AMCs find a shelter...

While market volatility is keeping investors away, fund houses have identified infrastructure as the new bet to lure them, says Deepak Ranjan Patra

When a country’s finance minister enhances allocation to urban infrastructure by a mind-boggling 87% to Rs.12,887 crore with a promise that infrastructure investments will be further increased to more than 9% of the GDP in next five years, you definitely need no rocket science to find out which sector will make it to the top of the investors’ minds. Yes, infrastructure is hot today in India and no one wants to miss this clear opportunity to make some moolah. So, how could the mutual fund industry stay sideway? Almost all Asset Management Companies (AMCs) have geared up to this infra-growth. Asserts R. K. Gupta, MD, Taurus Mutual Fund, “In coming six months you will see all fund houses having their own infra funds dedicated to the sector.” But the question remains, are these AMCs really hoping to offer a good return to the investors or are they just trying to skim the market when the buzz is still heavy?

Bandeep Singh Ranger, Chairman, IndusView avers, “Finance Minister’s commitment to increase investments in the infrastructure sector to more than 9% of the GDP by 2014 from 5% currently and other rural development and welfare programs opens scope for investment opportunities.” Moreover, Finance Minister’s inclination towards Public Private Partnership clears ground for the private players to avail a cool share in the returns to be generated. This combined with the fact that India is now considered as the preferred destination for doing business among the emerging BRIC countries (World Bank Report titled ‘Doing business 2009’) makes it a point worth mentioning that the sector may also see some foreign investments flowing in. Considering the expectations, possibilities, “the sector will now become hotter than ever,” claims Vinayak Banarjee, Chairman, Feedback Ventures.

However, AMCs’ rendezvous with the infrastructure companies is nothing new. Infra stocks always have been a part of different mutual fund schemes for the simple fact that majority of the BSE 500 companies belong to the domain. As a matter of fact, stocks of infra-based companies form a large portion of many of the diversified equity funds. The only new thing about the current trend is that this time around the AMCs are coming up with sector specific infra funds like ‘Reliance Infrastructure fund’ launched by Reliance Mutual Fund promising to invest in infrastructure and infrastructure related companies only. The fund managers too seem upbeat on the returns as Sundeep Sikka, CEO, Reliance Capital Asset Management told to media during launch of the new fund, “Undoubtedly, infrastructure is a key priority for India and we also hope a spurt of infrastructure spending in the economy on the back of the stable government and ease of project financing. Moreover, the valuation looks more attractive. The right time is now to invest in infrastructure and infrastructure-related firms.”

Explaining the prevailing bullishness in the sector R. K. Gupta explains, “Over the last two years other sectors are by and large flat or downward. The only good sector available is infrastructure. Moreover, it’s at a poor level in the country and government can’t survive without taking to higher levels. That means there is a better future in the sector with ample opportunities.” Perhaps that’s why Gupta feels that almost every fund house will soon have some infra-related funds in their portfolio. But the question is what impact will this flurry of infra funds have on the investors? Well, a lot of confusion as to which fund to chose.

Definitely it’s a tough time for the retail investors. While the abrupt volatility at the stock market is pulling them from entering into the market, launch of a number of infra-based funds are giving their investment strategy a tough time in case of mutual funds. The most common advice given by analysts at the moment is to go for existing funds with proven track records rather than jumping into the NFO bandwagon. The very basic reason for the same is that most of the new funds are typical sector funds, where the constituents are associated with similar type of risk that is attached to the sector. For the same, such funds often lack proper defensive stocks ending up as high-risk investments. In fact, the risk quotient associated with infrastructure sector as such is more than many others. That’s why, it’s time when investors need to be a little meticulous in their approach even though they know that infrastructure is the next big thing for them.

Deepak Ranjan Patra

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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We won’t be surprised if your answer is a big “NO!”, for you only know this company as HTC !

Surbhi Chawla debates on the strategic & branding issues of HTC...

