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CONTENTS YOUR GATEWAY TO INDIA INC. JULY 2015, Rs 35 EDITOR AMIT BRAHMABHATT ASSISTANT EDITOR SHRIVATSA JOSHI GENERAL MANAGER (Marketing) C S RAJARAMAN ADVERTISING MANAGER WILLIAM RUMAO GRAPHIC DESIGNER RENUKA SAWANT ADVISORY PANEL SHASHIKANT PATEL JITENDRA SANGHVI REGISTERED OFFICE 102, RAJASTHAN TECHNICAL CENTRE, PATANWALA ESTATE, GHATKOPAR (W), MUMBAI 400 086. INDIA PHONE: 6703 0250/6703 0251 FAX: +91 22 6703 0251 EMAIL: BUREAU CHIEFS AHMEDABAD: B D RAWAL CHENNAI: G JACINTH DELHI: RANJANA ARORA KOLKATA: DIPANKAR SEN COVER STORY THE MAGGI ALERT Nestle India's instant noodles debacle is a golden opportunity for India to clean up its food mess. 26 Special Report ..........32 On Growth Trajectory: Chief Minister Oommen Chandy's unique agenda is turning Kerala into a progressive economy. Q&A ..........38 Nitin Jairam Gadkari, Minister for Road Transport, Highways and Shipping Focus ..........40 Multi-Brand Mall: SSIPL Retail plans to become a single destination for sports and lifestyle products. Telecom ..........42 Royalty Row: Indian mobile handset manufacturers lock horns with Ericsson over unfair patent claims. Management Mantra ..........44 "If you're stuck, ask for help": Pallavi Jha, CMD, Walchand PeopleFirst Global Wrap-Up ..........46 A quick round-up of news and current affairs across the world Readers' Lounge ..........48 Catch up with new book launches - Modi's World - Aligning Strategy And Sales - Arise, Awake Viewpoint Rejuvenating Urban India News Round-Up A brief on news, tie-ups, appointments and awards ..........4 ...........6 Corporate Reports Timely Shift: RIL turns to telecom and internet in a bid to revive its sagging fortune in oil and gas.......12 Riding The Wave: Finolex Industries continues to dominate the agriculture sector as it forays into water management. ..........16 Smart Moves: Arfin India's diversification strategy is working wonders for the niche aluminium and ferro alloys manufacturer. .......18 Face To Face ..........20 "We now have a platform ready for exponential growth”: Piyush Somani, MD and CEO, ESDS Software Solution Infrastructure ..........22 Intelligent Modelling: Tekla has left its mark on the world's prime projects with its BIM software. Straight Talk ..........24 "Need to reinforce Incredible India brand": Dr Mahesh Sharma, Tourism Minister Interview ..........30 Dinesh Aggarwal, Joint Managing Director, Anchor Electricals INDIA BUSINESS JOURNAL Printed and published by Amit Brahmabhatt for Issues Analysis and Research Pvt Ltd and published from 102, Rajasthan Technical Centre, Patanwala Estate, Ghatkopar (W), Mumbai 400 086 and printed at Graphtone (India) Pvt. Ltd., A1/319, Shah & Nahar Indl. Estate, Lower Parel, Mumbai 400 013 Processed at Graphtone (India) Editor: Amit Brahmabhatt Volume XI, No 1 Issue date July 1-31, 2015 Released on July 1, 2015 EDITORIAL ASSOCIATE Press Trust of India MARKETING ASSOCIATE Star Talk ..........50 Forecast by Bejan Daruwalla Knowledge Zone ..........52 - John Cryan, Deutsche Bank - Monosodium Glutamate - Spiritual Corner: Worries Hot Seat ..........54 Reema Sanghavi, MD, Maximus Mice & Media Solutions JULY 2015 Milage ads & events SUBSCRIPTION RATES India Rs 420/- for 1 year (12 issues) Overseas Rs 1,860/- or US$32 for 1 year (12 issues) Add Rs 50/- for outstation cheques 3


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VIEWPOINT Rejuvenating Urban India t is a big leg-up for urban India. Last month, Prime Minister Narendra Modi launched his government's three flagship schemes - Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Housing for All Mission. The schemes, aimed at changing the face of urban India, are expected to entail an expenditure of around Rs 4,00,000 crore over the next few years. The Housing for All Mission or Pradhan Mantri Awas Yojana aims to provide at least 2 crore homes to people belonging to economically weaker sections and lower income categories in urban areas by 2022. Smart Cities Mission aims at development 100 smart cities, while 500 cities are being identified under AMRUT, which replaces the previous Jawaharlal Nehru National Urban Renewal Mission. Perhaps learning from past mistakes, the Centre has virtually withdrawn from the earlier practice of appraising and sanctioning individual projects. This goes a long way in ending the scope for likely subjectivity and discretion. Besides, States and Union Territories will have full liberty and flexibility in formulation, approval and execution of projects under the three missions. This paves the way for decentralisation of planning and execution of projects based on local needs. Emphasis on timely sanction and execution and certainty of resources for various projects make the flagship schemes to be time bound and backed by concrete plans. Moreover, making it mandatory for participation of citizens in identifying development needs under the new urban schemes ensures bottom-up planning of projects. A refreshing part of the schemes is a welcome move of not penalising States and urban local bodies for non-implementation of reforms by linking fund release with progress on reforms. This actually results in further delays. Instead, the guidelines now provide for incentivising reforms by earmarking 10 per cent of annual allocation to good performers at the end of each year. With 40 per cent of India expected to live in cities over the next 15 years, these schemes have been unveiled at an opportune time. The essence and intent of the schemes are commendable. But there are many issues that need to be tackled. The projects look big at the overall level. For cities to work - even non-smart ones - water, sewerage, urban transport and electricity are