What is dabba trading?

Dabba (empty box) trading refers to illegal or parallel stockmarket deals, those that aren't routed through the official exchanges.

Is it a new phenomenon?

No. It is no different from 'kerb' deals of the 1990s, which disappeared with the advent of screen-based trading.

Why has it returned?

Regional exchanges have become defunct. Brokers from these exchanges have reinvented 'kerb' dealing under a new name, dabba.

How does dabba trading work?

In three ways. One, it happens at a broker's office where two clients transact directly without routing the trade through the exchange. Two, brokers and investors assemble at a pre-ordained place. Recently, India's stockmarket watchdog, SEBI superseded the board of Ahmedabad Stock Exchange for allowing an unofficial market ro exist within its premises. Three (this is the most prevalent), the two parties entering into a dabba transaction also enter into one through the exchanges (in the ratio 1: 100; that is, if the unofficial deal is for 100 shares, the official one is for 1 share) to keep track of the price at which the transaction is effected.

What is the lure of dabba?

First, investors can take a forward position (settlement happens on a future date at a price agreed upon on the day of the trade) without any margin requirements (stock exchanges mandate that anyone taking a forward position has pay a certain amount every day depending on the stock's volatility). Second, they can take forward positions on all counters and not just the ones allowed by SEBI.

So, what's bad about dabba?

Problems in the dabba market can spread to the stock exchanges as most dabba brokers operate on the exchanges. And unlike kerb deals that used to be reported to the exchange the next day, all dabba transactions are in cash. Since no contract notes are issued, investors can't claim any protection from unscrupulous brokers. Three, dabba trading could result in tax evasion.

-Narendra Nathan

Vision 2020
A BPO fairytale comes out of Chennai.

Jain: The Brothers Grimm could have authored his story

It's the kind of moving-up-the-value-chain (oh no, not that again) story that is all too rare in the Indian Business Process Outsourcing sector. Six years ago Vision Healthsource was a medical transcription outfit. By 1998, however, its promoter Anurag Jain realised the need to move up you-know-what and diversified into the much broader area of medical billing, receivables and claims processing. Last fortnight, Jain was rewarded for his vision: the low-profile Chennai-based company was acquired by Texan billionaire Ross Perot's Perot Systems in a $10 million (Rs 47 crore) deal. Last year, the 500-employee company registered revenues of Rs 11.75 crore ($2.5 million), processed 25 million transactions, and provided end-to-end workfloor management services for nearly 2,000 doctors in the US. "We were looking for someone with cultural compatibility who could extend our market reach and capabilities," says Jain. "The acquisition will result in an expansion of Perot's healthcare BPO capabilities and further our position as the market leader in this space," says Chuck Lyles, VP (Healthcare group) Perot Systems. Since we started with a cliche, let's end with one: this deal sure looks like a win-win.

-T.R. Vivek

May Day, Losing Altitude
Indian Airlines is fast losing marketshare to aggressive rivals.

Stagnating capacity at 26 million asks (Average Seat Kilometres), a drop in marketshare to 39.8 per cent from 61.2 per cent in 2000-2001, and rising aviation fuel prices are tightening the screws on the domestic national carrier. Things don't look pretty, and nobody knows it better than Indian Airlines' CEO Sunil Arora. "In the last one year, Sahara has emerged a major threat and more than doubled its marketshare almost entirely at our cost," he says. "Without capacity expansion, it will be very difficult for us to maintain our market position."

The trouble with the vexing question of capacity expansion, however, is that it is more political than corporate. The government has already approved a phased funding of Rs 9,000 crore for IA to revamp its fleet by acquiring 43 aircraft, seven of them wet-leased. But there's little coming. Ergo, Arora is looking at other ways to make the airline-which has a passenger load factor of 70 per cent, compared to Jet's 90 and Sahara's 87 per cent-more efficient. Beginning April 2003, IA has set up a dedicated cell for frequent flyers (they fetch Rs 600 crore in annual revenues) in Mumbai.

To cash in on the holiday boom Arora has relaunched IA Flyways, holiday packages that cover 30 destinations and 60 cities, and is pushing hard on the apex fare front as well. Simultaneously, IA is trying to spruce up employee skills. ''This is primarily to bring them up to speed on the service front and improve on-time efficiency of the airline,'' says Arora. But all these efforts can only have a marginal impact. If fresh capacity is not created then the airline may well see its marketshare dipping even further in its golden jubilee year.

-Debojyoti Chatterjee

Is Phaneesh Back to Real Business?
The official version: the signs are all there. The short answer: We think so.

Phaneesh Murthy: Exploring new ops

When Phaneesh Murthy was still the star deal-maker in Infosys, he thrice tried to rope in friend and one-time neighbour Tiger Ramesh, former founder of Bangalore Labs. He failed all three times. Now, finally the friends are working together. Only this time, it was Ramesh's turn to rope his friend in. On paper, Phaneesh's Primentor is a consultant to the $30 million (Rs 138.51 crore) funded Quintant (it's an instrument mariners use to measure the altitude of stars), but people in the know jokingly refer to him as a backseat driver. But what's more exciting than the friends coming together is Quintant's business model. It has identified four to five processes in banking and insurance that Phaneesh and Ramesh think account for about $300 to $400 billion (Rs 13,85,100 crore-Rs 18,46,800 crore). They will build technology and framework for each of these processes and charge customers per transaction. The idea is to use the same infrastructure for multiple clients. Quintant has already hired 75 managerial heads and is building a 10-acre campus in Bangalore's Whitefield. Watch this space.

-Vidya Viswanathan