India Inc facesup to slowdownWHILE THE DEVELOPED WORLD STRUGGLES, INDIA COULD GRAB A LARGER SHARE OF GLOBAL GROWTH BUT IT IS EASIER SAID THAN DONE. POLICY GRIDLOCK AND A SPREE OF CORRUPTION SCANDALS HAVE SLOWED REFORMS AND DELAYED BIG TICKET PROJECTS.

INDIA INC HAS lost its swagger. Slowing growth, stubbornly high inflation, rising interest rates, political gridlock, gloom in the West and a sliding rupee

have conspired to dampen investor and corporate sentiment in Asia’s third-largest economy. Share prices are down 20 percent for the year, bad loans are on the rise and

companies are delaying big investments that would add much-needed industrial and infrastructure capacity. In a series of exclusive interviews, leaders of some of India’s largest companies discussed the outlook for getting the economy back on track and restoring business confidence at the sixth Reuters

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REUTERS INDIA INVESTMENT SUMMIT | NOVEMBER 21-23, 2011

An elephant decorated with ornaments closes its eye during the start of an annual temple festival at Tripunithura in the southern Indian city of Kochi November 23, 2011.India Investment Summit.

india invESTmEnT SUmmiT | novEmbER 21-23, 2011 2

by Tony mUnRoE MUMBAI, NOV 21

AS THE DEVELOPED world struggles, home-grown challenges are preventing India from grabbing a

larger share of global growth, executives told the Reuters India Investment Summit.

Economists in recent days have downgraded their outlook for Asia’s third-largest economy, with some making deep cuts in their growth forecasts to below 7 percent for the fiscal year that will start in April.

A slowdown in capital spending growth is keeping a lid on the potential of the economy.

“Where others are struggling to get any demand, we could be better placed,” Ajay Piramal, the billionaire chairman of the diversified Piramal Group, which has holdings in pharmaceuticals, glass and real estate, told the Summit.

“India actually has internal demand and therefore this is the time in the sun, if I may say, for India, and therefore we must not lose the opportunity,” he said.

“That is where I feel there is a sense of frustration, that if we did more we can establish ourselves in the world economy in a stronger position,” he said.

India has been beset by policy gridlock

over the past year as a spree of corruption scandals has put the government on the back foot, slowing reforms. Big-ticket projects have been delayed awaiting environmental clearances or access to coal.

Rising interest rates, high inflation and worsening global conditions are also dragging down near-term business sentiment in India.

Top Indian engineering firm Larsen & Toubro is stepping up its business overseas as a hedge against uncertainty in India, where half the expected $100 billion potential opportunity for his company this year has been deferred, Chief Financial Officer R. Shankar Raman told the Summit.

“The world is virtually on its knees. This is an opportunity for you to announce yourself, that what you did in the IT space was not an aberration, that you have the engineering skills, manufacturing skills, and an opportunity to...strengthen the country for a long time to come,” he said.

“You cannot mess up with this opportunity...because there will be a third country that will come up and do all this, and better...It is disheartening at the moment,” he said.

MACqUARIE ExPECTS GROSS fixed capital formation growth in India to slow to 4.2 percent in the current fiscal year from 8.6

percent last year, far below the double-digits clocked in the years before the global

financial crisis in 2008. Kotak Mahindra Bank on Monday cut its

economic growth estimate for the fiscal year ending in March to 7.1 percent from 7.3 percent, and slashed its outlook for the following year to 6.9 percent from 7.9 percent.

India’s economy grew 8.5 percent last year. The central bank’s 13 interest rate increases

since March 2010 have eroded demand in credit-sensitive sectors as well as investment, but have not managed to curb inflation that remains near double-digits. Monetary policy can do little to address structural bottlenecks in the economy.

Morgan Stanley said in a note on Monday that while the government’s recent approval of three major infrastructure projects is a step in the right direction, it needs to spur private investment.

“In this cycle, reviving growth will be possible only with a push to capex,” Morgan Stanley wrote.

“A further boost to domestic consumption through monetary and fiscal easing in the face of capacity constraints and already high inflation would only intensify the inflation problem. Hence, the government needs to push private investment to revive growth this time,” it said.

MVS Seshagiri Rao, chief financial officer of JSW Steel, India’s No. 3 steelmaker, said that even though the company will cut capital spending this fiscal year by as much as half due to an interim mining ban in a southern state, policy initiatives are headed in the right direction.

He cited new manufacturing, mining and land acquisition policies as positive moves, and noted that the company has no plans to scale back on any of its projects.

“As long as demand is strong, consumption is strong in India, investment cycle slowdown only will reduce our GDP growth from 9 percent to maybe six-and-a-half or seven-and-a-half, that range, but it is not going to structurally change the overall situation,” he told the Summit.

(Editing by Aradhana Aravindan)

Home-grown woes weigh on India amid global slowdown

REUTERS inSidER

The challenges of India’s industialization: :http://link.reuters.com/kut25s

INDEx

Infosys ..................................................... 3Maruti ......................................................4ICICI .........................................................5India power .............................................6India IT Cos look to Europe ..................... 7Cognizant ................................................8Citi ...........................................................9Marriage of Convenience ...................... 10L&T ......................................................... 11Piramal ...................................................12Biocon ....................................................13

india invESTmEnT SUmmiT | novEmbER 21-23, 2011 3

by KRiShna n daS and himanK ShaRma BANGALORE, NOV 23

INFOSYS LTD ExPECTS its third-quarter revenue growth closer to the lower end of its forecast as customers delay decisions

on large contracts, its chief executive said.The Bangalore-based company, a pioneer

in India’s $76 billion IT sector, has grown rapidly by employing thousands of engineers in low-cost Indian centres but is seeing its pace of growth slowing amid a sputtering U.S. economy and the European debt crisis.

