India’s Rupee Climbs to This Month’s High as Equities Advance

By Kartik Goyal - Aug 19, 2014

India’s rupee rose to this month’s strongest level as stocks advanced on optimism the government is stepping up efforts to rein in the budget deficit.
The S&P BSE Sensex (SENSEX) index of local shares climbed as much as 0.5 percent to a record high today. On Aug. 14, India cut the size of its weekly bond auctions in the coming five periods to 120 billion rupees ($2 billion) each from 140 billion rupees. The decision has buoyed confidence in the government’s plan to narrow its shortfall, according to Mumbai-based brokerage Edelweiss Financial Services Ltd.
“The overall bullish sentiment across asset classes is driven by expectations the government will take steps to strengthen the economy,” said Ankur Jhaveri, co-head of currency and rates at Edelweiss Financial in Mumbai. “The rupee gains are driven by inflows into equities.”
The Indian currency gained 0.1 percent 60.6850 per dollar as of 9:55 a.m. in Mumbai, prices from local banks compiled by Bloomberg show. It climbed to 60.6575 earlier, the strongest since July 31. The local currency market was shut yesterday for a holiday. The rupee rose 0.8 percent on Aug. 14.
Finance Minister Arun Jaitley aims to reduce the budget deficit to 4.1 percent of gross domestic product, which would be the least since 2008, in the year through March 2015, according to budget estimates released last month.
The benchmark equity index has jumped about 25 percent this year, the best performer among the world’s 10 biggest markets, as foreigners poured $12.3 billion into local stocks.
The rupee’s one-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose three basis points, or 0.03 percentage point, to 7 percent.
Three-month offshore non-deliverable forwards rose 0.4 percent to 61.63 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Anil Varma, Andrew Janes

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Modi Vows Bank Accounts for Poor With Zero Imports for India

By Santanu Chakraborty and Bibhudatta Pradhan - Aug 15, 2014

Indian Prime Minister Narendra Modi pledged to provide bank accounts and life insurance for millions of poor people while seeking to revive manufacturing in the country to reduce reliance on imports.
Modi announced the plan to give bank accounts and 100,000 rupees ($1,643) of life insurance to poor families during a wide-ranging Independence Day speech in Delhi in which he hailed women’s rights, denounced religious violence and urged a clean environment. He also called for foreign companies to set up manufacturing facilities in India.
“I want to see an India which has zero imports and all exports,” Modi said at the Red Fort today. “We should stress on zero defect while manufacturing products. We should strive to make products which are accepted globally and also should not harm the environment.”
Modi is seeking to revive Asia’s third-biggest economy after taking office in May with India’s biggest electoral mandate in 30 years. The rupee has been Asia’s second-worst performer since then after Modi blocked a global trade deal, refrained from cutting subsidies in his first budget, and didn’t allow foreigners to hold majority stakes in defense companies.
“It was great oratory, extempore, still reasonably strong announcements were missing,” A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte in Singapore, which oversees $450 million, said by e-mail today. “No major announcements have happened except in insurance, which has been held up. After the budget people were thinking things will happen slowly but no indications on any of that.”

Consensus Politics

Modi said his party members “are not those who want to move ahead on the basis of our mandate” and will seek consensus while governing. Opposition lawmakers yesterday blocked a bill proposing a higher foreign ownership cap in the insurance sector, raising concerns that Modi will struggle to pass laws to revamp land policy and to start a uniform goods and service tax.
Modi lamented that millions of Indians who had mobile phones don’t have bank accounts. The insurance cover will help the poor cope with unforeseen setbacks, he said.
“Economic development must benefit poor and it should start from here,” Modi said.
The World Bank estimated in 2012 that 65 percent of adult Indians don’t have a bank account. That’s about 530 million people, more than the U.S. and Brazil combined, or the whole European Union. In China, by contrast, 36 percent of adults don’t have a bank account.

