OCTOBER 12, 2003
 Cover Story
 Personal Finance
 Back of the Book

Kashmir On The Map
After a succession of false starts, this might actually be something worth taking note of. The World Travel and Tourism Council has joined hands with the Jammu & Kashmir government to promote the state as an international tourist destination for just about anybody who appreciates natural beauty. The plan.

Cancun Round-Up
The drumbeats on the way to Mexico were low-key, but audible enough. Now that the World Trade Organisation is back in pow-wow mode and India has attained some clarity on what the country's trade agenda is, it's time to do a quick round-up of the Cancun meet.

More Net Specials
Business Today,  September 28, 2003
Internet Survivors
Physical deliverables rule.
Popcorn anyone?: (L to R) Whizlabs' Nakra, Chopra and Sharma

Sometime in early 2001, some five months after they had founded Whizlabs.com, Kapil Nakra, Purvesh Sharma and Pradeep Chopra were trudging their way back home from their office when one of them wanted some popcorn. To their dismay, they discovered that the money in their three wallets combined didn't even add up to the required Rs 10. The story, in all probability, is apocryphal, but it captures the spirit of the times. Like the US, India had its era of dotcom excesses but that proved shortlived; by 2001, the pendulum had swung far back as evident in the we-didn't-have-Rs10-for-popcorn anecdote.

The story is also the perfect foil for what follows. For Whizlabs, a company that provides simulated test contents for those developers keen on picking up a certification from Sun, Cisco, or Microsoft, will close this year with over Rs 2 crore in revenues, not bad going for a venture that three quant jocks founded with Rs 7 lakh raised from family and "friends earning dollar salaries". Today, Whizlabs functions out of a modest office in West Delhi suburb Janakpuri which is an improvement over the garage where it all began. Profit margins are a healthy 40 per cent, and last year, a business plan competition conducted by IIT Mumbai adjudged Whizlabs' model the best. "For 15 months, none of us took home a salary," says Chopra. "But the award shows that we are on the right track."

A Series Of Exits
Unending Wars
Print Run
Wake Of The Flood
Cancun Endgame

Even pioneer Rediff.com, which expects to make an operating loss of $7.5 million (Rs 34.5 crore) on revenues of $17.3 million (Rs 79.58 crore) this year, sings a similar tune. An exec points to the fact that the portal-actually, India's only remaining player in this space-has wrung out significant cost savings by moving the entire publishing operations of India Abroad, a weekly newsletter it acquired in the US, to India. "We have had a happy experience with our dotcom portfolio, which includes contest2win, Naukri, and Hungama, among others," gushes Renuka Ramnath, CEO, ICICI Ventures. She clinically lists the reasons for her happiness: The companies have been conservative with their cash, have changed their business models to reflect changing business needs, and are focused on return on investment.

Still, these internet survivors have more than just austerity going for them. All of them have a physical deliverable. Tickets for makemytrip.com, jobs for Naukri, specialised exam content for Whizlabs, and financial products such as mortgages for Mumbai-based apnaloan.com. In April this year, investors pumped in an additional $3.3 million (Rs 15.1 crore) into the company founded by ICICI Bank vet Harsh Roongta. The company broke even last year on revenues of Rs 6.5 crore, but Roongta has an eye on the main chance. Lendingtree.com, the US company on whose model apnaloan is based, was picked up recently by media mogul Barry Diller for $720 million (Rs 3,312 crore). Austerity apart, CEOs of all surviving dotcoms have numbers like that at the back of their mind.

A Series Of Exits

KPMG's Narayan Seshadri: He's in but who's out?

KPMG's worldwide consulting arm KPMG Consulting may have become BearingPoint Inc, "an independent consulting firm not affiliated with KPMG International or any KPMG firm," according to the KPMG website-that's in keeping with regulations that prohibit audit firms from offering consulting services-but things are very different in India.

