THE BUSINESS CAPSULE

33nd Issue The Editorial Date: 15th July, 2012 By Ashwin Kumar Governments looking ahead of privatising diesel will once again flame number of such issues from social to economical grounds, also Delhi governments initiative to privatize the water supply system brings into light the inefficiencies of the new governance which is running with old practises. Also wrong reforms and much depreciated rupee value signifys whether Mr.P M is an underachiever or not? NEWS FOR USE Economy News By Ashwin Kumar

India can grow by 8-9% with reforms' India has the potential to grow at 8-9 per cent over the next 5-10 years by focusing on its intrinsic strengths and taking the Opposition on board to push economic reforms, said Singapore Prime Minister Lee Hsien Loong here on Thursday. "India would be able to grow not just at seven per cent, but 8-9 per cent for another 5-10 years easily, because the potential is there, human capabilities are there," Lee said at a symposium here. Hailing India's efforts since economic liberalisation in 1991, he said the country needs to capitalise on its large human capital and build on the success in the information technology sector. India will have to improve investment climate to attract foreign investments, Lee said, indirectly referring to the implementation the General AntiAvoidance Tax Rules (GAAR), which was in the midst of controversy recently. Global industry associations and investors have expressed apprehensions over India's business environment following the announcement of GAAR. The introduction of retrospective tax as in the case of Vodafone has also added to the uncertainty among overseas investors. Mauritius assures India to relook at tax treaties Amid concerns about Mauritius being used as a route for evasion of taxes, India on Thursday got an assurance from the country that it would have a re-look over various aspects related to tax treaties, like DTAA. "If there is room for improvement, we will constantly make room for improvement, of course, in respect and in compliance with the best international practices," Mauritius Foreign Minister Arvin Boolell told reporters here when asked about India's demands for reworking the Double Taxation Avoidance Agreement (DTAA). During talks with External Affairs Minister S M Krishna on Thursday, Boolell also underlined the importance of Mauritius as a springboard for investments by Indian entrepreneurs to Africa. Boolell also called on Prime Minister Manmohan Singh and is scheduled to meet Commerce Minister Anand Sharma tomorrow. India-Mauritius tax treaty provides that capital gains arising in India from investments in the country from the island nation can only be taxed in Mauritius. E-commerce may grow 50% this year' Driven by sustained growth of the online travel booking industry and new business models for insurance and mutual funds sectors, the domestic e-commerce market is poised to clip at over 50 per cent this year, according to an industry data aggregator. We do expect over 50 percent growth in this calendar year depending on certain sectors. The online travel booking segment will be the major contributor to this growth, First Data Corporation vice-president and country manager Mr Amrish Rau told PTI here. The total market size of the industry stood at Rs 46,520 last year, a massive jump from Rs 81.47 billion in 2007, he said. The online travel industry comprising rail and air ticket bookings, etc cornered 81 percent of the market share at Rs 378.90 billion last year, he added. Besides, the e-payments system is also expanding in the mutual funds and insurance segments, apart from the public sector space, with government bodies increasingly adopting this route for both accepting and making payments, he said. Cloud market nearing US$1 billion in India The overall Indian market for cloud-- both public & private -- has grown steadily to reach US$ 860 912 million in calendar year 2011, according to market advisory firm Zinnov Management Consulting. The 'Public Cloud Opportunity in India' study released today highlighted that the public cloud market comprises 20-22 per cent of the share, while the remaining 78-80 per cent is accounted for by private cloud. The public cloud market has rapidly evolved in the last two years in India with significant traction across SaaS, PaaS & IaaS (software as a service, platform as a service, infrastructure as a service), the study said. With the current market of US$ 160192 million in 2011, public cloud in India is at a very nascent state of the market and may not have hit the inflection point yet, indicating significant future potential. SaaS market in India is largely dominated by email, collaboration tools, CRM/ ERP and stood at US$ 123-143 million for 2011. The SaaS market has grown at a compound annual growth rate (CAGR) of 46 per cent from US$ 56-67 million in 2009 until 2011. The PaaS market in India is at US$ 1.5-2.5 million in 2011, having grown at a CAGR of 75 per cent from US$ 0.5-1.5 million 2009.. India's unemployment rate stood at 3.8% last fiscal India's jobless rate stood at 3.8 per cent during the last fiscal, with Daman and Diu and Gujarat topping the list of least unemployed among states and UTs."Our unemployment level is much better than that of other countries like US, Spain and South Africa," DirectorGeneral of Labour Bureau D S Kolmakar told reporters here today. The latest report for the year 2011-12, released by Labour Bureau (under Union Ministry of Labour and Employment) here said Daman and Diu and Gujarat had unemployment rates of 0.6 per cent and 1 per cent respectively. Chhattisgarh and Rajasthan stood at 3rd and 4th position in the list.As for Punjab, its fiscal position may be "worrisome" but it peformed better in providing employment than states like Haryana, Delhi and Maharashtra during last

