bgyan17_14sept_20sept

8/8/2019 BGyan17_14Sept_20Sept

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B-Gyan Weekly Newsletter

14 September 2010 20 September 2010

Power & Energy | Finance | FMCG | IT & Telecom | Manufacturing


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B-Gyan Newsletter 14.09.2010-20.09.2010 1

POWER & ENERGY

Mumbai company to set up 25 MW geothermal plant in APAn incubated company of IIT-Bombay, Geosyndicate Power Private Ltd., will set up Indias firstgeothermal plant in Khammam, Andhra Pradesh at an investment of ` 300 Crore. Geosyndicate hasentered into a power purchase agreement with Warangal-based Northern Power DistributionCompany, and the plant is likely to come up by 2012 . Geosyndicate is currently in the process of raising funds (it has not received any Governmental aid as of now) and ultimately aims to earncarbon credits from the project. The cost per unit of electricity would be below ` 10.

http://www.thehindubusinessline.com/2010/09/13/stories/2010091350950200.htm

Geothermal Energy: Geothermal energy is the heat from the Earth. Resources of geothermal

energy range from the shallow ground to hot water and hot rock found a few miles beneaththe Earth's surface, and down even deeper to the extremely hot molten magma.

Carbon Credits: A generic term for any tradable certificate or permit representing the right toemit one tonne of carbon dioxide or carbon dioxide equivalent (CO2-e)

Power Purchase Agreement: A legal contract between an electricity generator (provider) anda power purchaser (host). The power purchaser purchases energy, and sometimes alsocapacity and/or ancillary services, from the electricity generator.

Cost per unit of electricity: ` 4 for domestic users, ` 9 for industries, for thermal power. ` 15-30

for solar power.

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Tamil Nadu bans incandescent bulbs to save powerTamil Nadu on Friday, banned the use of old-style, energy intensive incandescent bulbs in officesacross the state and ordered the use of compact fluorescent lamps (CFL) to save power. Comparing the energy consumption of four crore 60 watts incandescent bulbs and 14 watts CFL for an hour, thegovernment said the use of CFL results in a whopping saving of 1,840 MW.

http://economictimes.indiatimes.com/Environment/Tamil-Nadu-bans-incandescent-bulbs-to-save-power-/articleshow/6381573.cms

Comparison: CFL = 8-15x lifetime of Incandescent Lamps, use much lesser energy for givenlight output, but 3-10x the cost.

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Power purchase: Govt to stick to competitive bidding deadlineThe Centre will stick to the January 2011 deadline for shifting to a tariff-based competitive biddingregime for the procurement of electricity from the market, and will disallow future projects fromentering into power purchase agreements (PPAs) on cost-plus, regulator determined tariffs. TheCentral Electricity Regulatory Commission (CERC) had in June firmly ruled in favour of shifting to thetariff-based competitive bidding regime for future power projects from January, citing better pricediscovery and lower retail tariffs through the bidding route. It came as a blow to NTPC, which hasbeen lobbying hard for an amendment to the Centre's Tariff Policy to permit continuation of thecost-plus tariff structure for public sector undertakings beyond the January deadline.

http://www.thehindubusinessline.com/2010/09/16/stories/2010091652910400.htm

CERC: Central Electricity Regulatory Commission regulates the competition and tariffs in bulkpower markets, and helps improve the demand supply gap to foster consumer interests. Setup by the Electricity Act of 2003.

NTPC: National Thermal Power Corporation Indias largest power generator, with a totalinstalled capacity of ~31000 MW and currently operates 15 coal-based plants, 7 gas-basedpower stations and 4 joint ventures.

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Brazil's oil firm Petrobras aims for largest share issue in historyBrazilian oil firm Petrobras is aiming to sell a record breaking $64bn worth of shares to investors thisweek. The offering is set to become the largest issue to date, surpassing the $36bn raised byJapanese telecom company NTT in 1987 and the $24bn raised by the Royal Bank of Scotland in June2008, when the lender rushed to inflate its corporate buffers as the credit crunch started to deepen.

The sale is expected to attract interest from energy investors, who have rushed into natural resourcecompanies as they perceive them to be safer than the recently volatile credit and equity markets.Utility and energy is the second biggest generator of equity issues in Europe so far this year, with$8.4bn worth of transactions. Only banks have issued more, worth $17bn.

http://www.guardian.co.uk/business/2010/sep/19/brazil-oil-firm-petrobras-biggest-share-issue-in-history

Petrobras: A semi-public Brazilian multinational energy giant headquartered at Rio de Janeiro.One of the world leaders in development of advanced technology for deep-water oilproduction, and owns refineries and oil tankers.