“Economic uncertainties are slowing down decisions,” S.D. Shibulal, also a co-founder of Infosys, said at the Reuters India Investment Summit in Bangalore.

“We’re clearly seeing it. The slowness has increased in the last month or month and a half,” he said.

Infosys had forecast quarter-on-quarter revenue growth of 3.2-4.5 percent for the October-December period.

“We’re also seeing higher scrutiny of larger contracts ... larger contracts are difficult to come by,” Shibulal said, adding that consumer and customer confidence was very low.

India’s No. 2 software services exporter is

facing severe competition from rivals Tata Consultancy Services, Cognizant Technology IBM and Accenture in clinching large deals.

Earlier this month, India’s top software services exporter TCS unveiled its second-largest order of $2.2 billion from UK-based pension provider, Friends Life, a unit of insurer Resolution .

INFOSYS AND TCS have long maintained operating margins in the high twenties. But stiff competition from global players such as IBM and Accenture has put margins under pressure.

“Our aspiration is to continue to have higher margins, and I don’t see any reason to compromise on that,” Shibulal said, adding that pricing was stable and he was not seeing project cancellations.

Margins at Infosys, which was incorporated in 1981 as Infosys Consultants Pvt Ltd, could gain from a steep decline in the Indian rupee, which makes exports more competitive.

“One percent depreciation in rupee (leads to) a net inflow of some 30 basis points in margins,” Shibulal said.

The Indian rupee fell to an all-time low on Tuesday, as oil refiners and other companies scrambled to buy dollars, with the currency

looking increasingly vulnerable to a swelling current account deficit and fears over the global economy and euro zone.

“Margin wise, rupee is the saviour. If we look back at 2008-09, when the whole top-line slid, all these companies’ margins were good,” Standard Chartered analyst Pankaj Kapoor earlier told Reuters.

SHIBULAL REITERATED that Infosys, which expects $7.0-$7.2 billion in revenue this fiscal year , would be willing to spend up to 10 percent of that on acquisitions.

“If you look over the last many years, we have talked about acquisition in consulting area, predominantly. Today, we have expanded that to consider products and platforms,” he said.

The company also backed its full-year dollar revenue growth view of 17.1-19.1 percent.

Infosys’ shares, which have lost about a fifth of their value this year, fell as much as 4 percent on Wednesday. The broader Mumbai market was down 3 percent.

(Reporting by Rajarshi Basu, Himank Sharma, Krishna N Das and Aftab Ahmed

in Bangalore; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila)

Infosys CEO sees Q3 sales close to low end of outlook

Workers construct the new building of Indian infotech giant Infosys in Bangalore May 9, 2008.

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by anURag KoToKy and dEvidUTTa TRipaThy NEW DELHI, NOV 21

INDIA’S MARUTI SUzUKI may see declining sales volume in the current fiscal year as the country’s dominant carmaker suffered

heavy production losses due to a labour strike, while demand for cars remains weak in Asia’s third-largest economy.

“We’ll be lucky if we break even with last year,” Maruti Suzuki Chairman R.C. Bhargava said in an interview for the Reuters India Investment Summit.

Maruti Suzuki, which specialises in small models, sold 1.27 million cars in the fiscal year that ended in March, an increase of 25 percent.

“So, it might even be slightly less than last year. There are still four months to go. Let’s see how it goes but I doubt if we’ll have any growth this year,” he said.

Bhargava had said in August he expected Maruti, 54.2 percent-owned by Japan’s Suzuki Motor Corp , to post single-digit sales growth this fiscal year.

He said on Monday he expects the Indian automobile industry to grow 2-3 percent this fiscal year, compared with the record 30 percent growth it had clocked a year ago.

Slowing economic growth, rising interest rates and fuel prices as well as falling stock markets have dampened sentiment in the Indian auto market.

“While first-time car buyers...have continued to buy cars, the people who used to replace cars or buy a second or a third car in their family, those people have deferred buying decisions this year,” Bhargava said.

He remained optimistic for a demand revival but said it was difficult to give a time frame.

Maruti shares, valued at $5.2 billion, are down by over a third this year, underperforming the sector index and the broader market that have lost about 19 percent and 22 percent, respectively.

Maruti, which until last year sold nearly every other car in India, faces tough competition from global car makers such as Hyundai Motor Co, Ford Motor Co , General Motors Co and Honda Motor Co and has seen its market share slide to just over 40 percent.

Bhargava said it was “a little bit unfair” to calculate this year’s market share as Maruti has been hit by one-off factors such as labour unrest and inadequate capacity to meet a surge in demand for cars that run on less-expensive diesel fuel.

“Realistically, we would expect to keep around 42-43 percent of the market,” Bhargava, a former official with the elite Indian Administrative Service, said at his plush bungalow in the outskirts of New Delhi.

Maruti was hit by a labour strike at a key plant in the northern state of Haryana, where workers wanted to leave their existing union to form one of their own.

The unrest led to a production loss of about 83,000 cars, or almost half a billion dollars in output, while buyers were made to wait longer for the cars they ordered.