critical. Right now, however, no city, including the rich Delhi and Mumbai, can boast of efficient amenities. In light of this huge challenge, the money allotted is really too small to make a difference to any city in any meaningful manner. Unless cities are able to fund themselves, it is only a matter of time before the smartest of cities degenerate into glorified villages as they are today. Nearly seven decades after independence, the country is still found grappling when it comes to creating physical infrastructure of some repute. It is hoped that public-private partnerships will deliver. But the mechanism seems to need a lot of tweaking in order for it to work. The big challenge will be to create self-sustaining cities, which create jobs, use resources wisely and also train people. This also means more autonomy for these cities. But are the country's politicians willing to let go of the cash cows that rich municipal corporations have become? I The Modi plan: Changing the face of Indian cities The big challenge will be to create self-sustaining cities, which create jobs, use resources wisely and also train people. This also means more autonomy for these cities. But are the country's politicians willing to let go of the cash cows that rich municipal corporations have become? 4 JULY 2015 INDIA BUSINESS JOURNAL


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NEWS ROUND-UP MISCELLANEOUS New, simplified I-T return form out The Union Finance Ministry has come out with a simplified income tax return (ITR) form. The new form replaces the controversial 14page form that had sought information on foreign trips and dormant bank accounts. The last date for filing returns has been extended to August 31 against the normal practice of July 31 as the software for these forms is under preparation. In ITR-2 and ITR-2A, the main form will not contain more than three pages, and other information will be captured in the schedules that are required to be filled only if applicable. The total number of countries agreeing to exchange information automatically in accordance with the MCAA has gone up to 60. RCap plans businesses in GIFT City Reliance Capital (RCap) plans to set up a host of emerging businesses including alternate investment funds, commodity exchange business and other international businesses - at the International Financial Service Centre (IFSC) special economic zone being set up under the GIFT City project in Gujarat. The company has been allotted 5,00,000 sq ft of space - the largest space taken by any private sector company at the IFSC till date. The allotment is expected to bring in investments of around Rs 200 crore and generate employment for around 2,500 people in next India inks financial information pact India has signed a multilateral agreement that will pave the way for effective exchange of financial account information on an automatic basis among countries. The agreement, called the Multilateral Competent Authority SEBI cuts IPO timeline, gives start-ups lifeline The SEBI has halved the time required between listing and closing of an IPO to six days. The new IPO timeline will be applicable for all public issues coming after January 1, 2016. The capital market regulator has said that the move will help reduce the costs involved with a public issue of equity shares. The SEBI has also relaxed norms for start-ups to list on the alternative institutional trading platform. The regulator has done away with the promoter concept, eased lock-in requirements and diluted fundusage disclosures under the liberalised norms for start-ups. The regulator has also expanded the fast-track route for follow-on offers and rights issue by reducing the qualification criteria. Agreement (MCAA) on Automatic Exchange of Financial Account Information, sets out the details of what financial account information would be automatically exchanged between countries and when. APPOINTMENTS Rita A Teaotia, a Gujaratcadre, 1981-batch, IAS officer and former special secretary in the Department of Telecommunications, was recently appointed the commerce secretary. Rajeev Nayan Choubey, a 1981-batch IAS officer of the Tamil Nadu cadre and special secretary in the Union Power Ministry, was named the civil aviation secretary last month. Upendra Tripathy, a 1980-batch IAS officer of the Karnataka cadre and secretary in the Union Ministry of New and Renewable Energy, was recently given an additional charge of power secretary for three months. Former CBDT chief K V 6 JULY 2015 INDIA BUSINESS JOURNAL


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Verbatim... MISCELLANEOUS three years. India's gas output to surge by FY19 The country's natural gas output is likely to rise by 50 per cent to 146.87 mmscmd by 2018-19, according to the Union Petroleum Ministry. In its recent annual report, the ministry has said that domestic gas production will rise from 98.15 mmscmd in 2014-15 to 99.87 mmscmd in the current financial year. The annual report notes that in 2016-17, the output will climb to 112.95 mmscmd and finally to 146.87 mmscmd in 2018-19. A bulk of the incremental output will come from State-owned ONGC, which will see production rise from 65.75 mmscmd in 2014-15 to 96.38 mmscmd in FY19. investigate a nearly 10-yearold case of alleged IPOrelated irregularities by some operators as "inconsistencies" have come to the fore in its earlier order. The regulator will re-investigate the matter pertaining to Jayesh P Khandwala, proprietor of Zealous Trading Company, its role in IPOs of IDFC, Sasken and Suzlon, its alleged direct or indirect transactions, relations with other entities and the alleged gains made by him. The IPO scam came to light in 2005. "The RBI is not a cheerleader. Our job