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In January, 2000, when the Memphis, Tennessee-based FedEx found that complicated Customs paperwork in India was keeping it from tapping the lucrative trade market, it promptly came out with a handbook listing Customs rules for textiles, leather, handicraft, electronics, and pharmaceuticals. The initiative paid off. Today, it is the biggest and the only player catering to export shipments 70 kg and above. ''Our USP is that we build value into our customer relationship,'' says Birender Ahluwalia, Head (Marketing), Indian Subcontinent, FedEx.
The choice of sectors is no coincidence. Of all export categories, these five are growing faster at rates between 18 per cent and 27 per cent. Besides, in terms of sheer volume, the five segments account for 48 per cent of the export earnings. Textiles, for instance, fetched $6 billion of the $36 billion the country earned last year. To justify the 15 per cent premium it charges for every kg of shipment, FedEx backs its customers with value-added services. Recently, it came up with three recycled (ecofriendly) corrugated boxes to ship samples in, and a 7.5-ft long sleeve for carpets and linen fabrics. To make up for the lack of information on international fashion, in terms of trends, colours, and fabrics, it even publishes an international forecast newsletter. By 2004, export quotas will go. To survive in a quota-free market, Indian exporters need to be plugged into key international markets, without pushing their distribution costs too high. Here again, FedEx sees a huge opportunity for itself. What if it fails to deliver? No problem, it has to offer another value-added solution: A money-back plan. -Vinod Mahanta AUTOMOTIVE A two-year old Honda Civic for the price of a Hyundai Santro? Possible. And if you are willing to shell out a tad more, say, Rs 7 lakh, you could end up owning a Pajero-used, of course. Or that's what some car dealers in India would have you believe. A whole lot of others aren't so sure. Consider: a two-year-old Honda Civic in international markets costs as much as $3,500. Add nearly 200 per cent duty on it and the landed price shoots up to Rs 5 lakh. Some importers, however, contend that cars can be bought cheaper from countries like the UAE, where tariffs are low and discard rates high. The key in this debate lies with the car manufacturers. Sometime ago, Ford India had announced that it would consider importing pre-owned cars if the economics worked out well enough in the post quantitative restriction era. What is not clear is whether the car makers like Ford will import directly or let their dealers do the importing, confining themselves to customer support and service. Apart from exposing themselves to currency fluctuations, the car companies would run the risk of cannabalising their investments in India. Agrees Vinay Nevatia, a leading Telco dealer in Calcutta: ''That is a big concern in the industry.'' What's likely is that except for some die hard fans of Pajero and Lexus, the car buyer in India will continue to zip around in desi models. -Debojyoti Chatterjee RETAIL It's fairly easy locating Cookie Man in Chennai's upmarket Spencer Plaza. Just follow your nose. But that's not the only reason why consultant-turned-entrepreneur R. Chandrasekaran is having it so easy. Ever since a year ago when the director of Cookie Man Foods chose to sell cookies instead of cookie machines he was planning to, he's found a retail niche for himself. ''We have a 60 per cent conversion rate,'' he claims, implying that six out of every 10 visitors to the shop end up buying his cookies. Not bad for a retailer who was told that his Rs 250-350 kg cookies would never sell in the thrifty city. These days, Cookie Man-a licencee of Australian Cookie Man-claims to be raking in Rs 35,000 a day in turnover. The recipes, baking techniques and processes are all from Australia. In fact, the idea itself was the product of window shopping one bright afternoon in Sydney. Currently, the outlet sells about 30 varieties of cookies, with weekly changes of at least two products to prevent monotony. The dough is prepared in the company's own commissary at a controlled temperature of 20 degrees celsius, transported at the same temperature to the leased cold storage facility, and frozen at minus 17 degree celsius. From there it goes to the backroom of the outlet, where it has to be thawed out for three days before being used. Chandrasekaran-who's worked with the "core competence" guru, C. K. Prahalad- is hard pressed to find suppliers who can cater to his stringent specifications, although that isn't stopping him from franchising his concept countrywide. By 2003, Chandrasekaran plans to have 40 outlets, one or two of which will be company owned. Some of the cities being looked at are Bangalore, Hyderabad, Cochin, Coimbatore, Mumbai and Delhi. The company, which has invested Rs 1.3 crore so far, will spend another Rs 2 crore or so on promoting the business. But Chandrasekaran may find himself a tad challenged in his search for franchisees, because he prefers them to be a husband-and-wife duo. May be that's his way of ensuring the franchisees stay married to his business... -Nitya Varadarajan CONTROVERSY Doing business in India is hard enough. But being in the business of making business leaders is harder still. Just ask the Kellogg-Wharton-McKinsey promoted Indian School of Business in Hyderabad. Even as the hi-profile school gears up to open doors in July this year, it faces a closure threat from the All India Council for Technical Education (AICTE). Just why? ''We are going to say that you cannot run it like this. You close down,'' says AICTE Chairman R.S. Nirjhar. Like what? Nirjhar's grouse is that the ISB did not ask for any permission before fixing its fee structure. And under the law, Nirjhar says, the AICTE has powers to regulate the tuition fees of both engineering and management schools. There's another fineprint in the regulations that Nirjhar has discovered. Apparently, corporations are not allowed to run educational institutions, although a company-owned trust may. And ISB-which refused to comment-is set up as a corporation, albeit not for profit. ''A company always works for profit and our mandate is to check commercialisation of education,'' says I.K. Bhatt, Advisor, AICTE. Don't be surprised if the AICTE's posturing turns out to be all bluster in the end. For, the ISB is backed by some of the biggest companies in India and elsewhere, including Reliance, Infosys, and ICICI. And there is little doubt that it promises to be one of the finest B-schools in the country. Meanwhile, it must tackle this lesson in bureaucracy. -Ashutosh Sinha INFRASTRUCTURE
