RIL's Chairman Mukesh Ambani: Curious interpretation

F

or those who came in late, public sector telcos BSNL and MTNL have alleged that Reliance Infocomm has cheated them of some Rs 550 crore it owes them towards access deficit charge (ADC) on international long-distance (ILD) calls by showing these as local calls. ADC is a sort of cess on all calls (it is Rs 4.25 on ILD calls, Rs 0.80 on domestic long-distance ones, and Rs 0.30 on local calls) that seeks to subsidise telephony in unprofitable areas and categories, and its main beneficiaries are BSNL and MTNL that provide basic telephony (read: wired) services.

Reliance, which carries some 120 million seconds of ILD calls a month on its network, allege the two companies, has done them out of several hundred crores in ADC. In turn, Reliance has procured temporary relief in the courts against any action by BSNL and MTNL (the companies were threatening to disconnect Reliance's calls at the point where they moved to their networks; the next hearing of the Delhi High Court is scheduled for November 30), but it has a curious interpretation of the rules. A Reliance Infocomm executive who did not wish to be named denies that the company is guilty of any wrong-doing. He claims Reliance offers an HCDS (Home Country Direct Service) that permits users to call India from a foreign destination through a pre-paid card. The company has forged an alliance with US telco MCI to offer this service and launched India calling cards in the country. The executive adds that under HCDS, which is legal under the laws of India, any international call terminates on the company's own network (thus, the ADC, if any, is payable to Reliance itself) and is later transported to the final destination. This two-stage termination process, he argues, means BSNL and MTNL are only eligible to receive the ADC on a local call.

Not too many people buy that argument. "Reliance's interpretation is absurd," says the CEP of a rival Indian telco. "The company makes its own rules in this country." His reference is to Reliance's entry into mobile telephony itself, something it effected by convincing the Indian government to move to a unified licensing regime, allowing companies with such licences to provide both basic and mobile telephony services.

-Sahad P.V.

LOANS
Home Dear Home

Happy?: Yes, but it costs more now

Early in the second week of November, housing loan giant Housing Development Finance Corporation (HDFC) announced that post-Diwali it would be increasing its loan rates by 50 basis points (or half a percentage) across all maturities. Other lenders are expected to follow suit. Rising interest rates may spill over into car financing as well, and jack up rates by 25 to 50 basis points. Will it impact demand for housing and vehicles? Unlikely, says Renu Sud-Karnad, Executive Director, HDFC. "The actual increase would be nominal and won't hurt pockets," she says. As for the auto business, demand isn't likely to be affected either, since the economy is in a good shape and white-collar salaries are rising. At the most, it may mean one less trip in a month to your favourite restaurant.

-Priyanka Sangani

Why Ranbaxy Will Not Go The DRL Way
India's two leading pharma companies are more different than alike.

Different strokes: Ranbaxy's Brian Tempest (L) and Dr. Reddy's G.V. Prasad

On November 6 this year, Ranbaxy Laboratories announced that Shwarz Pharma, to which it had licensed one of its molecules (in 2002), RBX 2258 that was meant to treat benign prostate hyperplasia, had put Phase II Clinical Trials on hold. Shortly after, in an unrelated development, Ranbaxy also announced that it was taking all its anti-aids drugs off the World Health Organisation's approved list, after discovering some "discrepancies" in tests done to show that its antiretrovirals (ARVs) were equivalent to brand-name drugs.

The two events raised fears in certain quarters of the stockmarket of the Ranbaxy stock going the Dr. Reddy's way. Since the beginning of the year, Dr. Reddy's has had a series of setbacks (a lost case, a failed molecule), and its stock now trades for around Rs 770 as against a high of around Rs 1,470 in January this year. The Ranbaxy stock did fall marginally on the days both announcements were made although it has showed more resilience than Dr. Reddy's. This resilience, explain analysts tracking the company on D-street, stems from Ranbaxy's standing as an "ideal generics company".

Both companies are involved in Para IV ANDA (Abbreviated New Drug Application) challenges that involve challenging the patent of the company that came out with a blockbuster drug in the us (the largest pharmaceuticals market in the world) and if successful, obtaining an approval to exclusively market the generic version of the same.

However, while Ranbaxy has a mere 23 Para IV challenges in its 127 ANDAs, Dr. Reddy's has 25 in its 49. This essentially means Ranbaxy has a much more broad-based portfolio that includes several plain-vanilla products for which it can easily obtain approvals.

What it also means is that Ranbaxy, with its diversified pipeline, is far less dependant on individual opportunities than Dr. Reddy's. For instance, following the expiry of its 180-days exclusive marketing period for Fluoxetine, a generic version of Eli Lilly's best-selling anti-depressant Prozac, Dr. Reddy's offering has been steadily losing share to competitors and the company is still looking for the next big generics opportunity. It has a pipeline (of products) going, but this, explains a Mumbai-based pharmaceuticals analyst, is strong in the long term and relatively weaker in the short term. The stock merely reflects this state of things.

-E. Kumar Sharma

The Box In A Box
DHL's acquisition of Blue Dart puts it in the top slot.

Merger mode: They will now ply for DHL

A global giant serving millions of customers in 220 countries, DHL was but a minnow in India. Until recently, that is. On November 6, the Deutsche Post World Net-owned logistics company acquired the Indian biggie, Blue Dart, for Rs 730 crore, turning itself into the No. 1 player in the country. With that it also becomes the first international express and logistics company to offer domestic and international services of its own in India. No wonder Bryan Jamison, DHL Express' regional director for south-east Asia and Indian subcontinent, calls it a merger with synergies.

Despite 25 years in the country, DHL hadn't built a big presence. It had 350 delivery vehicles, covered 80 cities with over 270 locations and logged 5.3 million shipments in 2003. Following the acquisition, DHL now gets access to Blue Dart's extensive domestic network covering 13,700 locations, warehouses at 14 locations and bonded warehouses at five metros, and 2,717 delivery vehicles, besides domestic customs and regulatory expertise. Blue Dart, which is the only logistics company in India focussed on carriage of packages as its prime business rather than as a by-product of a passenger airline business, logged over 35.9 million domestic shipments in 2003.

-Roshni Jayakar

A Taste For India
Eager foreign investors are lapping up debt and equity offerings from India.

Jefferies' Edward Males : Linking India to global investors

With interest rates headed north and foreign investors no longer unsure of the India story, the setting, it seems, is just right for India Inc. to tap capital markets overseas. Consider some of the large deals in the offing: Bharti Tele-Ventures plans to issue American depository receipts (ADRs) worth $300 million (Rs 1,350 crore) early next year, HDFC Bank has announced a $300-million ADR issue to be concluded this fiscal and Sun Pharma has been talking about a $300-million convertible issue overseas. "The pipeline looks robust, especially now that domestic stock prices are picking up, which affects conversion positively," says the investment head of a top foreign investment bank based in Mumbai. Action is hotting up as far as offerings in the $50-$60 (Rs 2,250-2,700) region are concerned, so much so that global investment bank, Jefferies, opened an office in Delhi last month to play matchmaker. "We have just done three convertible offerings for Indian companies in Europe in the $50 million (Rs 225 crore) range," says Edward Males, MD of Jefferies New York operations. Males expects more companies to follow suit next fiscal. "The Indian market isn't liquid enough for big issues, so companies will have to make offers internationally," he says. Where there's a will, there's money.

-Priya Srinivasan