|Dubai Port Worlds
is common between Orascom, the leading telecom operator in Egypt,
Dubai Port Worlds, a port operator, and Huawei, a Chinese telecom
equipment manufacturer? All three firms do business in the country-Orascom
holds equity in Hutchison Essar, Dubai Ports is an operator of
container terminals in Chennai, Visakhapatnam and Mundhra, while
Huawei has an R&D centre in Bangalore. The apex security wing
of the Government, the National Security Council Secretariat (NSCS),
believes they should not be allowed to do so.
"Late Yassir Arafat's organisation has
funded Orascom and the company also happens to be a leading operator
in Pakistan and Bangladesh. Hence it is not in our security interest,"
feels the NSCS. In the case of Dubai Port Worlds, the port operator
has won contracts from Pakistan (Gwadar Deep Sea Ports). Huawei
has been established by a former member of the People's Liberation
Army (PLA) and a member of the Chinese communist party.
| PARANOID SUGGESTIONS?
FDI in "sensitive" sectors will be filtered
Sectors under scanner include ports, airlines,
oil and gas, pharmaceuticals.
news for foreigners with a large presence in Pakistan, China
security wing suggests Act to restrict investments
should not be allowed into India because Yassir Arafat's organisation
has funded it
Port Worlds' entry is not in India's security interest because
it has won contracts from Pakistan
too is not in India's interest because it has been established
by a former member of the People's Liberation Army in China.
In a recent discussion paper, the NSCS has
suggested a series of measures to 'filter' foreign direct investment
(FDI) in sensitive sectors. The objective is to restrict investments
from Pakistan, Bangladesh, China and screen unverifiable investments
from tax havens. The NSCS has proposed a legislation, National
Security Exception Act, that would "empower the government
to suspend or prohibit any foreign acquisition, merger or takeover
of an Indian company that is considered prejudicial to our national
The apex security arm of the government has
also suggested that the Reserve Bank of India or the Securities
& Exchange Board of India should screen the security aspect
of all mergers and acquisition activity involving foreign equity.
Furthermore, "existing firms should be required to take approval
before starting any new activity in sensitive sectors or locations".
And, the definition of sensitive sectors envelops a good part
of industry-airports, seaports, aviation, telecom, internet service
providers, drugs and pharmaceuticals and metallurgy. The NSCS
has cautioned against the entry of Great Wall Airlines, a subsidiary
of China Great Wall Industry Group, which plans to enter the cargo
operations business in Chennai and Mumbai. Trade specialists point
out that such suggestions, if adopted as policies, are more likely
to be misused. And such restrictions don't do any good to the
Code of Justice
Better to put BPO fraudsters in jail than
make the office one.
a crime that would have been termed as an "open and shut"
case in a Mickey Spillane novel. In 2002, an ex-employee of the
Mumbai-based Geometric Software Solutions, sent emails to several
companies in the us offering to sell the source code of a software
package; Geometric was debugging the software for a us client,
SolidWorks. Another us company, Solid Concepts, responded to the
former employee's mails. Solid Concepts also informed the Federal
Bureau of Investigation (FBI) that SolidWorks' source code was
up for sale. The ex-Geometric employee agreed to sell the source
code for $200,000 (the software was worth $60 million that year).
A down-payment of $20,000 was wired to his bank in Mumbai.
The dubious transaction was caught on tape
in a joint operation of the FBI along with the Central Bureau
of Investigation (CBI). FBI agents, key witnesses from Solid Concepts
and SolidWorks flew down to India and deposed in the courts. Four
years later, the ex-employee is out on bail. Manu Parpia, Vice
Chairman and Executive Director of Geometric, is angry and frustrated.
"Over the past four years, I have spent nearly Rs 15 lakh.
Despite being the CEO of a company, I have spent the time shuttling
between Mumbai and Delhi and have spent two weeks of my time just
on this case. It's agonising," says Parpia.
Indeed, periodic security breaches threaten
to punch huge holes in the great Indian outsourcing story. But,
as Parpia elaborates, the sore point may not be the breach itself
but the fact that the perpetrator walks away unscathed. "I
am very aggrieved that this guy is free today. People are citing
this as a case against outsourcing. At the rate at which this
case is proceeding it might take 5-10 years to get over,"
To be sure, the Indian judicial system when
it comes to disposing cyber crime cases is extremely tardy. Take
the high profile case of former employees of BPO firm MphasiS,
who were arrested for allegedly siphoning off $300,000 from Citibank
customers after stealing account details in Pune in April 2005.
