Unilever offers $5.4bn to up HUL stake Renewing Faith In India Growth Story, Co Launches Biggest Open Offer

Mumbai: Anglo Dutch consumer products giant Unilever Plc on Tuesday launched a $5.4 billion, or Rs 29,000 crore, voluntary open offer to buy shares from the public in India. The offer, which is the largest in the country's history, will see the parent raising its stake in Hindustan Unilever (HUL) to 75%      Unilever, which currently holds 52.48% in HUL, is offering shareholders Rs 600 per share—a 26% premium to last one month's average trading share price—to tender their shares. HUL shares soared after the Tuesday morning announcement ending 17%, or Rs 86, higher at Rs 583.60. The move signifies Unilever's conviction in the growth story of India, as HUL reported steady growth over the last two years and actively invested in categories driving future sales. But it also provided heft to a gathering trend of market leading global companies delisting from Indian bourses, or limiting the local investor participation in one of their biggest growth engines worldwide.      "This represents a further step in Unilever's strategy to invest in emerging markets and offers a liquidity opportunity at an attractive premium for existing shareholders. The long heritage and great brands of Hindustan Unilever, and the significant growth potential of a country with 1.3 billion people makes India a strategic long term priority for the business," said Unilever CEO Paul Polman in a statement.      Unilever currently garners 55% revenue from emerging markets, and a faster pace of growth could see them contribute almost 75% of the business by 2020. Unilever has accelerated momentum in markets like India to offset slowdown in the developed world. Unilever will acquire up to 487 million shares representing 22.52% of the total outstanding shares of HUL under the voluntary offer managed by HSBC Securities and Capital Markets (India).      Sebi regulations require a minimum 25% public float to remain listed in the country. A Unilever spokesperson said there was no delisting plan on the anvil. The organization sees benefits in projecting HUL as an "Indian company" in addition to attracting good talent, he added. "India and Brazil are the No. 2 operating companies for Unilever after the US. It is an  attractive proposition for Unilever to increase holding in the Indian subsidiary," the spokesperson explained. The FMCG behemoth's local units in India and Indonesia faced some investor heat after recent moves to hike royalty payments to the parent. Unilever's ownership of the Indonesian unit stands at 85%, while it operates wholly owned subsidiaries in China and Brazil. Global rival Procter &Gamble India has a large part of its Indian business parked under a 100% company, P&G Home Products, though it operates another listed local company (Procter & Gamble Hygiene andHealth Care) as well.      HUL's higher dividend payout this year, and now an offer to buy shares at a premium, are seen by some as a means to assuage the investor fraternity perturbed after the increased royalty payouts. The annual results announced a day earlier exceeded analyst estimates, with volumes improving despite a slowdown in the industry growth. HUL is currently trading within striking distance of the voluntary offer price, with a section of the investors anticipating an upward revision factoring in the future growth. The Unilever spokesperson, however, said there would be no revisions in the offer price.      Industry analysts said it was worthwhile for the parent to buy shares in the Indian subsidiary as valuations would only move up, making share purchase offers more expensive in the future. Most MNCs hold 100% in their subsidiaries abroad or a substantially higher stake of 60-75% to benefit from any dividend payouts. That emerging markets like India would grow bigger in size is a bait worth biting for most MNCs who are now upping their holdings through costly buybacks. British drug giant GlaxoSmithKline recently increased stake in GlaxoSmith-Kline Consumer Healthcare, its publicly-listed consumer healthcare subsidiary in India, from 43.2% to 72.5% in a transaction valued at Rs 4,800 crore. The group attributed this to "a significant vote of confidence in the long-term growth prospects" in India.      In the last decade, companies such as Reckitt Benckiser (2003), Cadbury India (2003), Otis Elevator Company (2003), Kodak (2003), Philips (2004), Carrier Aircon (2005), Panasonic (2007) and Ray Ban Sun Optics (2008) have delisted their shares from the Indian bourses. India's growth potential spurs HUL, GSK offers Secular Uptrading To Boost FMCG IndustryNamrata Singh TNN  Mumbai: The growth potential of the Indian market, where a secular consumer trend of uptrading is expected to bolster growth in the FMCG market, is akey factor why multinationals such as Unilever and GlaxoSmithKline (GSK) are increasing their holdings through voluntary offers. The contribution of developing and emerging markets (D&E) to Unilever's turnover is expected to grow to 75% by 2020, as Asia overtakes North America as the biggest consuming continent in terms of purchasing power parity.      Certainly, India has a big role to play if Unilever is able to extract growth from this market to its maximum potential. At Hindustan Unilever's (HUL) press meet on Monday to announce the company's results, Unilever COO Harish Manwani made an interesting point about why the organization is investing in sectors of the future — face wash, deodorants, hair conditioners, fabric softners and premium personal products. What stands at a turnover of Rs 1,000 crore today, could very well become Rs 10,000-15,000 crore a decade down the line. HUL is making investments in these emerging categories to "future proof" the business.      "We can see the trend unfold in South-East Asia. History is littered with examples of how certain segments have grown to become full-fledged categories. These categories may be small today, but when the tipping point comes, we want to ensure we are leaders in these categories," he said, in effect demonstrating the future roadmap.      Most of these categories are aspirational in nature and premium in pricing, which means as these categories grow, they will result in a higher value or sales turnover for HUL. This should augur well for Unilever as well, especially if it has a substantially high shareholding in the company.      With HUL already investing behind categories of the future, its turnover and profits would only grow at a higher rate. Unilever certainly does not want to miss out on an opportunity to get a higher share of future dividends paid out by the Indian subsidiary.      According to a BCG/CII report, the Indian consumer market is poised to grow 3.6 times between 2010 and 2020, faster than most other emerging markets. Estimated at $991 billion in 2010, total consumption expenditure is expected to grow to nearly $3.6 trillion in 2020, the report said.      Unilever is allocating resources to this market with an eye on return on investment, said industry experts. Resource allocation is not only in products but also in technology. Unilever recently said its royalty payments from India would increase in a phased manner from the current 1.4% of turnover to 3.15% of turnover over five years. Two out of the six global R&D centres of Unilever are in India and China. In an interview to TOI last year, Manwani attributed the fundamental shift in resource allocation to D&E to rising income levels and these markets emerging as growth centres. He said D&E was an irreversible shift, wherein India and China have a growth runway of 20-25 years. FUTURE -PROOFING

