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| GW's Vishal Nevatia: Bottomtrawling |
It
seems somewhat apt that the Gary Wendt-promoted (remember, he was
former CEO of GE Capital) GW Capital launch a company that is willing
to buy non-performing assets (NPAs) from Indian banks and financial
institutions (FIs). After all, GE Capital, under Wendt, made some
300 acquisitions of which a mere two were considered failures. So,
yes, now that a law is in place giving banks and FIs the authority
to attach the assets of defaulters, GW Capital's Indian arm will
consider buying them, but not just yet. "We will begin once
there's political acceptance for banks and FIs selling NPAs at the
right price," says Vishal Nevatia, who runs the fund in India.
"If they have an NPA of Rs 1,000 crore, they should be willing
to write off Rs 800 crore, and take Rs 200 crore." Nevatia,
an Arthur Andersen vet whose name was suggested by HDFC Chief Deepak
Parekh-his company is an investor in GW Capital, believes the momentum
will build up in the next two-to-three years in what is a 15-year
opportunity. Already, Nevatia is in the process of identifying turnaround
specialists across sectors. "We ourselves have identified a
man who turned around two plastic packaging companies," says
Nevatia. Profits? Well, GW Capital will, when it enters the business,
target returns of 25 per cent to 30 per cent a year. That's a bit.
-Vidya Viswanathan
MALLING
Going Shopping?
Here
is something more for mall rats. The India Today Group (it publishes
Business Today) has partnered with Ansal Plaza Mall Management to
bring out a 32-page quarterly magazine, Mall Times. The first-of-its-kind,
Mall Times is specifically tailored to provide shoppers a complete
guide to the Ansal Plaza Malls, two of which are already present
in the National Capital Region (two more are coming up, one in Noida,
and another, a little farther away, in Ludhiana).
The magazine highlights new stores and products
and keeps consumers informed on mall-news related to promotions,
cultural extravaganzas, and the rest. It also features articles
by leading designers such as Malini Ramani and Raseel Gujral, on
the latest fashion trends and picks of the season. "With this
(magazine), we are also trying to break the consumer myth of malls
being expensive places to shop," explains Munish Baldev, Head
(Operations), Ansal Plaza. Sold largely through subscription (the
only place you'll find this in the stalls is in the mall itself),
the Rs 20 magazine already sells 15,000 copies an issue. Take our
word, it packs a punch.
DASH
BOARD
 A
To U.K. Bose, Air Sahara's Chief Executive Officer, whose company,
by announcing 24 more flights on a single day, continues to threaten
Indian Airlines' and Jet Airway's dominance of the market. For a
one-time laggard, that's an achievement.
D-
To National Dairy Development Board Chairman Amrita Patel and Gujarat
Co-operative Milk Marketing Federation Chairman Verghese Kurien
for turning a personal battle of egos into a nationwide milk shortage.
Won't someone step in and help them grow up?
What's The Deal?
Increasing M&A headlines may actually be signalling
the end of the current bull run.
As the stockmarket's benchmark index
hurtles headlong into the 4,500 terrain, it's not just the peripatetic
punters who're rubbing their hands with glee. Also licking their
chops are investment bankers, most of whom lay dormant in the extended
winter on Dalal Street pre-May. After all, a bull run is exactly
what's required to kickstart some hectic merger and acquisition
(M&A) activity. By the looks of some newspaper headlines, dealmakers
could soon be riding the gravy train. Rahul Bajaj has indicated
that he's keen to spin off his investments into a separate company,
which could possibly be a prelude to bringing in Japanese two-wheeler
major Kawasaki as an equity partner in the two-wheeler business.
Elsewhere, Mahindra & Mahindra is reported to have made a Rs
1,722-crore bid for a Finnish tractor maker. And darling-turned-pariah
Himachal Futuristic Communications Ltd. is considering a demerger
of its telecom services activities from its equipment manufacturing
business.
That's just a sample of the M&A activity
that's going to play out as the stock indices keep rising. A good
thing no doubt, given that much of Indian industry is ripe for consolidation,
which will help in increasing efficiency. That's the nice part.
The not-so-pleasant element of a bull-run-driven M&A spree is
that many promoters and raring-to-go CEOs view the euphoria on The
Street as an opportunity to further boost valuations via M&A
(or at least via an announcement of a deal). If there is a dramatic
increase from now on of headlines indicating mergers and demergers,
acquisitions and divestments, that could well be because stock prices
are headed into the overvalued zone. Liquidity-courtesy foreign
institutional investors-may not a problem, but there may be a strong
argument that much of the stocks that matter are now more than fairly
valued. That's when canny promoters, realising that fundamentals
no longer support a further uptrend in their stock, resort to M&A
to increase ''shareholder value''.
Globally, such examples of breakneck M&As
during bull runs abound-with many of them happening at the fag end
of the boom. One of the biggest-ever mergers, of Daimler-Benz with
Chrysler, happened during such euphoric times, and a number of tech
companies, like AT&T, Nortel, and Lucent, went on an acquisition
binge during the tech boom three years ago. They're now feeling
the pain.
Two lessons here: One, as over two-thirds of
M&As fail, think really long-term before being convinced by
your friendly-neighbourhood investment banker. Two, if the M&A
headlines keep increasing, maybe it's time to offload your portfolio-the
bull run may just be ending.
-Brian Carvalho
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