THE BUSINESS CAPSULE

financial year. Industrial production slows to 2.4% in May Industrial production growth rate slowed to 2.4 per cent in May, 2012 due to contraction in capital goods and mining output, coupled with poor show by manufacturing sector, indicating persistent slowdown that may prompt Reserve Bank of India to cut lending interest rate. Growth in factory output, as measured by the Index of Industrial Production (IIP), was 6.2 per cent in May 2011, according to the official data released on Thursday. Meanwhile, the industrial growth rate for April, 2012 was revised to 0.9 per cent, from 0.1 per cent reported earlier. For the first two months of the current fiscal, April- May, the industrial growth is sharply lower at 0.8 per cent, compared to 5.7 per cent in the year-ago period. Indian animation industry set to grow to US$2.9bn The fastest growing animation industry is set to grow to USD 2.9 billion by 2015 from the present USD 1.8 billion. "India's animation industry has immense potential to grow and it is estimated to grow to USD 2.9 billion by 2015 from the present USD 1.8 billion," St. Angelo's Computer Education CMD Agnelorajesh Athaide said in a statement here. The country also requires fresh talent for this growing industry. There are about 300 animation and 40 VFX companies in India. Animation industry needs more than 40,000 animators from India. The industry currently employs about 12,000 people with nearly 3,000 working as freelance animators, Athaide said. S&P lowers Tata Power credit rating to 'negative' Standard & Poor's today lowered the credit rating outlook of Tata Power to 'negative', citing financial issues related to its 4,000 MW Mundra project. Rating agency S&P revised the outlook from 'stable'. "The outlook revision reflects our expectation that Tata Power's cash flow and financial risk profile could deteriorate over the next six to nine months because company has breached a debt-to-equity ratio covenant on loans to its Mundra project," S&P credit analyst Rajiv Vishwanathan said in a statement. Mundra UMPP in Gujarat is being implemented by Coastal Gujarat Pvt Ltd (CGPL), a wholly-owned subsidiary of Tata Power. In a statement, Tata Power said that to provide protection to CGPL and support its cash flows, the company has already proposed to transfer at least 75 per cent of its equity interest in the Indonesian Coal mines and is also evaluating other alternative options. ADB lowers India's growth projection to 6.5% The Asian Development Bank (ADB) on Thursday lowered the growth forecast for India to 6.5 per cent for the current fiscal, from the earlier 7 per cent projection, on the back of subdued demand and high inflation. "India's economy is now expected to grow by 6.5 per cent in 2012, down from the previous forecast of 7 per cent. India's outlook is clouded by a combination of high inflation and poor demand, both externally and internally," the ADB said in its 'Outlook Supplement' report. It said that the weakness in the economy was reflected in declining business confidence, slow credit growth and subdued sales of automobile sector. "With persistently high inflation, monetary policy has little room to counter the slowdown in economic growth...high inflation and trade deficit make it difficult to ease monetary policy to stimulate demand," ADB said.

Corporate News

Violation of FDI policy: HC notice to Centre, pvt firms The Delhi High Court today sought replies of the Centre, Bharti Walmart Private Limited and Bharti Retail Limited on a plea for a probe against the firms for allegedly carrying out retail trading in multi-brand sector in violation of India's existing FDI policy. A bench of Acting Chief Justice A K Sikri and Justice Anil Kumar, who demitted office today, issued notices to the Centre and the firms on a public interst litigation (PIL) petition, filed by scientist and environmental activist Vandana Shiva. The PIL alleged Bharti Walmart was illegally carrying out multi-brand retail trade despite being permitted only to carry out wholesale cash-and-carry trade here. Infosys Q1 net rises 32.92% Country's second largest software firm Infosys today reported a 32.92 per cent jump in consolidated net profit to Rs 22.89 billion for the first quarter ended June 30, 2012. The company had posted a net profit of Rs 17.22 billion for the April-June quarter of the previous fiscal (2011-12), Infosys said in a filing to the BSE. Reacting to the results, the scrip of Infosys tumbled 9.42 per cent to Rs 2,233.95 at the BSE from its previous close since it failed to meet its dollar revenue guidance and also cut its dollar forecast for FY 2013. The company's revenues up 28.47 per cent to Rs 96.16 billion in the first quarter from Rs 74.85 billion in the year-ago period. FinMin dismisses Vodafone plea Dismissing Vodafone's contention in the Rs 200 billion tax case, the Finance Ministry has prepared a reply to the company's rejoinder which would be sent after approval of the Prime Minister. "We did not agree with Vodafone ... The Inter-Ministerial Group (IMG) on Vodafone has prepared reply of Vodafone's rejoinder. The reply will be sent to the Prime Minister's Office first. After approval of the PMO, it will be sent to Vodafone," a senior official said after the meeting of IMG. The government had earlier formed the IMG to look into the arbitration notice send by the telecom major under the India-Netherlands bilateral investment protection agreement (BIPA). The government has already replied to the initial notice arguing that tax matters are not covered under the BIPA.

