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CORPORATE FINANCE Safe As Houses-Hopefully The securitisation of housing loans could create new financing opportunities. Atlast,
they're laying the foundations of a high-rise home-finance market. The
pioneering effort: a pilot project of the Housing Development &
Finance Corporation (HDFC) to securitise its future earnings-streams from
the repayment of housing loans to borrow Rs 60 crore from the market.
Waiting in the wings to see if it works are, among others, LIC Housing and
Canfin Homes. Says P.P. Vora, 56, the Chairman of the National Housing
Bank (NHB), who has worked extremely hard to develop this market: ''We
have a long list of organisations in line for securitisation. Let the
first one go through.''
For
companies like HDFC, securitisation-where the firm, essentially, puts up
its future revenues, in this case from the installment-payments made by
borrowers, as collateral for loans-is an obvious and powerful way to raise
cash. Explains Keki Mistry, 45, Deputy Managing Director, HDFC: ''Securitisation
will enable us to convert illiquid assets into liquid assets, and sell
them to raise resources faster.'' All that the company has to do is to
cherry-pick the loans in its portfolio, and securitise the revenues from
them; route this income through a special purpose vehicle to convince
investors that their collateral is safe; and sell tradeable debt-paper. Despite
the long-winded foreclosure process that housing finance companies have to
go through to liquidate the property of a defaulter, financial pros
believe this could make for a huge market. At present, the 29 housing
finance companies registered with the NHB have a total outstanding
loan-portfolio of Rs 22,500 crore, with HDFC's own portfolio alone topping
Rs 10,000 crore. Were India to match the US, where 70 per cent of all
housing-loans are securitised, that could make for a market of Rs 15,750
crore. With the government having set a target of Rs 500 crore every year
for securitisation, this seems to be one device whose future is secure. -Dilip
Maitra CAPITAL
MARKETS On
February 1, 2000, when K.V. Shamshuddin, an NRI based in Sharjah, clicked
on www.geojitsecurities. com, logged on, and placed an order to purchase
10 shares of Aptech,he became the first investor to trade on-line on
India's bourses. Shamshuddin's order was routed through Geojit, a
Cochin-based brokerage firm, to the exchange's trading system, and, in 60
seconds, he received a confirmation on the purchase. Geojit Securities may
have been the first brokerage to begin Net-based trading, but a clutch of
other brokerages-like I-Sec, Motilal Oswal Securities, Investmart India,
SSKI, and Kotak Mahindra Securities-are in various stages of readiness for
on-line trading. The obvious fall-out: increased investor activity. Agrees
Dhiraj Agarwal, 38, CEO, SSKI: ''We'll see a 20-fold jump in the number of
active investors in 5 years through on-line trading.'' For
example, I-Sec is planning to launch a product that will not only take
orders and push it to the stock exchange after internal validation, but
will also combine brokerage, DEMAT, and bank accounts by offering
integrated e-invest accounts. But, until then, brokerages will insist on a
deposit. Shamshuddin has a deposit of Rs 3,00,000 with Geojit. Over time,
even cellular service-providers will jump in. Next time, to buy 100 of
that hot stock, you may have to just point-and-click with your cell. -Roshni
Jayakar CONVERGENCE Access
is the mother-lode of the dot.com gold-rush. With ISPS proliferating, so
are business models. The logic: markets cannot support more than a finite
number of ISPS; ERGO, those that wish to survive and succeed must be more
than just ISPs. Leveraging this logic to the hilt is the Hyderabad-based
Pioneer Online, the brain-child of civil-engineer-turned entrepreneur P.S.
Reddy. The company began its life in June, 1999, as a pure ISP, and claims
a customer-base of 6,000. But,
with competition brewing, the company has set its sights elsewhere:
namely, becoming an infrastructure service-provider for other ISPs. The
template? Six international gateways that the company plans to set up-in
December, 1999, the government announced its plans to allow private ISPs
to set up their own international gateways instead of going through the
vsnl-and a hardware-software off-the-shelf solution for ISPs: Alladin
ISP-in-a-box. Alladin
is targetted at smaller ISPs. Normally, it cost them Rs 60 lakh to set up
a service that caters to 600 customers; with Alladin the cost comes down
to Rs 18 lakh. Claims Reddy, 28: ''We will progress to ISP-consultancy,
market Alladin aggressively, offer wan solutions to firms, and enter the
e-Commerce solutions business by end-2001.'' Before that, he must make the
gateways deliver. The
costs of setting up a gateway are a function of several variables: the
bandwidth specifications, the choice of transponder, and the issue of
whether the gateway will remain a pure gateway or come with a
backbone-network that takes care of first-mile access. VSNL has invested
Rs 1,000 crore in the 12 gateways it already has; Reddy plans to replicate
that, albeit on a smaller scale. But N. Satish Kumar, 29, Executive
Director, Southern Online, another Hyderabad-based start-up ISP, believes
Pioneer will find the going tough: ''A company will find it difficult to
be both an ISP and a ISP service-provider at the same time. What will its
focus be?'' With national-level ISPs like Satyam Infoway, RPG, Dishnet DSL,
VSNL, and MTNL planning to set up more gateways in every city, the smaller
players could well end up with only a busy signal. -E.K.
