RIL in race for HUL Brookefields
Reliance Industries and Nitesh Estates, a Bangalore-based real estate developer, are in the shortlist to buy Hindustan Unilever's (HUL) Brookefields property in Bangalore.
The value of the bids, which were opened today, is estimated to be around Rs 350-420 crore. Brookefields is a 28-acre property located in the Whitefield area in Bangalore and was formerly Brooke Bond's corporate headquarters.
Other real estate players such as Hiranandani and DLF were reportedly in the fray for the property.
The final bidding is expected to take place in a week. According to sources close to the development, HUL is expecting Rs 15-20 crore per acre.
The company has appointed international property consultants Cushman & Wakefield to value the property and finalise the deal.
Despite Bangalore's falling realty prices and a high asking price, bids by the interested parties are said to be around Rs 12.50-15 crore per acre.
An HUL spokesperson said that process of bidding is underway but details of the front-runners are pure speculation. Reliance is actively scouting for prime property across the country for expanding its retail operations.
FMCG major HUL has been unlocking the value of its real estate assets across the country.
Apart from Brookefields, the company has also put other Bangalore real estate like a few apartments it owns on MG road and Airport road and other CBD locations on the bidders block.
Another battle awaits Tatas
Tata Motors may get into a competitive auction process to get majority control in Jaguar and Land Rover, which have been put on the block by their owner, Ford Motor.
Sources said Ford was likely to shortlist two preferred bidders next month and go for a competitive auction to shorten an otherwise long-drawn bidding process.
In such a case, Tata Motors will be the second company from the Tata stable to participate in an auction for an overseas acquisition. Tata Steel, the steel company of the Tata group, acquired Anglo-Dutch steel company Corus by outbidding its rival suitor Brazilian firm CSN, in a high voltage auction.
Apart from Tata Motors, a handful of private equity players, including TPG, Cerberus, One Equity Partners and Ripplewood, are in the race for acquisition of the two luxury brands. They are in various processes of due diligence.
However, Ford so far has not disclosed the identity of the companies that have expressed interest in Jaguar and Land Rover by the stipulated date of July 19. It said it was impressed by the "strength and quality" of the interested parties. Sources said the valuation of the two brands — said to be $2-3 billion — might be affected by the uncertainty over how the European Union would apply new regulations on carbon-dioxide emissions. The new norms are scheduled to take effect in 2012. Ford needs money to fund its restructuring in North America.
Ford may retain a minority stake in the units of Jaguar and Land Rover to ensure security of engines and parts supplies. The company may also provide engineering support to the successful acquirer of these brands.
The bidders, particularly the private equity players, want Ford to keep the stake in the range of 30 to 50 per cent in the two units so that the supply of parts is guaranteed. Ford's production links with Land Rover and Jaguar border on the inseparable.
Ford retained a 15 per cent stake in Aston Martin when it was sold several months ago. It had bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.73 billion in 2000.
Steve & Barry's likely to set up shop in India
The entry of the world's largest retailer, Wal-Mart, into India seems to be paving the way for others to follow suit. Steve & Barry's, one of the fastest-growing retail chains in the US, is planning to set up shops in India and China.
Sources said Steve & Barry's had started putting in place a blueprint for the foray, with an initial investment of Rs 500 crore, which is likely to be scaled up to Rs 2,000 crore.
Avirat Sonpal, managing director, Unisource Group, and vice-president, Steve & Barry's, in an email reply said: "Our feasibility studies are under way, but we have no firm plans to enter India and China yet.'' The company is looking at forming a core team that will focus on India and China. The first store is expected to be operational by late 2008 or early 2009.
Interestingly, Unisource Group, the global procurement and solutions affiliate for Steve & Barry's retail brand, Steve & Barry's University Sportswear, has its headquarters in Mumbai and has been functional for the last six years in the country. Unisource procured nearly 25 per cent of its products, mainly knit and woven, from India and this could give significant synergies for the US retailer once it set up shops in the country, the sources said.
"The Indian retail industry is extremely robust and is currently on a growth stage. The number of Indian companies investing in the industry and the attention it is receiving from foreign investors are the proof. However, FDI regulations are still not clear," said Sonpal.
Started by childhood friends Steve and Barry to sell screen-printing T-shirts for $1 at flea markets across Long Island and New Jersey, Steve & Barry's currently has about 220 stores and is looking at adding 70 more this financial year. Typically, a Steve & Barry's store ranges from 50,000 to 100,000 sq ft. Perceived as a value-for-money brand, the prime focus of this brand is the youth.
