INDIA BUSINESS WORLD - OCTOBER 2006
THE MONTH THAT WAS

News & important developments from the most prospective of the New World markets……. India. Our effort is to provide you with the latest and relevant developments that take place in the Indian business, economic and legal environment.

ECONOMIC & LEGAL NEWS

RBI TO MODIFY NBFC POLICY TO BLOCK FOREIGN, DOMESTIC BANKS : The banking regulator is close to firming up a policy that will virtually make it impossible for foreign and local banks to operate through the non-banking finance companies (NBFCs) route. It could well force banks to take the hard decision of operating either through a branch network or through an NBFC, officials familiar with the exercise. RBI's aim is to stop banks from taking advantage of a regulatory arbitrage. Such possibilities exist as NBFCs, unlike banks, are not bound by strict norms on raising funds and their end use.

HOUSEOWNERS MAY GET UPTO 50% TAX FREE RENT : If you subscribe to the view that a house is a machine for living in but left it idle for the fear of the taxman, then dust off the cobwebs to let in Lakshmi. In what could be a win-win situation for all involved parties, the government is considering raising the floor for tax on rental income to 50% from the existing 30%. The idea is to bring the 15.8 million unoccupied dwellings across the country into circulation to bridge the housin shortage.

MAURITIUS TIGHTENS TAX RESIDENCY NORMS : Mauritius has kept its word. The island nation has swiftly acted to do its bit to address issues raised by India on the alleged misuse of the double taxation avoidance agreement (DTAA).

GOVT WON'T WITHDRAW GUARANTEE TO LIC : The 16 crore policyholders of Life Insurance Corporation (LIC) can heave a sigh of relief with the government planning to continue with its guarantee for these policies. Fearing an erosion in value if the sovereign cover is withdrawn, the government has decided against discontinuing it.

FDI FROM CHINA, HONG KONG MAY FIGURE ON SENSITIVE LIST : For the first time ever, the government is proposing to put China on the list of countries categorised as a security risk from the foreign direct investment (FDI) standpoint. This means FDI from China will not get automatic clearance even if it is for an innocuous segment like consumer goods (FMCG).

POSCO SET TO BRING IN $27B MORE : This could well turn out to be the largest FDI proposal yet. Global steel major Posco is all set to bring in another $27 billion over the next seven years, to set up more steel plants in Chhattisgarh and Jharkhand. Posco has already committed $12 billion for its 12-million-tonne steel plant in Orissa.

NRIS MAY BE ALLOWED TO SEND $5,000 AT A TIME SOON : The legal channels for NRIs to send money home will soon be more attractive, with the Centre planning to double the amount per transaction allowed through money transfer operators (MTO) like post offices. Currently, an NRI can send a maximum of 12 transactions in a calendar year, each not exceeding $2,500, as per RBI regulations. This amount may be upped to $5,000

NRIS, PIOS CAN NO LONGER TRADE WITHOUT PAN : The Securities and Exchange Board of India on Friday said it was withdrawing the limited purpose beneficiary owner account/trading account facility for non-resident Indians (NRI) and persons of Indian origin (PIO) without a permanent account number (PAN).

CABINET OKAYS RS 41K-CR PLAN FOR SIX-LANING NH : The government has approved six-laning of 6,500 km of national highways, including 5,700 km of Golden Quadrilateral (GQ), at a cost of Rs 41,210 crore. As of now, these are primarily four-landed highways.

INDIA NOW HAS 83,000 HNIS :   Buoyant economic conditions and robust domestic stock market performance over the last couple of years has resulted in a rapid growth of India's population of high net worth individuals (HNIs), according to the first Asia-Pacific Wealth Report published by Merrill Lynch and Capgemini.

IPO MANIPULATORS MAY BE MADE TO RECOMPENSE PUBLIC :   Finance minister Mr. P Chidambaram wants Sebi to disgorge the gains made by a clutch of operators who manipulated allotment of shares in scores of initial public offerings.

HATE PAGE PUTS ORKUT IN SPOT :   In what could be a first, the Bombay High Court has ordered the Maharashtra government to initiate legal proceedings against Google for the allegedly ‘Hate India' campaign propagated on its social network service site Orkut

MOTOROLA TELLS COURT IT QUOTED RS 3,500 CR LESS THAN ERICSSON : Motorola has informed the Delhi High Court that its bid was Rs 3,500 crore lower than that of Ericsson which is all set to bag the mega GSM equipment tender of BSNL. Ericsson has quoted a price of around Rs 22,594 crore for supplying equipment and setting up a network of 45.5 million lines. A Rs 3,500-crore gap means th at Motorola's price is about 15% less than that of Ericsson.

