Biznews July 1 To July 15

BIZ NEWS for the period July 1st to July 15th 2007 BIZ VOCAB - Special Drawing Rights (SDR) An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. SDRs are defined in terms of a basket of major currencies used in international trade and finance. At present, the currencies in the basket are the euro, the pound sterling, the Japanese yen and the United States dollar. Before the introduction of the euro in 1999, the Deutsche mark and the French franc were included in the basket. The amounts of each currency making up one SDR are chosen in accordance with the relative importance of the currency in international trade and finance. The determination of the currencies in the SDR basket and their amounts is made by the IMF Executive Board every five years. Presently the weights are – USD 44%, Euro 34%, Yen 11% and Pound 11% SDRs basically were created to replace gold in large international transactions. Being that under a strict (international) gold standard, the quantity of gold worldwide is relatively fixed, and the economies of all participating IMF members as an aggregate is growing, a need arose to increase the supply of the basic unit or standard proprotionately. Thus SDRs, or "paper gold", are credits that nations with balance of trade surpluses can 'draw' upon nations with balance of trade deficits.

Deccan to allot over 3.52 cr shares to Kingfisher Radio 2 July, 2007 Deccan Aviation Ltd said it was allotting over 3.52 crore shares at Rs 155 apiece to Kingfisher Radio Ltd, a wholly-owned subsidiary of United Breweries Holding Ltd for about Rs 546 crore. Accordingly, the paid up capital of the company has increased to Rs 135.47 crore, comprising more than 13.54 crore equity shares of Rs 10 each. Earlier in June, Vijay Mallya-led UB Group had announced acquisition of 26 per cent in Deccan

Aviation for Rs 546 crore and had later also made an open offer to the shareholders to buy an additional 20 per cent stake for about Rs 420 crore.

ICICI okays $200-m credit line to Videocon 2 July, 2007 ICICI Bank has approved a $200-million (Rs 800 crore) credit line to the Videocon Group to acquire consumer electronic component firms in overseas markets. This apart, Videocon has lined up an additional $200 million warchest for global acquisitions. The group’s fresh bid for global acquisitions has been induced by its recent failure to acquire a 97.6% stake in Daewoo Electronics at $730 million. Elaborating on his acquisition plan, Mr Dhoot said, “We would like to acquire companies which are into picture tube and LCD panels. Our aim is to create a components hub for international markets. At present, we export components worth Rs 1,200 crore. We plan to export $2 billion of components over the next five years.” Videocon is also in talks with Sweden’s AB Electrolux-the erstwhile parent company of Electrolux Kelvinator (EKL) to supply components for refrigerators and washing machines at their global facilities. Back in 2005, Videocon had acquired AB Electrolux’s 91.85% stake in its then loss-making India subsidiary, EKL, for some Rs 331 crore. The size of the global consumer electronics component market is 140 million units. In value terms, it is close to $100 billion. “The market is expected to scale the $500-billion mark within five years and India can emerge as a destination for global sourcing”.

Glenmark Pharma gets US FDA nod for Terbinafine Hydrochloride tablets 3 July, 2007 Glenmark Pharmaceuticals has received a final approval from the U.S. Food and Drug Administration (USFDA) for its Abbreviated New Drug Applications (ANDAs) for Terbinafine Hydrochloride tablets, 250 mg (base). It is the AB-rated generic equivalent of Novartis`s anti-fungal Lamisil tablets with annual sales of over USD 650 million (IMS-Dec 2006) in the US. In addition to this, GPI now has a portfolio of 19 generic products for the US market and over 35 ANDAs undergoing US FDA approval process or launch.

Bharti Airtel, Nokia Siemens sign MoU for network expansion 3 July, 2007 Bharti Airtel and Nokia Siemens Networks have signed a MoU for a $900 million end to end network expansion contract across Airtel’s mobile, fixed and intelligent network platforms. Ø Nokia Siemens Networks will expand Airtel’s GSM network in eight circles Ø Among the largest GSM expansion deals in India Ø Largest Next Generation Network (NGN) deal in the country for 1.8 million subscriber lines for National Long Distance and International Long Distance Network making Nokia Siemens Networks the leading supplier of fixed line equipment to Airtel Ø Major expansion of International Calling Card prepaid service adding 4.5 million new users capacity to Airtel network

Kraft to acquire Danone's biscuit biz for $7.2 bn 4 July, 2007 Kraft Foods has announced it has offered $7.2 billion US to acquire the biscuit and cereal division of French food company Groupe Danone SA. Danone CEO Franck Riboud says the sale would allow Danone to concentrate on its dairy products and water divisions. The deal could be concluded in the last quarter of 2007 and is subject to regulator approval.

