|
|
    
|
EXECUTIVE SUMMARY 100 Ways to Postpone The Reforms Besides the Bills, the Vajpayee Administration did little to fulfil its ambitious 100-day targets. They certainly weren't 100 days of solitude. Not with a 25-party alliance forming the government at the Centre. But the markets appears to have approved. The rupee remained steady, and the BSE Sensex moved up from 5,032.99 on October 13, 1999, the National Democratic Alliance's (NDA) first day in office, to 5,355.80 on January 20, 2000-its hundredth.
Despite its bungling of the crisis related to the hijacking of Indian Airlines Flight IC 814, the government managed to get some work done. The specifics? Five Bills: the Insurance Regulatory & Development Authority Bill, which set the stage for foreign investment in insurance; a Bill on geographical indications which sought to institutionalise, from the patents perspective, the knowledge and the use of various indigenous natural resources like turmeric and basmati; a Bill allowing the extension of copyrights from 25 to 50 years; the Foreign Exchange Management Act; and the Securities Contract Regulation Act Amendment Bill, which facilitates the introduction of derivatives trading. And that wasn't all: the Union Government signed an agreement with the various state governments for the introduction of a uniform Value-Added Tax-a constant demand from corporate India-from April 1, 2001. The government also allowed Indian companies to float Global Depository Receipt and American Depository Receipt issues without the Reserve Bank of India's permission, and cleared a proposal for the creation of a secondary mortgages market.
However, despite easier approval norms for foreign investment in domestic satellite system projects and pharmaceutical companies, foreign direct investment did not show signs of picking up in the first 100 days in office. And the fact that the government is yet to take any significant step to address the fiscal crisis will make the next 100 days at work tougher. The government got off to a good post-100 start, though, by declaring its intention to privatise Indian Airlines, and selling Modern Foods to Hindustan Lever for Rs 105 crore. It also circulated a draft policy on civil aviation which has provisions for the privatisation of aviation infrastructure, the creation of a new regulatory body, and permission for domestic airlines to fly international routes. Now it's up to Union Budget 2000 to send out the message that investors want to hear: enough of policy-making; now let's get down to business. Ver 2000, that is -Dwaipayan chakraborty If It Ain't Working,
Break It India Inc. started the year by setting its house in order. Chafing at its under-valuation, the Adi Godrej-led Godrej Soaps decided to demerge its chemicals division-which accounts for close to 40 per cent of the company's turnover of Rs 900 crore-into an independent company. This will transform Godrej Soaps into a purely FMCG company. Mather & Platt, the Manu Chhabria-controlled engineering company, sang a similar tune by announcing a 3-way split: its fire-systems equipment, pumps, and process-machinery divisions will now become separate companies. Foreign companies continued to be bullish on India. Japanese financial services major, Orix, signed up for a 30 per cent stake in Investmart India, a retail finance advisor promoted by Infrastructure Leasing & Financial Services; and Belgian pharmaceutical company Solvay said it will acquire Duphar-Interfran's pharmaceuticals business once it is demerged from the parent company, which will now focus only on chemicals. The only wrong note was struck by the Foreign Investment Promotion Board, which rejected Unilever's proposal to acquire Rossel Industries. Meanwhile, M&A continued to occupy centre-stage.
Continental AG and Ceat Tyres both submitted bids to acquire Modi Rubber.
And Mobile Telecommunications acquired the Mumbai-based Access Information
Systems. The American gold rush continued too. Spurred by the success of
Infosys Technologies, Satyam Infoway, and the ICICI on the NASDAQ and the
New York Stock Exchange, Morepen Laboratories, Mahindra & Mahindra,
and Rediff Communications said they are planning American listings. With
the government now freeing Indian companies from taking prior permission
for GDR and ADR issues, more are expected to join the stampede. With such
an eventful start, the year looks promising. Q-3 Quickens
The Pulse-Quickly The stock-prices bounced back on January 21, 2000, on India's bourses fuelled by heavy speculative buying. Predictably, it was the infotech sector which led the charge. Following the rally of global infotech stocks on the tech-heavy NASDAQ, Indian tech stocks too reflected the sentiment. The BSE Sensex gained 47.94 points between January 3, 2000, and January 21, 2000. What came as a surprise was the fact that prices were firm despite the fact that the Foreign Institutional Investors (FIIs) were net sellers in most of the recent trading sessions. In the last 4 trading sessions alone, the FIIs sold shares valued at Rs 300 crore. What boosted the sentiment on the bourses was the first flush of third-quarter results flowing in from the corporate sector. But the action continued in the infotech sector, with the heavy buying of scrips like Infosys Technologies, Wipro, Satyam Computer, and Software Solutions Integrated. But the healthy Q-3 results of companies, like Tata Steel and Gujarat Ambuja Cement, triggered off buying as well. Still, stockmarket analysts expect a downward trend in the coming fortnight because of the lukewarm interest shown by the FIIs. Most of the institutions are expected to tread cautiously till the government shows its cards on the economic policies in Union Budget 2000. -Roshni Jayakar CAPITAL
