Bharti group to float $ 200m issue
Scepticism over interest rate cut stimulus
Philips to export its way out of slump

 
 
BHARTI GROUP TO FLOAT $ 200M ISSUE 
 
 
FROM M. RAJENDRAN
 
New Delhi, June 17: 
The Bharti group plans to come out with an initial public offer (IPO) of $ 200 million this year to raise funds for its ambitious expansion plans.

In an interview with The Telegraph, Sunil Bharti Mittal, chairman and group managing director of Bharti Enterprises, said the company would finalise the details of the IPO by the year-end. The company has embarked on a mega-expansion plan that will entail an investment of $ 1.1-1.5 billion for its telecom business.

“We plan to have about $ 600 million of equity and $ 900 million of debt. About $ 610 million has already been generated, part of it is already being invested in existing telecom business and the rest will be utilised for various other telecom projects,” said Mittal.

Bharti Enterprises has already invested about $ 600 million in its existing telecom ventures. The company plans to focus on its mobile telephony services, basic telephony services and broadband services. Bharti Group’s Bharti Telenet, the basic fixed line company will invest Rs 2000 crore in setting up its telephone networks in Delhi, Haryana, Karnataka and Tamil Nadu.

“We are awaiting the licence from the communications ministry .We have almost completed the network in Haryana and can start the service in 3-4 days; in Delhi, we can launch the services in 3-4 months. The fibre optic cable has been fully laid in Haryana. The work in Delhi is expected to be completed within a few months,” said Mittal.

The Bharti group intends to expand the range of its cellular operations by bidding for the fourth cellular licences, likely to be announced by the month-end.

“It is important that the government releases more spectrum for existing cellular operators in the 1800 band. It will enhance the quality of service and will also help increase the number of mobile subscribers,” he added.

Bharti Enterprises will target a turnover in excess of Rs 2,000 crore in 2001-02. It recorded an over 60 per cent growth, with sales turnover of Rs 1,300 crore as against the previous figure of Rs 800 crore. Bharti will also focus on building the broadband and long distance network, including completion of the Singapore-Chennai undersea cable by the end of the current fiscal. The broadband group also showed a growth of over 300 per cent in subscribers, crossing the 1,00,000 mark.

The company recently restructured its internet, very small aperture terminal (Vsat) services and broadband operations by creating Bharti Broadband Networks Limited with dual headquarters, in Bangalore and Delhi.

“It is a worldwide trend. With expanding business it is important to consolidate the region to harness potential on that particular business venture. Our Bangalore office was the V-SAT hub and will continue to be the technology base, while the Delhi office will concentrate on marketing and sales. We may also shift our human resources division to the south if necessary,” said Mittal.

He added, “We already have seven earth stations. Once our undersea submarine cable link lands at Chennai in December, we will be able to offer bandwidth at a speed of 8.4 terabits. We will offer this to corporate houses, commercial units and ISPs. We can also sell bandwidth to Videsh Sanchar Nigam Limited,” said Mittal.

   

 
 
SCEPTICISM OVER INTEREST RATE CUT STIMULUS 
 
 
FROM R. SASANKAN
 
New Delhi, June 17: 
Neither the finance minister nor the top bureaucracy, including the Reserve Bank of India, seems to have any clue about what ails the Indian economy.

According to sources in the banking industry, RBI governor Bimal Jalan’s prescription of softening the interest rate to fight the demand slump is unlikely to make any difference to the present situation. Such a step will only help reduce the profit margins of banks. They point out that even with a zero per cent interest rate, the Japanese economy could not be bailed out.

Different theories are being floated for the reasons behind the demand recession and the stagnation in industrial production. According to one theory, the huge capacity created in the wake of liberalisation has created the demand slump. Another version centres on the weak agriculture sector, which has virtually killed rural demand. Then there are theories on global competition and dumping. The most favoured theory among the uninformed section of industry is lack of infrastructure.

The demand contraction now, is different from those in the past. They say even when the interest rate ruled above 21 per cent, businessmen were queuing up before banks for credit. Now interest rate is around 14 per cent, but there are practically no takers for loans.

Ask any industrialist or bureaucrat for his views on the present demand recession. The industrialist will come up with the reply: lack of infrastructure. He will not go into the specifics. Is he willing to invest in a project if the infrastructure improves? Will that infrastructure make him more competitive? Such questions will remain unanswered.

A cut in interest rate need not boost industrial production. Credit is only one of the inputs for industrial production. Banking circles admit that Jalan has not gone deep into the problems. The RBI cannot directly intervene to reduce the interest rates. What it can do is to reduce the bank rate, the rate at which RBI lends to commercial banks.

Banks have been saddled with money. In view of the low offtake of credit, banks have been investing in SLR securities. Since interest on investments in SLR securities is market-related, banks are happy that they still get a reasonable return without any risk. The banks could limit their investment in SLR to 25 per cent of the deposits, but the lack of demand for credit has pushed up their investment up to 30 per cent.

   

 
 
PHILIPS TO EXPORT ITS WAY OUT OF SLUMP 
 
 
BY SUTANUKA GHOSAL
 
Calcutta, June 17: 
Philips India (PIL) has decided to export a large chunk of its colour television production to the Asia-Pacific region in the current financial year as part of its effort to beat the slowdown in the domestic consumer electronics market.

Philips Singapore will source 1 lakh CTVs from India in the current financial year and export them to Africa, West Asia, Vietnam, Bangladesh and Morocco. Philips India aims to make 2.8 lakh CTVs this year, up from 2.5 lakh last year.

Suresh Sukumaran, senior general manager marketing (TV and consumer electronics), said Philips Singapore would source the conventional 14 and 21 inch sets. “They have given us a firm commitment to buy 1 lakh sets.” Talks are under way to sell them another 25,000-30,000 real flat 21 inch CTVs, and a deal is expected to be clinched soon enough.

Explaining the rationale behind the export of CTVs, he said the move would help the company cover costs and utilise its fixed assets in a gainful and optimal manner. “More important, it will shore up our bottomline,” Sukumaran said.

Meanwhile, Philips is working on ways to bounce back into the black. “We expect to achieve a market share of 5 to 6 per cent in the current year. The optimism comes in the face of a recent ORG-Marg study which shows that the CTV market shrunk to 3.8 per cent in the first four months of the current year,” said Rupam Ganguly, general manager (consumer and trade marketing of consumer electronics).

The company is targeting the middle-class by launching 14, 20 and 21 inch CTVs, but at the same time sharpening its focus on high-end consumers through premium products like Matchline. “Real growth will come from high-end products,” said Ganguly.

The Matchline range, which will cost Rs 99,000, has digital innovations like 100 Hz digital natural motion (DNM), digital crystal clear with 10 bit video processing power to achieve higher picture resolution.

“We intend to use the new range to grab a sizeable share of the high-end CTV market. We will be present in all categories and at all price levels,” Ganguly added. The company has also set its sights on the fast-growing market for home cinema viewing, introducing a new 43 inch rear projection TV-Philips Matchline 433PP925 as an addition to its super-large TV line.

   
 

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