A lot of the disappointment voiced about Mr N.R. Narayana Murthy’s return to Infosys has to do with the fact that people had put him on a pedestal and expected him to be almost super-human in all respects. And by returning, son in tow, he proved that he is as human as anyone. All the corporate governance principles he preached in his first stint in the company were quietly junked. A compliant board tamely increased the retirement age to accommodate Narayana Murthy and while doing that, also changed the rule about involving family members of founders. In his original stint, for instance, Mr Murthy had made a great deal about how Infosys discourages children and relatives of the founders from treating the company as a family business.Mr Murthy has justified his return by saying Infosys is, after all, his middle child. He also says that he returned because he was worried about his legacy. And finally, he has reiterated that his son Rohan Murty is not aspiring for a leadership role in Infosys. To a certain extent, Mr Murthy’s return can be justified. He had left Infosys in reasonable shape just about two years ago — and he had never expected it to go downhill so fast, despite having practically dictated the succession plan when he retired. Then there are the small material issues — a significant portion of his personal wealth is tied to the 4.7 per cent stock he holds in the company. If the stock underperforms, it will directly affect his wealth. Even for a person who does not live a flamboyant lifestyle, the loss of hard-earned wealth is difficult to stomach. And remember that Mr Murthy has really sweated blood to build Infosys. Sure, he had set certain rules about corporate governance when he was building the company — and it is far easier to stick to the straight and narrow path when the company is doing well, than when it is being beaten by peers and other rivals.In the short run, I would expect that Infosys’ fortunes to improve because of Mr Murthy’s return. For one, nobody can dispute that he will provide better leadership than either Mr Kris Gopalakrishnan or Mr S.D. Shibulal. For another, as the man who set the foundations of the old Infosys, he is best placed to also dismantle the old strategic and operational model and bring in a new one. If Mr Murthy throws his weight behind a new path for Infosys, few will question his right to do so. The handicap that both Mr Shibulal and Mr Gopalakrishnan faced was that they could not tamper too much with Mr Murthy’s legacy.The problem is that it will take some time to figure out whether Mr Murthy can effectively handle the new marketplace realities as well he did when he was originally in the saddle. The conditions under which Infosys is operating today are very different from the era in which Mr Murthy built up the company. He may be equally successful this time around — or he may not. If he is not, Infosys will have lost quite a bit of ground and time by the time he retires again. Mr Murthy also needs to understand that while Infosys is his middle child, it is an adult and fast approaching middle age. As the parent, he needs to let the child make its own mistakes and live its own life.While it is easy to understand and even sympathise with Mr Murthy’s motivations for coming back, it is less easy to appreciate the role the board has played. At the age of 67, Mr Murthy can be forgiven for wanting one more shot at rejuvenating Infosys — and also for bringing his son into the company to help him out. The more important question is that did the board really try very hard to find a different solution that would not involve bringing Mr Murthy back when it became apparent that Mr Shibulal could not bring about change in Infosys quickly? Apart from the management members, the Infosys board has quite a few brand-name independent directors. Before Mr Murthy came back, the non-executive chairman was Mr K.V. Kamath, who now has become the lead independent director. The issue that is not clear is whether Mr Kamath and the other independent directors on the board of Infosys tried to look for leaders — both from within the company as well as outside talent — who could pull Infosys out of trouble. Indeed, Mr Murthy could have been co-opted to help in finding a new CEO.The point is, it seems that the board took the easy way out. Mr Murthy wanting to return is understandable. The board seeing him as the only option is less easy to comprehend. (A caveat: I don't know if the board seriously looked for options beyond Mr Murthy).One final point about Mr Rohan Murty, Mr Narayana Murthy’s son. He does seem to have good credentials for any company to hire — he holds a doctorate in computer sciences and is a junior fellow at Harvard. But he obviously did not feel that his current career goals would be hurt by taking a sabbatical to help out his father. At the same age, I doubt whether Mr Murthy would have made a similar choice. businessworldonline (at) gmail (dot) com
