UTI Chairman M. Damodaran: Focussing on equity research

May 31, 2003, by when the unit Trust of India has to get the net asset value of its flagship scheme-US 64-up into double figures, may be some time away, but the step-up from Rs 5.97 has already begun. A couple of days pre-Budget, US 64's NAV had entered into Rs 6.50 territory, but you can't read too much into that since the increase is more or less proportionate to that of the market as a whole.

	Faded, Not Worn Out
	The Never-Ending Haldia Story
	A 15-Year Shirt Warranty
	Tech IPOs In The Offing
	It Is A Re-Run

There's little doubt, however, that a couple of chairmen and sundry committee recommendations later, Operation Clean-Up has finally begun at UTI. To display how serious India's largest mutual fund-which had piled up negative reserves of Rs 3,400 crore as of December 2001-is about regaining investor trust, Executive Director B.S. Pandit, who oversees fund management at UTI, is talking the talk. He says that UTI will surely reduce its exposure, and in some cases even totally get rid of its holdings, in some 150 under-performing companies (you'd prefer to call them junk), which make up 12-15 per cent of the US-64 portfolio. ''We are not averse to bulk sales of companies with no long-term future,'' points out Pandit.

In charge of this gargantuan exercise won't be the chairman, but UTI's 14-odd fund managers (FMs). And that's another significant departure from the past at the beleaguered Trust. The FMs have now been empowered to make day-to-day buying and selling decisions. Every fm has a limit (according to his seniority), which can go up to Rs 2 crore per day per scheme (and the FM on an average takes care of four-five schemes). ''Decision-making is faster, and more opportunities can now be seized,'' explains Pandit, who says that trading volumes have registered a three-fold increase in equity and debt since the FMs were given more powers. Chairman M. Damodaran is also planning to enhance the scope of the hitherto-ignored equity research cell by extending it to do research into debt paper and money market instruments.

Meantime, to woo the none-too-impressed investor, UTI is readying to launch two new schemes: one is a regular income scheme that will offer steady but not assured returns; the other, a variable investible scheme, is more innovative and contrarian to the extent that the fund manager will be buying at low levels and selling 5 per cent at every 200 per cent rise. More power to the fund manager!

-Brian Carvalho

FADED, NOT WORN OUT
The great Denim comeback
The fabric of dissent is on an upswing.

The year 1998, marked the beginning of the great wash-out for denim manufacturers in India. Companies such as Arvind, Ashima, and kg invested in the blue fabric only to see global demand-courtesy, a gradually greying populace-stagnate well short of installed capacity. And prices fell. Concedes Milind Hardikar, Head, Denim Business, Arvind Mills: ''Although we were operating at full capacity, the falling prices did create difficulties.'' Now, the blues may have sung themselves out. ''With a number of companies in the business having gone out of business, and an increase in demand, things look better,'' says Arvind Singhal, CEO, ksa Technopak. Adds Chintan Parikh, CEO, Ashima: ''Prices are up 20 per cent and margins, 25 per cent. I see sunny days ahead.''

-Seema Shukla

A 15-YEAR SHIRT WARRANTY
In an effort to differentiate itself pan-Asian clothing brand Crocodile pulls out all stops.

It is the second largest selling clothing brand in Japan, the first in Singapore, and it isn't doing too badly in India either. ''We are already breaking even in the third year of operations,'' says Venkatesh Sivaram, the MD of the company's Indian ops. Emboldened by this success, perhaps, Crocodile has launched a cotton shirt, priced at a staggering Rs 3,000 under the Cartelo brand. Its USP: a 15-year warranty. ''There are people who prefer old shirts as they are increasingly comfortable,'' says Sivaram. Still, in an age of fleeting fashion, there may not be too many people willing to buy a shirt at that price merely on the strength of a warranty.

-Nitya Varadarajan

TECH IPOS IN THE OFFING
The Bharti Televentures success could see the beginning of a tech-IPO wave.

These days, prithvi haldea, the chief executive of Prime Database, a company that tracks the primary market, receives between five and six queries a day on software IPOs of those glory days. ''That means these companies are considering floating an IPO,'' says a gung-ho Haldea. Among these are Future Communications, Tata Consultancy Services (the amount in question is a staggering Rs 3,000-4,000 crore), software product company i-flex, Mahindra British Telecom, and Escotel. Analysts expect most IPOs to do well as long as the fundamentals of the company are beyond question, and the offer price isn't very high. Barring unusual circumstances, then the coming year should see a fair share of tech IPOs.

-Roshni Kayakar

HALDIA PETROCHEM
The never-Ending Haldia story
Why the Haldia Petro imbroglio doesn't look like ending any time soon.

