Business Standard Article

2 COMPANIES MUMBAI | MONDAY, 10 JUNE 2013 1>

> IN BRIEF

Jet Airways raises pilots’ salariesPrivate carrier Jet Airways has raised thesalaries of its pilots, acceding to their long-pending demand, even as its 24 per centstake-sale deal with Etihad Airways awaitsregulatory approvals. “The airline has hikedits pilots’ wages by up to 18 per cent in astaggered manner with retrospective effectfrom 2010-11,” sources told PTI in Mumbai.The highest rise is six per cent a year, basedon the pay scales. PTI <

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

SAIL consortium prunes Afghan planScaling down their original plan by around 75per cent, members of a Steel Authority of IndiaLtd-led consortium, Afghan Iron and SteelConsortium, have decided to set up a mini-steelplant of 1.25 million tonnes in Hajigak inAfghanistan with a $2.9-billion investment. Thedecision to cut the original project from $10.8billion was taken at a meeting on May 23-24between the members and the projectconsultants, a source said. PTI <

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Additional role for Johri at Discovery Discovery Networks International, on Thursday,said Rahul Johri, senior vice-president andgeneral manager (South Asia), will now also bethe head of revenue, pan-regional ad sales andSoutheast Asia. The company has also namedArjan Hoekstra as the new head of Asia-Pacific,effective September 1. BS REPORTER<

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

ICVL hopes for coal block deal by FY14International Coal Ventures, a consortium ofpublic sector units for coal block acquisition, isaiming to set up its first coking coal blockacquisition in the current financial year. “Wehave shortlisted four to five assets from Australiato Mozambique,” Chairman C S Verma said. PTI<

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Tata Motors’ trademark copiedTata Motors has filed a complaint before a Delhicourt, alleging infringement of its trademarkand copyright by unknown persons. Thecomplaint sought direction to DCP (DistrictInvestigation Unit) Central District to take incustody and produce any person privy toproduction, storage or sale of any suchobjectionable articles. PTI<

You don’t always need anoriginal idea for a start-up.Canadian residents Rahul

Simha and VishnuChapalamadugu, along withCalifornia-based Mohit Aggarwal,spotted a wheel and concludedthey didn’t need to reinvent it; allthey needed to do was modify it tofit their vehicle.

Last year, the three friendsstarted iDreamBooks. The website,www.idreambooks.com, aggregatesbook reviews from major publica-tions such as The New York Times,the Wall Street Journal and a num-ber of other media platformsaround the world, and assigns rat-ings to books based on the reviews.

The service is modelled onwww.rottentomatoes.com, a wellknown website that provides a sim-ilar service to moviegoers, aggre-gating film reviews. The foundersof iDreamBooks are open abouttheir source of inspiration, evenbilling their website as a “RottenTomatoes for books”. In fact, one ofthe founders of Rotten Tomatoes isan investor in iDreamBooks.

The ideaIn an interview, Simha recalled thethree founders were big fans ofRotten Tomatoes. Being avid read-ers, they sought a similar websitefor books. When they couldn’t findone, they decided it was a goodservice to offer.

iDreamBooks, with its casuallychatty slogan — “Never read acrappy book again!” — featuresbetween half a dozen and threedozen, sometimes more, critics’reviews for a book, along with read-ers’ comments. The website alsoassigns a rating for each book. Arating of 70 per cent or moremeans the book is recommended,and the score is accompanied by asmiling face within a blue cloud,the website’s logo. Lower scores aregiven a sulky-face-within-a-grey-cloud treatment.

Simha says the rating is derivedthrough a combination of automat-ed sentiment analysis and manualcuration of professional critics’reviews. He adds the software usedfor sentiment analysis was partly

developed by an in-house team;some of it was secured from avail-able Open Source software andtweaked to the website’s needs.