MARKETS Forget the unknown premium. Market forces are, finally, in control of the pricing of new Initial Public Offerings (IPOs). Last year, the adoption of the book-building process for the fresh issuance of equity shares by 2 companies-Hughes Software Systems (HSS) and HCL Technologies-marked a fundamental shift from pre-setting a price. And, in mid-January, 2000, the Ahmedabad-based Shree-Rama Multi-Tech became the first non-infotech company to use this market-driven technique. Book-building is now empowering the investor to set her own price-ranges, with the allotment-price being decided by the extent of over-subscription. The book for the HSS issue, for instance, was set in a range between Rs 480 and Rs 630. But, since the issue was oversubscribed 24 times, the price was Rs 630. Likewise, the HCL Technologies issue commanded a price-range between Rs 500 and Rs 580, but the oversubscription of 27 times ensured that the selling-price was Rs 580. This way, the CFO never has to worry about whether she has priced an issue too high-or, for that matter, too low. Says Arun Kumar, 50, Managing Director, HSS: ''The biggest advantage of book-building is that the final price is, generally, close to the market price.'' Sums up Shanti Ekambaram, 37, Executive Director, Kotak Mahindra Capital: ''Market forces decide the price. And the company benefits because it gets the highest that the market is willing to offer.'' Add to that the advantage of being able to announce the price-band on the eve of the issue-instead of having to freeze it 6 weeks earlier as is the case with fixed-price issues-and it is obvious why more CFOs may be moving to this mode. Predicts a senior manager in a Mumbai-based merchant bank: ''Given the tremendous flexibility in the book-building process, we shall soon see more public issues take this route.'' Of course, the overwhelming success of the first 2 issues does not mean that every company will get a similar response just because of book-building. In fact, the HSS and HCL Technologies issues received the response that they did largely on account of the current passion for software stocks. Which is why companies are watching the Shree Rama Multitech issue closely. Explains Bhupendra Patel, 43, Senior General Manager (Finance), Shree Rama Multi-tech: ''Our issue will be the real test of price discovery through book-building as the earlier 2 issues were from infotech companies, and they would have succeeded in any case.'' But then, CFOs may not have a choice but to take this route since investor pressure alone will ensure that the fixed-price strategy does not work any more. After all, it is a solution straight out of the book. -Dilip Maitra LABOUR The coincidence was striking. On one day, January 17, 99,000 employees of 11 major ports-Calcutta, Cochin, Goa, Kandla, Madras, Mumbai, Navi Mumbai, New Mangalore, Paradip, Tuticorin, and Visakhapatnam-struck work. Five lakh employees of the postal department held demonstrations across the country. Earlier, on January 15, 88,000 employees of the UP State Electricity Board had gone on strike. And 5 lakh employees and teachers of the Rajasthan Government and 3.6 lakh employees of the Jammu & Kashmir Government too were on strike. True, the port workers' strike ended on January 23, 2000, while the power-workers' strike was short-circuited 2 days later. But what explains this sudden revival of trade-unionism? For most public sector employees, operating in areas closed to the private sector, the primary issue is related to competition. Threatened by the imminent entry of (private sector) rivals, which will expose their company's inefficiencies and cause it to force shape up or ship out-which, in turn, will necessitate them to change their ways-the strike is their tool for halting the policy-making machinery, thereby stalling reforms. Explains Vishwanath A. Panandhikar, 64, President, Center for Policy Research: ''It's simple. Nobody likes to change the status quo. This is a standard practice of PSU employees all over the world. This trend is seen in the private sector too. The government should act firmly.'' It should, but given that trade unions play a significant role in the electoral process, will it? Points out Dr. Lakshmidhar Mishra, 58, Labour Secretary, GOI: ''If the government is serious it should implement the Gajendra Gadkar Committee recommendations and set up a Industrial Relations Commission with 3 arms, all independent of government control, for conciliation, adjudication, and enforcement.'' At a macro level the rising number of labour-disputes could be a manifestation of the workers' desire to participate in the decision-making process. ''We are also for efficiency,'' claims M.K. Pandhey, 75, General Secretary, CITU. ''We only want the government to put the facts before the workers and look at the problem from all directions-be it insurance, banking or power.'' But with 2 million PSU-employees announcing a strike in early February, and with restructuring and M&A being the themes that will drive corporate activity in 2000, y2k could end up as the year of labour discord. Strike 3. India's out. -T.K. Vishwanath |
|
Issue Contents Write to us Subscriptions Syndication INDIA TODAY | INDIA TODAY PLUS | COMPUTERS TODAY © Living Media India Ltd |
 |
 |
