India Now a $3-B Market for Big Blue

Half of this comes from local market; Co also controls half of India's outsourcing biz

IBM India's revenues crossed $3 billion ( 13,500 crore) in the year ended March, helped by contracts from a number of companies looking to improve their performance through better use of technology. Big Blue, a name IBM acquired from its bluepainted mainframe computers of the 60s, now controls over half of the outsourcing business in a market that is home to the world's fastest-growing tech firms. 

IBM does not comment on revenues from specific country markets like India, but at least six people, including experts and company insiders, confirmed the company's revenues from India touched $3 billion during the year ended March 2011. Nearly half of this is from India's domestic market, where IBM handles computer hardware, software and services functions of customers such as Bharti Airtel. Some revenues also come from developing solutions for government customers such as Indian Railways, which took the company's help for developing a crew management system last year. IBM Now Looking Beyond Telecom Sector 
The remaining $1.5 billion is earned from exports and from over 1,500 of IBM's top customers, including JPMorgan and others. Over the past 19 years, Big Blue has been slowly and quietly preparing to control India's lucrative IT business in the backyard of the country's top tech firms that started by writing software codes for helping overseas customers manage the millennium bug during the 90s. Now, as Infosys and Cognizant shift their focus to India's nearly $20-billion IT market, IBM's shadow is already looming large. "IBM Japan, for instance, is as good as any other Japanese tech company. Ditto in India—their undying focus on the markets they are present is a lesson," says a senior executive at one of the Indian tech firms. Unlike many other multinational tech firms like HP, CSC, Capgemini, which started their operations to develop a staff base to compete with low-cost Indian rivals, IBM looked at India as an important part of its 'emerging markets' growth story in the years to come. With nearly 120,000 employees, around one-fourth of its global workforce, IBM is now one of the top five tech firms in the country in overall revenues, behind TCS, Infosys, Wipro, Cognizant and HCL. However, none of these rivals has more than 10% of their business from Indian customers. 
"During recession, companies like Infosys realised that they have allowed an IBM to grow ahead in their own backyard," says the CEO of one of the tech firms now competing with IBM for local business. Shanker Annaswamy, managing director of IBM India, said, "In 2005, our chairman gave a challenge for us to become the number one in the services market here, and we have done that." 
"Our early efforts are paying off now," he added. 
Outsourcing contracts with customers such as Bharti Airtel and Indian Railways are now worth around $1.5 billion, higher than those of any Indian firm, including TCS. It's been a long, slow burn for IBM in India—It withdrew from the country in 1977 after the government passed a ruling that multinationals would have to give up some stake in their India units, and was one of the earliest to come back in 1992 when reforms started to take shape. 
Now, the company is fighting for large government outsourcing contracts against Indian rivals TCS, Infosys and Wipro. "In 1992, we entered India for the domestic market opportunity, which is what differentiates us from the others. And then we said if we can also do global delivery, it's good, but we did not come for the labour cost arbitrage," Jeby Cherian, director, strategy, IBM India South Asia, said. Years later, in 2006, the company announced an investment of $6 billion in India. Indian government departments and public sector units are going to spend the most on IT this year. The biggest driver for higher government spending on IT and related areas is India's UID project, which according to CLSA Research, will lead to $10 billion worth of investments in IT consulting, system integration, and computer hardware over the next five to six years. CLSA sees a $1-billion business opportunity for consultants in the first five years and a need to raise manpower by 15% for their services. Some 18,000 systems specialists and programmers will drive a $2.4-billion pie for integration of UID into existing software systems. 
However, IBM now has to find ways of growing its India business beyond large outsourcing deals from phone firms. "There's no Bharti-like deal in sight and opportunity to bundle computer hardware with outsourcing is not there in other sectors," says a senior executive at a company that competes with IBM. 
In some ways, IBM is still waiting for a 'magic' to happen similar to its success in India's telecom market, in sectors of banking, retail and healthcare. "In the first wave of banking and financial services, we did not participate; in the last 18 months, there has been a lot of focus and activity. SBI is one such example. Now banks are transforming beyond core banking," Vanitha Narayanan, managing partner, global business services (GBS), IBM India and South Asia, said. "In telecom, the deals are smaller but just as overarching' banking and telecom are IT-led businesses. The volume has increased, the size and scope are different," she added. 
On its part, IBM has already started signing smaller contracts with customers such as Tata Sky, Amul and HPCL that can potentially become multi-million-dollar deals over many years. For instance, the HPCL contract worth around $2.2 million, for implementing radio frequency identification device, will help the petroleum company streamline its processes of bottling, supplying and tracking over 500,000 LPG cylinders in the first phase. 
Coming out of recession, all IBM India employees are set to receive a $1,000 stock bonus each before June 16, the day the Big Blue celebrates its 100 years of existence, in a move that will force other multinational and Indian tech firms to dole out more incentives to check attrition. 
According to market intelligence firm IDC, the world's largest technology company had revenues of almost Rs 12,388 crore, with a headcount of 75,000, in the year ended March 31, 2010, more than double of what it had in FY06—revenues of . 5,412 crore, with a headcount of 55,000. IBM has drawn out a 2015 road map where it has divided its business into two markets—major markets comprising developed economies like the US, and growth markets comprising 140 countries, including India. IBM's smarter planet involves working with the private and public sector on large, complex problems like plugging water wastage or making the web more accessible to people who cannot read or write. For instance, the company is working on voice-based web to help illiterate people get jobs. The company is doing a pilot project on this with the government of Karnataka.