BSNL CUTS STD RATES TO RE 1/MIN : It's bonanza for BSNL subscribers. The telco's users in urban areas will be able to make STD calls at just Re one per minute, a reduction of 60% over the current charge of Rs 2.40 per minute.

INDUSTRIAL OUTPUT UP 9.7% :   The Indian economy is on a roll. Manufacturing output turned in a vigorous growth of 11.1% during August, bringing industrial growth for the first five months of the current fiscal to 10.6%.

BPO REDUX: LARGEST US UNION CAN'T SWALLOW MEDICAL TOURISM :   OPPOSITION to foreign companies outsourcing to India has now spilled over to medical tourism. The United Steel Workers' (USW) union — the biggest US industrial worker association

INDIA INC FOREIGN M&AS TREBLE TO $2.6B :  THE robust global stock markets in the past two years have led to a spurt in M&A activity across the world with cross-border M&A rising by 88% in 2005 to $716 billion. The number of deals rose by 20% to 6,134.

DIRECT TAX KITTY SWELLS 40%, NEARS RS 90 K CR :   This Diwali, finance minister P Chidambaram will wear a bigger smile. Riding on the back of an 8%-plus GDP growth, direct tax collections — growing at a heady 40% — are set to cross Rs 90,000 crore by this weekend .

UK'S ALPHA AMONG 896CR FDI CLEARED :   FINANCE minister P Chidambaram has approved 22 foreign direct investment (FDI) proposals totalling Rs 896 crore, including major investments by Singapore-based Solitaire Capital and UK-based Alpha Airports. Solitaire's proposal worth Rs 511 crore relates to the real estate sector

SANTOSH SINGH FOUND GUILTY IN MATTOO MURDER CASE :   Santosh Kumar Singh, prime accused in the Priyadarshini Mattoo murder case, has been found guilty by the Delhi high court. He could face a death sentence or life imprisonment, to be announced on October 30.

BOMBAY HC HALTS LAND GRAB BY LOCAL SELF-GOVTS :    IN A major decision that could halt the great land grab by politicians in the state, the Bombay High Court has ended the rule of local self-governments or municipal corporations in notified industrial areas with immediate effect

FDI FINE, BUT LOOK WHO'S FUNDING :    THE NATIONAL Security Council has sought stricter norms in order to address security concerns related to FDI investments. A discussion paper — potential threats to India's national security from FDI — which is being currently discussed by a group of secretaries has said that investments from entities owned by or linked to inimical elements could be prejudicial to Indian interests. .

INDIA INC BOTTOM LINE HITS THE ROOF :   INDIA Inc is on a roll. Around 450 companies, which have declared results for Q2 ended September ‘06, have registered combined growth rates of 30% in net sales and 36% in net profit, compared to 19% each for Q2 FY06.

RBI AGAIN RUNS REALTY CHECK :  AWEEK before the credit policy, RBI has said that house prices have moved up more than real income and could impact lending banks. Banks could be hit if the borrowers fail to service the loan.

FIRE AT RIL REFINERY TO HIT LPG, FUEL OUTPUT :   OPERATIONS at Reliance Industries' Jamnagar refinery were disrupted on Wednesday after a major fire broke out at the processing units of the facility. The fire, which broke out at around 10:40 am, has caused substantial damage to the vacuum gas oil (VGO) hydrotreater unit of the refinery, impacting the production of high-grade auto fuel.

GUARDIAN WINS, CHIDAMBARAM CLEARS 100% ARM :   THE air has finally been cleared over Guardian's proposal to set up a fully-owned venture in India. Finance minister P Chidambaram is understood to have given the final goahead to the company to set up a subsidiary without the requisite no objection certificate from its JV partner Modi Rubber (MRL).

NEW AIR NORMS SPARE FAT CATS A VISIT TO I-T OFFICE :   DID you wonder that purchasing property worth over Rs 30 lakh, or a credit card bill of more than Rs 2 lakh in a year would mean a mandatory visit to the incometax office?

EXCISE SLEUTHS SPOT RS 1,000-CR EVASION :  Companies including LG Electronics, Skoda Auto India and Sahara India Financial Corporation have been booked by the directorate of central excise intelligence (DGCEI) for tax evasion. In a crackdown on tax evaders in the first half of this fiscal, DGCEI has detected evasion of Rs 1,042.07 crore and booked 442 cases.