Cash Transfers

Modi’s plan will include identifying the poor, creating unique biometric identifiers for them, opening linked bank accounts, and making government transfers into those accounts, Reserve Bank of India Governor Raghuram Rajan said earlier this week. The previous administration had invested $550 million in a similar program.
Last month, the RBI proposed allowing mobile-phone companies and supermarket chains to set up banks that can take deposits and transfer money for customers in rural areas.
Planning Commission, a Soviet style body that formulates five-year plans, would soon be replaced with a new institution because of the change in India’s economy, Modi said today.
“If we have to take India forward, then states will have to be taken forward,” Modi said. “The importance of federal structure is more today than it was in last 60 years. We need an institution of creative thinking.”
Modi’s speech “laid out the direction of government policy and its priorities,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Ltd., said by phone. “The market will take confidence from Modi’s approach.”
To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net
To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net Ravil Shirodkar

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Tata Motors Surges as Profit Jumps on Demand for Jaguar

By Siddharth Philip - Aug 12, 2014

Tata Motors Ltd., India’s biggest automaker, surged the most since November after beating analysts’ estimates with a threefold jump in profit.
The company’s shares jumped 5.9 percent to 472.70 rupees as of 9:38 a.m. in Mumbai, the highest intraday gain since Nov. 14. Net income rose to 54 billion rupees ($883 million) in the quarter ended June, the Mumbai-based company reported yesterday. That surpassed the 37.9 billion-rupee median of 34 analysts’ estimates compiled by Bloomberg and was the biggest profit increase since the three months ended December 2010.
Sales of Jaguar and Land Rover in China, the world’s largest car market, surged 61 percent helping Tata Motors, which is struggling to revive demand in India, increase profit. Deutsche Bank AG and Credit Suisse Group AG were among brokerages which raised their share price target for the maker of Nano hatchback and Indigo sedan after the earnings announcement.
“JLR benefited from strength in China demand, strong variant mix and ability,” Govindarajan Chellappa and Rajasa Kakulavarapu, analysts at Jefferies wrote in a note today. “Strength in China is the key to sustenance of the high levels of profitability.”
Profit at the luxury unit more than doubled to 693 million pounds ($1.16 billion) on demand for the F-Type convertible and Range Rover SUVs. Tata Motors group revenue climbed 38 percent to 646.8 billion rupees.
Deliveries at Jaguar Land Rover climbed 22 percent to 115,596 vehicles in the quarter, bolstered by the F-Type that began shipping last year and the new and refreshed Range Rover line up.

Indian Car Debut

Tata Motors is striving to turn around its local business.
The brand will unveil its first new car model in five years today. The compact sedan, called the Zest, was developed to revive profitability at the Indian business as it lost market share to Maruti Suzuki India Ltd. and the local unit of Seoul-based Hyundai Motor Co.
Tata Motors’ domestic passenger-vehicle deliveries fell 37 percent in the quarter, according to the Society of Indian Automobile Manufacturers. The company’s truck sales dropped 25 percent in the same period.
“The domestic business has been a drag,” said Juergen Maier, a fund manager at Raiffeisen Capital Management in Vienna. “But we hope that with the new passenger vehicle models and the commercial vehicles picking up, things will get better.”
The local business of Tata Motors reported a profit of 3.94 billion rupees, after receiving a dividend of 150 million pounds from Jaguar Land Rover.

Small Jaguar

The automaker’s luxury unit is also building a mid-size sports sedan called the XE, which it will unveil next month and will go on sale in 2015.
The Jaguar XE, to be unveiled in London on Sept. 8, will compete against Bayerische Motoren Werke AG’s 3 series and Daimler AG’s Mercedes-Benz C Class models. The Jaguar will be the only car in its segment to be built on an aluminum platform that will help it go 75 miles (120 kilometers) on a gallon of fuel, the company has said.
The XE model will feature four cylinder, 2-liter gasoline and diesel engines built at the company’s new engine factory, according to the carmaker.
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Arijit Ghosh, Subramaniam Sharma

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India Sets Norms to Open $20 Billion REIT Market

By Bhuma Shrivastava and Santanu Chakraborty - Aug 11, 2014

India approved the setting up and listing of real-estate investment trusts as the nation seeks to unlock a $20 billion market.
The trusts, or REITs, will have to own assets worth at least 5 billion rupees ($82 million), the Securities and Exchange Board of India said in New Delhi yesterday. Investors must put in a minimum 200,000 rupees. Final notifications would be issued soon to make the new rules for REITs effective in a month or two, Press Trust of India reported, citing U.K. Sinha, chairman of the capital-markets regulator.
The introduction of REITs will provide a new source of funding for cash-strapped developers that are struggling to reduce debt amid one of the highest interest rates in Asia and economic growth near the lowest in a decade. The products will give investors the ability to participate in the country’s property market without investing directly.
“The sector has been in all sorts of trouble primarily due to high leverage for most of the developers,” Pramod Gubbi, director for institutional sales at Ambit Capital Pvt., said in an interview to Bloomberg TV India. “What REIT does is to open up another avenue for funding and this should bring down their cost. More money in the hands of the developers could see more projects taking off.”
DLF Ltd. (DLFU), India’s largest developer by value with about 28 million square feet (2.6 million square meters) of operational rental assets, could be a “big beneficiary,” brokerage Emkay Global Financial Services Ltd. said in an Aug. 1 report.

