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FEB. 11, 2007
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Taxing Times
The phase-out of central sales tax is yet another move towards ushering in the national goods and services tax (GST). The compensation to the states, in lieu of CST phase-out, will include revenue proceeds from 33 services currently being taxed by the Centre as well as 44 new services of an intra-state nature that will be traded by the states. However, VAT is the way forward, though much needs to be done to iron out the anomalies in the current VAT regime.

India, Ahoy!
Indian investments overseas are growing and how. For instance, total Indian investment in Latin America and the Caribbean has topped $3 billion (Rs 13,500 crore) so far. The latest investment is by ONGC Videsh, which acquired an oilfield in Colombia for $425 million (Rs 1,912.5 crore). Earlier, ONGC bought an offshore oilfield in Brazil for $410 million (Rs 1,845 crore).
More Net Specials
Business Today,  January 28, 2007
Kicking Off, Finally
Is in a hurry to launch its exclusive stores.
Puma’s Mehta: Racing ahead
Globally, the battle in the sportswear market would appear to be a high-stakes clash between Nike and Adidas (which has acquired Reebok). Last year's football World Cup saw both the giants come head to head-German giant Adidas as the official sponsor and Nike responding with a star-strewn advertising campaign. So, where does that leave the other German sportswear major, Puma (created, incidentally, in 1948 by the estranged brother of Adi Dassler, founder of Adidas)? Behind the leaders for sure (the grapevine keeps crackling with talk of Nike eyeing Puma as a potential acquisition), and it seems to be a similar story in India, where Puma formally launched its operations only a year ago. Till 2002, it was present via a licensee called Planet Sports but, as Rajiv Mehta, the 28-year-old Managing Director of Puma Sports India, puts it: "A licensee has many brands within its portfolio, so its priorities are different."

The way Mehta sees it, being a late entrant into India-Nike, Reebok and Adidas are all entrenched, with flagship stores all over the country-has its pros and cons. The advantage: "We can learn from the mistakes they have already made; the disadvantage is that it's more expensive as retail space prices have rocketed through the roof. Plus, the consumers' mind is already set towards the competition, so we have the challenging task of changing that; but I think that the cost of the disadvantage is lower than the benefit that we're going to get out of the advantage."

Indeed, Puma is doing its bit to make up for lost time. It already has set up eight exclusive stores in India-four in Bangalore, two in Delhi, one in Chennai, and the latest one in Mumbai last fortnight. The rollout plan involves having 90-100 such Puma outlets by 2010, with 25 of those coming up in 2007. "Retail is going to be the key in India, and we have plans to get localised completely," adds Mehta.

Puma is attempting to position itself differently, in that it will be a "sports lifestyle" marketer rather than one that focuses only on sports. Mehta explains with an example: "We have a Ferrari collection which looks like the kind of shoe Schumacher would wear while racing, though it's not really a shoe you can race in." His target customer base clearly is the youth, who boast higher disposable incomes, and who hanker for the best brands. Mehta's mandate would be to convince them that Puma is one such label.

Never Say Never
The Hindujas want to revive a mothballed power project.

The bad news in the power sector is the sluggishness with which projects move off the drawing board. An optimistic way of looking at this, however, is that you can never leave any such venture for dead. Example? "We want to revive the Vizag (1,040 mw coal-fired) project as a merchant power plant," says Ashok Hinduja, Executive Chairman, Hinduja TMT and the youngest of the four Hinduja brothers. What he is referring to is the project that was originally thought of more than a decade ago and which made little progress beyond having the then Prime Minister P.V. Narasimha Rao lay the foundation stone. The Hindujas want to revive the project but with a model where the state would have little role beyond transfer of land. The project was initially conceived as an independent power producer (IPP).

Hinduja, who is in talks with the state government, is not willing to disclose any more but those in the know say they do not anticipate any problem in getting a nod for the project. Apparently, the Hindujas are seeking transfer of the total land earmarked for the project. They are believed to have acquired 1,000 acres and are seeking transfer of the balance 2,000 acres for the project.

If the Hindujas set up the merchant power plant, they would be able to generate and sell electricity in the open market to any buyer willing to pay their price. The power producer could have the option to either import the coal or source it locally. State government officials are tightlipped on the status of the project apart from saying the Hindujas have submitted a proposal and that it is under consideration. Government observers point out that the old project is closed as the PPA (power purchase agreement) was not concluded. Apparently, the Hindujas feel the way forward in the Indian power sector is to delicense it completely.

Billion Dollar M&A Mania
India Inc.'s acquisitions will soon attain global size.

Ranbaxy’s Singh: If succeeds, he may polevault into the top 10 league in generics
In 2006, according to data compiled by Grant Thornton, Indian companies completed 266 cross-border deals collectively valued at $15.3 billion (Rs 68,850 crore). The corresponding figures in 2005 were 192 and $9.5 billion (Rs 42,750 crore). It's still very early days yet in January, but the M&A rumour mill has been working over time. Speculation abounds on a rash of multi-billion dollar deals, just two of which would help India Inc. sail past the 2006 figure of all cross-border M&As. Reliance Industries (RIL) is said to be looking at acquiring the $7-billion (Rs 31,500-crore) GE Plastics in what could potentially be a $10 billion (Rs 45,000 crore) deal. Ranbaxy Laboratories is working on the purchase of the generic business of German drug maker Merck, which promises to be another multi-billion dollar transaction. Also on a global mega-asset hunt is the A.V. Birla Group, which is said to be eyeing Norwegian aluminium maker, Norsk Hydro. Then Vijay Mallya's UB group is reportedly close to bagging Scottish distiller Whyte & Mackay for close to a billion dollars. Of course, all this comes on the heels of Tata Steel's bid for Corus Group Plc of the UK; at the time of writing the Tatas appeared poised to make another bid-to counter that of CSN, the Brazilian steel major that's also in the fray-which would take the value of the transaction to close to $10 billion. "Deal sizes have been increasing continuously over the past few years and this trend is likely to continue," says Raj Balakrishnan, Director, DSP Merrill Lynch.

The numbers may be looking bigger, but the triggers for going global remain the same-size, newer geographies and diversification of risk. For instance, if Ranbaxy does succeed in buying out Merck's generics portfolio, it will polevault into the top 10 league in global generics. "The generic business of Merck is a quality asset. It offers a strategic fit to our global business and we would certainly be interested if it is available at the right price and enhances shareholder value," says Malvinder Singh, Managing Director and CEO, Ranbaxy Labs.

The RIL spokesperson declined to comment when contacted by BT on RIL's interest in GE Plastics. But if Chairman Mukesh Ambani does pull it off, he would have, at a stroke, created a global marketing network, with a presence in at least 60 countries. GE Plastics' technology centres and production sites in 60 locations across 20 countries will also come RIL's way if the deal goes through. A GE spokesperson in an e-mail response to BT said: "The company does not comment on speculation." A spokesperson at the A.V. Birla Group, too, refused to comment to BT on the conglomerate's interest in Norsk Hydro, the third largest aluminium company in the world.

Many of these deals may not materialise, but there's little doubt about the action that's waiting to play out in 2007. "The most active sectors for outbound m&as are likely to be pharma, metals and mining and engineering. Apart from this, we are also likely to see industry leaders across almost all sectors seeking to expand from a largely domestic footprint to a more global one by making selective strategic acquisitions," says Balakrishnan. In the immediate future, though, something to clearly look forward to is India's first multi-billion dollar cross-border transaction.