Royal Enfield

Workers assemble a Royal Enfield motorcycle inside its factory in the southern Indian city of Chennai. Reuters
  • In what could have been a risky manoeuvre, the 119-year old brand of Royal Enfield redesigned its motorbikes.next
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In what could have been a risky manoeuvre, the 119-year old brand of Royal Enfield redesigned its motorbikes.

Beloved in India, the new motorbikes are meant to be sleeker and quieter. The drumbeat-like thump of the engine is gone but the ride is still low and heavy. The retro look remains, albeit with some mechanical liposuction.

“Our design philosophy was to take all the essential characteristics of what makes a Royal Enfield bike and bring them into the 21st century,” says Siddhartha Lal, the managing director and chief executive of Eicher Motors, which owns and manufactures Royal Enfield motorcycles.

Mr Lal is the scion of the family that owns the Eicher Group. The group bought the original Royal Enfield – with its overhead-valve, single-cylinder, four-stroke engine – when the brand was on the verge of bankruptcy in 1995. The bike’s new unit construction engine (UCE) is an evolution of the company’s traditional cast-iron engine, an essential part of the Enfield look since the 1930s.

“We moved to the UCE platform equipped with electronic fuel injection, as it was technologically superior, required lower maintenance, met with the emission norms and is clean and green,” says Mr Lal. “However, we have consciously worked at blending this new-age technology with the bike’s timeless appeal.”

For now, the strategy seems to be paying off.

Until a new plant in Chennai is fully operational, customers have to wait six to nine months for their bikes. Last year, the company sold just under 75,000 motorbikes, more than three times the 22,743 it sold a decade earlier.

By some estimates, the Indian motorcycle market is at least five times the size of the country’s car market. An informal survey of Indian roads, where two-wheelers swarm like bees, lends credence to this notion.

The major players include Honda, Bajaj, Yamaha, TVS and Royal Enfield, with Hero Honda and Bajaj enjoying the highest market share. Recently, foreign competitors including Harley-Davidson, Triumph and Kawasaki have entered the market.

Harley-Davidson motorbikes retail for between 560,000 rupees (Dh37,000) for the SuperLow and 765,000 for the Roadster. The company says it has sold 1,000 bikes in the country since July 2010, a respectable number for India but low compared with the numbers Harley sells in neighbouring China or in Russia. A big obstacle is its steep – for India, anyway – price. Harley plans to address this by building an assembly plant in India to circumvent Indian import tariffs that effectively double the price of a bike.

At the Mint Luxury Conference, held in Mumbai in March, Anoop Prakash, Harley-Davidson’s managing director in India, talked about inclusiveness rather than Harleys being perceived as an unaffordable luxury, achieving this in part through financing partnerships and opening showrooms in smaller cities.

“We want to remove all obstacles to ownership and enjoyment for our customers,” said Mr Prakash.

Royal Enfield and Harley-Davidson say they do not compete with but complement each other.

Most serious riders begin with a Royal Enfield and then “upgrade” to a Harley. But Indian customers have a “keen sense for seeking value at every step, which requires us to prove that our ownership experience is the best investment in time and money they can make for themselves”, said Mr Prakash.

The timing is right for Royal Enfield, by some indicators. The research firm RNCOS says “the Indian two-wheeler market possesses a significant potential” and is anticipated to grow at an annual average of about 11 per cent through 2015, to 17.8 million units.

 business@thenational.ae

About Starbucks

Café Coffee Day, an Indian coffee chain, will offer serious competition to Starbucks, which aims to open 50 outlets by the end of the year. Aijaz Rahi / AP Photo

Feb 5, 2012

There is a great line in the movie When Harry met Sally, in which the hero differentiates women as “high-maintanence” or “low maintenance,” and proceeds to tell the heroine she is a “high-maintanence who thinks she is a low-maintanence”.

Coffee lovers in India are high-maintanence drinkers of the brew who think they are low-maintanence. I am typical. I come from Tamilnadu, the state that drinks the most coffee and live in a state, Karnataka, that produces 54.6 per cent of coffee in India, according to statistics from the Coffee Board of India. As with 70 per cent of Indians, I drink the bulk of my coffee at home: a ground mixture of Arabica and Robusta beans with 20 per cent of chicory mixed in. In south India, we call this filter coffee, and all we coffee drinkers ask for when we go out to a cafe is a cup of “decent coffee”.

 Coffee lovers in India are high-maintanence drinkers of the brew who think they are low-maintanence. I am typical. I come from Tamilnadu, the state that drinks the most coffee and live in a state, Karnataka, that produces 54.6 per cent of coffee in India, according to statistics from the Coffee Board of India. As with 70 per cent of Indians, I drink the bulk of my coffee at home: a ground mixture of Arabica and Robusta beans with 20 per cent of chicory mixed in. In south India, we call this filter coffee, and all we coffee drinkers ask for when we go out to a cafe is a cup of “decent coffee”.

Therein lies the “slip ‘twixt the cup and the lip”, to quote an old English proverb that seems particularly appropriate for this topic.

“Decent” coffee for a committed south Indian coffee connoisseurs such as me involves a long, very specific list: it has to be piping hot; the foam must be on top; it has to be bubbly and the bubbles have to be breaking down; it should be served in a stainless-steel tumbler and “davara”, which is the Indian version of a saucer; the colour of the drink should not be as dark as cocoa, but not too milky either; and the amount of sugar should be just enough to take out the bitterness but without adding any sweetness to the taste. That’s what I would call decent coffee. You see why I think Indians are high-maintenance coffee drinkers who think they are low maintenance?