For starters, KPMG India never was in the audit business; this is the purview of its partner Bharat S. Raut & Company. Then, there's the ongoing flux at the firm which began, the buzz goes, when the company named Narayan Seshadri as head of business advisory services after taking over Andersen's consulting arm in March this year. Atul Pradhan, a director, left. As did several others in his wake: Partner Amit Pandurangi; telecom expert and Partner Rathin Bhattacharya; Associate Director (Corporate Finance), Gaurav Khungar; and VP (Corporate Finance), Amitabh Malhotra. It's not easy being a consultant.

Unending Wars
Or why lawyers love warring corporates

Foes forever: Kishore Chhabria (L) and Vijay Mallya

L 'affaire Herbertsons: The battle between Vijay Mallya and Kishore Chhabria enters its fourth year-and plays out to a weary routine.
The Bone of Contention: Control of Herbertons. The genesis: Chhabria splits from brother Manu and moves to Mallya camp with BDA. Mallya rewards him with 26 per cent stake in Herbertsons. Chhabria quietly increases his stake to 43 per cent, even winning recently a SEBI directive to make an open offer for another 20 per cent of Herbertsons. Mallya is peeved, appeals to Supreme Court, loses. Likely outcome: An out-of-court settlement, where Chhabria gets a great price for his 43 per cent stake, and Mallya his company.

Penguin-Baiting: The battle between Electrolux Kelvinator and its joint venture partner Harish Kumar enters its second year.
The Bone of Contention: The valuation of Kumar's company Intron, which was merged with Electrolux India, which in turn merged with Electrolux Kelvinator. Kumar, who's shareholding has come down to 10 per cent from 26 per cent following the mergers, says that Electrolux shut plants that were included in the valuation of the merger ratios. In other words, he's been short-changed. Status: The battle is in the courts, and EKL's Rs 200-crore rights issue hangs fire.

Problem Protégé: The battle between the scions of the Charat Ram family and the man's protégé N.R. Dongre enters its fifth year.
The Bone of Contention: The Shrirams (including Siddharth of SIEL) want control of several companies where Dongre, who joined DCM as a management trainee in 1964, has ownership control.

Some examples: General Sales, a closely-held trading company where Dongre is said to have a 40 per cent stake and Shriram Pistons, which is 30 per cent-owned by General Sales. Status: Several cases pending with Delhi courts, although efforts to thrash out an out-of-court settlement are on.

Print Run
The first big foreign investment deals in the print media stir up the industry.

Two high-profile foreign investment deals in one month are significant in any industry. In the Indian print media, it is two more than anyone could have foreseen a year ago. First, Henderson Global Investors announced that it would pick up a 20 per cent stake in Hindustan Times Media for a reported Rs 120-125 crore. Then, the Financial Times announced that it would spend Rs 14.1 crore for a 13.85 per cent stake in Business Standard.

The deals are significant because they mark the end of a period of forced insularity when wholly-Indian media companies tried to convince the government that any foreign investment could spell the end of an independent media. And access to global best practices, whether in editorial processes, or in management, will only do the business good; that's exactly what has happened in industries as diverse as colas and cars. Given that, speculation on what Hindustan Times or Business Standard will do with the money is irrelevant. Reports suggest that Hindustan Times may use its windfall to enter the Mumbai market where The Times of India has long ruled unchallenged. As for Business Standard, the Rs 14.1 crore is chump change when viewed in the context of the company's reported accumulated losses.

Already, a host of other publications, BusinessWeek, Par Golf, and Chip are in the process of entering into alliances with local media companies. The floodgates have opened.

Wake Of The Flood
Can the WTO survive Cancun?

Arun Jaitley: Dubious gains, at best

In 1947, when talk of the need for an international trade organisation (the fore-runner of today's World Trade Organization) did the rounds, one of the world's largest democracies opposed it. It feared that such an entity would erode its sovereign right to enact trade laws to its own benefit. This was the United States of America, today the world's #1 advocate of globalisation. The country got over its fears by becoming an expert at using the organisation to protect its interests. And the US smartly slipped non-trade issues such as foreign investment, trade facilitation, transparency in government procurement, and competition policy into WTO. This was done at the Singapore Ministerial in 1996; the themes are collectively called Singapore issues. The country also retained the right to impose unilateral trade sanctions against other countries, despite WTO providing a global dispute settlement mechanism.