The project started with a cou-ple of thousand titles; now, it cov-ers about 100,000 titles. While crit-ics’ reviews are displayed for mostbooks, ratings are available onlyfor about 2,000. A search for DanBrown’s long-awaited thrillerInferno, for instance, reveals onlyone review and no critic rating,though it was widely reviewed andone of the biggest publications thisyear. “Scaling up data is our mainchallenge, ever since we launched.On the business side, we see it as afunction of data. So, as we generatemore data and it is cleaner and ofbetter quality, everything on thebusiness side becomes easier,”Simha says.

Shot in the armThe initial investment for the ven-ture came from family and friends.Soon, they attracted funding from

500 Startups, a Silicon Valley incu-bator that invests in early-stagestart-ups, providing up to$250,000. iDreamBooks is head-quartered on its investor’s campusin Mountain View, California.Simha declines to specify the fund-ing his venture has secured so far.

He says the company is in talkswith other investors for morefinancing. Currently, the start-uphas a staff of five, including thethree founders.

In April, the company receiveda shot in the arm through a dealwith Sony ReaderStore. Through

an iDreamBooks icon on the Sonye-bookstore page, users can nowaccess critics’ reviews and theiDreamBooks rating for the book oftheir choice. “Sony approached usbecause they liked what we weredoing. It’s unique,” says Simha.

He adds the partnership wouldprovide the start-up with a revenuestream in the form of an annual fee.It also introduces iDreamBooks to amuch larger audience — the uni-verse of Sony e-bookstore users.While this would increase visibilityfor iDreamBooks, experts cautionSony Reader isn’t as popular as themarket leader Amazon’s Kindle.“The device is quite good, but theykeep a low profile and don’t seem toinnovate anymore. They seem toupdate long after everyone,” saysCalvin Reid, senior news editor atPublishers Weekly, a leading trademagazine for the US book publish-ing industry.

Simha admits Sony’s marketshare is smaller than Amazon’s. He,however, points out his company’spartnership with Sony isn’t anexclusive deal. He saysiDreamBooks is also in talks withother book-related sites that coulduse its service, pointing to Amazonas a potential partner. The start-upsees licensing its data as a majorpart of its revenue stream, withpublishers, retailers, libraries andothers into book discovery or bookselling as potential clients. “On theconsumer side, once we get to scaleand have a lot of traffic, we canmonetise it through book sales and,maybe, through ads,” Simha says.

For now, the founders want tofocus on scaling up content andbuilding traffic on their site. “Tento fifteen thousand books arereviewed by major publicationsevery year. Our goal is to be currentwith those. Right now, we’re cur-rent with the best sellers from May2011 and the Big Six publishingbooks,” says Simha.

ChallengesBuilding up content is the biggestchallenge, as the company can’trely solely on automation for sen-timent analysis; the need for man-ual curation makes the process

slow. For instance, the presence ofa word such as ‘disappointed’ in areview may push the book towardsa negative rating, which would bemisleading if the critic had actual-ly written the reader would not bedisappointed. “We’ve done somework on it, come up with somealgorithms to separate that and tocome up with accurate sentiment.But we’re not satisfied with whatwe have right now,” admits Simha.

To aggregate reviews from vari-ous publications more efficiently,the company also wants to build itsown crawler. “Right now, we have toquery a site with a certain book andif it exists, it gives us a ‘yes’ or ‘no’.But if we have a crawler, it informsus of all the books being talkedabout on that site. So, that wouldsolve all our problems,” he says.

OpportunitiesThe book market in the US, includ-ing educational and professionalpublications, is estimated at $27 billion; e-books account for afifth of this. “There’s a lot of shiftand turmoil in publishing, butthere’s a big move to e-books fromphysical books. It’s actually good forus, because everything is moving todigital and there are more e-booksbeing downloaded,” Simha says.

Amazon’s recent acquisition ofGoodreads, a site that allows booklovers to share opinions and rat-ings of various titles, has provideda boost to Simha’s morale. Amazonwas reported to have paid about$120 million for Goodreads.