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Brands are quick to shy away from controversies. But in the light of the IPL spot-fixing controversy, there was one brand that chose to embrace the entire imbroglio with both arms. Quikr, the online classifieds portal, chose to make hay when the spotlights were glaring down on tainted cricketers. Within a day of the news hitting the stands and screens, Quikr launched a print ad campaign with the phrase “An Open Letter To Indian Cricketers”. The appeal was to not sell themselves but rather sell old furniture or durables in their house for money through the online site. A television campaign followed suit almost immediately, showing a policeman appealing to the public, telling cricketers to sell everything except their souls for money on Quikr.But for every Quikr, there’s a Kingfisher. The brand lost no time in removing the mug shot of Kerala seamer S. Sreesanth from its "Ooh La La" ads that played on television during the match telecast. The King of Good Times clearly did not want to associate with someone who got bad times onto himself. — Prasad Samgameshwaran (Reuters)Taking The First StepsIt’s not exactly what the doctor prescribed, but it seems a beginning has finally been made. The central government has agreed to go in for a conciliation process to settle the Rs 11,217-crore tax dispute over Vodafone’s acquisition of a 67 per cent stake in Hutchison India for $11.5 billion in 2007.While Vodafone had last year offered to go in for conciliation under the United Nations Commission on International Trade Law (UNCITRAL), the government has opted to do it under the Indian law. It is now on Vodafone to decide whether it will go ahead. But, going in for conciliation is largely because the government did not have any other option. It is also a clear indicator that the government is willing to find a solution. This case will be followed by telecom operators globally. A resolution of the dispute will not just reduce uncertainty in the sector, but could be the first step to ensure that foreign direct investments start flowing back in. — Anup Jayaram (BW Pic By Jagadeesh N.V.)Not Music Over The Net, Yet!When Flipkart launched Flyte in February last year, the murmurs in the market became strong — Flipkart was clearly on the path of being India’s Amazon. The Bansals, owners of the online retail portal Flipkart, were doing everything Amazon did — from betting on a warehousing model to an online music store. Some industry experts claim that Flyte was investor Tiger Global’s plan to clone Amazon in India, just like it did in China with music.360buy.com.While Amazon and 360buy have been successful with their music stores, it seems like the idea was ahead of its time in India — where people still want to download free and/pirated music and products at a bargain. Add to that the fact that Indian telecom operators have slashed rates of music/video streaming, shelling out extra money by the consumer sounds unlikely. But all in all, Flyte was an idea that died because of lack of supports from its founders and investors. Amazon too had initially struggled with its music store and still faces a stiff competition from rival Apple iTunes, but the company had enough funds and continued to pump money into the venture even though it did not pick up scale in its seeding days. Similarly, given time, India is also expected to see its days of paid, legal music, especially now that companies like gaana.com are already doing well. What one needs in the online music industry is to have patience and a steady flow of money to back the idea till it matures. While Flipkart may have wrapped up its Flyte operations in its nascent stage, the dawn is not too far for this business idea. — Shrutika VermaThe Airwave Clashes ContinueThe spectrum loss saga continues, and the battle has moved on to the regulators. The Comptroller and Auditor General (CAG) recently said that a high reserve price for the spectrum auctions was what acted as a deterrent for participants, thus, causing the auctions to fail. It also pointed out that telecom operators had formed a cartel during the last two auctions resulting in lower realisation for the government. As a result, 453 MHz of spectrum in the 1,800MHz band (valued at Rs 85,014 crore) is lying idle.The Department of Telecommunications (DoT) has not taken kindly to the CAG’s comments, pointing out that according to the Telecom Regulatory Authority of India (Trai) Act, the national auditor can only audit Trai’s accounts and not its decisions. DoT has also said that CAG’s comments indicate that the auditor does not understand the basic engineering principles of telecom traffic handling. Amid these dissenting voices, the telecom industry is awaiting a solution from the stable of the empowered group of ministers on telecom with respect to the pricing of spectrum. — Anup Jayaram
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If you cannot beat them, join them. Advertising men have known to employ every trick in the book to shine at award shows – scam ads or work created specifically for award shows being only the most popular trick in the book.However, there are agencies who consciously chose to stay away from the creative awards scene in India. Ogilvy, a winner by far at most Indian creative award shows was the most prominent absence at this year’s Goafest, Indian advertising’s largest industry celebration. However, there are other prominent agencies like Lowe Lintas + Partners that have chosen to stay away from creative advertising awards in India for a decade now.To make the vice of others its virtue, this year Lowe decided to celebrate 10 years of “not giving a damn about awards”. And how did it celebrate? The agency relaunched its own internal awards, formerly known as The Lowe Show, as The True Show. "Since we do not create work for awards, we decided to create an award for our work," says an agency communique. However, there is one thing that separated this awards show from the rest -- all the work that went on to win that night were all genuine work. And the agency got clients to give away awards (a bottle of spirits and a tequila shot) to its creative champions.Lowe Lintas does not participate in the creative