Mervyn Davies, 50, a professional banker and Chief Executive Officer of the Standard Chartered Bank, is obsessed with cricket and increasing the bank's share in India. He has already visited the country over 30 times in the past six years and strongly believes that India and China hold the key to the bank's future. On a recent visit, he met with BT's Ashish Gupta:

How important are the India operations from a global perspective?

The Indian operations are absolutely critical for my success as a CEO and the future success of Standard Chartered Bank. It has become a part of our DNA since we have been here from 1857 onwards. Today, India operations contribute nearly 12 per cent of our total revenues, but I would like to see the Indian operations grow to the size of our Hong Kong operations, which contributes about 25 to 30 per cent.

What kind of growth path have you chalked out for the future? Will you grow through the organic route or prefer acquisitions?

We have been growing ever since we entered India and now have 66 branches in 24 cities. We acquired ANZ Grindlays in 2000, and it turned out to be a great buy. While I am not ruling out more acquisitions, they must create value for my shareholders. Our focus is to become both a strong retail consumer bank as well as a local bank. Acquisitions are very much on our radar.

Why have you concentrated on emerging economies?

Simply because that's were the future is. Standard Chartered has been around for the last 150 years and has always believed in the future of India and in the future of China. We are a special and different kind of bank and are present in some of the fastest growing areas of the world such as Asia, Latin America, the Middle East and Africa.

Many foreign banks such as the Bank of America started aggressively on the retail front in India only to sell out. Do you think you could face similar problems?

There is a big difference between a Bank of America and Standard Chartered. We have two million customers and a strong brand name. We have been here for the last 150 years and have also set up a shared service centre in Chennai to show our long-term commitment.

So how much money is Standard Chartered committing to India?

We have already invested over $1.34 billion in buying Grindlays, over $100 million in setting up the shared service centre in Chennai and we are also investing in brand building and expanding our footprint. I can't you give an exact number, but we will be increasing our investments in India. I am not satisfied by just being the largest foreign bank in the country, but would like to be among the top three banks in the country.

Increasingly, Indian public sector banks too are acquiring technology and developing sophisticated products. How will you stay different?

What will differentiate us from the rest is the quality of our service and product capability. We are expanding our product range, bringing in best banking practices, and developing innovative packages to take on the competition. We love competition.

India Inc's Dream Year
Revenues and profits soared like never before in 2003-04.

The year that produced two billion-dollar tech companies and one billion-dollar-in-profits conglo, also produced record revenues and profits for most. According to a Business Today analysis of results of 332 companies, 2003-04 will probably go down in corporate history as a golden year. Net sales grew a whopping 66 per cent and net profits soared even higher at 77 per cent. Says Jyoti Vaswani, CIO at JM Mutual Fund: "Except FMCG, the 2003-04 results were on par with expectations."

Will India Inc.'s dream run continue into 2004-05? Says Dhaval Mehta, CIO at Alliance Mutual Fund: "With interest rates still at lower levels and consumer demand remaining strong, the broad-based growth should continue into the next year as well." And at what rate? "Though the outlook is positive, you should not expect similar growth rates," warns Paras Adenwala, Head of Equity at Birla Sunlife Mutual Fund. Why? The main reason is the base effect i.e. revenues and profit have risen inordinately in 2003-04. But if corporate India is going to continue its march forward, what are the sectors that will lead it? First, there is near consensus among analysts that engineering will continue to do well, thanks to robust order book position.

Banking is another sector that is expected to do well because of the credit pick up. And with interest rates stabilising, banks won't be able to show treasury income. "Bet on banks that have very low treasury income component like HDFC Bank," says Nimish Shah, Director at Parag Parikh Financial Advisory Services. Auto and auto ancillary industries are happy stories too, as is the oil and gas sector, where prices are set to increase post elections.

The potential laggards? "Metal companies have to be watched," says Adenwala. Why? Commodity prices have reached very high levels and could soon peak. Further, the strengthening dollar and uncertainty over the growth in China have started causing panic in the commodities market. For example, copper prices have slipped recently. But some sectors that fell out of favour last year are expected to do well in 2004-05. it is one such sector. "With billing rates stabilising, it will do well in the future," says Vaswani. Incredibly, FMCG is expected to do well too. Still, keep your fingers crossed.

