September 25, 2000

Misplaced optimism
The stock market has a way of making the most powerful money managers eat their words. UTI chairman P S Subramanyam, is on record saying that the BSE Sensex would touch 6000 by October. With just a week to go and oil prices showing no sign of decreasing, the Sensex is in fact struggling to remain above 4000. UTI’s misplaced bullishness probably led to its private placement acquisition of PNC Communications’ shares at Rs 300 each when the market has now valued them at around half the figure. That is a straight loss of Rs 15 crores to unit holders.

MSEB’s crackdown
Armed with a decision from the Maharashtra cabinet, MSEB chairman Yashawant Bhave is cracking the whip to recover electricity arrears. Firstly, MSEB has started mopping up the additional deposits which it had neglected to collect from domestic subscribers over the years. Secondly, it is taking another look at the night- time supply of cheap power (at Rs 1.80 ) to certain ferro-manganese companies from NTPC. This was a concession that a few companies had wrangled through the central government. Finally, it has begun to talk tough with the defaulters including steel companies. The first condition is no outstanding on current bills and a programme for clearing arrears within a specific timeframe. Though MSEB’s crackdown against defaulters clearly demonstrates its determination to recover money, it is still the easier part of its job. The more difficult part is yet to begin — that is the MSEB management’s ability to withstand political pressure. Corporate houses that are under pressure to pay up have already begun to approach their political friends. On top of their agenda is a nearly impossible demand that the fund starved MSEB should cut subsidy to farmers so that the cost of electricity for everybody reduces significantly.

Ice says no to subsidies
While politicians and subsidies are MSEB’s problem areas, an equally difficult issue is dealing with corruption within its own ranks. At a recent seminar, the Bombay Ice Manufacturer’s Association demanded stoppage of “widespread power pilferage” in the ice industry and action against corrupt MSEB officials. Ice manufacturers who use of high-tension power allege that several ice manufacturers in Mumbai’s industrial suburbs which cover Kalyan, Ulhasnagar, Belapur, Taloja etc. have bribed MSEB officials to illegally split loads and are using ineffective meters to pilfer power. The Bombay Ice Manufacturers’ Association wants the MSEB to immediately install electronic meters in these areas; introduce extra vigilance at nights and on holidays to stop theft and prosecute those responsible for the thievery. It has also demanded that no ice factory should be allowed low-tension connections at all. Since power is the most expensive input for ice manufacture, rampant power theft damages the profitability of units which are correctly charged. It is thus the rare industry which is urging MSEB not to subsidise power; and asking it to levy the same commercial rates charged by BEST and BSES within the metropolitan area. An example of how tough competition forces transparency and attacks corruption.

Had Infosys happened today
Infosys the darling of the stockmarket and one of our most ethically run companies is the biggest triumph of venture financing in India. But if Infosys were to happen today, after the tax authorities have decreed that venture financiers should divest their stake within 12 months and the story would be very different. Its venture financiers would be on the verge of harakiri. Infosys first went public at Rs 95 a share (in 1993), its lead managers struggled to have it subscribed. Soon after it was listed at Rs 145 and in the next 12 months when the share was quoted just a little higher the venture capitalists would have had to exit. With the shadow of divestment hanging over the share price, it would never have moved beyond Rs 95 let alone gaining enough momentum to allow a private placement to FIIs at Rs 450 in 1994. Infosys would have gone from strength to strength, but venture capital would have stayed clear of India.

Updated weekly.

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

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