Between January and July, the Indian pharma industry pulled off 14 outbound acquisitions. Three of the transactions had Ranbaxy as the acquirer, whist the largest deal of the lot would be Dr Reddy's buyout of betapharm for $602 million. Ernst & Young (E&Y), in its latest report, points out this level of M&A activity is aimed at combining core strengths, generating scales of economy, integrating manufacturing capacity and finally ensuring diversified revenue streams. According to Saion Mukherjee, pharma analyst at Brics Securities, the key drivers have been the need to expand geographically, and have a larger product portfolio. But the transactions haven't come cheap. "Yes, valuations are looking slightly stretched where deals are being struck at 11-13 times EV/EBITDA (enterprise value/earnings before interest, tax, & depreciation)," adds Mukherjee. He adds that valuations are unlikely to cool off in the near term. That's because, as the report succinctly sums it up: "Indian companies are poised to play an increasingly active role globally."

-Krishna Gopalan

Sunrise On The Southside
Ambattur's allure as an IT destination is increasing.

Soaring Ambattur skyline: Hi-tech is now the buzzword

It's the second largest industrial estate in the south, one of the oldest-set up in 1961-and spans an area of 1,221 acres. Till recently, this park in Ambattur in north Chennai was the bastion of the region's small-scale sector. Over the past couple of years, however, Ambattur has been playing host to a clutch of it services majors, including the HCL group, TCS and Perot Systems. Most of the small-scale enterprises, in the meanwhile, have migrated to other regions and estates further down, like Gummidipoondi (just off Chennai) and Tada in Andhra Pradesh. They've made way for many more it and it-enabled services majors; so far 12 such firms have set up shop in Ambattur, the latest names on that ever-growing list being Polaris Software and ICICI OneSource. Two it parks of roughly 2 lakh sq. ft., each have been set up by local builders, and now global developers, like Americorp, are also launching similar projects.

So, what explains this new-found fascination for a timeworn stronghold of the old economy? "Land availability is becoming a constraint in some of the other corridors close to the city," says Srinivas Rao, Chief Financial Officer and Chief of Shared Services, Business Process Solutions, Perot Systems. "Many of the age-old industries located here are on the verge of closing down because of sickness, thereby releasing land." Some of the industries span across 5-10 acres, and a sale could be a surefire way to climb out of the red.

For the new kids in town, Ambattur has its advantages. It's just 15 km away from the airport, has its own railway station and Chennai's most developed areas are just a 15-minute hop. Importantly, roughly a quarter of Chennai's 1.5 lakh IT/ITEs workforce reside in and around Ambattur. And that explains the rush to build hi-tech it parks on land once occupied by makers of chemicals and textiles. For instance, the property development arm of the Americorp group is building a 17-floor building with a built-up area of 2.5 million sq. ft., over 10 acres at a cost of Rs 375 crore. The building will be called the Chennai Tech Park and will be the largest green building yet in the country in 2007. "The going rate for a ground, say 2,400 sq. ft, is Rs 50 lakh, which is close to double being charged in the Siruseri it corridor, but it players won't have to spend Rs 6 per km/person for transportation," says Rajesh Babu, Chief Consultant, RECs group, a real estate consultancy. Local firm R.R. Industries is constructing a 2.2 million sq. ft., twin tower with 24 storeys on nine acres of land-dubbed RR Skyline-at an estimated cost of Rs 510 crore. The project is slated to be completed in two years. Says R. Ravi, CEO and Managing Director: "My existing clients (from other it Parks) want to expand and have already expressed interest. (These are companies like Alcatel, us Technologies, Flextronics)."

Ambattur's biggest bugbear, however, is its choked-up roads. "Rains make the estate a nightmare to get in and get out," says Srinivas Rao. S. Salai Kumaran, Secretary of the it Parks & Infrastructure Developers Association and the Director at India Land and Properties of the Americorp Group, has trained his sights on upgrading the roads and related infrastructure in Ambattur. "There is a fund of Rs 35 crore (with contributions from the central and state governments and private parties) which has to be quickly utilised, preferably in one year," he says. Once the bottlenecks disappear, the allure of Ambattur can only increase.

