Hyderabad: The value of private equity (PE) transactions in the country’s real estate sector during the first nine months of 2013 was up 26 per cent at Rs 4,716 crore, indicating that funds continue to see India as a an investment destination despite a slowdown in the local market.
This was revealed in a report by real estate consultancy Cushman & Wakefield. In the first nine months of last year, the PE deals in the real estate sector stood at Rs 3,750 crore.
The increase in PE deals was due to a rise in investments in leased income generating office properties by institutional investors, said the report. But the slowdown in the local real estate market continued, it added.
The net absorption in offices was down 15 per cent during the period, vacancies increased and sales were subdued in the residential segment.
This was in part due to slower GDP growth, inflationary pressure and volatility in foreign exchange and stock markets, , the report said. Apart from offshore funds, domestic capital is also being raised and deployed in the income generating office properties, it added. “Despite a slowdown in the local real estate market, funds remain committed to India as a top investment destination with overall private equity investment only expected to increase especially in income yielding assets,” said Sanjay Dutt, Executive Managing Director South Asia, Cushman & Wakefield, in a statement.
With improving sentiments, the deal momentum in the real estate sector is expected to increase in the coming year, he added.
Around 65 per cent of the overall investment during the year happened in the third quarter at Rs 3,078 crore. The residential segment saw a drop of 11 per cent during the January-September period at Rs 2,240 crore, compared with the year-ago period.
Bangalore saw the highest level of announced investment value in 2013 at Rs 1,979 crore, up 79 per cent. At Mumbai, it was down 43 per cent in the total volume of deals worth Rs 720 crore.
Success in my Habit
Tuesday, December 10, 2013
Godrej Properties buys out PE firm in Kolkata project
Mumbai: Godrej Properties Ltd has bought out private equity (PE) firm Red Fort Capital’s 49 per cent stake in its subsidiary Godrej Developers Pvt Ltd (GDPL) for an undisclosed amount.
GDPL is the special purpose vehicle for the company’s IT park project in Kolkata, Godrej Genesis.
With this, GDPL becomes a wholly-owned subsidiary of Godrej Properties, the Mumbai-based realtor said in a filing with BSE on Wednesday.
Red Fort Capital had invested in Godrej Genesis in 2008.
Godrej Properties has a total exposure of 6.93 million sq ft in Kolkata, including Godrej Genesis, with a developable area of close to 1 million sq ft.
It has another IT park development in the city, called Godrej Waterside. It had earlier given an exit to the PE partner in its Waterside project, too, taking 100 per cent ownership.
In July this year, the developer had bought out HDFC Asset Management Co Ltd’s nearly 50 per cent stake each in its Chennai and Chandigarh projects. HDFC PMS (Portfolio Management Services) had invested about Rs 100 crore in those two projects.
Godrej Properties is developing residential, commercial and township projects spread across 87.6 million sq ft in 12 cities.
The company’s scrip closed at Rs 166.4 on Wednesday, down 0.92 per cent from its previous close on BSE.
GDPL is the special purpose vehicle for the company’s IT park project in Kolkata, Godrej Genesis.
With this, GDPL becomes a wholly-owned subsidiary of Godrej Properties, the Mumbai-based realtor said in a filing with BSE on Wednesday.
Red Fort Capital had invested in Godrej Genesis in 2008.
Godrej Properties has a total exposure of 6.93 million sq ft in Kolkata, including Godrej Genesis, with a developable area of close to 1 million sq ft.
It has another IT park development in the city, called Godrej Waterside. It had earlier given an exit to the PE partner in its Waterside project, too, taking 100 per cent ownership.
In July this year, the developer had bought out HDFC Asset Management Co Ltd’s nearly 50 per cent stake each in its Chennai and Chandigarh projects. HDFC PMS (Portfolio Management Services) had invested about Rs 100 crore in those two projects.
Godrej Properties is developing residential, commercial and township projects spread across 87.6 million sq ft in 12 cities.
The company’s scrip closed at Rs 166.4 on Wednesday, down 0.92 per cent from its previous close on BSE.
Mahindra & Mahindra to develop full-scale hybrid SUV
New Delhi: Mahindra & Mahindra, the country's largest utility vehicle maker, is developing the world's first hybrid technology that can be deployed in vehicles with manual transmission and enhance fuel efficiency by almost 20%.
The company, which may debut its hybrids at February's Indian Motor Show, has established a place for itself in green technologies with close to four lakh socalled micro-hybrid vehicles on Indian roads. It also owns the world's largest electric car company by production capacity, Mahindra Reva, which sells the E2O hatchback, the world's most affordable four-seater car that only uses battery power to run.
