Buyout begets Rs 3,300-cr PC powerhouse
Clear lead in race for CMC stake
Digital GlobalSoft awaits open offer
Bengal, Bihar to issue power bonds
TCS may go public to fund acquisitions
Futures in 31 scrips
Higher customs duty enlivens tea industry
Reality bites realtors riding retail boom
Ebony in expansion mode
Foreign Exchange, Bullion, Stock Indices

New Delhi, Sept. 4: 
The merger of the Indian operations of Hewlett-Packard Company and Compaq Computer Corporation will create a Rs 3,300-crore giant that will be the largest personal computer (PC) maker in India.

The new HP will offer the industry�s most complete set of IT products and services for both businesses and consumers with a commitment to serving customers with open systems and architectures.

The combined company will have straddle a wide range of IT businesses like servers, access devices (PCs and hand-held), imaging and printing. It will also provide IT services, storage and management software.

�The merger will create the largest PC company in India,� said Sameer Kochhar, managing director of Skoch Consultancy Services Pvt Ltd. �It can potentially capture a market-share of over 20 per cent next year. It puts pressure on Indian computer makers and on IBM, which will have to review their PC business.�

�It also opens up enterprise, government, and data centre markets for HP, which was a weak area and creates a formidable entity with presence and stronghold in every market segment. But it will also lead to at least 30 per cent job cuts over a period of time,� he added.

Vinnie Mehta, director of Manufacturers Association of Information Technology (MAIT), the apex body for the hardware industry, said: �The combined market-share of HP and Compaq today in India is over 17 per cent. Both companies will have a combined turnover of Rs 3,000 crore and control around a third of the organised sector�s 47 per cent share.�

Their combined market share in the Asia-Pacific region would nearly become 13 per cent, leaving every other company trailing in its wake. Compaq India has been the market leader in PC business. It shipped 1.88 lakh desktops during 2000-2001 and increased its market-share to 10 per cent from 7 per cent in the previous year. The company�s revenues were estimated to have grown 60 per cent over the previous year at Rs 1,761 crore during the year ended March 2001.

Commenting on the HP-Compaq merger, Nasscom chairman Phiroz Vandrevala said: �In today�s competitive business environment with an emphasis on maximising value to consumers by improving operational efficiencies, we believe that the merger of H-P and Compaq will provide them an opportunity to leverage each other�s core competencies.

According to a survey, H-P India grew by about 35 per cent to record revenues of Rs 1,540 crore. It sold 1.31 lakh PCs and increased its market share to 7 per cent from 6 per cent in the previous year.

�The merger will create the largest PC company in India which is slated to grab at least 20 per cent share at the end of the current financial year. Above all, the combined entity will complement each other�s product portfolio well,� said an IT consultant.

While both companies have offerings in desktops, notebooks, handhelds and servers, HP has been very strong in peripherals business, particularly inkjet printers where it is a market leader.

Compaq, on the other hand, has no presence in peripherals and has been focused on corporate PC business. Compaq has 730 employees in India, while H-P India has 316.

H-P has another subsidiary, H-P India Software Operation, which is a 100 per cent export-oriented development lab, besides its HP Services business, which has grown in a big way.

\ over past two years. The plan is to turn its Bangalore-based operations into a back-office hub for the Asia-Pacific region.

Significantly, the transfer of ownership of Digital India (now known as Digital Globalsoft) could pose problems for the new entity, analysts said.

In keeping with the trend that the technology industry has been experiencing due to challenging market conditions, it will allow the merged entity to gain from consolidation by allowing access to new markets and capitalising on growth opportunities."

Despite Compaq acquiring Digital Equipment Corporation globally a few years ago, Digital India could not be merged with Compaq India on account of an 18 per cent public shareholding.

Compaq holds a 51 per cent stake in Digital Globalsoft. FIIs and mutual funds hold another 9.17 per cent and 16.20 per cent respectively. It remains to be seen whether Compaq�s holding will be transferred to H-P and status quo maintained, or whether H-P will try to merge it fully. Digital Globalsoft focuses on software and services with Compaq India being its largest customer.

An HP spokeswoman said: �Ultimately, all the procedures and regulations will have to be followed. We will undertake the necessary steps in due course. Currently, we are not in a position to comment on Indian operations and the future course to be taken by the companies.�


Mumbai, Sept. 4: 
The Hewlett Packard-Compaq merger gives a new twist to the selloff process in public sector CMC Ltd where the big two were pitted against each other.