Started in 2001, Unisource Group, looks after the support, supply chain and retail operation solutions of its affiliate brand. It sources nearly 25 per cent of its products from India, 20 per cent from China and the rest from Pakistan, Bangladesh and Sri Lanka.
According to consultancy firm KSA Technopak, the retail apparel market is Rs 1 lakh crore and the organised retail market is 20 per cent of that. The major international apparel and accessory retailers who have entered Indian market include Diesel, Tommy Hilfiger, Esprit, Louis Vuitton, FCUK, Lee Cooper, Escada and Dunhill, which have either entered through the franchise route or under the single-brand retailing route.
FM to exporters: Get used to strong rupee
Finance Minister P Chidambaram has ruled out any more sops for the exporters hit hard by the rising rupee asking them to get used to stronger currency as dollar inflows would continue to grow.
The government had announced a Rs 1,400-crore package in July for exporters. "We have taken note of the difficulties faced by the exporters and we have given them a package. But we hope that they will quickly adjust to the new level of rupee," Finance Minister P Chidambaram told PTI.
Exporters are demanding more sops to deal with the rupee appreciation against the US dollar, complaining that their realisations have gone down due to the rupee effect and the prices they are quoting for new orders are turning away customers.
The rupee has appreciated about 9 per cent since March. From the lows of over Rs 45 in October-November last year, it is now ruling slightly above Rs 40.
The commerce and industry minister Kamal Nath also supported the exporters yesterday stating that the government was thinking of a new package for exporters. "The appreciating rupee has impacted exports," he said.
However, the Finance Minister said there could not be a situation where the economy grows but rupee remains weak. Exporters should take this into account while booking new orders, he added.
"When they book the new orders, they should factor these things into account. You cannot say the economy should grow but the rupee should not become strong," he said.
About special economic zones, which were primarily created to boost exports by providing units with world class infrastructure, Chidambaram said he was against proliferation of these zones.
"My views are known. I am not against SEZs. I am concerned about the proliferation of SEZs. But this is the decision of the government and I am bound by the decision of the government," he said.
Since the SEZ Act was operationalised last year, about 500 SEZs have been approved by the government. The finance ministry has been opposed to a large scale approval of SEZs because it fears loss of tax revenues as units in the zones.
Agra's footwear makers feel pinch of weak $
There was a time when the footwear exporters of Agra used to rue the fact that their export market was predominantly Europe where they could tot up only modest gains.
On the other hand, exporters sending their wares primarily to the US used to make a killing because the rupee was down against the dollar.
For the exporters whose main market is Europe, the current rupee rally against the dollar is therefore not a life-threatening event. Approximately 65 per cent of their exports are still Europe-bound.
Therefore only that component of their business that is in dollars — around 35 per cent — has been hit by the appreciating rupee. But the Agra exporters are not necessarily sanguine about this.
There are between 250 and 350 footwear exporting houses in the city of which 150 use a semi-mechanised process for manufacturing. Over the past two years, most of the factories have been running at 100 per cent capacity. Exporters are now wondering if this can be sustained.
"We had to refuse 30 per cent of the orders we received this year. Because of rupee appreciation, we have had to factor in at least a 10 per cent to 12 per cent price increase," said Amit Kumar, deputy general manager, Superhouse — a footwear export unit.
Kumar has several problems on his hands. Not only is his unit too efficient, but one of his most important clients is Carrefour — a European company that invoices in dollars. "It is a multinational company and sources from countries like China as well. Hence they do their invoicing in dollars. The weakening dollar has wiped out margins in that segment," he says.
"In the current circumstances, the industry is doing well in terms of volumes. But bottom lines have taken a hit, which is between 8 per cent and 10 per cent," says SP Raturi, general manager, Superhouse.
Spiralling input costs are adding to the woes of footwear manufacturers. Over one year, while cow hide has become 5-7 per cent costlier, buffalo leather is 10 per cent more expensive and synthetic sole material is up 5 per cent.
Small exporters like Anil Agarwal of Transworld Shoes Corporation have discovered a way out of the problem arising from rupee appreciation.
"We will exit the dollar business. It is only five per cent of my total business. We cannot go on incurring losses," explained Agarwal Kulbir Singh of Roger Exports — one of the key footwear exporter in Agra- has already refused orders worth $ 0.5 million in the first four months of FY 2007-08, but concedes this is not a long term solution.
"The Chinese, who are our major competitors, will not be able to hold on to their price competitiveness. Till then, we must protect our stake in the market so that foreign clients are not lost," he says. Agrawal feels that banning of leather exports could help the footwear industry. "Currently, a lot of leather is being exported to China, which has led to an increase in input costs in India. Banning leather exports will make bring down input costs, giving us relief," he says.
