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| R-Comm’s Ambani (left)
and Ratan Tata: Focus on corporate ethics |
Corporate
espionage may sound like cloak and dagger, although sometimes it
borders on the bizarre. A few months ago, for instance, allegations
flew that six employees of Yahoo! India, including its Managing
Director George Zacharias and Ajay Nambiar, the portal's head of
content, faked entry passes and took pictures during the Lakme Fashion
Week (LFW). The sponsor of the event? Sify, a competitor to Yahoo!.
The intrigue factor? Zacharias and Nambiar are former Sify honchos.
The plot thins out after that though, what with there being no earthshaking
reason for the Yahoo! boss himself to be shooting pix of scantily-clad
models romping down the ramp. A senior Sify official had launched
a police complaint against the six Yahoo! employees. A Yahoo! representative
maintains that "no employee of Yahoo! India was present at
the LFW event, yet George Zacharias and Ajay Nambiar, both ex-Sify
employees, have been named in the complaint. Further, the misrepresentation
of facts by the media is sensationalising the matter unnecessarily."
Now, from the near-ridiculous to the more-stimulating: An employee
of Tata group company VSNL, who is personal assistant to N. Srinath,
Managing Director of VSNL, allegedly stole sensitive data and
passed it on to another telecom company, Reliance Communications
(R-Comm), for a 'fee' of Rs 40,000. The employee, Prashant Indulkar,
is said to have named one Gaurav Wahi, R-Comm's VP for Corporate
Communications, as the provider of those pieces of silver. For
the record, officials of Reliance, VSNL, Tata and Sify told BT
that they couldn't say much as their cases were subjudice.
So, is the VSNL-Reliance episode a stray saga of a mole-at-work,
or is it just the only one that's made it to the front pages?
According to legal experts, as the stakes for India Inc get higher
and competition gets fiercer, there would be many more underhand
corporate dealings going on under the surface. "We are beginning
to see a surge in the cases of corporate theft and espionage over
the past 6-12 months; and we see that, rather than brush these
cases under the carpet, companies are now aggressively in prosecution
mode," says Pavan Duggal, Managing Partner at Pavan Duggal
Associates and an authority on it and intellectual property law.
Whilst criminals can be sued for damages, a lack of clarity surrounding
related laws means that convictions are hard to come by. Experts
say that a key reason for the increase in corporate theft and
espionage is because it's become so much easier to steal data,
now that most of it is online or can be accessed on a computer.
VSNL's Indulkar, for instance, is said to have stolen a heap of
corporate data, including critical corporate data involving buyout
transactions and tenders. "With a pen drive and some rudimentary
computer knowledge, I can today walk away with some mission critical
company data and if the person is a trusted aide or employee then
this makes life even simpler for criminals," says Duggal.
According to the India Fraud Survey Report 2006 by KPMG, employees
are the biggest culprits when it comes to data theft (36 per cent
of respondents to the survey felt so). "The findings of the
survey are consistent with the findings of the investigations
undertaken by us in the recent past, wherein it was found that
in most cases, the perpetrator was found to be the employee in
collusion with suppliers or the employee himself," says Deepankar
Sanwalka, Executive Director, KPMG in the report. Poor internal
controls and a lack of ethical values among employees were citied
as the main reasons for these kind of incidents.
Security and forensic experts say that on an average, they receive
at least four or five cases every month, asking detectives to
ferret out data on their rivals, ranging from salaries to hints
or even concrete ideas about future business plans. "We often
see cases of companies trying to get confidential data such as
salaries or government tender information and we have even heard
of dummy candidates being sent out to get such data," says
Sunil Sharma, CEO, Authentic Investigation, a New Delhi-based
private investigation agency.
Such desperation also means that perpetrators are using novel
methods to try and get hold of sensitive company data. Security
experts cite examples of tiny mikes being hidden in flower bouquets
to allow competitors to listen in on a boardroom discussion and
using tracking software to monitor e-mails from a specific account.
But even in today's hi-tech world nothing beats the favourite:
A good old backhander to spill the beans.
Not
What The Doctor Ordered
Is Ranbaxy in trouble with the US
FDA?
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| Kama’s Pathy: Partner
on the anvil |
Instead of cupid, federal
agents of the US Food and Drug Administration (FDA) paid a visit
to Ranbaxy's North American headquarters in Plainsboro and a manufacturing
facility in New Brunswick, New Jersey, on February 14. Papers and
electronic documents were amassed. According to a company spokesperson
in India, the searches were a surprise and the warrant did not appear
to indicate what agents were interested in. A press release didn't
shed too much light: "The company is not aware of any wrongdoing.