is to give people confidence in the value of the rupee and create a longer-term framework for good decisions to be made." Raghuram Rajan GOVERNOR, RBI IT-savvy Hyderabad likely to be mobile hub A group of mobile phone manufacturers have come forward to set up a manufacturing hub in Hyderabad. A delegation of senior executives from mobile phone manufacturing companies, headed by Indian Cellular Association President Pankaj Mohindroo, recently met Telangana Chief Minister K Chandrashekhar Rao after visiting a proposed site on the outskirts of Hyderabad. The project is expected to generate about 2,00,000 jobs. "OPEC's obituary has been prematurely written several times. But discounting its strong future seems more logical today than at perhaps any other point in the group's 55-year history." Ed Morse CHIEF, CITI COMMODITIES SEBI to re-probe IPO scam case The SEBI will reChowdary and former Information Commissioner Vijai Sharma were recently appointed Central Vigilance Commissioner (CVC) and Chief Information Commissioner (CIC) respectively. Retail broking firm HDFC Securities has appointed Dhiraj Relli as its managing director and CEO. Praveen Gupta has been appointed as managing director and chief executive officer of SBI Capital Markets. Prior to this, Mr Gupta was the deputy managing director and chief financial officer of State Bank of India. Online job exchange for MSMEs launched The government launched a digital employment exchange last month that will enable industrial enterprises to find suitable workers and jobseekers to find employment. The government's initiative is aimed at strengthening communication between stakeholders and improving efficiencies in service delivery in the Micro, Small and Medium Enterprises (MSME) Ministry. This online portal will develop entrepreneurship and provide employment to the youth as well," notes MSME Minister Kalraj Mishra. "CSR is something that comes from within and cannot necessarily be effective in the form of a tax." Ratan Tata CHAIRMAN EMERITUS, TATA SONS TIE-UPS NASSCOM has announced a pact with Kerala to open a start-up warehouse in Kochi. "Playing off one democracy against 18 others is not an attitude which is fitting for the great Greek nation." Jean-Claude Juncker PRESIDENT, EUROPEAN COMMISSION INDIA BUSINESS JOURNAL JULY 2015 7


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NEWS ROUND-UP CORPORATE Nalli accuses Snapdeal of trademark abuse Chennai- based iconic saree brand Nalli has initiated legal action against e-commerce major Snapdeal for misusing the company's registered trademark and images on the latter's website. In a statement issued last month, Nalli disclosed that it has issued a cease-and-desist notice to Snapdeal to stop misusing its trademark. Nalli has added that when undertaking a Google search, it noticed that Snapdeal had misused its registered trademark, NALLI, as well as copied the photographic images from the company's website. The saree company alleged that while clicking on the link, it directly led to Snapdeal's clothing segment. SoftBank President Nikesh Arora, Bharti Enterprises Chairman Sunil Mittal and SoftBank CEO Masayoshi Son firming up the alliance Bharti in solar JV with SoftBank, Foxconn Japan's SoftBank is teaming up with Taiwan's Foxconn and Bharti Enterprises to invest $20 billion (around Rs 1,27,000 crore) in solar power projects in India. Mobile phone operator SoftBank has revealed that the venture aims to generate 20,000 mw of energy through solar and wind power plants across coal-reliant India. The joint venture is looking at manufacturing solar equipment in India and tapping high potential as the government targets 1,00,000 mw of solar power by 2022. SoftBank has invested $1 billion (about Rs 6,400 crore) in the country's clean energy sector in the last nine months. with the appointment of country manager for H&M in India, Janne Einola, formerly the deputy country manager for the brand in Finland and the Baltics. The 25,000-sq ft store will come up in Delhi's Select Citywalk mall that also houses other foreign fashion labels, such as Zara, Mango, Tommy Hilfiger and GAP. H&M is the latest brand to woo young aspirational shoppers in India. purchase will include the Kesh King portfolio of hair oil, shampoo and ayurvedic capsules, along with its respective formulations. pipeline subsidiary, for $2.15 billion (over Rs 14,000 crore) to Enterprise Products Partners. RIL will use the proceeds from the sale of EFS, around $1.07 billion (more than Rs 7,000 crore), for further development of its shale gas portfolio as well as repayment of some existing debt. EFS has succeeded in its objective of building the gathering and midstream infrastructure in a timely manner to support ramp-up of the ReliancePioneer Eagle Ford upstream joint development operations. PVR acquires DT Cinemas for Rs 500 crore In yet another consolidation in the multiplex business, PVR last month acquired DLF's DT Cinemas for Rs 500 crore on a slump-sale basis. DT Cinemas, a wholly-owned subsidiary of realty giant DLF, has 29 screens with a seating capacity of more than 6,000, while PVR Cinemas has 467 screens in 105 properties in 43 cities. With the proposed acquisition, PVR will have presence in 44 cities with 115 multiplexes and 506 screens. In November 2009, DLF had signed an agreement with PVR to sell executive chairman with immediate effect. Hero MotoCorp has appointed Pawan Munjal, the former CEO and MD of the country's largest twowheeler manufacturer, as its chairman. Volvo Auto India has named Tom von Bonsdorff as the company's new managing director. Annaswamy Vaidheesh, a former vice-president (corporate governance affairs) of Johnson & Johnson's Asia-Pacific Infosys mulls stock options