Festivals to light up gold demand
Indian jewellers are expected to start buying gold as demand picks up for auspicious Hindu festivals, after holding off purchases in the past few days during a seasonal lean period.
"This weekend will be very good till Rakhi festivities," said Rahul Gupta, director of P P Jewellers, a leading jewellery chain.
The Rakhi festival, symbolising sisters' bond with their brothers, on Aug. 28 marks the beginning of a series of Hindu religious events culminating in Diwali in November when demand for gold jewellery peaks.
Analysts said gold prices could top $700 an ounce over the next three months from $670 now, but this was unlikely to dent demand in India.
Nearly 80 per cent of India's annual 800 tonnes gold consumption is for jewellery, which is also a form of investment in villages where people do not have easy access to banks.
"Only if gold shoots up, some people may postpone purchases," said Satish Bansal, director of M D Overseas. "Even then, those who have a marriage in the family would still go ahead and buy."
Anindya Banerji, analyst with IL&FS Investsmart India, said conditions were building up for a rally that could see gold prices topping a new high by the year end.
"It will test $700 in the next three months," he said, adding gold could cross the 26-year-high of $732 set on May 12, 2006 by the year-end.
"Gold is expected to strengthen in the next eight to 10 weeks because of financial market turmoil. This always spurs investment demand in gold," he said.
There may also be some selling pressure in the next one or two weeks because several funds are liquidating their assets, Banerji added.
Gold becomes less attractive when interest rates rise, but analysts say at least in India the rates are unlikely to go up immediately which should enhance its value.
Traders said gold jewellery buying during India's festival season would help to fuel the prices, but the major demand would come from investors.
Inflation seen at 4.41% on July 28: Poll
India's wholesale price inflation rate is forecast at 4.41 per cent for the 12 months to July 28, slightly higher than the previous week's annual rate of 4.36 per cent, a Reuters poll of 10 analysts showed on Thursday.
It would be the ninth consecutive week that annual inflation has been below 5 per cent, the central bank's target for the 2007/08 fiscal year, after 10 months above that level.
At its policy review last month, the Reserve Bank of India raised banks' cash reserve ratio to 7.0 per cent from 6.50 per cent in a bid to mop up excess funds that could fuel inflation.
The RBI held its short-term lending rate steady at the review, as expected, after raising it five times since mid-2006. On Wednesday, the RBI raised the ceiling on market stabilisation bonds it can use to absorb funds generated by its currency intervention to Rs 1.5 trillion $37 billion) from Rs 1.1 trillion.
Annual inflation hit 6.69 per cent in late January, its highest in more than two years, but softened as the central bank tightened policy and the government cut duties on a range of items to calm prices. It fell to a 14-month low of 4.03 percent in mid June. The wholesale price index is more closely watched than the consumer price index (CPI) because it includes a higher number of products and is published weekly.
Shop owners, activists protest Wal-Mart
Small shop owners, trade unions and left-wing activists rallied in India's capital on Thursday to protest moves by Wal-Mart and other foreign mega-stores to enter the Indian market.
The protest was relatively small, attracting only a few hundred people, who shouted and burned effigies that represented Wal-Mart and its local partner, Bharti Enterprises.
But the rally underscored how tensions are growing in India as the country's economic boom moves beyond high-technology and other big businesses that employ relatively few people and starts transforming parts of the economy that provide livelihoods for hundreds of millions of people _ and have remained largely unchanged for generations.
Since the start of the year, there have been spasms of violence by farmers angry over losing their land to big industrial projects, and a communist insurgency has continued to intensify in the hinterlands of southern and eastern India.
Organizers of Thursday's protest said it was now the turn of the country's estimated 12 million mom-and-pop shops to be heard, promising more rallies.
``This is just the first days of a long campaign,'' said Dhamendra Kumar of India FDI Watch, a group that's lobbying against the big stores. ``Corporate retail is going to crush the spirit of this country.''
The protesters' slogan, ``Quit Retail,'' is a play on Mohandas Gandhi's famous ``Quit India'' slogan, which rallied the country to independence from Britain 60 years ago this month.
While the rise of a mall culture in India, and the chains and mega-stores that go with it, has been welcomed by many in the country's rising middle class, opposition is growing to foreign chains like Wal-Mart and domestic companies that are setting up similar chains.
``My business is going down. I can't offer discounts the big shops offer. Why is the government not protecting us? We are not fit for other jobs if we lose our businesses,'' said Alok Prakash, who owns a small general store in Mumbai's busy Dadar market.