awards largely because agency sources say that it’s a scamfest, but it does not stay away from other Indian awards like The Effies, advertising effectiveness awards where a large number of clients form a part of the jury and of course, the campaigns are genuine work.The larger question is why can’t you keep away agency folks from awards for too long? In a business to business service like advertising, where ad men fight every day to keep their business away from scheming rivals, or face the pressure from all ends, client, media partner, suppliers and so on, awards do provide a window to release all the steam. They also give the much needed reassurance to your teams that all that effort through the year was after all “worth it”. A national creative director with a large agency says that awards also help in talent attraction and retention. For the smaller agencies, it’s an opportunity to shine on the same field as the larger giants and get noticed.And in times of a slowdown, it’s a great morale booster. Even The True Show was instituted a good five years after 2008. R Balki, the agency chairperson, however, said that he’d hold an awards show only if the agency had great work to celebrate, rather than make it a yearly fixture in the agency calendar. That was a bold statement to make in front of an audience that comprised the agency’s key clients like Rajiv Bajaj, Sanjiv Aga and other senior executives from Idea Cellular, Havells, Titan Industries and Hindustan Unilever among others.Sometimes, award shows are also used to massage a client’s ego. At times, even that massage can go all wrong. One agency self-financed an ad’s production and released it on YouTube and only got the client’s letter after assuring them that they need not spend a single rupee for the same. The ad went on to win at GoaFest, but someone at the MNC client’s global office did not like the creative execution saying it brought down the image of this premium brand. The India business head only managed to save his face, and probably his job too, by claiming that this ad was not released in mass media and hence was only a concept that went on to win. Sometimes award shows need not be win-win for everybody.
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Chief Investment Strategist with Prudential International Investments Advisors, John Praveen, predicts a year-end target of 21300 for the 30-share Sensex. Prudential International owns Pramerica Mutual Fund in India. “While we are cautiously optimistic on the outlook for Indian stocks for the rest of 2013, there are near-term risks given the global risks and domestic headwinds,” says John Praveen in an interview to BW|Businessworld’s Shailesh Menon. Markets do not seem to be happy about the US Fed’s decision to shrink the quantitative easing (QE) programme. Your comment?In our view, markets are over-reacting to the Fed announcement and Bernanke’s press conference comments. They feel the US Fed will start increasing rates once QE is tapered off. The Fed indicated that QE 3 could be tapered in late 2013 if economic conditions warrant. However, Bernanke clarified that while the US economy is improving, current conditions are still far from the conditions under which the Fed would begin to taper QE. Further, Bernanke also made it very clear that tapering QE does not mean that rate hikes are imminent and indicated that the Fed remains committed to keeping rates at current low through 2015. While the Fed announcement led to a big sell-off, markets are likely to calm down as Fed and Bernanke will reassure that QE buying will continue until late 2013, and that QE taper does not signal the start of rate hikes.What impact will the shrinking of QE have on global markets?When the Fed starts to slow asset purchases, it will have some impact on global liquidity flow. However, some of the other major central banks (Bank of Japan, Bank of England & ECB) are likely to expand their asset purchases and ease policies, which may offset the impact of QE taper by the Fed. Several emerging central banks are likely to deliver fresh rate cuts with inflationary pressures easing. Thus, the net impact on reducing global liquidity is likely to be small. How is it going to affect India?India is likely to attract capital flows once the market turbulence eases. Lower risk aversion (post the fears of Fed shrinking the scope of quantitative easing) and fresh policy easing measures by other central banks are likely to open capital flows to emerging markets including India. However, China has been trying to limit flows to prevent asset bubbles in the property market. Other big emerging economies such as Brazil and Turkey are facing political tension and FII are likely to avoid these markets in the near-term. Thus, markets like India can potentially attract capital flows, if the rupee stabilises.Indian markets have received significant foreign inflows over the past one year. Will this trend continue?In the near-term, India and other emerging market stocks are likely to continue to struggle due to domestic headwinds and global risks. Domestic headwinds are: 1) The RBI unable to cut rates due to weakness in the Indian rupee and concerns about the current account deficit; and 2) GDP growth is struggling below 5%. Global risks include fears about Fed QE tapering off, uncertainty about Japan stimulus, growth concerns in the Eurozone, growth disappointments in China and political tensions in Turkey and Greece. Fears about early Fed QE taper has resulted in significant capital outflows from India and other emerging markets. However, if the global