VSNL divestment race gets hot
New Delhi: The race to grab a slice of the country’s largest international telephony services provider and, till date, the largest Internet services provider, Videsh Sanchar Nigam Limited (VSNL) is getting hot.

Several leading industrial houses of the country are said to have put in their bids for the 25 per cent stake, which the government is divesting.

Among them are the Tata Group, Reliance, Birla, Essar, Bharti, BPL and the Chennai-based Sterling group. These companies are expected to submit their expressions of interest on Tuesday, the last date for submitting bids.

According to reports, the Tata Group, Reliance and Birla Group are said to be bidding on their own steam, while the Bharti Group is joining forces with Singapore Telecom. BPL is said to be form a joint venture with the Sterling group for this purpose. However, Essar’s strategy is not yet clear though sources confirmed its participation in the bidding process.

Reliance, Tata, Birla and Bharti have aspirations to become domestic telecom giants and are already leading cellular and basic services players in the country. They have also been granted letters of intent for operating basic telecom services recently.

It is understood that not many foreign operators are interested in acquiring the divested stake. One of the reasons for this was that the FDI norms did not permit more than 49 per cent foreign equity in the company.

With the current foreign holding in VSNL already 31 per cent, prospective strategic partners would have to form joint venture with domestic companies. That would make the entry of foreign carriers more difficult.

According to leading experts the lukewarm response from foreign bidders is on account of several factors. First, is the presence of more lucrative alternate destinations like China. Second, there are concerns surrounding the politically sensitive issue of disinvestment in India too, especially in the backdrop of the fate of the much-touted Balco disinvestment. The third major dampner is the future of long-distance telephony itself, with newer technologies like Voice over Internet Protocol emerging in recent times.
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RBI instructs banks to clean up loss-making units
New Delhi: As a reaction to the banking crisis arising from their exposure to stock markets, the Reserve Bank of India (RBI) has asked all state-owned banks to hive off or sell their loss making subsidiaries.

This means that underperforming companies like PNB Mutual of the Punjab National Bank, Indbank Merchant Banking Services and IndMutual of Indian Bank would be immediately up for grabs.

This recent notification is said to have been based on the ape bank’s thinking that it was better for the PSU banks to concentrate on their core operations rather than expanding laterally.

Following this directive, the PNB has already initiated preliminary steps to hive off PNB Mutual, while Indian Bank too is looking for buyers for its subsidiary operations.
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Domestic pharma companies take to contract production
Mumbai: Ahmedabad-based Dishman Pharmaceuticals struck pay dirt when it secured a several million dollar order from the $8-billion multinational Solvay group. The contract is to manufacture a a patented blood-pressure drug for Solvay and Dishman becomes the second manufacturer for the multinational giant.

Like Dishman, more and more Indian companies are profiting from the need of most MNCs to cut costs by farming out production to developing countries.

According to Mr. Venkat Jasti of Suven Pharma, more and more foreign players are outsourcing their generic (off-patent) products to contract manufacturers to cut costs.

MNCs can get bulk drugs and finished dosage forms 20-25 per cent cheaper if they source it from India.

Says Mr. A K Singal, who heads Pharmaplan India, a firm that designs and engineers manufacturing units for companies, the cost could be three times cheaper vis-a-vis developed countries provided sophisticated machinery is not imported.

According to Mr. David Fellows, president Asia Pacific of Allergan, India clearly has the manufacturing capabilities and infrastructure to support pharmaceutical exports. Further, since unit volume of the local Indian market is so substantial it gives economies of scale that we multinationals do not see in other markets.
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