BHARGAVA SAID RECENT rises in petrol prices have boosted demand for diesel cars, but Maruti did not have capacity to meet the demand.

Maruti last week raised diesel car prices by up to 10,000 rupees ($192), taking advantage of the demand for the segment as input costs continue to go up.

“We have a waiting list of diesel cars and we have surplus capacity of petrol cars,” he said.

Maruti is in advanced talks with Italian automaker Fiat SpA to source diesel engines to boost its production and expects to receive supplies starting in January, he said.

Europe has traditionally been the biggest export market for Maruti, but the company is now trying to build the export market beyond the debt crisis-racked continent, focusing on Southeast Asia, Africa and Latin America, Bhargava said.

A sharp fall in rupee against the dollar and the Japanese yen is a “very serious” concern for Maruti, which pays for imports of components in these currencies, Bhargava said.

Maruti, which has installed capacity to make about 1.5 million cars a year, is expanding one of its existing plants to reach 1.75 million annual capacity.

The company is in the process of buying land to build a new factory in the western Gujarat state, but will start work at the plant depending on the demand scenario and when it feels it needs to expand capacity beyond 1.75 million, Bhargava said.

“Today, I can’t say whether that will be in 2015 or 2016 or 2014. It is difficult to say.”

(Reporting by Anurag Kotoky and Devidutta Tripathy; Editing by

Aradhana Aravindan and Tony Munroe)

India’s Maruti may see volume drop this fiscal year

Chairman of Maruti Suzuki India R.C. Bhargava speaks during an interview for the Reuters India Investment Summit at his residence in Noida on the outskirts of New Delhi November 21, 2011.

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by SwaTi pandEy and SUmEET ChaTTERjEE MUMBAI, NOV 23

INDIA’S BIGGEST private lender ICICI Bank is open to buying loan portfolios of European banks, its chief executive said,

as banks in the region look to deleverage and offload loans to shore up capital base.

“The opportunity to pick up some good assets at good pricing clearly exists. So, that’s what we are looking at all the time and exercising it whenever we see the right opportunity,” Chanda Kochhar told the Reuters India Investment Summit.

“We have picked up some which are India-related assets, but I would say not very large number, because given the fact that on the other hand the ability to raise funds currently has also become more expensive,” she said.

European banks are struggling to raise their capital cushions to become more resilient against future shocks, which they can do by increasing equity they hold or by shrinking their asset base.

The European Banking Authority has said banks need more than 100 billion euros of new capital, but the International Monetary Fund warned in September EU banks faced possible losses of 300 billion euros as a result of sovereign and interbank lending risks.

Kochhar, who was ranked fifth in Fortune’s 50 most powerful women in business, ruled out the acquisition of any European bank.

ICICI SEES GOOD credit momentum in India from car loans, mortgages and working capital, Kochhar said.

However, credit demand for new corporate projects was slow, she said, and warned of slowing overall loan growth in the fiscal year 2014 if new projects do not start over the next six to 12 months.

Indian companies have been delaying investment plans as rising interest rates make projects expensive. Indian policy interest rates are at their highest since the global financial crisis in 2008.

Earlier this month, ratings agency Moody’s Investor Service downgraded its outlook for India’s banking system to “negative” from “stable,” as it warned of slowing growth at home and overseas hitting asset quality,

capitalisation and profitability. Kochhar expects asset

quality to remain mostly stable for ICICI, although debt restructuring may increase.

“Some projects, some large corporate may need some handholding but I don’t see sudden NPA (non-performing assets) shocks coming in the portfolio. I think broadly the credit quality is quite satisfactory,” she said.

India’s No.2 lender last month beat street estimates with a 21 percent rise in quarterly net profit, led by higher income and lower provisions for bad loans.

Bad loans accounted for 0.93 percent of ICICI’s loan book, down from 1.62 percent a year earlier, which the bank attributed to loan recoveries in its once-battered retail portfolio.

The lender expects net interest margins -- a key gauge of profitability -- to rise by 20 basis points in the financial year starting April, she added.

ICICI IS LOOKING to push retail lending after lying low for about two years, Kochhar said, as it has cleared its unsecured loan portfolio.

The lender, which had aggressively sold unsecured credit cards and personal loans in the heady days before the 2008 crisis, saw its non-performing loans rise more than 5 percent in 2010 as a large number of customers defaulted.

ICICI was also India’s most prolific card issuer during the boom but halved its cards portfolio to about 48 billion rupees ($1.08 billion) at end-March 2011 from 2008.

“From here on you will actually see a net increase in retail business taking place because we are done with the reduction that we needed to do. Our unsecured lending will be very, very selective compared to what it

has been in the past,” she said. The bank has not cut off lending to any

particular sector, but is selective about real estate and power projects.

Shares of ICICI Bank, which the market values at nearly $16.5 billion, closed down 2.5 percent at 726.7 rupees on Wednesday.

They are down more than a third in 2011 compared with a nearly 28 percent fall in the bank index. The benchmark BSE index fell over 23 percent in the period.

(Editing by Aradhana Aravindan)

ICICI Bank eyes Indian loans at European banks-CEO

India’s ICICI Bank’s Chief Executive Officer Chanda Kochhar speaks during a news conference in Mumbai December 19, 2008.

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by pRaShanT mEhRa and hEnRy Foy MUMBAI, NOV 23

INVESTMENTS INTO India’s power sector are slowing despite a chronic electricity shortage that threatens GDP growth,

executives told the Reuters India Investment Summit, due to coal shortages, land hassles and an inability by distribution companies to raise tariffs.

