Are Walt Disney India and UTV discussing a tie-up in the children's broadcasting space? Rajat Jain, Managing Director, The Walt Disney Company India, which has two channels, Disney and Toon Disney, and Ronnie Screwvala, CEO, UTV, which owns Hungama TV, dismiss this as "speculation", but industry watchers say a tie-up will do both a world of good, and enable them to take on Turner Entertainment Network's two children's channels-Cartoon Network and pogo-that are the clear market leaders in this space.

According to Television Audience Measurement (tam) Media Research, in the first half of 2006, the two Turner channels had 30 per cent and 23 per cent viewership share, respectively, while Hungama TV, Disney Channel and Toon Disney had 14 per cent, 11 per cent and 17 per cent shares, respectively. "Together, the two Turner channels account for more than 50 per cent of the total advertising, which stood at around Rs 700 crore in 2005," says a Delhi-based media buyer. Disney and UTV, however, dispute these figures. "Hungama TV, in the last few days, has overtaken Cartoon Network and registered a 42 per cent share," says Screwvala. Cartoon Network has also consistently lost market share (from 85 per cent in 2004 to 30 per cent now) in the past two years, he adds. "It's not fair to compare new players (Disney and UTV entered the market only two years ago) with those who've been around for over a decade," says Jain.

Turner Entertainment, meanwhile, seems unfazed. Says Ian Diamond, Senior Vice President, Turner Entertainment Networks Asia: "When you have well-entrenched and successful brands like Cartoon Network and pogo, it makes sense (for others) to consolidate. Maintaining our position in a multi-player environment is nothing new for us. We are our greatest competition and we will continue to work towards maintaining our leadership position."

Can the challengers topple the market leaders? Let the kids decide.

-Archna Shukla

Just Show Me The Money
Temasek is in the back seat in two Indian ventures.

Lotus AMC's Bagga: Eyeing breakeven

Temasek holdings, the Singapore-based investment giant with a global portfolio of a little over S$100 billion (Rs 3,00,000 crore), is known to be an active investor. As it is in Indian companies like Tata Teleservices and ICICI Bank, where it has a 9.9 per cent and 7.44 per cent stake, respectively. But there are times when Temasek takes a back seat and prefers to be a passive investor, involving only its cash and little else. These are times when the fund's wholly-owned subsidiaries play the strategic role, just as is happening in India in the mutual funds and the non-banking financial company (NBFC) spaces. Temasek's 100 per cent-owned subsidiary Fullerton, through a joint venture with Sabre Capital, is starting a mutual fund in India, which will go by the name of Lotus India Asset Management Company. Another fully-owned subsidiary, Asia Financial Holding (AFH), has set up First India Credit, a 100 per cent-owned NBFC.

Ajay Bagga, CEO, Lotus India, says this is the first time Fullerton is venturing into the AMC business. "They have their expertise in managing institutional money and now want to venture into retail space by managing third party funds," he says. Fullerton owns 55 per cent stake in the JV in which Rana Talwar through Sabre Capital is a minority shareholder, and former Mphasis head honcho Jerry Rao has also hopped on board with Talwar. The promoters have infused $5 million (Rs 23.5 crore) in the AMC and another Rs 20 crore are said to be waiting on the sidelines for growing the business. "Our target is to break even in three-and-a-half years," says Bagga. The AMC has roped in a former fund manager from SBI AMC, Sandip Sabharwal, to head the equity desk, whilst Nand Kumar Surti, formerly of JM Financial, will head the debt funds. With an employee strength of over 100 people, the AMC has already opened 35 branches across the country and has tied up with 3,700 distributors to sell its mf products. By the year-end, the distributor network is expected to hit 10,000.

Meantime, First India Credit, which began operations four months ago, is targeting the mass market, specifically the lower middle and middle salaried class. Temasek's afh has a strong presence in the Asian markets like Indonesia, Taiwan and Pakistan as a bank. Restrictions by the Reserve Bank of India on banking ventures would have persuaded AFH to take the NBFC route into India. AFH has met with a fair degree of success in targeting small and medium enterprises as well as mass consumers in Indonesia through its investment in the Bank of Danamon (AFH through a JV with Deutsche Bank has a 66 per cent stake in the bank), and it might well be looking to replicate that model in India via the NBFC. Led by a former Citibanker G.S. Sundararajan, First India Credit has roped in Raj Raman of Prudential ICICI AMC and Smita Aggarwal of ICICI Bank for the retail segment. The current employee strength of the NBFC stands at 400 people. It has bought an 80 per cent stake in the Chennai-based Dove Financial. Currently present in 12 locations and 20 branches, the NBFC has plans to open nearly 700 branches in the next one year in India. Temasek should be impressed.