DLF lists at 10.86% premium on the BSE 5 July, 2007 Equity shares of realty major DLF got listed on the bourses today. The scrip opened with a premium of 10.86%, at Rs 582.00 over the issue price of Rs 525.00. It hit a high of Rs 705.00 and is currently trading at Rs 590.05 (July 11). DLF had come out with an initial public offering (IPO) of 175 million shares, of face value of Rs 2.00 each, at a price band of Rs 500-550 a share. The company plans to deploy the issue proceeds to finance acquisition of land and development rights, the construction and development costs for some of the existing projects and repay certain loans.

Bajaj Auto forms five business units 7 July, 2007 Bajaj Auto, unveiled the company’s new structure with five broad strategic units under different heads.

Ø Three separate companies looking after automobile, finance and new businesses. Ø Two new ones, Bajaj Holdings and Investment; and Bajaj Finserv. Ø The two-wheeler businesses will be transferred to Bajaj Holdings, which will be renamed as `Bajaj Auto`. Ø The company will appoint three chief executive officers for the three units while the other two will be run under their existing heads.

RBI no to `credit wrap` for core sector projects 9 July, 2007 The Reserve Bank of India (RBI) has opposed Finance Minister P Chidambaram’s budget proposal to use part of the foreign exchange reserves of over $200 billion to provide “credit wrap,” or credit guarantee insurance, for financing infrastructure projects. The RBI held that the credit wrap proposal did not conform to Section 17 (12B) of the Reserve Bank of India Act, 1934. The clause concerned permits the RBI to give loans and advances in foreign currencies to financial institutions to finance international trade and import of capital goods but not for providing credit insurance to companies.

ONGC scouts for overseas partner for AP project 9 July 2007 Oil and Natural Gas Corporation (ONGC) is scouting for overseas investors for its Rs 22 billion refinery and petrochemicals project at Kakinada in Andhra Pradesh. ONGC plans to set up a 15 million ton refinery to export petroleum products, including gasoline, diesel and naphtha. The company is in talks with the US-based and Asian oil companies for better access to crude supplies and export markets. The Andhra project will be built by refining unit Mangalore Refinery & Petrochemicals. Funds will be raised through selling shares.

US Co. sues Cadila Healthcare over patent row 10 July 2007 US based, Three Rivers Pharmaceuticals, has sued Cadila Healthcare and its US subsidiary Zydus Pharmaceuticals (USA) for infringing on the former`s patent on a process for manufacturing an anti-viral drug Ribavirin used in the treatment of Hepatitis C. The US drugmaker alleged that Zydus Cadila infringed on its patent on an improved process for manufacturing Ribavirin pellets using wet granulation. The suit was filed in the district court of Virginia a month ago to prevent Cadila from making,

selling or importing finished dosage forms of Ribavirin in the United States.

GMR Infra consortium bags contract to develop airport at Istanbul 10 July 2007 Bangalore-based GMR Infrastructure announced that the company bagged the build-operatetransfer (BOT) project for Sabiha Gokeen International Airport (SGA) at Istanbul, Turkey, in consortium with Limak lnsaat Sanayi San Ve Tic A S Turkey and Malaysia Airports Holdings Berhad, amidst intense competition from global firms. The company and Limak lnsaat Sanayi San Ve Tic A S Turkey hold 40% stake each in the said consortium, while Malaysia Airports Holdings Berhad holds 20% stake. Note – 1. This BOT project involves construction of a new international airport terminal with 10 million capacity in 30 months besides managing the existing domestic and international terminals (with a passenger capacity of 35 million per annum). 2. The current international terminal will be converted to an all domestic terminal, subsequent to construction of the new terminal. The term of BOT concession would be for 20 years, while the new international terminal will have to be constructed within a period of 30 months from the transfer of the facility.

Bharti to enter USD 1.5 bn deal with Ericsson 10 July 2007 Bharti Airtel, India`s largest mobile operator, is all set to enter into an USD 1.5 billion contract with Ericsson, reports Economic Times. This will be Bharti`s second billion dollar deal with Ericsson in less than a year. The company is in negotiation with Ericsson, and the formal announcement will be made once the agreement is completed. • The agreement will extend over a period of three years, wherein the Swedish telecom major Ericsson, will carry out the designing, planning, supply, installation, commissioning and upgrading of Airtel`s network in 15 telecom circles. • Further, the company will take care of implementation and project management, handling of local logistics and materials as well as system integration for the base station sites, in the 15 circles. • Bharti Airtel will own all networks built by Ericsson in these circles. Note – 1. The contract will help Bharti to increase its focus and use its resources and expertise in its core areas of product innovation, value added services, marketing, branding & pricing, while utilizing Ericsson`s expertise in network management. 2. This will also be Bharti`s fourth major outsourcing deal with Ericsson. 3. Bharti signed a similar agreement with Ericsson for more than USD 400 million to build and manage networks across 13 circles in February 2004, followed by a USD 250 million deal in June 2005 for expanding its GSM/GPRS network in 15 circles.

