IFCI's move to replace the management at the embattled Malvika Steel, while understandable, is hardly a cure for an industry buried under loans and under-utilised assets.

Exactly six years after it first decided to fund the Vinay Rai-promoted Malvika Steel, the IFCI last month moved to oust the promoter-controlled management, and bring in its own. The reason: In the past six years, the project has only slipped deeper into the red. With the Rais expressing their inability to pay the interest on monstrous borrowings of Rs 1,800 crore, the FIs had no choice but to convert their debt into equity and then ask for control.

It's the first such move in the industry's history, but one that may be imitated over and over again. For, the industry is grossly overcapitalised and overbuilt. The total assets are estimated at Rs 90,000 crore, while the turnover is just Rs 52,174 crore. There's 39 million of capacity, and 2 million tonnes of import, although domestic demand (27 million) and export (3 million) included leave a lot unutilised. No surprise, then, that the new breed of steel makers-including Essar, Lloyds, and Jindal Vijaynagar-are awash in red ink.

Not all is the promoters' misdoing, though. For instance, when Malvika flagged off in July 1994, steel prices were buoyant at between $240 and $250 per tonne. ''There was a general sense of euphoria that fuelled heavy investments by banks and the FIs between 1994 and 1996,'' recalls P.V. Narasimham, Chairman and Managing Director of IFCI, a major lender to Malvika and the sector.

The scenario took a drastic turn in 1998, when steel prices crashed by as much as 30-40 per cent, largely owing to the ASEAN crisis and the inherent over-capacity of the industry. Caught in the middle, promoters could not back out of such high-cost projects and funding became a major obstacle. Malvika, like many others, felt the heat. Its management had by then upped the project capacity in the hope that better economies of scale would lower costs. But this only created more excess capacity.

Chary FIs only helped hike project cost; in the case of Malvika, there was an overrun of Rs 3,000 crore. ''There is just no viability in the business after servicing the huge interest on loans,'' rues an official with Malvika. Ergo, mergers, rather than management ousters, may help the situation.

—Moinak Mitra

TELEVISION
Direct To Erehwon

Five years after the first direct to home plan was conceived in India, the technology is proving to be stillborn.

I&B Minister SUSHMA SWARAJ: Unwilling to relent

For those waiting for the Playboy channel, there's some bad news. Direct to home (DTH) channels, which could have beamed into our homes a paid channel like Playboy, aren't happening. Sure, five years ago, Star, Zee, and C. Sivasankaran of the Sterling Group, among others, did announce ambitions plans for DTH. But since, their plans have been hanging fire, courtesy the government and the market peculiarities.

Under the guidelines announced by the Ministry of Information and Broadcasting, only Indian-owned companies can apply for a licence. Therefore, all foreign investment in the company (including direct, non-resident Indian, and foreign institutional holdings) should be 49 per cent or less. Given the economics of launching a DTH service, industry is flabbergasted by such regulations.

Consider this: Setting up a DTH platform alone could cost as much as Rs 1,000 crore. The cost of uplinking is another Rs 50 crore, and the cost of subsidising set-top boxes (needed to decode the signals) could be another staggering Rs 1,000 crore. Breaking even would need five million subscribers and about nine years. In such a scenario, other than Star and Sony, few are equipped to take the plunge. ''Nobody is really interested in DTH anymore, as the consumer is already receiving 70 to 80 channels and is quite contented with that,'' says Urmilla Gupta, former head of Star's DTH operations.

Policy isn't the only stumbling-block. DTH is increasingly losing out to broadband, a wired alternative that enables high-density connectivity. Moreover, broadband is an interactive option, where the viewer can really pick his kind of flick and at the same time, surf the net and get more channels than a DTH bouquet (normally 100 channels) has on offer. Interestingly, there is no mention of DTH in the soon-to-be-released Convergence Bill. The upshot: the boob-tube may have to stay ''wired'' for some more time to come.

—Moinak Mitra

SPLIT
Building Bhiwadi Wall

How Bausch & Lomb and luxottica skillfully managed a tricky split of operations in India.

CHOPRA (Right) and SINGH: Happily divorced

It may not quite draw tourists the way the Berlin Wall did until it was torn down in November 1989, but Bausch & Lomb's ''Bhiwadi Wall'' is worth a visit to managers curious to know how to split integrated businesses of a company. For, even the eyecare major agrees that the way its Indian managers went about cleaving B&L's eyewear business for the sake of its new buyer, Luxottica, merits a case study. And the wall that you see under construction in the picture will formally demarcate the boundaries of B&L's eyecare business and Luxottica's newly-christened Ray Ban Sun Optics India.

INNOVATION No Accident His clever software can prevent train collisions.

