best conditions for profits and their

economic growth rates are 2-3 times

higher than those of industrial countries.

Inflation in the developed countries

remains at low levels. This year there is no

reason to expect an increase in interest

rates neither in the US nor in the Euro

zone. The developing countries continue

their fight against inflation. Among the

possible risks one should name the

deepening and widening debt crisis in the

Euro zone, the significant reduction of


growth of Chinese economy, high levels of

unemployment in the US and the

possibility of overheating in the

developing markets.

In terms of asset allocation, investors will

pay more attention to stocks. Stock

volatility is now at a low level. At the

same time, dividends on shares remain

higher than interests on bonds. For a long

time, investment in stocks was regarded as

too risky. However amid low interest rates

and rising expectations of inflation, stocks

can regain their status of a long-term

investment. And government bonds are not

necessarily risk-free investments. Profits

of enterprises continue to grow, and most

companies do not longer follow solely

cost-cutting strategies, but rather are

starting to invest. Therefore the continuing

growth of mergers and acquisitions is

expected.

January 2011

Overview

For the financial markets year 2011 has

opened with mixed results. The developed

stock markets ended the month with more

than 2% growth. At the same time,

emerging-market stocks dipped by almost

3% if measured in US dollars. As in

January the euro strengthened against the

dollar by 2.5%, the emerging markets

decreased by more than 5% in total.

However, certain heterogeneity could be

seen within the emerging markets too.

India, Brazil and Turkey are among the

countries that have demonstrated the

largest decline. On the other hand, after the

crisis Russia and the Eastern Europe once

again caught the attention of investors,

with their stock markets demonstrating

high performance.

In the last month the emerging stock

markets have been heavily exposed to

concerns about overheating Chinese

economy and monetary policy of the

Chinese government, designed to prevent

such risks. The second important driver is

a sharp rise in energy and food prices,

which puts pressure on the inflation

especially in the developing world. All this

is forcing the governments to actively

implement measures to constrain economic

growth. In January China, India and Brazil

raised their base interest rates, and

according to many estimates we can expect

more hikes like that later this year. A

political crisis in Egypt added to the

market‘s uncertainty. Stocks of the

developed markets have received support

from the improved expectations of

economic growth and a positive start of the

earnings season. Three quarters of

companies who published their results by

now have exceeded the analysts' forecasts.


Companies in the developing countries

normally publish their results a month or

two later.

Due to higher inflation expectations the

bonds of the developed countries and

highly rated companies demonstrated

negative performance.German government

bonds were falling already for a few

months in a row having lost 3% in the last

three months. High yield corporate bonds

became an exception and unlike most

others showed some growth.

The investors' mood was lifted by the

continuing growth of investment in

commodities. Oil, industrial metals and

many agricultural crops have increased by

the end of the month. Gold as widely

preferred investment during last year has

decreased by 6% off its peak.

Outlook

The important and closely watched

economic indicators continued to

strengthen. The index measuring the

business climate in Germany, has reached

the highest level since the reunification.

According to most analysts Germany will

confidently continue with the gained

momentum this year due to the increasing

exports to the Asian region, as well as the

soaring growth in domestic consumption.

The Euro-zone as a whole also shows

some signs of improvement. Most

certainly, Germany will continue to serve

as the engine for recovery of economic

growth in the Euro-zone, but the so-called

"peripheral countries", such as Greece and

Spain, also demonstrate positive trends.

These are largely based on exports growth.

Also, there are signs of recovery in the

labour market that was such a painful issue

for the governments of Europe in 2010.

Surveys show that the businesses

demonstrate the highest willingness to hire

new workers for the last ten years. The US

manufacturing activity index also reached

its highest level since 2004. It is expected

that the number of new orders and the

production volumes will continue their

swift growth. Consumer behaviour that

supported the economic growth in the IV

quarter is gradually recovering, too.

Attempts of the Euro-zone countries to

avoid deepening of the debt crisis allowed

the "peripheral countries" to significantly

reduce the costs of servicing their debts,

which should also support the optimism of

investors.


Indian Markets

Daily Report February 25’ 2011

Indian equity benchmarks closed the session

on a positive note on short covering in the

most beaten down stocks. Mrakets were

consolidation ahead of the the Union Budget

scheduled on Monday, February 28. The BSE

Sensex climbed 69 points, to close at 17,701

and the Nifty went up 41 points to end at 5,303

after making an intra-day low of 5,233. The

Nifty March futures closed at 24 points

premium. Buying was seen in financial,

healthcare and FMCG companies. The breadth

remained flat and the total volumes were at Rs.

1,24,056 cr. For the week Nifty wad down 155

points.

In the reality pack, HDIL was up 6.3%,

Unitech down 1.6% & IB Reality up 1.5% and

DLF ended flat.

In the financial space Axis Bank up 4.2%,

ICICI Bk up 4%, SBI up 2% & PNB up 3.3%

and HDFC up 2%.

In Metal space Hindalco down 2.2%, Sesa goa

up 0.7%, Sterlite down 2.3% & Tata Steel up

1.1%.

In Oil & Gas Space BPCL flat, HPCL up 1.5%

& Ongc down 1.1% and Reliance inds. Up

0.6%.

In Auto space M&M down 2.6%, Maruti down

0.90% & Telco up 4.8% and Hero Honda up

0.7%.

There was a mixed trend in railway stocks

during presentation of Railway Budget.

BEML, Titagarh Wagons and Kernex Micro

were down 3-13%.

Amongst the Sensex gainers Telco up 4.4%,

ICICI Bank up 3.5%, ITC up 3%, SBI up 2%

and Wipro up 1.7%.

Among the Sensex losers RCOM down 5%,

Reliance Infra down 4.5%, M&M down 2.6%,

Sterlite down 2%.

Daily Report February 24’ 2011

The markets witnessed huge sell off on

account of weakness seen across the globe and

ended in deep red. All the major sectoral

indices ended in red, Banking and Reality

counters being the worst hit. The Sensex

closed at 17,632 down by 545 points after

making an intra-day high of 18,233 and the

NSE Nifty down by 175 points to close at

5,263 after hitting a high of 5,437. The mid

cap and small cap indices both were down by

2.91% and 2.77% respectively. The market

breadth was negative and the total turnover

was Rs 2,99,230Cr. The Feb future ended at

5,263 down by 341 points.

In the reality pack, DLF down 3.38%, HDIL

down 6.40%, Unitech down 2.98% & IB

Reality down 3.74%.

In the financial space Axis Bank down 5.35%,

ICICI Bk. down 5.63%, SBI down 3.67% &

PNB down 1.92%.


In Metal space Hindalco down 3.46%, Sesa

goa down 5.48%, Sterlite inds. down 3.46% &

Tata Steel down 2.88%.

In Oil & Gas Space BPCL down by 4.23%,

HPCL down 3.33% & IOC down 3.08%, Ongc

down 2.56% and Reliance inds. down 2.95%.

In Auto space M&M down 3.76%, Maruti

down 0.90% & Telco down 7.83%.

Amongst the Sensex losers Auropharma was

down by 16.93%, Patel Eng was down by

10.27% & Mtnl was down by 9.90%.

Among the Sensex gainers KTK Bank was up

by 2.30%, Opto Circuit was up by 2.25%, &

Hero Honda was up 2.20%Week Ending

February’19

Markets bounce back

The Indian stock market ended the three-week

losing spree, with the Sensex and Nifty

gaining 2.7% and 2.8% of their value,

respectively. However, the market gave up

some of its gains on the last day of the week.

Food inflation fell further to 11.1% from

13.1% in the previous week, thereby reducing

investor concerns. Overall WPI inflation for

January fell to 8.2% from 8.4% earlier. BSE

mid-cap and small-cap indices outperformed

the large-cap counterparts during the week,

gaining 2.9% and 4.1%, respectively. On the

sectoral front, the Bankex outperformed the

other indices, gaining 4.9% during the week,

followed by the BSE Metal index, which

increased by 4.0%. BSE Realty fell over yet

another week, losing 2.2% of its value.

Bankex outperforms the Sensex. The BSE

Bankex recovered smartly from the recent

lows on the back of value buying to report

gains of 4.9%, outperforming the Sensex

during the week. PSU banks showed good

momentum on the back of approval of capital

infusion into few PSU banks. The capital

infusion will enable these banks to grow

advances at a healthy pace going forward and

will be positive for them notwithstanding the

equity dilution. Liquidity also showed some

signs of easing with LAF borrowings for the

first fortnight of February averaging 74,000cr

compared to over 1,05,000cr during the second

fortnight of January. Among private banks, we

have a positive view on ICICI Bank and Axis

Bank; in the large PSU banking space, we

prefer SBI; and among mid-cap banks, we

prefer Dena Bank, J&K Bank and Indian

Bank.


Week Ending February 12’ 2011

The Indian stock market continued to witness

a decline for the third straight week, with the

Sensex and the Nifty losing 1.6% of their

value each. However, the market ended the

week on a positive note, with strong gains on

the last day of trade.

Food inflation abated a bit during the week,

falling to 13.1% compared to 17.1% in the

earlier week. IIP numbers for December 2010

came in at a weak 1.6%, mainly because of a

high base effect. BSE mid-cap and small-cap

indices significantly underperformed

compared to large-cap indices during the

week, falling 3.8% and 6.3%, respectively. On

the sectoral front, the BSE Metal index was

the biggest loser, losing 5.6% of its value

during the week; followed by the BSE Realty

index, which was down by 4.5%. BSE Bankex

ended the week flat.

Metals stocks witness correction

The BSE Metal index fell by 5.6% during the

week on the back of a broad decline in overall

markets and lower-than-expected profitability

for 3QFY2011. Furthermore, sentiment for

steel stocks was dampened, as Arcelor Mittal

reported EPS of US $(0.51) compared to

consensus estimate of US $0.18 for

4QCY2010. Tata Steel fell by 6.3%, as the

market started expecting poor results from its

European operations.


January 2011

Key Highlights

The Indian market was the worst performer

among the global indices. The direction of the

market for the month was decided by the

persistent rise in prices, hike in policy rates by

the Central Bank, deteriorating IIP numbers

and the mixed corporate results for the Oct-

Dec Quarter. The inflows by Foreign

Institutional Investors (FIIs) into Indian

equities were negative at approximately INR

4813.2 crore for January 2011 due to negative

macroeconomic events in India and prospects

of growth being seen in developed countries.

All sectoral indices have also ended in the red

for the last month.

The markets are expected to continue to

remain volatile in the current month on

account of both domestic and global factors.

The sectors that will be impacted on account

of continuous rate hikes will be Auto, Realty

and Banking. The Union Budget will be

keenly watched in the month of February. As

at 31 January 2011, the estimated PE ratio for

SENSEX is at 18.39 X and 15.34X for the

fiscal year 2010 (ending March 2011) and

2011 (ending March 2012).

Events

Production at factories, utilities and

mines increased 2.70% (y-o-y) in

November 2010, after increasing

10.80% (y-o-y) in October 2010

Increase in the WPI for the month of

December 2010 was 8.43% (y-o-y);

for the month of

November 2010, the increase was

7.48% (y-o-y)

The Reserve Bank of India (RBI) has

increased the Repo, Reverse Repo by

25 basis point to 6.50% and 5.50%

respectively

Global equities registered a divergent trend as

FIIs shifted their focus on developed markets

from developing markets on improving health

of the US economy. The MSCI AC World

Index climbed 1.5%, however the MSCI

Emerging Markets Index declined 2.81%. The


Sensex plunged 10.64%, while the Nifty

settled with a loss of 10.25%. The BSE Mid

and Small caps underperformed their larger

counterparts. The BSE Mid-caps dropped

sharply by 11.97%, while, the BSE Small-caps

plunged 12.33%.

Sector Performance

All BSE sectoral indices registered a drop

during January. Major selling was seen in BSE

Realty, which plunged 21.97%, followed by

Auto (-13.1%), Capital Goods (-12.25%), Oil

& Gas (10.56%) and Bankex (-9.83%).

Institutional Activities

FIIs flows turned negative for equities with net

outflows of Rs 6,484.50 crores (USD 1.42 bn)

during January. Domestic MFs remained net

buyers worth Rs 590.80 crores (USD 129 mn)

during January.

Key Q3 Earnings’ Releases

Reliance Industries reported a rise of 28.14%

y-o-y in the net • profit to Rs 5,136 crores

(USD 1.12 bn) during Q3 FY2011. Total

income for the quarter climbed 5.52% y-o-y to

Rs 60,530 crores (USD 13.12 bn).

Tata Consultancy S• ervices announced a

rise of 30% y-o-y in the consolidated net

profit during Q3 FY2011 to Rs 2,370

crores (USD 516 mn). Total income for

the quarter climbed 26.3% y-o-y to Rs

9,663 crores (USD 2.10 bn).

ICICI Bank reported a 77.5% y-o-y jump in

the consolidated profit to Rs 2,039 crores

(USD 444 mn) for the quarter ended

December 31, 2010. Total income increased

by 8.73% y-o-y during the quarter to Rs

15,416 crores(USD 3.35 bn).

December 2010

Key Highlights

Sighting higher returns in Indian markets

due to improved economic conditions,

foreign investors continue to invest in

India.

After six consecutive months‘ of

offloading, Mutual funds turned net buyer

in the market to the tune of Rs. 1,377 crore

in December 2010

In line with other major markets, volumes

remained thin in Indian markets too. The

total average daily turnover on NSE

plunged 23.95% to Rs. 1,20,582 crore,

On the sectoral front, out of 13 indices on

BSE, 10 indices moved higher while 3

indices came under selling pressure.

Banking stocks fell on worries that higher

cost of funds will hit their net interest

margins while Realty stocks fell on

concerns that higher interest rates may

affect demand for residential and

commercial properties.


Indian markets ended the month in

positive terrain on the back of higher

advance tax payments by corporate India,

liquidity easing measure taken by RBI,

upbeat IIP number and lower monthly

inflation figure.

Markets started the month on negative note

as indices plunged sharply led by Banking

and Realty stocks. Banks fell on worries

that higher cost of funds will hit their net

interest margins while Realty stocks fell

on concerns that higher interest rates may

affect demand for residential and

commercial properties.

During the Middle of the month, market

made smart recovery on the back of

positive economic data. India‘s, industrial

output in October rose a faster-than-

expected 10.8% from a year earlier, higher

than the previous month's annual growth

of 4.4%. Further, decline in monthly

inflation to 7.48% in November from

8.58% increase in October also boosted

sentiments. Market got further push after

RBI left key rates unchanged and

announced pumping in Rs 48,000 crore

into the system through reduction in SLR

and OMO purchases. Investors also

cheered 15-20% higher advance tax

payments by Corporate India for the third

quarter of the current financial year.

Towards the end of the month, market

extended gains as positive US economic

data bolstered sentiments. Investors

remained optimistic regarding the potential

economic growth of US in 2011.

Sentiments were also uplifted after report

showed encouraging holiday spending

figures. Energy stocks rose sharply as

crude prices surged following extremely

cold condition in western countries.

Sector Performance

On the sectoral front, out of 13 indices on

BSE, 10 indices moved higher while 3

indices came under selling pressure.

Metal stocks rose the most on bourses on

the back of higher commodity prices.

Hindalco, Hindustan Zinc, Tata Steel with

19.4%, 19.1% and 16.2% gains, topped the

list of gainers.

Better prospect of US economy lifted IT

stocks. All companies in BSE IT index

managed to edge higher. Wipro, Infosys,

and HCL cloaked 16.7%, 13.0% and

12.9% respective gains.

Realty stocks fell on concerns that higher

interest rates may affect demand for

residential and commercial properties.

Akruti City lost more than 30%, Sunteck

Realty slipped 11% and DB Realty lost

5.9%.


November 2010

Key Highlights

November 2010 turned out to be sluggish for

stock markets. The first few sessions saw

strong optimism in the market which pushed

Sensex to a new high closing above 21,000

Increase of 25 bps in Repo and reverse repo

rate by RBI came in line with expectations that

tightening may slow down going forward. The

expectations of second round of quantitative

easing by the US Federal Reserve lifted the

sentiments. However, the gains were short-

lived as subsequent sessions witnessed selling

pressure on lower than expected industrial

production data and rate hike fears in China.

The selling pressure intensified in the third

week when the Sensex went down below

20,000 levels due to political logjam over 2G

scam coupled with nexus between corporate

and banks individuals on loans given to realty

sector. Moreover markets were also spooked

by weak global cues. Nevertheless, the

markets cheered good Q2 GDP numbers which

helped recovery from the lows of month.

Global equities fell on concerns of possible

spill over of Ireland‘s debt crisis to other

European nations such as Spain and Portugal,

fears of continuation of tightening in China on

account of rising inflation. Tensions between

South and North Korea added to nervousness

in the market. The MSCI AC World Index and

the MSCI Emerging Markets Index lost 2.40%

and 2.70% respectively. Sensex registered a

fall of 2.55%, while Nifty settled with a drop

of 2.58%. The BSE Mid and Small caps

underperformed their larger counterparts

declining 6.49% and 8.05% respectively.

Sector Performance

The BSE sectoral indices gave a mixed

performance during November. Major selling

was seen in Realty, which plunged 19.52%,

followed by Oil & Gas (-8.10%), Power (-

7.27%) and Metal (-6.33%). On other hand,

Healthcare gained the most with rise of 2.33%,

followed by Auto (+1.92), IT (+1.69%) and

Teck (+1.20%).

Institutional Activities

The FIIs flows remained positive for equities

with net inflows of Rs 10,006.50 crores (USD

2.26 bn) in secondary market and Rs 8,513.60

crores (USD 1.9 billion) in primary market,

Domestic MFs remained net sellers worth Rs

100 Crores (USD 21.8 Mn) during November.

Major Corporate Announcements

Events

Axis Bank announced an Rs 2,067 crores

(USD 450 mn) all-stock deal to acquire the

investment banking and equity businesses of

Enam Securities.

Government divestment programe received

shot in the arm following the stupendous

demand of 15x for USD 3.40 billion (Rs

15,200 crores) Coal India IPO (40% gains on

listing day), the Indian government continued

with its programme in November with Power

Grid raising USD 1.70 billion (Rs 7,600


crores) in a FPO subscribed 18.5x, MOIL beat

those numbers by getting subscription of 56x.

Key Macro Economic

Developments

Indian economy expanded 8.9% during the

second quarter of fiscal 2010-11. Industrial

production registered a growth of 4.40%

for September. Core sectors growth stood

at 7% for October. Exports during October

climbed 21.30% to USD 17.96 billion (a

rise of 15.30% in Rupee terms to Rs

79,763 crores). The WPI inflation for

October moved down to 8.58% (y-o-y)

compared with 8.62% (y-o-y) previous

month. Oil prices gained 3.29% over the

month to USD 84.11 per barrel.

Meanwhile, rupee weakened 3.28% during

the month to Rs 45.88.

Indian Economy Economic Survey sees India back on 9%

growth path in FY12

NEW DELHI: The annual Economic

Survey could have been written by Aamir

Khan and titled ―Aal Izz Well.‖ It is gung-

ho about GDP growth rising to 9% next

year, and staying there in the medium

term. Services (which now have a 57.3%

share in the GDP) will be the main

locomotive of the economy. This, plus the

coming demographic dividend, will offset

many policy flaws and sustain fast growth.

