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JUNE 17, 2007
 Cover Story
 BT Special
 Back of the Book

Rupee Rise
Though an appreciating rupee is a cause for concern for many industries, it is proving to be a boon for some, particularly those that have large foreign currency borrowings. A weaker dollar is making repayments cheaper. Also, state-run refineries and those in the aviation sector are well-positioned to benefit from the stronger rupee. The Indian currency is up 8 per cent this year and is Asia's strongest currency against the dollar in 2007.

The ECB Route
The cap on maximum external commercial borrowings (ECBs), an annual ritual for the government, is fast losing its significance. Since the bulk of the foreign borrowings is raised under the automatic route by companies, it is becoming difficult to enforce the cap. The government had raised the annual limit of ECBs last year from $18 billion (Rs 81,000 crore) to $22 billion (Rs 99,000 crore). Now, it seems that total inflows will cross the $22-billion mark.
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Business Today,  June 3, 2007

Accidental Veecees
A strategic investment turns into a bounty for Tata Tea.

It began as an inspired strategy to create a beachhead in the world's biggest market. Last fortnight it ended as one of the investing decisions of the decade. Last August, when Tata Tea acquired a 30 per cent stake in us-based Energy Brands, the pioneers in the enhanced water segment, for $677 million (Rs 3,047 crore), a sellout within less than a year wouldn't have been too high on the Tata Group's list of options. So when the Coca-Cola Company barged into the picture by making a $4.2 billion (Rs 17,220 crore) play for 100 per cent of Energy Brands, it would have taken the top brass of Tata Tea by surprise. But not for long. J. Darius Bikoff, President & CEO, Energy Brands, didn't have to spend too much time to convince the Tatas to sell their stake. The numbers would have said it all: Coke was willing to buy the 30 per cent for $1.2 billion (Rs 4,920 crore). In nine months, a $677 million investment had resulted in a profit of $523 million (Rs 2,144.3 crore)-a 77 per cent return!

Said R.K. Krishna Kumar, Vice Chairman, Tata Tea, in a conference call with the media: "We were minority shareholders and did not want to stand in the way of Coca-Cola." Kumar added that the proceeds would be used to retire the debt on Tata Tea's balance sheet, which currently stands at about $600 million (Rs 2,460 crore).

Unsurprisingly, Krishna Kumar is once again training his sights on the US market. "It is important for us to be in the US market and we will look at possible targets," says Kumar. He adds that Tata Tea will look for a majority control in its future acquisitions. Tata Tea, following the acquisitions of Good Earth's range of speciality teas and Eight O' Clock Coffee, already has a useful presence in the us market. Water would well complete the story. Interestingly, Kumar spoke of a possible arrangement with Coca-Cola. "We will certainly look at it should the need arise," he stated.

Bailing Out?
G.R. Gopinath looks set to lose his Man Friday.

Air Deccan's Brady: New wings

There appears to be no end to the troubles for Bangalore-based low-cost carrier Air Deccan. While the carrier shot to infamy over the alleged over-booking of passengers (and a subsequent DGCA probe, which resulted in compulsory seat allocation by carriers) and continued dust-ups with passengers over late flights, it has also suffered a purge of top management, losing its finance and marketing heads (Mohan Kumar and John K. Kuruvilla) in the interim. It now appears that Warwick Brady, 42, Air Deccan's Chief Operating Officer, is the next in the exit queue, with industry sources linking him to private equity firm Indigo Partners and its investee company, Indonesia-based Mandala Air. Brady declined to comment on speculation of his departure from Air Deccan, when contacted by BT.

Air Deccan's Founder and CEO G.R. Gopinath had brought the South Africa-born Brady aboard in September 2005 specifically to turn around the fortunes of the carrier. Brady managed to effect several sweeping changes at the airline, first firing 10 ground-handling agencies and putting in place a new set-up. He also managed to increase on-time rates. Despite these moves, Air Deccan's losses have continued to grow to Rs 213 crore last quarter. Brady has apparently also been at odds with a very hands-on Gopinath, who has refused to loosen the reins. He is said to be unhappy with his stock options (valued at around Rs 5 crore) and was looking for a revaluation over the last few weeks.

Stagger And Conquer
Suzlon cuts an innovative global deal.

Suzlon's Tanti: Power play

Tulsi Tanti might have just pulled off one of the most spectacular deals of the decade. The founder of Suzlon Energy appears set to become the fourth-largest maker of global wind turbines in the world once he gets control of repower-even though he currently holds just 7.84 per cent in the German company. Here's how:

REpower has two major shareholders, Areva and Martifer, which hold 30 per cent and 23 per cent, respectively. Suzlon's stake is via buying in the open market; it spent m100 million (Rs 550 crore) at m150 per share, which values repower at over m1.2 billion (Rs 6,600 crore). Following an agreement between Suzlon, Areva and Martifer, their voting rights will now rest with Suzlon, although the stakes will be acquired at a later date. Suzlon's own holding of just under 8 per cent combined with the stakes held by Areva and Martifer puts the three parties firmly in control of repower, with a little over 60 per cent. "Areva will retain its 30 per cent holding in repower. It has the option of selling its shares to Suzlon after a year at a fair market price," says Tulsi Tanti, Chairman & Managing Director, Suzlon Energy. Martifer's stake will be acquired by Suzlon within two years at a fixed price of m265 million (Rs 1,457.5 crore). Eventually, Suzlon hopes to go up to 75 per cent (garnering another 15 per cent from repower, once it makes an open offer to its shareholders). Now that's not a bad way to end a fierce bidding war-with Areva, which will now end up as Suzlon's preferred partner for transmission and distribution-and still get what you want!