Sectoral Snippets

India Industry Information

Issue 13 - October 2007

KPMG IN INDIA
 Page 2 of 15

Sectoral Snippets

Table of Contents

Russell Parera
1. Indian Economy 3
Chief Executive Officer
2. Auto and Auto Components 4
KPMG in India
3. Banking and Insurance 5
Sectoral Snippets, Issue 13
4. Consumer Markets and Retail 6
India is fast emerging as one of the world’s

5. IT / ITeS 7
leading destinations for investment. This is
evident from the UNCTAD’s recent World

6. Media 8
Investment Report, which rates India as
second most-attractive location for investment

7. Oil and Gas 9

after China. However, if India is to remain
investment attractive, roadblocks like stringent
labor laws, an underdeveloped infrastructure

8. Pharma 10
and bureaucracy will have to be overcome.

9. Power 11
In a recent visit to Harvard Business School,
India’s Finance Minister P. Chidambaram
described India as a ‘poor- rich’ country, in
reference to the clash of realities in India, with
10.Real Estate and SEZs 12
India’s youthful population and abundant

11.Telecom 13
natural resources on one hand and widespread
poverty, illiteracy and endemic rural problems

12.Transport and Logistics 14

on the other.

Apart from this, the visit to India of Queen

Beatrix of the Netherlands —from where 12.5
percent of India’s FDI comes— is expected to
augment cooperation between the two
countries, particularly in terms of technology-
sharing and investment.
About Sectoral Snippets
We hope you find this edition of the snippets Sectoral Snippets is an India-focused, monthly, freely-distributable newsletter brought out by
useful and insightful. KPMG in India. This newsletter provides an overview of the Indian economy in the form of
news-briefs from across key sectors.
Regards,
Contact mknowledge@in.kpmg.com if you are interested in receiving this newsletter on a
regular basis, or wish to unsubscribe.
Russell

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 3 of 15

Indian Economy
Favorable economic reforms and a young skilled workforce have enabled India—
the world’s fastest growing free-market democracy— to claim its place in the
global economy. With positive indicators such as rising foreign exchange reserves
of over USD 200 billion, a booming capital market with the popular "Sensex"
index touching the 19,000 mark, Foreign Institutional Investors (FII) making a net
investment of USD 9.88 billion this year (till Sept 20, 2007) and Foreign Direct
Investment (FDI) flow of USD 5.6 billion in 2007-08 (April – July 2007), it is easy
to understand why India is a leading destination for foreign investment.

In 2006-07, the Indian economy has grown at an impressive growth rate of 9.4
percent, as against 9 percent in 2005-06. Some of the propellers of GDP growth
have been manufacturing, which grew by 12.3 percent; the trade, hotels,
transport and communications sector, which grew by 13 percent and
construction, which grew by 10.7 percent.

However, despite these positive indicators, India is faced with many challenges.
An estimated 800 million of India's 1.1 billion citizens survive on less than USD 2
a day. Education remains unattainable for millions and about 2.5 million people
are infected by the HIV virus, though progress has been made in terms of having
a better understanding of the epidemic. India’s poor infrastructure development
remains a hurdle to economic growth. Progress on these fronts is slow, and
estimates are that it will be years before any substantial change is seen.

Further, international consultancy and research firm AT Kearney and Foreign

Policy Globalization Index 2007 has ranked India at the 71st position (2nd to last)
“One would have thought that the in its annual ranking of the world's most globalized nations. One of the many
rationales behind the low ranking being, India's booming economy often
challenge of development in a camouflages the fact that 70 percent of its population lives in rural areas.

democracy, will become less The rising value of the rupee has also created concerns over the sustainability of
formidable as the economy economic growth in recent times. The Government of India recently reduced its
export target due to the appreciating rupee. Since January, the Indian rupee
cruises on a high growth path. gained more than 11 percent against the U.S. dollar, eroding the cost advantage
of Indian offshoring firms. Moreover, these firms face wage inflation, high
The reality is the opposite.” workforce attrition and increased operational costs. Profits of Indian IT
Indian Finance Minister, P. Chidambaram at the companies are down and their stock prices are falling due to the rising value of
Mahindra Memorial lecture delivered at Harvard the rupee. This is clearly reflected in the fact that for the first nine months of this
University year while the Sensex rose by 32.47 percent, the Bombay Stock Exchange (BSE)
(Source: The Economic Times, October 22, 2007) IT index fell by 13.08 percent.

While acknowledging the reality of the challenges facing the country, India’s
economy continues to register significant growth, on account of its inherent
strengths such as its large skilled labor pool, natural resources, well-established
financial system, and a large and growing market.

