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Feb 24, 2012

BREAKINGVIEWS: Too-coy India prompts Citi’s HDFC retreat

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – You should be careful what you wish for. India has resisted, strongly, what it sees as excessive foreign participation in its banking system. And with the need to conserve capital at home, it’s no real surprise that Citi(C.N: Quote, Profile, Research) has decided to cash in its 9.9 percent stake in Housing Development Finance Corp(HDFC.NS: Quote, Profile, Research) for $2 billion. But had India allowed Citi more skin in the game it might have stuck around.

India’s banking regulator has long worried about hot money and fair-weather friends. But the protectionism deployed actually increases the dangers. With a 10 percent cap on foreign direct investment in Indian banks, Citi lacked a real say in how HDFC was managed.

Feb 24, 2012

India would gain from letting the lawyers in

By Jeff Glekin

MUMBAI, Feb 24 (Reuters Breakingviews) – Foreign lawyers can
now practice from their suitcases, but can’t set up shop. That’s
self-defeating. Curbs don’t help native firms — they stunt
them. India is missing a chance to capitalise on its best
assets: democracy, rule of law and a low-cost, high-skilled
services sector.

Full view will be published shortly.


— An Indian court ruled on Feb. 21 that foreign law firms
could advise on international law and take part in international
arbitration while in the country. It said that visiting lawyers
could work on a “fly in fly out” basis.

Feb 20, 2012
via Breakingviews

Why 100 pct FDI could save India’s Kingfisher


By Jeff Glekin

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Kingfisher saga has dragged on for too long. Mounting debts and deteriorating service levels are bringing the Indian airline, majority owned by Vijay Mallya, the flamboyant liquor baron, to the brink. New investors are in short supply. A proposal to allow foreigners to buy up to 49 percent of the company does not go far enough. If the government is serious about saving the airline, why not go the whole hog and allow 100 percent?

Feb 16, 2012

BREAKINGVIEWS: Consolidation no panacea for Indian mobile returns

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – Everyone knows that industry consolidation leads to improved shareholder returns. India’s mobile market may be the exception. Revocation of 2G licences and now a change in M&A rules are expected to force a long-awaited deal frenzy in this challenging sector. But more concentration won’t necessarily boost Indian mobile’s famously poor margins. Just look at how a new giant-killer is challenging the dominance of the Big Three operators.

Overcrowding has savaged profitability. After rapid growth, the sector seems to be maturing and new customers are hard to come by. While the top firms continue to turn a profit, the trend since 2008 has been a steadily decline. Reliance Communications (RComm) reported a tenth consecutive quarterly drop in earnings in its most recent financial quarter; Bharti Airtel’s (BRTI.NS: Quote, Profile, Research) have fallen for the last eight quarters. Reliance’s average revenue per user is now a mere $2.02 per month — down from $7.63 in 2008.

Feb 15, 2012

BREAKINGVIEWS: JLR flotation would make sense for Tata Motors

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – Jaguar Land Rover contributed 95 percent of the combined profits of the Tata Motors group last quarter. A minority listing of the UK firm would let the Indian parent book a healthy return on its $2.3 billion purchase, and allow JLR to raise cheap capital overseas. There’s no need to keep this gem hidden.

Tata Motors should be rightly proud of the success it has achieved in reviving JLRs fortunes. The firm delighted the market with better than expected results in the third quarter ending December 2011, sending its shares up almost 13 percent in two days.

Feb 15, 2012

JLR flotation would make sense for Tata Motors

By Jeff Glekin

MUMBAI, Feb 15 (Reuters Breakingviews) – Jaguar Land Rover
contributed 95 percent of the combined group’s profits last
quarter. A minority listing of the UK firm would let Tata book a
healthy return on its $2.3 bln purchase, and allow JLR to raise
cheap capital overseas. There’s no need to keep this gem hidden.

Full view will be published shortly.


— India’s Tata Motors reported a stronger than expected
40.5 percent rise in quarterly profit as robust sales at Jaguar
Land Rover made up for weakness in its home market, sending up
its stock to its highest level in more than a year, Reuters
reported on Feb 14. Tata Motors has a market capitalisation of
$18.6 billion.

Feb 9, 2012

Iranian oil-for-rupees poses diplomatic dilemma

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – India and Iran share close historical links — or so argued India’s first prime minister, Jawaharlal Nehru. Now economic interests are pulling the two countries closer again. India has struck a clever deal to pay for Iranian oil in its own not freely convertible currency, the rupee. It could be a diplomatic hot potato.

New Delhi buys $12 billion of oil a year from Iran. But the trade isn’t balanced. Iran only spends $2.7 billion on Indian exports, according to Tehran. Under the mooted plan for 45 percent of Iranian oil to be settled for in rupees, Tehran would end up with a surplus of nearly $3 billion in rupees, assuming trade levels remain constant. If all of Iran’s payment shifted to rupees the surplus would be $9 billion per year.

Feb 8, 2012

India’s 2G ruling may stir hornets’ nest

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)

By Jeff Glekin

MUMBAI, Feb 8 (Reuters Breakingviews) – India’s judiciary is
making its presence felt in the fight against corruption and
crony capitalism. The Supreme Court’s ruling in the 2G telecoms
scam will change the way all state assets are sold in future. It
could also stir a hornets’ nest by reopening other old licence
awards, in telecoms and other sectors.

Feb 7, 2012

Indian airlines get the wrong help

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – Two wrongs don’t make a right. India’s beleaguered aviation sector needs a boost. But letting airlines avoid punitive state taxes by directly importing fuel isn’t smart. Some tax is necessary to pay for environmental costs. The real target should be the subsidy given to loss-making state-owned Air India.

The sector as whole is predicted to lose around $3 billion in the fiscal year ending in March 2012, according to the Center for Asia Pacific Aviation. The cumulative debt burden of the three big carriers — Kingfisher (KING.NS: Quote, Profile, Research), Air India and Jet Airways (JET.NS: Quote, Profile, Research) — is $16 billion. Air India’s debt alone is $8.8 billion. Kingfisher has struggled to buy fuel and pay salaries, airport charges and interest to its lenders.

Feb 2, 2012

Airtel, Vodafone boosted by Supreme Court telecoms ruling

By Jeff Glekin

MUMBAI (Reuters Breakingviews) – The Indian taxpayer may have lost billions of dollars as a result of the 2G telecoms scam. But the Indian consumer has been a great beneficiary. Since the introduction of new players with cheap licences, India has become the world’s second largest telecoms market with the lowest tariffs. The cut-throat competition, though, has been bad for business.

The Supreme Court’s order to revoke all 122 licences awarded in 2008 will change this picture. It will hurt those using spectrum awarded in that scandal-ridden sale — even those such as Norway’s Telenor (TEL.OL: Quote, Profile, Research) and Abu Dhabi’s Etisalat which bought stakes in companies holding the licences after the event. By contrast, those who are relying on earlier licences — notably Bharti Airtel (BRTI.NS: Quote, Profile, Research) and Vodafone (VOD.L: Quote, Profile, Research) — should benefit as the market consolidates and threadbare margins rise.

    • About Jeff

      "Jeff Glekin is the India columnist for Breakingviews. Jeff is a former diplomat. He spent four years in Mumbai as the Deputy Head of Mission and First Secretary Financial and Economic at the British Deputy High Commission. Before joining the diplomatic service he spent four years with HM Treasury in London. He has a BA in Philosophy, Politics and Economics from Mansfield College, Oxford University."
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