Lottery for Mhada flats M hada has announced its lottery for 1,259 flats.

 The carpet area of the flats ranges from 180 sq ft to 740 sq ft and the flats are priced between Rs 6 lakh to Rs 75 lakh. Applications can be downloaded from the Mhada website from 2pm on May 1 to 6pm on May 21. The draw is likely to take place on May 31. There are 584 flats for the high income group (monthly earning over Rs 40,000) in Dahisar, Kandivli, Powai and Gorai. With an area of 476 sq ft to 749 sq ft, the flats are priced between Rs 39 lakh and Rs 75 lakh. There are 220 flats for the economically weaker section, 95 for the low income group and 357 for the middle income group. EPFO's spl online drive F or proper valuation of Employees Pension Fund, theEmployees Provident Fund Office (EPFO) has launched a special drive to collect members' data through the EPFO employer portal www.epfindia.com.

It’s time to upgrade India ratings, finmin tells S&P

New Delhi: The finance ministry on Thursday sought to convince global ratings agency Standard & Poor's (S&P) about an upgrade in India's sovereign ratings against the backdrop of reforms, which are expected to boost investment and growth.      A team of S&P analysts met top finance ministry officials, led by economic affairs secretary Arvind Mayaram, and discussed the economic parameters of Asia's thirdlargest economy.      "We are simply saying we have taken strong, hard decisions," Mayaram told reporters after the meeting. This country has shown its determination to put economy back on track. We believe it will happen," he said.      Fitch & S&P had cautioned India about a ratings downgrade due to the deteriorating fiscal situation. But since September, after P Chidambaram returned to the finance ministry, the government has announced a series of measures including fuel price reforms to trim the subsidy burden. "I think there is a case for an upgrade because we have taken the kind of decisions that most of countries in the world have not been able to take," Mayaram said.      The finance minister has consistently vowed that the government will make every effort to ensure that the fiscal deficit for the current fiscal year remain below the estimated 4.8% of the gross domestic product. Growth is expected to pick up around 6.5% level due to the improvement in farm, industry and services sectors. The fear of ratings downgrade had prompted the government to push through some politically tough reforms which economists say will start showing results in the months ahead.      Any rating downgrade would have hurt India's efforts to attract foreign capital inflows and made oversees loans for Indian companies costly. S&P said in a report on Wednesday that India continues to struggle, grappling with low growth and relatively high inflation. It had said that economic data in early 2013 have not been encouraging. "We forecast India's GDP to grow 6% this year," the report had said.      Mayaram said there were signs of a pick since October on capital goods. "It is in anticipation of investments happening. We believe the Rs 70,000 crore worth of projects which have been approved... investments will begin to happen now," he said while referring to nod given by the cabinet committee on investment.

