HOT SEAT

RONNIE SCREWVALA
www.outlookbusiness.com

April 4, 2009 Rs 20 FOR DECISION MAKERS

The Perils Of
PROTECTIONISM
Countries are slamming the door on foreign trade, labour and
capital. That may prolong the recession, not shorten it

THE GUTSY GREEN MAN LEFT, RIGHT AND CENTRE

Oil’s falling. Still, Pramod Chaudhari Yechuri, Sinha and Chavan on how
is placing all his bets on ethanol they will jumpstart the economy
 INSIDE
www.outlookbusiness.com March 22-April 4, 2009 volume 4 > issue 7

COVER STORY

Building 42
Barriers
A wave of protectionism is sweeping
across the globe, hampering the flow
of trade, labour and capital. Countries
are hoping this will help domestic
economies, but it will only harm
them. Eventually, this could prolong
the global recession. India, too, will
get caught in the crossfire that could
undo the benefits delivered by many
years of globalisation

54 Interview
Ron Hira doesn’t want H-1B visas.

REUTERS
He wants to keep American jobs
in America

96 Diary
Politician-speak on protectionism that
will leave you in splits

FEATURES
56 68 Home, Green Home
Bangalore builder Total Environment
crafts eco-friendly homes tailored to
28 The Last Lap individual needs
Suitors are lining up. The sooner
Satyam is sold, the better 72 Desi Disneys
Not content doing work for Hollywood,
32 New Flight Plan Indian animation companies are flexing
Wilbur Ross wants to transform SpiceJet their creative muscles
from a loser to a winner
74 Boardroom Gods
36 Green Warrior Kishore Biyani is using mythology to re-
This is Pramod Chaudhari’s stand: Praj engineer management at Future Group
Industries will rise or sink with ethanol
80 Fitness Outsourced
SAPTARSHI BISWAS

56 A New Turn A Chennai-based company puts together

Under Siddhartha Lal, Eicher Motors is gyms for 35 companies and several
stepping out of its comfort zone homes, besides running its own centres

OutlookBusiness > April 4, 2009 1

 INSIDE
VIEW TAKE ONE
19 Post-Poll Economy 6 Still Shopping
Leaders of key political parties chart out the economic Sales figures of consumer durables
agenda for the next government firms throw a surprise

20 22 24 8 Booth Business
What the coming general elections
Yashwant Prithviraj Sitaram mean for coke and copters
Sinha Chavan Yechuri
9 Booted Out
PE investors show Peter and Indrani
Mukherjea the door at INX

10 Inward Ho
Global companies are stepping up
India acquisitions

16 India Logic

PHOTOGRAPHS BY AMIT KUMAR AND BHUPINDER SINGH

Mukesh Aghi of Steria on why India
matters despite not being a market

18 Slumdog Lessons
The movie draws Hollywood and
Bollywood closer

LIFE

HOT SEAT
64 The Intrepid Gamer
UTV Software CEO Ronnie
Screwvala is betting big on the
gaming industry. He says that
this business and new media
will be as important as his core
movies business 86 Fast And Dumb
Formula 1 has hit a pit stop, and it
has only itself to blame

88 HEY!
Radio City CEO Apurva Purohit learnt
management on the hockey field

REGULARS

4 Letters
82 Data Pages
92 Books
94 Diversions
SOUMIK KAR

COVER DESIGN: SUMEET GUPTA

COVER PHOTOGRAPHS: BHUPINDER SINGH

2 OutlookBusiness > April 4, 2009

 MAIL
The cover story on India’s cost savers
shows that companies that were prepared
to meet any untoward turn in business have
had less difficulty in swimming through
rough waters. However, have the tough
conditions and the cost-cutting affected
the quality of their goods and services?
Siddarth Kochchar | Jaipur
Curious Case Of WiMax
If faster broadband connectivity is what
companies and other enterprises in India
are looking for, WiMax should be a bet-
ter bet for them than 3G (The Case For
WiMax, March 21). Both technologies
serve different objectives for a consumer.
While 3G will help callers, WiMax is ideal
for surfers. Although 3G may seem to
be a good idea now, given its success in
other parts of the world and what it can
do, WiMax will pay rich dividends in the
longer term.
Ananthakrishnan
Hyderabad
Match Freezing
The Indian Premier League (IPL) has its
work cut out this year (Diamond In The
Rust, March 7). The franchises splurged
once again at the auctions this year. Early
indications were that the slowdown would
bypass the event. But now that there are
issues with security and elections, the
economy, Sony Entertainment Television
and the participation of foreign players,
things are not getting easier for IPL.
S Sudhir
Mumbai
Gains In Losses
The motto of players in the direct-to-
home (DTH) business seems to be: throw
more, reap more (Great Expectations,
March 7). The prospect of big losses in
the coming few years doesn’t faze them
at all. Given the size of the Indian market,
they have reason to believe. Estimates
TALK BACK
Email olb@outlookindia.com
Mail Editor, Outlook Business,
Nafed House [8th floor],
Ashram Chowk, New Delhi 110 014,
NCR, India
4 OutlookBusiness > April 4, 2009
show the number of households tuning
in to DTH services is increasing at a fast
pace. So, it seems, the money that DTH
players are losing today is an investment
for a beaming future.
D Prabhu
Coimbatore
Effective Pill
The feature At The Flip Of A Pill (Janu-
ary 24), which traced Biocon’s efforts to
develop the world’s first oral insulin drug,
was an excellent read. Well-researched,
the article deftly tracked the drug’s de-
velopment, as well as the risks involved
in the course. It even looked at what Bio-
con’s competitors were capable of. A com-
plete article. I hope to see an update on
the story sometime later in your magazine.
A Padmanabhan
Mumbai
Down To Earth
Thanks for telling the story of the Grama-
teller, the poor man’s ATM (Low-Cost Cash
Box, March 7). Such inventions have the
potential to revolutionise rural life. The
fact that this machine is cost-effective and
energy-efficient should make it a favourite
of financial institutions looking for easy ac-
cess to India’s rural households.
Sudhakar Naidu
Warangal
Progress Report
We will remember the UPA for its broken
promises (The UPA Scoreboard, March
7). Though it has introduced many inter-
esting initiatives such as the NRGES, it
has failed to bring about any significant
change to the lives of the poor.
S Bhagat
Delhi
Correction
Gary Steel, the newly appointed Chairman
of ABB India, is still the Head of HR and
Sustainability in the parent company.
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Published for the fortnight of March 22-April 4, 2009
TAKE 1
Still Shopping
At a time when low or negative growth is the norm, the two
consumer durables giants have posted stunning 30% growth
THE GOVERNMENT’S three-tranche
Rs 85,000 crore stimulus package aimed
at arresting the alarming slide in econom-
ic growth seems to be working, at least
as far as the consumer durables sector is
concerned. After the scare of job losses
and consumers zipping up their wallets,
industry players are beginning to see de-
cent growth.
LG’s home appliances business has grown
by 29% in January and February. The sale
of LCDs is up by 153%, while colour TVs
have grown by 12%. Amitabh Tiwari, Busi-
ness Group Marketing Head, Home En-
tertainment, LG Electronics India, expects
the durables business to grow at 28% in the
first quarter of 2009.
Samsung’s home appliances business, too,
has grown by around 30% in January and
February. CTV sales were good, says Ravi
Zutshi, Deputy Managing Director, Sam-
sung India. “Flat TV sales were up by over
30% and Panel TV sales by over 50%.”
These two companies seem to have out-
performed the rest of the industry. While
market researcher ORG-GfK doesn’t have
February figures yet, industry growth in
January was flat, says Sameer Shukla, Head,
ORG-GfK Marketing Services India. But
he adds that manufacturers are passing
6 OutlookBusiness > April 4, 2009
FIRST
HOT CAKES:
Samsung’s
flat TV sales
rose 30% in
January and
February;
panel TV
sales rose
50%
SHOME BASU
on the benefit of two excise duty cuts (4% banking on the Indian Premier League
and 2%, announced as part of the stimulus (that now seems to be in doubt, though)
packages) to consumers, and that probably to boost CTV sales. Along with this, Zut-
will show up in the February sales. shi adds, the new product launches will
Last month, Samsung reduced the price continue to lure customers. Samsung has
of its LCDs by 1.2-1.7%. Plasmas are now introduced 25 new AC models. And a new
cheaper by Rs 1,000-2,000. Prices of di- line of refrigerators is due for launch in the
rect-cool and frost-free refrigerator models coming weeks.
have come down by 1-1.5% and washing Consumer sentiment is certainly positive,
machines by 1-1.6%. LG, too, says Ajit Joshi, CEO, Infiniti
has reduced prices of its 29- Retail, which runs consumer
inch CTVs by 5%. Prices of
LG’s home durables and electronics chain
frost-free models in the high- appliances Croma. He has just opened
end have come down by 3%;
and for top-loading washing
business grew two stores in Hyderabad. “We
plan to add another 20 to the
machines, by 5%. 29% in January existing 30 stores in the com-
The stimulus package, the
sixth pay commission dues
and February; ingSlowdown fiscal,” he adds.
is a perception,
and lowering of the excise Samsung’s 30% points out Shukla of ORG-
duty helped buck the trend, GfK. “The middle-income
says Zutshi of Samsung. Along with this, groups greatly contributed to the dura-
the wedding season has also encouraged bles industry as growth came from the
sales. “The marriage season is a prolonged mass-market segments,” he observes. As
one starting from February till June 2009. per ORG-GfK figures, the durables industry
So, there will be enough impetus,” says grew by 10-11% in 2008 and the consumer
LG’s Tiwari. The company’s March target electronics industry by 12-14%. CTVs, for
is Rs 810 crore and for the first quarter, example, grew by 10-12%, LCDs by 150%
Rs 2,330 crore. and home appliances by 8-10%. Finally,
With a growth target of over 25% this there is something to cheer about. <
year, Samsung, too, is quite upbeat. It is —Sumita Vaid Dixit
TAKE 1
ELECTIONS

Polls Of Fortune
General elections means big spending—Rs 10,000 crore, by one estimate. For select
industries, that means a spike in demand
THE WORLD’S largest democratic process, involving about sectors will benefit more as parties will be wary of splurging
714 million eligible voters in 543 constituencies to elect the on new vehicles, for the Election Commission (EC) will be
15th Lok Sabha, will also mean huge expenditure—about Rs watching. Demand for chartered vehicles and small-time pri-
10,000 crore, according to the Centre for Media Studies (CMS), vate taxis will also increase.
a New Delhi-based research group. That spells good news for Media companies, and to a lesser extent advertising agencies,
companies in sectors as diverse as soft drinks, liquor, print- will also gain. “The total outlay for advertising in the mass media
ing, media, chartered helicopter services, utility vehicles and may be about Rs 400 crore, but large advertising organisations
private transport. may get only half of it,” says MG Parameswaran, Executive Di-
“About 50-75 helicopters and small planes will be used in this rector and CEO of Draftfcb-Ulka, Mumbai. “A lot of spending
election,” estimates Captain GR Gopinath, Founder of Dec- happens ‘below the line’. That is where small players get a large
can Aviation. “This is one service that political parties can’t slice of the cake,” says Parameswaran.
do without. They will have to move star campaigners from The use of posters and pamphlets may have dropped. “Still,
one part of the country printing industry revenues
to another in quick time.” could rise 2-5% in the elec-
He estimates that the tion quarter,” says Govind
sector will earn about Bhargava, General Secre-
Rs 100 crore in 45 days, tary of the All India Fed-
even though business eration of Master Print-
leaders may also lend ers, the apex body of the
their private jets and cop- industry.
ters to politicians. A bunch of small, unor-
“Having a great helicop- ganised players like food-
ter is not sufficient if you caterers, stage and rally or-
haven’t stocked extra fuel, ganisers and the like will
spare parts, extra pilots also benefit.
and so on. Therefore, the The CMS has a fairly good
charges during elections idea of how the Rs 10,000
are also high,” Gopinath crore is likely to be spent.
explains. That won’t be a “The EC alone will incur
problem, though. “Politi- about Rs 1,200 crore with
cal parties are recession- the government agencies—
proof and are flush with both Centre and states—
funds,” he says, based on spending about Rs 700
his experience with many crore in organising the elec-
elections over the past 14 tions,” says CMS Chairman
years. N Bhaskara Rao. Though
Also, expect a 10-15% each candidate is legally al-
spike in soft drink sales lowed to spend Rs 25 lakh
during the polls. “If the for the Lok Sabha, the actu-
elections were held in al spend will be many times
winter, the surge would have been only about 2-3%. But in over. Assuming there are four active candidates in each constitu-
summer, it should be at least 10%,” points out Prasanna Kumar, ency, this will lead to a spend of Rs 2,500–3,000 crore. There is
a distributor for Coke in Karnataka. no such curb on party spends. He estimates that the Congress
Liquor, it goes without saying, flows freely during election and BJP could together spend up to Rs 1,000 crore.
time. “There will be a surge in sales, but it will primarily be in “Elections do mean extra spending,” says Rajiv Kumar, Di-
the low-priced segment,” says a liquor industry insider. “The rector and Chief Executive of Indian Council for Research on
peak will be during the last three days of each polling date in International Economic Relations (ICRIER). “But I don’t think
the five-phase elections.” it is an economic stimulus. Even if the amount is estimated to
Elsewhere, the jeeps will roll. “Elections are likely to push be in the range of Rs 10,000 crore, it is still only about 0.2% of
new SUV sales in a few states. But it will be difficult to estimate the economy.” But in the current economic environment, even
the impact,” says Dilip Chenoy, Director General of Society of that is a welcome relief. <
Indian Automobile Manufacturers (SIAM). The used-vehicle —Sebastian PT

8 OutlookBusiness > April 4, 2009

 TAKE 1

LOSS OF FAITH: PE firms have shown

Peter Mukherjea and Indrani the door

English news channel)—and is estimated

to have spent about Rs 400 crore. But the
content was unimaginative, a mere copy
of what Star TV, the industry leader and
Peter Mukerjea’s former employer, was
dishing out.
Barely a year after INX Media raised $250
million from PE investors, it had run out
of cash and was desperately looking for a
fresh investment of $150 million. But there
were no takers. In an interview with this
magazine last December, Peter Mukerjea
had admitted the company was in trouble
and there was no money to run it beyond
that month. “As a new company which
is still a couple of years from break-even
point, this liquidity crunch has a different
impact altogether. We are totally reliant on
fresh funding...” he had admitted. Industry
players scoff at that. “They could have saved
at least 40% of the cash they had raised,”

SOUMIK KAR
says a senior media planner.
Private Equity investors, who had given
the Mukerjeas unrestricted authority in
running the company, are now ruing their
INX MEDIA decision. “We had no domain expertise
and had completely relied on Peter,” says

Prodigal Couple the head of a PE investor. “We can’t take

decisions on programming.” He says in-
vestors began to get anxious when newer
entrants like the Viacom and Network 18-
promoted Colors leapfrogged ahead of
The Mukerjea duo’s extravagant management style, reckless INX. “We entered the market thinking that
cash spends and unimaginative content led to their exit there was a gap, but we saw Colors filling
it up effortlessly,” says the PE honcho. As
investors, they had never imagined Muk-
LESS THAN a month after discount-re- ginning. INX Media spent Rs 60 crore on erjea could go wrong. Now, the PE firm is
tailer Subhiksha plunged towards bank- distribution (unprecedented at that time), even exploring the possibility of selling the
ruptcy, INX Media, another private-eq- set up a plush office at Grant Road in South company in parts. One part—news chan-
uity backed company, is hurtling into a Mumbai, and had an opulent marketing nel NewsX—was sold in January, report-
crisis for precisely the same reason—poor budget (Rs 60-70 crore during launch). edly for Rs 50 crore. There is also some
cash management. “Reckless cash manage- speculation that INX
The husband-wife combine of Peter Muk- ment has led INX to this INX spent Rs 60 cr Media could be merged
erjea (Chief Strategy Officer) and Indrani debacle,” says a former with Multi Screen Media
Mukerjea (CEO) that was running the com- Star TV employee. Even each on distribution (MSM), which runs the
pany since its inception about 18 months their hiring strategy was and marketing, and Sony bouquet of channels
ago was forced to step down by their PE in- excessive. They recruited in India. MSM is headless
vestors, including Temasek Holdings, New a number of expatriates set up a plush office after the exit of CEO Ku-
Silk Route, New Vernon and Kotak Private in senior management, in South Mumbai nal Dasgupta, and is also
Equity. A bunch of others like the SREI including former Star in dire straits. A highly
Group and some large corporate houses employees Anthony Pettifer (Brand Di- placed source from Sony’s international
are also invested in the company. Together, rector) and Richard Platt (Programming operations, however, says that these talks
they own over 80% of INX. Consultant), at huge pay packets. “What have broken down.
Industry insiders say that it was the was the need to spend crores on foreign The PE investors roped in media industry
Mukerjeas’ extravagant management talent when India has a surfeit,” asks an veteran Pradeep Guha three months ago as
style, poor cash management, lack of analyst. Platt’s and Pettifer’s contracts have a consultant for INX. They have also set up
imagination in content creation and fee- not been renewed. an investors’ committee that is looking at
ble entrepreneurial skills that proved to be The company launched three chan- day-to-day management. Still, a revival will
their undoing. nels—9XM (a music channel), 9X (Hindi be a long haul and drain more cash. <
Their profligacy was evident from the be- general entertainment) and NewsX (an —Ajita Shashidhar

OutlookBusiness > April 4, 2009 9

TAKE 1

INDIAN PREMIER LEAGUE

Jinxed
The IPL has been jeopardised
by recent events
March 3: Attack on Sri Lankan team in
Pakistan. P Chidambaram suggests that
the IPL, scheduled to be held between
April 10 and May 24, be postponed.

March 4: IPL organisers say matches

will be held with a gap of 48 hours after
election days in all venues. BCCI says
it won’t require central forces and will
manage with state police. INBOUND M&A

March 5: IPL sends revised tournament

schedule to the government.

March 9: Associations of international

Visitors On Deal Street
players say it is imperative to talk to
Saturated markets elsewhere are forcing foreign companies
IPL organisers about security. State to look at acquiring cash-strapped Indian firms
cricket associations express discomfort
in managing security for IPL. CORPORATE INDIA’S overseas M&A out- could work as an incentive for other play-
ing hit historic highs in 2008 with the $2.3 ers in the sector to become organised,” says
billion Tata-Jaguar Land Rover deal. How- Harish HV, partner with corporate M&A
ever, in the aftermath of the global financial advisory firm Grant Thornton.
meltdown, big-ticket acquisitions overseas While 2009 is yet to play out, 2008 was an
no longer seem such a good idea. Still, In- interesting year for inbound M&As. The top
dian companies remain in favour as acqui- three deals (See table: Overseas Calls) were
sition targets for foreign companies look- well over $1 billion in terms of size. The
ing for a foothold in deal that stood out,
this market—because Overseas Calls however, was the $1.7
growth elsewhere in Acquirer Target Acquisition billion acquisition of
the world has come Price ($ mn) Ranbaxy by Daiichi
to a near standstill. NTT DoCoMo Tata Teleservices 2,700 Sankyo, says Harish
Inbound M&A Daiichi Sankyo Ranbaxy Laboratories 1,704 HV. “The trend to-
deals have tradi- Telenor ASA Unitech Wireless 1,360 wards inbound deals
PTI

tionally trailed out- Emirates Telecom Swan Telecom 900 probably changed
STUMPED: IPL is on a sticky wicket bound deals, and CRH Plc My Home Industries 456 with that. It showed
it is too early to as- Lafarge SA Ready-mix concrete 370 that promoters of
March 13: Andhra Pradesh, Karnataka certain whether the business of L& T large family-run
and Delhi express inability to provide trend will change this Petronas Cairn India 355 businesses are will-
security for IPL. year. Inbound and HSBC Holdings PLC IL&FS Investmart 242 ing to sell to realise
outbound deals re- Fresenious Kabi Dabur Pharma 218 value,” he says.
March 14: BCCI terminates contract mained more or less Xchanging Plc Cambridge Solutions 153 This, in fact, has
with IPL broadcaster Sony, accusing it of on par during January Source: Grant Thornton been one of the con-
breach of contract. This is in response to and February. How- straints of the Indian
Reliance’s DTH arm, Big TV, cancelling ever, recently, sectors like hospitality and inbound M&A market. That could now
a deal worth Rs 137 crore with IPL after telecom have been in the spotlight as for- change for a couple of reasons. First, many
Sony signed on Reliance rival Airtel’s eign companies have been acquiring do- family-owned businesses are now helmed
DTH service as an advertiser. mestic players in these sectors. by second-generation promoters, who are
French food services major Sodexho said of a different mindset. They are more open
March 16: Sony goes to court seeking in a press release on March 10 that it has to selling their stakes in order to realise
an injunction to restrain BCCI from inking “signed a binding agreement to acquire better value and move on to newer busi-
any new agreement related to the T20 Bangalore-based Radhakrishna Hospital- nesses. Second, the economic downturn
tournament. A meeting between BCCI ity Services Group”, but did not reveal the has blocked access to capital. Promoters
and the Home Ministry fails to break the deal size. The deal is significant given the realise foreigners, hungry for new markets,
deadlock regarding the schedule. relatively unorganised nature of the food can give them the best value. <
services or catering business in India. “It —Snigdha Sengupta

10 OutlookBusiness > April 4, 2009

TAKE 1

AIRPORTS

CRISIS TALK>

VISHAL KOUL
We may see the recession
coming to an end this year.
The biggest risk is that we
don’t have the political
will, the commitment to
solve this problem, and that
Acting Pricey
we may let it just continue Even as airports in Asia are dropping charges, their Indian
counterparts are levying new fees and user charges
— BEN BERNANKE
US Federal Reserve Chairman predicting that
the US recession will end this year AIRPORTS IN Korea, Japan, Singapore, earmarked Rs 6,500 crore to upgrade these
Malaysia and China have all dropped their airports and a third of it was to come from
charges over the last six months in a bid to private partners, mostly from development
POINT > make flying attractive. But the exact oppo- of the real estate in and around the airports.
site is happening in India. After Mumbai, But the crash in the real estate market has
This is the time to create Delhi, Hyderabad and Bangalore—all of put paid to these plans.
alliances. Despite the which have introduced user development AAI’s internal accruals also seem to be
arrogance of the CEOs, the fees ranging from Rs 100 to Rs 1,300 per in jeopardy as falling air traffic has led to a
passenger—the Airports Authority of India drop in revenues. It has already sought the
market is taking us in that (AAI) is now levying similar charges in nine government’s nod to issue infrastructure
direction smaller cities including Goa bonds. It needs to invest Rs
—SERGIO MARCHIONNE and Ahmedabad. More air- The AAI is now 12,000 crore to modernise
Fiat CEO on surviving the financial meltdown ports like Chennai and Kolk- and upgrade airports in the
ata are also likely to join the levying user 11th five-year plan.
COUNTER POINT > list after their infrastructure development Airlines are not happy with
is upgraded. Earlier this year, the charges. “There is a lack
I have high regard for the Ministry of Civil Aviation fees in nine of transparency in determin-
Sergio, but he’s not Moses. had allowed all airports to hike smaller cities ing charges and ineffective
Historically speaking, going landing and parking charges consultation with airline cus-
for aircraft by 10%. as well tomers,” the International
for more volume does not Sample this: Malaysian Air- Air Transport Association
equate to sound finances ports Holdings slashed landing charges in (IATA) said in a recent statement. Air-
—DIETER ZETSCHE the country’s airports by 50%. But in India, lines say that the new fees and user charg-
Daimler Chairman responding to Marchionne’s the company, a part of the GMR Group led es will stifle recovery of the sector, which
prediction that in two years’ time, there may be consortium that owns and operates the new is likely to end this financial year with a
room for only six global mass producers international airport in Hyderabad, has in- $2 billion loss.
troduced fees of Rs 375 for each domestic Analysts say most airport expansion plans
WORDS WORTH > passenger and Rs 1,000 for every interna- were drawn between 2002 and 2008, when
tional passenger. It has also been asking air-passenger numbers more than doubled.
The philosophy of airlines to pay for the use of aerobridges Airlines are irked because these hikes are
protectionism is a and display screens in their counters. coming when the government is in the
philosophy of war “All the non-metro airports currently process of setting up the Airport Economic
being modernised are loss-making ones,” Regulatory Authority, which has the man-
—LUDWIG VON MISES VP Agrawal, Chairman, Airport Author- date to oversee all these issues.<
Austrian Economist
ity of India says in defence. The AAI had —Sudipto Dey

00
12 OutlookBusiness > April 4, 2009
TAKE 1
Q&A
MUKESH AGHI
> Chairman and CEO
Steria (India)
Steria spent £472 million
on Xansa. What was the ra-
tionale behind paying such a
high price?
In 2007, Steria was mostly
limited to continental Eu-
rope. Xansa was also strug-
gling to go beyond the UK.
Their management team was
willing to make a deal. The ac-
quisition gave us a ready cus-
tomer base in the UK. Also,
Xansa was strong in the BPO
space, where we did not have
any presence.
At that time, European com-
panies were looking at cost ef-
ficiencies to compete globally,
and they wanted to offshore IT
work. Steria could offer these
services with Xansa, with a
footprint in India.
What has changed for Steria
India in the recent past?
We have realised that the com-
pany needs to start looking
beyond Europe and begin
exploring other geographies
such as India and Asia-Pacific
countries such as Australia.
Steria is not a known brand
in India, which is a brand-con-
scious society. My first chal-
lenge was to build the
“We want to move
brand in India. Next
was to recruit the best
talent and build a co-
hesive team.
How much does India
contribute to Steria’s
overall revenues?
beyond Europe”
Zero. We are a Europe-centric company,
and the $500 billion market has kept us too
preoccupied to explore the Indian market
yet. We are building ourselves up to tap it.
We need to build the brand in India to at-
tract the best talent here.
Are your hiring plans on track?
In 2008, we said that we would double
our employee strength of 5,000 in three
16 OutlookBusiness > April 4, 2009
years’ time. We grew 15% by
the end of 2008, and have
reached about 6,000. This year,
our headcount should reach
around 8,000. We are still
hiring, with a small bench-
strength and a conservative-
growth approach.
What strategy do you have in
mind for India?
It’s a solution-based strategy.
We are not here to give cheap-
er and faster services to our
Indian customers. The big-
gest challenge in this coun-
try is to offer the best-in-class
solution. For example, Delhi’s
traffic needs a world-class so-
lution, and we can look at Sin-
gapore’s traffic management
system, which is one of the
best in the world, as a solu-
tion. Delhi will have it soon.
We are working with the Del-
hi government to deploy the
system before the 2010 Com-
monwealth Games.
Why did you set up a training
SAPTARSHI BISWAS
academy in India?
A good learning environ-
ment is the most important
thing that any company can
give its employees af-
ter its vision, mission
and targets. With our
academy in Chennai,
we wanted to send out
a message that Steria
India is at par with
any other Steria office
in Europe.
The academy serves two purposes: one,
In 2007, IT services obviously, is academics. The other, more
firm Steria spent £472 importantly, is that employees from Eu-
million to acquire Xan- rope will learn more about India. We have
become India’s brand ambassadors and
sa. Its India chief tells we want to change the perception of the
Anurag Prasad why the country. This becomes important to build
the bond between different teams. Our
company made such a prime market, continental Europe, is sill
costly acquisition quite ignorant about India. <

