Feb 29, 2008

Jet Airways and Kingfisher Airline Duel

Jet Airways Kingfisher Airlines Mumbai BillboardThis is an example of Mumbai billboards war. In an attempt to win back customer loyalty and to communicate that Jet Airways is listening to their customers, Jet put up the first billboard. It says "We have changed".

Immediately, in retaliation, Kingfisher Airline put up their billboard just above the original Jet Airways billboard. It says, "We made them change".

Talk about cutthroat competition.

Feb 28, 2008

Sewri Nhava Sheva sea link

One of the world's longest trans-oceanic bridges, Sewri -Nhava Sheva link with an estimated project cost of Rs 6,000 crore was finally bagged by the Anil Ambani led consortium. Now the task of the consortium is to complete the 22 km, six-lane bridge by 2013 on Design, Build, Own, Operate and Transfer (DBOOT) basis. However, transport and infrastructure experts believe that it will be a mammoth task to recover the costs as it will be a massive engineering and financial challenge to complete the project on time. Experts say most infrastructure projects in the city have suffered due to charges escalating beyond the total project cost.

The consortium has offered to build the 22-km six-lane bridge, connecting Sewri to Nhava Sheva by sea link, by 2013, recover the costs from revenues and hand it back to the nodal agency, the Maharashtra State Road Development Corporation (MSRDC), in just nine years and 11 months.

The road transport system is under severe stress and the trans-oceanic bridge will be critical to facilitate more traffic and reduce pressure from the Mumbai-Pune Expressway, Mumbai-Chennai Highway and the Mumbai-Goa Highway and thus decongest the city.

This sea link will be the future of Mumbai Metropolitan Regions, which includes Navi Mumbai and will help gain quick access to the southern half of Navi Mumbai.

Maharashtra State Road Development Corporation Chairman and Public Works Minister, Anil Deshmukh says, "This is one of the biggest infrastructure projects in the country. Reliance will have to complete the project within five years, and will have to recover the cost within 10 years and hand over the project to us. The project will commence at the end of the year. It is a prestige issue and their name is at stake. I do not find that there are major challenges for Reliance to undertake the project and complete it within the stipulated time. We have taken clearances from the central government on environment, the archaeological survey of India and pollution control board." Meanwhile, Reliance Energy, Director, Reliance Energy JP Chalasani says, “We are completely prepared for the challenge. We have professionals and expert consultants to execute the sea link project in time.”

The project, once executed is certain to revolutionize the real estate landscape of Navi Mumbai while opening up the hinterland for rapid development.

The Sewri-Nhava Sheva link is one of the vital components of a trinity of projects that are set to impact Navi Mumbai’s real estate, experts point out -- the other being the New International Airport likely to come up near Panvel and the massive SEZ being promoted by the Mukesh Ambani group.

It is this trinity of projects that will change Navi Mumbai from a distant suburb of Mumbai to a bustling mega-polis in its own right, real estate experts believe.

“So far Navi Mumbai’s appeal has primarily been because of its relatively cheaper property rates and a better quality of life. This is resulted in several people moving to Navi Mumbai to stay while continuing to work in Mumbai. Thus, rather than becoming an alternate node of development, it has become another distant suburb of Mumbai,” an analyst says.

While things have changed a bit in the last few years, with several companies setting up offices in Navi Mumbai, it is the Sewri-Nhava Sheva Sea Link along with the airport and SEZ that will make a crucial difference.
“Even within Navi Mumbai, development so far has been restricted to a few years like Vashi, Nerul, Belapur and Kharghar. The development potential of a vast hinterland still lies untapped. The Sewri Nhava Sheva Sea Link and related infrastructure development will uncork this potential,” experts say.

There is however some skepticism about the timely completion of the project and whether it can achieve within budget, given the various challenges.

MMRDA chief transporter PRK Murthy who was earlier chief engineer of Maharashtra State Road Development Corporation (MSRDC) for the sea link project says, "The proper inland navigation traffic dispersal on main land and Mumbai will be a major challenge in Nhava-Sheva Sea link project. During construction the movement to JNPT should be properly ensured as it is not an open sea and the presence of marshy land will make the job tough. The environmental safeguards - Shivajinagar mud flats on the mainland and Sewri mudflats on the Mumbai side - should be taken care of. Necessary arrangements should be made to channelise the tidal water to Shivaji Nagar mudflat for survival of existing mangrove vegetation. The disaster management system should be in place for the 22 km long bridge, once it is under operation."

Infrastructure expert and President of Salcon Strategic Advisories (India), Prof A G Iyer says, "The challenges for the consortium will be to control cost-escalation because of rising prices of inputs like cement and steel.”

