Telco

Undeterred by the drain on earnings caused by the slowdown in medium commercial vehicle and heavy commercial vehicle sales, Telco now seems to be banking heavily on its two new offerings. The first of which is a diesel sports utility vehicle, Safari. Telco's designs for the success of Safari appear to revolve around a niche marketing strategy of servicing the SUV segment.

The slew of global auto manufacturers operating in India have to their utter dismay realised that despite being technologically superior, "the price" has thus far been a definite clincher for a purchase. Thus, would not the Rs 8 lakh price tag for the Safari act as a deterrent? Especially since the market for sports utility vehicles is currently restricted to around 1.3 lakh units a year, the bulk of which is from the rural and semi-urban centres. The projected year-on-year growth of 10 per cent also fails to inspire much confidence in the niche. Furthermore, economies of scale and volumes have become the formula for success. But with an annual production target of anywhere between 36,000 and 40,000 units, (given that production would be adjusted on the basis of the first three months demand) would the Safari be a financially prudent option for the Tatas who are currently cash strapped? The only plus point here being that the Safari would from the very start have a very high degree of indigenous content. More importantly, there appears to be a host of players waiting in the wings to operate within this very niche. The Toyota-Kirloskar combine had only recently expressed a desire to enter the SUV segment. Mitsubishi is also planning a foray with its highly successful Pajero model. Daewoo with the recent takeover of Ssangyong worldwide would also now be in a position to exploit Ssangyong's stable of SUVs. The Mahindras are also said to be looking at the introduction of another SUV -- Scorpio. Besides all this the success of the Safari could well cannibalise market share belonging to cars from the Tata stable like the Sierra, Sumo and Estate.

Y2K

One question that frequently crops up about Indian software is whether it is merely cheap or it adheres to good quality. Granted that the Y2K problem is very well known and worldwide amounts to a business opportunity ranging from US$200bn to US$600bn. It is no surprise that Indian software companies like Satyam Computers, NIIT, Infosys and Tata Infotech have a glut of orders to cater to multinational clients. As on date their main focus would be to rewrite computer codes to make them Y2K compliant.

But recent studies conducted in South East Asia point towards prospective increased competition from Australian and UK players. This has increased scepticism about India's chances once the millennium problem is over. But it is a fact that Y2K represents a phenomenal opportunity for Indian software to gain recognition and generate strong client relationships to leverage for future business. For example, Satyam Computers is already an approved vendor for ten US state governments, because Y2K projects have provided it with increased client confidence. Post 2000 there would be burgeoning business opportunities in developing application software. Redundancy of Y2K programmers later on does not cut much ice because even an Oracle expert would have to be re-trained to keep in touch with changing technology. So the army of Y2K programmers can always be trained in emerging software applications later. Moreover, correction of non-critical systems affected by Y2K will spill over to the future which would be tantamount to increased business for Indian software companies.

Mutual funds

Kudos to the SEBI for empowering unit-holders of mutual fund (MF) schemes with "voting rights" -- rights that are yet to be defined with the principles of voting still undecided! SEBI has made it mandatory for MFs to seek unit-holder approval for making any changes in the "fundamental attributes" of a scheme. What constitutes these fundamental attributes, though, is a matter on which there appears to be no consensus.

Consider for instance, the acquisition of a majority stake by Prudential in ICICI Asset Management Company. The management thought that it amounted to a fundamental change and therefore the approval of unit-holders of all schemes floated by ICICI Mutual Fund would be necessary. A meeting was called and this was attended by around 40-50 per cent of the unit-holders. The proposal was unanimously passed and, thus, unit-holder approval was deemed to have been taken. Though SEBI has approved the above case, it is considering introduction of norms on postal ballot. It would also like to thrash out issues like whether one unitholder or one unit is equivalent to one vote and what percentage of responses would be decisive enough. It is highly improbable that a postal ballot would prove to be more effective in obtaining unit-holder approval than the method adopted by ICICI Mutual Fund. Not only is it essential to have clear guidelines on how to seek unitholder approval, when such an approval becomes necessary, but also needs to be defined.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.