The action has come as a surprise, but the company is fully cooperating
with officials." Ranbaxy has no clue as to when the investigations
will end. It says this is the first time such an incident has happened.
Says B.N. Singh, President, Indian Drug Manufacturer's Association
(IDMA): "Such action not only mars the company's reputation
in the international market but also makes the other Indian players
a bit apprehensive. Secondly, even after so many days, the FDA has
not given a plausible reason for the raid, which also raises doubts
about the entire incident."
The search of Ranbaxy's us offices came within a week of the
Indian company receiving the FDA's final approval to manufacture
and market in the US its formulation for the treatment of major
depressive disorders in adults. FDA-approved Ranbaxy formulation
of Sertraline Hydrochloride was determined to be bioequivalent
and have the same therapeutic effect as that of Pfizer Pharmaceuticals'
Zoloft. The drug has an estimated annual market sale of $3.07
billion (Rs 13508 crore). Ranbaxy sales in the US, where the company
introduced 10 new products last year, are currently around $350
million (Rs 1,540 crore), which the company is aiming to increase
to $5 billion (Rs 22,000 crore) by 2012.
-Pallavi Srivastava
Organic Growth, Inorganically
L'Oreal is scouting around for an ayurveda
buyout.
The world's largest cosmetics
brand, L'Oreal, is going organic, as last year's acquisitions of
Body Shop and French Laboratoire Sanoflore do testify. The French
cosmetics giant is now training its sights on India in search of
an ayurveda range of skincare brands which, CEO Jean-Paul Agnon
told the Wall Street Journal, will be L'Oreal's launch pad to introduce
ayurvedic products globally.
Agnon has quite a few options. There's the Coimbatore-based
Kama Ayurveda, for example. An excited Rajshree Pathy, one of
its four Managing Partners, says: "The company is looking
at various options and although we are not considering a sell-out,
some form of partnership will definitely be worth exploring."
Marico's less than four-year-old chain of Kaya skincare clinics
is another outfit that's open to alliances. "We are a skincare
company and as such we need to drive growth in both the segments-services
and products-simultaneously. We are reviewing proposals for only
the products segment," says Rakesh Pandey, CEO, Kaya.
But not all are as excited. Says Vinita Jain, Chairperson, Biotique.
"Biotique is competent enough to grow on its own globally,"
says Jain. Hindustan Lever's Ayush too is "not entertaining"
any such proposals as, it says, it has its own growth strategy
of opening five new health centres every month. So, whom will
L'Oreal buy out? Watch this space.
-Pallavi Srivastava
Taking Stock of Exchanges
Which bourse is more valuable? The BSE or
the NSE?
Last fortnight, the 422-year-old
German stock exchange, Deutsche Börse, picked up a 5 per cent
stake in the Bombay Stock Exchange (BSE) for Rs 189 crore. The transaction
comes hot on the heels of another such buyout at competing exchange,
the National Stock Exchange (NSE), which had offloaded 5 per cent
of its equity to the New York Stock Exchange in return for $115
million or Rs 512 crore (as per regulation a single foreign entity
can buy only 5 per cent in an Indian bourse; in addition to the
NYSE, Goldman Sachs, General Atlantic and SoftBank Asian Infrastructure
had also bought into the NSE). The BSE made a fresh issue of 3.63
lakh shares to facilitate the buyout by Deutsche Börse that
took place at a price of Rs 5,200 per share, pegging the Dalal Street
exchange's valuation at $854 million (Rs 3,777 crore). The NSE would
appear to enjoy a higher valuation, at $2.3 billion (Rs 10,120 crore).
Turnover and profits of the NSE, at Rs 473 crore and Rs 191 crore
respectively, are over three times that of the BSE. Also, the NSE
enjoys an 85 per cent share of the total trading turnover of the
Indian equity market. On an average, NSE does a turnover of a little
over Rs 40,000 crore from its cash and derivative segment; that
figure stands at just Rs 5,000 crore for the BSE.
Yet it's the BSE that enjoys a higher price multiple (P-E) as
of the year ended March 2006. Its P-E stands at a little over
60 (on a consolidated basis, however, which would mean including
the BSE's other operations like the training institute and depository-the
BSE's P-E comes down to 42)
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