The world's longest trans-oceanic bridge, the Hangzhou Bay Bridge, was China's most demanding infrastructure project. The 36-kilometre bridge in Zhejiang province went through numerous physical and economic challenges during its four-year construction through private finance. It would be interesting to see how the Nhava-Sheva 22 km sea link will shape within four to five years, says an expert.

Despite the project being a boon for the metropolitan city and the metropolitan regions, the challenges for the country's biggest infrastructure project is huge and only the time will reveal whether it will be completed on time by 2013.

Feb 19, 2008

Reliance, HDFC launch India’s first virtual credit card

After being a camera, an FM radio, and an MP3 player, the mobile phones are now all set to play the role of a credit card, Reliance Communications (RCOM) said here Tuesday. The Anil Ambani-promoted telecom firm, in collaboration with the HDFC Bank, launched what the company says was India's first virtual credit card.

The virtual credit card called "Reliance mPay Credit Card" will allow its subscribers who also have an HDFC credit card, not to carry plastic to make payments.

The bank will identify its customer with the user's mobile number that will suffice as the credit card number. It will then authenticate the information with RCOM, which will be used to initiate and authorise payments using the customer's mobile phone.

"An HDFC Bank customer can now shop using his Reliance mobile and make payment without disclosing details of his credit card," said Rahul Bhagat, country head, marketing and direct banking channels, HDFC Bank.

Reliance mPay services will also offer Reliance mobile post-paid bill payment, prepaid top up and payment of Reliance Energy monthly electricity bills. It will be extended to allow the customer to book movie tickets, travel tickets, merchant payments at shops, restaurants and shopping on the Internet among others.

Feb 18, 2008

Mumbai needs a robust bond market to weather stock price swings

Corporate bond market sizes by country India China US UK Japan

India's markets have long enjoyed a reputation for being well run. But after shares in Mumbai fell 10% in the first 57 seconds on Jan. 22 and regulators halted trading, investors started grousing that India's bourses still have a long way to go before they're on par with the world's leaders. "India has made major strides with market reform, but in finance, it's antediluvian," says Percy S. Mistry, chairman of London consultancy Oxford International Group.

The bond market—or lack thereof—is the core of the problem. Although India has long had the regulatory framework for companies to offer debt, the disclosure requirements are so stringent that few bother. Last year, Indian companies issued bonds equivalent to just 1% of the country's gross domestic product, compared with 112% of GDP in the U.S. and 10% in China, according to Britain's University of Reading. Lacking other financial options, Indians funnel almost all their money into stocks. "If there were more debt available," says Alan Rosling, a director of Indian conglomerate Tata Sons, "some institutional investors would buy and hold rather than join the hot money rushing in and out of equities."

That means Indian companies often sell shares rather than bonds, and some $50 billion in initial public offerings are in the pipeline for the next two years. But this creates another problem: IPOs in India are painfully slow. Regulators want all of the country's 20 million individual investors—many living in remote areas without computers—to have a shot at getting shares. So companies must also accept paper applications for allocations. Anyone who wants to buy must put down 10% of the value of the stock requested. Consequently, when a popular offering is in the works, investors' money is locked up for three weeks while the shares are parceled out—which saps liquidity from the market.

India paid the price for this in January. Reliance Power was in the midst of a $3 billion IPO to fund 13 new generating plants, and investors jumped at the chance to buy into the blue chip. The listing was oversubscribed 73 times, meaning Reliance was sitting on more than $21 billion in deposits just as the market headed south. The problems were aggravated because of the preference Indians have for trading in futures; last year 121 million futures contracts were traded, compared with just 6 million in the U.S.


Futures are attractive in a rising market because investors put down only about 10% to 25% of the price of a share—called a margin—but can capture the entire value of any increase. Losses pile up fast, though, in a declining market. In most countries, when the underlying share price falls, margins do, too. So investors need less cash to hold the stock future. But when shares in India dive, margins can increase. As prices tumbled in January, margins soared while billions were tied up by Reliance. The company asked regulators to release the funds early, but by Feb. 1, when the cash was finally available, plenty of damage already had been done.

India's regulators are starting to listen to the griping. On Jan. 30, the Securities & Exchange Board said it may consider changing the margin structure and will shrink to five days the time taken to process IPOs and simplify disclosure requirements for bond issues. The key, says Naina Lal Kidwai, CEO of HSBC (HBC) India, is to make it easier to sell bonds at home. If not, "we will end up exporting our debt market instead of developing a vibrant Indian one."