Analyst: Asmita Deshmukh

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 4 of 15

Auto and Auto Components

• India to become export hub for Suzuki’s two wheelers
Japanese auto major, Suzuki Motor Corporation, plans to make India an export
hub for its two-wheelers, through its 100 percent subsidiary in India, Suzuki
Motorcycles India (SMI). The company plans to export both motorcycles and
scooters to emerging two-wheeler markets where the annual demand is over a
million units. India will also be hub for exports to Africa, South America, and
countries around India. SMI has invested USD 87.5 million in India since its
inception in 2006 and will be investing another USD 37.5 million by next year.
This investment will be utilized largely for capacity expansion and new product
development.

• Maruti to form JV with Futaba for exhaust systems

Indian passenger car leader, Maruti Suzuki India Ltd (MSIL) (formerly Maruti
Udyog Ltd.), will form a Joint Venture (JV) with Japanese component major -
Futaba Industrial Co., to manufacture and sell exhaust component systems,
which will include exhaust pipes, exhaust mufflers, and exhaust manifolds. The
estimated project cost for the new facility is close to USD 45.5 million and will
be located at Manesar, Haryana.

• Hybrid cars to be available on Indian roads by 2008

Hybrid vehicles are set to strike Indian roads by 2008. Hybrid cars are vehicles
that will run on electricity and another optional fuel, which could be petrol,
diesel or bio-fuel. The car owner will have the option to drive the car using
either electricity or the alternative fuel and can easily switch from one to
another fuel option. Japanese auto major, Honda plans to launch its premium
Civic in its hybrid version in India by 2008. Also, Mahindra and Mahindra (M&M)
“We need to be in India as well. is test-piloting its Scorpio's mild-hybrid variant and full-hybrid variant. American
auto maker Ford India too, is monitoring the Indian market and globally has the
What helps is the growth of the technology ready for such products.
market. A year by year increase of
• Honda to set up powertrain facility in India
over 10 percent (in the Indian car Japanese auto major, Honda plans to setup a powertrain facility in India and the
new facility will be accommodated in its new manufacturing plant in Rajasthan.
market) gives us the opportunity The powertrain facility is expected to be operational by the first quarter of 2009
to grow as well” and will produce 200,000 units annually. According to market estimates, the
cost for building a powertrain facility will be close to USD 150 million. The
Joerg Mueller, India President and group sales
powertrain facility will help the company establish a full-fledged engine and
Managing Director for India, Volkswagen
gearbox manufacturing center in India and reduce the dependency on imports.
(Source: Economic Times, September 18, 2007)

• Toyota Kirloskar Motors to enter used car business in India

Toyota Kirloskar Motors (TKM) plans to enter the used car business in India
under its own-brand outlets ‘Toyota You Trust’. Initially, these will be opened in
Delhi, Bangalore, and Chennai and will be independent from the existing new
car dealerships, but will be linked for after-sale support. These outlets will
primarily cater to buyers looking for a certified pre-owned car. Though the used
car segment continues to be largely unorganized, Maruti’s “True Value” and
Ford’s “Ford Assured” used car outlets have been relatively successful.

Analyst: Ranjeet Javeri

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 5 of 15

Banking and Insurance

• Home loans GDP ratio in India is close to 5 percent
Inspite of real estate witnessing a boom in the last few years, with substantial
home loan borrowers being first timers, the home loans GDP ratio in India is
close to just 5 percent as against 50 percent in the U.S. and the U.K. Home
loan rates have increased from 7 percent in 2003 to 12 percent in 2007 with its
impact felt across the board including genuine buyers, speculators, real estate
developers and bankers. However, the share of housing loans in total personal
loans has been on its way up since 2000-01, increasing from 37 percent in
2001-02 to close to 48 percent in 2005-06.