Tata Motors to set up plant in South Africa 11 July 2007 Tata Motors is planning to erect an assembly plant for its vehicles in South Africa, reports Economic Times. The above stated plan will yield the desired results, on receiving the South African government`s approval for the Moto-Industry Development Program, which is expected to be cleared, by October 2007. Tata Motors has established its presence in South Africa. The new plant will add more value to the services provided by the company, in terms of low shipping cost, better logistics and customer services. South African market is also the largest export market for the company.

ADAG to raise its stake by 5% in REL 11 July 2007 Anil Dhirubhai Ambani Group (ADAG) is planning to increase its stake in Reliance Energy by 5% reports Economic Times. • ADAG will raise its stake through progressive acquisitions in the current financial year. • With this acquisition, the promoters stake will rise to about 40% form the current level of 34.45%. • REL plans to increase promoters stake to 50% in the next couple of years.

Videocon plans listing in US 11 July 2007 Videocon Industries, the USD 2 billion Indian durable major is planning to list on the US market in the next two years, reports Business Standard. It is also planning to launch its products in US. Moving ahead with its plans, the company has already started investing in Mexico, which offers export opportunities to the US. Videocon entered the Mexican market by acquiring French electronics major Thomson`s, colour picture manufacturing units for USD 291 million. It is expected that the company is likely to follow the same strategy for the US markets. Recently, the company entered into a joint venture with Verizon Wireless, a US-based telecom firm, so as to venture into the long distance telephony service. Videocon having drawn plans to raise funds in the US market, is subsequently foraying into the telecom business and other businesses like DTH in India.

TCS, Qualcomm may join hands to work on wireless technology 12 July 2007 India`s leading software exporter Tata Consultancy Services (TCS) and US-based wireless communications developer Qualcomm are in talks to work together on wireless communications technology and platforms, reports Business Standard. Both the companies will jointly work on improving wireless communication efficiencies and cost reduction of mobile telephony operations. The companies will primarily develop technologies to improve wireless penetration by using a lower amount of spectrum.

Government mulls raising cap on FIIs investment in debt market 12 July 2007 The government is considering a proposal to hike the ceiling for investments by foreign institutional investors (FIIs) in the Indian debt market • At present, the said cap is USD 4.7 billion, of which USD 3.2 billion is in government securities and USD 1.5 billion in corporate debt. • The proposal has been taken for discussion, taking into account immediate huge financing needs for infrastructure and to deepen and widen the debt market which will lead to an efficient, integrated financial sector. • The Deepak Parekh committee on infrastructure recommends the lifting of the cap on FII investments to deepen the secondary market for bonds as debt is the preferred way of financing for infrastructure. • There is also an urgent need to develop India`s debt market, complete with vibrant markets in credit, currency and interest rate derivatives. Note – 1. Such an upward revision of the investment cap would generate some interest among foreign investors, holding a view that the government is in process of creating a secondary market for corporate debt. 2. In spite of a strong view for the same, such proposal will require the concurrence of the Reserve Bank, which generally tends to be relatively conservative.

Forex Reserves touch USD 214.825 13 July 2007 Forex reserves surged by USD 1.349 million to touch USD 214.83 billion as on Jul. 6, primarily on the back of jump in foreign currency and assets collections, week on week basis. As per the weekly statistical supplement of the RBI released on Jul. 13, 2007, foreign currency and assets reached USD 207.58 billion on the back of USD 1.471 billion rise. During the same period, • Reserve position in IMF improved USD 2 million to USD 462 million. • Gold reserves dipped USD 124 million to USD 6.79 billion.

•

The special drawing rights (SDRs) however remained unchanged USD 1 million during the same period.