Equity Issue: is the sale of new equity or stock by a firm to investors, and is one of the ways inwhich firms obtain funds from investors. It can involve a private sale (directtransaction between investors and the firm), or publicly, in which case the firm has to registerthe securities with the authorities and the sale takes place in an organized market, open toany registered investor, like in an auction. Two common types of public equity issuanceare initial public offerings (IPOs) and seasoned equity offerings (SEOs).

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4/12


Green energy set to light up your homes soonEnergy distribution companies now have to replace 6% of their total quantity with power generatedfrom solar, wind or hydel energy. A new financial instrument called REC (reduction in emissioncertificate) has been created that can be traded by companies producing renewable energy todistribution companies. Sellers are probably waiting eagerly to cash in on this new source of profit* .

One REC will cost 1 megawatthour (MWh). The concept is different from CERwhich is equivalent to1 Tonne of CO 2.http://economictimes.indiatimes.com/articleshow/6576133.cms?prtpage=1

CER: Certified Emission Reductions are a ty pe of emissions unit issued by the CleanDevelopment Mechanism (CDM) Executive Board for emission reductions achieved by CDMprojects and verified by a DOE under the rules of the Kyoto Protocol.

*With Indias 1.60-lakh MW installed capacity, 9,600 MW has to be bought from renewable

energy companies physically or as REC. And given the government-fixed price band of Rs 1.5-3.67/MWh, the market is worth a minimum ` 14,400 crore!

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5/12


FINANCE Monetary reviewReflecting the necessity of always being on trigger alert in a fast-moving world, the RBI will nowrevisit monetary policy and interest rates twice a quarter , instead of once . Of course, mid-coursechanges are not ruled out, if economic and financial events overtake.

The new review calendar is being launched this week on September 16.

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ULIPs to charge for fund switchingFollowing the new IRDA regulations on unit-linked plans, some life insurance companies have startedlevying fund switching charges in their new ULIPs. From free switches prior to the new regulations,

companies now charge fees varying from Rs 50-250, for every switch made by customers.

Previously, the initial upfront charges levied by life insurance companies used to take care of theseexpenses. Now with the new IRDA regulations, there is no room to offer these services free of cost,said an official with another company.

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Rate hikes by RBIThe Reserve Bank of India, in its first Mid-quarter Monetary Policy Review, has hiked interest ratesconsecutively for the fifth time since mid-March 2010. The repo rate has been hiked by 25 basispoints to 6 per cent and reverse by 50 basis points to 5 per cent. It has maintained the Cash ReserveRatio (CRR) at 6 per cent. The objective has been to control the inflationary trends.

Repo Rate: The rate at which the RBI lends to banks

Reverse Repo Rate: The rate it pays for the surplus liquidity it accepts from banks

CRR: The amount of funds that banks have to keep with the RBI

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6/12


New price index prunes headline inflationWholesale Price Index (WPI) now based on 2004-2005 year as foundation instead of 1993-1994.Withthe arrival of the new series, the 1993-1994 index which was used as base will be no more.According to the new index, it will have inflation data of prices for about 676 items rather than 435goods. The year-on-year inflation estimate for August, released on Tuesday using the new dataseries, is down to 8.5 per cent compared to the 9.5 per cent under the old series.

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Exports up 22.5%, but imports grow faster at 32.3%Exports grew 22.5% to $16.64 billion in August, while strong demands for inputs and capital goodsfrom the domestic economy saw the imports increase 32.3% to $29.7 billion. Trade deficit widenedto $13.5 billion forcing the commerce ministry to revise the projection for the year to an all timehigh of $135 billion.

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RBI snubs finance ministers move to set up financial law bodyFollowing the turf between SEBI and IRDA over the regulation of ULIPs, Finance Minister PranabMukherjee outlined a plan to rewrite financial sector laws in his budget speech. He proposed a newbody Financial Sector Legislative Reforms Commission (FSLRC) to overhaul the laws. Thecommissions mandate will be to examine the kinds of inconsistencies and overlaps in financialsector laws. It may also review the structured objectives of each of the financial sector regulators sothat there is no overlap among supervisors when it comes to regulations of different products.

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7/12


FMCG Mergers & Acquisition deals among global consumer goods companies

risingFocusing on developing markets, consumer goods companies are turning bullish on merger andacquisition activities to bolster their competitive edge. Large Indian players such as Godrej, Wipro,Dabur and Marico have made multiple acquisitions across Asian and African markets. Moreover, theopportunity presented by the Indian consumer goods market has gathered significant interest frommost large international retailers such as Wal-Mart and Tesco .