The company is now moving to the next level of sustainable green mobility by focusing on full-scale hybrids and has roped in technology partners that have the expertise.
"We have signed up with Samsung SDI, which is the global leader in lithium ion batteries for development and supply of these batteries for our hybrid range of vehicles," Rajan Wadhera, chief executive, technology and product development, told ET from Cape Town in South Africa where he was attending a company meeting. "We are perfecting the hybrid technology to deploy it in various platforms and vehicles across the Mahindra range."
Hybrids generally pair electric motors and regular engines and use batteries to store energy from motion and braking. They also use aerodynamic design to reduce drag and new materials to lower weight. Mahindra's microhybrids reduce fuel wastage by shutting off the engine when it's not needed.
Hybrids such as the Toyota Prius, with sales of more than three million worldwide, come with automatic transmission. Other hybrids and hybrid variants include the Honda Jazz, Ford Fusion and Chevrolet Volt are all automatics.
Elon Musk's Tesla makes allelectric cars that have gained a significant market share in the US in the last few years, thanks to their sleek design and performance, although the company recently had to defend itself over some vehicles catching fire. Automatic cars, although they have gained ground of late in India, still aren't as popular in the country as they cost more and are less fuel-efficient. That's why Mahindra is going the manual-transmission route, says the company.
"We are keen to develop a manual transmission mode compatible with the hybrid technology," Wadhera said. "It is expected to be more efficient and also more adaptable to the range of vehicles sold across various markets."
Other technology partners include Germany's largest auto component maker ZF and tyremaker Continental. The fullscale hybrids are likely to be available as the top-end variants of sports utility vehicles such as the XUV500 and Scorpio. Both these models have micro-hybrid variants that enhance mileage up to 5% by switching off the engine when not required.
Various automakers in India have been trying to take fuel efficiency to the next level by developing different technologies to partially offset the spiralling cost of fuel. Maruti Suzuki, Tata Motors, Honda and Toyota Kirloskar are working on micro-hybrids, electric assists and start-stop technologies to decrease fuel consumption and increase the efficiency of petrol and diesel engines.
Maruti has introduced startstop technology, which increases fuel efficiency by 5-7%, in some of the models that it exports. The company plans to offer this option in top-end variants in the local market as well.
Mahindra officials expect that the initial success of its hybrid vehicles will establish new yardsticks for fuel efficiency in the Indian market.
"A hybrid electric vehicle combines conventional internal combustion engine propulsion system with an electric propulsion system leading to improved fuel economy and efficiency," said a person close to the development. "Mahindra's commitment to bring about a cleaner and greener future is exemplified through the partnerships entered with leading global technology conglomerates and pioneering consultants."
Toyota makes the Prius available as an import in India. The Z5 costs Rs 29.3 lakh and the Z6 Rs 31.5 lakh (ex-showroom in Delhi). Mahindra has been frustrated at the slack response to the E2O with sales nowhere near projections. Only a few hundred cars have been sold so far since its launch in March this year. The E20 starts at Rs 6.3 lakh after benefits and tax rebates. Mahindra's XUV500 microhybrid variant starts at Rs 11 lakh and that of the Scorpio at Rs 8.1 lakh.
Meanwhile, the Indian government is working on proposals to convert existing cars into hybrids that will improve fuel efficiency by 20-25%. This will involve more than 100 million cars on Indian roads being turned into hybrids by deploying a parallel system just as CNG kits are retrofitted in petrol cars and SUVs in India.
The company, which may debut its hybrids at February's Indian Motor Show, has established a place for itself in green technologies with close to four lakh socalled micro-hybrid vehicles on Indian roads. It also owns the world's largest electric car company by production capacity, Mahindra Reva, which sells the E2O hatchback, the world's most affordable four-seater car that only uses battery power to run.
The company is now moving to the next level of sustainable green mobility by focusing on full-scale hybrids and has roped in technology partners that have the expertise.
"We have signed up with Samsung SDI, which is the global leader in lithium ion batteries for development and supply of these batteries for our hybrid range of vehicles," Rajan Wadhera, chief executive, technology and product development, told ET from Cape Town in South Africa where he was attending a company meeting. "We are perfecting the hybrid technology to deploy it in various platforms and vehicles across the Mahindra range."