Asia’s third-largest economy, where blackouts are common, faces a peak power shortage of 13 percent as rising demand from industry, homes and shopping malls outstrips capacity growth.

The energy-hungry nation needs to add over 75,000 megawatts in the five years to March 2017 to support its target of 9 percent GDP growth, according to a government report. That will cost roughly 11 trillion rupees ($210 billion), with half the investment to come from the private sector. But investor appetite is weak.

“We are very worried about the power sector, for the simple reason that it is the catalyst for growth,” R Shankar Raman, chief financial officer at engineering conglomerate Larsen & Toubro, said at the Summit.

“Unless we fix that, much of the other investments are not going to happen easily,” he said. Larsen & Toubro last month slashed its overall order growth guidance for the current fiscal year by two-thirds to 5 percent, blaming slowing investments.

Firms struggle to get permission for land purchases and coal supplies from state and central authorities, while state-run distributors have ramped up debts due to their inability to raise low tariffs -- part of populist measures to provide cheap power to the poor.

India’s peak power deficit in October stood at 13.1 percent, according to data from the Central Electricity Authority, up from 9.4 percent a year previously.

“The situation in the power sector has definitely worsened. At this point, fresh investments on a large scale are not happening,” said Salil Garg, director at Fitch Ratings India.

“In the short term, there are several issues hindering investments, and it is also clear that financial health of state utilities, which are the main buyers, will not improve soon.”

Planned projects have been put on hold and plants already under construction are also facing delays, Garg said.

A slew of corruption scandals has put the government on the back foot and slowed reforms. That has hurt business sentiment, already suffering due to high interest rates, soaring inflation and global economic woes that have muted demand.

India is likely to grow at around 7.6 percent in the financial year to March 2012 compared with 8.5 percent a year earlier, according to a Reuters poll.

“If there is a power shortage of 15 percent, it obviously represents lost economic activity for industry,” said Kameswara Rao, executive director for government and infrastructure at PriceWaterhouseCoopers India.

“Certainly there is a serious implication in terms of GDP impact,” he said.

COAL ACCOUNTS FOR 55 percent of India’s power generation capacity of 182,344 MW. While India holds 10 percent of the world’s coal reserves, power firms often struggle to access local supplies due to environmental and land acquisition delays, forcing expensive imports.

Most new power projects -- dependent on imported coal -- have seen their costs jump in the past year due to the rise in global coal prices and a weakening of the rupee.

“If power companies have to sell power at lower rates when the cost of generation is going up substantially, it becomes difficult,” M.V.S. Seshagiri Rao, chief financial officer of

the steel and power-focused JSW Group, told the Summit.

“In the current scenario, power firms are at a disadvantage because of mismatch between cost and tariffs. That requires correction,” he said, adding the group would only make further investments in the sector if it was assured of coal supplies.

Shares in India’s biggest power firms have been battered this year, with the sector index shedding 37 percent since January, against a 22 percent fall in the benchmark index.

State-run power gear provider Bharat Heavy Electricals Ltd has seen its shares lose 44 percent of their value.

Ratings agency CRISIL last month warned of stress in the power sector due to rising losses and high debt among state-run distribution firms. CRISIL estimated power distribution companies would need to raise tariffs by 47 percent just to break even in 2011/12.

“Unless we improve the health of the state electricity boards, the entire economic progress could come to a halt,” Akhil Gupta, chairman of the Indian unit of U.S. private equity firm Blackstone Group, which has almost $1 billion of investments in Indian power-related firms, told the Summit.

“Some states have not raised prices for 25 years. Imagine anything else in the world that has not changed in price for 25 years,” he said.

(Editing by Tony Munroe and Aradhana Aravindan)

India power investment slows, chronic deficit worsens

REUTERS inSidER

Exclusive interview with Seshagiri Rao of JSW Steel:http://link.reuters.com/muq25s

india invESTmEnT SUmmiT | novEmbER 21-23, 2011 7

by SUpanTha mUKhERjEE andRajaRShi baSU BANGALORE, NOV 23

INDIAN IT SERVICES exporters are on track to increase Europe’s share in their revenue and see only a short-term impact of the

paralyzing debt crisis, top executives said.The debt crisis is sweeping closer to

the heart of euro zone, with fears that the contagion may now spread from Greece and Italy to Spain and France.

India’s showpiece IT sector feeds off increased outsourcing by companies trying to cut costs. As the crisis in Europe -- the sector’s second-largest market -- deepens, clients will likely outsource more, executives said.

“We are seeing clients -- who in the past have been hesitant to outsource ongoing application management work -- are now looking at outsourcing those type of

services,” Cognizant Technology Solutions Chief Financial Officer Gordon Coburn said.

A slowing U.S. market, which accounts for more than two-thirds of the Indian IT industry’s exports, has forced companies such as Infosys, TCS and Cognizant to expand their business in Europe and Asia.

“The short-term challenges will impact business, but in the long term, we see opportunities even in Europe,” S.D. Shibulal, Chief Executive Officer of Infosys, said.

Infosys plans to double its revenue share from Europe to 40 percent by the end of its 2014 financial year, while Cognizant expects “significant revenue” coming from the region in the next 4-5 years.

Infosys and Cognizant are also looking to scale up in continental Europe through acquisitions.

“We are now making heavy investments in building up our capabilities in France and Germany,” Coburn said.