Sharma COMPETITION The
market-leader's jumped on the price band-wagonR too. If pedigree and
track-record were the clinchers, the Suzuki WagonR-the third offering from
the stable after the Zen not to showcase the Maruti logo-which was
launched at a base-price of Rs 3.49 lakh in January, 2000, should win
hands down. After all, even in the face of stiff competition from Honda,
Toyota, and Mitsubishi, the WagonR has remained Japan's largest-selling
model for the last 3 years. Unfortunately for Maruti Udyog's CEO, Jagdish
Khattar, that won't guarantee it an instant place in India's fast-lanes. Unlike
Japan, where Suzuki pioneered the small car, in India, the WagonR has to
contend with well-entrenched players who have been busy strengthening
their competitive positions over the past year. The new car also has to
manoeuvre itself delicately into a price-point between the company's own
entry-level Maruti 800 (from Rs 1.98 lakh to Rs 2.57 lakh) and the Maruti
Zen (from Rs 3 lakh to Rs 4.30 lakh). Says Manish Maheshwari, 31, Senior
Analyst, ICRA: ''The WagonR is meant to strengthen Maruti Udyog's position
in the segment that is witnessing the maximum action.'' The
real competition, of course, will be with the Hyundai Santro, and, to a
lesser extent, the Tata Indica and the Daewoo Matiz. The Santro-the
price-tag on whose 6 models range from Rs 2.99 lakh to Rs 3.74 lakh-has,
in particular, been pulling away from the competition, selling 60,318 cars
in 1999 versus the Indica's 38,734, the Matiz's 24,175, and the Fiat Uno's
16,147. In
fact, it ran threateningly close to the Zen-77,786 of which were sold in
1999-near enough for Maruti Udyog to pull out a second car in the segment
to woo some of those customers in this price-band who want a newer car
rather than the 5-year-old Zen, or the face-lifted 6-month-old
niche-offering, the Zen Classic. In fact, there is a possibility that the
company will market the WagonR as its primary product in the small-car
segment, leaving the Zen for customers who swear by its reputation.
Declares Khattar, 56: ''The WagonR is positioned for leadership in the
segment.'' Read that to mean that the company's marketing efforts will
focus on pushing the WagonR-not the Zen. What
are the USPs with which the WagonR will run the race? It has an engine
that, at 1,061 cc, is marginally more powerful than the 999-cc engine
beneath the Santro's hood-besides generating superior 62 BHP versus the
latter's 52 BHP. That apart, the WagonR must win the game not just with
its product, but also with the quality of its post-sales service. The
excitement over a new car in the market will, probably, lead to the graph
coming out of the starting-gates at a sharp pace. Says the Mumbai-based
auto consultant, Hormazd Sorabjee, 35: ''The WagonR's real performance
will be noticeable after 12 months, once the initial excitement has died
down.'' Unless the difference in design-ironically, the Tall Boy tag for
which the WagonR is known in Japan has been usurped by the Santro as its
USP in India-is extended into a palpable difference in driving-comfort and
long-term performance, the WagonR will find the road too crowded to take
the chequered flag as easily as its predecessors from Maruti Udyog used to
do. -Rajeev
Dubey INFOTECH What's holding you back?'' posited Michael Dertouzos, Director, Lab for Computer Sciences, Massachusetts Institute of Technology. Cellphonedrop silence. The
delegates attending the inaugural session of it Asia 2000 had no answers.
But then, the 63-year-old Dertouzos' 60-minute presentation-just back from
Davos, the professor showed no discomfort from a rib injury caused by a
disagreement with a snow scooter (''It wasn't made by Bajaj,'' quipped
Rahul Bajaj, the President of the Confederation of Indian Industry)-raised
more questions than answers. For
a country that wants to see itself as an infotech superpower in the
making, Dertouzos' prediction about India's role in the wired economy was
a disturbing dose of reality. ''It's not about information technology,''
he stressed. ''That's a very small piece of the action.'' Instead, he
believes, Indian companies should target servicing-via the Net-the
office-work of companies and institutions in the developed countries.
Dertouzos estimates that $10 trillion, or half the world's industrial
economy, is accounted for by office work. And around 40 per cent of this
can be put on-line. His
thesis: this is ideal and lucrative work for India's 50-million strong,
English-speaking population. While medical transcription-centres and
telephone-answering services have already marked their presence, Dertouzos
points to opportunities in finance, insurance, mortgages, healthcare, as
well as government work. For instance, Indian organisations could train
their workforces to filter international insurance claims and mortgages.
Or, a panel of doctors could give their opinion on a patient's state of
health. High
labour-costs in the US and other developed countries have forced their
companies and governments to look outwards to outsource their
office-requirements. The Net now makes this a certainty. The man who had
predicted as long ago as in 1983 that computers will communicate with one
another tries to mitigate the impact of transplanting low-end jobs to
India by saying: ''Don't ever underestimate the lower end of the ladder.'' His
other predictions are fascinating. While automation will take time to make
a significant impact in the Indian market, he feels that the ability of
the Net to deliver access to information is crucial. But the trick lies in
finding the customer what she or he wants, pointing towards a market for
human-directory search-engines. At the same time, Dertouzos warns against
over-reliance on content, which represents only 4 per cent of the
industrial economy. The real strength of the Net, he argues, is in
harnessing a people-to-people economy-or collaborations across space or
time that are not limited by geography. By
extension, the harnessing of such an economy will create new jobs and
impart prosperity to this new workforce. While that is, of course, true,
it is hardly in sync with the Bangalore-driven aspiration of being a
top-end player in the infotech industry. Actually, directing the Indian
education system to churn out an English-speaking army of office-staff is,
perhaps, inevitable, considering that a large proportion of our software
success is built around writing code for back-end processes. Looking at it
positively, jumping onto a ladder is, after all, a necessary pre-condition
to climbing it. -Sunit Arora |
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