Saturday, June 09, 2007

The IndusView Publication - Volume 3, Issue 7

Indian Airspace: More Planes, Fewer Names

Market dynamics can create strange bedfellows. Kingfisher Airlines, a subsidiary of UB Group, India's largest alcoholic spirits manufacturer is looking to acquire Deccan Aviation, India’s top low-cost carrier to become India’s largest airline with a 34% market share. The transaction will bring together two contrasting companies. Kingfisher, run by Vijay Mallya, India’s flamboyant entrepreneur often compared with the U.K.’s Richard Branson and Air Deccan founded by Capt. G. R. Gopinath, a former Indian Army Officer who popularized low-cost air travel in India.

The merger follows the recent acquisition of Air Sahara by Jet Airways, until now, India’s largest private sector airline with a 32% market share, and the merger of two state owned carriers Air India and Indian – to create the National Aviation Company of India (NACIL).

The wave of airline consolidation we first predicted in Vol3 | Issue 5 clearly continues.

Wireless Telecoms: Size Matters

Consolidation also continues in the wireless sector, evident from the expected merger of Idea Cellular Ltd owned by Aditya Birla Group, one of India's largest diversified conglomerates, with Spice Telecom, which is 49% owned by South East Asia’s second largest phone company Telekom Malaysia Bhd.

Idea Cellular and Spice Telecom will have a combined subscriber base of 17.3 million in 11 circles making it the fifth largest mobile operator, surpassing Tata Teleservices Ltd, part of the Tata group, India's largest private sector business group.

The world’s fastest growing mobile phone market, which is expected to more than double to 348 million subscribers by 2010 has undergone consolidation worth more than $12 billion in transaction value so far this year compared with $2 billion last year. The most significant deal has been the acquisition of Hutchison Essar Ltd, second largest GSM mobile service provider, by the U.K.’s Vodafone Group Plc.

Real Estate: Billion Dollar Opportunities

General Electric Company (GE), the world’s second largest company by market value, is boosting its commitment to India’s real estate market by allocating $2 billion for real estate projects such as townships, special economic zones (SEZs), information technology (IT) parks, retail and residential developments.

Industry experts forecast demand, precipitated by India’s burgeoning Information Technology (IT) industry, for as many as 80 million housing units over the next 15 years and 200 million square feet in office space in the next five years.

More insight into India’s property market can be gotten from the Company Watch section of this issue where we’ve profiled DLF Ltd, India’s largest real estate developer slated to have the country’s largest initial public offering (IPO) when it lists $3 billion worth of new shares this month.

Bundeep Singh Rangar
Chairman, IndusView