Keep faith in govt’s growth agenda, PM urges India Inc

Vows Reforms, But Reveals No New Plans

New Delhi: The business mood in the country was unduly pessimistic, Prime Minister Manmohan Singh said on Wednesday and urged Indian industry to have faith in the government's determination to get growth back on track. 
    Addressing the annual session of the Confederation of Indian Industry (CII) after seven years, Singh said slowing down of economic growth to 5% was clearly disappointing but termed it as a temporary downturn and vowed to get back to 8% growth with deeper economic reforms. He reeled out the steps taken so far to revive growth but did not unveil any fresh plans to steer the economy out of the troubled waters. 
    "If the business mood was unduly optimistic in 2007, I think it unduly pessimistic today. This needs correction," Singh said to muted reaction from industrialists present in the room. "I would urge Indian industry to have faith in our determination and avoid getting swamped by negativism. I urge each one of you to keep faith and call on you to partner with the government in our effort to put the economy back on the path laid out in the Twelfth Plan," the PM said. 
PM to Sinha: All records with JPC P rime Minister Manmohan Singh has rejected the BJP's demand that he appear before the 2G scam JPC, saying all pertinent records and documents have already been placed before the committee. Responding to BJP leader Yashwant Sinha's letter urging him to be a witness and reply to the allegations levelled by former telecom minister A Raja, Singh said the decision on who to summon must be taken by the committee and its chair. P 10 SHOOTING FROM THE LIP 
Business mood was unduly optimistic in 2007, unduly pessimistic today 
In 2007, I often heard it that government had become irrelevant because India will grow at 9% whatever the government does. The consensus today is that unless the government acts swiftly, our growth, which has already decelerated, will be perennially stuck at 5% 
I urge Indian industry to have faith in our determination and avoid getting swamped by negativism 
There are many deficiencies. Corruption is a problem. Bureaucratic inertia is a problem. Managing coalitions is not easy. But these problems have not arisen suddenly 
Govt reviewing FDI policy comprehensively, Land Acquisition Bill in parliament soon Manmohan takes dig at India Inc 
    Slowing economic growth, stubborn inflation, widening current account and fiscal deficits, delay in implementation of projects have sapped confidence and attracted strong criticism from India Inc. 
    Prime Minister Manmohan Singh admitted there were many deficiencies but said they existed even when the economy was growing at 8%. "One of the advantages of being a democracy is that our shortcomings and deficiencies are always put before us. And there are many deficiencies. Corruption is a problem. Bureaucratic inertia is a problem. Managing coalitions is not easy. But these problems have not arisen suddenly," the PM said. 
    Singh, the architect of India's economic reforms, also took a dig at Indian industry saying he welcomed the rediscovery on the part of business of the importance of government. "In 2007, I often heard it that government had become irrelevant because India will grow at 9% whatever the government does. The consensus today is that unless the government acts swiftly, our growth which has already decelerated will be perennially stuck at 5%," Singh said. 
    The PM also admitted that there was a need to revive sentiment and create an environment in which enterprise can flourish and create both jobs and growth. "The environment today is not what it should be, and that is what the government must correct," Singh said and called for efforts to forcefully deal with the several domestic constraints that have arisen and which must be removed to enable the economy to perform at its full potential. "... and we must prove the prophets of gloom as wrong. We are seeing, I believe, a temporary downturn, which does happen. After all, business cycles have been a recurrent theme of all textbooks in economics in the past. I believe, we have seen a temporary downturn, which does happen from time to time. We must recognize it as such and take corrective action," Singh said. 
    The PM said the government was determined to "everything possible to achieve the fiscal deficit target" outlined in the 2013-14 budget and also promised all steps to ensure that capital inflows remain strong to finance the current account deficit. 
    He also said inflation was softening but still remained a problem and needs to be brought down further. Singh, the economist-turned politician, said the full effect of the steps unveiled in the 2013-14 budget would be felt in the next few months and hoped that they help improve investor sentiment.