The Survey cites a new Index of

Government Economic Power showing

that India is now the fifth greatest global

economic power after the US, China ,

Japan and Germany, and is well ahead of

Britain or France.

Analysts may worry about the fiscal

deficit, but the Survey declares that India

is galloping down the road to fiscal virtue.

The fiscal deficit in the first three quarters

of this year was just 44.8% of the level in

the previous year.

The Survey says the ratio of consolidated

government debt to GDP, which touched

79.3% of the GDP in 2004-05, will fall to

68.7% by 2013-14 and 65% by 2014-15.

The recent revision of GDP data shows

that we have underestimated true GDP for

many years, and hence have overestimated

the fiscal deficit. This, plus high inflation

this year (nominal GDP will rise 20.3%

against the expected 12.5%), means that

the budget estimate of a fiscal deficit of

5.5% of GDP now translates into just

4.8%.

This actually reveals a dirty economic

secret: inflation can, in the short-run, be

good for the government‘s books. Inflation

erodes the real value of debt, and the

government is the biggest debtor of all.


However, inflation with a lag also

increases government spending. Neither

this nor the prospect of rising subsidies

(implied by the Food Security Act and

spike in oil prices) disturbs the Survey‘s

fiscal optimism. It does not hint at any

painful fiscal squeeze to come, either on

the tax or spending side.

What will the government do to bring

down prices? The Survey analyses the

contribution of supply, demand and

international trends to inflation, but spells

out no new initiatives. It describes the

spike in vegetable prices as temporary bad

behaviour which will soon be checked by a

reversion to more normal behaviour.

Going forward, it expects monetary

tightening and other steps to bring down

inflation. Rising oil prices pose a

challenge, and the Survey says India must

adjust to the reality of expensive energy.

Higher infrastructure spending is another

reason cited by the Survey for optimism

about future growth. However, tucked

away in small print is the dismal

information that losses of State Electricity

Boards are 1% of GDP (which means Rs

76,000 crore). Unaccounted leakages of

electricity (theft and transmission losses)

are a whopping 35% of the electricity

generated. No wonder power continues to

be a constraint on growth. Cost overruns in

public sector projects had come down to a

reasonable 12% in March 2008, but rose to

20.7% by October 2010, thanks partly to

higher steel and cement prices. Land

acquisition and environmental clearance

need to be streamlined to expedite

infrastructure, along with standardised

contracts and better designed projects.

Industrial production has dipped in recent

months, and capital goods production has

crashed. The Survey indicates that gross

capital formation will rise only 8.8% in

2010-11, against 13.8% in the preceding

year. Yet, it maintains that the future is

bright since the savings rate is well above

33% and so the investment rate can easily

be 36.5%. Assuming an incremental

capital output ratio of 4.1 (achieved in the

11th Plan) these factors alone should

ensure a GDP growth of 9% in the coming

years. The demographic dividend should

raise savings (which tend to be especially

high for people in their 30s and 40s). The

Survey adds that once an economy

operates close to capacity, growth depends

more on skill development and

innovation.

Survey Criticises Subsidies

It says patent applications are up from

17,466 to 36,812 and patents granted up

from 1,911 to 16,061 between 2004-05

and 2008-09. Actually, a better measure of


innovation might be that global business

journals have now started citing ―jugaad‖

as a driver of Indian business success.

Jugaad is simply the ability to extract more

out of less in difficult conditions, and may

be more important for productivity than

just patents.

The Survey mounts a strong attack on

subsidies for an array of goods and

services, which result in huge leakages and

waste. It cites studies showing that 40-55%

of food supplied to the public distribution

system is diverted by ration shops. In

effect, the Survey criticises the proposal

for a Food Security Act operating through

the PDS. It calls for a new approach that

transfers cash to the needy — using the

new technology of smart cards — instead

of subsidising sundry goods and services.

It suggests that a start may be made by

providing a cash subsidy through smart

cards to kerosene beneficiaries, and then

freeing kerosene prices. The poor might

not use this cash for kerosene, but that will

still be better than letting the subsidy leak

to the shopkeepers and adulterators.

The Survey emphasises that it is important

to treat all economic players — including

the policeman, shopkeeper and citizen —

as rational self-seeking agents. If they can

make some money on the side with little

effort, many will do so. Many noble plans

fail because of the assumption that they

can be carried out by morally flawless

agents or perfectly programmed robots.

The problem with such programmes is not

just faulty implementation but faulty

conception.

FEBRUARY 26, 2011

Indian Central Bank Is Addressing High

Inflation

BHUBANESWAR, Orissa—India's high

food inflation is mainly due to supply-side

constraints and the central bank has been

taking steps to control a build-up in

inflationary expectations, its governor said

Saturday.

"Monetary policy becomes the first line of

defence, so if inflation persists for a long

time, people think inflation is going to be

high, and that becomes a self-fulfilling

prophecy," D. Subbarao said at an event in

Bhubaneswar, the capital of the eastern

Indian province of Orissa.

"To break that inflationary-expectations

psyche, [Reserve Bank of India] has to act,

which is why we have been acting over the

last year," he said.The central bank has

raised its policy rates seven times in the

past year.


Authorities have been grappling with high

inflation as food prices increased owing to

rising demand and choked supplies after

unseasonal rains damaged some crops late

last year.

Mr. Subbarao declined to comment on the

likelihood of an interpolicy-meeting rate

move by the RBI.Earlier this month, he

said that the central bank can act at any

time to deal with the evolving

macroeconomic situation. This fuelled

expectations of a rate increase, possibly

before the next scheduled policy review

March 17 if inflation didn't cool fast.

"Notwithstanding scheduled quarterly and

mid-quarterly reviews, we reserve the right

to alter our policy stance at any time to

respond to the evolving macroeconomic

situation," Mr. Subbarao had said.

Food inflation climbed slightly after two

consecutive weeks of decline, accelerating

to 11.49% in the week to Feb. 12 from

11.05% in the previous week, government

data Thursday showed. The general

inflation rate was at 8.23% in January, and

the government expects it to ease to 7% by

the end of the current fiscal year in March.

High prices have led to protests from

opposition lawmakers and public outcry in

a country where more than 40% of the 1.2

billion population lives on less than $2 a

day.Rising prices of crude oil and other

commodities globally have stoked worries

of intensifying inflationary pressures,

which could further erode the spending

power of the country's poor.

High inflation also would lead to more

monetary action, with most economists

predicting the RBI could increase policy

rates by 0.5 to 1.0 percentage point in

2011.

FEBRUARY 3, 2011

Budget 2011: Rising prices & black

money under the spotlight this year

Most budgets are dominated by tax rates

and high finance. But Budget 2011 will be

dominated by inflation and corruption, the

current two political hot potatoes. Finance

Minister Pranab Mukherjee will have to

announce tax and administrative changes

to curb prices and black money.

At the same time, he will try to enthuse

investors by restricting fiscal deficit to

maybe 5% this year and 4.5% next year,

well below existing targets.

To compensate for inflation, income-tax

relief is certain, especially for lower

income brackets. The tax exemption limit

will be raised from the current Rs 1.6 lakh

to maybe Rs 1.8 lakh, and further to Rs 2

lakh next year (as already envisaged in the

Direct Tax Code).


Additional tax breaks may be given to

citizens on fixed pensions. The scope of

tax-free savings instruments may also be

expanded.

Abolishing the surcharge on corporate tax

is possible if simultaneously the minimum

alternative tax (MAT) is raised from 18%

to 20%. This has been promised by the

DTC, and so may be implemented only in

2012-13.

Anti-inflation urgency means cuts in

import duty on crude or excise duties on

petroleum products are inevitable. Such

cuts will enable oil marketing companies

to absorb some of their higher costs and

not pass them on entirely to consumers.

Excise duties on some other essential

goods could also be cut.

Mukherjee wants to roll back the fiscal

stimulus of 2008 and 2009, when excise

and import duties were cut sharply. But

given inflation, he may stick to the

existing excise rates. The central tax on

goods and services has already been

equated at 10% for most items.

Some experts want the unified rate to

come down to 8%, in preparation of the

transition to a Goods and Services Tax.

But GST still looks some way off, and

Mukherjee needs revenue for expanded

welfare programmes and fiscal

consolidation. He may cut the central sales

tax from 2% to 1%, though he will have to

compensate states for lost revenue.

The public is sceptical of the government‘s

resolve to tackle corruption and black

money , but Mukherjee will have to

produce a list of schemes to curb both. He

has already talked of a five-point

programme, but got a tepid response. He

will need to do better on budget day. The

anti-corruption mood means proposals for

another tax amnesty scheme will be

mothballed.

He will greatly increase outlays for the

new Food Security Act. The food subsidy

looks like touching Rs 80,000 crore this

year against the budgeted Rs 55,000 crore.

Implementing the Food Security Act may

raise it further to around Rs 1 lakh crore.

Fiscal deficit at 5%

Indexation of wages in NREGA will also

require an increase of Rs 15,000 crore.

Additional funding will be needed for

education and Bharat Nirman.

Will spending more and cutting tax rates

increase the fiscal deficit? No, the boom in

tax collections, combined with windfalls

from the sale of spectrum may enable Mr

Mukherjee to announce that this year‘s

fiscal deficit is only 5% of GDP, against

the budgeted 5.5%.


Tax collections are up 27% against the

budgeted 18%, and the fiscal deficit in

April-December was less than half the

deficit in the same period last year.

Spectrum auctions fetched Rs 106,000

crore, and disinvestment may just touch

the budgeted Rs 40,000 crore, though that

depends on an ONGC issue by the end of

the fiscal year.

Next year too, Mr Mukherjee can aim for a

continuing revenue boom and equally high

disinvestment inflow. So, in 2011-12, he

can aim for a fiscal deficit of just 4.5%,

below the medium-term target of 4.8%.

The true deficit may be higher because of

off-budget government arrears to oil

marketing companies, fertiliser companies

and the Food Corporation.

If oil goes well beyond $100/barrel, the

off-budget deficit will swell. Yet it may

not exceed 0.5-0.75% of GDP. In which

case, markets will be delighted.

FEBRUARY 26, 2011

Railway Budget 2011: Mamata rolls out

voter-friendly budget

Railway Minister Mamata Banerjee spread

some cheer among inflation-battered

consumers by holding fares steady for both

suburban and long-distance train travel in

her third annual Railway Budget unveiled

in the Lok Sabha on Friday.

The Budget for 2011-12 increased senior

citizen concession for men to 40% from

30%. Women will get the senior citizen

discount from 58 years, instead of 60

years.

Like in previous years, the railway

minister, promised to make train travel

more comfortable and seamless with

improved amenities on trains and stations,

greater connectivity across the country and

more trains on suburban as well as long-

distance routes. And so, as many as 56

new Express trains, three new Shatabdis ,

and nine new Duronto trains are to be

introduced in 2011-12.

Suburban services in Mumbai and Kolkata

will be augmented with additional services

and an integrated network and those in

Hyderabad, Ahmedabad, and Chennai

upgraded as integrated suburban services.

The Budget also plans to introduce AC

double-decker coach on Jaipur-Delhi and

Ahmedabad-Mumbai routes. Also,

services of 33 trains will be extended and

frequency of 17 trains

increased. Expectedly, West Bengal,

Kerala, and Tamil Nadu, the states that go

to polls this year, are the chief

beneficiaries of Banerjee largesse.

Proposals to introduce faster trains

connecting important cities came up once

again as Banerjee suggested a feasibility


study with Japanese assistance to increase

speed of passenger trains to 160-200

kmph. Similar studies are to be initiated

for other corridors such as Mumbai-

Kolkata, Chennai-Bangalore, Delhi-Jaipur,

and Ahmedabad-Mumbai.

For passengers willing to pay a premium,

the minister proposed a new Super AC

Class with improved comfort and features

and more exclusivity. The proposal was

prompted by an upswing in occupancy and

earnings of the AC First Class, as well as

general buoyancy in passenger services.

The minister also promised to make

greater use of technology. A multi-purpose

pan-India smart card "Go India" that can

be used to pay for all forms of rail travel -

long distance, suburban, and metro, will be

introduced on pilot basis. The card can be

used at booking counters, vending

machines, and Internet. A new portal for e-

ticketing is to be launched soon by the

Centre for Railway Information System

that would enable people to make online

reservations for a nominal `10 for AC

classes and `5 for others. In addition,

Internet access will be provided on

Howrah-Rajdhani Express as a pilot

project.

The Budget also promised to improve

quality and cleanliness of linen on trains,

with mechanised laundries to be set up in

Nagpur, Chandigarh, and Bhopal, in

addition to the 19 that are in various stages

of commissioning and 23 under

consideration.

Railway stations across the country are

already undergoing a makeover. Over the

past two years, upgradation of 584 stations

as Adarsh stations were taken up to

provide safe drinking water, pay and use

toilets, and better accessibility for the

physically challenged. Of these,

upgradation of 442 stations is to be

completed by the end of the fiscal year.

Another 236 stations recommended by the

Members of Parliament are also to be

considered.

Other services to be introduced in the

course of the year include advance

booking for retiring rooms and better

access at stations for the physically

challenged. Services of Rail Yatri Sevaks

with modern trolleys are to be extended. It

will also explore possibility of setting up

more multi-functional complexes at

railway stations.

Real-time information on running trains

will be possible with the government

planning to extend train management

system to New Delhi, Bangalore,

Secunderabad, Ahmedabad, and Lucknow

stations.


FEBRUARY 24, 2011

Managing growth vs. inflation biggest

challenge: RBI

Terming management of tension between

demands of growth and of inflation as a

major challenge after the global financial

crisis, the Reserve Bank of India (RBI)

today said though India recovered early, it

was hit by inflation before others.

"In the aftermath of the crisis, our biggest

challenge has been to manage the tension

between the demands of growth and of

inflation," RBI Governor D Subbarao said

at the 24th convocation of Sambalpur

University here.

Even though we have recovered from the

crisis ahead of most other countries,

inflation too has caught up with us sooner

than elsewhere," he said.

Economic growth requires maintaining a

low interest rate regime whereas inflation

management warrants raising interest

rates.

"In managing this tension, we are deeply

conscious that inflation is a regressive tax

that hurts the poor the most as their

earnings are not protected against rising

prices," the RBI governor said.

As part of managing growth-inflation

dynamics in the post-crisis period, the

apex bank has raised policy interest rates

seven times since March 2010, he said,

adding the apex bank was are also

sensitive to the need for supporting

growth, a necessary condition for poverty

reduction.

The challenge of making monetary policy

has become even more complex in the

context of globalisation, he said.

"How other countries, especially,

systemically important advanced

economies, manage their monetary

policies has implications for us and we

need to take that into account in

determining our own policy stance,"

Subbarao said.

On financial inclusion programme that

seeks to provide banking access to poor

and those living in the villages and remote

parts of the country, the RBI chief said

banks had been advised to draw up board

approved Financial Inclusion Plans for a

period of three years upto March 2013.

Subbarao said this should be integrated

with the business plan of the bank.

A uniform model has not been imposed so

that each bank can build its strategy in line

with its business model and comparative

advantage, he said.

In order to further financial literacy, the

RBI has established centres focused on


financial education at its regional offices in

Chandigarh, Pune and Bangalore. "We

hope to replicate this in other cities too,"

he said.

The RBI has also encouraged commercial

banks to set up financial literacy and credit

counselling centres to help people develop

better financial planning skills and to learn

of the opportunities available in the

financial sector, Subbarao said.

"Most importantly, we are encouraging

both central and state governments to

include financial literacy in school and

college curriculum so that the next

generation enters the adult world

financially literate," he said.

Indian Sectors

Banking

The banking system remains, as always,

the most dominant segment of the financial

sector. Indian banks continue to build on

their strengths under the regulator's

watchful eye and hence, have emerged

stronger.

In the annual international ranking

conducted by UK-based Brand Finance

Plc, 18 Indian banks have been included in

the Brand Finance® Global Banking 500.

In fact, the State Bank of India (SBI)

which is the first Indian bank to be ranked

among the Top 50 banks in the world, has

improved its position from 36th to 34th, as

per the Brand Finance study released on

February 1, 2011. The brand value of SBI

has enhanced to US$ 1,119 million. ICICI

Bank, the only other Indian bank in the top

100 club has improved its position with a

brand value of US$ 2,501 million.

According to the study, Indian banks

contributed 1.7 per cent to the total global

brand value at US$ 14,741 million and

grew by 19 per cent in 2011.

According to RBI's 'Quarterly Statistics on

Deposits and Credit of Scheduled

Commercial Banks: June 2010',

nationalized banks, as a group, accounted

for 51.3 per cent of the aggregate deposits,

while State Bank of India (SBI) and its

associates accounted for 22.8 per cent. The

share of New private sector banks, Old

private sector banks, Foreign banks and

Regional Rural banks in aggregate

deposits was 13 per cent, 4.8 per cent, 5.1

per cent and 3.1 per cent respectively.

With respect to gross bank credit also,

nationalized banks hold the highest share

of 51.5 per cent in the total bank credit,

with SBI and its associates at 23.2 per cent

and New Private sector banks at 13 per

cent. Foreign banks, Old private sector

banks and Regional Rural banks held

relatively lower shares in the total bank

credit with 5.3 per cent, 4.6 per cent and

2.5 per cent respectively.


The report also found that scheduled

commercial bank offices (with deposits of

INR 10 crore or more) accounted for 65.2

per cent of the bank offices, 96.6 per cent

in terms of aggregate deposits and 94 per

cent in total bank credit.

Significantly, on a year-on-year basis,

bank credit grew by 24.4 percent in 2010

as against RBI‘s projections of 20 percent

for the entire fiscal 2010-11. However,

deposits lagged behind at 16.5 percent

versus a projection of 18 percent.

India's foreign exchange reserves stood at

US$ 299.39 billion as on January 21,

2011, according to the data in the weekly

statistical supplement released by the

Reserve Bank of India.

Indians working overseas sent more

money back home than any of their global

counterparts, remitting US$ 50 billion in

2009 despite a worldwide economic

slowdown and anti-immigration measures

adopted by industrialized countries.

Major Developments

Indian Bank has received the Central Bank

of Sri Lanka's nod to open its branch at

Jaffna in Sri Lanka.

Indian Bank has signed an agreement with

Weizmann Forex Ltd, and will now offer

foreign remittances service over the

counter at all its branches.

The National Payment Corporation of

India is rolling out an instant interbank

mobile payment service (IMPS) that will

enable retail customers of seven banks to

enjoy 24X7 funds transfer. State Bank of

India, Bank of India, Union Bank of India,

ICICI Bank, HDFC Bank, Axis Bank and

YES Bank on November 22, 2010 became

the first set of banks to go live with the

IMPS.

Amongst the private banks, owing to

strong growth in interest income, the

country‘s third-largest private sector

lender, Axis Bank, reported a net profit of

US$ 166.3 million for the second quarter

of FY11, a 38.28 per cent increase from

US$ 120.3 million a year ago.

