Paul Calello, chairman and CEO, Asia-Pacific Region, Credit Suisse First Boston, has just finished a packed fortnight in India trying to get the investment bank's reputation back on track, grab an FII license to begin portfolio investments in the country and meeting with corporate leaders. He spoke to BT's Ashish Gupta and Aditya Wali on the bank's plan for the country.

Why did the Securities and Exchange Board of India ask you to wind up operations in India in 2001?

We were suspended by SEBI for two years-April 19, 2001 to April 18, 2003-but that suspension is over now. First, CSFB accepts full responsibilities for anything its employees did. But that was before my time and none of the employees involved with the incident still work for CSFB. There were allegations with regards to transactions our firm did with Ketan Parikh and I am not going to get into the details of what we believe happened from a CSFB management perspective versus what SEBI believed happened. We feel we have served our time.

Have you applied for a Foreign Institutional Investor (FII) licence?

The current status is that CSFB has made an application for a FII license and we are still waiting for a reply. And as I said before, we were only suspended from our brokerage activities.

As an investment bank, credibility is very important. Don't you think your credibility has taken a beating?

Absolutely. We certainly have felt the pain. And the only way I see to rebuild credibility is to have individuals with high level of integrity. We hired Ajeya (Singh, from the India operations of Lehman Brothers), brought in a new team to help us build the trust with regulators, government and corporates, some of which we serve round the globe.

Do you believe in the India growth story, despite what's happening in the emerging markets and the possible slowdown in the Chinese economy?

If you read our recent research on Asia, we believe that India is probably among the most resilient of the Asia-Pacific countries toward a slowdown in China. More importantly, we do believe that from a China perspective we will see a soft landing rather than a hard fall (of the economy).

Has the change in the government at the Centre affected your outlook towards the country?

We are extremely positive. Prime Minister Manmohan Singh and Finance Minister Chidambaram have an impeccable record and seem to be very forward thinking. That's what the financial community looks for.

Losing Its Touch
For long the market leader, Nokia finds itself challenged by nimbler rivals.

Nokia India's MD Sanjeev Sharma: Facing stiff competition

It's like the cola wars, only worse," says Sanjeev Sharma, Managing Director, Nokia India. Cola wars may well be Sharma's favourite metaphor (he was with Pepsi earlier) to describe the battle in the cellular handsets market, but he has a point. Last year saw a rash of new entrants-Kyocera, BenQ, Bird, DBTel, Kejian, Primus, Sagem, Telson, GTran-upping the total number of players to 20 in the GSM and 10 in the CDMA space. Not only are the models offered by these vendors cheaper, but often better-looking too. Oomph has never been Nokia's strong point, and the company is losing ground in the country. That it entered the CDMA field rather late has not helped matters either. According to a study conducted by CyberMedia Research, LG Electronics leads the combined GSM and CDMA handset market, with Rs 2,797 crore in sales, and a 33.5 per cent market share for FY 03-04 (See Feeling The Heat). Nokia is the number two with sales of Rs 2,481 crore and a 29.7 per cent marketshare.

Does Nokia have a comeback strategy? You bet. Following global directives, the Indian subsidiary has just finished a restructuring of its operations to make itself leaner. It recently hired Sanjay Behl from Lever to head its marketing, and it is also revamping its channel strategy, roping in it resellers as retailers. New market segments-like the enterprise market-are being aggressively courted. New ideas such as gaming phones are being introduced. Seven new models are waiting in the wings.

For good reason. The Indian handset market grew a whopping 568 per cent growth last year in value terms. Of the total sales of Rs 8,344 crore, Rs 4,153 crore came from CDMA and the rest from GSM. Expect these numbers to go higher north this year with unified licensing, consolidation among the service providers and, of course, newer circles getting into the mobility net. Nokia, though, has bigger plans. "We are looking at managing the entire mobile communications ecosystems for enterprises," explains Sharma. That apart, Nokia plans to go after the rural consumer.

Competition hasn't been sitting idle either. BenQ is targetting a 5 per cent share in the next one year, and numero uno LG has revised projected sales for 2004 from 3 lakh units to 4 lakh. "By 2005 colour phones will dominate about 50 per cent of the handset market," says Praveen Valecha, Product Group Head (Mobile Phones), LG. With handset makers battling it out, the consumer can expect better phones at lower prices.

-Sudarshana Banerjee

Knowledge KO

Marketrx is a 'different' company. It is co-founded by an Indian, has about 100 employers in the country (some 30 of them are IIT-IIM types) and is engaged in Knowledge Process Outsourcing (KPO) for Big Pharma. Jaswinder S. Chadha, President and CEO, caught up with BT's Sudarshana Banerjee on a recent visit to India. Excerpts:

How does KPO work, as opposed to BPO?

