The Matrix gets reloaded...
India Inc. delivers half-year results with respect once again, the markets are in upbeat mood

(column by Deepak Ranjan Patra)

When the Sensex started a downward slide from nearly 13,000 points earlier this year, India Inc. came under severe pressure, owing to both depleting valuations as well as dented investor confidence. The bear factor threatened to jeopardise the much-hyped growth plans of Indian companies. However, by ending the first half of financial year 2006-07 with a rocking financial performance, Indian companies have hit back just the way they were expected to. And the bulls are back, as the Sensex has crossed 13,000 points on October 30, 2006. Just like the stock markets, the Indian economy also looks incredible with a quarterly GDP growth rate of 8.9%.

The combined gross turnover figures of 592 companies that have published their results for half-yearly ended October 28, 2006 stand at Rs.3.2 trillion (yearon-year growth of 27%). The net profit figures too marked impressive at Rs.328 billion (year-on-year growth of 27%). “A majority of the companies that have declared their results till now are either in line with the market expectations or have beaten the same for the second quarter. Considering the first half of this fiscal, it has been great for corporate India,” comments K. K. Mittal, VP & Head, Escorts Asset Management Ltd.

Buoyed by a rapidly developing economy and a booming infrastructure sector, cement companies are smiling all the way to bank during this quarter as well. Though the historical track record suggests a slowdown for the cement industry in Q2 due to the Indian monsoon season, this fiscal has been markedly different. Combined bottom-line figures of 11 companies have grown by a whopping 444% for the first half of the current financial year. The IT sector has come out good as always. While Infosys has posted a 48% top-line growth for H1, both TCS and Wipro have grown by 47% each. Pharma companies showed 22% top-line and 30% bottom-line growth. The gross turnover figures of auto and auto ancillary sectors have risen by 18% and 23%, respectively. The banking sector too has posted growth of 31%. Other sectors, where most companies declared their results, also showed profitable growth.

With consumer spending on a constant upswing, the bonhomie is expected to continue. As per R. K. Gupta, MD, Taurus Mutual Fund, “The age old mindset of ‘save and then spend’ is now changing to ‘spend and enjoy’, creating wide opportunities for various sectors like consumer durables and banking.” Considering the overall scenario, analysts are really bullish on corporate India’s future performance. And the results are a clear indicator of the fact that whether markets soar up or go tumbling down, the basic fundamentals of the Indian economy are strong; and that’s what ultimately matters.

(End of Deepak Ranjan Patra column)

Put on your thinking Caps
More M&As expected in Indian IT, especially for mid-sized firms

There are creeping doubts in the minds of analysts worldwide, regarding whether India will be able to retain its competitiveness as an outsourcing destination. Capgemini, though would not count as one of the skeptics. The Francebased IT consulting firm announced its acquisition of US-based Kanbay International for $29 per share, which values Kanbay’s share capital at $1.25 billion on October 26, 2006. While this transaction results in operational synergies, it helps Capgemini achieve two very critical objectives – expansion of base in North America and India.

Capgemini CEO, Paul Hermelin (in the picture below) reiterated, “The acquisition of Kanbay, a world-class IT services provider, supports our growth strategy and significantly enhances our global Banking, Financial Services and Insurance practice, particularly in North America and India, where Kanbay has over 5,000 associates.” In India, the headcount for Capgemini glowould increase to 12,000, a rise of 89% over its stand-alone figures. Another key aspect for Capgemini is Kanbay’s strengths in financial services. In September this year, Capgemini also acquired HLL’s 51% shareholding in Unilever India Shared Services Limited (Indigo).

According to Sudin Apte, Sr. Analyst & Country Head (India), Forrester Research, “This acquisition is not about “synergy”, it’s mainly about muscle power on Indian ground. It shows the centre stage position India – as an off shore destination – is gaining across US & Europe.” As Europe gets more open to off shoring, players like Capgemini will ramp up their India operations, where off shoring is headed. And this is expected to lead to more acquisitions in the Indian IT space. Apte foresees “a shake-out in Tier 2 of Indian companies via mergers and marginalisation.” For these firms, exiting the market at the opportune time would be the best thing to do; as more dollars and euros get pumped in.

Moving up in style...
Indian & foreign brands are forming tie-ups to tap the affluent class

(column by Angshuman Paul)

Enough has been said about the bottom of the Indian pyramid, so much so that one tends to overlook the teeming potential of the Indian affluent class. With the World Bank ranking it as the twelfth most wealthy nation in the world, India is the new-found paradise for global high-end ritzy brands. The year 2006 saw the entry of Versace, Escada, Lambourgini & many others waiting in the line, including Llardo, Valentino, Gucci & Giorgio Armani. Echoes Gregory J. Furman, Chairman & Founder of Luxury Marketing Council, “With the affluent consumer segment set to grow at 13% over the next few years – the market presents tremendous potential for luxury goods.”

