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L E A D S T O R Y Call in the hearse, the small car's dying
Sorry, Suzuki san. The car that built you-and revolutionised motoring-in India is dying. At last count, your Maruti 800 was still the largest-selling car in the sub-continent. But it is fast losing out to the new generation of sub-compact competitors. Figures tell me that last year, your tinny car sold 1,89,061 pieces; the Korean tall boy, Santro, 69,439; another Korean aspirant, the Daewoo Matiz, was catching up with 36,243 units, and the home-grown challenger, Indica, sold a not-so-insignificant 54,641. Agreed that your numbers are way up. But add up your competitors figures and you will realise that the small car market you don't have is almost as big as the one you have. The result: Your company's bottomline for the last financial is going to plummet. The point is, you can soup the 800 up with multi-point-fuel injection, add a couple more of BHP to the tired horse, and even slash prices. But, amigo, you'd be flogging a dead horse. Be honest, bury it. You really shouldn't be sad that your cash cow won't milk any more. It has repaid much more than you could have hoped for. In the last 17 years that it has been around, it has generated handsome royalty and dividend for you. In fact, your share of the dividends in the last four years (Rs 66 crore) is as much as your equity in Maruti Udyog. If one included the money paid to your Japanese company for the import of gear boxes (it beats me why somebody who sells as many cars as you do can't indigenise the gear box), then the Indian JV should probably be one of your best investments. Besides, your JV sits on a huge cash pile of Rs 2,500 crore. Your investment in dies and presses is well depreciated. You have achieved what no other car manufacturer can boast of: flogging the same model for 17 long years. (Do you see the envy on the faces of Ford, General Motors, Hyundai and Daewoo?) What surprises me is not that Middle Class India's dream car is gasping for breath; rather what amazes is the fact that it lasted out for so long. Ask somebody like Phil Spender of Ford India, and he will tell you that cars like the 800 are not manufactured any more in developed markets. Funny, how I always had this feeling that the 800 would never get past any of the fancy crash tests. Indeed, it didn't have seat belts until recently. Of course, you were lucky. The Government of India had as much interest as you in keeping competition at bay. Ergo, until 1993, no foreign competitors were allowed to challenge your monopoly. (Had it been the US, Maruti would have been cleaved in four, but that's a different story.) So, you did a perfectly logical thing: made lots of hay while the sun shone. OK, yours is still the cheapest car in the market. But, hey, who's hankering after cheap cars any more? People want a good, safe car, period. And you can hang me for saying it, but the 800 isn't quite my definition of a car. But your Zen and Wagon R come pretty close to it (by the way, I love your Baleno). You could argue that if the 800 dies, its attractive price point will die too. But wasn't the 800 supposed to be the affordable people's car? You've been hopping on to higher price points with the same car almost every year. The consumer, Suzuki san, is not a moron. Marketers who forget this will have to keep their black suits handy. -R.Sridharan S
T O C K M A R K E T They are the X-files of Indian investors. Companies, which investors were once interested in, but which are now buried quietly as duds. Called Z scrips, these are stocks of companies that have failed to meet listing requirements such as payment of fees, announcement of results and book closure. The Bombay Stock Exchange has moved more than 1,500 scrips to the Z group. It now intends to banish those Z scrips that have not traded on the exchange for the last three months. Some of the well-known Z scrips include ATV Projects India, Jindal Vijayanagar Steel, Montari Industries, Usha India, PAL-Peugeot, Patheja Forgings, NEPC India and NEPC Textiles. Most of these organisations are loss making. For instance, according to the latest available figures, ATV Projects India had a net loss of Rs 232.79 crore on sales of Rs 169.85; Jindal Vijayanagar sports a loss of Rs 29 crore, although the company is on its way to a turnaround; and Montari ratcheted up losses of Rs 12.77 crore on a turnover of Rs 55.23 crore. Among the Z scrips, however, there are some companies that get traded once in a while. Predictably, most of them trade below par and at a steep discount to their book value. Take JVSL, for instance. It has a book value of Rs 8.94 per share, but the stock trades at Rs 5.30; similarly, NEPC India on book is worth Rs 67. 50 per share, but the market won't touch it with a bargepole (price: Rs 2.30); ditto for Sanghi Polyester, which has a book value of Rs 21.50, but a market price of Rs 2.70. If you happen to own any of these scrips (except JVSL, which could well see an uptrend), the best thing to do is to put them on the block and wait for a lucky day. If even that doesn't work, there's always the neighbourhood kabariwallah. P O W E
