Indian Economy - News & Updates - Archive

[Contrarian]

FM to meet bankers on money-laundering

NEW DELHI: Ahead of the Budget, finance minister P Chidambaram has convened a meeting of all bank chiefs to discuss, among other things, money-laundering issues arising out of a glut of information received from banks and financial institutions in the last year.

The meeting, scheduled for February 5, will discuss filing of cash transaction report (CTR) and suspicious transaction report (STR), which is likely to form the basis for amendments to the Prevention of Money Laundering Act (PMLA).

Besides, some of the banking sector's proposals for the Budget are likely to be taken up for discussion and may find a mention when Chidambaram presents the Finance Bill in Parliament on February 28.

The meeting, which comes after the RBI's credit policy later this month, will also dwell upon interest rate movements and the steps initiated by the central bank to check overheating in the economy.

This apart, the agenda includes routine items like a review of small-scale and agriculture lending, relief for debt-prone districts, performance of PSU banks during the third quarter-ended December 2006 and filing of banking cash transaction tax returns.

As part of the Know Your Customer (KYC) guidelines issued by RBI, banks and other FIs are required to report all major cash transactions to the Financial Intelligence Unit every month and if they come across any suspicious transaction, it has to be immediately brought to the notice of the agency within a week, failing which they are liable for penal action.

The government had asked all financial institutions to monitor transactions of high-risk individuals and their alleged fronts on a day-to-day basis.

As part of a global clamour against PEPs — Politically Exposed Persons — special attempts were made in last year to educate bankers on the need to keep a close watch on such high-risk individuals.

This had also become important since pressure was mounting on India from the US and other countries to join the Financial Action Task Force (FATF), established by the G-7 countries in 1989, to combat money laundering and terrorist financing globally.

PEPs are people who fulfil prominent public functions like heads of state, ministers and deputy ministers, members of Parliament and legislative assemblies, government officials, head of customs, judges, magistrates and state prosecutors, military leadership, important party functionaries like opposition leaders, senior bureaucrats and top industrialists.

While the government's FIU arm is already functioning, the PML Act, which was set up on the lines of a similar act used by FATF member countries, is yet to take off with the Enforcement Directorate.

 

[Contrarian]

Minority loans against RBI policy

MUMBAI: Vote bank politics continues to bend economic reason. The recent central government proposal asking banks to reserve a share of loan disbursement for members of minority communities is in conflict with RBI policy.

The code of banks' commitment to customers drawn up in July 2006, announced by the Banking Codes and Standard Board of India (BCSBI) of RBI states that,"We will not discriminate on the basis of age, race, gender, marital status, religion or disability." Banks can be punished if the norms are violated.

Bankers and RBI are not happy with the centre's intentions."One has to see the spirit behind the entire initiative. However, this is not the way to achieve it as this could lead to heartburns. Implementation is also going to be a tedious task as none of the bank captures this data. The best way to reach to the sections of populations which have no access to banking service is through financial inclusion," says an official at a state-owned bank.

And, others agreed. Mahpara Ali, CGM at SBI's Bangalore circle, says,"Financial inclusion is the best way to get a larger section of population within the banking fold. This is the only way to make an individual self reliant."

Banks have launched campaigns to reach out to masses untouched by the system. A large number of people, including those from minority communities, do not have access to banking services because they do not fulfil tough customer verification criteria or are unable to produce documents required by banks.

The RBI also found that financial exclusion could be a reason for higher crime rates and social strife in many regions.

It has now told banks to let customers open no-frills accounts with nil or very little balance. The regulator has also eased know-your-customer norms to help such customers.

Ali said the bank had achieved 100% financial inclusion in Gulbarga district of Karnataka."Within six months we have opened close to four lakh no-frills accounts with zero-balance.

26 banks and 56 NGOs helped complete the task. We are now in the process of issuing general credit cards with a limit of Rs 25,000 to individuals," she said.

Banks are also working with microfinance institutions (MFIs) and self-help group (SHGs) to reach out to the masses.

According, to the latest RBI data, a number of SHGs linked with banks stood at 22,38,565 and total bank loan extended was Rs 11,397.55 crore during 2005-06.