Indian players are now bringing in global brands to tap this unexplored market. Tarun Joshi, CEO, S. Kumar, which roped in Escada, states, “A globally famous brand does help high class customers.” Reiterates Sushen Roy, Divisional Head, Marketing, Tata International who got Germany’s Lloyd, “Within 3 years there’ll be a market (for luxury goods) of 25 million people and to address them you need a premium international brand.” Arvind Brands has tied up with European Gant & Nautica and unleashed the world’s largest showroom for Nautica & Arrow in Bangalore.

And today when we are going ga ga over the foreign brands, there is a fear of the indigenous brands being throttled by them. But just as Joshi reassures, “It (Escada) does not disturb my other Indian brands as they are positioned in a different segment,” the Indian brands have developed an identity of their own and such tie-ups will only give the best to both the Indian producers and the affluent Indians!

(End of Angshuman Paul column)

Mis’management education!
The move by IIMs to tie-up with NIIT, to offer executive management programmes, is clearly puerile

Perhaps the most clichéd saying in the education sector is, ‘It’s better to have no knowledge than half the knowledge’. In their obstinate attempt to prove the above statement right... or wrong (take your pick, both choices seem as banal), the IIMs at Ahmedabad, Calcutta & Indore have shoved it upon themselves to offer management programmes priced between Rs.54,000 and Rs.1,94,000 from October 2006, to working executives using computer-based distance learning modules through NIIT Imperia, a joint alliance with NIIT Ltd. And in their frenetic impatience to reach the market, six Centres of Advanced Learning have already been opened at Mumbai, Delhi, Chennai, Bangalore, Hyderabad and Kolkata somehow. Not surprisingly, this “proactive” IIM move to spread education has been much criticized by various educationists & analysts on clearly visible anomalies.

One anomaly relates to the risible move of the IIMs in involving a third party like NIIT. Critics point out that it wasn’t long ago when premier institutions like IITs offered distance learning certificate programmes through questionable and shady outfits like CEP (in IIT Kharagpur), FITT (in IIT Delhi), and marketed them through a worse external outfit called ElNet-3L, which eventually turned out to be a completely fraudulent company, duping thousands of students and going bust consequently, ensuring a massive loss of face to the IITs. No doubt, the 25-year old NIIT’s name is much respected; but wasn’t it only around a year back that the much-hyped NIIT University, after negative court rulings, had gone into a limbo, and started operating in January 2006 under the new name of TNI from a ‘transit campus’ in Lajpat Nagar, a middle class residential locality in New Delhi?

Or is it that perhaps the esteemed administrators at IIMs hope that critics would have forgotten how, not many months back, IIM Bangalore, IIM Calcutta and IIM Kozhikode trampled over each other in their much sophomoric hurry to sign distance education agreements with a private education service provider, DiRECWAY Global? How successful was that? Well, the answers don’t seem to be coming. When questioned by B&E on the IIM-NIIT venture, Amarnath Krishnaswamy, Head (Corporate Communication), IIM Bangalore, expounded, “I don’t know the intricacies of the tie-up; it’s just a training programme that goes a ‘little beyond’...” And when questioned by B&E on the revenue objective, Professor Anindya Sen, Dean, IIM Calcutta, championed that while “IIM Calcutta online programmes do better than the likes offered by XLRI..., the revenue part is something that we don’t want to discuss.” And that’s where lies the most killing anomaly, which is the ostensible reasoning of teaching more students.

On the launch, Professor Bakul Dholakia, Director, IIM Ahmedabad, famously commented to the media, “We could have trained only 60-70 students in a physical class. But under this system, using the same faculty resources, we can train three adtimes the number of students.” Three times?! Just 180 to 210 students?!? One though a distance education setup was supposed to teach thousands. But then, IIMs are not alien to this concept of massive wastage of resources. Just for the sake of bringing out the ridiculous wastage of resources by IIMs, while Harvard Business School teaches 1800 students in a campus of just around 33 acres, guess how much space does IIM Ahmedabad use within its campus to teach around 250 students in each batch. A ludicrous 138 acres! And IIM Calcutta? An equivalent 135 acres. IIM Indore? An inane 195 acres. IIM Lucknow (with 185 acres), IIM Bangalore (with 100 acres), apart from the other IIMs, also form part of this list of institutions wasting infrastructure built on taxpayers’ money.

The fact is that IIMs, despite having quality infrastructure to teach almost ten times the number of students being currently taught, have limited the seats – in a mafia like fashion – to primarily ensure that placement salaries are falsely kept on a high. Consequently, these students are beyond the affordability of, say, public sector companies and small scale industries, two entities for which the government had primarily set up the IIMs. So who gains? Foreign firms and multinational corporations who walk away with some of India’s best brains bred up on Indian taxpayers’ contributions!

Clearly, the IIM move to offer courses through NIIT seems to be just another slaphappy tactic to earn some money by the way side, given the unlettered manner in which they have limited true management education to a ‘precious’ few. Perhaps it’s truly better to have no knowledge than half the knowledge... But as the IIMs might say, "Which half?"