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His tactics may be controversial, but Baron's Kabir Mulchandani knows how to wow some consumers. Late last month, Baron International's Kabir Mulchandani caught a flight out to Goungdong, China. His mission: convince his Chinese JV partner, TCL, not to 'waste' money on advertising, but rather use the cash to sell the Chinese colour televisions at throwaway prices. Unorthodox marketing strategy? Absolutely, but neither the 29-year-old Mulchandani nor his rivals are surprised. For, since 1995, Mulchandani and his mother Shakun Mulchandani-who, people say, is the brain behind the strategy-have emerged as the biggest price warriors of the CTV industry. Even if that meant getting in and out of partnerships faster than most companies can say 'yes'.
Consider: Baron launched Akai in 1995 with the now-famous exchange offer, and quickly made it the largest-selling foreign brand by end of fiscal year 1997. But by end of 1998, when Mulchandani foresaw that Akai's Chinese owner, Semi-Tech Corporation, was headed for financial trouble, he dumped Akai and struck a deal with Aiwa. To add volumes, Baron had earlier tied up with Hitachi in February 1998, but after an uneasy honeymoon, broke up nine months ago. In between, in September 1999, he roped in TCL to set up a joint venture in India. But point out the obvious and Mulchandani bristles: ''If you think I am a serial marketer, even HLL, which is dropping 70 per cent of its brands, is a serial marketer.'' Fine, may be he shouldn't have dropped out of Stanford University in 1993, but of marketing chutzpah, Mulchandani lacks little. Says he: ''We never work cost-down but we work market-down.'' Take, for instance, the TCL 14-inch CTV, which has been priced at Rs 5,990. Although it is a loss-making proposition-Baron will lose Rs 2.5 crore per year on the model-Mulchandani thought that was the right price for seeding a new market. Besides providing a platform for new brands to enter a market in the shortest span of time, Baron promises its partners quick gains in marketshare. For instance, Sony and Panasonic have been around for five years, but neither of them has yet touched a double-digit marketshare figure. For Baron, the distribution channel and price are more important than the brand. Says he: ''Hitachi was not focusing on the consumer electronics business, and consequently did not have (an attractive) cost-structure. We thought it was better to focus on Aiwa with a long term perspective.'' With a combined marketshare of 12.6 per cent, Mulchandani can well afford to be controversial and brash. -Ranju Sarkar TRENDS The gadgets Arun Kumar CEO, Hughes Software, can't do without...
EDUCATION The tech slump is taking its toll in IT education, too. While the biggies are managing, the smaller institutes are body strapped. The Americans have a word for it: collateral damage. That, in plain English, means the damage inflicted on IT training and education industry by the current slowdown in the IT sector. And hurt it will. There are an estimated 10,000 computer education institutes of all shapes and sizes across India. While no reliable numbers are available of early casualty, the signs are loud and clear. A lot of top institutes, including Tata Infotech, are advertising assured placement as a sop to lure students. Even NIIT, the market leader, recently sounded the fog alarm over a drop in earnings. Says Bala Gopal Menon, CEO of SSI Education: ''The rush into it training institutes has definitely come down.'' Taking the brunt are, of course, the mom-and-pop IT institutes. Typically, they are run out of homes or small shop-offices, and do not have an accredited curriculum or good faculty. Just the same it was easy to open shop because most of the software they used was pirated, besides which languages like Java-in great demand over the last four years-were distributed over the internet as freeware. Thanks to a low operating cost, such institutes were able to lure students with rock-bottom fee. But with the IT hype gone, skeptical students and parents are bound to seek out the security of bigger institutes such as NIIT and Aptech, even if they have to pay more in terms of fee. The problem that a lot students at such shady institutes are facing is of completing their course. For, with the business slowing down, those institutes in for a quick buck are making their escape. Wintech and Advance Technology Labs, both of which had a national presence, have downed the shutters. Says K. Murgesh, a student at Wintech, Chennai, before it shut shop: ''So many promises were made, but then just a month-and-a-half ago, it disappeared with our money.'' Those surviving the shakeout are being forced to discount their prices. And although this was supposed to help check the fall, it is leading to unhealthy price competition. Says T.K. Pranav, a Bangalore-based b.com student, planning to sign up for a computer course, ''The offers are baffling. Nothing is as it looks on the surface. The same course for the same duration costs differently even at the bigger institutes.'' All this churning has ensured that the segment, which was growing at a scorching 40 per cent plus rate, will slip to 15 per cent. Says Menon of SSI, ''We expect to end FY01 (June 30) with revenues of about Rs 225 crore, a 70 per cent increase over the previous year. But we will see future growth settling down at lower levels because of the general trend in the industry.'' Once the dust settles, the big institutes-who are also planning to strengthen their presence abroad-expect things to get back on an even keel. Says Menon of SSI, ''Luckily, there is no fundamental shift away from it as a career option.'' But where is a question that even Menon wants an answer to. -Venkatesha Babu STREET
