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| Renault’s Ghosn:
A win-win deal |
Pawan Goenka, president,
Automotive Sector, Mahindra & Mahindra (M&M), is a busy
man. In addition to developing a successor to the Scorpio, an all-new
people carrier called the Ingenio as well as helping the creation
of the Mahindra-Renault partnership, he now has to look after the
building of an all-new Rs 4,000 crore plant near Chennai. The plant,
a direct result of the deal signed by Anand Mahindra, Managing Director,
M&M and Carlos Ghosn, CEO, Renault-Nissan in Paris a couple
of months ago, will have a capacity of 400,000 units per annum and
is expected to produce new Mahindra products, extensions of the
Logan product line for Mahindra-Renault as well as Nissan products
which could well be aimed at the export markets.
But what about Nissan's deal with Maruti Udyog (MUL)? When Osamu
Suzuki, Chairman, Suzuki Motor Corporation, had come down to India
recently for the inauguration of MUL's new Manesar plant, he said
that the deal to manufacture 50,000 small cars a year from the
Manesar plant for Nissan remained intact since that agreement
has been signed. But discussions between MUL and Nissan for the
Indian company to contract manufacture an additional 250,000 cars
a year at a dedicated facility for Nissan fell through. Win some,
lose some.
-Kushan Mitra
Rock
of (All) Ages
They're laughing to the bank after they get
old.
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| DNA’s Vardhan: The show
must go on…and on |
They say if you remember
the sixties, you probably weren't there. Indian audiences are now
getting a chance to relive the psychedelic sixties (and seventies)-even
those who weren't born then-albeit in less picaresque environs.
Over the past couple of years, a rash of geriatric rockers has begun
to discover India, the Rolling Stones, Buddy Guy, Mark Knofler (of
Dire Straits fame), Deep Purple and Roger Waters (the former muse
of Pink Floyd) being just a smattering of names that are riding
on the nostalgia wave by belting out hits that were first heard
on scratched LP vinyl 35-40 years ago. That's good news for the
Indian live events industry, which is currently worth Rs 800 crore,
according to a report jointly put out by the Federation of Indian
Chambers of Commerce & Industry (FICCI) and PricewaterhouseCoopers
(PWC). However, roughly 70 per cent of these revenues accrue from
corporate gigs such as product launches, promotions and award ceremonies;
only 30 per cent come from ticketed shows. As more rockers line
up to prove their matured mettle-an apparently not-yet-rusted Iron
Maiden is set to do the honours this month-event managers are counting
on more action on the ticketed shows front.
"Entertainment has become an alternative media for brand
association today. New technologies, sophisticated lighting systems,
elaborate sets and growing awareness amongst the audiences to
buy tickets have helped a lot in promoting international events
here. All this holds good for the live ticketing events industry
which is only expanding for the future," says T. Venkat Vardhan,
Managing Director, DNA Networks, which has been responsible for
bringing acts like The Rolling Stones, Deep Purple and Roger Waters
to India. Adds V. Jairam, a partner with another live events company,
OranJuice: "The live events ticketing business in the country
is a highly untapped business. Currently, there are four or five
live shows that take place in an entire year. For the industry
to grow and the for people to get into the habit of buying tickets,
there need to be at least 30 shows a year like it is internationally.
But unfortunately, we are the only two companies (DNA is the other)
today who are seriously promoting live shows. We need more companies
to come in and expand the business."
According to Jairam, a lack of knowledge of legalities involved
in paying artists and of the international entertainment business
coupled with tax implications are some of the reasons for the
dearth of players in this sector. Event management (non-ticketed
events) seems a less risky option. "We drifted away from
ticketed shows and got into brand activation and built our own
brands such as the IIFA (Film awards) and F (Fashion) awards.
The ticketed show business is still at a very nascent stage. The
international ticketing companies are looking to set up shop in
India and once this happens we might think about getting back
to ticketed shows," says Andre Timmins, Director, Wizcraft,
an event management company.
A high entertainment tax that prevails in many states (25 per
cent in Mumbai), lack of infrastructure and the inability to get
a single-window clearance are the other obstacles to hosting ticketed
events. Organisers typically depend on sponsors to bring in 70
per cent of the moolah; ticket sales account for just 30 per cent.
As long as the trend of rockers not retiring-or coming out of
it-persists, there's hope for the ticketed events sector.
-Anusha Subramanian
M&A
Buzz In Banking
Is Canara Bank wooing Dena Bank?
Six months ago, the public
sector Canara Bank unsuccessfully bid for the beleaguered United
Western Bank (UWB).
The Bangalore-headquartered bank's interest in the Maharashtra-based
UWB was a conscious strategy to expand through the inorganic route
in the western region where it has a limited presence. However,
it was IDBI Bank that eventually bagged UWB. Within days of that
deal, according to banking industry observers, Canara Bank began
informal talks with another public sector bank (PSB), the profit-making,
Maharashtra-based Dena Bank. Both banks, though, have denied that
any such negotiations took place. But that doesn't mean Canara
Bank is ruling out the possibility of mergers & acquisitions
(M&A). "We would look for synergy-based M&A, with
market segments and geographical spread in mind," says M.B.N.
Rao, Chairman & Managing Director, Canara Bank. He refuses
to elaborate on the regional game plan, and whether the merger
candidate will be from either the western or the northern region.
Rao, for his part, has the blessings of Finance Minister P.
Chidambaram, who, has been advocating mergers of PSBs to create
a clutch of larger banking entities. Two years ago, Bank of India
and Union Bank were aggressively exploring merger talks, but opposition
from trade unions stalled the merger. With full-blown M&A
looking difficult today, alliances appear a more pragmatic way
to go about things. For instance, Corporation Bank, Indian Bank
and Oriental Bank of Commerce have agreed to jointly work in the
areas of products as well as marketing; observers see this as
a first step towards a mega-merger in the PSU space.
As for Dena Bank, it fits the part of a likely candidate for
merger with a larger bank. The government holding in the bank
has already plunged to 51 per cent, leaving no further scope for
equity dilution. There are now funding constrains as the capital
adequacy ratio is on the border line at 10.62 per cent as against
the statutory 9 per cent. Deposit growth has also been sluggish
at 13.05 per cent as against credit growth of 25 per cent in the
year ended March 2006. Dena's quality of assets also lags behind
with net non-performing assets (NPAs) at 3.04 per cent, as against
the industry norm of less than a per cent. Shareholders have had
little to cheer. Return on capital employed (ROCE) is at rock
bottom at 5.98 per cent. Even the once loss-making UCO Bank has
a ROCE of 8.65 per cent, while the big boys like hdfc Bank, SBI
and ICICI Bank have ROCEs of 17.74 per cent, 16.52 per cent and
14.33 per cent, respectively. On the return on assets (ROA) front,
the bank is also languishing, with an ROA of 0.27 per cent. HDFC
Bank has an ROA of 1.18 per cent and for Canara Bank it is 1.01
per cent. A merger into a stronger bank might just be what the
doctor ordered for Dena, but the stumbling block to a merger would
be the unions, as well as the Left parties, which are partners
to the UPA government that's in power.
-Anand Adhikari
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