• Private Equity Group Baring’s Indian arm investing in a brokerage

company
Duckworth Ltd., a wholly owned subsidiary of Baring India Private Equity Fund
Ltd., has acquired a 44.8 percent stake in JRG Securities (JRG), the second
largest brokerage company in the State of Kerala. JRG has a network of 540
branches, including a presence in West Asia and posted an income of INR 8.92
crore (USD 2.2 million) during the first quarter of fiscal 2007-08, and a net profit
of INR 1.57 crore (USD 0.4 million).
There have been several acquisitions and investments by private equity and
foreign banks in Indian broking space over the last one year, including Standard
Chartered investing in UTI Securities; Citigroup’s private equity arm, Citigroup
Venture Capital International (CVCI) acquiring an 85 percent stake in a retail
brokerage firm Sharekhan and Lehman Brothers acquiring the institutional
broking business of Brics Securities.
Top Five players in Non Life Insurance
(Gross premium underwritten) • Foreign financial services group eyeing Non Banking Financial
Non - Life April - Growth Market
Companies (NBFC) space
Insurer August (y-o-y) % share U.S.-based Investment Bank, Lehman Brothers acquired a 26 percent stake in
2007-08 (%) ECL Finance, the NBFC of Edelweiss Capital, for close to INR 180 crore (USD
(USD mn) 44 million). In March 2007, Financial services company Edelweiss announced
New India 548.5 57 18.6 its foray into the non-banking financial space and asset management by
(public) investing a total of INR 400 crore (USD 98 million) in the new ventures. Foreign
Oriental 428.1 2.6 14,5 financial services group have recently focused on the Indian NBFC space with
(public) BNP Paribas acquiring a 50 percent stake in an arm of SREI Infrastructure, AIG
Capital buying out 75 percent in Chennai's Vivek Hire Purchase and Barclays
National 416.7 8.1 14.1
(public) acquiring Chennai's Rank Investments.
United India 394.8 6.1 13.4
(public) • Private sector companies exhibiting higher growth in non-life
insurance market
ICICI-Lombard 365.9 27.3 39.3
The private sector companies who have a share close to 39 percent in the non-
(private)
life insurance market (April – August’07), are growing at a faster rate than the
Private Total 1,157.0 27.3 5.8 public sector companies. The latest numbers released by the Insurance
Regulatory and Development Authority (IRDA) for August reveal that while the
Public Total 1,788.1 5.5 60.7
private sector business in the segment increased by 27 percent; the public
Grand Total 2,945.1 13.1 100.0 sector business grew only by 5 percent. Industry experts say the private
sector’s performance is due to aggressive selling. In addition, private
(Source: Insurance Regulatory and Development Authority
companies have a smaller premium collection base compared with their public
sector counterparts. For instance, United India Insurance, the smallest player in
the public sector group, collected INR 1,579 crore (USD 394.7 mn) (April –
Aug’07) growing at six percent compared to last year, while HDFC General
Insurance, the smallest entity in the private sector group, collected INR 98
crore (USD 24.5 mn), growing at close to 28 percent for the same period.
Analyst: Aman Kaushik
© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 6 of 15

Consumer Markets and Retail

• Wal-Mart to sign JV agreement with Indian Bharti Enterprises
Bharti Enterprises and Wal-Mart Stores have signed an agreement to form an
equal Joint Venture (JV) for wholesale cash-and-carry and back-end supply chain
management operations in India. The joint venture would be named Bharti
Wal-Mart Private Limited and would serve small retail stores, fruit and
vegetable resellers, restaurants and other business owners. Also, the venture
would invest in setting up an efficient supply chain which would link farmers
and small manufacturers directly to retailers. The first wholesale facility is
expected to be operational by the end of 2008. In addition, Bharti Enterprises’
100 percent subsidiary Bharti Retail, would own and manage the retail stores,
entered into a franchise agreement with Wal-Mart to provide technical support
to Bharti Retail.

• McDonalds to expand Indian operations

The fast food chain, McDonald’s Corporation plans to invest USD 115 million
(excluding real estate costs), in India to double its network to 220 outlets by
the end of 2008. At present, McDonalds has 110 outlets spread across 29
cities in India. As part of its expansion plans, the company aims to open
about 50-60 outlets every year, by setting up a cluster of outlets at one place
rather than expanding throughout the country.

• Shoppers Stop and Home Retail Group to introduce catalogue

retailing in India
Shoppers Stop and HyperCity Retail (India) Pvt Ltd have signed a Memorandum
of Understanding (MoU) with the U.K. based Home Retail Group, to develop
the Argos format of catalogue retailing in India. The agreement is based on a
franchise model wherein Argos would be providing its brand, catalogue and
multi-channel experience to the joint venture. Argos will also provide

“I think India is going to be a very Information Technology (IT) support and its expertise on developing sales
through the internet. The brand would be launched at the end of 2007 in
important part of global strategy Mumbai. The arrangement is expected to give Argos a strong footing in the
rapidly expanding retail market in India. Shopper's Stop is an Indian retailer,
for the next 50 years and our which operates 22 department stores in 11 Indian cities.

perspective on India is in that • India's Future Group enters into a JV with UAE's Axiom Telecom
Future Group’s flagship company Pantaloon Retail India Ltd., has signed an
time frame”.
Raj Jain, Country President, Wal-Mart’s India
equal joint venture agreement with the United Arab Emirates (UAE) based

operations
Axiom Telecom LLC. The new venture would focus on developing backend
sourcing infrastructure for Pantaloon Retail’s existing telecom retailing
(Source: Reuters, August 8, 2007) business. Additionally, it would also create a nationwide network of after-sales
service centers for mobile handsets in India. The arrangement highlights Future
Group’s plan to be a major player in the Indian telecom wholesale, retail and
after-sales service market. Axiom Telecom is a distributor and retailer for
international mobile brands with more than 450 outlets across the Middle East.

