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.

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.

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.

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