But highlighting how difficult a task it is to rally opposition to mega-stores, Prakash had not even heard of the protest planned in the evening and a day-long strike called for that city's stores.
Other shop owners in Mumbai said they would only close if their competition did as well _ and that wasn't happening.
``Why will I close when the next shop is open? All my business will go to him. A strike makes sense only if all participate,'' said Prem Patel, who sells grains and other provisions in Mahim, a suburb of Mumbai.
On Monday, Bentonville, Arkansas-based Wal-Mart, signed a deal with Bharti Enterprises to jointly build wholesale outlets that will buy goods from farmers and small manufacturers and sell to retailers.
Critics say the move is a backdoor attempt by Wal-Mart to gain entry to the Indian market, which remains off-limits to stores that sell a variety of different brands. Those that offer only a single brand were allowed in last year.
With its 1.1 billion people and growing middle class, India is considered a rich prize for big retailers. Wal-Mart is not the only foreign chain seeking to tap a market estimated to be worth more than $250 billion and growing at a rate of 20 percent a year.
Global retailers like Carrefour SA of France, Tesco PlC of Britain and Metro AG of Germany have lobbied the Indian government to liberalize rules protecting the retail market.
RBI may opt for another CRR increase: Banker
The Reserve Bank of India may need to raise the cash reserve requirement for banks one more time in 2007 if its currency intervention pushes up surplus cash with banks, a senior official with Centurion Bank said.
In its policy review last month, the central bank raised the cash reserve ratio (CRR) - the percentage of deposits banks need to keep with it in reserve - to 7.0 per cent from 6.5 percent, to drain cash in the banking system.
The measure, which took effect on August 4, drained about 160 billion rupees. It was the fourth such increase since December 2006 to check price pressures and credit growth in Asia's third biggest economy.
"If liquidity continues to come into India, the Reserve Bank of India (RBI) will need to mop up some more liquidity once more this calendar year. You may see another CRR hike," Tarini Vaidya, country treasurer of the privately-owned bank, said.
However, she does not see the latest CRR increase as a rate signal, but rather a cash draining measure.
"A careful reading of this time's monetary policy... the clear interpretation is that it's not a rate-signalling hike, rather a liquidity-mopping rate hike," Vaidya said.
On Wednesday, the RBI raised the ceiling on market stabilisation bonds that it uses to absorb funds generated by its currency intervention to Rs 1.5 trillion from Rs 1.1 trillion.
On Tuesday, the government tightened foreign borrowing rules by local firms to curb the rising inflow of funds, which has led to an aggressive currency intervention by the RBI.
This year, the RBI bought about $23.5 billion in the currency market up to May to keep the rupee down and maintain India's export competitiveness. The partially convertible rupee hit a nine-year peak of 40.20 per dollar last month.
"I am not yet seeing a reversal... a very clear indication of a reversal in the strength of the rupee. It's still very early days," Vaidya said.
Annual inflation, which hit a two-year high of 6.7 per cent in January, has moderated to 4.36 per cent in late July. Credit growth has slowed to about 24 per cent, from near 30 per cent levels earlier this year.
Biocon to market Abraxis' breast cancer drug in India
Biocon Ltd on 9 August announced it has entered into a licensing agreement with US-based Abraxis BioScience Inc for selling Abraxane in India, used in treatment of breast cancer.
"Abraxane adds tremendous value to our innovation led Oncotherapeutics marketing strategy," Biocon Chairman and Managing Director Kiran Mazumdar-Shaw said in a statement to the Bombay Stock Exchange.
Abraxane for injectable suspension is indicated for the treatment of breast cancer. As it does not contain solvents, there is a reduced risk of certain hypersensitivity-related side effects and so additional medications, such as steroids and antihistamines, are not necessary.
"The company is committed to bringing new therapeutics for the benefit of patients both in India and other regions of the world through in-house and licensed products," Mazumdar-Shaw added.
As per the agreement, the company would also have the right to market Abraxane in Pakistan, Bangladesh, Sri Lanka, United Arab Emirates, Saudi Arabia, Kuwait and certain other Persian Gulf countries, the domestic healthcare major informed.
Under this agreement, Abraxis would receive royalties from Biocon based on net sales of Abraxane in these countries.
Mazumdar-Shaw further said, "Our partnership with Abraxis on multiple fronts is enabling us to realize this objective in an effective and expedious manner."
In July 2007, Abraxis applied in the Ministry of Health and Family Welfare in New Delhi to market Abraxane.