-Mahesh Nayak

The Party Continues
The first flush of results for the June quarter don't disappoint.

If the stock markets are subdued-perilously close to sinking below the 10k level at the time of writing-you can blame it on a number of factors, ranging from a sudden disenchantment of foreign investors with emerging markets to escalating tensions in the Middle East. What you can't blame for the bearish mood on Dalal Street is the corporate performance by India Inc. for the first quarter of 2006-07, ended June 30. The first flush of report cards-of 335 new as well as old economy companies-reveals bumper numbers. Net profits are up sharply by 38 per cent over the previous year's corresponding period for this sample of companies. Net sales aren't much far behind, surging by 32 per cent. On a sequential quarter basis, net profits surged by 6 per cent, and net sales 2 per cent over the March ended quarter. (One caveat: It's usually the better performers that release their results first, so by the time all numbers are in, the sales and profits growth numbers will be lower by a few percentage points.)

Says Rajat Rajgarhia, Head (Institutional Research), Motilal Oswal Securities: "Most companies have either met or exceeded expectations. Following an impressive first quarter performance we will be upgrading our 2007 earnings estimates." For Sensex companies, the brokerage had earlier estimated a 26 per growth in net profits for the entire year.

Operating margins, however, have been under pressure. This has been thanks to higher expenditure on power (up 7 per cent over the previous year's corresponding period), marketing expenses (up 24 per cent) and freight expenses (up 36 per cent). Rising crude oil prices and commodity prices have also played their part in lower operating profit margins, which were down by 30 basis points to 29.57 per cent over 2005-06's April-June period. At the net level, though, margins have improved by 57 basis points, to 13.6 per cent. Meantime, the hikes in interest rates globally have caught up with Indian companies, which showed a 30 per cent surge in their interest costs.

The sector that's the star of the show is clearly it services, with bellwether Infosys posting a 19 per cent growth in profits year-on-year (consolidated), and an impressive 15 per cent sequential jump in consolidated revenues (as against guidance of 6-7 per cent). However, wage hikes did bring down profit margins by 2.2 per cent, to 29.5 per cent over the March quarter. The good news is that Infosys has revised its guidance for the whole year, from Rs 12,254-12,446 crore to Rs 13,350-13,400 crore. Says R. Sreesankar, Head (Research), IL&FS Investsmart: "Rupee depreciation has helped the it companies to offset the wage hikes."

-Mahesh Nayak

Retail Overtures
Will Wal-Mart ally with DLF and Reliance Industries?

Wal-Mart may be the world's largest multi-brand retailer, but if it has to enter India it needs to sew up a few alliances. Current regulations permit only single-brand retailers to take up to 51 per cent in a joint venture operation with a local partner. Whether Wal-Mart will take the JV route is not clear, but what is slightly more certain is that Wal-Mart has begun doing the groundwork for other alliances as various Indian companies reportedly pitch themselves to win the retail giant's confidence. Some reports say that real estate major DLF Universal is in talks with the US retailer to be its franchisee in India to develop over 100 malls in 60 cities over the next four to five years. According to reports, Wal-Mart stores could be located either in DLF's malls or be stand-alone structures. While DLF will own the stores, Wal-Mart would take care of the backend and other logistics.

Meantime, industry insiders also reveal Wal-Mart is interested in partnering Mukesh Ambani's Reliance Industries Ltd (RIL) in the area of logistics. They point out that Wal-Mart is eyeing RIL for sourcing items such as fresh fruits and vegetables, as well as for transportation across the length and breadth of the country. RIL is readying a 40-plane air cargo fleet for its own logistical needs and this could serve Wal-Mart's purpose as well.

Wal-Mart, meanwhile, has appointed management consultant McKinsey & Co to help find a suitable partner or several of them for its India operations. On being asked about its India plans with DLF and others, Beth Keck, Director, International Corporate Affairs, Wal-Mart International, says: "We cannot comment on market rumours such as this." DLF refuses to comment as it has lined up an initial public offering.

-Amit Mukherjee