A Crisis Too Good To Waste By denationalising coal and cutting fuel subsidies, the government can kick-start economic repair

The country is in an economic crisis. The growth rate is coming down. The current account deficit (CAD) has reached 6.7%. A crisis provides an opportunity to take muchneeded decisions that one could not otherwise take. 

    The finance minister rightly identified the most important challenges facing the Indian economy as achieving fiscal stabilisation and reducing CAD. Yet, after the budget, the CAD has gone up. The main reasons for the high CAD, he pointed out, are increasing imports of coal, oil and gold and decreasing exports. 
    The specific measure suggested to reduce coal imports is to have private participation in coal mining through public-private partnership (PPP) with Coal India Limited (CIL), the public sector monopolist. Similarly, to increase oil exploration, a new exploration policy will be formulated where revenue sharing will be required instead of profit sharing as is done now. 
    To reduce gold imports the FM indicated that new investment instruments will be introduced that will be preferred by those who currently buy gold as a hedge against inflation and for capital gains. For promoting exports the finance minister promised to support whatever measures the Reserve Bank takes. 
    Would these work? Despite having adequate resources of coal to produce all that we need domestically, we imported 100 million tonnes of coal in 2011-12, nearly 25% of our consumption. Also, the 12^th Plan projects import of 185 million tonnes of coal in 2016-17. CIL says they are stymied by environmental clearances. The ministry of environment and forests will argue that CIL should have planned better accounting for the time needed for environmental clearance. 
    Under the Coal Nationalisation Act, only public sector firms can mine coal. Some designated users are permitted to mine coal for their own use, which they cannot sell to others. Thus only 
public sector firms can sell coal and so CIL mines and sells most of the coal in India. Today, CIL already outsources many activities to private firms. In a sense thus, there is already some form of PPP in coal mining. 
    What could the new announcement bring? Would it attract private firms to mine coal when it is to be sold through CIL, at the price fixed by CIL? Would private firms get environmental clearances faster than CIL? It is highly unlikely. One can argue that since the private sector will be more efficient than CIL it will make excess profit if it gets the price that CIL gets. 
    However, since the CIL price is not market determined, it is uncertain when CIL will reset price and if the government will decide to subsidise coal as it does petroleum products. 
    The sensible response to the CAD and coal crises would be to denationalise coal completely and let coal price be market determined. Only then can we expect the private sector to come in in a substantial way and introduce new technology. That is the only way we can avoid the import of 185 million tonnes in 2016-17 as envisaged by the 12^th Plan. 
    During UPA-I when i was member, Planning Commission, in charge of energy, we were told to suggest anything except denationalisation of coal. At that time one felt that this was because the UPA depended on the communist parties, which would never agree to it. Today, that constraint does not exist. Instead of reforming its coal policy, the government is taking patchwork actions that do not solve the fundamental problem. At this rate our energy security will be even more precarious than it is now, as we will depend on imports not only of oil but also of coal. 
    Even the short-term policy to deal with coal shortage shows the government's preference for bureaucratic non-market solutions. Today, CIL does not produce all the coal required by power plants, many of them operate below their capacity and power shortages persist. Since domestic coal is cheaper than imported coal, power plants are reluctant to import coal particularly when the coal cost pass through is not allowed by many state regulators. 
    CIL imports coal and charges a weighted average price of domestic and imported coal. A simpler, more efficient, solution would be to allocate domestic coal to all power plants on a pro rata basis and let the plants trade their allocations. Thus, a faraway coastal plant will sell the allocation to plants near the coalmines and import the coal it needs. The market will pool the price in a more efficient way. 
    To reduce oil imports we need to encourage efficient use and more exploration for oil and gas. Subsidies on diesel, LPG and kerosene need to be moderated if not eliminated and replaced by cash transfers to the really needy. That will increase the resources of domestic oil companies and their ability to explore and produce more oil domestically as well as acquire oil properties abroad. This is particularly important as the proposed bidding for revenue sharing increases perceived risk of oil exploration and is less likely to attract foreign firms. 
    Finally, to reduce gold import, inflation indexed bonds or bonds denominated in international gold price and tradable on an exchange at the prevailing gold price at any time, may be issued. Maybe the RBI can be persuaded to do this. 
    The writer is chairperson, Integrated Research and Action for Development.

Patchwork solutions can no longer reform the coal sector