HDFC Bank, India‘s second largest private

lender reported a 32.7 percent rise in net

profits at US$ 204.3 million for the quarter

ended September 30, 2010.

Government Initiatives

The Cabinet, on December 1, 2010

approved to provide an additional amount

of US$ 1.33 billion, in addition to the US$

3.32 billion already provided in the Budget

2010-11, to ensure Tier I CRAR (Capital

to Risk Weighted Assets) of all Public

Sector Banks (PSBs) at 7 per cent and also

to raise Government of India holding in all

PSBs to 58 per cent. It also approved that

the exact amount, mode of capitalization


and other terms and conditions would be

decided in consultation with the banks at

the time of infusion.

The proposed capital infusion would

enhance the lending capacity of the PSBs

to meet the credit requirement of the

economy in order to maintain and

accelerate the economic growth

momentum.

The RBI has allowed banks to make

changes in the repayment schedules or

drawdown without prior approval from the

central bank. However, such a change

could be made on the condition that the

average maturity of the loan should remain

the same. The move is expected to make

external commercial borrowing (ECB)

transactions easier. Transactions both

through automatic and approval routes can

take advantage of this change. Now,

without the prior approval of RBI, Indian

companies may borrow up to US$ 500

million in a year.

As part of further liberalisation of the

extant branch licensing policy in respect of

regional rural banks (RRBs), they have

been permitted to open branches in Tier 3

to Tier 6 centres (with population up to

49,999 as per Census 2001) without the

Reserve Bank's prior authorisation

provided-

The capital to risk-weighted assets

ratio (CRAR) is at least 9 per cent;

The net non-performing assets

(NPAs) are less than 5 per cent;

They have not defaulted in the

maintenance of cash reserve ratio

(CRR)/statutory liquidity ratio

(SLR) during the last year; and

They have earned a net profit in the

last financial year.

On the lending side, the Base Rate system

replaced the Benchmark Prime Lending

Rate (BPLR) system with effect from July

1, 2010. Base Rates of scheduled

commercial banks (SCBs) were fixed in

the range of 5.50-9.00 per cent.

Subsequently, several banks reviewed and

increased their Base Rates in the range of

10–50 basis points by October 2010. Base

Rates of major banks, accounting for over

94 per cent in total bank credit, are in the

range of 7.50-8.50 per cent. Banks have

also raised their BPLRs in the range of 25-

75 basis points for their old loans.

As at end-July 2010, around 70,000

branches of 98 banks had participated in

the national electronic funds transfer

(NEFT) system and the volume of

transactions processed increased to 9.5

million in July 2010.


In the central bank's Third Quarter Review

of Monetary Policy 2010-11, RBI

Governor D Subbarao has said that the

repo rate and reverse repo rates would be

increased by 25 basis points under the

liquidity adjustment facility (LAF) with

immediate effect. Repo rate increased from

6.25 per cent to 6.5 per cent while reverse

repo rate has been raised from 5 per cent to

5.25 per cent.

The cash reserve ratio (CRR) of scheduled

banks has been retained at 6.0 per cent of

their net demand and time liabilities

(NDTL).

On the basis of an assessment of the

current liquidity situation, the RBI also

decided to extend additional liquidity

support upto April 8, 2011 to scheduled

commercial banks under the LAF to the

extent of up to 1 per cent of their net

demand and time liabilities (NDTL),

which was set to expire on January 28,

2011.

Manufacturing

India has emerged as one of the world's

top ten countries in industrial production

as per UNIDO's new report titled

'Yearbook of Industrial Statistics 2010'.

India surpassed Canada, Brazil and

Mexico in 2009 to reach the 9th position

from the 12th position it held in 2008.

The Index of Industrial Production (IIP)

quick estimates data for October 2010

shows a growth of 11.3 per cent in the

manufacturing sector as compared to

October 2009. The cumulative growth

during April-October 2009-10 over the

corresponding period of 2008-09 is 11 per

cent, according to data by the Ministry of

Statistics and Programme Implementation.

Growth Trends

India is ranked second in terms of

manufacturing competence, according to

report '2010 Global Manufacturing

Competitiveness Index', by Deloitte

Touche Tohmatsu and the US Council on

Competitiveness. The report states that the

country's talent pool of scientists,

researchers, and engineers, together with

its English-speaking workforce and

democratic regime make it an attractive

destination for manufacturers.

As per the Industrial Outlook Survey

conducted by the Reserve Bank of India


(RBI) for October-December 2010 quarter

the Indian manufacturing sector showed

positive overall business sentiment in the

quarter. The business expectation index

(BEI), which acts as a barometer of the

overall health of the manufacturing sector,

has gone up to 126.5 for the assessment

quarter, its highest reading since the April-

June 2007 quarter.

The HSBC Markit Purchasing Managers'

Index (PMI), based on a survey of 500

companies, posted 58.4 in November

2010, increasing from 57.2 in October

2010. Incoming new business received by

manufacturers in India increased

substantially during the month. Further,

the latest expansion in new order volumes

was the strongest in four months.

Panellists also indicated a marked rise in

new export business during November

2010.

Around 50 segments in the manufacturing

sector grew by 39 per cent, entering the

'excellent growth' category, during April-

December 2010-11, according to a survey

by the Confederation of Indian Industry

(CII) and ASCON. Segments in the

excellent category included air

conditioners, natural gas, tractors, nitrogen

fertilisers, ball bearings, electrical and

cable wires, auto components, construction

equipment, electric fans and tyre industry.

Further, 22 segments made it to the 'high

growth' category, registering a growth of

17.3 per cent during the first nine months

of the current fiscal. Industries such as

utility vehicles, crude oil, power

transformers, energy meters, alcoholic

beverages and textile machinery have

registered around 10-20 per cent growth.

Exports from special economic zones

(SEZs) grew by over 68 per cent to US$

12.55 billion as compared to the

corresponding period of 2009-10. [June

30]

Buoyed by India's response to its super-

machines, iconic American superbike

maker Harley Davidson is setting up an

assembly unit at Bawal, Haryana. This will

be its second plant outside the US, after

Brazil

FieldFresh, the 50:50 joint venture of

Bharti Enterprises and Filipino firm Del

Monte Pacific Ltd formed in 2007-end, has

inaugurated its R&D and manufacturing

unit at Hosur, Tamil Nadu, set up with an

investment of US$ 26.14 million.

Doosan Heavy Industries and Construction

Co Ltd of South Korea had expressed

interest in setting up a power equipment

manufacturing facility in Haryana, to be

fully owned by the foreign company.


Pipavav Shipyard has signed a

memorendum of understanding (MoU)

with SAAB Dynamics AB, part of

Sweden's Wallenberg Group, for

developing products in the defence and

aerospace sectors.

Rieter Nittoku Automotive Sound Proof

Products India Pvt Ltd, a joint venture

between Rieter group of Switzerland (51

per cent holding) and Nihon Tokushu

Toryo Co Ltd of Japan (49 per cent

holding), has invested US$ 15 million in a

new facility at Oragadam, near Chennai.

Global Manufacturing Hub

India is fast emerging as a global

manufacturing hub with a large number of

companies shifting their manufacturing

base to the country. Moreover, India has

the largest number of companies, outside

of Japan, that have been recognised for

excellence in quality. As many as 21

companies have received the Deming

Excellence awards; 153 companies have

achieved Total Productive Maintenance

(TPM) Excellence Award for their total

productivity management practices by the

Japan Institute of Plant Maintenance

(JIPM) committee.

Nissan Motor Ltd of Japan is looking at a

four-fold increase in sourcing of

production components from India for its

global operations. The company would

import US$ 10 million of components in

2010 from Indian vendors. It is set to

increase this to US$ 40 million by the end

of 2012.

Japanese automobile major, Yamaha, is

planning to make India a hub for

manufacturing its premium and deluxe

bikes for overseas markets. The company's

Indian unit supplied 66,904 bikes in fiscal

2010 to Yamaha's global operation

compared with 38,639 units in 2008-2009,

an increase of 73 per cent.

VE Commercial Vehicles (VECV) is

investing US$ 61.9 million in its

Pithampur plant for the production and

final assembly of Volvo's new global

medium-duty engine platform. The

expanded facility will act as a global

manufacturing hub for Volvo group's

requirements.

Nokia's manufacturing facility at

Sriperumbudur near Chennai crossed

production volumes of 350 million

handsets in April 2010. Nokia is now

exporting to North America, Europe,

Middle East, Asia, Australia and New

Zealand, according to company statement.

According to a report by RNCOS, "Global

Vaccine Market Forecast to 2012"

published in February 2010, the vaccine

market in India is forecasted to grow at a

CAGR of around 23 per cent from 2009-


10 to 2011-12. India has emerged as a new

hub for vaccine manufacturers from across

the world.


The government has issued the new

Consolidated Foreign Direct Investment

(FDI) policy document, which has come

into effect from April 1, 2010.

Moreover, as per Mr Anand Sharma,

Union Minister of Commerce and

Industry, the government is planning to

launch National Manufacturing Policy by

January 2011. He said a Cabinet note will

be sent soon on manufacturing policy and

the setting up of National Manufacturing

and Investment Zones (NMIZs).

Main objectives of NMIZs are:

To promote investments in the

manufacturing sector and make the

country a hub for both domestic

and international markets

To increase the sectoral share of

manufacturing in GDP to 25 per

cent by 2022

To double the current employment

level in the sector; and

To enhance global competitiveness

of the sector

Infrastructure

The country‘s core sector, comprising six

key infrastructure industries, accelerated

by 7 per cent in October 2010 from a year

ago, according to the data released by the

Union Ministry of Commerce and

Industry. The growth was primarily led by

a 16.8 per cent increase in cement output

and a 6.2 per cent rise in production of

finished steel. Electricity generation

growth improved to 8.4 per cent in

October, the highest growth rate in 14

months.

The Planning Commission has projected

that investment in infrastructure would

almost double at US$ 1025 billion in the

12th Plan, compared to US$ 514 billion in

the 11th Plan. Of the US$ 1,025 billion, 50

per cent is expected to come from private

sector, whose investment has been 36 per

cent in the 11th Plan.

Infrastructure investment in India is set to

grow dramatically. As per Union Minister

for Finance, Mr Pranab Mukherjee, India

would require to develop a rupee-

denominated long-term bond market for

funding the infrastructure sector that

requires an investment of around US$ 459

to US$ 500 billion by 2012.

The State Level Single Window Clearance

Authority (SLSWCA) on October 1, 2010

cleared 16 investment proposals worth


US$ 1.46 billion while 15 other proposals,

each entailing an investment of over US$

225.35 million were referred to the High

Level Clearance Authority (HLCA). The

investment proposals approved by

SLSWCA include five in the steel sector,

four in the cement sector, two in ancillary

industries and one each in food processing,

power, paper manufacturing and

engineering.

Meanwhile, a committee on infrastructure

under Prime Minister Dr Manmohan Singh

will conduct quarterly review of

development of power, road, ports, civil

aviation and railways sectors, announced

the Planning Commission of India

recently. Further, the cabinet committee on

infrastructure (CCI) will handle specific

infrastructure cases that may require

necessary policy correction or solving

issues affecting projects.

Notably, truck sales, a key indicator of

goods movement, registered a growth of

43.6 per cent at 29,420 units during

September 2010, as per the data released

by the Indian Foundation for Transport

Research and Training (IFTRT).

In order to develop eco-friendly

infrastructure for new cities in the Delhi-

Mumbai Industrial Corridor (DMIC),

Japan-based consultants such as Nikken

Sekkei, Mitsubishi and IBM Japan would

work along with DMIDC and three state

governments. The project, expected to be

completed by 2018, as per Mr Anand

Sharma, Union Minister for Commerce

and Industry is ―by far the world‘s biggest

infrastructure project.‖

Ports

The major ports in India handled 271.29

million tonnes (MT) traffic during April-

September 2010-11, as compared to

267.98 MT handled during the same

period last year, registering a growth of

1.23 per cent, according to Indian Ports

Association data.

The annual combined capacity of the

major and non-major ports in the country

will be 1.5 billion tonnes by 2012, stated

by Minister of Shipping, Mr G K Vasan,

while speaking at the Logistics

Outsourcing Summit organised by the

Confederation of Indian Industry (CII).

The Union Cabinet has given the approval

to the Shipping Ministry for declaring

Andaman and Nicobar ports as major port,

stated Union Minister of Shipping, Mr G

K Vasan.

The Cabinet Committee on Infrastructure

(CCI) has approved a proposal to develop

the fourth container terminal at the

Jawaharlal Nehru Port (JNPT), the

country's busiest port, at an estimated cost


of US$ 1.44 billion. The government also

cleared a proposal to build standalone

container handling facility at Mumbai port

at a cost of US$ 129.6 million. The project

would be implemented within two years

from the date of the award of the project.

According to the Department of Industrial

Policy and Promotion (DIPP), the foreign

direct investment (FDI) inflow into ports

has been US$ 1.63 billion from April 2000

to September 2010.

Airports

The domestic airlines registered an 18.3

per cent growth, carrying 41.93 million

passengers during January-October 2010

as against 35.45 million passengers during

the same period last year, led by budget

carriers Spicejet, Go Air and IndiGo, as

per the data released by the Ministry of

Civil Aviation.

Mr Praful Patel, Minister of State for Civil

Aviation, stated that the country will

become the top-five civil aviation markets

in the world in the next five years. India is

the ninth largest civil aviation market in

the world at present.

The Airports Authority of India (AAI), the

agency responsible for civil aviation

infrastructure, is likely to spend over US$

1.01 billion on the modernisation of non-

metro airports in the current year.

Aircraft manufacturing companies, Boeing

and Airbus, remain upbeat over India's

aviation growth potential. Aircraft

manufacturer Airbus Industrie has forecast

that India will require an additional 1,000

aircraft in the next 20 years.

HCC Infrastructure, wholly-owned

subsidiary of Hindustan Construction Co

Ltd (HCC), is entering the business of

building and operating airports.

According to DIPP, the FDI inflow into air

transport (including air freight) has been

US$ 330.72 million from April 2000 to

September 2010.

Railroads

Indian Railways earned US$ 11.70 billion

during April-October 2010 registering an

increase of more than 7 per cent over the

same period last year. The total goods

earnings have gone up from US$ 7.3

billion during the same period last year to

US$ 7.78 billion this year, showing an

increase of 6.70 per cent.

According to DIPP, the FDI inflow into

railways related components has been US$

109.93 million from April 2000 to

September 2010.

Roads

An in-principal approval for converting

10,000 km of state roads to national


highways has been given by the

Empowered Group of Ministers (EGoM).

It is estimated that around US$ 3.3 billion

would be required over the next five years

to undertake this project.

According to the Press Information

Bureau, the Cabinet Committee on

Infrastructure (CCI) on October 5, 2010

has approved the implementation of the

sub-project for the development of four

laning of the 84 Km. long Panvel-Indapur

Section of NH-17 in Maharashtra under

NHDP Phase III in BOT (Toll) mode of

delivery on Design, Build, Finance,

Operate & Transfer (DBFOT) basis. The

total project cost is estimated at US$ 212.4

million.

Anil Dhirubhai Ambani Group (ADAG)‘s

flagship company Reliance Infrastructure

Ltd (R-Infra) a road project worth US$

205.7 million from the National Highways

Authority of India (NHAI).

Investments

The infrastructure sector seems to have

emerged as a favourite for the private

equity (PE) in 2010. According to Venture

Intelligence data, till June 2, 2010, there

have been 19 deals in this sector at an

approximate investment of US$ 1.1

billion, as compared to 14 deals with an

investment of US$ 257.5 million during

the same period last year.

Asian Development Bank (ADB) plans to

enter the Indian debt market in early 2011

to raise funds through rupee bonds to

finance private sector infrastructure

projects.

Sadbhav Infrastructure Project Ltd (SIPL),

a private developer of highways and roads,

is raising US$ 85.7 million from

institutional investors Norwest Venture

Partners (NVP) and The Xander Group

Inc.

The Ennore Port Ltd (EPL) has signed a

concession agreement with Bay of Bengal

Gateway Terminals Pvt Ltd for the

construction and development of the US$

301.48 million container terminal at

Ennore on a build, own and transfer basis.

Geosyndicate Power Private Ltd, a

Mumbai-based energy company, will set

up the country's first geothermal power

plant of 25 MW in the Khammam district

of Andhra Pradesh at an investment of

US$ 64.83 million.

IVRCL Infrastructures & Projects Ltd

(IVRCL) has bagged a toll road projects

on the Goa-Maharashtra border from the

NHAI. The project entails a total

investment of US$ 659.1 million.


The infrastructure finance companies

(IFC) are being included in the category of


non-banking finance company (NBFC) by

the Reserve Bank of India (RBI). The IFCs

would require a capital adequacy ratio of

15 per cent and the similar criteria of

NBFCs would be applied to IFCs as well.

Further, RBI stated that at least 75 per cent

of the assets of these institutions should be

used in infrastructure and their net owned

funds should be US$ 64.6 million or more.

Finance Minister had announced the

allocation of US$ 37.7 billion, around 46

per cent of the total plan outlay of US$ 81

billion for 2010-11 to infrastructure

sectors. In the last fiscal, this proportion

was about 30 per cent.

The Government of India has envisaged

capacity addition of 100,000 MW by 2012

to meet its mission of power to all.

Recently, a ministerial group discussing

large power plants with a capacity to

generate 4,000 MW of power has

approved, in principle, a proviso requiring

such plants that will be awarded in the

future to use local power generation

equipment. The move is expected to

provide a fillip to domestic manufacturing.

The decision on so-called ultra mega

power plants, or UMPPs, will also benefit

domestic power generation equipment

manufacturers such as state-owned Bharat

Heavy Electricals Ltd (Bhel) and Larsen

and Toubro Ltd (L&T), which has a joint

venture with Mitsubishi Heavy Industries

Ltd (MHI) of Japan. At least three joint

ventures, between Toshiba Corp. of Japan

and JSW Group; Ansaldo Caldaie SpA of

Italy and GB Engineering Enterprises Pvt.

Ltd; and Alstom SA of France and Bharat

Forge Ltd are looking to start

manufacturing power equipment in India.

Further, the government is also

implementing the National Solar Mission,

aimed at setting up 20,000 MW of solar

power capacity by 2020.

The Asian Development Bank (ADB) has

approved a financial assistance for US$

200 million under the Assam Power Sector

Enhancement Investment Programme. The

project has some innovative features like

franchisee-based distribution, off-grid

electrification with renewable energy,

reduction in CHG emissions through

efficiency gains.

Services

The services sector has been at the

forefront of the rapid growth of the Indian

economy.

As per the Central Statistical Organisation

(CSO), Ministry of Statistics and

Programme Implementation:

Trade, hotels, transport and

communication are collectively

estimated to grow by 11 per cent in

2010-11 owing to major progress


pertaining to passengers handled in

civil aviation (14.9 per cent), air

cargo (21.3 per cent) and stock of

telephone connections (40.9 per

cent) during April-November

2010-11.

