Chandrababu Naidu: Follwing in Shourie's footsteps

When the government of Andhra Pradesh sold its 26 per cent stake in Godavari Fertilisers and Chemicals to the Chennai-based Murugappa Group for around Rs 100 crore recently, it acquired more than the money-an appetite for divestment. Predictably, it is now divesting its holdings ranging from 0.44 per cent to 25.36 per cent in eight companies. It co-promoted one of these, AP Paper Mills; in the others, it is just another investor.

None of the deals is likely to be as large as the GFCL one, and the bulk of the Rs 100 crore the state government plans to raise will likely come from the sale of its stake in Tata Engineering (See Naidu's Sell List). "Thus far, disinvestment has always meant the sale of assets," says one state government official. "This is different." He can say that again: Naidu will have to fight neither unions nor political rivals to sell his stake in the eight companies. The money should help too. Given the state's precarious financials (a fiscal deficit of 4.48 per cent in 2001-02), the chief minister needs every rupee he can lay his hands on to keep AP chugging.

-E. Kumar Sharma

THE BT 50 INDEX
As the BT 50 indicated several weeks ago, a stock-market revival is definitely underway.

One of the advantages of a free-float index is that it is far more responsive than other indices-put simply, it is faster to indicate either an uptrend or a downtrend. True enough, BT 50 Index, India's first index based on free-float did just that with the recovery underway. But we are getting ahead of the story.

In early 2003, BT decided to launch its own stockmarket index because of issues it had with the construct of India's two most commonly used indices, BSE's Sensex, and NSE's Nifty. Both are based on market capitalisation; that is, the weightage allotted to a certain company in the index is based on its market capitalisation. The problem: the inclusion of closely held companies with large market capitalisation distorts the index. Corollary: the total exclusion of such companies will render the index unrepresentative. The Nifty, for instance, includes Wipro, one such company, while the Sensex doesn't.

BT decided to adopt the free-float method, wherein the market capitalisation of a company is based on the quantum of shares available in the market for trading. Ergo, this method excludes the holding of promoters and strategic investors. However, while companies are required to furnish their shareholding pattern to the exchanges, the current format of disclosure isn't very strong-some companies have reported that their free float is 100 per cent, while it is common knowledge that a major portion of the equity of these companies is held by a few strategic investors. BT discounted these strategic holdings when it was calculating free float. Free float didn't just help us choose the companies that should constitute the index; it helped us allot them weightages. To complete the methodology: the free float is according to data as on December 31, 2002; the index begins in January 2002, a relatively stable period; and its base value, like other indices is 100. Keep tracking!

-Narendra Nathan

In the Wake Of Maruti
It's a good time for public sector IPOs.

NALCO: Will delinking the IPO from the strategic sale help?

The Maruti IPO did what everything else failed to: perk up the market for new stocks. That's good for corporates and for Disinvestment Minister Arun Shourie, too. He's got a long list of public sector units that he needs to sell to fill up the government's impoverished coffers. Already, Shourie has stated his intention to sell the government's residual stake in PSUs where the government has sold a controlling stake. The list includes VSNL, CMC, Balco, IBP, IPCL, and Hindustan Zinc. That apart, he has Nalco, Shipping Corporation of India, and BPCL-among other key PSUs-to sell. If Shourie is able to line up his PSUs quickly enough, he may get to ride the Maruti wave. "If the pricing is right, investors may come flocking," says Prithvi Haldea, a primary market tracker.

But the odds of the government catching the boat are long. For one, in six companies where the government has residual stake, there has been little trading in recent years. More importantly, the government is still to appoint merchant bankers, obtain the requisite inter-ministerial clearance, and draft a prospectus for the IPO. Then, there are big hurdles in the disinvestment of some potentially attractive PSUs. Take the case of Shipping Corporation of India. Even after foreign companies were allowed to bid for a majority 51 per cent stake of the company, not a single offer has come in. The result? The race is confined to just three Indian companies: Videocon, BPL, and Essar (Great Eastern walked out because of delays). Similarly, Nalco's sale has been hanging fire for three years, although its prospects now look brighter, given that Shourie has delinked its public issue from strategic sale.

