Cementing The New M&A Arena

By R. Sridharan

Is cement going to construct the next major M&A theatre? It took just one such move to turn the bearish stocks in the sector into hot pickings on the bourses. As more hostile bids look set to follow the trend set by the Rs 832.49-crore India Cements' open offer for acquiring 20 per cent of the Rs 414.05-crore Raasi Cement, the guns could be trained on companies whose stock prices are ruling below their book values--a natural corollary of the overcapacity in north India in particular, accompanied by a consequent squeeze in margins.

According to a BT study of the 89 listed cement companies, there are at least 63 such profit-making manufacturers with market prices well below their book value per share. Says Raghuttama Rao, 34, head (advisory services), ICRA: "Considering the fact that the market capitalisation of some cement companies is well below their replacement cost, they certainly make for attractive takeover targets." Long deprived of sufficient buyers for its products, will the cement sector now witness an explosion of buyers for its companies instead?

Going In And Out Of Holiday Inn

By R. Sridharan

Lalit Suri may not like going round in circles. But that's the hand he's been dealt with by the hospitality business. In 1995, the 51-year-old CEO of the Rs 101.89-crore Bharat Hotels, who owns a plush property in the heart of the capital, broke his alliance with the Holiday Inn international chain of hotels. The reason, apparently, was a promise unkept. Suri says Holiday Inn had promised to set up a joint venture hotel with him but, instead, went ahead with two non-resident Indians.

Suri then roped in the $5.04-billion Hilton Hotels for an alliance--a relationship that's now on the rocks, thanks to a battle over management control of Bharat Hotels. Accordingly, Suri is partner-hunting again, and talks are underway with the Japan-based Inter-Continental chain of hotels. But now, the $50-billion Saison Group, which owns the Inter-Continental chain, is in sell-out talks with Baas of the UK. And Baas, ironically, owns the Holiday Inn chain. Shrugs Suri: "The parting with Holiday Inn was not bitter; so, there's no problem." Perhaps. But will it be back to square one for Suri?

Courting The New Act

By Ranju Sarkar

They've forgotten its teeth. The Companies Bill, 1997, intends to rechristen the Company Law Board (CLB) as the Company Law Tribunal (CLT). But the one all-important power that corporate India wanted it to be vested with--arbitrating in M&A disputes--still remains with the courts. Complains Jayant Thakur, 33, ceo, Jayant Thakur & Co.: "It was a big disappointment. We expected a change."

Sure, modelled as it is on the Income Tax Tribunal, the CLT is expected to be more autonomous and powerful than its predecessor. Concedes L.V.V. Iyer, 47, vice-president (legal) at the Rs 960.43-crore Nagarjuna Fertilizers: "The idea seems to be to make it more independent, and delink it from the government." Of course, with the Bill yet to be translated into law, it isn't too late for change--which is why lobbying for this move is likely to intensify at Udyog Bhavan. The case is far from being open-and-shut.

No Severity In Severance Pay

By Paroma Roy Chowdhury

They're cutting off the connections, but not the lifeline. As managerial downsizing becomes an imperative, corporates are busy innovating on severance pay-packets. Companies ranging from the $30-million ING Barings (financial services) to the Rs 1,814.26-crore Siemens (capital goods), from the Rs 1,551.89-crore Philips India (consumer durables) to Enterprise Nexus (advertising) are trying to sweeten their pink slips. Counsels Nripjeet Singh Chawla, 47, the CEO of the Delhi-based Korn/Ferry Consultants India: "Instead of feeling guilty, CEOs should plan for severance in a way that does not compromise their companies' image as fair employers."

Of course, it's the white-collar manager who has no real protection against lay-offs, unlike his blue-collar counterpart whose severance benefits must conform to the Industrial Disputes Act, 1947. But smart companies are realising that they cannot afford to sever their relationships with managers whom they may well hire back after an upturn. Cautions Parandeep Singh Pahwa, 25, an associate at the Delhi-headquartered human resource consultancy firm, Noble and Hewitt: "Since white collar professionals in India have no legal bargaining power if retrenched, designing of severance packages which protects their interests is crucial."

The single-point strategy for severance pay design is to minimise the impact of income-tax on the recipient. Thus, many companies are offering packages that comprise between three and eight months of base salary, and upto eight months of leave encashment, the threshold after which takings are taxed. Paying a month's salary as royalty for every year of service is a typical feature too. Obviously, paymasters are keen on retaining their reputations, if not their managers.

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