4 Corporates
c o m
Quick view
Mahindra Navistar puts
roll-out plans on fast track
In order to capitalise on the sharp revival in
the Indian commercial vehicles market and
to become one of the major players in the CV
industry, Mahindra Navistar Automotives
Limited (MNAL), a joint venture between
M&M and Navistar of the US, is gearing up to
roll out complete range of products over the
next one year. It will also well spread its
wings across the country through 100
dealerships, besides setting up large
number of service points and road side
assistant points.
Trimex plans $850 million
titanium unit in Indonesia
Trimex Sands, a part of the Trimex group
which has presence across India, UAE, Dubai
and a leading international conglomerate
with a focus on heavy minerals, has signed
an MoU with the Indonesian government to
set up a world-class integrated titanium
project worth $850 million. Leveraging heavy
mineral resources in Indonesia, the company
will identify the project’s site in accordance
with the location of titanium resources in the
country and will enable the authorities to
advance lesser-developed regions of
Indonesia. The company will invest in three
phases over the next 10 years.
Medfort ties up with
Ras Al Khaimah
Medfort Hospitals, a healthcare delivery
organisation has floated a joint venture with
Ras Al Khaimah Hospital, UAE and in
association with LV Prasad Eye Institute
(LVPEI) for setting up of a Centre for
Excellence for eyecare. The joint venture was
announced recently at Ras Al Khaimah, UAE.
Medfort is an associate of the largest
integrated healthcare organisation in India,
founded by GSK Velu (founder and managing
director of Trivitron Healthcare).
Zuari pre-tax profit
up 9% at Rs 208 crore
Fertilizer maker Zuari Industries has reported
an 8.9% rise in profit before tax at Rs 208 crore
in the third quarter on higher sales in plant
nutrients and pesticides. Turnover rose 39%
in the December quarter to Rs 1,524 crore
from the previous corresponding period. In
the first nine months of the fiscal, turnover
jumped 49% to Rs 4,556 crore, the company
stated. The enhanced performance was
primarily on account of higher fertilizer sales
volumes, which at 1.745 million tonnes,
recorded a growth of 40% over the 1.244
million tonnes achieved in the nine month
period ending December 2009.
Accel Frontline revenue
up 36% at Rs 91.7 crore
Accel Frontline (AFL), a key player in IT
infrastructure services posted a
consolidated revenue of Rs 91.7 crore for
the third quarter, clocking a rise of 36%
over the corresponding quarter previous
fiscal. AFL’s profit after tax has increased to
Rs 2.4 crore from Rs 1.2 crore. The company
had a sequential growth of 9% in turnover
and 472% in profits as compared to the
quarter ended September 30, 2010. The
company had an order intake of Rs 154
crore for various system integration
projects such as data centre integration,
network management and managed
services, said a release.
Maruti crosses 1 million
sales mark in 10 months
The country’s largest carmaker Maruti
Suzuki India, which became the first
company in India to sell one million units in a
single year last fiscal, has already crossed
the milestone in just ten months this
financial year. During the April-December
this fiscal the company sold a total of
9,27,655 units, which includes both domestic
sales and exports. “As on January 25,
domestic wholesales is at 73,874
units, while the export figures will be
compiled at the end of the month. Even then,
we have already crossed the one million
mark for this fiscal," a senior Maruti Suzuki
India (MSI) official said.
Tata Steel targets 10 m
tonne capacity in 2011
Tata Steel's Managing Director H M Nerurkar
on Tuesday said 2011 will be challenging for
the company as they will be completing the
ongoing expansion programme to achieve 10
million tonnes capacity. “Following the
expansion, the official capacity will be 9.7
million tonnes, but we are confident to excel
the target and achieve 10 million tonnes,"
Nerurkar said. However, the
commissioning and operation following the
expansion will be a challenging task before
the employees, he said.
Cauveryassetcrosses
1milliontonneoutput
It will be a race to the finish for state-run oil
and gas firm ONGC's Cauvery Asset to
meet its production target for the XI Five-
Year Plan (2007-12), with cumulative output
crossing the 1-million metric tonnes mark
recently, a top company official said on
Wednesday. The company was set a target
for production of 1.113 MMT of crude oil
from the Cauvery Asset in the XI Plan.
w w w. f i n a n c i a l e x p re s s .
LOW-COST CARRIERS ADOPTING FULL-SERVICE METHODS
SpiceJet plans to shift to
hub-and-spoke model
Nirbhay Kumar
New Delhi, Jan 26: The divid-
ing line between the operating
models of full-service and low-
cost airlines seem to be blur-
ring. The country’s second
largest budget carrier SpiceJet
plans to operate on a hub-and-
spokemodelwiththeinduction
of Bombardier regional jets be-
ginning June this year.