And here is why Starbucks should worry: there are millions like me in India.

Last week, Starbucks announced it would enter India through a US$80 million (Dh293.8m) joint venture with Tata Global Beverages. The chain had planned to come in on its own, but daunting regulations prevented the move. A recent ruling has allowed 100 per cent foreign ownership of single-brand retail outlets. Costa coffee has recently arrived in India and will be Starbucks’ biggest foreign competitor. Café Coffee Day (CCD), an Indian coffee chain, offers much more serious competition. With some 600 outlets in more than 95 cities, including Vienna and Karachi, CCD owns two thirds of all the chain coffee houses in India, by some estimates. It is ubiquitous at airports and malls and has stand-alone outlets in most neighbourhoods. Yet, in terms of outlets per person, its market penetration is one forty-fourth that of Starbucks, according to the Espresso News & Reviews website.

Starbucks hopes to change that. It hopes to convert tea-drinking north India into a nation of coffee-drinkers. RK Krishnakumar, the chairman of Tata Coffee, said the company planned to move aggressively and could have 50 stores by the end of this year. Brand consultants caution Starbucks should not assume that just because it is a well-known global brand, it can just walk into India and attract customers. Part of the problem is just the differential pricing of coffee in India. My dad drinks four cups of coffee a day and pay 10 rupees (75 fils) per cup at his neighbourhood, no-name café. I pay 35 rupees for a cup of espresso at Café Coffee Day. It still costs under a dollar for the most expensive cup of coffee in India. How is Starbucks going to get price-conscious Indian consumers who think they are coffee experts to pay US$4 (Dh14) for a tall latte?

The company’s biggest outlay will be on property.

Santosh Unni, the chief executive of Costa Coffee India, has said the consideration for a coffee chain is not so much about rent per square metre but to keep the “rent-to-revenue percentage in the ballpark of 25 per cent”.

Café Coffee Day has used it first-mover advantage to set up outlets in every premium location imaginable, from the hills of Coonoor where Bangalore millionaires go in the summer, to motorways and urban malls, with extremely high footfalls. Starbucks needs to think through its strategy for India quite significantly so that its failure in Israel is not replicated.

Lastly, it needs to figure out what the Indian consumer means when they say, “All I want is a simple cup of decent coffee.”

Hotel Business

In the hotel business, bigger isn’t always better

Shoba Narayan (Writer)

Jan 27, 2010

 

Mohammed is afraid of losing his job. I met the middle-aged man from Kerala in Bahrain’s transit lounge. Emboldened by my few words of Malayalam, and since we would never see each other again, he told me his story. A housekeeping supervisor at a hotel on Yas Island, he can see the writing on the wall: “Too many empty rooms, even during high season, too many new hotels. It’s going to bite all of us.”

Thanks to the many hotels built ahead of the Formula One Grand Prix, room prices in Abu Dhabi have dropped by nearly 30 per cent. Occupancy is down to below 60 per cent (from nearly 90 per cent a year ago), the revenue per available room (REVPAR) has dropped 53 per cent, and hotels have slashed their rates – all of which will eventually trickle down to people like Mohammed. At least, that’s his worry.

As a travel writer I have one word for those in Abu Dhabi’s hospitality business: Aman. The Indonesian hotelier Adrian Zecha founded and expanded the Aman franchise using a counter-intuitive, indeed contrarian, approach: less is more. Aman’s 24 resorts across the world think small instead of big. The number of rooms is the bare minimum. Privacy and exclusivity are marketed and guaranteed, albeit at what some might consider exorbitant prices; at about $800 a room, they are among the highest in the hotel business. But instead of putting people off, they have spawned a cult of self-described “Aman junkies”.

The Gulf states already have some fine hotels and fine hotel brands. Contrary to popular perception, a few boutique hotels do exist, mostly in Dubai, including Fusion, the hip B&B in Jumeirah, and the XVA Art hotel in Bastakiya. Al Maha Desert Resort and Spa, also in Dubai, comes closest to the Aman experience, and at $1,000 a night full board it mirrors Aman prices. The UAE does ritzy very well; it does big, even better. What it lacks is the “bespoke” experience, a growing and lucrative sector in the reccession economy. The rationale is that the average traveller in today’s global village has been there, done that, and now wants is an “experience”, not merely accommodation.

The Gulf states lack the history of Egypt; the exoticism of Vietnam; the stunning natural beauty of Hawaii and other Pacific islands; the outdoorsiness of Australia or New Zealand; the magnificence of Africa; or the cultural sophistication of Europe. So the UAE, much like Singapore, Hong Kong and Las Vegas, has to invent its tourist idiom.  Simply building one more Ritz-Carlton, however comfortable, will not do it. Offering one more Dune Safari doesn’t cut it either.

What is required is a paradigm shift, which may involve turning traditional tourism adages on their head. Most five-star and seven-star hotels in the Gulf tone down religion and region, much as their counterparts do elsewhere in the world. What about doing the opposite? How about marketing the rich heritage of Islam to non-Muslims? How about going against the grain and marketing a mudbath in the desert, as Egypt is attempting in resorts near Aswan?

What hotels in Abu Dhabi are going through is what economists call diminishing marginal returns. The 4,000 new rooms that opened in Abu Dhabi last year put pressure on the existing 13,000.  Hoteliers need to balance the ability to spread fixed costs over larger numbers of rooms with the capital cost of building them and the marketing costs of getting as many of them occupied as often as possible. One example of this trade-off in the airline business is the strategic split between Boeing’s new and nimble 787 Dreamliner, which will carry up to 250 passengers, and Airbus’s gigantic A380, which can carry up to 853. So far the Dreamliner is winning hands down. In these capital-constrained times, big is not necessarily best.

