2 COMPANIES

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IN THE NEWS
* OVER PREVIOUS CLOSE

MUMBAI | FRIDAY, 21 SEPTEMBER 2012

> TTK Prestige > HPCL Top loser among A group stocks
~3,890.80 PREVIOUS CLOSE ~3,657.60 CLOSE 5.99% DOWN*
315 305 295 285
Sep 13 2012 Sep 20

> Bajaj Auto

1,795 1,765 1,735 1,705
Sep 13 2012 Sep 20

> GSFC Plans to raise ~1,080 crore via ECB issues

~286.75 PREVIOUS CLOSE ~296.39 CLOSE 3.36% UP*
77.50 76.50 75.50 74.50
Sep 13 2012 Sep 20

> BHEL Turned into ex-stock split

230 220

Ties up with Kawasaki for Indonesia sales

~1,748.20 PREVIOUS CLOSE ~1,788.55 CLOSE 2.31% UP*

3,950 3,750 3,550 3,350

Sep 13 2012 Sep 20

Top loser among Sensex stocks

~225.00 PREVIOUS CLOSE ~216.85 CLOSE 3.62% DOWN*
.

~74.95 PREVIOUS CLOSE ~77.30 CLOSE 3.14% UP*

210 200
Sep 13 2012 Sep 20

>

> IN

BRIEF

Future Group buys Big Apple for ~61 cr

Future Group on Thursday said it would acquire Express Retail Services Pvt Ltd (ERSPL), which runs Big Apple stores, for ~61.35 crore. ERSPL, which is a debt-free company, was expecting a net sales of ~120 crore during 2012-13, it added.
PTI <
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Telecom subscriber rankings throw up surprises, worries

Idea tops list of companies with high percentage of active subscribers
SURAJEET DAS GUPTA
New Delhi, 20 September

Govt, Vodafone likely to resolve tax issue

BS REPORTER
New Delhi, 20 September

ACTIVE VOICE

Essar Ports refinances ~405-cr loan

Essar Ports had refinanced ~405-crore loan for its Hazira bulk terminal to save ~10 crore annually in interest cost. The company announced on Thursday it has tied up with India Infrastructure Finance Company Ltd to BS REPORTER < refinance the loan.
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AIs advance purchase fare scheme

Eying a healthy share in domestic market in the upcoming festive season, Air India launched an advance purchase fare scheme that would give fliers tickets at a price 15 per cent lower than available cheapest fares. PTI <
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DRL launches Amoxicillin tablets in US

Dr Reddys Laboratories on Thursday announced the launch of antibiotic Amoxicillin tablets, capsules and oral suspension, a bio-equivalent generic version of Amoxil, in the US market. PTI <
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Suzlon arm bags windfarm project

Suzlon Group subsidiary REpower Systems on Thursday said it had signed a 25.6-Mw contract with Windkraft Simonsfeld to supply eight turbines for its windfarm project in Austria. PTI <
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f you thought the big boys of the telecom industry Bharti Airtel and Vodafone had the highest share of active subscribers in their overall mobile subscriber base, think again. Idea Cellular is at the top of this list. At 92.8 per cent, the company had the highest percentage of visitor local register (VLR) subscribers in July. From January 2011, it has consistently recorded monthly VLR of about 90 per cent. Idea is followed by Bharti and Vodafone. Bharti had seen its VLR rise to about 92 per cent in January. However, in July, this dropped to 90.5 per cent. VLR subscribers are those whose phones are switched on they make or receive calls. Bharat Sanchar Nigam Limited ranks ninth in the top-10 list. With about a half of its customer base inactive, CDMA operator Sistema stood last in the list. The Russian company, however, says its data subscribers arent reflected in the VLR numbers.

Idea

Airtel Vodafone RCom

Tata

Aircel

Uninor

BSNL

Sistema

VLR means visitor local register, which reflects the number of subscribers who have their phones on and use it to make or accept a call Source: TRAI

A major concern is new companies such as Uninor and Sistema arent alone in recording poor VLR numbers. Some incumbents, too, recorded a poor VLR subscriber base. These include Tata Teleservices, Aircel and BSNL. Till July, together, these five companies increased their active subscriber base by a mere 22 million

through the past year. The top four companies added 68 million subscribers in the same period. This indicates most of these companies are roping in subscribers who use their numbers as a second SIM option, generating little or no revenue at all. This presents a challenge for some companies that would bid for 2G telecom

spectrum it might not be easy to draw paying subscribers from established operators. Many telecom operators have, however, been consistently cleaning up their subscriber base to reduce the number of low- or nonpaying customers. The VLR of Vodafone, for instance, rose from 77.7 per cent in January 2011 to a healthy 89.2 per cent in July. Tata Teleservices VLR rose from about 50 per cent to about 61.7 per cent in the same period. Reliance Communications has tried to clean up its inactive subscriber base in just a month, wiping 20 million subscribers off its records in July. Now, securing spectrum is no longer related to subscriber numbers; it would be auctioned. So, retaining inactive subscribers doesnt help. Second, a Department of Telecommunications directive, effective November this year, would make know-your-customer norms for securing new connections strict. This would also ensure a ban on retailers selling pre-activated SIMs, and stiff penalties for non-compliance.