• P & G ventures into the Indian skin care market

Procter & Gamble (P&G) forayed into the skincare products market in India with
the launch of its ‘Olay’ brand of skincare products. The company has introduced
its anti-ageing cream, Olay Total Effects, in six Indian metros, which would be
available in around 2,000 outlets in India. With this move, the FMCG player
plans to establish a strong presence in the Indian Skin care market. The Olay
brand competes primarily with Hindustan Unilever’s ‘Pond's’ premium skincare
products in India.

Analyst: Sitanshu Sheth

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 7 of 15

IT / ITeS
• Wipro acquires Infocrossing
Wipro Technologies, a part of Wipro Ltd., India’s third largest IT company,
acquired U.S.-based Infocrossing Inc. for approximately USD 600 million.
Infocrossing provides IT infrastructure management, enterprise application and
business process outsourcing (BPO) services. Further, it has five data centers
and 900 employees in the U.S. Wipro believes the acquisition will strengthen
its IT infrastructure management solutions.

• Firstsource buys MedAssist Holding Inc.

Firstsouce, a leading third party ITES player, acquired U.S.-based ITES player
MedAssist Inc. for USD 330 million. MedAssist provides services in the field of
revenue cycle management in the healthcare industry including eligibility
services, receivables management services and post default collections
services. MedAssist has 1,400 employees serving around 1,000 clients.

• Tata Consultancy services bags contract from BSNL

Tata Consultancy Services (TCS) won a multi year transformational contract
from India’s largest telecom player BSNL valued at USD 140 million. As per the
terms of the engagement, TCS will facilitate complete transformation of
existing systems and processes to next generation convergent billing system.
The engagement involves setting up of complex data networks and the
deployment of Operational Support Systems (OSS) and Business Support
Systems (BSS) components.

• Hero ITES acquires Telecom Service Centres

Hero ITES, the ITES arm of India-based Hero group, acquired U.K.-based
Telecom Service Centres (TSC), a contact center player, for an undisclosed
amount. Industry sources estimated the deal to be worth around USD 80
“Since India is the largest IT million. TSC has nine locations across the United Kingdom and serves some of

manpower provider in the world, the leading companies of the world in the financial, telecom, technology and
retail sectors. The combined entity is estimated to have over 3,500 seats and
the business of Indian IT firms an annual revenue in excess of USD 100 million.

presently operating in Japan is • New Zealand Stock Exchange selects TCS’ BaNCS Market
Infrastructure solution
currently growing at over 40 TCS’ BaNCS market infrastructure solution, which offers multi-entity,

percent compound average growth multilingual support to depository and clearing institutions with functionality
across major financial products such as equity, fixed income, commodities and
rate although the Indian IT sector derivatives, has been selected by the New Zealand Stock Exchange (NZX). NZX
believes that implementing this solution will enhance its efficiency in offerings
is growing at about 30 percent per such as clearing, registry and depository services.

annum”.
Atul Hemani, Director, Arham Technologies
• Personal computer sales crosses 1.7 million units in Q1

Company (Japan) Ltd.

According to the Manufacturers’ Association for Information Technology (MAIT),
the apex body representing the IT hardware industry in the country, personal
(Source: Asian Age, September 18, 2007) computer (PC) sales in India including desktops and laptops crossed 1.7 million
units for the quarter April-June 2007. The desktop sales were close to 1.4
million units. MAIT expects the desktop sales to cross 6.25 million units by FY
2008. An increase in sales is expected from implementation of e-governance
projects at centre and various states, increased demand from SMEs and
educational institutions.

Analyst: Devesh Bhatt

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 8 of 15

Media
• TV18 acquires 50 percent stake in MTV
The Television Eighteen Group (TV18) acquired 50 percent equity stake in MTV
Networks India (MTVI) for about USD 50 million. The deal is a part of the recent
50:50 Joint Venture (JV) between TV 18 and Viacom, known as Viacom-18.
MTVI, a part of Viacom, runs the flagship channel MTV India, kid’s channel
Nickelodeon India and international music channel VH1.

• Fidelity acquires 10 percent in BAG Films

FID Funds Ltd. (part of U.S. based Fidelity Funds) has acquired a 10 percent
stake in television content provider BAG Films & Media Ltd. for about USD 16
million. BAG Films has presence in Programming, Films, Radio FM and New
Media Business (mobile telephony) segments besides promoting a Media
School. The company has also obtained a license for its news and current
affairs channel News24 and wellness channel Bliss24.

• Eros International and Sony to invest in Indian movies

Sony Pictures Entertainment and Eros International will co-invest in a series of
Bollywood Hindi movies to be released in India and abroad. The JV will initially
invest about USD 70 million. The companies will develop, produce and acquire
multiple films. While Sony Pictures will distribute titles in the United States,
Eros will look after distribution in other international regions.

