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Tuesday, November 21, 2006
Gitanjali Gems taps Saudi retail market
Gitanjali Gems has entered into a MOU for a 50:50 joint venture with Sulieman Al Othaim of Saudi Arabia, one of the leading retail chains in the Middle East. The joint venture will facilitate the entry of the company into the mainstream retail segment in Saudi Arabia leveraging Sulieman Al Othaim's chain of specialty stores across the region.
The company will market and distribute new jewellery brands such as Rayana, La Baguette and Hart to Hart for the local market and Indian brands like Nakshatra, Asmi and Sangini. Apart from this, these brands would also be marketed through other independent retail chains.
The stock has gained 0.61% at Rs213 on volumes of over 1,474,000 shares on the BSE.
Sharekhan Commodities Buzz dated November 21, 2006
The weak base metals and lower energy prices have capped the upside in bullion. European Central Bank (ECB) President Jean-Claude Trichet yesterday suggested the ECB might push for higher interest rates. On the other hand, a slowing US economy and easing inflation might force the Federal Reserve to maintain the status quo. In any case, this is a win-win scenario for the yellow metal. A weak greenback is supporting the yellow metal and amid the consolidation the prices are likely to move up ahead of the year-end demand. Gold should be bought on dips.
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India takes on the World - Time Magazine
Big companies beware: that elephant in the room may be An Indian competitor looking to Buy you out
You have probably never heard of Essel Propack but there's a fair chance you have squeezed one of its products. The Bombay company is the largest manufacturer of laminated tubes in the world. Most toothpaste these days is packaged in such tubes and one-third of global supply comes from Essel Propack's 20 factories in 13 countries across Africa, Asia, Europe, and North and South America. The company also churns out tubes for cosmetics, pharmaceutical creams, hair-care products and food. It may not be the sexiest industry, but the business is growing fast and Essel is determined to be its biggest player. "We definitely see an opportunity to move further into the global space," says R. Chandrasekhar, Essel Propack's president. "India always had a global outlook in the past but we became very inward-looking after independence. Now we're back."
Glance through the business news these days and it quickly becomes apparent Chandrasekhar is right. As international business leaders prepare to arrive in New Delhi for the World Economic Forum's annual India Economic Summit, India is ending decades of isolation. Indian companies have returned to global commerce. Indian-born business executives are climbing the corporate ladders at well-known multinationals, some to the highest rungs. Meanwhile, Indian companies, flush with cash from a booming domestic economy, are prowling for overseas acquisitions to expand their footprints. The most recent headline grabber was last month's $8.1 billion bid by Tata Steel for Anglo-Dutch steel manufacturer Corus, and there have been many smaller deals as well. In February, Hyderabad-based drugmaker Dr. Reddy's acquired German-based rival Betapharm for $572 million. A few months later, construction major Punj Lloyd bought Singapore-based SembCorp Engineers and Constructors for $22.5 million. And now electronics manufacturer Videocon is the lead player in a consortium that has offered more than $700 million to buy Korean electronics giant Daewoo Electronics.
In the first 10 months of 2006, Indian companies cut more than $10 billion worth of cross-border deals, up from about $1 billion in all of 2000. According to Dealogic, which tracks global M&A activity, Indian companies this year have spent twice as much on overseas acquisitions as foreign companies have invested in India. "There is a real bullishness" among the leaders of Indian industry, says Sabeer Bhatia, the Indian-born co-founder of Hotmail, the Web-based e-mail system acquired by Microsoft in 1997. "Every single Indian CEO is looking outwards to see how he or she can expand their own base and expand into newer markets."
One reason Indian companies are suddenly going abroad is that they can. For years, government controls and restrictions?the infamous "license Raj"?shielded Indian businesses from foreign competition, isolating them and stifling innovation. But in the early 1990s, the government began to slowly open up the economy. Anticipating an eventual onslaught from outsiders, the country's more far-sighted industrialists decided to modernize their operations. As a result, the most efficient businesses were able to reap outsized profits as India's economic growth began to accelerate, explains Delphine Cavalier, a Paris-based economist at BNP Paribas, which has advised Indian companies on M&A activity in Europe. "Today, with competition now mounting in India, those same groups are seeking to protect that profitability by taking their activity abroad, knowing that continued economic growth in India will provide a strong base for years to come," Cavalier says.
New Delhi also helped clear the way for the recent buying spree. Last year, the government doubled the cap on how much Indian companies can annually invest abroad to 200% of a company's net worth. Thanks to the boom at home?India's GDP growth has averaged 8% a year over the past three years?many companies are financially stronger than ever before. Net profits are up nearly 40% this year, according to a recent report from Motilal Oswal Securities, which surveyed 127 publicly traded companies from various sectors. Besides having deep pockets, many Indian companies have been around for decades; they've got experienced managers who are confident in their ability to run large, complex organizations. "They're not like start-ups," says Bhatia, "so they say, 'you know, our balance sheet is actually stronger than some of our counterparts in London, or Europe, or America. We might as well buy these brands and make use of our low-cost manufacturing base to branch out into other markets outside of India.'"