Analysts feel the HP-Compaq combine will have an edge over the rest when the Indian infotech major is put on the selling block.

Merchant bankers say the two were among the prime contenders, along with the two domestic competitors � Azim Premji�s Wipro Corp and Tata Sons. CMC is coveted by all four as it is compatible with their businesses. CMC is among the few Indian infotech companies with a presence in both sectors of the infotech realm, that is the software and hardware segments. Since Compaq, Hewlett-Packard and Wipro, all have a presence in both aspects of the computer business, CMC will be an ideal buy for any of them.

In fact, the Tatas, who are now concentrating on the software side, had a presence in the hardware segment through group outfits like Nelco, Tata-Burroughs, Tata-IBM and Tata Elxsi.

CMC has a fair mix of hardware sales, hardware maintenance, software products and services.

With the government keen on speedily computerising its infrastructure, it is expected that foreign companies like HP-Compaq can get a better response from government departments if they gain control over CMC.

Analysts also point out that CMC is known for its products business which is more profitable than the software services business.

In fact, CMC was behind the successful implementation of several government initiatives like the Railways� reservation system and the trading system of the premier stock bourses among others. It has also successfully implemented the software system of the London Metro, which has earned it acclaim from other players.


Mumbai, Sept. 4: 
An open offer looms for shareholders of Digital GlobalSoft as a result of Hewlett-Packard�s (HP) $ 25-billion buyout of Compaq Computer Corp.

Compaq holds 51 per cent in Digital, whose investors will have to be offered the option of selling their shares � that amount to at least 20 per cent � under Sebi�s takeover regulations.

The Digital share flared up in anticipation. It has been at the centre of intense speculation for some time because the market believed Compaq would make an open offer to take its stake to 100 per cent � a policy it has followed in the case of all subsidiaries.

There was also a buzz that the company would be delisted and merged with Compaq�s fully owned arm.

Today, the scrip zoomed 7.7 per cent to Rs 486.80 at the close after opening at Rs 456 and scaling an intra-day high of Rs 490.90. It recorded 29,736 deals amid a volume of 26.07 lakh shares and a turnover of Rs 124.98 crore.

Industry observers said it was too early to assess the impact of the acquisition on the fortunes of Digital.

However, an analyst with a foreign brokerage said the deal bodes well for a company which derives the bulk of its turnover from exports to Compaq.

While some feel that the merger will bring more business to Digital, others reckon the combined entity will now have to redefine its plans in the country given that it already has a 100 per cent subsidiary here and H-P plans merger-linked cost cuts.

As part of the deal, all computer products and services of Digital will be transferred to Compaq India. These include its alpha business line, customer services operation, network and system integration services and the operations management services division.

�In view of the change in parentage, it now needs to be seen whether Digital will maintain the identity of a software services company. It is also not clear whether the subsidiaries of Compaq and H-P will be merged and their product range reshuffled,� another analyst said. Compaq India has four representatives on the Digital board.

Analysts have panned Digital for its dependence on Compaq (more than 80 per cent of its revenues came from Compaq). The company responded by tapping other sources of income in the recent past.

H-P-Compaq will have combined global revenues of $ 87.4 billion, pitting it against PC leader IBM. H-P will have a 64 per cent stake in the merged entity while Compaq will control 36 per cent.


New Delhi, Sept 4: 
West Bengal and Bihar will be among the six states that are likely to issue bonds to clear the dues that their state electricity boards owe public sector utilities like National Thermal Power Corporation. �Bihar will be signing the memorandum of understanding (MoU) this week to issue bonds. West Bengal is another state which is also keen to clear its dues by issuing bonds. There are about five to six states that will be signing MoU and issuing bonds within this month,� power minister Suresh Prabhu said today.

The minister said the power ministry will try to add 50,000 megawatt of power during the 10th plan period in addition to the additional generation of 10,000 mw that NTPC proposes during this period. The addition proposed by power ministry is based on individual projects.

Prabhu also announced that a state wise detail of all states which have released the bonds and have agreed follow the guidelines will be released by January. The move will help clear the states a total outstanding of Rs 41,000 crore towards the public sector utilities.

�By March 31, 2002, the state electricity boards will have a financial accounts to meet international standards,� claimed Prabhu.

Prabhu also stressed the need to improve energy conservation and highlighted the recent energy conservation bill passed in the Parliament.

�Energy audit will be mandatory for all sectors like agriculture and industrial sectors. A US-based company � International Institute of Energy Conservation � will undertake a study to examine the methods which can be used in India to conserve energy. The company will submit its report within six months, � said Prabhu.

