July 24, 2000

A No takers for dollar returns

The cash strapped Sajjan Jindal group has a peculiar problem. It is now well known that relations between Jindal and Tractabel, its 50 per cent joint venture partner in the Jindal Tractabel Power project have soured and the foreign company is seeking an exit. The power project too had serious starting problems, with one turbine and then another developing snags and skewing production. As a result there were few takers for the Tractabel stake even at ICICI’s valuation of $ 42 million. Sajjan Jindal now claim that the project is operating at a 97 per cent plant load factor and giving the promoters a hefty 30 per cent dollar-returns.

Yet, the Tractable stake has not takers. Powergen which had prolonged negotiations with the Jindals walked away when the Jindals’ insisted on a 51 per cent holding. ICICI, the lead institution has hammered a deal to give Tractabel an exit and fixed a six-month period for the Jindals to find another buyer. Those six months are up and the Jindals have now bought extra time to find a buyer. Since the Jindals are themselves cash strapped, it is surprising that they continue to dictate terms.

Too bid to handle?

Mumbai came to a standstill last week following the monsoon deluge. Its Disaster Management Programme also proved a non-starter. Now the state government is busy trying to precipitate another disruption in the city by arresting Shiv Sena leader Bal Thackarey. Thackarey is certainly not above the law and the Sena has no business threatening to riot. But the threat to arrest him for an article written in 1993 smacks of political vendetta. A comparison with the financial sector would be useful. When UTI suffered a crisis last year, the government pumped in Rs 4,800 crore to bail it out.. Should something similar apply to political leaders? He should certainly be jailed if a court sentences him, but to arrest him for questioning, so many years later seems far-fetched.

Finding new pastures

After several vehement denials by the Finance Minister, the RBI has done the inevitable and hiked the bank rate. Almost as though a change in sentiment was anticipated FIIs led by Morgan Stanley have been heavy sellers on the stock market causing the sensitive index to tumble over a hundred points on consecutive days. The rupee too is under pressure as FIIs rush for the exits and find more attractive investment opportunities elsewhere in the world. Punters and regulators are both watching the tumbling stock prices with trepidation and refuse to accept the new reality. Unless economic policies remain forward looking , portfolio funds would find new opportunities.

Swadeshi economics

S Gurumurthy of the Swadeshi Jagran Manch never gives up. In a newspaper interview last week, Gurumurthy continued to espouse Swadeshi economics and pointed how it was superior to western economics. In western economies, he said the State was forced to provide Social Security for the aged and the infirm, while in India the ‘society’ defined as family, caste and community takes care of social security. Maybe Gurumurthy should look at the picture India presents to outsiders who find no glamour or virtue in the mangled system.

The Everett view

Here is how Jonathan J Everett, a venture capitalist from the View Group said this in a speech at a Harvard Asia Business Conference in January this year. He says, India has one great strength, one great weakness, and one great hope. Its great strength is its people, Its great weakness is its government and its great hope is the Internet. He says ‘‘India’s government is a powerful drag on India’s economy. In fact, it’s more than that. The past policies of the Indian government,Swadeshi socialism, constitute a human tragedy of immense proportions’’. Everett views are bound to make Gurumurthy see red even as he strives to push the country back towards swadeshi socialism.

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

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