liquidity concerns ease with the Fed reassuring about continuing QE though late 2013, and global growth picks-up, the global equity rally is likely to resume and capital will flow into India and other EMs.What's your outlook for Indian equities market?If the RBI cuts rates, the rupee stabilises, and the government makes some progress on the reform front, the Indian market can also rally. We have a year-end 2013 target of 21300 for the Sensex. While we are cautiously optimistic on the outlook for Indian stocks for the rest of 2013, there are near-term risks given the global risks and domestic headwinds. While the Indian domestic macro situation is likely to improve slowly, the big wild card is political and policy uncertainty. With Parliament elections due in 2014, the window to undertake reforms is small. However, given the shaky coalition, the risk is that the government may not be able to accomplish much. Nonetheless, if the government manages to push through some reform measures, global investors are likely to respond favourably. Thus, there is scope for gains by the Indian markets, especially if the RBI is more aggressive in cutting rates and the government surprises on the reform and policy side. What are your views on Indian stock valuations? Are you comfortable?India’s valuation multiples are not expensive with trailing price-to-earnings easing to 14.8X currently from 15.1X at the beginning of the year with the Sensex down -3.4 per cent YTD. This is below the long-term average price-to-earnings of 17X. However, Indian stock valuations are still at a premium to other emerging markets and BRICs. Emerging market PE multiples are currently around 12.5X, down from 12.8X in early 2013 with the EM index losing -9.5 per cent YTD. BRICs price-to-earnings are currently around 10.3X, down from 11.1X in January 2013 with the BRIC index down -12.9 per cent YTD. Hence, Indian stocks are currently trading at a discount to its own historical valuations but expensive compared to EMs and BRIC equities.shailesh(dot)menon(at)abp(dot)inalertsmenon(at)gmail(dot)comTwitter: (at)alertsmenon
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Ever since broadband wireless licences were handed out over two years ago, the industry, the rivals, the analysts and the consumers have all speculated about when Reliance Industries will launch its services.Reliance chairman Mukesh Ambani has, however, refused to push his team to a deadline despite all the expectations. Reliance has finalised the key vendor and supplier partnerships but not yet announced the names. The Rs 1,200-crore network-sharing and the Rs 12,000-crore tower-sharing deal announced today have now plugged another gap in its strategy. Eariler, Reliance signed a deal with Bharti Airtel for cable network sharing.Since Mukesh is going for a big play, he wants his team to be free from compulsions. He told them to take their own time in building the platform for the service. Incidentally, broadband wireless business Reliance Jio will absorb nearly 20-25 per cent of the Rs 1,50,000 crore investment Reliance Chairman Mukesh Ambani announced at the AGM on June 6.Besides, there's the Hungama scheme in the works. Older shareholders of Reliance Industries still remember the ‘Monsoon Hugama’ of 2003. It was the launch offer of Reliance Infocomm’s cellular service, which was also spearheaded by Mukesh Ambani. The company gave mobile handsets for Rs 500 along with the CDMA connection. The customer base swelled week-by-week with the people from bottom-of-the-pyramid. Though CDMA technology failed to catch up with GSM, Monsoon Hungama went well with carpenters, rikshawallahs and so on. Reliance Infocomm, however, was apportioned to Anil Ambani when the family split in 2005.When Mukesh Ambani plans launching the his 4G service around monsoon 2014 is the big question. Since he has spent Rs 18,000 crore in buying spectrum and preparing the ground, a Hungama is necessary for Reliance Jio launch.
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The Ambani brothers — Mukesh and Anil — seem to have begun the process to settle their differences, at least in telecom. In the second deal in as many months, Mukesh Ambani-owned Reliance Jio Infocomm (RJI) has agreed to use 45,000 telecom towers of Anil Ambani-owned Reliance Communications (R-Comm) in a Rs 12,000-crore deal. Last time round, RJI had tied up with RCom in the Rs 1,200 crore deal for sharing inter-city optic fibre connectivity.There are enough reasons why this deal is important to both brothers.Read Also: RJIL, RComm Sign Telecom Tower Deal Suddenly, the business case for R-Comm has become all that better. The deal will help Anil Ambani retire some of the accumulated net debt of Rs 38,864 crore that R-Comm is saddled with. It will also provide a regular, clear fixed source of income for R-Comm that has seen net profit in FY 2013 fall 28 per cent to Rs 671.6 crore on revenues of Rs 21,778 crore.For Mukesh, it will help in a faster roll-out of broadband wireless access services. More importantly, three years after winning 20MHz of 2300MHz spectrum nation-wide, RJI has yet to launch services anywhere in the country. Meanwhile, Bharti Airtel which won BWA spectrum in 8 circles (including four that it acquired from Qualcomm later) has already launched services in Kolkata, Bangalore, Pune and Mohali. Another advantage that Mukesh has is that it was after all he who built that network before the brothers split.But one thing is clear, after going through tough times for well over a year the telecom sector is finally looking to get going all over again.