Rather than emulating the Airbus approach, hotels and resorts in Abu Dhabi and elsewhere in the Gulf should look towards the Boeing experience. Or better yet, adapt the private-plane approach. After all, the Netjets owner, Warren Buffet, has predicted a profitable 2010 for his private jets. Doing small and bespoke may not boost the profitability of hotels in the Middle East right away, but this far-sighted approach can alter the fortunes of tourism in the Gulf states in the years to come.

Shoba Narayan is the author of Monsoon Diary, a memoir about growing up in South India

Secular India

A tolerant and secular India is a myth to make real

Shoba Narayan (Writer)

Mar 29, 2010

 

While the roots of Hindu-Muslim enmity in India run deep, every now and then – and dishearteningly, with increasing frequency – certain events serve as touchstones. These events become both symbols and a shorthand; a single word or phrase that encapsulates a community’s anger. For my parents’ generation, it was partition; for mine, it was Babri Masjid, the demolition of a mosque in 1992 by a large group of Hindu fundamentalists. For today’s thirty-somethings, the event was Godhra, where 59 Hindus aboard a train were burnt to death in 2002. Hundreds of both Muslims and Hindus died in the riots that followed.

The partition of India in 1947 was initiated by a small group of Muslims led by Muhammad Ali Jinnah, resulting in carnage that my parents’ generation would never forget. A cycle to the violence has continued with a narrative of its own. With partition, the Muslims were at fault; at Babri Masjid, the Hindus were to blame; at Godhra, both communities were culpable. The Hindu-Muslim divide within the subcontinent has become an irreparable chasm. Or has it?

Recently, there has been reason for hope. For secular Indians such as myself, who abhor the religious sentiment that the BJP has foisted upon national politics, that party’s resounding defeat in the last elections is cause for celebration. Recently, the Liberhan Commission’s report on the Babri Masjid killings, 17 years in the making, was handed to the Indian prime minister Manmohan Singh. The report indicts many of the top BJP leaders including the party boss LK Advani, who incited Hindu mobs that eventually rased the mosque. Mr Advani later called the demolition of Babri Masjid “the saddest day of my life”.

At about the time that Mr Advani solidified his status as leader of the BJP in 1988, I was a college student in America with a crush on a Muslim man. Ahmed and I tried to gauge family sentiment towards any future union by asking a rhetorical question of all our family elders:”If you could come up with a hierarchy of castes and cultures that your child could marry, what would it be?” Ahmed and I asked our parents, aunts, uncles, friends’ parents, and grandparents. The mother of my best friend, a Kashmiri Brahmin, told me that “obviously” it would be good if her daughter married a Kashmiri Brahmin. Second on the list was a Kashmiri “non-Brahmin”. Even though the caste was different, at least they would share the same language and state. Her third choice would be a North Indian, then a South Indian, then a Caucasian – perhaps someone that her daughter had fallen in love with while studying at Oxford. Jewish boys were good, then Asians, then Blacks, then Hispanics and finally, last on the list, an Indian Muslim.

 

 

This was telling because my friend’s mother had lived her entire life in Kashmir, the only Indian state with a Muslim majority. As a Brahmin in Kashmir, Sanjana’s mother had many Muslim friends, some of whom she had known for decades. Still, she preferred that her daughter marry almost anyone else but a Kashmiri Muslim. Different family members gave me different versions of this list. One uncle preferred that his son marry a black woman to a poor, white one. Some didn’t care about caste or vegetarianism. What they all shared was where Muslims appeared on their lists.

Ahmed’s family had the same opinion about Hindus. He told me that his family would oppose our union because of misconceptions about the way Hindus venerate cows. They thought we were infidels because we didn’t pray five times a day and assumed we that we were kanjoos (stingy) because we were not required to give a percentage of our income to the poor. They preferred a Caucasian bride to a Hindu one.

Both my family and Ahmed’s were sophisticated and well-travelled. Ahmed’s family was from Lucknow but lived in New York. They celebrated all the Indian holidays in a community centre, wearing saris and dancing to Bollywood tunes. They spoke Hindi at home but didn’t want their son to marry a Hindu girl. Our romance fizzled out but the way our families perceived each other has stayed with me. As a Hindu mother, I am trying to raise my two daughters without the same prejudices. Secular and tolerant India was a myth that I grew up with – one that reality frequently contradicted.

I cannot prevent the Hindu-Muslim hatred that exists in my parents’ generation but I can influence my children. I can influence the way my daughters choose their boyfriends. I can make the myth of a secular, tolerant India more of a reality.

 

Shoba Narayan is the author of Monsoon Diary, a memoir about growing up in South India

Microfinance

Microfinance has become a big deal for India’s poorest

Shoba Narayan (Writer)

Aug 7, 2010

 

For all the controversy surrounding SKS Microfinance’s initial public offering (IPO) last week, its shares were fully subscribed. SKS is India’s largest and arguably most successful micro-lender. It began as a non-profit organisation in 1997, lending as little as US$10 (Dh36.73) to women weavers, cow herders, farmers and electricians before reinventing itself as a profit-making concern in 2005. When the company announced a few months ago that it was looking to raise $350 million from the market, it disconcerted people – and not just those in the development sector. Micro-lending pioneers such as Muhammad Yunus criticised the SKS stock offering as profiteering from the poor.

