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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
On a Dollar Raising Spree
ICICI Bank mobilises $2 bn, Asia's largest deal in 5 years.
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?

New School Of Thought
Now, Pitroda may leave his mark on education.

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.

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.