Reliance Industries and Nitesh Estates, a Bangalore-based real estate developer, are in the shortlist to buy Hindustan Unilever's (HUL) Brookefields property in Bangalore.
The value of the bids, which were opened today, is estimated to be around Rs 350-420 crore. Brookefields is a 28-acre property located in the Whitefield area in Bangalore and was formerly Brooke Bond's corporate headquarters.
Other real estate players such as Hiranandani and DLF were reportedly in the fray for the property.
The final bidding is expected to take place in a week. According to sources close to the development, HUL is expecting Rs 15-20 crore per acre.
The company has appointed international property consultants Cushman & Wakefield to value the property and finalise the deal.
Despite Bangalore's falling realty prices and a high asking price, bids by the interested parties are said to be around Rs 12.50-15 crore per acre.
An HUL spokesperson said that process of bidding is underway but details of the front-runners are pure speculation. Reliance is actively scouting for prime property across the country for expanding its retail operations.
FMCG major HUL has been unlocking the value of its real estate assets across the country.
Apart from Brookefields, the company has also put other Bangalore real estate like a few apartments it owns on MG road and Airport road and other CBD locations on the bidders block.
Another battle awaits Tatas
Tata Motors may get into a competitive auction process to get majority control in Jaguar and Land Rover, which have been put on the block by their owner, Ford Motor.
Sources said Ford was likely to shortlist two preferred bidders next month and go for a competitive auction to shorten an otherwise long-drawn bidding process.
In such a case, Tata Motors will be the second company from the Tata stable to participate in an auction for an overseas acquisition. Tata Steel, the steel company of the Tata group, acquired Anglo-Dutch steel company Corus by outbidding its rival suitor Brazilian firm CSN, in a high voltage auction.
Apart from Tata Motors, a handful of private equity players, including TPG, Cerberus, One Equity Partners and Ripplewood, are in the race for acquisition of the two luxury brands. They are in various processes of due diligence.
However, Ford so far has not disclosed the identity of the companies that have expressed interest in Jaguar and Land Rover by the stipulated date of July 19. It said it was impressed by the "strength and quality" of the interested parties. Sources said the valuation of the two brands — said to be $2-3 billion — might be affected by the uncertainty over how the European Union would apply new regulations on carbon-dioxide emissions. The new norms are scheduled to take effect in 2012. Ford needs money to fund its restructuring in North America.
Ford may retain a minority stake in the units of Jaguar and Land Rover to ensure security of engines and parts supplies. The company may also provide engineering support to the successful acquirer of these brands.
The bidders, particularly the private equity players, want Ford to keep the stake in the range of 30 to 50 per cent in the two units so that the supply of parts is guaranteed. Ford's production links with Land Rover and Jaguar border on the inseparable.
Ford retained a 15 per cent stake in Aston Martin when it was sold several months ago. It had bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.73 billion in 2000.
Steve & Barry's likely to set up shop in India
The entry of the world's largest retailer, Wal-Mart, into India seems to be paving the way for others to follow suit. Steve & Barry's, one of the fastest-growing retail chains in the US, is planning to set up shops in India and China.
Sources said Steve & Barry's had started putting in place a blueprint for the foray, with an initial investment of Rs 500 crore, which is likely to be scaled up to Rs 2,000 crore.
Avirat Sonpal, managing director, Unisource Group, and vice-president, Steve & Barry's, in an email reply said: "Our feasibility studies are under way, but we have no firm plans to enter India and China yet.'' The company is looking at forming a core team that will focus on India and China. The first store is expected to be operational by late 2008 or early 2009.
Interestingly, Unisource Group, the global procurement and solutions affiliate for Steve & Barry's retail brand, Steve & Barry's University Sportswear, has its headquarters in Mumbai and has been functional for the last six years in the country. Unisource procured nearly 25 per cent of its products, mainly knit and woven, from India and this could give significant synergies for the US retailer once it set up shops in the country, the sources said.
"The Indian retail industry is extremely robust and is currently on a growth stage. The number of Indian companies investing in the industry and the attention it is receiving from foreign investors are the proof. However, FDI regulations are still not clear," said Sonpal.
Started by childhood friends Steve and Barry to sell screen-printing T-shirts for $1 at flea markets across Long Island and New Jersey, Steve & Barry's currently has about 220 stores and is looking at adding 70 more this financial year. Typically, a Steve & Barry's store ranges from 50,000 to 100,000 sq ft. Perceived as a value-for-money brand, the prime focus of this brand is the youth.