A private sector bank CEO says,"There is already a mechanism of disbursal to minority community members. Banks extend loans to borrowers referred to them by the respective state development commissioners for minorities. These loans also carry an element of government subsidy."

Commercial banks must lend 40% of loans to farmers and small businessmen, who constitute, along with a few other categories, the priority sector.

Indirect farm credit and home loans below Rs 10 lakh are also included in the category. CMD of a PSU bank said:"Any lending decision should be driven by credit worthiness of an individual. The government directing the flow of credit to a particular sector is understandable. But the moment you try to get into social sectors it tends to get partial."

 

[Contrarian]

India asks Mauritius to review tax treaty

MUMBAI: India's tax treaty with Mauritius is under review. The Union government is negotiating with the government of Mauritius for inserting a few 'limiting benefit' clauses in the tax treaty to stop its misuse.

A group, led by the head of international taxation cell in the Central Board of Direct Taxes (CBDT), has already made a few visits to Mauritius."By the month-end, things may be clear," a member of the group holding negotiations said.

The Union government is worried about the revenue losses incurred due to the India-Mauritius Double Taxation Avoidance Treaty.

Over the years, Mauritius has been used by foreign investors to route their investments into India. Mauritius does not tax capital gains, while the corporate tax liability is 3-4%.

About 40% of the $45-50 billion FDI that came into India from 1991 to 2006 has been routed through Mauritius. A similar percentage of FII inflows also are from Mauritius.

Tax authorities are more worried about the incidence of 'round tripping' and 'treaty shopping' by investors. In round tripping, Indians bring their (black) money back into the country via Mauritian shell companies.

In treaty shopping, foreign investors invest in a country from another place which has a favourable tax treaty. The department had estimated a revenue loss of over Rs 5,000 crore caused by treaty shopping.

This has prompted finance minister P Chidambaram to shoot a letter last month to his Mauritian counterpart urging him to revisit the treaty.

"The department has even suggested to give an aid of Rs 500-600 crore to the government of Mauritius in lieu of removing or limiting clauses causing revenue loss," said an I-T official.

However, this proposal has not found favour with the Mauritian government which is not in favour of amending the treaty.

With nearly 70% Mauritians of Indian origin, the country heavily depends on the revenues generated by the GFCs, a majority of whom only invest in India.

Tax experts like Dinesh Kanabar, partner of Mumbai-based consultancy firm Ambit RSM, say India has the option of putting a limitation clause in the tax treaty to cap misuse, just like what China did recently with Mauritius.

A limitation of benefit clause will check treaty shopping as it will ensure treaty benefits to those residences who qualify certain criteria.

This clause, say experts, will come very handy in limiting the capital gains benefits enjoyed by FIIs coming via Mauritius.

In India, short term (one year) capital gains tax is 10% while there is no tax for long term investments.

"Alternatively, India has the option like US to put an anti-abuse clause in its I-T Act which will deny any treaty benefit if any abuse or misuse of the treaty is found," says Kanabar.

But as all experts believe, classifying abuse or misuse of a treaty and even making 'treating shopping' illegal will be a very difficult task for the Indian government especially after judgments like the Azadi Bachao Andalon where Supreme Court justified treaty shopping.

Experts say India faces pressure to renegotiate the treaty with Mauritius, also because of the commitment given to Singapore while revisiting treaty with them.

This commitment was given primarily to put Singapore on a level-playing field with the Mauritius.

 

[Contrarian]

Liberty bullish on JV with Prozone

MUMBAI: Liberty International, a UK-based company with total property assets of over £7.5 billion is upbeat about its plans for India.

Liberty has entered into a joint venture-Prozone Liberty with Provogue subsidiary called Prozone and says it is here for the long haul.

Said David Fischel, chief executive officer, Liberty International, "We are looking to build a successful long term business with Prozone which is a much broader and more exciting opportunity than simply investing in individual projects."

Liberty, which owns some of the largest shopping centres in the UK including nine of the UK's top 25 shopping centres said that it does not invest in a new market in a rush.