India Pledges $5b Credit to Africa

Manmohan Singh announces extra $700m for education, skill development at India-Africa summit

Prime Minister Manmohan Singh unveiled a slew of initiatives to help African nations build local capabilities, continuing the Indian strategy of treading softly on a continent where there is a scramble for natural resources. 
India pledged a $5 billion line of credit for development initiatives and an additional $700 million for education and skill development in Africa, Singh said at the plenary session of the second India-Africa summit here. India has traditionally adopted a lightfooted approach to economic diplomacy in Africa and there have been concerns that the Indian engagement lacked consistency and is not as effective as that of China. Officials accompanying the prime minister insisted that India's is not being outsmarted by the Chinese, pointing to the Indian initiatives to build local institutions and capacity in agriculture, education and training. 
"The Chinese are absent in many of these areas. We don't agree that China has outflanked us here. There is enough place to do what we are good at,'' said a senior official. Africa, with a population of 1 billion, is being wooed by developed and emerging powers because of its potential as a huge market and a continent with vast mineral and oil resources. China, in particular, has pursued an aggressive strategy of acquiring oil and mineral concessions while building large infrastructure projects. 
The $5 billion line of credit will be for three years, Singh said at the summit, attended by 15 African nations. A substantial chunk of the credit line -- $300 million -- will be to support the development of a new Ethio-Djibouti railway line linking Addis Ababa and the port of Djibouti. 
To boost engagement in the agriculture and allied sectors, the prime minister announced the formation of an India-Africa food processing cluster. "This would contribute to value addition and the creation of regional and export markets," he said. Furthermore, an India-Africa Integrated Textile Cluster will support the cotton industry and the processing of the raw material into high-value products. 
India, which is looking at close coordination with the Africans in climate change negotiations, has also pledged support for weather forecasting technology. "This will harness satellite technology for the agriculture and fisheries sectors as well as contribute towards disaster preparedness and management of natural resources,'' Singh said. India had announced a $5.4 billion line of credit in 2008 at the first India-Africa summit in New Delhi but much of it remains unutilised. 
India-Africa trade, which is about $45 billion now, is expected to reach $75 billion by 2015. Nigeria, from where India imports more than a tenth of its crude, and South Africa, are the two main trading partners. But neither attended the summit. 
China's trade with Africa is expected to double from its present level to $300 billion by 2015. Indian investment in Africa is driven by the private sector in contrast to China, where state-run enterprises dominate. Many Africa analysts complain that while China is unwavering in its focus on Africa at the highest level, India has been fitful. The Chinese premier or the president visit Africa every year but Indian prime ministers' visits are few and far between. Prime Minister Singh, in his address, also spoke about the need for better connectivity between India and Africa. "One of the biggest gaps in our interaction is that of insufficient air connectivity. To begin with, India would be too happy to increase the access of African airlines to Indian cities in a significant manner over the next three years," he said. With Somalia pirates becoming a major security concern, Singh said India would back African capacities in the maintenance of peace and security. "As a token of our commitment to supporting Africa's endeavours for seeking African solutions, India will contribute $2 million for the African Union Mission in Somalia." He announced the setting up of a formal arrangement for better interaction between businesses in India and Africa. "I propose that we jointly establish an India-Africa Business Council which will bring together CEOs of major corporation from both sides," he said. Among the major business groups with operations in Africa are mobile phone service provider Airtel, the Tata group, the Essar group, Reliance Industries, BHEL and software training company NIIT. 
India Pitches for 
UN Reforms at 
Africa Summit 
ADDIS ABABA India on Tuesday made a strong pitch for reform of global political and economic institutions, including the UN Security Council, as it began a second summit with Africa here. "The current international economic and political system is far from favourable, specially for developing countries. The world faces new challenges in assuring food and energy security," Prime Minister Manmohan Singh told African leaders at the African Union headquarters in the Ethiopian capital. 
"The global institutions of governance are outmoded and are working under stress," he said. "We, therefore, need a new spirit of solidarity among developing countries." The two-day India-Africa Forum Summit began on Tuesday morning with a rendition of the anthems of the African Union and India. PRR