EXECUTIVE DIARY > WORLD
Bernard L Madoff
$50 BILLION, 150 YEARS
BERNARD MADOFF, the 70-
year-old US financier, has been
sent to jail and is awaiting
his sentence after he admit-
ted that he ran a vast Ponzi
scheme and robbed thousands
of investors of their life sav-
ings. Madoff is the only person
accused in Wall Street’s big-
gest and longest fraud (esti-
mated at around $50 billion
and running since the early-
1990s). His fraud had world-
wide exposure and his victims
include banks like HSBC, the
Royal Bank of Scotland, BNP
Paribas, pension funds, indus-
try leaders and celebrities in
the US. Prosecutors are inves-
tigating whether others had
joined him in the crime. They
are also continuing work to see
how much of the stolen money
can be recovered. Madoff
could receive up to 150 years
when he is sentenced in June.
MERGER MANIA
IT’S BEEN a busy time for big
pharma deals. After a nine-
month struggle, Swiss drug
major Roche has finally
acquired Genentech for $46.8
billion. Genentech is widely
considered the world’s oldest
and most successful biotech-
TAKE 1
nology company. The com-
bined entity will become
the seventh largest pharma
company in the world. The
deal comes days after Ger-
man major Merck snapped
up Schering-Plough for $41.1
billion, and a few weeks after
the world’s largest pharma
company, Pfizer, bought Wyeth
for $68 billion. That makes
it about $160 billion in Big
Pharma deals so far this year.
With new research pipelines
drying up and generics throng-
ing the market, companies
are resorting to strategic buys
as they get newer products to
peddle and better access to
emerging markets.
Pain At The Bottom Of The Pyramid
THE GLOBAL financial crisis that originated on Wall
Street will have a lasting impact on the lives of the world’s
poorest people, several studies have warned. Reduced ROUGH CUT
GDP growth rate in poor countries in 2009 will push AILING US carmaker General
an estimated 46 million people into poverty, according Motors has said its cost-cut-
to a recent World Bank report. Many countries will see ting efforts are starting to pay
their per capita incomes stagnate, and in some cases, off and that it will not need
the per capita income could shrink. the $2 billion of funding it had
Export-oriented and urban-based sectors (textiles, previously requested from the
jewellery, construction, mining, manufacturing) are government. Earlier, it had
witnessing huge layoffs. Up to 30 million workers could said it needed $2 billion to
become unemployed globally, says the International La- avoid running out of cash by
bour Organisation. Workers are migrating from cities March-end. The company re-
back to rural areas, and this will stymie the economic ceived $13.4 billion in aid in
development of poorer countries, which was fuelled to a December and has requested
great extent by movement of labour away from agricul- for another $16.6 billion. The
ture to industries. Declining wages and falling remittance announcement came even
flows are also having a strong welfare impact on these as pressure was mounting on
economies, increasing poverty and inequality. the company to be forced into
Fiscal pressures in these countries will result in the bankruptcy protection after its
poor getting lesser services, particularly at a time when auditors said that they had no
they are migrating from private to public education and confidence in its ability to sur-
health services. Children will be withdrawn from schools, vive the steep decline in auto
people will be forced to buy less nutritious food and sales amid the economic cri-
healthcare will get lower priority. These will have long- sis. General Motors and Chrys-
standing effects, as the children, once removed from ler have until the end of March
school, will find it difficult to make good their learning to show President Barack
gaps. And the impact of malnutrition and reduced food Obama’s task force that they
consumption may be irreversible. are making progress on their
restructuring plans.
OutlookBusiness > April 4, 2009 17
TAKE 1

FILMS

Crossover
Millionaires
Slumdog Millionaire has a
host of cues for Indian
production houses looking
to go global
SINCE THE mid-1990s, a handful of Hindi
films have enjoyed outstanding success
abroad. The overseas distribution of films
from Dilwale Dulhaniya Le Jayenge (1995)
to Kabhi Alvida Naa Kehna (2006) were
primarily managed by Mumbai-headquar-
tered production houses. The audience
comprised mainly the 25 million-strong
NRI diaspora, notably in the US and UK.
However, the success of Slumdog Million-
aire has been unique: while the content is
primarily Indian, the film has transgressed
NRI audiences on the back of large-scale
distribution by Fox Searchlight.
So, while the erstwhile all-time overseas
grosser in Hindi, Kabhi Alvida Naa Kehna
clocked Rs 44.5 crore (as per Box Office
India statistics), Slumdog Millionaire had
made Rs 58.7 crore in the US alone by
March 1. That it is not an Indian produc-
tion merits iteration, but the film has shown
the way for the Indian film industry (both
content and talent) to go global.
DEEP POCKET
Foreign studios also gain from such joint
productions. “While foraying into local
markets, it helps them form partnerships
with Indian talent who understand the mar-
ket,” says Siddharth Roy Kapur, CEO, UTV
Motion Pictures.
The number of Indian films receiving
distribution muscles from co-productions
has been on the rise. Take the UTV Motion
Pictures-Fox Searchlight Pictures produc-
tion, The Namesake (2007), for instance.
The film was directed by Mira Nair, while
Fox Searchlight and UTV co-financed it.
Most crucially, Fox Searchlight distribut-
ed it globally, while UTV distributed it in
South Asia. In the US, The Namesake74was
shown on 327 screens.
“If you don’t have a worldwide distribu-
36 lock-in, it becomes a difficult prop-
tion
osition,” points out Kapur of UTV. “It is
much better to be able to de-risk yourself
right from the beginning with the help of
international distributors.”
Reliance Big Entertainment has been forg-
ing tie-ups with foreign studios mostly at the
script-development stage itself. Its yet-to-
be-released Kites, directed by Anurag Basu
and starring Hrithik Roshan, has a host of
foreign cast members. The company is slated
to make as many as 10 Hollywood films.
This is unchartered territory. “Such projects
will open up more revenue streams for In-
dian film companies, apart from enabling
them to work with advanced techniques,”
states the FICCI-KPMG Media & Enter-
tainment Industry Report 2009.
The report sheds light on the benefits of
joint productions, including subsidised
finance. An Indo-UK treaty, for instance,
provides co-productions the opportunity
to waive off import or export duties on any
production equipment.
Amid the slowdown, tightening of film
ties between Bollywood and Hollywood
may be the way forward for both. <
—Kunal N Talgeri
GO FIGURE

91.4 The reading of the NCAER Business Con-

fidence Index for January. This is a seven-year low, down
41% from a year ago.

3.45% Monthly dip in the average income

of workers in labour-intensive sectors in India during the
third quarter of this fiscal, according to the government.

$23.9 BN Loss posted by US mortgage

major Freddie Mac in the fourth quarter. The figure for
Fannie Mae, its sister concern, was $25.2 billion.

VIVEK THAKKAR

00
18 OutlookBusiness > April 4, 2009
 Yashwant
Sinha 20 ECONOMIC AGENDA VIEW
INSIDE Prithviraj
Chavan 22
Sitaram
Yechuri 24

IF WE COME
TO POWER... What’s the economic agenda of the
three central players vying to form the
next government?
Sebastian PT

T HE 15TH LOK SABHA ELECTIONS ARE BEING HELD

in the backdrop of an economic crisis that is worsening
by the day. The dream run of 9%-plus growth has come
to an abrupt end, and managing even 5% seems difficult.
Many sectors in manufacturing and services are seeing a sharp de-
cline. Job losses are widespread and many of those who have jobs are
unsure of retaining them. The next government, therefore, will have
its hands full.
But, while the economic crisis becomes clearer, the political picture
is only getting murkier. Alliances are being formed and broken by the
day, with regional and small political players jumping from one coali-
tion to another. From Navin Patnaik’s BJD ending its 11-year-old as-
sociation with the BJP in Orissa to the Trinamool Congress tying up
with the Congress in West Bengal, the backdoor manoeuvrings are on
in full swing. Consequently, it’s anybody’s guess as to who will emerge
victorious on May 16, when the last votes are counted. There are three
possible outcomes: the Congress-led United Progressive Alliance (UPA)
retaining power, the BJP-led National Democratic Alliance (NDA)
making a comeback, and a third alternative, comprising the Left and
regional parties, forming the government with or without support from
the Congress or the BJP.
While the two big national parties will greatly determine the economic
agenda if either of them lead the next government, the Left parties will
have an important say if a third alternative comes to power or if they
extend support to a UPA government. Whoever it is, with inflows of
foreign money falling and tax revenues declining, the new government
will be hamstrung in its efforts to kick-start the economy. The full Budget,
which is due to be presented in June, will be its first opportunity to take
some hard decisions to get the economy back on track.
The three columns that follow offer some sense of the kind of poli-
cies each of the three pivotal players is likely to pursue. Putting forth
the BJP’s viewpoint, former Finance Minister Yashwant Sinha believes
ILLUSTRATION BY ARINDAM

that spurring consumer and investment demand will do the trick. The
Congress, on the other hand, will focus on continuing economic pro-
grammes launched during its current tenure and doing more of what
it did in the past five years, says Prithviraj Chavan, Minister of State for
the PMO. On its part, the Left, says Sitaram Yechury of the CPI(M), will
push for massive public spending, fiscal deficits be damned. <

OutlookBusiness > April 4, 2009 19

VIEW ECONOMIC AGENDA
YASHWANT SINHA
NATIONAL VICE-PRESIDENT, BJP
T
HERE IS LITTLE DOUBT
that the global slump will go on for a long
time. The next government will have the
unenviable task of stimulating growth while
keeping the fiscal deficit at manageable
levels and balancing inflationary tenden-
cies. The UPA government could have built
‘hurricane shelters’ when the economy was
buoyant. For instance, it could have met fis-
cal targets such as keeping the fiscal deficit
below 3% under the FRBM Act, at least in
Budget 2008, well before the global finan-
cial meltdown started. Instead, it went on a
sop-disbursing spree, and was caught un-
prepared when the global lag hit India.
Given this scenario, if the BJP-led coali-
tion comes to power in the forthcoming
general elections, the government’s prime
focus would be on increasing demand lev-
els and improving overall confidence. That
is, the two kinds of demand—consumer
and investment—will have to be given a
huge fillip. Improving the purchasing power
20 OutlookBusiness > April 4, 2009
More Bang And
More Bucks
Return to the NDA formula: stoke investment
and consumer demand, and build infrastructure
of the consumer is very critical because
only then will the other basic economic
postulates of increased production and
more jobs follow. Further, more invest-
ment has to be directed towards indus-
tries during this downturn through proper
policy initiatives.
The secret of the Indian economy showing
substantial growth in recent years can be
traced back to the policies of the AB Vaj-
payee-led NDA government. We focused
on reducing interest rates—be it hire-pur-
chase, lease, purchase of dwellings, etc—on
the one hand, and investing in large in-
frastructure projects such
as national highways, on
the other. This is exactly
the process that has to be
Many big
infrastructure
reverted to.
Interest rates will have to
be reduced to 5-6%. This projects will
will spur housing in a big
way and, consequently, re-
have to be
juvenate industries such bankrolled
as steel and cement. But
inflation will also have to through
be tackled with caution.
Though headline inflation
‘off-Budget’
has declined, food infla- financing
tion is still in double dig-
its, and this is going to be
a big challenge.
Talking of big public spending on large
infrastructure projects is one thing and
executing it in the backdrop of declining
revenues is another. There has to be a para-
digm shift in policy formulation and im-
plementation in the given scenario. Many
big core-sector projects have to be funded
through ‘outside-the-Budget’ financing.
For instance, the Delhi-Mumbai rail
freight corridor, national highway corridors
that are on a BOT (build-operate-transfer)
basis and large irrigation projects that can
be financed through user charges would
fit this model. The internal rate of return
(IRR) of each project will have to be as-
sessed first and the money raised through
the market. A special purpose vehicle (SPV)
can be created, with the government pro-
viding the seed capital.
Social sectors, especially health and edu-
cation, are still in need of huge investments
and better delivery systems. Here, again,
there has to be a change in mindset—the
number of social schemes under the Centre
has to be reduced to about 10. The pattern
for all the schemes under the Centre has
to be similar to what we introduced under
the Pradhan Mantri Gram Sadak Yojana,
where the Centre alone funds and monitors
the scheme. The Centre
will have to ensure that
the schemes work.
While schemes such as
the Sarva Shiksha Ab-
hiyan, National Rural
Health Mission and the
National Rural Employ-
ment Guarantee Scheme
remain with the Centre,
the remaining schemes
and resources should be
transferred to the states.
This way, even the states
will not object to the
proposal.
Micro-management by
the Union government and the Planning
Commission should go. The states and pan-
chayats should be given reasonable au-
tonomy to manage schemes for education,
health, rural infrastructure, electricity and
so on. Even for urban revival, municipalities
will have to be empowered to raise funds
and manage schemes. Systems will have
to be created that will increase efficiency
so that every paisa spent on the schemes
reaches the target.
Difficult times can be opportunities
in disguise for change for the better.
And, the BJP is well prepared to meet the
challenge. <
(As told to Sebastian PT)
VIEW ECONOMIC AGENDA
PRITHVIRAJ CHAVAN
MINISTER OF STATE FOR THE PMO
T
HE UPA GOVERNMENT
has, in the last five years, delivered on the
people’s aspiration of change for the bet-
ter, with the aam aadmi being the central
focus of every policy. Revolutionary steps
such as the National Rural Employment
Guarantee Scheme (NREGS), Unorganised
Sector Social Security Act, Agricultural
Debt Waiver and the Right to Information
Act not only help alleviate the condition of
the poor, but also insulate them from the
vagaries of economic shocks, while mak-
22 OutlookBusiness > April 4, 2009
Much More Of
The Same
‘Aam aadmi’ policies of the past five years have
delivered. That will be the bent in future too
ing the administration more accountable.
Our high economic growth rate ensured a
frontal attack on poverty.
Unprecedented expenditure on infrastruc-
ture, both urban and rural, and a huge step
up in public spending on the social sector,
was possible because we had more to spend.
A greater outlay was made possible by high
tax revenues, which was the result of a sus-
tained high growth rate. Even the historic
civil nuclear deal with the US is a major
step in securing our country’s energy needs
for the future. Our policy successes during
the last five years and promises of more of
the same will bring us back
to power.
Our main thrust during
the next five years will be
The NREGS
on the continuation of our will guarantee
aam aadmi policies of the
last five years, with a clear more than
objective of ending abject
poverty in our tenure.
100 days of
Until the last year, the work and will
economy was growing
very fast. We were able to be extended
keep the fiscal deficit with-
in the limits of the Fiscal
to urban areas
Responsibility and Budg- as well
et Management (FRBM)
Act; exports were growing
steadily; forex reserves were comfortable;
the rupee was strong.
However, the oil shock in 2007-08 hurt
us badly and inflated our subsidy bill for
energy and food. We were relieved when
oil prices came down, and brought down
inflation with it. But the current global
meltdown is causing us worry, as it impacts
the growth rate and jobs.
So, our future policy response will contin-
ue the emergency measures in the shape of
stimulus packages and sectoral benefits, as
has been done with two stimulus packages
and tax cuts in the past three months.
Finance Minister Pranab Mukherjee has
already indicated that the new government
will formulate tax and expenditure policies
that will help sustain a GDP growth rate
of 9%, with the agriculture sector growing
at 4%. We not only have to protect jobs,
but we also have to create millions of new
jobs annually. A massive thrust on infra-
structure will continue. The public-pri-
vate partnership route, as well as the vi-
ability-gap funding model, will continue
to be used depending on the appetite of
the market to invest in India. The UPA will
continue the investment-friendly regime
to attract foreign investors to the infra-
structure sector.
We will also continue
to expand the range and
reach of the social safety
net to insulate the vulner-
able sections of the soci-
ety from the disruptive ef-
fects of economic cycles.
Universalisation of edu-
cation will be extended
to the secondary level;
the scope of the mid-day
meal scheme will be wid-
ened; the health scheme
will be extended to urban
areas; rural and urban in-
frastructure development
projects will be continued
with new vigour.
The NREGS will guarantee more than 100
days of work and will be extended to urban
areas as well; the skill development mission
will be fully rolled out to impart marketable
skills to the youth of the country.
Agriculture will remain the mainstay of
the economy, as it employees the maximum
number of people. What agriculture needs,
besides public investment, is knowledge
input. Massive expansion of agricultural
schools, polytechnics and universities will
happen. Developing secondary occupations
for farmers so that they have continuous
cash flows will be a priority. <
(As told to Sebastian PT)
VIEW ECONOMIC AGENDA
SITARAM YECHURI
CPI(M) POLITBURO MEMBER
W
E LIVE IN AN
altogether different world today—the global
recession has changed everything. The next
government will have to realise this and
get unstuck from the prevailing mindset.
It is important to get the right perspective
on what caused the slowdown, remove the
blindfold of ‘neo-liberal’ idealism and real-
ise that the earlier parameters that related
to 8% growth are no longer relevant. This
is the time to go in for unhindered massive
public spending to provide the people with
purchasing power. This is not the time to
worry about fiscal deficits or consequent
inflationary tendencies, which is irrelevant
under conditions of no supply constraints
or credit ratings.
If the government doesn’t spend, who will
generate jobs and spur demand? If there
is no money in the people’s hands, where
is the question of demand going up or, for
that matter, inflation? The government is
living in a peculiar hangover. The need of
24 OutlookBusiness > April 4, 2009
A ‘Fresh
New Deal’
Roosevelt’s ‘new deal’ after the Great Depression
was dismissive of deficits. We need an encore
the moment is a change in mindset.
What caused the global financial melt-
down was the inability of the consumer
to return cheap loans. That triggered the
whole crisis, which has led to a recession
globally. If the basic problem is that the
consumer has no money in his hands to
spend, then your bailout packages have to
address that. It is important to strength-
en the bottom-end and not give packages
to the top-end. The recent bailout pack-
ages to big companies have only helped
them balance their balance sheets, with
the consumer gaining precious little. For
instance, the government
has reduced the price
of aviation turbine fuel
(ATF) substantially, but
This is the
time to go for
airlines have hardly passed
on the benefits to consum-
ers. Air traffic continues liberal public
to be low.
Unless you strengthen
spending
the purchasing power of to boost the
the people, the economy
can never come out of purchasing
a slowdown. For that to
happen, a huge amount
power of
of public investment is re- the people
quired. The focus should
be on building your social
infrastructure—public health, sanitation,
internal waterways, rural infrastructure,
construction of wells and minor irriga-
tion works. We have a situation where a
thousand children die every day due to
diseases that are preventable. There is so
much that can be done.
The next government should, undoubt-
edly, go in for big infrastructure projects
without worrying about foreign direct in-
vestment (FDI) or private participation. We
have to first build our infrastructure. FDI
will automatically follow when they see the
facilities. Also, when private companies are
themselves seeking bailouts, where is the
question of them investing with the govern-
ment? And, their participation only seems
to burden the consumer. For instance, the
private players modernising the major air-
ports are now imposing user charges to
overcome losses caused by the slowdown.
This only reduces the purchasing power of
the consumer further.
That apart, the concern about fiscal defi-
cits during a slowdown makes neither eco-
nomic nor common sense. No slowdown
can be overcome without massive deficits.
Franklin Roosevelt’s ‘new deal’ was all about
that. Let us not worry about deficits as they
will be eventually overcome when economic
activity expands.
In fact, the UPA gov-
ernment should have
spent more in the years
before the global slow-
down set in. In each of
the four years of the UPA
government, the revenue
surplus was more than
20% annually. However,
the expenditure increas-
es that were announced
in the various Budgets
were never more than
10%. Not spending the
remaining 10% is the
biggest mistake made
by the UPA government. We have always
been critical of this restricted spending.
The government was then keen to follow
the concerns of the Fiscal Responsibility
and Budget Management (FRBM) Act and
was trying to keep the fiscal deficit below
3%. That preoccupation on continuously
reducing fiscal deficit is what I call “fiscal
fundamentalism”.
If they had spent as much as they should
have, they would have met the global reces-
sion in a better manner and saved many
jobs. What is needed now is a ‘fresh new
deal’ of massive proportions. And, a fresh
mindset in the next government. <
(As told to Sebastian PT)
FEATURE SATYAM COMPUTER

THE Customers are deserting Satyam fast. The

earlier the company is sold, the better it is for its
employees, clients and the buyer

RUSH TO
SELL
AM Naik

TV Mahalingam & Snigdha Sengupta Larsen & Tourbro

The Mumbai-based engineering

T
IME IS RUNNING OUT FOR THE BELEA- major, led by AM Naik, already
guered Satyam Computer Services. On February 26, owns 12% of Satyam. Its presence
in the IT services business, through
days before the company’s government appointed- subsidiary L&T Infotech, has not
board admitted expressions-of-interest (EoIs) from been impressive. L&T Infotech
employs 10,000 people, and counts
potential bidders for a 51% stake, California-based Chevron, Freescale and Hitachi
SanDisk told the US Securities and Exchange Com- among its clients. The firm has been
around for 12 years, but ranks as
mission that it may replace the software services firm as a vendor. a mid-tier player. In fiscal 2008, it
The storage devices maker has cited “project delays and loss of made a net profit of Rs 212 crore,
productivity” due to Satyam’s financial difficulties as the reason. on revenues of Rs 1,619 crore.
Buying Satyam could catapult it
It suggested that if Satyam were to lose key personnel, or declare into the big league (in terms of
bankruptcy, the storage major would be forced to engage a new delivery capabilities), but many
doubt Satyam’s customers will be
vendor, albeit at a significant cost. After the termination of Satyam’s confident of L&T’s ability to manage
services by US insurer State Farm Insurance in mid-January, complex global contracts and clients.