Hybrids generally pair electric motors and regular engines and use batteries to store energy from motion and braking. They also use aerodynamic design to reduce drag and new materials to lower weight. Mahindra's microhybrids reduce fuel wastage by shutting off the engine when it's not needed.
Hybrids such as the Toyota Prius, with sales of more than three million worldwide, come with automatic transmission. Other hybrids and hybrid variants include the Honda Jazz, Ford Fusion and Chevrolet Volt are all automatics.
Elon Musk's Tesla makes allelectric cars that have gained a significant market share in the US in the last few years, thanks to their sleek design and performance, although the company recently had to defend itself over some vehicles catching fire. Automatic cars, although they have gained ground of late in India, still aren't as popular in the country as they cost more and are less fuel-efficient. That's why Mahindra is going the manual-transmission route, says the company.
"We are keen to develop a manual transmission mode compatible with the hybrid technology," Wadhera said. "It is expected to be more efficient and also more adaptable to the range of vehicles sold across various markets."
Other technology partners include Germany's largest auto component maker ZF and tyremaker Continental. The fullscale hybrids are likely to be available as the top-end variants of sports utility vehicles such as the XUV500 and Scorpio. Both these models have micro-hybrid variants that enhance mileage up to 5% by switching off the engine when not required.
Various automakers in India have been trying to take fuel efficiency to the next level by developing different technologies to partially offset the spiralling cost of fuel. Maruti Suzuki, Tata Motors, Honda and Toyota Kirloskar are working on micro-hybrids, electric assists and start-stop technologies to decrease fuel consumption and increase the efficiency of petrol and diesel engines.
Maruti has introduced startstop technology, which increases fuel efficiency by 5-7%, in some of the models that it exports. The company plans to offer this option in top-end variants in the local market as well.
Mahindra officials expect that the initial success of its hybrid vehicles will establish new yardsticks for fuel efficiency in the Indian market.
"A hybrid electric vehicle combines conventional internal combustion engine propulsion system with an electric propulsion system leading to improved fuel economy and efficiency," said a person close to the development. "Mahindra's commitment to bring about a cleaner and greener future is exemplified through the partnerships entered with leading global technology conglomerates and pioneering consultants."
Toyota makes the Prius available as an import in India. The Z5 costs Rs 29.3 lakh and the Z6 Rs 31.5 lakh (ex-showroom in Delhi). Mahindra has been frustrated at the slack response to the E2O with sales nowhere near projections. Only a few hundred cars have been sold so far since its launch in March this year. The E20 starts at Rs 6.3 lakh after benefits and tax rebates. Mahindra's XUV500 microhybrid variant starts at Rs 11 lakh and that of the Scorpio at Rs 8.1 lakh.
Meanwhile, the Indian government is working on proposals to convert existing cars into hybrids that will improve fuel efficiency by 20-25%. This will involve more than 100 million cars on Indian roads being turned into hybrids by deploying a parallel system just as CNG kits are retrofitted in petrol cars and SUVs in India.
Manufacturing zones in AP
Hyderabad: The Centre has accorded in-principle approval for the three national investment and manufacturing zones proposed in Andhra Pradesh.
The proposal for sanction of Rs 250 crore for payment of advance for the land acquisition for the proposed zones in Chittoor and Medak districts has also been agreed, a state government release said.
It is estimated that the Medak district zone could attract investments up to Rs 43,000 crore, whole those in Chittoor and Prakasam district could attract Rs 31,000 crore and Rs 43,000 crore respectively.
The three zones are coming up on an area of over 5,000 hectares each.
The proposal for sanction of Rs 250 crore for payment of advance for the land acquisition for the proposed zones in Chittoor and Medak districts has also been agreed, a state government release said.
It is estimated that the Medak district zone could attract investments up to Rs 43,000 crore, whole those in Chittoor and Prakasam district could attract Rs 31,000 crore and Rs 43,000 crore respectively.
The three zones are coming up on an area of over 5,000 hectares each.
Australian agency NICTA, Infosys in pact for research centre
Chennai: National ICT Australia Ltd (NICTA) and Infosys will jointly set up a centre of excellence in optimisation algorithm to solve complex problems related to supply chain for clients in Australia, according to Hugh Durrant Whyte, CEO, NICTA.
Early this year, NICTA, an ICT research organisation, and Infosys signed a joint research collaboration agreement to tackle the ‘hard technology’ problems facing businesses. Setting up the centre in India and Australia, is part of this tie up, Whyte told Business Line.