Kotak PE Arm to Launch 600-cr Realty Fund Soon

Kotak Realty Funds Group, the private equity (PE) arm of Kotak Bank, is aiming to raise . 600 crore through its fourth realty fund to be launched in the next few days. The fund will mobilise money from the domestic market and invest mainly in residential properties across India. It will have a green shoe option of . 100 crore.
"We will launch our fourth fund soon. Some of our first fund investors, who received the entire principal in addition to over 20% return, have already shown interest in participating in this new fund. We should be able to conclude fund raising within the next few weeks, that is early June," said S Sriniwasan, chief executive officer of Kotak Realty Fund.
Kotak Realty has a total $750 million worth of assets under advisory through three funds, including $331-million Kotak Alternate Opportunities India Fund and an offshore fund of $265 million.
Its first fund, Kotak India Real Estate Fund I, launched in February 2006, has deployed its entire corpus of . 457 crore with notable investments such as Lemon Tree Hotels, Pride Hotels, 3C Green Boulevard and Clover Golf community. Earlier this year, it returned the entire principle of this first fund in addition to over 20% returns to investors.
Kotak is raising the new fund after almost three years of launching its last fund — an offshore fund worth $265 million. A majority of this offshore fund has also been deployed, and Kotak is in talks with some developers to invest the balance money in residential properties, primarily in Delhi and the National Capital Region. It has also managed to return 20% principle of another domestic fund, worth $331 million, which was launched in August 2007.
The fund has already exited from its earlier investments, including Sobha Developers, Mayfair Housing, Phoenix Mills and NDR Warehousing in Mumbai. In January, the fund sold its 20-acre land parcel at Old Mahabalipuram Road in Chennai to Homex for . 130 crore. Recently, the fund sold its 720,000 sq ft commercial building in Goregaon suburb of Mumbai to Tata Realty for . 525 crore. In August 2006, Kotak Realty through its Kotak India Real Estate Fund I had bought this then under-construction property from K Raheja Constructions for . 230 crore