Publishers Weekly’s Reidbelieves demand could grow forsites such as iDreamBooks, whichaid discoverability. “This is the holygrail of bookselling in the digital era.How, in this sea of content, do youcome up with something you’d beinterested in reading or, on the busi-ness side, how do you make yourbook stand out from somebodyelse’s? These kinds of entities wouldbe valuable to both consumers andthe publishing side,” he says.

iDreamBooks’s traffic isn’t any-where close to that of Goodreads.But if it succeeds in making itselfvaluable to book readers, it may beequally valuable to booksellers, too.

iDreamBooks: Reading between the linesThe Silicon Valley start-up spotted an opportunity in aggregating book reviews, but accurate sentiment analysis remains a challenge, writes IInnddiirraa KKaannnnaann

It’s a good idea because they are followingthe trend of consumption of books in adigital format. Other types of media arewell reviewed by different types ofsources, whether it’s Netflix or RottenTomatoes for movies or iTunes for musicdownloads. For e-books, there reallywasn’t a similar way to judge a book.Being part of 500 Startups, they haveaccess to all the mentors. They also havethe profile that comes from being part ofthat programme. They have a big marketthat doesn’t really have manycompetitors; there aren’t a lot of ratingservices for books that have received anysort of widespread adoption.But they need to have partnerships withbooks, digital publishers or platforms.It’s a bit of a fragmented market. Thereare different types of e-book readers —there’s Kindle, there’s Kobo, there’sNook from Barnes & Noble. So, it mightbe a good idea to work with one of thebig e-book publishers or with traditionalretailers still focusing on in-storeexperience. Another idea is they couldstart working with a very large platformfor people to read the writings ofunpublished authors. It’s called Wattpad,a Toronto-based company that hasseveral million users around the world.This is where people can discover thewriting of other people who aren’tpublished, mostly fiction. I recommendthey try to work with a company such asWattpad as a way to build awareness.Their business model can be applied inmany countries; the focus is to build theworld’s leading review brand forpublished work. They’re not trying todilute it by focusing on other areas. Themodel of books is a steadily growing andtruly international business one.

Sunil Sharma , Managing Director,Extreme Startups, Toronto

> EXPERT TAKE

START-UP CORNER

Vishnu Chapalamadugu(foreground, in white shirt) andRahul Simha, co-founders ofidreambooks

PPrroodduucctt:: Aggregate book reviews frommajor publications; assign bookratings based on reviews; readyreference guide for readers and book buyers.IInnvveessttoorrss:: Dave McClure, Paul Singh –Partners at 500 Startups; Daniel Hoffer –Mentor at 500 Startups; Patrick Lee – Founder, Rotten Tomatoes; JoshuaGreenough.

RReevveennuuee ssttrraatteeggyy:: Annual fee from partnershipdeal with SonyReader e-bookstore; similar dealswith other e-booksellers; licensing data topublishers, retailers, libraries, and others withbook discovery or book selling functions; monetiseuser traffic through book sales and advertisements.

CChhaalllleennggeess:: Visibility and user traffic are still low; scaling up data provingslow because manual curation of reviews is needed alongsideautomated sentiment analysis; team still working on building a crawlerto aggregate reviews more efficiently; need partnerships with servicesmore popular than SonyReader; two founders have to travel frequently toSilicon Valley from Canada as they don’t have suitable work visas for the US.

www.idreambooks.com:RATING BOOKS WITH REVIEWS

The firm’s homepage & logo (bottom)

Nod unlikely for stake increase in HZL, BalcoINDIVJAL DHASMANA &

SURAJEET DAS GUPTA

New Delhi, 9 June

Anil Agarwal’s SterliteIndustries might not gainin the dispute with the

government over its exercise of acall option in Bharat AluminiumCompany (Balco) and HindustanZinc (HZL) in the light of the pro-posed move to allow call and putoptions in listed companies out-side the stock exchanges.Attorney-General G E Vahanvatihas told the finance ministry themove should come with a clausethat it would be prospective andwouldn’t affect ongoing court dis-putes, said those in the know ofthe development.