Other liberals complained that SKS’s successful IPO would change the character of those attracted to microfinance. Instead of social entrepreneurs and do-gooders, the money would attract profit-hungry bankers. As the controversy surrounding the IPO increased, the entire Indian microfinance industry went through what seemed like collective soul-searching and hand-wringing. Market-loving capitalists passionately defended the issue, stating a successful IPO would encourage more microfinance companies to flourish and do good. Still others took the middle ground.

“Why this discomfort [with the IPO]?” asked Monika Halan in a column in Mint, a business daily affiliated with The Wall Street Journal. “If capital markets are an efficient way to move money to their best use, why baulk at the SKS issue? Does that mean that hospitals must not list, or educational institutes or media?” Chitradurga district in interior Karnataka seems an odd place to contemplate not just the fall-out of the IPO, but also the future of Indian microfinance.

 

Five hours by road from the state capital Bangalore this picturesque hamlet with its undulating hills, verdant paddy fields and rocky outcrops is known more for its silk weavers and cotton fields than for anything remotely resembling big business. Yet it is here that 10 women sit on a summer’s eve contemplating their finances and the possibilities of what their bank might do for them. It is a powerful indicator, not just of India’s successful model for women’s self-help groups that flourish across the country, but also a measure of how deep micro-lending and micro-credit enterprises have penetrated into rural India.

Until recently, most of these women sitting under a tree did not have a bank account. They are illiterate housewives who work a few hours a day, plucking cotton or weaving silk. The leader of the group, a woman named Lakshmi, has a small tally book in her hands in which she records the money each woman has contributed. The amounts are small – sometimes $10 and sometimes as little as $1. When done consistently over a couple of years, however, it adds up. Now, these women have a collective bank account that they can use to dispense money for medical and other emergencies.

 

 

Over the past two years, these 10 women have amassed more than 10,000 rupees, or just under Dh800. They are now contemplating applying for a small business loan to start a weaver’s co-operative. Perhaps they can link up with another co-operative in a nearby village that supplies organic honey to Bangalore city at handsome profits. Bangaloreans seem willing to pay a lot of money for local crafts, one woman says. Maybe we can weave silk bags and send it to Bangalore, says another. The group laughs at the thought of city dwellers paying big bucks for their work.

But it is a huge leap of faith for these small-town housewives, one that Vikram Akula, SKS’s polarising and maverick founder, would relish and point to as an indicator of the success of his micro-lending model. Mr Akula doesn’t make it easy for his defenders. His personal life is a mess – he is locked in a bitter custody battle with his ex-wife Malini Byanna. The corporate governance of his company has been questioned.

Most galling of all, at least for those in the non-profit world, Mr Akula stands to make about $60m from the IPO. “Vikram is going to make an unseemly amount of money off the backs of cow herds. Isn’t it ironic?” muses a competitor. These questions raise the delicate balance that microfinance treads in the world. Even though most microfinance institutions are intended to make profit, they are perceived as beacons of good. But the point is that micro-lending in India has grown at 45 per cent so far this year.

Most microfinance companies have very few defaulters, which shows that the women who make up most of their clientele want these services. While microfinance interest rates of 30 per cent are high compared with regular banks, they are far lower than the 100 per cent loan sharks would charge these women. The high rate of return also suggests the borrowers use this money wisely and make a profit from it. The sector has been growing exponentially.

While Mr Yunus’s Grameen Bank took 30 years to build up its portfolio, newer entrants such as SKS and Spandana have achieved the same result in five years. In fact, Spandana, India’s second largest microfinance company, is planning its own IPO. If SKS and Mr Akula can address the questions swirling around his company it will be cause for celebration, not just of a successful IPO but also for the deep penetration of micro-lending institutions into rural India, as the 10 women sitting under a banyan tree in Chitradurga district demonstrate.

Shoba Narayan is a journalist based in Bangalore and the author of Monsoon Diary


 

 

Money Buys Happiness

Money makes the world go round and can buy happiness

Shoba Narayan (Writer)

Aug 28, 2010
Experiences bring more happiness than objects.

Experiences bring more happiness than objects.

 

BLOOMBERG

 

Last week, I did something I have never done before. I took out my credit card bill and categorised my payments into two columns: experiences and objects. Going to a restaurant was an experience; buying a Zara dress was an object. The reason for this curious exercise was a research paper, recently published in the Journal of Consumer Psychology with a provocative title “If money doesn’t make you happy, you probably aren’t spending it right”. Written by Elizabeth Dunn of the University of British Columbia, Daniel Gilbert of Harvard University and Timothy Wilson of the University of Virginia, the paper offers eight principles on how to spend money so that it improves, or as the authors prefer to call it, “buys” happiness. Choosing to spend money on experiences rather than things was the first suggestion.

Our grandparents always told us that money cannot buy happiness, at least mine did. The fact is they were wrong. Scientists have studied the correlation between money and happiness. Their conclusion is that there is a positive but only modest connection between the two. Recently, there have been a slew of books that attempt to chart out tangential paths to happiness. Gretchen Rubin’s best-selling book, The Happiness Project, takes a practical, month-by-month approach to improving the way we spend time and money. The Art of Choosing by Sheena Iyengar, a professor at the Columbia Business School, analyses the decisions we make and how we make them.