to spur sales Infosys is planning to introduce stock options as a part of its sales incentivisation strategy as the IT major focuses on generating more revenue from existing clients. The Bengaluru-headquartered software company is focusing on sales efficiency and account mining, the areas where it has significantly underperformed. Account mining is a key strategy for Indian IT services companies that typically generate over 95 per cent of their revenue through repeat business. Infosys is also in the process of hiring a new human resource head, a post that has been vacant since April. RIL to sell US pipeline arm to Enterprise Reliance Industries (RIL) and its shale gas joint venture partner Pioneer Natural Resources Company have signed a deal to sell EFS Midstream, a Emami buys Kesh King for Rs 1,651 crore Emami acquired the Kesh King brand of hair and scalp care products from SBS Biotech for Rs 1,651 crore last month. The acquisition is one of the largest deals in the segment in recent times after SBS Biotech agreed to lower the original asking price. The valuation is pegged at 5.5 times Kesh King's sales, which are equivalent to about 15 per cent of Emami's Rs 2,030-crore turnover in the previous financial year. The AWARDS The Pride Group of Hotels has won the Leading Luxury Hotel Chain of the Year Award in India at Brand Achievers Award 2015 held in New Delhi recently. H&M plans India debut by September Hennes and Mauritz (H&M) will be opening its first flagship store in India at a Delhi mall by September, according to a media statement released by the Swedish fashion retailer last month. The news comes APPOINTMENTS Infosys has appointed R Seshasayee, the nonexecutive vice-chairman of Ashok Leyland and chairman of IndusInd Bank, as the IT giant's non- 8 JULY 2015 INDIA BUSINESS JOURNAL


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CORPORATE DT Cinemas, but deal fell through in February 2010. Vedanta-Cairn India merger to slash debt The Vedanta Group has announced a merger between its flagship Indian mining company Vedanta (formerly Sesa Sterlite) and its oil subsidiary Cairn India. According to the deal, minority shareholders of Cairn India will receive one equity share in Vedanta for each share held, along with one 7.5 per cent redeemable preference share with Rs 10 face value. The transaction is expected to be completed in the first quarter of 2016. The deal will help Vedanta, which has a debt of about Rs 77,000 crore, reduce its leverage ratios by accessing Cairn India's Rs 21,000-crore cash. RJio to ring in operations in December Reliance Jio (RJio), the telecom arm of Mukesh Ambani-led Reliance Industries, has slotted a December date to launch its much-awaited 4G services. According to Mr Ambani, RJio is in the final testing phase and aims at commercial launch of its services by December. The chief of division, has been appointed as managing director of GlaxoSmithKline Pharmaceuticals' India operations and vice-president of South Asia. Ericsson has appointed Paolo Colella as its India operations head with effect from September 1. end of 2016. The brand had debuted in India in 2009 under a partnership with Precision Motor India. Ducati took a pause last January when it decided to open its own national sales company in India. Hero enters electronics with Rs 500-cr plan The Ashok Leyland ramps up green projects The Hinduja Group's Ashok Leyland has drawn up a road map for introduction of alternative propulsion systems. With global trends moving towards zero-emission cities, the company has a head start in hybrid and electric drive system capabilities. Ashok Leyland is actively pursuing cost-effective solutions through a frugal engineering approach. In the current financial year, Ashok Leyland is planning to maintain momentum to the business transformation exercises that are under way in its green initiative. Reliance Industries has also said it will make available 4G-supported smartphones in the market at a price below Rs 4,000 by partnering with various handset-makers. RJio plans to provide 4G services using the LTE technology in 800-mhz, 1,800-mhz and 2,300-mhz bands. Teva's Copaxone patent. The court ruling may help generic pharmaceutical companies to launch one of the top-selling multiple sclerosis drugs, Copaxone. Natco is awaiting the USFDA nod to launch the product in the US. Last year, the US Supreme Court had denied Teva's application for an injunction seeking to prevent launch of a generic version of Copaxone. Pharmaceutical companies involved in the generic forms of Copaxone are Novartis' Sandoz, Momenta Pharmaceuticals, Mylan and Natco Pharma. Hero Group last month entered the electronics segment by acquiring a majority stake in set-top box-maker Mybox Technologies. The group has formed a new company, Hero Electronix, and plans to invest Rs 500 crore in the next few years to spearhead the group's activities in the segment. The acquisition of Mybox will enable Hero Electronix to leverage the former's core competence in hardware and embedded systems design. Hero is focusing on fulfilling the demand for digitisation in India while simultaneously developing electronics products for the world. Legal boost for Natco in Copaxone row In a relief to Natco Pharma, a US court of appeals has invalidated components and fabrications for the global market. GMR Airport Developers, a subsidiary of GMR Infrastructure, has signed an MoU with Oman Airport Management Company for providing training and consultancy services. Escorts has partnered with Cognizant Technology Solutions in a five-year, multi-million-dollar engagement to digitally transform its businesses across all segments. Bharti Group buys minor stake in OneWeb The Bharti Group has acquired