A truce appears to be emerging between the government and UK-based telecom major Vodafone over the companys multi-million tax issue. After Finance Minister P Chidambarams indication the tax department would not act rashly on the issue, the company today said it was ready to discuss a solution with the government. Responding to a query on weather waiving the penalty and interest on the tax was possible, Vodafone India non-executive Chairman Analjit Singh said, It is certainly an option. I dont know if its viable. According to the tax department, the tax liability on the company for its acquisition of Hutchisons stake in 2007 stands at about ~7,900 crore, with a penalty of ~7,900 crore and interest of about ~4,500 crore. Vodafone is not a company that is confrontational and controversial. This is not Vodafones business. It is building telecom. So, Vodafone is definitely willing to discuss. But I dont want to

get into this question of arbitration and negotiation because I dont know what all that means, Analjit told reporters outside North Block, after a meeting with some finance ministry officials. Without any waiver in the penalty and interest, the company would have to pay the government about ~20,000 crore. However, under Chidambaram, the finance ministry is reviewing the tax provisions related to retrospective amendments passed during President Pranab Mukherjees term as finance minister. Earlier this week, Vodafone Chief Financial Officer Andy Halford had said the company might make a provision to cover legal risks arising out of the tax dispute with the Indian government. A committee headed by Parthasarthy Shome is looking into the retrospective taxation of indirect transfer of India assets. Though it has not given its report yet, there are indications it might suggest some relaxation in applying such provisions retrospectively.

Orchid plans entry into new segments

Orchid Chemicals and Pharmaceuticals plans to foray into new high-margin, low volume therapeutic verticals with an investment of about ~200 crore in the next two years.
BS REPORTER <
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Police remand for former Reebok executives

BS REPORTER
New Delhi, 20 September

NMDCto review iron ore prices on October 1

BS REPORTER
Hyderabad, 20 September

CCI notice to carmakers to hit foreign players harder

SHARMISTHA MUKHERJEE
New Delhi, 20 September

Tata receives largest order for trucks

Tata Motors said it had received its largest ever single order for commercial vehicles from Siddhivinayak Logistics Ltd, for a supply of 1,314 trucks to be delivered during the current financial year. BS REPORTER <
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EMD, Bombardier ink assembling pact

Electro-Motive Diesel (EMD), a diesel locomotive manufacturing company, and Bombardier Transportation on Thursday announced an agreement that would allow Bombardier to assemble diesel electric locomotives for BS REPORTER < EMD in Savli, Baroda, India.
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Billing Solutions, PayPal ink deal

Online payment service provider E-Billing Solutions on Thursday said it would work as the first channel partner for global online payment provider PayPal in India. PTI <
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USFDA nod to Jubilant Lifes 4 drugs

Jubilant Life Sciences on Thursday said it had received approvals from the US Food and Drug Administration for four products that target central nervous system and cardiovascular PTI < system therapeutic areas.
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Tata Tea to sponsor Narain Karthikeyan

Tata Global Beverages on Thursday said its brand Tata Tea would sponsor Indian Formula 1 driver Narain Karthikeyan and the HRT Formula 1 team for two upcoming races in Singapore and PTI < India.

Four former employees of Reebok India, including two top executives, who were arrested on Wednesday for allegedly cheating the company of ~870 crore, have been sent to police remand. The Gurgaon judicial magistrate has sent the accused Reeboks former managing director Subhinder Singh Prem, former COO Vishnu Bhagat, former head of warehousing Prashant Bhatnagar and senior sales executive Surakshit Bhatt and Sanjay Mishra, a service provider and owner of Shivam Enterprises, Oriya Sales and Om Trading, to police remand for seven days. The Gurgaon police stared investigating the case after a complaint by Reebok India finance director Shahim Padath. The special investigation team (SIT) of Gurgaon police, which is probing the case, has said that it has found four illegal warehouses, whose existence was not disclosed to auditors, tax authorities or to the Adidas management in Germany. However, both Prem and Bhagat have denied the charges against them. The SIT has also alleged that billed goods worth ~62 crore were kept in these warehouses but not dispatched. It also says that in FY2011, fake institutional sales of ~21 crore were made by Prem and company. The SIT has contended that the group was involved in fake sales and falsification of accounts since 2005. It also showed fake receipts from franchisees and collected ~108 crore through franchisee referral programme