Most of the low-cost air-
lines worldwide maintain a
single-type fleet and offer
point-to-point connectivity.
SpiceJet currently maintains
a fleet of 25 B737 aircraft but is
planning to induct 15 Bom-
bardier Q400 turbojets by the
end of next year.
“We are in the process of
taking a decision on hub-and-
spoke model. There are sever-
al routes where this could
work well,” a SpiceJet official
told FE. The official said that
the airline would get the deliv-
ery of upto seven aircraft by
the end of this year. SpiceJet
had in December last year
placed firm order to buy 15
Bombardier Q400 valued at
about $446 million.
Indigo can grow capacity: Experts
Shaheen Mansuri
Mumbai, Jan 26: Delhi-based
low-cost carrier Indigo, which
signed an ambitious deal with
European aircraft manufac-
turer Airbus recently to buy
180 aircraft worth $15.6 billion
(Rs 702,00 crore), is well posi-
tioned to grow its capacity at
a time when competing air-
lines have not made such
moves, say experts.
The Indian aviation sector,
growing at a rate of 15% year on
year, will need over 1,000 air-
craft in the next 20 years, com-
pared to 420 as of now.
Banks account for 46% of corporate borrowings
■ Reliance, REC, Indian Oil, NTPC and PowerGrid top five borrowers
Pradip Kumar Dey
Mumbai, Jan 26: With the re-
vival of investment sentiments
aftertheglobaleconomicdown-
turn, Corporate India was on a
fund-raising spree and banks
were the largest source of bor-
rowings in 2009-10, followed by
debt and debentures.
A FE study on the funding
pattern of 365 corporates in
2009-10 shows that about 46% of
the total corporate borrowing
came from banks and around
24% from the domestic debt
market through debentures
and bonds. Of the total borrow-
ingsof Rs9.31lakhcrore,banks
accountedforRs4.25lakhcrore
We will hike prices of all products by 4%
Motoo Morimoto, managing
director,HitachiIndiadiscusses
with FE's Neha Pal about
the company’s distribution
strategy, expansion plans and
the impact of increasing raw
material costs.
How much is India’s share
in the overall global rev-
enues of Hitachi and which
verticals are more revenue
driven?
India’s contribution to the
global revenues is 5% but In-
dia is considered as a strate-
gic market globally and we
are very bullish about our
growth here. The verticals
which are more revenue dri-
The airline's CEO Neil Mills
could not be contacted for com-
mentonthedevelopment.Atext
message sent to him did not elic-
itanyresponse.
Among the full service air-
lines, the largest private carrier
bymarketshareJetAirwayshas
alreadyintroducedall-economy
flights to put a break on shift of
customers from its network to
budgetairlines.
Low-costairlinesofferpoint-
to-point connectivity to bring
efficiency in its operation. As
against this in case of full-ser-
vice carriers which operate on
Sushi Shyamal, partner in-
frastructure practice at Ernst &
Young, said, “Indigo has earlier
ordered 100 aircraft and cur-
rently has a fleet of 34 aircraft
withhighutilisationlevels.The
airline has replicated the same
strategy this time.” He further
said that though other carriers
haveplacedaircraftorderswith
either Boeing or Airbus, none
has placed this big an order.
While national carrier Air
India has already placed orders
for 111 aircraft, 63 from Boeing
and 43 from Airbus, it still falls
short of 69 aircraft when com-
pared with Indigo’s recent gi-
Borrowing spree
(Rs Crore)
Items 2009-10 2008-09
Banks 425513 436924
Deb. & Bonds 222728 162539
FC Loans 118161 113873
FI 37719 34555
Comm.Paper 14876 8231
Deposits 11681 8464
Total(Incl.others) 931912 859850
Note; Data relates to 365 major companies
followed by debentures/bonds
to the tune of Rs 2.23 lakh crore.
The share of foreign currency
loans in the total borrowings
amounted to 12.67%. The share
INTERVIEW: MOTOO MORIMOTO
M A N A G I N G
ven are split air-conditioners
and refrigerators.
Are you planning to hike the
prices of your products to
minimise the impact of in-
creasing raw material
costs?
Yes, we are hiking prices of
our entire range of products
by 4%. The prices of copper
andsteelhavegoneupwhichis
why the company cannot ab-
sorb it and will have to pass it
on to the customers.
Is Hitachi planning to foray
in some new product catego-
ry?
