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DIS-INTERMEDIATION Trade In, Drop Out In a flashback of the 1997 brokerage bloodbath, three multinational brokerages quit India. It's 1997 all over again on dalal street. Then, in the wake of the Asian crisis, six brokerages wound up their Indian ops in an effort to cut losses. Now, circa 2001, three have followed suit after a prolonged slowdown in global equity markets. It isn't as if the Indian markets gave them reason to linger on: trading volumes on the Bombay Stock Exchange have been on a downward spiral, from Rs 3,961 crore on January 1, 2001 to Rs 452.45 crore on July 9, 2001 and then up to Rs 1,456 crore on November 30, 2001. The specifics: in the last week of November British brokerage Cazenove closed shop; a week earlier, two French bans, Credit Agricole Indosuez and bnp Paribas had wound up their securities operations on India, Indosuez wi Carr Securities and BNP Paribas Securities respectively. While WI Carr's pull-out was the result of a regional decision-it is shutting research and brokerage divisions in 12 Asian countries-BNP Paribas' and Cazenove's are India-specific. ''Our decision is in line with the group's strategy of repositioning its activities in India,'' says Jonathan Lyon, the Country Manager and Chief Executive of BNP Paribas India. Thus, the bank will now focus on retail and corporate banking. Ironically, the decision of the three firms to exit the country comes at a time when the market looks to be bottoming out. Either it's all about mistiming again, or the three know something others don't. -Roshni Jayakar Q&A
Nine months into her assignment as CEO of the LSE, Clara Furse, 44, found herself in India, selling the cause of the exchange she heads to Indian companies. In an interview to BT, the lady explains why it makes sense for Indian companies to list on what she calls ''the most international stock exchange in the world''. Postscript: Most people may not know the fact that more Indian companies are listed on LSE, 19, than on NASDAQ, 3. An obvious question: why should Indian tech companies list on LSE? The NASDAQ, after all is a natural choice. The LSE provides greater liquidity, higher visibility, and an entry point to the European capital market. An average of $19.5 billion worth of international equities are traded in London every day. In terms of size the LSE is bigger than Boston, New York, Tokyo, and far bigger than any other European market. It is our international flavour that we believe offers specific benefits to overseas companies that wish to raise money abroad. It is also relatively easy and cheap to list on the LSE compared to the US exchanges. For instance, we charge anywhere between 1-3 per cent of the total amount raised compared to the 5-7 per cent charged by American stock exchanges. And while the American exchanges provide only one route to listing-American Depository Receipts-we do three depending on the kind of company: Global Depository Receipts, Retail Depository Receipts, and Government Securities Index. What kind of Indian companies are you hoping to attract? There are 50-odd companies we are already talking to. These belong to a variety of sectors. However, since we have just launched our new ''techmark mediscience'', an index for specialist healthcare and technology companies, we would like India's pharma and technology companies to take advantage of the new index. Will you move all technology, pharmaceutical, and healthcare companies to the techmark mediscience? We won't impose any such condition, but it makes sense for the company to do so. By moving to the specialised index, companies will benefit from the ability to access extra capital, and the extra visibility (that such an index promises). -Ashish Gupta HEAVY METAL
The sales of medium and heavy commercial vehicles (M&HCVs) is one statistic economists turn to while assessing the health of an economy. Going by that, the Indian economy's ticker is going strong. In the first seven months of 2001-02, sales of M&HCVs was up 5.35 per cent as compared to the same period last year. Still, any conclusions that the Indian economy is on the path to recovery may be premature. ''Sales have increased primarily due to fleet-replacement,'' says a Mumbai-based auto analyst. Fleet replacement is happening due to the need to restructure the fleet, points out Ravi Kant, the Executive Director of Tata Engineering. "Fleet operators are going in for multi-axle vehicles that reduce the per-tonne-kilometre cost.'' Adds Ashok Leyland MD R. Seshasayee, ''There is a clear correlation between economic cycles and sales of HCVs.'' He lists three factors that have spurred growth: innovative financing options, a good monsoon, and the introduction of new models. Paradoxically, sales of LCVs, up 4.5 per cent in 2000-01, were down 16.56 per cent between April 2001, and October 2001. Industry sources attribute this to the slump in the white goods and the FMCG industries. Reading HCV and LCV performance, then, the industrial economy is on an upswing and the consumer one, on a downswing. Actually, we liked the fleet-replenishment explanation better. -Swati Prasad AFTERLIFE
Grab a pizza or a cup of hot coffee, get that film roll haunting your glove compartment developed, withdraw cash, stock up on groceries, and all this while your vehicle tanks up at the ubiquitous petrol station. Public sector oil companies, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL), are rushing for retail-their strategy of choice to combat competition post April 1, 2002, when fuel-retailing will be thrown open to the private sector. The obsession with retail is understandable: it is seen as not just a means of consumer retention, but as a route to substantial non-oil revenues, upwards of 15 per cent of turnover in the next two-three years if analysts are to be believed. Thus, IOC is investing over Rs 500 crore to refurbish and expand its 227-outlet Convenio chain, with food chains in Domino's and Kamat's as partners. And BPCL has tied-up the likes of Kodak, DHL, HMV, and HDFC, to partner it in its retail offensive. The emphasis on retail may prove not-so-beneficial: IOC's retail revenues thus far this year tot up to a laughable Rs 72 lakh. IOC, the biggest of the three PSUs, with 7,549 stations, is also trying to erect entry barriers to competition, by buying over its dealer-owned dealer-operated (dodo) stations. With just about 28 per cent of its retail outlets under direct control (compared to 58 per cent for BPCL and 47 per cent for HPCL), IOC is seen to be the most susceptible of the lot-the company's dodo stations could well switch loyalties post April 2002. As they say, if you can't beat them, block them. -Shailesh Dobhal
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