Too many choices can overwhelm, she says, and sometimes abdicating tough choices can be healing and helpful. Happier: Learn the Secrets to Daily Joy and Lasting Fulfilment by Tal Ben-Shahar is a middling read. The class that Ben-Shahar taught at Harvard that was the basis of the book would have been a better choice and experience. Martin Seligman, the “father” of positive psychology, wrote Authentic Happiness and continues to work on the subject.

Ms Dunn’s paper has the advantage of brevity and its eight principles make eminent sense. Her first suggestion, for instance, is to buy experiences rather than things: attending a music concert rather than buying a new suit; indulging our passions and hobbies be they flying, skiing or antiques collecting; learning a new language or taking an art class. The second suggestion has to do with helping others.

“Human beings,” she says, “are the most social animal on our planet. Only three other animals (termites, eusocial insects such as ants and bees, and naked mole rats) construct social networks as complex as ours and we are the only one whose complex social networks include unrelated individuals.” Her second suggestion is about what she calls “pro-social spending” or, in plain English, helping others instead of yourself. This has been proven in study after study. Those of us with the strongest human connections are the happiest; and an easy way to develop such human connections is to volunteer, to spend money on our preferred charities. The third principle is my favourite: buy many small pleasures instead of few big ones. In other words, if you have US$15,000 (Dh55,090) to spend, you could buy one Hermes Birkin handbag, or you could buy a whole new wardrobe. Ms Dunn would advocate doing the latter because of a notion called “adaptation.”

 

 

Once an object becomes a possession rather than a yearning, the pleasure it offers decreases. Smaller pleasures, therefore, are less susceptible to “diminishing marginal utility”. People who diet know it; eating one chocolate is a thrill but eating several is a guilt trip. Ms Dunn suggests “people can therefore offset diminishing marginal utility by “breaking up” or “segregating” a pleasurable experience such as biscuit-eating into a series of briefer experiences. Separating pleasure into bite-sized bits works, she says. This is eminently practicable in everyday life: get a massage instead of an expensive massage chair. Rather than going out to an expensive restaurant once a month, get a drink at the chic bistro once a week, if possible with friends. Less expensive, more social contact and a whole lot more pleasure. By treating ourselves to frequent new and pleasurable experiences, we can spread the wealth, literally.

There are several other suggestions in the Journal’s paper, which is available on the internet:buy less insurance; pay now and consume later; follow the herd instead of your head; and beware of comparison shopping. Most of them touch upon things that we all know or have thought about. For example, I have found there is greater pleasure to be had in the lead up to a grand event,such as a family wedding, than the actual event itself.

Talking to girlfriends about what dress you are going to wear, going to the beauty parlour to get yourself pretty for the big day – all afford greater pleasure, sometimes, than the actual day itself. Ms Dunn’s paper reinforces all these things we have noticed in passing and forces you to be mindful about your spending. Mindful spending: what a great way to mix eastern and western paths to happiness – and one that both a monk and a money manager would approve of.

business@thenational.ae

 

Quintessentially

India’s super-rich a quintessentially complicated bunch

Shoba Narayan

Sep 26, 2010

 

I have a request for Paul Drummond, the boyish co-founder of Quintessentially, the UK-based luxury concierge service: can he get me into elBulli before it closes forever? If he can, here is one Indian who will sign up for his company’s services on the spot. Mr Drummond was in India recently to drum up (sorry, couldn’t resist) clients for his bespoke concierge and luxury lifestyle group. As a fast-growing economy, India is “a very serious market for us”, he said. To that end, Quintessentially has tied up with Lodha Developers who are constructing Mumbai’s World One, which, when launched, was touted to become the tallest all-residential tower in the world. Now though, Dubai’s Pentominium, currently unfinished, is expected to take that title. World One is scheduled to be completed in 2014 and Quintessentially’s services are on offer to all 300 apartments, which are priced between US$1.6 million (Dh5.9m) and $10.8m.

Quintessentially’s entry into India makes sense: right place, right time. With 49 dollar billionaires, India stands fifth in the world in its billionaire count, after the US, China, Russia and Germany. It has just increased the number of its millionaires by 51 per cent – the second-biggest biggest jump in the Asia-Pacific region after Hong Kong – from 84,000 to 126,700, according to the 2010 World Wealth Report issued by Capgemini and Merrill Lynch Wealth Management. Wealth managers say even these large numbers underestimate the true wealth in India, given its “black money billionaires” who literally have wads of cash tucked under the floor and have to figure out a way to spend it. Many of them prefer to spend it abroad, which plays in nicely with Quintessentially’s property services. Indians overtook Britons as the seventh-highest big spenders in hotels, according to the latest Hotel Price Index survey, conducted by Hotels.com.

A magazine profile of Nita Ambani, the wife of Mukesh Ambani, Asia’s richest man with an estimated net worth of $29 billion, is a case in point. In the article, the interviewer asks Mrs Ambani the price of one kilogram of vegetables, almost as a test. Does Mrs Ambani know the price of a kilo of tomatoes? She claims she runs a tight ship, visiting her kitchen every morning and knows exactly how much the family spends on groceries. You could almost see Indians everywhere nodding approvingly when they read this. The Ambanis may be building a $2bn home, the most expensive residence in the world but, by Jove, the Missus knows the price of carrots and tomatoes. Try fleecing her at the bazaar. This is the type of customer that Mr Drummond and company will have to deal with.

Quintessentially states its customers are famously picky: demanding that a birthday cake be delivered to a distant Moroccan island; or asking for seats at exclusive fashion shows and art auctions. Indian customers will have the same requests with added layers of complication. Imagine the conversation between Quintessentially and Mrs Ambani, who perhaps wants a similar cake delivered to an uninhabited Greek island where a relative is doing solitary yoga.