Similarly, financing, insurance, real

estate and business services is

expected to show a growth rate of

10.6 per cent during 2010-11, on

account of 14.0 per cent growth in

aggregate deposits and 22.6 per

cent growth in bank credit during

April- November 2010 (against the

respective growth rates of 18.6 per

cent and 10.1 per cent in the

corresponding period of previous

year)

Community, social & personal

services is estimated to grow by 5.7

per cent in 2010-11.

Indicators

Lead indicators suggest that the pace of

expansion in the services sector activity is

likely to be sustained.

Foreign tourist arrivals (FTAs)

during Month of January 2011

were 5.38 lakh as compared to

FTAs of 4.91 lakh during the

month of January 2010 and 4.22

lakh in January 2009, as per the

Ministry of Tourism data.

According to the Telecom

Regulatory Authority of India

(TRAI), the number of telephone

subscribers in the country reached

787.28 million in December 2010

from 764.76 Million in November-

2010, thereby registering a growth

rate of 2.95 per cent. With this the

overall tele-density (telephones per

100 people), touched 66.16.

According to the Indian Ports

Association data major ports in

India handled 468.27 million

tonnes (MT) traffic during April

2010- January 2011, as compared

to 463.25 MT handled during the

same period last year, registering a

growth of 1.1 per cent.

The total approximate earnings of

Indian Railways on originating

basis during April 2010 – January

2011 were US$ 16.68 billion (INR

76187.27 crore) compared to US$

15.48 billion (INR 70696.03 crore)

during the same period last

financial year, registering an

increase of 7.77 per cent.

The total goods earnings have gone

up by 6.57 per cent and total


passenger revenue earnings

expanded by 10.05 per cent during

April 2010-January 2011.

Sales of commercial vehicles have

registered a growth rate of 34.1 per

cent whereas cargo handled by

civil aviation has grown by 21.3

per cent and passengers handled by

civil aviation has grown by 14.9

per cent during April-November

2010.

Exports

According to World Trade Organisation's

(WTO) "International Trade Statistics

2010" released recently, India ranks

twelfth in commercial service exports.

The HSBC Markit Business Activity

Index, based on a survey of around 400

firms, rose to 58.1 in January 2011 from

57.7 in December.

The Indian IT-BPO sector is estimated to

have grown by 19 per cent in 2010-11 to

US$ 76 billion in revenues, according to

software industry body National

Association of Software and Service

Companies (NASSCOM). Exports

continued to be the mainstay of the

industry with revenues of US$ 59 billion,

growing at 18.7 per cent.

Investments

According to data released by the

Department of Industrial Policy and

Promotion, the services sector (financial

and non-financial) attracted foreign direct

investments (FDI) worth US$ 2,596

million between April and November 2010

while the cumulative FDI between April

2000 and November 2010 has been US$

26,197 million, accounting for 21 per cent

of the total FDI inflow.

Some of the investments in the service

sector include:

Denmark-based ISS, a facility

services provider, has acquired a 49

per cent stake in Chennai-based

security firm SDB CISCO.

Travel, transport and logistics

major IBS Software has entered

into a five-year deal with TUI

Group Airlines to provide support

services.

Kolkata-based Keventer Group will form a

joint venture with French analytical

service major Groupe Carso for setting up

a state-of-the-art food tasting laboratory in

the state.


Automobiles

Post liberalisation in 1991, Indian

automobile sector has been aptly described

as the sunrise sector. Owing to its vertical

and horizontal integration with other key

segments of the economy, the industry is

said to be a major growth driver. A steady

growth in the sector has attracted heavy

investments from various foreign majors

through direct investments or private

equity.

India continues to consolidate its position

on the global front being one of the

world‘s top 10 auto-producing countries.

India, the seventh largest vehicle

producing nation in the world, now

accounts for 5 per cent of global auto

production, up from 1.4 per cent at the

beginning of 2000, according to industry

lobby Society of Indian Automobile

Manufacturers (SIAM).

According to a study by global

consultancy firm Ernst & Young, the

Indian market will clock the fastest

compound annual growth rate between

2009 and 2020, more than double that of

China and the triad of North America,

Europe and Japan. India's CAGR between

2009 and 2020 is expected to be 14 per

cent compared with China's 6 per cent,

other emerging markets' 6 per cent (which

includes BRIC nations) and the triad‘s 4

per cent.

Investments:

India has emerged as one of the favourite

investment destinations for automotive

manufacturers in recent times.

Maruti Suzuki India Ltd (MSIL)

has announced an investment of

US$ 411.45 million for setting up

its third plant at Manesar in order

to capitalise on the rapid growth of

the Indian auto industry. This new

production line–Maruti's sixth

overall would have 250,000 units

annual capacity.

The auto-maker has also launched

its luxury sedan Kizashi in India.

The cars would be imposrted from

parent company‘s Japan facility.

Volvo-Eicher Commercial

Vehicles (VECV) has announced

an investment of US$ 61.51

million for a new engine plant at its

existing facility at Pithampur,

Madhya Pradesh. With this, India

will now become a global

manufacturing hub for Volvo's new

medium-duty engine platform, with

the only other factory for the

engine type being present in Japan.

Tata Motors is in talks with a


Canada-based company for its

second generation gearless Nano.

Toyoto plans to invest US$ 107

million to make engines and

gearboxes for Toyota's new small

car, Etios that is expected to be

launched by year-end.

India Yamaha Motor Limited is

also planning to tap the rural

market, which currently accounts

for around 15 per cent of its overall

sale. The company has launched a

new bike YBR 110 that will target

the rural markets.

Mercedes Benz has met its single

largest order—of 150 cars worth

US$ 14.7 million—from the small

industrial town of Aurangabad,

Maharashtra.

The Renault-Nissan alliance and

Bajaj Auto have signed a

memorandum of understanding for

developing a low-cost car.

According to the MoU, the design,

engineering, manufacturing and

supply base expertise to create the

product will be executed by Bajaj

with the support of the Renault-

Nissan alliance.

Indo-Russian commercial vehicle

joint venture (JV) Kamaz Vectra

Motors plans to more than double

its annual capacity to 12,000 units

at its Hosur plant by 2012 to

capture the fast-growing market in

India.

Ashok Leyland and Japanese car

maker Nissan Motor Co Ltd have

announced the launch of three light

commercial vehicles (LCVs) from

2011 through 2013. The auto

makers also confirmed to be in

talks to create a small car for the

Indian market within the US$

2,000 - US$ 6,000 price range.

British luxury brand Jaguar Land

Rover (JLR) plans to increase

presence in India and will tap

parent Tata Motors for assistance

in areas like logistics and service

support.

BMW, the luxury car maker, is

planning to infuse US$ 15.76

million in its Indian operations.

Andreas Schaaf, President, BMW

India, said that the company had

invested US$ 24.77 million till

September 2010 and this would be

increased to US$ 40.53 million by

the end of 2012.

Luxury carmaker Mercedes-Benz

India will set up a new facility for


building of city bus bodies at its

Chakan plant in Pune. The new

unit will become operational by

mid-2011 and will have a capacity

of 700 units a year.

Mercedes Benz has also re-

introduced its super premium sedan

Maybach in India in 2011.

Mahindra & Mahindra has revealed

its plans to launch 8-10 new

products, including a premium

sports utility vehicle, across

various segments by March 2012.

Domestic Market/ Sales:

India‘s auto market grew at 32.69

per cent in 2010, marginally better

than China‘s 32.44 per cent,

according to SIAM.

According to the data released by

SIAM, in December 2010, total

sale of vehicles across categories

registered a growth of 30.51 per

cent to 13,05,872 units, as against

10,00,562 units in the same month

of 2009. The industry has been

growing at around 30 per cent in

the ongoing fiscal.

According to data released by

SIAM, the passenger vehicles

segment during April-December

2010 grew at 31.83 per cent over

same period last year. Passenger

cars grew by 32 per cent, utility

vehicles grew by 20.82 per cent

and multi-purpose vehicles grew

by 50.58 per cent during this

period.

The overall commercial vehicles

segment registered a growth of

34.08 per cent during April-

December 2010, as compared to

the same period last year. While

medium and heavy commercial

vehicles registered growth of 42.85

per cent, light commercial vehicles

grew at 27.12 per cent.

Two wheelers registered a growth

of 28.21 per cent during April-

September 2010. Mopeds, scooters

and motorcycles grew by 24.47 per

cent, 48.90 per cent and 24.62 per

cent, respectively.

Road Ahead:

Global auto companies are investing to tap

the growing demand in India as investment

spending and the government's social

programmes raise incomes in smaller cities

and rural areas too. "The Indian

automobile industry is geared up to invest

up to US$ 17.12 billion in fresh capacity in

the next four years," Vishnu Mathur,


Director-General, SIAM said. He further

stated, "The components industry will also

invest US$ 12 billion up to the end of the

Automotive Mission Plan."

Car and motorcycle sales in India are

setting records with rising incomes, cheap

lending by banks and launch of new

models such as Volkswagen's Polo and

Fiat's Linea. Car manufacturing capacity is

set to rise to 5.7 million units by 2015,

according to consultants Ernst & Young.

Further, India aims to become the small

car hub of the world by dethroning Japan,

the biggest maker of compact cars, a

majority of which is consumed

domestically. Last year, it had pipped

Brazil to become the second-largest

producer of such cars.

Passenger vehicle production is expected

to grow to 9 million a year in 2020, while

two-wheeler production will touch 30

million, said B.S. Meena, secretary,

department of heavy industries.

According to the annual forecast of the

SIAM, passenger vehicle sales in the

country will be 21,96,791 units in 2010-11

as compared to 19,49,248 units in 2009-

10.

While two-wheeler sales are expected to

be up 9-10 per cent at 10,287,837 units

from 9,368,230 units in 2009-10,

commercial vehicle sales in India will

grow 17-18 per cent at 6,21,681 units vis-

à-vis 5,31,395 units last financial year.

Sales of three-wheelers are expected to go

up 7-8 per cent at 4,73,693 units in the

current financial year as against 4,40,368

units in 2009-10.

However, with demand outgrowing the

supply in the market, the overall market

growth for 2010-11 is most likely to

exceed SIAM's initial prediction of 10-14

per cent.

HealthCare

Sector structure/Market size

The Indian healthcare sector is expected to

become a US$ 280 billion industry by

2020 with spending on health estimated to

grow 14 per cent annually, according to a

report by an industry body. "Healthcare

has emerged as one of the most

progressive and largest service sectors in

India with an expected GDP spend of 8 per

cent by 2012 from 5.5 per cent in 2009. It

is believed to be the next big thing after IT


and predicted to become a US$ 280 billion

industry by 2020," the report said.

At present the sector is estimated to be

around US$ 40 billion and will grow to

US$ 78.6 billion by 2012.

As per a study by an industry body and

Ernst & Young, India would require

another 1.75 million beds by the end of

2025. The public sector however is likely

to contribute only around 15-20 per cent of

the required US$ 86 billion investment.

The corporate India is therefore,

leveraging on this business potential and

various health care brands have started

aggressive expansion in the country. Some

of the companies that plan to increase their

footprints include Anil Ambani‘s Reliance

Health, the Hindujas, Sahara Group,

Emami, Apollo Tyres and the Panacea

Group.

Sahara Group is planning several

healthcare projects such as a 200-bed

multi-specialty tertiary care hospital at

Gorakhpur in Uttar Pradesh, a 1,500-bed

multi super-specialty, tertiary care hospital

at Aamby Valley City and 30-bed multi-

speciality secondary care hospitals across

all the 217 Sahara City Homes Townships.

Meanwhile, Artemis Health Sciences

(AHS), a health care venture of the Apollo

Tyres Group, is also planning to establish

four to eight multi-specialty hospitals in

Punjab, Uttar Pradesh, Madhya Pradesh,

Rajasthan and Haryana over the next three

years.

The rural healthcare sector is also on an

upsurge. The Rural Health Survey Report

2009, released by the Ministry of Health,

stated that during the last five years rural

health sector has been added with around

15,000 health sub-centres and 28,000

nurses and midwives. The report further

stated that the number of primary health

centres have increased by 84 per cent,

taking the number to 20,107.

The size of the Indian medical technology

industry may touch US$ 14 billion by

2020 from US$ 2.7 billion in 2008 on

account of strong economic growth, higher

public spending and private investments in

healthcare, increased penetration of health

insurance and emergence of new models of

healthcare delivery, according to a report

‗Medical Technology in India: Enhancing

Access to Healthcare through Innovation‘

released by PwC and an industry body.

Health Insurance

The Indian health insurance market has

emerged as a new and lucrative growth

avenue for both the existing players as

well as the new entrants. According to a

latest research report "Booming Health

Insurance in India" by research firm

RNCOS released in April, 2010, the health


insurance market represents one the fastest

growing and second largest non-life

insurance segment in the country. The

Indian health insurance market has posted

record growth in the last two fiscals (2008-

09 and 2009-10). Moreover, as per the

report, the health insurance premium is

expected to grow at a CAGR of over 25

per cent for the period spanning from

2009-10 to 2013-14.

Investments in Healthcare

As per data released by the Department of

Industrial Policy and Promotion (DIPP),

the drugs and pharmaceuticals sector has

attracted foreign direct investment (FDI)

worth US$ 1.82 billion between April

2000 and September 2010, while hospitals

and diagnostic centres have received FDI

worth US$ 955.10 million in the same

period.

Care Institute of Medical Sciences

(CIMS), a hospital venture brought

forth by a group of doctors in

Ahmedabad, has come up with

India‘s first ‗green hospital‘.

Drug maker Lupin plans to invest

an average US$ 100 million each in

the coming years for capital

expansion and acquisition of

foreign companies, according to

Ramesh Swaminathan, President –

Finance and Planning, Lupin.

The Apollo Hospitals Educational

and Research Foundation

(AHERF) has firmed up its stem

cell research collaboration with

US-based StemCyte, investing US$

15 million in the 50-50 venture.

Apollo Hospitals also plans to

invest US$ 650.04 million by 2014

to add 4,000 beds.

New Delhi-based hospitals chain

Fortis Healthcare plans to invest

US$ 146.81 million over next 12-

18 months to add 2,100 new beds,

said Bhavdeep Singh, Chief

Executive Officer, Fortis on

November 3, 2010.

Nova Medical Centres, a

specialised day care surgery centre

chain, plans to invest nearly US$

225.5 million for setting up 100

centers across the country by 2014,

said Suresh Soni, Chairman, Nova

Medical Centres.

Manipal Hospitals plans to invest

US$ 45.23 million in the next three

years to double its capacity to

8,000 beds, said Rajen Padukone,

Chief Executive Officer, Manipal

Hospitals.

Wockhardt Hospitals plans to

invest up to US$ 158.32 million to


double its bed capacity to 2,000 by

2013, said Anil V Kamath,

Managing Director, Wockhardt

Hospitals Ltd.

Medical Tourism

According to a new report published by

RNCOS, titled "Booming Medical

Tourism in India" India‘s share in the

global medical tourism industry will reach

around 3 per cent by the end of 2013. The

report states that medical tourism is

expected to generate revenue around US$

3 billion by 2013, growing at a CAGR of

around 26 per cent during 2011–2013. The

number of medical tourists is anticipated to

grow at a CAGR of over 19 per cent

during the forecast period to reach 1.3

million by 2013.

The Indian medical tourism industry is

presently at a nascent stage, but has an

enormous potential for future growth and

development on the back of low cost range

of treatments provided by the country. The

growth in India‘s medical tourism market

will be a boon for several associated

industries, including hospital industry,

medical equipments industry and

pharmaceutical industry.

Domestic medical tourism in the country

has also seen growth in the recent years.

As per the report ‗Domestic Tourism in

India, 2008-09‘ released by the National

Sample Survey Office (NSSO), trips for

‗health and medical‘ purposes formed 7

per cent of overnight trips in the rural

population and about 3.5 per cent in the

urban population. ‗Health and medical‘

purposes accounted for 17 per cent of

same-day trips in rural India and 8 per cent

in urban India. Expenditure on medical

trips accounted for 30 per cent of all

overnight trip expenditure for rural India

and 15 per cent for urban.

Mobile Healthcare

Computer-based bio-surveillance projects

generating data about diseases and creating

databases on healthcare in rural areas are

becoming popular in India with various

organisations entering into this arena.

The Indian Institute of Chemical

Technology (IICT) in Hyderabad

has developed a model to forecast

possible epidemics of diseases such

as malaria and encephalitis in rural

Andhra Pradesh.

A recent initiative by a global

consortia consisting of the Indian

Institute of Technology, Madras,

the National Centre for Biological

Sciences, Carnegie Mellon

University's Auton Lab,

LIRNEasia, University of Alberta,

Respere Lanka, Lanka Jathika

Sarvodhaya Society and the


International Development

Research Centre (IDRC), called the

Real Time Biosurveillance

Program (RTBP), has attempted to

use the power of the mobile phone

in developing a healthcare model.

Narayana Hrudayalaya and the

Mazumdar Shaw Cancer Centre

tied up with SANA, a research

group at Harvard/MIT, to use smart

phone-based detection of oral

cancer and other diseases.

Government Initiative

The Government launched the National

Rural Health Mission (NRHM) in 2005. It

aims to provide quality healthcare for all

and increase the expenditure on healthcare

from 0.9 per cent of GDP to 2-3 per cent

of GDP by 2012.

According to Union Budget 2010-11, the

Finance Minister, Mr Pranab Mukherjee

increased the plan allocation for Ministry

of Health and Family Welfare from US$

4.2 billion in 2009-10 to US$ 4.8 billion in

2010-11.

Moreover, in order to meet revised cost of

construction, in March 2010 the

government allocated an additional US$

1.23 billion for six upcoming AIIMS-like

institutes and upgradation of 13 existing

Government Medical Colleges.

The Union Cabinet on October 20, 2010

approved the proposal of the Ministry of

Health & Family Welfare to declare

National Institute of Mental Health and

Neuro Sciences (NIMHANS), Bangalore

as an Institute of National Importance on

the lines of All India Institute of Medical

Sciences, New Delhi, Post Graduate

Institute of Medical Education and

Research, Chandigarh and Jawaharlal

Institute of Postgraduate Medical

Education & Research, Puducherry.

Telecom

The Indian telecommunications industry is

one of the fastest growing in the world.

The industry has witnessed consistent

growth during the last year on the back of

rollout of newer circles by operators,

successful auction of third-generation (3G)

and broadband wireless access (BWA)

spectrum, network rollout in semi-rural

areas and increased focus on the value

added services (VAS) market.

According to the Telecom Regulatory

Authority of India (TRAI), the number of

telephone subscriber base in the country

reached 742.12 million as on October 31,

2010, an increase of 2.61 per cent from

723.28 million in September 2010. With

this the overall tele-density (telephones per

100 people) has touched 62.51. The

wireless subscriber base has increased to


706.69 million at the end of October 2010

from 687.71 million in September 2010,

registering a growth of 2.76 per cent.

Meanwhile, Indian Global System of

Mobile Communication (GSM) telecom

operators added 17.45 million new

subscribers in November 2010, taking the

all-India GSM cellular subscriber base to

526.18 million, according to the Cellular

Operators Association of India (COAI).

