COVER STORY

Fixing India's Power Woes : Let There Be Light!

-- Amit Singh Sisodiya andKavita Putta

As India prepares to grow into the double digit, after consistently growing at 8-9% during the last couple of years, one sector that threatens to act as a major deterrent is the power sector. It is no secret that the power situation in the country remains grave even after more than five decades of independence, and more importantly, even after over a decade-and-a-half when we ushered into the era of reforms in 1991-92. The ground reality is: SEBs continue to accumulate losses thanks to unabated power theft and transmission and distribution losses; demand continues to outpace supply (peak demand vs. peak met situation is even worse) as new capacity additions are far and a few.

© 2007 IUP . All Rights Reserved

COVER STORY

Interview

-- Kameshwara Rao

From being a power deficit nation to becoming a power surplus nation and `power for all' in 2012-once again the power sector is in the limelight. While all this may sound a little overambitious, it is not unachievable either, provided the government takes approriate measures. In a freewheeling conversation with Kavitha Putta of The Analyst, Kameshwara Rao, Executive Director, PricewaterhouseCoopers offers powerful insights into the issues affecting India's power sector and what the government needs to do.

© 2007 IUP . All Rights Reserved

Article Price : Rs.50

FINANCIAL SERVICES

Microfinance in India: PEs Rush for Bigger Pie

-- Amit Singh Sisodiya and Sanjoy De

The new generation of Microfinance Institutions (MFIs) in India have suddenly become the rage for foreign investors. It was a watershed moment for India's nascent microfinance industry when Silicon Valley-based venture capital firm, Sequoia Capital, famous for its early stage investments in Google, Yahoo!, PayPal, Electronic Arts, YouTube, Cisco Systems, Oracle and Apple among others, announced a $6.5 mn package for Hyderabad-based SKS Microfinance.

© 2007 IUP . All Rights Reserved

FINANCIAL SERVICES

New Pension Scheme : Spearheading the Pension Reforms

-- N Janardhan Rao and Pratichi Samal

The new pension system may push the prospect of enlarging the market size to a whopping $95 bn by 2025. The ever-increasing longevity and the retirement provision based on inter-generational income transfers may not be a suitable option. There is a mismatch in the equation as more people are living longer and working populations are decreasing. In the long run, there are fewer workers supporting each retiree which is leading to a crisis.

© 2007 IUP . All Rights Reserved

CORPORATE STRATEGY

Toyota : On the Road to the Top

-- N Janardhan Rao and B Suma

As the one-time world leader General Motors wobbles, the Japanese automaker races to number one position. Toyota, the most profitable automaker has now emerged as the world's biggest carmaker. In 2006, it sold 2.5 million cars and trucks and forged ahead of the US-based Chrysler and is now in the process of passing another US auto major, Ford. For the second year in a row, Toyota emerged as America's third most admired companies after General Electric and Starbucks.

© 2007 IUP . All Rights Reserved

CORPORATE STRATEGY

Reliance Retail : Consumer Electronics Foray

-- Amit Singh Sisodiya and Sanghamitra

The Reliance juggernaut's foray into retailing of consumer durables could have the unorganized sector on its toes.Reliance Retail is at it again. After storming the food-cum-grocery retail market, the Mukesh Ambani-owned retailing major is all set to create ripples in the consumer electronics retailing as well. It unveiled its pilot consumer electronics concept mega store in Ghaziabad in April this year. The latest foray is a part of the Group's plan to tap the country's $5.6 bn consumer durables market, while complementing its existing retail format. The move also gains significance in the sense that this marks another initiative from the corporate world to organize consumer durables retailing in the country which has been dominated by unorganized players right from the beginning. Videocon-owned `Next', is probably India's first corporate-owned consumer durables retail chain spread across the country.

© 2007 IUP . All Rights Reserved

CORPORATE STRATEGY

IBM : Integrating Globally

-- N Janardhan Rao and Pratichi Samal

To become a true global leader, the big blue is betting on more complex projects rather than just software or services.Over the years, the evolution of IBM has seen three distinct models. These include, international model, in which most operations centered in the home country complemented the overseas sales and distribution subsidiaries; multinational model, to access local markets; and now globally integrated enterprise, which is similar to the transnational model. Under the new model, the company is changing its strategy, management, and operations in a truly global way. Based on the right cost, skills and business environment, it locates operations and functions by integrating those operations horizontally and globally.

© 2007 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

India : In the Trillion Dollar Club

-- N Janardhan Rao with inputs from P Sridevi

With the rupee hitting an all-time high, the Indian economy joins the elite trillion dollar club. India has emerged as the 12th country in the world with a trillion dollar economy. This was boosted by growth in the services and manufacturing sectors, coupled with an appreciating rupee against the US dollar. This milestone could prove to be a mixed blessing for the economy and could create both opportunities and obstacles.