The government has decidedto allow put and call options inshare purchase agreements to

permit listed companies to buyor sell equity at a predeterminedprice in future. The proposal wascleared by Telecom MinisterKapil Sibal within a day of hisassuming additional charge ofthe law ministry. It will come intoforce after approval by thefinance ministry and theSecurities and Exchange Boardof India (Sebi). It will be imple-

mented through a Sebi notifica-tion. Under the SecuritiesContracts (Regulations) Act, putand call options are treated asderivatives and are not permit-ted in listed companies outsidestock exchanges. Unlisted com-panies, however, can go for putand call options. When thefinance ministry sought theattorney general’s opinion on the

proposal, he said a notificationallowing the option could beissued by invoking the powersconferred under section 16 and28 (2) of the Securities Contracts(Regulation) Act, 1956. He alsosaid the notification didn’t sufferfrom any infirmity under theCompanies Act, 1956, and theIndian Contract Act, 1872.

However, he said a suitableprovision might be inserted in thenotification that it wouldn’t affector validate past contracts or thosewhich were in courts due to dis-putes. This specific opinion was toaddress the concerns of the min-istry of mines about the litigationpending with regard to Balco andHZL. Call and put options wereone of the major clauses in theagreement with SterliteIndustries, an arm of London-based Vedanta Resources, when it

bought majority stakes in HZLand Balco. Sterlite had bought 51per cent stake in Balco for ~551.50crore in 2000-01 and 26 per centin HZL for ~445 crore in 2002-03,when the Bharatiya Janata Party-led National Democratic Alliancewas in power at the Centre.

Sterlite later invoked the calloption to acquire another 18.92per cent in HZL for ~323.8 crore.Subsequently, it increased itsstake to 64.92 per cent.

However, the governmentheld Sterlite’s call option wasinvalid and could not be used toacquire further stake in HZL.Then Attorney General MilonBanerji had said the country’slaws didn’t allow for call and putoptions to be included in share-holders’ agreements.

When Sterlite chose to exercisethis option in the case of HZL in

2004, the Congress-led UnitedProgressive Alliance governmentdidn’t reciprocate with a putoption. The company movedcourt against the government’sdecision in 2007; the court heldsince the dispute arose out of theshareholder agreement, it shouldbe resolved through arbitrationprescribed in the agreement.While rejecting Sterlite’s plea inearly 2011, the arbitration panelsaid the law of the land should beconsidered first, followed by thearticles of association of a com-pany and then the mutual con-tract between two partners.

Later, the government andSterlite decided to approach theDelhi High Court. Subsequently,Vedanta Resources offered to thegovernment to buy the residualstakes in HZL and Balco for about~17,000 crore.

Jet-Etihad decision on TuesdayThe finance ministry will on Tuesday take acall on the ~2,000-crore Jet-Etihad deal andthe FDI proposal of Norway’s Telenor. TheForeign Investment Promotion Board,headed by Economic Affairs Secretary ArvindMayaram, will also take up the foreign directinvestment proposal of Multi CommodityExchange. While Jet Airways plans to sell 24per cent stake to Abu Dhabi-based Etihadfor about ~2,058 crore, Telenor is seeking toraise stake by 25 per cent in its domesticsubsidiary Telewings to 74 per cent. PTI <

How is the discovery of Lipaglyn abreakthrough for Cadila Healthcare?This is a unique achievement by any Indianpharmaceutical company. For the firsttime, a lot of firsts have happened. It is afirst Indian NCE (new chemical entity), it isalso the first drug to treat dia-betic dyslipidemia and this isthe first drug which hasappeared in the glitazar classacross the world. It gives us theconfidence India and Indian sci-entists can do it. Our basic objec-tive is once we launch in India,we will take it to global markets.So, we will launch in India in thethird quarter of this year andthen take this to the global market. We areregistering into some emerging markets.

Which are the markets?About 15 emerging markets and, amongdeveloped markets, we are taking it to theUS, Europe and Japan.

What will be your strategy?The first approved indication for this drug

is diabetic dyslipidemia but we also haveplans and studies undergoing, which havecompleted phase-II and are moving tophase-III, for some additional indications.Some of these indications are unique.Then, we want to take this drug to devel-

oped markets with additionalindications, which can hastenthe process of approval. This isa patented product.