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A traditional Burmese umbrella planted in the white sands of an empty beach offers shade to a couple on deck chairs. The first ever TV ad of brand Myanmar begins with this image. The ad spot takes the viewers through the history, culture of Myanmar. It offers glorious visuals of its pristine countryside untouched by development. The spot closes with fascinating images of Schwedagon Pagoda and the diversity of its cheerful people. The line for Myanmar: "Let the journey begin."This clever line invites not just travellers, but also foreign investors, financial giants, friendly neighbours and voluntary groups to start exploring a country that was closed for almost six decades. At the World Economic Forum on East Asia in capital Nay Pyi Taw, delegates are in awe of the rapid pace of change. Many are also concerned whether this change is too fast. Myanmar's iconic Aung San Suu Kyi was asked whether process of political reform was irreversible. Her answer, "The question is whether the mindset for change is irreversible." Read Also: Myanmar TransformsShe declared her willingness to run for President in next elections but seeks changes to constitution that disallowed citizens with foreign spouse and children be eligible. For her making changes in constitution is the first priority. "Unless the constitution is amendable, lasting change can't happen," she says. For Aung San Suu Kyi, the pace of change can't be fast enough. President Thein Sein, who surprised the world by freeing Suu Kyi and ushering in political and economic reforms two years ago, reassured the delegates, " We are working hard to move from military rule to democracy in Myanmar." This statement met a great applause from global investors including many from India. Harshpati Singhania of JK Corp, Hari Bhartia of Jubilant Group and Sunil Mittal of Airtel spent busy days planning their future in Myanmar. India is working hard to increase transport links with Myanmar. Highway projects to connect north east india to Myanmar are critical for economic ties. One strategy is to see north east India and Myanmar as a common market of over 100 million people; about 60 million in Myanmar and rest in northeast. The cultural and ethnic links make it a ideal common market. Investment plans are not just for Myanmar. Most companies are planning for region now. Myanmar is in talks with ASEAN countries to have a common visa like the Schengen visa for Europe. Bridging gap between ASEAN and Myanmar would require urgent steps on financial inclusion. Several models including micro finance and mobile banking are being discussed by financial institutions like Standard Chartered that are stepping up their presence here. The government on its part has not announced any new grand plan or project. Most ministers are attending all sessions ànd listening patiently. They realise that the first step to connecting with the world economy is to understand how it works to and develope internal capability to manage the transition. Listening before acting is perhaps the best approach for government of Myanmar. Let the journey begin.(Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com)
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In the last four years, hardly any Indian retailer increased their number of stores. Future group’s Big Bazaar and AV Birla group’s More have shut down more than 30 per cent of the value format stores and focused on high-margin super market and hyper market business. But Mukesh Ambani’s Reliance Retail has chosen to go against the conventional wisdom by attempting to create a large base.Yet, despite its Rs 10,000-crore revenue, Reliance Retail is struggling to succeed. It has increased the number of stores to 1,500 from around 1,150 in 2010. Last year, when Businessworld wrote on the value formats under Reliance Fresh, it had 1,300 stores and the total retail business reported Rs 7,500 crore of revenue (Read: Digging Day To Stay Fresh). The numbers are really landmarks. But Rs 10,000 crore from 1,500 stores means each store generates average annual revenue of Rs 6.66 crore. The analyst community says that the number is below expectation. Also, the EBDIT of Rs 78 crore that Reliance Retail posted could have been better considering the nearly 7 years of experience and the farm-to-fork format created by the company. Historically, the margins are higher for retail players who source everything directly from the producer. Ambani plans more investments in the retail business to catapult the revenue to Rs 40,000- 50,000 crore. Since this is topline focused growth, mass-base creation is important for him. But the value formats CEO Robert Cissell prefers to build more hypermarkets of 50,000 sq. ft or more rather than the small Fresh stores, where the margins are less. Creation of a solid retail business model is critical for Reliance.
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