Former Reebok India managing director Subhinder Singh Prem at Gurgaon court on Thursday. DALIP KUMAR

(FRP) and in-and-out transactions. The investigating team also alleges that the accused carried out circular transactions of ~98 crore, where funds were routed through eight customers and vendors. They also made interest payment of ~14 crore against the FRP investment by creating forged ledger account. The SIT said that Prem and his associates have misused the invoice discounting facility with Standard Chartered Bank, Deutsche Bank and Bank of America to discount the same invoices from two different banks simultaneously. This way, they obtained short term funding to the tune of ~82 crore.
For full report, visit www.business-standard.com

Public sector mining company NMDC Ltd will take a call on iron ore pricing for the December quarter at its board meeting on October 1, amid concerns that prices are already high compared to international benchmarks. There are pricing pressures internationally and India cannot be insulated from the effects of those pressures though the domestic demand is good, said SAIL Chairman and Managing Director C S Verma, who also holds the additional charge as chairman-cum-managing director of NMDC. However, he declined to comment on whether the company was planning to lower the prices. In a related move, NMDC has also decided to rope in an international consultant for devising a proper and professional pricing policy in place of the pricing formula currently followed by the company, according to Verma. The current formula, which is based on the domestic supply-demand dynamics, has drawn criticism after NMDCs prices stayed higher when the international iron ore prices were going down.

Even as the Competition Commission of India (CCI) has shot off showcause notices to 17 automobile manufacturers on an alleged anti-competitive practice of selling spare parts at higher prices to consumers, sources indicated foreign car makers are more susceptible to being held accountable on the said charges than home-grown auto majors. Home-grown companies such as Maruti Suzuki, Tata Motors and Mahindra and Mahindra sell spares in the open market except for a few models. Hyundai, too, has started making parts available in retail. It is mostly the foreign companies that have been insisting that their customers go to authorised dealers for repairs which lead to an increase in service and maintenance costs of vehicles, a senior industry executive aware of the development said. CCI has scheduled hearings next month to seek explanations regarding the practice being followed by certain section of automobile manufacturers operating in India. Nearly 50 per cent of car owners move away from authorised dealerships due to higher servicing costs. Servicing expenses are higher by around 30 per cent at company-operated service outlets than in independent and unorganised workshops. As margins get squeezed due to discounts in sales of new vehicles, dealers resort to increasing servicing costs to make up, said the executive, who attended the meeting in

If needed, we will look into airfare rise: CCI chief

BS REPORTER
New Delhi/Mumbai, 20 September

The Competition Commission of India today said volatility of demand and supply could be the main reasons behind airfare rise, but if there was any cartelisation in the aviation sector, the commission would look into it. The Commission looked at the airfares some time ago, but we found that the fares had moved up and down more because of the market play dynamics and not because of anticompetitive practices, that they had formed a cartel, CCI Chairman Ashok Chawla said. If the need arises, the commission will look into the issue again, he said.

which 200 people were called to provide evidence by the Commission. At present, independent service chains have around one per cent share in the ~25,000 crore aftermarket service and spares industry. The aftermarket service industry includes over ~6,000 crore of body shop and ~15,000 crore service and spares work. It is growing at a compound annual growth rate of over 20 per cent.
For full report, visit www.business-standard.com

Blurred picture for personal computers

In CY2010, 9.9 million PCs were shipped, a growth of 30% over 2009, while in CY2011 total shipments went up by just 7.3%
SHIVANI SHINDE
Mumbai, 20 September

The Indian personal computer (PC) market, which grew 15.7 per cent during April-June 2012 over the same period of the previous year, would appear to be going great. However, a closer look shows a different picture. In calendar year (CY) 2010, 9.9 million PCs were shipped. Thats an impressive growth of Unenterprising cycle 30 per cent over 2009, which The Indian PC market is mostreported total shipments of 7.62 ly driven by the commercial million. But CY 2011 segment, which saw the total shipconstitutes enterment go up by just prise, SME, govern7.3 per cent over the ment and educaprevious year to tion, makes up for 10.62 million. about 60 per cent of According to PC sales in India. CyberMedia Analyst say that Research, the Indian the global uncerSLOWDOWN tainty has stretched PC markets growth BLUES-4 in CY2012 will be the hardware just eight per cent. refresh cycles for the The PC penetration in India is enterprise segment, which has just about six-seven per cent. the biggest buyers of PC such The PC market was largely as IT & ITeS, BFSI, manufacturdriven by demand in consumer ing and exports companies. segment, specifically around All these segments have portable PCs that remained their own set of challenges. buoyant. And fulfilment for the Although the SME segment has largest deal, Electronics grown, its hardware buying Corporation of Tamil Nadu patterns have been patchy. (ELCOT), was underway in Q2 The India PC market has