Combined Debt

Other gainers include Prestige Estates Projects Ltd. (PEPL), a Bengaluru-based developer with 8 million square feet, and Phoenix Mills Ltd. (PHNX), a mall operator that owns 6 million square feet, according to HDFC Securities Ltd.
The S&P BSE India Realty Index rose 2.6 percent as of 9:56 a.m. local time. DLF added as much as 4.2 percent, Prestige 4.5 percent and Phoenix Mills 4.8 percent.
The combined debt of India’s six largest developers climbed to a record 394 billion rupees in the 12 months through March 31, more than double the 158.8 billion rupees in 2007, according to data compiled by broker IIFL Ltd.
REIT-funded assets may reach $20 billion by 2020, according to an estimate by property-broker Cushman & Wakefield, of which as much as $12 billion could be raised in the first three to five years.

Top Markets

“It’ll also provide liquidity to investors as these trusts will be listed and traded on stock exchanges,” Neeraj Bansal, partner and head of the real estate and construction practice at KPMG India, said in an e-mail.
REITs, pioneered in the U.S. in the 1960s, are traded publicly and pool investor money to buy real estate such as shopping malls, office buildings and rental housing. India’s REIT market has the potential to grow to rank among the top five markets in Asia by market capitalization, according to Cushman & Wakefield.
While the market regulator had released the first draft of guidelines for REITs in 2008, they didn’t get final approval because of a lack of clarity on taxes and because the global financial crisis hurt the investment climate, according to a report by Knight Frank LLP in June. The regulator released a new set of guidelines in October, outlining the eligibility criteria for setting up REITs.
To contact the reporters on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net Sunil Jagtiani

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

State-owned Indian Bank and Andhra Bank are cracking down on middlemen, who act as facilitators between lenders and borrowers, to clean up the system after the recent arrest of the Syndicate Bank chairman and company executives over corruption related to enhancing credit limits. While Indian Bank has banned middlemen or arrangers from entering the premises, Andhra Bank has stipulated that an intermediary should always be accompanied by a borrower. State Bank of India doesn't plan any changes to its policy as it follows a rigorous due dili gence process, said Chairman Arundhati Bhattacharya. SBI accounts for 20% of all loans. Syndicate Bank chairman and managing director SK Jain was arrested by the Central Bureau of Investigation on August 2 over charges of corruption. He was arrested for seeking Rs 50 lakh in bribes to increase loan limits for Prakash Industries and Bhushan Steel. CBI also arrested some intermediaries who were said to be negotiating the bribes. The August 4 memo issued by Indian Bank CMD TM Bhasin was explicit: “It has been ensured that no middlemen or arrangers to meet top management so as to avoid extraneous pressures or obligations,“ it said, adding, “Middlemen or arrangers should not be entertained at the zonal and branches level.“ It further said that that all official meetings with the CMD, executive directors and general managers will be held in conference or meeting rooms that have CCTV cameras with a notice making clear that proceedings were subject to surveillance. Also, the bank has directed staff that visitors should only be allowed to carry with them papers, laptops and tablets that are required for meetings or discussions with an X-ray machine installed at the entrance to check those who come in. While many banks are taking a closer look at their policies, the banking regulator is considering measures to improve corporate governance. “There are some good middlemen and some not-so-good middlemen. A good middleman acts as a broker. But if the point of a middleman is to pay bribes, that is obviously not OK. It's part of the whole set of governance issues that we need to look at,“ Reserve Bank of India governor Raghuram Rajan said last week. The central bank under Rajan has been campaigning for banks to take a tough line on bad loans that act as a drag on finances. For small and medium-sized companies that are not well versed in bargaining for better terms with lenders, intermediaries play a significant role. “Intermediaries will be there, they are unavoidable. How to regulate them is an issue,“ said CVR Rajendran, CMD of Andhra Bank. Andhra Bank has made it mandatory for officers to mention from where or from whom the loan proposal originated. Intermediaries will have to arrive and leave along with the borrower. This rule stems from bank officials noticing that intermediaries often ask the borrower they've accompanied to step out from the room for a few moments. The intermediary may then give the borrower the impression that a gratuity of some sort is expected. The Syndicate Bank episode is the third instance in the recent past in which middlemen were involved in bribes-for-loans cases, following such occurrences at State Bank of India and LIC Housing Finance. [Click To Enlarge]