28 OutlookBusiness > April 4, 2009

this is the second instance of a marquee
customer publicly admitting to difficulties
on account of Satyam’s misfortunes, which
show no signs of ending anytime soon. In
fact, if the initial bunch of known potential
bidders (See table: How The Bidders Stack
Up) is anything to go by, neither customers
nor employees are confident that it will be
business as usual once the bidding process
is completed.
Customers Sulk
“Business continuity is paramount in an
IT services outsourcing engagement, more
so when it involves a large offshore com-
ponent. None of the known bidders who
have submitted EoIs inspire that confi-
dence,” says a consultant with a leading
European outsourcing advisory firm, which
has been working with Satyam for some
HOW THE BIDDERS STACK UP
BK Modi
Spice Group
The New Delhi-based Spice Group,
helmed by BK Modi, is the only one
in the list of known contenders that
does not have a track record in the
IT services space. Customers are
likely to repose the least confidence
in this bidder. Also, if Spice does
buy Satyam, it will have a tough
time holding back key and senior
executives, say IT analysts. This
would be further incentive for
customers to jump ship.
years. And, as the SanDisk filing shows,
customers are beginning to hurt. Indus-
try sources say that even large customers
(more than $5-10 million in annual con-
tracts) such as Merrill Lynch, Caterpillar,
Nissan, GlaxoSmithKline and Citigroup
are already in the process of transitioning
work out of the company. Market watch-
ers believe that GlaxoSmithKline is mov-
ing most of its work to Cognizant, while
Pfizer, a smaller engagement, is likely to
move entirely to TCS.
Even though customers are largely tight-
lipped about their current relationship
with the company, they admit that they
are watching events closely. Philadelphia-
based health services firm CIGNA has been
outsourcing application development and
maintenance work for its back-office sys-
tems to Satyam. “CIGNA has been closely
Anand Mahindra
Tech Mahindra
M&M group company Tech
Mahindra, which employs 24,000
people, is seen as one of the rising
stars among India’s second-rung
IT services companies. However, it
continues to be heavily dependent
on the telecom sector for its
revenues—over 80% of its $934.7
million fiscal 2008 revenues came
from telecom. Further, it still derives
more than 60% of its revenues from
British Telecom, which also owns a
31% stake in the company. Satyam
will certainly help the company to
diversify into other verticals. But
given its inexperience in executing
projects in non-telecom verticals,
customers may choose to move to a
tested player.
following the recent events regarding Saty-
am, their senior leaders, and their financial
challenges...we have detailed contingency
plans so that regardless of what happens
with any of our vendors, processes are in
place,” says the company’s spokesperson, Joe
Mondy. “The quality and continuity of the
operations with which Satyam deals con-
tinue uninterrupted. Our actions regarding
any potential change in our relationship
with Satyam are confidential,” he adds.
A Nissan North America spokesperson
admitted that even though the “quality
and continuity of work” with Satyam con-
tinues “uninterrupted”, the company will
monitor the situation with Satyam closely.
Recently, the United Nations said that it
plans to cancel its contract. “Contracts with
Coca-Cola, Pfizer and Novartis may not
be much in terms of dollar size, but they
Phaneesh Murthy
iGate Corporation
Nasdaq-listed iGate Corp may have
just the man Satyam needs right
now in CEO Phaneesh Murthy,
who is largely credited with
setting up Infosys Technologies’
North American operations in the
1990s. But, among the four known
contenders, iGate’s resources
are the leanest. It reported a
net income of $29.3 million, on
revenues of $218.8 million, for the
fiscal year ended December 2008
and employs 5,800 people. Murthy
has been quoted in news reports
as saying the company will team
up with a private equity investor to
finance the acquisition.
OutlookBusiness > April 4, 2009 29
FEATURE SATYAM COMPUTER
are marquee clients. Their loss may affect
the prestige of the client roster more than
the numbers themselves,” says a market
analyst in Mumbai.
Lingering Haze
The crux of the problem lies in the con-
tinuing ambiguity around the company’s
true value. Its books are yet to be re-stated
after promoter and Founder B Ramalinga
Raju confessed to fudging accounts worth
Rs 7,800 crore on January 7. There is still no
clarity on how many of the 600-odd stated
customers will actually show on its roster
when the company closes its books for this
fiscal. Industry analysts say that even the
$250 million worth of new contracts that
the company claimed to have won in the
third quarter ended December 2008 are
suspect. “These contracts may have been
acquired earlier, but not announced,” says
an equity analyst based in Mumbai.
Such factors, say analysts and industry
sources, may have contributed to keep seri-
ous bidders out of the race. Even Big Blue
IBM, which, a few years ago, was speculated
to be making a hostile takeover play for Sa-
tyam, has been conspicuously absent from
the bidding process. “It’s easier and cheaper
for an IBM to move customers and key
people to its own facilities rather than tak-
ing the risk of buying the whole company.
In any case, they don’t have much faith in
the top management” says the consultant
with the European advisory firm. None of
the much-speculated Indian IT services
contenders, chiefly TCS and Cognizant
Technology Solutions, have shown an iota
of interest either. “The legal liabilities and
complications of this deal alone make it un-
viable,” a source at Cognizant told Outlook
Business. While the board has suggested
that the five to eight bidders who have sub-
mitted EoIs include a couple of big-ticket
Employee attrition is more real now than ever
before. Many top executives based in the US for
business development are in the job market
private equity firms, the response to the
deal has been lukewarm in Mumbai’s pri-
vate equity circles. “The company’s current
financial situation is a black box. There is
still a question on whether the investment
can be turned around to make decent re-
turns in three to five years,” says the head
of bank-backed PE firm in Mumbai.
Panic Sets In
These reasons give Satyam’s already nerv-
30 OutlookBusiness > April 4, 2009
Customer
Speak
United Nations:
Suspended Satyam
from its list of ven-
dors in January and
is now said to be in
discussions to termi-
nate services.
State Farm Insurance: In mid-Janu-
ary, the Chicago-headquartered
insurer was the first customer to an-
nounce the termination of
its contract with Satyam. Analysts
put the size of the contract
at $50 million.
Nissan North America: The auto
major told Outlook Business
that the “quality” of work with
Satyam remains unaffected.
But the copmany is speculated
to be moving part of its work to
other vendors here.
ous and worried customers enough cause
to jump ship. Going by the buzz within the
company’s ranks at its Hyderabad head-
quarters, several customers may not want
to wait until the exercise of finding a buyer
is completed. “Many of our delivery heads
are in active discussions with customers
to move projects to other vendors along
with the delivery team,” says a mid-level
manager engaged with one of Satyam’s
pharma contracts.
Indeed, the risk of employee attrition is
more real now than ever before. Many of the
company’s senior executives based in the
US for business development are in the job
market. However, that’s not the big worry
for Satyam, which has never been known
for exceptional front-end capabilities. “The
company’s strength has always been its off-
shore delivery capability, and that is what
CIGNA: Analysts say that a back-up
transition is already in play, but the
Philadelphia-headquartered com-
pany told Outlook Business that it is
still watching the situation.
SanDisk: In a February SEC filing,
California-headquartered storage
devices major SanDisk admitted that
Satyam’s financial difficulties have
resulted in “project delays and loss
of productivity”. The filing goes on
to state that if Satyam were to lose
key employees or declare bankrupt-
cy, SanDisk “would have to engage
a new integrator, which would likely
result in significant delays in our im-
plementation and additional cost”.
GlaxoSmithKline:
Industry sources
say that Cognizant
Technology Solu-
tions, which has
offshore delivery
headquarters in
Hyderabad, has
been approached by the London-
based pharma major to take over its
Satyam contract.
competitors are targeting,” says a consul-
tant with another US-based outsourcing
advisory firm. Sources in the company say
that in the last three to four weeks, panic
has set in and delivery heads, particularly
in the telecom and SAP practices, have
started firming up plans to move on. “In
the next few weeks, I expect several 15-20-
member delivery teams to start moving
out,” says the consultant.
There are some who believe that Satyam
still has a fair chance at getting its act to-
gether. “If you look at the number of clients
who are speculated to be leaving Satyam,
it’s less than a dozen. Given that Satyam
had over 600 clients at last count, that’s
miniscule. A lot depends on the credibility
of the new buyer and how effectively that
buyer communicates to the marketplace,”
says Diptarup Chakraborti, Principal Re-
search analyst, Gartner.
As the bidding process gathers steam—
the registered bidders will have to show
proof of cash worth Rs 1,500 crore on
March 20—Satyam’s customers can only
hope that the credibility and profile of the
bidders will improve. That is easier said
than done. <
FEATURE AVIATION

SpiceJet is talking
of acquiring another
player. Given the
airline industry’s
sorry marital record,
that is worrying

On The Wings Of
An American Eag
Sudipto Dey

F
OR ALL HIS FABLED ABILITY TO BUY INTO
troubled companies, restructure and turn them around,
American investor Wilbur Ross Jr hadn’t really run an air-
line until August 2008. That was when he bought an undis-
closed equity stake in SpiceJet for $80 million. If his inex-
perience in aviation was a handicap, it didn’t show. Slowly,
but surely, Ross, Ranjeet Nabha, the India operations head of his private
equity fund, WL Ross India, and Sanjay Aggarwal, his handpicked CEO,
have begun to the turn the budget airline’s fortunes around. But just as
the airline is finding its feet, Ross is priming it for a risky leap of faith.

32 OutlookBusiness > April 4, 2009

 We will lead the next round
of consolidation by buying out
a competitor as and when an
opportunity presents itself
—Sanjay Aggarwal
CEO, SpiceJet
gle
“The LCC (low-cost carrier) space is not
big enough for five players (SpiceJet, In-
diGo, GoAir, JetLite, and Kingfisher Red).
Our investors (read Ross) believe there will
be consolidation,” says Aggarwal. “And we
will lead the consolidation by buying a com-
petitor.” This shakeout, he believes, will play
out over the next 12 to 18 months. “The
current market can take two full-service
carriers and two low-cost ones.”
Rumours of SpiceJet talking to the Wa-
dia-family-owned budget carrier GoAir
of a merger have been doing the rounds.
However, both sides are mum on the issue.
The talk, however, had the desired effect
on the SpiceJet scrip, which surged almost
10% to close at Rs 13 on March 9.
Some call it false bravado. “Indian air-
lines are past the consolidation stage,” says
M Thiagarajan, Managing Director, Para-
mount Airways. “They are in the elimina-
tion round.” A few suspect this is posturing
on SpiceJet’s part to lure more investors.
But Ross is known to take such audacious
gambles—and pull them off. His classic
approach is to buy an ailing company in
a troubled sector, turn it around, use it to
make more acquisitions, and ultimately
build a big empire with small initial in-
vestments. He did it with steel earlier this
decade. He bought a few steelmakers for
$2 billion when the US industry was strug-
gling, bundled them into one company,
International Steel Group, and sold it to
NILOTPAL BARUAH
Lakshmi Mittal for $4.5 billion in a few
years. He did something similar in the
global auto component industry when
he bought several ailing firms and turned
them around to create the International
Automotive Group. Now, it appears, he
is attempting the same in India’s aviation
sector through SpiceJet.
Against The Tide
Barely four months ago, SpiceJet had out-
standing dues of Rs 150 crore. Today, it is
getting discounts from suppliers for paying
bills on time. The airline is, in fact, confident
that it will hit the break-even mark in fiscal
year 2010. If that comes to pass, it will be a
seminal event for an industry that has been
OutlookBusiness > April 4, 2009 33
FEATURE AVIATION
plagued by losses across the board.
SpiceJet has reason to sound confident—
the LCC actually recorded a net profit (be-
fore extraordinary items) of Rs 80 lakh for
the third quarter (October to December
2008) of the current fiscal. This was largely
due to the sharp fall in the price of aviation
turbine fuel (ATF). Only a one-time charge
of Rs 18.7 crore to settle a legal dispute
with SK Modi, the original promoter of
the airline, over some pledged shares relat-
ing to the airline’s earlier avatar, ModiLuft,
marred the results. The extraordinary item
left SpiceJet with a net loss of Rs 17.9 crore
for the period.
During the same quarter, Kingfisher Air-
lines’ net loss stood at Rs 626 crore, while
Jet Airways’ net loss amounted to Rs 236
crore. Although it would not be fair to make
a comparison between the LCC and the
full-service carriers because of fundamen-
tal differences in their business models,
the difference in profitability does reflect
SpiceJet’s improving position.
A Fresh Outlook
Over the last seven months, Ross has qui-
etly gone about revamping the airline. For
a start, he took two seats on the SpiceJet
board, one for himself and the other for
Nabha. Next, he began looking for a new
CEO to head the company’s operations.
He found the man he wanted in Aggarwal.
But it wasn’t easy roping him in.
When Aggarwal was offered the top job
at SpiceJet in August 2008, airlines across
the world were reeling from the runaway
cost of ATF, which had almost doubled
over a six-month period. Fares had been
hiked, but planes were flying empty. The
industry was in a tailspin.
Moreover, SpiceJet, which was wooing
him, had closed the first half of fiscal year
2009, ended September 2008, with a whop-
ping Rs 325 crore loss. In contrast, its net
loss for the whole of the previous year was
Rs 133 crore. SpiceJet’s marketshare had
dropped to 8% in September 2008. Mean-
while, arch-rival IndiGo had taken over
the top spot in the budget segment with
a 10.3% share. Making matters worse,
SpiceJet’s dues to oil marketing compa-
nies, aircraft leasing firms and airport
operators were mounting. So, in spite
of having the right pedigree—he had
spent 16 years in the US, including
six with US Airways and five with
a private jet company—Aggarwal
hesitated at the thought of heading
a loss-making airline.
When he met Aggarwal, Ross perhaps
had an inkling of what was running through
the other’s mind. In the hours that followed,
34 OutlookBusiness > April 4, 2009
The Wilbur Ross Effect he outlined his plans for the airline. Ulti-
After Wilbur Ross landed in SpiceJet, in August, its mately, it just took one line: “We are not
losses have fallen and market share risen in the business of writing off our money,”
he told Aggarwal, who was convinced of
Net loss (Rs cr) Ross’s intentions.
0
-18.0 The new CEO found the work culture at
-50 SpiceJet very laid back. Within a few days of
-100
joining the airline in October last year, Ag-
garwal realised he was “in a company that
-150 -127.5 was safe but lethargic. It had great people to
-200 work with, and a very good brand identity,
but it needed a breath of fresh air.”
-250
Jan-Mar Oct-Dec Aggarwal says Ross gave him a simple
2008 2008 and clear-cut brief: plug cash outflow and
Market share (%) expand the business. He went about the job
14 with a missionary zeal. In keeping with the
12.4 general economic mood, existing supplier
12 contracts were reviewed and fresh contracts
signed with new terms and conditions. The
10 airline’s 2,300-odd employees, including
10.3
pilots, cabin crew, ground- and front-of-
8
fice staff, were also told not to expect any
6 increments in 2009. That alone will save
Jan Feb the carrier Rs 20-25 crore annually.
2008 2009
Source: Company website, Ministry of Civil Aviation
Today, in addition to nearing the break-
even mark, the airline has increased its mar-
ket share to 11.8 % in January and 12.6% in
February. “We will fight for market share
and there will be no compromise on our
We are not in the business bottom line,” says Aggarwal. “We are aim-
of writing off our money ing for break-even by next fiscal (FY10),”
he adds. That may happen if ATF prices
—Wilbur L Ross Jr continue to remain at current levels.
Chairman, Wilbur Ross & Company Now, even as they continue to work on
making the airline profitable, Ross and Ag-
garwal are upping the ante for others in the
budget airline space. A merger with GoAir,
however, won’t be much of a bargain given
that the latter controls barely 2.5% of the
low-cost space. Moreover, SpiceJet has sig-
nificant capital requirements and needs a
further injection of funds. Aggarwal, how-
ever, insists that the cash infusion by Ross
will last for several years. The airline’s accu-
mulated losses are pegged at Rs 850 crore
and it is still a zero-debt company.
The first round of M&A activity in
the sector, between 2005 and 2007,
achieved nothing, a fact that was crystal
clear in FY09, when the industry as
a whole was reeling under losses to
the tune of Rs 8,000 crore. In hind-
sight, analysts believe both Kingfisher
Airlines and Jet Airways would have
been on sounder financial ground
had they not taken the M&A route
to buy Air Sahara and Air Deccan,
respectively. Letting Air Deccan and
Air Sahara exit the market on their
own, they say, would have been the
smarter thing to do. Can SpiceJet
prove them wrong with an acquisi-
tion of its own? <
FEATURE PRAJ INDUSTRIES

GREEN
GAMBLE
Oil is cheap again. But Pramod Chaudhari is still
betting that ethanol, the clean fuel, will be a sound
business for the future

Rajiv Bhuva

P
RAMOD CHAUDHARI BOUGHT A SMALL
lot of about 29,000 shares of his company worth
Rs 24 lakh, on October 8, 2008. This was the first
time that India’s ethanol evangelist and the chair-
man of Praj Industries had bought his company’s
shares from the open market. To an outsider, the
timing would have seemed awfully wrong. Over the next few
weeks, oil prices slid inexorably downwards and the sheen wore
off global companies that produce ethanol “This establishes faith in the future of the
(a biofuel alternative to conventional fos- company,” says Chaudhari. The last trans-
sil fuels). Verasun Energy Corp, an $848 action recorded before this issue went to
million ethanol producer, went bankrupt. press was about 256,00 shares, at about Rs
Others, including Pacific Ethanol, which 50 a share. In all, Chaudhari had invested
has Bill Gates as a big investor, saw their Rs 21 crore in 26 transactions and bought
share prices go into a free fall. It was a time 1.75% of the company.
to sell ethanol stocks, not buy. In a season when promoters were pledg-
But Chaudhari and his family kept buy- ing their equity stakes, Chaudhari was
ing the Praj stock off the market. He would among the rare exceptions to increase his
buy at least five to six times every month. holding. It was his own, quiet way of re-
Some transactions were small—less than affirming his belief that ethanol was still
9,000 shares worth about Rs 5 lakh. Some the best hope for Praj Industries—and for
were big—almost 100,000 shares worth a cleaner, greener world.
Rs 7.7 crore. It takes a lot of faith to believe when every-
Over the past six months, oil kept sliding. body else is giving up. And it is Chaudhari’s
The bad news kept coming. The share prices unwavering belief in ethanol that could be
of ethanol companies, including Praj, kept Praj Industries’ biggest asset. Or if things
SOUMIK KAR

falling. (Pacific Ethanol went from $40 to 25 go wrong, its greatest undoing.
cents.) But Chaudhari kept buying—qui- After a four-year climb, oil prices have
etly, yet frequently and with clear resolve. dropped sharply, putting Praj Industries’

36 OutlookBusiness > April 4, 2009

 We have
established technical
feasibility of our
second-generation
ethanol technology at
a pilot scale and aim to
go commercial by 2011
—Pramod Chaudhari
Chairman, Praj Industries

OutlookBusiness > April 4, 2009 37

FEATURE PRAJ INDUSTRIES
ethanol-centric business model through a
severe test. Praj sells technology and en-
gineering services to global firms that set
up ethanol plants. Between 2003 and 2008,
rising oil prices (it shot up from $30 per
barrel to $145) propelled Praj Industries
into a high orbit. As oil became more ex-
pensive, demand for ethanol soared, gener-
ating loads of business for Praj. Its revenues
grew from Rs 98 crore to Rs 768 crore and
its market capitalisation from Rs 44 crore to
Rs 2,737 crore. It also attracted big money
from marquee investors like the Tata Group,
green capitalist Vinod Khosla and hotshot
investor Rakesh Jhunjhunwala (See box: The
Triumvirate That Is Backing Praj).
But in the past eight months, oil prices
have dipped 68%. The Praj stock has had
a hard landing, falling 77%. Its order book
dipped from Rs 950 crore in September
2008 to Rs 800 crore in December. Its US
and Brazilian subsidiaries (both big etha-
nol markets) are yet to break-even. Sev-
eral ethanol producers in the world like
Aventine Renewable Energy Holding, Pa-
cific Ethanol and Green Plains Renewable
Energy, all potential Praj customers, have
reported huge losses in recent quarters. A
few more are tottering on the brink. Faced
with a real threat of being yanked out of his
high growth orbit, Chaudhari is grappling
with a tough question: is Praj Industries’
dream run coming to an end?
Rakesh Jhunjhunwala
Holding in Praj|8.47%
Market value|Rs 72.2 cr
Gain/loss|NA
Chaudhari doesn’t think so. He believes
ethanol will still be the fuel of the future,
and is continuing funding research on new-
er and cheaper bio-sources. He has just
announced a breakthrough: the cellulosic
biomass to ethanol technology, a second-
generation process to extract ethanol from
corn cob and sugarcane bagasse, both waste
products in food production.
So far, ethanol has largely been extracted
from the main food sources, namely sug-
arcane molasses, corn and wheat. The new
technology will enable companies to pro-
duce ethanol from food waste, not food. A
team of scientists are also working on taking
the company from the second-generation
THE TRIUMVIRATE THAT
IS BACKING PRAJ
Vinod Khosla
Holding in Praj|5.95%
Market value|Rs 51.1 cr
Gain/loss|-61%
to the third in biofuels. “We are currently
working on algae (as a source for ethanol).
It will take at least four to five years to get
commercialised,” says Chaudhari. All this
research is being done at Praj Matrix, a re-
search hub in Pune, that it set up last April
with an investment of Rs 50 crore and a
head count of 50 scientists (75 now).
The Food-Fuel Paradox
The idea for the cellulosic biomass to etha-
nol technology was originally hatched in a
different economic environment. In April
2008, when Praj started work on cellulosic
ethanol, the world was gripped by a food
versus fuel debate. High oil prices were
sucking food products like sugarcane, corn
and wheat into biofuel production. This sent
food prices soaring and even threatened
to unleash a global famine, especially in
the developing world. “Even hedge funds
were very active in commodity trading,
leading to humungous price rises,” says
Shashank Inamdar, CEO and Managing
Director, Praj. The biofuel industry was
severely challenged in the furore that en-
sued. Until then, Praj had evolved its tech-
nology, moving from sugarcane molasses
as feedstock to starchy feedstock, namely
corn, wheat and cassava. But these were
all first-generation biofuels and competed
with food sources.
By the time Praj unveiled its new tech-
Tata Capital
Holding in Praj|7.32%
Market value| Rs 62.88 cr
Gain/loss|-81%
FEATURE PRAJ INDUSTRIES
nology of extracting ethanol from agri-
waste and non-food products, the food
versus fuel debate had turned on its head.
Food prices have now dropped due to a
variety of reasons. Agricultural produc-
tion has grown 23% in North America
and Europe, compared to a 20% decline
last year. “The problem now is of surplus
grains,” says Chaudhari.
The Second Generation
Nevertheless, the technology is still rel-
evant, though it is likely to go commercial
only in the next three years. Globally, com-
panies manufacturing ethanol using first-
generation technology are slowly dying.
They are being replaced by several newer
companies that are betting on second-gen-
eration celullosic ethanol, the kind Praj
has developed.
But the problem is that second-genera-
tion ethanol is still not cost-effective. It can
cost $2.5-3 a gallon—quite high compared
to ethanol from conventional food sources
($1.5-1.7 a gallon) and regular gasoline
prices of ($1.5-1.8). “Currently, on its own,
cellulosic ethanol is not cost-competitive,”
concedes Inamdar. There are other chal-
lenges too. The sourcing of agri-biomass
(corn cob, bagasse, etc) is an issue, concedes
Chaudhari. But going forward, costs will
come down.
To begin with, using waste, not foodgrains,
will help, once companies find efficient ways
to source the biomass. Second, conventional
ethanol plants can upgrade to cellulose
ethanol easily. “The plant would require
an add-on module with a relatively smaller
investment to extend the utilisation,” says
Chaudhari. Further, many ethanol plants
work for part of the year, as foodgrain pro-
duction is seasonal. An add-on second-
generation module that can use waste from
the conventional mother plant can extend
the production cycle for greater utilisa-
tion, believes Inamdar. “Ethanol plants
in India operate at 60% utilisation levels
and the 40% under-utilised capacity can
be optimised.”
Many believe second-generation ethanol
prices could come down substantially by
2012 or so. And if feedstock challenges are
overcome, ethanol production could surge,
giving companies like Praj more new busi-
ness. But that promise is still on paper. So
far, ethanol has promised more than it has
delivered. Only the naïve would rush to any
conclusions until many companies kick-off
commercial production using second-gen-
eration technologies. Among the skeptics is
Arjun Murti, Head, Global Energy Equity
Research, Goldman Sachs, the man who
had, in May 2008, famously predicted that
40 OutlookBusiness > April 4, 2009
Ripple Effect Chaudhari. Simply put, it is going to take
a while before Praj’s revenues get a boost
Praj’s fortunes have risen with oil—and from its second-generation ethanol tech-
fallen with it nology. But Chaudhari is happy to wait
Oil and keep investing. This is his big, green
gamble, and he fancies his chances.
160
More importantly, Praj has enough cash
Nymex crude ( $ per barrel)
120 to last the wait. Besides operational cash
80 flows of about Rs 100 crore a year, the
$31 company had free cash of Rs 240 crore
40
$47
(as on March 2008). “Praj is trading at an
0
Jan 2, 03 Mar 9, ‘09
attractive level given the company’s current
cash position, which translates to Rs 20
Praj per share,” Sanjay Manyal, Analyst, ICICI
Securities said in a research note released
300
in late-January.
Share price (Rs) The company is also debt-free and has
200
funded two recent projects—the expan-
100 sion of its engineering-manufacturing
Rs 3 facility in Kandla (Gujarat) and Praj Ma-
Rs 46
0
Jan 2, 03 Mar 9, ‘09 trix—with internal accruals. “We are not
Prices rebased to 100 worried about funding our current tran-
sition path,” says Inamdar.
Hunt For The Elixir The Case For Ethanol
Praj Industries has worked on three generations of
biofuel technology For governments, mainly in Western
countries, biofuels (especially ethanol) are
FIRST-GENERATION emerging as a clean and cheap fuel option.
Molasses Many of these countries have taken initia-
Conventionally, ethanol has been produced tives to promote biofuel usage. Mexico has
from molasses. Praj has also promoted sweet mandated 10% blending of bio-ethanol. The
sorghum as an alternate energy crop for European Union, in December, adopted
ethanol production
a renewable energy directive mandating
Starchy Feedstock 10% biofuels blending in all transport fuels
Praj has developed technology to by 2020. This mandate requires an addi-
manufacture ethanol from grains like corn, tional capacity of 12-14 billion gallons of
wheat and cassava bioethanol. Recently, the US advanced its
SECOND-GENERATION renewable fuels target of 11 billion gallons
Agri Biomass from 2012 to 2009.
“These measures reflect a global commit-
Praj has achieved breakthrough at pilot
scale for cellulosic ethanol. The feedstock ment towards biofuels and provides Praj
includes corn cobs, sugarcane baggase. Praj’s with many opportunities,” observes ICICI
research centre is also working on variety Securities’ Manyal. Another Mumbai-based
of grasses to be used as feedstock. The
commercial demo plant would be up by 2011 brokerage, Finquest Securities, forecasts
Praj’s revenues to grow by 10% in FY10
THIRD-GENERATION as a result of the demand from European
Algae Union and the US. Global business forms
Praj is separately working on algae as possible about 60% of Praj’s orders. “Going forward,
feedstock for biofuel. However, this could take
at least 4-5 years to get commercialised our international business proportion will
keep increasing,” says Inamdar.
The US energy bill has specifically laid out
the path for advanced biofuels production:
oil would touch $200 a barrel, when it was 21 billion gallons by 2022, of which, 16 bil-
trading at $120. “Next generation biofuels lion gallons should come from cellulosic
such as cellulosic ethanol are still years ethanol. “They (US) have a well-defined
away from commercial viability,” he had subsidy of $1.1 per gallon, which is a large
concluded in that report. Much has hap- incentive,” says Inamdar, who believes that
pened since, but doubts persist. the US and Europe would be the major
It will be a few more years before Praj market for cellulosic ethanol. “Encouraging
starts building ethanol plants (for clients) policies supplemented with financial sup-
using its new technology. “We have estab- port from government make them distinctly
lished technical feasibility at a pilot scale attractive,” Inamdar adds. For Praj, despite
and aim to go commercial by 2011,” says the weak barrel, hope still floats. <
COVER STORY PROTECTIONISM

We will restore a se
We want to stop moving factories and balance to our
abroad, and perhaps we will bring finallyending the ta
them back. If we are to give financial American corporat
assistance to the auto industry, we our jobs overseas
don’t want to see another factory being Barack Obama, President of the Un
moved to the Czech Republic
Nicolas Sarkozy, President of France, in a TV interview in February

Right now, there’s something our

citizens can do for their country: bet
on Spain, bet on our products, our
industry and our services — bet, in
short, on ourselves
Miguel Sebastian, Industry Minister of Spain

WALLED
World leaders are building barriers to protect their workers and indu
ASHISH GUPTA
n THE US STIMULUS BILL HAS A ‘BUY AMERICAN’ PROVISION IN THE
$150 billion public infrastructure projects it is launching to kick-start the econo-
my—only material made in the US should be used. However, while allowing the
27 European Union members and 12 other countries to bid for these contracts,
the bill keeps out the four BRIC (Brazil, Russia, India and China) economies.
n Turkey has increased import tariffs by 15 percentage points on goods coming
from developing countries that don’t have a free trade agreement with it.
n Malaysia has banned the hiring of foreign workers in factories, stores and res-

42 OutlookBusiness > April 4, 2009

 nse of fairness
tax codes by There are some who want to
x breaks for extinguish the flames of the crisis
ions that ship with the fuel of protectionism and still
others who want to have a boat of their
nited States, to Congress
own, a national boat
Mirek Topolánek, Prime Minister of the Czech Republic,
responding to Sarkozy in the European Parliament on February 17

Can anybody here say that they

don’t want British workers to get
jobs in our country?
Gordon Brown, Prime Minister of the United Kingdom,
in the House of Lords, in early-March

D MART
stries. Such tendencies protect little, they erode a lot—for everybody
taurants. In Britain, UK Prime Minister Gordon Brown’s slogan “British jobs
for British workers” has become a rallying cry.
n The €6 billion lifeline the French government is extending to three of its home-
grown automakers—Renault, Peugeot and Citroen—comes with the rider that
they will not move plants to other countries and use them to service home de-
mand; they will have to shut down overseas plants that are doing so.
n When Citigroup arranged an $8 billion loan for public authorities in Dubai
and Bank of America lent $7 billion to the China Construction Bank, they drew
flak from a Congressional committee. Why were they using the $200 billion US
bailout money to lend to foreign borrowers instead of domestic ones, it asked.