THE BUSINESS CAPSULE

Following which the British telecom major sent the rejoinder seeking an assurance that the retrospective tax amendments would not apply to acquisition of Hutchinson's stake in Hutch-Essar in 2007. ICICI sells Rs 4.30bn Kingfisher debt to Srei Infra A debt fund operated by the Kolkata-based Srei Infrastructure Finance today said it has bought out the entire exposure of ICICI Bank, worth around Rs430 crore, in the crippled Kingfisher Airlines. Srei Infra Finance group chief financial officer Sanjeev K Sancheti confirmed the deal to PTI over phone from Kolkata and described the asset as "a good buy as it is a fully secured debt." When contacted, an ICICI Bank spokesperson said, "We have recovered the entire debt exposure of Rs 4.30 billion and currently we do not have any debt exposure to the Kingfisher Airlines." FICCI moots idea of decontrolling diesel prices Observing that the country's rising fiscal deficit was due to import of oil products, industry body FICCI today mooted the idea of decontrolling diesel prices or the government consider imposing higher duty on imported diesel cars. "Government should now think of decontrolling the price of diesel...", FICCI President Rajya Vardhan Kanoria said. Kanoria, here to chair the FICCI's National Executive Committee meeting tomorrow, told reporters that this would be among the 12-point agenda (to stimulate Indian economy's growth) that would be discussed. Chief Economic Adviser Kaushik Basu had also advocated the idea of diesel prices going on a float like petrol. Delhi govt planning to privatise water sector Delhi government is planning to privatise the water distribution system, a move which may lead to increase in rates and add to the woes of Delhites already burdened with a steep hike in power tariffs. "It (privatisation) is necessary in the water distribution sector. We want to replicate the same model for water distribution sector that we adopted in the power sector," said Dikshit when asked whether her government has decided to privatise the water sector. Put off GAAR till 2015, says Assocham Concerned over sluggish growth and poor investment climate, Assocham President Rajkumar Dhoot today met Planning Commission Deputy Chairman Montek Singh Ahluwalia and demanded the controversial tax proposal GAAR be put in "cold storage". In his 30minute meeting with Ahluwalia, Dhoot raised issues like delay in GST, the introduction of General Anti-Avoidance Rules (GAAR), high interest rates and financial problems of the SME sector. "To boost the economy, GAAR which has been doing the rounds for the last few months and has investors worried, should be immediately put in cold storage. "Secondly, pending projects like Mumbai-Delhi industrial corridor should be immediately given green signal, so that investments start flowing in and boost is given to the economy," Dhoot told reporters after meeting Ahluwalia.
The Business Case By Ashwin Kumar

Going places
How Volvo changed the way Indians travel

Executive Summary: In 2001, Volvo Buses India sold 20 coaches. By December 2011, 5,000 of them were running on Indian roads. Volvo did not achieve this by toning down its products or cutting prices as multinational companies often do. It developed the market and waited for it to mature. Volvo now has 76 per cent of the Indian luxury bus market. The company changed the way Indians travel. Now, as the competition closes in, it is preparing to launch products that could transform the market - again. A decade ago, buses were more or less a by-product of trucks. They were built on truck chassis. Body builders bought chassis primarily from Telco (now Tata Motors) and Ashok Leyland. The difference between city and inter-city buses, or regular and 'deluxe' ones, was

THE BUSINESS CAPSULE

reclining seats and a stylish paint job. That is how things were when Volvo Buses entered India. The Swedish company bid for a tender by the Delhi Transport Corporation (DTC) in 1998 while showcasing its B10LE low-entry city bus in several cities. The bus drew much interest. Akash Passey, Senior Vice Presidentregion international, Volvo Bus Corporation, who headed India operations then, says many people came to see it at the 1998 Delhi Auto Expo. He laughs, recalling an animated discussion between two youngsters he overheard. "The older of the two, in an attempt to explain how the bus loses height, said: 'When it halts, the driver jumps out and deflates the tyres'," he says. The coach prompted more weighty concerns too: were India's roads and travellers ready for rearengine buses? What about prices? Volvo city buses cost up to 10 times more than those used by state transport corporations. Meanwhile, the DTC tender was shelved. Selling to state companies was proving tough, so in 2000, Passey changed tack. He imported two Volvo B7R inter-city buses from Hong Kong and Singapore, and sent them out on a six-month demonstration drive. The B7R cost five times more than a 'deluxe' bus. But he persevered. "I felt there was little reason why an airconditioned bus would not work in a tropical country like India," he says. THE ROAD TO SUCCESS CHANGE STRATEGY Volvo brought in its inter-city bus when it saw the market was not ready for a city bus SELL THE CONCEPT, NOT JUST THE PRODUCT Volvo engaged with all stakeholders - from operators to passengers to drivers - to sell its buses USE MACRO CHANGES TO YOUR ADVANTAGE When Volvo saw that increasing congestion and growing environmental awareness were making public transport attractive, it brought back the city bus CHANGE THE GAME When the competition started to close in on Volvo, it introduced products that would increase the number of passengers

The changing economic landscape strengthened his resolve. The company approached private operators who ran inter-city 'deluxe' buses and could price tickets higher. Volvo refused to compromise on product specifications . Passey points out that inter-city buses are 12 metres long everywhere in the world.