By Bhuma Shrivastava and Santanu Chakraborty - Aug 11, 2014

India approved the setting up and listing of real-estate investment trusts as the nation seeks to unlock a $20 billion market.
The trusts, or REITs, will have to own assets worth at least 5 billion rupees ($82 million), the Securities and Exchange Board of India said in New Delhi yesterday. Investors must put in a minimum 200,000 rupees. Final notifications would be issued soon to make the new rules for REITs effective in a month or two, Press Trust of India reported, citing U.K. Sinha, chairman of the capital-markets regulator.
The introduction of REITs will provide a new source of funding for cash-strapped developers that are struggling to reduce debt amid one of the highest interest rates in Asia and economic growth near the lowest in a decade. The products will give investors the ability to participate in the country’s property market without investing directly.
“The sector has been in all sorts of trouble primarily due to high leverage for most of the developers,” Pramod Gubbi, director for institutional sales at Ambit Capital Pvt., said in an interview to Bloomberg TV India. “What REIT does is to open up another avenue for funding and this should bring down their cost. More money in the hands of the developers could see more projects taking off.”
DLF Ltd. (DLFU), India’s largest developer by value with about 28 million square feet (2.6 million square meters) of operational rental assets, could be a “big beneficiary,” brokerage Emkay Global Financial Services Ltd. said in an Aug. 1 report.

Combined Debt

Other gainers include Prestige Estates Projects Ltd. (PEPL), a Bengaluru-based developer with 8 million square feet, and Phoenix Mills Ltd. (PHNX), a mall operator that owns 6 million square feet, according to HDFC Securities Ltd.
The S&P BSE India Realty Index rose 2.6 percent as of 9:56 a.m. local time. DLF added as much as 4.2 percent, Prestige 4.5 percent and Phoenix Mills 4.8 percent.
The combined debt of India’s six largest developers climbed to a record 394 billion rupees in the 12 months through March 31, more than double the 158.8 billion rupees in 2007, according to data compiled by broker IIFL Ltd.
REIT-funded assets may reach $20 billion by 2020, according to an estimate by property-broker Cushman & Wakefield, of which as much as $12 billion could be raised in the first three to five years.

Top Markets

“It’ll also provide liquidity to investors as these trusts will be listed and traded on stock exchanges,” Neeraj Bansal, partner and head of the real estate and construction practice at KPMG India, said in an e-mail.
REITs, pioneered in the U.S. in the 1960s, are traded publicly and pool investor money to buy real estate such as shopping malls, office buildings and rental housing. India’s REIT market has the potential to grow to rank among the top five markets in Asia by market capitalization, according to Cushman & Wakefield.
While the market regulator had released the first draft of guidelines for REITs in 2008, they didn’t get final approval because of a lack of clarity on taxes and because the global financial crisis hurt the investment climate, according to a report by Knight Frank LLP in June. The regulator released a new set of guidelines in October, outlining the eligibility criteria for setting up REITs.
To contact the reporters on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net; Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net Sunil Jagtiani

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

State Bank of India Posts First Profit Gain in Six Quarters

By Anto Antony - Aug 8, 2014

State Bank of India posted its first profit increase in six quarters as the country’s largest lender by assets boosted lending and contained bad credit.
Net income climbed to 33.5 billion rupees ($545 million), or 44.86 rupees a share, in the three months ended June 30, from 32.4 billion rupees, or 47.38 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. Profit exceeded the 32.5 billion-rupee median of 31 analyst estimates compiled by Bloomberg.
Shares of the 208-year-old lender surged 40 percent in the three months through June, the most in almost four years, as investors bet on Chairman Arundhati Bhattacharya reining in bad loans and newly elected Prime Minister Narendra Modi spurring India’s economy. The nation’s growth will strengthen this fiscal year, the government forecasts.
“Growth in income from loans and improving asset quality is driving the profit growth,” Asutosh Kumar Mishra, a Mumbai-based banking analyst at Karvy Stock Broking Ltd., said by phone. Still, investors are waiting to be convinced that improvements in asset quality will be sustained, he said.
SBI shares fell 0.8 percent to 2,417 rupees at 1:32 p.m. in Mumbai trading, less than the 1.3 percent decline in the S&P BSE Sensex index.