OutlookBusiness > April 4, 2009 43

COVER STORY PROTECTIONISM

F ROM THE MIGHTY US TO TINY ECUADOR, FROM STAUNCH

capitalists like the UK to communist regimes like China, the winds of pro-
tectionism—economic policies that provide preferential treatment to a
chosen few in the name of ‘home advantage’—are blowing across the world.
Their points of origin lie in sectors of consequence, like banking, automo-
tives, IT, steel and textiles, to name just a few. And they are grazing every
important aspect of the way the world does business—foreign trade, labour
movement, capital allocation and asset building.
They are just gusts today, but they are already putting some
of the affected sectors, businesses and individuals through the
blender. More worryingly, in a world economy that is hurtling
downhill and whose bottom can’t be seen today, these gusts have
the potential to become storms. Although governments pitch
such protectionist tendencies as home fixes for the current bout
of economic hardship, this inward-thinking strategy can backfire
and prolong the world recession.
“Protectionism is a misnomer,” says Manoj Pant, Professor,
School of International Studies, Jawaharlal Nehru University, New
Delhi. “In the long run, it protects nothing, but erodes competi-
tiveness, growth, employment and real incomes. This has never
been more true than it is now.” A tit-for-tat spiral into protection-
ism, says Pant, will not only be self-defeating, but also exacerbate
the global downturn.
Turning Inwards
“Protectionist sentiments grow
in a downturn,” says Maryscott
Greenwood, Executive Director,
Canadian American Business
Council. Governments, today,
are resorting to four types of
It leads to inefficient allocation
protectionism. Trade protec-
tionism, the first type, is the
of labour and capital, and trade
most rampant and the one with
the maximum ramifications for
distortions. An integrated world
nations. In order to breathe life means the fallout is wide and deep
into their domestic industries,
countries are raising old barri-
ers or erecting new ones against
participation by entities from
other countries.
According to a study by Elisa Gamberoni, a World Bank econo-
mist, and Richard Newfarmer, the World Bank’s special representa-
tive to the UN, between December 2008 and February 2009, gov-
ernments have proposed or enacted 78 trade-restricting measures.
Ironically, these include 17 of the G20 countries, most of which
have, over the years, championed the cause of free trade.
There are differences in the ‘economic nationalism’ strategy
followed by developing and developed nations. The developed
world has, historically, relied on subsidies, primarily in agricul-
ture. Now, they are also looking at preferential terms for domestic
industries, a case in point being the US infrastructure push and
the debate on outsourcing. Developing countries, by comparison,
have mostly relied on prohibitive tariffs and quantitative restric-
tions on imports. In 2009, Ecuador, for instance, has put quantity
restrictions on about 900 items like Peruvian shampoo, Chilean
grapes and American shoes.
The second kind of protectionism being practiced is labour
protectionism—restrictions on labour movement. With unem-
ployment rates at record highs and job losses increasing by the
day, workers and unions are fanning the flames of economic na-
tionalism, and forcing governments to act to protect their inter-
ests. In January, in the UK, British workers struck work due to a
dispute over the use of Portuguese and Italian contractors in oil
refineries, which triggered several sympathy protests.
In the US, the noise against outsourcing among workers, think
tanks and policymakers has increased. “Call this ‘xenophobia’ if
you will, but the pain is real,” says Les French, President of Wash-
Tech, the technology workers’ union in the US. “Opposition to
both outsourcing and guest-worker programmes grows in pro-
portion to the pain felt by those losing their jobs and seeing their
replacements come from abroad.”
Such outpourings are now having an impact. In January, Ma-
laysia banned the hiring of foreign workers in factories, stores
and restaurants. In the US, soon
after Microsoft announced plans
to axe 5,000 jobs, US Senator
Charles Grassley, a long-time
critic of the H-1B programme,
demanded that the company give
priority to Americans over H-1B
workers in retention.
The US stimulus bill, in fact,
places restrictions on hiring of
foreign workers by financial
entities being bailed out by the
government. Says Matthew No-
lan, Partner, Arent Fox, a US law
firm: “They can’t apply for visas
for highly skilled immigrant workers.” Recently, Bank of Ameri-
ca, which has already received $45 billion from the government
Troubled Assets Relief Programme (TARP), withdrew job offers
to foreign MBA graduates.
Mostly under directives from their saviour-governments, finan-
cial entities that are in trouble are also practicing the third form
of protectionism: capital protectionism. The US, UK, Germany,
France, Greece and Denmark governments have told the banks
they are hand-holding to lend their scarce capital to domestic
companies and households, rather than to foreign ones. “Govern-
ments are influencing banks’ commercial decisions and distorting
credit allocation to sectors that they might consider politically
important,” says Arpitha Bykere, Lead Analyst, RGE Monitor for
South and South-East Asia, US and International Trade.
Similarly, the French government has promised to provide €5
billion to French banks on the condition that they lend mostly
to cash-strapped airlines that might cancel, or reconsider, orders

44 OutlookBusiness > April 4, 2009

Disunited Colours Of Protectionism
Since December, many countries have changed policy or made statements of intent that restrict, even cut
off, access for the outside world. They cover four major areas and their impact is sweeping.
ASSETS
FRANCE
Promised €5 billion to
French banks on the condi-
tion they lend mostly to cash-
strapped airlines that might
cancel orders with European
aircraft manufacturer Airbus.
A €6 billion bailout pack-
age for carmakers Renault,
Peugeot and Citroen has
two riders: they should not
lay off workers at home and
they should not set up plants
in other countries to service
home demand. The coun-
try also created a $25 billion
fund in November to “protect
strategic companies from for-
eign predators”
TRADE
ARGENTINA
Increased restrictions
on imports of items such as
Brazilian and Chinese cutlery,
and Thai air-conditioners; im-
posed licensing restrictions on
auto parts, textiles and televi-
sions, among others
BRAZIL
Increased import duty
on wine, leather and leather
products, dairy products,
wooden furniture, peaches
and textiles
CHINA
Banned imports of
Irish pork, Belgian chocolate,
Italian Brandy, British sauce,
Dutch eggs and Spanish dairy
products; altered value-added
tax rebate system to promote
exports; imposed restrictions
on raw material exports; can-
celled export licence require-
ments; increased rebate on
duty drawback for exporters
ECUADOR
Increased import du-
ties on 940 products
EUROPEAN UNION
Imposed duties on
preserved fruits from China,
as well as on welded tubes
and pipes from Russia, Bela-
rus and China
INDIA
Cut excise duty across
the board; hiked import du-
ties and placed quantitative
restrictions on steel products;
imposed 20% import duty on
palm oil; lifted ban on Chi-
nese toys, but with restric-
tions; raised rebate on duty
drawback for exporters
INDONESIA
Imposed licensing re-
LIFT OFF: French banks have been asked to lend money to
airlines that have placed orders with Airbus
strictions on imports of about
500 items; placed limits on
imports of garments, electron-
ics, toys and food; cut VAT
KAZAKHSTAN
Raised import duties
on certain goods from China
RUSSIA
Hiked import tariff on
cars to 35%; increased import
duties on some metal prod-
ucts, farm machinery, food
products and rubber products;
cut limit on poultry imports
SPAIN
Industry Minis-
ter Miguel Sebastian has
launched a ‘Made in Spain’
drive, exhorting Spaniards to
buy Spanish clothes and take
ski holidays in Sierra Nevada,
Spain, instead of the Alps
TURKEY
Increased duties by
15% on imports from devel-
oping countries that don’t
have a free trade agreement
with it
UNITED STATES
Made the $150 bil-
lion spend on public works
conditional to use of material
made in the US or 39 other
countries that have a free
trade agreement or an agree-
REUTERS
ment on government procure-
ment with it. Excluded China,
Russia, India and Brazil,
among others
CAPITAL
ARGENTINA, ICELAND,
INDONESIA, UKRAINE
Imposed restrictions on
availability of foreign
exchange
CHINA
Directed banks to
lend more to export-oriented
firms, and to small- and
medium-sized companies
OutlookBusiness > April 4, 2009
RUSSIA
Imposed restrictions
on availability of foreign
exchange. Its central bank has
also advised Russian banks
to channel credit to domestic
producers if they want to
access central bank funds
UNITED KINGDOM
Royal Bank of
Scotland, the beneficiary of
a big government bailout,
has said it will cut back or
withdraw from 36 of the 54
countries it operates in. The
government has also asked
the bank to give priority in
lending to domestic entities
UNITED STATES
Asked the 300-odd
banks that are receiving
government largesse to give
priority in lending to domestic
companies and individuals
UZBEKISTAN
Imposed limits on
imports of consumer goods by
placing restrictions on access
to foreign exchange
LABOUR
KAZAKHSTAN
Halved quota for
foreign labour
MALAYSIA
Banned hiring of
foreign workers in factories,
stores and restaurants
UNITED STATES
Imposed stringent
conditions on hiring of
H1-B workers by financial
entities benefiting from the
government bailout; has
asked companies to retrench
foreign workers before locals
UNITED KINGDOM
Wants “British jobs
for British workers”
45
COVER STORY PROTECTIONISM
A tit-for-tat spiral into
protectionism will not only be
self-defeating, but also prolong
the global downturn
with European aeroplane manufacturer Airbus. “We could well
be a seeing a situation when private banks increasingly become
state-owned and state-directed,” says an investment banker.
France is the most active on the fourth type of protectionism:
asset protectionism—preventing assets from going out of the
country. Besides offering a conditional bailout to French auto
companies, and ensuring business for Airbus, President Nicolas
Sarkozy’s government has also created a $25 billion sovereign
wealth fund in November 2008 to “protect strategic companies
from foreign predators”.
The India Impact
With the recession in the world economy deepening, the Inter-
national Monetary Fund (IMF) expects global trade to fall by
2.8% in 2009—the first contraction in almost 30 years. As coun-
tries see a serious drop in their national growth and exports,
elected representatives are being forced to take the ‘economic
nationalism’ route to pacify domestic constituents. Although
these measures comply with the rules of the World Trade Or-
ganisation (WTO)—the body that oversees world trade—they
discriminate against foreign companies, workers and investors.
“They use legitimate discretionary powers at their disposal to
keep out foreign competition,” says Pradeep S Mehta, Secretary
46 OutlookBusiness > April 4, 2009
LABOUR PAINS: In February,
British workers struck work
over the use of foreign labour
at a French-owned oil refinery
in eastern England
REUTERS
General, Consumer Unity and Trust, a think-tank that looks at
WTO and other regulatory issues.
In terms of money at stake, the US is proving to be the most
protectionist. It doesn’t want to proceed with the already-signed
free trade agreements (FTAs) with Panama, Colombia and South
Korea. Forget about new FTAs, it is talking about renegotiating
NAFTA. All this on top of the fiscal stimulus bill’s terms and
conditions. Says Greenwood of the Canadian American Busi-
ness Council: “Such provisions will have an adverse impact on
both the US and its trading partners, like Canada. In the long
run, it will deplete the competitive advantage of the US.” Over
a period of time, protectionist policies result in inefficient allo-
cation of labour and capital, and create trade distortions. And
given that the world is more integrated than ever, its fallout will
also be wider and deeper.
Today, goods are no longer made in just one country. The produc-
tion chain has many more links and winds itself through several
countries. If, say, the US stops imports of laptops assembled in
China, it not only throws China’s laptop assemblers into disarray,
it also affects thousands of component-suppliers in countries like
Taiwan, South Korea and Vietnam.
A reduction in Chinese exports to the US hurts India too. China
is forced to cut output, which means it buys fewer inputs (mostly
commodities) from countries like India. In January to October
2008, India’s exports to China fell to $345 million—a drop of 65%
over the 2007 figure of $1 billion.
In 2009, because of falling demand and protectionist measures,
India’s total exports are expected to contract in dollar terms.
Admits A Sakthivel, President, Federation of Indian Export Or-
ganisation (FIEO): “We will be lucky to cross last year’s export
target of $163 billion. Most sectors have been registering nega-
tive growth since October.”
India has more to lose than gain in a protectionist world. The
WTO Doha negotiations will drag on for a few more years. And
India’s efforts at signing free trade agreements—the fast road to
increasing trade—with countries such as Korea, Japan and the
COVER STORY PROTECTIONISM

EU will be pushed back, as countries will now have a large wish-
list of items on which they wouldn’t like to cut tariffs.
Shrinking trade means loss of business for Indian exporters.
In an uncertain demand environment, even exporters who are
in business will find it more difficult to get a guarantee for a let-
ter of credit. Compounding the problem is the acute shortage of
global funds, which not only hurts financing of trade, but also
domestic capital needs.
Foreign capital played a big role in taking India’s GDP growth to
8-9%. If foreign banks, directed by nationalist urges rather than
economic logic, choke external supply, it will affect the growth
plans of Indian companies. With
more domestic demand compet-
ing for less capital, it will exert
upward pressure on domestic
interest rates.
Even in labour, India has much
17 of the G20 countries, champions
to lose. It is one of the largest
suppliers of human capital to
of free trade, have proposed or
the world, which serves its own
interest, as it may not be able to
enacted trade-restricting measures
absorb everyone at home. Mi-
grants are also a source of capi-
between December and February
tal. Be it software engineers in
the US or construction workers
in the UAE, they earn a multiple
of what they would earn in India, and remit it. Economists Arpitha
Bykere and Rachel Ziemba, in a paper titled The Re-emergence
of Global Protectionism: A Newer Version of Smoot-Hawley, say:
“There are reports the UAE has instituted policies to protect jobs of
its nationals. This will reduce remittance flows to other countries
in the Middle East and North Africa and to South Asia.”
Other countries will also see a similar interplay between protec-
tionism and their economies. Say Bykere and Ziemba: “As Russia
contracts, Central Asians working in Russia are losing jobs and are
facing greater pressure from nationalist groups. With remittances
as high as 30-50% of GDP in many Central Asian countries, the
reduction in remittances will exacerbate the contraction.”
Tit For Tat
If countries start to retaliate, it can become more sweeping. Jag-
dish Bhagwati, Professor, Economics and Law, Columbia Uni-
versity, argues that India and China can raise tariffs on items that
are of export interest to the US. It’s a realistic possibility, as tariffs
on most commodities in both countries are far lower than their
respective WTO ceilings.
They can also retaliate in other ways to hurt the US. For example,
they can shift their commercial
aeroplane purchases from Boe-
ing (of the US) to Airbus (of
Europe), and of nuclear reactors
from American to French firms.
That will, probably, raise cries of
further retaliation by some US
senators. Says Bhagwati: “The
notion that the US will continue
to be a player and a referee no
longer works. So, we would have
a Hobbesian chaos.”
In the auto industry, for ex-
ample, after the US govern-
ment bailed out General Mo-
tors, Chrysler and Ford, several other West European countries
like Sweden, France, Germany, Italy and Spain did the same for
carmakers in their countries. “When the Americans put up $30
billion to support their auto industry, you cannot accuse any coun-
try of being protectionist,” Sarkozy remarked. In Europe, though,
the support being provided by Western European countries to
their auto companies could pose an uncomfortable question
to the single-market ideology of the EU. France and the Czech
Republic have been trading barbs on the location of automobile
plants, and any moves on either side can create challenges.

LIFELINES: The
French struck
work in Lyon in
January to force the
government to do
more to protect jobs
and wages
REUTERS

50 OutlookBusiness > April 4, 2009

COVER STORY PROTECTIONISM
REUTERS
ALIEN TREATMENT: Demonstrators protest outside the
Malaysian embassy in Jakarta against abuses suffered by
Indonesian migrant workers in Malaysia
In a recent paper titled Buy American: Bad for Jobs, Worse for
Republicans, economists Gary Clyde Hufbauer and Jeffrey J Schott
from the Peterson Institute of International Economics, Wash-
ington, show the extent of damage that protectionism can cause
the US because of its $150 billion diktat on public infrastructure.
According to the authors, the ‘buy American’ provision will add
500,000 tonnes to US steel production. Because steel is a capital-
intensive industry, it will add only 1,000 jobs.
Now, say, the top 12 trading partners retaliate, and decide to
cut off US participation in their government programmes. The
authors extrapolated that the value of US participation in public
projects of other countries was $104 billion. At least a small share
of these exports was at risk of “echo or retaliation measures.” Even
if 1% of those exports were lost, they estimate, the US would lose
6,500 jobs; if it is 10%, as many as 65,000 jobs could vanish.
Come Undone
It’s something the US experienced the last time it went into a
protectionist funk, of far greater import, in the wake of the great
market crash of 1929. The Smoot-Hawley Tariff Act, passed in
1930, raised import tariffs on about 20,000 items to record levels.
Many countries retaliated and increased tariffs on US imports.
All this had a catastrophic effect on trade and employment. In
1933, trade of most countries fell 50-80% from 1930 levels. US
imports plunged 66%, exports 61% and GDP 50%; unemploy-
52 OutlookBusiness > April 4, 2009
The ‘buy American’ clause will
create 1,000 steel jobs. But if the
US’ trading partners retaliate, it
could lose 6,500-65,000 jobs
ment rose from 3% in 1929 to 25% in 1933.
Today, the contours of the world economy and the rules that
govern it are very different. Economists Bykere and Ziemba, in
their paper, say: “The probability of these measures becoming
significant enough to lead to a trade war like in the 1930s might
be low given that countries understand that retaliation effects will
be counter-productive for domestic growth and jobs.” There’s also
the WTO to go to, which wasn’t the case in the 1930s.
However, protectionism can set the world economy back by
many years. It was after the end of the Cold War in the late-1980s
that globalisation came into its own and enabled developing
economies to express their strengths and flourish. Trade between
countries got organised under the aegis of various trade blocs
and the WTO. Movement of goods and services, and labour and
capital, got freed. This increased asset efficiency made goods and
services cheaper, allowed for innovation, lifted world output as a
whole and spawned possibilities.
South-east Asian nations like South Korea, Thailand and Taiwan,
and Central American countries like Mexico, took their economies
to another level on this export-driven growth. Even developed
countries saw new markets open up for them. They were the ones
who negotiated, pressured and arm-twisted developing economies
for greater access. Now, ironically, they lead the barrier brigade,
while developing ones, especially the ones that are coming into
their own, are crying for access. “Protectionism can seem benefi-
cial at first...But in the long-term, it wounds countries, above all,
poor countries, which need to sell their goods to rich countries,”
Brazilian President Luiz Inacio Lula da Silva said in an interview
with the Wall Street Journal earlier this month.
If this march down the road of protectionism gathers pace, it will
tug at these linkages that were established or getting established
in line with an economic model that had a reasonable degree of
global consensus, and snap them. They will be joined together
again, but if efficiency and competitiveness are not guiding fac-
tors, goods, labour and capital won’t find their way to where they
are wanted or where they will be valued fairly.
The coming years are going to be a tussle between protectionist
forces and votaries of free trade. Although the protectionist noises
are coming from the highest quarters, there is also some recog-
nition of the flip side of this phenomenon. Also, at some point,
the free trade supporters will exert pressure to counter shrinking
trade. Take Obama’s declaration that he will stop tax credits to US
companies that outsource jobs. Says Ron Hira, Assistant Profes-
sor of Public Policy at Rochester Institute of Technology, and an
expert on outsourcing: “MNCs hold a lot of power in Washing-
ton. They will fight any attempt to eliminate these breaks.” (Turn
to Page 54 for full interview with Hira.) If protectionism still wins
the day, the world will be the loser. <
With TV Mahalingam in Mumbai and Sharmistha
Chakraborty in Washington DC
COVER STORY PROTECTIONISM

The H-1B programme has

become a way to replace
American workers
Dr Ron Hira is an assistant professor of public policy at Rochester
Institute of Technology, New York, where he specialises in engineering
workforce issues and technology policy. Known for his opposition to US
outsourcing laws, Hira has written a book and testified before the US Congress
twice on the issue. He explains his stand to TV Mahalingam
What are your main objections to the H-1B programme? President Obama recently said he will cut tax breaks to compa-
The H-1B programme is meant to supplement the US workforce nies that outsource. What tax breaks are they getting now?
where there are specific shortages. But some loopholes in the law The tax break has to do with a deferment that US-based MNCs
helped companies use it to pay below-market wages and force get on profits from their foreign operations. Companies don’t
US workers to train their replacements. Instead of complement- want to repatriate the money and pay the 35% corporate in-
ing the US workforce, employers used the programme to replace come tax. So, they keep the profit overseas and reinvest there.
American workers. The upshot of this is that tax laws are creating an incentive to
keep profits overseas (investing in operations and creating jobs
The recent bailout package has restricted those who receive re- there) rather than bringing them back to the US, to be invested
lief from hiring H-1B visa holders. Will this move reduce H-1B- and creating jobs here.
worker use by American firms, especially on Wall Street? Think about how this contrasts with India’s tax holidays for BPO
The Troubled Assets Relief Programme (TARP) legislation will and IT exports and the software technology parks. To say that the
have a small impact on the abuse of H-1B by banks. Many of US policy is a basket case is an understatement. But it also shows
the banks have policies in place where they force US workers to the power of US MNCs to drive policies that favour them, even
train foreign replacements. This trend sometimes results in trag- at the expense of the American economy and workers.
edy, as in the case of Kevin Flanagan, who was forced by Bank of
America to train his foreign replacement. He was so distraught Will repealing tax breaks help save American jobs?
that he committed suicide. The H-1B programme has been over- It will be politically difficult for Obama to get this fix through.
subscribed for the past few years. Demand has been fuelled by US MNCs are very powerful politically, and there isn’t any or-
the fact that H-1B workers are cheaper. It has nothing to do with ganised and influential constituency that wants to fix it. Instead,
the supply or demand in the US labour market. it adversely affects most Americans, not one group. Take Intel
Chairman Craig Barrett’s comments after a recent visit to Wash-
Research by organisations such as National Foundation for Amer- ington. He characterised the proposal to fix the loophole as a “tax
ican Policy (NFAP) suggests that five jobs are created for every increase” and vowed to fight any efforts to reform what is clearly
H-1B worker who comes to the US. Indian IT industry bodies like in the interests of America. So, you’ve got the top CEOs of the
Nasscom use this statistic to defend H-1B in its current form... top American companies arguing for tax incentives to offshore
This is an absurd assertion, and anyone making it should be jobs. Even if Obama got this ‘fix’ through, it would have little ef-
laughed out of the room. First, the study didn’t say what you’re fect on outsourcing. He is using this for political points, not for
claiming it did. It found a correlation between H-1B hires and serious policymaking.
worldwide increases in jobs in a cherry-picked sample of firms.
The study has more flaws. You have said American engineers must unite to save jobs. Why
For example, the sample purposely excludes the top H-1B em- should an educated, highly-qualified workforce organise itself?
ployers, and the number of H-1Bs is compared to global, not US, This is one of the major issues American white-collar workers are
employment. Another way to interpret the findings, probably facing. Except for a few groups like doctors, lawyers and nurses,
more accurately, is to say H-1Bs gobbled up one out of every six workers have no representation in politics. We need some or-
new jobs created by these companies. ganisational innovations to address this issue. Most white-collar

54 OutlookBusiness > April 4, 2009


workers probably won’t join a traditional union. So, there needs
to be some new organisational model.
How many tech jobs have been lost in the past US in the couple
of months? How many more job cuts do you see coming in?
It’s hard to get a real-time, aggregate picture. Major technology
companies have announced major job cuts. The semiconductor
and auto sectors have been hit hard. Sectors that are huge consum-
ers of technology like banking, insurance, auto and infrastructure
are reducing spending. The other negative is the probable cuts in
defence spending (for example, technology conglomerate United
Technologies recently said it would slash about 12,000 jobs).
Obama’s easing up on the war effort will adversely affect Ameri-
can engineers. War is good for the engineering labour market.
On the positive side, some of the government stimulus spending
will help engineers in infrastructure, alternative energy, healthcare
and IT. The net effect is that engineering unemployment will rise
in the near term, and the job market for them will remain poor
for the next 18 months at least.
IT services firms like Infosys, IBM and TCS say that the cost sav-
ings they provide through outsourcing, especially offshoring, are
vital for the survival of their American clients, which, in turn, will
H-1B demand is fuelled
by the fact that these
workers are cheaper.
It has nothing to with
US supply or demand
protect American jobs...
Of course, they will say that, as it serves their
purpose. Americans have to understand that
companies, whether they are US-based or for-
eign, will promote their own interests. IBM’s
CEO Sam Palmisano doesn’t get paid based on
how many American employees IBM employs.
He doesn’t care if the policies he advocates
are bad for American workers, including his
own, or for the US economy. What’s good for
IBM is not necessarily good for America, and
vice versa. IBM will lobby for policies that are
good for IBM’s executives, even if they are bad
for the American economy. Further, compa-
nies have a disproportionate influence over the political process,
which is why we have dysfunctional policies like H-1B and tax
breaks for shipping jobs overseas. These are good for companies,
but bad for the US economy.
But experts say that outsourcing will benefit the US economy...
In 2004, Nobel Laureate Paul Samuelson explained what economic
theory can and cannot tell us about outsourcing. He showed that
there are scenarios where outsourcing can make America poorer.
Samuelson wrote the article to correct the “polemical untruths”
being perpetrated by economists like Jagdish Bhagwati.
Further, even the strongest advocates of outsourcing have stat-
ed it will be bad for American workers. For example, a study by
McKinsey’s Diana Farrell shows the US gets $1.12 back for each
$1 offshored. The study—a lobbying document, not a serious
analysis—also found that American workers get 72 cents of that
$1 before offshoring, and only 45 cents of the $1.12 after outsourc-
ing begins. So, even the biggest proponents of outsourcing find
that American workers lose from outsourcing. It’s also impor-
tant to note that Farrell was appointed by Obama to the National
Economic Council—the highest organisation within the White
House providing economic advice. This is a clear indication that
Obama doesn’t take outsourcing seriously. <
OutlookBusiness > April 4, 2009 55
FEATURE EICHER MOTORS

Anurag Prasad

C
’MON GUYS, LET’S WRAP THIS UP. I GOT
to rush. It’s my wife’s birthday,” he pleads, ig-
noring the pleas of our photographer to do
something on or with or around his retro bike.
And so, at 5.30 pm on a cool March evening,
about five minutes into the photo shoot, Sid-
dhartha Lal—the 35-year-
old Chief Executive Officer

Lal And The of Eicher Motors—zips up

his Enfield jacket, checks his
leather gloves, straps his hel-

Art Of Auto met, joins the rush hour and

disappears into the Delhi sun-
set for a birthday. As the sput-
ter of his turquoise blue 1955

Maintenance
Siddhartha Lal earned his spurs turning
Bullet Classic fades away, three
thoughts cross the mind.

around Royal Enfield. He’s now on a bigger

mission: retooling group flagship Eicher Motors
 One, heck, this shy, unassuming boyish-
looking man in denims and leather heads Lal wants to transform were in Royal Enfield.

