Hovering war clouds: A swift, decisive US blitz could put an end to much of the uncertainty that's dogged the global markets

Richard (Rick) R. Tynes, like most of us, doesn't like war. Yet, as the Senior Vice Vice President (Asia Pacific) of global money transfer major, Western Union, reveals, previous wars gave his company an opportunity to do "very good things in very bad times." At the height of the Bosnian conflict, for instance, Western Union was the only company to bring money into that country, explains Tynes.

Tynes, to be sure, isn't looking for similar "bad times" in Iraq to do some more "very good things''. Yet, even as US President George W. Bush continues to brandish his sabre and Iraq President Saddam Hussein remains unfazed by the incessant rattle, a war may indeed be a good thing. That's because currently it's just threat of war that's resulting in pretty bad times: Stock prices are stagnating, oil prices are zooming, and consumer confidence is ambivalent, just when it was threatening to improve. "Nobody likes uncertainty, especially the stockmarkets," says Nimesh Kampani, Chairman, JM Morgan Stanley.

So if Bush is able to assert himself quickly on the battlefield--in say 10-12 days-that would take care of (amongst other things) the cloud of uncertainty hovering over global markets. Stocks are unlikely to crash since a war is already factored into current prices, oil prices will fall into saner territory, and investment decisions that have been deferred because of the uncertainty will be taken. "A short war that's localised will be good, and won't have much of an impact," reckons Rajiv Chopra, Managing Director, The Resort, a Mumbai hotel that's part of the C. Raheja Group. For Chopra, the threat of war is an irritant he could do without at a time when occupancy levels are healthy (80 per cent upwards) and expansion and development plans are in the pipeline.

Of course, if a short war could be beneficial, a long-drawn conflict would be disastrous--not just for the recession-struck US economy, but for Indian industry too. Consider just one sector: Industrial electricals and electronics, which boasts such players as BHEL, L&T, GE, Alsthom and abb. "We have a considerable stake in that region (the Gulf), all of which will get affected if there's a long war. Investments there will stop, so there won't be new orders for some time, and there will be a lag in executing existing orders," points out Sunil More, Secretary General, Indian Electrical & Electronics Manufacturers' Association (IEEMA). He adds that in two years, the Middle East was projected to account for 50 per cent of the IEEMA's exports of Rs 3,000 crore.

If there's one sector that is actually benefiting from the threat of war, it's shipping. As crude oil inventories build up, along with the oil prices freight rates too are heading northward. For instance, the average freight rate for a very large modern crude carrier more than doubled from $35,000 per day in 2001 to $72,000 last month. "This is an artificial spurt largely created by the war-like situation. These prices will fall if the war isn't a long one," says H.K. Mittal, Chairman & Managing Director, Mercator Lines. The shipping sector won't be celebrating a short war too much, but almost everybody else will for sure.

-Brian Carvalho

SPARK
Got A Light, Anyone?
ITC has. Here's how the behemoth entered the Rs 800-crore matchbox market, at little cost to itself.

It's as efficient a business model as you can get: Tobacco major ITC feeds small-scale match factories in Tamil Nadu with paperboard from its Bhadrachalam plant and labels from its printing division. And it sells the seven brands-yes it has that many-at prices ranging from 50 paise to Rs 3 through a 4-million strong retail network that it uses to sell cigarettes. ''We have just around 8-10 dedicated employees," says Rajeev Gopal, Chief Executive, Matches Strategic Business Unit. And that's itc's strategy to take on the Rs 179- crore Wimco, the only organised player in the matches industry. Numbers? ITC isn't saying anything but analysts estimate its matches business to touch the Rs 100-crore (sales) mark by the end of this year. Now, what did the company wait this long to enter the business?

-Shailesh Dobhal

MUNIFICENCE
Three-Letter Rescue
It's called CDR and it is a handout with strings attached.

IDBI's P.P. Vora: Playing Father Christmas

''The whole purpose is accountability and the proper implementation of the plans for which the money was borrowed in the first place. The overruns have assumed alarming proportions and it is time to bring in some discipline."
P.P. Vora, Chairman, IDBI and Head, Corporate Debt Restructuring Forum

"The proposals are balanced and should help the companies effect a turnaround. There are some tough clauses in case there are defaults, but that is only to be expected."
S.K. Gupta, Managing Director, Jindal Vijaynagar Steel

Lenders and borrowers aren't supposed to mouth the sort of win-win lines that the two gentlemen quoted above have done. Not unless the deal they've struck is as fair as fair can be. Or not unless one of the interested parties, in this case the lenders, is actually presenting a brave face in the wake of a decision that will really not change things. The decision of the Corporate Debt Restructuring (CDR) Forum, chaired by IDBI Chairman P.P. Vora to create two revival packages, one for the steel industry, aimed at preventing the default on some Rs 5,500 crore of debt on the books of steel projects started in the 1990s, and another, a Rs 750-crore one seeking to prevent a default on loans of around Rs 1,000 crore by Spic Petro, works both ways. The revival in the steel industry, coupled with the package's efforts to make each of the ailing companies-Essar Steel, Ispat, and Jindal Vijaynagar are the biggest beneficiaries-competitive by aligning interest costs to existing rates makes it look like a fair deal. The companies turn profitable, and the lenders don't have to watch their debts degenerate into non-performing assets. However, the CDR Forum, has steered clear of changing the management teams of these companies, teams that some analysts believe are responsible for the state of affairs. And while the steel bailout took the form of an industry-wide package, Spic managed to wrangle a unique one-off deal. That said, the project's geographical location-in the South where there aren't too many petrochemical plants-does bestow it with some advantages. Maybe, things will be different this time around. ''We have to deliver now, or it may be too late,'' says Vinod K. Mittal, Managing Director, Ispat Industries. We agree.

-Debojyoti Chatterjee

MARQUE
Chevy Chase
General Motors brings its mass-market brand, the Chevrolet, to India.

When your grandfather's generation wanted to make a statement, it went out and bought itself a Chevrolet. That may no longer happen, but gm is hoping that it can cash in on the equity Chevy once had in India. How else do you explain the fact that while gm has announced the launch of Chevrolet in India, it will be months before the car hits the road. Or the fact that the legendary bow-tie emblem may actually hide a Subaru or Daewoo (other gm brands) underneath? GMI's CEO Aditya Vij wouldn't give any details except to say that it will target the mass market. The Chevy is no greenhorn when it comes to competition. Its 490 (named so to reflect its dollar price) was launched in 1915 as an answer to Ford's Model T and by 1917, it had sold more than a 100,000 units. All that Vij has to do now is to pray for an encore.

-Suveen K. Sinha