Volvo departed from the industry norm by offering service support for the entire bus, and not just parts"

But in India, bus length was capped at 11 metres. "We got the regulation changed," says Passey. It was a good thing Volvo had a wide range of products. "All I had to do was choose the one best suited for India," he adds. "I did not choose the most sophisticated, because operators were used to frontengine buses, very little suspension and ordinary brakes." To persuade operators that Volvos were profitable, the sales team drew up a lifecycle cost comparison. Volvos had a few more seats than others - a disadvantage in the early 2000s, when states taxed operators per seat. But the biggest advantage was that they could run for 22 hours without maintenance. Operators were concerned whether Volvo would provide maintenance centres every 25 km, as was the usual practice. Passey says: "We told them you don't need that with a Volvo. We'll give you one every 400 km." Volvo also departed from the norm by offering service support for the entire bus, and not just individual parts. With maintenance hassles reduced, operators could focus on routes. For example, Mumbai-based Neeta Tours and Travels, which had 20 Volvos in 2004, figured it could serve seven destinations. A bus could leave Ahmedabad at 10 p.m., reach Mumbai at 6 a.m., then go to Pune and back, and then head back to Ahmedabad at 10 p.m. Operators could also focus on sprucing up service with hot towels and entertainment. This also meant they could raise ticket prices by as much as Rs 100 on some routes. Phanindra Sama, founder and CEO of redBus, a portal that sells bus tickets, says, "The Volvo phenomenon coincided with higher per capita income, more awareness about luxury, and increasing migration to cities from Tier-II and Tier-III towns." As Volvos could run farther than buses used till then, routes such as the 1,000-km Bangalore-Mumbai run became popular. Being faster, they could depart later than a deluxe coach, yet arrive at the same time.

THE BUSINESS CAPSULE

SPECIAL: Can Tata's Divo beat Volvo in the luxury bus market? In 2001 - within a year of demonstrating the inter-city coach - Volvo sold 20 of them in India. That figure reached 1,100 in 2006, and 5,000 by December 2011. Volvo now has 76 per cent of the luxury bus market. The market itself, according to industry estimates, is growing at around 10 per cent a year. Volvo expanded gradually, starting with South and West India. It was not until 2004 that it had a countrywide presence. "It was of utmost importance to us to have service leading sales and not the other way round," says Passey.
Volvo stuck to its product specifications. It got India to change a regulation that capped bus length at 11 metres

Volvo also reached out to not only operators, but also other stakeholders. It ran commercials in film theatres. Before launching the B7R in 2001, it sought driver and passenger feedback. "We realised we wouldn't sell much if we sold merely the product," says Passey. "We had to sell the concept of luxury bus travel." Eventually, state bus companies not only bought Volvos but also built brands around them: Garuda in Andhra Pradesh, Shivneri in Maharashtra, Airawat in Karnataka. The development of expressways such as the Mumbai-Pune one helped things along. Volvo became a ticket brand - something no other commercial vehicle has achieved anywhere in the world - as passengers asked for Volvo tickets, rather than an operator or a route. More case studies As with the inter-city coach, the success of the city bus was gradual. In January 2006, Volvo sold its first city bus to the Bangalore Metropolitan Transport Corporation. Under the Jawaharlal Nehru National Urban Renewal Mission, Volvos now ply in 13 cities.
Volvo hopes to make second-tier city connections viable, as traffi c is set to grow in this segment

The company is again looking to change the market, especially with rivals such as Mercedes-Benz and Tata Motors tail-gating it. Its 14.5-m inter-city bus is the longest in India, with more space for passengers and luggage. Its 14.5m multi-axle city bus is being pitched as a solution for urban traffic congestion. With the 9,100 medium-haul bus (for distances of 300 to 400 km), Volvo hopes to make second-tier city connections viable, as traffic is set to grow in this segment. This move - changing the market when the competition closes in - is possible because of a previous strategic step. In 2008, Volvo started manufacturing buses near Bangalore. It makes 1,100 buses a year, and hopes to raise production to 2,500 by 2013/14. Sama of red-Bus says: "The fact that Volvo manufactures its own buses works to its advantage. Mercedes still depends on its body maker, Sutlej." Would any other bus company, had it entered India in 2001, have done as well as Volvo? Perhaps, if its product range was comparable, and if it were patient enough to develop the market. After all, one of the crucial factors in Volvo's success in India is that it has invested in changing the circumstances.

EXPERTS SPEAK

To fare better in the transport market, Volvo should offer a systemic solution: Geetam Tiwari

'THINK BEYOND BUSES' Local manufacturers did not upgrade bus technology almost until 2004, because there was no demand for a better product. Given this environment, Volvo's strategy of bringing state-of-the-art products and creating a market for long-distance luxury travel has been commendable. Higher disposable incomes and other changes in the economic landscape have certainly contributed to the success of inter-city travel driven by Volvo. But it was also because local manufacturers could not create this market successfully. {quote}Urban public transport remains a challenge because it requires not just state-of-the-art buses, but also state-ofthe-art roads designed for public transport. This means creating central lanes for buses, stops for level boarding, passenger information systems, and making streets safe for pedestrians (because every public transport user is a pedestrian at the beginning and end of the journey). Also, money cannot be recovered from fares alone. There is need for thought on financing public transport systems. To fare better in the urban transport market, Volvo should offer a systemic solution, not just buses. It could form a consortium of planners, operators, and IT service providers and offer comprehensive solutions supported by local or state governments. As the urban population is going to double in 25 years - about 600 million people by 2040 - the urban transport market will grow and could attract more investment. Growing environmental concerns and easy availability of information technology will fuel this growth. So demand for good