As problems become more complex, the optimisation methods (algorithms) need to become more capable. For example, if a company needs to deliver a million items to 10,000 customers using 100 trucks, what is the allocation of items to trucks and customers that will minimise cost? Or, in a complete supply chain, what set of ships, port movements, people and trucks is needed to deliver all of a companies outcomes to the right place at the right time to maximise profit? “This is a hard problem and is the type of thing we will be doing with Infosys,” he said.
Whyte was in Chennai leading an Australian ICT delegation to showcase innovation and research excellence in ICT and explore partnerships with local IT companies, including HCL Technologies, Tech Mahindra, Wipro and Cognizant.
Infosys has the capability to design and implement the solutions while NICAT has a group of experts in optimisation. Supply chain is critical for Australia, which is a big country and vastly populated. There is mineral supply chain and food supply chain and nearly 40 per cent of GDP is spent on shipping goods around the country as against 20 per cent globally.
Best place
If Infosys wants to offer customer supply chain expertise, Australia is the best place to build capacity, expertise and apply first with Australian customers and take it globally, he said.
Early this year, NICTA, an ICT research organisation, and Infosys signed a joint research collaboration agreement to tackle the ‘hard technology’ problems facing businesses. Setting up the centre in India and Australia, is part of this tie up, Whyte told Business Line.
As problems become more complex, the optimisation methods (algorithms) need to become more capable. For example, if a company needs to deliver a million items to 10,000 customers using 100 trucks, what is the allocation of items to trucks and customers that will minimise cost? Or, in a complete supply chain, what set of ships, port movements, people and trucks is needed to deliver all of a companies outcomes to the right place at the right time to maximise profit? “This is a hard problem and is the type of thing we will be doing with Infosys,” he said.
Whyte was in Chennai leading an Australian ICT delegation to showcase innovation and research excellence in ICT and explore partnerships with local IT companies, including HCL Technologies, Tech Mahindra, Wipro and Cognizant.
Infosys has the capability to design and implement the solutions while NICAT has a group of experts in optimisation. Supply chain is critical for Australia, which is a big country and vastly populated. There is mineral supply chain and food supply chain and nearly 40 per cent of GDP is spent on shipping goods around the country as against 20 per cent globally.
Best place
If Infosys wants to offer customer supply chain expertise, Australia is the best place to build capacity, expertise and apply first with Australian customers and take it globally, he said.
At 1,200 kV Wardha-Aurangabad will be world’s most powerful transmission line
Chennai: Driven by need and denied help, India developed its own super computers, learnt to put satellites in space and mastered the pressurised heavy water reactor nuclear technology. While these do not make India a scientific super power, they do fetch the country a measure of respectability.
Now, the same need is driving India to the cutting edge of technologies in another field — power transmission.
The 400-km distance between Wardha and Aurangabad may not be very long, but the cables which connect the two cities in Maharashtra will, in a couple of years, have the distinction of being the world’s highest capacity power transmission line. At present, it is “charged to 400 kV” but when the Power Grid Corporation of India is ready, the capacity of the line will be raised to 1,200 kV. Nowhere in the world does a 1,200-kV line exist, partly because other countries do not need such high capacity lines. China, another country of distances, which does need ultra high voltage transmission, has a 1,100 kV line in commercial operation.
The Wardha-Aurangabad transmission system takes off from a 2 km-long pilot line that the public sector PGCIL has been experimenting in Bina, Madhya Pradesh. The pilot was to study how electrical systems behave when a current of 1,200 volt zips through them.
The ultra high voltage (UHV) systems have one significant advantage — they can carry more power. This is crucial in a country where laying new lines is a challenge because of ‘right of way’ problems.
“UHV is an evolving technology, specially initiated by countries with large surface areas like China and India,” says John Yesuraj, Deputy General Manager, Design and Technology, Crompton Greaves Ltd. “India’s ambition of 1,200 kV system, which would be a step greater than China’s 1,100 kV, is now widely discussed in international technical forums across the world,” Yesuraj told Business Line.
Cromption Greaves recently announced the setting up of a Rs 40-crore ‘UHV lab’ to test how well the various transmission equipment can withstand electrical stress when current of very high voltage, up to 1,600 kV, passes through it. The lab will enable local manufacture of UHV products, substituting costly imports.
In the meantime, Power Grid Corporation is all set to begin research into superconducting transmission systems. Superconductivity has been in physics books for long, but is yet to come into reality. Basically, if you pass electricity through a wire, the wire resists the flow and this resistance heats up the wire and some energy is lost as this heat. A superconducting system keeps the cable under extremely low temperatures, so low that making it possible at temperatures of -135 degrees Celsius is called ‘high temperature super conductivity’. The challenge is, of course, to keep the cable so cold but if you get it right, there will be practically no transmission losses.
