TCS' Ramadorai: On the brink of a consolidation

It's the whisper of the season at d-street: ''Buy CMC.'' The CMC stock may have risen some 350 per cent-it was quoting at Rs 682.40 on April 22, 2002-since its acquisition by Tata Consultancy Services, and it could go up some more. Driving the ascent is what TCS CEO S. Ramadorai is expected to say when he releases TCS' first elaborate financial statement to the world at large in the first week of May. The market expects the financials to be accompanied by an announcement on TCS' much-awaited initial public offering of a rumoured 10 per cent of its stock and, hopefully, by another on how the Tata Group plans to consolidate all its it businesses under one roof. ''The logical thing will be to first list TCS, then consolidate all infotech businesses of the group (the others being Tata Elxsi and Tata Infotech, in addition to CMC), and then take the combined entity global,'' says a TCS insider, hinting at a possible listing on NASDAQ. Ergo, the interest in the CMC scrip can be attributed to a growing perception that it is perhaps the most economical way to acquire TCS stock. And how!

However, no word is forthcoming on the subject officially. All that vice-president Phiroz Vandrevala is willing to reveal is that ''a valuation of all the assets and capabilities of the two companies is going on to determine how the synergies can be best leveraged''.

So, should you buy CMC stock? Not if you are a believer in the fundamentals. But since when has that been a constraint?

-Suveen K. Sinha

BATA
The Emperor's New Sole
There's nothing radically different about Bata's restructuring plan but this: it could be the last.

A new CEO, labour costs that are 25 per cent of sales, a plunging bottomline, and yet another restructuring plan. That's the story of Bata India. So, when the new man in the hot seat, Fernando Garcia speaks of new launches and mentions brands like Weinbrenner, the initial reaction is to step back and say, ''Didn't the company try that once?'' It did. Ditto with Garcia's comment on ''creating a four-tiered hierarchy of dedicated stores, each designed to meet the particular needs of the customer''. Thus the International Store will stock Bata's international range and imported brands (like Dr Scholl's); the City Store will cater to the needs of the high- and middle-income groups; the Family Store will vend mid-range footwear; and the Bazar Store will typically feature merchandise that has to go (read: sale!sale!sale!). That doesn't address the issue of the company's high wage costs. Nor does it solve the gripe-of-choice of Bata distributors: low channel margins that are rendered even lower by the carrying cost of the inventory thrust on them by the company. We're watching your next step, Mr Garcia.

-Moinak Mitra

JET AIRWAYS
The Case Of The Tainted(?) Airline
Even Arthur Conan Doyle couldn't have penned a more gripping corporate whodunnit.

Jet's Naresh Goyal: The mystery deepens

The doggedness with which questions about ownership of Jet Airways keep surfacing is matched only by its promoter Naresh Goyal's resolve to reveal as little as possible. Ergo, last month, even as newspapers were full of news about Goyal's alleged links with underworld dons Dawood Ibrahim and Chota Shakeel, the NRI Goyal kept quiet, except for issuing denials that took the form of ads. Last year in June, a similar controversy had arisen, and Goyal had used a similar tactic.

This time round, Jet seems to be in hotter water. The immediate provocation is a letter written by the Intelligence Bureau to the Minister of Home Affairs, in which the agency is believed to have aired its suspicions of Goyal using underworld money to run the airline. In fact, the agency also claimed that it had a transcript of a call that Goyal allegedly made to Dawood Ibrahim. Now, there's talk of cancelling Jet's operating licence for security reasons. But the airline, which claims not having received any formal communication from the government in this regard, dismisses the stories as baloney. ''We have complied with all rules and are ready to cooperate with any investigative authority,'' says Saroj Datta, Executive Director, Jet Airways.

The fact that Jet is owned by Tailwinds, a company registered in secrecy-friendly Isle of Man, adds to the controversy. Some Jet supporters say that the airline is being hounded because Disinvestment Minister Shourie-who has openly expressed his intrigue over Jet's ownership-thinks it was Jet that grounded his Air India disinvestment plan. Who's right? It's hard to say. But what's clear is that in this proxy war, truth is emerging as the biggest casualty.

