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| ICICI Bank’s Mulye: A stellar performance |
At
a time when India Inc. is making waves in the international market
with a string of mega acquisitions involving billions of dollars,
the under-capitalised Indian banks have been conspicuous by their
absence on the financing front. Most Indian companies have been
relying on global banks for acquisition finance. Against this
backdrop, ICICI Bank's mobilisation of $2 billion (Rs 9,000 crore)
in the form of bonds in the first month of 2007 comes as a breath
of fresh air, and has created a flutter in the global market.
By all accounts it's a big deal-to put it
in perspective, this single issue virtually matches the $2.08
billion (Rs 9,360 crore) raised collectively by Indian banks in
2006. The issue surpasses, by far, the $500 million (Rs 2,250
crore) raised by ICICI Bank in November 2005. Not just that, this
is also the largest transaction since 2001 by any Asian bank-for
something larger, you would have to rewind to 2001, when Malaysia's
OCBC Bank raised $2.1 billion.
Now for the $2 billion question: what exactly
does ICICI Bank plan to do with all this money? "The money
mobilised would be utilised for funding the bank's domestic as
well as international growth," says a visibly-excited Vishakha
Mulye, CFO at ICICI Bank, who played a key role in the deal. ICICI
Bank, which is targeting 25 per cent of its balance sheet size
from international markets by 2010, has set aside $1.25 billion
(Rs 5,625 crore) of the $2 billion kitty for international funding.
"It could either be local lending or helping an Indian corporate
expand abroad with acquisition financing," reveals Mulye.
The balance $750 million (Rs 3,375 crore) has been kept for deployment
in the domestic market where the bank is witnessing explosive
growth in the retail as well as rural markets.
Sceptics, however, question the idea of borrowing
abroad (with looming currency as well as interest rate risks)
and deploying in the domestic market when the bank can very well
raise money locally. "We have done our math and after taking
into account the exchange rate, tax implication, Indian money
market conditions and the fact that the money raised would get
capital treatment, the interest rate is reasonable," counters
Mulye. "This interest rate differential keeps changing depending
on the exchange rate and domestic money market conditions,"
she adds.
It's pretty clear that foreign currency borrowings
will become a key plank of the bank's resource mobilisation strategy
going forward. "The success of the current issue-bids worth
$8 billion (Rs 36,000 crore) came in from various investors in
the us, Europe and Asia-has revealed the appetite of international
investors for Indian paper," says Mulye. And this may just
be the beginning for icici Bank. Are other Indian banks watching?
-Anand Adhikari
New
School Of Thought
Now, Pitroda may leave his mark on education.
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| Sam Pitroda: Focussing on knowledge |
Sam Pitroda
is credited with revolutionising the Indian telecom sector. In
1984, he set up the Centre for Development of Telematics (c-dot)
and went on to frame the blueprint for Indian telecom. His more
recent role is that of Chairman of the National Knowledge Commission
(NKC) which, among other things, is aiming to strengthen India's
knowledge base. Under this are areas like access to knowledge,
effective creation of knowledge, application of knowledge and
e-governance. The NKC was set up in June 2005 and has been given
a mandate to focus on areas like education, science and technology,
e-governance and preservation of knowledge systems. So far, the
NKC, which is a high-level advisory body to the Prime Minister,
has made recommendations and proposals to the government on each
of these areas.
"It is a complex task and is not easy to accomplish. It
requires many stakeholders to participate," said Pitroda
on a recent visit to Mumbai. According to him, India needs to
have a larger number of universities. "We also need to separate
colleges from the universities. It really does not make sense
to have 800 colleges affiliated to the University of Mumbai."
Pitroda is clearly under no illusion about the state of Indian
education. "Only 7-8 per cent of India's students get a chance
to go to college. That number has to be raised to 15 per cent."
The quality of education in India, he adds, barring elite institutes
like the IITs and IIMs, is still poor and opportunities have not
been made available to everyone. Apart from Pitroda, the NKC has
five other members, who include Nandan Nilekani, CEO, Infosys,
and academicians like Jayati Ghosh and Deepak Nayyar from the
Jawaharlal Nehru University. "The focus is more on knowledge
rather than on something like science and technology or education,"
says Pitroda, adding that it is necessary to think of public-private
participation in education in addition to thinking of ways of
working with foreign universities. "Obviously, it will have
to play a big role in the whole process of knowledge. India today
has access to broadband and that can help the process a great
deal."
When Business Today asked Pitroda what, according to him, was
the biggest challenge for the NKC, Pitroda was quick to respond:
"It would have to be a change in mindset, to enable things
to be done differently." He added that it was important for
some big investments to come into education as that could change
a lot of things. "Just imagine what could happen if $70 billion
(Rs 3,15,000 crore) comes into education as investment. It would
yield wonderful results." Few would disagree with that.
-Krishna Gopalan
Buyout
Blitz
Subex makes its 7th acquisition in
seven years.
When Subash
Menon, President and CEO of Subex Azure, announced in the third
week of January that his company was acquiring Canadian telecom
solutions provider Syndesis in an all-cash deal of $164.5 million
(Rs 740 crore), not many analysts were surprised. Menon has made
a habit of acquiring to grow-be it to increase customers, enhance
Subex's footprint in the world, acquire products or expand the
addressable market itself. In the last seven years, the company
has made seven acquisitions (see A Takeover Spree).
Subex Azure is one of the few genuine product success stories
to come out of the Indian it landscape. Its suite of products
is used in the unsexy but the essential parts of the telecom market
like fraud management. For instance, Subex's software alerts a
telecom service provider if there is an extraordinary spike in
usage from a mobile number, as the post-paid user might be thinking
of misusing the facility and vanishing thereafter. Telecom fraud
is said to cost operators 3-5 per cent of their revenues. Subex
also provides routing and billing optimisation as well as risk
management solutions. It recently renamed its suite of solutions
as RocWare.
However, analysts question the timing of the acquisition and
attendant integration challenges. Subex is raising $200 million
(Rs 900 crore) through the sponsored GDR route. The company had
revenues of just Rs 149 crore and a net profit of Rs 21 crore
for the first six months of the current financial year (at the
time of BT going to press its third quarter numbers were yet to
be announced). Menon is dismissive of the concerns: "We always
look at a cultural fit before making any acquisition. The new
acquisition brings 300 people to the existing 900. Also, we've
not been making acquisitions only for the sake of growth. We are
also growing organically." He justifies the Syndesis acquisition,
saying that it expands Subex's portfolio of offerings. "We
had a gap in the sense that we were not present in the fulfilment
and assurance solution segment. Syndesis will plug this gap. Also,
our addressable market, which was earlier $500 million (Rs 2,250
crore), has suddenly gone up five-fold. We are now a strong player
in the telecom OSS, Operations, Support, Software space."
Once the acquisition is completed in three months, the company
says it will have 32 of the top 50 telcos in the world as its
clients.
-Venkatesha Babu
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