|Popcorn anyone?: (L to R)
Whizlabs' Nakra, Chopra and Sharma
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."
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.
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.
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.
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
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.
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
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,
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
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
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,
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.