IRDA chairman C.S. Rao

The year-old general insurance broking business is in the throes of a major crisis. At the heart of its new predicament is an announcement last month by insurance regulator, Insurance Regulatory and Development Authority (IRDA), that general insurance seekers would forfeit the special 5 per cent discount on tariff-based business (where IRDA sets the floor price on premium chargeable) such as petrochemicals and engineering if they choose to go through a broker or an agent. Prior to the order, which came into effect April 1, clients were entitled to the 5 per cent discount irrespective of how the insurance was arranged. What the order means is that for a large part, almost 60 per cent, of the Rs 14,000-crore general insurance business that is tariff-based, the use of brokers may cease. "We have lost business (because of the order) and a lot of the potential business has gone dormant," says a worried A.L. Suri, Advisor, Armour Consultants, one of the 150-odd brokers who have come into the business since IRDA opened up general insurance to private players. Now there is fear that a large number of small brokers may go into suspended animation, and some even out of business. That's because only the bigger brokers may be able to bide their time till tariff setting is done away, which could be good two years away.

What prompted IRDA's move? The regulator did not respond to BT's questionnaire, and the insurance brokers association seems clueless too. Some market observers, however, point out that the system had become a clandestine route for brokers to pass on their discounts to customers, without any value-added advisory, which was the original idea behind allowing brokerage. But the sad part is, the new ruling affects genuine advisory-based brokers too.

-Shailesh Dobhal

BPI Product Play
A local start-up launches a nifty software.

Epiance's S. Ramamurthy : On to something big?

Why did Promod Haque's norwest ventures chase Epiance, a Bangalore-based start-up? Ask Shankar Ramamurthy, the Virginia-based CEO of Epiance, and pat comes the answer. "Because we did not want their money", he says. Shankar, an IIM-Bangalore alumnus of 1982, has built up a revenue of $5.5 million with a whopping 40 per cent net margin from a business performance improvement (bpi) product called Epiplex. In 2000, he raised $4 million from angel investors and contacts. "This product would have cost $40 million had it been built in the US," says Shankar.

What exactly does Epiplex, which has customers in Microsoft, IBM, and Nomura, do? It is used to increase the efficiency of processes that have already been digitised. The software captures all the stages of a process-through all the software systems in an organisation-for hundreds of transactions. They can then be analysed, modelled, and monitored. Epiplex also has the ability to store audio and video. Take, for instance, a company that wants to make sure there is 100 per cent customer response in a 24-hour turnaround time. Typically, a process like this would have been observed, measured and analysed manually through interviews, data collection and so on. Epiplex automates the whole process, besides which it does so on a continuous basis, not one time.

According to Gartner, bpi is a $100-billion consulting practice and is growing at 9.3 per cent anually. "This is a $5-billion opportunity for us and we intend to grow into a $100-million company in three years, with a revenue of at least $400,000 per man," says Shankar. Watch this company.

-Vidya Viswanathan

GLITTER
Surat Vs Antwerp

Indian diamond traders : Challenging Belgium

Almost everybody knows that India cuts and polishes nine out of every 10 diamonds that finds its way into global markets. But few know that these are typically low-value diamonds, fetching India just $6 of every $10 paid for cutting and polishing. The Gem and Jewellery Export Promotion Council, buoyed by a record 31 per cent growth in exports (in dollar terms) to $9.2 billion in 2003-04, has set its targets higher still. "It's not enough to be the largest manufacturer of diamonds," says Sanjay Kothari, President of the association, "we want to be a trading centre like Belgium." In other words, Indian diamond traders want to become a hub not just for low-cost work, but also high-quality finishing. Moving towards that goal, the association plans to persuade diamond-producing countries like South Africa to come straight to India, instead of routing its uncuts through Belgium and Israel, which end up picking up the higher-value ones. Last year, the government opened an Indian Institute of Gems and Jewellery, which will create a pool of artisans and designers trained by Germans to international standards. That apart, the association is planning cluster developments at Rajkot and Coimbatore and setting up of "Bharat Diamond Booths", which will facilitate meetings among major exporters. Kothari reckons that all these steps will help the country meet its short-term export target of $16 billion by 2007. Antwerp had better watch out.

-Amanpreet Singh

Nutraceuticals: Sales Supplement
Health pills are the next big opportunity.

Doctor dough: Health pills get the cash register ringing

If global trends are anything to go by, Indian pharma companies should soon be clambering to churn out health pills, or nutraceuticals. Already, these fetch Rs 2,400 crore in an industry Rs 27,000-crore big, and growing at a cumulative 6 per cent a year. Which means that by 2010, it should be at least Rs 3,400-crore big.

Driving the nutraceuticals, or food supplements growth is greater consumer attention to personal well being. Supplements are seen as a convenient way of fortifying the body against illnesses. Pharma companies have figured out as much. Parry Nutraceuticals, part of the Chennai-based Murugappa group, has grown its sales to Rs 11 crore in 2003-04 compared to Rs 7 crore the previous year. Ranbaxy, Dr Reddy's Labs, Orchid, Dabur and Cipla are some of the other companies pushing nutraceuticals. Says Amar Lulla, Joint MD, Cipla: "It may not be a business driver at the moment, but nonetheless it does expand the range of products and provides good additional business."

Interestingly enough, research in this segment is getting more scientific, with focus on basic research, clinical trials and new drug delivery systems. Parry, for instance, is currently trying to find a vegetarian equivalent of fish oil. The idea is to look for an alternate source of docosahexaenoic or DHA (an omega three fatty acid), which enhances brain function. Says Ram Bajekal, the company's CEO: "There are export opportunities too." In other words, just what the doctor may order for a healthy bottomline.

-E. Kumar Sharma

Will Dabhol Light Up?
Enron's out. And that's a good sign.

Dabhol Power: A monumental headache

When it comes to the Dabhol Power Company (DPC), nothing can be taken for granted. Take, for instance, the recent permission to vendors GE and Bechtel to pick up Enron's 65 per cent stake in the beleaguered power company. Although some Dabhol watchers say that this will speed up resolution to the stalemate dogging the $3-billion plant since the end of 2001, when it stopped production, others aren't so sure.

Actually, neither of the camps is totally wrong. Allowing GE and Bechtel to ramp up their holdings in DPC to 85 per cent (eventually) will allow the two companies-which are not in the business of owning and running power plants-to find a buyer. Already, some top energy companies such as Reliance Industries, British Gas, Royal Dutch/Shell, Tata Power, British Petroleum and GAIL have evinced interest in Dabhol. Primarily because the new Electricity Bill has made the power sector much more attractive.

The biggest stumbling block remains the price tag, with estimates ranging from $270 million to $470 million. However, these figures by themselves mean very little. The final price would depend on whether it's a mere "asset sale" or a comprehensive "equity sale". The rub is that in order to go in for the latter, where the price would naturally be higher, an evaluation would need to be done of Dabhol's significant and complex debt pile up. When BT went to press, its lenders were scheduled to meet in Singapore. But knowing Dabhol and its jinxed past, this will just be the first of many.

-Abir Pal