Companies hive off business processes or it because they do not want to do it themselves for reasons of cost or efficiency. KPO comes into play when a company can't do the knowledge bit itself, even if it wants to. It is primarily consultancy on strategy issues and audience research.

How big is the Indian market for pharma KPO?

KPO works mostly with branded pharma products, as opposed to generic ones. The Indian market mostly runs on generic products, ergo, there are not much business activities on that front. But if we look at the KPO service industry, the prospects are very high (in India). The pharma industry worldwide spends about $30 billion (Rs 1,35,000 crore) a year on sales and marketing and some $3 billion (Rs 13,500 crore) a year on sales planning, market planning and market research. Add to that the fact that technology analytics requires the kind of skill set that is not freely available.

What is the business model of marketRx?

KPO, because of its IP-intensive nature is more of off-site than of offshore. We have a major footprint in US, a workforce of some 125 people. India services the European market. Relationships with clients are ongoing, multi-year ventures. Size of the deals vary from quarter to a half million dollars (Rs 2.25 crore) for market research to $1 to $3 million (Rs 4.5-Rs 13.5 crore) for helping pharma companies implement enterprise solutions. Typically, billings for a client is around $18 to $20 million (Rs 81-90 crore). Gross margins can be as high as 90 per cent.

CHARMED
Potter Crazy

Is the teenaged wizard's magic in India on the wane? If early box office collections of Harry Potter and the Prisoner of Azkaban are to be believed, then maybe not. In its first week, the movie had taken in more than Rs 12 lakh from one theatre alone in Mumbai. "The initial response has been phenomenal," says Komal Nahata, a trade expert. But expect the crowds to thin once the schools reopen in a week or so. Already, the Harry Potter merchandise is going abegging because of steep pricing. "The Swords and Hogwarts Castle were relatively popular, but the rest of the range didn't go down as well as we expected," says Vishal Dabre, Merchandiser (Kidswear), Westside. Fortunately for Harry Potter's creator, J.K. Rowling, the books are still doing brisk business.

-Priyanka Sangani

Tapping ATMs
Infocomm offers cheaper ATM hook up.

Kishore Oka: From telecom to banking

For all their convenience, automated teller machines (ATMs) are devilishly expensive to operate. Blame it on technology. Currently, ATMs are hooked up to the bank's central servers through VSAT technology, deploying which requires a licence from the government (a time consuming process) and a leased telephone line.

The high cost of setting up an ATM is one reason why their spread is still limited in the country. Reliance Infocomm believes it can change that. By providing last mile wireless connectivity through its CDMA network riding on a nationwide network of optic fibre covering 1,100 cities, Reliance Infocomm claims that it can wire up ATMs at least 40 per cent cheaper than conventional VSAT technology. Says Kishore Oka, Head of Finance Vertical at Reliance Infocomm: "Since ATMs require limited bandwidth, the cost to the bank for leasing the line is high. Reliance Infocomm's solution is, therefore, more cost effective."

At present around 11,000 ATMs have been installed in the country and analysts expect the number to quadruple over the next five years. State Bank of India has already connected 100 of its ATMs using Reliance Infocomm's CDMA technology. "Others like HDFC Bank, ICICI Bank, Citibank and Bank of Punjab have also linked to our Reliance Infocomm's central point at Navi Mumbai," says Oka. Lower infrastructure cost may also enable banks to spread card terminals to B and C class towns. In other words, it's smart business-one way or another.

-Venkatesha Babu

Flexing Muscle
Flextronics snaps up Hughes Software.

Flextronics' Ash Bharadwaj: Big deal

It came, it saw, it bought. Flextronics, a $14.5 billion (Rs 65,250 crore) electronics manufacturing services (EMS) provider based out of Singapore, has acquired a 55 per cent stake in Hughes Software Systems. The deal, being dubbed as the biggest cross-border deal to date in India, is worth Rs 1,023 crore, at Rs 547 per share. Ever since Rupert Murdoch disclosed his intention of selling News Corp's non-core businesses, DirecTV's stake in Hughes Software had been up for grabs, and several leading tech and venture capital outfits are believed to have had a go at it. Flextronics entered the fray after the middle of May. "EMS providers offer solutions like logistics, reverse logistics, hardware, manufacturing support, mechanical design etc. With this acquisition, we enter the crucial software design and services business," says Ash Bharadwaj, President (Design Services), Flextronics. Hughes, however, will continue to function as before. "The management structure will remain the same and HSS will remain a public company," Bharadwaj adds. Arun Kumar, President and Managing Director of HSS clarifies that the guidance of 25 per cent mentioned earlier will not change, as won't the relationship with HSS' top five customers, including News Corp.

-Sudarshana Banerjee