THE BUSINESS CAPSULE

quality buses will grow. Most Indian cities will not be able to meet mobility demand without stateof-theart bus transport. The country requires about 5,000 more buses a year. It is up to the government and the mobility service providers, and not just vehicle manufacturers, to create a financially viable market. Geetam Tiwari, Ministry of Urban Development Chair Professor of Transport Planning, IIT Delhi

Volvo's success lies in converting its belief that there was a market for luxury travel in India into a value proposition: Abdul Majeed

'FILLING IN THE QUALITY VOID' The bus industry in India started with a focus on public transport, especially to cater to the common man. There were quality issues, but no one really cared. Things began to change with liberalisation, as more people began to move from the middle class to the upper middle class and above. They sought better quality travel. You needed to book months in advance for trains, and air travel did not suit them. They were willing to pay a premium for bus transport, but no such service was available barring a few air-conditioned buses. {quote}Volvo was first to spot this opportunity. It firmly believed there was a market for luxury bus transport in India, for which commuters would pay a premium. Volvo's success lies in converting this belief into a value proposition. Its buses were many times costlier, and the operators needed to charge higher fares to make money. A comfortable journey that reduces travel time by a few hours was what Volvo bus operators offered to justify the premium fares, and people bought into it. The rest is history. What Volvo has demonstrated is that though Indians are traditionally cost conscious, there is a growing crop of customers who demand quality. As road infrastructure improves and people get richer, the luxury bus segment, especially for inter-city travel, will grow faster and larger. We are far away from a bullet train era, and the poor state of the railways would only catalyse this shift. Volvo's success has triggered the entry of more players into the luxury segment. The Swedish company is best placed to take advantage of this transformation, as luxury bus travel in the country has become synonymous with Volvo. Abdul Majeed, Partner and Leader - Automotive, PwC
Business Icon By Namita Katariya

NOEL TATA

NoelTata added another interesting chapter to Ratan Tata has resigned as the Managing International as a non-executive Vicehandles the group's overseas trade. Tata Chairman B Muthuraman. Noel will also another newly-created position. Earlier he was Corp. Ltd, a listed investment firm that has a taken over from N A Soonawala, a trusted

the Tata Group's succession story. The half-brother of Director of retail firm Trent, and joined Tata Chairman, appointed MD of Tata International, which International did not have anMDso far and was led by continue to be Trent's non-executive Vice- Chairman, appointed non-executive Chairman of Tata Investment substantial holding in Tata Group companies. He had lieutenant of RatanTata.

Born in 1957, Noel is the son of Naval and SimoneTata. He is married to Pallonji Shapoorji Mistrys daughter, Aloo. Pallonji is a construction tycoon. He also benefits from his 18.5%stake (as last published) inTata Sons which is the holding company of the Tata conglomerate. Noel Tata is an influential figure in one of India's largest business conglomerates, the Tata Group. After beginning his career at Tata International, the group's arm for the products and services it offered abroad, Tata joined Trent, Tata Group's retail arm, of which he became Managing Director in 1999. Praised as an intelligent and candid businessperson, Tata earned his reputation largely by developing Trent's department store,Westside, from a single unprofitable shop to a chain of fourteen highly successful outlets. Trent operates lifestyle chain Westside, one of Indias largest and fastest

THE BUSINESS CAPSULE

growing chain of lifestyle retail stores, Star Bazaar, a hypermarket chain, Landmark, a books and music chain, and FashionYatra, a family fashion store. Noel is a graduate of Sussex University and has anMBAfrom Insead in Fountainbleau, Paris. He is the son-in-law of Pallonji Mistry, the largest single shareholder in Tata Sons, the controlling arm of the diversified Tata Group, with an 18 per cent stake. Mistry's sons, Shapoor and Cyrus, are on the boards of Indian Hotels and Tata Power. Cyrus is also a director of Tata Sons. In 2003 Tata was appointed as a Director of Titan Industries, the Tata Group's manufacturer of watches, clocks, and jewelry, and an additional Director of Voltas, the Tata Group's air-conditioning giant. The new positions would give Noel, who has been handling retail for 11 years, more exposure in groupwise finance and export activities. Noel is as low-profile and introverted as Ratan Tata was before being forced into the limelight, and prefers to spend much of his time on the shop floor rather than board rooms. He also hates suits and pin-stripes and his standard response to most invitations to corporate dos is a polite 'no'. Noel has overseen the profitable growth of Trent from a single-store company in 1998 to over 90 stores across its retail formats. Under his leadership, the consolidated turnover of Trent has increased from Rs 8 crore in 1998-99 to Rs 1,137 crore in 2009-10. Noel will continue to remain on the board as non-executive Vice-Chairman and, consequently, will continue to be involved in the overall management. Under Noel, Tata International is expected to take on an aggressive growth path, strengthening its leather business by organic expansion and through acquisitions. The Tata Group has over 90 companies, of which 28 are publicly listed. The group has operations in over 85 countries. According to group executives Noel Tata is a low-profile man, actively involved in driving the growth plans of Trent. He gives a free hand to professionals running the business and was till now not seen as taking active interest in other group businesses. Tata Sons, the conglomerates holding company, owns most of the stake in group companies. About 66% ofTata Sons is held by philanthropic trusts that are endowed by members of theTata family. The successor to Mr Ratan Tata is widely-speculated in business circles as the group is closely tracked by Indian and international investors. The group which first catapulted to the global arena with its acquisition of the UK-based tea company Tetley in 2000, followed that up with a series of takeovers, including the high profile buyouts of UKs Corus and Jaguar Land Rover. With about 65% of its revenue coming from outside India, the group has deliberately followed an international management character by appointing expats to top jobs; it recently appointed Carl-Peter Forster from General Motors, to take charge of Tata Motors.
Add Ons By Namita Katariya

