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TRENDS: TRENDS 2001
FM: Finance Minister Yashwant Sinha's finest hour in 2001, came soon after he presented the budget. Industry responded ecstatically to Sinha's pronouncements and the Sensex soared 240 points. A mere 48 hours later the dream started unravelling. The Sensex crashed by 260 points, and a paranoid Sinha asked the Securities and Exchange Board of India (SEBI) to investigate. Heads began to roll and the markets went into a slump as scam followed scam. Worse was to follow. On July 2, the Unit Trust of India (UTI) suspended trading in its flagship scheme, US 64, for six months, an event that would eventually bring to light the rot in the Trust. Sinha spoilt his case by trying to distance himself from the whole affair. Buffeted by these controversies, the man had little time to devote to the economy. Industrial growth slumped to 2.2 per cent in April-October 2001, and growth in gross domestic product (GDP) is not expected to go beyond 5.1 per cent, leave alone the 6 per cent anticipated in February. Tax revenues have fallen and it's reasonably certain that the fiscal deficit target of 5.1 per cent of GDP can't be met. But fed up with all the criticism about his inaction, Sinha has finally decided to act. Fiscal deficit won't be allowed to stand in the way of stepping up spending, he now says. With that, he's thrown the ball back into the court of his critics. With revenue collection stagnant, money can only come through higher government borrowings, which in turn will push up interest rates. If someone now slams his proposal, he'll just turn around and say: I'm damned if I do and damned if I don't. Come to think of it, that's a neat and very politician-like move. -Seetha FDI: There's quiet rejoicing in Udyog Bhavan, home to the commerce and industry ministry. Foreign direct investment (FDI) inflows into India have actually gone up 40 per cent in the first nine months of 2001. Till end-September, FDI worth $3.6 billion came into the country, against $2.5 billion in January-September 2000. This is 80 per cent of the $4.4 billion FDI India attracted in2000. So does this mean that all those dire warnings about foreign investors staying away are misplaced? Well, FIPB officials themselves are not so optimistic. They attribute the increase to the one-year time lag between approvals and inflows. In 2000, approvals had jumped 27 per cent to touch $8.6 billion and this is reflected in the increased inflows this year. But India still fares poorly in the global FDI sweepstakes. Brazil, logged $33.5-billion inflows last year. And perennial competitor China pulled in $64 billion. -Seetha FOREX: 2001 was a great year for India from the forex reserves point of view. The country's F-reserves-comprising foreign currency assets, bullion with RBI, and SDRs (Special Drawing Rights) held by the GoI-increased month after month. On November 30, 2001, India's foreign exchange reserves stood at $46.89 billion (Rs 2,25,030 crore). Investments by foreign institutional investors also rose steadily, and stood at $2.7 billion (Rs 13,604 crore) on the same date. That's very close to the peak FII inflow into India, $3.05 billion (Rs 14,579 crore) in 1996. The rupee didn't do anything out of character in 2001. It opened at Rs 46.66 to the dollar and, at the time this article went to press (December 18), was quoting at Rs 47.82 to the dollar. The rupee is marked against a basket of currencies that includes the yen, the deutschemark, the euro, the pound sterling, and the Swiss franc, and perforce has to react to any appreciation or depreciation of these currencies against the dollar. At the same time, it also has to react to movements in the dollar itself. That could explain why, post 9-11, when other currencies gained against the dollar, the rupee lost. -Roshni Jayakar GOVERNANCE: The most important happenings of the year, from the corporate governance point of view (hint: it wasn't such a hot year for everyone's favourite buzzword)