Power Grid Corporation will soon be set up a research centre in collaboration with IIT Kharakhpur, the company’s Director-Operations, I. S. Jha, said
Now, the same need is driving India to the cutting edge of technologies in another field — power transmission.
The 400-km distance between Wardha and Aurangabad may not be very long, but the cables which connect the two cities in Maharashtra will, in a couple of years, have the distinction of being the world’s highest capacity power transmission line. At present, it is “charged to 400 kV” but when the Power Grid Corporation of India is ready, the capacity of the line will be raised to 1,200 kV. Nowhere in the world does a 1,200-kV line exist, partly because other countries do not need such high capacity lines. China, another country of distances, which does need ultra high voltage transmission, has a 1,100 kV line in commercial operation.
The Wardha-Aurangabad transmission system takes off from a 2 km-long pilot line that the public sector PGCIL has been experimenting in Bina, Madhya Pradesh. The pilot was to study how electrical systems behave when a current of 1,200 volt zips through them.
The ultra high voltage (UHV) systems have one significant advantage — they can carry more power. This is crucial in a country where laying new lines is a challenge because of ‘right of way’ problems.
“UHV is an evolving technology, specially initiated by countries with large surface areas like China and India,” says John Yesuraj, Deputy General Manager, Design and Technology, Crompton Greaves Ltd. “India’s ambition of 1,200 kV system, which would be a step greater than China’s 1,100 kV, is now widely discussed in international technical forums across the world,” Yesuraj told Business Line.
Cromption Greaves recently announced the setting up of a Rs 40-crore ‘UHV lab’ to test how well the various transmission equipment can withstand electrical stress when current of very high voltage, up to 1,600 kV, passes through it. The lab will enable local manufacture of UHV products, substituting costly imports.
In the meantime, Power Grid Corporation is all set to begin research into superconducting transmission systems. Superconductivity has been in physics books for long, but is yet to come into reality. Basically, if you pass electricity through a wire, the wire resists the flow and this resistance heats up the wire and some energy is lost as this heat. A superconducting system keeps the cable under extremely low temperatures, so low that making it possible at temperatures of -135 degrees Celsius is called ‘high temperature super conductivity’. The challenge is, of course, to keep the cable so cold but if you get it right, there will be practically no transmission losses.
Power Grid Corporation will soon be set up a research centre in collaboration with IIT Kharakhpur, the company’s Director-Operations, I. S. Jha, said
Saturday, December 7, 2013
Hero ties up with Italy's Magnetti Marelli to boost research capability
New Delhi: Hero MotoCorp, the country’s largest two-wheeler maker, on Tuesday announced a joint venture with Italy’s Magnetti Marelli for developing powertrains and next-generation electronic fuel-injection systems.
The companies will invest $8.5 million over the next three years and a total of $27 million over 10 years in the joint venture, HMC-MM Auto Ltd. Hero will hold 60 per cent stake in the venture, while the remaining will be with Magnetti Marelli.
Pawan Munjal, managing director and chief executive, Hero, said, “This development will help the cause of Hero engines, improve our products and help meet environmental regulations.”
He added the venture would start manufacturing by the end of next year and was targeting $200 million in turnover in 10 years.
The venture might also supply components to other manufacturers, Munjal said.
The companies will invest $8.5 million over the next three years and a total of $27 million over 10 years in the joint venture, HMC-MM Auto Ltd. Hero will hold 60 per cent stake in the venture, while the remaining will be with Magnetti Marelli.
Pawan Munjal, managing director and chief executive, Hero, said, “This development will help the cause of Hero engines, improve our products and help meet environmental regulations.”
He added the venture would start manufacturing by the end of next year and was targeting $200 million in turnover in 10 years.
The venture might also supply components to other manufacturers, Munjal said.
Tata Motors to invest £30 m for research in UK
Mumbai: As part of its commitment for long-term R&D in the UK, Tata Motors Ltd will invest about £30 million (a little over Rs 300 crore) in the National Automotive Innovation Campus (NAIC).
The investment would be made through its subsidiary Tata Motors European Technical Centre (TMETC) at the University of Warwick campus, the company said in a statement.
“This investment constitutes the next step in Tata Motors’ strategy to develop world class products for its global customers and TMETC plays a significant role in that plan. Our teams in India and in the UK complement each other in academic excellence and product experience, and we see the UK as a global hub for innovative and low carbon automotive technologies, which will benefit our customers,” said Tim Leverton, Head of Advanced Engineering and Product Development for Tata Motors.