CO2
Carbon Credits

Trade clean air for green-house gases. What do you get? Pollution? Not necessarily. Money? Almost certainly. Under the 1997 Kyoto Protocol, most developed countries agreed to reduce greenhouse gas emissions by an average 5.20 per cent between 2008 and 2012. The European Union, which is one of its signatories, is trying to meet its target by buying "carbon credits" from developing countries, which are outside the protocol and also pollute less. That has prompted the Indian government and a few other agencies to invest in projects that are non-polluting and, hence, entitled to carbon credits. EDL India has proposed a World Bank-funded project in Chennai that will turn solid municipal waste into energy. Vestas RRB and Suzlon Energy have proposed to generate electricity from wind and biomass. Until now, the lack of a credible third-party certifying agency (to monitor deployment of funds and rate credits) had stood in the way of the projects. But recently, Det Norske Veritas, a UN approved agency, was appointed to certify such projects. Today, rates of Certified Emission Reductions (CERs) from India are loosely priced between $4 and $6 per tonne. Although no CERs have yet been sold, informal MoUs are being signed with an eye on the future. Says N.R. Krishnan, a former secretary of the Ministry of Environment and Forests: "It is worthwhile for European countries to accumulate credits at cheaper rates ahead of ratification of the Kyoto Protocol." Meanwhile, for some Indian companies, green will also mean greenbacks.

-Nitya Varadarajan

The Immortal 800
The small car cheats death year after year.

Twenty years and two million cars later, the Maruti 800 is still the best selling car in the country. Those predicting its imminent demise better be warned. This plucky little car was rubbished as a 'little plastic toy' when it was launched in 1983. Since then, countless column centimetres and television hours have been dedicated to killing off this little machine. With little success. And under a new scheme Maruti launched in March, sales have actually revved up.

Last fiscal, Maruti halted the decline in sales of the car by targeting a whole new market. The car remains the most affordable vehicle on Indian roads-with prices starting at Rs 1.7 lakh. The 'pachchis ninety-nine' (Rs 2,599) scheme that started alongside the Indo-Pak cricket series has meant that Maruti sales are up almost 20 per cent in April 2004. Under this scheme, consumers can buy a Maruti 800 for a monthly payment of only Rs 2,599 on a seven year loan from State Bank of India. Enquiries at Maruti's 1-600 toll-free number went up from 36 a day to 370 after the start of the campaign. Says Jagdish Khattar, Managing Director, Maruti Udyog: ''There is a large mass (almost 50 million) of two-wheeler users who want a car, but hitherto found it unaffordable. I believe that this is start of a tidal wave of such schemes.'' In fact, Maruti is working on plans to launch schemes with an EMI as low as Rs 2,200.

Ashok Mukand, General Manager, State Bank of India says that the idea behind the scheme was simple. "This is an unmatchable deal, and with the reach of both organisations I can only see this growing," he says. The Maruti 800 gave personal mobility to a whole generation of Indian families. Despite the barbs, it still continues to faithfully do its job as the wheels of the nation.

-Kushan Mitra

Bigger And Better
An expanded EU bodes well for India.

May 1, 2004, could well go down as one of the most significant "integration dates" in the history of the modern world. After all, not every day does one witness the entry of 10 new nations-eight from Central and Eastern Europe and two from the Mediterranean islands of Malta and Cyprus-into the15-member European Union, India's largest trading partner. But what does the entry of an additional 76 million people mean for the developing economies, especially India? Francisco da Camara Gomes, Head, Delegation of European Commission in India, believes that such integration would add an additional 5 per cent to EU's gross domestic product making it a euro 9,712 billion economy. As for the emerging economies, especially India, there are a lot of positives, contends Da Camara. For one, a new enlarged EU, which will now account for nearly 18 per cent of the global trade, will mean a much larger market for Indian exporters, especially those of gems and jewellery, pharmaceuticals, and leather.

Additionally, by becoming a member of the EU, the new countries will be forced to reduce their external tariffs from 9 per cent to 3.6 per cent, thereby making Indian imports that much cheaper.

While investments from these 10 countries have been rather muted-only $83.7 million or Rs 374 crore in the last 11 years-it is possible that the flows may go up once the enlargement is fully complete. Again, while EU enlargement does not automatically mean an immediate extension of a single currency in all the 10 countries, it is only a matter of time before that happens. Therefore, at the moment, EU seems set to become even more important in India's scheme of things.

-Ashish Gupta