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A former CEO turns VC, and a top executive ventures out into consultancy.
Starting out: It was always too difficult to believe Ravi Bhoothalingam would hang up his boots at the Oberoi group. But the inevitable has happened. Bhoothalingam, who's spent six years as President at the hospitality major, is setting up a consultancy practice on corporate governance and change management.
Push start: From what we hear everyone's friend Ajay Kapila is all set to ride into Kinetic Motors as head of marketing after his exit from his high-profile position at LG. Chip Survey: Its rival Intel may have a huge headstart in India, but chipmaker AMD is playing catch up fast. The result: It has roped in Sanjeev Keskar, former Country Manager, National Semicon, as its first Indian CEO.
Spotted: After his unhappy exit, Enron's India-posterboy, and ex-CEO Asia-Pac, Enron Broadband Solutions, Sanjay Bhatnagar had disappeared. But now it seems he has resurfaced in a VC avatar as Chairman and CEO of Thot Capital Group. Good for him that he won't be investing in power projects. M&A The fight for VST Industries signals the first serious battle for consolidation in the cigarette industry. In any war, the kings rarely show up on the battlefront. Rather, they make their strategic plotting from the safety of their castles. Tobacco companies ITC and BAT-which is the single-largest shareholder in ITC-may bristle at the analogy. But the Damani brothers-owned Bright Star Investment upping the ante on Russell Credit's-a fully owned subsidiary of ITC-offer for purchasing stock in Hyderabad-based cigarette maker, VST Industries, is a clear case of the two majors fighting to consolidate their respective positions in the Indian industry. ITC is the country's largest cigarette manufacturer, but is under immense profit pressure. BAT, like other cigarette makers abroad, is facing potential persecution in its core markets, and desperately needs to consolidate outside, where regulations are more friendly. But for the record, the war is between two strategic investors. According to John Band, CEO of ask Raymond, which is lead managing the Bright Star offer, the Damanis are looking at VST as a long-term investment. ''We are not spoiling for a fight with the VST management or ITC, we want to ensure that the management optimises shareholder value,'' says Band. But how much is the Damanis' offer of Rs 118 a share a premium over Russell Credit's Rs 115 offer is a moot question. People in the know feel that the Damanis may just be trying to leverage their current 16 per cent holding in VST to make a killing. Assuming Russell Credit were to make a counter offer of Rs 120 or more, the three brothers-R.S., G.S., and S.R. Damani-will end up making a neat packet. In fact, in a message to shareholders, VST's chairman Abhijit Basu has taken pains to explain the difference between the two offers. According to him, a strategic investor (read Russell) would enhance shareholder wealth, while a financial investor (read Bright Star) would neither add value nor appreciate investment in exploring and exploiting the potential in the industry. His message went on to add that since the perspective of a strategic investor is long term, ''it is in the interest of the company to (opt for) a strategic investor''. Raymond Noronha, VST's managing director was travelling and hence not available for comment. Russell Credit's offer for a 20 per cent stake in VST has been open since April 30, during which time the Securities and Exchange Board of India was vetting the Bright Star offer. But both the offers will close simultaneously on June 13. As BT went to press there was no news on whether Russell would make a counter offer, although there were some talks of an amicable settlement happening. What is interesting about la affairé VST is that if Bright Star's offer sails through, then it may just start a trend of investment companies taking positions of influence in professionally run companies, as part of their long-term investment strategies. Remember, Warren Buffet never allowed Coca-Cola to buy out Quaker Oats. -E. Kumar Sharma and Debojyoti Chatterjee CEO Survival Kit The Briefcase of EMC India CEO T. Srinivasan must have an alarm clock besides his devices.
RAIDERS Pelf, not power, is what this broker may eventually want from J.P. Gaur.