a strategic minority stake in OneWeb, a satellite internet company that seeks to provide affordable internet access in rural and remote areas across the world. Other investors in OneWeb include Qualcomm, Virgin Group, Airbus Group, The CocaCola Company, Intelsat and Grupo Salinas. Together, the stakeholders have invested $500 million (over Rs 3,000 crore) in the venture, which plans to start services by 2019. Bharti Airtel, a Bharti Group company, will be a preferred distributor of the service in India, Bangladesh, Sri Lanka and Africa, with a strong focus on rural markets. Ducati lines up 10 model launches by 2016 Italian superbike-maker Ducati plans to sell over ten motorcycle models in India, priced between Rs 6.5 lakh and Rs 40 lakh, by the end of this year. The new launches are a part of Ducati's plan to ramp up operations after reentering the country in March. The bike manufacturer is on a network expansion drive and looking to have 13 showrooms by the TIE-UPS Canada-listed Magellan Aerospace has partnered with Mahindra Aerospace to offer their mutual customers major structural assemblies, machined INDIA BUSINESS JOURNAL JULY 2015 9


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NEWS ROUND-UP FINANCE LIC to start operation in Bangladesh LIC has been allowed to form a joint venture in Bangladesh. With this development, the country's largest life insurer has become the second foreign insurer to operate in the country. The Bangladesh Insurance Development and Regulatory Authority recently issued LIC a letter of consent upon certain conditions. The insurer will be able to start operations once these conditions are fulfilled. The State-owned insurer will be starting operations as a joint venture entity to be called LIC Bangladesh with a paid-up capital of $8,000 (a little over Rs 5,00,000). bottom-of-the-pyramid category. The lender will start with 600 branches, of which 200 will be in metro and urban areas and the remaining in semi-urban and rural areas. The bank will have 250 automated teller machines to start with. Axis Bank launches secure debit card Axis Bank has launched an EMV chip-based debit card called Secure+ that offers multiple security features, including fraud protection and wallet protection. The Secure+ debit card has a feature called Total Control through which customers can switch off or on their cards when not in use through various channels, like mobile application, internet banking, SMS or phone banking. Once the customer switches off the card, it cannot be used in an ATM or for any online transaction. The card can also be switched on at convenience and a usage limit can also be set. Banks can take control of stressed companies The RBI has notified that banks can convert existing debt into equity, resulting in 51 per Online transactions to get tax rebates soon The government is considering giving incentives to electronic transactions in the form of tax rebates, waiver of charges on card payments, such as purchase of rail tickets, and discounts on utility bill payments. The move is aimed at discouraging transactions in cash and curbing black money. Last month, the Union Finance Ministry put up draft proposals for facilitating electronic transactions. In a move that will reduce cost of services to citizens, it proposes policy intervention to waive convenience fee, service charge and surcharge levied by government entities on card payments to utility service providers. cent or more stake in a stressed company. The managing director. Nilesh Shivji Vikamsey has been appointed parttime chairman of Federal Bank. central bank has permitted banks to raise such stake if the joint lenders' forum decides that the stressed account can be rendered viable by effecting a change in ownership of the company. The SEBI had given its nod to the scheme earlier this year, allowing banks to convert debt into equity at a price not below face value. Banks have been allowed to upgrade the stressed company's assets to standard after a new promoter comes on board. APPOINTMENTS Yes Bank has re-appointed Rana Kapoor as its MD and CEO. Rajesh Aggarwal, a joint secretary in the Union Ministry of Finance, has taken over as acting chairman and managing director of National Insurance Company. The RBI has appointed Meena Hemchandra as executive director in charge of the department of banking supervision. She will also be in charge of the departments of non-banking supervision and cooperative banking supervision. Asset Reconstruction Company of India has appointed Vinayak Bahuguna as its CEO and RBL Bank files for Rs 1,100-crore IPO Kolhapur-headquartered private sector lender RBL Bank (formerly Ratnakar Bank) has filed its draft offer document with capital markets regulator SEBI to raise Rs 1,100 crore through a fresh issue of equity shares. The IPO will also include an offer for sale component of over 1.75 crore shares. The draft offer document also mentions that RBL Bank is considering a pre-IPO placement of up to 2.5 crore equity shares for up to Rs 500 crore. RBL Bank intends to utilise the fresh funds raised to meet its future capital adequacy requirements to conform to BaselIII norms. TIE-UPS Aditya Birla Nuvo, a diversified conglomerate operating in services and manufacturing sectors, has entered into a definitive joint venture agreement with MMI Holdings of South Africa to enter health insurance and wellness businesses in India. Global payment service provider Western Union has tied up with Yes Bank for international direct-tobank transfers. This will facilitate money transfers to bank accounts in India through NEFT and IMPS clearing systems. New bank Bandhan to start ops from Aug 23 After more than a decade, a new private sector lender will start operations from August 23. Bandhan Financial Services, The Kolkata-based microfinancier, received the final approval from the RBI last month. The new bank will not lend to the corporate sector, at least for the time being, and focus on its strength of serving the 10 JULY 2015 INDIA BUSINESS JOURNAL


