Rediff.com among top Asian portals: Merrill

MUMBAI: Merrill Lynch has picked leading India-focused Internet portal
Rediff.com as its third top Asian Internet recommendation. The brokerage expects
Rediff to become the first Asian portal to break even. In its weekly
Internet-sector research report, Merrill analysts Matei Mihalca and David Cui
cited Rediff's better than expected October-December results, its strong cash
position, a growing Indian online advertising market and cheaper Internet access
as reasons for the selection.

Korea's Internet Auction and Hong Kong-based Chinadotcom are its top two
recommendations in the Asia-Pacific region excluding Japan and Australia.
"Growing lower fee and even fee-free Internet access in India favor Rediff,
as they bring more people online," the report said.

India's advertising market is also in better shape than most global markets,
with TV broadcasters reporting 15-20 per cent year-on-year growth, it said. The
share of online advertising from consumer goods, automobiles and insurance
companies was also on the rise in India, it said.

Rediff's page views soared to 670 million in the October-December period, up
69 per cent from the previous quarter. Net revenue rose 31 per cent to $1.75
million, while the proportion from dotcoms declined to 30 per cent from 47 per
cent. Its operating loss narrowed to $1.5 million from $2.09 million in the
previous quarter.

Rediff also has $57 million in cash which Merrill expects will last for over
seven years. Merrill is bullish about Rediff's plans to increase non-advertising
income and estimates its revenue to grow at 22 per cent quarter-on-quarter to
$2.15 million in the January-March quarter and $2.62 million in the next.

"Even on our current conservative numbers, Rediff would be the first
Asian portal to achieve breakeven by end-2001 (significantly ahead of
netease.com and sina.com)," it said.

Indian Internet sector mixed

Merrill feels India, along with China and Korea, are Asia's most important
Internet markets in the long-term. It estimates the number of Internet users in
India to rise seven-fold to 44 million by 2003, up from 5.5 million now. But
trends in the Internet market augur for mixed forecasts for India's Nasdaq-listed
Internet companies, Rediff.com and Satyam Infoway, it said.

Satyam Infoway, majority owned by India's fourth-largest software exporter
Satyam Computer Services, is India's second-largest Internet Service Provider
and also runs a portal, besides offering Web solutions. While Merrill remains
bullish about Satyam Infoway's portal and Web solutions prospects, it is worried
about the impact of lower Internet access pricing on its revenue.

"We believed that as venture capital funding dropped and brash new
entrants suffered, pricing power would return to leading private players such as
Satyam Infoway," Merrill said. But increasing competition from
state-monopoly Videsh Sanchar Nigam Ltd., India's largest Internet Service
Provider which now has a national license and is offering free night-time
access, does not augur well for access pricing, it said.

Merrill has lowered Satyam Infoway's revenue estimate for the current
financial year by 17.7 per cent and for the next year by 15.1 per cent. And it
has pushed back Satyam's EBITDA (earnings before interest, tax, depreciation and
amortization) breakeven point by two quarters to October-December 2001.

Lower access pricing should benefit Rediff.com, Merrill said.

(C) Reuters Limited 2001.