How many patents do youhave for it and in whichcountries?Our chemical structure ispatented. Once this is patent-ed, you do clinical studies.

Based on that, we have receivedapproval for one indication and thenwe might get approval for additionalindications. So, we will get multiple usepatents for different indications.Currently, we have one product patent.We have patents in the world whereverwe have approval. For additional indi-cations, we have filed additional patentapplications.

What are the additional indicationsunder evaluation?We would not like to disclose these now.We would do that at an appropriate time.

What is unique about this drug?We have done studies of this drugwith pioglitazone, fenofibrateand atorvastatin and we haveseen it is comparable to piogli-tazone with its anti-diabeticeffect without the usual side-effect of pioglitazone such asweight gain. Similarly, it does nothave the side-effect of fenofi-brate. Third, when it is adminis-tered along with atorvas-tatin, additionalreduction in choles-terol level happens tothe extent of around20 per cent. Allthese things makethe drug differ-ent.

When othercompanies shyaway fromresearch due tofinancial risk andregulatory hurdles, howdid you manage such adiscovery?I want to go back to my

strategy. When we decided we wanted tobe a research-based pharmaceutical com-pany, we evaluated how we can doresearch within our resources.

What you read and hear is that onerequires a billion dollar-plus to discover a

molecule. The obvious question tomy mind was, where do we get abillion dollars to do so? Wedecided we do not want to getdisheartened by this number.

So, we decided to do it in acost-optimised way. We focusedour energy in developing

inhouse capability. We are theonly company with a

dedicated researchcentre onlyfocused on doingdiscoveryresearch. We arethe only company

with capacity to dolarge animal stud-

ies, including on pri-mates. From conceptto pre-clinical stud-ies, we have completecapacity to do it.

What are theinvestments madeby Cadila on this drug?This drug discov-

ery took us a total of 12 years, commis-sioned in 2000-01. The first five yearswere spent on discovery and pre-clinicalstudies and the next seven years on clin-ical studies. Our strategy was very clearthat we want to discover and own the drugand not license out. Till now, we havespent around $250 million. We plan tospend another $150-200 million for addi-tional indications and also approvals inother markets.

Do you plan to market the drug on yourown or join hands with other players?We have no marketing capabilities insome developed markets. So, ultimately,we will need marketing partners in thosecountries. (We have) not yet started talk-ing to prospective partners as we are wa-iting for the launch in India. We are exp-ecting approvals in various countries inthree to five years. In India and some em-erging markets, we will market on ourown.

Are you looking for multinationals topartner in developed markets?We will be looking for somebody who hasthe capability to market this product.None of the Indian companies has thecapability to market products in the US orEurope.

For full interview, visit www.business-standard.com

‘Our strategy was to discover and own the drug and not license out’While most domestic as well as multinational companies shy away from making investmentsin drug discovery because of high financial risks and regulatory hurdles, Cadila Healthcaresays it is the first Indian pharmaceutical company to develop a drug from its own discoverypipeline. The research-based firm now plans to partner MNCs for marketing its new drug,Lipaglyn, in developed markets such as the US, Europe and Japan, Cadila Healthcare’sChairman and Managing Director PANKAJ R PATEL told Sushmi Dey. Patel also said that currentchallenges will help Indian pharma industry evolve to become better. Excerpts:

PANKAJ R PATELChairman andManaging Director,Cadila Health

Attorney-General Vahanvati has advised govt to only prospectively allow listed firms to buy or sell stake through contracts, say sources

NO OPTION FOR STERLITE| The government might not allow listed companies to buy or sell equity

through options; past contracts or those in courts might also not beallowed

| Options were one of the major clauses in the agreement with SterliteIndustries, an arm of London-based Vedanta Resources, when itbought majority stakes in Hindustan Zinc (HZL) and Balco

| The government had held Sterlite’s move in 2004 to increase its stakein the companies through options invalid

STERLITE’S SHARE PURCHASE THROUGH DERIVATIVES