You see children: Marketers see customers

That nearly a third of the country's population is under the age of 14 years is not lost on marketers. At last count, there were seven television channels for kids. And marketers across categories are busy catering (or trying to cater) to the organised market (across categories) for infants to pre-teens (0-12), estimated in excess of Rs 7,500 crore.

For big businesses such as ITC, Godrej, Arvind, Reebok, Lee and Hindustan Lever, checking into this kid market means entry into a high-growth area. Play-school franchisees such as Shemrock and Kangaroo Kids are mushrooming all over India. And advertising for coaching and computer classes accounts for a chunk of the Rs 4,500-crore print advertising market.

Yet, in one sense, the market is still largely unexplored. If there is room for seven kids' channels, how does one explain the complete absence of children's films in India, especially when 10-15 per cent of Hollywood's output every year is targeted largely at kids. Even in apparel, there is no strong national school-uniform brand.

India's young demographic profile is its global calling card, yet the country seems oblivious to it. India knows that a much bigger outsourcing and onshore service opportunity awaits it, not just in areas of software and technology, but in nursing, accountancy and the like. Yet, the country continues to produce assembly-line 10-plus-two-plus-three graduates, who, by default, are fuelling today's BPOs. With India's cost advantage eroding fast, isn't it time we retool our education and professional institutes to remain relevant in a fast ageing world?

-Shailesh Dobhal

Lifestyle
An Ode To Consumerism

Tis the festive season, so for results better or worse, We'll take the plunge, and tell this tale in verse.

Austerity be damned, said Mrs. Bharat in 2004, we'll have that too,

Be it a Sony 29 incher, Boss, Dior, Louis Vuitton or Vertu.

Cars, apartments, holidays and phones; she just can't have enough of them,

Forcing more than one manager to say, "Our Indian customer; she's a gem."

The banks, they're laughing too, for much of the spending is fuelled by debt,

Now issuing cards in schools, praying tis a consumption habit will set.

That, we expect to see happen in Two Thousand And Five,

Unless the Sensex, that blithe index, should take a dive.

-Kushan Mitra

M&As
More, Not Less

As the numbers would indicate, M&A activity involving Indian companies is on an upward curve. In 2003, India Inc. was involved in $4.5 billion (Rs 19,800 crore) worth of M&As; in 2004, this number touched $7.5 billion (Rs 33,000 crore). And almost everyone in the investment banking business expects things to be better in 2005. "M&A activity will continue in a much bigger way," says Vedika Bhandarkar, Managing Director and Head (Investment Banking), JP Morgan India. As the economy continues to boom and companies use up their capacity, adds S. Sriniwasan, Executive Director, Kotak Investment Banking, "there could be capital investment or consolidation in an effort to build size and improve efficiencies". And it won't just be big companies doing the shopping, in India and overseas. Mid-sized firms could look for global buys too, says Bhandarkar, with "larger interest from financial sponsors that have the capability to play a lead role in large deals".

-Roshni Jayakar

North South Divide
Sexy South

There exists a divide between the northern and the southern states of the country and in 2005, and in years ahead, it will only get wider. Any broad categorisation of the northern states would include Bihar, Rajasthan, Madhya Pradesh and Uttar Pradesh. Similarly, any categorisation of southern states will include Andhra Pradesh, Kerala, Karnataka and Tamil Nadu. It is to this broad categorisation that BT has added Gujarat (to the North) and Maharashtra (to the South).

The northern states are clearly laggards in terms of economic as well as social indicators. "If the northern states are lagging behind their southern counterparts in agriculture, then it is because they are still using traditional methods of cultivation," says Laveesh Bhandari, Chief Economist, Indicus Analytics. And while the northern states may boast bigger markets in terms of size, they essentially revolve around low-value products; in contrast, the southern states have become a thriving market for premium products.

However, it is in the go-go sectors of it and it-enabled services that the southern states are far ahead of their northern peers. "Seventy five to 80 per cent of the total exports of it, ITEs and BPO comes from the southern states," explains Sunil Mehta, Vice President, NASSCOM, India's national association of software companies. Given the South's better social and economic indicators (see South Is Supreme), that is likely to continue for time to come.

-Ashish Gupta

(From left) TCS' S. Ramadorai, Wipro's A. Premji
Infosys' N. Lilekani and Satyam's R. Raju: Big four

Offshoring
Bangalored!

In 2004 the hot-button issue was offshoring. US Presidential candidate John Kerry (thank God, he lost!) described companies offshoring jobs as Benedict Arnolds. And a new word, Bangalored, as in 'My job was Bangalored', entered the popular lexicon. Still, India's national association of software companies, NASSCOM, estimates that some $12.5 billion (Rs 55,000 crore) worth of work (in the it and it-enabled services space) was offshored to India in 2004. In 2005, the number is expected to be even higher, at around $16.3 billion (Rs 71,720 crore). And much of the growth will happen in an environment that is far less jingoistic and far more conducive to business in general. There's no longer any doubt that offshoring adds value. However, India now has to deal with the competitive reality of other countries such as China, the Philippines and Vietnam catching up with it.

-Venkatesha Babu

Pharma
Year Of Reckoning

Miracle cure: Pity there can't be one for Y2K+5 blues

Pharma will remain an Indian success story in 2005. Yet, in many ways, the year is a veritable minefield for companies. "The year 2005 comes with many uncertainties," says S.V. Veerramani, Vice President, Indian Drug Manufacturer's Association. Uncertainties not from the perspective of the radical changes the sector is set to see in 2005, but from that of the impact of these on the Indian pharmaceutical industry. First, the changes. India makes its transition to a product patent regime this year. That means products related to patent applications submitted or granted after January 1, 1995, cannot be reverse engineered (in one move, a great revenue generating opportunity has just been closed to Indian pharma companies, the bulk of them small- and mid-sized units). Then, there is the fact that 2005 will see the government change guidelines related to good management practices (GMP), something that could mean the end of the road for small pharmaceutical units that may not be able to make the investments required to adhere to GMP. The industry is also worried about the mailbox provision. Under trips (trade-related aspects of intellectual property rights), it became necessary for countries that did not have a product patent regime on January 1, 1995, to provide for a mailbox, essentially a mechanism for accepting patent applications till a product patent regime came into force, apply fair rights of priority, and offer exclusive marketing rights. That could well mean that once the mailbox is opened, a company is granted patent protection for 20 years in India, despite the same patent having expired in the original country of filing.

-E. Kumar Sharma

Quiet Period
Governance Premium

Indian 'quiet period' laws governing what companies can say in the run-up to an initial public offering and prior to declaring financial results may be stricter than us ones, but few companies follow them. That could change soon, courtesy free market dynamics. "Investors usually pay a higher valuation for stocks (such as Infosys and HDFC) that are ranked high in terms of corporate governance," says Andrew Holland, Chief Administrative Officer and Executive VP (Research), DSP Merrill Lynch. So there!

-Narendra Nathan

Retail
To Be Or Not To

The big question about retail in 2005 is whether or not the government will allow 26 per cent foreign direct investment (FDI) in retail. The indications are that it wants to. Not that it matters. Organised retail will continue to boom in 2005, although Arvind Singhal, CEO of retail consultancy KSA Technopak estimates that 2006 will mark the point of inflection when modern retail formats shall begin to make a very significant impact not only in the metro towns, but other top 20-30 cities.

-Abir Pal