It’s not just the IT sector that is expecting gains from the crisis. Kiran Mazumdar-Shaw, head of India’s largest listed biotechnology company Biocon Ltd , said diminishing returns on R&D spending is forcing European and U.S. companies to outsource their research work to India and China.

BOTH THE companies are, however, cautious about the short-term impact from the Europe crisis.

“Europe in 2012 is tough to determine,” Cognizant’s Coburn said.

Analysts echoed the sentiment. “Nobody is quite sure what the impact of

the sovereign debt crisis will be on demand for capital goods,” analyst Mark Wilson at Collins Stewart Europe said.

(Additional reporting by Himank Sharma

and Krishna N Das in Bangalore; Editing by Sriraj Kalluvila, Saumyadeb Chakrabarty)

Indian IT cos’ look at Europe, shrug off debt crisis

A labourer sleeps in a roll of underground cables at a construction site in Jammu September 20, 2010.

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by RaChana KhanzodE andSiddhaRTh CavalE NOV 22

AS THE EURO zONE crisis deepens and businesses outsource to cut costs amid the uncertainty, Cognizant

Technology Solutions expects revenue from Europe to grow significantly, a top executive at the software services company said.

“We see Europe as a very significant opportunity,” Chief Financial Officer Gordon Coburn told the Reuters India Investment Summit.

“Today, Europe is 18 percent of revenue ... when I look at 4-5 years (ahead), I expect it to be at a significantly higher percentage of revenue,” he said.

“The economic difficulty that has occurred there will actually serve to expand the addressable market for services in Europe.”

India’s No.2 software services exporter and Cognizant’s larger rival, Infosys , also said recently it aims to double its revenue share from Europe to 40 percent of total sales by the end of the 2014 financial year.

Teaneck, New Jersey-based Cognizant is also looking at small tuck-in acquisitions next year to strengthen its position in continental Europe and Asia, the CFO said by telephone.

“We continue to focus on tuck-under acquisitions, which we define as $200 million or less in revenue,” Coburn said.

Cognizant has completed two acquisitions this year including CoreLogic Global Services, the India-based captive operations of CoreLogic , and a privately held company.

Founded in 1994, Cognizant has about 75 percent of its 130,000 employees based in India.

COBURN SEES OVERALL IT budgets for 2012 to be flat to slightly up and expects pricing to be up by a little, though not by as much as in 2011.

“The pricing discipline has remained ... and it is headed in a positive direction,” Coburn said.

The company has traditionally worked with lower margins than rivals Infosys and Tata Consultancy to gain market share, and has grown 42 percent in the last year even as

other IT services companies grapple with the slowing economy.

But Cognizant, which has a market value of $19.55 billion, still boasts an impressive track record of beating market expectations for eight-straight quarters.

Coburn said healthcare, which contributes about 26 percent of revenue, and smaller verticals like retail and manufacturing will grow at a faster rate than financial services.

With about half its revenue coming from the financial services segment, the company

has been trying to reduce its dependence on any one segment.

Cognizant’s shares, which have gained 23 percent since its year-low in August, were trading mostly unchanged at $65.06 on Nasdaq on Tuesday.

(Reporting by Supantha Mukherjee, Siddharth Cavale and Rachana Khanzode

in Bangalore; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila,

Anthony Kurian)

Cognizant sees revenue growth amid Europe crisis

A man pushes an auto-rickshaw loaded with plastic balls to sell at a wholesale market in New Delhi November 10, 2011.

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by SUmEET ChaTTERjEE and SwaTi pandEy MUMBAI, NOV 22

CITIGROUP ExPECTS to boost its loans and deposits growth in India by about a fifth in each of the next two years, its

India head said, as the U.S. bank enhances its focus on emerging markets.

Citigroup global Chief Executive Vikram Pandit is trying to turn the bank around after the financial crisis by focusing on emerging markets, where economies are still growing relatively quickly.

“India is amongst the top five or six emerging markets that is expected to contribute to this growth going forward,” Pramit Jhaveri, a 24-year Citi veteran who became the head of its India operations last year, told the Reuters India Investment Summit.

“I believe our franchise in India continues to be an area of great focus as we look to execute on that strategy,” he said, referring to Pandit’s growth plans.

The bank, one of the top three foreign commercial banks in India along with Standard Chartered and HSBC ,operates across businesses including corporate, consumer and investment banking, and wealth management in the country.

Citi, the No. 3 U.S. bank by assets, is “comfortable” with its asset quality in the country and has not slowed down lending activity, Jhaveri said, amid concerns a series of interest rate hikes will lead to a surge in corporate and consumer loan defaults.

India’s central bank has been among the most aggressive globally, increasing rates 13 times since early 2010 to tame inflation.

Earlier this month, Moody’s downgraded its outlook for the Indian banking system to “negative” from “stable,” and warned of slowing growth at home and overseas hitting asset quality, capitalisation and profitability.

“As far as our business is concerned we are not, in any way, seeing signs of stress that one would associate with sleepless nights,” said Jhaveri, who was previously head of global banking and the vice chairman of Asia investment banking at Citigroup.

“Even though we have not slowed down and the business is continuing as usual, our

credit losses on the credit cards business or any of the consumer business are very much under levels that we would like them to be.”

CITI VIES WITH Morgan Stanley , Goldman Sachs and host of local firms in India’s highly competitive investment banking market that has plunged this year due to slowing corporate growth, sluggish markets and global uncertainty.