© 2007 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

India's Family-Managed Businesses : Of Family Feuds and Power Struggles

-- Amit Singh Sisodiya and Kavitha Putta

Many family-managed business empires in the country have disintegrated. What has gone wrong? Family business feuds have been hitting the news headlines regularly for quite sometime now. In fact, in the last two decades, India Inc. has witnessed more than 20 business feuds. Leading business groups such as the Modis, the Dalmias, the Birlas, the Goenkas, and the Ambanis, with Bajaj being the latest entrant to the list, have all witnessed painful inheritance battles. As a result, today, many of these family empires that once ruled the Indian business landscape have disintegrated.

© 2007 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Trading on Insurance Policy:Is It for Good?

-- Y Bala Bharathi

In a landmark ruling, the Mumbai High Court has paved the way for free trading of insurance policies in India.Thanks to the recent verdict by the Mumbai High Court, now the insurance policyholders with lapsed policies have a big reason to cheer. The high court ruling which favored the trading of the insurance policies has come as a blessing in disguise for them. They can now easily get rid of their lapsed policies while simultaneously earning a little more than what they can get from the insurance company as the surrender value. Thus, this acts as yet another investment avenue for policyholders to raise money at a short notice.

© 2007 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Cash & Carry Retailing : India Calling

-- Amit Singh Sisodiya and Sanjoy De

The Cash & Carry format of retailing appears all set to storm the retailing landscape of the country-provided the biggies, such as Metro AG of Germany, US' Wal-Mart (in tie-up with Bharti Group), and India's home-grown Reliance Retail and Future Group, have their way. Walk inside the sprawling Metro AG Cash & Carry store in Kukatpally area of Hyderabad and you are sure to feel spellbound. The giant shopping center, spread over an area of 7 acres, occupies a selling space of 100,000 sq ft, which includes a 20,000 sq ft temperature-controlled space to store perishable food items such as vegetables, fruits, dairy products, meat and fish. A customer (read: wholesaler) can find, under one roof, an assortment of over 18,000 articles across food and non-food segments at the best wholesale prices.

© 2007 IUP . All Rights Reserved

BUSINESS ENVIRONMENT

Shopping Malls : Bigger Is Better?

-- R Venkatesan Iyengar

It's an emblem.it's an urban sprawl.No, it's a shopping mall! The towering concrete building that is comfortably ensconced in a strategic location of the city, the imposing glass facade that is emblazoned with logos of brands ranging from apparels to shoes, the ubiquitous billboards and banners that proudly proclaim the availability of fast food, electronic gadgets, gifts and novelties, swarms of people, consisting mostly of trendily-dressed teenagers and 20 somethings buzzing around and enjoying the luxury and ambience of the centrally air-conditioned floors - welcome to the Shopping Mall, the neuve symbol of India's tryst with economic boom.

© 2007 IUP . All Rights Reserved

APOLITICAL

Inflation : RBI Is Right on the Course!

-- grk

The monsoon winds that hit the western coast of India bang on the due date have, true to their tradition, brought good tidings: the month of June was a witness to two good things that happened on the monetary front. First, the most important: inflation has dipped to a 13-month low of 4.28% for the week ended June 9, as against 5.29% of the corresponding week of the previous year, from a high of 6.56% as on March 17th of this year. And all kudos to the Reserve Bank of India (RBI) for so splendidly taming it, that too, in such a short span.

© 2007 IUP . All Rights Reserved

PERSPECTIVE

Basel II: Why not 8% Capital for Credit Risk?

-- GRK Murty

A regulatory capital of 9% for credit risk vis-à-vis a minimum of 8% prescribed under Basel II may not augur well for Indian banks, more so during the transition. Banks are essentially known for transferring financial resources from net savers to net borrowers. The banking sector plays a dominant role in the complex financial system of a country by providing liquidity and payment services to the real sector. It institutionalizes savings by accepting deposits from the public and using them to make credit available to households, government, businesses, and others.

© 2007 IUP . All Rights Reserved

M&AS

Sprint-Nextel : Wrong Connection?

-- Amit Singh Sisodiya and Sanjoy De

A string of developments puts a big question mark over the survival of the year-long merger. Much to the chagrin of the top brass of Sprint-Nextel, the third largest telecommunications company in the US, a research report from Probe Financial Associates Inc., voiced concern that the year-old merger of the two carriers might be ripe for a takeover. While not many would buy this argument, at least for now, a string of developments in recent times does suggest that all is not well with the operator. In an announcement that dampened investor sentiments, the company said that it incurred losses of $211 mn during the first quarter ended March 31, 2007, while adjusted operating earnings dipped 45%.