INDRANIL MAJUMDAR: Inspired design When a young indranil Majumdar saw a ghastly train accident in West Bengal in 1989, it disturbed him deeply. So much so that he swore to do something about rail accidents. Twelve years on, Majumdar has come up with a Railway Collision Avoidance System (RACS) that lets trains talk to each other and stay off each other's way. The system, designed as part of ti's Analog Design Challenge (by the way, Majumdar won it, and with it a cool $100,000 in reward), uses paired digital transponders for interrogation and reply between trains in a railway circuit, and alerts of any possible collision. The Indian railways, with more than 60,000 kilometres of network, uses route relay interlock. ''However, RACS is a safety measure to counter human and instrumental errors that occur in route relay interlocking,'' says Majumdar. At Rs 2 lakh per train, the system should be a steal. One thing that Majumdar hasn't figured out yet, however, is how to spend his $100,000. —Venkatesha Babu

For the two men of either side of the wall-J. P. Singh, Managing Director of B&L and Harsh Chopra, Managing Director of Ray Ban-the brick structure marks the happy end to an ordeal that began way back in October, 1998. That was when B&L's global CEO, Bill Carpenter, announced the sale of his company's eyewear business, in a bid to appease Wall Street. It took until June 1999 for the $1.9-billion Italian major, Luxottica, to step in as a buyer with a $650-million offer.

Worldwide the visioncare and eyewear plants were separate units, which meant the sale could be quickly consummated. But in India, the story was a lot different. Not only was the local company listed, but its operations were integrated as well. Therefore, it wasn't until October 23, 2000 that Luxottica could make its presence in India. Reminisces Singh: ''It was like an Indian joint family splitting its common kitchen.''

Separating the machinery was easy, but splitting up the staff of 360 between the two companies was extremely tricky. These employees had two choices: they could stay with B&L or cross over to Luxottica. In most cases, people were allowed to go with whatever choice they made. However, key executives were offered a retention bonus to ensure they stayed on and saw the sale through. Says Giovanni Colazzo, director, Ray Ban Sun Optics: ''A transition such as this can create problems for both sides. Luckily, we managed not to create any.'' Sounds like a case of 20/20 corporate vision.

—Seema Shukla

CORPORATE NOTES: PUBLISHING
The Blazing Son

A young scion of the Malayala Manorama family is pushing the group's business like never before.

AMIT MATHEW: Plans, and mind, of his own

They've been around for 113 years, but you would hardly have known. That may sound blasphemous if you're on (or from) the Malabar coast, but for most of those decades the Rs 280 crore Malayala Manorama Group has always believed in letting its newspapers and magazines speak for themselves. And there's plenty to be spoken about-23 products actually-right from flagship Malayala Manorama newspaper, which boasts daily sales of 12.57 lakh (ABC: July-December 2000), making it the country's No 1 language daily, and No 2 overall.

But like we said, if you aren't from Kerala, you wouldn't have known. The group today may boast a whole host of products, including the highly successful Manorama Yearbook, but you have to wonder why it hasn't explored opportunities within newer media, like television and the Internet. ''We may not be as high a risk-taker or as marketing-oriented as, say, a Times of India, but we do have plans of our own,'' says Amit Mathew, a fifth-generation General Manager of the group, who did stints in Australia with Rupert Murdoch's Weekly Times and Kerry Packer's Channel Nine, before rejoining the family business.

The plans Mathew is talking about include ''11-12 ventures'' that are currently being evaluated. The Mathews will not go ahead with all of them, but the options include a TV channel, an Internet portal for the non-resident Keralite population, a Hindi daily newspaper, taking the group's Malayalam products into Hindi, English, and regional markets, turning out niche magazines for the Kerala market, taking the Malayalam products into other regions where pockets of Malayalis exist, and setting up a unit in Cochin for producing television soaps. Phew! Just one more thing: the conservative Mathews are even willing to take the Malayala Manorama group public to fund their expansions!

And if it's aggression you're looking for, check out the plans for the English weekly, The Week. Clearly not satisfied with being a distant No 3, the Mathews are looking to close the gap on leaders India Today and Outlook. As of December 2000, The Week had a circulation of 1.57 lakh, compared to India Today's 4.32 lakh, and Outlook's 2.30 lakh. ''But once the latest ABC figures are released, you will see that we have gained substantial ground,'' promises M. Rajagopalan Nair, General Manager, Circulation.

Last fortnight, the Mathews launched their automatic vending service at the Mumbai airport, where the focus will be on selling more copies of The Week. Similar machines will be put up at nine other airports, including Thiruvananthapuram, Kochi, Hyderabad, and Chennai.

Clearly, what the Mathews are trying now is to replicate their success within Kerala in other markets and genres-not the easiest of tasks. But, then, the young scion knows as much.

—Brian Carvalho

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