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The event-Unilever Indonesia increases royalty payment to its parent Unilever: Unilever's Indonesian subsidiary, PT Unilever Indonesia, has approved a hike in royalty payments to its parent Unilever. Unilever Indonesia has agreed to pay a 5% fee and a maximum of 3% actual cost recovery as compared with the existing 3.5% fee.
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Near- to medium-term order flow to taper down from PGCIL; though global opportunity visible: Our interaction with the management of PGCIL revealed that around Rs70,000 crore of orders were already placed by the company out of the total approved investment worth Rs85,500 crore for the 12th five-year plan. Out of the approved investment, around Rs15,000 crore of ordering is pending. PGCIL would require additional orders worth Rs15,000 crore to touch the target of Rs100,000 crore. So, we believe that till the end of FY2015, ordering could be around Rs30,000 crore on the higher side from the PGCIL. Ordering from the PGCIL crossed Rs18,000 crore in FY2011 and Rs22,000 crore in FY2012, which should not be above Rs15,000 crore on an average in the next two years. Hence, we maintain our cautious stance. Nevertheless, opportunity from the international market is likely to remain buoyant driven by the aging infrastructure requiring replacement, investment driven by American Recovery and Reinvestment Act and finally due to a smart grid and focus on renewable sources.
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Fears about similar changes in HUL's royalty fee structure: The hiking of royalty fees for Unilever Indonesia has led to fears of a similar action on Hindustan Unilever (HUL). HUL currently pays a royalty fee of 1% of the net sales for using the brands and trademarks held by Unilever. HUL has been paying 1% royalty to Unilever since August 1999 when for the first time entered it into a technical collaboration agreement with Unilever. The same was revised in December 2009, wherein additional products were added to the arrangement. The products added included product categories, where technical inputs are provided by Unilever, and products of specified categories manufactured by third-party manufacturers, where technical inputs developed by Unilever were made available to them.
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Relatively weaker flow YTD: The order awarding activity of Power Grid Corporation of India Ltd (PGCIL) picked up in September at around Rs1,873 crore. However, October and November (part of Q3FY2013) have broadly recorded average ordering to the tune of ~Rs700 crore in each month. In Q3FY2013, we expect that PGCIL will find it difficult to catch up with order flow compared with that of Q3FY2012, given the year-till-date (YTD) order flow. However, going by the historical trend, significant (almost 40-50%) ordering is expected in Q4FY2013.
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Transmission line segment remained the highest contributor, while KPTL and KEC regained the market share: Among segments, order from the transmission line segment remained the highest growth contributor in YTDFY2013, contributing around 35% (excluding transmission line order of high-voltage direct current [HVDC] multi-terminal system worth Rs2,500 crore during June 2012). In the transmission line segment, we observed that (KEC; 17%) and Kalpataru Power Transmission Ltd (KPTL; 14%) regained their market share YTD.
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What Is a Firm?
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| Peter Klein | Some of you have heard me suggest — at least half seriously
— that we ban the word “entrepreneurship” from scientific discourse. The
word h...