 

“How will you get there — by car or boat? Better take the boat because gas is cheaper. Oh, and by the way, my assistants have charted the shortest route between the mainland and the island so your people had better stick to that. And each account statement is looked over by me personally, so the numbers had better add up.” Quintessentially will have to carefully calibrate its services to manage the Jekyll and Hyde personalities of India’s super-rich, who still haggle over the price of groceries but wildly overspend on other things; weddings now routinely cost $5m and more. Wealthy Indians prefer to have their children married abroad – a recent one took place at the Ferragamo mansion outside Florence in Italy – to escape prying, poverty-stricken eyes. Brand names are big among status-conscious Indians and Quintessentially’s ability to procure an exclusive Birkin bag at short notice (in time for a niece’s wedding next week, perhaps) will gratify its Indian clients. The trick is to spot them.

As the author and marketing consultant Santosh Desai says, an Indian millionaire could just as well be a farmer buying a souped-up tractor as a senior manager in a big city. They may hide their wealth from the income tax people but have no qualms about buying a Ferrari “all-cash” at the showroom . Does Quintessentially even want these people as clients? A few years ago, Ferrari was in the news because it claimed to have turned away 700 customers who didn’t “suit [the] product profile”. One way to spot clients is what Quintessentially has just done: through the property developers. Jones Lange LaSalle, the property consultancy, estimates about 3,500 luxury homes costing $1m and above are being constructed in Mumbai. After homes come cars, brand names and exotic vacations. The frugal lifestyle of the Gandhian era is long gone. With 44 per cent of the population less than 20 years of age, India is not just a young economy – it also has the largest number of young people in the world. Indian youth is no longer shackled by the Hindu notions of detachment and contentment. My father, for instance, can afford a Cartier Tank watch but wouldn’t dream of buying one. He would think it to be an obscene, crass and unnecessary display of wealth. Young Indians on the other hand, revel in such spending.

One last thing for Mr Drummond to ponder: how is he going to say “No” to Mrs Ambani’s sister-in-law’s aunt’s nephew by marriage who will beat on his door for membership? In other words, how is he going to process the spider-web of Indian extended families? Like I said, a reservation at elBulli would do the trick for me.

 

Shoba Narayan is a journalist based in Bangalore and the author of Monsoon Diary

 

Indian Pharma

A dose of Indian state support will keep drug firms healthy

Shoba Narayan

Oct 3, 2010

 

Indians are not pill poppers. Or so I thought until a report in the Lancet Infectious Disease Journal linked an antibiotic-resistant “superbug” to India. In a somewhat dubious compliment the new “genetic mechanism” is even named after us: New Delhi metallo-beta-lactamase 1 or NDM1. The report, published in August, caused uproar in the Indian and international medical community. The Indian health ministry has appointed a committee that will frame and monitor policy on antibiotic use.

Hard as it is to believe, India really doesn’t have a comprehensive framework on how to prescribe, control and monitor the use of pharmaceutical drugs, including antibiotics. As a result, Indians self-medicate; in large numbers it seems, according to the Lancet. This is contrary to my own experience. Everyone I know of my parents’ generation hates popping pills. My father complains bitterly about problems he has sleeping but refuses to be persuaded to take a sleeping pill. My mother has a veritable array of lotions, unguents and Ayurvedic oils by her bedside. But no pills.

She prefers Amrutanjan for headaches, Vicks VapoRub for colds and Tiger Balm for aches and pains. No wonder Indian pharmaceutical companies had to look abroad for their generics businesses, I thought. The Indian pharmaceutical industry is in robust stock-market health, having outperformed the broad market index substantially over the past two years. But it is also in the throes of intense self-reflection on how to prevent chronic degeneration, and in the coming months will attempt to reinvent itself to remain relevant in these changing times.

 

A couple of weeks ago, the health minister Ghulam Nabi Azad convened what was dubbed a “high-level” meeting with the captains of the pharmaceutical industry. The springboard for the meeting was the so-called “sell-outs” among Indian drug companies to foreign multinationals. Piramal, for instance, recently sold its domestic formulations division to the US-based Abbott for an up front payment of US$2.2 billion (Dh8.08bn) and additional cash influx of $400 million a year for the next four years starting next year.

Shantha Biotech and Dabur Pharma, too, have sold controlling stakes to the France-based Sanofi-aventis and the German company Fresenius Kabi, respectively.Some Indian firms, such as Lupin Pharmaceuticals, have followed a different route to the same result by acquiring foreign-branded pharmaceutical businesses. Recently, Sun Pharma bought a controlling stake in the Israeli company Taro Pharma, after a bitter three-year battle.

Taro, which makes topical dermatological products, was seen as the perfect niche branded business that Sun needed to complement its existing stable of products. So far, the pharmaceutical industry has been pretty much going it alone. The Indian government left them to fend for themselves. Mr Azad wants to change all this. He assured the industry chief executives the Indian government would help them address urgent and long-term issues regarding what the industry called “eking out profits in an increasingly competitive world”.

In turn, Mr Azad wanted the companies to supply low-cost drugs to the poorest of poor Indians. The reason for all this angst, both in government and industry circles, is the fact that the industry needs to change course. In the next three years, several products are coming off-patent in the West, thus ending the ride that Indian drugs companies have enjoyed on the coattails of generics. Now that sales of generic drugs are expected to peak worldwide, the industry is being forced to look at new revenue streams.

