Kishore Chhabria & Vijay Mallya: In happier times

When D.R. Mehta delivered his order in the Vijay Mallya-Kishore Chhabria feud for Herbertsons on February 19, his last day in office, it caused several brows to rise. The outgoing SEBI chief ordered Kishore Chhabria & Co. to divest part of their holding-the grounds were that they had violated the take-over code-thereby bringing down their stake from 47.48 per cent to under 10 per cent. The sale is to be at face value, or at the lowest price at which the shares were acquired, whichever is lower (a loss of Rs 20 crore for Messrs Chhabria). Mallya too, has been ordered to bring down his shareholding by 9.28 per cent.

Mallya should be happy, as the order restores his status as the largest shareholder, with 21.38 per cent. But he has decided to appeal to the Securities Appellate Tribunal (sat) because he believes some 3 per cent of 9.28 per cent was acquired when some of his companies merged. Chhabria too will appeal, but that doesn't come as a surprise given his penchant for litigation. What's more, he's reduced to a minority holder of this Rs 296 crore liquor company, into which Mallya had inducted him by transferring 27.21 per cent in December, 1993.

The bigger worry for the UB camp is if Chhabria's 37-odd per cent and Mallya's 9 per cent is offloaded at par, a third party could buy almost half of the company's equity for just Rs 4.5-5 crore.

The stock, then, is in for a beating, which won't do Herbertson's beleagured 14,000-odd small shareholders any good. Sources at Herbertsons point out that the merchant bankers they approached are clueless on how to proceed with the disinvestment. So, it's over to the new SEBI Chairman. Meantime, the Mallya-Herbertsons-Chhabria saga rolls on.

-Brian Carvalho

BUYOUT
No Fairy-Tale, This
A Deloitte takeover won't mean much for Andersen India.

As this issue goes to press, the dailies are replete with news of Andersen selling out to Deloitte Touche Tohmatsu. So, what does that mean for the Indian ops of both firms? Well, Andersen (the fifth among the Big Five) has around 800 people in India (140 in consulting) and a practice that was doing quite well till Enron and Global Crossing happened.

Deloitte doesn't seem to have a lucid India strategy and has thus far been content to operate through several alliances. Thus, it has ties with C.C. Chokshi and P.C. Hansotia in Mumbai, Fraser and Ross in Chennai, and S.B. Billimoria. It also operates through Deloitte Haskins & Sells. And the firm has a negligible presence in the high-end business of consulting. If a buyout happens, say industry sources (Andersen refused to comment), Deloitte will do more work through Andersen in India, although the addition of one more partner, (Andersen) will make its operations in India that much more complex.

While that may make enough of a case for the Indian operations of both firms to merge, the acquisition isn't yet through internationally. What is clear, though, is that Andersen will be sold. And if it isn't Deloitte, says one wag, it will be someone else: a buyout is that inevitable.

-Seema Shukla

BPL-TATA-AT&T
Elephants Get Wings
BPL-Tata-AT&T frees itself from the legal web.

BPL Innovision's CEO Rajeev Chandrasekhar: Relieved

Behemoths, by nature, are not fast. but this one quickly became a favourite butt of slowcoach jokes. After all, not much had moved following the announcement of BPL Communications' merger with Birla-AT&T-Tata in late June last year.

The Supreme Court has just prodded it, dismissing the appeals of BPL's shareholders-CDC Financial Services (Mauritius), Inditel Holdings, Aidtel Holdings (Mauritius), and South Asia Regional Fund-seeking voting rights on the merger.

''The six-month impasse created by (an) unnecessary legal wrangle is over,'' says Rajeev Chandrasekhar, CEO, BPL Innovision Business Group. But the damage is done. ''Six months is a long time in telecom. Had we done what we could six months ago, we would be a stronger merged entity now,'' says a BPL insider.

According to a rival, the legal hassles have prevented BPL from doing much in its Mumbai operation even as the spectre of the fourth operator-Bharti-looms. Not true, says Chandrasekhar. BPL kicked off GPRs in Mumbai in February, and that entailed an investment of Rs 100 crore. In addition, the company put up 35 new base stations.

As a BPL spokesperson explains the wrangle had merely stalled the legal finalisation of the meger. Behind the scenes, he adds, the four principals of the two merging entities have been constantly backing the merger. Can this behemoth now show some speed?

-Suveen K. Sinha

Uday Kotak: A bank at last!

KMFL
Goodbye NBFC, Hello Bank
After much suspense, Uday Kotak gets his banking licence. Now he can also get in a foreign partner.

In the end, it was worth the wait. Last March, Uday Kotak, Vice Chairman, Kotak Mahindra Finance Ltd (KMFL) put in his proposal with the Reserve Bank of India (RBI) for a banking licence. Last month he got the apex bank's go-ahead.

And, as if to make up for the delay in granting KMFL the green signal, the RBI provided Kotak with another spur: foreign banks can now invest up to 49 per cent in the private banking sector.

The stockmarkets were quick to take notice. All of a sudden, the hitherto spurned scrip rocketed to its 52-week high of Rs 175. At the time of writing, the KMFL stock was hovering in the Rs 140-150 range.

Clearly, there are two drivers for the excitement on Dalal Street around KMFL. One, by converting itself into a bank from a non-banking financial company (NBFC), Kotak's cost of funds will reduce substantially, and that will go a long way in fuelling the retail thrust in areas like car and consumer finance. ''Increasingly, it's becoming very difficult for NBFCs to compete, what with their costs of funds being over 10 per cent. As a bank, Kotak can bring it down to under 7 per cent,'' points out Punit Srivastava, a research analyst with Enam Securities.