-Abir Pal

TEN SPORTS OPENS ITS ACCOUNTS
Abdulrahman Bukhatir's sports channel bags the soccer World Cup rights.

If it's still India's exploits on the cricket pitches of the Caribbean that are giving you your jollies, wake up: World Cup soccer begins from May 31, and beaming this one-month fiesta into your living room will be Ten Sports, the channel promoted by Dubai-based tycoon Abdulrahman Bukhatir's Taj Entertainment. ''The soccer World Cup is the world's biggest sporting event,'' says Chris McDonald, CEO, Taj. Whilst figures ranging from Rs 20 crore to Rs 200 crore are being bandied about as the sum paid for the rights, McDonald says it's closer to Rs 20 crore. ''If I paid Rs 200 crore, I would need to be fired,'' quips the former espn-Star Sports Senior VP. Meantime, Sony TV's SetMax has bagged the telecast rights for world cricket, including the next two World Cups, for $255 million (Rs 1,220 crore). There's still some time to go for the next Cricket World Cup, which gives Sony time to figure out how it's going to make that kind of money.

-Brian Carvalho

EIH
Strategic Investor Or Black Knight
ITC's 13.79 per cent stake in East India Hotels sets tongues wagging even as the company says all's well.

P.R.S. 'Biki' Oberoi: Playing the Sphinx

Long ago the Birlas held more equity in Tata Steel than the Tatas. This case isn't quite similar but ITC's 13.79 per cent holding in East India Hotels has set tongues wagging in the marketplace about a possible open offer. ITC now holds its stake in EIH through three firms: Peninsular Investment, New Deal Finance, and Megatop Financial Services. And the tobacco major's stake in the Oberoi-controlled company has risen 3.39 per cent since August 2001. ITC is quick to dismiss any predatory aspirations: ''We are investing purely from a strategic point of view and have no takeover intent,'' says K. Vaidyanath, Executive Director, ITC. EIH, too, is not unduly perturbed and the promoters, the Oberoi family, have made no effort to shore up their holding, which stands at 40.95 per cent.

The broker fraternity, however, has a different story to tell. With ITC placing a great deal of stress in its non-tobacco businesses, hotels, the story goes, could well be the focus of the company's growth efforts. In fact, marketmen point to some statements made by Chairman Y.C. Deveshwar at the ITC AGM last year and at the EGM to consider the Bhadrachalam merger, that ITC would not be averse to acquisitions that help the growth process.

So, why are both sides playing it cool?

-Debojyoti Chatterjee

INDIA ONE
Why Is This Man Smiling?
After much dithering, BSNL agrees to provide subscribers access to Bharti's long-distance services.

IndiaOne's N. Arjun: The smile is back

On April 22, 2002, N. Arjun, CEO of Bharti Enterprises' long-distance arm IndiaOne, allowed himself a smile. And it wasn't just because his company had just announced the launch of its international service with tariffs half of the current rates. Few knew that Arjun had just got news that IndiaOne would soon be able to connect to the state-owned basic telephony companies Bharat Sanchar Nigam Limited (subscriber base: 37 million), and Mahanagar Telephone Nigam Ltd (subscriber base: 5.2 million).

''Interconnect for ILD (international long distance) should happen this week and for domestic should happen selectively by May 15,'' says Arjun. That's almost three months after IndiaOne launched its service. Thus far, the company's service has been limited to calls arising from cellular networks (where it has a 90 per cent marketshare) and from its own basic services network. Hypothetically (assuming IndiaOne would have been able to get at least 40 per cent of calls arising from BSNL and MTNL's networks in the past months), the company has lost some Rs 700 crore of revenue. Industry sources claim that the state-owned telecom companies have acted just as Bharti was considering legal recourse. Still, Arjun's glee could be short-lived. BSNL and MTNL are yet to work out how much of the revenue will go to IndiaOne and how much they will keep. And BSNL will give IndiaOne access to its subscribers in phases, first a few cities, then a few more. We'd like to see what happens once the Competition Bill gets through a Parliament obsessed with everything but the economy.

-Suveen K. Sinha