The GSM subscriber base stood at 508.72

million at the end of October 2010.

Value-Added Services (VAS) Market

Mobile value added services (VAS)

include text or SMS, menu-based services,

downloading of music or ring tones,

mobile TV, videos and sophisticated m-

commerce applications. As per a report,

‗India Telecom 2010‘ released by KPMG

in December 2010, currently, the VAS

market is worth US$ 2.45 billion-US$ 2.67

billion, which is around 10 per cent of the

total revenue of the wireless industry. The

share of VAS in wireless revenue is likely

to increase to 12-13 per cent by 2011, on

the back of increased operator focus on

VAS due to continuous fall in voice tariffs,

increasing penetration of feature rich

handsets, availability of vernacular content

and increased user adoption of VAS

applications.

Major Investments

The booming domestic telecom market has

been attracting huge amounts of

investment which is likely to accelerate

with the entry of new players and launch

of new services. According to the

Department of Industrial Policy and

Promotion (DIPP), the

telecommunications sector which includes

radio paging, mobile services and basic

telephone services attracted foreign direct

investment (FDI) worth US$ 1,062 million

during April-October 2010-11. The

cumulative flow of FDI in the sector

during April 2000 and October 2010 is

US$ 9,993 million.

As per an industry report the telecom

industry witnessed merger and acquisition

(M&A) deals worth US$ 16.60 billion

during April-December 2010, which

represented 28.26 per cent of the total

valuation of the deals across all the sectors

during the period analysed. There were 10

inbound, outbound and domestic M&A

deals in the telecom sector during the first

nine months of the current fiscal. The

biggest M&A deal in the sector was made

by telecommunications service provider

Bharti Airtel through the acquisition of

Zain‘s African mobile services operations

in 15 countries. The deal involved a

transaction of US$ 10.7 billion. In another

deal, Bharti Airtel acquired 100 per cent


stake of Telecom Seychelles Ltd for US$

62 million.

Other major M&A deals included the

acquisition of 95 per cent stake in Infotel

Broadband for US$ 1,032.26 million by

Reliance Industries and 26 per cent stake

of US-based mobile chipmaker

Qualcomm‘s Indian arm for US$ 57.72

million by India's Tulip Telecom and

Global Holding. Further, India-based GTL

Infrastructure Ltd has bought 17,500

telecom towers of Aircel Ltd. for US$

1,702.95 million.

Going Global

In March 2010, Bharti Airtel bought the

African operations of Kuwait-based Zain

Telecom for US$ 10.7 billion, driving the

Indian player into the league of top ten

telecom players globally.

The Reserve Bank of India (RBI) has

liberalised the investment norms for Indian

telecom companies by allowing them to

invest in international submarine cable

consortia through the automatic route. In

April 2010, RBI issued a notification

stating "As a measure of further

liberalisation, it has now been decided... to

allow Indian companies to participate in a

consortium with other international

operators to construct and maintain

submarine cable systems on co-ownership

basis under the automatic route." The

notification further added, "Accordingly,

banks may allow remittances by Indian

companies for overseas direct investment."

Tele-medicine

With increase in cell phone users to around

700 million and introduction of 3G

services soon in the country, remote

treatment and diagnosis of patients through

mobile phones would become a reality in

the near future. In fact, a few telecom

operators and value-added service

developers are planning to use mobile

phones for diagnostic and treatment

support, remote disease monitoring, health

awareness and communication.

The Gujarat health department plans to

connect all villages through its

telemedicine network. The state

government has so far expanded the reach

of telemedicine services from 53 villages

in 2008 to 453, and hopes to cross 500

villages soon. Jay Narayan Vyas, state

health minister, said "First thing we plan to

do is to start the 104 service over the

phone. People can call up and talk to

paramedics in call centers who can suggest

the primary action to be taken in case of

any health emergency. Also, they would be

able to suggest generic and over the

counter drugs."


3G Services

The Department of Telecom has taken the

pioneering decision of launching of 3G

services by BSNL and MTNL and

initiation of process for auction of

spectrum for 3G services to private

operators. Allocation of spectrum for 3G

and BWA services was done through a

controlled simultaneous, ascending e-

auction process.

All the 71 blocks that were put up for

auction across the 22 service areas in the

country were sold, leaving no unsold lots.

Auction for 3G spectrum ended on May

19, 2010 after 183 rounds of intense

bidding over a span of 34 days. The

Government is expected to morph revenue

worth US$ 14.6 billion. All the available

slots across 22 circles have been sold to

seven different operators.

A pan-India bid for third generation

spectrum stood at US$ 3.6 billion. The

Anil Ambani-led Reliance Communication

bagged the highest number of 13 circles at

a cost of US$ 1.9 billion, followed by

Bharti Airtel in 12, Idea in 11 and

Vodafone and the Tatas in nine circles

each, according to the Department of

Telecommunications. MTNL and BSNL

will have to pay US$ 1.42 billion and US$

2.2 billion respectively.

3G spectra have already been allotted to

successful bidders for commercial use on

September 1, 2010 as per the timelines

indicated in the Notice Inviting

Application (NIA) and in the Letter of

Intent issued after the bid amounts were

deposited. The 3G spectrum has been

allotted to AirTel, Aircel, Vodafone, S Tel,

Reliance, Idea Cellular and Tata Cellular

Services who won the bids through the

electronic auction spread over a period of

34 days in respect of 3G and 16 days in

respect of BWA. The BWA spectra have

also been assigned to the successful

bidders which are Aircel, Augere, Tikona,

Qualcomm, Infotel and Bharti. 3G &

BWA spectrum would enable users to have

value added services like video streaming,

mobile internet access, higher & faster

data downloads.

Manufacturing

The Indian telecom industry manufactures

a vast range of telecom equipment using

state-of-the-art technology.

As per a press release by the Ministry of

Communications & Information

Technology, the production of telecom

equipments in value terms is expected to

increase from US$ 10.87 billion during

2008-09 to US$ 11.87 billion in 2010-

2011. Favourable factors such as policy

moves taken by the Government,


incentives offered, large talent pool in

R&D and low labour cost can provide an

impetus to the industry. Exports increased

from US$ 89.24 million in 2002-03 to US$

3 billion in 2009-10 accounting for 26 per

cent of the total equipment produced in the

country and it is expected to increase to

US$ 3.33 billion in 2010-11.

Meanwhile, telecom regulator TRAI has

released a consultation paper on

‗Encouraging Telecom Equipment

Manufacturing in India‘ seeking views of

stakeholders for promoting research and

development (R&D) and manufacturing of

telecom equipment in the country. The

consultation paper issued on December 28,

2010 aims at discussing, debating and

finalising measures for promotion of R&D

and creation of intellectual property as

well as manufacture of telecom equipment

and electronic components in India.

Further, the Indian mobile handsets market

continued to grow in the third quarter 2010

as well to record a quarter-on-quarter

growth of 3.6 per cent to touch 40.08

million units in the quarter, according to

market intelligence firm IDC‘s India

Quarterly Mobile Handsets Tracker. The

year 2010 is expected to end with total

mobile handset sales of 155.9 million

units.

The study further showed that the Finnish

handset maker Nokia had the largest share

of 31.5 per cent in terms of units shipped

during the third quarter of 2010. Nokia

was followed by the Chinese brand G‘Five

in terms of unit shipments market share

and Korean handset manufacturer

Samsung occupied the third slot.

According to a report by technology

researcher Gartner Inc, India ranks fourth

in manufacturing telecom equipment in the

Asia-Pacific (Apac) region. The country

has a 5.7 per cent share of the region's total

telecom equipment production revenue of

US$ 180 billion in 2009.

"We expect India to move up to the third

spot (after China and South Korea) with a

share of 8.5 per cent of the total

(estimated) Apac telecom equipment

production revenue of US$ 277 billion by

2014," Gartner said. The firm estimates

India's telecom equipment production

revenue to grow at a CAGR of 17.1 per

cent to reach US$ 22.6 billion in fiscal

2014. India will be the fastest growing

telecom equipment production market in

the Apac region over the next five years, it

predicts.

Rural Telephony

The rural Telephone connections have

gone up from 3.6 million in 1999 to 12.3

million in March 2004 and further to


200.77 million in March 2010. Their share

in the total telephones has constantly

increased from around 14 per cent in 2005

to 32.75 per cent at the end of October

2010. The rural subscribers have grown to

243.04 million at the end of October 2010.

The wireless connections have contributed

substantially to total rural telephone

connections; it stands at 233.95 million in

October 2010. During 2010-11, the growth

rate of rural telephones was 21.05 per cent

as against 18.69 per cent of urban

telephones.

The private sector has contributed to the

growth of rural telephones as it provided

about 84.27 per cent of rural telephones

during October 2010.

The government plans to connect all

revenue villages in India either through

landline, mobile or WLL by February

2011. ―We have already connected about

96 per cent of the revenue villages. The

remaining 25,000 villages will have

connectivity by February 2011,‖ stated Mr

Sachin Pilot, Minister of State for

Communications and IT.

Further, the Government, under Bharat

Nirman II Programme, has envisaged

providing broadband coverage to all

250,000 Gram Panchayats by 2012.

Policy Initiatives

The government plans to formulate a

comprehensive ‗National Telecom Policy

2011‘ including the recognition of

Telecom as infrastructure and as an

essential service, encouraging Green

Telecom, steps to accelerate migration

from IPv4 to IPv6 at the earliest, release of

IPv6 standards by Telecom Engineering

Centre for implementation in the country,

etc., as per a press release by the Ministry

of Communications & Information

Technology.

Further, the government plans to take

concrete steps towards finalisation of

‗National Broadband Plan‘ including

strategy for implementation and initiation

of steps for roll out of optical fibre.

The government has taken many proactive

initiatives to facilitate the rapid growth of

the Indian telecom industry.

In the area of telecom equipment

manufacturing and provision of IT-

enabled services, 100 per cent FDI

is permitted

No cap on the number of access

providers in any service area. In

2008, 122 new Unified Access

Service (UAS) licences were

granted to 17 companies in 22

services areas of the country


Revised subscriber based criteria

for allocation of Global System of

Mobile Communication (GSM)

and Code Division Multiple Access

(CDMA) spectra were issued in

January 2008

To provide infrastructure support

for mobile services a scheme has

been launched to provide support

for setting up and managing 7,436

infrastructure sites spread over 500

districts in 27 states. As on

December 31, 2009, about 6,956

towers had been set up under the

scheme

According to the Consolidated Foreign

Direct Investment (FDI) Policy document,

the FDI limit in telecom services is 74 per

cent subject to the following conditions:

This is applicable in case of Basic,

Cellular, Unified Access Services,

National/ International Long

Distance, V-Sat, Public Mobile

Radio Trunked Services (PMRTS),

Global Mobile Personal

Communications Services

(GMPCS) and other value added

Services

Both direct and indirect foreign

investment in the licensee company

shall be counted for the purpose of

FDI ceiling. Foreign Investment

shall include investment by

Foreign Institutional Investors

(FIIs), Non-resident Indians

(NRIs), Foreign Currency

Convertible Bonds (FCCBs),

American Depository Receipts

(ADRs), Global Depository

Receipts (GDRs) and convertible

preference shares held by foreign

entity. In any case, the 'Indian'

shareholding will not be less than

26 per cent

FDI up to 49 per cent is on the

automatic route and beyond that on

the government route. FDI in the

licensee company/Indian

promoters/investment companies

including their holding companies

shall require approval of the

Foreign Investment Promotion

Board (FIPB) if it has a bearing on

the overall ceiling of 74 per cent.

While approving the investment

proposals, FIPB shall take note that

investment is not coming from

countries of concern and/or

unfriendly entities

The investment approval by FIPB

shall envisage the conditionality

that the Company would adhere to

licence Agreement


FDI shall be subject to laws of

India and not the laws of the

foreign country/countries

The Road Ahead

According to a report published by Gartner

Inc in June 2009, the total mobile services

revenue in India is projected to grow at a

compound annual growth rate (CAGR) of

12.5 per cent from 2009-2013 to exceed

US$ 30 billion. The India mobile

subscriber base is set to exceed 771

million connections by 2013, growing at a

CAGR of 14.3 per cent in the same period

from 452 million in 2009. This growth is

poised to continue through the forecast

period, and India is expected to remain the

world's second largest wireless market

after China in terms of mobile

connections.

"The Indian mobile industry has now

moved out of its hyper growth mode, but it

will continue to grow at double-digit rates

for next three years as operators focus on

rural parts of the country," said

Madhusudan Gupta, senior research

analyst at Gartner. "Growth will also be

triggered by increased adoption of value-

added services, which are relevant to both

rural and urban markets."

Mobile market penetration is projected to

increase from 38.7 per cent in 2009 to 63.5

per cent in 2013, according to Gartner.

The much-awaited mobile number

portability was launched on November 25,

2010 in Haryana and will be available to

more than 700 million subscribers from

January 20, 2011 across the country. As

continued efforts of the Government to

increase competition in the market and to

provide wider choice to customer, Mobile

Number Portability will be an important

step.

Steel

Sector structure/Market size

India became the fourth largest producer of

crude steel in the world in 2010 as against

the eighth position in 2003 and is expected

to become the second largest producer of

crude steel in the world by 2015. India also

maintained its lead position as the world‘s

largest producer of direct reduced iron

(DRI) or sponge iron.

Led by strong demand for autos and

engineering services, the domestic steel

demand in India remains robust, as per

Moody's sectoral analysis on Asia's steel

sector. According to the analysis, the

outlook for the domestic operating

environment is positive, driven by robust

growth in infrastructure, autos and

construction and constrains on additional

supply by 2011.


Production

As per provisional data released by World

Steel Association (WSA), India was the

fourth largest producer of crude steel

during January–September 2010. India

produced 50.1 million tonnes (MT) crude

steel during the period under review.

Capacity for crude steel production

expanded from 51.17 million tonnes per

annum (mtpa) in 2005-06 to 72.96 mtpa in

2009-10. Crude steel production grew at

8.4 per cent annually from 46.46 MT in

2005-06 to 64.88 MT in 2009-10.

As per the latest estimates, the crude steel

capacity in the country is likely to reach

120 MT by 2012 from 72.9 MT in the

2009-10.

Production for sale of finished steel stood

at 59.69 MT during 2009-10 as against

46.57 MT in 2005-06, an average annual

growth of 6.5 per cent. Production for sale

of finished steel during April-October

2010-11 stood at 35.595 MT and was up

by 4.4 per cent over the corresponding

period of the previous year.

Public sector steel companies Steel

Authority of India Ltd. (SAIL) and

Rashtriya Ispat Nigam Ltd. (RINL) are in

the process of expanding their crude steel

capacities. SAIL envisages increasing its

crude steel production from existing 12.84

Mt to 21.40 MT per annum in Phase-I to

be completed by 2012-13 at an

approximate estimated cost of US$ 15.23

billion including cost of mine

development.

RINL is expanding its existing capacity of

2.9 MT of crude steel production to 6.3

MT per annum to be completed by

December, 2011 at an estimated cost of

US$ 26.60 million.

Another public sector company, NMDC

Ltd., is to set up a 3 MT per annum

integrated steel plant at Nagarnar,

Chhattisgarh at an estimated investment of

US$ 33.78 million. The Plant is likely to

be commissioned in 2014.

Tata Steel registered sales of 5.9 MT

during the third quarter ended December

2010, while Steel Authority of India Ltd

(SAIL) sold 3.25 MT steel in Q3 FY'11,

registering a growth of 10.7 per cent over

Q3 FY'10. Meanwhile, JSW Steel‘s

production during the quarter grew by 11

per cent to 1.636 MT.

Consumption

The domestic steel consumption grew by

9.8 per cent to 29.82 MT during April-

September 2010 over the year-ago period,

on the back of steady demand from sectors

like automobile and consumer durables. As

per the provisional data from the Ministry


of Steel, consumption was at 27.15 MT in

the same period a year ago. In September

2010, steel consumption rose 4.1 per cent

to 4.72 MT, against 4.53 MT in the year-

ago period.

Major Developments

A host of steel companies have lined up

major investment proposals. Furthermore,

with an expanding consumer market, the

Indian steel industry is likely to receive

huge domestic and foreign investments.

Tata Steel plans to invest US$ 22.5

million to commission its proposed

ferroalloys plant and bar mill at its

industrial park at Gopalpur and a

greenfield steel plant at Kalinga

Nagar.

JSW Steel plans to invest US$

16.86 billion over the next 10 years

to ramp up capacity from 7.8

million tonne per annum (MTPA)

to 32 mtpa through greenfield and

brownfield projects.

Japan's Nippon Steel will begin a

manufacturing operation in India

making steel pipes for use in

automobiles and plans to invest

US$ 36.91 million on production

and sales operations.

Tata Steel plans to ink a pact with

Japan-based Nippon Steel

Corporation (NSC). The proposed

joint venture (JV) with a 50:50

holding would be set up at an

investment of US$ 537.37 million

for producing auto-grade steel.

Visakhapatnam Steel Plant (VSP)

has entered into a memorandum of

understanding (MoU) with the

Central Public Works Department

(CPWD) to develop a new

stockyard here near Ukkunagaram

township and augment its facilities

at Hyderabad stockyard. The

Ukkunagaram project would cost

US$ 3.7 million while the

Hyderabad one is estimated at US$

1.70 million.

Essar Steel and Kobe Steel of

Japan have entered into a

memorandum of understanding

(MoU) to produce autograde steel

in India.

Steel Authority of India Ltd has

signed a memorandum of

understanding (MoU) with

Japanese steelmaker Kobe Steel

Ltd for a comprehensive strategic

collaboration covering

technologies, projects and other

areas.

India's largest miner NMDC has

signed a pact with Russian steel


and mining major Severstal to set

up a 5 million tonne per annum

steel plant in Karnataka as part of a

strategy that aims to boost the

company's revenue by increasing

presence in value added product

chain.

National Aluminium Company

(Nalco), JSW Steel and Jaiprakash

Industries have evinced interest in

setting up an alumina refinery and

aluminium smelter in Kutch. The 1

million tonne per annum (TPA)

alumina refinery project and 0.5

million TPA smelter project

involves expenditure of US$ 2.20

billion.

Sunflag Iron and Steel Ltd, makers

of automobile spring steel, has

announced a technical tie-up with

Japanese speciality steel maker

Daido Steel Ltd.

JSW Steel plans to infuse US$

83.54 million in Ispat industries in

the next 2-3 years.


As per the Press Information Bureau,

during 2009, the government took a

number of fiscal and administrative steps

to contain steel prices. Central value added

tax (CENVAT) on steel items was reduced

from 14 per cent to 10 per cent with effect

from February 2009.

Moreover, in the Union Budget 2010-11,

the government has allocated US$ 37.4

billion to the infrastructure sector and has

increased the allocation for road transport

by 13 per cent to US$ 4.3 billion which

will further promote the steel industry.

In order to encourage R&D activities in

iron and steel sector, Ministry of Steel is

providing financial assistance from Steel

Development Fund (SDF) and Plan Fund.