After a long lull of six months, the smartphone category has once again become the talk of town, with a slew of high profile launches. First, it was Samsung Star and Star 3G. They were followed by the Nokia N97, and now, HTC plans to get back at competitors’ heels with its first Android-based handset in India – HTC Magic. So what prompted such enthusiastic acts on the part of the smartphone manufacturers? Well, despite the fact that consumer spending on mobile handsets dried up during the first quarter of 2009 (it fell by 19% as compared to the same period in 2008, according to Gartner), the smartphone category recorded a swashbuckling growth of 25% during the same period, all thanks to the terrific market performance of the Apple iPhone, BlackBerry Pearl, BlackBerry Storm and of course, the HTC’s Android phone – G1. That was global, how about local? The story is no different for the smartphone market in India too, where sales in this category is currently growing between 20-25% (a trend expected to continue till 2010). And of all the ‘smart’ brands, perhaps the least discussed of late has been HTC. But does that mean that all is silent and still behind the HTC wall. 4Ps B&M decided to pay a visit to HTC’s Indian headquarters, to uncover strategies that it has drawn-out, to run through competition in India.

We begin with the HTC Magic. Surely, there are some ripples that this so-considered ‘magic’ device from HTC’s stable is causing, but of course, minus the loud marketing efforts made by Apple during the launch of its iPhone in India, about a year back. Of course, the unavailability of the handset model currently makes it a tad difficult to make predictions about its future, but some issues are as apparent as they can get, and the trouble starts right where its strength lies -the Android mobile OS on which HTC works. The USP of an Android is that it is open-source which enables one to install a host of applications on their handsets as per one’s needs. The problem is that Android’s application store is not functional in India yet, therefore customers who buy the Magic would have to play around with the existing applications that come pre-loaded with this handset or develop something for themselves. Simply stated, a hurdle that stands between HTC and the success of its latest Android-based handset.

So aren’t officials at the company worried over the same? Not really, as Jack Tong, Vice-President, HTC APAC states, “I think the response that Android mobiles have received worldwide was at times even beyond expectations and we expect something similar in the Indian market.” Of course, a spokesperson in the company acknowledged the fact that, “availability of an application store would have sweetened the offering.” However, he goes ahead and optimistically opines that there would be plenty of early adopters willing to get their hands on HTC Magic, despite the roadblock.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Government’s new found love for private enterprises seems to be finally taking shape in the form of PPPs.

No doubt, they are the only way forward for the Indian economy towards growth at present, but then, there are areas which need immediate attention, if the government doesn’t want to hit a road block, feels Niharika Patra

What can be more surprising to a person, who is visiting India after a long time, than a host of long and shimmering roads, swanky buildings and above all, a sudden increase in the quality of basic amenities provided by the government. After all, it’s a never-seen-before India for him!

All thanks to the government’s new found love for private business houses, an impressive combination of public projects and private money is finally making India a place to be. Though, one cannot disagree that the results have been few and far, but the good thing is that the whole concept of mixed economy is finally coming up with the combination, which is certainly making the idea click.

In fact, public-private partnership (PPP) is that one thing which can make India rub its shoulders with the dragon nation, when it comes to world-class infrastructure coupled with the much needed push for the Indian economy. Agrees M. Y. Reddy, Committee Head, Infrastructure, FICCI, “Applying PPP model to the infrastructure is what can give the sector the necessary boost that it wants as of now.”

Though the idea is not new for the Indian policy makers, PPPs have been utilised to a greater extent only during the last decade or so (and that have been mostly limited to roads, airports, ports, bridges, et al). However, the recent announcements made by Finance Minister, Pranab Mukherjee, to provide infrastructure sector the much needed push, through clearing of pending PPP projects, would surely open new doors, not only for the private sector, but will also make projects like that under National Highways Authority of India (NHAI, which requires 60 highways to be built across India with an upward investment of Rs.70,000 crore) get going once again.

