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APRIL 8, 2007
 Cover Story
 BT Special
 Back of the Book

Mobile Security
Today, it is all about information and how the right information is sent to the right people at the right time and right place. Uncertainty about how to secure mobile phones in the face of increasing threats is slowing individual adoption of mobile applications. There are many facets of mobile security, including network intrusion, mobile viruses, spam and mobile phishing. Analysts expect big telecom companies to develop security solutions on various security platforms.

Rough Ride
These are competitive times for the Indian aviation industry. As salaries zoom, players are scrambling to find profits. Even the state-owned Indian is now seeking young airhostesses to take on the competition. It is planning to introduce a voluntary retirement scheme for airhostesses above 40 years. On an average, they draw a salary of Rs 5 lakh a year. The salaries of pilots, too, are soaring. According to industry estimates, the country needs over 3,000 pilots over the next five years.
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Business Today,  March 25, 2007

Splits Are Good
One for the album: The Bajaj undivided family
There's nothing like a business family fight to send business media into overdrive. Editors and writers bored out of their heads writing on humdrum events-announcements of expansions, diversifications, losses, profits and, sometimes, acquisitions-take to it with gusto. As warring members of the family make allegations and counter-allegations, juicy details begin emerging about the feuds within. Thus, mighty industrialists start looking more human-perhaps, like you and me. Jokes apart, business families get written about simply because they matter. Some of the most successful corporations in the world, not just India, continue to be owned and managed by families.

Therefore, every time things come to a head at a family-owned group-and that usually happens in the second and third generation-it rattles other shareholders, and also tests the governance systems within not just the group, but the country. Sometimes splits that are settled to the dissatisfaction of at least one party tend to simmer as corporate rivalries, but, by and large, splits are good. Where the warring scions are ambitious and capable, the unbundled companies tend to grow faster and create greater value. The most recent example is, of course, the Ambani split. When part of Reliance Industries, companies such as Reliance Communications did not find their market value fully reflected in that of the parent.

Splits help in two ways. One, where the spun-out companies are not listed, it offers them an opportunity to list on stock markets, thereby unlocking latent value in them. Investors, on their part, get greater clarity into the financials and performance of the company, and the confidence that the management is not busy spending its energies on anything other than enhancing shareholder value. Consider some of the other business families that have split over the last several decades: The Singhanias, the Thapars, the Piramals, the TVS Group, and the Singhs (of Ranbaxy and also Apollo). All of them have gone on to do much better under a new generation of scions.

In the case of the Bajajs, too, the bone of contention seems to be the up-and-coming sugar company, Bajaj Hindusthan. Evidently, it was Rahul Bajaj's newphew Kushagra who built it into an aggressive player (some years ago he told BT that he wanted to be the Dhirubhai Ambani of sugar), and now he feels the company is slipping out of his control because the majority ownership is with his uncles. It would be unfortunate if the family fight were to prolong, and end up hurting Bajaj Hindusthan's performance and, thereby, its stock market value. In fact, a greater certainty over who controls what may actually end up helping all the Bajaj groupcompanies, not just Bajaj Hindusthan.

One India, One Tax

Assembly line: GST will lead to uniformity and transparency
The centre's plans to put in place a harmonised Value Added Tax (VAT) nomenclature during the current year needs to be pursued aggressively. For, it holds the key to a successful implementation of the single-rate Goods and Services Tax (GST) regime across the country in 2010-a move that will result in a symbiotic situation for the citizen (individual and corporate) as well as the exchequer. While the citizen will enjoy a transparent and simple taxation regime, the exchequer's kitty will swell. Moreover, investment distortions created out of differential tax regime across states and products can be avoided, paving the way for optimal investment decision by corporates in India.

Here's why: Thus far, it's the states (not all) that have embraced the VAT system. The gains: incentive to evade taxes is vastly reduced. For example, in the earlier regime, a contractor would collude with the local small-scale industry units and avoid paying taxes on the input goods purchased from them-now he will prefer to; otherwise, he pays their taxes as well. Also, for the tax complying variety, the burden of cascading taxes is eliminated.

Key to this system is a tax collection management system that catalogues every product and drives an information technology (IT) system that provides ease of transaction for taxpayers. The system, however, does not cater to inter-state transactions, nor does it ease the burden of the central sales tax levy nor the federal taxes like central excise. It is here that the harmonised nomenclature holds the key-a single catalogue list that not only encompasses the varied products produced across states but also allows for federal levies to be paid on the same it platform.

This engine holds the key to bringing about a single tax rate (GST) across the country, thereby eliminating sub-optimal business decisions that arise out of differential tax regimes across states. But that will not be easy, for then, tax shelters across states will need to be rationalised-a challenge for a good part of the political class that looks to industry for employment generation, without putting in adequate efforts to improve the business environment and infrastructure in the states.

Successful implementation of the GST would also enable the government to lower tax rates without compromising on its social obligations. This, since it will marry federal taxes with state levies, leaving virtually no room for evasion. For the consumer, the proposition of a GST is compelling: the purchase bill reflects tax rate that reflects all the levies on the final product. Surely, we can't afford to delay its implementation.


A Cup of Woes

The blues: It's not just cricket, there's money at stake
The calculators are out. And they're being used not only to check the net run rates and sundry other figures that form the basis of India's (hoped for) crawl into the next round of the World Cup. The corporate honchos who finance the game-through advertisements and sponsorships-the television broadcast companies that are airing the game to an estimated worldwide audience of two billion, the service providers and businesses that were depending on the World Cup to generate revenues, are all crunching numbers. Why? All because a bunch of overpaid, overhyped and underperforming men in blue cricket gear lost a match everyone expected them to win with ease.

The repercussions of India's defeat to Bangladesh will be felt far beyond the cricket field. It can, potentially, destablise the every edifice of the multi-billion dollar global cricket economy. The fact that India is the powerhouse that generates most (more than 70 per cent) of the money that goes into world cricket is old hat. But the dichotomy between its status as cricket's financial nerve centre and its dismal performance on the field has starkly exposed International Cricket Council's (ICC's) soft underbelly. If India goes belly-up in the first round of the Cup and fails to make it to the next round, Indian advertisers (both domestic as well as multinational) will lose interest in the event. They may not totally abandon it, but will definitely baulk at paying astronomical rates for advertising airtime. Much as cricket's traditional powers may try to brush it under the carpet of self-serving political correctness, the fact remains that a contest between arch rivals Australia and England or, for that matter, between any other teams, does not quite bring the same financial rewards as an India-Pakistan or even India-Australia clash. Pakistan has already been eliminated from the tournament. And the game's administrators must be choking over their gins and tonics, or whatever cricket administrators drink, as they contemplate the possibility of India following suit.

Already, there are reports that ad rates are down. And they'll fall further if the worst nightmare of Indian fans comes true. That will not only throw the economics of this World Cup into disarray, but also substantially bring down the value of future cricket tournaments (called "properties" in broadcasting and advertising lingo). Can Rahul Dravid's men claw their way back into reckoning? The answer lies inside the calculators.