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India's new retail growth centres - Small TownsChanging demographics, higher disposable income and improved agro-produce realization have

made smaller cities and rural areas the future hotbeds of growth. So, from customizing collectionsand keeping a wider entry-level merchandise mix to leveraging local franchisee know-how andopening more outlets, retailers such as Future Group, Shoppers Stop, ITC Wills Lifestyle and Spice.Retail chain Shoppers Stop will open over 12 stores in smaller cities by year-end. The K Raheja-promoted company, which has positioned itself as a bridge-to-luxury brand, will open departmentstores in cities such as Ahmadabad, Aurangabad, Jalandhar, Ludhiana and Mysore and with aninvestment of ` 120 crore.

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P&G takes 20% price cut, J&J may follow suit Procter & Gamble India (P&G) has decided to cut prices of select products even as input costs have

started pinching FMCG companies thanks to rising costs of raw materials and transportation.

The maker of feminine hygiene care brand Whisper and baby care brand Pampers, has taken a 20%cut in the consumer price of Whisper Choice and a 12% drop in the price of Pampers Active Baby.The price of Whisper Choice, which is a low-priced brand in the companys portfolio, has come downfrom ` 24 to ` 20 for a pack of eight units, while the price of Pampers Active Baby (pack of five) hasbecome lesser by ` 10 at ` 70.

High taxation is one of the reasons why companies would find it difficult to reduce prices in thiscategory. The last Budget had levied a 10% excise duty on sanitary napkins, which was previouslyexempt from excise duty.

http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/PG-takes-20-price-cut-JJ-may-follow-suit/articleshow/6544548.cms

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8/12


Godrej sets up VC fund to finance agri-start upsDiversified business group Godrej Industries has set up a $50 million venture capital fund along witha set of individuals to invest in agri start-ups.

A venture capital fund is being promoted by Godrej Agrovet in partnership with other professionals

for funding the start-ups in agriculture. The new venture, Omnivore Capital, is targeting a corpus of $50 million (about ` 228 crore), to which Godrej will contribute ten per cent. Godrej Agrovet willpool in $5 million to the fund and rest would be raised by other professionals associated with thefund.

Though nothing has been finalized so far regarding the partners and talks are going on with severalpeople. The fund will look at innovative agri-projects in India and abroad.

Godrej Agrovet, the agri business division of the Group, deals with products and services thatincrease crop and livestock yields. The company has interests in animal feed, oil palm plantations,

agri-inputs and poultry, and registered total sales of ` 1,576 crore in 2009-10.

http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fmcg/Godrej-sets-up-VC-fund-to-finance-agri-start-ups/articleshow/6591886.cms

Venture capital: (also known as VC or Venture) is provided as seed funding to early-stage,high-potential, growth companies and more often after the seed funding round as growthfunding round (also referred as series A round) in the interest of generating a return throughan eventual realization event such as an IPO or trade sale of the company. To put it simply, aninvestment firm will give money to a growing company. The growing company will then usethis money to advertise, do research, build infrastructure, develop products etc. The

investment firm is called a venture capital firm, and the money that it gives is called venturecapital.

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Emami, Marico join the fray for Paras PharmaFast-moving consumer good firms Emami Ltd. and Marico Ltd. are interested in acquiringAhmadabad-based unlisted firm Paras Pharmaceuticals Ltd. Paras Pharma, which has over-the-counter and personal care brands such as Moov, Krack, D Cold, Set Wet among others, is up forgrabs after two private equity firms which hold a majority stake have shown interest in selling their

stake for as much as $700 million. Shares of Emami ended down 0.92 percent at ` 455.25 whileMarico shares ended down 0.68 percent at ` 124.8 in a firm Mumbai market.

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9/12


IT & TELECOM

IBM to handle IT for Bharti Airtel Africa operationsIndias top mobile phone firm Bharti Airtel took the initial steps to replicate its hugely successfuloutsourcing model in Africa by awarding a $1.5-billion contract to IBM for managing its ITrequirements across 16 countries in the continent. The 10-year deal will involve IBM consolidatingAirtels IT operations in Africa into one integrated system. The US firm also handles Bhartisinformation technology requirements in India, Sri Lanka and Bangladesh under a 2004 deal, which isestimated to worth at least $3 billion.

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Microsoft releases newest version of web browser IE9IE9 work at faster speeds, deliver better graphics and be less obtrusive to users. IE9 unlike previousversions pushes itself to the background. It is available in public beta and trial versions. As this isgoing to make the Windows platform more attractive Microsoft hopes it help stop people fromleaking away to other browsers.