The investment would be made through its subsidiary Tata Motors European Technical Centre (TMETC) at the University of Warwick campus, the company said in a statement.
“This investment constitutes the next step in Tata Motors’ strategy to develop world class products for its global customers and TMETC plays a significant role in that plan. Our teams in India and in the UK complement each other in academic excellence and product experience, and we see the UK as a global hub for innovative and low carbon automotive technologies, which will benefit our customers,” said Tim Leverton, Head of Advanced Engineering and Product Development for Tata Motors.
ECB route allowed for funding infra projects
Mumbai: To strengthen the flow of resources to the infrastructure sector, the Reserve Bank of India has permitted holding companies / core investment companies to raise resources via the external commercial borrowing (ECB) route.
The ECB should be for project use in special purpose vehicles (SPVs), subject to terms and conditions.
Among the terms and conditions, the RBI specified that the business activity of the SPV should be in the infrastructure sector; and the infrastructure project is required to be implemented by the SPV established exclusively for implementing the project.
Further, the ECB proceeds should be utilised either for fresh capital expenditure (capex) or for refinancing of existing rupee loans (under the approval route) taken from the domestic banking system for capex.
ECB for the SPV can be raised up to three years after the commercial operations date of the SPV.
The SPV should give an undertaking that no other method of funding, such as trade credit (if for import of capital goods), will be utilised for that portion of fresh capital expenditure financed through ECB proceeds.
In the case of holding companies that come under the RBI’s core investment company (CIC) regulatory framework, the central bank has specified additional terms and conditions for raising ECB for project use.
The ECB should be for project use in special purpose vehicles (SPVs), subject to terms and conditions.
Among the terms and conditions, the RBI specified that the business activity of the SPV should be in the infrastructure sector; and the infrastructure project is required to be implemented by the SPV established exclusively for implementing the project.
Further, the ECB proceeds should be utilised either for fresh capital expenditure (capex) or for refinancing of existing rupee loans (under the approval route) taken from the domestic banking system for capex.
ECB for the SPV can be raised up to three years after the commercial operations date of the SPV.
The SPV should give an undertaking that no other method of funding, such as trade credit (if for import of capital goods), will be utilised for that portion of fresh capital expenditure financed through ECB proceeds.
In the case of holding companies that come under the RBI’s core investment company (CIC) regulatory framework, the central bank has specified additional terms and conditions for raising ECB for project use.
M&A rules for telecom cleared
EGoM also raises quantity of spectrum to be auctioned
New Delhi: In a move likely to encourage consolidation in the telecom sector, an empowered group of ministers (EGoM) on Tuesday cleared the much-awaited final merger & acquisition (M&A) guidelines for the sector.
Also, in a happy surprise for operators, the EGoM decided to increase the quantum of 1,800-MHz spectrum to be put up for auctions in January to 403 MHz, an addition of 118 MHz, or 41.4 per cent, to what it had proposed earlier. The addition also means that an average 18 MHz of spectrum will be up for sale in each circle - enough for three to four operators.
"An acquirer will have to pay the differential between the auction-determined market price and the administrative price for anything beyond 4.4 MHz in the GSM band and 2.5 MHz in CDMA, if an acquired company has got spectrum after paying administrative price," said a member of the EGoM. The M&A guidelines will now be sent to the Union Cabinet for its approval.
The ministers also agreed to increase the earlier-proposed 35 per cent cap on market share (in revenue, as well as user base) for merged entities in a circle to 50 per cent. However, if a merged entity breaches this 50 per cent ceiling in any circle, the companies will get a year to lower the share to below 50 per cent.
On the three-year lock-in period during which companies are not allowed to transfer equities, the ministerial panel decided to maintain the status quo for now. "This was in the Notice Inviting Applications (NIA) and the lock-in period will continue. The issue needs legal consultation," said the member. The matter is likely to be sent to the Attorney General of India for legal consultation.
The EGoM's decision, experts say, will benefit incumbent operators like Bharti Airtel and Vodafone.
If an incumbent telco acquires another incumbent operator, it will not have to pay for the 4.4 MHz GSM spectrum, or 2.5 MHz CDMA spectrum, the acquirer had got as part of its licence agreement. It will only have to pay market price for the spectrum being acquired. But, if a new operator - such as Telenor, which has already bought spectrum through auctions - decides to acquire an incumbent telco, it will have to pay market-determined price for the spectrum held by the company it is acquiring. On the other hand, if an incumbent operator buys a new operator, it will not have to pay anything for the spectrum it gets after acquisition.
