Birla plans $10-b financial services

THE Aditya Birla group wants to build a $10 billion integrated financial service business, spanning everything from stock broking and consumer finance to life and non-life insurance.
“We want to build a business that’s at least worth $10 billion for the group in this vertical,” said Ajay Srinivasan, chief executive for financial services and director for corporate strategy and business development at Aditya Birla Management Corporation, the group’s management company.
“The vertical could perhaps be more valuable than… Hindalco or Idea Cellular in market value over the next five years,” he said.
The group is ready to re-enter stock broking, which it exited a few years ago, and strengthen the existing consumer finance business. It will also make a debut in private equity and general insurance. It has drafted a Rs 2,000 crore plan for both organic growth and acquisitions.

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Gujarat turns to Shanghai developers to build a ‘towering’ financial hub

Mumbai's Shanghai dreams may not have taken off, but Gujarat may soon be getting there. The state is working on a customised financial services and business district, to be designed by a company that has built more than two-third of Shanghai’s buildings.

A team of designers from the East China Architectural Design and Research Institute (ECADI) was here last week to present concept designs of six skyscrapers — one may possibly be the tallest in India — for the planned Gujarat International Finance Tec-city (GIFT).

The project, which will be located along the eastern banks of Sabarmati on the outskirts of Gandhinagar, will have the region’s tallest high rise — over 350 metres. The signature skyscraper is likely to be called “The Diamond Tower” to mark Gujarat’s eminence as the diamond hub of the world.

The other highrises too will be based on a special theme. While promoters are tightlipped about the project details, the towers are expected to measure 200-350 metres high, and will “carry the imprint of Gujarat’s cultural heritage”.

“First, we have to sell the space,” says GIFT chairman Sudhir Mankad, amid hectic parleys that have seen memoranda of understanding for over 80 million sq ft of business space against 75 million sq ft planned for the first phase by 2010.

A joint venture between the Gujarat Urban Development Company (GUDC) and Infrastructure Leasing & Financial Services Ltd (IL&FS), GIFT is to be benchmarked as a global finance hub on the lines of London Dockyards, Lujiazui Shanghai, or Shinjuku in Tokyo.

While some work in the form of levelling of land has already begun, sources say the construction activity was likely to begin in September. Spread over 500 acres, the core area of GIFT would be a showcase business district, with its engineering geared for a “plug-n-play” and “walk-to-work” concepts.

“Details are being worked out keeping in mind 100 years of scalability, so that the ground infrastructure would need no changes,” say sources.

The hub will be connected to the Gandhinagar-Ahmedabad highway through two landmark bridges on the Sabarmati and a possible tunnel under the river.

“Given the scale, much underground work will need to be done in terms of laying the cables, pipes, wires to enable those highrises,” say government officials.

With the Gujarat government and IL&FS contributing Rs 25 crore each by way of equity, GIFT would also consider going public in more favourable market conditions. The construction cost is pegged at Rs 50,000 crore. Sources in the Chief Minister’s Office say GIFT would be hawked during the upcoming Vibrant Gujarat Global Investors Summit.

ECADI is credited with building or designing prestigious landmark buildings in Shanghai like the Shanghai World Financial Centre (101 floors, 492 m), Shimao International Plaza (60 floors, 330 m), 21st Century Tower (48 floors, 180 m), Jin Mao Tower (88 floors, 421 m), Pudong International Airport, Shanghai Oriental Art Centre, and the Shanghai Supreme People’s Court.

Hewlett-Packard in talks to buy Electronic Data Systems Corp to compete with International Business Machines Corp

Hewlett-Packard Co is in talks to buy technology outsourcing company Electronic Data Systems Corp for $12 billion to $13 billion in a deal which would vault it to a close second to IBM in technology services.

The acquisition would be HP's biggest since its $19 billion acquisition of Compaq in 2002. Shares of EDS rose nearly 28 percent, taking its market value to about $12 billion.

HP shares fell nearly 5 percent amid some skepticism that slow-growing EDS, still considered in turnaround mode, would provide more than a one-time boost, and might not be worth a premium of as much as 37 percent.

A source briefed on the matter told Reuters about the talks and that the plan was to announce a deal by the close of Tuesday. The Wall Street Journal first reported the discussions, and later HP and EDS both said they were in talks about a business combination but gave no details.

"While Hewlett-Packard has over time built up its own outsourcing practice, this clearly is a move by Mark Hurd to challenge IBM in the services area," said David Garrity, director of research at Dinosaur Securities, referring to HP's chief executive.

A bigger HP could compete better against International Business Machines Corp going after large clients and help it keep costs in line, analysts said. If HP completes the acquisition, it would be by far the largest under CEO Hurd.

"It would put Hewlett-Packard in the sweet spot of an IT spending trend. It would definitely improve their position against IBM," said CRT Capital Group analyst Ashok Kumar.

SKEPTICISM ABOUT TARGET

HP has long considered an acquisition to beef up its tech services business, a sector that offers relatively stable income and high margins even in an economic downturn.

Worldwide computer services revenue rose 10.5 percent to $748 billion in 2007, according to data released on Monday by market research firm Gartner Inc.

IBM continued to be the leader, with 7.2 percent share. EDS weighed in at No. 2, with 3.0 percent of the market, while HP was No. 5, with 2.2 percent market share.

Together HP and EDS would have roughly $39.4 billion in services revenue, compared with IBM's $54.1 billion last year.

"HP gains a very strong No. 2 position in total services market share and professional services market share behind IBM," said Gartner analyst Allie Young.

If EDS were to remain independent it would have a tough time holding on to its number 2 slot in IT services market, Young said.

EDS brings to HP a strong base in infrastructure outsourcing, Young said. But neither HP nor EDS is strong in high-end consulting, which is a strong suit for IBM.

Yet there was some skepticism about HP's target, EDS.

"Unless HP has some synergies where they can dramatically impact earnings growth of EDS, I'm not sure why they'd want to buy it," said Jim Huguet, co-chief executive at Great Companies LLC. He noted that EDS's earnings growth has averaged 2.8 percent.

"EDS is trading at about half its historical PE, so they're obviously seeing it as a value, which it is if you can generate earnings growth at 15-20 percent. But my question is whether it will become a drain on Hewlett-Packard?"

In April, EDS reported a 62 percent decline in first quarter profit, though the results had topped Wall Street expectations. Despite the beat, analysts said EDS faced intense competition from Indian rivals and saw little catalyst for growth.

"Growth could temporarily stall but then the opportunity is for the merged operations to be extremely strong and competitive," Young said.

Besides HP and IBM, EDS also competes with Accenture Ltd and Computer Sciences Corp in the United States, as well as Indian companies Infosys Technologies Ltd , Tata Consultancy Services Ltd and Cognizant Technology Solutions Corp.

"EDS has been relatively stagnant over the past few years. HP has been trying to promote themselves as a major services organization over the past few years. This will certainly help them with that," said Chad Hersh, an analyst at Novarica.

EDS has cut thousands of jobs to boost profits, and also is generating revenue from contracts including a lucrative deal last year with the U.S. Navy.

"We believe that Hewlett would be acquiring a fairly clean book of business, at least one that has been well scrubbed. So there shouldn't be any untoward surprises," Garrity said.

In 2000, HP pulled out of talks to buy the consulting business of Price water house Coopers for as much as $18 billion. IBM in October 2002 closed its $3.5 billion acquisition of Price water house Coopers' consulting division.