At the pharmaceuticals industry get-together held in Hyderabad last month, the buzz was all about CRAMS (contract research and manufacturing services) and branding Indian drugs. According to several analysts, drugs industry growth is largely being driven by branded generics, which are expected to generate almost $8bn in sales this year and double that by 2015. Concomitantly, the global market for CRAMS is expected to increase from a value of $26.2bn to $43.9bn, according to the numbers bandied about at the conference.

The other driver is something I see everyday: more and more Indians are falling prey to chronic illnesses and lifestyle diseases such as diabetes and hypertension. They need branded drugs they can trust and use long-term. Until now, affluent Indians used to buy medicines abroad and bring them home. Nowadays, as Indian brands gain credibility, many of them buy their drugs at their local pharmacy. I used to bring all my children’s medication from the UK or the US, either when I travelled abroad or when relatives and friends travelled they would buy them and bring them back for me.

Now that I have tried branded Indian remedies for my children and found them to be effective, I don’t mind paying first-world prices for these medicines. The point is that there is a segment of Indians who are willing to pay for branded drugs and this segment is growing. Indian pharmaceutical companies have realised their domestic businesses will grow just when their foreign businesses are showing signs of strain.

If only one of these pharma hotshots can figure out a way to prevent Indians from self-medicating, particularly with antibiotics. We do so many things wrong on that front: stopping halfway through the course, choosing our own antibiotic based on past experience rather than go to the doctor. I am ashamed to say that since moving back to India, I’ve done all this, too. The health ministry’s committee that will frame policies on antibiotic and other drugs has its work cut out.

Shoba Narayan is a journalist based in Bangalore and the author ofMonsoon Diary

 

Oberoi Hotels

White knight to old man’s rescue when black-tie party’s over

Shoba Narayan (Writer)

Sep 4, 2010

 

Hotel insiders in India have been wondering about the fate of the Oberoi hotels group for some time now, given that its octogenarian chairman’s succession plan appears to have failed. In a recent press conference in Kolkata, Prithvi Raj Singh Oberoi, or Biki Oberoi as he is better known, conceded as much when he indicated that his son and nephew, both joint managing directors of the company, would not work together after him.

“So what happens to the Oberoi hotels after the old man?” said one hotelier in response, echoing the feelings of many. Well, as it turns out, Reliance happened. Last week, Reliance Industriesacquired a 14.21 per cent stake for US$217 million (Dh797m) in East India Hotels (EIH), which owns the Oberoi and Trident brands. The cash injection will help the Oberoi group thwart potential takeover attempts, particularly from its rival, the ITC hotel company that already owns a 14.98 per cent stake in the business, just shy of the maximum 15 per cent allowed by Indian takeover laws.

Anything more than 15 per cent and ITC would have to make an open offer for an additional 20 per cent stake, according to regulations. Reliance’s investment was welcomed by Mr Oberoi, and not just because Reliance paid 22 per cent more than market price for its stake. The Indian press dubbed it the “white knight” of the Oberoi hotel group. Reliance’s shares fell 3 per cent following the announcement and EIH’s shares rose 11 per cent. Reliance has pledged not to interfere with the management of the Oberoi hotels, preferring instead to view the investment as diversification from its core manufacturing businesses.

 

Of the five big Indian hotel chains, the Oberoi is arguably the best, at least in terms of the travel awards it has garnered. The Oberoi Udaivilas in Udaipur is routinely listed as the best hotel in the world by magazines such as Conde Nast Traveller and Travel + Leisure. The Taj group’s palace hotels such as the Rambagh Palace in Jaipur give the Oberoi hotels a run for their awards, but somehow don’t make that final cut. The Leela group has some very nice hotels in Kerala and Goa but their design and execution is hardly cutting edge.

The Park hotels pioneered the concept of small boutique hotels and still remain stylish and edgy, reflecting the modern design sensibility of the owners’ – the sisters, Priya and Priti Paul – but it remains a small chain. The ITC, in contrast, is a massive conglomerate that is into everything from cigarettes to paper. In 1974, the company changed its name from India Tobacco Company to ITC. Their Bangalore property, the ITC Royal Gardenia, recently got a LEED platinum rating and the group is making a push towards going green.

But the character and style of the ITC hotels – including the ITC Maurya in Delhi, frequented by visiting heads of state – somehow betray that they are run by a corporation, not an individual. Mr Oberoi is an old-style hotelier, the kind who knows every detail of his hotels and nit-picks each one. He has an eye for proportion – legend has it that he insists that the solitary rose in each vase is one-and-a-half times the vessel’s height.

His instinct for aptness is also spot on. Oberoi hotels are Indian, but just enough and no more. The staff wear saris and the architecture uses Indian design elements including arches, lattice-worked “jaali” windows and marble counters. But they are also minimalist enough to be comfortable for global travellers. Mr Oberoi himself has a taste for the good life, preferring handcrafted John Lobb shoes, Cohiba cigars, Earl Grey tea, and white-gloved butlers in his homes and black-tie parties.

The challenge for most hoteliers is how to offer consistent service all through its staff hierarchy – from the newest bellboy to the oldest housekeeper. The Oberoi group’s strategy has been to pay above-market salaries and to send its most gifted employees through its two-year in-house training school called the Oberoi Centre for Learning and Development (OCLD). At the Mena House Oberoi in Egypt, one of the concierges informed me that his training at the OCLD was on par with any of the courses he had undertaken in European hospitality schools.

