Indian wine adds sparkle to British spirits

S Kalyana Ramanathan / London May 23, 2010 Indian wineries are no more looking to exploit Britain’s love affair with Indian cuisine. They are looking to trounce the traditional and renowned wineries with products that can compete with the best Britain has in offer. Indian wine makers are now demanding their rightful place in a world so far dominated by wineries from France, South Africa, Australia and California. For the first time in the 30-year history of the London International Wine Fair (LIWF) that ended on Thursday, the British got a taste of the red, white, rosé and sparkling wines from eight of India’s best wine markers under one roof — “Wines of India”. The mood in pavilion 40D was anything but sober — only partly explained by the tasting sessions. Visitors, experts and amateurs alike, expressed surprise at the distance Indian wine-makers have travelled in terms of quality and taste. Rajiv Singhal, a consultant with the Indian Grape Processing Board, said there was a buzz around the India pavilion. “People were curious. There was something about India (and Indian wine).” Over the last 10 years, wine making in India had become a serious business, he said. The number of licensed wineries in India has shot up from two in 1999 to 69 in 2010. There were more in the pipeline, Singhal said. Cecilia Oldne, head of international business for Sula Vineyards, said despite being a young wine-making country, the scope for Indian wines in the UK was enormous. Interestingly, UK consumes more South African wines than French wines. After 1993 (after trade ban were lifted), South Africa has significantly increased wine exports to the UK. India can learn and emulate the South African road to success in selling wine in the UK. Sula has its own ambitious plans — the Mumbai-based wine maker has, in the last three months, exported 1,200 cases (12 bottles per case) to the UK. Oldne said if it could have kept pace, Sula would have exported more than 5,000 cases to the UK this year — an unprecedented achievement in its decade-old journey of wine making. The market in India, however, would continue to be Sula’s stronghold for a long time to come. Of the 2,70,000 cases the company produced last year, only 7 per cent were exported. This year, Sula hopes to produce 3,50,000 cases. Sula is probably the most visible Indian wine in the UK. Oldne said clients in the UK included Michelin Star restaurants like Benares in Berkeley Square. While India is still the biggest market for Indian wines, the sheer size of the UK market is irresistible. Despite being a small wine producing nation, the per capita consumption of wine in the UK is 28 litres a year, about half of what major wine-producing countries like France consume (about 56 litres per capita). The per capita consumption of wine in India is just 10ml, which is less than a shot of tequila. Abhay Kewadkar, chief winemaker and business head of UB Group’s wine-making division, said the route to success for Indian wines in the UK was to see beyond Indian restaurants. “We want to present a truly international wine. Fine wine with any fine cuisine.” With just about three years since the spirits and beer major got into wine making, UB is already looking at markets in France, the US, Germany and the UK. From the present level of making one million bottles a year, UB wants to take it up to 12 million bottles (one million cases) in the next three to four years. It had set aside Rs 100-crore investment in this new and exciting business, said Kewadkar. UB sells its wines under the Four Seasons brand. However, Mercury Winery’s Veral Pancholia said Indian wines must zealously hold on to their “Indianness”. He said that was precisely the reason why he sold his wines under the Aryaa brand name in slender bottles with henna designs on them. Today, Mercury exports to as many countries as the number of states in India where it sells its wines. Pancholia says 40 per cent of the 2,00,000 cases it produces in a year are exported to countries like Japan, Norway, the UAE, China, Italy and the US. This year he wishes to add UK. “We are not just selling wine. We are selling the experience of Indian wine.” While many of these wine makers are just starting to taste success in India, Indage has already made some serious inroads into the UK market. With its vineyards near Pune, Indage had been selling wines in the UK for the last 22 years, said Vikrant Chougule. Of the 400 restaurants in the UK where its wines are dispensed, only 30-40 per cent are Indian restaurants. Chougle said the biggest challenge Indian wineries had to fight was the temptation of selling Indian wine with Indian food. He said Indian wine makers had to address the larger food market outside the circle of Indian restaurants. Renowned wine writer Oz Clarke, after tasting what India had to offer, said he was impressed. But he also cautions that Indian wineries must keep the sweetness and oak finish a notch lower if they hope to succeed in a discerning market like the UK — an advice Indian wineries might as well use if they wish to taste the sweetness of success in the UK.