Just who is Harish Bhasin? ''A long-term strategic investor,'' says the man himself, in a Damani-like fashion. ''That's a humbug,'' spew his detractors. ''He's merely a greenmail artiste looking to sell his holding at the maximum possible price while causing as much nuisance in the meantime,'' say one rival broker. The context: The spat between the Guar family, promoters of Jaiprakash Industries, and Bhasin, one of the biggest stock brokers in Delhi. Bhasin-who fronted Swaraj Paul's raid on DCM and Escorts-claims to hold 12 per cent of JPI's equity, but the cement and engineering company itself puts it at a shade over 5 per cent. So what does Bhasin want? A say in the management, and-huh?-the list of JPI's shareholders. His point: ''I can tell them what their perception is in the market and what to do about it.'' While there has been nothing official coming from the Gaurs, Bhasin claims his son has been offered a seat on JPI's board of directors. ''I have been in touch with the company,'' he says. He doesn't intend to join the board himself owing to his age, which he won't tell. Bhasin isn't all bluster. While the Gaurs hold more than 50 per cent in JPI and, therefore, are not really vulnerable to a takeover, Bhasin has held on to his holding, acquired from market operations, for close to two years now, and is quick to point out that he did not sell even when the price touched Rs 80 earlier this year (the average price of his purchases are estimated at Rs 55-60). But don't be surprised if Delhi's Old Fox snags a juicy deal from Gaur. -Suveen K. Sinha REGULATION The bid to tax services is bound to get mired in a web of loopholes and ambiguities. Come July 1, and 14 new services will have to pay a 5 per cent service tax, courtesy Yashwant Sinha's Budget 2001-02. Caught in the new tax dragnet are a host of services, ranging from specified banking and financial services to broadcasting services to scientific and technical consulting services to port services. For the cash-strapped government, it is a smart move. Services, accounting for more than a half of the gross domestic product, are growing at 8.3 per cent per annum, and yet pay no tax. Says T. G. Keswani, Consultant, PHD Chamber of Commerce and Industry: ''The government is trying to correct a historical anomaly.''
What Keswani is referring to is a glitch in the carving up of taxes between the Centre and States. The Constitution does not mention services as a tax category, and therefore, it came under the residual category belonging to the Centre. With the share in GDP of agriculture and industry more or less stagnating over the last decade, the government is keen to milk the services cash cow. Notes Parthasarathi Shome, an international tax consultant: ''There is little alternative but for the services to fill the gap in taxable base in order to maintain-leave alone increase-the overall tax to GDP ratio of general government.'' The logic is flawless, but the question is whether it will work. Although most tax experts agree that services tax is the tax of the future, there is little consensus on the mechanics of such taxation. Contends S. Madhavan, Partner and Head, Indirect Taxes, PricewaterhouseCoopers: ''Unless the government comes out with clear guidelines and definitions, there could be absolute chaos. The major problem will be that of computation.'' For instance, do credit cards issued by banks fall in the category of Specified Banking and Financial Services? Even if they do what is the value of the taxable service. Would the 5 per cent service tax be levied on the annual/ renewal fee paid by the customer or on the total purchases made by the customer in a month or year? International consulting firms like Arthur Andersen and PWC have already locked horns with the government over the proposed tax on fee from advising firms on fund raising. Their claim: such advice is not 'management consultancy'-it has nothing to do with the management of the company-and hence, should not be taxed. The fight has gone to the Bombay High Court. The answer to the quandary, experts feel, may lie in hastening the introduction of vat. But that's another Pandora's box. -Ashish Gupta
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New man in: True to his promise, Arun
Duggal, ex-country manager Bank of America, pulled a surprise by joining
HCL Technologies as CFO. Given HCL Tech's ambitious M&A plans and ADR
programme, Chairman Shiv Nadar probably wanted a finance head with a lot
of international experience.
Moving out: From what we hear, there is a
lot of changes happening at Xerox Modicorp. With the MNC in clear majority
now, there is a lot of restructuring happening. And as is usual, there are
people changes happening too. The latest we hear is that P.M. Pai, a
25-year veteran at the B.K. Modi group, has joined Moser Baer India as
President.
Cellphone: Motorola 3688. It is the most
important thing for me. The SMS comes in very handy in difficult places in
Delhi and Mumbai, where some times voice calls cannot get through.