© 2007 IUP . All Rights Reserved

M&AS

Jet-Air Sahara Deal: Changing Dynamics

-- N Janardhan Rao and B Suma

The merger has changed the dynamics of the entire aviation sector showing a definite trend towards consolidation. After clearance by a three-member arbitration panel, Jet Airways finally struck a deal on April 12, 2007 to buyout rival air carrier Air Sahara for Rs. 1,450 cr, about 40% less than its initial offer of $500 mn (approx. Rs. 2,200 cr). Jet has won the battle in bagging Air Sahara at a `bargain' price. Air Sahara would be renamed as `Jetlite', positioning it as a value-based carrier that offers value to passengers at low fares to compete with low-cost carriers. Post-merger, Jet-Sahara bagged a combined market share of about 32%. This merger signifies the beginning of consolidation in the sector.

© 2007 IUP . All Rights Reserved

M&AS

UB - Whyte & Mackay : In High Spirits!

-- Amit Singh Sisodiya and Sanjoy De

With the high-profile acquisition of Scotch giant Whyte & Mackay, United Spirits has solidified its position in the global liquor arena. After months of being fodder for whisper columns, United Spirits Limited (USL), the flagship of the United Breweries (UB), led by its charismatic Chairman and the beer baron, Vijay Mallya, is again in the limelight. In his usual astutely majestic style, Mallya acquired 100% in Glasgow-based Scotch giant Whyte & Mackay (W&M), the world's fourth largest Scotch maker. The historic £595 mn ($1.18 bn) acquisition of W&M, which boasts of producing nearly 10% of the world's Scotch whisky, gives Mallya a first-mover advantage in an industry where success is determined by mindspace.

© 2007 IUP . All Rights Reserved

FINANCIAL MARKETS

Chinese Buoyant Bourses: Will the Party Continue?

-- Y Bala Bharathi

Though the seemingly unstoppable Chinese bourses took a plunge for a short while, it doesn't signify the end of the golden era for the dragon. An astute adage goes this way: "Put not your trust in money, but put your money in trust." The Chinese investors are now a baffled lot trying to gamble with their trust in the risky stock markets. The Chinese bourses almost looked like a casino for them until the recent plunge which was the consequence of the stamp tax hike on stock trading. Nevertheless, before that, it was almost impossible for the Chinese investors not to participate in their pathbreaking stock market rally.

© 2007 IUP . All Rights Reserved

FINANCIAL MARKETS

Credit Derivatives : A Welcome Move

-- Y Bala Bharathi

As India is paving the way for the entry of credit derivatives, its credit and bond markets could get the much-needed boost.Credit risk, one of the biggest risks of the financial system, poses a great challenge to banks and bond investors at times when the borrower is in default. Nevertheless, an effective management of credit risk largely aids in enhancing the efficiency and resilience of the financial system of any economy. To serve this very purpose, credit derivatives have globally emerged as a potential risk management tool for banks, financial institutions and bondholders.

© 2007 IUP . All Rights Reserved

INTERNATIONAL

Global Financial Institutions : Losing Their Identity?

-- N Janardhan Rao and B Suma

The recent Wolfowitz scandal has come as a wake-up call to the World Bank as well as the other financial institutions on the need for governance reforms. The World Bank's objective "a world free from poverty" and the IMF dream "a world free from financial crisis" have gained recognition throughout the globe. There is no doubt that these are crucial and daunting goals and no financial institution, other than these two, dares to dream of such objectives. However, today, the World Bank's future is in a crisis over the pay scandal involving Paul Wolfowitz, former President of the World Bank and on the other hand, the impact of IMF loans has been widely debated, giving both the appearance of having lost their age-old glory. Now a spate of crises-ranging from financial to institutional to moral-is diluting the integrity and impartiality of these two global institutions.

© 2007 IUP . All Rights Reserved

ARTS AND ARTISTS

Alfred Chandler

-- GRK Murty

Life is an empty canvas on which the invisible morphs into the visible and visible dissolves into invisible, and so repeats the cycle of growth even in businesses.Alfred Du Pont Chandler, the noted global business historian and the former professor of business history at the Harvard Business School, died of cardiac arrest on May 9, at the age of 88, in Cambridge. He wrote extensively - 25 books, written or edited - on management theory with an exclusive focus on innovation and generation of wealth.

© 2007 IUP . All Rights Reserved

ARTS AND ARTISTS

The Mesmeric Maya

-- Dr. P G Nirmala

The ancient Maya, with their ruined cities deep in the jungles of Mexico and Central America, have evoked feelings of mystery for centuries. If one of the solutions to the modern metaphysical malaise lies in Paganism, we might with our `back-looking curiositie' go back in antiquity to this land of the `Plumed Serpent'-the land of the ancient Maya- and experience the aura and magic of a vanished civilization. Their myths "seem to rise out of the deep well of knowledge lying unfathomed in the human mind- hidden by that logical brain so overworked in many of the activities of modern life." This innovative, creative, and majestic people no doubt possessed a secret wisdom.

© 2007 IUP . All Rights Reserved