Hindujas to buy Belgian banking arm for euro 1.35 bn

S Kalyana Ramanathan / London May 22, 2010 The Hinduja Group has acquired KBL epb, the private banking arm of Belgian banking and insurance group KBC, for euro 1.35 billion (Rs 7,918 crore) in an all-cash deal. With this acquisition, the Hinduja brothers plan to grow KBL's private banking business in India, West Asia and the rest of Asia. KBL epb (European Private Bankers) is one of Europe’s largest onshore private banking groups, with affiliated local banks at 55 locations across 10 European countries, including France, Germany and United Kingdom. Speaking to Business Standard, Hinduja Group’s 76-year old hairman, Srichand P Hinduja, said KBL’s business model, with its local banks in several European countries, was unique and would augur well for its venture into the Indian banking sector. Of the several bidders for KBL, only two were left in the final round. Exor, an investment firm controlled by Italy's Agnelli family, lost the final round to the Hindujas. “We plan to invest further in the business, maintaining each of the subsidiaries, while also providing KBL epb with access to the fast-growing markets of the Middle East, the Indian subcontinent and Asia,” Srichand Hinduja said. “In this way, we hope to address the private banking needs of clients internationally and facilitate capital flows between fast-growing economies and established Western financial markets.” At the end of 2009, KBL epb had assets under management worth euro 47 billion, assets under custody worth euro 37 billion and, through a 52.7 per cent stake in EFA (European Fund Administration), assets under administration worth euro 103 billion. The sale of KBL epb was mandated by the European Commission as a restructuring plan for KBC in return for a euro 7-billion state aid. The closing of the transaction is subject to customary regulatory approvals and is expected to be completed in the third quarter of 2010. In a joint press statement, KBC and the Hinduja Group said the transaction comprises the sale of KBC’s entire interest in KBL epb and includes all the private banking subsidiaries as well as the custody and life insurance businesses. The KBL epb brand, management team and operations will be maintained in their entirety and KBL epb will continue to be headquartered in Luxembourg. KBL epb operates a unique private banking business model focused on local client service supported by centralised operations. This model has its global hub based in Luxembourg with control functions such as audit, compliance and risk management of the entire group. The local banks of the KBL count among the most prominent banks in the markets they operate in. Theodoor Gilissen Bankiers in the Netherlands, Merck Finck & Co in Germany, Puilaetco Dewaay in Belgium and Brown Shipley & Co in United Kingdom are among 11 such banks with presence across Europe. The group employs 2,661 staff, 466 of whom are private bankers. The Hinduja Group said the deal would further strenghten its presence in the banking sector that already has two banks under its belt -- Geneva-based Hinduja Bank Ltd, established in 1978, and IndusInd Bank in India, set up in 1994. IndusInd in India has two million customers, 1,225 outlets and a balance sheet of $8 billion, the group said. The Hinduja brothers -- Srichand, Gopichand, Prakash and Ashok Hinduja -- are one of the wealthiest families in Europe and have strong presence in India through their interests in automotive, energy, hydrocarbon chemicals, information technology, media,and entertainment, infrastructure and project development, real estate, healthcare, trading and banking and finance.

British govt may review TCS contract with UK pension body

S Kalyana Ramanathan / London May 19, 2010 A £600-million contract won by Tata Consultancy Services (TCS) from Britain’s Personal Accounts Delivery Authority (Pada) has come under renewed media scrutiny. This was after the new government’s chancellor (finance minister), George Osborne said yesterday all major expenses approved by the former Labour government after January 1 would be reviewed. No contract was named in this regard. However, speculation began on this one. Some details of the cost cuts the new government proposes would emerge only next week. Osborne and his team are hoping to cut expenses worth £6 billion a year. The new government is to also present an emergency budget on June 22. In March this year, the UK’s pension manager, Pada, had awarded the £600 million deal to TCS as the only remaining vendor who had bid for this contract, after other bidders withdrew. Both Pada and TCS refused to comment on the outcome of a possible review. A TCS spokesperson in India said, “We, just like Pada, are also under an obligation to not comment on any speculation.” Pada released the contract to TCS in two parts — the designing and implementation part. The designing part is to end this October. The 10-year implementation part starts after that, subject to a go-ahead. “The contract is divided into two stages and runs for 10 years, with possible extensions for up to a further five years. The first stage will run to October 2010, allowing TCS to begin the activity required to set up and administer NEST (National Employment Savings Trust). Prior to the expiry of the first stage, a decision will be made on whether to proceed with the contract for the remainder of the contract term,” Pada had said in March. “Clearly, whoever approved this contract, had obviously provided for the possibility of a non-Labour government in UK after May 2010 and also expected that the new minister in-charge might want to review it,” said a source here.

