There
is no denying that oil markets have perhaps never been so attractive-fuelling
investments in every aspect of the business-exploration, refining
and marketing. But will this eliminate the shortages in products
across-the-board when the new refineries come up a few years from
now? Not quite, argues the petroleum ministry in its domestic
projections for the next five years (2007-2011). At present, the
country imports only LPG. However, by the end of the 2011, the
country is likely to end up importing not only LPG but also Fuel
Oil and Low Sulphur Heavy Stock that are predominantly used in
the fertiliser (as feedstock fuel) and power sector. The ministry
argues that this trend is in line with global projections that
predict a shortage of LSHS and FO over the next few years.
Why? The simple answer is that there is more
money to be made in other products like petrol and diesel. The
existing refineries are upgrading to improve the product mix,
maximising output of higher value products like naphtha and petrol
in the hope of increasing profitability. However, the investment
decision may not be entirely optimal given the projected shortage
in the two low-value products. While the refiners may opt for
a flexible upgrade in view of this finding, the possibility of
import has little bearing on the users of the two products, since
the domestic prices of industrial fuels are benchmarked to the
global basket.
How trustworthy are the government's estimates?
In the past, the government has got it awfully wrong. The current
planning exercise has learnt from past mistakes and factored in
the growth of the services sector and the substitution of petroleum
products by natural gas and LNG. Rigorous planning and projection
could help match demand and supply of oil products.
-Balaji Chadramouli
Fine
And Be Damned
FIIs still have the upper hand in dealings
with SEBI.
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SEBI Chief M. Damodaran: Doing
what he can |
As
this magazine goes to press, the buzz in stockmarket circles is
that Citigroup Global Markets Mauritius (CGMM) has decided to
pay the fine of Rs 1 crore imposed on it by the Securities and
Exchange Board of India for a 2003 violation of FII (Foreign Institutional
Investor) norms. The violation in question concerns wrong reporting
of issued Offshore Derivative Instruments (ODIs); Citigroup had
reported that no ODIs had been issued to overseas corporate bodies
(OCBs); however, SEBI discovered that an ODI had been issued to
an OCB, Magnus Capital Corporation and levied the maximum fine.
"Citigroup should consider itself lucky to get away after
committing a substantive crime," says Sandeep Parekh, Advocate,
ph Parekh and Company. "No ODI should have been issued to
an overseas corporate body." "We are fully co-operating
with the regulator," counters a Citigroup spokesperson.
Some FIIs do seem to place client confidentiality
over market regulations; in May 2005, SEBI banned UBS from accessing
the market because of the FII's poor compliance to the regulator's
know-your-client requirement (in investigations surrounding the
May 17, 2004 stockmarket crash); the ban was overturned by the
Securities Appellate Tribunal and is being contested in the Supreme
Court. Today, regulations only insist that ODIs are issued and
transferred to entities regulated by relevant regulators in countries
of their incorporation; most FIIs do not disclose names of eventual
beneficiaries. "Until regulations favour the regulator FIIs
will always have an escape route," says Parekh. Maybe SEBI
should amend norms to have FIIs name ultimate beneficiaries to
ODIs.
-Mahesh Nayak
Top Of
Her Game
PepsiCo gets an Indian CEO.
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PepsiCo's Nooyi: No glass
ceiling at all |
Growing
up in the middle class environs of T-Nagar in Chennai, Indra Nooyi
would join her sister in a game pretending to be the President
of India. The purpose of the game put together by their mother
was simple: to instill in the two siblings that one could aspire
for anything, provided a person was committed to it and really
tried. Decades later, their mother would have cause to feel proud.
Though Nooyi-now, an American citizen-will never become the President
of India, she has achieved something of note: becoming CEO of
the second largest cola company in the world.
As the head of PepsiCo, the 50-year old will
oversee over 150,000 employees and a company with a market cap
of around $100 billion (Rs 4,70,000 crore) and earn an annual
personal compensation of around $6 million (Rs 28.2 crore) with
a handsome stock option to boot, making her probably the most
highly paid executive of Indian origin in the world. Reacting
to her elevation, she told a meeting of analysts-hours after the
public announcement-that she was both "humbled and honoured".
Nooyi's ascendancy to the top has come as
no surprise. Known for her dogged determination, she joined PepsiCo
in 1994 and has been credited for being the driving force behind
the strategic diversification and expansion the company undertook
soon after. Some of this was achieved inorganically, through the
acquisition of companies like Tropicana and Quaker Oats, giving
PepsiCo the much wanted stability at a time colas seemed to being
losing their fizz. In fact, she got the best endorsement from
outgoing CEO Steve Reinemund, when he said, "Indra's record
of transforming PepsiCo speaks for itself, and she has been an
invaluable partner and ally throughout my time as CEO. She not
only co-authored our vision and drafted our strategic blueprint,
she has a sharp talent for turning insightful ideas and plans
into realities and for developing and replenishing our talent
base. Having worked side-by-side with Indra for many years, I
am convinced she is more than qualified and clearly ready for
her new role leading PepsiCo."