Started in 2001, Unisource Group, looks after the support, supply chain and retail operation solutions of its affiliate brand. It sources nearly 25 per cent of its products from India, 20 per cent from China and the rest from Pakistan, Bangladesh and Sri Lanka.
According to consultancy firm KSA Technopak, the retail apparel market is Rs 1 lakh crore and the organised retail market is 20 per cent of that. The major international apparel and accessory retailers who have entered Indian market include Diesel, Tommy Hilfiger, Esprit, Louis Vuitton, FCUK, Lee Cooper, Escada and Dunhill, which have either entered through the franchise route or under the single-brand retailing route.
FM to exporters: Get used to strong rupee
Finance Minister P Chidambaram has ruled out any more sops for the exporters hit hard by the rising rupee asking them to get used to stronger currency as dollar inflows would continue to grow.
The government had announced a Rs 1,400-crore package in July for exporters. "We have taken note of the difficulties faced by the exporters and we have given them a package. But we hope that they will quickly adjust to the new level of rupee," Finance Minister P Chidambaram told PTI.
Exporters are demanding more sops to deal with the rupee appreciation against the US dollar, complaining that their realisations have gone down due to the rupee effect and the prices they are quoting for new orders are turning away customers.
The rupee has appreciated about 9 per cent since March. From the lows of over Rs 45 in October-November last year, it is now ruling slightly above Rs 40.
The commerce and industry minister Kamal Nath also supported the exporters yesterday stating that the government was thinking of a new package for exporters. "The appreciating rupee has impacted exports," he said.
However, the Finance Minister said there could not be a situation where the economy grows but rupee remains weak. Exporters should take this into account while booking new orders, he added.
"When they book the new orders, they should factor these things into account. You cannot say the economy should grow but the rupee should not become strong," he said.
About special economic zones, which were primarily created to boost exports by providing units with world class infrastructure, Chidambaram said he was against proliferation of these zones.
"My views are known. I am not against SEZs. I am concerned about the proliferation of SEZs. But this is the decision of the government and I am bound by the decision of the government," he said.
Since the SEZ Act was operationalised last year, about 500 SEZs have been approved by the government. The finance ministry has been opposed to a large scale approval of SEZs because it fears loss of tax revenues as units in the zones.
Agra's footwear makers feel pinch of weak $
There was a time when the footwear exporters of Agra used to rue the fact that their export market was predominantly Europe where they could tot up only modest gains.
On the other hand, exporters sending their wares primarily to the US used to make a killing because the rupee was down against the dollar.
For the exporters whose main market is Europe, the current rupee rally against the dollar is therefore not a life-threatening event. Approximately 65 per cent of their exports are still Europe-bound.
Therefore only that component of their business that is in dollars — around 35 per cent — has been hit by the appreciating rupee. But the Agra exporters are not necessarily sanguine about this.
There are between 250 and 350 footwear exporting houses in the city of which 150 use a semi-mechanised process for manufacturing. Over the past two years, most of the factories have been running at 100 per cent capacity. Exporters are now wondering if this can be sustained.
"We had to refuse 30 per cent of the orders we received this year. Because of rupee appreciation, we have had to factor in at least a 10 per cent to 12 per cent price increase," said Amit Kumar, deputy general manager, Superhouse — a footwear export unit.
Kumar has several problems on his hands. Not only is his unit too efficient, but one of his most important clients is Carrefour — a European company that invoices in dollars. "It is a multinational company and sources from countries like China as well. Hence they do their invoicing in dollars. The weakening dollar has wiped out margins in that segment," he says.
"In the current circumstances, the industry is doing well in terms of volumes. But bottom lines have taken a hit, which is between 8 per cent and 10 per cent," says SP Raturi, general manager, Superhouse.
Spiralling input costs are adding to the woes of footwear manufacturers. Over one year, while cow hide has become 5-7 per cent costlier, buffalo leather is 10 per cent more expensive and synthetic sole material is up 5 per cent.
Small exporters like Anil Agarwal of Transworld Shoes Corporation have discovered a way out of the problem arising from rupee appreciation.
"We will exit the dollar business. It is only five per cent of my total business. We cannot go on incurring losses," explained Agarwal Kulbir Singh of Roger Exports — one of the key footwear exporter in Agra- has already refused orders worth $ 0.5 million in the first four months of FY 2007-08, but concedes this is not a long term solution.
"The Chinese, who are our major competitors, will not be able to hold on to their price competitiveness. Till then, we must protect our stake in the market so that foreign clients are not lost," he says. Agrawal feels that banning of leather exports could help the footwear industry. "Currently, a lot of leather is being exported to China, which has led to an increase in input costs in India. Banning leather exports will make bring down input costs, giving us relief," he says.