He added, �Institutions like Tata Energy Research Institute (TERI) have devised methods to construct building using materials which will reduce the dependence on air-conditioning. These methods will also be examined. We will also undertake discussions with association of all sectors including architects before a final draft is prepared.�

The aim to introduce the compulsory energy audit is expected to save about 40 per cent energy. The power ministry will incorporate a clause by which future buildings will have to meet certain parameters which are essential to conserve energy.

The Energy Conservation Bill has a clause which stipulates the setting up of bureau of energy efficiency. This will co-ordinate with designated consumers and agencies and other agencies, recognise and utilise the existing resources and infrastructure.

Meanwhile, a high power team headed by power secretary Ashok Basu has started state-wise study on problems relating to power situation.


Mumbai, Sept. 4: 
Tata Consultancy Services (TCS), the country�s largest software services firm, is planning an initial public offering (IPO) to fund acquisitions.

Chief executive officer (CEO) S Ramadorai confirmed the idea was floating around in his company, but said there was no decision on when and where the floatation will take place.

Speculation about the IPO has been swirling in the market over the past year.

The purpose of the public offer, he said, is to raise funds for inorganic growth via acquisitions.

TCS, a subsidiary of Tata Sons, is the biggest revenue spinner for the group. However, a section of the market feels the Tatas are unlikely to take TCS public at a time when technology stocks have taken a drubbing.

Ramadorai said the IPO will not be prompted by stock options for a company that has linked employee bonuses directly to the performance of business divisions. The software major clocked revenues of Rs 3,142 crore in 2000-01, up from Rs 2,115 crore in the previous year.

It expects global clients to renew their orders, and has drawn up plans to expand its presence in South America.


New Delhi, Sept 4: 
The Securities and Exchange Board of India (Sebi) today approved �in-principle� the introduction of futures trading in 31 scrips in which individual stock options are already permitted, thus ushering in a modified form of carry-forward system with fixed liability in these scrips.

The Sebi members, who met here today for over three hours, also decided to clamp down on the misuse of participatory notes by foreign institutional investors (FIIs) by making it mandatory for them to disclose details of their issue besides discussing the annual report for the last fiscal and Sebi�s reply to the interim report submitted to the Joint Parliamentary Committee.

The board also decided to introduce a new class of trading-cum-clearing member with a minimum net worth of Rs 1 crore who can settle and clear trades on his own behalf and on behalf of his clients. This move is expected to allow greater participation of brokers in the derivatives segment.

However, the brokers� demand for the introduction of margin trading was not cleared by the board which agreed to wait for the recommendations of the Sebi-RBI technical committee which is deliberating on the subject.

Sebi also decided to rationalise the fee structure of options contracts. The turnover fee on the option contracts shall now be calculated on the premium traded. In cases where the options are exercised/settled, the turnover fee shall be calculated on the notional value of the option contract.

The board also discussed various legal, taxation and operational issues related to corporatisation and demutualisation of exchanges and decided to convene a meeting shortly to take a final view on the subject.

Taking note of the present status of the secondary markets, the board said the advisory committee on derivatives had been asked to work out the details for the introduction of futures in 31 individual stocks to begin with.

The advisory committee has also been asked to specify the risk containment measures, including cash settlement.

Sebi chief D.R. Mehta told The Telegraph that the two measures of allowing futures on individual stocks and creation of trading-cum-clearing members would boost the derivatives market.

As of now there are only two types of members - trading members and clearing members. While trading members have a minimum net worth of Rs 50 lakh and cannot clear their own trades as they are not members of the clearing house, clearing members having a minimum net worth of Rs 3 crore are members of the clearing house enabling them to not only clear their trades but also of trading members.


Calcutta, Sept. 4: 
The 70 per cent customs duty levied on imported tea in the Union budget, which effectively restricts the entry of tea from other countries into India, has come as a shot in the arm for the tea industry.

Between January and June last year, about 5.4 million kgs of tea entered the country from Vietnam, China and Indonesia, for domestic consumption. But much to the relief of the tea industry, this year has not seen any imports till date for domestic consumption. The 5.8 million kgs of tea imported this year are for re-export, which is duty-free.

�We are happy that the government�s decision to increase customs duty from 35 per cent to 70 per cent has yielded the desired results. There are hardly any imports from countries like Vietnam or Kenya. Only some quantities have come in, which are for re-export,� a senior tea industry official said.