BRAND ICON: VODAFONE

Vodafone is the largest mobile telecommunications network company (as measured by turnover) and has a market value of about 86 billion. It is headquartered in Newbury, Berkshire, England. It currently has operations in 31 countries and partner networks in further 40 countries. As of January 2009, Vodafone had 427 million customers in 31 markets worldwide. In terms of customers, therefore, only China Mobile is larger. The largest mobile telecommunications network in the world, Vodafone, was founded in 1984 as Racal Telecom Ltd, which was a subsidiary of Racal Electronics Plc. Racal was a British radar and electronics firm founded in 1950. Vodafone made UKs first mobile call a few minutes past midnight on January 1, 1985 from St. Katherines Dock to Newbury. In 1987 Vodafone was recognized as the largest mobile network of the world, the very same year Vodata was created as the voice and data business to market Vodafones voice and mail service. In 1991 Racal Telecom was demerged from Racal Electronics Plc, to become an independent company as Vodafone Group Plc. The name Vodafone originates from Voice Data Fone, which reflects provisions of voice and data over mobile phones. The story about the worlds largest telecommunications giant has been nothing short of phenomenal, with head quarters in United Kingdom, and interests in Europe and United States of America Vodafone Group, has marked an astonishing achievement in the cellular business, with its major acquisition strategies and takeovers. The Groups subsidiaries operate under the brand name Vodafone. Vodafone currently has operations in 25 countries and partnering networks in another 45 countries. Vodafones business unit is enabling the worlds leading multinational companies to develop and control their entire mobile communications networks. During the mid 1990s Vodafone began to consolidate itself on the British high-street. In July 1996 Vodafone acquired two thirds of Talkland it did not already own for 30.6 million. On 19 November 1996, in a defensive move, Vodafone purchased Peoples Phone for 77 million, a 181 store chain whose customers were overwhelmingly using Vodafone's network.

THE BUSINESS CAPSULE

In a similar move the company acquired the 80% o f Astec Communications that it did not own, a service provider with 21 stores. This made Vodafone very visible on the British high street and significantly increased the company's share of UK mobile customers. In 1997, Vodafone introduced its new corporate Speechmark logo. This represents a quotation mark within a circle. The 'O's in the Vodafone logotype have opening and closing quotation marks, suggesting conversation. In the year 2005, Vodafone announced the acquisition of a 10 percent stake in India's Bharti Televentures, which operates the largest mobile phone network in India under the brand name AirTel. When Vodafone in 2007 entered the race to buy a controlling stake in Hutchison Essar, one of Indias largest mobile phone companies, the fight was protracted and bitter. Vodafone Essar is the Indian subsidiary of Vodafone Group and commenced operations in 1994 when its predecessor HutchisonTelecom acquired the cellular license for Mumbai. It was then known as Max Touch. The company now has operations across the country with over 100 million customers and is Indias third largest telecom operator after Bharti Airtel Ltd and Reliance Communications Ltd. In the December quarter, Vodafone Essar posted a 37.3% jump in revenues to $674 million (about Rs3,280 crore), the highest in percentage terms among all the countries its parent operates. Starting with about 28 million subscribers across 16 circles in May 2007, Vodafone Essar today has 100 million customers and its footprint has extended to all the 23 circles in the country. This journey is a testimony of Vodafones success in a highly competitive and price sensitive market. Around 60% of the Companys customer additions now come from upcountry areas. With a distribution reach of about 1.2 million outlets, Vodafone is well-geared to serve customers in the remotest corners of India. BUSINESS TRIVIA Captain Morgan Diageo is a brand of rum produced by . It is named after the 17th-century Caribbean privateer from Wales, Sir Henry Morgan. Captain Morgan's slogan is Got a little Captain in you? In 1944, the Seagram Company started producing rum under the name Captain Morgan RumCompany. Apollo Tyres' founder, Raunaq Singh Kanwar, an entrepreneur from Lahore, in 1978, bought a licence to manufacture tyres from a family that was desperate to sell. The Kanwar family decided to add Apollo tyres to their flagship company Bharat SteelTubes. Norwich Union is the biggest insurance company I n the UK. It is a part of the , itself created by a merger of Norwich Union and CGU plc in 2000. Aviva group announced that the Norwich Union brand would disappear over a period of two years. Norwich Union was founded in 1797 in Norwich, when 36-year-old merchant and banker, Thomas Bignold formed the Norwich Union Society for the Insurance of Houses, Stock and Merchandise from Fire. Silverthorne was Intel's low-power mobile processor for mobile Internet devices. 23and Me, Sergey founded by the wife of Google founder Sergery Brin, offersWeb-basedDNAtesting Dell (PRODUCT) RED is the name of the products launched by Bill Gates, Michael Dell and Bono to help eliminate AIDS in Africa. Sachin Chaudhuri founded the Economic and Political Weekly and later became India's finance minister. He earned the dubious distinction of having devalued the rupee against the dollar in 1966. CitizenWatches (India), a subsidiary of Citizen of Japan, sells its watches at 'First Citizens' (Citizen's exclusive showrooms) and 'Citizen Corners' (multi-brand outlets) across India.
Market Watch By Girish Kumar Mishra