Idea, IBM ink 10-year IT infra deal 13 July 2007 Idea Cellular, a leading Indian GSM mobile services provider, and International Business Machines today announced a 10-year business processes and IT infrastructure deal. • The pact is designed on an innovative risk - reward revenue sharing model. It covers all of Idea`s existing operations and potential new additions. • The 10 year pact, depending upon Idea`s business revenues and circle expansion, would size around USD 600 million to USD 800 million. • The pact with IBM will enable Idea to meet the needs of its 14 million current subscribers and future growth. This will be through supporting end-to-end transformation of business critical processes including billing, revenue assurance, and credit collection, subscriber management, business intelligence, fraud management, customer relationship management, e-billing and payment , and customer self care.

Allahabad Bank ties up with Franklin Templeton for MF distribution 13 July 2007 Allahabad Bank announced that the bank tied-up with Franklin Templeton Asset Management (India) for distribution of their products through bank`s branches to augment the fee based income and to give customers a wide range of investment avenues for their surplus fund. The bank is already having distribution tie-ups with UTI Asset Management Co., Principal PNB Asset Management Co., Kotak Mahindra Asset Management Co. and Reliance Capital Asset Management for distribution of their products through the bank`s branches.

RIL gets nod from center for Navi Mumbai SEZ 13 July 2007 Reliance Industries' 1,250-hectare multi-product SEZ at Navi Mumbai received Government clearance on July 12, 2007 • The government body cleared 28 fresh SEZ proposals, including the Mukesh Ambani promoted Navi Mumbai SEZ, taking the total number of approvals to over 500. • RIL’s SEZ got approval after the center received a no- objection from the Maharashtra government. • Navi Mumbai SEZ will set up three zones covering a total area of 345 hectares, which will include biotechnology, light engineering and pharmaceuticals zones.

Articles: Oil Hits 11-Month High Brent crude oil continued its climb towards $78, setting another fresh 11 month high of $77.68, as rising equity markets boosted prices already up on supply threats and an influx of speculative buyers. Brent prices, which have gained around 8 pct in the last two weeks, are now within sight of the all-time high of $78.65 struck last August. Concerns over tight global crude supply have propelled the market recently, attracting fund speculators, pushing prices even higher. Crude-oil futures also climbed to just below $74 a barrel, settling at an 11-month high amid concerns about the reliability of North Sea oil production.

Reasons 1. U.S. refineries' struggle to increase gasoline stockpiles as the U.S. entered peak summer driving demand. 2. Oil-supply concerns, particularly from militant attacks on oil facilities in Nigeria, and tensions over Iran's nuclear program also are helping drive prices higher. 3. Traders have been watching refinery utilization, which remains below the average of 94% of operating capacity for this time of year. 4. The Paris-based International Energy Agency reported that 2008 world oil demand is expected to rise 2.5%, or 2.2 million barrels a day, amid expectations of a cooler winter in the U.S. and Europe and strong industrial demand in China and the Middle East.

SENSEX leaves the 15,000 mark behind Background This has been the longest Bull Run in the history of the Indian stock market. The 30-share Sensex hit a new peak of 15,330.73. The 50-share Nifty saw a new peak of 4,513.90. The combined traded turnover in the cash segment on BSE and NSE was Rs. 21,635 crore on July 13th 2007, the second highest till date. Reasons The market returns have been mainly led by high growth in corporate earnings. The Sensex earnings have witnessed a CAGR of 18% in the last 15 years. The earnings are expected to grow at 17-26% even with a GDP growth rate of 7-8%. The investors’ confidence in India has increased due to the qualitative changes in the Indian economy with higher RoEs, rising free cash flows and healthier balance sheets. Today, India has a 17% share in Asia’s GDP growth 15% share in Asia’s GDP itself, and 12% share in Asia’s market capitalisation. Initial public offers (IPOs) have attracted the retail investors the most in recent times given the phenomenal returns they have managed. Around 24 issues have outperformed the market in the last one year and nearly half are trading above their issue prices. Future expectations There is a high probability that the Sensex will continue to rise in the current week due to high liquidity and controlled inflation. India is one of the most diversified markets among the emerging markets due to the lower stock and sector concentration. India has less than 20% weight age for the top stock and sector in their markets as compared to more than 30% in Brazil and Russia. Less than 5% of the financial savings are invested in equities which is bound to change and will lead to an eventual re-rating of the Indian markets. Though the Nifty series have opened with deep discount at the beginning of each month, the market has always been able to pull itself up. According to Morgan Stanley the Sensex will cross the 50,000 mark by 2020. Taking GDP growth of 8% and inflation of 5-6 % and assuming the Sensex stocks grow by 17-18% till 2020, it will work out to be more than what Morgan Stanley has predicted. According to some analysts the forward P-E for Sensex is between 17 and 18, the same level it was valued at in January. The Sensex is expected to add another 10-12% in the next eight to ten months.