• UTStarcom and Bharti Airtel to launch IPTV in India

U.S.-based UTStarcom Inc., a networking solutions provider, has entered into
an agreement with India-based telecom service provider Bharti Airtel, to
provide RollingStream Internet Protocol Television (IPTV) solutions to the latter.
The solution will enable Bharti Airtel to offer entirely new services to its
“Indian pay TV market is likely to customers consisting of live broadcast television, time shifted TV and video on
demand (VoD) along with the operator's existing broadband and voice services.
generate a turnover of USD10
• OOH Media acquires AdImpact
billion by the next three years as Out of Home Media (OOH Media), a company owned by private equity fund 3i,
has acquired Mumbai-based AdImpact, an out of home digital media company.
against USD 4.2 billion in the OOH sells advertisements on a network of about 3,000 LCD Plasma screens
current fiscal following increased located in heavy traffic areas in around 22 markets in India. With this
acquisition, OOH Media will have access to additional 1,200 screens of
digitization of the cable delivery AdImpact, located in key areas across Mumbai and Bangalore. The out of home
television segment in India is in a nascent stage and at present, has 4,500
system and the deep pay TV screens.

penetration” • NDTV to foray into the Middle East and North Africa
(Source: Financial Express, September 21, 2007) India-based broadcaster New Delhi Television Limited (NDTV), plans to launch
‘NDTV Arabia’, a 24 hour news and infotainment channel. The launch marks its
entry into the Middle East and North African region. It is the first wholly owned
region specific channel from the bouquet of NDTV. Initially, the channel will
broadcast general and business news and current affairs programming from
India, and then add local news content produced from its bureau in Dubai.

Analyst: Ashwini Kulkarni

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 9 of 15

Oil and Gas

• ONGC and British Petroleum (BP) tie up for joint exploration
India’s oil giant Oil and Natural Gas Corporation Ltd. (ONGC) entered into a
Memorandum of Agreement (MoA) with global oil major BP, to collaborate in
the Exploration and Production (E&P) business in India and abroad. This will
include sharing knowledge in Coal Bed Methane (CBM) and deepwater
exploration. The memorandum envisages possible participation in each other’s
acreages in India and abroad, including offshore licenses and the CBM
acreages in India. ONGC and BP may also jointly bid for exploration acreages in
India and abroad.

• BPCL and Premier Oil find huge gas reserves in India

A consortium of India’s state owned Bharat Petroleum Corporation Limited
(BPCL) and Premier Oil of U.K. have struck huge onshore gas reserves in
Assam. Initial estimates peg gas reserves at 8-18 trillion cubic feet. The find is
in the north eastern state of India, Assam. Assam accounts for about 12
percent of India's crude oil production of about 665,000 barrels of oil per day
(BOPD). Premier holds 14.5 percent interest in this block.

• Reliance Industries acquired Gulf Africa Petroleum Corporation

India’s privately owned Reliance Industries, has acquired a majority stake in
east African fuel retailer Gulf Africa Petroleum Corporation (GAPCO) for an
undisclosed sum. GAPCO is headquartered in Mauritius and has 250 retail
outlets and storage terminals in Kenya, Tanzania and Uganda. Reliance
Industries operates the world’s third largest refinery and is India’s largest
exporter of oil products.

“Both the oil majors (on signing • BPCL-Videocon acquires 50 percent stake in EnCana Brasil
MoU between ONGC and BP) have Videocon Industries and state run Bharat Petroleum Corporation acquired 50
percent stake in Brazil's EnCana Brasil Petroleo Limitada. The transaction is for
varied experiences in the interests in ten deep water offshore exploration blocks in four concessions in
Brazil. EnCanBrasil, an oil exploration firm, is a subsidiary of EnCana
exploration and production Corporation, Canada's biggest natural gas producer. The transaction is

business and this synergy will estimated to be worth USD 425 million.

give competitive advantages to • Petronet LNG will import LNG from Algeria
India’s largest liquefied natural gas (LNG) importer, Petronet LNG Ltd., will sign
both entities in global operations” a long term contract to import LNG with Algeria’s national oil company,
R.S. Sharma, Chairman and Managing Director, ONGC Sonatrach. Petronet will import 1.25 million tonnes of LNG per annum for 25
(Source: Deccan Chronicle Group, September 2, 2007) years. Sonatrach will export LNG from its 4.5 million export terminal which will
be operational by 2011. Algeria has the world’s fifth largest gas reserves and is
fourth largest exporter of LNG.

Analyst: Amiya Swarup

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 10 of 15

Pharma
• Cipla is planning to spend USD 230 million on capacity expansion
Cipla, one of India’s leading pharmaceutical companies, is planning to spend
around USD 230 million on capacity expansion over the next two years. It will
invest in three formulations facilities - a tablet and injection facility in Sikkim; an
aerosols, capsules and tablets facility in Goa and a form-filled sealed units
facility in Indore. Cipla has already invested about USD 195 million over the last
two years for capacity expansion.