Saturday, 14 July 2012 Sensex: 17,214 (1.8%) 11.4 Nifty: 5,227 (1.7%) 13.0

Gold (-0.01) Silver (-0.03)

29,275.00 (-2.00) 52,790.00 (-17.00)

BSE SENSITIVE (BSE) Basic Chart

THE BUSINESS CAPSULE

S&P CNX NIFTY (NSE) Basic Chart

Market Outlook Our markets were down ~1.8% for the week, reflecting weak global cues US markets were down 1.5%. IIP data for May 2012 came in better-than expected at 2.4% (above market expectations of ~1.8%), showing improvement across various sectors - manufacturing, mining, and electricity. Infosys disappointed the street with lower-than-expected results and a sharp reduction in guidance (to 5% from 8-10% for FY13E). TCS, on the other hand, reported results slightly above the streets expectations and also painted a positive outlook. Going ahead, action on government policy reform especially in terms of increasing diesel prices immediately post the domestic Presidential elections and progress on resolution of the various power sector issues bailout of discoms, power tariff hikes, increasing domestic availability of coal would set the direction of the market. Markets are likely to be in a wait and watch mode next week. There would be stock specific action based on results performance in terms of expectation and management guidance. Major auto and bank companies would report results next week. Top Corporate News during the week 1. TCS Q1 slightly above estimates; Management commentary is quite confident and positive on deal pipeline and outlook for FY13; Outperform on relative basis. During Q1FY13, TCSs top line registered an impressive growth of 12.1% to Rs. 148.69 bn from Rs. 132.59 bn on sequential basis and 37.7% on YoY basis. In dollar terms, revenue grew at a healthy pace of 3.0% to $2.73 bn on QoQ basis. The company witnessed a good volume growth of 5.3% and witnessed a healthy traction across all the verticals, except Energy. On geographical wise, UK and US led the growth by 15.2% and 3.2% respectively, whereas India contradicted by 13.9% on QoQ basis. EBITDA improved by 10.2% to Rs. 43.23 bn from Rs. 39.24 bn on QoQ basis, with margin slip of only 52 bps to 29.1% despite wage hike. PAT increased by 14.6% to 33.17 bn. On overall basis, the results were marginally ahead of street estimates. More importantly, the management commentary on outlook and pipeline were quite confident and maintained hiring guidance of 50k employees for FY13E, which further confirmed the managements confidence on the environment and this would keep TCS as bellwether in IT space. We believe that TCS would continue to command premium over the peers (~30% premium now) and continue to outperform on relative basis. 2. Infosys Q1 below estimates; Magnitude of $ revenue guidance for full year came as huge negative surprise; Underperform in the short term. During Q1FY13, Infosys top line grew by 8.6% to Rs. 96.16 bn from Rs. 88.52 bn on sequential basis, thanks to rupee depreciation of 9.7%. On dollar terms, it decreased by 1.2% from $1.75 bn to $1.77 bn. On Vertical wise, Manufacturing (2.2%) and Retail (5.9%) led the growth, whereas BFSI remained soft (-1%) and Energy Utilities (-25.4%) witnessed client specific ramp down of (~$15 mn). On geographical mix, Europe declined by ~8% because of client ramp down. On services wise, Run the Business (RTB) side of services such as BPO and IMS showed an impressive growth of 5.4% and 5.4%, whereas Change The Business (CTB Discretionary in nature) such as Consulting declined by ~5% (QoQ basis). EBITDA increased by 6% to Rs.32.43bn from 30.59 bn. EBITDA Margin declined by 83 bps to 33.7% due to service mix change and 3.8% price reduction. PAT decreased by 1.2% to Rs.22.89 bn from Rs. 23.16 bn. (QoQ basis). On a positive side, volume growth continued to remain positive ~3% in Q1FY13. Predominately, Guidance reduction (to 5% from 810% for FY13E) was due to price reduction and cross currency fluctuations but volume assumption remained almost same around 9.5%. The results are below street estimates on dollar front and magnitude of guidance reduction came as negative surprise. We