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JNPT, MMB join hands for new Dahanu port Jawaharlal Nehru Port Trust (JNPT) and the Maharashtra Maritime Board (MMB), on behalf of the Maharashtra government, entered into an MoU to develop a new major port of close to Rs 6,000 crore near Dahanu, off Wadhwan Point in the State. The port will be established as a corporate port under the Companies Act, 2013. JNPT will have an equity share not exceeding 74 per cent, while the Maharashtra government will own 26 per cent in the new port company. The new port will facilitate in easing heavy cargo traffic concentrated at JNPT. Committee of Secretaries and then to the Cabinet Committee on Economic Affairs. Greater financial powers will help the company make quicker decisions in acquiring oil and gas assets abroad. OVL has 35 projects in 16 countries from Brazil to New Zealand. PUBLIC SECTOR Corporate debt to get more NPS funds The BPCL to go solo in phase-II Bina expansion Bharat Petroleum Corporation (BPCL) has decided to fund the Rs 20,000crore expansion of its Bina refinery in Madhya Pradesh on its own. BPCL, the country's second-biggest State refiner, plans to raise Bina refinery capacity to 15 mt in two phases of 7.8 mt a year from the current 6 mt at a cost of Rs 3,500 crore by 2018 and then to 15 mt at an additional investment of Rs 20,000 crore in five years. Oman Oil Company, which holds 26 per cent stake in the refinery, is willing to participate only in the first phase of expansion. slotted for this year at 250 locations at an investment of Rs 500 crore. As a part of the Digital India project, the government is working towards enabling cities and tourist centres with Wi-Fi hot spots. sought greater financial autonomy to decide on investments of up to $1 billion (about Rs 6,400 crore) without government nod. The board of OVL, the overseas arm of State explorer ONGC, currently has powers to decide on investment of up to Rs 300 crore. An amount higher than that has to first go to an Empowered Gujarat's Dahej at a cost of Rs 1,789 crore. BSNL lines up Rs 6,000 crore for Wi-Fi spots BSNL is planning to invest Rs 6,000 crore for setting up about 4,000 Wi-Fi hot spots in the next three years. The State-owned telecom company, which recently launched free roaming service across the country, set up a Wi-Fi spot in the worldfamous tourist destination of Taj Mahal in Agra. BSNL has already set up 200 of the 2,500 Wi-Fi hot spots Pension Fund Regulatory and Development Authority (PFRDA) has tweaked investment guidelines for government sector subscribers of the National Pension System (NPS). The new norms allow pension funds to invest 5 per cent more in corporate debt to 45 per cent and reduce exposure in government securities by 5 per cent to 50 per cent. The move is expected to help increase returns for subscribers. Though the equity exposure limit has been unchanged at 15 per cent, the pension regulator has allowed investments in equity-linked instruments, such as exchange-traded funds. OVL seeks greater investment autonomy ONGC Videsh (OVL) has SpiceJet to allow train travellers with wait-listed tickets to book flight tickets by paying an incremental fee. Hindustan Aeronautics (HAL) and Turbomeca have signed an MoU to establish a joint venture in India to provide maintenance, repair and overhaul services to helicopters manufactured by HAL. NALCO has signed an agreement with Gujarat Alkalies and Chemicals for setting up an integrated caustic soda unit and a captive power plant in FCI eyes LIC funds to clear subsidy dues Food Corporation of India (FCI) has moved a proposal to raise Rs 40,000 crore through long-term bonds from LIC to liquidate subsidy arrears due from the government. According to the proposal, the 10-year bonds will be redeemed at 10 per cent per annum. They will be raised at government security interest rate plus 30 to 40 basis points, which comes at around 8.50 per cent. Subsidy arrears of FCI, the nodal agency for procurement and distribution of grains, have crossed Rs 55,000 crore till March 31. FCI has a cash credit limit of Rs 54,495 crore with a consortium of 67 banks. JULY 2015 TIE-UPS Hindustan Aeronautics and Bharat Electronics have signed an MoU to share their expertise in design, development, engineering and manufacturing to develop advanced airborne communication equipment to meet requirement of the defence services. Indian Railway Catering and Tourism Corporation, a subsidiary of the Indian Railways, has tied up with GoAir and APPOINTMENTS Sanjay Gupta, a former director of Engineers India, has taken over as the Stateowned EPC company's chairman and managing director. Indian Tourism Development Corporation (ITDC) has appointed Umang Narula, the former chief electoral officer of Jammu and Kashmir, as its chairman and managing director. INDIA BUSINESS JOURNAL 11