• Fortis Healthcare to set up USD 195 million medicity in Gurgaon

Fortis Healthcare, established by the promoters of Ranbaxy Laboratories, is
planning to set up a seven-star medicity project in Gurgaon. It will set up a
950-bed seven-star hospital - Fortis International Institute of Medical Sciences
(FIIMS), spread over 10.7 acres of land. At present, Fortis has a network of 12
hospitals in North India.

• Sun Pharmaceuticals receives its first 180 day exclusivity

Sun Pharmaceutical Industries, one of India’s leading pharmaceutical
companies, has received the 180-day exclusivity from the USFDA for its
Abbreviated New Drug Application (ANDA) with a Para IV certification, to
market a generic drug in the U.S. market. Sun will market the generic version
of Wyeth’s Protonix, pantoprazole tablets in the strengths of 20 mg and 40 mg.
These strengths of Protonix have reported yearly revenues of around USD 2.3
billion in the U.S.

• Ranbaxy signs an in-licensing deal with an Australian company

Ranbaxy Laboratories, one of India’s largest pharmaceutical companies, has
entered into an in-licensing agreement with Sirtex Medical Pvt. Ltd., an
Australia-based company, to market the latter’s product, SIR-Spheres. Ranbaxy
“Fortis International Institute of will sell the drug in India, Bangladesh, Sri Lanka and Nepal. This agreement will

Medical Sciences is going to be mark Ranbaxy’s entry into the liver cancer market.

our flagship hospital, and it will • Ipca acquires an Australia-based company

Ipca Laboratories, an Indian pharmaceutical company, has acquired 100 percent
contribute significantly in setting stake in a small Australia-based formulation product dossier
registration-cum-distribution company. At present, the Australian company has
new standards of healthcare five formulation registration dossiers in Australia. It also has a wholly owned

delivery in the country” subsidiary in New Zealand having three formulation registration dossiers in that
country. This acquisition will strengthen Ipca’s formulations business in
Shivinder Mohan Singh, CEO and Managing Director, Australia and New Zealand.
Fortis
(Source: Business Standard, August 27, 2007)

Analyst: Nandita Kudchadkar

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 11 of 15

Power
• Joint venture between NTPC and BHEL
Bharat Heavy Electrical Limited (BHEL) and National Thermal Power Corporation
(NTPC) have signed Memorandum of Understanding (MoU) to form a Joint
Venture (JV) for undertaking engineering, procurement and construction activity
in the power sector on mutually beneficial terms.

• FTIL gets approval to set up first power exchange

Financial Technologies India Limited (FTIL) has received an approval from
Central Electricity Regulatory Commission (CERC) to set up India’s first national
level power exchange. The exchange will named India Energy Exchange Limited
and Power Trading Corporation India Limited will have 26 percent stake. Others
who have given their consent for the stake are Tata Power Company, Reliance
Energy Limited, Rural Electrification Corporation Limited, Adani Enterprises
Limited and Infrastructure Development and Finance Corporation (IDFC).

• Crompton Greaves forays into power distribution

Power equipment major, Crompton Greaves has entered into the power
distribution sector by winning the bid for 15-year franchise agreement from
Mahavitaran (Maharashtra State Electricity Distribution Company Ltd.) in
Nagpur. As per the terms of the contract, the company will pay INR 4.68 per
unit to Mahavitaran against the benchmark price of INR 2.43 per unit. This
move by Mahavitaran comes on the back of rising transmission and distribution
losses, which is over 35 percent in six cities and towns of Maharashtra.

• World Bank approves USD 400 million loan for hydro power
project
World Bank has approved a USD 400 million loan to an Indian state-owned
“Power sector business in India is power company, Satluj Jal Vidyut Nigam limited (SJVN), to develop a run-of-river
hydro power plant on the river Satluj. The loan is provided by the International
now looking attractive and we Bank for Reconstruction and Development (IBRD), and has 20 years to maturity
with a five year grace period.
want to participate in its growth”
Hameed Syed Salahuddin, Director- ETA Ascon Star • BHEL wins USD 465.8 million order from NTPC JV company
Group Bharat Heavy Electricals Limited (BHEL), a public sector power equipment
(Source: The Economic Times, September 24, 2007) maker, has bagged USD 465.8 million order from NTPC-Tamil Nadu Energy
Company Limited (NTECL), a JV between NTPC and the Tamil Nadu Electricity
Board (TNEB). The order involves designing, engineering, manufacturing,
supply, erection and commissioning of steam and turbine generators,
electrostatic precipitators, associated auxiliaries and controls and
instrumentation system for the upcoming Vallur Thermal Power Project at
Ennore in Tamil Nadu.