BUILDERS FINALLY GET HEMMED IN BY DEADLINES :  THE government has made it mandatory for developers to adhere to deadlines on finished housing properties. Property developers will now have to refund the entire advance amount with interest if they fail to deliver flats to customers in the agreed time-frame

FIIS WON'T BE ABLE TO BOARD THE BOURSES :  Foreign portfolio investors are set to be barred from being represented on stock exchange boards in the upcoming policy on overseas investment in this financial segment.

ELKEM'S CASH & CARRY TRADE IN GOVT CROSSHAIRS :      ELKEM, among the largest Norwegian firms, has come under government scrutiny for breach of FDI norms — the commerce & industry ministry has recommended action against the company for violations under FEMA provisions. Part of Norway's $8.5-billion Orkla Group, Elkem has been allegedly undertaking cash and carry wholesale trading activities in India without permission.

MONEY LAUNDERING ACT TO BE AMENDED :    Indian banks can now look forward to easy entry into the US financial market. The government has decided to move amendments to the Prevention of Money Laundering (PML) Act

NEW DELHI SEEKS REVIEW OF TAX PACT WITH MAURITIUS :   INDIA wants Mauritius to do more to prevent the abuse of the double taxation avoidance treaty (DTAT). New Delhi will push for a wholesale review of the treaty, so that the misuse of the provisions are tightened in the treaty itself.

BENCH LIVID AT MISUSE OF NINTH SCHEDULE :   THE political class' itch to duck the judicial process by putting “favourite legislations” within the Ninth Schedule came in for a sharp attack from the Supreme Court on Monday. Chiding the government, the apex court said that instead of correcting the defects of invalid laws, the tendency now was to extend the laws under the “protected umbrella” of the Ninth Schedule of the Constitution.

BUSINESS NEWS

TATA STEEL MAKES $8-BILLION CASH OFFER FOR ALL OF CORUS : TATA Steel took a giant step towards its global ambitions when it formally announced on Tuesday its move to acquire Corus — the world's seventhlargest steel producer and almost six times its size. Tata said it will offer 455 pence per share for 100% stake in Corus. While the cash offer values the deal at about $8 billion, Tata Steel has put the enterprise value of the British steel maker at $10 billion.The offer,

GOLDMAN SACHS MAY PUT RS 1,000 CR IN DLF: GOLDMAN Sachs is likely to ink a deal with real estate major DLF for investing close to Rs 1,000 crore in the company. According to sources, Goldman Sachs is bullish on investing in some of the company's ongoing projects, including one being developed in Delhi in a joint venture with Indiabulls.

STARBUCKS TO ENTER INDIA STORY IN COLLABORATION WITH BIYANI : The world's largest coffee chain, Starbucks, is finally here. The Seattle-based iconic brand is learnt to have signed up with Kishore Biyani's Planet Retail Holdings (formerly Planet Sports) to enter India, putting to rest speculations about its partner in the country.

VIDEOCON ACQUIRES DAEWOO ELECTRONICS: The consortium led by Videocon Industries has signed a preliminary agreement to acquire South Korea's beleaguered Daewoo Electronics for 700 billion won or about $729 million.

BAR ON STAKE SALE BY VCS & PES : The Securities Exchange Board of India (Sebi) has put the venture capital and private equity (PE) firms in a bind by removing the provision that allowed them to sell stake in a company after its initial public offering. Now, only those firms that have invested more than a year before the company goes public can sell their shares on listing.

HONDA GETS NOC FOR HOLDING FIRM : The Munjals of Hero Honda have given a no-objection certificate (NOC) to Japanese joint venture partner Honda for its proposed new holding company in India — Honda Motor India. This puts to rest speculation over whether Honda's application to the Foreign Investment Promotion Board (FIPB) for the new subsidiary has got entangled in the Press Note 1 controversy.

NOW, TATAS CHECK IN AT RITZ-CARLTON BOSTON :  IN A deal that will help expand its presence in the US market, Indian Hotels Co (IHCL) — which runs hotels and resorts under the Tatas' Taj brand — is buying the Boston-based Ritz-Carlton hotel for $170 million.

NOOYI MOST POWERFUL BIZ WOMAN :   IT'S annus mirabilis for Indra Krishnamurthy Nooyi. First came the big announcement of her elevation to the top job at PepsiCo. Then she topped Forbes list of most powerful women, followed by the prestigious Economic Times Global Indian Of The Year award. And now, Nooyi's topped Fortune's 50 Most Powerful Women In Business list.