Truckin’ With Volvo

a Rs 2,500 crore company and is trying to
take it places. Two, he loves his bike. Three,
he has a mind of his own. He goes about
doing business in an understated way, but
he sure means business.
The first time the world noticed he meant
business was in 2002-03, when it was re-
vealed that he had turned around Royal
Enfield—makers of the iconic 350 cc Bullet
motorcycles. That story goes back to 2000,
to an Eicher Motors’ management meeting,
where the people assembled were debating
what to do with the gasping Royal Enfield
Motorcycles division. Other motorcycle
manufacturers were pressing on the throt-
tle, the Bullet brand was in decline, the
division was making losses, and Eicher
couldn’t justify the resources assigned to
it. The board even talked sale.
Then, Lal, all of 27 years then and only in
the second year of his second stint at Eicher,
talked. From his heart and from his gut, for
the bike and the brand that were constant
companions in his formative years, includ-
ing on a voyage of discovery and adventure
in Europe in 1996-97. “I asked the board
for 24 months to make it profitable,” says
Lal, and took over as CEO of Royal Enfield
in March 2001. He kept his word—within
Eicher Motors from a
middling commercial
vehicles player to an
industry leader
two years, the division returned to profits.
In the eight years since Lal took over, Royal
Enfield has undergone a reinvention, with
a more dynamic management approach,
new models and fresh appeal.
Now, Lal is putting on the gloves for an-
other challenge. He is looking to transform
the group flagship, Eicher Motors, whose
reins he took over in May 2006, from a
commercial vehicles (CVs) player of mod-
erate significance to an industry leader. It’s
a challenge of a different kind. While Royal
Enfield was primarily an internal fight to
discipline oneself, this one is about wrest-
ing market share from the two giants of
the Indian CV market, Tata Motors and
Ashok Leyland, that too at a time when
demand is seeing a severe pullback and
there is little appetite for new offerings.
And, in this one, the stakes for the Eicher
Group are about 10 times higher than they
This story also goes back a few years, to
2004, when Lal took over as Chief Operat-
ing Officer of Eicher Motors, and the team
there was taking stock of the business. “We
said that we are comfortable today, but this
doesn’t mean it will always be like that,”
he recalls. “We were not a market leader,
or even among the leaders, in any of our
businesses.” That had to change.
Rather than be mediocre and mid-sized in
two businesses, the group decided to make
one business number one in the long-term,
at least start growing faster than the market.
In the toss-up between tractors and CVs,
its two main businesses then, CVs got the
vote. Eicher didn’t have a credible story to
sell in tractors, where it was number five.
December
2007 July 2008
Formalises joint Volvo Eicher
venture between Commercial
Eicher Motors and Vehicles
Volvo (VECV)
becomes
operational

January 2004 May 2006

Such A Long Lal takes over as
Eicher Motors’ Chief
Lal takes over
as CEO of

Journey Operating Officer Eicher Motors

In his 14 years at Eicher 2001

Lal takes over as Head of
Motors, Siddhartha Lal has Marketing and Product
gone from management Development Division of Royal
trainee to turnaround manager Enfield in January; becomes
to young leader CEO in March

1995 2000
Siddhartha Lal Eicher board
joins Royal Enfield December weighs options on
as management 1997 Royal Enfield; Lal Rs 608 cr
trainee; stays for Father Vikram asks for two years
two years before Lal steps down to ride it back into
leaving to pursue as Eicher profits 2005
Motors CEO.
2003
engineering Royal Enfield Eicher
studies abroad Professionals Motors sells
back in black
take over its tractors
division to
TAFE for Rs
310 crore

1999
Rs 108 cr Son returns, joins the
marketing division of
GRAPH SHOWS MARKET CAP IN RS CR
PHOTOGRAPH AND IMAGING BY SAPTARSHI BISWAS; GRAPHIC BY MANISH MARWAH Eicher Tractors SOURCE: COMPANY REPORTS, CMIE PROWESS
FEATURE EICHER MOTORS
For A Greater Share Of The Pie
With an overall share of 4.5% in the commercial vehicles segment, Eicher is dwarfed by the two biggies, Tata Motors and Ashok
Leyland. However, with the Volvo JV, it hopes to make up ground
Light commercial vehicles (LCVs)
Vehicle size: 3.5-7.5 tonnes
Market size: 203,000 units
Mahindra &
Mahindra
24.9
Others Eicher Motors
13.5 2.2
Ashok Leyland
Tata Motors
58.9 0.5
Market
share (%)
Market size is sales for 2008-09 (April to February)
“The size of the CV market and profitability
is much more than tractors,” says Lal. In
June 2005, Eicher sold its tractors division
to TAFE for Rs 310 crore.
The other thing Eicher figured out was
that it had to look beyond its existing seg-
ments of light commercial vehicles (LCVs)
and medium commercial vehicles (MCVs).
“The LCV and MCV segments were too
small for us to survive in the long-term,”
says Lal. “The larger players, with their
width, could cross-subsidise and squeeze
us out of the market. We were at risk.” So,
Eicher decided to get into HCVs.
HCVs should have been a logical exten-
sion for Eicher, but it struggled to do it
alone. The company launched a few HCV
models in 2006, but those came and went,
and hardly anyone noticed. The realisation
that it will be difficult to develop competi-
tive trucks, that too while putting a large
sum of money at stake, Eicher readied itself
for a partnership.
It found suitors, who liked what Eich-
er brought to the table in terms of reach
and reputation. These included Volvo and
Mercedes. After several rounds of negotia-
tions over two years, Eicher threw in its lot
with Volvo, for a 50:50 joint venture. “They
liked our compact and cost-effective pro-
duction line,” says S Sandilya, Chairman,
Eicher Group.
In order to best tap the potential of the
new venture and ensure Eicher Motors’
operational continuity, Volvo and Eicher
transferred their respective Indian CV op-
erations to a new company, VE Commercial
Vehicles (VECV). So, in May 2008, Eicher
58 OutlookBusiness > April 4, 2009
Medium commercial vehicles (MCVs)
Vehicle size: 7.5-35.2 tonnes
Market size: 175,000 units
Others
Tata Motors 4.4
61.2
Eicher Motors
7.4
Ashok Leyland
26.9
Market
share (%)
With better Eicher and
Volvo products, Lal
hopes to build a niche
in HCVs and increase
his 4.5% market share
transferred its entire truck and bus opera-
tions, and its components and engineering
design services divisions, to VECV. Volvo
did the same with its existing Indian truck
sales and distribution operations.
Volvo also invested Rs 1,082 crore in
VECV for a 45.6% stake. The balance 54.4%
is held by Eicher Motors. Volvo also bought
8.1% in Eicher Motors, which meant its ef-
fective holding in VECV was 50%. Explains
Lal: “If either had a majority shareholding,
the level of trust would not be there. They
would have hesitated in transferring tech-
nology and expertise, we would have been
conservative living in the constant fear of
being kicked out.”
The tie-up fills crucial missing links for
both players—technology and expertise
for Eicher, production at emerging-market
costs and a 300-strong sales and support
network for Volvo. The Swedish company
has identified India, China, Japan and South
Korea, as its focus growth markets in Asia,
which account for 18% of its revenues.
So far, Volvo India was selling trucks in
the 40-49 tonnes category, while Eicher
was present in the 5-40 tonnes segment.
However, Volvo is not just about 40-49
Heavy commercial vehicles (HCVs)
Vehicle size: Above 35.2 tonnes
Market size: 5,000 units
Others
15.9
Tata Motors
55.5
Eicher Motors
0.8
GRAPHIC BY KISHORE DAS
Ashok Leyland
27.5
Market
share (%)
Source: Society of Indian Automobile Manufacturers
tonners. Its range starts from 16 tonnes,
which can provide a valuable upside to
Eicher’s existing range in terms of manu-
facturing and technology inputs. Volvo
can also choose to bring in new products
in the lower tonnage segments. “Volvo
makes brilliant trucks for emerging mar-
kets, but they have not been able to meet
cost targets,” says Lal. “We need to create
business models, not just truck models for
developing markets.”
Look, Feel, Sense
For Lal, who is the Managing Director and
CEO of VECV, building business models
for developing markets has two aspects. The
first part is managing production costs. The
second part, which is central to his sales
and marketing strategy, is what he calls
“customer profitability”—how to ensure
a customer gets the best returns possible
from a truck. That’s an outreach exercise,
and involves understanding a customer’s
loads and usage patterns, and suggesting
suitable models.
Lal narrates an anecdote to make his
point. Once, in the Western Ghats, he saw
overloaded trucks labouring uphill, as their
engine power was inadequate to haul that
load. Such addition in journey time not
only adds to delivery costs, it also causes
greater wear and tear to the truck, and low-
ers the transporter’s profitability.
Lal is banking on a new range of trucks—
with better engines, greater fuel efficiency
and more spacious cabins—to give greater
value for money to transporters. In the
process, he hopes to carve out a space in the
FEATURE EICHER MOTORS
While Royal Enfield was an internal fight to discipline oneself, this one is
about wresting market share from the two commercial vehicle giants
HCV segment. Lal expects to grow faster
than the market, thus increasing his market
share in CVs from the current 4.5%.
The way he thinks about the automobiles
business, Lal draws from diverse influenc-
es—from engineering finesse to design pa-
nache, from customer psyche to cost man-
agement, and, most importantly, return on
capital. “Siddhartha doesn’t carry any bag-
gage and will even question fundamentals
if change is required,” says Sandilya, who
has spent over 30 years with the group.
Take design, which Lal emphasises on
because it shapes the first impression of a
vehicle. Trucks, he says, have to look sturdy
and strong, the technology inside comes
later. It’s something he learnt during his
stint with the tractors division, when he
travelled to rural India.
A similar thought played an important
part in turning around Royal Enfield. Back
then, one of the things dragging down Roy-
al Enfield was that it had multiple engine
platforms, but it hardly registered with
customers and only added to costs. The
company, then, decided to have just one
engine platform in two variants—350 cc for
Indian markets and 500 cc for export mar-
kets. On this base, Royal Enfield launched
new models (Thunderbird and Electra) and
started tweaking the design of the bikes,
60 OutlookBusiness > April 4, 2009
sometimes evoking extreme, but profitable,
reactions. “The Bullet faithfuls hated the
Thunderbird. The Thunderbird owners
loved the new look.”
Beyond The Slowdown
With trucks, Lal will be hoping for a more
homogenous reaction to the new products.
VECV will use the capacity in Pitham-
pur, Madhya Pradesh, of 4,000 units per
month. There won’t be any co-branding of
the products under the new arrangement.
The Eicher range of products will be rolled
out from Pithampur, whereas the Volvo
trucks will be assembled and sold through
the Eicher network.
It’s not the best of time to launch some-
thing new, more so in the CVs business,
where demand closely tracks the state of
the economy and which is seeing a serious
slump in demand. In the 11 months to Feb-
ruary, Eicher’s CV sales dropped 37% over
the corresponding period of the last finan-
cial year—more than the industry average
(21%), Tata Motors (22%) and Ashok Ley-
land (35%). Capacity utilisation is dismal.
During the same period, Eicher recorded
a capacity utilisation of 35%, way below
the 60% recorded by Ashok Leyland. Says
Lal: “Some of the companies have dumped
inventories on their dealers. We have, in
STOP: In the
current fiscal,
Eicher Motors’
capacity
utilisation has
been just 36%
fact, reduced inventories with our dealers
to give them more liquidity.”
Lal is thinking beyond this slowdown.
“Returns might not be visible in the short-
term, but we are expecting huge returns
in the long-term.” In the coming months,
there is plenty of work to be done for VECV
to reorient itself to the new arrangement
and the greater ambition. There are plans
to revamp the entire chain—procurement
of components, manufacturing, distribu-
tion, sales and service—over the next few
years. To begin with, an experienced Japa-
nese hand is working closely to increase
productivity and create more capacity at
the existing Pithampur plant. “With him
around, we can even squeeze out 6,000
units,” grins Lal, though he will have to
wait for demand to revive to make that
increase count.
Lal has earned, not inherited, his spurs in
Eicher, going to the trenches and deliver-
ing results when it mattered. His patient,
easy-going, informal, open-door, respon-
sive management style has found takers in
a group that hasn’t always moved with the
times or milked upturns. The Volvo deal
is, perhaps, its most significant gambit so
far to change that. “The pot of gold at the
end of tunnel is so large that it is worth the
shot,” says Lal. <
HOT SEAT RONNIE SCREWVALA
The centerpiece of UTV Software Communications is its motion
pictures business, bringing in about 45% of its revenues today.
As important and as high-profile this business is to the company, CEO
Ronnie Screwvala declares: “It is not our biggest driver.” That status
is now reserved for gaming and new media (Internet). With four
acquisitions in the last two years, an investment of about Rs 370 crore
and the world as its target market, UTV is getting ready to make
a splash in these two emerging businesses.
Screwvala has always held that, in terms of vision, UTV is at least five
years ahead of other Indian media companies. It’s an audacious claim
that will be tested by its gaming gambit. Ajita Shashidhar spent an
afternoon with Screwvala at his plush office in Andheri in Mumbai, and
quizzed him on his gameplan.

In gaming, India
is not our target
market, the world is
PHOTOGRAPHS BY SOUMIK KAR
Last year was great for UTV Motion Pic-
tures (the films division of UTV). Jodha
Akbar and Fashion were blockbusters.
Meanwhile, you have also been active in
the gaming and the online spaces, mak-
ing several acquisitions last year. Are you
looking at these new businesses to be ma-
jor drivers for UTV in the coming years?
Everyone looks at it from an Indian per-
spective until you have a Slumdog Million-
aire. Then, everyone wakes up to it like,
‘hallelujah, what happened!’ It was always
staring at you but nobody got it, and it took
some Oscars for everyone to get it.
Similarly, in the gaming business, it is
critical that everyone understands the size
and scale of the market here. We are in the
gaming business because we believe that it
is an automatic extension of us being in the
content business. Gaming, as an industry
worldwide, is double the size of the mo-
tion picture industry. Console gaming is a
$30 billion industry. Online gaming is also
growing very fast and people expect it to
be another $10 billion industry. Of course,
you have the mobile gaming industry. So,
if you look at all three segments, we have
it covered with three companies (Ignition
Entertainment for console, True Games for
online and India Games for mobile gam-
ing). I would see this as the major growth
factor for UTV by 2010.
In new media, it was natural for us to
look at Internet and digital. New media is
a platform, just like broadcasting. Under
this segment, we have verticals such as busi-

OutlookBusiness > April 4, 2009 65

HOT SEAT RONNIE SCREWVALA

ness and technology, which are very allied
to each other, and entertainment. Here, we
want to have leadership, just as what we
want in gaming and movies.
How much have you invested in this new
media space?
About Rs 370 crore, through a mix of ac-
quisitions and investing in the ideas. We
had envisaged a total investment of around
Rs 400 crore. So, now, we are almost in
the last leg.
UTV Motion Pictures has been the key
driver for UTV all these years. Do you ex-
pect the gaming and online businesses to
outperform movies?
I won’t say movies is our biggest driver. It
may be the most high-profile contributor to
sphere. The next couple of years, our key
growth engines will be gaming and mov-
ies, but our focus will continue to remain
on broadcasting and new media.
Your broadcasting business has been
incurring huge losses recently. Do you
think the gaming and online businesses
are recession-proof?
In the broadcasting business, if anyone is
losing money, it would have been in their
business plan to lose that kind of money.
I don’t know why suddenly investors and
analysts are shocked. Everyone who gets
into the broadcasting business must be
prepared to lose money for at least three
years. We are all in investment mode.
Of course, there is a lot more pressure
in broadcasting. As far as gaming is con-
those games? That is all the more reason
for us to stay on track.
In the last quarter, gaming worldwide
grew by 18% on a quarter-on-quarter basis.
So, gaming is pretty much recession-proof
because people play more when they are
at home. You buy a game for $50 and you
will use it for a long, long time. We made
these investments a year back, when most
pundits didn’t even think there would be
a slowdown. It is pretty much part of our
plan. Therefore, wherever we are in invest-
ment mode, we are staying completely on
course. Only in broadcasting have we scaled
down our costs.
Where have you cut costs in the broad-
casting business?
We have not cut costs. We have brought

On A Sells its kids channel, Gets into the

Signing Hungama TV, to Walt
Disney for $31.1
broadcasting
business with

Spree mn. Walt Disney also

buys 14.8% in UTV
UTV Bindass

Software for $14 mn

March August March September

2005 2006 2007 2007

Pays £7 mn for
UTV Software 70% in UK-
Communications
based Ignition
goes public
Entertainment, a
console gaming
company

our revenues, but it contributes only 45%.
Gaming and new media will be around 20%
this year and we want that to increase to 40%
in the next two years. This segment will at
least be at par with movies, if not more.
This year, we plan to do Rs 15 crore-plus
business in the online space. For a start-
up, that’s huge. Not that many companies
record that kind of revenues in their first
year of business. Over the next two years, as
a percentage, I don’t think it will contribute
more than 5% to the top line. But it will be
a significant 5%. Internet is not really about
revenues, it is about many other aspects of
penetration that we want to do. So, when
it really matures, it will go into a different
cerned, it is a total content business. Broad-
casting is a combination of advertising, car-
riage fees and many other such elements.
The geography we are looking at, as far as
broadcasting is concerned, is India. And in
gaming, we are looking at the world market.
For us, the biggest market is the US, Japan
and European Union. India wouldn’t even
constitute 0.5% of our business.
So, the question of why (we are getting
more involved in gaming) in this kind of
an economy doesn’t arise. Moreover, these
games will be released a year from now. So,
why should I go slow on my investments
when I know that when things come back
to a certain extent, we will be ready with
down our scale of costs to a different level.
It is much easier to cut costs in boutique
channels, which we have, than in general
entertainment channels. In a general en-
tertainment channel, you need a minimum
of five hours of original programming eve-
ry day. The moment you stop that, your
gross rating points (GRPs) can plummet
from 70 to 29. Therefore, it’s a risky space
to be in.
Basically, we are running a tight ship.
Three of our four channels are content-
based—UTV Movies, Bindaas Movies and
World Movies. Content costs have come
down by 40-50% worldwide. We are buy-
ing the same amount of content, but at a

66 OutlookBusiness > April 4, 2009

 much lower cost. Most of the content we
acquire is international content. The other
area where we have saved costs is carriage
fee, which again has dropped by 30-40%.
How do you plan to take your films busi-
ness ahead?
We had a good 2008 from all perspectives.
We have also been able to demonstrate that
there is no such thing as a small movie. We
have been very committed to our market-
ing strategies. We have focused on a good
script, we have focused on the director’s vi-
sion and we backed it to the hilt. And, that’s
what we plan to do going forward.
There is no question of pumping in more
money, as UTV Motion Pictures has already
done a fair amount of its investment. At
the moment, we need to see how we can
Launches UTV
World Movies
and UTV Movies.
Walt Disney
increases its
stake to 32.1%
December February
2007 2008
Buys 59% in
mobile gaming
company India
Games for
$10.5 mn
rotate it and scale it up.
The movie industry is going through a
rough patch, with many filmmakers shelv-
ing projects. What’s gone wrong?
The biggest problem was that everyone
wanted to get into the movie business, but
didn’t know how to produce. They went
ahead and bought movies at a very high
cost. The people who make the content are
continuing to make it thinking someone
will acquire it, but now there is nobody to
buy it and release it.
The motion pictures business will not
only correct in terms of prices, it also has
to shrink in terms of number of releases.
There were three to four movies getting
released every week. We need to go back
to a maximum of two.
In the past few months, valuations of
media companies, including UTV, have
crumbled. How do you see the industry
panning out in the next few months?
There are several companies in the private
space that can drop dead, and nobody will
notice. Then, you are left with companies in
the public space. There are about 30 listed
media companies. Of them, 20 don’t have
a business model to be listed. This was ob-
vious from 2000-2007, as they were just
there. This lot includes a few motion pic-
ture companies and a few television content
companies. They don’t have the scale to be
listed. They may be producing three mov-
by investing Rs 805
crore. Also picks up
15% in UTV Global
Broadcasting for
Rs 119 cr
May September
2008
Launches business
channel, UTVi.
Buys 76% in
ITNation, an
online technology
firm, for Rs 15 cr
ies or TV serials a year, but do they need
to be a listed entity? No. Then, there are a
couple in broadcasting, one or two movie
companies, media firms and music com-
panies. Even a pure-play music company
has no business of being listed.
So, what are the challenges for them?
It is growth. They have to first grow the mar-
ket, and the overall supply too has to shrink.
There is too much supply in the market,
and that has to go down. The number of
channels needs to shrink, the number of
movies getting made needs to shrink.
Do you expect some of the media compa-
nies to succumb to the slowdown?
I don’t know. But thank god for the slow-
down. The good news is that due to the
slowdown, the stable companies can go
back to their business. The other good news,
for the industry, is that the slowdown has
come two years before its time. It is sharper,
but overall, it will be less costly. Otherwise,
in the next two years, people would have
put in a lot more money. Now, whoever
was putting in more money has stopped.
So, the correction will be faster.
Walt Disney has a 32% share in UTV
Software. How do you plan to take this
tie-up ahead?
We have had a strong strategic alliance.
They have a one-third share in UTV, which
is strong. They have a 55% equity stake in
Buys 80% in True
Games Interactive,
a US-based online
gaming start-up, for
$8 mn
December
2008 2008
Walt Disney
increases stake to
55% (with 32%
voting rights)
GRAPHIC BY MANISH MARWAH
the company today, which resulted out of
a 20% open offer. However, I have a right
to buy back 20%, taking it back down to
32%. Today, their voting right is capped
at 32%, even though their equity share is
higher, and I have a right to buy back the
shares over the next four years.
They have invested into a company, they
are not investing in projects. They have in-
vested into the fact that all these verticals
pretty much mirror what they do in the
western markets. Having said that, there
will be synergies we will tap. For example,
we are distributing all Disney movies in
India. Wherever we find strategic interests,
we will look at them. <
OutlookBusiness > April 4, 2009 67
FEATURE HOUSING
MADE TO
ORDER
Nandita Datta
R
OCK BANDS PINK FLOYD, GRATEFUL
Dead and Social Distortion may not have much
in common, but their songs Cirrus Manor,
Scarlet Begonias and Reach for the Sky sure
do. They are the names of housing colonies
built by Total Environment Building Sys-
tems (TEBS), a little-known realty firm in Bangalore. The
company has created a unique business model by focus-
ing on building comfortable living spaces that are in har-
mony with nature. This innovative approach in construc-
tion has helped it create a niche for itself even as real estate
developers struggle with free-falling prices and overloaded
68 OutlookBusiness > April 4, 2009
At a time when builders are strug
inventories. Sample this: TEBS, with rev-
enues of Rs 150 crore last year, does not
have too many unsold units—three of its
five ongoing projects have been sold out.
Of the other two, the first phase of one
project is almost sold out (17 units left out
of a total of 213), while the second project
has done 30% so far. “That’s the advantage
of a high-quality offering,” says Kamal Sa-
gar, Director, TEBS.
So, what did this developer do differently
to weather the slowdown? Sagar, an IIT
Kharagpur-trained architect, builds homes
that are in sync with the outside environ-
ment. It’s not about green buildings—al-
though there is a lot of thrust on greenery
and open spaces. It’s about blending the
indoors with the outdoors. This means us-
ing natural building materials (that absorb
less heat and keep the insides cool), fewer
walls (to allow natural light and air to flow
in unobstructed), a terrace garden and even
a water-body in every home it builds.
The idea, Sagar says, is to treat each apart-
ment like an independent bungalow. While
 We built
individual gardens
in our apartments to
make them look like
bungalows
— Kamal Sagar, Director, TEBS

