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P O L I T I C O - E C O N O M Y The foreign Hand The US business delegation that accompanied Clinton came, networked, and went away. Unimpressive. That one word summed up the business fall-out of US President Bill Clinton's visit to India. Not that there wasn't a business delegation that accompanied him. There was. However, no new deals were struck, no partnerships forged, and no investment decisions made. At least, none that would not have happened otherwise. Thus TechnologyNet.com's strategic alliance with Satyam Infoway for an infotech e-commerce channel, and Sun Microsystems' collaborative research initiative with the 5 IITS, and the Indian Institute of Science, Bangalore, may have been announced during the presidential visit, but didn't certainly stem from it. Cribs abounded. For some, it had to do with infrastructure. Says Anant Agarwal, 41, Vice-President, Sun: "Infotech infrastructure in India is developing way too slowly." For others it had to do with the regulatory framework. Complained Brant W. Free, 51, Sr Veep, International External Affairs, The Chubb Corporation: "The 26 per cent cap on foreign equity in insurance joint ventures is too low". Bottomline? Clinton's India expedition should be seen for what it is: a political exercise by a president in the exit mode. But it did send out a message to business people looking for one in it: let the spirit of laissez faire prevail. -Jaya Basu S
T O C K M A R K E T S It's official: the Sensex has changed again. This recast is the second in 2 years. First, in November, 1998, 2 infotech stocks, Infosys and NIIT, were included in the Sensex to make it representative of the new economy. And now, from April 10, 4 new scrips--Satyam Computer, Zee Telefilms, Reliance Petroleum, and Dr Reddy's Laboratories-will replace the old-world stocks of IDBI, Indian Hotels, Tata Chemicals, and Tata Power. Sure, the new entrants will make the index a far better indicator of the market's behaviour. For the new Sensex will account for 38 per cent of the total market capitalisation of the BSE as compared to its predecessor's 34.50 per cent. But is the inclusion of new-economy scrips that are yet to settle down a good strategy? Explains Prof V. Raghunathan, 43, IIM-A: "It does make sense to reshuffle the Sensex, but it's necessary to see the trend (in the movement of individual scrips that are being considered for induction) over a longer period before making the changes." For instance, a scrip like Zee, which has been extremely volatile, will, under the new dispensation, enjoy the third-largest weightage in the Sensex after Infosys and HLL. The fall-out of this weightage could be a skewed index. Representation is one thing; dependence, another. -Roshni Jayakar C
O M M U N I C A T I O N It's a motley band of brands: a wacky music channel, a fridge, a wash-bar, a cola, and a fabric whitener. The common thread: each of them is a whopping performer. The 5--MTV, Whirlpool Quickchill, Pepsi, Vim Bar, and Ujala--were, in early 2000 inducted into the Hall of Fame of Mumbai's Ad Club. MTV India used a series of self-deprecating films to increase its reach from 5 million households in 1996 to 12 million in 1999. Says Cyrus Oshidar, 31, Creative Director, MTV India: "The MTV Enjoy campaign encapsulated our strategy." Latecomer Whirlpool's campaign, handled by FCB Ulka, zeroed in on the brand's eponymous USP: Quickchill. And, for Pepsi, HTA used a series of campaigns to build an emotional link with teen consumers. Avers Rohit Ohri, 36, Veep, HTA, Pepsi's agency: "Its irreverence resonated with the consumer." The others? Situations' campaign for Ujala helped it beat market-leader Robin, while Vim Bar (agency: Ammirati Puris Lintas) used a campaign aimed at converting non-users, to grow its usership by 23 per cent in 2 years. Ads that work are the winners. -Nita Jatar Kulkarni T
A X A T I O N Can India Inc.'s CFOs soften the blow of Budget 2000's dividend tax, new mat-regime, and export tax? They can--and here's how: Dodging dividend-tax. CFOs at high dividend paying companies can reduce their dividend payout. A lower dividend would increase retained profits, which would add to the company's reserves and increase the book value per share. And this could, in turn, boost its share price. So shareholders would get less as dividend, but would benefit from a higher share price. Getting off the mat. The convenient twin-track system of depreciation which allows one set of calculations for working out book profits and another for income tax will help. Companies use the Written Down Value (WDV) system for calculating depreciation for income tax purposes. This involves providing for depreciation at the rate of 25 per cent of the reduced value of the assets each year, offering a shelter against taxes. In the books, however, depreciation is provided at 10.37 per cent on the original value of the assets by the Straight Line Method (SLM). To reduce the book profits, companies can change the basis of the calculation to the WDV method, re-compute the depreciation on this basis for the previous years and provide for the additional amount in the current year's books. Escaping export tax. If, as anticipated, the exemption from export tax given to units located in software technology parks and EPZs is extended for a couple of years, there could be a spate of takeovers with exporters taking over existing units in such zones. Says Rajesh Dhume, 36, Country Head, Tax Practice, Ernst & Young: "Takeovers of STPs and units located in export processing zones is a viable option to beat the export tax." Clearly, India Inc.'s CFOs are working overtime to minimise the impact of the triple whammy on their companies' bottomline. -Dilip Maitra |
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