India’s M&A deal volume has fallen to $35 billion in this year through October from $57 billion in the year ago period, while share sale volume has more than halved to $8.4 billion in the same period, according to Thomson

Reuters data. Citi is No. 2 in India’s share sale league

table this year after Bank of America Merrill Lynch, while the bank stands at seventh position in the completed M&A league table, the data showed.

Jhaveri said the sharp slowdown in investment banking activity could result in consolidation and downsizing in the crowded sector. The fierce competition in the sector has also resulted in very low fee for banks’ advisory services.

“The implications are obvious when you have over capacity in a slowdown,” he said. “If you have operating models that (are) very standalone or very uni-dimensional they will see relatively more turmoil.”

(Editing by Aradhana Aravindan)

Citigroup sees 20 percent growth in India for next 2 years

Citigroup India head Pramit Jhaveri speaks during the Reuters India Investment Summit in Mumbai November 22, 2011.

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SuMMITtwItterReuters Summit coverage on Twitter click here:http://link.reuters.com/dav69r

india invESTmEnT SUmmiT | novEmbER 21-23, 2011 10

by indUlal pm MUMBAI, NOV 23

LISTED INDIAN companies and private-equity investors are being pushed into each other’s arms by the plunge in

equity markets and the rising cost of credit. The marriage of convenience lets private

equity funds deploy some of their $20 billion in uninvested capital in liquid holdings at increasingly attractive valuations in a country where buyouts are rare and companies go public early.

More such deals are on the way, with at least $750 million being raised by funds that target listed Indian equities.

“Unfortunately, Indian companies tend to go public much faster, much earlier in the stage of growth. So yes, India is more conducive in terms of public deals,” Akhil Gupta, India chairman and managing director for U.S. buyout giant Blackstone Group told the Reuters India Investment Summit.

That means many companies in India looking for late-stage growth capital are already listed.

Washington-based Carlyle Group recently picked up 9 percent of Indian financial services firm India Infoline , a stake with a market value of about $38 million at the time.

“If you look at the size of the investments we look to make, a lot of the companies we evaluate would end up being in the listed space,” said Devinjit Singh, a Mumbai-based managing director at Carlyle.

Private equity investments in listed firms more than doubled in the first nine months of 2011 to $1.34 billion in 44 deals compared to $562 million in 33 deals a year earlier, according to KPMG, outpacing the 31 percent growth in overall India private equity deals to $7.89 billion in the same period.

Earlier this year, Apollo Global Management LLC invested $500 million in Welspun Group, of which $290 million went into listed Welspun Corp..

In May, International Finance Corp and Kohlberg Kravis Roberts & Co invested $98.25 million in non-banking finance company, Magma Fincorp . In July, the private equity arm of Standard Chartered bought 12 percent in Redington India for about $98 million.

PRIVATE EqUITY investors say listed companies are increasingly attractive relative to unlisted firms, whose controlling shareholders tend to demand valuations that do not reflect the plunge in public markets.

“Why would an investor accept the additional penalty of having no liquidity without some benefit in valuation,” said Parag Saxena, founding general partner and chief executive of New Silk Route, an Asia-focused private equity fund.

Indian shares are down 23 percent in 2011, making them the worst performers in Asia and shutting down the public markets as an option for raising equity capital. Interest rates have surged, meanwhile, after 13 policy rate hikes by the central bank since early 2010.

Public equity investments for private equity firms also allow for easy exits, an attraction when IPO markets have all-but dried up. That’s a key motivator in a country where 85 percent of private equity exits are made through public offers.

For listed companies, bringing in private equity investors provides stable institutional funding, as well as expertise. Carlyle, for example, will be represented on IIFL’s board.

MORE SUCH deals are expected.

In August, WestBridge Capital, set up by four founding partners at the India unit of Sequoia Capital, raised $500 million to invest in listed and later-stage private companies.

Avendus PE Investment Advisors, a unit

of Indian financial services firm Avendus Capital, is raising up to $200 million to invest in mid-sized listed firms.

“The fall in equity markets has provided cheaper valuations. You would have probably paid a higher valuation for the same companies a year back,” said Manoj Thakur, chief executive at Avendus Private Equity.

Avendus has invested in mid-cap companies such as V-Guard, TTK Prestige and Camline through creeping acquisitions in the open market.

Most Indian companies are small and operate below the radar of institutional coverage, which means private equity firms need to do their homework to find attractive deals and justify the high fees their charge their investors.

Of more than 7,000 listed Indian firms, fewer than 1,000 have access to institutional capital, which makes them hungry for private equity money, said Charles Daugherty, managing partner at Stanwich Advisors, which connects private equity funds and limited partners.

“The opportunity is real and potentially large,” he had said in October. “However, the only way PE investment in PIPEs (private investment in public equity) will be supported by institutional investors is if the fund can deliver an increase in sustainable operating value.”

(Editing by Tony Munroe)

India private equity, listed firms find mutual attraction

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Interview - Blackstone India head Akhil Gupta :http://link.reuters.com/juq25s

india invESTmEnT SUmmiT | novEmbER 21-23, 2011 11

by hEnRy Foy and pRaShanT mEhRa MUMBAI, NOV 21

LARSEN AND TOUBRO, India’s biggest engineering conglomerate, is targeting overseas revenue growth as part of a

strategy to beat a slowdown in Asia’s third-largest economy, the firm’s chief financial officer said.