Analyst: Rajiv Parekh

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 12 of 15

Real Estate and SEZs

• Deutsche Bank invests USD 425 million in Lodha Group
Deutsche Bank Singapore along with some private equity investors has
invested USD 425 million in Lodha Group, a Mumbai-based real estate
developer. This investment will fund the development of Lodha group's three
FDI-compliant projects located in and around Mumbai.

• Beary’s to raise USD 100 million Shariah Compliant Funds

The Beary’s Group, a Bangalore-based property developer, is raising over USD
100 million “Shariah Compliant Investments” from different entities in West
Asia. It has raised about USD 20 million from the Saudi Economic and
Development Company and plans to raise about USD 90 million from the Kuwait
Finance House. The company plans to invest the funds in various commercial,
retail and residential projects in Bangalore, Mysore, Mangalore, Udupi, Bhatkal
and a few places in north Kerala.

• Parsvnath to invest USD 60.67 million in Hyderabad

Parsvnath Developers is planning to invest about USD 60.67 million to
construct a commercial complex and a five star hotel in Hyderabad. The project
is expected to be completed in next three years and would be funded through
internal accruals and debt. The commercial complex is expected to have a
saleable area of three lakh square feet and the hotel would be spread on an
area of 1.75 lakh square feet.

• Mantri to invest in Kolhapur

Mantri Realty is planning to invest about USD 24.76 million in Kolhapur in
Maharashtra, for setting up an IT park, a mall and a residential township. About
“The base of Indian real estate USD 5 million will be spent on the IT park which will be spread over one lakh
square feet with a seating capacity of 1000. The company plans to invest USD
market, growing at 30 percent, is 19.76 million to build a 3-5 lakh square foot mall and a township which would
likely to touch U.S.USD 90 billion be spread over 100 acres. The company is also planning a similar IT park in
Sangli and Miraj in Maharashtra with an additional investment of about USD 5
by 2015 from the current level of million.

U.S.USD 14 billion and help • IL&FS and Milestone launch USD 248 million real estate fund
economy continue to grow IL&FS Investment Managers Ltd. and Milestone Capital Advisors have jointly
launched USD 248 million real estate investment fund on the lines of Real
between 9 to 10 percent.” Estate Investment Trusts (REIT). The fund is expected to have a corpus of USD
(Source: ASSOCHAM Press Release, October 1, 2007) 248 million including a green shoe option of USD 124 million. The scheme is a
close ended scheme with a term of four years, with an option to extend the
term by a year. The fund plans to invest in ready properties, in order to
eliminate the development risk. IL&FS Milestone Fund-I is said to be the first
real estate investment fund in India to offer a low minimum investment
commitment of USD 24,765 for individuals and USD 2,47,647 for corporates.

Analyst: Nitin Dehadraya

© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 13 of 15

Telecom
• OnMobile buys France-based Voxmobili
OnMobile, a leading telecom value added service (VAS) provider incubated by
Infosys Technologies, has acquired VoxMobili, a France-based company focused
on providing personal data management and wireless synchronization.
Voxmobili has around 45 employees and operations in Europe, North America,
Middle East, Australia and Eastern Europe and has over 21 platforms deployed
worldwide, and has issued over 20 million licenses for their products globally.
The acquisitions will help OnMobile add powerful complementary products and
IP to its VAS portfolio and will strengthen its standing in the Global Telecom
VAS industry.

• India’s mobile phone production to reach 107 million units by 2011

According to Gartner, mobile phone production in India is expected to increase
from 31 million units in 2006 to 107 million units in 2011 – registering a
Compound Annual Growth Rate (CAGR) of 28.3 percent. The growth is
expected to be driven by increasing mobile phone subscribers, favorable
government policies, entry of new local and global telecom equipment
manufacturers and increasing presence of global Electronics Manufacturing
Services (EMS) players. It is expected that India could also become an export
hub for the supply of low cost handsets to regions like Africa, the Middle East
and other parts of South Asia.

• India becomes second largest market for Nokia

India has replaced the U.S. as the second largest market for Nokia, which
commands more than 50 percent market share of India’s telecom handset
market. In recent times, Nokia set up its first design studio in Bangalore in
partnership with the Srishti School of Art, Design and Technology. This studio
will give Nokia designers and Indians an opportunity to work together on new
"Since our entry into India, our ideas for India and the global markets. At present, Nokia has about 4,700

capital expenditure has doubled. employees at its Chennai factory and has started exporting handsets made at
this plant to 58 countries.
We are now spending USD 2
• Russia’s Sistema acquires 10 percent stake in Shyam Telelink
billion a year" . Russia’s telecom giant, Sistema JSFC, has acquired 10 percent stake in Shyam
Arun Sarin - CEO, Vodafone Group plc Telelink for USD 11.4 million. Shyam Telelink offers CDMA and basic telephony
services in Rajasthan and has about 2,70,000 subscribers. It has also applied
(Source: Asia Pulse, October 09, 2007) for new licenses for offering unified access telecom services in 22 other
States. As per the agreement, Sistema will increase its stake to 51 percent
after it gets approval from the Foreign Investment Promotion Board (FIPB) and
has an option to increase its stake up to 74 percent.