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Mobile Number Portability get going with BSNLBSNL announced the launch of MNP by its scheduled deadline and will be implemented from

October 31. MNP service involves users to retain their mobile numbers in case they want to changetheir operators. MNP service have not started earlier because operators were not ready with theinfrastructure, but Gopal Das, chairman and managing director of BSNL said that we are ready withour infrastructure to meet MNP demands.

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10/12


Cloud Computing: $1 billion opportunity in IndiaOver next five years, the technology would pick up momentum. Instead of large enterprises, thetechnology would rescue the smaller firms including SMBs, SMEs, and other small enterprises. Thiswill be using pay per use model to trim costs, also it will be going to show exponential growth inDigital Information, it has been estimated that digital information in India would reach to some2.3million Petabytes in next 10 years. It is approximately twice as fast as the global rate.

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Oracle takes cloud computing a step furtherOracle has introduced new software to run business applications. It has stepped into the arena of cloud co mputing and trying to come up with an all-in-one product for enterprises. Oracle recentlyrolled out the software Exalogic, which combines server, storage and networking technology withOracle's software. Oracle chief executive described Exalogic as a cloud in a box as reported. Thecompany is placing a premium on innovation to ease out things with the help of cloud computing.

http://economictimes.indiatimes.com/tech/software/Oracle-unveils-new-hardware-for-managing-cloud-computing/articleshow/6589604.cms

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What is Cloud Computing? Cloud computing is Internet-based computing, whereby shared resources, software, and informationare provided to computers and other devices on demand, like the electricity grid. The term cloud isused as a metaphor for the Internet, based on the cloud drawing used in the past to represent thetelephone network. Most cloud computing infrastructures consist of services delivered throughcommon centres and built on servers. The major cloud service providers include Microsoft,Salesforce, Amazon, Terremark, and Google.

http://en.wikipedia.org/wiki/Cloud_computing

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11/12


MANUFACTURING

Manufacturing sector growth may slow down in Q2 The manufacturing sector growth is expected to moderate in July-September period over theprevious quarter due to the gradual phasing out of stimulus measures and increase in input cost, asurvey by industry body FICCI has said. The survey was done on 342 companies across sectors likeauto, textiles, metal, chemical and FMCG, among others.

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Nestle will invest ` `` ` 500 crore in food processing unit The Nestle group has expressed interest in establishing a state-of-the-art food processing unit inOrissa at an investment of approximately ` 500 crore.

The food processing facility of Nestle would be spread over 50 acres. In addition to this, theIndustrial Infrastructure Development Corporation of Orissa Ltd (IDCO) has identified land for thepurpose between Bhubaneswar and Khurda.

Nestle Orissa outlet will manufacture the entire scale of the company's products including milkproducts, beverages, chocolates and confectionery.

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GE aims to establish another manufacturing facility by next year in IndiaGE aims to establish another manufacturing facility by next year in India. The company recentlystated that this unit would be a "multi modal" facility and it will have the capability to producevaried products.

A $157-billion company, GE is one of the largest and most diversified firms in the world. In 2010,Forbes ranked GE as the world's second largest company, based on a formula that compared thetotal sales, profits, assets, and market value of several multinational companies.

The company also said that it plans to significantly increase the strength of its technology centre inBangalore, India. At present, the centre has 5,500 people, the largest R&D location outside the US.This number is expected to rise up to 8,000 over the next 3 years.

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12/12


Maruti invests in a third plant at ManesarMaruti Suzuki India Ltd (MSIL), Indias largest carmaker, plans to invest a whopping amount of

` 1,925 crores for setting up a third plant at its second facility in Manesar. The proposed third plant isexpected to boost MSIL's capacity by more than 17 per cent to 1.70 million units from 1.45 millionunits per annum along with the second plant at Manesar going operational.

Demand for cars has risen by over 30 per cent this year. According to the Society of IndianAutomobile Manufacturers, sales may double to 3 million units by 2015. Maruti Suzuki recordedhealthy growth in the first eight months of this calendar year, where sales grew 24 per cent to104,791 vehicles in August, while crossing the 100,000 mark for a third time.

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Smart materials: To transform manufacturing of productsResearchers have discovered a new smart materials process named Multiple Memory Material

Technology that could change the manufacture of diverse products like medical devices, microelectromechanical systems (MEMS), printers, hard drives, automotive components, valves andactuators. This ground-breaking technology makes smart materials even smarter. The researchershave developed a technology that embeds several memories in a monolithic smart material. Inessence, a single material can be programmed to remember more shapes, making it smarter thanprevious technologies.

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bgyan17_14sept_20sept

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