India's dismal standing (rank: 117) and inability to qualify for the FIFA World Cup 2006-and, almost certainly, many more World Cups to come-may actually not be a bad thing and may actually work in favour of foreign inflows into domestic equities.

If that sounds like a bad joke, consider this: global corporate finance giant UBS (with its tongue not entirely in its cheek) has put out a research report that attempts to predict the winner of the 2006 World Cup. UBS thinks it will be Italy but more relevant to us is its finding that emerging markets (with a football culture) tend to react strongly to major football tournaments. UBS also says there is some sort of a correlation between losses at the World Cup and adverse performance of markets.

What's in all this for India? Plenty! At least 12 of the 32 teams that have qualified for the World Cup are classified as emerging markets. These include exciting markets like South Korea and Mexico, and exotic ones like Argentina. Now the fact that 31 of the 32 teams have to lose at some stage means that 31 markets are going to be subdued following a loss at some stage. Now picture this scenario: Argentina goes on to win the finals, Brazil gets dumped in the quarters, Mexico flatters to deceive (as usual), and Korea doesn't do justice to its dark horse tag. Investors start deserting these markets (either because of their inability to deliver or, as in Argentina's case, because they provide a good exit opportunity). What are the options for investors looking to reallocate assets?

Countries like India, of course, are resplendent above the vagaries of World Cup performance. So if your heart is on Brazil and your money on Dalal Street, here's a suggestion: place a wager on the men in yellow jerseys lifting the Cup, and hedge that with a fresh position in your favourite Indian stock(s).

-Brian Carvalho

Tripping On Gas
RIL's gas venture is behind schedule.

Mukesh Ambani: Will RIL keep its date with the deadline?

When Mukesh Ambani addressed shareholders at the Annual General Meeting of Reliance Industries Ltd (RIL) in August last year, it was historic for the fact that younger brother Anil was not on the podium as a Vice Chairman. The other big thing was the unveiling of his grand vision for the Krishna Godavari (kg) basin in Andhra Pradesh where RIL had struck gas in 2002. "In the first phase, we will produce 40 million cubic metres per day of gas production," Ambani told his shareholders. Today, that goal still looks some distance away; costs have almost trebled from an estimated $2.5 billion (Rs 11,250 crore at the then exchange rate) to $7 billion (Rs 31,500 crore) now; and the gas, which should have been flowing by the end of 2005, will reach the market a full three years later in December 2008.

The delay in obtaining necessary clearances from the Andhra Pradesh government is reportedly the main reason for the time overrun. And the rising costs of oil rigs in the international markets have contributed in no small measure to the higher cost. But these are issues Reliance has never had to face before. The question, then, is: has it overreached itself in this sector? An RIL spokesperson declined to comment. Raj Gandhi, who tracks the oil sector at Mumbai's Angel Broking, says a five to six year time frame starting from 2002 is reasonable. "It was also the first time that RIL was getting into exploration," he says. The obvious implication: the company lacks in-house talent in this field. "The expected cash flows, and their impact on profitability, will, at worst, be delayed by a year," he adds. These delays coincided with the timeline of the battle between the Ambani siblings; so it is tempting to conclude that the internal strife did indeed take a toll on Reliance's formidable project management capabilities.

With that chapter now firmly behind, Mukesh Ambani will need to draw on all his entrepreneurial resources to ensure that Reliance keeps its date with the 2008 deadline.

-Krishna Gopalan

Goal
Football-related ads are on the rise.

Soccer seems to be finally getting its due in the Indian advertising firmament. There's a loud buzz around FIFA World Cup this time around and companies have already spent Rs 4-5 crore on various on-ground and on-air marketing initiatives for the event which kicks off on June 9 in Germany. Says R.C. Venkateish, Managing Director, ESPN: "We have already got eight leading sponsors-Coca-Cola, Bharti, Adidas, Motorola, Mirc Electronics, IndianOil, HDFC Securities and Maruti Suzuki-for the event." ESPN star Sports has the India rights for the event.

Advertisers confirm his claim. According to media buyers, ESPN star Sports is charging Rs 80,000-1,00,000 for a 10-second spot, almost 70-80 per cent more than World Cup 2002, and nobody is complaining. Says Anita Nayyar, Managing Director, Starcom (North India and Pakistan), a media buying agency: "Soccer is gradually emerging as a popular sport among niche male audiences; this group is the most difficult one to catch on TV." Indeed, TRPs for soccer in recent years have seen a consistent rise and ranged between one and three for English Premier League and Spanish Primera Liga matches. "The FIFA World Cup in 2002 reached a cumulative audience of 30.3 million in India and the finals got a rating of 9.1, which is comparable to One-day cricket," says Venkateish. "We expect it to be even better this time," adds Nayyar.

"There has been a latent demand in India for good sport events other than cricket. We, as the official sponsors of the FIFA World Cup, are providing an alternative to sports enthusiasts in India," says Andreas Gellner, Managing Director, Adidas. Coca-Cola and Adidas are adding to the buzz by running football-related contests; the prize: a ticket to Germany to watch the World Cup and play in a parallel soccer event. Football is still nowhere near the league of cricket in India, but media buyers say companies will spend about Rs 50-80 crore on World Cup-related marketing initiatives over the next month.

-Archna Shukla