WATCH A dull Sensex sees some relief as ICE stocks pick up steam. It was a sign of how bored the markets were that no news last fortnight was bigger than India getting a lower weightage on the important Morgan Stanley Capital International's Emerging Markets Free Index. That was probably also why the markets decided to gloss over the news that companies like Sun Pharma, DSQ Software, Jai Prakash Industries, and Escorts had been dropped from the index, while Reliance Petroleum re-entered the index, accompanied by new comers VSNL and HDFC Bank. Explains Abhay Aima, a Mumbai-based market analyst: ''Only the passive funds are influenced by the MSCI index and not the active funds, who prefer to follow the general market direction.'' Foreign Institutional Investors (FIIs) continued to be strong in selective counters, but failed to push the Sensex out of its narrow range. FII net monthly cumulative inflows crossed Rs 967 crore during May, even as Janus, one of the largest funds in the US, mopped up HFCL stocks. Institutional interest seems to have been revived in ice stocks, post the news of ban on carry forward trading. Compare the market capitalisation of ice stocks between April 27 and May 27, and you see a 30 per cent rise. For the badla-embattled market, that's a breath of fresh air. -Roshni Jayakar POWER Foreign investors may hate India for it, but it might make sense to let Enron go and reconfigure the Dabhol equation. Even as claims and counter-claims fly thick and fast between Enron and the Maharashtra State Electricity Board, the question that most needs answering is: can the $3-billion Dabhol Power Company be run better without its American promoter, Enron? Probably, yes. Here's some perspective: when MSEB signed up to buy electricity from Enron, it agreed to pay a base tariff of 7.3 cents per kwh; the rupee-dollar exchange rate then was 32. Subsequently, the tariff was renegotiated to 7.5 cents per kwh, but now it takes 47 rupees to buy a dollar. Therefore, the tariff rate in rupee terms has soared from Rs 2.40 per unit to Rs 4.10. The second issue is the nature of the deal itself. DPC has been positioned as a base load power plant with 2,000 mw capacity (the first phase has 695 mw and the second phase, the remaining). A base loaded unit of this size would tend to restrict flexibility in terms of power generation. Also, with the fuel project coming up as a separate unit, the fixed cost (again denominated in dollars) would considerably be higher. As the Godbole Committee report has pointed out, this would to a large extent take away MSEB's ability to control how much power it buys from DPC. If Enron leaves, with its $900 million in damages from India, the DPC economics can be changed. For one, the second phase can be shelved, keeping the overall project cost low, and allowing the new player in to renegotiate the power purchase agreement in rupee terms. Given that DPC is a combined cycle power project, the new owner can rework the fuel mix to lower costs. But which Indian company can step into Enron's shoes? In private, the National Thermal Power Corporation has been saying that it can take on DPC. But neither the NTPC nor the government of India, which owns NTPC, may have the billion dollars or so they may need to pay Enron in damages. The ball will then fall in the court of one of the big corporates-most likely Reliance, which with its experience in handling mega projects and the administration, may be able to come up with a win-win formula. But the pressure from investors in the US and other countries may be too high for the government to handle. -Debojyoti Chatterjee INFRASTRUCTURE It is the Prime Minister's pet project. Which explains why the National Highway Development project is right on track. Four years ago on October 24, when Prime Minister Atal Bihari Vajpayee announced a plan to build 13,252 kms of roads, connecting every nook and corner of the country, his critics sniggered. Not only was such foresight uncharacteristic of Indian politicians, but the project would cost Rs 55,000 crore. What's more, there was talk of completing it by 2007. It now turns out that Vajpayee's critics may have sniggered prematurely. Work on the ambitious National Highway Development Project (NHDP) is continuing apace. Finance, the biggest stumbling block in projects such as this one, is being tied up rapidly. Of the Rs 20,000 crore that was to come from cess on petrol and diesel, Rs 5,800 crore is already in. The National Highway Authority of India (NHAI) has raised Rs 656 crore by way of bonds, although its target is Rs 10,000 crore. The Asian Development Bank and the World Bank have paid out Rs 5.60 crore in first tranche (from total promised loans of Rs 20,000 crore). Better still, of the Rs 4,000 crore worth of projects set aside for the private sector, Rs 1,020 crore value projects have already been sanctioned. The Cabinet, too, has given advance approval for spending upto Rs 30,000 crore on the NHDP. Points out Major General, B.C. Khanduri, Minister of Highways, and the person responsible for implementing the project: ''We will not have to run to the cabinet every time we want to spend a few extra rupees.'' The NHDP is three projects rolled into one: the 5,952-km Golden Quadrilateral project costing Rs 27,000 crore; the 7,300-km-long North-South-East-West Corridor connecting Srinagar to Kanyakumari and Silchar to Porbandar costing another Rs 27,000 crore; and finally the 4,000 km-long road project connecting the major ports with the main cities at a cost of Rs 1,000 crore. While 802 km of the golden quadrilateral has already been four-laned, 658 km work on the North-South-East-West Corridor too has been completed. And work is fast progressing on the 2,433 km of the golden quadrilateral, and 338 km on the n-s-e-w corridor. In fact, so happy has been the minister with the pace of the implementation that he has already pushed ahead the date of finalising the golden quadrilateral project by nearly a year from 2004 to 2003. However, the implementation deadline may be delayed because the government is having second thoughts about the novel annuity scheme. Says a senior official in the Planning Commission involved in the NHDP project: ''The annuity route is a very expensive proposition because of the structuring of the payment which factors in the risk factor. For Rs 2,000 crore of borrowings, the government may ultimately have to pay up Rs 5,000 crore.'' Amul Gogna, Executive Director, ICRA, and a person who tracks infrastructure projects on a regular basis, makes another point: ''It is virtually impossible to build another 5,000 km of roads in the next two years given the poor track record of our contractors and the fact that a number of contracts have yet to be awarded.'' The n-s-e-w corridor project, according to him, has a better chance of being completed by 2007, since by then all the teething problems will be over. Let's hope Gogna proves right. -Ashish Gupta
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Cellphone: Nokia 8810-My travelling
companion. Voice calls for me are still primary. But after a long day,
sometimes, I do SMS an occasional joke to friends too.