Purnendu Chatterjee: No end in sight

The Haldia Petrochemicals soap just got a fresh lease of bubbles, sorry, life. In the past, it was all about an alleged feud between one promoter, Purnendu Chatterjee and another, the West Bengal government. Now it is the turn of the financial institutions to get into the act. The latest salvo in the ongoing Rs 5,278 crore Haldia Petrochemicals project saga has been fired by IDBI, the lead financial institution with the maximum exposure in HPL's Rs 4,268 crore debt component. It has decided to block the West Bengal government's decision to allow the Chatterjee group (TCG) acquire a controlling interest in Haldia Petro on the grounds that it is detrimental to the company's. What's more, IDBI insists that Indian Oil be brought in as a partner.

For those who came in late, TCG holds 43 per cent of the equity, the West Bengal government 43 percent, and the Tata Group, 14 per cent. With the last mentioned wishing to exit, the government decided, after much negotiating, to allow TCG up its stake to 51 per cent, with its own stake increasing to 49 per cent. Both brought in their respective share of the equity and everything signalled a happy ending. Chatterjee, apparently, had even identified a strategic partner-reportedly the Hinduja Group-which was willing to invest up to Rs 500 crore as equity, thereby reducing the debt-equity ratio of HPL (a staggering 3.69:1)

But IDBI, which has an exposure in excess of Rs 450 crore to HPL didn't like that. Not only is it opposed to Chatterjee running the show, it wants IOC-the oil major's ambivalence is manifest in the unattractive price at which it is offering to buy out both TCG and the WB government-to take over. Says H.K. Khan, IDBI nominee on the HPL Board, ''TCG had not done enough to earn our confidence.'' With the issue of control once again raising its ugly head, chances that HPL will be able to restructure its high cost debt are remote.

-Debojyoti Chatterjee

INTERNET TELEPHONY
It Is A Re-Run
Another liberalisation, another set of doubts, yet another controversy...some things never change.

TRAI's M.S. VERMA: Oops, he did it again

It's the same old feeling. Yet another communication channel-internet telephony, slated to become legitimate on April 1, even as everyone knows its use is already rampant-promises to create more issues than it can possibly address.

Déjà vu no 1: It is touted to be good for the consumer as it will bring down the cost of making calls. It is just that most of the potential beneficiaries would be proud owners of state-of-the-art personal computers and may not need much benefiting. In any case, those who are in a position to use internet telephony are already using it. A wag says it is like making fuel free for those that own cars.

Only In India The Disc Side Story VCDs have a huge market in India, most of it grey.

Most VCDs sold in India are pirated

VCDs are goners in most of the rest of the world. But interestingly, India still remains cast in the VCD mould-thanks to a burgeoning grey market. Cetma secretary-general Suresh Khanna says 2.5 lakh stand-alone VCD players are carted off every month in Delhi's Lajpat Rai market alone. ''I would value the total VCD market in the country at approximately Rs 10 lakh per month,'' Khanna adds. Companies like Sony India are discontinuing stand-alone VCD operations. Says its Managing Director, Teruo Ishii: ''The consumers prefer audio-video CD models. We are concentrating on enhancing the hi-fi AVCD line-up.'' Meanwhile, Chinese and Malaysian VCD players, which stormed the market last year, cost Rs 2,400-4,200. A Philips VCD player costs Rs 9,000. How's that for competition? -Moinak Mitra

Déjà vu no 2: A fresh controversy is on anvil. Much of the telecom industry, including some in the department of telecommunications, feels that that Telecom Regulatory Authority of India's recommendation that internet service providers be allowed to provide internet telephony without having to pay any additional entry fee rewards those that have not invested in infrastructure. Those that have-fixed line, cellular, and domestic long-distance operators-will face a squeeze on margins as rates fall further. There could be a massive shift of revenues to internet based telephony once its voice quality, most charitably described as unsatisfactory now, improves. That won't take long, six to eight months at most.

Déjà vu no 3: The section seen to be benefiting the most, ISPs, says it gain nothing from it. ''A service provider is not needed in pc-to-pc calls. The applications can be downloaded free. Fixed service providers will benefit as internet usage goes up,'' says ISP Association of India Secretary General Amitabh Singhal.

Déjà vu no 4: Fixed service providers, yet to recover from the sharp drop in domestic long-distance rates, have made a fresh pitch to TRAI for cost-based rentals and call charges. It will be of little help, though. FSPs cannot raise tariffs, which is the sole possible intent behind seeking cost based tariffs, when charges are dropping for all the other services.

Déjà vu no 5: TRAI intends to prevent domestic pc to phone calls. No one, just no one, has a clue on how that can be done.

-Suveen K. Sinha