Manjeet Kripalani (businessweek)

EPI -- New US listed ETF from WisdomTree

WisdonTree logo ETF EPI India

With Indian regulators clamping down on derivates contracts from outside markets, the only exchange-traded note [ETN] providing direct access to U.S. investors has been in a stop-and-start mode issuing new shares. As a result iPath MSCI India ETN (INP) isn't acting like an open-end vehicle. Late last year, the ETN's price was trading at around a 20% premium to its net asset value. Even after this year's negative 16% return, it's still selling at a premium. Retail investors in the U.S. are about to get a second option. In early February, WisdomTree Investments plans to launch the WisdomTree India Earnings ETF.

The ETF's benchmark includes 150 locally listed companies. That compares to around 62 companies the MSCI Index tied to the iPath uses. The WisdomTree India Earnings Index also screens for profitability as a criteria. "We only include Indian companies that've been profitable in the last reported 12 months," Lavine said. Stocks are weighted in the index by "their contribution to the earnings stream of corporate India," he added. "We look at trailing net income and work with S&P in those calculations."

The rival ETN is market-cap size weighted. "The Indian market has been soaring for years now," Lavine said. "Our fund gives investors an ability to buy into India at a lower price-earnings ratio and in a more diversified underlying index." The fund will trade on the NYSE Arca under the symbol "EPI." Its expense ratio will be 0.88%, which will serve as the ETF's permanent cap as well. That's slightly less than the iPath's 0.89% expense ratio.

"Another key is that this fund has a level of certainty in regards to taxation as you see with other ETFs," he said. "We won't use any derivates, or participatory notes, in our ETF." Use of derivates was a key sticking point for Indian authorities in their efforts to slow the flow of "hot money" by foreign investors into one of the world's fastest-growing economies.

Advisor Newcomb agrees, pointing to recent tax rulings that make ETNs less attractive than ETFs under certain situations. "There are some closed-end vehicles covering India," he said. "But they've got less transparency than an open-end ETF and you've got to juggle the premium-discount swings. That can be a real problem at times."
Update: Powershare joins the India ETF Party with (PIN)
PowerShares—as the second to launch—has undercut the annual expense ratio of WisdomTree's India ETF, charging 0.78% versus EPI's 0.88%. The 10-basis-point gap in the expense ratios will surely make a difference in attracting investors, especially with the similarities in the indexes. However, EPI holds roughly 100 more companies than PIN, so some investors may be drawn to its broader scope. Another determining factor will be weighting methodology, as EPI's weightings are based mainly on earnings, while PIN's are based mainly on the amount of investable market capitalization available to foreign investors.

Feb 16, 2008

Slum fire near Dharavi

Prakash Nagar Slum Fire Mumbai Dharavi Feb 2008

Prakash Nagar slum near the railway tracks between Mahim and Bandra. This slum is near fisherman's colony near Dharavi. The slum has 100 hutments. A major fire broke out on 2/15/08. Only two fire brigade trucks with water tankers could access the narrow lanes leading to the slums. Neighouring building residents could hear explosions of LPG cylinder blasts.

With all the talk about Dharavi makeover where the builders are obliged to provide residence for the current hut owners, I hope this is not a strategy to drive the current residents away so that more of the square footage can be allocated for commercial purpose.

Incidently, there is no casualty in spite of such a huge fire. The vehicles seen burning were the abandoned cars inside garages nearby.

Feb 9, 2008

George Soros Invests in Reliance Entertainment

George Soros Doctor Evil Pose

Anil Ambani Reliance CEO ProfileA fund owned by George Soros has bought a 3% stake in Reliance Entertainment, the films-to-mobile gaming company founded and owned by Anil Ambani.

Mr Soros, the maverick billionaire whose run on the pound caused a currency market crisis in Britain 1992, will buy new shares in Reliance Entertainment for about $100 million. The deal values the company at about $3 billion. Reliance Entertainment produces and distributes movies, provides gaming services and runs a social networking portal. It also operates a growing home video and music business. Group company Adlabs runs multiplexes and FM radio stations across the country.

The money will be used to expand the company’s presence in these segments and also produce movies that have been signed with leading Bollywood directors such as Farhan Akhtar, Madhur Bhandarkar and Vivek Agnihotri. Reliance is already a leading player in the movie business and recently bought out ND Studios.

Reliance Entertainment hopes to enter the TV broadcasting business later in the year with a slew of channels providing news (general and business) and entertainment.

Group officials said that Soros’ investment is just one part of their fund raising plans. The company will probably raise more money during the year either through private placement, debt or an initial public offer, they said.