"The price the acquirer will have to pay for spectrum might be a dampener. However, M&A activities are expected in the situations where an acquirer would not have to pay for spectrum," said Mohammad Chowdhury, partner & telecom industry leader, PricewaterhouseCoopers India.
The 50 per cent market share ceiling also gives incumbent operators more leeway to acquire other telcos; that would not have been possible under the 35 per cent rule.
Based on revenue market share, Bharti Airtel and Vodafone, the top two telcos in India as at the end of June 2013, together had more than 50 per cent share of the market in 15 of the 22 telecom circles. But, in terms of subscriber base, the two together exceeded 50 per cent market share in only three circles.
So, Bharti Airtel and Vodafone, if they were to merge, going by their revenues, a merger would not be possible in 15 circles (unless they are ready to bring the combined revenue market share down to less than 50 per cent within a year).
Going by market share in terms of both user base and revenues - where merged entities would not cross the 50 per cent threshold in any of the 22 circles - complete mergers are possible between Vodafone and Aircel, Idea Cellular and Aircel, Reliance Communications (RCom) and Aircel.
Had the government maintained the market share ceiling at 35 per cent for both revenue and user base, the possible merged entities would have exceeded the ceiling in most of these cases. For instance, the combined market share of Bharti Airtel and Vodafone exceeds 35 per cent in 21 circles by revenues and in 19 circles by subscriber base.
Cellular Operators Association of India (COAI) Director-General Rajan Mathews says: "With more spectrum being available in the 1,800-MHz band, operators are likely to shift their voice business in this band and use 900-MHz spectrum for LTE. I think we are happy. Also, the new M&A guidelines is likely to offer telcos the room to do some cherry picking."
According to a Department of Telecommunications (DoT) source, the value of the entire 403 MHz of spectrum at reserve price translate into Rs 36,000 crore. The additional spectrum the government auctions in January next year will come from the reserve that DoT has kept aside for refarming of 35 licences in the 21 circles that come for renewal between 2014 and 2016. As the government has decided to abolish reservation of spectrum for incumbent players, an additional 87.5 MHz of 1,800-MHz spectrum will be available for auction in January.
Besides, 27.8 MHz of 1,800-MHz spectrum is there in non-metro circles with the 15 telcos whose licences will be due for renewal between 2015 and 2016. These could also be auctioned. Earlier, DoT had said it would auction 285 MHz of spectrum in the 1,800-MHz band.
"The quantum available in an auction plays a very important role in determining fair price for spectrum, capacity of operators to pay for the quantum they acquire, quality of services, etc. The EGoM decision to increase the quantum will be very positive for the industry, as a lower availability of spectrum might have led to aggressive bidding by operators, who would have ended up paying very high price," said Hemant Joshi, partner, Deloitte Haskins & Sells.
CLEAR SIGNALS
Key EGoM decisions
M&A policy for telecom cleared
If an acquired firm has got spectrum at an administrative price, its acquirer will pay for its spectrum. Price to be the gap between market and administrative prices
The 3-yr period for which transfer of equity is barred will continue; the issue needs legal opinion
Market share of a merged entity should not exceed 50% in each circle. If it does, firms will have to bring it down below 50% in a year
Govt to auction 403 MHz of spectrum in 1,800-MHz band
Telcos to benefit: Incumbent ones like Bharti and Vodafone, which got spectrum bundled with licences at administrative prices
New Delhi: In a move likely to encourage consolidation in the telecom sector, an empowered group of ministers (EGoM) on Tuesday cleared the much-awaited final merger & acquisition (M&A) guidelines for the sector.
Also, in a happy surprise for operators, the EGoM decided to increase the quantum of 1,800-MHz spectrum to be put up for auctions in January to 403 MHz, an addition of 118 MHz, or 41.4 per cent, to what it had proposed earlier. The addition also means that an average 18 MHz of spectrum will be up for sale in each circle - enough for three to four operators.
"An acquirer will have to pay the differential between the auction-determined market price and the administrative price for anything beyond 4.4 MHz in the GSM band and 2.5 MHz in CDMA, if an acquired company has got spectrum after paying administrative price," said a member of the EGoM. The M&A guidelines will now be sent to the Union Cabinet for its approval.