Ships-to-software firm Larsen last month slashed its order growth guidance for the financial year to March, as it warned of project deferrals and sluggish investor appetite in India thanks to high interest rates and a gloomy economic outlook.

“It’s essentially an India de-risking strategy,” R. Shankar Raman told the Reuters India Investment Summit in Mumbai, saying the company was targeting 15-20 percent of revenue to come from overseas markets, compared with 10-12 percent last year.

“We will try to expand in the international market...Today our international business is largely in the Middle East, but hopefully in passing years the Far East will start giving more orders.”

India has pledged to spend $1 trillion on upgrading its creaking power plants, railways and ports in the five years to 2017 to deal with a key bottleneck to continued growth. Private cash has been penciled in for half of that.

But investments have slowed in recent quarters, as stubbornly high inflation, 13 interest rate hikes since early 2010 and rising commodity prices bite. Companies also point fingers at a policy paralysis in New Delhi.

Larsen, with a market capitalization of $15 billion, has aggressively targeted overseas projects in recent months and has announced since August $1.1 billion in new foreign contracts, mainly for hydrocarbon firms in the Gulf region.

The firm secured a $250 million contract to build a pipeline for Thailand’s top oil and gas explorer PPT Exploration and Production Plc in August.

“The Far East, some areas of Africa and South America have some interest for our products. We have just opened up a few offices,” Shankar Raman said.

INDIA IS LIKELY TO grow at around 7.6 percent in the 12 months to March 2012

compared with 8.5 percent a year earlier, according to a Reuters poll. Industrial output has slowed, consumer confidence is waning and investments are being put on hold.

“The (domestic) opportunity spectrum around this time last year was coming around to $100 billion,” said Shankar Raman. “We find that half of that $100 billion has got deferred.”

Larsen, which gets more than 80 percent of its revenue from the domestic market, cut its order growth guidance for the current fiscal year by a third to 5 percent last month, blaming slowing investments and rising competition.

“We’ve not seen any cancellations in our order book. There are deferments. People are sitting and waiting and watching,” said Shankar Raman, adding that he expected deferred projects to come back on-line during the 12 months to March 2013.

Larsen shares erased early gains of 0.7 percent and fell 1.7 percent on Monday after the comments.The 73-year-old firm, which bears the name of its two Danish founders, is looking at an initial public offering (IPO) in its Infrastructure Development Projects Ltd (IDPL) unit, after a successful listing of its finance arm in August.

“IDPL is another entity where we need to find a permanent solution for capital growth plans,” said Shankar Raman.

“In the ultimate analysis, I would visualize

this company to be another listed entity in the group, seeking capital from the market for its own growth plans,” he said, adding any potential listing was likely to happen within three years.

Larsen will not reduce its prices in a quest to secure market share, Shankar Raman said, and would instead focus on reducing costs and increasing productivity across the firm as it works through an order book worth around $28 billion.

The company is not desperate “because we think we have the balance sheet to withstand tough times,” he said. “I am not worried about the next eight to 10 quarters. I don’t have large debt to service so ultimately what is the pressure on me? I have the window of time.”

The firm still expects to see order book growth of 12-15 percent over the next five years, Shankar Raman added.

Larsen has said it expects revenue to grow 25 percent in the year to March 2012, from 439 billion rupees ($8.5 billion) a year previously.

Shares in the firm have fallen almost 40 percent this year, double that of the drop in the benchmark index , wiping more than $8 billion off the firm’s market value.

($1 = 51.7 Indian rupees)

(Editing by Ranjit Gangadharan and Matt Driskill)

L&T looking overseas to beat local slowdown

R. Shankar Raman, chief financial officer of Larsen and Toubro, speaks during the Reuters India Investment 2011 Summit in Mumbai November 21, 2011.

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india invESTmEnT SUmmiT | novEmbER 21-23, 2011 12

by KaUSTUbh KUlKaRni and SUmEET ChaTTERjEE MUMBAI, NOV 21

DIVERSIFIED INDIAN conglomerate Piramal Group plans to lend up to $193 million to real estate projects in

the current fiscal year to March as it focuses on building its newly launched financial arm, its chairman said.

The group also aims to set up a team by the end of March to look for opportunities to fund large projects such as power and road construction, sectors in which the government is hoping to rope in private-sector participation in a big way.

“We have started our investment first in the real estate sector,” Ajay Piramal told the Reuters India Investment Summit on Monday. “Today, there are unique opportunities available in real estate.”

He said the financial arm, which was launched this year, aims to lend between 7.5 billion rupees ($145 million) and 10 billion rupees by next March.

Ranked 39th with a net worth of $1.4 billion

in the India rich-list by Forbes, the 56-year-old heads Piramal Healthcare, Piramal Glass, drug discovery unit Piramal Life Sciences and property developer Piramal Realty.

He made global news last year for selling his India drugs business to U.S.-based Abbott Laboratories for $3.72 billion. Later, the group sold its diagnostic services unit to India’s Super Religare Labs for about $132.6 million.

Post the two major divestments, market speculations have swirled about the group’s investments outside the pharmaceutical sector.

Besides the financial business, Piramal said there were other investment opportunities the group would consider to tap in the near future but declined to elaborate.

“If you have cash in hand there are lots of opportunities that are available,” he said. “We are presented with more opportunities these days and there is much more reasonableness in the valuations.”