Oil companies HPCL and BPCL do have investors drooling, but the problem here is of getting all the constituents of the ruling NDA to agree to their sale. Their sale may yet happen. But Shourie may have missed the window for the others.

-Ashish Gupta

A Tale Of Two Vijays
Mallya and Sankeshwar, both Vijay, and both businessmen, want to be CM.

Sankeshwar (L) Vijay Mallya: Who will be Karnataka's Perot?

One is a liquor baron with a larger-than-life image, a recent entrant into politics. Another is a transport tycoon who made his political debut six years ago. Both are Karnataka-based businessmen; both have extensive media holdings; both share the first name Vijay; both are followers of Sri Sri Ravishankar; and (wonders will never cease) both aspire to the chief ministership of the state, although neither will confirm the fact.

Vijay Mallya, everybody knows. He is the Chairman of the Rs 3,000-crore UB Group, a Rajya Sabha mp, and Working President of the Janata Party. "I looked around and saw that the Janata Party's symbol of a farmer carrying a plough had tremendous brand equity," laughs Mallya. "So, like a good businessman I bought the brand."

Although the man's efforts to unite the various factions that once constituted the Janata Party have proved futile, he claims the response to his low-key, statewide meet-the-people campaign has been "tremendous". "My immediate aim is to have at least 20 mps in the next Parliament and make the Janata Party the focal point for all non-Congress forces in the state," says Mallya, adding that this is an achievable target. "Like a hard-headed businessman I am aware of the constraints.''

The other Vijay, Sankeshwar is his last name, is not as well-known. He runs Vijayanand Roadlines (turnover of around Rs 300 crore), and owns Vijay Karnataka, a Kannada daily with a circulation of more than five lakh, and Vijay Times, an English one (for the record, Mallya owns the Kolkata and Bangalore editions of The Asian Age, Blitz and Cine Blitz).

A BJP mp for six years, Sankeshwar quit the party in May this year to launch his own outfit, Kannada Nadu. Come October 2004, and Kannada Nadu proposes to contest all 224 seats in the elections. "Only a regional party can meet the expectations of the people," says Sankeshwar.

The two Vijays will meet sometime soon. "Some common friends have arranged a meeting and I hope we can pool resources," says Mallya. Sankeshwar is still playing coy. "It is too early to comment," he says. With both being ardent followers of Sri Sri Ravishankar, there could be a twist in this tale yet.

-Venkatesha Babu

Milk's Bitter Battle
Now, Dy PM L.K. Advani will play mediator.

Verghese Kurien (L) & Amrita Patel: A family feud

The war between GCMMF's (read Amul's) Verghese Kurien and Amrita Patel, Chairperson of NDDB (Mother Dairy), shows no signs of letting up. On the contrary, Kurien-who's opposing Patel's move to make NDDB the mother of all co-operatives by setting up marketing companies along with various state milk cooperatives-may have only stepped up the tempo. "NDDB's mandate is to replicate the Anand model across the country. If they want to go any other way, we'll they have to go back to the Parliament first," says Kurien. His objection primarily is to the setting up of a 'marketing company' by NDDB, as against a cooperative set-up in GCMMF for its brand Amul.

On its part, NDDB claims that its marketing joint-venture proposals have the approval of the Ministry of Agriculture, besides which the marketing JVs will continue to be managed by the cooperatives. GCMMF's reply: "NDDB's role is that of a development organisation and a facilitator, and (it) should not meddle with marketing," says a top source at GCMMF.

NDDB is hitting back at GCMMF, too. Recently, Dhara Vegetable Oils and Foods Company, NDDB's wholly-owned subsidiary, terminated GCMMF's exclusive marketing contract for its brand, Dhara, in favour of Mother Dairy. Although Kurien wouldn't confirm or deny it, he is rumoured to be pushing for B.M. Vyas, gcmmf's Managing Director, as NDDB head, once Patel's term comes to an end in October this year. The twist: Patel might push for an extension.

Such has been the acrimony between the two that all efforts by mediators (including former IPCL Chairman Hasmukh Shah) have come to naught. The new peace-maker on the scene: L.K. Advani. "The skies will clear soon," says Kurien. Especially if Advani orders so.

-Shailesh Dobhal