R T A R I F F When the figures are finally tallied up for 1999-2000, India's State Electricity Boards (SEBs) will turn in a whopping loss of Rs 13,817 crore. That's almost three times the losses they reported in 1992-93. Critics say if things don't improve soon, it may take less than seven years for losses to triple again. The only way out is to overhaul the way SEBs function today. For starters, the SEBs must shore up their sagging recovery rates. For instance, in the early 90s, the recovery rate at the all-India level used to be 82.2 per cent. Today, it's 73.9 per cent. Even in the case of best-managed SEBs, such as Himachal's, the rate of recovery-which indicates the SEB's ability to recoup its expenses-is not 100 per cent. Points out Sujatha Srikumar, 37, Director (Infrastructure Sector Rating), CRISIL: ''Over the years, the creditworthiness of SEBs has been coming down and state finances are also coming under a lot of pressure.'' A key reason for the losses is the skewed tariff structure. While some sectors like agriculture get power at throwaway prices, others pay a punitive price. For example, agriculture pays a measly 25 paise for every kilowatt hour of electricity, while the commercial sector pays a staggering Rs 3.54. Similarly, the domestic sector pays Rs 1.49 per kilowatt hour versus the industrial rate of Rs 3.50. The irony is that half of the power sale is made to the agricultural and domestic sectors, but they fetch just one-sixth of the revenue. The differential tariff structure is taken care of by the new Electricity Bill, which replaces all the existing electricity-related Acts. It says that the subsidy has to be borne by the concerned state government. But as of now, only Orissa, Haryana, and Andhra Pradesh have passed the Electricity Reform Act, and the others have chosen to continue with the old laws. ''Tariff rationalisation will take another three to four years. The peak load and non-peak load tariff structure has to evolve,'' says R.K. Kapoor, 56, Director, IPPAI. But by then the SEBs would have run up bigger losses, making a turnaround even more difficult. -Biju Mathew I
N T E R N E T Before you go silly over the great Indian ISP war, there's something that you should know. Cheap, or free, Net service may not be good for you. Seems illogical, right? Not quite. Be it a Net service provider or a dot.com, companies need to make money to be able to pay their bills. By slashing access rates every other day, what the ISPs are trying to do is attract eyeballs. Once they have a sufficient number of them, they can either ramp up advertising on their portals or simply sell out to a willing buyer. At least, that's what the rationale seems to be. Fighting price wars, however, is an expensive proposition. With less and less revenue coming in per subscriber, the investment needed to service a growing number of them gets bigger and bigger. Losses mount even as the ISP scrambles to raise money from private or public investors. But these days, investors are running scared of the dot.coms, and cash-starved companies are finding it more and more difficult to keep their gravy trains going. You know your ISP's in a soup when its server is eternally busy, or when accessing sites is a lesson in patience. But ISPs who can get their customers to pay a viable price, don't just survive; they make profits. Like America Online. But talk to any Indian Internet Service Provider and it will pooh-pooh all fears of poor service quality. Says Ramesh Ramanathan, 45, President (Net Access), Satyam Infoway: ''We have invested ahead of the curve to grow in the market.'' Almost all the ISPs claim that they have surplus capacity. The Calcutta-based ISP, Caltiger, which provides Net access for free, says it has invested in a storage area network, voice-capable RAS (Remote Access Server) ports and 60 state-of-the-art Alpha servers, giving it a processing capability of one million subscribers. Avers P.K. Vijay Kumar, 38, CEO, Caltiger: ''Free is not necessarily cheap. As a serious telecom company, quality is of paramount importance to us.'' MTNL's Managing Director R. Rajagopalan, 60, echoes: ''MTNL today has 38,000 subscribers, but we can handle as many as 70,000 of them.'' If all that's true, can somebody tell me why is web surfing still such a grind? -Vinod Mahanta C
O R P O R A T E E S P I O N A G E
Five years ago, in November, 1995, when Sanjay Bhatla joined Samsung Electronics as manager of the Jaipur branch, little did the Korean consumer electronics major suspect that it may have been hiring a potential time-bomb. In fact, there was no reason to believe that at all. Bhatla was a good manager, who quickly moved up the ladder at Samsung. Till, last March, when Samsung decided to promote him as Assistant General Manager, based at Samsung's Delhi headquarters. That's when the time-bomb started ticking. Within weeks, it exploded. According to Samsung, here's what happened. As manager of the Jaipur branch, Bhatla had limited access to the company's sensitive information on its sap, enterprise resource planning (ERP) system. Sometime around mid-March, Samsung says, Bhatla began accessing data that he was not authorised to: details of all-India sales figures broken up across dealers, regions and products. On All Fool's Day this year, Bhatla joined the Delhi office of Samsung for his new assignment. But barely ten days later, he put in his papers and signed up with Samsung's arch rival LG Electronics. That was when the bomb went off. On 19 April, Samsung discovered that from mid-March till the time he was relieved, Bhatla had amassed market-sensitive data without authorisation. And, yes, you guessed it, that data was now with his new employers, LG, which Bhatla joined in May. Bhatla's new employers, however, refused to comment on the matter when contacted by BT. And what of Bhatla? Ensconced in his new job, he seems unaffected. Well, almost. The Jaipur city police has registered a complaint of cheating and breach of trust against him. What this latest piece of corporate espionage shows is that there are indeed no holds barred in the battle for marketshares. -Ashutosh K. Sinha |
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