"For a start, it takes time to identify the right local partner. This is important because along with bringing a lot of its international experience into the business, it understands the importance of local knowledge in making the entire business model a success," said Fischel.

"The long-term commitment is also important as one needs to view a longer term horizon and recognise that a lot of new destinations will be built over the next few years that will perhaps be more suitable and cost effective than the locations hitherto available in India. The idea is to provide retailers, both in India and new entrants from abroad,
world class infrastructure at a price that is affordable," said Fischel.

Managing a shopping centre is a complex business and each centre varies depending on its location and consumer profile. Liberty says that it is this expertise which is built over the years that will ensure its success.

Said Fischel, "We have learnt over the years what the retailers and consumers want to see in a location and we've derived an efficient way to deliver them that product. Key variable therefore is the rental income stream and there are a host of factors which can influence that."

 

[Contrarian]

Tata Motors starts initial work for car plant at Singur

KOLKATA: Initial phases of construction work for the Tata Motors' ambitious Rs 1,000 crore small car project began with a bhoomi puja at Singur in Hoogly district, the West Bengal government said on Sunday.

The Tata communication came a day after the West Bengal government extended prohibitory orders banning the assembly of four or more people in Singur till Jan 28 midnight following reports that more protests could be organised over the takeover of fertile farmland for the small car project.

Even as Singur remained tense with a Tata official heckled by protestors recently, a statement from the company said that it had begun construction work on Sunday, but without detailing the exact nature of the first step.

Reports from Singur said that with over 500 policemen present, a ' bhumi puja', a Hindu ritual prior to starting any project, was performed at the site, but not over the plot whose owners claim they have not given up their land yet.

"The Tata Motors plant operation is expected to create employment in excess of 10,000 direct and indirect jobs," the release said.

The civil construction for the plant is being initiated by Tata Motors, it said.

Singur, about 40 km from here in Hooghly district, has been chosen by Tata for its small car project over 997 acres of land.

This has triggered a violent face-off between the government and farmers led by civil society groups and parties like Trinamool Congress.

Tata Motors said through its contractors and its sub-contractors will deploy appropriate and necessary people from Singur area for various unskilled jobs and skilled assignments like masons and fitters.

It said it was initiating various steps to train people of the Singur villages, who had earlier registered with WBIDC, to improve their employability.

It has already selected a batch of individuals for an extensive six-month training. Another 179 residents of Singur, selected by WBIDC, are being trained by the Ramakrishna Shilpa Mandir (Belur).

The company is in the process of organising more extensive training for them based on a selection process. Arrangements will also be made to impart relevant training to other individuals, in WBIDC list, appropriate to their educational background and skills and based on a selection process.

Tata Motors is also organising groups of women from Singur families to supply food for construction workers. This is part of the company's plan to infuse income-generation for Singur families, by enabling them to produce various items required during the construction phase and when the plants are operational.
http://timesofindia.indiatimes.com/...t_Singur/articleshow/msid-1358412,curpg-1.cms

 

[Contrarian]

'Corporates confident about Indian economy'

NEW DELHI: Buoyed by impressive performance in the past six months, India Inc is upbeat about robust show of overall economy as well as by individual companies this fiscal and planned more investments in the second half, reveals a CII survey.

Majority of those surveyed forecast the economy to grow at 8.5-9 per cent this fiscal, with quite a number of them pointing out that the growth over nine per cent would not be a distant possibility.

CII's business confidence index (CII-BCI) showed an increase of 2.5 points at 71.8 for the period October-March 2006-07 over the previous period of April-September 2006-07.

The CII-BCI, constructed as a weighted average of the Current Situation Index (CSI) and the Expectations Index (EI), was higher among the non-manufacturing firms engaged in provision of services as compared to manufacturing firms.

The CSI that compares current business conditions with the previous six months has witnessed a significant increase of 3.4 points for the period April-March 2006-07.

The respondents have also expressed confidence that the sector in which they operate and their individual company growth performance would be better as compared to the previous six months.

The EI that reflects the perceptions of Indian industry with regard to performance of their company, sector and the Indian economy for the next six months is up by two points for the period October-March 2006-07.

