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L E A D E R Trends Stubbed?
The Tobacco Products (Prohibition of Advertising and Regulation) Bill 2000, prohibits tobacco companies from either advertising of any kind (print, electronic, and hoardings) or promoting events. Given that the industry spends Rs 276 crore in advertising and promotion each year (ITC alone accounts for Rs 185 crore), the ban will impact a number of people. ITC says it is planning to pull out of sports sponsorships by the end of this fiscal. VST Industries had begun promoting the 'Charms Companion Freedom Concert' last year, but its future now looks uncertain. ''We are all for a constructive bill and appreciate the need for self-regulation,'' says ITC Chairman Y.C. Deveshwar, ''but there must also be an objective participation by the cigarette industry in the whole process.'' It's hard to disagree with him. In most developed countries, the curbs on tobacco ads were preceded by measures such as a ban on smoking in public places and awareness campaigns. By making a quantum leap in legislation, the government could be shooting itself in the foot. Cigarettes account for just 16 per cent of tobacco consumption in India, but a staggering 90 per cent of tobacco taxes. That is assuming the regulation achieves its objective, which not too many people think it will. Ram Poddar, Managing Director, Godfrey Philips India (GPI) is one of them. Poddar's research points to very little correlation between advertising ban and a drop in consumption. Poddar looked at countries that had clamped down on tobacco advertising and found that there was no impact on industry sales. On the contrary, countries like Norway, Finland, and Singapore actually showed sharp spurt in sales. Ironically, a UNICEF report of 1996, revealed that the largest number of 15-year-old smokers in the world were in Finland, an ad-ban country. ''The reasons why people start smoking are complex and connected to the individual's attitude, background, and social context,'' says Poddar. Some experts feel that the government would be better off legislating for low tar and nicotine-free cigarettes, banning sale to under-aged consumers, checking entry of contraband cigarettes, or even coming up with nation-wide rules against smoking in public places. For, companies like ITC also have legitimate non-cigarette businesses like retail, which could get affected by the ban. But since the legislation is merely a proposal, optimists are hoping that there's nothing that some Indian-style persuasion won't get the lawmakers to do. -Ashish Gupta & Debojyoti Chatterjee P I R A C Y A flood of duplicate hardware is choking sales of legit players. It's a shop not larger than your regular closet at home, but it's spilling over with an array of hardware: floppy disks, printer cartridges, hard disks, sound/video cards, cables, keyboard, mouse...Spotting you, the shopkeeper throws you his bait: ''Looking for hp cartridges or Seagate hard-drives? I will give you at bargain prices.'' You probably get taken in, because that's what makes shops in Delhi's busy commercial centre, Nehru Place, a booming Counterfeit Central. An estimated Rs 3,500 crore worth of fake hardware is bought from such shops all over the country every year. For an industry that rakes in just Rs 19,000 crore annually, that's a huge blow. Says Vincent Chew, Marketing Manager, Adaptec, a storage solutions provider: ''We estimate that about one-third of the loss in revenue for Asia Pacific is from the Indian market, due to counterfeit products being passed off as original products.'' Apparently, it's not just manufacturers but also the pirates who are moving up the value chain. Not long ago, the hardware industry's main concern was the grey market (smuggled and unbranded hardware), but the battle has now moved on to a different plane. That's partly because the pirates (most of whom seem to be based in countries like Taiwan and China) find selling duplicates more lucrative than churning out unbranded hardware. In the Rs 100-crore cartridges market, for instance, Hewlett-Packard (India) estimates that fakes account for nearly 10-15 per cent of the market. Says Vinnie Mehta, Director, MAIT, the Hardware Industry Association: ''Fakes exist in most markets, but in India their availability is near epidemic.'' Worse, consumers who end up having a bad experience with a fake product, end up hurting the company's sales and brandname. Doubly damned... -Aparna Ramalingam S T O C K M