64 research projects initiated by

public and private undertakings,

research laboratories, educational

and other promotional institutions

have so far been approved at a cost

of US$ 98.45 million during 2010,

of which the SDF component is

US$ 61.92 million. So far 31

projects have been completed and

24 research projects are underway.

US$ 26.28 million was allocated

from Plan Fund during the 11th

five year plan for promotion of R

& D in steel sector. Under this

scheme eight R& D projects have

been approved with Plan fund of

US$ 24.72 million.


Pharmaceuticals

India's pharmaceutical industry is now the

third largest in the world in terms of

volume and stands 14th in terms of value.

According to data published by the

Department of Pharmaceuticals, Ministry

of Chemicals and Fertilizers, the total

turnover of India's pharmaceuticals

industry between September 2008 and

September 2009 was US$ 21.04 billion. Of

this the domestic market was worth US$

12.26 billion.

The Indian pharmaceuticals market is

expected to reach US$ 55 billion in 2020

from US$ 12.6 billion in 2009, according

to a report ‗India Pharma 2020: Propelling

access and acceptance, realising true

potential‘ by McKinsey & Company. The

report states that the market has the further

potential to reach US$ 70 billion by 2020

in an aggressive growth scenario.

Moreover, according to an Ernst & Young

and industry body study, the increasing

population of the higher-income group in

the country, will open a potential US$ 8

billion market for multinational companies

selling costly drugs by 2015. Besides, the

report said the domestic pharma market is

estimated to touch US$ 20 billion by 2015,

making India a lucrative destination for

clinical trials for global giants.

Further, IMS Health India, which tracks

drug sales in the country through a

network of nationwide drug distributors,

estimates the healthcare market in India to

reach US$ 31.59 billion by 2020.

Growth

The Indian pharmaceutical market reached

US$ 10.04 billion in size, with a value-

wise growth rate of 20.4 per cent over the

previous year‘s corresponding period on a

Moving Annual Total (MAT) basis for the

12 months ended July 2010, according to

data from IMS Health India.

Cipla maintained its leadership position in

the domestic market with 5.27 per cent

share, followed by Ranbaxy. The highest

growth in the domestic market was for

Mankind Pharma, which grew 37.2 per

cent. Leading companies in the domestic

market such as Sun Pharma (25.7 per

cent), Abbott (25 per cent), Zydus Cadila

(24.1 per cent), Alkem Laboratories (23.3

per cent), Pfizer (23.6 per cent), GSK India

(19 per cent), Piramal Healthcare (18.6 per

cent) and Lupin (18.8 per cent) had

impressive growth during July 2010,

shows the data.

According to the All India Organisation of

Chemists and Druggists (AIOCD), the

pharmaceuticals industry in India will

grow by over 100 per cent over the next


two years.

"The people are increasingly becoming

health conscious and the sell of all types of

medicines, particularly anti-biotic, will

zoom up in the coming years. We expect

the business to double by 2012", as per JS

Shinde, President, AIOCD.

According to Shinde, the pharmaceutical

industry is currently growing at the rate of

12 per cent, but this will accelerate soon.

The sale of all types of medicines in the

country stands at US$ 9.61 billion, which

is expected to reach around US$ 19.22

billion by 2012.

India's domestic pharmaceutical market is

valued approximately at US$ 12 billion in

2010, and has shown a strong growth of

21.3 per cent for the 12 months ending

September 2010, as per consulting firm

Pricewaterhouse Coopers (PwC). It

estimates that over the next 10 years, the

domestic market will grow to US$ 49

billion, at a compounded annual growth

rate (CAGR) of 15 per cent.

Further, a RNCOS report titled 'Booming

Pharma Sector in India' projects that the

formulations industry is expected to

prosper parallel to the pharmaceutical

industry. It is expected that the domestic

formulations market in India will grow at

an annual rate of around 17 per cent in

2009-10, owing to increasing middle class

population and rapid urbanisation.

Diagnostics Outsourcing/Clinical Trials

According to the research published by

RNCOS titled 'Indian Diagnostic Market

Analysis' published in January 2010, the

Indian diagnostic services are projected to

grow at a CAGR of more than 20 per cent

during 2010-2012.

Some of the major Indian pharmaceutical

firms, including Sun Pharma, Cadilla

Healthcare and Piramal Life Sciences, had

applied for conducting clinical trials on at

least 12 new drugs in 2010, indicating a

growing interest in new drug discovery

research.

Generics

According to Mr Srikant Kumar Jena,

Union Minister of State for Chemicals and

Fertilisers, India tops the world in

exporting generic medicines worth US$ 11

billion and currently, the Indian

pharmaceutical industry is one of the

world's largest and most developed.

Moreover, as per a press release by

research firm RNCOS in May 2010, the

report titled ‗Booming Generics Drug

Market in India' projects the Indian generic

drug market to grow at a CAGR of around

17 per cent between 2010-11 and 2012-13.


Mr Anand Sharma, Union Minister of

Commerce and Industry and Lim Hng

Kiang, Minister for Trade and Industry,

Singapore , have signed a 'Special Scheme

for Registration of Generic Medicinal

Products from India' in May 2010, which

seeks to fast-track the registration process

for Indian generic medicines in Singapore.

According to Lim Hng Kiang, "What we

have agreed is that if your (Indian)

generics have already cleared the

regulations of one of the five countries/

regions - US, Canada, the European

Union, UK or Australia - Singapore will

take that as 'already cleared' and we will

import it (the generic medicines) without

any additional clearances."

Mr Sharma said, "This (understanding)

will facilitate quick registration and

approvals (of Indian generic drugs) in

Singapore. It is a major movement

forward. One-fourth of the world's

generics come from India. This has

ensured easy availability of life-saving

medicines particularly where affordability

has been an issue."


100 per cent foreign direct investment

(FDI) is allowed under the automatic route

in the drugs and pharmaceuticals sector

including those involving use of

recombinant technology. (DIPP)

The Government plans to set up a US$

639.56 million venture capital (VC) fund

to give a boost to drug discovery and

strengthen the pharma infrastructure in the

country.

According to Mr Ashok Kumar, Secretary,

Department of Pharmaceuticals, the

Government had issued an expression of

interest (EoI) for technical and financial

bids for the selection of a global level

consultant (GLC) for the preparation of a

detailed project report (DPR) in order to

develop India as a drug discovery and

pharma innovation hub by 2020.

The Drugs and Pharmaceuticals

Manufacturers Association has received an

in-principle approval for its proposed

special economic zone (SEZ) for

pharmaceuticals, bulk drugs, active

pharmaceutical ingredients (APIs) and

formulations to be located at Nakkapalli

mandal in Visakhapatnam district,

according to a government press release.

According to Mr Srikant Kumar Jena,

Union Minister of State for Chemicals and

Fertilisers, the Department of

Pharmaceuticals has prepared a "Pharma

Vision 2020" for making India one of the

leading destinations for end-to-end drug

discovery and innovation and for that


purpose provides requisite support by way

of world class infrastructure,

internationally competitive scientific

manpower for pharma research and

development (R&D), venture fund for

research in the public and private domain

and such other measures.

The government plans to open 3,000 Jan

Aushadhi stores, which sell unbranded

generic drugs at heavy discounts to

branded drugs, in the next two years

Investment

The healthcare sector has attracted

growing investor support in 2010 with

nearly a tenth of the total private equity

funding going to this sector. In the third

quarter the calendar year 2010, a total of

US$ 2,047 million was invested across 88

deals, of which 9 per cent were healthcare

deals, according to research firm Venture

Intelligence.

Further, in October 2010, the pharma,

healthcare and biotech sector witnessed

five merger and acquisition transactions

(M&A) worth US$ 250 million, according

to global consultancy firm Grant Thornton.

The drugs and pharmaceuticals sector has

attracted FDI worth US$ 1,825.43 million

between April 2000 and September 2010,

according to data published by Department

of Industrial Policy and Promotion (DIPP).

Some of the major investment

developments in the sector include:

Hyderabad-based Natco Pharma

plans to raise US$ 22.22 million to

fund its expansion plans and

research activities.

Private equity major Sequoia

Capital has made its first

investment in the pharmaceutical

sector in the country by investing

US$ 15.86 million into Celon Labs,

which will use the funds to double

its manufacturing facility.

Belgium based Helvoet Pharma,

part of the Daetwyler Group is

setting up its first greenfield

production facility in Khandala

Industrial Area, phase I (SEZ), on

Pune- Bangalore Highway, near

Pune. The company has invested

US$ 26.56 million for the plant.

Swiss Pharma major Lonza AG,

would invest around US$ 55.33

million through its Indian

subsidiary in a phased manner in

Genome Valley project,

Hyderabad, said Stefan Borgas,

CEO, Lonza.

Chennai-based Bafna


Pharmaceuticals plans to raise

around US$ 4.43 million for its

future expansion by issuance of

warrants and shares.

Hyderabad Menzies Air Cargo

Private Limited, a joint venture

between GMR Hyderabad

International Airport Limited

(GHIAL) and Menzies Aviation,

has launched India's first airport-

based pharma zone, a dedicated

pharmaceutical cargo storage and

handling facility, at Hyderabad.

The project involved an investment

of US$ 1.22 million.

Road Ahead

According to a report by PwC in April

2010, India will join the league of top 10

global pharmaceuticals markets in terms of

sales by 2020 with the total value reaching

US$ 50 billion.

World Economy

Oil Crisis: Impact of Middle-East

revolutions Global markets paid scant attention to

the Egyptian and Tunisian revolutions as

both were seen as lacking systemic

economic and financial significance. This

is now changing as youth-inspired

uprisings spread to other countries in

North Africa and the Middle East.

It is understandable that Egypt and Tunisia

had essentially not registered on the

markets‘ traditional scale of systemic

influence. The two countries are not

significant global economic powers; they

do not owe much money to western banks

and governments; and they are not large

exporters of commodities. Yet Egypt and

Tunisia are catalysts for a broader

phenomenon of change that is gaining

systemic importance. Over the past few

weeks, protests occurred in a growing

number of countries in the region, from

Algeria and Morocco in the west to

Bahrain and Yemen in the east. Two

developments are particularly important

when it comes to global demand and price

dynamics.

With an oil exporter such as Libya now in

the grips of a popular uprising, markets

will push oil prices higher to reflect much

greater supply uncertainties for this key

global commodity. And with sectarian

issues now on display in Bahrain,

geopolitical risks are higher for the region

– especially as other countries seek to

influence events in the Kingdom.

Unfortunately, there is also a deplorable

change in dynamics; and one that makes

this transformational period even more

unpredictable and dangerous.


Relatively peaceful movements in Egypt

and Tunisia regrettably gave way to

violence elsewhere as governments applied

force to clamp down on street protests.

Casualties multiplied alarmingly. Yet the

strength and determination of the popular

movement became even more apparent for

all to see.

In the short run, regional developments

will be stagflationary for the global

economy due to three main factors: First,

higher oil prices will increase production

costs and act as a tax on consumers.

Second, greater precautionary stockpiling

around the world will intensify pressures

on commodities as a whole, aggravating

the impact of demand-supply imbalances

and large injections of liquidity. Third, the

region will be a smaller market for other

countries‘ exports. This economic reality is

far from encouraging for western countries

that have few options in reacting to what is

an increasingly fluid situation.

On the regional stage, they are essentially

bystanders to developments in countries

where protests are in their early phases. At

best, they can only marginally offset

tendencies towards violence. Fortunately,

they can do more in post-revolutionary

Egypt and Tunisia, where both Europe and

the US are eager and able to support the

peaceful path to democracy, including the

important visit to Cairo of David Cameron,

the UK prime minister.

Domestically, having already countered

aggressively the impact of the global

financial crisis, western economies have

little room left for further demand

stimulus. Some have already embarked on

fiscal consolidation, while for others it is

only a matter of time. Moreover, recent

evidence of inflationary pressures is

already influencing the narrative of some

central banks. In the next few days,

markets will react to the changed outlook

for the region and the global economy.

Higher commodity prices will be

accompanied by greater risk aversion in

the equity and credit markets. Over time,

however, such market apprehension is

likely to give way as the impact of greater

long-term stability in a key part of the

world is felt. In the long term, after all,

democracy and individual freedoms are the

best drivers of prosperity.

Europe’s Inflation The European Central Bank has been

warning about the inflationary effects of

higher commodity prices. For a central

bank that takes its target seriously the

concern is justified. But higher food and

energy costs are not even the biggest

problem. A clearer and more present

inflationary threat would be an


overheating German economy at a time

when peripheral Europe is in a depression.

Is Germany overheating?

It is hard to come to that conclusion from

the actual levels of real gross domestic

product. Between the third quarters of

2007 and 2010, seasonally adjusted

quarterly German real GDP fell by 0.2 per

cent, according to Thomson Datastream,

while it rose by 0.1 per cent in the US. So

how can it be overheating when it has not

even reached the pre-crisis level of output?

It would certainly be a sign of

extraordinary structural weakness if that

were to happen. And Germany, so we are

told, is very strong.

For Germany, this is the first cyclical

recovery in decades that begins with a

comparatively low level of unemployment.

In August 2007, seasonally adjusted

unemployment was still relatively high at

8.9 per cent. The rate fell to 7.6 per cent a

year later and rose to only 8.3 per cent

during the 2009 recession. Companies

used imaginative short-time work schemes

to keep their workers on board. The

unemployment rate has since come down

to 7.5 per cent.

That is very good news for German

workers. But due to an export-based

industrial monoculture, Germany is

vulnerable to labour supply shortages. In

December, the shortage of graduate-level

engineers rose by 6 per cent, double what

it was a year earlier. The Association of

German Engineers, which monitors the

labour market situation within its

profession, said the rate of increase in

labour shortages was frightening, and it

expects it to get worse. The gap was

accounted for by mostly two sectors –

mechanical and electrical engineering.

Average German labour costs will be

contained in the current year because some

of last year‘s wage agreements run into

this one. The economy also still generates

new low paying jobs that bear down on

average wage costs. This effect, which

stems from welfare reforms, is not going

to last forever

Where would this leave the eurozone?

Until now, German inflation has been

consistently below the eurozone average.

But the situation is about to reverse. This

will make the adjustment process in the

European periphery progressively harder –

if you factor in the ECB‘s likely policy

response. Because of price-indexing

mechanisms, Belgium and Italy would

produce inflation rates at least as high as

Germany‘s. So the combination of an

overheating German economy, indexations

and commodity price rises might bring a

persistent increase in eurozone inflation. A

German inflation rate rising slowly


towards 4-6 per cent over the next two

years, which would be consistent with a

rate of nominal annual GDP growth of

about 6-9 per cent. The eurozone data

would be a little lower, perhaps 3-5 per

cent for inflation, and 5-8 per cent for

nominal growth.

Where would this scenario leave

monetary policy?

If the ECB is determined to stick to

its inflation target, it will need to raise

interest rates soon. It is probably best to

think in terms of insurance – a central bank

is ready to pay a premium to prevent large

deviations from the inflation target. From a

pure monetary policy standpoint, the least

risky option is a moderate rise right away,

followed by a few further rate increases

during the year. That would depress

average growth. It may even drive the

eurozone periphery over the edge. But it

would probably not produce deflation for

the eurozone as a whole. If the ECB leaves

rates unchanged for another year, it will

risk an inflationary overshoot later.

Britain: Inflation Dilemma For many years the job of the Bank of

England‘s monetary-policy committee

(MPC) seemed straightforward. The

knocks that from time to time pushed the

economy off its path of steady growth

tended to shove inflation downward, too.

A weaker economy meant interest-rate

cuts; recoveries prompted rate rises. The

bank‘s rate-setters knew it might not

always be so easy—that in some instances,

output and inflation might be pulled in

opposite directions. But they might never

have envisaged a policy dilemma quite as

acute as the one they now face.

Figures released on February 15th showed

that Britain‘s inflation rate reached 4% in

January, twice the bank‘s official 2%

target. Inflation is likely to rise further in

the coming months, to 4.5% or even

higher, according to the bank‘s

quarterly Inflation Report, published a day

later. The report seemed to endorse the

widespread expectation that interest rates

will go up as soon as May, and continue

climbing: the bank reckons inflation is as

likely to be below as above 2% in the

medium term—based on the financial

market‘s forecast of a gradual rise in the

benchmark interest rate to 3% by the end

of 2013.

Mervyn King, the bank‘s governor, said

the report should not automatically be read

as a manifesto for a swift rate increase.

The timing and speed of policy changes

will not be set by market expectations but

by how the MPC sees the balance of risks,

he said. The fear of enduringly high

inflation has to be set against the danger


that it falls too far if the economy stays

weak.

Hence the bank‘s dilemma.Much of

today‘s inflation stems from temporary

influences beyond its control: a surge in

energy and food prices, increases in VAT,

a consumption tax and the delayed effects

of a weaker pound. These are likely to

fade—unless firms and employees start to

factor high inflation into their price- and

wage-setting. An increase in interest rates

might lower the chances of that spiral. But

it might also unduly harm the economy,

which is still fragile, and, in April, faces

tax increases and sharp public-spending

cuts.

What makes the bank‘s problem especially

acute is that, in recent years, inflation has

spent more time above 2% than below it,

testing faith in the bank‘s ability to meet

the target (see chart). Some think it

unseemly to keep interest rates at 0.5%

when inflation is at such relatively heady

levels, and believe there is a case for one

or two ―symbolic‖ quarter-point rate

increases to show the bank is serious about

curbing it. A modest tightening might do

little harm: the benchmark rate is too low

to have much influence on the higher

charges levied on business loans and

mortgages. The idea that a rate rise will

make little difference, but is necessary all

the same, was scorned by Mr King. Better

to explain carefully why high inflation is

likely to prove temporary than to indulge

in ―futile gestures‖, he said.

The trouble with the bank acting tough to

shore up its reputation is that the Treasury

is engaged in a similar exercise. Mr.

Osborne believes that Britain‘s reputation

for fiscal prudence depends on cutting

public spending aggressively. His hope

was that the bank could insure against the

perils of his fiscal tightening by keeping

monetary policy very loose, or even

loosening it further. There is now some

fear of a ―credibility race‖ between the

central bank and the Treasury, resulting in

an economic policy vice that strangles the

recovery.

Certainly another round of ―quantitative

easing‖—using central-bank money to buy

government bonds—now looks

improbable. And even if a rate rise in May

is uncertain, the recent poor run of

inflation data makes an increase this year

seem likely. If that happens, Britain would

scarcely be the first biggish, rich country

to raise interest rates since the global

financial crisis: Australia and Canada have

already done so. Sweden‘s central bank

raised its benchmark interest rate to 1.5%

on February 15th, and said further

increases were likely. Canada and


Australia have strong banks and are

benefiting from the commodity boom.

Sweden‘s export-based economy has

bounced back even more impressively than

Germany‘s.

The challenges facing the rich world‘s

central banks have increased as a result of

the financial crisis. But Britain‘s has the

least room for error in its main job of

keeping inflation stable. Tighten too soon

or too much, and the recovery is in

jeopardy. Tighten too late and inflation

might take off.