GREEN HOUSE:
Terrace gardens,
natural building
materials and
fewer walls are
some USPs

gling to sell houses, this man’s innovative, customised homes are still in demand
TEBS homes fall in the premium category—
units cost upwards of Rs 70-75 lakh—they
are not lifelessly opulent because the idea
is to go beyond just concrete and stones
to a living style closer to nature.
Building An Idea
TEBS homes are custom-designed to the
tastes and needs of the owners even be-
fore construction begins. So, whether it’s
knocking off walls or changing the pattern
of cupboard shelves or drilling holes in the
wall to hang paintings, every minute detail
is planned and designed well in advance.
Says Sagar: “We are, perhaps, the only firm
in the country to do this.” TEBS homeowner
AN Rao agrees: “I see enormous detailing,
patience and willingness to co-create the
apartments with all of us. I haven’t seen
this in other builders.”
So, it’s not surprising that TEBS has so far
not felt the need to advertise. Its proper-
ties (12 residential and two commercial)
have been sold through word-of-mouth
publicity. Sagar claims people often leave
messages on the TEBS website inquiring
about upcoming properties. Homeowner
and veteran journalist Veeresh Malik says
several of his friends have bought TEBS
homes after seeing his apartment at Scarlet
Begonias in Bangalore’s southern suburb
of JP Nagar.
Sagar’s tryst with TEBS goes back to
1996, when he moved from Pune to Ban-
galore, high on his success at Poonawala
Stud Farms, where he handled everything
from design to construction. After finishing
it, Sagar says, he couldn’t imagine working
as a designer involved only at the drawing-
board stage. “I wanted to see my designs
transformed into something real and be part
of that process,” he adds. Egged on by his IIT
friends—who promised to buy his apart-
ments if he created something freaky—Sa-
gar turned entrepreneur. A few days later, he
convinced three of his erstwhile batchmates
to join him. Sagar would focus on the design
and construction aspects, while his friends
would do the rounds of corporate houses to
tap clients.
Right since inception, TEBS’ vision was
to build homes, not houses. This result-
ed in the firm adopting an inside-out ap-
proach—the main focus would be on the
apartment and not the landscape around it.
This was in sharp contrast to the outside-in
approach that other developers and build-
ers in Bangalore had at that time. TEBS
was also influenced by the transition from
the bungalow culture to apartments that
Bangalore real estate was witnessing in the
early- to mid-1990s. Recalls Sagar: “We
asked ourselves what the key difference
was between a bungalow and an apart-
ment. We finally figured it was the garden,
and decided to build individual gardens in
our apartments.”
A plot of land was identified in the east-
ern suburb of Bangalore, but there was no
money to buy it. All friends who had prom-
ised to buy Sagar’s apartments chickened
out. Undeterred, Sagar mailed his designs
to four former college-mates in Mumbai;
they liked what they saw and paid Rs 25,000
each as booking amount. This money was

PHOTOGRAPHS BY JAGADEESH NV OutlookBusiness > April 4, 2009 69

FEATURE HOUSING
used to pay the advance for the land (the
total cost was Rs 13 lakh), and, finally, TEBS
moved from an idea to a functional enter-
prise. After some aggressive hard-selling
that involved sending mass mailers with
the floor-plan attached to mid-level corpo-
rate executives, the remaining eight units
were sold in a month.
Brick By Brick
Because TEBS’ apartments were to be de-
signed and built differently from what was
on offer from other realty firms, the cost of
construction (at Rs 1.3 crore) exceeded the
sales price (Rs 1.03 crore). “We used wire-
cut bricks from Kerala and Kota stone for
flooring. We transported gunny bags full of
Ipema creeper cuttings from Pune to run
along the big windows we had built. None
of these came cheap,” recalls Sagar.
Unfortunately for him, home-own-
ers refused to cough up the extra
amount and the company had to
bear this additional expenditure. To
save TEBS from going under, the
promoters had to act quickly and
find a new set of buyers for a sec-
ond project—the booking amount
would be used to complete the first
project.
Another round of hard-selling
saw 16 executives from IT-firm Mi-
croland signing up. As part of the
deal, they agreed to buy a plot of
land identified by TEBS, which it
would use to build homes for them.
But, as before, the cost of construc-
tion was higher than the sale price. A large
chunk of the cost-overrun (Rs 20-22 lakh)
was on account of the individual terrace
gardens in each apartment—the multi-
layer waterproofing to prevent seepage
wasn’t cheap. Once again, TEBS bore the
additional expenditure. “We had no op-
tion. Cash-flow was important—we had
to quickly move from one project to an-
other to keep our finances going,” recalls
Sagar. Fortunately, for the company, the
third project came close on the heels of
the second project—the same landlord of-
fered some adjacent pieces of land. Soon,
construction was on in full swing.
On completion, the terrace gardens at-
tracted immense interest. Competition,
too, acknowledges this innovation. The
general manager of a large reputed real
estate firm in Bangalore admits: “Eve-
ryone, including us, imitated TEBS and
started offering terrace gardens with our
penthouses. But seepage was a common
complaint and, hence, we had to stop. But
even after 10-11 years, none of TEBS’ ter-
race gardens face any seepage issues—they
70 OutlookBusiness > April 4, 2009
seem to have mastered the art of building
terrace gardens.” Sagar says it’s no rocket
science and the trick lies in the several lay-
ers of water-proofing.
The terrace garden concept put TEBS
into a new orbit. Offers started to pour in
and customers were now willing to pay a
premium for a TEBS home. Around the
same time, TEBS also realised that offer-
ing a uniform floor plan to everyone wasn’t
working, as no two families had the same
needs. Post-construction, alteration adds to
cost, besides being tedious and extremely
stressful. Allowing people to customise
their homes down to the last detail at the
design stage was a runaway success. The
company started out by making customised
paper designs for all its home owners based
on individual requirements, but has since
Allowing people to
customise their homes
down to the last detail
at the design stage was
a runaway success
moved to a proprietary software that allows
customers to re-design their living space
and simultaneously keep tabs on cost.
Unlike the competition, TEBS does not
outsource work to third parties—except for
electric and plumbing work, everything is
done in-house. The company even makes
most of the components that go into build-
ing an apartment. This includes a factory
to build door and window sets, a fabrica-
tion unit for metal work, a furniture unit
for wood-work, etc. “There’s no other way
you can control quality,” argues Sagar. The
use of natural building materials like ex-
posed wire-cut bricks instead of cement
blocks, Kota or Jaisalmer stone instead of
vitrified tiles, and hard-wood windows in-
stead of aluminium ones is expensive and
time-consuming. Improving the quality of
the finished product and making it main-
tenance-free also results in higher cost of
construction and longer timelines.
Slim Pickings
Sagar admits TEBS operates on thin profit
margins. “The competition does much bet-
ter than us,” he rues. “But we will not com-
prise on the quality of inputs used. Maybe,
in due course, the market will recognise
our efforts and pay a higher premium for
our products. Until then, we will continue
to operate on wafer-thin margins.” Apart
from designing and building homes, TEBS
also maintains them. Interestingly, despite
its premium price-tag, 70% of the compa-
ny’s customers are salaried
professionals, drawn mainly
from the IT sector.
But, as a differentiated
builder with a unique busi-
ness model, is TEBS better off
than its competitors, many
of whom are struggling with
large inventories? Sagar says
he does not have too many
unsold units and that he does
not foresee a situation where
his homes will remain unsold.
“While we work on very thin
margins, we have only a few
projects that are on currently.
So our risk is minimal.”
TEBS has not committed to
any new project, and that should work to
its advantage. But Sagar is quick to point
out: “It’s not as if we have stopped plan-
ning new projects. We will come up with
new plans, but at the moment, our focus
is on completing ongoing projects.” TEBS
is also looking to diversify its geographical
risk. It has made a foray into Pune and Hy-
derabad, two cities that Sagar claims have
customer mindsets similar to Bangalore’s.
Plans to enter Chennai, however, have taken
a backseat. TEBS has also entered the luxury
home market, where units cost in excess
of Rs 2 crore. The segment hasn’t seen a
slowdown, as supply is limited.
So far, the lure of the Total Environment
brand has worked in Sagar’s favour, but
can the downturn sink him? Detractors
say it’ll be a tightrope walk because TEBS
operates as a start-up even today, after 13
years of operations, annual revenues of Rs
150 crore and a workforce of 380. While
admitting that the days of easy pickings are
over, Sagar says his unique business model
and the low risks associated with it should
stand him in good stead. <
FEATURE ANIMATION

The Indian animation industry

started out by doing work for
foreign companies. Increasingly, it is
developing characters, lines and
voices of its own

Anurag Prasad
101 Animatio
L
ORD HANUMAN DID WHAT GHATOTKACH,
Ganesha and even a Romeo couldn’t. He got people
to watch his antics as he burnt Lanka and wreaked
havoc on Ravana’s army. The animation movie
Hanuman 1, released in 2005, thus did what no
other Indian animation flick had done before—it
got the audiences to the big screen, and made a tidy profit in
the process. The film, produced at a cost of about Rs 3 crore,
grossed almost Rs 10 crore at the box office. ised that the entertainment sector did not
Conceived and executed by Silverline Tech- work like the technology sector. They had
nologies and released by Percept Picture to move up the value chain.”
Company, Hanuman 1 marked the coming The success of Hanuman 1 has spurred
of age of the Indian animation industry. many other players. A Nasscom-Ernst &
Until recently, Indian animation com- Young report says the industry will grow
panies were mostly back-end production from $460 million in 2008 to $1.2 billion in
houses for American studios. Today, how- 2012—a CAGR of 27%. The numbers are
ever, the industry is coming into the lime- small compared to the $80 billion global
light with its home productions. “Animation industry. But the growth is encouraging
studios are spending close to Rs 30 crore per Indian animators.
project,” says Alpana Mishra, COO, UTV The winds of change are already visible in
Motion Pictures. UTV plans to release two the shift from low-end outsourced jobs to
films next year: Arjun-The Making of a War- concept-to-screen contracts. And increas-
rior and Alibaba Aur Chalis Chor. ingly, animation houses are partnering with
Tapaas Chakravarti, Chairman and CEO, Bollywood and Hollywood studios to come
DQ Entertainment International, agrees: out with international quality shows and
“The animation industry started as a pure films. Margins have gone up by 10-15%
services business, like the IT industry, about due to this shift, says Chakravarti of
10-12 years back. But players soon real- DQ. Of the 100 or so films that are

72 OutlookBusiness > April 4, 2009


ons
currently in the pipeline, 28 are already in
production, and about 15 are scheduled
for release in 2010.
Still Evolving
However, progress has been slow. Four years
after Hanuman 1, the Indian animation
industry is still waiting for its next big hit.
Even on television, Japanese shows domi-
nate, though the characters and themes
are alien to the culture here. Pokemon and
Dragon Ballz on Cartoon Network, Do-
raemon and Ganso Tensai Bakabon on Hun-
gama and Ninja Hattori on Nickelodeon
are some of the popular Japanese shows
here. Hollywood films are far ahead of any
Indian production in terms of quality and
storylines. Moreover, some recent local
TOON MANIA:
(clockwise from top)
Hanuman, Paddy’s
Page, Cowboy Maharaja,
Tenali Raman and
Freefonix are completely
homegrown characters
Riding on own
content, the
industry’s size is
projected to increase
from $460 mn in 2008
to $1.2 bn in 2012—
a CAGR of 27%
launches have bombed badly. The biggest
failure was Roadside Romeo, produced by
Disney and Yash Raj Films. Analysts say
the Tata Elxsi team did a great job on the
animation, but the theme and target audi-
ence did not sync. “The romantic theme did
not appeal to the kids and adults could not
appreciate the dubbing by the Bollywood
stars,” says a critic. Jumbo, a Thai movie that
was dubbed in Hindi with Akshay Kumar
doing the voiceover, also tanked.
“None of the Indian animation films have
got the desired audience, but that is more to
do with the content and a poor script,” says
P JayaKumar, Managing Director of Toonz
Animation. “If Indian audiences can con-
sume Western animation films, why won’t
they consume homegrown content?”
Perhaps, the biggest constraint has been
tight budgets and lack of characters with
global appeal. The Rs 10-12 crore budget
for an Indian animation movie means the
financial risk is hedged, but quality takes
a beating. “How can we compete with a
$100-200 million Hollywood production
that is three to five years in the making
with something produced within $2.5 mil-
lion?” asks Toonz Animation’s JayaKumar.
The company recently acquired rights to
produce a movie and a TV series based on
stories from Chandamama. It’s also working
on a movie based on Lord Shiva.
Toonz was the first company to animate a
folk character, with its Tenali Raman series.
The project, which cost around Rs 6 crore,
established the studio’s—and India’s—cre-
dentials in producing original animation
films. However, the show took nearly five
years to turn profitable.
Partnering For Profits
Studios are looking at new business models,
including partnerships, to produce films
and shows. Sometimes, the partnership
may just be an investment. In return, they
get to own a big chunk of merchandising
rights. Some are even negotiating distribu-
tion rights. This ensures flow of money even
if there is no cash flow in the short term.
For example, Toonz has bought the rights
for the PlayMobil characters and will be
producing content (films, TV serials, etc)
to be distributed by Sony Pictures.
Today, global companies are looking at
India for co-production. “Indian studios
are now on par with American, European
or Japanese production houses in terms of
skills and infrastructure. But it will be an-
other three to four years before we can actu-
ally produce world-class content,” says DQ’s
Chakravarti. Almost 70% of the company’s
content is co-produced or with back-end
rights (including home video, TV, DVD,
music, merchandising, etc). Some of DQ’s
production properties include Iron Man,
Large Family and Little Nick.
The impact of the economic downturn
also cannot be ignored. Big companies like
Toonz or DQ may not be severely hit as they
have a number of movies and content deals,
both their own and co-productions, in the
pipeline. But smaller companies will suffer
as they depend on outsourced work.
Still, the industry is young. The Japanese
style of Anime has a robust domestic mar-
ket, but it took almost 50 years to develop
that style and build that market. Indian
companies started end-to-end productions
only about five years ago. So, they’re still
on the learning curve.<
With inputs from Ajita Shashidhar
OutlookBusiness > April 4, 2009 73
FEATURE MANAGEMENT

TV Mahalingam

T
HE FUTURE GROUP IS LOOKING FOR
Duryodhanas. No, the group is not auditioning
for the role of the evil Kaurava for an in-house
Mahabharata play. Nor is Future Group CEO
Kishore Biyani planning a plunge back into show-
biz with ideas to film Indian mythology’s greatest
epic. But the hunt for Duryodhana is on, nevertheless.
“Duryodhanas are employees who play in his own words, is a “borderline atheist”
by the rules but whose intentions and who has neither prayed since his early teens
integrity are questionable. They are the nor visited a temple. But that does not stop
ones who come to office before time, leave him from understanding or harvesting the
after time, but spend the whole time in of- power of mythology in a country where
fice playing solitaire,” says Biyani with his there is an auspicious time, method and
characteristic wry humour. “I have asked place for doing everything—waking up,
my departmental heads to look out for such bathing, marrying and even dying.
Duryodhanas,” he adds. Take the Kartha ceremony the group has
Duryodhana is not just another catchy put in place. Kartha in Sanskrit means crea-

The Atheist Turns

To Mythology
Kishore Biyani is “a borderline atheist”. Yet, he’s got a Chief Belief Officer
delving into mythology to shape management at the Future Group
way to describe employees who play hooky.
It’s a part of a whole new lexicon that the
Future Group is working hard to create. To
achieve this, Biyani has hired a mytholo-
gist. Dr Devdutt Pattanaik will help cre-
ate a vocabulary, symbols and, eventually,
a unique style of communication drawn
from Indian mythology to achieve Biyani’s
ultimate goal: make retail a religion across
the length and breadth of the group. His
formal designation: Chief Belief Officer.
Retail Mantra
“Retail is our religion. Customers are our
gods. The stores are our temples. In every
temple, there are rituals, there are customs.
We have to enshrine customers as our gods
in our minds. Devdutt will dip into Indian
mythology and help us create these rituals,
symbols and vocabulary,” says Biyani, who,
tor or the head of a family. Every time some-
body is hired to head a Future Group store,
he or she is anointed as a Kartha. That does
not just translate to a fancy designation on
a rectangular visiting card. It’s much more.
“We seat the Kartha on a chair and all the
employees stand around him. His family
members—wife, siblings and parents—are
invited to the ceremony. His boss reads
him out his duties as a Kartha, which is to
ensure the welfare and happiness of em-
ployees and customers,” says Sanjoy Jog,
Chief People Officer, Future Group. Sounds
tacky? Well, the results are not.
“The store manager of the last store that
we opened (in Surat) had worked all his
life for an MNC. As his duties were being
read out, tears rolled down his cheeks. We
have beaten the life out of the competition
in that place. What would have taken us

74 OutlookBusiness > April 4, 2009

“Retail is our religion, customers our gods,
the stores our temples. We have to enshrine
customers as our gods in our minds
—Kishore Biyani
CEO, Future Group

ILLUSTRATION BY ARINDAM
FEATURE MANAGEMENT
six months in terms of aligning mindsets
happened with a single ritual,” adds Jog,
whose office in suburban Mumbai has 11
Ganesha idols.
Drawing Parallels
Sceptics might scoff that an induction like
this might work only with blue-collared
workers, and not the highly educated. The
experience shows otherwise. When the
Future Group appointed the CEO of its
insurance business, it decided to have the
same ceremony. “Halfway into the cere-
mony, Jayant (Khosla), the Kartha, an IIM-
A graduate with more than two decades
of MNC experience, started choking up,”
says Jog.
Jog argues that fables and tales from
mythological texts succinctly explain a
theoretical sounding management con-
cept, something that a 20-page case study
from the Harvard Business Review would
labour to get across.
A sample: the age-old tale of Kalia the
snake. Legend has it that Kalia the snake
lived in a lake outside Mathura. The snake
was so venomous that it poisoned the whole
lake. When Krishna subdues the snake and
asks him why he is afraid to move, Kalia
says that he is afraid of being eaten up by
Garuda the eagle, who is hovering outside.
So, Krishna assures Kalia safe passage, and
all’s well again. Pattanaik narrated this sto-
ry and interpreted it as a case for change
management. Kalia does not move because
he is afraid to leave the familiarity of his
comfort zone, and ends up poisoning the
whole lake. So, it’s important he moves.
Moral of the story: change might be tough
and scary, but if you don’t, you will take
everybody down with you. “When Patta-
naik narrated the story, the rationale for
change management was clear to every
person,” says Jog.
Meanwhile, the Vishwakarma of the
Kartha ritual, Pattanaik, is busy meeting
the Future Group’s senior management,
brainstorming, evangelising, telling them
stories of gods and goddesses, and sum-
marising their lessons. He narrates yarns of
legendary king Vikramaditya and the sagely
ghoul Vetal and fables from the Mahab-
harata to prove a subtle point or two about
change management or handling tough
times. “We’re looking at stories that have
lasted the test of time, like the Ramayana,
the Mahabharata and the Bible. That’s proof
of their effectiveness,” says Pattanaik, whose
favourite mythological text is the Bible.
Pattanaik, himself, is a bit of an oddball.
A doctor by training, he has worked for
14 years in several roles in the pharma in-
dustry. Eight jobs in 14 years, beams Pat-
76 OutlookBusiness > April 4, 2009
Fables and
mythological texts
succinctly explain
a management
concept that a 20-
page case study
would labour to
get across
—Sanjoy Jog
Chief People Officer, Future Group
PHOTOGRAPHS BY SOUMIK KAR
tanaik. He took to reading mythology af-
ter he passed out of medical college to get
over the frustrations of a boring job, and Religion is the
discovered a passion. Since then, he has best example of people
authored 14 books on mythology.
following rules regardless
Different Strokes of who they are. Why can’t
“Biyani has great intuition about the intui- we take that vocabulary to
tive sense of India. What I have is a vocabu-
lary. We clicked because our understanding the world of business?
of Indian-ness matched,” says Pattanaik,
—Damodar Mall
who believes that Indian businesses are ap- Group Customer Director, Future Group
ing the west by putting too much emphasis
on “processes” over intuition and culture.
“You cannot standardise a smile. Similarly,
you cannot standardise service for a coun-
try as diverse as India,” he adds.
The diversity of India—in terms of re-
ligion, culture and economic power—is
something that the Future Group tracks
closely and, thereby, profits from. That,
perhaps, explains why a Big Bazaar store in
Sangli (Southern Maharashtra) organises
a kumkum ceremony for its women clien-
tele. Or why a Big Bazaar store in Mumbai
Central is the only store in that format that on beliefs and culture.”
stocks burqas. The area has a significant It’s an insight that Kruben Moodliar, a
Muslim population catchment. The store fourth-generation Indian from South Africa
organises an iftaar party during the holy and CEO of Future’s learning initiatives,
month of Ramzan. gained while interacting with his trainees.
“Women in Northern India would hate A retail professional, with decades of in-
it if a shop-floor assistant stared over their ternational experience in setting up proc-
shoulder or tried to help them. On the other esses and standard operating procedures,
hand, a maami in Tamil Nadu would prob- Moodliar had a tough time making train-
ably love it if a sales person tagged along ees and staff follow a simple process like
holding her shopping cart,” says Jog. “One the opening and closing of a store. “They
system, one process doesn’t work for the would constantly find new ways of doing
country. Therefore, it makes sense to work things,” jokes Moodliar. So, when the com-

pany wanted to open a new store in Agra,
the employees were boarded onto a train
and packed off to the group’s training centre
in Ahmedabad. Among other things, the
employees were asked to repeat a simple
chant daily: “I’m getting better everyday, I
recognise that you are getting better every-
day. We are getting better everyday.”
“It’s amazing what this has done to the
store. Whoever walks in says that the vibe
in the store is fantastic. Employees are also
asked to greet each other with a Namaste,”
gushes Moodliar. Namaste, in fact, is the
preferred form of greeting at the Future
Group. Most of the mails that Biyani gets
from employees begin with a Namaste.
That seems to be the crux of what the Fu-
ture Group is doing—an anti-thesis of the
McDonaldisation of service. Service with
a smile, but no forced ones, please.
“What’s the purpose of creating a stand-
ard operating procedure? It is unsuper-
vised compliance,” says Group Customer
Director Damodar Mall. “And what’s the
world’s greatest example of that—of peo-
ple following rules, mores, irrespective of
their background or education? It’s reli-
gion. When we realise that, why can’t we
use the vocabulary and symbols of that
world, and take it to enhance the world of
business,” asks Mall.
The Storytellers
Ask Pattanaik about what he has in store for
the group, and the Chief Belief Officer has
this to say: “We hope to create kathakars
(storytellers) who will take the message
throughout the organisation. How did the
Bhakti movement spread across the coun-
try? It spread through songs and stories
sung from one person to another.”
A movie buff, Biyani has been an ardent
student of storytelling. His presentations, be
it to employees or ministers, are peppered
with Bollywood characters like Bunty Aur
The Bhakti movement
spread from one person to the
next through songs. We hope
to create kathakars to take the
message through the group
—Dr Devdutt Pattanaik
Chief Belief Officer, Future Group
Babli or comic heroes like Tintin. With Pat-
tanaik on board, those characters are likely
to give way to mythological characters like
Krishna or Moses. That’s a significant shift,
as they are part of our phyche and influence
us in more ways than we know.
Critics might argue that workplaces,
worldwide, are moving towards becoming
secular environs, antiseptic offices, which,
in a perfect world, should be as far away as
possible from religion and mythology. First-
ly, it’s not a perfect world. Secondly, here’s a
pointer in the other direction. Nike is not
a randomly chosen name. It’s the name of
the Greek goddess of strength, speed and
victory. Apollo, Amazon, Delphi, Mars,
Odyssey and Olympus are a few brands
that are named after popular mythological
characters. The Future Group is simply tak-
ing mythology to another level. <
OutlookBusiness > April 4, 2009 77
FEATURE ENTERPRISE

In Good
Shape
Gym chains are a dime a dozen in the country.
FitnessOne stands out because it sets up
gyms for companies and individuals
Sharada Balasubramanian

R
AMESH SHIVA, CEO, SABARI GROUP OF HOTELS, CHENNAI,
didn’t really think he could build a body to match Arnold Schwarzneg-
ger’s, but he decided to give it the old college try. Unfortunately for
him, the nearest gym was some distance away, and he didn’t fancy
the atmosphere of the place anyway. So, the 36-year-old Shiva did the
next best thing—he went out and bought one, literally. He visited a
showroom and purchased equipment that would let him work out at home almost
like he would have in a regular gym. “I spent about Rs 3-4 lakh on four different
items of equipment. Now, I can work out ft, the gym cost Saint Gobain Rs 80 lakh. ment: “We aim to be present wherever peo-
at my own convenience, in my own home,” The smell of sweat pervades the air as they ple want to work out, be it at home or at
Shiva exclaims proudly, flexing his muscles pump iron with a zeal that would make the workplace.”
to show his considerable progress in look- Arnie proud. Trainers walk around the Apart from setting up customised gyms
ing like Conan the Barbarian. gleaming equipment, keeping a watchful for more than 35 corporates, including
Elsewhere in the city, employees of Saint eye on their wards. Saint Gobain, Ashok Leyland, ABN Amro,
Gobain are hard at work as they go about Ramesh Shiva and the gym-visiting Saint Biocon and Motorola, FitnessOne has also
the business of making and selling a thing Gobain employees have two things in com- installed numerous home-gyms, tailored
that is brittle by nature. At day’s end, how- mon. They are all fitness fanatics and they to meet the fitness needs of individuals.
ever, glass is the last thing on their minds. mostly use equipment supplied by Fitness The equipment needs as little as 60 sq ft
All they can think of is becoming lean and One, a Chennai-based fitness chain. Vivek of space. The cost of setting up a home-
tough. Like Shiva, they too begin work- Anand, the company’s Founder, sums up gym varies from Rs 40,000 to Rs 1.5 lakh,
ing out, not at home, but in the company’s FitnessOne’s philosophy in what sounds depending on the fitness goals of the indi-
state-of-the-art gym. Spread over 4,000 sq uncannily like Microsoft’s mission state- vidual. FitnessOne also has flexible instal-

