SPREADING WINGS - IndiGo to start international flights from Aug

Budget carrier IndiGo, which recently placed a record order for planes, will start international operations in August, pitting it against Emirates, Singapore Airlines Ltd and AirAsia Bhd.

The aviation ministry has approved IndiGo's proposal to fly to four countries, joining Indian carriers Air India, Jet Lite (India) Ltd, Jet Airways (India) Ltd, Kingfisher Airlines Ltd and SpiceJet Ltd, in a market that's growing at around 10% annually.

The Gurgaon-based carrier, run by InterGlobe General Aviation Pvt. Ltd, has been cleared to operate daily flights to Bangkok, Singapore and Dubai from New Delhi and Mumbai, besides connecting Muscat with Mumbai, all considered to be high-traffic routes. The aviation ministry cleared the four month old proposal late last week. IndiGo's proposal to fly to several other overseas destination starting from November is still to be cleared.

On 12 January, the airline announced a record order for 180 Airbus SAS A320 jets in Toulouse worth $15 billion (68,000 crore) at list prices.

“As IndiGo turns five in August 2011, this approval dovetails well into its planning process. This will hasten the process of Indian carriers taking back some of the market share that has been lost over the past many decades to foreign carriers,“ the airline said in a statement.

Of the 241 A320s it has on order till 2025, including 61 from a previous order, 14 will join its fleet this year, helping it expand its domestic presence and run flights to neighbouring destinations to optimize aircraft utilization. IndiGo uses 34 A320s on 221 daily domestic flights. Government rules mandate five years of domestic experience and a 20 aircraft fleet before a domestic carrier can fly overseas.

The entry of another low- cost carrier may benefit passengers as fares are likely to fall on many of these sectors. “I think there would be good downward pressure,“ said G.R.
Gopinath, who pioneered low cost airlines in India with Air Deccan, later acquired by Kingfisher Airlines. “It's good for everybody, especially the consumers.“

Another travel industry official said the decline in ticket prices will depend on IndiGo's strategy to woo the market. “The problem is that a fare war is already happening on these sectors. You can fly to Dubai for 5,000 on Air Arabia. I am sure they will match whatever is the lowest fare,“ said Aloke Bajpai, head of travel website IxiGo.com. “Unless IndiGo comes up with a completely radical strategy of pricing it below that.“

Bajpai said the routes IndiGo has selected were “predictable“ as they see heavy traffic and are profitable. The top 10 international routes by number of daily travellers from India are Mumbai-Dubai, Delhi-London, Mumbai-London, Chennai-Colombo, Chennai-Singapore, Delhi- Dubai, Delhi-Kathmandu, Delhi-Bangkok, Chennai-Dubai and Mumbai-Singapore, ac- cording to a Kingfisher Airlines investor presentation.

“This continues the trend of Indian carriers deploying capacity away from the highly competitive and lower yield domestic market,“ said Vikram Krishnan, an analyst with US- based aviation consultancy Oliver Wyman. “These airlines would have to develop a brand presence and cultivate agency distribution channels at the international points of sale. Emirates and Qatar are selling a global network behind Dubai or Doha, while IndiGo will rely more on point-to-point traffic terminating in Dubai or Singapore.“

UID to serve as proof for telecom connections

The department of telecommunications (DoT) has decided to allow the use of unique identification (UID) numbers, which will be issued to all residents of India under the government's Aadhaar project, as proof of identity and address for obtaining telephone connections.

The move will make it easier for millions of people, particularly in the the insurgency-hit states of the North-East and Jammu and Kashmir, to get new phone numbers. It will also help telecom companies save time and expense.

DoT's decision comes a month after the finance ministry said UID was sufficient to meet the know your customer norms, under which banks are expected to verify customers before opening bank accounts or conducting any financial transaction.

“The Aadhaar shall be taken as valid proof of identity (PoI) and proof of address (PoA) after details of identity and address are confirmed through Aadhaar authentication procedure,“ said a DoT notice issued on 14 January. “After implementation of the Aadhaar authentication procedure, it can be used as valid PoI and PoA in Jammu & Kashmir, Assam and north-east service areas also.“

Rajan Mathews, director general of industry lobby group Cellular Operators Association of India, said this will help telcos cut cost substantially. “It removes the need for warehouses to store the millions of customer verification forms or spend time and money scanning and uploading these forms or physical verification (needed in the North- East and Jammu and Kash- mir),“ he said. “If today an operator spends 750-1,000 per subscriber verification, the cost comes down to 150-200 per subscriber. That is immense, given the hundreds of millions of mo- bile phone subscribers in the country.“

India added 18.98 million subscribers in October, taking the total to 742.12 million, according to the telecom regulator.

