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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

Joining the Race
Are cheap made-in-China bikes a threat to the big boys?
Bang in Bengal: It’s motorbikes now
Even as Tata Motors' Rs 1 lakh car unit, the first automobile plant in West Bengal in independent India, is embroiled in controversy, the state on February 15 got its first two-wheeler manufacturing facility at Chinsurah, a stone's throw from Tata Motors' proposed site in Singur. Interestingly, Global Automobiles, a joint venture between the Kolkata-based Xenitis Group (makers of the popular Aamaar PC brand) and Guangzhou Motors of China (the state-run company that manufactures Wuyang-Honda motorcycles in China), will roll out its assembled two-wheelers ahead of Salim Group's "Mahabharat" motorbikes-another venture in West Bengal-although the latter had announced its project earlier. Quite similar to how Xenitis penetrated the rural and semi-urban markets with its sub-Rs 10K PCs, Global Automobiles has now flagged off sub-Rs 30K motorbikes. Branded as Xoom, the two-wheelers come in three variants: 100cc, 125cc and 150cc with price tags ranging between Rs 25,000 and Rs 45,000. The Rs 300-crore assembly line has a capacity to put out 3.6 lakh vehicles per annum. Santanu Ghosh, Chairman, Xenitis Group and CMD, Global Automobiles, says the JV will explore possibilities in other segments, including small passenger cars. "Together with our Chinese partner, we will create new generation vehicles for the young and the restless GenNext," Ghosh says. The Xoom bikes will be available nationally through its 60 dealers from March 1. Should competition be worried? Says a TVS official, "Indian consumers are more quality-sensitive than price. They go for established brands and time-tested quality."

Go Home, Doctor
New immigration rules spook sub-continental physicians.

Last month, UK-based Dr Imran Yousuf committed suicide. A qualified doctor who migrated to the UK from Pakistan in 2004, Yousuf was unable to find a job because of the changes in the Highly Skilled Migrants Programme (HSMP) in April 2006. Yousuf is not the only one who has been affected.

"The situation is terrible for thousands of doctors who spent thousands of pounds to come to the UK and give the Professional and Linguistic Assessment Board (PLAB) exam, attend courses but were unable to get jobs and are returning home emotionally and financially devastated. Many of them stay in very cheap accommodations and eat in temples and gurudwaras," says Dr Raman Lakshman, Vice Chair (Policy), British Association of Physicians of Indian Origin (BAPIO).

Dr Yousuf, along with BAPIO, had filed a case against the UK government's department of Health (DOH) which had ruled that Non-European Union (EU) doctors would need a work permit to train in Britain. According to the new rules, doctors from EU countries would be preferred over non-EU doctors who now need a work permit. Last fortnight, a British High Court upheld the government's ruling. BAPIO, meanwhile, has announced that it was mobilising funds and would file an appeal before March 2. Lawyers say the appeal process would take about six months.

BAPIO is challenging the government on two fronts. One, it is challenging the new immigration rules by the Home Office and seeking that the special arrangement to train overseas doctors, Permit Free Training (PFT), which has existed since 1985 and was abolished by the new rules, be restored. It is also challenging the guidance issued by the Department of Health with regard to the employability of doctors on Highly Skilled Migrant Programme. Till the appeal is decided, doctors expecting to go on to PFT cannot work while doctors on HSMP can continue working till the appeal court decides.

Till that happens, the livelihoods of doctors of Indian origin, who have been the backbone of the British healthcare system, will hang by a thread. "It is estimated that the number affected by changes in PFT is probably 10,000. The number of doctors affected by HSMP is thought to be 15,000. About 80 per cent in each group are thought to be from India. Most PFT doctors have gone back to their countries. About 60 per cent of HSMP doctors (9,000) may be forced to return if the appeal is unsuccessful," says Anthony Robinson, Associate Solicitor with Manchester-based Linder Myers Solicitors who are handling the case.

Outsourcing's Day Out
A maturing BPO sector is attracting private equity.

Avendus’ Vohra: BPO calling
India has entered the next phase of BPO (business process outsourcing)," says Bruce Keith, Director (Growth Capital), at the London-headquartered private equity (PE) major, 3i Plc. "The convergence of offshore and nearshore is happening," adds Keith. That's a good enough reason for 3i to scout around for BPO firms into which it could invest. 3i, which is looking at minimum investments of $20 million (Rs 88 crore) in such companies, isn't the only PE major with an eagle eye on Indian outsourcing. The Mumbai-based Avendus Advisors has floated a $200-million (Rs 880 crore) fund dedicated to BPO investing, according to Managing Director Ranu Vohra. "We are looking at investing in knowledge-oriented and outsourcing companies in the areas of legal processes, financial services and equity research," Vohra told BT on the sidelines of a nasscom summit in Mumbai last fortnight. The fund, which was launched in December in association with us-based venture capitalist Mayfield Fund, is still in the process of tying up the finances, Vohra adds. According to the Mayfield website, the fund has $2.4 billion (Rs 10,560 crore) under management. Avendus will make investments in companies with revenues ranging between Rs 80 crore and Rs 100 crore and with a track record between three and five years, says Vohra.

Clearly, outsourcing of financial services and legal processes is a hot favourite and, like Avendus, 3i too wants a slice of such action. "At this point in time, the proposition has to be to look for companies that have good international connections-companies that have offshore and nearshore operations," adds Keith, who was also present at the NASSCOM summit.

Investors in BPOs are typically looking at returns of 25-30 per cent-in line with the IT-BPO sector's growth, which is estimated at 28 per cent for the year ending March 2007. Such returns, points out an investor, are possible even after paying up a 15-20 per cent premium on investments. Now, does this mean that global PE investors themselves will consider outsourcing equity research from India?