Reliance Chairman, Mukesh Ambani: In a bit of a spot

In mid-February, three oil PSUs (Indian Oil, Hindustan Petroleum, and Bharat Petroleum) dropped a bombshell on Reliance Industries. They told the Ministry of Petroleum that they would need to cut their offtake of petroleum products (petrol, diesel, and kerosene) from Reliance's Jamnagar refinery by 60 per cent in 2004-05. In the current fiscal, the Ambanis-owned Reliance sold 7 million tonnes of petro products through the three PSUs. And 12.3 million tonnes, or 45 per cent of production, in the previous year.

Hectic negotiations that followed the announcement seem to have yielded little headway. Reliance Industries Chairman, Mukesh Ambani told reporters at an unrelated press conference that the private refiner had no intentions of renewing the contract. That may be easier said than done, though. The company's gargantuan refinery in Jamnagar produces 33 million tonnes of petro and related products. Although Reliance, like a few other private oil companies, has the government's approval to set up retail outlets (5,849 of them) across the country, so far it has just three on the ground. Ambani has promised to set up 300 outlets by June 2004 and another 600 by March 2005 but the task is herculean. Around nine approvals are required for each outlet, which can mean a significant build time. The only silver lining is a separate contract Reliance has with Indian Oil which involves the state-owned oil behemoth buying from the private sector company once it has absorbed its own produce. This agreement is valid till March 31, 2008, but could provide little relief, given that IOC is expanding its own capacity. So, after exports, direct sales and captive consumption are accounted for, where will 45 per cent of Reliance's production go? Mostly to the spot market in the country (spot contracts are for less than a year), and about 6 per cent to markets overseas.

But why are the PSUs loath to renew the contract? Apparently, the trio itself has increased its own refining and production capacity through expansion, and currently is operating at an average capacity utilisation of 95 per cent. To accommodate Reliance's throughput, they have to find markets abroad. Here's the rub: Despite the glut in domestic market, petro products fetch far higher locally (profit margins can be as high as $3 per barrel, or Rs 138 per 119 litres) because of import parity pricing and tariff protection, besides sales tax exemptions.

Remarkably, despite the fracas, Dalal Street hasn't panicked. The Reliance stock was in the Rs 566-580 price band when BT went to press. According to one analyst, part of the confidence stems from Reliance's modern refinery, which yields higher gross margins compared to its PSU competitors, or even other Asia-Pacific refineries. For instance, Reliance had a gross margin of $6.5 per barrel in the quarter ended December 31, 2003, compared to an Asia-Pacific average of $3.5. The other source of confidence, of course, is Reliance's uncanny ability to emerge on top of its problems-always. After all, the government's stake in hpcl goes on the block soon.

-Roshni Jayakar

OBIT
The Passing of A Guru

In a market that confers gurudom on its management thinkers most reluctantly, Sumantra Ghoshal achieved the near-incredible: He won the status of Euroguru, bestowed on him by no bigger sceptic than The Economist. The Robert P. Bauman Professor of Strategic Leadership at London Business School and author of several books, Ghoshal taught at insead before moving to lbs, where he taught since 1994. So, his untimely death on March 3, at the age of 55 in London of brain haemorrhage snatches away not just a fine mind in the area of international strategy, but also India's reflected glory in Europe's management circles.

-R. Sridharan

Mother Of All Fevers
What do board exams have to do with productivity loss?

Go, girl: You can top the class

Parentous nervous. Ever heard the word? No? Let's look it up in BT's dictionary Flip, flip...here it is: Parentous nervous (n). A deadly virus that attacks parents with children appearing for board exams, causing extreme nervousness, loss of sleep, and a near-paranoia about leaving children unsupervised. Sounds familiar now? You bet. With an estimated 9.7 lakh children appearing for the 10th and 12th board exams across the country, the virus is having a field day. Work has taken back seat, as anxious parents take to standing outside examination centres in show of support to their harried children. The moderately concerned take half-a-day off work, the rabid ones days-a week, a fortnight, or as long as the exams last. As for corporate productivity, well..."Any loss can be made up by working over the weekend, but you need to give your child three hours of your time if he so demands," argues Sunil Gupta, VP, Coca-Cola India. Translated, it means: "Hey, will somebody get these heartless shareholders off my back? It's the board, for god's sake!" And guess what? Some employers are actually sympathetic. Says Y.V. Verma, Head of hr at LG Electronics: "An empathetic approach helps in developing more trust between the employee and management." That only goes to prove that there are enough edgy parents who'll quit if forced to choose between their job and children. Parentous nervous, we bow to thee.

-Supriya Shrinate

CHIC
Complete Chukker

It is turning the clock back--literally. Past fortnight, Jaeger-LeCoultre (re)launched the wrist watch it especially crafted in 1931 for Polo players in India. Names Reverso, the watch sports and innovative case that flips over the protect the fragile glass. The obverse side is also meant for personalisation. In the days of the Raj, customers had their family's crest of coat-of-arms printed on it. Today, thought, customers are more likely to get monograms printed or diamonds encrusted on their personalised piece. Starting price: Rs 1.5 lakh. Snob value: It is hand-tooled in the Art Deco style, and remains true to the principle of manual winding. Ending price: None.

-Amanpreet Singh