Retail vendors of phone connections are likely to be provided biometric reading devices that could directly send an appli- cant's UID number and biometric data to the Aadhaar central database for online authentication.

Such devices cost around 10,000, but large-scale use could reduce their prices and make them affordable even for small retailers.

“The cost savings from man power, and time among other resources would be immense,“ said an executive at telecom company Bharti Airtel Ltd, asking not to be identified.

The UID authority plans to issue UIDs to around 600 million people by 2014 by collecting basic demographic data and biometric information such as fingerprints and iris scans. By March 2011, around 100 million Indians will have UID, if the authority meets its targets.

Neel Ratan, executive director of consultancy firm PricewaterhouseCoopers Pvt. Ltd, said the security benefits of the move are moderate at this stage. “But it is important to build a critical mass so that the end- user can be traced,“ he said. “The more ubiquitous UID becomes, the stronger it will be.“

SUSTAINING MARGINS - TCS profit rises 30% to 2,369 cr

Tata Consultancy Services Ltd (TCS), India's largest information technology company, carrying over volume growth and high operating mar- gins from the previous quarter, beat estimates by posting a net profit of 2,369 crore for the quarter ended December, up 9.3% quarter-on-quarter, and 30% year-on-year (y-o-y).

That exceeded estimates of 2,200 crore. Revenue rose to 9,663 crore, up 4.1 % sequentially and 26.3% y-o-y. It declared a quarterly dividend of 2 per share, and earnings per share of 12.08. In dollar terms, revenue rose 7% to $2.14 billion (9,758 crore today), while profit came in at $517 million, up 14% sequentially and 35% y-o-y.

“They have beaten our expectations,“ said Dipen Shah, senior vice-president at Kotak Securities Ltd. “In a seasonally weak quarter, the volume growth of 5.7 % is encouraging and the improvement in operating margins is a positive surprise.“

The gap between TCS and its peers is widening, said Abhishek Shindadkar, an analyst at ICICI Securities Ltd. “Clearly, they have done a better job of managing headwinds. They look a really cohesive unit, reinvigorated under Chandra (chief executive officer and managing director N.Chandrasekaran).“

Infosys Technologies Ltd turned in low single-digit sequential growth in revenue (2.29%) and net profit (2.5 %), at 7,106 crore and 1,780 crore, respectively, for the quarter.

Srishti Anand, analyst at Angel Broking Ltd, said she had expected volume growth at 7%, but TCS “overperformed our expectations on margin and PAT (prof- it after tax). A 52 crore forex gain this quarter vis-a-vis a forex loss last quarter helped in a stronger PAT“.

Chandrasekaran said a “sharp focus on strategy, with rigorous execution discipline, has helped capture volumes, defend margins and deliver another stellar quarter. Demand environment continues to be strong.“

Chief financial officer S. Mahalingam said pricing and productivity were improving. “We continue to live with currency volatility, but we leveraged strong cost management efforts to sustain margins,“ he said.

TCS rose 1.57% to 1,136.30 on the Bombay Stock Exchange on Monday. Results were announced after the market closed.

Volume growth at 5.7% is in contrast with the 11% seen in the last quarter, while operating margins continued to see the highs of Q2 at 28%. In the quarter, 35 new clients were added.

“Keeping in mind that TCS is the leader of the pack, we expect Wipro too to disappoint on the volume front,“ Anand of Angel Broking said. Wipro is to announce results later this week.

TCS added a record 20,219 staffers, a net addition of 12,497, for a total strength of 186,914 as of 31 December. Attrition was marginally up to 14.4% from 14.1% in the previous quarter.

The company said that growth was led by developed markets in the US and Europe, while Asia- Pacific, West Asia and Africa were also growing. Last quarter, North American revenue alone crossed $1 billion and the company posted double-digit growth across verticals. Net profit had risen by 14% sequentially, and 32% y-o-y. Europe and the UK continued to show growth, Chandrasekaran said. Offshore revenue rose 30 basis points to 51.4%.

Key wins for the quarter included firms in telecom, pharma and healthcare, banking, and airlines. New services such as assurance and infrastructure services were showing good growth, the company said.