THE BUSINESS CAPSULE

believe that the management is on the track to transform the organization into more agile and ahead of curve organization in the future trends. However, the difficult environment weighs down on the transformational activities, as more services are depending upon CTB (discretionary in nature). Currently, it is trading at 13.5x on FY13E EPS (Bloomberg consensus), which is ~27% discount to market leader TCS. We believe the discount is likely to remain same until consecutive earnings improvement by Infosys. However, current cash holding of ~17% of m-cap would support the downside from the current levels. It is likely to underperform in the short term. 3. RBI refuses to confer infrastructure status on loans given to Lavasa (subsidiary of HCC); Negative for HCC in short to medium term. Lavasa(HCCs 65% subsidiary) had sought infrastructure status from RBI some months ago on the grounds that it would help the company join the Corporate Debt Restructuring cell(CDR) set up by banks. However RBI has rejected the proposal of conferring infrastructure status to Lavasa. The rejection means that Lavasa cannot enter the special cell set up by banks to help ease the debt burden coupled with high-cost borrowings. Lavasa might have to take the difficult route of negotiating individually with the banks and its debt will have miniscule chances of becoming a standard asset. We believe the stock would be under pressure in the short to medium term. Macro Economy & Other News Domestic 1. Credit growth hits 3-year low, deposit mop-up even slower Bank loans at June end grew at 16.3% YoY, the slowest since June 2009. Deposit growth was at 13%, the lowest in a decade. Commercial banks raised total deposits of Rs 62.3 tn as on June 29, the RBI data showed. 2. Sowing gets boost as monsoon covers central, northwest India The monsoon has covered the key farming regions of central and northwestern parts of the country, giving a boost to sowing. However, the coarse grain producing areas of western Rajasthan and Gujarat are yet to get any rain spell. July and August, which contribute 65% of total rainfall, are crucial for farming. International 1. China June inflation eased to a 29-month low to 2.2% Chinas inflation eased sharply in June against the backdrop of cooling food costs and easing industrial demand, raising hopes that weakening price pressures will leave Beijing with more room for further relaxation in policy to support growth after the second interest-rate cut in a month. 2. Job Openings in U.S. Rose in May After April Plunge: Economy Job openings increased in May after plunging the prior month, easing concern the U.S. job market was faltering. The number of positions waiting to be filled climbed by 195,000 to 3.64 mn, partially counters the 294,000 drop seen in April.

The Business Quiz

By Puneet Arora

GK QUESTION

Sathya Sai Baba, one of India's most influential spiritual leaders expired on 24 April 2011 in his home town in Andhra Pradesh. Name his hometown. a. Warangal b. Puttaparthi c. Mahabubnagar d. Vepagunta

According to reports of Freedom House published on 23 April 2011 what was Indias ranking among 37 countries that were assessed on the basis of free and unrestricted access to the web? a. 10th b. 14th c. 25th d. 28th

THE BUSINESS CAPSULE

Which group won 12 awards, including four Golds at the third edition of the WOW awards in April 2011 for events and experiential marketing? a. Mudra Group b. Wizcraft c. GroupM Media d. Candid Marketing

Which one of the following became the first Indian state to set up Agriculture Cabinet? a. Bihar b. Uttar Pradesh c. Haryana d. Punjab

Western Ghats Ecology Expert Panel (WGEEP) has identified twenty-five ecologically sensitive areas in which one of the following states? a. Kerala b. Goa c. Maharashtra d. Karnataka

The National Advisory Council (NAC) finalised a draft bill named the draft prevention of communal and targeted violence (Access to Justice and Reparations) Bill to tackle communal violence including attacks SC and ST members and religious and linguistic minorities. Who is the Chairperson of NAC? a. Sonia Gandhi b. Manmohan Singh c. Suresh Kalmadi d. Rahul Gandhi 7. Sally Pearson, the world 100m hurdles champion, was named the Female World Athlete of the year for 2011 by the IAAF. To which country does she belong? 1) Australia 2) New Zealand 3) U.K. 4) U.S.A. 8. The term Bull's eye is associated with which of the following sports? 1) Badminton 2) Boxing. 3) Shooting 4) Cricket 9.Which of the following program-mes was launched by the govern-ment to develop rural infrastruct-ure in India? 1) SHGs 2) Bharat Nirman 3) JNNURM 4) IAY 10. Which of the following is not the name of a foreign bank? 1) BNP Paribas 2) Deutsche Bank

THE BUSINESS CAPSULE

3) Barclays 4) Cathay Pacific VOCABULARY Drawl: speak in a slow, lazy way SYN: drone, say slowly ANT: gabble He thought it was stylish to drawl but had to change his mind when he was denied the lucrative call centre job.

Sporadic : occurring at irregular intervals SYN: occasional, intermittent ANT: frequent, steady He kept breaking into fits of sporadic anger.

Ferocious : savagely fierce, violent STN: brutal, cruel ANT: gentle, mild The ferocious midday sun wore the travelers out.

Coherent : logical and consistent SYN: reasonable, rational ANT: incoherent, muddled They failed to develop a coherent economic strategy.

Apprise : inform or tell SYN: notify, intimate AYN: confuse, obfuscate We must apprise them of the dangers that may be involved. Editor in chief Ashwin Kumar Dwivedi Sourceswww.yahoo.finance.com , www.rediff.business.com, www.wikipedia.com, www.businesstoday.com www.indiabiznews.com,www.moneycontrol.com , The economics times, Business standard, economist. Editorial Team- AshwinKumar Dwivedi , Namita Katariya , Puneet Arora , Payal Ahuja, Nandish ,Mani Dubey , Girish Kumar Mishra

Under the guidance of: Prof Avinash Deshpande We welcome your feedback @ mitsobbcapsule@gmail.com