80 OutlookBusiness > April 4, 2009


ment plans for individuals and corporates
who cannot afford to pay the full amount
up front.
First Steps
Anand, who returned to India in 2003 af-
ter working in the US for two decades as
a pilot, is himself a fitness fanatic. The first
thing he did when he returned was look for
a health club. To his chagrin, there weren’t
any that were to his liking. But the optimist
that he is, Anand spotted an opportunity in
the lack thereof. “Being a pilot, I had mem-
berships to many fitness clubs in the US. I
realised that most health clubs in India were
in bad shape and that there was a market
for well-run, well-equipped gyms.”
After months of planning and looking for
a location, Anand opened his first gym in
Chennai in 2004, spending Rs 2.2 crore.
“My family and friends funded me,” he
says. Real estate costs, interior decorations,
trainers’ charges and equipment costs ate
up most of his budget. But the return on
investment was quick for that gym and the
others that followed—each centre recovered
its costs within six months to a year.
Since then, there has been no looking
back. Today, FitnessOne has expanded be-
yond Chennai, to other cities in the South.
It has 10 self-owned gyms: five in Chennai,
four in Bangalore and one in Coimbatore.
The company also has 56 franchises and
35 corporate clients. It has 435 employees,
including trainers and maintenance staff.
Impressed by the company’s sterling show,
Mauritius-based India Equity Growth
Fund, part of Reliance Asset Management
(Mauritius), bought a 4.5% stake in Fitness
One in 2007, valuing it at Rs 100 crore.
All this has come within five years of the
fitness chain’s launch.
About three years after setting up his first
health club, Anand decided to open fran-
chises and set up gyms for corporates and
individuals. “We felt that outsourcing fitness
services to companies will help us garner
more revenues.” His intuition was spot on.
Though he doesn’t disclose revenue figures,
he does say that, last year, corporate gyms
constituted about 22% of revenues, while
franchises and home-gyms accounted for
10% and 5%, respectively.
Apart from setting up gyms for corporates
and individuals, FitnessOne has opened
an institute in Chennai, called Academy
Our products
are priced 60%
lower than those
of international
brands. It’s the
same equipment
minus the premium
for the brand name
—Vivek Anand
Founder, FitnessOne
R A CHANDROO
of Fitness Management, to offer certificate
programmes to trainers. The company has
also got into equipment retailing with its
own brand, Propel. The equipment is made
in Taiwan and Korea. “Our products are
priced 60% below international brands. It’s
the same equipment minus the premium
for the brand name,” he claims.
With revenues from corporate clients
falling because of the economic slowdown,
Anand has decided to focus on his own
health clubs. The plan is to set up 30-40
gyms in the next 18 months at a cost of Rs
15-20 crore. “We thought it better to ease
up on the franchisee front and have our
own centres because the effort that goes
into both—training people, setting up the
place, etc—is the same,” he says. The expan-
sion will be financed largely by internal ac-
cruals and loans. “If markets improve and
provide the opportunity, we may look out
for private equity,” says Anand.
With a market penetration of just 1%
in India (in the West, it is 15%), Anand is
hoping that things will look up once the
economy improves. Until that happens, he
will have to count on the likes of Ramesh
Shiva to butter his bread. <
OutlookBusiness > April 4, 2009 81
 WORLD
Global Snapshot
MARKET ECONOMY
Country Index Index Value Change % 52-week 52-week Current Forward GDP at current GDP growth at
(Mar 11) 15 days 1 year high low PE PE prices ($ mn) constant prices(%)
BRAZIL BOVESPA 38,286 0.3 -38.4 73,920 29,435 9.4 8.6 1,835 4.4
CHINA SSEC 2,133 2.5 -47.6 4,055 1,664 20.0 11.9 6,991 10.0
FRANCE CAC 40 2,650 -3.4 -43.6 5,142 2,465 7.0 6.4 2,046 2.1
GERMANY DAX 3,873 -1.8 -41.3 7,231 3,588 7.6 7.2 3,653 1.0
HONG KONG HANG SENG 12,001 -7.1 -48.8 26,387 10,676 8.0 7.0 216 4.6
INDIA BSE SENSEX 8,343 -6.6 -48.3 17,735 7,697 12.2 9.0 2,988 8.4
JAPAN NIKKEI 225 7,198 -4.7 -44.0 14,601 6,994 8.5 8.1 4,289 1.9
MALAYSIA KLSE 838 -6.2 -32.0 1,305 801 9.2 8.0 357 5.5
MEXICO BOLSA 17,712 -1.9 -39.5 32,292 16,480 9.2 7.7 1,346 3.4
RUSSIA RTSI 987 7.0 -67.1 3,713 788 5.8 4.5 2,087 7.0
SINGAPORE STRAIT TIMES 1,493 -7.4 -48.8 3,269 1,455 6.0 6.4 228 6.0
SOUTH AFRICA JSE AFRICA ALL SHARE 19,016 0.1 -38.1 33,309 17,770 9.2 6.6 467 4.7
SOUTH KOREA KOSPI 1,128 5.2 -32.0 1,901 892 11.1 7.7 1,200 4.7
THAILAND SET 415 -3.5 -49.8 886 384 16.4 7.8 519 4.5
UNITED KINGDOM FTSE 100 3,681 -6.0 -36.3 6,377 3,460 7.7 7.0 2,137 2.8
UNITED STATES DOW JONES 6,945 -3.3 -42.7 13,191 6,440 9.3 7.4 13,843 2.3
SOURCE: MARKET (YAHOO FINANCE AND BLOOMBERG), ECONOMY (IMF)

Exchange Rates Commodity Prices

Spot Rates Forward Rates Change (%)

1 USD In INR 1 month 12 months 1 month 12 months Agri Metals

Canadian Dollar 1.255 40.002 -3.5 -29.7 1.255 1.251 Aluminium Copper Zinc
Coffee Cotton Sugar Rice Wheat
Chinese Yuan 6.837 7.341 -0.1 3.7 6.906 6.906 105 42 19 12 558 1,300 3,635 1,216
300 125
Danish Krone 5.848 8.583 -0.3 -19.4 5.857 5.884 (Figures as on March 11, in cents/lb)
250 100
Hong Kong Dollar 7.754 6.473 -0.1 0.4 7.752 7.743
200
Indian Rupee 50.190 - -5.8 -28.0 -50.335 51.131 75
Indonesian Rupiah 12,050 0.004 -1.0 -31.0 12,200 13,600 150
50
Japanese Yen 97.891 0.513 -6.9 6.5 97.845 96.767 100
(Figures as on March 12, in $/tonne)
Kuwaiti Dinar 0.295 170.424 -1.7 -9.2 0.303 0.380 50 25
Apr 25, ‘07 Mar 11, ‘09 Apr 25, ‘07 Mar 12, ‘09
Malaysian Ringgit 3.670 13.676 -2.2 -15.9 3.670 3.670 Values have been rebased to 100 Values have been rebased to 100
Phillipine Peso 48.095 1.044 -2.5 -17.5 48.095 48.095
Saudi Arabian Riyal 3.753 13.375 -0.1 -0.1 3.753 3.754 Precious Metals Oil
Singapore Dollar 1.528 32.854 -1.3 -10.2 1.528 1.526 Gold Silver Palladium Platinum
160 160
Swedish Krone 8.777 5.718 -4.7 -43.0 8.780 8.715 949 1,388 200 1,045
Swiss Franc 1.169 42.924 0.7 -11.8 1.169 1.157 120 100
UAE Dirham 3.673 13.664 -0.3 0.0 3.676 3.692 120
Currency/USD In INR 1 month 12 months 1 month 12 months 80
42
Australian Dollar 0.650 32.618 0.8 30.1 0.648 0.640 80 (Figures as on
40
Euro 1.274 63.949 0.3 16.3 1.274 1.276 February 25, in
$/standard traded unit)
Great Britain Pound 1.426 71.561 3.2 30.9 1.426 1.426 40 0
Jan 1, ’08 Mar 11, ’09 Jan 2, ‘08 Mar 11, ‘09
New Zealand Dollar 0.513 25.752 2.3 36.0 0.512 0.504 Values have been rebased to 100 Price for Light Crude ($/barrel) Source: Viratech, LME
As on March 12 Source: Mecklai Financial & Commercial Services

WORLD VIEW
Average Tariffs
How Free Is The Trade? OECD countries
Eastern Europe & Russian Federation
3.0
In 2005
A country’s openness to trade is often measured by its sum of exports and imports 6.6
Other high-income countries 7.5
(%)
as a share of its GDP. A more direct measure is its average tariff rate. The average Southern Africa 8.0
tariff rate for the world fell from about 30% in the early-1980s to about 10% in Central America & Caribbean 9.7
2005. According to the latest World Development Report of the World Bank, tariffs South America 9.9
are highest in Africa, South Asia and Western Asia, and lowest in member-countries Southeast Asia & Pacific 10.3
Western Africa 13.0
of the Organisation for Economic Co-operation and Development (OECD). It also 13.2
Western Asia
says that poor countries restrict trade more than rich countries using tariff and non- South Asia 16.0
tariff barriers. Non-tariff barriers, on an average, account for about two-thirds of Eastern Africa 17.0
total trade barriers, with a higher proportion in rich countries than in the poor ones. Northern Africa 17.0
0 5 10 15 20
Note: Figures are the unweighted mean of a country’s average tariffs Source: World Bank 2006

82 OutlookBusiness > April 4, 2009

 INDIA
Wholesale Price Index Inflation vs G-sec Yield
Manufactured items Primary articles Fuel, power, light & lubricants 14
180 10-year G-Sec yield (%)
4.0% 5.8% -5.1% 12
160 All commodities 10
140
2.4% 8
6.39
6
120
4
100 2
Figures indicate year-on-year change Monthly inflation (%) 2.43
80 0
Jan 7, 2006 Feb 28, 2009 Jan 2002 Feb 2009
Note: Figures rebased to 100 to enable comparision Source: MOSPI Source: ASA,PNB Gilts

FDI Inflows Industrial Output Forex Reserves

Total* 16 350
As on Feb 27: $249.2 mn
6
2008-09 2007-08 21.2 300
12
5 2006-07
11.6 250
4.4
4 8 200
3.8
24.5
3 0.5 150
4
2 100
15.7 0
1 50
1.4
0 -4 0
Apr Jun Aug Oct Dec Feb Mar Jan 06 Jan 09 Aug 05 Feb 09
Figures are in $bn *Apr-Mar Source: Commerce Ministry Year-on-year change in % Source: MOSPI Source: RBI

Money Supply Foreign Trade

As on 15 Days Change YoY Change
80
February 13 Amount % Amount % Exports Growth %
60
M3 Money 45,90,189 36,039 0.8 7,62,878 19.9 Imports
Components : 40
Currency with the Public 6,52,440 18,364 2.9 97,533 17.6 20
DD with banks 4,96,609 -15,244 -3 18,279 3.8 0
TD with banks 34,34,186 32,591 1 6,44,824 23.1 -20
Other deposits with RBI 6,953 328 5 2,242 47.6 Sep 2007 Dec 2008
Figures in Rs crore Source: RBI Source: CMIE

INSIDE TRACK
Who Is IFRS-Ready?
Different Standards All ‘public interest’ Top 100
International Financial Reporting Standards, or IFRS, is the next frontier in financial entities companies
reporting. As the deadline of April 1, 2011, for ‘public interest entities’ (includes listed 3
and unlisted companies) to move to IFRS approaches, the preparedness of Indian 14
companies leaves much to be desired, says consultancy firm Grant Thornton. In a All listed
companies Top 500
recent survey conducted among senior finance and accounting executives in India, it companies
found that many unlisted companies were not confident enough of moving to the unified 50 33
accounting standard—about 97% of respondents said only listed companies will be
able to prepare IFRS statements from April 2011. The survey report notes that lack of
awareness on IFRS methods could be a major reason for this assessment.
Figures show % of respondents who agree

OutlookBusiness > April 4, 2009 83

 CORPORATE
Corporate Debt
Resources Raised From Capital Markets
Domestic (by asset class) Domestic (by issue type)
Total Domestic Overseas Equity Debt Public Rights Private placement
MAY-08 4,699 4,586 113 1,649 2,937 307 10 4,268
JUNE-08 4,868 4,501 366 2,601 1,900 1,226 439 2,836
JULY-08 2,790 2,208 582 508 1,700 94 167 1,946
AUGUST-08 10,267 10,267 0 8,067 2,200 262 104 9,901
SEPTEMBER-08 15,842 15,833 9 8,973 6,860 31 8,714 7,088
OCTOBER-08 3,919 3,919 0 251 3,668 26 102 3,791
NOVEMBER-08 11,635 11,635 0 3,738 7,896 0 146 11,488
DECEMBER-08 16,398 16,398 0 1,464 14,934 41 1,349 15,007
JANUARY-09 12,735 12,735 0 119 12,615 0 0 12,735
APRIL 07-JANUARY 08 175,871 145,412 30,459 107,480 37,977 49,017 8,084 88,301
APRIL 08-JANUARY 09 89,879 88,747 1,131 30,549 58,198 2,002 11,034 75,710
All figures in Rs cr Source: CMIE

Infrastructure Throughput
Railways (freight traffic) Power (generation) Ports (traffic at major ports) Port-wise traffic
Change (%) Share (%)
16 12 20 Kandla 16.8 14.2
12 Vishakhapatnam 0.8 12.3
8 10 7.6 Mumbai 9.6 11.2
8 5.8 Chennai -1.6 10.6
7.5 3.0
4
4
0.0 JNPT -10.6 9.8
0
0 1.4 Haldia 5.7 8.3
Paradip -1.2 8.1
-4 0 Nov 07 Jan 09 -10 New Mangalore 3 7.1
Nov 07 Dec 08 Dec 07 Dec 08
Apr-Dec 07 8.4% 572 mn tonnes Apr 07-Jan 08 6.3% 586 billion KWH Apr-Dec 07 12.5% 378 mn tonnes Mormugao 14.3 6.8
Apr-Oct 08 6.0% 606 mn tonnes Apr 08-Jan 09 2.5% 600 billion KWH Tuticorin 6.7 4.2
Apr-Dec 08 3.4% 391 mn tonnes
Change for April-December on a y-o-y basis
Graphs show monthly change on a y-o-y basis in % Source: CMIE

Commodities Production
Sugar Tea Edible oil Sugar prices
20 30 40 2,200
52.3 2,008
0 20 2,000
16.8 20
30.2
-20 -10.7 10 1,800
0
-40 0 1,600
-40.1 -2.3
-60 -10 -20
Nov 07 Dec 08 Oct 07 Dec 08 Oct 07 Dec 08 1,400
Price of small grade
Oct-Dec 07 -12.8% 6.4 mn tonnes Jan-Dec 07 -1.3% 945,000 tonnes Nov-Dec 07 15.2% 241,000 tonnes 1,356 (Mumbai) in Rs per quintal
Oct-Dec 08 -6.1% 6.0 mn tonnes Jan-Dec 08 3.8% 980,000 tonnes Nov-Dec 08 36.1% 328,000 tonnes 1,200
Sep 07 Jan 08
Graphs show monthly change on a y-o-y basis in % Source: CMIE

SECTOR SNAPSHOT: SOFTWARE

Financials (Rs cr) 3-year CAGR (%) Ratios (%) Valuations India compared
Revenues Net profit Revenues Net profit Op. margin* RoCE PE Mkt cap (Rs cr) TCS CSC
TCS 19,371.6 4,508.8 19.6 29.2 30.2 43.2 10.8 46,513.4 REVENUES ($ BN) 4.3 17.1
WIPRO 18,087.7 3,063.3 20.1 26.1 22.4 27.4 10.5 31,046.9 OPERATING PROFIT ($ BN)1.2 2.5
INFOSYS TECHNOLOGIES 16,692.0 4,470.0 21.6 34.8 35.6 33.3 13.2 70,271.7 NET PROFIT ($ BN) 0.9 0.9
HCL TECHNOLOGIES 4,785.8 780.6 15.4 20.3 23.2 23.3 6.7 6,007.8 OP. MARGIN (%) 27.1 7.1
TECH MAHINDRA 3,724.3 342.2 44.4 31.0 13.3 68.6 3.3 3,202.3 NET MARGIN (%) 21.1 5.4
ORACLE FINANCIAL SERVICES 1,879.7 410.9 16.6 29.9 28.1 14.5 8.8 5,183.7 ROE (%) 47.5 16.3
LARSEN & TOUBRO INFOTECH 1,597.0 211.1 25.9 60.5 18.2 36.4 NA NA PE (TIMES) 8.4 5.8
MPHASIS 1,496.0 264.5 56.5 67.9 24.1 22.4 8.8 3,814.2 MARKET CAP ($ BN) 9.0 5.2
FINANCIAL TECHNOLOGIES 1,355.1 961.3 139.9 209.1 92.6 76.8 6.6 2,129.5 1-YEAR RETURN (%) -41.2 -20.3
PRITHVI INFORMATION SOLUTIONS 1,131.0 63.7 35.4 20.7 8.3 13.5 1.3 57.4 DIVIDEND YIELD (%) 3.0 NA
Financials for 2007-08; PE and market cap as of Mar 11; NA: Not applicable as company is unlisted; Satyam Computer was ranked Source: CMIE ($1 = Rs 51.70) Source: CMIE, Yahoo Finance
number 4, but wasn’t considered as its financials are yet to be restated

84 OutlookBusiness > April 4, 2009

 MARKETS
Indices Watch FII Net Flows MF Net Flows
52-WEEK % CHANGE
VALUE HIGH LOW 15 DAYS 1 YEAR 3 YEARS 0 300
-1.6
BSE 100 4,160 9,433 3,949 -8.0 -50.7 -25.1 200 130.0
-200 129.3
BSE 200 963 2,214 922 -7.9 -51.5 -27.5 100
BSE 500 2,983 7,066 2,899 -7.8 -53.0 -29.6 -400 0
BSE BANKEX 3,633 9,306 3,599 -15.1 -56.9 -30.2 -453.2
-600 -100
BSE CG 5,453 14,774 5,394 -7.6 -59.1 -31.3 -200
BSE CD 1,472 4,774 1,453 -6.6 -64.5 -53.6 -800
Feb 26, 2009 Mar 9, 2009 -300
BSE FMCG 1,803 2,530 1,549 -10.6 -17.7 -9.5 Feb 25, 2009 Mar 6, 2009
BSE IT 2,025 4,747 1,988 -3.0 -43.3 -45.8 Net FII inflows into equity Rs cr Net MF inflows into equity Rs cr
BSE MIDCAP 2,553 7,369 2,548 -7.4 -62.3 -48.8 Feb 26-Mar 9 (3,151) Feb 25-Mar 6 (206)
BSE PSU 4,676 8,283 3,853 -6.0 -38.6 -18.7 2008-09 (up to Mar 6) (50,696) 2008-09 (up to Mar 6) 4,829
BSE SENSEX 8,160 17,736 7,697 -8.3 -48.8 -22.8 2007-08 53,404 2007-08 19,896
Source: SEBI
BSE SMALLCAP 2,867 8,936 2,864 -8.5 -65.2 -54.5
NIFTY JUNIOR 3,595 9,541 3,588 -9.2 -56.4 -42.0
S&P CNX NIFTY 2,573 5,299 2,253 -6.9 -46.4 -17.8
NSE: F&O turnover (Rs 3,39,498 cr) Cash market turnover (Rs 88,182 cr)
Highest index gainer: BSE IT (-3.0%); Highest gainer in BSE IT over
25,000 12,000
last fortnight: Mphasis (12.0%, Rs 179) 19,007
As on March 9 Source: CMIE & BSE 20,000 6,525
8,000 9,617
BSE 500: Gainers & Losers 15,000 8,181
Change (%)
10,000
Price (Rs) 15 days 1 year 4,000 2,632 2,201
Index futures 9,771
Top 10 Gainers 5,000 Stock futures
Bombay Rayon Fashions 111 25.9 -58.9 Index options Stock options 938 NSE BSE
Amtek Auto 84 23.7 -68.5 0 0
Feb 26, 2009 Mar 9, 2009 Feb 26, 2009 Mar 9, 2009
Amtek India 31 16.8 -72.9 Source: NSE Source: NSE & BSE
Nava Bharat Ventures 125 14.4 -28.0
Mphasis 179 12.0 -13.4
Hindustan Zinc
Mcleod Russel India
354
47
10.3
10.2
-38.5
-25.6
Mutual Funds
Redington (India) 98 9.8 -68.3 Top 10 fund houses Leaders and laggards: equity
Birla Corporation 161 9.0 -23.8 AUMs (Rs cr) Change (%) NAV (Rs) Return (%)
Berger Paints India 36 8.1 -1.5 Reliance Capital 81,627 7.2 Top five
Top 10 Losers HDFC 56,864 10.6 JPMorgan India Alpha 10.4 0.2
Rolta India 43 -51.2 -84.6 ICICI Prudential 53,514 12.6 ING Dynamic Asset Allocation 10.1 0.1
Everonn Systems India 90 -35.0 -86.0 UTI 49,225 6.6 Escorts Growth 34.6 -1.0
Ranbaxy Laboratories 135 -34.9 -68.8 Birla Sun Life 48,556 15.2 Escorts High Yield Equity 7.1 -1.5
Aban Offshore 232 -34.8 -93.3 SBI Funds Management 27,627 2.5 UTI Wealth Builder-Series II 9.9 -2.6
Vishal Retail 27 -33.4 -96.6 LIC 24,268 29.6 Bottom five
Tanla Solutions 22 -31.0 -93.0 Franklin Templeton 19,408 0.5 SBI Magnum Sector-Emerging Bus. 11.5 -10.0
Indian Bank 65 -30.1 -63.3 Tata 19,300 -4.2 JM Hi Fi 3.6 -9.9
ICSA (India) 55 -28.9 -87.2 Kotak Mahindra 17,262 9.8 Canara Robeco Multicap 5.7 -9.8
Reliance Capital 281 -26.2 -79.1 Total 5,00,973 8.7 JM Multi Strategy 7.1 -8.9
Indage Vintners 44 -25.8 -92.8 AUMs are monthly average for February, change shows increase Canara Robeco Equity Div. 20.1 -8.9
or decrease over January
As on March 9 Source: CMIE Source : AMFI NAV date: Mar 9 Returns for two weeks (%)
Source: mutualfundsindia.com

REAL ESTATE: MUMBAI (RETAIL RENTALS)

Change (%)
Rent (Q4) 3-month 1-year
South (CBD-Nariman Point) 375 -25.0 -14.8
Central (Worli) 325 -18.8 -18.8
Central (Lower Parel) 200 -35.5 -35.5
Suburban (Bandra-Kurla) 300 -22.1 -22.1
GRAPHICS BY KISHORE DAS

Suburban (Andheri) 135 -25.0 -25.0

Suburban (Powai) 100 -9.1 -9.1
Suburban (Malad) IT 80 -20.0 -11.1
Suburban (Malad) Non IT 120 -20.0 NA

Rent in Rs per sq ft for average bare shell Source: Cushman & Wakefield India

OutlookBusiness > April 4, 2009 85

LIFE FORMULA ONE

THE
ENEMY
Formula 1 is its
own worst enemy.
Always has been,
always will be

INSIDE
Avinash Singh
in the sport last year, has ended its second
solo stint with F1. Word is, if Toyota has
another middling or disastrous season,

T
HEY HAVE BEEN KNOWN TO SNOOP
into each other’s work, raise questions about
their rivals’ motives, character and man-
hood—and, of course, deny all of it. So, ear-
lier this month, when the 10 Formula 1 (F1)
team principals jointly outlined proposals
that would, ostensibly, make it more affordable for them
to race fast cars, the irony was striking, to say the least.
The world’s most expensive sport, which petitiveness, moral codes are bound to get
doesn’t acknowledge the law of diminishing stretched, and disagreements erupt over
returns, was talking cost-cutting—not in the agreement.
fractions, but in straight halves. The grey-
haired men with massive egos, who share Forced Pitstop
morally ambivalent relationships at the best It’s not as if the teams wanted to scale down
of times, were trusting one another to think the scope of their operations or stop spend-
about the greater good of the sport. ing gazillions on, say, crafting a piece of
If F1 history is any marker, the fun and bodywork that magically allows air to pass
games start now, as much off the race track through rather than impede the moving
as on it. In good times, the F1 fraterni- car. It’s just that sub-prime and its fallout
ty would put a tax accountant to shame forced their hand.
with its interpretation of rules. In these The crisis has already forced many to leave
bad times, when there is unprecedented F1. Honda, one of the six car manufactur-
pressure to cut costs without losing com- ers (traditionally, the guys with the money)
as it has had since it entered the sport in
2002, it might follow Honda. Elsewhere,
the sub-prime victims are also pulling out.
Two major sponsors, ING for Renault and
RBS for Williams, have said that, come
2010, they would use their precious mil-
lions to generate tangible revenues instead
of intangible benefits.
For an industry that prides itself on preci-
sion and measures itself in fractions, con-
clusive or official numbers—for anything—
are hard to come by. By some estimates,
ING, along with Vodafone, was the second-
largest spender in F1, after Philip Morris
cigarette brand Marlboro. According to a
Formula Money report, ING pumped $86
million into F1 in 2008, with $65 million
going to Renault, representing more than
half of the team’s sponsorship revenues.
So, when Flavio Briatore, the crusty Italian
who helms Renault, realised that about a
fifth of his team’s budget will go poof next
year, and that there aren’t many sponsors
willing to pay that kind of money to have
their names splashed on his cars, he had no
option but to scale down. Likewise, when

