India Real Estate Developers Now Want to Control Telecom

By Vipin Agnihotri

You may not believe at first but it’s true that the second wave of the telecom revolution in India is being led by real estate developers of India. It has come into the notice of The India Street that real estate developers like Indiabulls Real Estate Limited, DLF, Unitech and Parsvnath Developers have applied for universal telephone licenses.

This is not surprising in my book because in India still only one out of five person uses a cell phone and real estate developers are interested in making profit out of this promising sector.

If experts are to be believed, Indiabulls Real Estate Limited has applied for telephonic licenses in 22 cities, which will give them access to sell wireless, fixed line and internet access services in India. The market cap of Indiabulls Real Estate Limited is Rs 15,726.41 crore and company has a net worth of Rs 6,300 crore.

Initial signs are that most of the real estate developers will play a role of financial investor in the telecom sector and not an operator, pretty much like the role Essar is playing in Vodafone. Talking about Indiabulls Real Estate Limited, they have planned an outlay of Rs 1,500-1,700 crore for the telecom business.

Point to be noted here is that while telecom market may be big but players like Reliance Communications and Bharti Airtel have a head start. As a matter of fact, these companies have already roped in millions of subscribes. In this scenario, what chance would these new players have of making a dent in a business that’s capital intensive and with a long gestation period?

That is where; I believe that some of the real estate developers are not a serious player. In other words, it’s more of a valuation game for them. In a sector where average revenues per user are dipping, it will be real tough for new players to capture market share.

In terms of statistic, for fiscal 2008, Bharti and Reliance Communications have already planned an investment outlay of more than $ 12 billion to expand their networks. The only advantage for the new players is the low penetration of telecom services in India.

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• Analysis of the Top 25 IndianPad Users

Top three business news stories this week

By Vipin Agnihotri

The India Street is always interested in giving you detailed information regarding Indian business scene. Below find top three business news this week.

Indian government going all out to woo investments in manufacturing business

In my opinion, Indian government is working overtime to woo investments in the manufacturing business. First and foremost, it was a policy to promote Petroleum, Chemicals, and Petrochemicals Investment Regions. According to sources, now Indian government is planning to extend it to the entire manufacturing sector, by setting up mega manufacturing hubs.

It is worth mentioning in this regard that Manufacturing Investment Regions will be specifically designated zones over an area of 250 square km each for domestic and export-led production along with associated services and infrastructure. If experts are to be believed, the Indian government plans to ensure a minimum processing area about 40 per cent of the total designated area.

Pretty much like Special Economic Zones, the policy envisages that the hubs or zones will be built and managed by a developer or a group of developers. On the other hand, external linkages will be provided by the Centre and the state government concerned.

Foreign individuals can register directly as Foreign Institutional Investors

In an attempt to discourage the use of Participatory Notes and, in turn, bring about greater transparency in the capital markets, SEBI have decided to permit foreign individuals, companies and other investors such as hedge funds to register directly as Foreign Institutional Investors.

The pivotal factor here is that a large chunk of proportion of portfolio inflows into the country has been through the Participatory Note route. According to sources, regulatory bodies like SEBI and RBI have been concerned about the misuse of the instrument- it is felt that lots of overseas investors use this route to conceal their identities.

Allocation of spectrum takes new turn

In what can be termed as the new twist to the ongoing controversy over allocation of spectrum, Union Telecom minister A Raja has returned all 16 applications for spectrum allocation, both from existing and new players, deciding, instead, that number of committees will be formed to look into the issues raised by both the GSM and CDMA camps.

It is worth pointing that the Telecom Regulatory Authority of India has delayed its proposed recommendations on the capping of telecom service providers and other licensing regulations, citing the complexity of the issues involved.

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• BREAKING NEWS: New Bangalore Airport Due to be Open March 28, 2008

Editor Musings – India High Net Worth Individuals, New Videos and Other Updates

Starting this week we will be starting a couple of new things I’d like to share with our readers. First, our series of video interviews that are meant to be entertaining yet educational yet maintaining our purpose here which is to give you information to make intelligent investment decisions. Second, like the Robb report in the US, we want to start offering a look at how Indian high net worth individuals spend their money inside of India and around the world. We’ll start slowly, but we want to better examine the habits and spending activities of India’s super rich. Speaking of India’s super rich, KP Singh became India’s third rupee trillionaire after DLF’s stock rose sharply after the IPO. Incidentally, the other rupee trillionaires are Mukesh and Anil Ambani.

India Telecom Industry

India’s telecom industry’s profit is ahead of the US, Japan, France, Australia, Switzerland and a lot of other Western countries. The latest Merrill Lynch report gives high marks to the Indian Telecom industry management.

NRI’s and the Stock Market

NRI’s are starting to put more money into India Stocks. As NRI’s inherit money or land from their relatives, they are selling the land off and buying stocks. That may explain some of the recent performance of the stock market, but here we tend to believe it’s just good fundamentals. It appears NRIs are largely investing in IPOs (which we cover extensively here) and buying shares in the market. These investments have increased from over $350 million in 2000 to over $6 billion in April 2007.

Interestingly, the largest amount of money goes into bank stocks calculated at $3 billion at the end of 2006. The RBI data shows 3% of the remittances by the NRI are invested in stocks and 54% is used for family care. The remaining amounts are spent on other assets like real estate, bank deposits, and other investments.

Private Equity Deals Top China

According to Thomson Financial, in the first 6 months of 2007 India saw nearly 30 Private Equity deals worth 2.5 billion (USD) compared with 68 deals totaling 2.3 billion for all of 2006. India ranks 16^th globally in terms of completed private equity deals and above all of the BRIC countries (Brazil, Russia, India, China) – That in itself is an amazing statistic given our belief that China has a 10 year start on India. The globe is voting and India is the preferred destination for Private Equity deals.

Why did Starbucks postpone their plans of Entering India?

I do not know whose idea it was to reject the application for Starbuck’s entry into India, but I can tell you that it will hurt India not help it. How, you might be thinking can one rejection hurt India? Well when politics are involved (Starbuck’s application was rejected by the Foreign Investment Promotion Board and Commerce Ministry on account of unclear proposed equity structure for India operations). Other foreign retailers watch these political decisions and put their India plans on hold. If you want further proof, ask Harley Davidson why it took so long to get Harley’s into India. It took an Indian mango to break the impasse.

Starbucks is working with partner New Horizons, however, the Joint Venture supposedly violated FDI norms as Starbucks was not an equity partner in the Joint Venture. Speaking from experience, this is a load of bunk and in my opinion the delay is meant to allow homegrown coffee chains like Barista and Café Coffee Day to further gain market share. As a Starbucks chain will really hurt the domestic chains due to their much more efficient supply chains and management structure. Politics is clearly in play and should be immediately sidelined. Do you honestly think the Starbuck’s India attorneys didn’t advise Starbucks of FDI norms prior to their submittal to Foreign Investment Promotion Board?

REBI to Reach out to NRI’s

Bangalore’s Real Estate Bank International (REBI) plans to reach out to NRI’s an investment of Rs. 250 million. REBI currently has offices in the US, Sri Lanka, UAE, Singapore, Malaysia and Australia that enable easy real estate service information. It is expected that REBI’s domestic network will be expanded to 3000 franchises over the next three years. REBI offers brokerage, financial and relocation services to sellers and purchasers of property.

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