A R K E T It's made a debut with a modest office in Bangalore, but NASDAQ says it's here for the long haul. If you took whatever goods and services India produces (that's about $347 billion) and multiplied it by 10, you'd still be $130 billion short of what the tech-heavy NASDAQ of the US is currently worth. Which is why it should be a matter of some importance that the 30-year-old stock exchange, which incidentally was the world's first electronic bourse, has chosen Bangalore as its third home outside the US. Says Alfred R. Berkeley III, Vice-Chairman of NASDAQ: ''We believe that we are at an inflection point in the history of Indian commerce. The Indian office will provide service to companies already listed with us (Infosys, Satyam, and Rediff) and assist those looking to list on NASDAQ.'' The point, of course, is that NASDAQ-which is facing competition not just from the New York Stock Exchange, but also a host of other virtual exchanges, called Electronic Communication Networks (ECNs)-wants more business from a country that has 7,000 listed companies. Says Berkeley: ''Even for a small country like Israel, there are 118 companies listed on NASDAQ. India is a huge potential market for us, and we are here for the long haul.'' Although NASDAQ is a 'new economy' oriented exchange-90 per cent of infotech and 96 per cent of biotech companies in the US are listed on it-it is looking at good traditional companies in India too. For corporates, the NASDAQ proposition is compelling. It not only provides them with liquidity and access to low-cost capital, but could also help align their valuations with those of their global peers. Points out T.V. Mohandas Pai, Senior Vice-President and CFO of Infosys, the first Indian company to be listed on NASDAQ: ''The process of listing on NASDAQ includes several regulatory requirements that have to be met. This process requires a lot of hand holding and guidance, which the liaison office in India could provide.'' Guess, it's time for Dalal Street to get toothy with corporates. -Venkatesha Babu It's an inflexion point: Berkeley
On target companies: On NASDAQ VS NYSE: -Roshni Jayakar F I N A N C
E There's a new proposal to turn IFCI into a universal bank. The question is who'll pay for it?
An expert committee set up in April this year to work out a revival plan for IFCI has spoken. It wants the institution to be turned into a universal bank, which will specialise not only in project finance, but also offer full range of banking services. The Basu Committee has also suggested that IFCI seek a comparable strategic partner, and that the Industrial Development Bank of India's (IDBI) 31.7 per cent stake in IFCI be offered to the strategic partner. Says Deepak Basu, author of the report: ''The transformation will help IFCI balance its portfolio with a mix of project finance and non-project related assets, and make significant headway in asset diversification.'' But such a transformation may not be easy. In order to become a licensed bank, IFCI will need to restore its capital adequacy (8.8 per cent versus the mandatory 9 per cent) and debt-equity ratios. To do that it needs a capital infusion of Rs 400 crore, which is not exactly forthcoming from the government. Says a senior bureaucrat in the Banking Division of the Ministry of Finance: ''We are still studying the proposal and the government has yet to take any decision on it.'' What's adding to IFCI's cash crunch is that 94 per cent of its assets is locked up in ailing industries such as textiles, chemicals, steel, and cement. And a cleaner balancesheet will be absolutely essential for a turnaround. Narasimham believes that becoming a universal bank is not the only solution; focusing on medium-term projects could be one as well, he says. What's clear, however, is that IFCI does not have the luxury of time for decisions and revisions. -Ashish Gupta
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Tobacco
is easily the most hated industry in the world. Lawmakers target it for
populist reasons, lawyers hound it for money, and activists nag it
because, well, it's their job to do so. Not all of the persecution is
unmerited, though. Nearly 3 million people die each year because of
tobacco-related illnesses. Of these, 30 per cent are children. But will a
solution of the kind now proposed by the government help? We don't think
so.
On
the Indian office: 
On
a clear day, P.V. Narasimham can see far from his 18th floor office in New
Delhi. But these days the vision is a little blurred at the state-owned
financial institution, IFCI, which Narasimham heads. With less than a year
to go before he retires from the top job, Narasimhan faces the Herculean
task of executing a turnaround at the one-time financial powerhouse.
Soarings bad debts (Rs 5,942 crore at last count) have blown a hole in the
bottomline, sending profits spiralling from Rs 370 crore three years ago,
to a bare Rs 60 crore last year.