The ministers also agreed to increase the earlier-proposed 35 per cent cap on market share (in revenue, as well as user base) for merged entities in a circle to 50 per cent. However, if a merged entity breaches this 50 per cent ceiling in any circle, the companies will get a year to lower the share to below 50 per cent.
On the three-year lock-in period during which companies are not allowed to transfer equities, the ministerial panel decided to maintain the status quo for now. "This was in the Notice Inviting Applications (NIA) and the lock-in period will continue. The issue needs legal consultation," said the member. The matter is likely to be sent to the Attorney General of India for legal consultation.
The EGoM's decision, experts say, will benefit incumbent operators like Bharti Airtel and Vodafone.
If an incumbent telco acquires another incumbent operator, it will not have to pay for the 4.4 MHz GSM spectrum, or 2.5 MHz CDMA spectrum, the acquirer had got as part of its licence agreement. It will only have to pay market price for the spectrum being acquired. But, if a new operator - such as Telenor, which has already bought spectrum through auctions - decides to acquire an incumbent telco, it will have to pay market-determined price for the spectrum held by the company it is acquiring. On the other hand, if an incumbent operator buys a new operator, it will not have to pay anything for the spectrum it gets after acquisition.
"The price the acquirer will have to pay for spectrum might be a dampener. However, M&A activities are expected in the situations where an acquirer would not have to pay for spectrum," said Mohammad Chowdhury, partner & telecom industry leader, PricewaterhouseCoopers India.
The 50 per cent market share ceiling also gives incumbent operators more leeway to acquire other telcos; that would not have been possible under the 35 per cent rule.
Based on revenue market share, Bharti Airtel and Vodafone, the top two telcos in India as at the end of June 2013, together had more than 50 per cent share of the market in 15 of the 22 telecom circles. But, in terms of subscriber base, the two together exceeded 50 per cent market share in only three circles.
So, Bharti Airtel and Vodafone, if they were to merge, going by their revenues, a merger would not be possible in 15 circles (unless they are ready to bring the combined revenue market share down to less than 50 per cent within a year).
Going by market share in terms of both user base and revenues - where merged entities would not cross the 50 per cent threshold in any of the 22 circles - complete mergers are possible between Vodafone and Aircel, Idea Cellular and Aircel, Reliance Communications (RCom) and Aircel.
Had the government maintained the market share ceiling at 35 per cent for both revenue and user base, the possible merged entities would have exceeded the ceiling in most of these cases. For instance, the combined market share of Bharti Airtel and Vodafone exceeds 35 per cent in 21 circles by revenues and in 19 circles by subscriber base.
Cellular Operators Association of India (COAI) Director-General Rajan Mathews says: "With more spectrum being available in the 1,800-MHz band, operators are likely to shift their voice business in this band and use 900-MHz spectrum for LTE. I think we are happy. Also, the new M&A guidelines is likely to offer telcos the room to do some cherry picking."
According to a Department of Telecommunications (DoT) source, the value of the entire 403 MHz of spectrum at reserve price translate into Rs 36,000 crore. The additional spectrum the government auctions in January next year will come from the reserve that DoT has kept aside for refarming of 35 licences in the 21 circles that come for renewal between 2014 and 2016. As the government has decided to abolish reservation of spectrum for incumbent players, an additional 87.5 MHz of 1,800-MHz spectrum will be available for auction in January.
Besides, 27.8 MHz of 1,800-MHz spectrum is there in non-metro circles with the 15 telcos whose licences will be due for renewal between 2015 and 2016. These could also be auctioned. Earlier, DoT had said it would auction 285 MHz of spectrum in the 1,800-MHz band.
"The quantum available in an auction plays a very important role in determining fair price for spectrum, capacity of operators to pay for the quantum they acquire, quality of services, etc. The EGoM decision to increase the quantum will be very positive for the industry, as a lower availability of spectrum might have led to aggressive bidding by operators, who would have ended up paying very high price," said Hemant Joshi, partner, Deloitte Haskins & Sells.
CLEAR SIGNALS
Key EGoM decisions
M&A policy for telecom cleared
If an acquired firm has got spectrum at an administrative price, its acquirer will pay for its spectrum. Price to be the gap between market and administrative prices
The 3-yr period for which transfer of equity is barred will continue; the issue needs legal opinion
Market share of a merged entity should not exceed 50% in each circle. If it does, firms will have to bring it down below 50% in a year
Govt to auction 403 MHz of spectrum in 1,800-MHz band
Telcos to benefit: Incumbent ones like Bharti and Vodafone, which got spectrum bundled with licences at administrative prices
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