It has many firsts to its credit, but the most unique of them must be that the Delhi-NOIDA-Delhi (DND) Flyway is the first infrastructure project in India to need savvy marketing. The 6.5-km tollway, built at a cost of Rs 408 crore by NOIDA Toll Bridge Co., an SPV promoted by the Infrastructure Leasing and Financial Services (ILFS), sits cheek-by-jowl with two toll-free bridges: the Nizamuddin bridge, 6 kms to the north, and the Okhla Barrage, 2 kms to the south. Quips Pradeep Puri, CEO, NOIDA Toll Bridge Company: ''It's an unprecedented challenge.'' Soon after the Flyway was thrown open in February, 2001, 80,000 mailers were sent to Noida residents, who account for 80 per cent of the users. That apart, door-to-door and spot marketing were done to drive home the Flyway's USP: it not only cuts time by10 to 30 minutes, but it also saves money by shortening the distance to Delhi. Puri, for instance, calculates that a typical Maruti 800 owner would save Rs 15 per round trip from NOIDA. Yet, if the response is lukewarm (18,000-20,000 vehicles plying on the toll bridge versus 2.2. lakh vehicles on the free bridges), part of the reason is the congestion at the Flyway's exit point into Delhi. By Puri's own reckoning, a traffic of 80,000 at an average daily revenue of Rs 15 lakh will be needed to make money. The terms of the project allow the company to earn a 20 per cent IRR (Internal Rate of Return). Puri expects this to happen by the end of the 23rd year. Meanwhile, he has worked out separate marketing strategies for various categories of commuters: the day tripper, corporates, bulk users (buses), and trucks. For retail consumers, the company has introduced a monthly scheme that allows 60 crossings at Rs 599 per month. To corporates, the Flyway's toll system is being marketed as a tax-saving expense item, which lowers per-crossing cost by a third to Rs 5. The companies on Puri's radar: HCL, Indian Oil, National Thermal Power Corporation, Daewoo Motors, Samsung, and LG, among others. Finding commercial traffic-potentially the most price insensitive segment-may be harder. Unlike some other highway projects, the Flyway does not fall on the main truck-traffic corridor. Ergo, the company is busy lobbying with the NOIDA administration (incidentally, also its partner in the project) to ban heavy commercial traffic on the ageing Okhla barrage. The company's best bet, however, is retail consumers. Once they start paying for use, Puri would have earned himself a generation of assured customers. -Ranju Sarkar MONEY MARKETS
For starters, the finance minister has proposed sweeping proposals that will make debt trading hi-tech. A Clearing Corporation-hanging fire for the past two years-is now to be set up by June, 2001. Among other things, it will facilitate settlement and payment of government securities and foreign exchange in one place. Says Arun Kaul: ''Once the Clearing Corporation is set up, it would provide a big boost to retail participation in G-secs.'' Already, the debt market-related proposals have give government securities a leg over other instruments such as corporate and Public Sector Undertaking (PSU) bonds. Reason: the latter are subject to TDS, while gilts aren't. However, the tax benefits to interest income from G-secs have been reduced. While prior to Budget: 2001, the exemption limit was Rs 12,000, it has been lowered to Rs 9,000 now. ''Still, government securities are safer and more liquid for the small investor,'' says R.C. Royappa, Managing Director, SBI Gilts. The proposals will also deepen the primary market, which is just a quarter of the secondary market. Around 15 primary dealers traded securities worth Rs 5 lakh crore last year, compared to Rs 20 lakh crore the secondary market raked in. But what will actually transform the debt market into a technology-driven system will be the replacement of the Public Debt Act of 1937, with the Government Securities Act. The new legislation will allow the primary dealers to come up with innovative instruments like zero coupon bonds, deep discount bonds, and Separate Trading of Registered Interest and Principal of Securities (Strips), which is popular with retail investors in the US. Deep discount bonds, for instance, allow primary dealers to sell the interest and principal amount separately as smaller instruments in smaller lots. Similarly, Strips principal and interest are traded separately as deep discounts. So, while the interest can be traded for six months, the principal can be traded for a longer period. For a government crippled with interest payment, a more robust debt market may be the first step to Fiscal Wellville. -Ashish Gupta
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The banner outside the Punjab National
Bank's Delhi corporate office in New Delhi says it all: Come save your
taxes...by investing in PNB gilts. For instruments long considered the
'Plain Jane' of money markets, government securities have received a
stunning facelift from surgeon Sinha.