The non-manufacturing firms came out to be appreciably more bullish about growth prospects compared to the manufacturing firms.

The survey reveals that GDP growth for the year 2006-07 is expected to be in range of 8.5-9 per cent with majority 32 per cent respondents feeling this way.

A growth exceeding 9 per cent is also not a distant possibility according to 22 per cent respondents.

The survey revealed that 85 per cent of the respondents plan to increase investments during October-March 2006-07. Capacity utilisation across the board has increased and 58 per cent of the respondents have expressed confidence that capacity utilisation for October-March 2006-07 will be in the range of 75-100 per cent.

The value of production is also expected to increase in the next six months said 82 per cent of the respondents. In fact, for 79 per cent of the respondents production increased in the first half of 2006-07. Further increase in production is likely because of expected increase in new orders.

The second half of 2006-07 is expected to be better in terms of increase in new orders as 80 per cent of the respondents expected new orders to increase in the next six months, while about 78 per cent of the respondents revealed that new orders had increased in the first half of 2006-07.

Out of the total respondents, 56 per cent expected employment to increase during October-March 2006-07, while 50 per cent of them said that employment had increased during the period April-September 2006-07.

The survey revealed 73 per cent of the respondents expressed confidence in exports expansion for the period October-March 2006-07. During April-March period of 2006, about 67 per cent of the respondents revealed that exports had increased.

 

[Contrarian]

Public offers to flood market

NEW DELHI: The public offer market is on a roll in the last three years. If the present boom in the stock market continues, companies are all set to mop up a staggering Rs 45,000 crore from public offers in 2007.

According to Prime Database, offer documents are already filed with the market regulator Sebi, to raise Rs 28,376 crore from the primary market. This is higher than Rs 24,432 crore raised in 2006. And many companies are waiting to enter the market to take the figure at Rs 45,000 crore in 2007, said Prime Database.

However, when large companies are competing against each other to enter the market, first-generation promoters are finding it tough to raise money for greenfield projects. Prime Database said there were hardly any small issues, not only because the market would not support them, but also because investment bankers are not willing to willing to take small assignments. There was no issue of less than Rs 10 crore in 2006, while in 2005 there was only two such issues.

In 2007 so far, 93 companies have filed offer documents to raise Rs 28,376 crore at an average of Rs 305 crore per issue. Out of 93 issues that are planned in 2007, 66 are of Rs 100 crore or below. Compared to this, in 2006, 92 companies raised Rs 24,432 crore at an average size of Rs 266 crore. In 2005, 72 issues hit the market to raise Rs 22,754 crore.

And 2004 was the most successful year considering the capital raising activities, when Rs 30,511 crore was raised by 34 public issues, giving an average of Rs 897 crore per issue. This was mainly because of the mega public issues launched by public sector units like ONGC and GAIL. In 2004, out of Rs 30,511 crore that was raised, Rs 20,218 crore was raised by PSUs.

In 2007, a number of public sector banks, real estate and infrastructure companies would raise money from the capital market. According to Prime Database, major banks that would hit the market include Indian Bank, Bank of India, Canara Bank, Central Bank of India, Corporation Bank, SBI and some of its subsidiaries, UCO Bank, United Bank of India and Vijaya Bank. SBI would raise around Rs 12,000 crore through its follow on public issue. Several private sector banks are also likely to join the bandwagon to raise funds.

A number of real estate companies have already filed offer documents with Sebi. Some of them are DLF, Omaxe, Akruti, Purvankara Projects, The other who would be doning soon are Ansal Properties, Ansal Buildwell, Emaar Properties, G Corp, Taneja Developers and JMD.

Among the infrastructure companies, some of the major companies that are entering the market are Gammon Infrastructure, Jas Toll Road and IVRCL. In the health sector, major IPOs are expected from Fortis Healthcare, Max Healthcare, Serum Institute and Unimark Remedies. Major issues from telecom will come from Idea, Essel Shyam and Spice Telecom.

However, the fate of the primary market, said Prime Database MD Prithvi Haldea, is linked with that of the secondary market. He said the secondary market needs to remain scam-free.