More than a year has passed and even though the police have completed
their investigations, the case is yet to come up to trail. Says
Pawan Duggal, an expert in cyber-laws and a practicing Supreme
Court advocate: "No conviction has happened even in the first
case of cyber theft that was registered in 2000." So, where
does industry go from here? Says Vivek Kulkarni, Chairman and
CEO of Bangalore based b2k Corporation: "Data security is
a test of character for the industry. At the same time, you want
your office to be a beautiful place to work and not a jail."
Is Mukesh Ambani set to re-enter
the power sector?
|RIL's Ambani: Reserve power
a crippled space shuttle in outer space would probably be an easier
task than salvaging the 2,184 mw Ratnagiri Gas and Power Private
project. Last fortnight, the Group of Ministers (GoM) sowed the
seeds of a solution that could well see Reliance Industries (RIL)
enter the power sector. The GoM first reviewed ownership of the
LNG terminal, presently in the hands of NTPC and Gail; and also
opened negotiations with potential and existing gas suppliers.
Gail, which was entrusted with procuring
gas for the project, failed to do so. Petronet LNG (PIL) managed
to secure gas for the project. Over the last few weeks, a consensus
was emerging to transfer the LNG terminal to PLL and provide a
minority share in the terminal to Qatar Gas, a supplier to PLL.
Then came along another option-that of piped gas from domestic
sources. Leading the pack in commercialising new discoveries is
Reliance, which has reserves in excess of 7 trillion cubic feet
(TCF), enough to power three times the capacity of the Ratnagiri
plant. Piped gas will be cheaper than LNG. The government may
well decide to sell the integrated project to the company that
provides the cheapest gas. Industry observers, however, argue
"Reliance will have little interest in the LNG terminal given
its domestic gas reserves." Watch this space.
Canbank is the latest MF to offload a stake
to a foreign major.
action in the mutual funds space just doesn't stop. In the past
couple of years, at least three foreign players flagged off their
Indian operations by buying into an Indian asset management firm.
And there are many more in the wings, with a host of names including
JP Morgan, Goldman Sachs, UBS, Nikko, Sumitomo and Schroeder rumoured
to be eyeing the Indian mf market. What's more, speculation persists
that Standard Chartered mf is up for sale and, on another front,
Shinsei of Japan has roped in Sanjay Sachdev, formerly with Principal
For the moment though it's the turn of a
Rabo Bank subsidiary, Rabeco, to go the same way. The Netherlands-based
firm is said to be acquiring a sizeable stake (between 40 and
50 per cent) in Canbank Mutual Fund, a wholly-owned subsidiary
of Canara Bank. Says B. Sukumaran, Managing Director, Canbank
Mutual fund: "We are in the final stage of roping in a foreign
strategic partner for our mutual fund business. The deal will
be finalised in the next 2-3 months and we may place a maximum
49 per cent stake with them." Advisors KPMG and Ernst &
Young have already started the due diligence process at the state-run
mutual fund. Industry experts reveal that Canbank mf, which manages
assets to the tune of Rs 2,800 crore, would command a valuation
in the range of Rs 40 and Rs 60 crore. That figure is arrived
by valuing the equity and debt funds separately. The former is
valued at 7-8 per cent of the total corpus of Rs 500-600 crore-which
works out to a minimum of Rs 35 crore and Rs 50 crore on the higher
side; the liquid and debt finds have assets of Rs 2,200-2,300
crore, and are valued at 1-3 per cent of the figure-which works
out to Rs 40 crore on the lower side and Rs 70 crore at the top.
If the deal goes through, Rabeco will have
such names as BNP Paribas of France, the Singapore-based DBS and
Societe Generale for company. Last October, BNP Paribas acquired
a 49.9 per cent stake for Rs 100 crore in Sundaram Mutual Fund,
which works out to a valuation of 7.2 per cent of its assets under
management of Rs 2,779 crore at the time of sale. Prior to that
in June, DBS got a foot into Cholamandalam Mutual Fund by acquiring
37.5 per cent in the listed Cholamandalam Investment & Finance
Co for Rs 228 crore. Other than mutual funds, the flagship also
has a presence in car loans and insurance. In July 2004, Societe
Generale bought a 37 per cent stake in SBI Mutual Fund for Rs
According to Sukumaran, the Canbank deal
is win-win for both parties. "The foreign partner will bring
to the table essentially product expertise and global reach. We
offer them an entry into India as well as access to the 2,500
branches of Canara Bank", says Sukumaran. "Canbank AMC
would also earn substantial fee income from advising and managing
the India-dedicated offshore fund of the foreign partner."
It also gets a chance to compete head-on with the moneyed foreign
funds like Fidelity, who are spending plenty on promotions as
well as on more sophisticated products. The tie-up also helps
it match up to industry standards on the salary and remuneration