Bad Loans

The bank’s gross bad-loan ratio narrowed to 4.9 percent from 5.56 percent a year earlier. That’s still the highest among the country’s five largest lenders by assets. For all Indian banks, the level was 4 percent in March, down from a six-year high of 4.2 percent in December, according to a Reserve Bank of India report.
In an interview last month, Bhattacharya, 58, said that SBI (SBIN) is pushing large corporate borrowers that have defaulted or are under stress to make repayments to the bank by tapping equity markets and selling non-core assets. She leads an SBI panel that tries to recover sour loans of more than 5 billion rupees.
India’s finance ministry predicts the economy will expand as much as 5.9 percent in the fiscal year through March 2015, up from 4.7 percent. That may help to spur banking-industry loan growth, which this year touched the weakest levels since the global crisis.
SBI’s outstanding loans increased 13 percent to 12 trillion rupees in June from a year earlier, exchange filings showed. The lender’s capital-adequacy ratio stood at 12.3 percent, the filings showed, compared with a central bank requirement of at least 9 percent under Basel III rules.
The bank is considering share sales in its insurance and asset-management units to raise money, Bhattacharya said in the July interview. SBI needs more than 800 billion rupees of additional equity capital by 2019 to meet Basel requirements.
To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net
To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net Paul Panckhurst, Russell Ward

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

Indians Flaunt 4-Year-Old IPhones as Apple Builds Appeal: Tech

By Bianca Vázquez Toness - Aug 7, 2014

Apple Inc. (AAPL), which has struggled in emerging markets because of the price of its new iPhones, has devised a strategy for India that’s starting to pay off: It’s pushing older models that offer cachet at affordable prices.
The iPhone 4, which was released in the U.S. in June 2010, is still available. So is the iPhone 4s that went on sale in October 2011.
“You flaunt an iPhone, but you don’t flaunt an Android,” said Punit Mathur, a 42-year-old vice president of a digital media company who switched to a new iPhone 4s from a Nexus 4. An iPhone 5s that would cost 53,500 rupees ($874) is too expensive, “but the 4s is still an upgrade,” he said.
Apple doubled sales in a market growing faster than China and the U.S. as it tries to close the gap with Samsung Electronics Co. and domestic makers Micromax Informatics Ltd. and Karbonn Mobiles India. The strategy is critical to Apple’s success in a nation where two-thirds of the population live on less than $2 a day -- and it may become a model for other emerging countries.
“Once Apple has fully proven this model in India, you’re going to see them roll it out to other markets,” said Ken Hyers, an analyst with Strategy Analytics in North Carolina. “Particularly Brazil, Russia, Indonesia, the other large emerging markets where they want to gain market share.”
Apple’s approach in India has helped it build traction in a country where 225 million smartphones will be sold this year, said Brad Rees, chief executive officer of London-based Mediacells, a marketing company. Apple, the fifth-largest vendor in India, more than doubled sales there in the first quarter to 325,000 iPhones from a year earlier, according to researcher Canalys.

Xiaomi Competition

Competition in India is intensifying. Xiaomi Corp., the four-year-old company that outsells Apple in China by offering inexpensive devices with high-end features, began offering its Mi3 mobiles in India at 13,999 rupees on Flipkart.com. In three limited online sales, 35,000 phones were bought within minutes.
Apple has historically used the strength of its brand to lure consumers instead of price. However, its success stems in part from carriers that offer discounted devices or allow consumers to pay for a mobile phone over a multi-year contract.
“Apple has started to understand India is a more price-sensitive market,” said Katyayan Gupta, an analyst at Forrester Research Inc. in New Delhi. “Indians want to show their status, so people want Apple. It doesn’t matter if it’s a two-year-old phone. It’s an Apple at the end of the day.”