The question now confronting the Oberois is what next? The Oberoi group is still closely associated with Mr Oberoi and his family. He could use the Reliance investment to groom a successor. One possibility is for him to look to JJW Hotels and Resorts. Owned by Sheikh Mohamed bin Issa al Jaber, the group has acquired hotels all over Europe and the Middle East. It owns, for instance, the highly rated UK-based Eton Collection, comprising The Colonnade and Threadneedles, among others. JJW’s management style: hands-off. Perhaps a similarly hands-off style at Reliance could give Mr Oberoi the breathing space he needs to come up with a game plan.

Shoba Narayan is a writer based in Bangalore and the author of Monsoon Diary

Indian Exuberance is misplaced

Indian exuberance is misplaced

Shoba Narayan

Oct 10, 2010

 

The odious comparison comes up all the time, especially during the recent run up to the Commonwealth Games. Every time a walkway collapsed or an official complained about filthy toilets, India collectively sighed and mutely acknowledged the elephant in the room: the Beijing Olympics. Across the globe, in Indian blogs and usenet mailing lists, Indians engaged in a collective, heartfelt and oft-repeated comparison between the two most populous nations on earth. As I prepare to spend 10 days in China, I wonder if the Chinese indulge in as much soul-searching about India as we do about their country?

Against this milieu, The Economist’s recent issue that talks up India over China offered welcome relief to Indians. “How India’s growth will outpace China’s,” said the cover. The numbers, certainly, seem to add up. Indian stock markets are flirting with their all-time highs. According to data from the Bespoke Investment Group that compared the performance of stocks in 22 countries since the financial crisis of 2008, China is the worst performer and India the second-best, behind Mexico. Chinese stocks are down 56 per cent from the peaks reached before the global downturn. In comparison, India is down a mere 2 per cent. In last week’s World Economic Outlook, the IMF forecast that the Indian economy would grow 9.7 per cent next year and 8.4 per cent the following year; higher than the 8.5 per cent that the Indian finance minister Pranab Mukherjee estimated when he sought to reassure investors last week that India’s record foreign institutional investor inflows and its strong market rally did not point to a bubble economy.

 

The reason for India’s current strength goes back to China’s mercantilist, export oriented economy. China’s fortunes, linked as they are with the West, mean that when the West sneezes as it did during the credit crisis, China catches a cold. Thanks to a large domestic economy that is not so export-oriented, India (and Indonesia) have been relatively immune to this phenomenon. A recent report from HSBC said trade confidence in India was the highest among the 17 countries they surveyed. India’s trade confidence index for the coming six months stood at 140 , up from 133 in the first half of the year. China’s was 111.

The numbers are only part of the story. This reality is visible on the ground. Walk the streets and India’s economic vibrance is both palpable and infectious. Vegetable vendors lease solar-powered lamps to continue their business late into the night. Illiterate women who work as household help band together to borrow micro-credit loans in growing numbers. Jewellery stores are jammed with customers buying ornaments for the coming festive season, no matter that gold prices are at an all-time high. Consumer confidence is buoyant. There is little memory here of the financial malaise caused by the credit crunch a mere two years ago. As the IMF report says: “Leading indicators – the production manufacturing index and measures of business and consumer confidence – continue to point up.”

 

 

As contrary as this sounds, I think The Economist and other forecasters are being overly optimistic about India, at least in the short term. India’s consensus building, take-everyone-with-you approach is in contrast with China’s take-no-prisoners approach. This may well win in the long term but it is a gradual, even glacial process. I doubt that it is going to happen by 2013, as The Economist predicts. The reasons trotted out to substantiate India’s growth over China’s are India’s demographic dividend, its democracy, its knowledge economy, and its English-speaking elite who don’t distrust the West and its ways. What most people don’t talk about is the differences in national psyche. China is rooted in a martial arts culture that is fierce and focused. Its people grew up with discipline and are comfortable with hierarchical control imposed by superiors. The whole notion of losing face could be applied to the current currency stand-off between China and the West. For all these reasons, I believe China will continue to surge ahead of India, not only because they are a centrally controlled, efficient economy but also because every Chinese citizen works in tandem towards the same goal. No questions asked.

India, in contrast, doesn’t have China’s killer instinct. In India, everything is chalta hai, as we say. It’s OK. We’ll adjust. We are comfortable with failure and philosophical about our flaws. Nowhere was that more obvious than during the Commonwealth Games brouhaha when officials gave all sorts of outlandish excuses for India’s infrastructure woes. Cleanliness was relative, said one when asked about the filthy toilets. When asked about a collapsing walkway, another official said it was a one-off incident caused by unusually torrential rains. The whole nation made up jokes about their own administration and still, it seemed, the officials didn’t care. There was no accountability but much cacophonous dialogue. That’s supposed to be our strength, isn’t it? A joke about Suresh Kalmadi, the head of the Games organising committee, went like this: “So Kalmadi wanted to commit suicide and hung himself. Except he couldn’t. The ceiling collapsed.” There was seemingly no embarrassment at losing face in the eyes of the world.

As the Obama administration is finding out in the ongoing gloves-are-off currency fight, China doesn’t like being told what to do. Instead of issuing ultimatum, the Treasury secretary Timothy Geithner should find a “superior” to tell China what to do. The IMF is a good start but its clout is doubtful. In addition to studying the numbers, Mr Geithner should perhaps study Chinese martial arts. He could use them, both to get into the Chinese mindset and to build up his own and his administration’s strength.

Shoba Narayan is a journalist based in Bangalore and the author ofMonsoon Diary