 |
| Ratan Tata: He now has to hit the M&A
trail |
Ratan Tata needs to be careful.
He has actually got what he had been seeking: Videsh Sanchar Nigam
Ltd. And now the world is waiting to see what he does with it.
Unfortunately, some obvious advantages of bagging
VSNL may not be advantages at all. The biggest of them is VSNL's
debt-free balance sheet, which, given its listing at NYSE, can be
leveraged to raise huge funds-some say as much as $1 billion-overnight.
The problem is, what will Tata do with the
funds? He gets into domestic long distance by default as VSNL, the
country's sole international operator till April this year, has
been given a free DLD licence to compensate for the loss of its
monopoly in the international long-distance telephony business ahead
of schedule. VSNL's existing leased lines give it a headstart in
DLD and telecom analysts are already counting Tata as the second
DLD operator ahead of Bharti Telesonic.
Capital isn't an issue with
the Tata group. Its special purpose vehicle for buying into VSNL,
Panatone Finvest, has been funded by Tata Sons, Tata Industries,
Tata Power, and Tata Steel.
Sure, VSNL has over 250 bilateral agreements
with global carriers. However, an overcapacity in the sector means
global carriers will be happy to carry calls irrespective of who
hands them over. Anyway, an ILD operator will need connectivity
only to the US, West Asia, Europe, and South East Asia, which account
for nearly all of India's overseas calls. And while vsnl's ILD infrastructure
is impressive, it does not constitute an entry barrier: ILD business
can literally be started in a basement. All it needs is a switch.
The biggest concern for the Tata group will
be originating and terminating the long-distance calls that VSNL
will carry. Its role as a carrier is limited to the fixed line operation
in Andhra Pradesh and its presence in Birla-AT&T-Tata, which
is merging with BPL Communication.
The merged entity will have expansive cellular
operations covering-including the fourth cellular licences-Delhi,
Mumbai, Madhya Pradesh, Chattisgarh, Gujarat, Maharashtra, Goa,
Andhra Pradesh, Tamil Nadu, and Kerala. However, post-merger, the
Tata group will have a mere 16.5 per cent of the equity, the same
as the AV Birla group. AT&T, with 26 per cent, and BPL and its
associates, with 24 per cent, seem set to dominate the show.
The group, therefore, needs to make the mega
merger happen quickly and raise its presence by possibly buying
the holding of the AV Birla group, which is understood to be waiting
for a good price.
As Tata goes about doing all this, the last
luxury he can afford is time. Going by estimates, it won't be more
than a year before others offer ILD services. After winning the
VSNL bid, Ratan Tata said the acquisition will help the group become
a fully integrated telecom service provider. All we'd like to say
is good luck. The group needs it.
-Suveen K. Sinha with additional
inputs by Ashutosh Sinha
TITAN
Turnaround Time
Titan turns around smartly by wiping out its
first-half losses in the third quarter. But can the party continue?
 |
| Titan's Xerxes Desai: bidding adieu on
a high |
It
might just prove to be a fitting farewell for Xerxes Desai, who
is expected to step down as Managing Director of Titan Industries
by March. At the end of the first half of the current year, the
Bangalore-based company was showing a loss of Rs 6.48 crore on a
turnover of Rs 242 crore.
The third quarter, however, was turnaround
time- with Titan notching up a net profit of almost Rs 7 crore on
sales of Rs 207.44 crore. Bhaskar Bhat, Titan's soft-spoken deputy
managing director, who's tipped to succeed Desai spells out the
turnaround trick. ''The festive season started in the third quarter
and helped sales go up 29 per cent. Cost cutting measures helped."
Another factor contributing to the turnaround
was that whilst the watches business grew by 17 per cent over the
previous year's quarter, the jewellery business vaulted by 54 per
cent. The Tanishq brand of jewellery contributed Rs 85.24 crore
to the top-line last quarter.
Yet, the worry for Titan is that it is under
threat in the higher-margin watches business (10 per cent, whilst
in jewellery it is less than 5 per cent). At the lower end (watches
under Rs 1,000), hmt, Maxima, and a host of unorganised players
are nibbling at Titan's market. Even in the middle segment (Rs 1,000-Rs
4,000), where Titan boasts a 75 per cent-plus marketshare, Timex
has been making inroads. At the top end, a number of players like
Tissot, Raymond Weil, and Omega are proving worthy competitors to
Titan. The third quarter might have seen Titan turn around, but
festive seasons come only once a year. Will Desai's swansong-the
fourth quarter-be as good?