 

[Contrarian]

Pension funds to go in stocks

NEW DELHI: The Centre has finally decided to bite the bullet on one big-ticket reforms measure. Buoyed by the support from a majority of state governments, it has decided to release up to 5% of the proceeds of the new pension scheme to be deployed in stockmarkets, defying protests from the Left. The change will be notified soon.

An angry Left fielded West Bengal finance minister Asim Dasgupta to attack the decision.

While the decision itself is significant, the manner in which it was taken brings out the new-found urgency to get started on the reforms front after a long pause forced by Left. The decision came after a meeting of chief ministers with Prime Minister Manmohan Singh on Monday, at which most states, except those ruled by the Left and including those controlled by the common ideological foe, BJP, supported the migration to a contributory pension system. Quite clearly, it was the support from non-Left ruled states which emboldened the Centre, which had so far shied away from a head-on collision with the Left, to go ahead with the plan.

At the meeting, the PM strongly justified the change. He said the new investment pattern would fetch a better return for NPS funds than the 8% interest offered by government at present.

Coming just after finance minister P Chidambaram’s assurance to the British chancellor of the exchequer to raise the FDI cap in insurance to 49%, the decision to deploy a part, if tiny, of the pension kitty reinforces the belief that the current year may see government stepping on the reforms pedal.

So far, 19 states have joined NPS, leaving only the three Left-governed states and some north-eastern states out of it. Chidambaram said the north-eastern states too have indicated their interest in joining the scheme once the investment architecture is made available to them.

Though isolated, the Left justified its stand to stay away. Dasgupta questioned the twin premises of pension reforms — rising pension bill and the pressure it puts on government spending.

 

[Contrarian]

Companies rush to grab road projects

NEW DELHI: Will competition in the highway sector ultimately translate into lower user charges? As 2007 begins, private companies are jostling for road projects with renewed gusto. The National Highways Authority of India (NHAI) has been deluged by a staggering 143 pre-qualification (PQ) proposals for just 8 BOT (Toll) projects under NHDP Phase V.

As many as 49 firms (in various combinations) have submitted proposals to expand 1,405 km of identified highway stretches to six lanes. The total value of these projects is approximately Rs 9,133 crore and the entire bidding process is expected to close by the end of March. The Chennai-Tada stretch has attracted maximum attention with 25 proposals, followed by Gurgaon-Jaipur with 21 bids (see Table).

"The robust interest in NHDP V projects is very encouraging," says chairman, NHAI, Pradeep Kumar.

But this is just the start. Between Jan-March 2007, 996 km of projects in NHDP Phase 1 and 111 worth Rs 6,474 crore will be awarded, with bids being invited for 1,225 km worth Rs 7,766 crore in Phase V. Additionally, another 5,506 km of projects worth Rs 35,792 crore in Phases 11, 111 and V will be awarded in 2007-8, generating bids for 9,132 km worth Rs 59,165 crore for 2007-8.

"The ability of the highway sector to generate competition among so many technically competent bidders is a good sign, likely to ensure both better quality roads and reduced user charges," says Umesh Gupta, assistant V-P, Gammon India Ltd. Gammon is a key player in road sector.

Toll rates are fixed at 40 paise/km for passenger vehicles with tolled stretches fetching the government staggering amounts from the private sector by way of negative capital grants. However, NHAI officials rule out any reduction in toll rates on grounds that toll rates are already among the lowest globally.

 

[Contrarian]

Bengal eyes Rs 12000 cr investment in current fiscal

KOLKATA: Investment figures for West Bengal have never looked this good in past.

In the first two quarters of 2006-07 — between April and September — the state has had an investment of Rs 6,000 crore already, raising expectations that it could reach a whopping Rs 12,000 crore this financial year. And that's unprecedented, say officials of the state commerce and industries department, considering that the investment in West Bengal has been on an average of Rs 2,000 crore per year for the last 15 years (considering that the total investment in state from 1990-91 to 2004-05 has been Rs 28,500 crore).

"The reason behind this however, might not be a huge increase in industrial investment after all," say officials. Rather, it all changed when Buddhadeb Bhattacharjee's government took a policy decision to modify the system of calculating investment for the state.