And with emerging markets like India, China
and Brazil becoming an integral part of the balance sheet of global
companies, Nooyi's ascent to the top is expected to ensure that
Pepsi retains its newly acquired edge in business.
At a personal level, especially for someone
who has made it big in the rough and tumble world of corporate
America, Nooyi has always worn her Indian heritage on her sleeve,
or rather as the nine-yard Kancheepuram silk drape, her sartorial
favourite for most off-work events. Born and raised in Chennai,
she completed her under-graduate degree at Madras Christian College.
Fluent in French, she went on to graduate from the Indian Institute
of Management, Calcutta and then enrolled for her Masters in Public
and Private Management at Yale University-where she is now on
the advisory board.
It is however the ability to marry two worlds-professional
and personal-that has stood Nooyi in good stead and brought her
to the threshold of corporate stardom. Or as she herself told
a forum, "Let me say that when I was a young girl growing
up in Madras, I knew that to achieve my dreams I would one day
follow the advice of the famous New York newspaperman, Horace
Greeley. He said, "Go West, young man!" Silly me. I
made the bold assumption that he was also talking to young women.
So I did go West." And how.
-Anil Padmanabhan in New
York
Coming
Soon: Server Farms
And Google may be first off the blocks.
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Google's Larry Page and Segey
Brin: Farming in India now |
Each
time you check your e-mail, do a web search, buy something online
or download a video clip you are interacting with data located
in several thousand servers scattered across the world as most
of the websites you visit are hosted there. With net traffic to
and from India exploding-Internet and Mobile Association of India
estimates that our country is the fourth largest user of net with
more than 50 million users-it was inevitable that data centres
in the form of server farms, would make an appearance locally.
That is what Google is believed to be examining in India, though
the company itself will not comment on the issue. While several
companies have their own small scale data centres and some internet
service providers like VSNL or Sify host data for some companies,
the server farms of the scale of which we are talking about are
currently not present in India.
"It was inevitable that players look
at setting up server farms in India given the growing demand for
it," says K.P. Unnikrishnan, Marketing Director, Sun Microsystems,
a major player in the server market. A local server farm does
make eminent sense: from an end-user perspective it means faster
data uploads and lower telecom costs. Then why aren't companies
rush to set up server farms?
Blame it on problems related to men, machines,
power and money. Typically, a server farm occupies the space of
a couple of football fields filled with hundreds of thousands
of servers and sucks power supply equivalent to that required
in a large town. Setting up a data centre thus poses a challenge
especially in the Indian context.
In a country where blackouts are routine
and the quality of power supplied cannot be guaranteed, ensuring
adequate and uninterrupted power which is also cheap will be a
formidable task. Since data centres cannot afford any downtime
and have to run 24 X 7, companies planning to set up server farms
will have to ensure adequate backup power thus pushing up costs.
And with real estate costs zooming by the day, finding real estate
at reasonable cost (and other assorted specifications) is another
task. Conservative estimates suggest that the total capital cost
of a large server farm (including real estate) would be around
$1 billion or Rs 4,700 crore.
There is, however, no denying the fact that
India needs server farms (and the logic isn't just internet traffic).
Increasingly, companies will look to even provide software as
a service. Nothing resides on your hard disk, you just plug into
the network, use the required software to do the desired task
and store results on a server at a server farm till you want to
access it again. Analysts point out the advantages of such a mechanism.
Companies need not spend huge amounts on software upgrades, worry
about maintenance or technology refresh. They can just focus on
the core business, access a service and pay as per use.
If Google does indeed setup a server farm
in India, Yahoo and Microsoft which have some of the most visited
properties on the web are also expected to follow suit sooner
than later.
-Venkatesha Babu
A Chip
In Time
Tamil Nadu's hardware belt gets a chip unit.
It boasts hardware
manufacturers such as Nokia, Flextronics, and Motorola. There
are rumours that Dell and Foxconn could soon set up shop here.
So, it shouldn't come as a surprise to anyone at all that Sri
Perumbudur, 48 km to the South-west of Chennai, fast emerging
as one of India's most vibrant hardware belts, finally gets a
chip shop of its own. The plant in question, which will cost Rs
1,000 crore, will belong to TAPP Semiconductor India, founded
by P. Raja Manickam, a 50-year old alum of the Indian Institute
of Technology, Kharagpur, and a veteran of the chip-testing industry.
In 2003, Manickam founded Tessolve, a chip-testing firm in the
us, then moved it to Bangalore, and has now decided to go the
full nine yards with a unit at Sri Perumbudur "where our
customers will be closest." TAPP will source wafers from
various companies; each wafer is between 200 mm and 300 mm in
diameter and could contain as many as 2,000 dies, which will then
be cut, packaged and tested before being supplied to customers.
"India is emerging as a favoured design centre, but there
is no one here who does the final bit of assembling needed in
the semi-conductor industry," adds V. Veerappan, Co-founder
and Vice President, TAPP. With a total current market size of
around $3 billion (Rs 14,100 crore), which is set to grow exponentially
given the recent hardware boom, TAPP would seem to be onto a good
thing.
-Nitya Varadarajan
|