2012 (April-June). and this resulted in the overall growth for the PC market during that period. However, barring the fulfilment on ELCOT, we only noted a sequential shipment growth of 2.6 per cent, which reflects the marginal spike in the overall demand for PCs in India, says Kiran Kumar, senior market analyst at IDC.

always been swayed by global sentiments, especially enterprise segment. To give an instance, the Indian PC market in Q4 of CY2008 (OctoberDecember) saw a steep drop of 30 per cent, compared to Q3 (July-September) of 2008. However, the recovery has been sharp as the sentiments improved. While 2012 is certainly better than 2008, we definitely see an erosion in the sentiment which firmed up in 2010, says Sumanta Mukherjee, lead analyst, information technology practice, CyberMedia Research. He adds that the damp mood in enterprise hardware procurement is unlikely to change any time before the second half of 2013. A look at individual company numbers also show the impact of enterprise delays on the sale. Considering that the enterprise segment is a larger chunk for several players. Take, for instance, Lenovo, which has been the top PC seller in India for the past two quarters. True, the company has grown year-on-year, but its growth has tapered down. If you look at our growth rates, in 2010-11 Lenovo would have grown at 70 per cent odd,

FADING APPEAL
Breakup of Indian PC market
Commercial Consumer

41.7% 58.3%
Q2 2011

47.7%

52.3%

Q2 2012

Total unit shipments

Source: IDC Quarterly Asia/Pacific PC Tracker, Q2 2012

but for 2011-12 it has been around 47-48 per cent. From a demand standpoint in the enterprise segment, we have seen an impact, says Amar Babu, managing director, Lenovo India. For Lenovo, enterprise gives 55 per cent of its business. Babu agrees that the impressive growth that Lenovo has seen in the enterprise growth has come partially

from eating into rivals pie. With the rupee-dollar fluctuation, the PC manufacturers are in no position to get into a price war and reduce prices. This was one of the reasons why Dell has kept away from low-margin business. Several OEMs could not participate in large deals and many preferred to go slow due to the currency fluctuation. Moreover, towards

the start of the year, due to floods in Thailand, certain component costs went up due to shortages, says Saji Kumar, director-product management, Acer India. Dell, another major player, saw its revenue from India slip by 30 per cent for the second quarter of FY2013. In the past few quarters, Dell has been struggling to retain its market share in India in terms of unit sales due to its focus on highvalue business. The latest IDC figure show the company has now slipped to the third position in India after its market share fell to 13.4 per cent. The revenues from all business segments in India declined in double digits. The currency has moved 25 per cent in the past year, which has clearly impacted us, says Amit Midha, president, APJ (Asia-Pacific and Japan), Dell. IDCs Kumar agrees that enterprise refresh cycles are stretched, which in turn has delayed sales cycle. Commercial spending continues to remain adversely impacted by the prolonged uncertainty in the euro zone and other mature markets. The widening trade deficit contin-

ued to exert downward pressure on the rupee in Q2, further diluting spending in enterprises pinched by the rising costs, he adds. The enterprise refresh cycles are also being delayed due to the launch of Windows 8, where many are holding on to their decision to upgrade to new hardware. Riding on freak consumer demand Over the past few quarters, the PC market have been riding on consumer demand and that will peak during the upcoming festivities. IDC figures show that the consumer segment grew by six percentage points in Q2 2012 to record 47.7 per cent shipment share, against 41.7 per cent shipment share in Q2 2011. CyberMedias Mukherjee points out that even within the consumer segment, the growth is coming from tier-III and IV cities, where some of the PC vendors have been aggressively growing. Since all the top players have a significant exposure in the enterprise segment, they are experiencing a drag in the segment. Amidst the weakening scenario, the enterprise hardware refresh cycle seems

to have elongated too, which is also not helping the cause. However, vendors focusing only on consumer segment could be riding the consumer wave at the moment, he says. Players such as Lenovo have been increasing their presence in smaller cities to boost sales. Babu says that Lenovo has seen growth coming from its exclusive stores in tier-II and tier-III cities. Bulk of our growth is coming from these stores. They are growing much faster than the multibrand stores, says Babu. According to Vishal Tripathi, principal research analyst at Gartner, consumer buying accounted for 50 per cent of total PC sales in Q2 2012. Consumer PC sales grew 24 per cent sequentially. It is being primarily being driven by entry level products. Vendors such as HP, Lenovo, Asus and Samsung registered more than 50 per cent growth in the consumer segment, he says. As Acers Kumar puts it, the next four to six months will be crucial for the PC industry.
This is the fourth of a five-part series on the slowdown that companies are facing