86 OutlookBusiness > April 4, 2009


So obsessive and limitless is the pursuit of success in Formula 1 that teams
admit they can’t turn off the spending tap—unless someone does it for them
Mercedes told Ron Dennis, the co-owner
of McLaren-Mercedes, that it didn’t have
money to burn as in the past, he had no
choice but to join Briatore. Bernie Eccle-
stone, the maven who has been running
F1 since 1978, probably empathised, given
that he’s in the midst of a costly divorce that
could take some billions out of his personal
fortune. When the F1 boss heard team own-
ers complain that they couldn’t afford to
spend like this, but couldn’t afford to stop
spending either, he had no choice but to
call in the artillery.
The artillery, in this case, came in the
shape of FIA President Max Mosley, a man
who likes to wear Nazi uniforms and get
whipped by women in leather outfits. When
it comes to the sport and the men that drive
it, however, Mosley doesn’t mince words.
Recently, the 68-year-old summed it up
for German magazine Der Spiegel: “The
endeavour for success has succeeded over
any kind of financial discipline. Formula
1 is becoming ridiculous.”
Since 1990, 28 teams have either changed
hands or vanished. According to F1 Rac-
ing, in 2005 (the only year for which figures
are available), Ferrari spent $426 million,
Toyota $397 million, McLaren $359 mil-
lion and Renault $258 million. Minardi’s
was the lowest spend—at $39 million, it
was around Michael Schumacher’s salary
for that year from Ferrari. That year, Re-
nault won both the driver’s and construc-
tor’s trophies, and Ferrari and Schumacher
were a distant third.
Racing As Usual
Mosley wants F1 to reorganise itself in such
a way that each team won’t spend more
than $50 million per season. In that pe-
nurious backdrop, earlier this month, the
team principals, through their grouping,
Formula One Teams Association (FOTA),
outlined the ‘low-cost version’ of F1, rela-
tively speaking—because F1 will still be the
world’s most expensive sport. The major
proposals are cheaper engines, standardisa-
tion of some electronic equipment, lesser
on-road and wind-tunnel testing, limits
REUTERS
on iterations to the chassis, bodywork, etc,
and elimination of a wide range of exotic
metallic and composite materials.
Each proposal is an admission by teams
that so obsessive and limitless is the pursuit
of success in F1 that they can’t turn off the
spending tap—unless someone does it for
them. That is what these proposals partly
do. So, everyone will scale down. But in
the absence of a universal spending cap,
they will scale down in proportion. So, the
night-and-day gap between a Ferrari and
a Force India will remain.
More importantly, the urgency to win or
move up the grid will move teams to work
around the curbs on testing and devel-
opment—like the difference between tax
avoidance and tax evasion. Sooner rather
than later, someone will push the envelope.
Someone else will follow. It will eventually
become a self-perpetuating cycle, one that
turns cost-cutting into a self-defeating ex-
ercise. And the team principals will go back
to calling each other names. That’s how it
has always been in F1. <
OutlookBusiness > April 4, 2009 87
HEY! APURVA PUROHIT

KEE
SE
 GOAL
EPER,
GOAL
ETTER
Once, as a goalkeeper, she
imperiously fended off attacks
on the hockey field. Today,
she plots strategy and
directs traffic for a young
team at a radio station.
APURVA PUROHIT, CEO of
Radio City, has come a
long way since she took off her
pads. But the lessons hockey
taught her are etched deep in
her mind. AJITA SHASHIDHAR
caught up with her
recently in Mumbai to
find the parallels
SOUMIK KAR
She was once the custodian of the Tamil Nadu
hockey team. Today, she plays a somewhat
similar role at Radio City. Apurva Purohit,
CEO of the popular radio station, doesn’t
need to pad up for her new job, nor does she need to dive and slide, but
she has to be constantly on her toes to rally her team and best opposing
radio stations. That’s something that comes naturally to her, just as it did
when she was egging on her teammates from the goalpost, nearly 25 years
ago. The learnings from that time have remained with her to this day,
Ironically, Purohit first picked up a hockey stick out of compulsion, when
she was 18-years-old. At Stella Maris College, Chennai, it was mandatory
for all students to pursue at least one sporting activity. While most of her
classmates opted for cricket, Purohit, who found the game too lengthy,
opted for hockey instead. In no time at all, she found herself in the col-
lege team, despite never having played the game before.
Purohit was a natural athlete, but had confined her sporting activity to
the 100-metre dash in school. She took to hockey like a duck to water.
Her speed and agility caught the coach’s eye. To top it all, she had superb
hand-eye co-ordination, an essential pre-requisite for the job. Soon, she
was putting her body on the line, blocking balls flying towards her. The
hard work paid off. Within months, she was representing Chennai. Not
long after, she was selected as the Tamil Nadu goalkeeper and criss-crossed
the country to play at various inter-state tournaments.
She helped her different teams win many a tournament, and the certifi-
cates and trophies remain a source of pride to this day. The collection is
quite impressive, considering she played for only three years. After her
graduation, Purohit decided to unpad and pursue higher studies. She
cracked the CAT and got into IIM-Bangalore.
Life Lessons
Nearly 22 years have passed since Purohit last played a hockey match,
but the lessons she learnt on the field are still fresh, and guide her both
in her personal and professional life. “I acquired valuable management
lessons during my short stint in hockey, lessons even my B-school degree
didn’t teach me.” The goalkeeper’s job, she says, isn’t popular because it
is extremely dangerous at the best of times, even with all the protective
gear. “It requires a lot of courage and confidence to face balls that are
flying past one’s face like bullets,” says Purohit. That same courage and
confidence helped her build Radio City up from just four stations in
2005, when she took over, to 20 stations today. Many of the stations have
HEY! APURVA PUROHIT
broken even and most are market leaders
in their cities.
“Hockey makes you tough, and goalkeep-
ing more so. It’s a lonely position, and if
you don’t have the nerve to face the danger,
you have no business standing under the
bar,” says Purohit, intensity writ large on
her face. “If you’re the CEO of a company,
it’s pretty much the same—the buck stops
with you.” The Radio City chief explains
how even during practice, the keeper is
pretty much used as a target, as one player
after another hammers the ball at the goal,
often at face-level. Sometimes, inadvert-
ently, two players take a crack simultane-
ously. But neither this nor the injuries
that were part and parcel of
being a custodian deterred
Purohit. She was good in
the goal, and she enjoyed
being there.
The skill that she values
most from her hockey days
is communication. During
matches, while her team-
mates were in the thick of
the battle, Purohit had a
perfect view of the run of
play. She could spot the
weak links in the oppo-
sition’s defence and point
those out to her players.
Holes in her own defence
were also plugged in this
manner. Tactics had to be
modified constantly; for in-
stance, a dangerous forward
“Goal k
on the opposition’s team
would find it hard to make
If yo
a breakthrough with Puro-
hit keeping her full-backs
you ha ve n o
on her tail. Of course, de-
spite this, there were many
attempts on goal.
The other lesson hock-
being u
ey taught her is to have a
“positive attitude”. She recalls an i n -
cident that took place during the Women’s
Federation Cup in Chandigarh. Her team
had lost badly in the first two matches and
the selection for the third one was on. Puro-
hit stood dejectedly in one corner blaming
herself for the defeat. “My captain came up
to me and said that I was passing wrong
signals to the selectors. She was right—I
was dropped for that game.” That experi-
ence was ingrained deeply in her psyche.
“Today, if I have to appraise two team mem-
bers who haven’t achieved their targets, I
will support the one who has a fighting
spirit rather the one who accepts defeat. I
strongly believe that employees shouldn’t
be judged on skill alone, but also on the
90 OutlookBusiness > April 4, 2009
basis of their attitude.”
Not surprisingly, her experiences as a
hockey player figure prominently in her
discussions with her team at Radio City.
“She narrates anecdotes from her hockey
days and relates them with the current
work situation effortlessly,” says a former
colleague of hers.
Those Were The Days
Apart from the management mantras she
has imbibed from the sport, Purohit also
has fond memories of her team members
and the fun they had together. Since she
was from the Northern part of the coun-
e ep in g is t ou gh.
rve,
u la c k th e n e
b us iness
n d e r t he b ar”
try, many of them were initially wary of
her. “I remember one girl bought herself a
sleeveless outfit and her parents promptly
blamed me for polluting her!” she says with
incredulity. All it took for Purohit to be-
come one with the team was pick up a few
Tamil phrases. “I even learnt some slang
without knowing what the words actually
meant. Once it got me into trouble with
a teammate,” she says, breaking out into a
paroxysm of laughter.
Purohit’s mother always told her that
“adaptability was the greatest form of in-
telligence”. And, adapt she did. “We were
often asked to spend nights on school cam-
puses of towns in interior Tamil Nadu. Of-
ten, we had to sleep on railway platforms
during our tours,” she recalls. However,
the hospitality of the organisers made up
for all the hardships. “I can never forget
the steaming hot idlis and sambar. I also
loved mor (butter-milk) which used to be
served with each meal.”
Since those days, she has always remained
a sambar-loyalist. “At IIM, there was the
sambar brigade and the dal brigade. Since
I am a North Indian, I was expected to
join the dal brigade. But I was a sambar
loyalist, and pleaded with the caterers at
the canteen to serve us sambar seven days
a week,” she says.
Teamwork Is Key
Purohit believes nothing can beat team-
work. At Radio City, she ex-
plains, there is often a conflict
between her sales and program-
ming teams over commercial
time—the sales team wants to
push in as many commercials
as it can, while programming is
not comfortable accommodat-
ing that many, as it interferes
with the content. “I always tell
them that there has to be some
give-and-take between the two
functions. That can happen only
if they work together, keeping the
greater interest of Radio City, the
team, in mind.”
Does she regret having given up
hockey? “Not really,” says Puro-
hit. “I feel there is a right time
for everything in life. I have done
so many other things since then.
I pursued my studies, worked,
got married, had a child. And I
have enjoyed all these as much
as I enjoyed playing hockey.” She
is not actively involved with
any sport today and prefers
yoga instead to stay fit and de-
stress. But Purohit makes it a point to
cheer her company’s football and cricket
teams each time they participate in a cor-
porate tournament.
Both her husband, Sanjay Purohit, the Ex-
ecutive Director of Cadbury India, and her
son Siddarth, are keen sports enthusiasts.
“I often watch cricket matches at Shivaji
Park with Siddarth, who is a cricket fan,”
she says. The family has travelled all over
the world to watch cricket matches.
So, what plans now that the second half
of her life has begun? Purohit and her fam-
ily love to travel, and that will be the main
item on their agenda, the slowdown not-
withstanding. If you happen to be in the
Netherlands, don’t be surprised if you bump
into her near a hockey stadium. <
BOOKS

The Secret
Of Success It’s not about being smart. It’s about being
in the right place at the right time.
At least, that’s what Malcolm Gladwell’s
latest book would have you believe

Sudipto Dey TRUE OR FALSE? Bill Gates, Steve Jobs,

Michael Jordan and Mozart made it

S
UCCESS NEEDS GENIUS, BUT THERE’S NO because of fortuitous circumstances
such thing as a self-made genius. At least, that’s plest language are to be lauded. However,
the premise of Malcolm Gladwell’s Outliers. The the message starts becoming repetitive half
way through the book. Often, it seems as
author contends that there are other factors that if the writer is stretching an anecdote to
contribute to someone becoming successful. These make it fit into his line of thinking.
The book, which has been written for
include place and time of birth, family and cultural an American audience, has some riveting
background, opportunities and circumstances, and what sections. For instance, Gladwell has also
touched on outlier underachievers. Take
the individual made of those opportunities. Together with Christopher Langan, who was self-taught
genius, these factors create an outlier Germany, over 1,200 times between 1960 and had an IQ of 195-210. Langan did well
achiever. An outlier, by definition, is some- and 1964, crossing the 10,000-hour mark. in school, but difficult economic and fam-
one who doesn’t quite follow the beaten The writer feels those hours helped hone ily circumstances forced him to drop out,
path. He falls outside the mean. And just the band’s talent and laid the ground for and he never rose to the top. In contrast, J
as there are outlier achievers, there are also them to become fantastic. Robert Oppenheimer, who matched Langan
outlier underachievers. Again, Gladwell says Microsoft Founder in brilliance, did well because of an affluent
Gladwell, who has already penned two Bill Gates met the 10,000-Hour requirement family background. He went on to head the
bestsellers, The Tipping Point and Blink, has because of some fortuitous circumstanc- Manhattan Project, which developed the
devoted a good part of Outliers to explain es—at age 13, he got access to a mainframe atom bomb (though some would be loath
how a genius becomes an outlier achiever. computer, thanks to his mother’s circle of to consider that an achievement).
Right through the book, he harps on the friends, and spent thousands of hours pro- The writer states that a person’s time of
‘10,000-hour rule’, stating that success in gramming on it. birth could play a huge role in his success.
anything can be achieved by practising a It is no coincidence, he says, that several
specific task for at least 10,000 hours. He A Nice Read stalwarts in the American IT industry were
cites the Beatles as an example. The Brit- Gladwell’s writing is easy and his efforts to born within years of each other. Paul Allen,
ish band performed live gigs in Hamburg, simplify a rather complex issue in the sim- Bill Gates, Steve Ballmer, Steve Jobs, Scott

92 OutlookBusiness > April 4, 2009


T HIS IS the advantage that Oppen-
heimer had and that Chris Langan
lacked. Oppenheimer was raised in
one of the wealthiest neighbourhoods
in Manhattan, the son of an artist and
a successful garment manufacturer.
His childhood was the embodiment of
concerted cultivation. On weekends, the
Oppenheimers would go driving in the
countryside in a chauffeur-driver Pack-
ard. Summers, he would be taken to Eu-
rope to see his grandfather. He attended
McNealy, Vinod Khosla, and Bill Joy were
all born between 1953 and 1956, and were
well equipped to ride the personal comput-
ing wave that swept the world in 1975.
Apple Founder Steve Jobs benefitted from
growing up in Mountain View, California,
in the heart of Silicon Valley. He attended
evening talks by Hewlett-Packard scien-
tists, hobnobbed with H-P founder Bill
Hewlett, and even had a summer job with
the company. He later went on to make the
celebrated Macintosh computer.
OUTLIERS
Author: Malcolm Gladwell
Publisher: Allen Lane
Price: Rs 399/-
Pages: 309
the Ethical Culture School on Central
Park West, perhaps the most progres-
sive school in the nation, where, his bi-
ographers write, students were “infused
with the notion that they were being
groomed to reform the world.”
By the end of the book, Gladwell has
dimmed the halo around many successful
people, reducing their brilliance to back-
ground, timing, circumstances and sheer
luck, without demeaning their intellect
and effort. The writer is brutally forthright,
when he says: “(The outliers) are products
of history and community, of opportunity
and legacy. Their success is not exception-
al or mysterious. It is grounded in a web
of advantages and inheritances, some de-
served, some not, some earned, some just
As a child, Oppenheimer was pas-
sionate about rock collecting. At the
age of 12, he began correspond-
ing with local geologists about rock
formations he had seen in Central
Park, and so impressed them that
they invited him to give a lecture
before the New York Mineralogical
Club. Dreading the thought of ad-
dressing an adult audience, Robert
begged his father to explain that
they had invited a 12-year-old.
Greatly amused, Julius encouraged
his son to accept the honour.
On the designated evening, Rob-
ert showed up at the club with his
parents. The startled audience of
geologists and amateur rock collec-
tors burst out laughing when he ap-
proached the podium; a wooden box
had to be found for him to stand on
so the audience could see more than
the shock of his black hair sticking
up above the lectern. Shy and awk-
ward, Robert nevertheless read his
prepared remarks and was given a
hearty round of applause.
Is it any wonder Oppenheimer
handled the challenges of his life
so brilliantly? If you are someone
whose father has made his way
up in the business world, then you’ve
seen, firsthand, what it means to ne-
gotiate your way out of a tight spot. If
you’re someone who was sent to the
Ethical Culture Schools, then you aren’t
going to be intimidated by a row of
Cambridge dons arrayed in judgement
against you. If you studied physics at
Harvard, then you know how to talk to
an army general who did engineering
just down the road at MIT. Chris Lan-
gan, by contrast, had only the bleakness
of Bozeman, and a home dominated by
an angry, drunken stepfather.
plain lucky—but all critical to making them
who they are. The outlier, in the end, is not
an outlier at all.”
You have to admire the man for the zeal-
ous manner in which he has made his case.
However, the data on which he has based
his theory is too small. And, moreover,
even if it were true, that would mean that
poor people would never be able to become
successful. The world has enough examples
to prove otherwise. Nevertheless, Outliers
makes for a great read. <
OutlookBusiness > April 4, 2009 93
00
ACADEMICS

A Different Course
The Fab Four, and a crazy lot of academic programmes
IN A FIRST, the Liverpool Hope University
in the UK has launched a Master of Arts
degree course on the Beatles. The post-
graduate course in musicology is designed
to study the impact of the Fab Four on
popular music and society. Students have
to take four 12-week modules and prepare
a dissertation. Explaining why the course
was launched, Mike Brocken, a senior
lecturer in popular music, says: “There
are over 8,000 books about The Beatles,
but there has never been serious academic
study and that’s what we’re going to
address.” The course, ‘Beatles, Popular
Music and Society’, starts in September.
While the Fab Four certainly deserve
having a course dedicated to them, there
are some curricula in other universities
that make one wonder about the rationale
behind them. For instance: ‘Arguing with
Judge Judy: Popular Logic on TV Judge
Shows’ is a programme offered by the
University of California, Berkeley, in the
US. The course is “an exploration of
logical fallacies that are often presented
by defendants and plaintiffs on court
television shows like Judge Judy and The
People’s Court.” If that one is unusual,
the next one is downright wacky; the
University of California, San Diego, has
a short-term programme on ‘Underwater
Basket Weaving’.
The College of Charleston, South Carolina,
tops them all. It has a summer course
called Myth, Baseball, and the Meaning

ADVERTISING that, in general, messages expressed in believe this is not due to differences in
native languages tend to be perceived as languages or difficulty in understanding

Mother Tongue more emotional than messages expressed

in their second language. The authors
copy in other languages. They say that the
emotional advantage of a consumer’s native
language depends on personal memories
If advertisers want to connect emotionally and the context in which those memories
with consumers, they need to communicate were generated. Thus, reading or hearing
in the vernacular. That’s what researchers a word unconsciously triggers memories
at Erasmus University in the Netherlands of situations in which that word played
have found after studying bilingual and a role. Because consumers usually have
trilingual populations in Europe. They more personal memories with words in
tested different slogans with participants their native language, marketing messages
and found differences in how the messages in their native language tend to be perceived
were perceived. The researchers found as more emotional, the researchers claim.

94 OutlookBusiness > April 4, 2009

 Photography is truth. Cinema is truth twenty-four times per
second.”
CURRENCY
Sign Value
The Indian government is keen on having
a unique symbol to denote the rupee. To
this end, it has decided to hold a public
competition to design a symbol for the
rupee. Currently, Rs is used to denote rupees.
Experts say that since this is an abbreviation,
it is not really a symbol for a currency.
Nepal, Mauritius, Pakistan, Sri Lanka and
the Seychelles also call their currency the
rupee and use the same abbreviation, which
is perhaps why the government wants to
differentiate the Indian rupee.
India is not the only country without a
currency sign; in fact, most world currencies
have no specific symbol, excepting a few
major ones like the US dollar ($), the British
pound (£) and the Japanese yen (¥).
Many of these currency signs have an
interesting history. The dollar sign is a
corruption of the Spanish-Mexican ‘P’s’ for
of Life. Students have to take a critical
look at many of the myths that have grown
around baseball and use the sport as a
mirror to understand the experience of life
in America. In Massachusetts, Merrimack
College has something for those with a
theological bent of mind: a course that
explores “spirituality” and analyses prayer,
sacraments and pilgrimage as ways of
understanding running. College students’
actual experience with running is shared,
along with ways that running creates a
connection with the world and with God.
Given the times we live in, perhaps, these
programmes are par for the course.
Jean-Luc Godard, French filmmaker (1930- )
< The concept of
the ORGAN was
created in 246
BC by Ctesibius
of Alexandria.
He invented a
mechanical flute-
playing instrument
with wind pressure
regulated by means of water pressure,
called a hydraulis.
< Ib on the South Eastern Railway
and Od on the Western Railway
are the shortest STATION NAMES
in the Indian Railways’ network.
Venkatanarasimharajuvariipeta on the
Arakkonam-Renigunta section of the
Southern Railway is the longest station
name in the Indian Railways’ network.
GETTYIMAGES
< When a GIRAFFE is born, it falls from
a height of six feet, normally without
being hurt.
pesos or Spanish dollar. The ‘S’ gradually
came to be written over the ‘P’, developing < Underground is the only word in the
a close equivalent to the ‘$’ mark. ENGLISH LANGUAGE that begins and
The pound sign (£) is derived from librum, ends with ‘und’.
the Latin word for balance and the basic
Roman unit of weight. The £ symbol is also < Charlie Chaplin won third prize in a
known as the lira sign. In Italy, before the CHARLIE CHAPLIN look-alike contest.
country adopted the euro, the lira sign was
used as an alternative to the more usual < Playing CARDS were standard issue
L to indicate prices in lire, always with for British pilots in WWII. If captured,
double horizontal lines. Other nations, such they could be soaked in water and
as Lebanon and Syria, continue to use the unfolded to reveal a map.
lira sign to denote their currency. There are
other countries whose currency is called the < Lake Nicaragua,
pound, but that do not use the symbol. the largest lake in
The ¥ sign stands for renminbi, which Central America,
literally mean people’s currency, and is boasts the only
shared by two countries—Japan and China. F R E S H -W AT E R
And, the euro sign (€) was designed by SHARKS in the
Belgian artist Alain Billiet for the European entire world.
Commission in 1996 and is used in 27
countries in the European Union. < DONALD DUCK
comics were once
banned from
Finland because the cartoon character
didn’t wear pants.
< The world’s first law criminalising
Best of the WORLD PORNOGRAPHY was enacted by the
Parliament of the UK in 1857 in the
BODY COPY: Don’t be lost in the
Obscene Publications Act.
weird world of investments
AGENCY: Leo Burnett, Sao Paulo, < CRICKET was played in Kerala’s
Brazil Thalassery town much before it was
introduced in Calcutta in 1860.
CLIENT: AE Investmentos
Compiled by Jinoy Jose P
OutlookBusiness > April 4, 2009 95
PROTECTIONISM
Stop Whining
CALIFORNIA GOVERNOR Arnold
Schwarzenegger has some advice for
those who are feeling the heat of the
recession. Stop whining, is the succinct
message from the Austrian Oak. “We
can complain and whine and resign our-
selves to defeat or stand up and challenge
ourselves...that’s what winners do. Los-
ers whine, but winners move forward
in a positive way,” said the Terminator
star at the sidelines of the Cebit tech
fair at Hanover, Germany. The seven-
time Mr Olympia also believes that pro-
tectionism is a bad thing. “There’s talk
in the US about protectionism and I
think it’s the wrong way to go...I hope
that our country doesn’t start dialogue
in the other direction. I will do every-
thing in my power to stop that,” said
Schwarzenegger.
Given the fact that the Austrian-born
Schwarzenegger made his millions in
the US and now holds the gubernato-
rial office of California, that stance is
hardly surprising.
Traitor, Coolie, Indian
FOR A business that’s about plain bits
and bytes, IT services outsourcing has
attracted a lot of strong language. A
former bureaucrat once termed India’s IT
workforce as ‘cyber coolies’. John Kerry,
who ran for the presidency of the United
96 OutlookBusiness > April 4, 2009
States in 2004, brand-
ed companies that
outsource as ‘traitors’,
putting the likes of
IBM, Citibank in the
same league as cold
war spies Ethel and
Julius Rosenberg. Obama, many hoped
and prayed in India, was a man dyed in
more liberal ethos. Eyebrows were raised,
but just a tad, when he brought up out-
sourcing during his preliminary jousts
with Mrs Clinton. After all, the elections
were still a while away and Obama was a
dark horse. But when the former Illinois
senator, in his maiden address as Presi-
dent to the US Congress, spoke of ending
tax breaks to companies that move jobs,
many a Nasscom member’s heart was bro-
ken. It’s back to 2004, and this time, it’s
not just some president hopeful shooting
off some ‘political rhetoric’, like Nasscom
used to brand it.
The Cocaine Trap
What do protectionism and cocaine have
in common? Both are addictive, both can
give a good high and both can cause a
quick demise. Richard Fischer, President
and CEO of the Federal Reserve Bank
of Dallas, drew this interesting parallel.
He describes protectionism as the crack
cocaine of economics. “We cannot afford
to go down that path. And I hope our
senators, Democrat and Republican, will
be sensible on that front,’’ says Fischer.
In fact, the US may have already dipped
into the cocaine pile and started sniffing
it. The ‘Buy America’ slogan and the ban
on those benefiting from government aid
from hiring H-1 B visa holders are just
the after-effects, he bemoans.
Worst Guy In Europe
THIS IS a shocker. Debonair French
President Nicholas Sarkozy has been
dubbed as the “worst guy in Europe”.
No, it’s not that some are jealous of him
for having the glamorous Carla Bruni as
his arm candy. Though most European
countries have turned to some kind of
protectionism to save their industries
and jobs, Sarkozy is alleged to have been
the most vocal about the whole affair. He
ruffled a few feathers in Europe when he
told French carmakers in Czech Republic
and Slovakia to shut down their plants
and return home. Czech President and
European Union President Vaclav Klaus
was so rattled that he has been openly
talking about retaliation. Robert Fico,
Prime Minister of Slovakia, said that if
France doesn’t stop its brutal protec-
tionist sabre rattling, he will send Gaz
de France, the French natural gas com-
pany—a current stockholder in Slovak
gas companies—back home.
Sweden, which is tipped to take over
the European Union presidency from
the Czech Republic in July 2009, too has
been lamenting that France has contract-
ed a deadly, protectionist virus. It fears
that the €6 billion in loans that France
has granted its carmakers might hurt the
competitiveness of Swedish cars. <
—TV Mahalingam and
Ashish Gupta
ILLUSTRATION BY VIVEK THAKKAR