Even steel, ports and the Railways have been waiting for long for some big programme implementations under PPP. In fact, a latest report by BNP Paribas shows that the Railways alone provides for an investment opportunity close to a whopping Rs.2.7 lakh crore in the next eight years. Of the whole corpus, an investment of Rs.68,000 crore is alone needed by the Dedicated Freight Corridor, which covers 2,800 kms of rail corridor across seven states of India.

But then, that’s not all. Poverty eradication and social reforms too are reaching ground levels and this is where the PPP model is eying for a big opportunity. In fact, Food Security Bill, which talks about providing grains to the poor at Rs.3, can do wonders coupled with a proper distribution system. For instance, the use of Smart Cards (for the distribution of food grains), the latest innovative step that allows the holder to check the status of their application and stock while facilitating easier and more transparent distribution of stocks, provides huge business opportunity to Smart Card producers, who have been eagerly waiting to tap the huge potential in the public sector. The initiative (which has already tasted success in National Health Insurance Scheme) can be seen as a win-win solution for both the government as well as private players. Avers S. Kumarswamy, Chairman, Agrochemicals Promotion Group, “Public distribution has been a problem not only for the BPL families, but also for the ingredient suppliers of fertilisers and seeds because of the rampant corruption.” Certainly, Smart Cards would to a great extent also help in removing that devastating loophole.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Sunil Bharti Mittal believes that life gives everyone at least one big break, and he got his big break when he was awarded the telecom licence for the National Capital Region and launched services in 1995. The ‘big boys’ in India Inc. laughed at him then. But With Airtel a clear market leader today, they are not laughing anymore. teaming up with his brothers - Rakesh and Rajan Bharti Mittal now - sunil is bent on extracting another big break from destiny. financial services, retail or agri-biz: Where will the next big leap for the mittal brothers come from? savreen gadhoke, suRbhi chawla and gyanendra kashyap dive into the mittal empire for some answers...

“I am a new age entrepreneur. I believe I represent the changing face of India,” said Sunil Bharti Mittal (SBM to his friends and colleagues), while addressing faculty and students at the convocation function of a management school in Bangalore. His self-assessment could not have been more accurate! The manner in which he has been able to usurp a ‘pole-position’ in India Inc. (from right under the noses of the Tatas, Birlas and Ambanis of the world) stands testimony to his revolutionary streak. For those who came in late, the Ludhiana boy started with a bicycle parts business and today straddles a multi-billion dollar telecom empire.

It all began when he applied for and won a telecom licence and launched mobile services in Delhi and NCR in 1995. That was the beginning of SBM’s battle with the ‘big boys’ to stake his claim to a coveted ‘pole position’ in Indian business – a battle, which he has won, fair and square. With a market cap of Rs.1.52 trillion (as on June 2, 2009), Bharti Telecom now stands tall among India Inc.’s top rankers, amidst the Ambani and Tata empires – the very names that once perhaps sparked his envy! If the MTN deal comes through (see box on pg.71) , Bharti’s stature will grow bigger and better.

The telecom dream is on track. But not resting on past laurels, Mittal already seems to be looking for the next big leap. In fact, he had started fantasising about new frontiers years ago. And last year when he gave up the role of Bharti Airtel’s CEO to Manoj Kohli, the desire in part was to focus more on emerging businesses. Along with brothers Rakesh and Rajan Bharti Mittal, the winsome threesome have laid out the roadmap for Bharti Enterprises. Financial services (where Bharti teams up with AXA); retail (with Walmart as their winning gambit) and processed foods (a JV with Singapore based Del Monte) are the new playing fields. Question is, which of them will deliver the goods? Do these forays have it in them to come up to the stature of brand Airtel? More important, do the Mittal brothers have it in them to repeat their telecom achievements?

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Bingo! We all tasted ITC’s madness... didn’t we?

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Brand: Bingo!
Agency: O&M

No Confusion, Great Combination yelled ITC’s Bingo, with the result that a completely new snack got a munching response from the Indian market. Within a month, Bingo’s brand recall was as high as 70%. And introducing 15-16 flavours simultaneously helped Bingo grab 16% of the market in just 9 months. The ‘Mad’ angle did prove sane for the brand new product...

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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