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MARCH 11, 2007
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The centre is looking at removing the distinction between FDI and FII investments. This will impact sectors like asset reconstruction, real estate and aviation, where separate ceilings apply to FDI and FII investment. However, allowing FDI through the FII route in the realty sector could result in prices shooting through the roof. The Asian financial crisis of the '90s is still fresh in mind, and a method should be devised to moderate possible volatility in key sectors.

S&P And After
For the first time in 14 years, international credit rating agency, Standard and Poor's (S&P), has raised India's credit rating to investment grade. S&P is the last of the three major international rating agencies to do so. Moody's Investors Service did it in January 2004 and Fitch Ratings in August 2006. The upgrade is likely to spur the flow of foreign investment into power, steel and other industries, which receive less than a tenth of the funds going China's way.
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Business Today,  February 25, 2007

Digestion Blues
Why MTR had little choice but to sell to Orkla.
European connections go back over half a century at the Bangalore-based ready-to-eat (RTE) food maker MTR, which last fortnight was acquired for around $100 million (Rs 440 crore) by the $8.8 billion (Rs 38,720) Norwegian consumer goods giant Orkla. In 1950, Yajnanarayana Maiyya, founder of the restaurant (which later expanded into the rte market), overhauled hygiene standards after a long European tour, setting in place a five-decade association with the continent. Since that time, MTR has gone from one restaurant on Bangalore's busy J.C. Road, to a Rs 165-crore company with some 120 varieties of rte food under its belt. Despite these numbers, MTR Foods has struggled to compete, with the topline remaining stagnant at Rs 140-150 crore mark for the last three-four years. A retail venture in the form of Namma MTR (our MTR) is restricted to just one outlet in south Bangalore and a handful of kiosks around the country.

While MTR's packaged food idea was novel three decades ago when it sold its first package of rava idli mix, since then several competitors, most notably ITC Foods, have entered the nascent, yet fast-growing market. According to some industry estimates, the rte market is worth Rs 250-300 crore and is growing 20-30 per cent annually. While MTR has managed to scale up its revenues from Rs 130 crore in 2003-04 to around Rs 150 crore at the end of last fiscal, that's some distance away from the ambitious Rs 600 crore target originally laid out for 2005-06.

The problem for MTR could be that competitors such as ITC Foods have been able to better leverage their supply chain and retail reach and expand from rte foods into related categories such as biscuits and toffees. At the same time, a poor supply chain has meant that MTR has been forced to shutter its retail operations in cities like Delhi and Chennai. "Our reach to over two million points from our tobacco business is a huge advantage compared to our rivals," says Hemant Malik, Head, Marketing, ITC Foods. MTR officials, including Chairman Sadananda Maiyya, refused to comment on this and other queries, citing unspecified regulatory issues.

The urgency to sell the business may have also been hastened by venture capitalists, JPMorgan Global Packaged Foods, Indocean Packaged Foods and Magnus Capital Corporation, who jointly control around 40 per cent of the company and have reportedly been clamouring for an exit for some time. Maiyya did try to professionalise the company by hiring former HLL Foods honcho J. Suresh to run the foods business, but after a brief and bright period (when turnover doubled) the latter found himself on the way out. While both Maiyya and Suresh publicly deny any differences, industry insiders argue that the latter found it difficult to function when the family continued to tightly hold onto the reins as the company expanded its product offerings and its geographical reach into the European and North American markets.

However, with the market growing at around 30 per cent annually and MTR planning a Rs 10-crore expansion of its production facilities near Bangalore, Orkla may have found a convenient passage into the Indian market. "MTR Foods is located in an interesting, growing market. We expect to spend some time learning and assessing the situation before any final decisions are made concerning further strategic investments in India," says Torkild Nordberg, Executive Vice President in charge of Orkla's Branded Consumer Goods business.

The company's products are focussed primarily on the European markets and this move could give it a strong foothold in the fast-growing Asian market, say industry executives. Orkla is expected to keep MTR and its products on shelves for some time and also leverage MTR's distribution network to vend its products (it sells everything from processed potatoes to juices and jams) in the Indian market.

First Lap of Luxury
BMW thinks Indian market is ready for its premium cars.

Full throttle: BMW on the move
Two decades ago, peter Kronschnabl came to India to do his thesis on the motorcar in India, now he finds himself President of German luxury-car maker BMW in India and about to commence assembly of vehicles in the country. "India is an important market to us, it is a fast growing economy and more people are buying better cars," he says.

So, how big is the market for luxury/premium cars in India? According to data from the Society of Indian Automobile Manufacturers (SIAM), cars classified as premium (more than 4.7 metres in length) and luxury (longer than five metres) have sold a cumulative 4,788 units for the first 10 months of the current fiscal. Add to this imports of cars and luxury SUVs (which are not counted in SIAM data) and that number exceeds 5,000. Kronschnabl believes this market will double in five years.

But BMW India does not plan to bring in its complete range to India just yet. Assembly, which begins at the Chennai plant in a few months, will initially be restricted to the 3-series (with three engine options) with the 5-series coming later. "We have even announced our pricing; the price of our 320ia, which will start our range in India, will be Rs 26.95 lakh ex-showroom all India." With an initial distribution strategy that will involve eight showrooms in six cities, including Chandigarh ("The Punjab market is crucial", Kronschnabl says), BMW does not plan to be an also-ran in India.

Trucking With Fiat
Tata Motors prefers Fiat to Daewoo for Europe.

Ratan Tata: Tapping foreign markets
Tata motors' ambitions of becoming a major global automotive player received a fillip last fortnight when the company announced that it would be extending its partnership with Italian giant Fiat to make pick-up trucks in Argentina. With an investment of $80 million (Rs 352 crore), the truck will be based on the new-generation Tata pick-up and will be made at Fiat's plant in Cordoba in Argentina. Production is scheduled to begin in 2008 with an annual capacity of 20,000 units. The trucks will be sold in southern and central America as well as parts of Europe through Fiat's distribution and importer network.

"I am pleased at this first step in expanding this relationship beyond Indian shores. Latin America is a key market for us. We hope this would augur well for a truly global partnership across markets and business segments," says Tata Group Chairman Ratan Tata in an official statement.

Tata Motors also signed a memorandum of understanding (MOU) with Fiat's commercial vehicle arm, Iveco, to analyse the feasibility of cooperation across markets, in engineering, manufacturing, sourcing and distribution of products, aggregates and components for commercial vehicles.

Fiat and Tata Motors formalised an alliance in December 2006 following an MOU in July last year. It's also noteworthy that, in early 2004, Tata Motors acquired Daewoo Commercial Vehicle, the truck making arm of the bankrupt Korean chaebol Daewoo. Market watchers, however, feel that Daewoo's truck line weren't the perfect fit for the sophisticated European markets. "With the Fiat JV, Tata Motors can tap the sophisticated West European markets, besides the competitive South and Latin American markets. Their Daewoo tie-up, on the other hand, can be used to tap the Chinese, and East European markets," says Kalpesh Parekh, Head of Institutional Sales, ask-Raymond James and Associates.