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CORPORATE REPORT Timely Shift Battling decline in its core oil and gas business, RIL turns to telecom and internet in a bid to revive its sagging fortune. AMMAR ZAIDI eliance Industries (RIL) is intensifying its shift from oil and gas to telecom and internet. This was clearly evident at its 41st annual general meeting (AGM) held in Mumbai recently. In fact, the recent AGM offered three major takeaways related to the company's future plans. Firstly, expansion in petrochemicals is on track and will deliver significant EBITDA (earnings before interest, tax, depreciation and amortisation) growth in the coming years. Secondly, rollout of mobile has been delayed until the year-end as RIL puts more emphasis on getting it right than doing it quickly. The target of 80 per cent coverage by the year-end and 100 per cent coverage in three years is unchanged. Thirdly, Reliance has announced a major initiative to be a leading player in the internet in India with major initiatives in social media, payments and entertainment. RIL will start commercial opera12 JULY 2015 R tions of its much-awaited telecom services in December this year, offering a 4G smartphone for as low as Rs 4,000 and a monthly bill of Rs 300 to Rs 500, RIL Chairman Mukesh Ambani announced at the recent AGM. Unveiling a road map to propel the oil refining-to-retail major to a select group of most valuable companies in the world, Mr Ambani told shareholders that RIL will complete over Rs 2,00,000 crore of projects in core oil and petrochemical businesses as well as new ventures, like telecom, in the next 12 to 18 months to add capacity. Reliance Jio Infocomm (RJio), RIL's telecom arm, is testing network with a "beta launch" due over the next few months and commercial operations around December. Mr Ambani's reentry into the telecom business, nearly a decade after Dhirubhai Ambani's Reliance empire was split and the communication business went to younger sibling Anil Ambani, will include offering voice and high-speed data services, such as viewing HD television. Downstream push Mr Ambani, the world's richest energy billionaire, said that the over Rs 2,00,000 crore of investment "will build new capacities, strengthen our global position, improve the return on capital and make our existing refinery and petrochemical businesses among the most competitive in the world". Stating that the full benefits of these investments would be realised from 2016-17 onwards, he noted that RIL would have a unique portfolio of globally competitive petrochemical and refining business with a new-age, India-centric, consumer business with a very high growth potential. "This will place Reliance in a select group of most valuable companies in the world," he stressed. Buoyed by deregulation of diesel prices, RIL plans to re-enter auto fuel retailing business. Six years ago, RIL had shut its 1,400 petrol pumps after it could not compete with public sector companies selling subsidised fuel. "We plan to re-commission the entire network of petroleum retail outlets by the end of 2015-16. Currently, close to 400 outlets are operational," he added. RIL has reiterated its plans to expand its petrochemicals volume further across all major product categories. The company is set to start transINDIA BUSINESS JOURNAL


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porting ethane from the US by the end of 2016, providing it with feedstock security as well as significantly lowering the costs of running its existing ethylene crackers. With India expected to emerge as a major automobile hub, RIL has strengthened its position as an elastomer producer with the commissioning of its 150-mtpa styrene-butadiene rubber capacity this year on top of 115-mtpa polybutadiene rubber production which it started last year. RIL's purified terephthalic acid capacity will be increased to 4.2 mtpa by the end of this year from 3.35 mtpa currently, making it the fifth-largest producer in the world. In refining, margins continue to be robust and pet coke gasification plant, which is expected to start up in early 2016, will increase margins by 20 per cent. Complex refining margins remain strong despite the fall in oil price as light-heavy crude oil spreads widen and demand continues to improve. Given the complexity advantages of Jamnagar refinery, the refining margin hovers around $8.6 per barrel, which is significantly higher than the benchmark Singapore indicator. The pet coke gasification plant, currently under construction, is expected to start up in early 2016. This will further boost RIL's refining margins by $2 per barrel from current levels. In his first direct comment on regulatory challenges facing RIL's oil and gas business, Mr Ambani pointed out that domestic exploration and production (E&P) business "generated shareholder returns lower than the cost of capital". This was lower than 12 to 16 per cent assured returns in other domestic infrastructure sectors, such as roads, fertilisers and power. "It is important to highlight that there is value yet to be unlocked from 5 to 6 tcf of gas resources discovered at various stages of development, appraisal and approval. RIL is constructively engaged with the government to resolve legacy issues in a INDIA BUSINESS JOURNAL "RIL will have a unique portfolio of globally competitive petrochemical and refining business with a new-age, India-centric, consumer business with a very high growth potential." MUKESH AMBANI Chairman, RIL timely manner with regard to our rights-to-cost recovery, gas pricing and other issues to create value for the nation and our shareholders," he added. "In this context, it is important to follow the intent, purpose and commitment of the NELP (New Exploration Licensing Policy), which include maximising E&P activities, getting the risk-reward balance right and providing marketing and pricing freedom. This will provide predictability and certainty to the investors," said Mr Ambani, hoping that the government would address the policy issue in the larger interest of attracting investments in the critical E&P business. The company has said that in the E&P segment, further development of offshore gas fields is conditional upon reform of the natural gas price. The KG-D6 gas block has produced 2.5 tcf of reserves and is on the decline. The company, however, notes that there is a further 5 to 6 tcf of discovered but undeveloped resources in D1 and D3, R-series, MJ-1 and NEC-25 gas fields, which can be developed if gas prices are raised. With the gas sector reforms and an increase in the gas price to $8 per mscf, Reliance can raise its gas production from 13 mmcmd to 40 to 50 mmcmd by the end of the decade, RIL stresses. 