SEBI asks all Group A companies to submit a corporate governance report along with their annual reports, starting April 1, 2001. This is one of the recommendations of the Kumar Mangalam Birla Committee Report on Governance. Tata Group Chairman Ratan Tata bags the GoI award for corporate governance. It recognises the Tata Business Excellence Model (tbem) that evaluates Tata companies on the basis of seven criteria-leadership, strategic planning, customer and market focus, information and analysis, process management, hr, and business results. In a bid to comply with the corporate governance code, Dabur India inducts three independent directors, Abhishek Manu Singhvi, Ajay Behl, and P.N. Vijay to its board, taking the total number of independent directors on its board to nine. ICRA announces its plan to rate companies based on corporate governance. The parameters? Transparency, accountability, responsibility, and fairness. The Conference Board completes its report Determining The Effectiveness of the Board of Directors, which takes a critical look at some of the top 25 Indian companies. USAID agrees to fund PricewaterhouseCoopers to train institutions like SEBI and UTI in areas of corporate governance and insider-trading. The author of SEBI's corporate governance report, K.M Birla, disappoints when he names his mother Rajashree as one of the executive directors on the L&T board after acquiring Reliance's 10 per cent stake in the company. The Murugappa Group appoints N.S. Raghavan, the former Joint Managing Director of Infosys, as its Chairman. -T.R. Vivek GONERS: Five Ventures That Just Went e-Ventures: With investors capping their investment in eventures, lay offs followed, and fresh investments went dry. Indya: Star acquires all of Indya.com and subsequently rightsizes it as an extension of Star's TV interests. CEO Lulla and entire management resigns. IndoSuez WI Carr, BNP Paribas, Cazenove Securities: The three brokerages wind up their operations after a prolonged slowdown in Global equity markets. Dabhol Power Project: See D for Dabhol HFCL Nine: The company decides not to bid for the prime-time slot on dd metro on revised terms, and closes shop. -Vinod Mahanta
HEALTHCARE: Was 2001 the year that organised healthcare came of age in India? It could well be. The year saw the emergence of two new companies in the largely unorganised Rs 73,000-crore industry, Max Healthcare and Fortis Healthcare. That apart, Reliance and the A.V. Birla Group (through an eponymous foundation) entered the domain, and existing biggies like Apollo and Escorts embarked on an expansion drive. The specifics: Escorts is expanding its two cardiac hospitals in Delhi and has acquired a hospital in Amritsar; Apollo has announced the launch of 250 neighbourhood Apollo Clinics by 2004, is eyeing opportunities in SAARC countries and West Asia, and has leveraged its knowledge of the business to launch hospital management services; Max Healthcare, which opened shop with a clinic and a medical centre apiece in Delhi, hopes to have a network of 30 Dr Max primary centres, four secondary ones, and two hospitals by 2004; and Fortis, which opened a 200-bed speciality cardiac hospital in Mohali, plans to have six secondary care hospitals in place by 2003. ''In 2001, the healthcare sector has decisively moved from being a government-driven one to being a corporate-driven one,'' says Janak Singh Bajwa, Director (Corporate Marketing), Fortis Healthcare. Maybe the sector that has been termed sunrise for the last decade-and-a-half is finally getting its place under the sun. -Vinod Mahanta HEROES
-Seema Shukla HYSTERIA: The lemmings probably know a thing or two about hysteria. Humans have lots to learn from these lowly rodents. Dotcom Hysteria: A single event often signals the passing of a revolution. In the case of the dotcom revolution in the first world, this was the closure of boo.com, the UK-based fashion retailing site. The Indian experience was different. Even by the time Go4i went, it was evident that the bubble wouldn't last. By early 2001, the dotcom hysteria in India had all but faded. Stockmarket Hysteria: Talk about irrational exuberance. The pendulum swung to one extreme first. Then, partly due to some rational correction, and much irrational depression, it swung the other way, hastened on its journey by the occasional scam. Then 9-11 happened and the Sensex plummeted to an eight- year low. Despite a year-end rally the investor views the market with suspicion. Tech-mania has claimed its victim. Software Services Hysteria: Buoyed by Infosys' success and secure in the claim that tech could never really go out of fashion, an entire cottage it services industry emerged in Bangalore and other parts of India, even in the first quarter of 2001. Then, as the first profit warnings went out, companies realised that predictions of a slowdown in the US spending on it were real. This was a bigger carnage in India than the dotcom bust. -Ashutosh Sinha INNOVATION: An economic slowdown typically breeds innovation. However, the objective of this story isn't to find those related to business process improvements (there were many) or product launches (there were a few). There were three 'real' business innovations of note in 2001: the first was Hindustan Lever's successful adoption of the Grameen-bank concept of micro-banking