HEADLINER
G.V. Prasad

FIRST THE GOOD NEWS: Germany's fourth-largest generics marketer betapharm now belongs to Dr Reddy's Labs (DRL), which agreed to pay m480 million (Rs 2,544 crore) recently to buy it from private equity investor 3i. The deal, to be funded through a combination of internal accruals and debt, gives DRL an immediate 3.5 per cent share of the largest generics market outside the US. The bad news: DRL may have overpaid. The deal price is three times betapharm's revenues, against the accepted multiple of 1.75 to 2. Says Malvinder Singh of Ranbaxy Laboratories, which was also a bidder: "Sometimes walking away is also winning." CEO of the triumphant company, G.V. Prasad, does not deny there were competitive pressures, but says that the deal wasn't overpriced "if you look at the profitability" of betapharm, which posted m40 million (Rs 212 crore) in EBITDA last year. D-Street seems to agree with Prasad. His company's stock was up almost 10 per cent to Rs 1,281 the day the deal was announced.

-E. Kumar Sharma with Shalini S. Dagar

Focussing On Petrochem

Indo Rama's Lohia: Change in focus

O.P. Lohia of Indo Rama Group struck a deal to sell his family's 49 per cent stake in Indo Rama Textiles to Spentex Industries for about Rs 128 crore. Spentex already owns 15 per cent of Indo Rama Textiles, and will be making an open offer to non-family shareholders. "The acquisition puts Spentex among the top three yarn (manufacturers) in the country," Spentex's Managing Director Mukand Choudhary said in a release. Lohia, on his part, plans to focus on the petrochemicals business. His Indo Rama Synthetics is the second largest polyester manufacturer in India.

Novartis Trips On Patent

India's new patent regime in pharma may have just been put through its first big test. India's Patent Office refused Novartis a patent on its anti-cancer drug Glivec and agreed with challenger Natco Pharma that it had merely tinkered with the original molecule (patented in the us in 1993). In other words, "this was a classic case of ever-greening", according to Hyderabad-based Natco. Novartis, which also gives away Glivec through the Max Foundation to those that cannot afford it and to others, sells a month's course of the branded drug at Rs 1.10 lakh versus Rs 10,000 of local firms. Novartis may appeal.

Vedanta's Agarwal: Learning curve

From Copper To Classes

Chairman of Vedanta Resources, Anil Agarwal, is reportedly planning to set up a world-class university like Oxford or Harvard at a cost of $1 billion (Rs 4,500 crore). To be called Vedanta University, it will be launched by July 2008 and offer courses in arts, engineering, law and medicine. Consulting firm at Kearney will be advising.

NEWSMAKERS
LALU PRASAD YADAV

Turnaround man: At least now he can afford a smile

Railway minister Lalu Prasad Yadav has been called many things: Badshah of Bihar, strongman, canny, wily, casteist and a whole host of less wholesome epithets. The latest is turnaround man; and he's actually earned it the hard way-by delivering. The Indian Railways is expecting to end 2005-06 with record net revenues of Rs 8,000 crore and a fund balance of Rs 11,000 crore. This will allow it to transfer money-Rs 2,000 crore-to its Capital Fund, which is used for long-term investment purposes, after a gap of eight years, and pay the government Rs 3,500 crore as dividend. And it has achieved all this despite absorbing a Rs 12 per litre hike in diesel prices in five phases over the last year, and giving away Rs 250 crore by way of discounts on short distance tickets.

What's the secret behind this turnaround? Ministry officials say it was Yadav's decision to tap the unexploited potential of the Indian Railways that did the trick. Giving a 20 per cent discount on freight in the "empty flow direction" (when goods trains return to their points of origin after delivering goods) substantially boosted revenues. Since running costs remained constant, the entire additional revenue went straight to the bottom line.

On the passenger side, e-ticketing has boosted traffic. And its scheme of upgrading lower class passengers to higher classes has led to a huge increase in capacity utilisation. As a result, the railways expects its daily refunds of Rs 7 crore a day to come down by about Rs 2 crore. These initiatives point to a major change in mindset. "The Railways now operates as a transporter and not as another government department," says a spokesperson.