-Nitya Varadarajan

Enabling Devices
Lesser-known handset makers are slugging it out.

One of the few industries growing faster than Indian telephony is the market for mobile handsets. As telecom operators add over 6 million subscribers every month-in September, the total number of telecom users in the country reached to 170 million-demand for mobile handsets is galloping at 80-90 per cent annually. Industry expects some 60 million handsets to be sold in 2007 alone.

Now that's a mouth-watering opportunity for any handset maker worth its brand name. Predictably the big five comprising Nokia, Motorola, Samsung, LG and Sony Ericsson have muscled in and today they control roughly 95 per cent of the market. But there are still as many as 40 brands-at last count-wrestling for the rest of the market-which may appear puny in percentage terms, but is still fairly sizeable at close to 3 million handsets. The bit players include Chinese names like Bird and Haier, Meridian Mobile of the UK, Sagem of France and Kyocera from Japan.

Many of these players are aiming for as much as 5 per cent of cell phone users, by eating into the share of the established players as well as targeting new subscribers. The best way to go about that task is to bombard the consumer with a flurry of launches, almost incessantly. And as India still remains largely a market for entry-level phones-70 per cent of the handsets sold are in the mass segment-most of the smaller firms have trained their sights on this part of the pie. There are other similarities across strategies too: The youth is the target audience, which means a sharp focus on snazzy features (mp3 players are a given); and many features are in Indian languages, as rural India is the target market for all the small boys.

Bird, which has sold roughly a million phones in the two-and-a-half years that it has been in India, plans to soon phase out its existing six models and replace them with half a dozen new ones, priced in the Rs 2,000-10,000 bracket. "Every product has a lifecycle, after which it is feasible to (launch) newer products," says Adarsh Shastri, Director, Marketing, Bird (Asia-Pacific).

Bird is focussed on new growth markets, essentially rural areas where price points are typically low, starting at as little as Rs 1,400. And that's where alliances with operators become an imperative. "It would be difficult for us to achieve those price points so we decided to partner with Airtel," says Adarsh, adding that Bird is looking at other operator tie-ups as well. Bird's two models bundled with the Airtel connection contribute to about 70 per cent of its total sales, and the percentage of sales from operator tie-ups is likely to remain in the range of 70-75 per cent in the next two-three years. Haier is also looking at operator tie-ups. The only difference is that it is targeting a slightly more aspirational segment, at least in GSM phones, with prices starting from Rs 7,000 and going up to Rs 15,000. For CDMA phones, Haier prefers to straddle the pyramid with phones in the Rs 1,400-3,000 bracket, bundled along with the Tata service. Haier, which has already shipped 2.5 million handsets in the last nine months, hopes to sell 5 million handsets per year, says Arun Khanna, Vice Chairman and MD, Haier Telecom India.

The UK-based Meridian Mobile too is eying the lucrative mid-segment. It currently has seven models priced between Rs 6,000 and Rs 10,000, and plans to launch 15 new ones in the next one year in the Rs 5,000-15,000 price bracket. Meridian, which sells its phones under the "Fly" brand name, is looking at the "rapidly growing replacement market," says Rajiv Khanna, CEO, Meridian Mobile (India).

Kyocera, which makes only CDMA phones, emphasises that it is the ease of use that will drive its sales. "Kyocera handsets are stylish, affordable, feature-rich and above all easy to use," Chuck Becher, Senior Director, International Sales and Marketing, Kyocera, replied via e-mail. Kyocera, which currently sells 12 models, available through Tata, Reliance and in the open market, hopes to double its sales volumes in 2006.

-Shaleen Agrawal

Broadsheet Broadside
Dainik Bhaskar perfects the 'art' of being #1.