That's certainly the logic behind many of the recent deals. "[Economic] liberalization made Indian companies a lot more competitive globally, especially when it comes to price," says Ranjit Pandit, a director at consultancy firm McKinsey & Company in Bombay. "The two things missing were customer access and certain advanced technologies." It's much faster to buy what you need than spend years building it up yourself. By purchasing Corus, for example, low-cost steel producer Tata Steel hopes to get access to technology to make more sophisticated products, as well as a European client base. By bidding for Daewoo, Videocon seeks a foothold in East Asian markets and an extended global marketing-and-sales network. There are other compelling reasons to go abroad. International exposure may be essential for Indian companies to maintain high sales-growth rates. Because of a host of problems at home, such as pervasive poverty and obsolete, overtaxed transportation and power networks, India's most successful companies have in some ways already outrun the Indian economy and are now simply spreading their bets. "I will apply my money where my judgment thinks it can make the maximum return," says Videocon chairman Venugopal Dhoot. "Business is business everywhere."
It's important to keep the country's acquisitiveness in perspective. Companies in other rapidly developing nations such as China and Brazil are also heading overseas. From 2002 to 2006, for example, India made 176 investments in Europe, according to Invest in France Agency, a government-backed investment-promotion group. China wasn't far behind with 114 deals over the same period. And last week, a Brazilian steel group?Companhia Siderúrgica Nacional?challenged Tata Steel's bid for Corus by making a preliminary $8.5 billion offer, 4.4% more than Tata's buyout proposal. Says Rajat Gupta, former global managing director of McKinsey & Company and the first Indian-born CEO of a large U.S. multinational: "It's a gathering trend, but to say that we are somehow uniquely terrific at globalizing, I don't think the evidence supports that. There is no track record yet of Indian companies."
Still, Indian businessmen are proving to be unusually adept in the international arena. It helps that millions of them already speak English, the global language of commerce. India is also a free-market democracy with a legal system that, though frustratingly slow, is easy for Westerners to understand. The country has longstanding cultural and trade ties with the rest of the world, which adds "a comfort factor" to its business dealings overseas, says Andrew Cahn, chief executive of UK Trade & Investment, a government body that supports foreign companies looking to invest in Britain. To be sure, Indian companies occasionally run into xenophobia and protectionism. Earlier this year, Indian-born Lakshmi Mittal's $33.5 billion purchase of Arcelor, Europe's top steel producer, was initially opposed by CEO Guy Dollé, who said Mittal's company?Mittal Steel, the largest steel producer in the world?was "eau de cologne" compared with the "perfume" of Arcelor. But India's forays abroad have so far proved less controversial than those launched from that other emerging economic superpower, China. According to Sanjaya Baru, an adviser to Indian Prime Minister Manmohan Singh, that's because major Chinese companies are usually partly or wholly owned by government entities, which can raise doubts about their management's motives. "Private companies in India are private," Baru says. "They are not an extension of the government."
Being annexed by India Inc. might also be more palatable to some because individual managers and entrepreneurs from the subcontinent are familiar faces overseas. Driven in the past by lack of opportunity at home, India's best and brightest have long studied and worked in the U.S. and Europe. America's high-tech sector in particular has an unusual concentration of Indian workers. Some 13% of all private, venture-backed start-up companies in the U.S. are founded by Indian immigrants, according to a study released this month by the National Venture Capital Association. Many of Silicon Valley's high-tech leaders are of Indian origin, among them Prabhakar Raghavan, 45, head of Yahoo!'s research division. After finishing college in India, Raghavan migrated to the U.S. and earned a Ph.D. in computer science at the University of California, Berkeley, before joining IBM. "Indians are looked upon not only as technical wizards but, beyond that, as people who can make things happen," he says.
The diaspora has spread beyond Silicon Valley. Indian-born executives have in recent years taken the reins at some of the world's biggest companies. Arun Sarin, a native of Madhya Pradesh in central India, is CEO of Britain's Vodafone. Three months ago, Indra Nooyi was named CEO of PepsiCo after serving five years as the U.S. beverage giant's CFO. Indians have credibility as managers, says Hemant Luthra, head of the Systems & Automotive Technologies division at Indian car-and-tractor manufacturer Mahindra & Mahindra. This was not always so. Luthra remembers visiting Hong Kong in 1991 when India's government was close to bankruptcy. "I had $100 in my pocket and if I went into a watch shop the salesmen would instantly show me the cheapest watches just because I was Indian," he says. Three years ago, Mahindra tried to buy Finland's biggest tractor company. Luthra says Finnish newspapers ran stories "asking how dare an Indian look at buying Finland's crown jewels?" But those things don't happen to him anymore, he says. "When we go and talk to these people in Germany or the U.K., it's a given that we're professional managers capable of running a huge business," says Luthra, who last month was juggling the final details of four separate acquisitions. "My biggest problem is finding the bandwidth to look at all the opportunities that come across my desk every day."