In August, the group through its Piramal Healthcare unit agreed to buy 5.5 percent stake in Vodafone’s India mobile operations

for $640 million. Piramal Healthcare, which specialises

in contract manufacturing and over-the-counter drugs, is looking to raise its research and development spend to 2 billion rupees in the next financial year from 1.5 billion rupees this year, he said.

The group also plans to buy small overseas biotechnology firms to boost drug discovery and research capability, Piramal said.

The over-the-counter segment, which makes emergency contraceptive tablet i-Pill and skincare lotion Lacto Calamine, will continue to make losses in the next few years, weighed by investments the company is making on brand-building, he said.

In May, Piramal Life Sciences, the group’s research firm, decided to hive off its drug discovery business to Piramal Healthcare , and the group chairman said on Monday the process would be completed in this quarter. ($1 = 51.7 rupees)

(Editing by Ranjit Gangadharan)

Piramal to boost financial business

A man and two passengers ride on a scooter past a shop displaying the Vodafone logo on its shutter in Jammu November 21, 2011.

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india invESTmEnT SUmmiT | novEmbER 21-23, 2011 13

by anand baSU and joChEllE mEndonCa BANGALORE, NOV 23

BIOCON LTD, India’s largest listed biotechnology company, expects to find a deep-pocketed global partner

for its experimental oral insulin pill by end-March, its top executive said.

“We are in advanced discussions with potential partners,” Biocon’s Managing Director Kiran Mazumdar-Shaw told the Reuters India Investment Summit in Bangalore.

However, Mazumdar-Shaw, listed by Forbes magazine as one of the 100 most powerful women in the world, declined to name them.

In January, Biocon had said it was looking for a partner after its oral insulin, IN-105,

failed to meet the main goal of an Indian late-stage trial in patients with type-2 diabetes.

Currently, there are no insulin tablets available and patients with diabetes who need insulin -- a naturally occurring protein that controls blood sugar -- must inject it.

“We know it (IN-105) works, but we have also made some mistakes on the protocol design,” said Mazumdar-Shaw, blaming the trial design for the disappointing late-stage results.

She does not expect “a normal high upfront licensing kind of deal,” as the company still needs to prove the efficacy of the drug to the potential partner.

Analysts expect bigger players like Novo Nordisk and Eli Lilly and Co to partner the drug by the end of March 2012.

Media reports suggest even Pfizer , whose inhaled insulin Exubera was withdrawn

due to poor sales, has shown interest in partnering the drug.

Last year, Bangalore-based Biocon signed a deal with Pfizer to make insulin drugs, which the world’s largest pharma company would sell globally.

The size of India’s insulin market, which was $147 million in 2010, is expected to grow three-fold by 2015, according to market research firm IMARC Group.

THE COMPANY, which has a 5 percent share in the domestic insulin market dominated by Abbott Laboratories is also betting on its recently launched reusable insulin delivery device INSUPen.

“It (INSUPen sales) has not just met our forecast but it (has) exceeded our forecast,” said Mazumdar-Shaw, who founded Biocon in 1978 in her garage.

She, however, warned about competitors possibly cutting prices.

Biocon’s INSUPen, which costs about 675 indian rupees, is competing against cheaper pens that are available in the market for 410-450 rupees and with costlier devices sold by Novo Nordisk that cost above 1,000 rupees.

The company claims that users of INSUPen will save 1,200-1,500 rupees on refills, compared with competitors’ products.

Mazumdar-Shaw also said Biocon’s contract research organisation (CRO), Syngene, is on track to go public in the next 16 months.

Syngene, started in 1984, has research capabilities in synthetic chemistry and molecular biology for early-stage drug discovery and development, a booming business at a time when large pharmaceutical companies are paring back their in-house research departments to cut costs.

Biocon shares closed down 5 percent at 305.20 rupees on Wednesday on the National stock exchange. Since Jan. 31, they have fallen about 10 percent, underperforming the wider CNx Pharma Index as the company struggles to find an oral insulin partner.

(Reporting by Anand Basu, Jochelle Mendonca, Aftab Ahmed in Bangalore and

Himank Sharma; Editing by Sriraj Kalluvila, Saumyadeb Chakrabarty)

India’s Biocon expects oral insulin partner by March

Kiran Mazumdar-Shaw, chairman and managing director of Biocon Ltd., speaks during a news conference in the southern Indian city of Bangalore March 8, 2007.

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aKhil gUpTaChairman and Managing Director, India Blackstone Group

mvS SEShaRgiRi RaoJoint MD and Group CFOJSW Steel Ltd

pRamiT jhavERiIndia Chief Executive OfficerCitigroup

KiRan mazUmdaR-Shaw Chairman & Managing DirectorBiocon

bazmi hUSainManaging Director ABB India

Chanda KoChhaRManaging Director & Chief ExecutiveICICI Bank

R. C. bhaRgavaChairman Maruti Suzuki

goRdon CobURn CFO CognizantTechnologies

summit speakers

R. ShanKaR RamanChief Financial OfficerLarsen & Toubro

ajay piRamalChairman Piramal Group

S. d. ShibUlal Chief Executive & Managing DirectorInfosys Technologies

ShanKaR naRayananManaging Director, IndiaCarlyle Group

For more storiesOn Reuters India Investment click here:http://www.reuters.com/summit/IndiaInvestment11

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FOr MOrE InFOrMaTIOntony Munroe InDIA FInAnCIAL eDItor tony.munroe@thomsonreuters.com

tIzIAnA BArghInI eDItor In ChArge gLoBAL SuMMItS tiziana.barghini@thomsonreuters.com

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