We are planning to re-
Thursday, January 27, 2011, New Delhi
hub and spoke and maintains growing but still not sufficient
bigger network there are tomakepoint-pointconnectivi-
chances of missing flights and ty commercially viable.
baggages thus inconvenienc- "Pure point-to-pont some-
ing passengers. times does not make sense.
An airline source said that Since bulk of the traffic is still
SpiceJetwasindiscussionwith on metro routes low-cost air-
the operators of Hyderabad lines may not find it commer-
and Bangalore airports to hub cially viable to operate direct
partof theiroperatinginsouth- flightstosmallercities,"KPMG
ern part of the country. director (aerospace and de-
Someindustryexperts,how- fence) Amber Dubey said.
ever feel that low-cost airlines Nearly 45% of the country's
could have to go for hub and 50millionairtrafficisonDelhi-
spoke in a particular region as Mumbai route alone. demand
the demand for air traffic from on small city pairs is growing
smaller towns and cities are fast though on lower base.
gantic order. The carrier had in Boeingfor29B737s,deliveriesof
2009 and 2010 deferred deliver- which will commence from
ies as it was already reeling un- 2012, and 10 B787 Dreamliners
der huge debt of around Rs duefordeliveriesfrom2015.The
16,000 crore plus losses of over Naresh Goyal-led airline has al-
Rs 5,000 crore. The carrier con- so firmed up plans for 10 A330s
sistently made efforts to reduce to be taken on lease. Kingfisher
expenses and streamline its ex- Airlines which will receive ap-
isting fleet. The airline in 2010 proximately67aircraftbetween
had also floated tenders for its 2010-2016 from Airbus, has also
three aircraft to be given on not enhanced its fleet order of
lease. The national carrier is late. The carrier, which has a
now implementing a 3-year re- debt of over Rs 6,000 crore, is
vival plan which began in Au- completely focussed on its debt
gust 2009. recast plan which will increase
Similarly, the country’s its moratorium period and an
largest private carrier Jet Air- interest reduction amongst oth-
ways has placed an order with er benefits.
panies increasedto42.65%dur-
ing the financial year 2008-09
from 39% during the financial
2007-08 year 2007-08. However, in the fi-
296964 nancial year 2009-10 the per-
110062
centage of borrowings as per-
centage of capital employed
95243
was lower at 40.16%.
32122 Overall, 36% companies
5251 from the sample showed an in-
5063 crease in the ratio of borrow-
616751 ings as a percentage of capital
employed in the financial year
2009-10.
The top five borrowers in
borrowings from financial in- 2009-10fromthesamplestudied
stitutions amounted to about were Reliance Industries Lim-
4%. The study also shows that ited (RIL) amounting to Rs
borrowings as percentage of 62,495 crore, Rural Electrifica-
capitalemployedbymajorcom- tion Corporation (REC) at Rs
D I R E C T O R , H I T A C H I I N D I A
launch washing machines in
another 1-2 years and are in
talks with the Hitachi team in
Thailand. Wehadstoppedsell-
ing washing machines in In-
dia as their capacity was 7 kg
plus which was not as per the
Indian requirement which is
between5-5.5kg.Thecompany
is planning to roll back the
washing machine segment
sinceIndianrequirementsare
changing.
What is your market share
in the air-condition space in
India and what is the future
target?
The AC market size is Rs
5,500 crore and our present
Start-ups go for
energy efficiency
to woo investors
Ajay Sukumaran &
Debojyoti Ghosh
Bangalore, Jan 26: With the
clean technology space in In-
dia attracting major funding
in 2010, more start-ups are
looking at energy efficiency
applications and waste man-
agement as a business model
to woo investors into this
space.Inthecleantechsector,
about $790 million has been
invested by private equity
and venture capital firms
across 18 deals during 2010
alone, according to data from
VCC-Edge,aprivatefirmthat
tracks investments.
The investor community
sees opportunities in clean
technology either in big-tick-
etdealstofundmegaprojects,
or in early stage deals where
companies raise capital to
build technology platforms.
According to the ministry
of science and technology,
the number of clean-tech
start-ups in the 60 incubators
across the country it sup-
ports is increasing.
The Indian Renewable En-
ergy Development Agency
(IREDA), which provides fi-
nancial support to renewable
energy projects, financed
1,921 projects with a loan
commitment amounts total-
ing over Rs 12,180 crore as of
March 31, 2010.
“The scope for invest-
ments in this sector are vast.
However, in depth analysis
needs to be carried out to
source profitable business
modelsandavoidonesthatdo
not prove to be beneficial in
the long term,” said Harshal
J.Shah,CEOof RelianceVen-
tures Asset Management,
which this month invested
$12 million along with GE En-
ergy in Bangalore-based
start-up AllGreen Energy.