Two, Kotak's record at bringing in joint venture partners at handsome premiums-like Goldman Sachs for investment banking, Ford for car finance, and Old Mutual for insurance-is impressive, and analysts expect Kotak to work that magic in the banking JV too.

For the time being, however, what remains to be seen is how Kotak, with his multiple partners, structures the banking entity (banking regulations don't permit a bank to have over 30 per cent equity in other ventures). Knowing Kotak, he will find a way.

-Brian Carvalho

DISINVESTMENT
Proving Its Mettle
The move to allow a partner to buy into Nalco could propel it onto the global stage.

NALCO FOR SALE: But please join the queue

The government's move to chart out a phased disinvestment plan for Nalco has triggered off a queue of suitors for India's second largest producer of aluminium and the largest producer of alumina. However, unlike Balco, the sale of Nalco will be through strategic disinvestments. The Central Government, which has 87.15 per cent in Nalco will disinvest 10 per cent through a domestic offering; a further 20 per cent via the issue of American Depository Receipts; and a further 29.16 per cent to a strategic partner. The process has already sparked off major speculation in the market and names like Sterlite, Hindlaco, and Pechiney of France are making the rounds. ''We would definitely be interested in an alliance even if it means a 26 per cent stake,'' says Pechiney Chairman, Jean-Pierre Rodier.

''Anyone who acquires a strategic stake in the company will be able to influence aluminium prices in the country significantly, primarily because of Nalco's access to alumina and bauxite,'' says D. Satapathy, a spokesperson for Nalco. Nalco is already a net exporter of alumina and companies like Pechiney may well use it as a captive source for alumina as the mining costs in the western world are extremely high.

The PSU is also among the lowest cost producers of aluminium in the world and the strategic sale will help it forge an alliance for better value added products both in the domestic and international markets. The interest in Nalco is evident from the sharp increase in share prices of the company. From around Rs 58 in February 4, 2002, the price had moved to a high of Rs 92 at the time of going to press. There's money in aluminium.

-Debojyoti Chatterjee

EXECUTIVE TRACKING
A HR-head goes old-e with a vengeance, and there's some positive news from the audit business.

Rajinder Sinh: Westward ho!

It was only a matter of time before Rajinder Sinh moved out of HFCL. The high-profile hr pro who was poached from Ranbaxy is apparently moving to Mumbai and taking over as head of group hr at Raymond. From pharma to telecom equipment to textiles, Sinh is sure bucking the trend.

This one doesn't buck any trend, just goes along with the one about transnationals not being able to have enough of their Indian execs. The newest Indian executive to make global waves is Sanjay Gupta, the VP and gm of American Express' Financial Centre (East), who has just been named head of all global transaction processing for AmEx.

Finally, the events surrounding Enron and Global Crossing may have made audit a four letter word. But audit majors operating in India are going ahead with expansion plans. Ernst & Young, reports go, has just hunted JM Morgan Stanley Director Premal Parikh as a partner for its India ops.

IBM
P2P: Patents To Profitability
A small IBM facility in India churns out IP.

Pradeep Varma: Notching up numbers

In 2001 IBM made $1.7 billion by just licensing its technology. That shouldn't surprise anyone familiar with two numbers: IBM's R&D budget ($5.1 billion), and the number of patents issued to it (3,411). So, what's this piece doing in an Indian business publication? Well, five of the patents went to IBM Research Labs India, a development centre established by Big Blue in the sprawling South Delhi campus of the Indian Institute of Technology in 1998. Says Manoj Kumar, who heads the lab: ''The process of patenting (technology) is a long one. It is a good augury that the Indian labs have been able to obtain their first patents.''

The star performer of the Indian operations (it has 75 researchers) is Pradeep Varma who is credited with three of the five patents (and five more are in the pipeline). ''All my patents have to do with some aspect of parallel and distributed computing,'' says Varma, himself an alum of IIT-Delhi. Thanks to researchers like Varma, IBM Research Labs India applied for 40 patents in 2001, and, according to Kumar, ''was among the leading contributors from the Asia-Pac region to IBM's IP portfolio''.

-Venkatesha Babu

GTB
Guarding The Trust
An uneasy homecoming awaits Gande, with rumours of "wrongdoings" doing the rounds.

Ramesh Gelli: In a denial mode

Sudhakar Gande, slated to become the man-aging director of Hyderabad-based Global Trust Bank late this month, calls it a ''professionally challenging assignment''. Regardless of how he handles his job, he already merits an award, one for the understatement of the year.

Gande comes in at a time when the rumour mills are working overtime regarding wrongdoings at the bank and a fire-sale by the promoters. If they intend to do that, this could be the right time. The Reserve Bank has recently clarified that foreign banks having branches in India can take up to 49 per cent equity in private Indian banks.

Founder promoter Ramesh Gelli is vehement in his denial. ''There is no thinking on these lines. This is pure speculation.'' Could be, but there has to be more than that driving trading in the bank's scrip, which has jumped 40 per cent to Rs 28 over the past month. That doesn't look too bad against Bank of India's Rs 23, Bank of Baroda's Rs 48, and UTI Bank's Rs 40. The supposed offloading by the promoters is rumoured to happen at Rs 35 a share.

Gande's 'professional challenges' don't end here. The MD's post at GTB looks more like a game of musical chairs: Gande will be the third in the last 12 months. For Gande, an engineering grad from Hyderabad's Osmania University, the new job is a homecoming of sorts. An uneasy one, though.

-E. Kumar Sharma