Earlier, investment figures for the state would only include investment in manufacturing industry. "But this was not giving the actual amount of investment, because the state gets a huge amount of investment in infrastructure," said an official. This is when the government took a decision and asked Webcon to compile the investment figures.

 

[Contrarian]

BSE broker members to sell 51% of their stake

MUMBAI: Broker-members of the Bombay Stock Exchange have agreed to go for an offer-for-sale to dilute about 51% of their stake in the bourse, in another four months. In Monday’s general body meeting, attended by about 400 BSE brokers, majority of them agreed to offer a little over 5,000 of their 10,000 shares to institutional investors. Post placement, the BSE will go in for an initial public offer to list its shares on the bourses.

Under the government's de-mutualisation scheme that was approved by BSE, by May 17 broker-members of the exchange are required to dilute at least 51% stake in the exchange. Earlier, it was widely believed that BSE would issue new shares to a clutch of investors to meet the government's guidelines.

"Kotak Mahindra, the present financial advisor to the BSE, will handle the institutional placement process which has to be completed by May 17. About 99% of those who attended Monday’s AGM agreed to this decision," Mohan Kumar Vijan, chairman, BSE Brokers Forum, said. "Thereafter, between June and September, the BSE will dilute about 10% of its shares through an IPO," Vijan said. Post-IPO, brokers will hold 45% in the exchange.

At present, there are about 700 broker-members with the BSE, each holding 10,000 shares of the bourse in its Rs 70 lakh equity capital. Each broker will surrender at least 5,000 shares for institutional placement. "Members are allowed to surrender their full holding, that is all the 10,000 shares," Vijan said.

As per the government’s FDI policy relating to stock exchanges in India, foreign investors are allowed to hold up to 26% stake. Since the placement will lead to a dilution of 51% stake in the BSE, there has to be substantial participation by domestic institutions as well.

 

[Contrarian]

Dr Reddy's surpasses $1b mark in revenue

HYDERABAD: The NYSE-listed Dr Reddy’s Laboratories has joined the $1-billion revenue club. The company has posted $1.1 billion revenue for the nine months ended December 2006. While the revenue for the period stood at Rs 4,950 crore, it registered Rs 600 crore net profit.

For the quarter ended December 2006, the company's revenues stood at Rs 1,543.4 crore, which is about 160% growth over Rs 592.6 crore revenues in the corresponding period of the previous year. The gross profit for the quarter stood at Rs 674.4 crore, which is an improvement by 124% over corresponding period’s Rs 301.6 crore. However, as a percentage of revenues, gross profit component has slipped from 51% to 44%.

The bottomline of the company has improved by about 199%. While the net profit in the Q3 of 2005-06 was at Rs 62.8 crore, it has improved to Rs 187.9 crore in the third quarter of current year.

"The 180-day exclusivity on ondansetron in the US market is very promising. This is one significant opportunities it has gained after fluoxetine in 2001. With in one week after launch of the product, we have captured about 55% of the market," the COO K Satish Reddy said.
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Cheers another Indian company crosses the $1B mark!

 

[Contrarian]

Essar ties up with French firm Arkema

NEW DELHI: The Ruias-promoted Essar group has tied up with French chemicals company Arkema for a joint venture in India as part of its plans to add value to refinery operations by using product streams — other than motor or kitchen fuels — to manufacture acrylics.

The MoU has been signed by Essar Chemicals, the Chennai-based group arm that manufactures rubber-based adhesives. The MoU envisages setting up a unit to manufacture and market acrylic acid and esters, used by a wide variety of industries.

The plant is expected to come on stream in 2010. The plant will be set up at Vadinar where Essar Oil started its refinery last year. The chemicals plant will use propylene from the refinery to produce acrylics.

"This unit will be the first acrylic acid plant to be built in India and will serve the fast growing acrylics market in this part of the world. Its location will be ideal to supply both the Indian and the Asian markets," an Essar release quoted Henri Dugert, group president of Arkemas acrylics business unit, as saying.