The recently concluded Cancun meet of WTO could change all that. The developing world-specifically the 21 countries (including India) that call themselves g21, although the number is increasing by the day-seems to have finally worked out how to handle the complex world of WTO negotiations. At Cancun, it stuck together to push its own agenda. The result, predictably, was an impasse that raises the spectre of the irrelevance of the WTO. "Developing countries need WTO to ensure that there is a level playing field, but the organisation has not delivered on that," explains Biswajit Dhar, Head of the Centre for WTO Studies at Delhi's Indian Institute of Foreign Trade. "The West was used to having its way in WTO, but now finds itself being blocked by developing countries; neither of the groups really trusts WTO."

This lack of faith is reflected in numbers that show that the number of bilateral trade agreements has grown since the inception of WTO. One of the organisation's objectives was to replace bilateral trade agreements with one common agreement where everyone had equal opportunity to trade and profit. The bilaterals, as they are termed, benefit the participants but ignore those who do not have much bargaining power. Between 1948 and 1995, WTO's precursor received 124 notifications on bilaterals and regional trade agreements (RTAs). Since its birth in 1995, WTO has received 130, and it estimates that another 70 that are in operation haven't yet been notified. Post-Cancun, there could be a rush for bilaterals. These may well be the tools employed by the US and the European Union to break G21.

Burn! Burn! Burn!: Globalisation pangs

India has a rash of bilaterals with countries such as Sri Lanka and Afghanistan, and is even party to a still-born RTA titled South Asian Preferential Trade Agreement. Now, it is pushing ahead for agreements with Singapore, ASEAN, Mercosur (the South American Common Market which includes countries like Argentina and Brazil), South Africa, and Chile. India's commerce minister Arun Jaitley, hailed within the country as the voice of the developing world, doesn't sound very convincing when he says that "there is no fundamental conflict between the existence of bilateral trade agreements with the multilateral framework provided by WTO". That's because entering into bilaterals with 148 trading partners (that's the strength of WTO) is far more cumbersome than one agreement.

To regain the trust of its constituents, WTO must become more transparent, says Dipak Chatterjee, India's Commerce Secretary. "Otherwise, it will start to weaken." Despite another scheduled meeting in December in Geneva, few expect things to change drastically in the next few years. India and the US go to the polls in 2004, and populism will likely be a plank in both election campaigns. "The Doha agenda of barrier-free trade in agriculture and resolution of Singapore issues will be postponed beyond 2005," says Bibek Debroy, trade economist and Director of Delhi's Rajiv Gandhi Institute for Contemporary Studies. Until, then expect more protectionist calls from different corners of the world.

Cancun Endgame

Cancun means snakepit in Mayan. That explains a lot of things.

Stage 1: US and EU are scornful of all alliances ranged against them.

Stage 2: When the developing world sticks together, Pascal Lamy, the Trade Commissioner of a nervous EU claims that India's Confederation of Indian Industry (CII) had agreed to discuss Singapore issues. CII denies this, and bluntly accuses Lamy of lying.

Stage 3: The US leans on the weak. The Chairman of the US Senate Committee on Finance, Senator Chuck Grassley, issued a threat on record. ''What I find most disturbing is that some of the nations that have aligned themselves with the G-21 position are seeking to deepen their relationship with the United States...". The threat is clear: Fall in line, or else...

Stage 4: G21 manages to push three out of the four Singapore issues out of the agenda and is close to getting the US and EU to commit to cut subsidies to their farmers. The US and EU convince long-time friends, Japan and South Korea, to insist that all Singapore issues be discussed. Kenya and Botswana demur. The standoff ends the talks. And provides a face-saving exit to the US and EU. Hsssssssssssssss.