Vodafone turns clock back to 2007 value in India

S Kalyana Ramanathan / London May 19, 2010 Competition forces lower valuation, despite strong results. Britain's telecom giant, Vodafone Group Plc, has written down the value of its Indian operation by £2.3 billion (Rs 15,156 crore) to an estimated £5.7 billion (Rs 37,530 crore). The reason given is the intense competition it has faced since it took the acquisition route to enter the world’s fastest-growing mobile telecom market in 2007. Globally, Vodafone today reported a nearly three-fold growth in net profit at £8.61 billion ($12.4 billion) for 2009-10. The company today released its annual results for the year ended March 31, 2010, and said, “Although our operational performance in India since acquisition in 2007 has been strong, the award of six new national licences in the market one year after our entry and the resulting intense price competition have led to an impairment charge of £2.3 billion.” Interestingly, the company’s current valuation of its Indian business at £5.7 billion is the same as the price it had paid in 2007. Apart from a cash consideration of £5.7 billion, Vodafone also took on itself debt worth £1 billion ($2 billion at that time) when it acquired the stake in Hutch Essar. MARKET CAP OF BHARTI & RCOM BHARTI AIRTEL Current Rs 1,01,697 crore ($22.31billion) As on Feb 11, 2007 Rs 1,46,701 crore ($33.25 billion) RELIANCE COMMUNICATIONS Current Rs 29,928 crore ($ 6.56 billion) As on Feb 11, 2007 Rs 99,317 crore ($ 22.51 billion) Strong Indian growth A Vodafone spokesperson later clarified that impairment charge was a “non-cash” book adjustment and did not reflect its impressive performance in India. Vodafone, in the books of its holding company, puts a value on the operations in various countries. The company spokesperson said prior to the revaluation, its Indian operations were approximately valued at £8 billion. The lower valuation also comes after a year when its revenues grew by 14.7 per cent in India. The company’s Indian operations attracted 32 million customers in March, making it the second largest mobile telecom company in India. “In a very competitive pricing environment, we were pleased to have confirmed our number two position in the market. Since Vodafone’s entry into India in 2007, our performance has been strong. We have gained about one percentage point per annum in revenue market share, added 72 million customers, moved the business into operating free cash flow generation and launched Indus Towers, the world’s largest tower company, with more than 1,00,000 towers under management.” Despite the robust growth in revenues and customer-base, the Ebitda (earnings before interest, taxes, depreciation and amortisation) margin for the Asia Pacific region (of which India is a part) fell by 2.2 per cent, primarily reflecting lower margins in India caused by the competitive pricing environment and operating investment in new circles, the company said. Vodafone India reported a total revenue of £3.11 billion (Rs 20,500 crore) for 2009-10, against £2.69 billion a year earlier (Rs 17,700 crore), a growth of f around 15 per cent. Ebitda for the year improved to £807 million (Rs 5,315 crore) against £717 million (Rs 4.720 crore) in 2008-09, a growth of 13 per cent. Due to non-cash expenses like depreciation and amortisation, the company reported an adjusted operating loss of £37 million (Rs 244 crore) for its Indian operations. The company had reported an adjusted operating loss of £30 million (Rs 197 crore) a year earlier. The company’s India operation was the major contributor for its growth in the Asia-Pacific region. While APAC region service revenues grew by around 9.8 per cent, the India operations reported 14.7 per cent growth. The rest of APAC grew by only 2.9 per cent. The Group also said it had granted put options exercisable between May 8, 2010, and May 8, 2011, to members of the Essar group of companies that, if exercised, would allow the Essar group to sell its 33 per cent shareholding in Vodafone Essar to the Group for $5 billion or to sell up to $5 billion worth of Vodafone Essar shares to the Group at an independently appraised fair market value. On the government of India’s tax claim of around $2 billion on its acquisition deal (that brought it to India in 2007), the company said it continued to seek resolution. The company had become a majority shareholder in the company through the acquisition of Hutchison Telecommunications International in 2007 for a cash deal of £5.5 billion ($11 billion at that time). Global group revenue increased by 8.4 per cent to £44.5 billion. Group Ebitda was £14.7 billion, up 1.7 per cent. The Ebitda margin declined in line with expectations, the company said. On a consolidated basis, the group’s net profits more than doubled to £8.62 billion against £3.08 billion in 2008-09.