-Venkatesha Babu
BSNL
& BHARTI TELESONIC
David And Goliath: The Wired Version
Who says BSNL is afraid of fair competition?
IndiaOne thinks so.
 |
| N. Arjun, CEO, Bharti Telesonic |
BSNL: As laid
down in the licence, long-distance operators must connect to short-distance
charge area (SDCA).
 |
| D.P.S Seth, CMD, BSNL |
IndiaOne: There is no point in connecting
to SDCA, which is needed only for intra-circle calls. The licence
says intra-circle has to be done in tie-up with fixed-line operators.
BSNL: IndiaOne's operation should be
put on hold until all issues related to billing, revenue sharing,
and interconnection between the domestic long distance operator
and the local access provider are sorted out.
IndiaOne: It is the usual reaction of
an incumbent to delay the entry of other players in a demonopolising
sector. Our operation cannot be stayed just like that. We have all
the clearances.
VYSYA BANK
The ING Thrust
The Dutch financial major wants to increase
its stake in Vysya Bank from 20 per cent to 49 per cent. Here's
how, and why.
 |
| Vysya's K. Balasubra- manian: he'd like
to do what's right by shareholders |
Last
fortnight, when the bank Brussels Lambert (bbl), a subsidiary of
ING, informed the Bombay Stock Exchange that it was in talks to
increase its holding in Vysya Bank from 20 per cent to 49 per cent,
it was a first of sorts in the banking industry. ''We are keen that
something gets finalised,'' says Bart Hellemans, DMD, Vysya bank,
and ING representative on the board.
Currently, the GMR Group owns 23 per cent,
International Finance Corp, 10 per cent, and the public and NRIs
the rest. Investment banking sources reveal that BBL will make an
open offer of Rs 225 per share (market price: Rs 190); Hellemans
refuses to comment on the pricing.
That's the 'how' part of it. Here's the 'why':
Vysya Bank, with 487 branches, is India's largest private sector
bank in terms of assets and deposits. In the first nine months of
the current year net profit doubled to Rs 58.59 crore. V. Raghunathan,
President, who is tipped to take over as MD, adds that the focus
is on making Vysya profitable.
That won't be easy. The CEO of a nationalised
bank says: ''Vysya lacks a presence in retail lending, a growth
segment.'' Hellemans points out that will change. But first, there's
the minor issue of that stake.
-Venkatesha Babu
 |
| Naidu: now, it's BT |
BIOTECH
BUILD-UP
Naidu ditches IT for BT. Surprised?
Hardsell isn't
alien to Naidu; he persuaded Microsoft to set up its India Development
Centre in Hyderabad in 1998, and aggressively pushed his e-governance
initiatives. Now, he's moved on from it to BT. In the US to attend
the World Economic Forum, N. Chandrababu Naidu took off to North
Carolina for a visit to the Research Triangle Park and the North
Carolina Biotechnology Centre. Armed with presentations aimed at
stoking biotech start-ups at the newly-christened 600 sq km Genome
Valley on the outskirts of Hyderabad, the cm did clinch a few MOUs.
But MOUs on their own mean little, and that would depend on the
way they're implemented. For now, though, the pitch has been set.
-E. Kumar Sharma
POLARIS
Fifteen-Year Itch
Will Polaris Software's biggest client, Citigroup,
lean more on its own subsidiaries?
 |
| Polaris CMD Arun Jain |
What
happens when a highly successful marriage is interrupted by a third
member-that too one from the family? This is the predicament of
Polaris Software Labs. For 15 years Polaris has been gainfully wedded
to Citigroup (revenue contribution: 35 per cent till December 2001).
Now, OrbiTech, a Citi subsidiary, has entered the fray in India.
Polaris' CEO Arun Jain says the boards of Polaris
and OrbiTech (formerly Citibank's it division) are working out how
to add depth to the alliance.
Jain's logic is simple: Citigroup's exposure
to India is barely $50 million. This is bound to grow. Besides,
Polaris already gets 10 per cent of its revenues from OrbiTech.
Last quarter, Polaris bagged some prestigious
contracts from Commerz Bank and AIG. This marriage, it would appear,
is steady.
-Nitya Varadarajan
|