to spur demand for its products where none existed before. The company's success with this initiative in Nalgonda district of Andhra Pradesh could well change the way products are distributed in rural India (and stimulate demand as well). The second were the sudden signs of vitality in India's hardware genes (did we have any?). A clutch of utilitarian hardware offerings were prototyped in India, the most visible among them being the Simputer Trust's hand-held Linux-based device that could change the way the rural populace accesses the web. Not only are most of these offering simple to operate, they are in the sub-10,000 range, redefining the word 'access'. The third was the collaboration of the Bangalore-based Mavalli Tiffin Rooms (MTR) and the Defence Research Development Organisation, to develop high-grade foil-packaging for ready-to-eat Indian foods-something that has become the industry-standard and reconfigured the entire processed foods business in India today. -Ashutosh Sinha
INTRIGUE: Every year presents us with intrigues, and 2001 has three of note. Who scotched the Tata-sia bid for Air India? Is Shankar Sharma guilty or not? And did someone in the government persuade the then UTI chairman P.S. Subramanyam to invest in Cyberspace Infosys? We don't have the answers, but power-circle habitues in Delhi do put forth some plausible ones. The buzz about Tata-sia is that a private sector airline feared the Tata-sia combine would, after turning around AI, turn its attention to launching a domestic airline (or if regulations regarding zero foreign investment in domestic private airlines stayed, then enter into an alliance with another private airline for feeder services). That motivated the airline to start an information campaign (restricted to those who matter) of how the Tata-sia joint venture would eventually provide a backdoor for a foreign airline to enter the domestic market. That intrigue, however, reads like a tame Enid Blyton book in comparison to the next. It started innocuously enough (if you can call it that) with a SEBI investigation into the role of a bear cartel behind the Sensex's free fall in the days following the budget. One brokerage being investigated was Shankar Sharma's First Global. Then, Armsgate happened on March 13, the markets plummeted, and it came out that Shankar Sharma had a 14.5 per cent stake in Tehelka. SEBI claims it is still investigating First Global's possible bear connections. And sundry enforcement agencies-the it department, the immigration department, the Enforcement Directorate-are investigating the brokerage for related offences. Sharma claims his Tehelka-connection has motivated the Ministry of Finance to issue a ''look out'' circular against him. The investigation was still on when BT went to press. Unlike the first two intrigues, which, like all good ones are not strictly black and white, there's no questioning the culpability of Cyberspace Infosys promoter Arvind Johari. From getting Prime Minister Atal Behari Vajpayee to lay the foundation stone for the company's facility in Lucknow, to ramping up Cyberspace Infosys shares to Rs 1,480 through a brokerage called Century Consultants, the man's guilt is clear (he's absconding). What isn't is whether UTI Chairman P.S. Subramanyam invested Rs 32 crore in the company's stock on his own steam or on the directive of someone in the central government. -Ashish Gupta JOUSTS:It was late last year that Arun Bajoria, a little-known jute tycoon from Kolkata (little-known at least in the financial capital), took on Bombay Dyeing's Nusli Wadia in an attempt to wrest control of the once-upon-a-time textiles major. The battle continued in the current year with Bajoria, who had mopped up close to 15 per cent of Bombay Dyeing's equity, threatening to kick Wadia out of the saddle.
Bajoria's efforts may have been in vain, but he for sure succeeded in spurring a clutch of hitherto-unknown businessmen to play the hostile takeover gambit. The broker-duo from Mumbai, G.K. and R.K. Damani, made an attempt on tobacco major VST, the Gujarat Samachar group trained its sights on Tata company Voltas, and the latest pretender in the game is Pawankumar Sanwarmal who fired a counter-offer for Shapoorji Pallonji company Forbes Gokak. It's not been a 100 per cent success rate, of course, but the efforts of one Abhishek Dalmia will ensure that many more promoters have sleepless nights-Dalmia, who had made an open offer for the Sheths' Gesco Corp, eventually sold his stake back to the Sheths and made a 100 per cent-plus profit in the bargain. More power to the small shareholder. -Brian Carvalho
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