JLR set to wrap up $850-mn order one year in advance

S Kalyana Ramanathan / London May 18, 2010 The times, they are a-changin’... From a painful 2008-09, when global car sales plummeted, the signs of recovery in 2010 have never been clearer. Tata Motors-owned Jaguar Land Rover (JLR) is set to wrap up the £600-million ($850 million) three-year Chinese deal it had bagged in February 2009, one year ahead of schedule. A JLR spokesperson told Business Standard the company was confident of completing delivery of the 13,000-car deal by the end of 2010 itself, as against the schedule of 2011-end. In February 2009, when luxury and premium car maker JLR was under stress with sales numbers sinking, it got its first big break with the order from a Chinese delegation that visited the UK at the start of 2009. The order was for 10,000 Land Rovers and 3,000 Jaguars. The status of the delivery breakup for these two parts of the deal is not known, though. The Chinese order was a major morale booster for JLR-owner, Tata Motors. The order by value is a little over half the price Tata Motors paid (£1.15 billion) for the two iconic name plates in 2008. The massive order is from an importer based in Shenzen, in South China's Guangdong province. It is not clear at this stage if this impressive delivery performance will have any major impact on other difficult decisions the company has been forced to take recently. In April 2009, JLR had asserted it had no plans to reconsider an earlier decision to close one of its plants in the UK — a decision that expected to enable production rationalisation. An announcement on this, as scheduled originally, will be made by the middle of 2010. In September 2009, the company had announced it would be forced to close one of its three midland plants as a cost-cutting measure. The company as a whole employs around 14,000 people and the three assembly plants employ 9,000 workers — 5,000 in Solihull, 2,000 in Castle Bromwich and 1,800 at Halewood. Castle Bromwich makes some Jaguar models, Solihull makes the Land Rover Defender and Discovery, the Range Rover Sport and Range Rover, and Halewood makes the Jaguar X-Type and Land Rover Freelander models. Apart from the new cost-cutting measures, the company has also revamped its top management. It has brought in Carl Peter Forster, former head of General Motors Europe and Ralf Speth from BMW to lead the turnaround. The start of 2010 also saw the exit of the then CEO, David Smith, who had spent 18 months to revamp the company’s operations. Since the start of 2010, JLR has reported impressive improvement in sales. JLR’s global sales in April 2010 were 17,909, higher by 61 per cent. Jaguar sales for the month were 3,559, almost the same as last year in spite of the withdrawal of X-Type. The Jaguar XF sales were up 23 per cent, while Land Rover sales were 14,350, higher by 89 per cent. In March 2010, JLR sold 23,538 vehicles, higher by 43 per cent. Jaguar sales for the month were 4,642, higher by eight per cent, while Land Rover sales were 18,896, higher by 55 per cent. However, cumulative sales of JLR for the financial year are 193,982 units, lower by 11 per cent. Cumulative sales of Jaguar are 47,418, lower by 24 per cent, while cumulative sales of Land Rover are 146,564, lower by six per cent.