Prepaid Cards

While an unlocked and contract-free, 16-gigabyte iPhone 5s is listed for $649 on Apple’s U.S. website, Verizon Wireless offers the same device for about a third of that price when customers agree to a two-year contract. China Mobile Ltd. gives monthly rebates for users who buy an iPhone and sign a two-year contract, according to the carrier’s website.
China Mobile, the world’s largest phone company by users, in April posted a third straight drop in quarterly profit as expenses for subsidizing the iPhone and building networks increased. NTT Docomo Inc., Japan’s largest wireless operator, missed its full-year profit forecast in March after offering the iPhone for the first time in September to lure subscribers.
Bethan Lloyd, a London-based spokeswoman for Apple, declined to comment on the company’s sales strategy in India.
Carriers in India typically don’t subsidize the costs of phones because the majority of customers don’t sign multi-year agreements. That’s because it’s difficult to check a person’s credit-worthiness or enforce contracts, said Rajan Matthews, Director General of the Cellular Operators Association of India, in New Delhi.

Retail Shops

Most Indian consumers buy phones from retail shops, not carriers, and use prepaid cards to charge their devices with talk time, Matthews said. Wireless operators earn an average $2 per month per user, another reason Indian operators don’t subsidize phones as they do in the U.S., he said.
“At that rate, it would be extremely difficult to get a payback in two years,” Matthews said.
Bharti Airtel Ltd. (BHARTI) is the largest carrier in India, and the only one among the top three to offer iPhones. Ashutosh Sharma, a company spokesman, declined to comment on Apple sales.
The iPhone 4 was shipped to India as recently as May, said Jessica Kwee, a Singapore-based analyst for Canalys.
Sathish Babu, founder of UniverCell, an electronics retail chain in South India, said he received an iPhone 4 shipment manufactured in January. “It’s not old stock,” he said.

Half Price

Suresh Subbian, 42, bought an iPhone 4 in June for his wife, paying about 19,500 rupees.
“We don’t want to take a big risk by buying a new model,” he said by phone from Chennai. “I thought I’d buy her a simple model and try it. It’s about half the price of a 5s and that’s an important factor.”
Apple is doing a few things differently in India that have driven its performance, Kwee said.
“But the main reason is that Apple is focusing its efforts on selling cheaper and older products in India,” she said.
The average price of an iPhone in India is about $450 due to the larger proportion of older models sold, according to Kwee. That compares with $600 to $700 in the U.S., she said.
The approach helps get users into Apple’s network for selling applications, music and movies. The iPhone 4s is also available on Apple’s website.

Gateway IPhone

Apple’s strategy also likely includes shipping factory-refurbished phones from developed markets, according to Hyers of Strategy Analytics.
“Our ability to keep customers is very good and our ability to show other products that Apple produces to a family that’s buying Apple products is also very good,” Apple Chief Executive Officer Tim Cook said on an earnings call April 23. “If we can get them in on the entry iPhone, it gives them a great product, at a great value and gets them into the ecosystem.”
Apple had a successful second quarter of iPhone sales in Brazil, Russia, India and China, a sign the company is building a footprint in emerging markets, according to a July report from IDC Corp.
Some stores in India are finding success by offering installment plans to purchase iPhones for consumers with credit cards.

Mature Line

Himanshu Chakrawarti, chief executive officer of Indian retail chain The Mobile Store Ltd., took out full-page ads in major cities about a year ago promoting installment plans for iPhones.
“In India, you have to pay that whole cost upfront,” Forrester’s Gupta said. “There aren’t that many people who can pay $800 in one lump sum for a phone. That’s the cost of a laptop. But as soon as you divide that $800 over 24 months, you can sell it.”
Reliance Communications Ltd., the fourth-largest carrier in India, began offering iPhones in November to credit-card holders who agree to fixed monthly payments for two years with no down payment. Rajeev Narayan, a company spokesman, declined to comment on sales or strategies.
Selling older models will become more central to Apple’s plan in India as its product line matures, said Rees of Mediacells. And as the company looks to boost sales in markets including Vietnam and Brazil, it may repeat the India gameplan.
“You will see Apple bringing back more of its older models in more markets globally,” Hyers said. “It’s a great way to build mind-share and bring them into their ecosystem, and kind of make those customers who have bought these perhaps lower-end Apple devices want to upgrade to the next generation when they can.”
To contact the reporter on this story: Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net
To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Aaron Clark, Robert Fenner

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