NYSE STAKES CLAIM TO 26% HOLDING IN BSE : THE New York Stock Exchange (NYSE) is in advanced negotiations to pick up a strategic equity stake in the Bombay Stock Exchange (BSE). Sources said a team from NYSE was recently in the city to talk with the BSE brass. The move, if successful, could lead to a sharp rise in listed Indian firms and an improved access to modern trading processes.

TDS NORMS SET TO BE TIGHTENED :  THE income-tax department is all set to tighten norms for deducting tax at source. The department, which had found laxity in filing of TDS returns, is moving to tighten the loopholes

GOVT TO DELETE 1.5 LAKH DEFAULTING COS FROM RECORDS :  Corporate India is set to shrink in number by a fifth in six months. Company affairs minister Prem Chand Gupta has asked the registrar of companies (RoC) to strike off the names of over 1.5 lakh defaulting companies from official records.

TATAS, CORUS REACH PACT FOR $9-B DEAL, FORMAL BID SOON :    TATA Steel's talks with the Corus management, ahead of its possible bid for the British steel maker, have been successful, people close to the development said. This might pave way for the Indian steel major to follow up with a formal offer valuing Corus at about $9 billion. A formal announcement is expected by the end of this month.

JET AIRWAYS LOSS WIDENS IN Q2 TO RS 55.1 CR : AIRLINE industry market leader Jet Airways has been hit yet again by falling yields and lower load factors. The company has posted a loss of Rs 55.1 crore for the quarter ended September, against a loss of Rs 45 crore in the previous quarter and a net profit of Rs 68.6 crore in the same quarter last year.

COKE CLOCKS A FROTHY 4% RISE IN VOLUMES :   COCA-Cola India has reported a 4% increase in unit case volume in the third quarter ended September 30, cycling a decline of 22% in the previous-year quarter, according to the quarterly results announced by The Coca-Cola Company in Atlanta last week.

FENDI TO OPEN SHOP IN INDIA : To whet the appetite of the fashion-conscious elite in India, ultra-premium luxury brand Fendi is landing here. The French boutique brand is setting up a joint venture through the recently introduced window for FDI in single-brand retail.

CHRYSCAPITAL PUTS RS 550 CR FOR 5% IN IDEA : PRIVATE equity (PE) major ChrysCapital has reportedly invested around Rs 500-550 crore in Idea Cellular. With Idea Cellular's valuation pegged at around Rs 10,000-12,000 crore, ChrysCapital's stake is expected to be around 4-5%.

BHARTI NET UP RECORD 79% AT RS 934 CR :   Riding high on a near doubling of subscriber base, Bharti Airtel, the country's largest mobile operator, on Friday announced a record 79% growth in net profit to Rs 934 crore for the quarter ended September, 2006, from Rs 521 crore in the corresponding period of the previous year.

CVC BAGS RS 801 CR FROM PART OF SUZLON :  VENTURE funds and private equity (PE) firms often dream of waking up in the morning to a multi-bagger — an investment that delivers returns that are many times the invested money.

RELIANCE COMM POSTS RS 702-CRORE PROFIT IN Q2 :  Reliance Communications (RCL), the largest CDMA-based telecom company, on Monday reported a net profit of Rs 702 crore during the September 30 quarter against a loss of Rs 19 crore in the year-ago period.

AIRBUS TO PAY RS 100 CRORE TO KINGFISHER FOR A380 DELAY :    European aircraft manufacturer Airbus has agreed to pay Kingfisher Airlines over Rs 100 crore as compensation for the delayed deliveries of the five A380 aircraft ordered by the airline.

NEW DEVELOPMENTS AND JOINT VENTURES

PROVIDENCE TO PICK 25% IN IDEA FOR RS 4,000 CRORE : Private equity firm Providence Equity Partners is close to picking up a stake in AV Birlaowned Idea Cellular. According to sources, Providence is likely to buy 25% share in the Pune-based telco.

RELIANCE MAKES ENTRY INTO RETAIL : RELIANCE Retail (RRL), the wholly owned subsidiary of Mukesh Ambani-led Reliance Industries (RIL) will open its first retail showroom in Hyderabad on November 3 with a pilot store called 'Reliance Fresh'. The company will also introduce its own brand Reliance Select, for packed staple foods. These would be followed by general merchandise and specialty products.

WHO SAID IT'S AN UNLUCKY NUMBER! : A sense of having been left out, rather than of euphoria, is what one gets on the street as the 30-share Sensex crossed yet another milestone — the psychological 13,000-mark — on Monday