New UK govt's emergency budget on June 22

S Kalyana Ramanathan / London May 18, 2010 The UK’s new Tory Chancellor, George Osborne, has said the first emergency budget will be unveiled on June 22 and a new independent Office for Budget Responsibility (OBR) has been formed that will make forecasts of growth and borrowings by the government. The Emergency Budget would be released exactly 42 days from the date of formation of the new government. Prime Minister David Cameron had earlier promised to present the Budget within 50 days of the formation of the new government. Addressing the media here on Sunday, Osborne said that with the OBR in place, the UK would for the first time have a “truly independent assessment of the state of the nation’s finances”. Noted British economist Alan Budd would head the OBR. He was the founding member of Bank of England’s Monetary Policy Committee formed in 1997 by the then Labour government. “We need to fix the budget to fit the figures, not fix the figures to fit the budget. To do this, I am today establishing a new independent Office for Budget Responsibility. For the first time we will have a truly independent assessment of the state of the nation’s finances. So they can get to work immediately, the OBR will initially operate on a non-statutory basis, just as the Monetary Policy Committee operated before it was enshrined in legislation,” said Osborne. At 38, he is the youngest chancellor of the exchequer (finance minister) in the UK in the last 120 years. Summarising the new government’s plans to get to work on war-footing, Osborne said, in a space of one week since the Cameron-led coalition government was formed, it has already changed the way budgets are made, has created a new independent office to monitor government spending, set in motion the creation of the first independently audited national balance sheet and plans to cut £6 billion worth of wasteful spending without affecting frontline services. The government also announced that it would re-examine all spending approvals made since January 1 by the previous Labour government. “If we don’t get on top of our debt, every family in Britain will be poorer and the dreams of millions of young people will be dashed. Mortgages will be higher, businesses will go bust and debt interest will become one of the largest items of government spending. We urgently need to restore confidence in our economy. And we need the determination to act quickly in the short-term in order to establish credibility for the longer term,” said Osborne. The government’s chief secretary would meet the Cabinet colleagues this week to agree on £6 billion of cuts in this year’s spending. “This is to make an immediate start on tackling the UK’s unprecedented £163 billion deficit, boost credibility and help keep interest rates lower for longer,” HM Treasury said today. As part of cutting government spending, the new Conservative-Lib Dem government last week agreed to cut ministers’ pay by 5 per cent and freeze it over the next five years of the government. Ministers’ pay would also not get any raise to reflect inflation as well. Yesterday, Cameron announced that bonuses for senior civil servants and NHS managers would be cut by two thirds. This intends to save around £15 million. The new government is also expected to raise value added tax to 20 per cent from the present 17.5 per cent. On May 11, the new coalition government formed by Conservatives and Liberal Democrats was put in place, ending a 13-year Labour-led government headed by Gordon Brown.

New ash cloud disrupts UK, Ireland air traffic

S Kalyana Ramanathan / London May 17, 2010 Ash from a volcano in southern Iceland is back over the UK airspace, disrupting flights from nearly a dozen airports in the country. However the main airports in London — Heathrow, Gatwick and London City Airports — are functioning normally as of now. In the mainland, East Midlands, Manchester, Liverpool, Doncaster, Humberside and Carlisle airports have been hit by the Civil Aviation Authority’s no-fly zone. Airports in Northern Ireland, Prestwick near Glasgow, some on Scottish islands and the Isle of Man are also affected, according to initial reports. Between April 15 and 23, air passengers across Europe were affected by the ash plumes from Eyjafjallajokull in southern Iceland. Three weeks after the ash subsided, they are back now. From Saturday evening, aviation authorities in the UK started issuing warning about the ash clouds from Iceland moving towards the UK. The only sliver lining to this problem now is that the southern part of the country’s airspace remains unaffected, thus allowing flights from London airports to function normally. It was estimated that the airline industry in Europe lost $1.7-2 billion during the week-long ban on flight movement declared by European navigation authorities in April. UK’s navigation service provider NATS, in its latest notice, said: “The CAA’s no-fly zone required by the high density volcanic ash cloud will not affect London airports for the period 1300-1900 (local time) today. The no-fly zone for this period has moved east to a line stretching from Prestwick on the west coast to Humberside on the east coast and south to a line just north of Birmingham. Airports which fall within the no-fly zone include all those in Northern Ireland, Ronaldsway, Prestwick, Carlisle, Manchester, Liverpool, Doncaster, Humberside and East Midlands and some Scottish island airports including Campbeltown, Islay and Barra.