The panic that spread last year on rumours of huge imports had then pulled down tea prices.

However, though industry is getting ready to ring in the good times with the threat from imported teas receding, , exports have yet to reach expected levels. The Russian offtake has not been the same as targeted. Moreover, unit price realisation is lower compared with last year. Exports have, however, gained volumes in countries like USA, UK, Iran and other countries.

Comparable figures show that tea exports in January to June last year stood at 84.58 million kgs, and the foreign exchange earned was Rs 765.63 crore. But despite the duty shield, exports this year have been able to fetch only Rs 741.10 crore.

The major blow has come from Russia, with India being able to export only 39.81 million kgs, earning Rs 299.18 crore. Tea shipped to Russia last year in the same period was 45.81 million kgs, which fetched Rs 765.63 crore. �Our target is to export 80 million kgs to Russia this year. The export target last year was 86 million kg. We are happy that we have already been able to export 40 million kgs to Russia. We are confident to export another 40 million kgs in the coming months,� said Gautam Bhalla of Warren Tea.


New Delhi, Sept. 4: 
The retail boom is about to sputter out � and it will have a knock-on effect on the real estate business that has been riding on its coat-tails.

Result: Only six of the 52 mega malls that have been conceptualised in the recent past have got off the ground. The others have been stalled for one reason or the other.

Says Anurag Munshi of Jones Lang LaSalle, �The Indian retail market was so far enveloped in a wave of euphoria. Consequently, every person owning any kind of land wanted to develop it into a mega store or mall. We as developers took all the assignments. But now the scales have tilted and perceptions are being corrected. Most projects have been given up because their owners have seen the fate of other projects, which are floundering, steeped in losses.�

�Quality tenancy on a mega shopping mall is very important. The anchor shops in India are very few in number � at best five to six. Now, six anchor shops cannot attract customers to 52 shopping centres. Expectations and property prices are very high � it�s time for the realtors to see reality,� he added.

The 52 proposed malls were supposed to have been spread across the entire country � 11 projects were planned in western India including Mumbai, Goregaon and other suburbs; Delhi also had 11 projects proposed mainly by the Delhi Development Authority (DDA) and the Municipal Corporation of Delhi (MCD). The Delhi projects also include Gurgaon and Noida. While three projects were scheduled in Calcutta and another three in Chennai, the others are spread over various cities like Baroda, Hyderabad and Ahmedabad.

Anuj Puri, managing director of Chesterton Meghraj Property Consultants, said, �India started consolidating in real estate only from 1999. But we are still riding a high. The prices are higher than those in the international market. Moreover, customers in India are more price conscious. They may drop into a glamorous mall, but still shop in their favourite places. In the long run, the prediction is that retail will go for unglamorous but comfortable selling sheds, rather than glamorous upmarket buildings.� All said and done, the real estate industry hasn�t lost all hope yet.


New Delhi, Sept 4: 
The DS group-owned Ebony retail chain is in expansion mode and aims to open 12 new stores in its two years at an investment of about Rs 61 crore. This will raise the number of Ebony outlets to 20. The company is also in talks with international players for a tieup, said DS Group president H.S. Narula.

Narula, who refused to name the international players it is talking to or the stake that it wants to divest, said the funds for the expansion will come from internal accruals.

Of the eight existing stores, two are yet to be officially launched. These are at Chennai and Indore, which will be up and running by mid-October. The Rs 56 crore company has so far invested Rs 40 crore in its eight stores.

Ebony has six retail outlets in the north and plans to add four more. These will be in Amritsar, Jaipur, Lucknow and Kanpur. The company will also be focusing on the south and plans to open outlets in Hyderabad, Bangalore, Pondicherry and Kochi. It may open one more outlet in west Mumbai. Other Ebony outlets in the West are located in Pune, Ahmedabad, Surat and Nagpur.

Ebony is also keen to set up shop in Calcutta but said that will be after the present phase of expansion. The company mostly takes premises on rent and spends money on refurbishing and re-doing them. The cost of setting up a store (which includes logistics) in the East is more expensive than the North, with South being the cheapest, said Lalit Kumar, group vice president. West is the most expensive.

Ebony, which already has a tie-up with Barista Coffee for all its north India Stores and with Kodak camera in Ludhiana, is also looking for more tie ups with other brands for shop-in-shops -- where a small area within the store is �islanded� to stock the retail brands of only one company. It earns commission on the sale from these �shop in shops�. Ebony is aiming for a turnover of Rs 300 crore in fiscal 2002-03, said Narula.



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