India's economic and business bandwidth is likely to continue growing. Take Essel Propack. The toothpaste-tube maker has begun to diversify in more profitable markets by buying a British company that makes packaging for upscale cosmetics and toiletries, and a U.S. company that makes medical products like catheters and esophageal balloons. "We'll keep looking for the right opportunities," says Essel Propack's managing director Ashok Goel. "And when we see something we like, we'll go for it." As Indian companies following that same script continue to expand overseas, in the future we'll be buying more than toothpaste tubes stamped "Made in India."
Info Edge India impresses on debut
Info Edge India was trading at Rs 574.45, a massive premium of 79.5 over the IPO price of Rs 320.
The company priced the IPO at the upper end of the Rs 290 - Rs 320 band. The public offer had received strong investor response. Post issue FII-holding in the stock is 7.9% wheread promoters own 54.6%. The company has a paid-up equity of Rs 27.29 crore.
The current price of Rs 574.45 discounts its Q1 June 2006 annualised EPS of Rs 7.70 (based on consolidated financials), by a PE multiple of a whopping 74.6.
Info Edge (India) is a leading provider of online recruitment and matrimonial classified and related services in India. Its online recruitment portal Naukri.com is currently India’s number one website for online recruitment services and its matrimonial portal Jeevansathi.com is presently India’s number third for online matrimonial classified services, in terms of number of unique visitors to the website, as per data provided by Comscore.
The online advertising market has grown from Rs 42 crore in FY 2004 to Rs 107 crore in FY 2005. This is expected to grow to Rs 162 crore in FY 2006 and reach Rs 218 crore in FY 2007 (Source: Internet and Mobile Association of India, IAMAI).
For Q1 June 2006, Info Edge reported a consolidated net profit of Rs 5.22 crore on revenue of Rs 27.92 crore. For FY 2006 (year ended 31 March 2006), it earned a net profit of Rs 13.29 crore on revenue of Rs 82.41 crore.
Info Edge (India) is currently over-dependant on recruitment services. Naukri.com contributed 93.47% (94.6% in FY 2006) of the operating revenue in the quarter ended June 2006.
Market may remain edgy
A sharp rise in several Asian indices in the early trades may help the domestic indices rebound from lower levels. However, lack of clarity in the market and higher volatility may drag down the market. Among the indices, the Nifty could test higher levels at 3870 and has a supports at 3840 and 3792. The Sensex has a likely support at 13330 and may face resistance at 13500.
Indian ADRs were largely mixed on the US bourses. Rediff jumped nearly 9.64%, Satyam, ICICI Bank, Dr Reddy's and Patni Computers ended with modest gains. while VSNL, MTNL, Tata Motors, and Wipro ended with loss of around 1%. However, HDFC Bank slipped marginally.
Crude oil prices in the US market was marginally down, with the Nymex Light Crude oil for December delivery losing 45 cents to close at $55.81 a barrel. However, in the Commodity space, the Comex gold for December series dropped 40 cents to settle at $622.10.
FII activity to dictate the trend
The market staged a solid intra-day rebound on Monday (20 November) after Sensex had plunged over 200 points at one point of time. The market sentiment turned cautious following RBI’s circular on Friday (17 November) which capped banks’ exposure to capital market.
Given that built up of positions in futures & options segment is substantial, high volatility may take place in the next few days in the run up to the expiry of October 2006 derivatives contracts on 30 November. There were heavy FII sales in the futures segment on 20 November. FIIs were net sellers to the tune of Rs 1051 crore in index based futures on that day. They were net sellers to the tune of Rs 249 crore in individual stock futures. As per provisional data, FIIs were net sellers to the tune of Rs 300 crore in the cash segment on that day.
FII inflow has boosted the bourses over the past few days. The Sensex is up 43% in calendar 2006 so far. FII inflow in 2006 has reached $7.8 billion (till 14 November). The inflow of funds from foreign institutional investors may pick up further in December 2006 following new allocations.
Asian markets were in the green on Tuesday (21 November). Key benchmark indices in Hong Kong, Japan, South Korea, Singapore and Taiwan were up by between 0.08% to 1.1%.
US blue chips ended lower on Monday as investors sold stocks after a series of record-high closes and a drop in oil prices hit energy shares. The Dow Jones industrial average was down 26.02 points, or 0.21 percent, to end at 12,316.54. The Standard & Poor's 500 Index closed down 0.70 point, or 0.05 percent, at 1,400.50. The Nasdaq Composite Index edged up 6.86 points, or 0.28 percent, to end at 2,452.72. A brokerage upgrade of Microsoft Corp. helped the Nasdaq end slightly higher.
Oil for January delivery ended down 19 cents a barrel at $58.78 a barrel on ample supplies and concern about demand.
Edelweiss - HLL
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Bullion: Weak commodity prices cap upside
Gold may rebound on speculation that the Federal Reserve (Fed) will not increase the interest rates anytime soon, thus eroding the value of the dollar and boosting the appeal of the precious metal as an alternative investment. The slumping housing market and the falling PPI numbers would prevent the Fed from raising the rates. Further, the recent WGC demand trends indicate that the investment demand has moved up amid speculators increasing their bets on gold as the net long positions increased by 9.5% in the week ended November 14.
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