The Hindu Business Line : M-Commerce foray may boost RCom realisations

Reliance Communications’ foray into Mobile-Commerce, the first such major foray by an Indian telecom service provider, opens up a new avenue for the company to improve its realisations, in a highly competitive pricing environment.

Falling revenues per user in recent times have been forcing telecom operators to innovate and offer services that could offset this fall through alternate revenue streams.

This service, launched in partnership with ICICI Bank, enables a Reliance customer to transfer money into any ICICI account through the mobile phone. Reliance Communications has also recently kicked off the facility of recharges through the mobile phone, making the mobile phone the centre of commercial transactions and adding to the value-added service bouquet.

The mobile commerce foray may have two-fold benefits for Reliance Communications. With transactions to be charged at Rs 10 per transaction, after the introductory period, this has the potential to improve realisations. The money transfer service may also expand the rural subscriber base, by providing electronic access to banking facilities.

Other services like booking railway, air and movie tickets have also been made available, thus making it a holistic offering. This foray may be keenly watched by competitors—Bharti Airtel and Idea Cellular—as its success could pave the way for deeper penetration of electronic commerce.

Defence foray

Punj Lloyd’s plans to foray into the manufacture of defence equipment may open up a new business opportunity for the infrastructure major, which has so far focused on providing turnkey solutions for the oil and gas and similar sectors.

Reports suggest that the company has applied for an industrial licence to produce arms and ammunitions. The market for defence equipment is perceived to be sizeable in India, as the country has an “offset policy” that requires foreign defence companies to reinvest a portion of their sales in India, by procuring defence components and services from local equipment makers.

Punj Lloyd has been in a rapid diversification mode. The company has in the recent past, announced plans including foray into real estate, onshore drilling services, ground handling services in airports and also a strategic investment in a shipyard company.

While a number of non-public sector companies such as Mahindra & Mahindra, Kirloskar Brothers and Tata Group are already into supplying defence equipment, Larsen & Toubro was among the few to receive licence for supplying small arms and ammunitions to the defence.

Unravelling sub-prime crisis

Collateralised debt obligations—the instruments created by the securitisation of otherwise illiquid assets on a financial company’s balance sheet—could have as many as 15 layers or tranches of different levels of credit risk. It is therefore no surprise that CDOs created from the sub-prime home loans in the American financial markets over the past few years have entered the exposure books of investors in several countries.

These exposures now seem to be unravelling, layer by layer, as the crisis spawned by the busting of the US housing bubble spreads its net.

Central banks, globally, have been forced to perform their lender of last resort role as the crisis sucks in more international investors and makes liquidity scarcer.

Starting with the US Fed, emergency liquidity injection has been done by almost all key global central banks—the ECB, the Bank of England and the Reserve Bank of Australia in the past couple of weeks.

The markets, though, seem to have not calmed down yet. The global interest rate scenario has dramatically changed in the past few weeks on the back of this unfolding drama in the financial markets.

Interest rates, which till last month, were still moving up, now seem firmly pointed downwards as the temporary liquidity injection by the central banks could assume a more permanent character in the form of official rate cuts.

These developments augur well for the interest rate scenario in India.

A softening of interest rates in major global currencies could see greater capital flows into emerging markets such as India, even factoring a certain level of risk aversion.

The liquidity boost to Indian stock markets could propel them to higher levels in the period ahead. From a fundamental perspective too, the prospects of Indian interest rates softening from their current levels seem to have brightened. This could bolster the margins of banks as well as non financial companies.

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