• New wave of telecom license applicants takes industry by surprise

Following the Department of Telecom’s announcement that 1st October is the
cut off date for new players to apply for telecom licenses and TRAI’s (Telecom
regulatory Authority of India) recent guidelines on the future spectrum
allocation norms, at least 15 new applicants have applied for a telecom service
license. The list includes names such as U.S. firm AT&T in a tie-up with
diversified group Mahindra & Mahindra and property developers DLF, Unitech,
Omaxe Indiabulls Real Estate and Parsvnath Developers. Media reports
suggest that companies such as Hinduja Group, JSW Steel and IT firm Tulip IT,
Videocon, Future Group and Jaypee Group have also applied for pan India
telecom licenses.
Analyst: Amit Shah
© 2007 KPMG, an Indian partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. All rights reserved.
 Page 14 of 15

Transport and Logistics

• Railways plan USD 57.4 billion investments
The Indian Railways has submitted a proposal to the Planning Commission to
raise around USD 57.4 billion (INR 2.51 trillion) in the 11th Five Year Plan
(2007-2012) to develop railway infrastructure. The Indian Railways will internally
generate USD 20.5 Billion (INR 900 Billion) and will raise USD 16.7 billion (INR
728 Billion) from the overseas and domestic markets to part-finance its capex
plans for the next five years. It plans to raise a portion of the requisite funds
through external commercial borrowings (ECBs) and from multilateral funding
agencies. Railways also intend to build 20 warehouses and logistic parks as
part of a development plan.

• APL IndiaLinx to invest USD 60 million

Container rail freight service provider APL IndiaLinx plans to invest USD 60
million over the next one year in India. APL IndiaLinx is a 76:24 joint venture
company between Neptune Orient Lines (NOL) and Hindustan Infrastructure
Projects and Engineering. According to NOL, APL IndiaLinx would invest USD
60 million in acquiring rail licences, rolling stocks, nine rakes and inland
container depots. It has maintained 90 percent utilization of its rail units
between Mumbai and Delhi (which began operations in May 2007) and also
plans to commence its second rail service between Mumbai and Delhi.

• Indian airports to turn into aeropolises

Airports in India will now go beyond flight operations. Aeropolis or Aerotropolis
is gaining ground and Delhi, Mumbai, Hyderabad, Bangalore and Nagpur
airports will soon become self-sufficient cities. Facilities such as luxury hotels,
retail space, convention centres, banks and entertainment options are planned.
The Government is expected to invest around USD 2.7 billion in modernizing
major airports as well as 35 non-metro airports over the next five years.
Approximately USD 5.5 billion is expected to be invested by private investors
“We have submitted the draft with and developers. Revenue earned from non-aeronautical activities at some of
the airports abroad is sizeable, hence many other facilities, such as hospitals
the Planning Commission for a USD and speciality retail outlets are also in pipeline.
57.4 billion investment roadmap
• DP World plans port expansion in India
during the 11th plan period”. The world's third-largest container terminal operator DP World reportedly plans
to buy or expand port facilities in India and China. Their focus area is gateway
V N Mathur, Railway Board Member
ports as almost 80 percent of their business is gateway cargo. It plans to invest
(Source: The Economic Times, July 24, 2007)
about USD 3.5 billion over the next five years on global port projects, with a
special emphasis on India and China. In India, the company plans for investing
USD 500 million in a container terminal in the southern city of Cochin. It is also
investing about USD190 million on an expansion project of Kulpi Port in West
Bengal. DP World’s total investment in India is likely to reach USD 2 billion.

• Jupiter Aviation plans USD 100 million JV with Kingfisher

Jupiter Aviation & Logistics, an aviation infrastructure and logistics company, is
planning to sign a Joint Venture (JV) agreement with Kingfisher Airlines and Air
Deccan for USD100 million for a maintenance, repair and overhaul (MRO)
project in Bangalore. Kingfisher Airlines and Air Deccan jointly will hold around
50 percent and Jupiter will own the remaining stake. The joint venture will be
positioned as a global aviation outsourcing hub that will also cater to training
and design needs of global carriers. Jupiter is an exclusive partner of Airbus
parent European Aeronautic Defense and Space (EADS) for MRO and life-cycle
support of commercial aircraft in India. Jupiter is also working on a proposed
MRO project with national carrier Indian in Delhi.
Analyst: Preeti Sitaram
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