For Kamlesh Tejwani,
founder of AllGreen, there
had been ‘a lot of interest'
fromprivateequityplayersin
his firm which plans to build
a 6.4 MW biomass power
plant in Tamil Nadu by the
year-end. “We plan on reach-
55,948 crore, Indian Oil Corpo-
ration Limited (IOCL) at Rs
44,566 crore, National Thermal
Power Corporation (NTPC) at
Rs 37,797 crore and Power Grid
Corporation amounting to Rs
34,417 crore. Notably, the high-
est increase in borrowings dur-
ing the financial was for Power
Grid Corporation at 20.9%.
However, a downward trend
in the ratio of borrowings as a
percentageof capitalemployed
was seen for companies like
SpiceJet, DishTV, Jubilant
Food, Unitech, DB Corporation
and Radico Khaitan. For exam-
ple, the ratio for DishTV de-
creased from 223% during 2008-
09 to 69.63% during 2009-10.
market share is 12%. We ex-
pect it to grow to 15% in the
next fiscal year 2011-12.
What is your distribution
strategy at present? How
many outlets do you have in
India and what are the new
expansion plans?
Hitachi is planning to
double its outlets from 1,500
to 3,000.
At present, Hitachi is pre-
sent mainly in Tier 1 and some
parts of Tier 2 cities. The com-
pany is going to expand to 317
towns this year from the pre-
sent236andisplan-
ning to employ
1,000 people.
IN THE CLEAN TECH
SECTOR, ABOUT
$790 MILLION HAS
BEEN INVESTED BY
PRIVATE EQUITY
AND VENTURE
CAPITAL FIRMS
ACROSS 18 DEALS
DURING 2010
ing a critical mass of 100 mw
with greenfield projects as
well as acquisitions,” said
Tejwani, the focus being on
scalability.
In power deficit India, en-
ergy companies have attract-
ed the maximum investment
in 2010 with 34 investments
worth about $2,141 million,
according to research firm
Venture Intelligence. Indus-
try experts say the renewable
energy sector is poised for
growth with the govern-
ment's initiatives such as the
National Solar Mission and
incentives for renewable en-
ergy installations.
“The investor is more con-
cerned when the govern-
ment is going to pull the plug.
Any investor who is going to
come in will have this view,”
said Anmol Jaggi, whose
start-up Gensol Consultants
received funding of upto $6
million from US-based India
Venture Partners in 2010 .
“When you come to the VC
stage, the bet is on the tech-
nology,” said Jaggi whose
carbon trade consultancy
had about 50 clients at the
time of the funding.
“With the development of
the carbon service platform,
the business can really scale
in all areas of energy con-
sulting and lead to develop-
ment of clean energy pro-
jects as well,” said Navneet
Gosal, advisor, India Ven-
ture Partners, explaining
that they invested in Gensol
after tracking the firm for
over a year.
It will take another 2-3
years for exits in the clean-
tech sector, he added.
Shipping
sector still
in choppy
waters: Fitch
fe Bureau
Chennai, Jan 26: Backed by
expectations that freight rates
will continue to remain de-
pressed due to the demand-
supply imbalance caused by a
net increase in capacity ex-
ceeding demand, Fitch Rat-
ings said the 2011 outlook for
shipping industry is negative.
Inarecentlypublishedreport,
it said that companies with a
greater proportion of their
shipsonlong-termchartersal-
so cannot expect to be com-
pletely protected against the
prevailinglowcharterratesas
most contracts have a tenor of
one year and contract rates
will be reset at prevailing low
rates upon renegotiation.
Leverage will continue to re-
mainhighasdebtislikelytobe
refinancedgivenloweroperat-
ing cash flows. The rating
agencyexpectsallsegmentsof
the shipping industry to face
low freight rates in 2011. As at
end-2010,theglobalorderbook
positionfornewbuildsasaper-
centage of existing capacity
was46%fordrybulksegment,
28% for tankers and 26% for
containercarriers.
With these, additional ca-
pacities are expected to come
on stream over 2011-2013 peri-
od and the global shipping in-
dustry over the next three
yearswillcontinuetowitness
overcapacity and depressed
freight rates. In the dry bulk
segment,ratesareexpectedto
be range bound, given the
volatility in demand for iron
ore from China. China's over-
all steel production is expect-
ed to go up by 7%-9% in 2011
and 5%-7% in 2012 and ineffi-
cientsteelplantsareexpected
to close down.