4G foray Looking to tap the surging voice and data demand, Mr Ambani said that the 4G-enabled smartphone in India will be priced below Rs 4,000. The company also plans to launch many software applications for providing news and entertainment services to its telecom service users. "Our plan is to provide the same power of comput- RIL's New Plans Completing over Rs 2,00,000-crore projects in oil, petrochemical as well as telecom in 18 months Re-commissioning entire network of petroleum retail outlets by 2015-16 Expanding petrochemicals volume across all major products Further development in E&P segment only after gas sector reforms and gas price hike RJio launching mobile operations by December 2015 New e-commerce model on the cards by integrating internet infrastructure with its existing physical retail business Set to roll out a portfolio of digital services and mobile apps JULY 2015 13


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CORPORATE REPORT Reliance Retail is planning a big push into e-commerce by leveraging RJio's internet infrastructure. ing, communication and information coverage network will be consistent to every individual, whether in towns with a premium-service positioning, or rural areas. All this at about Rs 300 the delay will provide Bharti and to Rs 500 per month," he said during Vodafone a precious six months to his over-an-hour-long speech, a third extend their 4G footprint and narrow of which was devoted to RJio. the data-speed gap with RJio. Idea Targeting 100 per cent national has not committed to 4G deployment coverage within the next three years, yet and is likely to end up squanderMr Ambani added that RJio had ap- ing this window of opportunity. Its plied for a pan-India cable television core differentiator - voice coverage multi-system operator (MSO) licence will provide less protection against and plans to enter broadcast TV distribution. Five years after buying out Infotel Broadband Services within hours of the company winning nationwide wireless broadband licences, RJio appears to be the first operator to achieve wireless coverage far in excess of the rollout obligation according to its licence conditions. "This beta programme will be RJio's 4G smartphone will cost a mere upgraded to commercial operations Rs 4,000 with a monthly bill of Rs 300 to around December of this year," Rs 500. Mr Ambani said, adding: "I am glad to announce that 2016-17 will be the RJio by the year-end. RJio's impact first full year of commercial operations on existing players will become more divergent. for Jio." Despite the delay, RJio is aiming It was originally expected that RJio for coverage of 80 per cent of populawould launch commercially in phases, tion by the year-end. This is another starting from June this year. The first sign of the 800 mhz at work. The RJio phase of the network is already fit for Management is also confident that the launch, but RIL wants to make full use 4G device shipment in India will repliof the 800 mhz first that it acquired cate the exponential ramp-up in China. this March. It is aware that despite having the fastest speed, its over-re- Retail & e-tail liance on the 2.3 ghz has also created With an aim to capitalise on the significant coverage issues that only country's large demographic divilow-frequency spectrum can resolve. dend, along with rising income levWhile launching with a quality els, RIL continues to add new retail 14 JULY 2015 stores. With 2,600 stores spread across 200 cities, RIL is already one of the largest retail chains in India. Nonetheless, it continues to expand its retail footprint as it seeks to embark on the next phase of high growth in retail. RIL accelerated its pace of growth by adding 930 stores last year, which translates into five new stores every two days. In modern retail, the company is scaling up its presence to over 900 cities from 200 across formats by the next year. Reliance Retail, the company's retail subsidiary, is planning a big push in the e-commerce segment this year by leveraging group company RJio's internet infrastructure to roll out online stores for fashion and lifestyle, grocery and business-to-business verticals. RJio will also be rolling out fibre-to-home services, targeting 10 lakh connections by April 2016. RIL's telecom subsidiary is also launching a portfolio of digital services and mobile apps. Reliance has announced ambitious plans to roll out an array of digital services as it seeks to capture additional value from its shift to mobile telephony, which includes major new initiatives in social media, payments and entertainment. It plans to roll out social media applications (Jio Chat), cloud computing storage (Jo Drive), financial services (Jio Pay) and entertainment (Jio Play) such as video on demand, which will be a key driver of data demand. RIL is all set to create a differentiated e-commerce model for India by integrating its internet infrastructure, which is being built by RJio, with its existing physical retail business. A decade ago, the undivided Reliance Group's telecom initiative changed the rules of the game in the country. As RJio readies rollout of its telecom and internet initiatives, the sectors are likely to benefit from yet another set of disruptive plans. INDIA BUSINESS JOURNAL


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