-Shaleen Agrawal

NUMBERS OF NOTE

17,000: The number of Indian students in Britain, compared with nearly 80,000 in the US

4,000: The number of Municipal Corporation of Delhi (MCD) officers and employees found guilty of corruption or misconduct till January 15, 2006

1.3 billion: Number of smokers worldwide. China accounts for about one-quarter of the world's smokers, i.e., around 350 million

$250 billion (Rs 11,25,000 crore): Worth of Indian retail sector in a year. But it is heavily underdeveloped, over 95 per cent of the market is made up of small, family-run stores

$168 million (Rs 756 crore): The amount the Rolling Stones generated in record and concert sales last year (2005). The band topped Forbes' list of last year's biggest money makers in music, followed by U2, which generated close to $150 million (Rs 675 crore)

$200 billion (Rs 9,00,000 crore): China's trade surplus with the US. It also has a $137 billion (Rs 6,16,500 crore) trade deficit with the rest of Asia

$1.1 million (Rs 4.95 crore): General Motors CEO Rick Wagoner's expected salary in 2006, representing a 50 per cent cut over last year (2005). GM suffered $8.4 billion (Rs 37,800 crore) loss on continuing operations last year

42 million: The number of sleeping pill prescriptions filled in the US last year (2005), according to the research company IMS Health, up nearly 60 per cent since 2000

55,000: The number of workers US-based business software maker Oracle Corp. plans to employ worldwide shortly

522 tonnes: Amount of gold imported from Dubai by the rest of the world in 2005. This is up from 502 tonnes in 2004, according to a recent statement from the Dubai Metals and Commodities Centre (DMCC)

$15.3 billion (Rs 68,850 crore): The size of the US chocolate industry

A Question of Trust

Sahara group supremo Subrata Roy has announced that he plans to transfer all shares controlled by him in all his group companies to a trust to pre-empt any split in the business. Disclosing his plans to select newspapers, Roy said the trust would be headed by him but have 60 members, just six or seven of whom would be family members. "The trust is being made to ensure that no single person can play around with the shares for his own benefit," Roy told Business Standard. Sahara just exited the airline business and could be looking for investors in its media and housing ventures to focus on the core business of para-banking.

NOTED

RECALLED: Clemenceau, the asbestos-lined warship, by French President Jacques Chirac. The French high court has blocked its export to India for dismantling. This was in response to complaints by Greenpeace and anti-asbestos groups, which said the ship posed environmental and health hazard.

ACQUIRED: By Aurobindo Pharma, UK generics drug firm Milpharm for an undisclosed sum. Milpharm had revenues of £7.7 million (Rs 59 crore approx.) in the year to September 2005. Aurobindo will use a part of the proceeds from a $60-million (Rs 270 crore) convertible bond issue raised in 2005 to fund the deal. This is Aurobindo's first European acquisition.

PACT: Between Tata Consultancy Services and Stanford University, for research in data privacy. TCS will be investing $1 million (Rs 4.5 crore) in this research collaboration. As part of the five-year agreement, TCS will also become an industrial partner on data privacy in the new Team for Research in Uniquitous Secure Technology (TRUST). TRUST is a multi-university and multi-industry initiative that includes UC Berkeley, Cornell University and Carnegie Mellon University, Cisco Systems, HP, IBM, Intel, Microsoft, Qualcomm, Sun and Symantec.

OVERSEAS BORROWING: Of $1.5 billion (Rs 6,750 crore), by Reliance Petroleum Ltd (RPL), a wholly-owned subsidiary of Reliance Industries Ltd (RIL) through a mix of 10-year and seven-year loans. This is the single-largest limited recourse financing mandated in the Asian markets in recent years, excluding China, and the fourth-largest single mandate in Asia in the last five years. The loan will be used to finance the setting up of a new 27-million tpa refinery and a 0.9-mtpa polypropylene complex. The total cost of the project is $6 billion (Rs 27,000 crore). RPL also plans a domestic IPO.

MILESTONE: Reached by Airtel, which has crossed the two million cellular phone customer mark in Delhi.

BOUGHT: By United Phosphorus Ltd (UPL), Advanta Netherlands Holdings BV, a supplier of seeds and seed technology, for m100 million (Rs 530 crore approx.). The acquisition, through United's Mauritius-based subsidiary, would help UPL's strong entry into the global agri-biosciences sector.

Subhiksha's Makeover

Subramanian: A new experience

Nine years after bare-bones retailer Subhiksha opened its first store in Chennai, it is mulling a makeover. It is switching from a serve-on-demand model to a self-service format. "The customer has changed 10 years down the line," says R. Subramanian, Managing Director, Subhiksha Trading Services. Since space is at a premium, the retail chain wants to increase sale per square foot without compromising with its discount philosophy (discounts of up to 10 per cent are offered on a range of items). Therefore, Subhiksha stores will relegate dry groceries like sugar, dals, rice to the background (they will be fetched for the asking) and bring several new "impulse items" to the fore. "It is cosmetics, after shaves and ready-to-eat items that are seeing very good sales," says Subramanian. Simultaneously, the Rs 235-crore-in-revenues retailer plans to open 800 new stores in markets like Andhra, Karnataka and Delhi, in addition to the 145 it already has largely in Tamil Nadu. Planned investment in the expansion: Rs 145 crore (for the next four months). Subramanian, however, isn't straying too far from his no-frills model. None of the new stores, like the existing ones, will have air-conditioning.

-Nitya Varadarajan