US BEFORE November‘s election,

Republican leaders in the House of

Representatives solemnly promised that

they would cut spending by $100 billion

this year alone if voters put their party in

charge. Voters did, in the House at least,

and on February 19th the new Republican

majority repaid the compliment by

approving cuts of $100 billion in the

budget Barack Obama proposed for last

year (compared with the short-term

―continuing‖ spending resolutions

Congress has actually adopted, the cut is

only $61 billion). The hitch is that the

measure will not become law, since the

Democrats who control the Senate, not to

mention the president with his veto pen,

are implacably opposed to it. With the

continuing resolution due to expire on

March 4th, there is little time to work out a

compromise, and little evidence either side

wants one.

The cuts the House approved constitute an

unprecedented reduction of some 10% in

non-defense discretionary spending. Food-

safety inspections, oversight of financial

institutions, college scholarships for the

poor, nutrition schemes for mothers and

babies and other seemingly

unobjectionable items would all be scaled

down. Funding for pet Democratic causes,

such as public broadcasting, regulating

greenhouse-gas emissions and Mr

Obama‘s health-care reforms, would be

eliminated altogether. There were even

some cuts to homeland security and

defence—normally a sacred cow for

Republicans. Tim Geithner, the secretary

of the treasury, said the cuts would

―damage our capacity to create jobs and

expand the economy‖. Harry Reid, the

leader of the Democrats in the Senate,

complained that the Republicans were

slashing ―the programs that keep us safe

and keep the economy growing‖. Mr

Obama, who proposed a mere freeze on

non-security discretionary spending in his

budget earlier this month, had threatened a

veto of the House bill even before it was

passed. Yet the Republican Study

Committee had wanted to cut $22 billion

more.


Despite such worrying portents, the leaders

of both parties say they want to strike a

deal before March 4th, to avoid a

government shutdown. Moderate

Republicans, in particular, seem fearful of

a repeat of earlier budget battles that led to

shutdowns in 1995-96, when Bill Clinton

managed to paint the Republican majority

in Congress as extreme and recalcitrant.

Whether they can persuade their extreme

and recalcitrant colleagues of the wisdom

of holding back is another matter. The

party‘s top brass, after all, had originally

proposed much smaller cuts, only to be

overruled by the lower ranks. The Senate‘s

Democrats are not making things any

easier. They say that with Congress in

recess this week, there will not be time to

hammer out a deal before March 4th.

Instead, they say, Congress should extend

the government‘s authority to continue

spending at current levels for another

month or so. John Boehner, the House

speaker, says he will not agree to any

extension that does not entail cuts. A

group of moderate senators are trying to

help. But time is short, and the willingness

of the Republican rank and file to

compromise uncertain.

Banking: The debt net Recently, Ireland‘s High Court issued two

rulings to initiate the wind-up of the two

failed banks at the centre of the

country‘s financial meltdown, namely

Anglo Irish Bank and Irish Nationwide

Building Society. A few days later, there

was a response to the court action – one

that goes to the heart of the crisis in the

eurozone and the question of just who

should bear the cost of the bust. Two of

Anglo Irish‘s bondholders, Cayman

Islands-registered hedge funds run by Fir

Tree Capital, filed a lawsuit in a New York

district court claiming the Irish rulings

were ―egregious‖ and ―brazenly violated‖

its right to be repaid.

Fir Tree‘s claim to victim status contrasts

sharply with attitudes in Dublin, where

calls to ―burn‖ the bondholders of Irish

banks are a central theme in the general

election campaign – itself a result of the

crisis that toppled the government – that

reaches its conclusion this Friday. Voters

facing tax rises and job losses are angry.

While such fury may be at its harshest in

Ireland, it reflects a question being asked

by many across the western world: why

the investors who imprudently lent the

money with which banks such as Anglo

Irish made bad loans during the boom

years now appear to be getting off scot-

free, leaving taxpayers to foot the bill.

To date, bondholders have been largely

shielded from the fallout of the eurozone

crisis.In Ireland, the second-tier investors

have received as little as 20 per cent of


their money – a far larger group of senior

bondholders have not, so far. That is a

state of affairs policymakers in Europe and

the US are keen to change. In future, bond

investors would lose part of their

investment to, in regulatory parlance, ―bail

in‖ an ailing institution before taxpayers

are called upon to bail it out.

The European Commission last month

proposed a bail-in regime across the 27-

member bloc. ―We must put in place a

system that is well prepared to deal with

bank failures in an orderly manner –

without taxpayers being called on again to

pay the costs,‖ said Michel Barnier, the

European Union‘s internal market

commissioner, at the time. The US has

already put in place bail-in-like powers as

part of the Dodd-Frank financial reform

act passed last year. The law includes a

resolution scheme that gives regulators the

ability to impose losses on bondholders

while ensuring the critical parts of the

bank can keep running. Employees will be

paid, the lights will stay on and derivatives

contracts will not have to be instantly

unwound, one of the areas that caused

market confusion when Lehman

Brothers collapsed in September 2008.

Germany and the UK have developed their

own versions of bail-in. This month

Denmark deployed its powers for the first

time on Amagerbanken, after loan losses

unexpectedly wiped out its capital.

Creditors stand to lose two-fifths of their

investments. Advocates of such

measures see them as one way of sharing

the pain and protecting taxpayers from

footing the entire bill of future bank

rescues. By quickly addressing the

problems of sickly institutions, they would

also help stabilize the financial system by

removing uncertainty.

But bondholders warn that such moves

could have negative consequences for the

wider economy. Banks finance most of

their customer lending through bonds.

Raise the risks of bond investors losing

money, and they will charge more interest.

If banks‘ borrowing costs rise, that in turn

will be priced into the costs of mortgages

and other customer loans. Regulatory

efforts to protect taxpayers could

unintentionally expose them to a

permanent rise in the cost of credit.

Furthermore, senior bank bonds are

typically held not by hedge funds but by

pension funds, insurers and other asset

managers– attracted by the apparent safety

and reliability of bank bonds. If that safety

goes, there is a knock-on risk that the

ultimate cost will be borne by those behind

the insurers and pension funds: the general

public.


Bail-in is a novel concept that unnerves

investors as it would take place in the no-

man‘s-land just before insolvency: a grey

area where an institution is tottering but

has not yet completely collapsed. Banks in

particular need a special regime because

they crumble so quickly. Traditional

insolvency systems are too slow because

cash and customers flood out of the door

as soon as trouble strikes. ―Insolvency is

the third rail for banks. Touch that and

everything starts to unravel,‖ says Wilson

Ervin, senior adviser at Credit Suisse. ―So

you deliberately design bail-in to happen

five minutes before that.‖ ―Bondholders‘

biggest fear is not getting repaid. With

bail-in, that has to be a big risk and it will

cost the banks,‖ says one investor. ―Bail-in

should only ever be the very, very last

resort but our fear is that regulators will do

anything to prevent a failure and [impose

losses] way too early.‖

The timing of the debate is unfortunate.

Markets have not fully recovered from the

crisis; investor confidence remains fragile.

While the biggest banks are able to sell

bonds, smaller institutions and those from

weaker economies such as Spain and

Portugal are still struggling to tap the

market at prices that make economic

sense. Many of these weaker banks are still

largely reliant on the European Central

Bank for funding. In January the ECB

privately warned the European

Commission about the dangers of its bail-

in announcement – even if it felt the long-

term principle was sound – spooking the

still jittery markets.

When Brussels unveiled its plans in early

January, bond markets choked. For a few

days they virtually froze as investors

digested the implications. While nerves

have since steadied, one outcome is

already clear: investors are increasingly

seeking specially protected bonds that

would not be subject to bail-in. These

include ultra-safe covered bonds backed

by bank assets such as mortgages (see

box). This year, banks are selling record

amounts of them.

Rating agencies have already warned that

the presence of bail-in is likely to lead to

downgrades – another factor likely to push

up borrowing costs. Moody‘s Investors

Service downgraded the junior debt of five

Danish banks and 23 German ones, and

has warned that it is reconsidering its

assessments of all banks‘ junior debt in the

light of bail-in regimes.

There is also the question of whether bail-

in would, in fact, help stabilize the broader

system. Bail-in might allow you to freeze

the institution, giving you some critical

time to sell off or transfer the systemically

important and viable pieces, but it‘s highly


unlikely to create an environment where

you can preserve a bank in anything like

its original form. In Europe, lawyers have

cautioned that altering existing insolvency

regimes to reflect the new powers is no

simple task since it touches on

fundamental areas of law such as property

rights.

This is one of the arguments that Fir Tree

has made in its complaint about the

treatment of bondholders in Anglo Irish. It

is a familiar position. Bondholders have

none of the potential upside offered to

shareholders, for whom theoretically the

sky is the limit. The best outcome that

bond investors can expect is to receive

their money and interest on time. This is

why they have always guarded the legal

covenants and conditions they felt

guaranteed that they would be paid back in

full.

ASIA M&A DEALS

1.Mahindra & Mahindra to

acquire South Korea’s SsangYong

Mahindra & Mahindra (M&M) has signed

a Memorandum of Understanding (MoU)

to acquire South Korean auto maker Ssang

Yong Motor Company (SYMC). The deal

is valued at close to $ 500 Million, making

it the second largest outbound acquisition

in the automotive space.

The deal is expected to close in March.

SsangYong would give M&M access to

more than 1400 dealers in almost 100

countries. Of special interest, is access to

markets in Russia, Europe and Latin

America. Access to the US market is also

valuable as M&M has not been successful

in its past efforts to create a viable

distribution in the US.

The two companies would also share their

R&D and production platforms resulting in

huge cost savings. This will also help the

companies launch new products with a

reduced lead time. Mahindra & Mahindra

launched the SUV ‗Xylo‘ seven years after

the launch of its flagship ‗Scorpio‘ in

2002. Ssang Yong has not launched a new

product in the last four year.

M&M also intends to bring in Ssang

Yong‘s existing products to the Indian

market. Mahindra currently does not have

any presence in the aboveRs.10 Lakhs

market segment in India and Ssang Yong‘s

SUVs like the Rexton, Kyron and Actyon

are expected to fill up this void. The

product portfolios of the two companies

complement each other extremely well.

Overall, the move seems to be a perfect fit

in M&M‘s target of becoming a big player

within the niche of utility vehicles and

having a globalpresence in this market.


http://115.111.80.201/consult/wp-

content/uploads/2010/09/PanoramaSepte

mber2010.pdf

2. Reliance Industries buys 95%

stake in Infotel Broadband for Rs

4,800 cr

MukeshAmbani owned Reliance Industries

has bought 95% stake in Infotel

Broadband for Rs 4,800 crore. Infotel

Broadband will now be a subsidary of

Reliance Industries. Shares of RIL have

been buzzing of late on rumours of foray

in the telecom sector.

Unlisted Infotel Broadband Services is the

only firm to win broadband spectrum in all

22 zones in India in an auction that ended

on Friday. The firm is paying Rs 12,848

crore ($2.7 billion) for the spectrum, the

government said. Announcement of the

deal came within hours of Infotel emerging

as the sole winner of broadband spectrum

for the entire country.

This marks Mukesh Ambani group's entry

into telecom sector in less than a month of

he and his younger brother Anil reaching a

truce by ending all the no-compete

agreements to enable each other an

opportunity to enter and invest in areas

hitherto barred under the family settlement

reached in 2005 for division of Reliance

empire.

RIL will invest Rs 4,800 crore by way of

subscription to fresh equity capital at par

to be issued by Infotel Broadband, the

company said in a statement.

RIL's shares also surged over three per

cent to close at Rs 1,046.25 a share on the

day of announcement. Commenting on the

initiative, RIL Chairman and Managing

Director Mukesh Ambani said, "We see

this as the next wave of value creation

opportunity in the wireless broadband

space. We believe this will pole-vault

India's economy into the digital world at

an accelerated pace while creating next

generation tools that will enhance

productivity and create world-class

consumer experiences." RIL said that

BWA services can provide an opportunity

to be in the forefront among the countries

providing world-class 4G networks and

services.

"A single 20 MHz spectrum when used

with Long Term Evolution (generally

known for 4G technology) has the

potential of providing greater capacity

when compared to existing communication

infrastructure in the country," the company

said.

In the BWA space, no other player could

bag pan-India spectrum. BhartiAirtel and

US-based Qualcom won four circles each,

while Aircel bagged spectrum in eight

circles.

There are reports that RIL was also talking

to a new telecom licencee, Videocon

http://economictimes.indiatimes.com/reliance-industries/stocks/companyid-13215.cms

http://economictimes.indiatimes.com/bharti-airtel/stocks/companyid-2718.cms


Mobile, for a possible stake in the

company. Videocon's share also went up

by 0.40 per cent to close at Rs 22.20 a

share.

It was reported in The Economic Times

that MahendraNahata-owned Himachal

Futuristic‘s arm, Infotel Broadband

Services, could be a candidate for

acquisition by RIL. The government has

raised over Rs 38,300 crore from the 16-

day long auction for Broadband Wireless

Access (BWA) spectrum. As many as 11

companies, including BhartiAirtel,

Reliance, Idea Cellular , Aircel, Vodafone

and Tata Communications Internet

Services, participated in the auction for

Broadband Wireless Access spectrum.

http://economictimes.indiatimes.com/news

3. Steel Consolidation- JSW- Ispat

deal

High rates of growth to the tune of 9% per

annum, compounded with huge

infrastructure investments have ensured

that the demand for steel will remain

robust in the near future. JSW Steel is

therefore continuously on the lookout for

both organic and inorganic growth

opportunities. The collaboration with Ispat

Industries fits in very well with JSW‘s

bullish outlook on the emerging steel

scenario.

ISPAT’s UNIQUE FEATURES:

Ispat Industries, with a production capacity

of 3.3 mtpa, is inherently seen as a

pioneering company that brought new

technologies into India viz: Twin Shell

ConArc furnace and Thin Slab Casting

facility. The Twin Shell Con Arc furnace

provides the steel making facility with a

great amount of flexibility. Along with the

state-of-the-art Compact Strip Mill, Ispat

also has an in-house jetty, with a cargo

handling capacity of 12 mtpa,that gives it

an added advantage. Further, Ispat‘s

mining concessions in India and overseas

along with the geographical location of the

plant in the West of India makes it all the

more attractive.

STRATEGIC PLAN FOR PERFORMANCE

ENHANCEMENT:

The current difficulties of Ispat Industries

emanate from a financial imbalance and

lack of integration in key inputs of coke,

pellet and power. JSW‘s infusion of equity

removes this financial stress and the

proposed linkages of key inputs will

reduce the operating cost. By taking over

the management of Ispat Industries, JSW

will address these concerns, creating value

for all Ispat stakeholders.

Ispat Industries will issue on the

preferential basis, 108.66 equity shares at

Rs.19.85 per share for a consideration of

http://economictimes.indiatimes.com/idea-cellular/stocks/companyid-3154.cms

http://economictimes.indiatimes.com/news


Rs.2157 cr. In addition, JSW will make an

open offer to minority shareholders of

Ispat Industries as per the SEBI

requirements.

While JSW‘s holding will be at 41.29% on

completion of preferential allotment, with

a scope to go up based on the outcome of

the open offer, the existing promoters will

hold 26% on completion of transaction.

Dilution of holding for both the parties

will occur if there is a capital raising in the

future. JSW will further re-finance the

entire outstanding debt of Ispat.

JSW will also put in a systematic plan to

turnaround Ispat Industries by developing

synergies in the competitive steel market.

JSW Steel will facilitate sourcing of key

inputs like coke, pellet and power which

will bring down the cost of production

substantially. JSW‘s extensive pan India

network will provide Ispat with better

market penetration. By improving the

levels of efficiency and by rationalizing

the sourcing of Iron ore lumps and fines

JSW will reduce the cost of production.

Besides this, Ispat industries will set up a

captive coke oven plant, pellet plant and

power plant to achieve complete

integration of steel making facilities over a

period of 36-48 months in order to reduce

cost of production. Along with this various

operational efficiency projects which shall

be taken up along with debottlenecking of

existing facilities for capacity

enhancement from 3.3 mtpa to 4.2 mtpa.

Ispat Industries will be renamed JSW Ispat

Steel Ltd. Mr.Sajjan Jindal will be the Non

Executive Chairman of the Company. Mr.

Vinod Mittal will be Executive Vice-

Chairman of the Company during the

transition period and subsequently

function as a Non-Executive Vice

Chairman.

This controlling stake takes JSW one step

closer in achieving its aim of producing 34

mtpa by 2020.

http://www.jsw.in/media_zone/pdf/JSW_

Steel_Ispat_press_release-1.pdf

4. ADAG pack consolidates

Reliance Natural Resources Ltd (RNRL)

will merge with Reliance Power (R-

Power) in an INR 500 bn, all-stock deal.

The approved swap ratio for this deal is of

4:1, meaning RNRL shareholders will get

one R-Power share for everyfour they

hold.

The merger will take the market

capitalisation of R-Power to over INR 500

bn. Its market cap was INR 419 bn at the

close of trading on Friday and that of

RNRL was INR 104 bn.R-Power will

retain the assets and people of RNRL.

After the merger, the company‘s net worth

http://www.jsw.in/media_zone/pdf/JSW_Steel_Ispat_press_release-1.pdf

http://www.jsw.in/media_zone/pdf/JSW_Steel_Ispat_press_release-1.pdf


will exceed INR 160bn. The net worth of

RNRL is INR 19 bn.

THE RATIONALE

RNRL was formed to supply gas from

RIL‘s KG basin to the ADAG companies.

The company has no power projects

of its own, so it has to resell the gas

purchased from RIL to R-Power. This

comes under gas trading.

Merger of R-Power and RNRL will ensure

that RNRL ceases to exist and R-Power

gets the gas directly from RIL.

The gas supply will be ensured for R-

Power as RIL and RNRL had recently

signed a new gas supply agreement to

comply with the Supreme Court ruling in

May.

THE IMPACT

The merger will be positive for R-Power‘s

plans to set up a 10,000 MW gas-based

power plant. R-Power currently has ~1,000

MW of generation capacity and plans to

implement about 37,000 MW of power

projects. RNRL‘s shareholders, about 80%

of them also shareholders of R-Power, will

now get an opportunity to join the latter‘s

powerd reams.

This merger will make R-Power a

domestic power company with one of the

largest coal reserves. It has about four

billion tonnes of coal reserves in Indonesia

and India. RNRL has 45% interest in four

coal-methane blocks, spread over 3,251 sq

km and estimated resources of 193 billion

cubic metres, and a 10% share in an oil

and gas block in Mizoram, with an acreage

of 3,619 sq km and reserve potential of up

to 28 bn cu m. R-Power will also benefit

fromRNRL‘s coal supply logistics and

shipping business.

OUTLOOK AND VALUATIONS

The merger is positive for R-Power as gas

allocation will be done faster by the

government. This will give a boost to

R-Power‘s gas based plants.

http://www.uniconindia.in/Research_Pdf/

RPower-RNRLMerger-EventUpdate.pdf

5. Axis Bank and Enam combine

their investment banking and

equities businesses

Axis Bank Limited (―Axis‖) and Enam

Securities Private Limited (―Enam‖)have

agreed to combine their Investment

Banking and Equities businesses.