The release quoted Essar group director Anshuman Ruia as saying his company was "firmly on the path of expanding value chain in all group businesses and entry into this (acrylics) business will further enhance potential of Essar Oils refinery... joining hands with Arkema will provide strategic leverage in Indian chemicals market to both companies."

 

[Contrarian]

AOL names Indian CEO as global ops head

NEW DELHI: America Online Limited (AOL) on Monday announced that Maneesh Dhir, who was so far heading its Indian operations, will lead the company's international operations as executive vice-president, reporting directly to AOL President and COO Ron Grant.

In this role, Dhir will oversee the growth of AOL's international portals and review new overseas business opportunities in Europe, Asia and the Americas. He will relocate to AOL's office in London from Bangalore in India where he is currently based.

Dhir has had a long stint at AOL. He has been until now senior vice-president and country manager of AOL's Indian entity where he has led all of the company's operations, including technology development, back-office operations, and even call centre operations.

Prior to that, he served as vice-president and general manager of Netscape in Mountain View, CA. Earlier in his career, he was also on the management team of a start-up that was later bought by Netscape, and has also served in various technology and business roles at technology major Sun Microsystems.

AOL has also announced that Dana Dunne will serve as head of AOL Europe, reporting to Dhir. Dunne has worked in several European countries for most of the past 15 years, most recently as president of Belgacom, a $10 billion telecommunications company in Belgium.

He was also president of US West International, and was one of the leaders of McKinsey & Company's telecom practice, working from London, Brussels and Madrid.

“AOL is in a terrific position to grow internationally, and with Maneesh and Dana, we have a leadership team that can expand our global presence as an advertising-supported web company," Ron Grant, AOL President and COO, said in a statement.

"I am extremely excited to take up this new responsibility. The experience of setting up and developing businesses in India will no doubt help me as AOL enters new and challenging markets globally" said Dhir.

 

[Contrarian]

Nimbus gets $125m

MUMBAI: There's no stopping private equity funds in India. Last week, the country saw its single largest foreign direct investment into real estate when Morgan Stanley invested Rs 675 crore in Oberoi Construction, a Mumbai-based real estate company.

On Sunday evening, private equity investors — the US-based 3i, Oman Investment Fund (OIF) and Cisco, a multinational technology company — together invested $125 million (Rs 552 crore) in unlisted Nimbus Communications for a 28.5% stake in the company.

Nimbus has interests in media, entertainment and sports. It also holds the International Cricket Council's (ICC) broadcast rights until end-2007.

All the three investors will subscribe to convertible bonds, which will later be converted into equity shares before Nimbus' public offer in 1-3 years.

Harish Thawani, Nimbus' executive chairman, said the money will be utilised to expand the company's international sports business and diversify into football and golf.

A part of the funds will also be utilised to finance Indian language films, international film production and distribution, developing digital content for wireless and IPTV platforms and to expand the company's broadcasting operations.

While Nimbus earns 70% of revenues from cricket—-it holds BCCI rights for domestic and international matches played by India between 2006-2010 — Thawani said football and golf are the fastest growing sports business in the world and Nimbus wants to tap these.

Industry sources said the company is close to acquiring long term management rights with the European PGA Tour to bring golf into Asia. On the football front, Nimbus may bag one or two European league matches.

For 3i, one of the largest US private equity funds, which manages close to $10 billion globally, this is the second investment in Nimbus.

In 2005, the fund had invested $45 billion for a 33% stake in the company. In the current tranche, it has put in $30 million for 6.5%__a function of the fact that Nimbus' valuation has shot up over the last 18 months.

OIF, promoted by Sultan of Oman, has invested $75 millon for an 18% stake while Cisco got 4% for $20 million. London-based boutique Euromax Capital Partners and Enam were advisors to the transaction.

Nimbus' current revenues stand at $310 million, up from $70 million when 3i first picked a stake in it. Over the last five years, the company has received close to $200 million (Rs 900 crore) in foreign investments.

PE investors eye returns in the region of 20-25% — a number Nimbus has delivered on. Cisco's strategy is complimentary to its own line of business.

It has hooked on to Nimbus' digital content model to promote innovative uses of internet and networking technology.