Dainik Bhaskar's Agarwal: New launch

On October 8, Dainik Bhaskar, India's #1 newspaper group in all languages (according to NRS Survey 2006), launched its Punjab edition. And as it had done with earlier launches in Haryana and Gujarat, the group duly claimed #1 position even before readers got a chance to pick up the paper. As Girish Agarwal, Director, Marketing, Dainik Bhaskar, told BT before the launch: "We're launching in Punjab-Jalandhar and Amritsar-on the morning of October 8 and I can very well say that we're going to be #1 from day 1 because we will sell 176,000 copies compared to 115,000 copies of the Punjab Kesari in that belt. We too have stuck our necks out and given our advertisers the assurance that if we do not remain at #1 we will refund their money to them," adds Agarwal.

The secret-actually not any more-is of course advance subscription numbers. Agarwal claims to have locked in readers for a year by collecting Rs 200-that's 54 paise per day!-from them upfront for an annual subscription. "One year is good enough for me to romance with the customer, to date him, and finally get married to him. If I can't hold a customer for three or four months-and 12 months is a huge amount of time for being engaged to him-I don't think I deserve to be in business at all," explains Agarwal. Agarwal now hints at something even more radical. "In the us, there's a huge concept of free newspapers. Why shouldn't it work in India too?" asks Agarwal.

The rest of the publishing industry isn't exactly salivating at the thought of free newspapers. "Once regional penetration gets higher, people will have to start paying more because only the big players-#1 and #2-will get enough advertising to sustain themselves," says Bhaskar Das, Executive President, The Times of India Group.

-Deepti Khanna Bose

Laughing all the Way...
Ogilvy and public sector banking hit it off in style.

Old man presents old wife with a pair of diamond earrings on Valentine's Day. Wife gently chides husband for spending so much money, asking him what she's going to do wearing diamonds in her old age. Old man replies with this gem: "Heera ko kya pata aapki umar ka? (How would the diamond know your age?)."

Little boy guards his piggy bank with his life every second of the day. He keeps it at arms reach all the time; even while bathing and sleeping! One fine day, he sets off purposefully out of his house; he is headed to the bank that his family banks with, because he feels it's the only place his piggy bank will be safe. A bank employee escorts him to a safety deposit box, into which the piglet is safely locked. "Rishton ki jamapunji-Relationships beyond banking," goes the punch line.

The first film is one of the TV commercials for SBI Life Insurance. The second is for Bank of India. Both ads are made by Ogilvy & Mather Advertising, the agency renowned for the Hutch boy-and-pug ads, and the 'Building Bonds' series for Fevicol. Not in the least bit surprising, the campaign for SBI Life won O&M not only a silver Effie but also the Yahoo! Big Idea Chair and the People's Choice Award for Best Case Study Presentation. It also swept the Abby's.

So, what did it take for O&M to make public sector banking (PSB) advertising sexy? Just a bit of reality and honesty is all it took, if you believe Sagar Mahabaleshwarkar, Group Creative Director, Ogilvy & Mather Advertising. "They (the two SBI Life spots) were both warm, emotional, believable, identifiable and aspirational. Furthermore, they told a story, and it is a fact that a well-told story works with any audience."

The SBI group hasn't restricted its snazzy image to just the insurance arm. There's also the memorable campaign for the bank itself-remember the guy in the elevator, going up to his office, dressed in his shirt, tie, blazer... boxer shorts? And all because he lost a bet with his colleagues because the fact was that SBI Bank did give car loans for on-road prices? Or Mohan snapping and yelling at everyone-finally to a point of frustration-that his name is now 'Chiman Lal Charlie' because he lost a bet in which he insisted that SBI did not have the maximum number of ATMs in the country? The slogan 'Surprisingly SBI' drove home the message that the PSB these days is as good as any international bank. Rensil D'silva and Anup Chitnis, Senior Creative Directors at O&M, make up the team responsible for above-mentioned campaign. "I think that a lot of the PSUs are waking up to the competitive environment, and that the manner you're perceived in is extremely important; especially as far as the younger generation is concerned," says D'silva. Mahabaleshwarkar agrees: "PSU banks are aware of the onslaught of foreign banks in the country, and more so aware of the fact that young people are attracted to them because of the contemporary look and feel of their advertising." O&M isn't just laughing all the way to the bank, it's coming out of it in good spirits too!

-Deepti Khanna Bose