Accordingly, it is proposed that Enam

Securities will demerge its investment

banking, institutional equities, retail

equities and related businesses such as

distribution of financial products and loans

against shares, among others to Axis

http://www.uniconindia.in/Research_Pdf/RPower-RNRLMerger-EventUpdate.pdf

http://www.uniconindia.in/Research_Pdf/RPower-RNRLMerger-EventUpdate.pdf


Securities and Sales Limited (―ASSL‖), a

wholly owned subsidiary of Axis Bank.

The proposed transaction has also been

approved by the Board of Directors of

ASSL.

Pursuant to the Scheme and in

consideration for the proposed demerger,

Enam shareholders will receive shares of

Axis Bank in the ratio of 5.70 shares of

Axis for every 1 share held in Enam,

translating into an approximately 3.37%

shareholding in Axis Bank.

The proposed transaction is subject to the

requisite regulatory approvals including

approvals from the RBI, SEBI, Stock

Exchanges and the High Courts of Gujarat

and Maharashtra and from the

shareholders and creditors of the

respective companies.

The proposed transaction would create one

of India‘s leading financial services

powerhouses combining the investment

banking and equities franchise of Enam

Securities with thedominant debt capital

markets and commercial banking franchise

of Axis Bank. The strategic bjective is to

create a complete bouquet of financial

products and services for corporate,

institutional and individual clients that will

enhance the ability of the combined

business to better serve client needs in a

seamless manner across product categories

and geographies.

With Axis‘s distribution platform of over

1,100 branches and Enam‘s extensive

retail network,the combined business will

have an unparalleled opportunity to build a

dominant retail franchise as well.

The Board of Axis proposes to invite

Mr.Vallabh Bhanshali, the Co-founder and

Chairman of Enam, as an independent

director, subject to necessary approvals.

Mr. Manish Chokhani would be the MD &

CEO of ASSL while Mr.Jagdish Master

will provide guidance as aboard member

of ASSL, subject to necessary approvals.

Commenting on the proposed transaction,

Ms. Shikha Sharma, Managing Director &

CEO of Axis said ―This transaction is in

line with Axis‘s strategy of continuously

expanding its product and service offerings

to its customers in order to deepen its

relationships and value differentiators. We

are delighted at the prospect of combining

forces with Enam Securities, apre-eminent

name in the investment banking and

advisory field, to create an Indian financial

services power house at a time when India

has occupied the world‘s centre-stage and

is poised for years of rapid growth.

http://www.axisbank.com/xmlapplication/personal

/pdf/Axis-Bank-and-Enam-combine-their-

investment-banking-and-equities-businesses.pdf


6. iGATE to Acquire Majority

Stake in Patni Computer Systems

iGATE Corporation (Nasdaq:IGTE), the

first Business Outcomes based integrated

technology and operations company, today

announced that its subsidiaries have

executed definitive agreements to acquire

a majority stake in Patni Computer

Systems Ltd. (NSE:PATNI) (NYSE:PTI),

the Mumbai-based IT services and BPO

company. The transaction is valued at

approximately $1.22 billion, including the

mandatory open offer to the public

shareholders of Patni. The transaction is

expected to be completed in the first half

of 2011. iGATE expects the transaction to

be accretive by 2012 on a cash earnings

per share basis.

The acquisition will bring together two

highly recognized information technology

outsourcing companies with

complementary industry verticals, and

facilitate sustained long-term growth for

the combined entity. The combination will

create a compelling go-to-market strategy

with iGATE's differentiated iTOPS and

outcomes-based business model

augmented by Patni's delivery expertise

and focus on micro-verticals. iGATE

expects to realize multiple synergies from

this combination:

- Opportunity to play in larger deals and

more verticals

- Opportunity to cross-sell key solutions to

a broader client base

- Opportunity to enhance win ratio based

on selling combined strengths

- Efficiencies in operations and delivery

services

- Economies of scale from consolidation of

shared services

Commenting on the acquisition, Phaneesh

Murthy, CEO of iGATE Corporation, said,

"It has been our stated intent to scale

revenues, customers, and expand our

vertical capability. We believe the

threshold of a billion dollar revenue will

facilitate faster adoption of our iTOPS for

Business Outcomes model. We also

believe that the combination will help

customers get better service, access to

more service lines and deeper pools of

expertise."

He added, "The objective is to synergize

the leadership team of both iGATE and

Patni to create, over time, a world class

integrated leadership team which will

drive the combined company to newer

horizons."

iGATE's subsidiaries have signed

definitive agreements with the three

founders of Patni Computer Systems, viz.,

Mr.Narendra Patni, Mr.GajendraPatni and

Mr. Ashok Patni, and private equity firm

General Atlantic, to acquire their 45.6%

and 17.4%stakes, respectively, at a price of

Rs.503.5 per share, amounting to a total


consideration of approximately $921

million.

In accordance with the requirements of the

Securities and Exchange Board of India

("SEBI") and the applicable Indian rules

on Takeovers and Mergers, iGATE's

subsidiaries will make an open offer to the

public shareholders to purchase an

additional20.6% stake in Patni. The

aggregate price for the shares to be

purchased in the open offer assuming full

tender is estimated at$301 million.

The closing of the acquisition is subject to

customary conditions, including receipt of

required regulatory approvals, and the

completion of the open offer for the

purchase of shares of the public

shareholders of Patni. Patni Computer

Systems has16,556 employees, 282

customers, 22 global delivery centres, and

offices in 30 locations worldwide, and

reported revenues of$689 million for the

12 months ended September 30, 2010.

iGATE has 8,278 employees, 82

customers, seven global delivery centres,

and offices in 16 countries, with revenues

of $252 million for the 12 months ended

September 30, 2010.

An expanded pool of talent, diverse

expertise across multiple verticals, higher

level strategic end-to-end service offerings

and an established management team with

a track record of proven execution are

expected to strengthen iGATE's

competitive position as a top-tier player in

the highly-fragmented global IT industry.

iGATE's iTOPS solution methodology is

designed to overcome the limitations of

traditional outsourcing models. It

addresses the problem of conflicting

business interests between traditional

outsourcing vendors and clients by

allowing clients to use and payfor only the

outcome. For the service provider, it also

creates a discontinuity in the linearity of

revenue with people iGATE's advisors

include: Jefferies & Company, Inc.,

financial advisors, Kirkland & Ellis LLP,

international legal counsel, Khaitan & Co,

Indian legal counsel, Kotak Mahindra

Capital Company Limited, Managers for

the Open Offer, and Ernst and Young, tax

advisors.

http://www.igate.com/uploads/newsroom

/press_releases/163iGATE_to_Acquire_M

ajority_Stake_in_Patni_Computer_Systems.

pdf

7. BP, Reliance enter $20bn

investment deal

British energy giant BP and India‘s

Reliance Industries announced last week a

massive investment deal which could be

worth up to $20bn with later investment in

key Indian oil and gas assets.

http://www.igate.com/uploads/newsroom/press_releases/163iGATE_to_Acquire_Majority_Stake_in_Patni_Computer_Systems.pdf




http://www.thepeninsulaqatar.com/business-news/143366-bp-reliance-enter-20bn-investment-deal.html



BP said it will pay $7.2bn (¤5.3bn) to

Mumbai-based Reliance Industries for a

30-percent stake in 23 Indian oil and gas

blocks, announcing another major foreign

venture as it seeks to put last year‘s Gulf

of Mexico oil spill disaster behind it.

Earlier this year, it joined forces with

Russia‘s Rosneft in what could be another

transforming deal to explore for oil in the

Arctic region.―BP will pay Reliance

Industries Limited an aggregate

consideration of $7.2bn, and completion

adjustments, for the interests to be

acquired in the 23 production sharing

contracts,‖ the two firms said in a joint

statement.

―Future performance payments of up to

$1.8bn could be paid based on exploration

success that results in development of

commercial discoveries. These payments

and combined investment could amount to

$20bn.‖

―The partnership will combine BP‘s

world-class deepwater exploration and

development capabilities with Reliance‘s

project management and operations

expertise,‖ the two groups added.

The Indian news marks BP‘s latest attempt

to move on following the devastating Gulf

of Mexico oil spill disaster last year which

forced it to set aside billions to cover

environmental damage and tainted its

reputation.Crisis-hit BP reported its first

annual loss in almost two decades earlier

this month, as a result of the oil spill

catastrophe, and outlined fresh plans to

shift its focus away from the United States.

BP suffered a loss of $4.9bn last year, the

first shortfall since 1992 and compared

with a massive profit of $13.96bn in

2009.The group has also announced plans

to halve its US refining business.

Analysts in India hailed the accord as a

huge boost for Reliance and the country

which has been trying to boost energy

production to meet the needs of its

booming economy.―This is a huge

sentiment booster for Reliance and the

country, demonstrating that its oil blocks

have strong credibility,‖ said SonamUdasi,

head of research with Mumbai-based IDBI

Capital.

The BP cash will also help Reliance build

its war-chest for further expansion, Udasi

said.Reliance has generated two billion

dollars through the sale of shares since

September 2009 and is expected to keep

raising cash to boost its reserves and

ability to make acquisitions.

Reliance operates the world‘s largest oil-

processing complex in Jamnagar, western

India, where two adjacent refineries have a


combined capacity to process 1.24 million

barrels of oil a day.

Apart from the oil and gas blocks, BP and

Reliance will also set up a 50-50 joint

venture for the sourcing and marketing of

gas in India.The production sharing

contracts currently produce more than 30

percent of India‘s total gas consumption

and more than 40 percent of its total

production.

http://www.thepeninsulaqatar.com/busines

s-news/143366-bp-reliance-enter-20bn-

investment-deal.html

USA & Europe M&A

The M&A scorecard lists the top deals of

2011 based on published headline value in

US dollars.

M&A deal scorecard | deals valued at

over $500m

Last updated: 18 February, 2011

Rank Partners Date Value,

US$m

1 Sanofi -

Genzyme

Feb

'11

$20,100m

2 Danaher -

Beckman

Coulter

Feb

'11

$6,800m

3 DuPont -

Danisco

Jan

'11

$6,300m

4 Amgen -

BioVex

Jan

'11

$1,000m

Sanofi-Aventis - Genzyme

February | headline value: $20,100m

Sanofi-aventis and Genzyme Corporation

have entered into a definitive agreement

under which sanofi-aventis is to acquire

Genzyme for $74.00 per share in cash, or

approximately $20.1 billion.

In addition to the cash payment, each

Genzyme shareholder will receive one

Contingent Value Right (CVR) for each

share they own, entitling the holder to

receive additional cash payments if

specified milestones related to Lemtrada™

(alemtuzumab MS) are achieved over time

or a milestone related to production

volumes in 2011 for Cerezyme® and

Fabrazyme® is achieved.

Danaher - Beckman Coulter

February | headline value: $6,800m

Definitive merger agreement under which

Danaher will acquire all of Beckman

Coulter's outstanding common stock for

$83.50 per share in cash (without interest),

representing an approximate 45% premium

over the closing price of Beckman

Coulter's common stock on December 9,





2010 before rumors of an acquisition

entered the marketplace.

The transaction is valued at approximately

$6.8 billion, including debt assumed and

net of cash acquired.

DuPont - Danisco

January | headline value: $6,300m

DuPont has entered into a definitive

agreement for the acquisition of Danisco, a

global enzyme and specialty food

ingredients company, for $5.8 billion in

cash and assumption of $500 million of

Danisco net debt.

Amgen - BioVex

January | headline value: $1,000m

Biovex, Inc. has entered into a definitive

acquisition agreement where Amgen has

agreed to acquire BioVex Group, Inc.

Amgen will pay up to US$1 billion;

US$425 million in cash at closing and up

to US$575 million in additional payments

upon the achievement of certain regulatory

and sales milestones.

Scorecard: Top M&A deals 2010

M&A deal scorecard - top 25 - 2010 -

deals valued at over $500m

Source: CurrentPartnering, 2011,

http://www.currentpartnering.com/scorecar

d/manda2010

Last updated: 31 December, 2010

Rank Partners Date Value,

US$m

1 Novartis/Nestle

- Alcon

Aug

'10

$28,300

2 Sanofi -

Genzyme

Aug

'10

$18,500

3 Merck KgaA -

Millipore

Feb

'10

$7,000

4 Teva -

Ratiopharm

Mar

'10

$4,925

5 OSI - Astellas May

'10

$4,000

6 Reckitt - SSL Jul

'10

$3,900

7 NBTY - The

Carlyle Group

Jul

'10

$3,800

8 Abbott -

Piramal

May

'10

$3,700

9 Pfizer - King Oct

'10

$3,600

10 Grifols -

Talecris

Jun

'10

$3,400

11 Biovail -

Valeant

Jun

'10

$3,300

12 Celgene - Jun $2,900

http://www.currentpartnering.com/scorecard/manda2010

http://www.currentpartnering.com/scorecard/manda2010


Abraxis '10

13 Covidien - ev3 Jun

'10

$2,600

14 Crucell - J&J Sep

'10

$2,300

15 Thermo Fisher -

Dionex

Dec

'10

$2,100

16 McKesson - US

Oncology

Nov

'10

$2,000

17 Wuxi - C. River

(term.)

Apr

'10

$1,600

18 Cardinal -

Kinray

Nov

'10

$1,300

19 Aspen - Sigma

(term.)

May

'10

$1,240

20 Qualitest - Endo Sep'

10

$1,200

21 Inventiv -

Thomas H Lee

May

'10

$1,100

22 DSM - Martek Dec

'10

$1,087

23 3M - Cogent Aug

'10

$943

24 Boehringer Ing.

- SSP

Feb

'10

$913

25 BMS - Sep $885

ZymoGenetics '10

Novartis/Nestle - Alcon

August 2010 - headline value: $28,300m

Novartis and Nestlé have wrapped up a

$28.3 billion all-cash deal that gives

Novartis, the Swiss drug giant, a

controlling stake in the eye-care company

Alcon, one of the last steps in a deal

initiated in 2008.

Novartis now holds 77 percent of Alcon

shares, with the remaining 23 percent

trading on the New York Stock Exchange.

While Novartis has proposed a merger

with Alcon, representatives of Alcon‘s

minority shareholders have resisted the

terms of the deal.

Sanofi - Genzyme

August 2010 - proposed acquisition -

headline value: $18,500m

France's Sanofi-Aventis has publicly

disclosed its $18.5 billion, $69-per-share

cash offer for Genzyme Corp. in a bid to

rouse shareholders after failing to engage

the U.S. biotechnology company in merger

talks.

Sanofi said it is considering all options to

complete the transaction, hinting it would

consider a hostile takeover bid.


Analysts have said they expect a deal to be

finalized in the range of $74 to $77 a

share. If Sanofi walks away, analysts see

shares of Genzyme falling to the low $50-

range. Some say it could take at least a

year for them to rebuild the lost value.

Merck KgaA - Millipore

February 2010 - headline value: $7,200m

Definitive agreement under which Merck

KGaA will acquire all outstanding shares

of common stock of Millipore, for US$

107 per share in cash, or a total transaction

value, including net debt, of approximately

€ 5.3 billion (US$ 7.2 billion). The

transaction was approved by the boards of

directors of both companies. Millipore and

Merck will create a € 2.1 billion (US$ 2.9

billion) world-class partner for the Life

Science sector, achieving significant scale

in high-margin specialty products with an

attractive growth profile.

Teva - Ratiopharm

March 2010 - headline value: $4,925m

Definitive agreement to acquire

ratiopharm, Germany's second largest

generics producer and the sixth largest

generic drug company worldwide, for an

enterprise value of $3.625 billion. The

transaction is subject to certain conditions

including relevant regulatory approvals.

On a pro forma basis, the combined

company would have had 2009 revenues

of $16.2 billion. Teva expects to complete

the transaction by year-end 2010.

OSI - Astellas

May 2010 - acquisition - headline value:

$4,000m

Astellas Pharma, Japan's no. 2 drugmaker

buys U.S. biotech OSI Pharmaceuticals for

$4 billion in cash, in a sweetened bid that

will add OSI's blockbuster cancer drug

Tarceva to its line-up.

Astellas will pay $57.50 per OSI share, 11

percent more than a previously proposed

$52. The new price represents a 55 percent

premium to OSI's last closing price before

Astellas launched its hostile bid on March

1.

Reckitt Benckiser - SSL

July 2010 - acquisition - headline value:

$3,900m

Reckitt‘s offer is worth 1,171 pence a

share, 33 percent more than SSL‘s closing

price yesterday. SSL rose 33 percent in

London trading, the most ever. Reckitt, the

maker of Cillit Bang cleaners and Nurofen

painkillers, gained 3.5 percent.

Reckitt is paying about 18 times SSL‘s

earnings before interest, taxes,

depreciation and amortization, according

to Bloomberg data. The maker of Veet hair


remover paid almost 30 times Ebitda for

the $2.3 billion purchase of Adams

Respiratory Therapeutics Inc. in 2008, its

last major acquisition.

NBTY - The Carlyle Group

July 2010 - acquisition - headline value:

$3,800

The board of directors of NBTY has

unanimously approved the merger

agreement and recommended that NBTY's

stockholders adopt the agreement with

Carlyle. A special meeting of NBTY's

stockholders will be held as soon as

practicable after the preparation and filing

of a proxy statement with the Securities

and Exchange Commission and

subsequent mailing to shareholders. The

mailing of the proxy statement is expected

to take place following the expiration of

the 35 calendar day period following the

date of the merger agreement, during the

course of which NBTY is permitted to

solicit alternative proposals from third

parties. The transaction is expected to

close by the end of 2010.

Completion of the transaction is subject to

customary conditions to closing, including

approval of NBTY stockholders and

regulatory approvals, but is not subject to

any condition with regard to the financing

of the transaction. The transaction has

fully committed financing, consisting of a

combination of equity contributed by

Carlyle Partners V, a $13.7 billion U.S.

buyout fund, and external debt financing

provided by BofA Merrill Lynch, Barclays

Capital and Credit Suisse.

Abbott Laboratories - Piramal

Healthcare

May 2010 - asset purchase - headline

value: $3,720m

Abbott Laboratories announce the $3.7bn

acquisition of the generic drugs unit of

Indian conglomerate Piramal, in a move

which significantly increases the U.S.

group's emerging market presence.

Piramal will receive $2.1bn in cash up-

front and $1.6bn over the next four years

whilst underlining group's growing interest

in getting a foothold in one of the world's

fastest growing pharmaceutical markets.

Pfizer - King

October 2010 - acquisition - headline

value: $3,600m

Pfizer will acquire King, a diversified

specialty pharmaceutical discovery and

clinical development company, for $3.6

billion in cash, or $14.25 per share, which

represents a premium of approximately

40% to King's closing price as of October

11, 2010, and 46% percent to the one-

month average closing price as of the same

date.


Grifols - Talecris

June 2010 - acquisition - headline value:

$3,400m

Definitive agreement through which

Grifols will acquire Talecris for a

combination of cash and newly-issued

Grifols non-voting shares having an

aggregate value today of approximately

$3.4 billion (€2.8 billion), creating a global

leader of life-saving and life enhancing

plasma protein therapeutics.

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