Festivals to light up gold demand
Indian jewellers are expected to start buying gold as demand picks up for auspicious Hindu festivals, after holding off purchases in the past few days during a seasonal lean period.
"This weekend will be very good till Rakhi festivities," said Rahul Gupta, director of P P Jewellers, a leading jewellery chain.
The Rakhi festival, symbolising sisters' bond with their brothers, on Aug. 28 marks the beginning of a series of Hindu religious events culminating in Diwali in November when demand for gold jewellery peaks.
Analysts said gold prices could top $700 an ounce over the next three months from $670 now, but this was unlikely to dent demand in India.
Nearly 80 per cent of India's annual 800 tonnes gold consumption is for jewellery, which is also a form of investment in villages where people do not have easy access to banks.
"Only if gold shoots up, some people may postpone purchases," said Satish Bansal, director of M D Overseas. "Even then, those who have a marriage in the family would still go ahead and buy."
Anindya Banerji, analyst with IL&FS Investsmart India, said conditions were building up for a rally that could see gold prices topping a new high by the year end.
"It will test $700 in the next three months," he said, adding gold could cross the 26-year-high of $732 set on May 12, 2006 by the year-end.
"Gold is expected to strengthen in the next eight to 10 weeks because of financial market turmoil. This always spurs investment demand in gold," he said.
There may also be some selling pressure in the next one or two weeks because several funds are liquidating their assets, Banerji added.
Gold becomes less attractive when interest rates rise, but analysts say at least in India the rates are unlikely to go up immediately which should enhance its value.
Traders said gold jewellery buying during India's festival season would help to fuel the prices, but the major demand would come from investors.
Inflation seen at 4.41% on July 28: Poll
India's wholesale price inflation rate is forecast at 4.41 per cent for the 12 months to July 28, slightly higher than the previous week's annual rate of 4.36 per cent, a Reuters poll of 10 analysts showed on Thursday.
It would be the ninth consecutive week that annual inflation has been below 5 per cent, the central bank's target for the 2007/08 fiscal year, after 10 months above that level.
At its policy review last month, the Reserve Bank of India raised banks' cash reserve ratio to 7.0 per cent from 6.50 per cent in a bid to mop up excess funds that could fuel inflation.
The RBI held its short-term lending rate steady at the review, as expected, after raising it five times since mid-2006. On Wednesday, the RBI raised the ceiling on market stabilisation bonds it can use to absorb funds generated by its currency intervention to Rs 1.5 trillion $37 billion) from Rs 1.1 trillion.
Annual inflation hit 6.69 per cent in late January, its highest in more than two years, but softened as the central bank tightened policy and the government cut duties on a range of items to calm prices. It fell to a 14-month low of 4.03 percent in mid June. The wholesale price index is more closely watched than the consumer price index (CPI) because it includes a higher number of products and is published weekly.
Shop owners, activists protest Wal-Mart
Small shop owners, trade unions and left-wing activists rallied in India's capital on Thursday to protest moves by Wal-Mart and other foreign mega-stores to enter the Indian market.
The protest was relatively small, attracting only a few hundred people, who shouted and burned effigies that represented Wal-Mart and its local partner, Bharti Enterprises.
But the rally underscored how tensions are growing in India as the country's economic boom moves beyond high-technology and other big businesses that employ relatively few people and starts transforming parts of the economy that provide livelihoods for hundreds of millions of people _ and have remained largely unchanged for generations.
Since the start of the year, there have been spasms of violence by farmers angry over losing their land to big industrial projects, and a communist insurgency has continued to intensify in the hinterlands of southern and eastern India.
Organizers of Thursday's protest said it was now the turn of the country's estimated 12 million mom-and-pop shops to be heard, promising more rallies.
``This is just the first days of a long campaign,'' said Dhamendra Kumar of India FDI Watch, a group that's lobbying against the big stores. ``Corporate retail is going to crush the spirit of this country.''
The protesters' slogan, ``Quit Retail,'' is a play on Mohandas Gandhi's famous ``Quit India'' slogan, which rallied the country to independence from Britain 60 years ago this month.
While the rise of a mall culture in India, and the chains and mega-stores that go with it, has been welcomed by many in the country's rising middle class, opposition is growing to foreign chains like Wal-Mart and domestic companies that are setting up similar chains.
``My business is going down. I can't offer discounts the big shops offer. Why is the government not protecting us? We are not fit for other jobs if we lose our businesses,'' said Alok Prakash, who owns a small general store in Mumbai's busy Dadar market.
