December 27: Telecom Minister Pramod Mahajan launched Reliance Infocom’s challenge to India’s telecom industry with its threat to announce fantastically low call tariffs. January 2: Pramod Mahajan does the honours again, leading a pack of cellphone operators responding to the Reliance challenge. A dozen odd cellphone company chiefs who shared the dais with Mahajan carried identical placards with 2.99 written on them, denoting identical long distance tariffs that they planned to charge. In most other situations, this would have been called a cartel. A few days hence, Minister Mahajan may be back in the spotlight announcing tariff reductions on behalf of BSNL and MTNL. As the minister told the media, the industry would announce many more concessions to ‘kill their rivals in instalments’. Obviously, everybody is thrilled at the falling tariffs but consumers aren’t easily fooled. A reader wrote in to say: “Tell me, is this not a cartel? If they got together to bring down prices today, can’t they gang up tomorrow and do exactly the reverse?” Maybe the minister who surprised the cellphone operators by turning up to announce their tariffs may have some answers.
Guess which stocks were among the top gainers in a sample of large companies in 2002? The answer is not Reliance or any of your glamour stocks like Infosys. It is Ispat Industries and Essar Steel. Ispat quoted at Rs 1.40 at the start of 2002, remained thereabouts until April and climbed to Rs 9 in July 2002. The price crashed to Rs 3.50 on October 28, when the loan-restructuring package that had driven up prices failed to materialize. After the market turned, it almost doubled again to around Rs 6 on January 2 this year. In effect, a 500 per cent appreciation in the calendar year. Interestingly, Ispat Industries’ lifetime high was Rs 105 in March 1992 at the height of the Harshad Mehta led rally. Essar Steel, the other big gainer was quoted at Rs 2.75 on January 1,2002. It was Rs 3.90 in May and shot up thereafter to peak at Rs 14.90 on July 8. It dipped to Rs 5.25 on October 28 and moved again to touch Rs 9.45 on December 31—a 300 per cent gain in 2002. Given that trading volumes run into a few lakh shares everyday, some smart operators have obviously made a lot of money in these otherwise dud stocks.
God and Godmen
If C.R. Bhansali was notorious for his proximity to the late Acharya Tulsi and used the guru’s network of powerful devotees to gain instant credibility and acceptance—he is not the only one. Several large defaulter groups, with hugely expansive lifestyles seem to be using various Godmen and gurus to cover their sharp business practices. By taking a lead in exhibiting their devotion and bank rolling the gurus’ public appearances, they are also able to display their closeness the holy men and shore up their credibility. Unfortunately, Godmen aren’t bound by a good governance code and asked to choose their disciples with care. After all, they are in the business of reforming even the worst sinners. Bt some restraint in making public appearances with shady businessmen may be in order.
It is obviously the season for break-ups and neither the biggest corporate house nor the oldest ones seems immune from this bane of family run corporate empires in India. Sources in the steel trade say that the Bhushan Steel family is the latest to be hit by family troubles, with one of the eldest siblings separating from the business. Bhushan Steel is the only steel company that got a few hundred crore rupees of fresh funding when the industry was languishing. ICICI, the lead lender, insisted that Bhushan Steel was not a defaulter. Will it reassess the company after the split? It is pertinent to point out that lending institutions have never acknowledged the impact of family separations on the Jindal and the Mittal groups who are among their largest borrowers and are beset with chronic repayment problems. Now that there is increased attention to issues such as lenders liability, will things be different?
What is that advertisement about? An advertisement for imported furniture? Or is that repetitive splash of red leading up to an Eveready ad? Or maybe it is selling a sunlamp… but a sun lamp in India? Who knows? Why then does the catch line say Indigo when the red suit gets into a car? Red? Indigo? Hai koi jawab? -- Sucheta Dalal