This is not Mr. Soros’ first association with the group. Back in 2006, he and Anil Ambani held talks about forming a multi-billion dollar telecom fund that will invest in telecom companies and related businesses around the world. Mr Ambani was to personally invest $500 million in the venture. One of the objectives of the fund was to act as the acquisition vehicle if Reliance Communications’ bid to buy Hutchison Whampoa’s stake in Hutch-Essar succeeds.

Feb 7, 2008

Dharavi Makeover

Dharavi Mumbai slum makeover rebuilding dharaviDharavi - Asia's largest slum is going to have a transformational makeover. 57,531 families will be rehabilitated as a result.

Dharavi project covers 551 acres of total land area. out of which 70 acres will be reserved for gardens. The cost of the project is Rs. 9250 crore. The total area of construction will be 3.5 crore sq ft, out of which 1.5 crore sq ft will be used for the current residents and businesses. That will leave 2 crore sq ft for new development attracting buyers in the open market.

The plan include elevated walkways with hanging gardens, multi-layered driveways with 30 story buildings. New Dharavi railway station between Sion and Mahim is also planned to connect this to the rest of Mumbai.

If all goes according to the plans, then Dharavi will be Mumbai's first step towards becoming Shanghai. The current end date for the project is 2013.

Feb 5, 2008

Migrants Account For A Declining Percentage In The Growth Of City’s Population

Gateway of India

Any city with a population density that averages 20,000 per square km at the very least is bound to feel concerned about rising numbers. Post-independence, Mumbai’s population has gone up from roughly 3 million (data: 1951 census) to 4.12 million (1961) and then increased rapidly for the next 30 years: 5.9 mn in 1971, 8.2 mn in 1981 and 9.9 mn in 1991. The last census in 2001 put the figure at 12 million in Greater Mumbai.

However, studies have confirmed that migrants now play a declining role in the growth of population. Data shows the city no longer attracts migrants at the same rate as it used to in the 60’s and 70’s. With the emergence of other urban-industrial hubs across India, the flow of skilled and unskilled labour from other states has reduced.
The first few years after 1947 saw a sharp rise starting with the Partition era which brought Sindhi and Punjabi refugees, who went on to set themselves up with various enterprises. Subsequently the period from 1961 to 1971 and from 1971 to 1981 saw the influx peak at 8.7 lakh and 10.7 lakh migrants respectively.

Since then, census data has shown a decline in the proportion of migrants to the total population — between 1981 and 1991, figures suggest the city saw a mere 2.8 lakh newcomers arrive. Thereafter, migrant population rose by 8 lakh from 1991-2001, but it still remained below the figures recorded between 1971 and 1991.

In many cases, demographers have also pointed to rise in migration on the basis of shifts in ‘Place of Last Residence; thus, migrants who resided in Mumbai and went away for some time before returning to the metropolis form part of the recorded influx. “There are two kinds of migrants — one who is defined on the basis of place of birth, and the other based on the last place of residence. In all the data, migrants are made up of the two categories,’’ said Professor D P Singh, a senior researcher at the Tata Institute of Social Sciences.

Over the years, there’s also been significant change in the proportion of migrants from various regions. The share of migrants to Mumbai from other districts of Maharashtra has remained more or less constant in the range of 37-41% between 1971 and 2001, and they form the bulk. On the other hand, the percentages of those coming from Gujarat, Uttar Pradesh, Karnataka, Andhra Pradesh, Kerala and Tamil Nadu have varied.

Gujarat, which used to account for the largest number of new arrivals from outside the state (15% in the early 70’s), finds its share has declined toabout 10%. Similarly, fewer people from the southern states now choose to make Mumbai their new home. But the flow from Uttar Pradesh and Bihar has increased, up from 19% in 1991 to 24% in 2001.

Feb 2, 2008

Mumbai and Dow Jones Equity Market Comparison

Here's how the US and Indian equity markets have performed in the past five years. Bombay Stocks have been more volatile, but have shown clearly superior results. Each time, there is a turbulence in the US markets, the Indian markets seem to have amplified it. Seen over the five year period, however, these corrections have been great buying opportunities.

Home Loan Borrowers in India

housing loan market india demographics income distributionHousing loan markets in India is vibrant. Here are the details about the how that market is composed.

52% of borrowers are from rural areas, but only 10% belonging to super-metros and metros.

22% of borrowers are younger than 30 years. 60% of home loan borrowers are between the ages of 30 and 50.

People with annual incomes around Rs. 100,000 have sought the loans from moneylenders, friends, and government schemes. Housing finance companies have attracted clients with more that Rs. 200,000 per year.