But highlighting how difficult a task it is to rally opposition to mega-stores, Prakash had not even heard of the protest planned in the evening and a day-long strike called for that city's stores.
Other shop owners in Mumbai said they would only close if their competition did as well _ and that wasn't happening.
``Why will I close when the next shop is open? All my business will go to him. A strike makes sense only if all participate,'' said Prem Patel, who sells grains and other provisions in Mahim, a suburb of Mumbai.
On Monday, Bentonville, Arkansas-based Wal-Mart, signed a deal with Bharti Enterprises to jointly build wholesale outlets that will buy goods from farmers and small manufacturers and sell to retailers.
Critics say the move is a backdoor attempt by Wal-Mart to gain entry to the Indian market, which remains off-limits to stores that sell a variety of different brands. Those that offer only a single brand were allowed in last year.
With its 1.1 billion people and growing middle class, India is considered a rich prize for big retailers. Wal-Mart is not the only foreign chain seeking to tap a market estimated to be worth more than $250 billion and growing at a rate of 20 percent a year.
Global retailers like Carrefour SA of France, Tesco PlC of Britain and Metro AG of Germany have lobbied the Indian government to liberalize rules protecting the retail market.
RBI may opt for another CRR increase: Banker
The Reserve Bank of India may need to raise the cash reserve requirement for banks one more time in 2007 if its currency intervention pushes up surplus cash with banks, a senior official with Centurion Bank said.
In its policy review last month, the central bank raised the cash reserve ratio (CRR) - the percentage of deposits banks need to keep with it in reserve - to 7.0 per cent from 6.5 percent, to drain cash in the banking system.
The measure, which took effect on August 4, drained about 160 billion rupees. It was the fourth such increase since December 2006 to check price pressures and credit growth in Asia's third biggest economy.
"If liquidity continues to come into India, the Reserve Bank of India (RBI) will need to mop up some more liquidity once more this calendar year. You may see another CRR hike," Tarini Vaidya, country treasurer of the privately-owned bank, said.
However, she does not see the latest CRR increase as a rate signal, but rather a cash draining measure.
"A careful reading of this time's monetary policy... the clear interpretation is that it's not a rate-signalling hike, rather a liquidity-mopping rate hike," Vaidya said.
On Wednesday, the RBI raised the ceiling on market stabilisation bonds that it uses to absorb funds generated by its currency intervention to Rs 1.5 trillion from Rs 1.1 trillion.
On Tuesday, the government tightened foreign borrowing rules by local firms to curb the rising inflow of funds, which has led to an aggressive currency intervention by the RBI.
This year, the RBI bought about $23.5 billion in the currency market up to May to keep the rupee down and maintain India's export competitiveness. The partially convertible rupee hit a nine-year peak of 40.20 per dollar last month.
"I am not yet seeing a reversal... a very clear indication of a reversal in the strength of the rupee. It's still very early days," Vaidya said.
Annual inflation, which hit a two-year high of 6.7 per cent in January, has moderated to 4.36 per cent in late July. Credit growth has slowed to about 24 per cent, from near 30 per cent levels earlier this year.
Biocon to market Abraxis' breast cancer drug in India
Biocon Ltd on 9 August announced it has entered into a licensing agreement with US-based Abraxis BioScience Inc for selling Abraxane in India, used in treatment of breast cancer.
"Abraxane adds tremendous value to our innovation led Oncotherapeutics marketing strategy," Biocon Chairman and Managing Director Kiran Mazumdar-Shaw said in a statement to the Bombay Stock Exchange.
Abraxane for injectable suspension is indicated for the treatment of breast cancer. As it does not contain solvents, there is a reduced risk of certain hypersensitivity-related side effects and so additional medications, such as steroids and antihistamines, are not necessary.
"The company is committed to bringing new therapeutics for the benefit of patients both in India and other regions of the world through in-house and licensed products," Mazumdar-Shaw added.
As per the agreement, the company would also have the right to market Abraxane in Pakistan, Bangladesh, Sri Lanka, United Arab Emirates, Saudi Arabia, Kuwait and certain other Persian Gulf countries, the domestic healthcare major informed.
Under this agreement, Abraxis would receive royalties from Biocon based on net sales of Abraxane in these countries.
Mazumdar-Shaw further said, "Our partnership with Abraxis on multiple fronts is enabling us to realize this objective in an effective and expedious manner."
In July 2007, Abraxis applied in the Ministry of Health and Family Welfare in New Delhi to market Abraxane.
0 comments:
Post a Comment